A snippet preview via Bank of Montreal, focusing on potential messaging from Federal Reserve Chair Powell:
- this forum has historically been used by policymakers to attempt to shift the broader macro narrative for investors.
- Much has been made about the event as a potential inflection point for Powell to declare victory on inflation and imply the forward path for hikes will be limited from current levels. While we are sympathetic to the elegance of the late-summer timing; the single point of inflation moderation represented by the July CPI print isn't going to be sufficient to warrant a shift at this stage. Perhaps by offering more details around the Committee's reaction function to moderating consumer price pressures, the Chair could set the tone for a less hawkish Fed in the second half - but even that would be data-dependent.
- It goes without saying that the official line of 'it depends on what inflation and employment do' has been unsatisfactory for many investors and further stoked the type of volatility evident today.