StoneX market analyst Fawad Razaqzada said Wosh's speech on Friday evening was viewed as fairly hawkish. In remarks on forward guidance, Wosh said what markets expected him to say — he does not believe in forward guidance and therefore refused to pre-commit to a September rate hike. That did not stop speculation that a hike could return to the table. On inflation, Wosh said fighting it remains a clear priority, a point he elaborated at length, while adding that he is confident core inflation is moving toward the Fed's target. Overall, his speech was more hawkish than markets expected. During Wosh's Jackson Hole remarks, the market substantially repriced expectations for the Fed's September decision, with the probability of a 25-basis-point rate hike jumping from 30% to about 50%. Before the September meeting, one nonfarm payrolls report and one CPI inflation report are still due, along with some secondary data releases. Under the new chair, the Fed has become more data-dependent. Given that recent US employment reports have missed expectations by wide margins, any further weakening signal could seriously undermine market expectations for a September rate hike.
Wosh's take on the economy landed with a distinctly hawkish tone on Friday evening, according to StoneX market analyst Fawad Razaqzada. On forward guidance, Wosh essentially delivered the line markets expected: he does not believe in it, and he declined to pre-commit to a September rate increase. Even so, speculation that a hike could be back on the table did not fade.
On inflation, Wosh said bringing it down remains an explicit priority and went into some detail, though he also voiced confidence that core inflation is moving toward the Federal Reserve's target. All told, his appearance came across as more hawkish than the market had priced in.
During Wosh's Jackson Hole remarks, expectations for the Fed's September meeting shifted notably. The probability of a 25-basis-point rate hike climbed from 30% to roughly 50%. Before that meeting, policymakers will see one more nonfarm payrolls report and one more CPI report, plus a handful of secondary data releases.
Under the new chair, policymaking has become more dependent on incoming data. Recent US employment reports have missed expectations by a wide margin. Any further sign of weakness could seriously dent market expectations for a September hike.
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