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The Fed's Jackson Hole symposium will take place this week from Thursday through Saturday. This year's topic is 'Reassessing the Effectiveness and Transmission of Monetary Policy.' The resilience of the US economy in facing high policy rates has surprised many, and led analysts to question the level of restrictiveness implied by the current rates, and to potentially reassess the neutral policy rate. While the full agenda is not yet available, the program will feature a variety of research trying to answer the question whether monetary policy is indeed less effective, although it is unlikely to have already incorporated the most recent slowdown in the labor market. A complete assessment will simply require more data to become available as time passes.
An important milestone in that data becoming available occurs this Wednesday, when the BLS will provide a preliminary estimate of the revision to non-farm payrolls (NFP) between March 2023 and March 2024, based on the quarterly census of employment and wages (QCEW) at 4 p.m. CET (10 a.m. ET). We expect a strong downward revision of the data, as current data up to Q4 suggests a gap of about 700k between QCEW and NFP. First quarter data, as well as revisions to previous quarters, may change the ultimate size of the revision. Of course, these revisions are strictly backward looking, and already quite far in the past. They will however be crucial in in the labor market data, where NFP has been looking considerably better than other measures of employment. They will also be vital for the Fed to understand the strength and speed of monetary policy transmission, which will impact the Fed's path going forward.
Chair Powell is scheduled to speak on the economic outlook at 4 p.m. CET (10 a.m. ET) on Friday. Given the market's repricing of the Fed path since the last FOMC meeting, his tone will likely be less dovish than in July. We expect Chair Powell to signal that a rate cut is likely to happen in September, but refrain from calling the size of the rate cut. The current pricing for September is a good place to be for the Fed, as both 25 and 50bps cuts are feasible. Recent growth and consumption data suggests the Fed can still be patient and data dependent, and there will be another jobs report and inflation reading before the next policy decision on September 18. Therefore, this Friday he will likely repeat that the Fed is prepared to ease quickly if labour markets deteriorate. In contrast to July, he might put more emphasis on the upside risks to the inflation outlook, while acknowledging the recent progress. He will likely downplay the impact of the single disappointing job report this August. Similarly, with regards to the revision of past non-farm payroll data, he will emphasize that he has previously acknowledged these data were likely overstated. Overall, we expect a balanced performance at Jackson Hole, carefully worded with the objective to keep markets calm, and without any precommitment to September.