JACKSON HOLE, Wyo. (Reuters) – When Federal Reserve leader Jerome Powell speaks in Jackson Hole, Wyoming, on Friday, traders will comb through their comments for clues as to whether the US central bank will deliver more interest rates this year.
FILE PHOTO: Federal Reserve Leader Jerome Powell holds a news conference following the Federal Reserve's two-day Federal Open Market Committee meeting in Washington, USA, July 31, 2019. REUTERS / Sarah Silbiger / File Photo
They may be disappointed.
For all his reputation as the most arguably the person who has run the US central bank for decades, if not ever, Powell may be reluctant in his comments to other central bankers at this year's Kansas City Economic Symposium to say much about where prices will go. The reason: He may not know, and does not want to be locked up.
Fellow Fed politicians, even those who supported Julie's interest rate cut, signal reluctance to do more, with Philadelphia Fed chief Patrick Harker asking to wait-and-see approach and Dallas Fed chief Robert Kaplan saying he is "open minded" but will "avoid having to take further action."
Since the Fed cut interest rates in July, the US economic picture has darkened.
New threats by President Donald Trump to impose additional tariffs on China, and then a decision to postpone some of the new taxes until December, are already raising uncertainty for businesses.
U.S .. factory activity is on the way down.
Globally, dozens of central banks are reducing interest rates and some economies appear to be in a recession.
Finally, in a signal that investors are increasingly concerned about a US recession, the yield on 2-year government bonds below the ten-year debt fell on Thursday in yet another "inversion of the yield curve."
At the same time, labor markets are still strong and consumers continue to use in stores and online.
Part of the reason why the yield curve is inverted is because the US economy remains so much stronger than large parts of Europe: Investors would rather have "safe" US Treasuries, even with falling interest rates, say, German bonds with a negative return.
In addition to the conflicting economic data, expensive market signals and the Fed's dissent, Powell may also want to lay low to avoid attracting even more vitriol than he already has as the first Fed boss publicly called "clueless" by the president who appointed him.
“The economy is doing very well. The Federal Reserve can easily do that Record Setting !, Trump said on Twitter Thursday. “Be early (for a change), not late. Let America win big, instead of just winning! "
Although Powell adheres to a set, characterizing last month's move as a" mid-cycle "adjustment and retaining the options going forward, he can still disappoint markets and court even more turbulence.
However, investors have high hopes that the Fed will stimulate the economy, and place overwhelming bets that the central bank will lower its borrowing costs again at its political meeting on September 17-18.
Reporting by Ann Saphir, Howard Schneider and Trevor Hunnicutt; Editing Dan Grebler