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The US economy is trending in the Fed’s direction, so expect Powell to take a cautious approach this week

By Greg Robb

A repeat of last month’s Jackson Hole speech is expected, with something for everyone but no strings attached

“If things go well the first time, we might as well try again,” economists say could be the mantra of Federal Reserve Chair Jerome Powell as he prepares for this week’s policy meeting.

Powell’s speech at the central bank’s annual summit in Jackson Hole, Wyoming, last month appeared to please both hawks and doves, with a combination of anti-inflation rhetoric and dovish details that showed no concrete plans to raise rates again.

“The Jackson Hole speech was a brilliant message because everyone heard what they wanted,” Bill Adams, chief economist at Comerica Bank in Dallas, said in an interview.

He predicted that Powell would repeat that speech, emphasizing that the Fed is committed to getting inflation back to its 2% target and that the central bank firmly believes interest rates will remain high for an extended period of time become.

The Fed will release a statement at 2 p.m. Eastern time. Powell will hold a news conference starting at 2:30 p.m

Read: 4 things to watch for at the Fed’s policy meeting next week

Powell’s cautious approach was echoed by other Fed officials.

Fed Governor Christopher Waller told CNBC: “There’s no indication that we need to do anything anytime soon, so we can just sit there.” [and] and wait for the data.”

In an interview with MarketWatch, Boston Federal Reserve Bank President Susan Collins said the central bank has earned the right to take its time making interest rate decisions.

The Fed can also be patient because the inflation trend is moving in the right direction, Yelena Shulyatyeva, senior U.S. economist at BNP Paribas, said in an interview.

Although the August consumer inflation report was not as positive as the June and July reports, “we see that the level of inflation has moderated,” she said.

At the same time, the labor market has remained stable, with some very slight signs of weakening. A year ago, many economists said that lowering inflation was not possible without a large increase in unemployment.

What will the Fed do?

Economists expect the Fed to hold interest rates steady when its meeting ends on Wednesday, after raising interest rates by 25 basis points to a range of 5.25% to 5.5% at its last meeting in July.

The central bank is expected to propose raising interest rates by 25 basis points at one of its two remaining meetings this year, but is making no commitment to do so.

Although the Fed’s dot plot forecast continues to indicate another rate hike this year, the Fed “will not exercise the option to raise rates again unless progress on inflation and the labor market stalls in the face of stronger growth.” said Krishna Guha, Vice Chairman of Fed Evercore ISI.

Many economists, including Michael Hanson, senior global economist at JPMorgan, believe the Fed is completely done raising interest rates. Others expect the central bank to hike rates again before stopping, while few believe it may need to do more.

This debate will continue until the next Fed meeting, scheduled for October 31-November 31. 1.

-Greg Robb

This content was created by MarketWatch, operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

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09/19/23 0911ET

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