Powell Set to Speak Loudly and Carry a Little Stick

August 28, 2023

Powell Set to Speak Loudly and Carry a Little Stick  Photo

After staging the most aggressive monetary tightening campaign since the early 1980s, Federal Reserve (Fed) Chair Jerome Powell suggested in Friday’s Jackson Hole speech that the Fed should “proceed carefully” when it comes to additional interest rate hikes.1 In contrast to President Theodore Roosevelt’s famous phrase on foreign policy, “speak softly and carry a big stick,” Chair Powell and company are likely to rely more on tough talk than additional rate hikes to keep inflation moving toward the Fed’s 2% target.2 Chair Powell’s speech gave talking points for both the monetary “hawks” and “doves,” but I do expect the debate to keep shifting toward “how long” versus “how high” on short-term interest rates.

Even though the last week of August is historically a slow one for financial markets, inflation data out Thursday and Friday’s release of the August employment report could offer up some surprises and keep rates and equity market volatility elevated.3   



1Board of Governors of the Federal Reserve System – Inflation: Progress and the Path Ahead; 8/25/23

2The White House – Theodore Roosevelt; as of 8/28/23

3MarketWatch – U.S. Economic Calendar; as of 8/28/23

Tags: Federal Reserve | monetary tightening | rate hikes | Inflation | Jackson Hole

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