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WEEKS MACRO SUMMARY

Stocks closed sharply higher Friday after Federal Reserve Chair Jerome Powell confirmed that the central bank could soon deliver long-awaited interest rate cuts. During his remarks Friday, Powell said that "the time has come for policy to adjust" as inflation risks have diminished and the labour market has "cooled considerably." Powell said the timing and pace of monetary easing would depend on incoming economic data. The yield on 10-year Treasury's, which had also bounced around this week ahead of the Powell remarks, dropped to just below 3.80% Friday, down from 3.86% on Thursday.

What did Powell say?

In his speech at Jackson Hole yesterday, Federal Reserve Chair Jerome Powell highlighted several key points:

  1. Inflation Progress: Powell noted significant progress in reducing inflation, which has fallen from a peak of 9.1% in mid-2022 to 2.9% last month. He expressed confidence that inflation is on a sustainable path back to the Fed’s 2% target12.
  2. Interest Rate Cuts: Powell signalled that interest rate cuts are likely on the horizon, depending on incoming economic data and the evolving outlook. He emphasized that the timing and pace of these cuts will be carefully considered2.
  3. Economic Outlook: He discussed the current economic situation, noting that the labor market is no longer overheated and supply constraints have normalized. Powell believes the economy can achieve 2% inflation while maintaining a strong labor market1.
  4. Lessons Learned: Powell acknowledged that the Fed initially misjudged the inflationary threat in early 2021, expecting it to be transitory. He highlighted the importance of learning from these experiences to better manage future economic challenges2.

Overall, Powell’s speech conveyed optimism about the Fed’s progress in controlling inflation and hinted at potential rate cuts in the near future.

ES Profile finished balanced in a balanced week as aggressive buy and sell activity from prior RTH session POC and Tail Highs contains activity following the much anticipated Jackson Hole event. Nice tapering by sellers from the high and lows.

Fed Minutes:

• Federal Reserve: The Fed is considering rate cuts, with recent FOMC meeting minutes showing support for a cut if inflation and job trends continue to ease.

What's coming up this week?