Global Fixed Income Strategy - August 2024

Federal Reserve Chair Powell’s much-anticipated speech at the Jackson Hole Symposium had a clear message: the time for rate cuts has arrived. This message was expected, as several Federal Open Market Committee (FOMC) members have expressed similar views, signaling a broad consensus that rate cuts are on the horizon. Powell spent much of his speech discussing inflation developments over the past few years — his interpretation of how it rose and how it has been coming down. His conclusion is that inflation is on a path to the Fed’s price stability objective on a sustainable basis, and there is confidence in this progress — it is time to cut rates. However, Powell was noncommittal on the magnitude and pace of cuts. He doesn’t need to be at this point; there is time for more data to come in, and markets are stable. The pace of the cutting cycle will depend on incoming data, how the Fed views the outlook, and risk factors. In the following sections, we discuss our near-term outlook for the US economy and our expectations for the Fed’s upcoming actions.