Current Key Considerations

Today's US inflation rate is clearly not as high as it was two years ago, but it remains about 1 percentage point above the Fed's 2% target and is evidently more overheated than what Powell himself had hoped for. Meanwhile, on the other side of the Fed's dual mandate, the US unemployment rate is currently still at a historically low level of 4.2%.

The theme of this year's Jackson Hole conference is "The Labor Market in Transition: Demographics, Productivity, and Macroeconomic Policy." Powell has stated that the unemployment rate is the best indicator of the labor market. Of course, this does not mean that the current low unemployment rate will automatically lead to a hawkish speech—history shows that when the unemployment rate begins to rise, it can do so quickly, catching the Fed off guard and leaving it behind the curve.

Regardless of which side Powell leans toward, the market may already be prepared for a round of significant price volatility.

**Powell is also highly likely to use the global central banking symposium platform to defend his eight-year tenure as chair, just as his predecessors did—Alan Greenspan in 2005, Ben Bernanke in 2012, and Janet Yellen in 2017. Given that US President Trump has put unprecedented pressure on Powell this year to cut interest rates, what reason does the Fed chair have not to seize this opportunity to express his inner thoughts?

UBS economists wrote: "Powell may provide some dovish guidance, hinting that rates could move lower at the upcoming meeting. However, this will be his last speech at Jackson Hole. He may never again have such an influential platform to articulate how he believes his history should be written."