The Federal Reserve chair Powell on Friday reignited market expectations for rate hikes with remarks at the Jackson Hole annual symposium. While he did not directly provide policy guidance for the September meeting, he clearly said that policymakers must be confident that underlying inflation is falling back toward the 2% target in a “clear and sufficiently rapid” manner; otherwise, the Fed “still has work to do.”
The statement quickly changed pricing in the interest-rate market. Media reports said market moves indicated traders restarted bets on a single 25-basis-point rate hike later this year, and leaned toward expecting two hikes by March 2027. CME-related data showed the probability of a September hike rose from about 35% before Powell’s remarks to 50%, while other market data at one point suggested the probability increased to around 55%. Later reporting also said market data showed the probability briefly reached about 60%.