At a critical point this week is the big betting bond bet that the US Federal Bank (FED) is ready for interest ratesas the president Jerome Powell (Jerome Powell) has the opportunity to express his opinion on the economy.
Powell’s speech on Friday (15.8.2025) at the Central Bank’s annual meeting in Jackson Hall, Wyoming, marks the start of a critical period for the bond market, which considers almost certainly a reduction in interest rates by one by one by one by one by one.
In recent years, Powell has taken the opportunity to make statements about the policy that affect the market, and this time the framework is probably very important.
Investors are convinced that the weakening of the labor market has paved the way for a more lenient stance than the Fed president, although the amazing high information on inflation has caused doubts to some economists.
For the time being, investors expect it to avoid overturning their expectations to reduce interest rates next month, and will probably remind you that the decision of officials on September 17 will depend on the reports to be submitted before the meeting, which will confirm that the labor market is undergoing a labor market.
“It has the ability to do something that will affect the market, but I’m not sure it will do it,” said Kelsey Berro, executive director for fixed incomes at JPMorgan Asset Management. Prices on the bond market “are still in line with a sluggish environment. I do not think they see any important reason to oppose market expectations. “
Performances are lower for most expirations in August, led by two -year, following weak employment data in July that reinforced the expectations of the Fed relaxation. The result is that the yield curve has become steeper this month, with the two -year interest rate stabilizing around 3.75%, not far above the lowest levels of recent months.
State bonds opened with minor changes in Monday’s first transactions in Asia, with 10 -year reference bonds kept at 4.32%.
Surprise in Wyoming
This scene enhances the interest in meeting Jackson Hall. Three years ago, Powell pushed the yields of short -term bonds upwards, warning that the fight against inflation would bring difficulties to households and businesses.
At last year’s symposium, he showed that the Fed was ready to reduce borrowing costs from the highest level of the last two decades. The yields of two -year bonds fell that day as comments confirmed the investors who had bet on interest rates. In September of that year, the Fed made the first from a series of reductions, with a huge half -point traffic.
Some investors are preparing for a repetition of this decision. A series of large transactions in optional rights have been aimed at a half -point move next month, even after the rise of producer prices. These betting moves will make profits if the market assesses about 40 relaxation points at the September meeting.
Growing pressure from President Donald Trump and other members of the government to reduce borrowing costs, helps to strengthen these bets. Powell has said for months that it takes time to see the impact of duties on inflation and remains stable in his place, despite Trump’s efforts to push him to reduce.
“The Fed is under huge pressure,” said Scott Dimaggio, head of the Alliescebernstein fixed income department. “They are a little behind, but they are waiting to see the impact of the duties and their impact on the economy and inflation.”
According to Dimaggio, the figures have reached the point “where you can say,” Yes, they must continue the interest rate reduction cycle “.”
Decisive information
Following Jackson Hole, the market will focus on the August employment data that will be published on September 5 and whether they will seal the course for relaxation next month and may mark the possibility of even a surprise reduction by half. Of course, several investors and traders said that a move of such a scale is unlikely after the hot report on producers inflation.
“Our sense is that everything will depend on the employment report,” said Gregory Faranello, head of AMerivet Securities on US interest rates and strategy. “If it is weak, we will invoice 25 and we do not believe that Powell will react.”
A faster rate of relaxation could boost the economy at a time when inflation remains steadily above the Fed target, and with the prospect of a possible budgetary advantage by the Trump bill on taxes and costs. In conjunction with investor concerns about the government’s pressure on the Central Bank and the President’s move to replace the head of the Office of Labor Statistics, this could push fund administrators to demand a higher risk premium for longer expirations.
“Promoting implementation of aggressive cuts requires Fed to set aside any remaining risks of upward inflation” and to adopt the view that unemployment is clearly higher, said Ed Al-Hussain, strategic interest rate analyst at Columbia Threadneedle Investment.