Transcript
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Shop Abercrombie Denim in the app online and in store. Into it stocks down on earnings, but our take on its hidden gem Looking for investing? Reads our new book segment and Fed Chair Powell's big Speech today. What he said, what the market heard and what he left out for Friday, August 22nd. It's blue markets Daily and I'm Anne Barry. More market details to come. But first, just like a well crafted horoscope, Jay Powell's speech from Jackson Hole today had something for everyone. We all got to hear whatever we wanted to hear. Now the market's been eagerly awaiting what the Fed Chair had to say at the annual economic symposium. And the market certainly could not contain its enthusiasm for this one key line in particular, let's hear the words from the man himself.
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Nonetheless, with policy in restrictive territory, the.
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Baseline outlook and the shifting balance of.
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Risks may warrant adjusting our policy stance.
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Well, the markets ripped on hearing this. The major indices hitting at different points all time highs. And this I think is because the market was choosing to hear that the maybe that there would be a change in policy in that statement would equal a rate cut in September with expectations of a quarter point rate cut rising to nearly 90%. So that is why the markets were up. The market heard what it wanted to hear, but I wanted to just dive into what J. Pal actually said. So I went, I listened to the speech multiple times. I read the transcript and here's what I honed in on. Number one on tariffs, he said that the effects of these are now, quote, clearly visible, an issue likely to accumulate over coming months. Basically, he said that the risk of expected inflation as a result of tariffs might actually cause it, although he hoped that this was all, quote, relatively short lived. He did not, however, use the word transit transitory. Then on inflation, he said that the near term risks are tilted to the upside. And then on jobs, he thought that the labor market still looked pretty strong. Now those three points would typically point to keeping rates where they are higher for longer, but instead the market actually focused on the following comments on GDP that growth has slowed, notably in the first half of this year to roughly half the pace in 2024, largely from a slowdown in consumer spending. And he focused too on, quote, the value of a strong lab market for American households, reiterating that keeping unemployment low is a key priority. Overall, he said there are risks to employment downside and as a result as all of all of this. So the market saying of everything he said, this is what really matters and this is why rate cuts are imminent. Now, there is one other thing that struck me that did not get a lot of press coverage today actually, and it's towards the end of this speech, Powell dug into this idea that long term rates may not go back to the levels that we got used to before COVID This is something called the neutral rate or the balanced rate. And he said that this may now be higher than during the 2000s. This is a quote reflecting changes in productivity, demographics, fiscal policy and other factors that affect the balance between saving and investment. Now, he did do one thing that I expected him to do. This is his last speech from Jackson Hole in his tenure and he did take the opportunity to say that he felt that the Fed had succeeded in getting post Covid inflation down much closer to its 2% target target rate without quite a painful rise in unemployment, which is what you usually see when the Fed's trying to aggressively get inflation down. But there was also something he didn't say and after months of criticism from the White House, he's had pressure from the President to resign, he's had pressure from President Trump to cut rates. Powell did not double down on stating something he said before, which is the importance of the Fed staying independent. I thought he might do it, but clearly he is picking his spots today. Coming up, we're digging into death and taxes, but first Brew Markets Daily is sponsored by public. So let's throw it over to our producer John to tell us what he's excited about now that it's Friday.