Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium sparked varied reactions from Wall Street analysts, all noting a dovish tone and a potential shift in the Fed's approach to monetary policy.
Evercore ISI described Powell's remarks as "bullish-dovish," highlighting his declaration that "the time has come for policy to adjust."
Powell emphasized the Fed's commitment to doing "everything we can to support a strong labor market" while continuing to bring inflation back to its 2% target.
Evercore said Powell's discussion pointed towards a series of 25 basis point (bp) rate cuts but also left open the possibility of faster moves if necessary. They interpreted his comments as a sign that the Fed is still aiming for a "soft landing" and is prepared to act aggressively if the labor market weakens further.
Overall, Evercore views Powell's stance as reducing macroeconomic risks and sees it as a positive signal for the markets.
UBS echoed this sentiment, stating that Powell gave "the clearest indication yet" that the Fed is ready to begin dialing back policy restraint.
They noted his emphasis on the shift in risks, with more focus now on the downside risks to employment rather than inflation.
UBS expects 25 bp rate cuts at each of the three remaining Federal Open Market Committee (FOMC) meetings this year, consistent with Powell's indication that the Fed believes it can achieve both 2% inflation and a strong labor market with an "appropriate" pace of easing.
Goldman Sachs (NYSE:GS) also described the speech as dovish, predicting a 25bp rate cut at the Fed's September meeting.
Goldman noted that Powell expressed increased confidence in the inflation outlook while putting more emphasis on the risks to the labor market.
While they expect a 25 bp cut in September, they suggested that a 50 bp cut could be on the table if the upcoming employment report shows significant weakness.