Two the Point — Shifting Gears: Powell Signals Rate Cuts on the Horizon

Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Economic Symposium solidified expectations for upcoming rate cuts, highlighting a shift towards a more neutral monetary stance amid signs of a cooling but resilient labor market. The U.S. economy continues to show mixed signals, with strength in the services sector offsetting weaknesses in goods, and early indications of a rebound in interest-rate-sensitive sectors.

Key Insights:

• Federal Policy Shift: Powell’s speech confirmed that the Fed is on a path to lower interest rates, with cuts expected to begin in September, aligning with global central banks.
• Labor Market Resilience: Despite downward revisions to payroll data, unemployment claims data suggests underlying labor market strength.
• Housing Market Rebound:  New home sales in the U.S. surged by 10.6% in July, suggesting early positive responses to declining interest rates.
• Sector Performance: The services sector continues to demonstrate resilience, offsetting the rolling recession in goods, and supporting a disinflationary economic trend.