That line from Federal Reserve Chairman Powell, uttered at Jackson Hole looms large in market pricing this week and going forward. The takeaway is that they don’t want to see unemployment rise meaningfully, or perhaps at all.
Financial conditions are worsening to start the month and the ISM manufacturing survey had the lowest new orders component since May 2023.
Non-farm payrolls loom large on Friday but at some point we will get a soft non-farm payrolls survey and the market thinks that will mean at least one 50 bps cut this year.
For September 18:
- 63% chance of 25 bps
- 37% chance of 50 bps
For Nov 7 meeting:
For Dec 18:
-100.9 bps
For this time next year:
-202 bps
That puts Fed funds likey in a range of 3.25-3.50% at this time next year.