Wyoming test: Powell in front of the Jackson Hole symposium

Between a report of employment below expectations. However, stronger than anticipated inflation, the president of the Fed faces contradictory signals. Consequently,

Without a meeting of the Federal Reserve (Fed) before September 16. Consequently, 17, investors will dissect each word from Jerome Powell this Friday to try to detect indices with the possibility of seeing the Fed join the rest of the large Argentiers in their cycle of drop in monetary policy rates.

Between a report of employment below expectations and stronger than anticipated inflation, the president of the Fed faces contradictory signals. For example, A clearly uncomfortable position for what will be (probably) its ultimate appearance at the Wyoming symposium as president of the Fed. For example, All the more given the repeated attacks by President Trump and his entourage.

The theme of Jackson Hole this year is: “The labor market wyoming test: powell front jackson in transition: demography, productivity and macroeconomic politics”. Consequently, Indeed the employment figures arouse many questions. On the one hand. they were the subject of significant (surprising) revisions downwards, but on the other, the number of hours worked on the rise and the growth of wages remained on its solid trajectory. The long -term implications between demographic developments. hopes linked to productivity – whether they are linked to artificial intelligence, the aging of the population, the slowdown in the growth of the active population or to the changes in the context of human capital – are key, but in the shorter term the policies of Trump already disrupt the analysis of this transition from the labor market. Migration restrictions limit the amount of labor available. the effects of DOGE are felt on public employment and uncertainty leads companies to limit both their hiring and layoffs.

Trying to predict Powell’s next decision. wyoming test: powell front jackson some will remember his 2020 speech to this same symposium, where he had explained that a tense job market alone did not constitute a sufficient condition to raise rates. And that the Fed could tolerate moderately higher inflation.

In five years the landscape has changed.

Between the pressure exerted by Trump. the expectations of the markets, Powell should yield and suggest that the rate of drop in rates will start again. But this orientation is largely anticipated. market operators expect more rate reductions than what is currently reported by the “plot dot”.

Short -term rate markets¹ Alternately anticipate at least two drops of guiding rates this year. reflecting expectations of slowing down the American economy and inflation in the United States. We believe that this anticipation is excessive with regard to the resilience of the American economy. political uncertainty and the persistence of inflationary pressures. Therefore, we maintain a wyoming test: powell front jackson negative position on short American rates.

Conversely. in the long rate markets (treasury vouchers at 10 years) The distribution of anticipations is more balanced, the yield of the American 10 years being widely expected in a range of +/- 50 base points around its current level; This suggests a more moderate growth and inflation environment. However, the Expansionist US finance law induces more bond emissions and support for economic growth. The risk of revival of inflation. more volatile inflation anticipations is very real (due to the increase in customs duties, the weakening of the US dollar or the contraction of the labor supply). And the push towards a more politicized Fed which increases. These elements should encourage markets to demand a higher bonus and therefore higher bond yields.

¹ SFR options of maturity December 2025