Stocks reaches new highs in Asia as oil market awaits updates from Ukraine discussions
Fed Prepares for Monetary Policy Easing as Powell Signals September Rate Cut
The Federal Reserve is set to begin easing its monetary policy, with Chair Jerome Powell signaling a potential interest rate cut as soon as the September Federal Open Market Committee (FOMC) meeting. This shift was announced during Powell's speech at the Jackson Hole Symposium on August 22, 2025.
In his address, Powell acknowledged that while the U.S. labor market remains near maximum employment, recent softening increases downside risks to employment stability. Inflation, while still somewhat elevated, has come down significantly, reducing the immediate upward risks. Given the restrictive policy stance currently in place, the Fed is now considering adjustments that may include cutting rates to balance risks and support economic stability.
Powell's speech reinforced the Fed's commitment to its dual mandate of maximum employment and price stability. The inflation targeting has been revised at 2 percent as a long-run goal, providing room for policy accommodation during downturns. This shift reflects a more cautious and potentially accommodative policy stance going forward.
The Fed's August 17 meeting saw officials increasingly acknowledging emerging signs of labor market weakness, though no direct transcript of the meeting was provided. Powell's comments have led investors and economists to widely expect a 25 basis points cut at the mid-September 2025 FOMC meeting.
This move comes amid historically low public confidence in the Fed, and political pressures, including from former President Trump, have complicated the Fed’s independence narrative but have not overtly shifted Fed policy decisions announced at the symposium.
The anticipated rate cut is expected to have a ripple effect on various markets. S&P 500 futures have nudged up 0.1%, and share markets pushed ahead in Asia. Japanese and Taiwanese indices made record peaks, while the Nikkei made a new high on Monday. Gold bounced 0.5% to $3,343 an ounce, and markets imply an 85% chance of a quarter-point rate cut at the Fed's meeting on September 17.
However, the oil market is wary as Zelenskiy goes to Washington, and European bonds have been pressured by the prospect of increased borrowing to fund defense spending, pushing German long-term yields to 14-year highs. The dollar is on defensive ahead of the Fed conference, and the major economic event of the week is the Kansas City Federal Reserve's August 21-23 Jackson Hole symposium.
This week, results will provide insight into the health of consumer spending with Home Depot, Target, Lowe's, and Walmart reporting. Additionally, US President Donald Trump is more aligned with Moscow on seeking a peace deal with Ukraine instead of a ceasefire first.
In bond markets, the chance of Fed easing is keeping down short-term Treasury yields. Chinese blue chips reached their highest in 10 months, and Nasdaq futures have added 0.2%. This week also marks the release of earnings reports for the Magnificent 7, a group of mega-cap tech companies, and European bonds have been pressured by the prospect of increased borrowing to fund defense spending, pushing German long-term yields to 14-year highs.
In conclusion, the Federal Reserve is poised to begin easing monetary policy in September by lowering interest rates slightly, motivated by a softening labor market outlook and a balanced inflation environment. The Fed also reaffirmed its forward-looking monetary framework that supports such flexible policy actions based on developments in inflation and employment.
- The potential interest rate cut by the Federal Reserve, as signaled by Chair Jerome Powell, could have a significant impact on personal-finance, particularly for individuals investing in the stock market, as S&P 500 futures have already shown a minor increase.
- As the Fed prepares for monetary policy easing, focusing on education-and-self-development and staying updated with general-news becomes crucial for anyone interested in business and finance, as it allows them to understand the implications of the Fed's decisions on their investments and the overall economy.
- The upcoming FOMC meeting in September is igniting technology-driven discussions among economists and investors, as they analyze the effects of potential adjustments to the Fed's restrictive policy stance on financial markets, such as the expected 25 basis points rate cut.
