Fed Officials Signal Caution on Rate Cuts, Powell’s Jackson Hole Speech in Focus

GLOBAL MOOD: Risk-Off
Drivers: Russia-Ukraine Conflict, Fed Rate Speculation, Strong US Business Activity

Markets leaned into a risk-off mood as Fed officials signaled caution on interest rate cuts, reinforcing expectations of a steady or hawkish stance ahead of Jerome Powell’s Jackson Hole speech. Investors shifted away from riskier assets like tech stocks, while demand for safe-haven assets remained elevated amid concerns over mixed economic data and persistent inflation pressures.

TODAY’S WATCHLIST
 - FED Powell’s speech at Jackson Hole

THE BIG STORY
Federal Reserve officials expressed caution on Thursday regarding the possibility of an interest rate cut next month, as investors prepared for Fed Chair Jerome Powell’s speech at the annual Jackson Hole conference in Wyoming. Cleveland Fed President Beth Hammack said she enters each meeting with an open mind but added that, based on current data, she sees no case for reducing rates if the meeting were held tomorrow. Kansas City Fed President Jeffrey Schmid echoed the sentiment, noting that “very definitive data” would be required to justify any policy changes.

Atlanta Fed President Raphael Bostic maintained that a rate cut remains possible this year but stressed the forecast is surrounded by uncertainty. Meanwhile, Chicago Fed leader Austan Goolsbee described the upcoming meeting as “live,” capable of influencing rate policy, but pointed to mixed economic data and unexpectedly high inflation as reasons for caution. He highlighted the recent spike in services inflation, which he described as a “dangerous data point,” suggesting that the Fed is approaching any easing in rates carefully.

The remarks underline a cautious Fed stance as markets await Powell’s guidance for signals on the central bank’s next moves on interest rates.

Data Spotlight
US labour market showed signs of softening as initial claims for state unemployment benefits rose by 11,000 last week to a seasonally adjusted 235,000, the largest increase since late May. Continuing claims also climbed to the highest level in nearly four years, highlighting ongoing weakness in August.

Meanwhile, US business activity gained momentum, led by a resurgence in manufacturing. S&P Global’s flash Composite PMI Output Index rose to 55.4 in August, the highest since December, with the manufacturing PMI jumping to 53.3, the strongest growth in orders in 18 months and above expectations, signalling expansion in the private sector.

Takeaway: US latest data provided mixed signals for the economy as investors weigh labor weakness against resilient business activity.

WHAT HAPPENED OVERNIGHT

• US Stocks fall ahead of Fed Chair Powell’s Jackson Hole speech
  
  • Major indexes fell on Thursday as investors awaited Fed Chair Jerome Powell’s speech today at the Jackson Hole, expecting clues on US interest rate cuts in September. 
  • Walmart quarterly results disappointed, contributing to negative investor sentiment across consumer stocks.
  • Nvidia, Meta, Amazon.com, and AMD continued to underperform, keeping pressure on Nasdaq despite a partial rebound earlier this week.

• US Treasury rise on strong economic data
  
  • The yield on the 10-year US Treasury rose to 4.328% on Thursday, reflecting strong economic indicators that support a hawkish stance from Fed policymakers.
  • Markets reacted to stronger economic signals, including accelerated business activity in August.

• US dollar gains ahead of Powell’s speech as business activity strengthens
  
  • US Dollar strengthened as investors positioned ahead of Fed Chair Jerome Powell’s speech for potential signals on interest rate policy.
  • The euro weakened against the greenback amid stronger-than-expected US business activity.
    Supported by strong US business activity data.

• Crude oil prices rise amid stalled Ukraine peace talks 
  
  • Brent crude oil futures rose 1.2%, to settle at $67.67 a barrel, marking a two-week high.
  • Prices climbed as Russia and Ukraine blamed each other for a stalled peace process, while earlier US data indicated strong oil demand, supporting the market.

Day’s Ledger

Economic Data:

• ECB July Consumer Inflation Expectations
• India Foreign Exchange Reserves 
• Japan July Inflation Rate 

Corporate Actions:

• Bizotic Commercial to consider fund raising 
• Classic Leasing to consider fund raising
• Foseco India to consider fund raising
• Unison Metals to consider stock split.
• Welcure Drugs to consider stock split, bonus share issue

Policy Events:

• Fed Chair Powell Speech at Jackson Hole

TICKERS TO WATCH

• Block deal slip at Clean Science blamed on broker’s erroneous sell order
• Concord Biotech’s Limbassi API plant clears EU inspection process
• CRISIL shifts PG Electroplast long-term outlook to negative from stable
• GMR Airports set to raise funds through mix of debt and equity route
• HUL brings in Niranjan Gupta, ex-Hero MotoCorp head, as finance chief
• NHPC board to review revised FY26 borrowing programme on Aug 29
• NewAmsterdam, Piramal Pharma arm roll out oral solid dosage facility
• Suzuki and Tata Elxsi unveil cloud-enabled centre in Thiruvananthapuram
• Usha Martin offloads leasehold land parcel in Tamil Nadu
• Wipro moves to acquire Harman’s digital transformation business unit

MUST READ: 

• RBI floats discussion paper to review inflation targeting framework
• GST rationalisation: GoM backs Centre's proposal to end 12%, 28% tax rates
• India's GDP growth likely at 6.3% in FY26, below RBI estimates: SBI report
• Hindalco plans $10 bn push; Dahej copper smelter set for global milestone
• SEBI to improve tenor of derivatives, hints at pre-IPO trade project
• RBI board to meet Friday to approve new internal monetary policy member
• Govt may complete IDBI Bank privatisation by Mar 2026: Dipam Secretary
• Business Activity gains pace as manufacturing rebounds
• Boeing in talks to sell China hundreds of planes as part of US trade deal
• Fed’s Cook says she won’t be bullied into stepping down

See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

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