Summary · why it matters
Kevin Warsh, President of the Federal Reserve, delivered a more hawkish-than-expected speech at the Jackson Hole symposium, prompting investors to increase bets on a 0.25% rate hike at the September meeting to 60.4%, up from 56%, according to the CME FedWatch Tool. Warsh emphasized inflation risks and his commitment to bringing inflation back to the 2% target. Meanwhile, Deutsche Bank maintains its forecast that the Fed will raise rates by a total of 0.50% this year, with 0.25% hikes at both the September and December FOMC meetings. UOB views the risk of the Fed returning to a more restrictive policy as still high, but also notes the possibility that the Fed may only signal with strong language without actually adjusting policy. Nomura points out that short-term inflation data will be crucial for the Fed's decision. However, some analysts, such as Matthew J. Maley of Miller Tabak + Co., see no empirical evidence supporting the need for a rate hike, citing weak labor market data and better-than-expected inflation. Gavekal Research notes that Warsh's stance could put the Fed at odds with the Treasury's increased long-term bond buybacks. Susquehanna's gold market commentary suggests that Warsh's commitment supports the dollar, causing the debasement trade that had driven gold prices up 14% in August to begin reversing.
NOMURA CORPORATION
NOMURA Co., Ltd.
Nomura Holdings, Inc.
Deutsche Bank Aktiengesellschaft
United Overseas Bank Limited