As August draws to a close, attention turns to the annual central banking event in Jackson Hole, where Fed Chair Jerome Powell will deliver a pivotal keynote speech. The market is speculating on the potential for a rate cut in September, which CME futures currently predict at 71% likelihood. This expectation contrasts with last month’s disappointing jobs report and persistently high inflation that remains above the Fed's 2% target. Additionally, the Fed is due to release its five-year review of its monetary policy framework, which may signal a potential shift from its flexible average inflation targeting towards a more rigid 2% target. The July FOMC meeting minutes, which were seen as hawkish and indicated no inclination for rate cuts, may serve as a blueprint for Powell's upcoming address—potentially downplaying market expectations for imminent cuts. Despite the weak jobs data, the inflation dynamic may keep Fed officials focused on maintaining a hawkish stance. The upcoming days will reveal whether these predictions hold true or if the market sentiment shifts drastically.

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