Powell Speech: Average inflation targeting is a baseline expectation – JP Morgan

In the latest note to clients, analysts at JP Morgan said that they believe the US Federal Reserve (Fed) Chairman Jerome Powell could unleash a new monetary policy framework during his address at the Jackson Hole Symposium due later on Thursday at 1310 GMT.  

Key quotes

“It’s unlikely that Powell will not address the Fed's policy review before the September Fed meeting.

Average inflation targeting is a baseline expectation.

Expects the USD to come under more pressure if Powell effectively sets the stage for a roll-out of this framework at the September meeting, more so if he gives specifics and assurance that it's moving forward.

Clearly there's scope for disappointment if Powell avoids the subject or dismisses it, which would no doubt see the USD regain some of its recent losses.

No surprise FX options are pricing increased short-term USD-related volatility.”

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