Powell speech to offer clues on Fed interest rate path

Federal Reserve Chairman Jerome Powell participates on Monday in a moderated discussion titled "A View from the Federal Reserve Board" at the National Association for Business Economics Annual Meeting in Nashville, starting at 17:00 GMT. Powell is expected to speak on the economic outlook and comment on the monetary policy path.

Fed rate outlook remains uncertain

The Fed opted for a 50 basis points (bps) interest-rate cut following the September policy meeting, bringing the fed funds rate to the range of 4.75%-5.0%. The revised Summary of Economic Projections (SEP), the so called dot-plot published alongside the policy statement, showed that projections imply 50 bps of additional rate cuts in 2024 from current level, 100 bps more in 2025 and another 50 bps in 2026.

The CME FedWatch Tool shows that markets are currently pricing in a nearly 50% probability of another 50 bps rate reduction at the next policy meeting in early November. On Friday, the US Bureau of Economic Analysis reported that the core Personal Consumption Expenditures (PCE) Price Index rose 0.1% on a monthly basis in August, at a softer pace than the market expectation of 0.2%. 

Fed policymakers spoke on the policy outlook recently and their remarks painted a mixed picture. Fed Governor Michelle Bowman, who is also set to speak again at 12:50 GMT, noted that she prefers a more measured re-calibration of policy and added that she continues to see greater risks to price stability. On a dovish note, Chicago Fed President Austan Goolsbee argued that interest rates need to come down significantly and said that "many more rate cuts" are likely needed over the next year.