Fed expected to begin rate cuts in September after Powell speech

Federal Reserve officials and Wall Street analysts are converging on the view that the central bank will begin cutting interest rates in September after Fed Chair Jerome Powell signaled a shift in policy at a speech in Jackson Hole last week, triggering a swift rally in U.S. stocks and renewed market expectations for easing. Investors now assign roughly an 80 to 90 percent chance that the Federal Open Market Committee will lower its target range from the current 4.25 to 4.50 percent at the meeting on September 16 and 17, according to the CME Group FedWatch tool and market moves after Powell spoke.

Powell told the annual Jackson Hole gathering that the baseline outlook and a shifting balance of risks may warrant "adjusting our policy stance," pointing to a labor market that has cooled from last year's pace even as unemployment remains low. Investors read those comments as an opening for a 25 basis point cut at the September meeting. Stocks jumped on the remarks, with the Dow hitting a record high and the S&P 500 and Nasdaq also advancing before some of the optimism eased in early trading this week.

Federal Reserve Governor Christopher Waller reinforced that trajectory on...