Federal Reserve Chairman Jerome Powell's remarks in Jackson Hole last week broke little ground. They confirmed what the market already expects - a 25 basis point (bp) cut in the Federal Funds rate in September - but stopped short of hinting at further easing. What's more, various current and former FOMC (Federal Open Market Committee) officials raised the prospect of a slower (or no) response. We think a more aggressive approach will be needed to mitigate the risk of recession in the U.S.
We believe so, in part, because recent economic data may understate the