 Welcome to the Market Maker podcast, hosted by me, Anthony Chung, where every Friday I talk to a member of the team about what happened in markets this week, from macro themes and single stock news to cryptocurrencies and careers in finance. Our aim is simple, to make finance interesting and easy to understand for everyone. So let's get to it. Hello and welcome to episode 79 of the Market Maker podcast. Piers Curran, my normal colleague who would do the show with me, is off the desk. And so I thought I would just do a breaking news episode, keeping it short and focused on what arguably is the main important event of this week. And it's literally just happened in the last 15 minutes. And that is the chairman of the Federal Reserve, the US Central Bank, Jerome Powell, has just delivered his Jackson Hole symposium speech. If you're wondering what Jackson Hole is, just a quick one on one. Essentially, the US Central Bank has eight interest rate meetings where they set major policy eight times a year. However, outside of that, the Jackson Hole symposium is an annual platform that central bankers have. So typically you have all of the members of the US Central Bank, but you also get people from the Bank of Japan, the Bank of England and so forth. And they all come together and gather for a symposium where they give their views about current economic conditions and then perhaps lay some hints, i.e. forward guidance on future policy. So there's been a lot of concentration from market participants awaiting the speech this Friday. Historically, that can absorb quite a lot of the just general activity of the week, because not many people really want to step into the market and re-initiate new positions or change too much ahead of such a large risk event. But the events just come out. Markets are still chewing over it. So depending on when you actually listen to this episode, the overall end of day market reaction might be a little bit different. But let me talk you through exactly what has been said, because it's a major talking point. And I literally have just replied to someone on LinkedIn from the Amplifier alumni and he said he has an interview at point seventy two in two and a half hours time and and Jerome Powell is going to be one of the key things of which I'm sure that they're going to ask him about for his commercial awareness. So for that point, let's talk about what's just been said. And so the way that the information comes out, so if you've never really watched intraday daily markets, is that this is a predefined speech. So it's at a set time. In this case, it came out at 3 p.m. London time. So at 3 p.m., he will begin delivering his speech live if you were to watch it on on TV or financial news networks. But if you have a professional news terminal service, so like a Bloomberg, for example, then his speech would have been embargoed legally. And all that means is that these accredited news agencies, they have seen his speech already ahead of time, typically half an hour. And it's in what's called a lockup where all the journalists go in. They're literally given his speech. They're able to go through it and pick out the top 10 kind of main takeaway points. And then when we get to the legally legally embargoed times, in this case, 3 p.m., they drop all of those 10 major comments. So instead of kind of looking at Jerome Powell speaking, no one really cares about that when you're actually an active market participant, because you've already seen all the key comments come out. And typically someone like Bloomberg will highlight with a red kind of sticky text headline, what the major important thing is. So in this case, really, I can kind of distill down a very long speech into some critical takeaway points that really summaries what's being said here. And first one is that Jerome Powell said September rate action will depend on the totality of incoming data. And that really sums up the status quo. And it's something we've been talking about all week with some of the interns we've had who are with us at the moment. And that's the idea of I guess when you're not used to looking at markets, you kind of think that, you know, is Jerome Powell going to go for 70 kind of hint towards a 70 basis point rate hike come the end of September? Or is it going to go for 50? What could he say? And this is exactly what we were expecting was the idea that really we are too far away from that meeting. It's not until the 21st of September. So that's like 26 days away from today I'm recording this. And in between that period, you're going to get, as you always do, at the beginning of a month, you get the latest US major labor report, non-farm payrolls. And I think it's around the 13th, you get the US CPI report, which is obviously a very weighted component of central bank decision making, given the overarching focus on inflation at the moment. And so what he's saying is, is look, we got to wait for the data. So actually, you know, if you were thinking of this from a longer time horizon, if I was not, let's say, a day trader or a market maker or a sales trader in the short term, if I was a portfolio manager, I'm thinking, look, I don't really want to alter anything right now. I've really got to see for clarity to emerge from those data points to come in to really have a much better insight then as to what likely is to happen in September. We're too far out to really speculate. The other things that were said that were important was restoring price stability will likely require maintaining a restrictive policy stance for some time. How added the lower July inflation print. You remember the one we had just a few weeks ago, surprised at the downside, which was a welcome relief at the time. So power added the lower July inflation print was welcome, but not enough to change the Fed's view. And that's very important because central bankers typically are not reacting to one time data prints, whether negative or positive. If they're trying to determine policy over typically what is a two year medium term time horizon, they want to be making judgments on the data, providing them with some degree of a trend and direction of where that kind of economic data set is heading, not reacting to one time anomalies in that sense. So if inflation has peaked in the US, we need to see that in the upcoming CPI report that we'll get in about two and a half, three weeks time, as I said earlier. Then the final comment he said, which was interesting, was that history cautions against premature loosening of policy. So actually, we've had a bit of two way price action in the initial five minutes, and then we were exactly scratch of where we were. And a lot of that rationale is based on the notion that what's been said here is kind of little guidance, but consistent with what Fed officials have been saying. It doesn't rock the boat. It's not definitive about 5075. And it's exactly then as we would have thought. And so a little bit of volatility and it's kind of flattened out. We have in the subsequent five minutes. So now 15 minutes or so after the announcement, seeing a little bit of downside weight come into the equity space and a little bit of strength in the US dollar. And if you piece together the overall step back and look at what's being said here is we're not talking about hiking or stopping hiking rates here. We're talking about hiking rates in a very aggressive fashion, like the double 75 that they done. Do we get a triple in that sense? Or do we slow slightly the pace? But we're still tightening at a fairly aggressive margin. And the idea then putting together that restoring price stability will likely require maintaining restricted policy and that history cautions against premature loosening. You know, you could argue still means that the the Fed are in inflation mindset, which is tightening policy at this point. And that, of course, is more leaning on being an equity negative, i.e. further pressure on things like tech stocks and so forth. The further removal of the accommodative policy that underpin the rise that we've had of equities of late. So hopefully that explains very shorthand exactly what's happened from the Fed. I think once we have the weekend to sleep on this, really the market acclimatizes to the fact that, look, we've got to wait for incoming information. But that's the difference between what markets look at and trade in the short term to ultimately a real key decision making on the real path of the economic direction coming from emanating from Fed policy. So there's a difference between the trade opportunity against real fundamental view, if you like, of which the latter we're going to have to wait for. So that is it. Nice, short and sweet episode this time round. So I'm not going to go through the entire week. If you don't already do so, you can stay, of course, on top of all of the market news and insights and career opportunities that we get from our partners. All you need to do is just go on the link in the show notes and sign up for the market, make a daily newsletter. And then, yeah, please do feel free to rate the show, share it with a friend, the podcast. It'd be amazing to get out there to many people as possible and have yourself a fantastic long weekend. If you're in the UK and I'll see you for next week's episode as per normal's peers. All right, take care. See you next time.