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BofA: Powell To Send "Higher For Longer" Message At JH

FED

BofA thinks Powell is likely to use his Jackson Hole speech to say the pace of hikes could slow 'at some point' while emphasizing restrictive policy ("a slower pace of hikes does not imply the Fed has changed its view on the appropriate terminal rate of the current hiking cycle").

  • BofA expects the Fed "to push back against any notion of a quick pivot to rate cuts", with Powell "likely to repeat that the Fed will keep policy restrictive until it has clear and convincing evidence that PCE inflation is on a path to average 2% over time."
  • That message could be characterized as "higher for longer" vs the prior cycle's "lower for longer".
  • BofA continues to expect a 50bp hike in September. Another 50bp in Nov and 25bp in Dec will bring rates to 3.50-3.75%, but "risks to our outlook are in the direction of a longer expansion and more hikes."
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