Key points:

  • US stock indexes fell, breaking their positive momentum.
  • Market attention is focused on the annual economic symposium in Jackson Hole, where Federal Reserve Chairman Jerome Powell will speak.
  • The Fed is aiming for a “soft landing” of the economy, that is, a reduction in inflation without a significant increase in unemployment.

US stock indexes ended the trading session on Tuesday with a moderate decline, interrupting the recent positive dynamics. The market experienced pressure from several factors on the eve of the annual economic symposium in Jackson Hole, which starts on Thursday, where Federal Reserve Chairman Jerome Powell is scheduled to speak.

The Dow Jones Industrial Average index fell by 61.56 points, the S&P 500 index lost 11.13 points, and the Nasdaq Composite index fell by 59.83 points.

Fed ready to cut rates

Participants at the annual central bank conference in Jackson Hole, Wyoming, including representatives of the US Federal Reserve, are likely pleased to note the continued low unemployment rate in the country. The unemployment rate in the US is 4.3%, which is a historically low figure.

While the unemployment rate has gradually increased from 3.7% in January 2023 to 4.3% in July 2024, this was accompanied by an increase in the number of people actively looking for work by 1.2 million. Such an increase is usually seen as a positive signal for the economy, but it can also put pressure on the unemployment rate in the future.

Lately, Fed officials have increasingly expressed the need to be prepared to cut interest rates. This is due to the potential weakening of the labor market. It is worth noting that the US central bank’s key interest rate has been held at 5.25%-5.50% for more than a year, which is the highest level in the last quarter of a century.

Other top Fed officials, including San Francisco Fed President Mary Daly, have expressed confidence that inflation is gradually falling and approaching the central bank’s 2% target. They are also open to discussing the possibility of lowering interest rates in the future.

The regulator is trying to avoid a crisis in the labor market

Next month, the Federal Reserve is likely to decide whether to cut interest rates by a quarter percentage point. Along with that decision, it will release updated economic forecasts that will outline the Fed’s outlook for rates and the broader economy through the rest of this year and into 2025.

Fed Chairman Jerome Powell is expected to reiterate the central bank’s commitment to a more accommodative monetary policy in his speech at the annual Jackson Hole meeting after successfully tackling record inflation.

Fed policymakers hope that gradually lowering interest rates will allow the economy to experience a so-called “soft landing,” in which inflation declines without a significant increase in unemployment. Historically, central banks’ attempts to slow inflation by raising interest rates have often led to economic downturns and rising unemployment.

Despite continued strong consumer spending and positive economic growth, the Fed sees no sign of serious problems in the labor market. The goal of the central bank is to prevent a crisis in the labor market while containing inflation.