Warsh speaks at the Jackson Hole symposium

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Walsh speaks at the Jackson Hole Symposium

August 28, 22:00 Beijing Time, Fed Chair Walsh will deliver his first keynote address since taking office at the Jackson Hole Global Central Bankers Symposium. This is the most critical policy window before the September FOMC meeting. Niuniu Circle will provide a live broadcast of this major event!

Multiple Wall Street institutions warn that Walsh's speech serves as a systemic pricing anchor, with influence even greater than NVIDIA's earnings report. The remarks will directly impact interest rate expectations, U.S. Treasury term premiums, USD liquidity, and discount rates for global risk assets, causing volatility across major asset classes including U.S. equities, Treasuries, gold, and foreign exchange.

The yield on the 30-year U.S. Treasury recently touched 5.34%, a high not seen in over two decades, while inflation has remained above the 2% target for five consecutive years. The market is waiting for Walsh to restore the Fed's credibility in fighting inflation. Institutions note that since taking office, Walsh has pursued a "quieter Fed" strategy, actively reducing forward guidance and shortening policy statements. This new model shifts pricing power to the market, which has already increased volatility in interest rate markets.

Goldman Sachs estimates that enhanced central bank communication could reduce interest rate volatility by approximately 10% over the next year, yet Waller is currently doing the opposite. Even if Waller himself does not raise rates, if his remarks remain vague, investors will actively demand higher risk premiums, causing long-term bond yields to continue rising—effectively amounting to market-driven tightening.

Real-world pressures have forced Waller to confront the market directly. Many on Wall Street are urging him to break his silence and address inflation head-on in his Friday speech, rather than merely discussing long-term macroeconomic themes; he needs to provide an assessment of the current economic situation and clarify the triggers for rate hikes. Adam Posen, Director of the Peterson Institute for International Economics, suggested that Waller should send a clear signal: if inflation data does not improve, there is a realistic possibility of rate hikes in the coming months.

The market will focus on four core issues:

First, whether a clear and verifiable anti-inflation reaction function will be provided, specifying which data triggers rate hikes while adhering to the 2% inflation target;

Second, how to interpret persistently high long-end US Treasury yields, along with statements on balance sheet reduction and Treasury bond buybacks;

Third, should the Fed continue to stick to its reform path of downplaying forward guidance, or should it moderately release clues regarding the interest rate trajectory for September and December?

Fourth, how to balance fiscal intervention with the Fed's policy boundaries in a high-debt environment.

The market projects asset performance under three scenarios:

Scenario 1,Maintaining ambiguity (highest probability): Only verbal commitments to price stability, without providing a specific policy path。Institutions predict that the 30-year US Treasury yield may break through 5.4%, putting pressure on the US dollar, while gold continues to strengthen and growth stock valuations face headwinds.

Scenario 2,Hawkish signals emitted: Clear willingness to raise rates to combat inflation, significantly boosting the probability of a rate hike in September.。Long-term bond yields declined in the short term, helping to restore the Fed's credibility, but the strengthening US dollar has put pressure on risk assets.

Scenario 3,Pivot to dovish stance: Implies an extremely high threshold for rate hikes, with no further hikes expected this year.Long-term bond yields fall and risk assets rebound, but this will further erode the Fed's anti-inflation credibility.

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