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Inflation, the "number one financial risk" in the United States, seems to be slowly declining. As the hot wind of the economic "soft landing" last week blew again, global stock markets and emerging market stock markets recorded their best single-week performance since October last year and April this year, respectively.

After the big rise, in this week's lackluster economic data, the focus of global markets will return to global central banks.

The most anticipated event is the Jackson Hole Global Central Bank Annual Meeting to be held from August 22 to 24. Fed Chairman Powell will deliver a speech at 10 a.m. Eastern Time on the 23rd. In addition, the Governor of the Bank of England and the Chief Economist of the European Central Bank will also deliver speeches on the 23rd and 24th. The Governor of the Bank of Japan will explain why it decided to raise interest rates in July on the 23rd. The Reserve Bank of Australia will release the minutes of the meeting. The Bank of Indonesia, the Bank of Korea, and the Bank of Thailand will also announce interest rate decisions one after another. The Bank of Indonesia and the Bank of Thailand may cut interest rates.

"How global markets trade stocks in another quiet data week will depend more on global central bank decisions and guidance. This is also critical to setting the tone for a busier month-end," said Bob Savage, head of market strategy and insight at Bank of New York. He added that the market will also be affected by unknown factors in the political and geopolitical fields this week. Obviously, the slightest disturbance in the Middle East situation and the conflict between Russia and Ukraine is enough to affect market confidence.

Jackson Hole Central Bank Annual Meeting is coming

From August 22 to 24, the Federal Reserve's Jackson Hole Annual Meeting will be held in Grand Teton National Park, Wyoming, USA. As one of the oldest central bank meetings in the world, this annual meeting will once again become the highlight of the global economic and monetary policy field. Among them, Powell's speech at 10 am on August 23, US Eastern Time will undoubtedly be the top priority of the market.

Unlike previous years, the theme of this year's meeting is "Reassessing the effectiveness and transmission mechanism of monetary policy", which indicates that Powell's speech may involve new trends and assessments of monetary policy. The market generally expects that Powell will give clues on monetary policy in his speech.The market hopes to confirm whether the Fed will cut interest rates in September. At the same time, as the Fed faces the dual risks of inflation and employment, what will happen after the first rate cut, what will be the pace of further rate cuts in the coming months, and whether it will be more dramatic are also information the market is trying to seek.

"Financial markets are sensitive to every word from Powell," wrote Commonwealth Bank of Australia strategist Joseph Capurso in a research note. "We expect the Fed to cut rates for the first time on September 19, but we expect Powell to be reserved in his comments this time to see whether the subsequent rate cuts will be delayed or based on the next consumer price index (CPI).CPI) and employment data to make a bigger rate cut option.”

Bloomberg's team of economists commented that "Powell is very likely to announce in his speech at the Jackson Hole Annual Meeting that it will soon be the 'appropriate' time to cut interest rates. Therefore, the market's attention will be focused on a narrower question: Will he signal that he is open to a single 50 basis point rate cut?" In this regard, the brokerage team believes that "Powell will not close the door to a 50 basis point rate cut, but he will not show any particular inclination, because the Fed may not have reached a consensus on the urgency of a rate cut."

Goldman SachsThe market is expected to receive dual signals of "confidence in rate cuts" and "data dependence". Goldman Sachs economists expect the Fed to cut interest rates by 25 basis points three times in a row starting in September, and the market has overpriced a single rate cut of 50 basis points. In the view of Michael Gapen, head of economics at Bank of America Merrill Lynch, Powell may place more emphasis on the influence of labor market data. "The easiest thing for Powell to do is to repeat the message he delivered in July. The evolution of the Federal Open Market Committee (FOMC) statement in July shows that the Fed is 'very close' or 'close' to the extent that monetary easing may occur. Of course, Powell may also send a more dovish signal, indicating that the FOMC wants to avoid unexpected weakness in the labor market, rather than wait until the labor market does weaken before responding," he said.

Chicago Mercantile ExchangeThe FedWatch tool shows that the market generally believes that a 25 basis point rate cut in September is more likely, while a 50 basis point rate cut is also possible. Market participants believe that the Fed will remain cautious on the issue of rate cuts, neither wanting to cause a recession by cutting rates too late, nor wanting to cut rates too proactively to trigger a rebound in inflation. In a report last week, a team of strategists at Piper Sandler said that Powell is unlikely to signal a 50 basis point rate cut at the Jackson Hole Symposium. Powell could simply update the recent FOMC statement, emphasizing that "the committee is gaining greater confidence" and that inflation is falling to the Fed's 2% target. The agency's strategists believe that with more data to be released before September, Powell may hesitate to overstate his position.

Before the speech on the 23rd, the Federal Reserve will also release the minutes of its July monetary policy meeting on August 22nd, Eastern Time. The market generally expects to find the direction of the Federal Reserve's future monetary policy through this minute.QualcommIn response to inflation, the Federal Reserve has taken a series of aggressive interest rate hikes, pushing the benchmark interest rate to a range of 5.25% to 5.50%. However, since the last 25 basis point rate hike in July 2023, the Federal Reserve has remained on hold.

Recently, the economic data released by the United States are mixed. On the one hand, the employment data in July was unexpectedly weak, and the unemployment rate rose to the highest level in nearly three years. At the same time, the CPI and the industrial producer price index (PPI) and other economic data were lower than expected, indicating that inflation has gradually slowed down; on the other hand, retail sales and initial jobless claims data were better than expected, and the positive performance of consumers and the job market eased market concerns about the economic outlook. These data increased market disagreement on the prospects of the Fed's rate cut.

In addition to Powell, Bank of England Governor Andrew Bailey will also deliver a lunch speech at 15:00 on August 23, Eastern Time, and European Central Bank Chief Economist Philip Lane will participate in the meeting review group discussion on the 24th. Bank of Japan Governor Kazuo Ueda will be absent from the meeting this year. The specific meeting schedule details will be announced on the evening of the 22nd, Eastern Time.

Several central banks in Asia will also announce interest rate decisions

After the "Black Monday", the Asia-Pacific market also rebounded last week along with the global stock market. The trend of the Asia-Pacific market this week will also be affected by the Jackson Hole Central Bank meeting. At the same time, many central banks in the region will also announce interest rate decisions this week, which will also affect the outlook for the stock market in the region.

After last week's general rise, Asia-Pacific stock markets rose and fell on the 19th. Japanese stocks fluctuated in early trading in Asia-Pacific. The Nikkei 225 index fell more than 600 points to close at 37,388.62 points. Previous data showed that Japan's core machinery orders, a leading indicator of capital expenditures in the next 6 to 9 months, fell 1.7% year-on-year in June.

Kazuo Ueda will attend a Japanese parliamentary hearing on the 23rd to explain the July 31 rate hike, which is believed to have triggered the unwinding of yen carry trades and disrupted global markets. Data from the U.S. Commodity Futures Trading Commission (CFTC) last Friday showed that hedge funds began to go long on the yen for the first time since March 2021 last week. In the first week of July, the dollar was at a 38-year high of around 162.00 against the yen. Subsequently, hedge funds gradually closed their short yen positions, during which the yen rose by about 10% against the dollar. On the 23rd, Japan will also release July CPI data, and the market expects that the data may record a rebound for three consecutive months.

Elsewhere in Asia, Australia's S&P 200 index rose 0.12% to 7,980.40 points as of press time. On August 20, the Reserve Bank of Australia will release the minutes of its August monetary policy meeting. Economists are looking for signs of a softening of the Reserve Bank of Australia's "hawkish" rhetoric. Traders currently expect that by the end of the year, the Reserve Bank of Australia has a probability of about 70% to cut interest rates from the current 12-year high.

Among other major Asia-Pacific stock markets, the Seoul Composite Index fell 0.2% to 2690.83 points; Hong Kong's Hang Seng Index rose 1% to 17611.77 points; the Shanghai Composite Index rose 0.5% to 2894.57 points; and the Bangkok SET Index rose 0.8%. Earlier data showed that Thailand's GDP grew 2.3% year-on-year in the second quarter, driven by tourism.

On August 21, the Bank of Thailand and the Bank of Indonesia will both announce their interest rate decisions. Given the continued decline in prices and slowing economic growth, the market believes that both central banks are expected to announce rate cuts. Following closely, the Bank of Korea will hold a rate meeting on August 22 and is expected to keep its policy unchanged. South Korea's unemployment rate unexpectedly fell to its lowest level since October last year, giving the Bank of Korea the confidence to further delay its policy shift. South Korea's statistics department said last Wednesday that the seasonally adjusted unemployment rate fell to 2.5% in July from 2.8% in June, while economists surveyed had previously predicted that the unemployment rate would rise slightly to 2.9%. Many economists have recently pushed back their expectations for the timing of the Bank of Korea's shift to easing, predicting October as the most likely time.

Economists at Nomura Securities said in a report earlier that the Fed's upcoming rate cut will lower the threshold for Asian central banks to cut interest rates, but not all Asian central banks will follow the Fed's footsteps. Nomura believes that the Fed's easing of monetary policy and lower U.S. Treasury yields may lead to early rate cuts by the Indonesian Central Bank and the Philippine Central Bank; however, the Bank of Korea may only cut interest rates from October because concerns about foreign exchange have been replaced by concerns about rising housing prices.