It’s Friday! But more importantly, it’s Jackson Hole day! Jerome Powell will deliver comments at 10 a.m. ET in Wyoming in what could be his most important speech of the year.

We’ve got everything you want to know.👇️ 

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Powell must take the right tone

Two items this week confirmed that the Federal Reserve will cut interest rates in September: 

1. The biggest downward jobs revision since 2009

2. Minutes from the July Fed meeting

The jobs data told us the labor market has been much weaker for much longer than policymakers previously acknowledged, while the Fed minutes revealed some central bankers had already wanted to ease policy earlier this summer. 

All this suggests the Fed is indeed behind the curve on cuts. 

Jerome Powell & Co. have been able to bring inflation from a searing 9% to a less than 3% annual rate over the last two years without causing a meaningful economic slowdown. 

Nonetheless, it’s time for Powell to play catch-up — starting today in Jackson Hole, Wyoming.

“The Fed is late, and is now going to have to scramble after the decline in inflation, in an undignified manner,” UBS economist Paul Donovan said. “Policy operates with a lag, so the economic benefit of these cuts will take some time to come through.”

Callie Cox, chief market strategist at Ritholtz Wealth Management, says she’ll be monitoring Powell’s comments and tone regarding jobs in particular.

“I think the Fed is behind the curve when it comes to commentary,” Cox said.

“I’m not sure a 25-basis-point cut in July would have done much, but the Fed needs to take this opportunity to change their messaging. I’m not sure how markets will tolerate a speech that talks about a balance of risks. It sure looks like the risk is shifting to the unemployment side of the mandate.”

Markets, meanwhile, are sure to be watching closely.

One year ago, the S&P 500 climbed 0.6% after Powell’s Jackson Hole speech was taken as the end of rate hikes.

Two years ago, the benchmark dropped more than 3% after more aggressive remarks about curbing inflation and the potential for economic pain.

As of Thursday, traders see a three-in-four shot of a 25-basis-point rate cut at the September meeting, according to CME data.

By year’s end, markets forecast a total 100 basis points of cuts.

To be sure, central bankers have a challenging task in making data-based decisions to steer a complex economy. That becomes even more difficult when said data is subject to hefty revisions. 

The 818,000 jobs we saw wiped out Wednesday, for instance, have injected fresh doubt into the quality of other recent economic data. 

Plus, rate cuts don’t have an overnight impact, which is one reason a “data dependency” approach isn’t foolproof.

“Given that everything was weak in the latest July jobs report — weak payrolls, rising unemployment, falling hours worked and cooling wages — [Wednesday’s] update will only put more pressure on the Fed to loosen monetary policy,” wrote James Knightley, chief international economist at ING, in a note to clients.

“Momentum is being lost from an even weaker position than originally thought.”

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Elsewhere:

💼 Jobless claims have ticked up. The number of Americans filing new applications for unemployment benefits increased in the latest week, though the rate of change appears to be flat-lining, the Labor Department reported Thursday. Initial claims for state unemployment benefits rose 4,000 in the week ending August 17, to hit 230,000 total, seasonally-adjusted. (Reuters)

🏠️ Mortgage rates dropped below 6.5%. This month, the US housing market has been supported by expectations for imminent Fed rate cuts. That’s helped the typical 30-year fixed-rate mortgage to drop to 6.46% from 6.49% a week ago. However, at the same time, applications to refinance and purchase homes have seen a recent decline. (Yahoo Finance)

🥇 Gold is at a record high. The price of bullion could keep climbing despite already gaining more than 20% this year. Investors are betting on lower interest rates, which should lead to a weaker US dollar. Gold, in turn, tends to strengthen when the buck gets weaker. Geopolitical uncertainty has also fueled gold prices, as it’s considered one of the safest stores of value. (Barron’s)

Rapid-fire:

• Peloton stock notched its best day on record with a 35% rally (CNBC)

• Economist Mohamed El-Erian says the market is pricing in too many Fed cuts (Bloomberg)

• A key manufacturing and services indicator showed marginal signs of slowing in August, but it remains at expansion levels (WSJ)

• Philly Fed President Harker endorsed a rate cut for September (CNBC)

• A top ESPN+ executive explains how he helped make Disney’s streaming business profitable (Business Insider)

Last thing:

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