Powell's Dilemma, Laura's 4th Category and jobless claims

Today, all the attention of the financial markets will be focused on the speech of the head of the Fed, Jerome Powell, at the online version of the annual symposium in Jackson Hole. The fact is that the Fed in the foreseeable future may face a dilemma: if inflation rises, the Central Bank should intervene and tighten monetary policy (raise rates, cut quantitative easing, etc.), but in the current environment, when the economy is experiencing a deepest crisis since the Great Recession (often used to refer to the 2007-2009 Global Financial Crisis), this can make matters worse.

So, everyone is waiting for the Fed's position on this issue. A compromise option is to temporarily move away from the inflation target in favor of, for example, “average inflation”. This will give the Central Bank time to maneuver, freeing it from the obligation to respond as quickly as possible.

In addition, deflation is a potential problem for the Fed, which, coupled with falling GDP, creates preconditions for the economy to go into a depression. In this case, the Fed should use additional monetary stimulus, for example, yield curve control, additional quantitative easing program, moving rates into the negative zone, etc.

In total, Powell's speech may well become historical. This, in turn, can provoke an increase in volatility in the financial markets.
In the meantime, hurricane Laura got the fourth category and threatens with great destruction and losses. According to experts it can cost about $18 billion, and this is not counting the possible closure of oil refineries for months. However, a more likely scenario is that there will be no catastrophic consequences and everything will quickly return to normal. This means that the growth of oil prices still remains an opportunity for more expensive sales.

A telephone call between the US and China appears to have benefited the trade agreement between the countries. At least according to sources, China plans to buy record volumes of soybeans from the United States this year.

Today, data on jobless claims in the United States will be published, which is the earliest indicator of the state of the labor market in the United States.