Monetary policy

In his speech at the Federal Reserve's Jackson Hole Economic Symposium, the Fed chair said employment losses are now a bigger risk than elevated inflation.

"Fed watchers will be parsing Powell's comments for signs that a 50bp rate cut is on the table for September," noted Lauren Saidel-Baker, an economist with ITR Economics. "However, the notoriously tight-lipped chair is unlikely to confirm this, making a 25bp cut the most likely outcome."

Policymakers also made several adjustments to the language of a statement released after their two-day meeting in Washington, signaling they are closer to reducing borrowing costs.

The central bank also noted that the banking system is sound but faces several challenges. The report precedes Federal Reserve Chair Jerome Powell's upcoming appearances on Capitol Hill.

Federal Reserve Chair Jerome Powell says crushing inflation is the most important thing the Fed can do to reduce costs in the housing market. Some economists and policy specialists say higher rates are not the only tool at its disposal.

In a speech, the Federal Reserve governor said she would have liked to see the Federal Open Market Committee move more quickly to reduce its holdings. The central bank is poised to begin slowing the pace of balance sheet runoff this week.

The Federal Open Market Committee held the federal funds rate at current levels, citing "lack of further progress" toward meeting inflation goals.

During this week's Federal Open Market Committee meeting, officials voted to lower the cap on the amount of Treasury securities that can roll off the central bank's books each month from $60 billion to $25 billion.

Banks and other financial market participants have been keyed into the central bank's communications around monetary policy expectations. But in an unpredictable economy, the guidance doesn't always hit the mark.

According to the Federal Reserve Board's latest financial stability report, persistent inflation and policy uncertainty are the primary worries for banks. Survey respondents expressed heightened anxiety over murky policy outlooks due to geopolitical turmoil and rapidly approaching domestic elections.

Global yields rose on Thursday as markets around the world adjusted to central banks keeping interest rates higher for longer, with the US two-year yield briefly exceeding 5% for the first time since November.

Federal Reserve Chair Jerome Powell said at the Federal Open Market Committee press conference Wednesday that a slower pace of reduction could help the central bank avoid shrinking its holdings further without disrupting the banking system.

Federal Reserve Chair Jerome Powell last week suggested the central bank is getting close to the confidence it needs to start lowering interest rates.

Jefferson voiced cautious optimism that inflation is headed lower despite a blip in January and said the Fed is likely to begin cutting interest rates later this year.

Federal Reserve Chairman Jerome Powell suggested that a rate cut is coming, but cast doubt about whether the central bank would see enough data suggesting inflation is sufficiently tamed for interest rates to come down at their next meeting.

The president of the Federal Reserve Bank of Dallas and former manager of the central bank's open market account said a slower approach to balance sheet reduction may be warranted sooner rather than later.

Federal Reserve officials point to overnight reverse repurchase agreement activity as an indication of excess liquidity, which the central bank is working to reduce. But some analysts say that excess liquidity may be drying up faster than expected, with important implications for banks.

Benchmark two-year yields, those most closely tied to the outlook for US central-bank policy, rose as much as 14 basis points, the most in a day since June.

Often a harbinger of recessions, the fact that short-term yields are higher than long-term is not inherently bad, Federal Reserve Gov. Chris Waller said Tuesday, noting that in this case it could prove that market expectations are anchored.

Federal Reserve Chair Jerome Powell said he expects the final version of the Basel III endgame reforms to garner "broad support" after comments are received and addressed.