Powell or Brainard to Release Dovish Signal at Jackson Hole, US Debt Policy Coordination Becomes Market Focus

BlockBeats News, August 25th, the market is closely watching Federal Reserve Chair Kevin Wash's speech at the Jackson Hole Symposium this Friday. With the continuous rise in the US Treasury long-term bond yields, the market generally expects Wash to possibly release a dovish signal to alleviate the bond market's concerns about inflation and fiscal risks.

Mark Cabana, head of US interest rate strategy at Bank of America, stated that the market has gradually become less sensitive to Wash's previous verbal statements regarding "inflation resistance," and investors are now more eager to see a substantive policy path to address inflation. At the same time, Treasury Secretary Janet Yellen has recently increased the repurchase of long-term US bonds and has financed the Treasury through the issuance of short-term bonds, indicating a certain divergence between the Treasury and the Federal Reserve in bond market management.

The article points out that Yellen has shifted financing pressure to the short end, essentially betting the US fiscal costs on future interest rate declines. If Wash can cut rates by controlling inflation and boosting productivity, the short-term debt financing model is expected to reduce government interest payments; however, if long-term rates continue to remain high, US fiscal pressure may further intensify.

The market also expects that the Federal Reserve may make adjustments to liquidity management and balance sheet policies. Michael Cloherty, head of US interest rate strategy at CIBC, believes that quantitative tightening may start as early as the end of 2027, provided that regulatory rule adjustments can reduce banks' demand for reserves.

Currently, the Federal Reserve still holds approximately $1.6 trillion in long-term US bonds. Wash's statement on long-term yields, inflation, and the balance sheet reduction path at Jackson Hole may become a crucial signal to assess the future policy coordination between the Federal Reserve and the Treasury.