"Jackson Hole Speech Strengthens Global Liquidity Rally"

by Cha Minyoung

Published 26 Aug.2024 08:23(KST)

Jerome Powell, Chair of the U.S. Federal Reserve (Fed) [Image source=Yonhap News]

iM Securities on the 26th predicted that Fed Chair Jerome Powell's Jackson Hole speech would lead to a strengthening of the liquidity rally centered on risk assets.

Researcher Park Sang-hyun stated, "We were concerned about significant damage to global liquidity flows due to the unwinding of yen carry trades in early August, but fortunately, global liquidity flows appear to be expanding again," adding, "The Jackson Hole speech is expected to mark a more favorable trend in global liquidity flows."

Park noted, "Over the past two years, following the Jackson Hole meetings, the simultaneous rise of the US dollar and Treasury yields has posed considerable pressure on global liquidity flows," and added, "In contrast, Powell's Jackson Hole speech, which even left open the possibility of a big rate cut, could lead to additional downward pressure on the US dollar and Treasury yields."

He continued, "Not only the US Fed but also the European Central Bank (ECB) is expected to implement additional rate cuts in September, and other major countries are likely to join the rate-cutting cycle," explaining, "The Fed's rate cuts have the effect of alleviating the burden of monetary policy for other countries." China, in particular, is also expected to follow the rate-cutting trend.

Regarding Japan, he said, "The Bank of Japan, the only major central bank currently raising rates, seems inevitably headed for further rate hikes within the year, but it is expected to delay the timing of rate increases as much as possible by observing the results of the Liberal Democratic Party leadership election at the end of September and the yen's movement," adding, "This will help mitigate the market's concerns about additional unwinding risks of yen carry trades."