Jackson Hole Summary: Fed to break on through to the dovish side (timing TBD)

In his highly anticipated speech, Fed Chair Jerome Powell signaled that cuts were on the way and September is a live meeting, but the timing of when cuts will come will be (as always) dependent on the data . The speech was viewed as dovish, and rightly so, as Powell confirmed that the “ shifting balance of risks may warrant adjusting our policy stance” but he also acknowledged that both inflation and unemployment are moving in the wrong direction (“a challenging situation”). For rates, we feel the market re-pricing in the front end is appropriate given Powell's speech and ahead of the next key NFP report.  For the long end, we are much less constructive, given potential easing into still elevated service inflation. Put together, from here we see an easy path to steepening than further directional moves.