What Jerome Powell's Jackson Hole remarks mean for Dalal Street investors

Wall Street benchmarks finished Friday's session on a high note after Federal Reserve Chairman Jerome Powell's dovish comments at the annual Jackson Hole symposium in Wyoming, United States, cemented hopes of a rate cut in the upcoming scheduled review next month as well as in the following months. The Dow Jones Industrial Average climbed 462.3 points, or 1.1 percent, to end at 41,175.1, and the S&P 500 settled with a gain of 64 points, or 1.2 percent, at 5,634.6, while the technology-heavy Nasdaq Composite rose 258.4 points, or 1.5 percent, to 17,877.8. As Dalal Street bulls await a fresh trading week back home, here's what analysts make of the Fed Chair's remarks and the way forward for equities around the globe.

In his keynote address at the annual gathering where policymakers, economists, and financial experts from around the world discuss economic issues and policies, Powell said that the "time has come" to lower the benchmark interest rates while acknowledging that "the upside risks of inflation have diminished."

Further cooling would be unwelcome in the US jobs market, Powell said, while also exuding confidence that inflation is within reach of the US central bank's goal of two percent.

"The direction of travel is clear... And the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks," he said at the event hosted by the Federal Reserve Bank of Kansas City.

His dovish remarks, which contained a clear indication that the Fed is preparing to introduce monetary easing in the current cycle, came days after minutes from the last FOMC meeting showed that most Fed policymakers also indicated a policy rate cut in the September meeting.

In the last meeting, held at the end of July, the Fed Chair-headed FOMC decided to maintain the policy rates at the existing 5.25–5.5 percent while hinting at a cut in the next review.

The rate-deciding panel of the US central bank meets for scheduled reviews eight times a year. "The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting," the latest minutes mentioned.

What to expect on Dalal Street?

Most analysts found the Fed chief's comments to be along expected lines.

"The market has been expecting an interest rate cut during the next Fed meeting in September. The big question is how quickly the rates will be reduced. There are indications that the rate cuts could happen at a faster pace, especially with the weakening of jobs data," said Naveen Kulkarni, Chief Investment Officer at Axis Securities PMS.

"However, Mr. Powell believes that the chances of the US economy entering a recession in the near term are very low. This implies that rate cuts would likely align with consensus expectations, and the possibility of deeper rate cuts may be lower. Overall, the regime of high interest rates is coming to a close, but the likelihood of returning to an ultra-low interest rate environment also appears to be low at the moment," Kulkarni said.

It remains to be seen how domestic equity benchmarks and their Asian peers react to Friday's rally on Wall Street.

Earlier on Friday, the Sensex added 33 points to end a choppy session at 81,086.2, while the Nifty50 settled at 24,823.2, up 11.7 points over its previous close, as selling pressure in IT stocks offset buying interest in auto and energy counters. Read more on the August 23 session on Dalal Street.

Global markets staged mixed moves ahead of the event as investors awaited clues on how quickly and deeply the Fed may cut interest rates.