WASHINGTON, Aug 22, 2022 (BSS/AFP) - US central bankers have been hammering

home a single message: Interest rates will rise until inflation begins to
come down. But financial markets keep hoping to hear a different tune, one
indicating the pace of rate hikes will slow.

All eyes will be on this week's annual gathering of policymakers in Jackson
Hole, Wyoming to hear Federal Reserve Chair Jerome Powell explain his stance
-- again -- with market watchers hoping to get something more to their
liking.

The Fed could be a victim of its own success.

After keeping the benchmark borrowing rate at zero throughout the pandemic,
the steep spike in prices, which surged to a 40-year high following Russia's
invasion of Ukraine, prompted the central bank to take aggressive action.

In the battle to contain red-hot inflation, which topped nine percent in
June, the Fed has hiked rates four times, including massive, three-quarter
point increases in June and July -- steep moves unheard of since the early
1980s.

But in recent weeks signs of easing price pressures and a slowing economy,
along with falling energy costs and indications global supply chain snarls
have lessened, caused financial markets to become optimistic the Fed will
dial back or even pause rate increases -- and even begin to cut next year.

Stocks on Wall Street have risen for four straight weeks, despite a string of
officials repeating the message that rates will continue to rise, even though
annual inflation slowed in July as oil prices fell.

While the annual gathering often becomes a place for global central bankers
to signal shifting policy, Powell is expected to repeat that message Friday -
- though he may acknowledge that a slowdown will come later in the year.

"It does seem like what we've heard from Powell so far suggests there's quite
a high bar for them to transition from aggressive hikes" to a slower pace of
25 basis point steps, said Jonathan Millar of Barclays.

Millar, who served as a Fed economist and forecaster under four central bank
chiefs, told AFP that markets are looking further ahead, anticipating the
rate hikes will be successful in slowing inflation.

But for policymakers "One thing they definitely want to communicate is that
they remain very much focused on issues with price stability and that they
will react very cautiously to any signs of improvements in the inflation
data."

That means indications prices are coming down more broadly, not just because
of falling oil.

Managing the market's expectations "is really job one," Millar said. "They
have to enforce that credibility."

But like other economists he believes the Fed's policy-setting Federal Open
Market Committee (FOMC) at its September meeting will step down to a 0.5
percentage point increase, taking the range of the key lending rate up to
2.75 to 3.0 percent, to be followed up with quarter-point hikes in November
and December

- Walking a narrow line -

Kathy Bostjancic of Oxford Economics said the dilemma for Powell is to
recognize the progress towards achieving a soft landing -- bringing inflation
back down towards the two percent target, without derailing economic growth -
- while confirming the Fed's resolve.

He "continues to have to walk kind of a narrow line," she told AFP. "You
don't want to be too pessimistic."

And with housing prices and sales cooling from their torrid pace along with
other encouraging data "he has the wind at his back."

But she said, "The message he really has to give is that we're still going to
be looking to raise rates to restrictive level to really make sure inflation
is still our number one priority."

The annual monetary policy symposium hosted by the Kansas City Federal
Reserve Bank runs August 25-27. It often is a place for officials from around
the world to come to discuss policy changes in the works, but so far no major
global central bank chief has confirmed they speak at the event other than
Powell.