ORLANDO, Florida, Aug 20 (Reuters) - Financial markets

are taking in a collective breath ahead of Jerome Powell's

eighth and final keynote Jackson Hole speech as Federal Reserve

Chair. If the moves following his last seven are any guide,

investors buckle up for a bumpy ride.

Fed-watchers will be focused squarely on whether Powell

signals that he's willing to cut interest rates at the central

bank's September 16-17 meeting. His public comments in recent

months have been relatively hawkish, but those were all before

the release of the weak July employment figures that fired up

easing expectations.

Rates futures traders are pricing in an 85% probability of a

quarter-point cut next month, with another 25 basis points of

easing expected by year end. Powell's words on Friday could

provide significant clarity about whether these positions are

'in the money' or not.

Given that traders are betting so heavily on an imminent

move, the 'pain trade' will be if Powell holds the line that

policymakers need to see more incoming data before resuming the

easing cycle put on hold in December.

Investors have reason to be cautious. History shows Powell's

Jackson Hole speeches tend to move markets a lot, especially the

bond market. And even though Powell is often considered a policy

dove at heart, his Jackson Hole set-piece speeches have usually

pushed yields higher, not lower.

WATCH BOND YIELDS

In the month following each of Powell's last seven Jackson

Hole speeches, the 10-year Treasury yield has risen by an

average of 21 bps, according to Reuters calculations. The dollar

has risen 1.4% and the S&P 500 has fallen nearly 2%, on average,

over the same period.

Stretching that out, the S&P 500 has risen an average of

2.3% between the late-August speech and year end, the dollar has

gained 0.4%, while the 10-year yield has climbed 27 basis points

on average.

But these averages mask some much bigger moves, especially

in the month after the central bank jamboree in Wyoming.

The stand-out example is 2022 when Powell, in his Monetary

Policy and Price Stability speech, invoked former Fed Chair Paul

Volcker, warning of the "pain" that households and businesses

were likely to face from the tight policy needed to slay

inflation.

In the following month, the S&P 500 tanked 12%, the dollar

rallied 5%, and the 10-year Treasury yield soared 75 bps.

Bond yields climbed at least 20 bps in the month following three

other Powell Jackson Hole speeches, in 2018, 2021 and 2023, the

latter being another where Powell signaled a readiness to keep

rates higher for longer.

KEY CONSIDERATIONS

Inflation today is not as lofty as it was two years ago,

but, sitting around 1 percentage point above the Fed's 2% goal,

it is higher than Powell would like. Meanwhile, on the other

side of the Fed's dual mandate, unemployment remains at a

historical low of 4.2%.

This year's theme at Jackson Hole is "Labor Markets in

Transition: Demographics, Productivity, and Macroeconomic

Policy." Powell has stated that the unemployment rate is the

best measure of the labor market. But that does not mean today's

low unemployment rate will automatically lead to a hawkish

speech - history shows that when unemployment starts to rise, it

can move quickly, leaving the Fed woefully behind the curve.

Markets are probably prepared for some large price swings

whichever way Powell leans.

THE LAST TIME

It's also likely that Powell will use the platform to defend his

tenure, just like his predecessors: Alan Greenspan in 2005, Ben

Bernanke in 2012, and Janet Yellen in 2017. Given the

unprecedented public pressure President Donald Trump has placed

on Powell to cut interest rates this year, why would the Fed

Chair not seize this opportunity to have his say?

"He may offer some soft guidance that rates may move lower

at a coming meeting. But, this is his last speech at Jackson

Hole. He may never again have a platform this influential to

offer his view of how his history should be written," economists

at UBS wrote on Friday.

Will he sign off with a bang? Markets are locked and loaded.

(The opinions expressed here are those of the author, a

columnist for Reuters)

(By Jamie McGeever

Editing by Bernadette Baum)