All eyes are on Powell as the Chairman of the Federal Reserve prepares to deliver a major speech at Jackson Hole
When Federal Reserve officials gather this week for the central bank’s annual economic symposium in Jackson Hole, Wyoming, the investment world will hear how Fed Chairman Jerome Powell Framework for the fight against inflation.
The question for Powell and other Fed officials is whether inflation is on a convincing downward trajectory yet and has not picked up a more measured pace with rate hikes, or whether a more aggressive approach is warranted.
Last August, Powell sent the markets lower After he pledged in a speech shorter than usual to do whatever it takes to bring inflation back to the central bank’s 2% target.They warn that higher interest rates may lead to pain and higher unemployment.
“We’re going to continue that until we make sure the job is done,” he said a year ago.
This year, Powell, who delivers a new speech on Friday, enters, believing that there is a way to be able to achieve lower inflation without seeing sharp job losses.
It has a resilient economy, a still-strong job market and American consumers who are still spending at healthy rates. At the same time, it is also facing fresh market turbulence caused by a rise in long-term Treasury yields to their highest level in 15 years.
“guided by the stars”
Traditionally, Fed chairmen have used the Jackson Hole speech to deliver an important and long-term political message.
President Powell’s 2018 “Guided by the Stars” speech — perhaps his most memorable speech as president — outlined how he thought about the natural real interest rate — a rate that neither stimulates nor slows growth.
Former Fed chair Ben Bernanke used his speech in 2010 to make the argument that the Fed can get the economy moving by buying bonds, a tool also known as quantitative easing (QE).
The tradition of gathering in Jackson Hole began more than four decades ago, when Kansas City Federal Reserve officials chose the venue in 1982.
That was the year the regional Federal Reserve Bank, which organizes the annual symposium, announced I figured the best way to ensure then-Fed Chairman Paul Volcker would accept the invitation was to locate the event at a good fly-fishing spot in late August. It was widely known that Volker was fond of sports.
Decades later, central bankers from around the world, academics, policymakers, and journalists still gather in the same place to discuss economics and monetary policy. The event takes place at Jackson Lake Lodge in Grand Teton National Park. The main theme for the organizers this year is “Structural Transformations in the Global Economy”.
Many observers expect Powell to confirm this week the Federal Reserve’s commitment to lowering inflation. The question is whether he will imply that he was emboldened enough by the data to move to an extended hold or whether he is signaling another move.
Last month, Fed officials Raising interest rates for the 11th time Since March 2022, in what could be the first of two rate hikes, officials have planned for the rest of the year.
On a headline basis, inflation has eased from a peak of over 9% last June to just over 3% in July. But excluding volatile food and energy prices, inflation exceeds 4% — twice the central bank’s inflation target of 2%.
In his recent comments after the Fed’s policy meeting in July, Fed Chair Jay Powell wasn’t convinced by inflation yet to get rid of the gas, and said he needed to see remaining distortions from the pandemic in terms of supply and demand.
“The policy has not been constrained long enough to achieve the full desired effects,” Powell said at a press conference on July 26.
“So we intend to keep policy constrained until we are confident that inflation will fall sustainably to our 2% target, and we stand ready for further tightening if appropriate,” he added.