Fed Chair Powell At Jackson Hole: Will History Repeat Itself?
Jackson Hole’s monetary policy conference this year, which will be featuring a speech from Jerome Powell, the Federal Reserve chair, at 10:05 a.m. ET on Friday looks like it is curated to be a downer for the S&P 500. The topic of the conference is “Structural Shifts in the Global Economy”. This clearly implies that there has been some kind of a change – which is definitely not for the better when it is related to inflation.
When Powell spoke last year, this time at the Kansas City Fed symposium, which was held in Wyoming, he gave fair warnings that the hikes of the interest rates would result in “pain” for the American households. The Dow Jones Industrial Average Index dropped 1,000 points as a response to this.
Is history going to repeat itself?
At the most recent meeting in July, the Federal Reserve had unanimously voted to increase the interest rates within a range of 5.25-5.5%, which is their highest in the last 22 years. Minutes from that meeting that was released this month revealed that the officials of the central bank worried that the inflation might not slow any further until the US economy and the labor market cool down.
“Participants continued to view a period of below-trend growth in real GDP and some softening in labor market conditions as needed to bring aggregate supply and demand into better balance and reduce inflation pressures sufficiently to return inflation to 2% over time,”
the minutes had said.
While inflation has significantly cooled compared to last year, it remains above the 2% target set by the Fed. The central bank’s preferred inflation gauge – the Personal Consumption Expenditures price index, increased by 3% for the 12 months that ended back in June.
“Expect a balanced assessment with no abrupt hawkishness, but no mission accomplished: The Fed has not come this far to let inflation slip out of its grasp,”
said the Evercore ISI strategists on Tuesday.
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