Updated August 25, 11:30 am ET

Chair Powell’s Remarks at Jackson Hole

Federal Reserve Chair Jerome Powell spoke at the Jackson Hole Economic Symposium for 14 minutes this year, but in some ways said less than he did in 8 minutes a year earlier. At last year’s symposium Powell delivered a speech that jarred Wall Street with it’s hawkish tone. This year, Powell was far more measured and stocks (as of 11 AM ET) are trading about flat. Thus, the markets got what they expected from the speech: the economy is not cooling as expected, tightening may not be over, the Fed is committed to reigning in inflation, and data will guide the Fed’s hand in the future.

Powell began his speech by noting the obvious – “although inflation has moved down from its peak… it remains too high.” He went on to say that price pressures on both the supply and demand side are abating, but the process still has a long way to go. He noted that core goods inflation has fallen sharply, that price pressures in housing services will continue to cool as new rents are factored into inflation metrics, but that labor market tightness is keeping prices in non-housing services from easing further.

On economic growth, Powell said that a period of below-trend economic growth and some softening in labor market conditions will likely be needed to get inflation back down to 2 percent. However, he noted that the Fed is “attentive to signs that the economy may not be cooling as expected.” Powell said that consumer spending has been robust and that the housing sector is showing signs of picking back up. These trends, he stated, “could warrant further tightening of monetary policy.”

On the labor market, Powell said that the rebalancing process is incomplete. Labor supply has improved and demand has cooled, helping to ease wage pressures. However, real wage growth has been increasing as inflation has fallen, and job openings remain high. Powell concluded that “evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response.”

Powell also took the time to clear up rumors about changes to inflation rate targets. In recent months there’s been discussion that the Fed may elect to raise its inflation target due to a variety of structural changes in the economy. On this issue, Powell was blunt – “two percent is and will remain our inflation target.”

At the conclusion of his speech, Chair Powell stressed that the Fed “is navigating by the stars under cloudy skies.” Future decisions on monetary policy will be made on a meeting-by-meeting basis and will incorporate the totality of data and the evolving outlook and risks. Based on these inputs, the Fed will “decide whether to tighten further or, instead, to hold policy rates constant and await further data.”  

The Conference Board forecasts that the Fed will hold rates steady at the September meeting, but that another 25 basis point hike is likely sometime in Q4 2023. Thereafter, we expect rates to hold steady until mid-2024 at which point the Fed will gradually begin to ease as inflation continues to abate.  However, rates will remain in restrictive territory until at least the end of 2024 as inflation slowly falls to its 2 percent annual target. Please see our US forecast for additional details.

Updated August 25, 9:00am ET 

Agenda and Speakers

This year’s meeting at Jackson Hole features a variety of notable attendees. In addition to the numerous economists presenting at the symposium, four top central bankers will also be in attendance.  Jerome Powell of the US Federal Reserve, Christine Lagarde of the European Central Bank, Ben Broadbent of the Bank of England, and Kazuo Ueda of the Bank of Japan will all be speaking at various times over the next two days. Clues about monetary policy actions, not just in the US but globally, may be gleaned from what is said. For more details on the symposium please see the just-released agenda.

Chair Powell’s speech, scheduled for 10:05 AM ET, will be closely watched. Check back in with us for the key takeaways later today.

Updated August 24, 11:00am ET 

What Is the Jackson Hole Economic Symposium?

The Jackson Hole Economic Symposium is an annual event sponsored by the Federal Reserve Bank of Kansas City. At the end of each summer, dozens of central bankers, policymakers, academics, and economist from around the world gather for three days in Jackson Hole, Wyoming to discuss economic issues, implications, and policy options pertaining to the symposium’s theme for the year.

This year the symposium is focused on “Structural Shifts in the Global Economy.” According to the Kansas City Fed, “While the immediate disruption of the pandemic is fading, there likely will be long-lasting aftereffects for how economies are structured, both domestically and globally, as trade networks shift, and global financial flows react.” This year’s symposium will also explore the longer-term implications of the policy responses to the pandemic, including rapid shifts in monetary policy, and substantial increases in sovereign debt.

What Should I Watch For?

While the bulk of the symposium is focused on various presentations, paper releases and meetings, the highlight is the keynote from the Federal Reserve Chair. This year, Chair Powell will speak on Friday, August 25th at 10:00 AM ET (livestream here). He is expected to discuss the Fed’s final steps to rein in inflation and potentially what monetary easing may (or may not) look like in the future. We will be listening to his remarks carefully tomorrow morning and will update this post with the key takeaways.