Comments from Federal Reserve Chairman Jerome Powell at Jackson Hole:
- Does not repeat 'mid-cycle adjustment'
- Fed is working to sustain economy that faces 'significant risks'
- US economy is close to both of Fed's goals
- US economy is in a favorable place
- Says three weeks since last meeting were 'eventful'
- Fed is carefully watching developments
- Slowing global growth, trade policy uncertainty, muted inflation weigh on favorable outlook
- Inflation is moving up towards 2%
- US job market is 'historically strong'
- Low inflation seems to be the problem of this era, not high inflation
- Full text
All the speculation ahead of time is whether or not he would repeat 'mid-cycle adjustment'.
Market moves were relatively subdued on the headlines. Initially stocks moved a bit higher and yields a bit lower, suggesting a dovish take.
It's interesting how he downplays prior concerns about an inflation shortfall: "It appears to be moving back up closer to our symmetric 2 percent objective, but there are concerns about a more prolonged shortfall."
Here's the key passage:
"Turning to the current context, we are carefully watching developments as we assess their implications for the U.S. outlook and the path of monetary policy. The three weeks since our July FOMC meeting have been eventful, beginning with the announcement of new tariffs on imports from China. We have seen further evidence of a global slowdown, notably in Germany and China. Geopolitical events have been much in the news, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government. Financial markets have reacted strongly to this complex, turbulent picture. Equity markets have been volatile. Long-term bond rates around the world have moved down sharply to near post-crisis lows. Meanwhile, the U.S. economy has continued to perform well overall, driven by consumer spending. Job creation has slowed from last year's pace but is still above overall labor force growth. Inflation seems to be moving up closer to 2 percent. Based on our assessment of the implications of these developments, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective."
It hardly seems like a hint on anything. He dwells on the downside risks but his two comments on the dual mandate were upbeat and inflation -- arguably -- is a more-hawkish change from what we heard at the end of July.
If anything is a tell, it's the headline at the top of this story but that points to a cut or two, not the easing cycle that markets want. It's also straight out of the FOMC statement, which said:
"it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion."
