Powell delivering speech at Jackson Hole 2023
- We will decide next move based on data
- Fed will proceed 'carefully' when deciding to hike again or hold steady
- Will decide next moves based on data
- Fed attentive to signs economy not cooling as expected
- Economic uncertainty calls for 'agile' monetary policy making
- Inflation remains too high
- Two months of good data are only the beginning of what we need to see to build confidence on inflation path
- Policy is restrictive but Fed can't be certain what neutral rate level is
- Fed will not change 2% target
- Lowering inflation also likely to require a softer labor markets
- Signs job market not cooling could also warrant more Fed action
- Sees evidence inflation becoming more responsive to labor market
- Full text
This speech is a bit of a dud. These are all the same things that he said after the last FOMC and they echo what most other Fed officials have said. Perhaps the market is keying on the 'carefully' comment, which might be seen as dovish. The dollar kicked lower initially but I just don't see that continuing based on the headlines.
Interesting portion:
"Beyond these traditional sources of policy uncertainty, the supply and demand dislocations unique to this cycle raise further complications through their effects on inflation and labor market dynamics. For example, so far, job openings have declined substantially without increasing unemployment—a highly welcome but historically unusual result that appears to reflect large excess demand for labor. In addition, there is evidence that inflation has become more responsive to labor market tightness than was the case in recent decades. These changing dynamics may or may not persist, and this uncertainty underscores the need for agile policymaking."
Here is the 'conclusion' portion, note that it includes the 'carefully' bit:
As is often the case, we are navigating by the stars under cloudy skies. In such circumstances, risk-management considerations are critical. At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data. Restoring price stability is essential to achieving both sides of our dual mandate. We will need price stability to achieve a sustained period of strong labor market conditions that benefit all.
We will keep at it until the job is done.
Pricing for Sept is steady at 13%. The market might be a bit relieved that Powell didn't hammer the point of holding rates at the top for a long time.
