Fed Can’t Celebrate Yet as Investors Expect Rates, Inflation to Remain Elevated

If they’d been offered today’s economy a year ago – with inflation downgraded from emergency to mere headache, still-low unemployment, and growth that’s slowed without stalling – the world’s top central bankers would’ve taken it like a shot.

That doesn’t mean anyone at Jackson Hole, where Federal Reserve chief Jerome Powell and his peers meet this week, is likely to declare mission accomplished.

One example of the fragile backdrop to this year’s gathering: Even in the US, which has the rosiest numbers among major economies, two-thirds of 602 respondents in Bloomberg’s latest Markets Live Pulse survey say the Fed has yet to conquer inflation.

At Jackson Hole Too Early to Celebrate

Powell and Co. can’t be sure they’ve raised interest rates high enough to tame prices. They’re even less clear about how long policy will have to stay tight –- increasingly the dominant question for financial markets. Over 80% of those surveyed said Powell’s Jackson Hole speech will reinforce the message of a hawkish hold.

“We could see ourselves in this 5+ percent benchmark risk-free rate environment for the foreseeable period of time – perhaps into mid-2024 or beyond,” says Jerome Schneider, head of short-term portfolio management and funding at Pacific Investment Management Co., which oversees $1.8 trillion in assets.