At Jackson Hole, Fed Reinforces Policy Stance

The Fed chair’s high-profile speech emphasized the central bank’s focus on taming inflation.

Federal Reserve Chair Jerome Powell is a good golfer, and if (as I thought going in) the goal of his speech at the Jackson Hole Symposium was to strike the ball down the middle of the fairway, then he achieved it – with perhaps a gentle draw in a hawkish direction. Powell’s clear, brief reiteration of the Fed’s monetary stance lent support to PIMCO’s outlook for perhaps one more interest rate hike this fall followed by an extended pause. He also noted Fed policy is likely to remain highly data-dependent.

Prior to Powell’s speech, some observers (though not PIMCO) speculated he might delve into a technical discussion of neutral interest rates or even float a trial balloon in the direction of raising the Fed’s inflation target.

He did none of that. Instead, his speech was a direct and thoughtful summary of the sources of post-pandemic inflation, the Fed’s policy response to date, and the outlook for the U.S. economy, inflation, and policy in the quarters ahead. His speech was about reinforcing previous communications, not about signaling a change in direction, tactics, or goals.