With Fed rate cut set, Powell may focus on explaining US economic conditions at Jackson Hole
Repeats 0707 GMT story, no change to text
Fed expected to cut rates at September meeting
Powell telegraphed policy easing in July remarks
Jackson Hole speech begins at 10 a.m. EDT (1400 GMT)
By Howard Schneider
JACKSON HOLE, Wyoming, Aug 23 (Reuters) -U.S. economic data is giving the Federal Reservethe green light to cut interest rates, financial markets are aligned for the first move, and the central bank all but gave the game away on Wednesday when a readout of its July meeting showed a "vast majority" of policymakers agreed the policy easing likely would begin next month.
With all that in place, Fed Chair Jerome Powell's goal in his keynote speech on Friday to the Kansas City Fed's annual Jackson Hole research conference may be less about further shaping expectations and more about assessing where the economy stands ahead of what he has called a "consequential" first step.
"I don't think he needs to do a lot beyond the press conference in July," said Richard Clarida, a former Fed vice chair who is now global economic adviser for Pimco, referring to how Powell leaned strongly toward a rate cut at the Sept. 17-18meeting in remarks to reporters after the July 30-31 meeting.
"You will not get 'mission accomplished,'" Clarida said, "but he might look back at the last two years, where we were and where we are, and acknowledge that they are close" to taming the worst outbreak of inflation in 40 years.
Powell will take the podium at 10 a.m. EDT (1400 GMT) in a remote lodge in Wyoming's Grand Teton National Parkto address a gathering that has become a global platform for central bank officials to shape views of monetary policy and the economy.
With one exception, the six speeches Powell has delivered to the conference since becoming Fed chief in 2018 have been largely explanatory, designed less to influence short-term policy expectations than to lay out how officials were thinking about major structural issues or, since the start of the COVID-19 pandemic, detailing the mechanics of inflation.
The exception was in 2022 as the Fed fought to keep public expectations about high inflation in check: Powell delivered a terse, market-moving address meant to convey his seriousness about defending the central bank's2% inflation target. Some called it his "Volcker moment," a reference to Paul Volcker, the Fed chief who triggered a recession in the early 1980swith punishing interest rates to break an inflationary cycle.
REACTION FUNCTION
That's a consequence the Powell Fed has dodged - so far. Inflation crested at levels not seen since the Volcker eraand two years later is roughly half a percentage point above target. The unemployment rate, at 4.3%, is well below its 5.7% long-run average. And financial markets seem in sync with where the Fed is heading.
In light of that, former Fed staff, policymakers and outside analysts said Powell may well revert to his explanatory norm, perhaps sketching out in broad terms how the central bank will approach its coming easing cycle or delving into lessons learned over two years about inflation's causes and cures.
The conference theme - how monetary policy impacts the economy - would fit either.
William English, a former head of the Fed's monetary affairs division who is now a professor at the Yale School of Management, said he felt the moment called for a general outline about the approach to cutting rates.
Because Fed policymakers at next month's meeting will update their interest rate projections for this year and 2025, Powell won't want to provide detailed forward guidance about what's to come - a risk in itself for the possible market reaction it could trigger, or the possibility coming data could push in a different direction.
Powell instead could provide some background for the public and markets to understand how the Fed will respond as the economy evolves, English said. "Let'ssay the economy does not go as we expect. What would that mean for policy? ... What is it going to take to move faster or slower?"
THE OTHER MANDATE
Powell and other Fed officials have become fans of describing different economic scenarios, a strategy that allows them to provide a baseline outlook, but also convey uncertainty around what might happen and how different outcomes might cause them to react.
Some, for example, have begun to worry the economy is at a point where the unemployment rate could rise fast and far enough to derail the "soft-landing" from inflation that they thought was within reach.
Yet it is unclear how the Fed, at this point, thinks about "maximum employment" - one of its two goals alongside stable inflation - and the degree to which officials are willing to tolerate rising joblessness to wring another one quarter or one half of a percentage point from inflation.
Antulio Bomfim, a former special adviserto Powell and now the head of global macro forNorthern Trust Asset Management's fixed-income team, agreed that the Fed chief will likely steer clear of short-term guidance in favor of a discussion about broader issues - perhaps trying to capture what the central bank has just lived through and how coming labor and inflation dynamics may differ from those before the pandemic.
"We're kind of at an inflection point for policy, potentially for the economy too ... Inflection points are very difficult to navigate," Bomfim said.
Open questions linger about the economy that's emerging, including whether inflation will prove a more persistent headache for central banks after years of running soft before the pandemic, and whether job market dynamics have shifted and may imply higher unemployment rates than the Fed thought it could achieve based on the economy's pre-COVID-19 performance.
With inflation being such a high priority "over the past couple of years, the Federal Reserve ... was behaving like a single mandate central bank," Bomfim said. "And now we are not just in the transition from hikes to cuts, but also transitioning back to what I would call a more normal state of affairs."
Graphic-Stocks on Powell's Jackson Hole speech days https://reut.rs/3AssQE1
Graphic-The path to a rate cut https://reut.rs/3WLOpqz
Reporting by Howard Schneider;
Editing by Dan Burns and Paul Simao
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
