Beckner: Powell Unlikely To Send Significant Signals At Jackson Hole

Written exclusively for InTouch Capital Markets

20th August 2018

By Steven K. Beckner

Federal Reserve Chairmen have sometimes broken news and moved markets in Jackson Hole, Wyoming. So speculation is rampant about what Jerome Powell might say when his turn comes Friday to keynote the Kansas City Federal Reserve Bank’s annual symposium.

But Powell seems unlikely to rock the boat at a time when the U.S. economy is fulfilling the Fed’s statutory mandates amid relative financial stability. True, there are worrisome trade tensions, but there are hopeful signs the worst of them will ease.

Powell is not scheduled to talk about current economic and monetary policy issues per se. His announced topic, “Monetary Policy in a Changing Economy,” dovetail’s with this year’s symposium theme: “Changing Market Structure and Implications for Monetary Policy.”

The Kansas City Fed says officials and other participants “will explore dynamics that have contributed to shifts in productivity, growth and inflation that are of concern to central bankers….” They will look at “increased market concentration” and decreased competition in many industries” and how this causes “lower capital investment, a declining labor share, slow productivity growth, slow wage growth and declining dynamism.” They’ll examine how technological change affects consumer behavior and prices. And they’ll discuss how banking changes have “raised questions about potentially competing trade-offs between competition, efficiency and stability.”

“With changes in the markets that firms, consumers, banks and the government transact in, understanding the implications of these changes for inflation, pricing dynamics, productivity and growth is vital for policymakers as they seek to promote conditions that can best foster long-run sustainable growth with stable prices,” the host said.

Interesting topics, some of which — investment, productivity, labor force participation — Powell has addressed before, but hardly a jumping off point for signaling where monetary policy is headed. The Federal Open Market Committee is widely expected to increase short-term interest rates a third time Sept. 26, with a good chance of a fourth on Dec. 19, and Powell is unlikely to gainsay those expectations.

While recognizing downside trade risks and acknowledging interactions between Fed policy and the global economy, Powell has consistently hewed to a primarily domestic mission of maximum employment and “symmetric” 2% inflation. “For now,” he told Congress in July, this means “the best way forward is to keep gradually raising the federal funds rate.” Where the funds rate ultimately goes will depend in part on the longer run “neutral” rate, which he has in turn related to investment, productivity and the economy’s growth potential.