- Jerome Powell will deliver his final speech as Fed chair on 22 August at Jackson Hole
- The US Federal Reserve kept interest rates steady in July for the fifth consecutive meeting
- US economic data has created uncertainty in Powell’s data-dependent policy approach
US Federal Reserve Chairman Jerome Powell is all set to deliver his last speech as the Fed chief on Friday, Aug. 22 at the Jackson Hole Conference, in Wyoming. This comes after the US central bank last announced its policy decision in July and kept the interest rates steady for the fifth straight meeting.
In his valedictory speech to the conference before his term ends next May, Powell faces a choice on his approach towards the policy stance. Recent US macroeconomic data has confounded Powell's data-dependent strategy by pulling in both directions.
US Fed policy expectations
Analysts say that US Fed policymakers are split whether higher inflation in the economy or higher unemployment is the bigger risk. Global investors and the Trump administration have strong expectations that interest rates will fall at the US Fed's September meeting regardless.
According to economists, while Powell has pivoted hard when needed, the current moment may find him still straddling the US Fed's twin goals of stable prices to reach the inflation target and low unemployment. The dot plot reveals two likely interest rate cuts by December-end.
Jackson Hole Conference: What's on agenda?
Inflation remains about one percentage point above target now, with reason to think it is moving higher, but the Trump administration argues the risk of persistent price increases is minimal and the rising productivity that it could induce.
Fed Governor Christopher Waller, on Trump's list of potential successors, has also laid out arguments for looking beyond the inflation risk from higher tariffs. Waller favors rate cuts to guard against developing weakness in the job market, in contrast to those who want more confirmation before acting.
Beyond weaker job and economic growth, the macro situation in the US are different from a year ago. Interest rates are lower and therefore already less restrictive and the unemployment rate has remained steady. The inflation rate that had been declining monthly when the Fed cut last year, has changed little since, except to edge higher recently.
It remains to be seen whether Powell will signal if the Fed is about to resume steady cuts and further make a cautious first reduction without promising more, or keep waiting on more economic data. Powell's speech against the backdrop of the Grand Teton Mountains near Jackson Hole will cap a tumultuous eight years as the chairman of the central bank.
His term was punctuated by a global pandemic that demanded aggressive policy invention, a follow-on outbreak of inflation that prompted record-setting rate hikes, and an incessant stream of personal attacks from Donald Trump.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
