Tuesday, August 24, 2021
Since 1978, the Federal Reserve Bank of Kansas City has played host to central bankers, policymakers, academics and economists from around the world at its annual economic policy symposium in Jackson Hole, Wyoming, which is slated to begin this week. This year’s symposium, “Macroeconomic Policy in an Uneven Economy,” will take place from Thursday to Saturday and the Federal Reserve (Fed) Chairman Jerome Powell will headline the event (a complete list of speakers has not been released yet). The symposium was originally scheduled to return to a live format this year, but late Friday afternoon (August 20), it was announced the event would be held virtually due to the “recently elevated COVID-19 health risk”.
“Moving Jackson Hole back to an entirely virtual format this year is telling us that Fed officials are taking the Delta variant seriously,” noted LPL Financial Fixed Income Strategist Lawrence Gillum. “We’ll have to see if that alters the tapering timeline and importantly the market’s expectations for when the Fed will start to increase short-term interest rates.”
Notable economic policy shifts have occurred at the event in the past, including last year when Powell announced that the Fed would operate under a new monetary policy framework called Flexible Average Inflation Targeting (FAIT), which seeks to avoid premature interest rate hikes. We will have to see if this year’s symposium offers any monetary policy surprises as well. Fed watchers will be looking for any additional hints on when monetary accommodation will start to be scaled back. The July Fed meeting minutes were released last week and indicated that “most” participants judged that it could be appropriate to start reducing the pace of asset purchases “this year” if the economy evolves in line with their expectations. Additionally, “most” participants noted that substantial further progress has been made towards the inflation goals but the employment goals have not been met yet. Importantly, these minutes came from a meeting held more than three weeks ago—before a string of disappointing economic data releases and before the recent surge in COVID-19 cases.
This symposium may serve as an opportunity for Powell to clarify and update the committee’s current assessment of the economy, which will tell us if the minutes released last week are still relevant. Additionally, Powell may use his time to help separate any tapering decisions from upcoming interest rate decisions, which was something the committee has recently discussed. This would potentially help push back expectations for rate hikes despite potentially moving forward with tapering plans.
As seen in the LPL Research Chart of the Day, market expectations for when the Fed will start to raise short-term interest rates have not changed over the past few months. After the June FOMC meeting, the market repriced the Fed’s actions and pushed back expectations for rate hikes to the first part of 2023. Despite ongoing commentary from some Fed officials that indicate an initial rate hike in 2022 may be appropriate, the market remains unconvinced. Markets, however, will be watching for any clues from Powell on Friday (August 27) that may alter this view.
Federal Reserve Chairman Jerome Powell’s remarks will be livestreamed to the public at 9 a.m. CT/10 a.m. ET on Aug. 27 via the Kansas City Fed’s YouTube channel at www.youtube.com/KansasCityFed. The program’s full agenda will be available at www.KansasCityFed.org at 7 p.m. CT/8 p.m. ET on Aug. 26. Continuing with past practice, conference papers and other materials will be posted as they are presented during the event. After the event, a transcript will be posted on the Bank’s public website.
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