Powell to Headline Jackson Hole and Speak on Long-Awaited Review

(Bloomberg) -- Federal Reserve Chairman Jerome Powell will deliver a speech at next week’s annual Jackson Hole symposium on the central bank’s long-awaited monetary policy framework review, which has focused on a new inflation strategy.

The speech to the Federal Reserve Bank of Kansas City event, which will be virtual this year and livestreamed to the public, is set for Aug. 27 at 9:10 a.m. New York time, according to the weekly schedule of public Fed appearances released Thursday.

Prompted by worryingly low inflation and interest rates that eroded the central bank’s ability to fight recessions, the Fed spent all of 2019 and much of this year conducting its first comprehensive framework review.

Policy makers have discussed a more relaxed approach to inflation, one that would call for inflation to sometimes exceed the 2% target in order to achieve average outcomes closer to that objective.

“One possibility is that he will give an overview of what the committee considered over the course of the review as well as the reasons why,” said Roberto Perli, a former Fed economist and partner at Cornerstone Macro LLC in Washington. “And then he might summarize what seems to be the consensus of overshooting a bit, with an averaging concept in mind.”

Longer-Run Goals

Minutes of the rate-setting Federal Open Market Committee’s July 28-29 meeting released Wednesday showed that officials are going ahead with a new statement of longer-run goals and strategy, a step that would mark the conclusion of the strategy review.

Officials said “it would be important to finalize all changes to the statement in the near future.” Such a move “would help guide the committee’s future policy actions and communications,” they said.

Economists say it might be premature for Powell to make a clear announcement at next week’s conference, which would seem to pre-empt the role of the FOMC before the next scheduled meeting Sept. 15-16.

Delicate Situation

“So Powell is in a very delicate situation,” said Columbia University economist Michael Woodford, a past speaker at Jackson Hole. “He will probably want to indicate something about how the consensus is evolving on the framework review, but without saying too specifically what they will be announcing after the September meeting.”

The Fed first pronounced a 2% target for inflation in 2012, and officials took that to mean they would always shoot for 2%, no matter how much or for how long they missed. But the Fed’s preferred measure of inflation has consistently fallen short, averaging just 1.4% since the target’s introduction.

An average target would be intended to help recenter inflation expectations by pledging to make up for those misses with overshooting, economists said. The idea is a less radical shift than other options discussed during the long course of the review, including negative interest rates. While that strategy has been deployed by central banks in Europe and Japan, it has been consistently played down by Fed officials as a viable route in the U.S.

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