Powell’s alpine resort trip: peaking inflation and restricted visibility

Jerome Powell, the chairman of the Federal Reserve, will lay out what he expects to happen in an economy fighting inflation while also, some fear, edging towards a recession, in his remarks this week to a central banking conference in Wyoming. This will be important information for workers desiring to hold onto wage gains as well as investors wishing to hang onto profits.

He would be the first to admit that he has no clue what the coming few months will hold.

Powell stated on July 27 following the conclusion of the Fed’s most recent policy meeting that it is very difficult to predict with any degree of certainty what the economy will look like in six or twelve months. The current period is not typical.

Powell will talk on Friday morning at the annual Jackson Hole research conference of the Kansas City Fed, which will take place in a lodge outside of Jackson inside the western U.S. state.

The event is one of the elite gatherings for the central banking industry, with international leaders mingling over cocktails, taking in talks about recent findings, hiking in the Grand Teton Mountains, and fish-hunt for fine-spotted cutthroat trout on the harvest-ready Snake River.

The event also provides a prominent platform from which the head of the Fed or another policymaker can fine-tune their messaging.

Powell is anticipated to put the focus firmly on that conflict—and on the Fed’s unwavering dedication to winning it—as the US central bank battles the worst outbreak of inflation ever since the early 1980s.

Next week, they should and probably will hear criticism of the notion that the Fed believes it has tightened credit conditions sufficiently to address the inflation issue, or that, as some have predicted, it would “blink” at the first indication of economic malaise and either stop rate hikes or even start cutting them, according to Seema Shah, the chief strategist at Principal Global Investors.

Instead, she predicted Powell would stress that while GDP is slowing and will likely drop further, inflation will remain sticky, and that containing inflation is their top concern. Even if growth has slowed down, they are not about to quit.

The foundation has been laid by recent remarks from the Fed’s core group of regional bank presidents, who have publicly entertained the danger of recession as part of regulating inflation, and used terms like “raise and hold” to describe a rate-hiking strategy where cuts have not yet found a place, or outright called for continued significant rate increases like the back-to-back 75-basis-point hikes made in June and July.

The world will be listening intently to Powell’s remarks, which are scheduled to be made at 10 AM EDT (1400 GMT) on Friday.

The direction the 69-year-old retired investment banker charts for the Fed as the head of the most potent central bank in the world will have an impact on countries all around the world at a time when most other central banks are also engaged in their own wars against inflation.

The federal funds rate, the Fed’s primary tool for monetary policy, has climbed from practically 0 in early March to the present target range of 2.25% to 2.50%; further increases are very certainly on the way, but it is still uncertain on what rate and when they will end. To varying degrees, policymakers have carried out the same action everywhere around the world.

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