While many interesting papers are discussed every year at the central bank conference in Jackson Hole, it is the Friday morning address by the Federal Reserve chair that has captured the lion’s share of media attention over the years. Recognising the level of interest, Fed chair Jay Powell and his predecessors have adopted one of three main approaches depending on the circumstances: signalling imminent monetary policy steps, delving into long-term monetary policy issues or limiting themselves to a narrow economic question with no immediate policy implications.
Powell has a particularly target-rich environment for whatever strategy he chooses this year. It is a moment of great economic fluidity with fascinating policy challenges and trade-offs, both tactical and strategic. Indeed, I would not be surprised if it is not the availability of topics that will determine what he opts to say on August 25 but a personal calculus driven largely by risk assessments.
A year ago, Powell chose the first strategy, delivering a shockingly short (under nine-minute) speech centred on the notion that “While higher interest rates, slower growth and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses.” He went on to say: “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”