Over the years, the annual central bank confab at Jackson Hole has seen Federal Reserve chairs address immediate policy issues as well as longer-term and more academic ones, that involve the economic and institutional context for policymaking.
Present circumstances called for Jay Powell, the current chair, to do both — that is, address the policy errors of the last 18 months, try to realign monetary policy expectations and establish a path for the resetting of the guiding policy framework. In the event, his brief speech (just under nine minutes) last Friday largely attempted just one of these three. By focusing on the present, he left much still to be said while less than fully exploiting a much-anticipated opportunity for enhancing policy effectiveness.
There are five reasons why Powell needed to deal with issues that relate to the past, present and future. First, time has not been kind to his presentation at last year’s gathering. His characterisation of inflation as transitory, his forecasts of the economy and his elucidation of the required policy responses have fallen short. They are now part of the four-element Fed policy mistake that involves inadequate analysis, bad forecasts, poor communication and belated policy responses.