What to Look For in the Jackson Hole Conference?

Markets are eagerly anticipating the Chairman of the United States Federal Reserve, Jerome Powell, Friday’s speech at the Jackson Hole Economic Policy Symposium.

The event, sponsored by the Federal Reserve Bank of Kansas City, has been limited to a virtual online setting, instead of having it in-person at the resort town as usual.

This does not diminish the importance of the event and its substance, with academic discussions set to take place, and more importantly, remarks by the Fed Chair.

We already know that the speech will focus on the economic outlook, but any comment by Powell and his fellow monetary policymakers is now more important than any time over the past year and a half, given that the Federal Reserve’s July meeting minutes showed that most members of the Federal Open Market Committee (FOMC) believe that scaling back asset purchases before the end of the year would be appropriate.

This has dramatically increased the chances of tapering during the fourth quarter of 2021 or the first quarter of 2022, after many Fed officials expressed similar views, especially with the improvement in economic indicators.

Question marks over the jobs market and when would it be able to restore the pre-pandemic full employment remain on the horizon.

Moreover, FOMC members are clearly acknowledging the risk of inflationary pressures lasting longer than desired.

On the other hand, the inflation rate above 2% is in line with the Fed’s new guidelines, tolerating a surge in consumer prices with the aim of achieving price stability and full employment targets.

The Fed seems to be gradually seeing the “substantial further progress” that it needs to begin policy normalization. It could soon begin to cut back on the easing measures it took since March 2020 to support the economy, with interest rates at a historically low range close to 0%, and massive $120 billion monthly purchases of bonds and mortgage-backed securities to keep the low rates.

This year’s symposium is being held under the theme:

“Macroeconomic Policy in an Uneven Economy.”

Accordingly, the question about the uneven and incomplete recovery will be the focal point of most discussions, and will most likely be addressed by Powell in his remarks.

Many have discussed the disparity in the American economy and how it was magnified by the pandemic, and Powell will likely discuss the risks of inequality and inequity on the economy and society in the broader sense.

Many minorities were severely impacted by the pandemic and its subsequent economic hardships, and many market sectors were variably impacted by the pandemic, recovering, or receiving support and stimulus.

Powell has previously preached a vision of job gains across the market, including low-income minorities, as a result of monetary and fiscal stimulus measures and the Fed’s easing policies.

It is worth noting that a number of states, more than half of the U.S., recently ended their extra unemployment support paychecks, to encourage more people to look for jobs, but the results of the decision remain debatable.

Last month, data by the Bureau of Labor Statistics reportedly showed that some states that cut the extra $300 weekly federal unemployment benefits are closer to recovery. However, earlier data by the Census Bureau have suggested that the benefits recipients, including those who have been unemployed for a long time, gig workers, and others, did not really seek to find jobs shortly after the decision came into effect.

The environmental aspect is also set to be discussed, with the Fed recently vowing to try and better highlight climate risks from financial and economic perspectives, and given the expected increased support by the Biden administration to renewable energy and electric vehicles.

The Federal Reserve recently changed its plans in organizing the event, due to the rising health risks in the area, as per the CDC scale, especially with the spread of the Coronavirus Delta variant.

Although it was already decided that all attendees, most of which already paid $1,100 fees, would have to be fully vaccinated and wear masks indoors, event organizers are adhering to the new health rules in the county and the state of Wyoming.

Much has been said about canceling the event and moving it online, despite plans for weeks and months, which some analysts believe will send a signal that a return to normal is not as close as previously thought.