4 Takeaways from the Fed’s Jackson Hole Annual Conference

(Bloomberg) — The Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming is winding down.

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Here are some key takeaways from the conference:

Powell Pivot

Fed Chairman Jerome Powell’s widely anticipated speech affirmed expectations for an interest rate cut at the central bank’s next meeting on Sept. 17-18, supporting stock prices and Treasuries.

“The time has come for politics to adjust,” Powell said Friday. “The direction of travel is clear and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”

Powell said he had more confidence that inflation was on track toward the Fed’s 2 percent target, while acknowledging that there had been an “unmistakable” cooling in the labor market. “We do not seek or welcome further cooling of labor market conditions,” he said.

While Powell offered few details on how the Fed might proceed on borrowing costs after its meeting in September, he stressed the need to focus on lessons learned in the central bank’s upcoming review of its framework.

International vision

Powell was not the only central banker to signal that interest rates were on a firm downward path.

Bank of England Governor Andrew Bailey said on Friday that while it was “too early to declare victory” over inflation, the risks of lingering price pressures appeared to be receding. Britain’s central bank cut its benchmark interest rate earlier this month, and its comments suggested it is increasingly confident about further rate cuts.

Meanwhile, several members of the European Central Bank’s Board of Governors attending the conference said they would support another rate cut next month. This group included Finland’s Olli Rehn, Latvia’s Martins Kazaks, Croatia’s Boris Vujcic and Portugal’s Mario Centeno.

The ECB cut borrowing costs in June. Centeno called the decision to ease in less than three weeks “easy” given the inflation and growth data.

The Way Forward

On the sidelines of the conference, a number of Fed officials offered updated views on the economy and hints about the way forward.

Philadelphia Fed President Patrick Harker said rate cuts should be “methodical.” He agreed it was time to lower interest rates, adding: “Just start the process and keep it moving.”

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Boston’s Susan Collins echoed a similar sentiment Thursday, noting that a “gradual and methodical pace” of cuts would likely be appropriate.

Papers and boards

The three-day conference is essentially academic in nature. Economists presented four research papers, all related to the theme “Reassessing the effectiveness and transmission of monetary policy”.

Perhaps most relevant to the current economic moment—given the growing focus on employment—was research by Pierpaolo Benigno of the University of Bern and Brown University professor Gauti Eggertsson. They concluded that the cooling labor market is nearing an inflection point, where a further slowdown could bring a much larger increase in the US unemployment rate.

Speaking on Saturday with Brazil’s Roberto Campos Neto and Norges Bank’s Ida Wolden Bache, the ECB’s chief economist, Philip Lane, said a return to 2% inflation was “not yet certain”. Campos Neto, meanwhile, said a tight labor market made the task of taming inflation challenging.

For more details on the full program, click here.

—With assistance from Jonnelle Marte, Mark Schroers, Steve Matthews and Catarina Saraiva.

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