Federal Reserve at Jackson Hole: What You Need to Know

All eyes are on Jackson Hole today through Saturday.

Amid a great deal of trade tensions, the threat of a currency war, and slower economic growth, central bankers are converging.  This one is a big deal as we wait for hints from Fed boss Jerome Powell on the future of potential rate cuts.

Kansas City Fed President Esther George will also be in attendance.

She has been a dissenting vote against rate cuts, and has noted that it’s not yet time for further accommodation.  She also notes the Fed didn’t need to cut rates in July. “My sense was we’ve added accommodation, and it wasn’t required in my view,” George told CNBC. “With this very low unemployment rate, with wages rising, with the inflation rate staying close to the Fed’s target, I think we’re in a good place relative to the mandates that we’re asked to achieve.”

Boston Federal Reserve President Eric Rosengren will be there.

Rosengren was another dissenting vote against interest rate cuts.

He believes the Fed should be careful not to cut interest rates too much now because it would push U.S. homeowners and businesses to take on more debt, thus making any recession more painful, as noted by MarketWatch. “We have to think about…how much we want households and firms to be leveraged going into whenever we actually do have a significant downturn.”

Also attending, John Williams of New York, Charles Evans of Chicago, Patrick Harker of Philadelphia, Robert Kaplan of Dallas, Neel Kashkari of Minneapolis, and Loretta Mester of Cleveland will likely be in attendance.  In addition, Board of Governor members Michelle Bowman, Lael Brainard, Richard Clarida, and Randal Quarles will be there. 

The 2019 Symposium is a Crucial One

This year, the meeting is being very closely watched because of the current economic situation in the U.S. and globally.  Investors and analysts will be listening for hints from Jerome Powell about what will happen at the Fed’s September meeting.

At the moment, the U.S. bond and stock markets are anticipating another rate cut by September 2019.  But how much that cut will be, or if we’ll even see another cut is open for debate. Should Powell fail to hint at further cuts, we could see a market bloodbath next week.  

There’s hope that won’t happen.

However, we must also consider the economy may be stronger than previously thought. All thanks to U.S. consumers.  Remember, July 2019 retail sales jumped 0.7% month over month.  Excluding autos, retail sales were up a robust 1.0% in July. 

After all, consumer spending — the primary catalyst of economic growth — remains healthy even as other sectors of the economy, such as business investment, have weakened with the trade war. “While the incoming global data have been weak, the latest round of U.S. data would not seem to warrant another rate cut so soon; not with core inflation rebounding and the U.S. consumer seemingly hell-bent on single-handedly saving the world economy,” said analysts at Capital Economics, as quoted by Yahoo Finance.