The Fed: What happens next now that Jackson Hole is over? More Fed hawkishness is in the cards

by | Aug 28, 2022 | Stock Market

What’s ahead for Wall Street and Main Street when Federal Reserve officials return to work after a few days in the fresh mountain air of Jackson Hole, Wyoming ? Economists expect the central bankers will seek to underscore and expand on Fed Chairman Jerome Powell’s message that the “pain” of derailing inflation now is much worse than the “agony” of high inflation in the future if the central bank does not act forcefully.

Powell’s main message in his blunt comments Friday was to disabuse markets of the notion that the Fed will reverse course and cut interest rates next year – a so-called “fed pivot.” See: Fed’s Powell says bringing down inflation will cause pain to households and businesses in Jackson Hole speech With this task done, “the Fed now has to underscore interest rates need to get to a higher level,” said Vince Reinhart, chief economist at BNY Mellon Investment Management. The most likely vehicle for this hawkish policy message may be the Fed’s updated economic forecast, which will be released on Sept. 20 at the same time the next interest-rate decision is announced. In previous forecasts this year, the Fed has projected a soft or soft-ish landing for the U.S. economy, where the central bank manages to get inflation down without a steep rise in the unemployment rate. Powell’s remarks about “pain” for households and businesses and “sub-par growth” opens the door for the Fed’s Summary of Economic Projection to be different now, said Diane Swonk, ch …

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