The Macroeconomic Sitch: Pre-Jackson Hole Weekend Check-in
There will be a 40-month gap between when the economy’s soft landing commenced & when Fed policy reaches neutral. That is a truly uncomfortable place for an economy to find itself placed in…
The very sharp and interesting Claudia Sahm has a preview of the Federal Reserve’s forthcoming gathering this week at the Federal Reserve Bank of Kansas City’s annual conference at Jackson Lake Lodge in Grand Teton National Park in Jackson Hole, Wyoming. Her bottom line:
Claudia Sahm: Looking back to look forward: Jackson Hole preview: ‘How [Powell] thinks… about monetary policy…. Go slow unless it’s a crisis…. Pay attention to the risks…. A strong labor market is not a threat on its own…. Don’t overreact to temporary inflation…. “We… intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective…. Two percent is and will remain our inflation target”… <https://stayathomemacro.substack.com/p/looking-back-to-look-forward-jackson>
And:
Claudia Sahm: Looking back to look forward: Jackson Hole preview: ‘Debates will rage on whether inflation was “transitory.” The Fed was correct about…temporary… [but] underestimated the time horizon. Some argue that transitory implies that it returns to normal without any intervention. The Fed raised rates, which would be an intervention. That’s true, except that the Fed works through demand, and demand held up fine…. Starting to cut rates does not mean that the “job is done,” but rather that we are on the path to it. Powell is leading the Fed through its first major disinflation under an inflation-targeting regime…. <https://stayathomemacro.substack.com/p/looking-back-to-look-forward-jackson>
Well worth reading.
And I have eight brief comments: