Central Bank Watch: Fed Speeches, Interest Rate Expectations Update; Jackson Hole Preview

JACKSON HOLE IN SIGHT

In this edition of Central Bank Watch, we’ll review the speeches made over the past week-plus by various Federal Reserve policymakers in the run-up to the Jackson Hole Economic Policy Symposium, set to take place over the next few days.

HINTING AT TAPERING

A slew of hot labor market reports and inflation rate readings have set the stage for a more hawkish Federal Reserve in the coming months. FOMC policymakers seem to concur, insofar as the tone of commentary over the past week-plus has been catering to the market’s need to be given clear guidance well in advance of any forthcoming policy changes.

August 12 – Daly (San Francisco president) said that the FOMC could begin scaling back its stimulus withdrawal by the end of 2021.

August 15 – Kashkari (Minneapolis president) commented “if we see a few more jobs reports like the one we just got, then I would feel comfortable saying yeah, we are -- maybe haven’t completely filled the hole that we’ve been in -- but we’ve made a lot of progress, and now, then will be the time to start tapering our asset purchases.”

August 16 – Rosengren (Boston president) suggested “if we get another strong labor market report, I think I would be supportive of announcing in September that we are ready to start the taper program.”

August 18 – July FOMC minutes are released, which noted “various participants commented that economic and financial conditions would likely warrant a reduction in coming months," as well as “several others indicated, however, that a reduction in the pace of asset purchases was more likely to become appropriate early next year.”

August 20 – Kaplan (Dallas president) issued caution, warning that his view on favoring tapering sooner rather than later could be adjusted if the delta variant concerns continued.

August 25 – George (Kansas City president) said in regards to delta variant concerns, “I don’t think it changes my own calculus that it is time to begin to make those adjustments given the gains we have seen so far.”

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