Blink, and observers may have missed four major takeaways from Federal Reserve Chair Jerome Powell’s speech Friday at the annual Jackson Hole symposium.
1. “The question that matters for monetary policy is whether [tariff-related] price increases are likely to materially raise the risk of an ongoing inflation problem. A reasonable base case is that the effects will be relatively short-lived — a one-time shift in the price level.”
For all of President Donald Trump’s bluster over the Federal Open Market Committee’s vote – and Powell’s, in particular – to keep interest rates steady, this quote lays out the point that spurred Fed Gov. Christopher Waller and Vice Chair for Supervision Michelle Bowman to dissent in July.
It reveals that Powell’s philosophy may not differ all that much from Bowman’s or Waller’s. But more crucial is what Powell said directly afterward.
2. “Of course, ‘one-time’ does not mean ‘all at once.’”
“It will continue to take time for tariff increases to work their way through supply chains and distribution networks,” Powell said. “Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process.”
He also detailed the principal negative impact that FOMC voters who favor higher-for-longer rates, presumably, are trying to avoid.
“It is also possible, however, that the upward pressure on prices from tariffs could spur a more lasting inflation dynamic, and that is a risk to be assessed and managed,” Powell said.
He added that monetary policymakers “cannot take the stability of inflation expectations for granted.”
“Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem,” he said.
For observers who were poring over the Jackson Hole speech for a direct response to Trump’s recent efforts to influence the future composition of the Fed’s board – i.e., mortgage-fraud allegations against Fed Gov. Lisa Cook, meant to persuade her to resign; and conditions that may have contributed to former Fed Gov. Adriana Kugler’s early departure – there was this:
3. “Monetary policy is not on a preset course. FOMC members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach.”
That last sentence is critical. Powell has never been a flashy speaker. But that is as close to a death blow as one might get from him. Translation: The FOMC, on Powell’s watch, will not be unduly influenced.
Observers did not seem to miss the fourth point. One need only look at the 846-point gain the Dow Jones Industrial Average saw after Powell’s speech, to a record high.
4. “Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance.”
Powell is priming the market for an interest-rate reduction at September’s FOMC meeting.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell added, explaining the justification for such a move.
But indeed some of Powell’s points may have been lost in the shuffle. His speech, which began at 10 a.m. Eastern time Friday, lasted 21 minutes. And at 10:21 a.m., news outlets began publishing comments Trump made Friday, essentially doubling down on pressure being applied to Cook.
“I’ll fire her if she doesn’t resign,” Trump told reporters Friday during a surprise appearance at a White House museum. “What she did was bad.”
Cook, attending the Jackson Hole symposium, didn’t escape the pressure. As she entered the conference, according to Bloomberg, Trump-aligned investor James Fishback, who incidentally has sued the Fed, repeatedly yelled, “Governor Cook, why did you commit mortgage fraud?”
Fishback was removed from the hotel lobby where the symposium met.
Cook did not comment Friday beyond her statement earlier in the week that she has “no intention of being bullied to step down from my position because of some questions raised in a tweet.”
She added, at the time, that she “intend[s] to take any questions about my financial history seriously as a member of the Federal Reserve, and so I am gathering the accurate information to answer any legitimate questions and provide the facts.”
Rep. Maxine Waters, D-CA, the ranking member of the House Financial Services Committee, however, jumped to Cook’s defense.
“In their brazen and disgraceful attempt to undermine the independence of the Federal Reserve and bend it to Donald Trump’s will, the President and his spineless, cowardly minions are resorting to the only tactic they know: using the power of the federal government to bully and attack their political enemies and anyone who stands in their way,” Waters said Friday in a statement.
“This is classic Trump, to go after Black women who refuse to bow to him,” she added, citing New York Attorney General Letitia James as another target.
“The allegations against Dr. Cook have been cobbled together as a pretext to try to replace her with someone who will be loyal first to Trump instead of the U.S. Constitution or U.S. law,” Waters said Friday. “Instead of rethinking his own failed and shortsighted economic approach, he’s using the full force of the government to fire any public servant who dares to tell the truth and make decisions that are in the best interest of Americans and our economy.”
