August 26, 2019 — Powell Speaks at Annual Jackson Hole Summit


Trade policy uncertainty is creating challenges to monetary policy. Fed Chair Jerome Powell spoke Friday in Jackson Hole and said the Fed is ready to simulate the economy as needed, but trade uncertainties are compounding the risks to the global economic outlook.  He said, “while monetary policy is a useful tool that works to support consumer spending, business investment and public confidence, it cannot provide a settled rulebook for international trade.”

Powell said the trade war is a “complex, turbulent” situation and that the central bank will “act as appropriate to sustain the expansion.”  Powell sees the US economy as performing well and is close to the Fed’s dual mandate of price stability and full employment. But it is facing risks from slowing global expansion and the US-China trade dispute. The Fed’s role is to sustain the expansion as best it can with adjustments to monetary policy.

Powell and President Trump are at odds. Trump is calling for faster and deeper cuts, wanting the Fed rate to be 1 percent lower than where it is now. Powell’s clearest message is there will likely be another rate cut at September’s FOMC meeting, but not what the President demands. Wall Street investors expect a 25 bp cut next month with 95 percent certainty.