Central bankers rewrite monetary policy rules at Jackson Hole
In turn, that means finding new ways to stimulate activity, by keeping borrowing costs down and reassuring businesses and families that the central bank is here to help.
Jerome Powell, chairman of the Fed, is giving the main speech at the Jackson Hole symposium, an annual get together of central bankers.
Usually held in a ski resort in Wyoming, this year it is a virtual event. Nevertheless, financial markets, economists and officials will still be hanging on to his every word.
The key hope among observers is that Powell will give a strong indication of the results of the Fed’s long-running review of its policy tools and options.
Top on the list of things to look for is a hint that the Federal Open Market Committee (FOMC) will no longer stick to its usual goal of getting inflation back up to target, but could let it overshoot for some time, in a policy known as average inflation targeting, or AIT.
“We expect the FOMC to say that they plan to hit 2pc inflation ‘on average, over time’ and to go on to note that overshooting 2pc inflation is not only acceptable, but desirable when inflation has undershot 2pc persistently and inflation expectations have been pulled down,” says Seth Carpenter at UBS.
Effectively that means committing to “keeping the funds rate at zero for as long as is necessary to ensure full employment and an overshoot of inflation”.
