Reuters Econ World: The Jackson Hole effect

By Howard Schneider

Aug 21 (Reuters) - The view from the Jackson Lake Lodge in Wyoming is about as serene as it gets: willow flats and the occasional munching moose, with a lake and the Teton mountains in the background.

But for Fed Chair Jerome Powell, it has been the setting of some not-so-serene moments, including being compared by President Donald Trump to the head of the Chinese Communist Party in 2019 and delivering in 2022 a terse, stern lecture to the nation about the pain that might be needed to fix inflation.

Powell will deliver what is in all probability his last keynote address to the Fed’s annual conference here on Friday, a speech that could mark the U.S. central bank’s resumption of rate cuts – at least that’s what markets are betting and Trump is demanding.

Don’t count on a lot in the way of forward guidance beyond the Fed’s next meeting, though; the Fed has been shying away from those sorts of promises given how fast tariffs and other policies have been changing, and how much remains up in the air about the impact.

It may be a footnote to his policy speech, but Powell is also expected to release the Fed’s new strategic framework. It may see the central bank declare a do-over of sorts; some of the ideas launched during the pandemic became quickly irrelevant when inflation surged. One issue to watch, however, is how the Fed squares its twin commitments to inflation control and maximum employment, while making clear that it will never, ever, ever – like, NEVER – let inflation get bad again.

Meanwhile, the hunt for Powell’s successor continues, a search that has gotten far more expansive than seemed likely at first, as does the president’s efforts to mold the central bank more to his liking. Treasury Secretary Scott Bessent says he will be interviewing 11 candidates in the coming couple of weeks to decide who gets face time with his boss. It’s an important recommendation for Bessent: his predecessor in Trump’s first term, Steven Mnuchin, is now ridiculed by Trump for … recommending Powell.

Trump’s resign-o-meter also found a new target this week in Fed Governor Lisa Cook over allegations about mortgages obtained before she joined the Fed. Cook responded that she would not be “bullied” into resigning.

It’s a significant issue. Cook’s board term outlasts Trump’s time as president, and unless one of three sitting governors appointed by former President Joe Biden resigns, Trump could remain one vote short of a Fed board majority until near the end of his own term.

THE HEADLINES

• Riding high on Wegovy, Novo doubled its workforce. Now layoffs loom

• Walmart hikes annual forecast as low price focus draws shoppers

• EU pushes to secure lower U.S. car tariff from Aug 1

• Hollywood's biggest AI debut? Las Vegas Sphere's 'Wizard of Oz'

THE CHART

Fed funds futures traders are currently pricing in 77% odds of a September cut and 51 basis points in cuts by year-end.

THE PODCAST

"It would be the first time, though, that you have a chair, potentially the chair to come, nominated and sitting on the Federal Open Market Committee, sitting on the board, and actively there in the meetings."

Howard Schneider on the Econ World podcast.

There was no show this week. But the Shadow Fed Chair episode from July remains a fascinating listen.

THE REAL WORLD

• Berlin: A Ukrainian man has been arrested in Italy on suspicion of coordinating the 2022 attacks on the Nord Stream gas pipelines, marking a breakthrough in an episode that sharpened tensions between Russia and the West.

• United States: Most Americans believe efforts to redraw U.S. House of Representatives districts to maximize partisan gains, like those under way in Texas and California, are bad for democracy, a new Reuters/Ipsos poll found.

• Gaza City: The Israeli military maintained its pressure on Gaza City with heavy bombardments overnight, residents said, ahead of a meeting between Prime Minister Benjamin Netanyahu and his ministers on plans to seize the enclave's largest city.

THE WEEK AHEAD

• August 22: Jerome Powell to speak at Jackson Hole

• August 27: Nvidia reports second-quarter results

• August 29: The end of the global "de minimis" exemption