Powell heads to Jackson Hole for final speech as Fed chair

Jerome Powell has arrived in Wyoming for his final appearance as head of the Federal Reserve. He’ll walk once more through the massive lobby of Jackson Lake Lodge, past the grizzly bear statue, under elk-antler chandeliers, and into the same ballroom where he’s given seven straight speeches to the world’s top central bankers.

Powell will speak Friday at 10 a.m. Eastern, the same time he’s taken the stage since 2018. What he says then, as always, will hint at the Fed’s next move.

The Fed chair was first picked by President Donald Trump in late 2017 to run the U.S. central bank. Since then, Powell’s speeches at Jackson Hole have previewed everything from hikes to cuts, slowdowns to panics. Some years, he leaned into economic theory. Others, he addressed live crises. But every year, the message signaled what would follow.

Powell backed hikes in 2018 and reversed course in 2019

Powell’s first Jackson Hole speech in 2018 was his longest. He laid out his policy framework using the phrase “navigating by the stars,” which referred to the neutral interest rate and natural unemployment level. But his real point was about balance.

“I see the current path of gradually raising interest rates as the FOMC’s approach to taking seriously both of these risks,” Powell said, referring to the risk of overdoing or underdoing tightening. The Federal Reserve raised interest rates twice after that speech, following two hikes earlier that year.

In 2019, Powell’s tone changed. The U.S. was deep into Trump’s first trade war, and the global economy was feeling it. Powell brought that issue directly into his speech, saying, “We have been monitoring three factors that are weighing on this favorable outlook: slowing global growth, trade policy uncertainty, and muted inflation.” Within hours of that comment, Trump posted on social media: “Who is our bigger enemy, Powell or Xi?” The Fed responded that year with two more rate cuts, following one in July. Then came COVID, and everything changed.

Powell leaned on jobs in 2020, misjudged inflation in 2021

In 2020, Powell addressed the conference remotely because of the pandemic. This time, he introduced a new policy framework, focused more heavily on jobs. “Our revised statement emphasizes that maximum employment is a broad-based and inclusive goal,” he said.

“Following periods when inflation has been running below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”

In September that year, the Federal Reserve adopted a new test for future rate hikes: the economy needed to reach maximum employment and 2% inflation, with signs inflation would hold above that level.

But in 2021, Powell misread inflation. He again appeared virtually and dismissed the price spike as temporary. “Current high inflation readings are likely to prove transitory,” he said.

The Federal Reserve slowed its asset purchases in November but kept the interest rate near zero until March 2022. That delay was later blamed by both critics and Fed officials for allowing inflation to grow worse.

Powell warned of pain in 2022 and opened the door to cuts in 2024

In 2022, Powell returned to the Jackson Hole podium in person and kept his comments short. “Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said. That year, the Fed followed his speech with two more massive 75-basis-point hikes and then switched to smaller increases until rates reached 5.25%-5.50% by July 2023.

In 2023, Powell’s tone was different but still cautious. “We will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data,” he said. He didn’t commit to more hikes but left the option open. The Federal Reserve kept the rate steady at 5.25%-5.50% through the year.

By 2024, Powell said the risks had flipped. Inflation was cooling, but job numbers were starting to look weak. “My confidence has grown that inflation is on a sustainable path back to 2%,” he said. “We do not seek or welcome further cooling in labor market conditions… The time has come for policy to adjust.”

That adjustment came fast. In September, the Fed ended its year-long pause with a half-point rate cut. It followed with two more quarter-point cuts to close the year.

KEY Difference Wire: the secret tool crypto projects use to get guaranteed media coverage