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Key Takeaways From the Fed’s Annual Jackson Hole Conference

(Bloomberg) -- The Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming is winding down.

Here are some of the key takeaways from the conference:

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Powell Signal

Fed Chair Jerome Powell used his Friday speech to signal the US central bank is likely on track for an interest-rate cut in September, after holding its benchmark steady in the first eight months of the year.

Powell pointed to a “shifting balance of risks” which “may warrant adjusting our policy stance,” nodding to surprisingly weak figures on employment published after the Fed’s last policy meeting.

But he also emphasized the ongoing risk of higher inflation spurred by President Donald Trump’s tariffs, setting up a likely debate when officials gather in Washington on Sept. 16-17 over the appropriate pace of rate cuts, and whether they should cut at all, in the meetings that follow.

New Framework

Powell also used his speech to introduce changes to the central bank’s overarching monetary policy strategy, marking the conclusion of an official review that began late last year.

Fed officials decided to roll back changes that were made at the conclusion of the last review in 2020, reflecting the difference between the policy challenges they’ve faced over the last five years and those they grappled with in the five years before the pandemic.

In particular, they scrapped a “makeup strategy” they implemented in 2020 that pledged to allow inflation to run a bit above their 2% target for a time following periods in which inflation undershot the goal.

Officials also tweaked the way they describe their maximum employment objective: They’re no longer prioritizing “shortfalls” from that goal — a change in 2020 that suggested they were moving away from a decades-long practice of “preemptive” tightening.

Political Pressure

The weekend was overshadowed by attacks from the White House on Fed Governor Lisa Cook — who at one point was confronted in the lobby of the Jackson Lake Lodge by Trump ally James Fishback, before he was removed by security personnel.

On Friday, the president said he would fire Cook if she doesn’t resign from her post over allegations that she engaged in mortgage fraud. That followed a statement from Cook on Wednesday in which she said she would not be bullied into stepping down.

The back-and-forth over Cook this week is only the latest in a string of attacks the White House has levied against the central bank this year in an attempt to pressure it into cutting rates. It raises the stakes for the Fed as Trump weighs who to choose as Powell’s replacement when the chair’s term ends in May.

Global Panel

During a Saturday panel that featured three major central bank chiefs, leaders of the Bank of Japan and the Bank of England steered clear of comments on the outlook for monetary policy, but spoke to the difficult challenges of expanding their countries’ labor forces.

In Japan, where an aging population and low birth rate are squeezing the labor market and pushing up inflation, BOJ Governor Kazuo Ueda said bringing more women into full-time jobs and employing more foreign workers could help address the problem.

BOE Governor Andrew Bailey said a combination of weak productivity and a poor labor-force participation rate have left the UK with the “acute challenge in raising the potential growth rate.”

He added, “This is a pretty sad story for the UK.”

European Central Bank President Christine Lagarde had a more upbeat message, saying Europe’s labor market has proved surprisingly resilient in the face of a once-in-a-generation inflation shock and aggressive interest-rate hikes.

“Inflation has fallen sharply, and at a remarkably low cost in terms of employment,” she said.