At Jackson Hole, Fed Chair KEVIN WARSH said forward guidance should be limited;
communication transparency is not an end in itself and over-sharing
deliberations or over-committing on future decisions can mislead markets, firms
and households. He said policymakers must be confident that underlying inflation
is moving toward the 2% PCE target or “there is more work to do”; inflation data
have not shown a clear improvement in trend and medium-term inflation
expectations remain broadly stable. The Fed’s 2% PCE objective is a firm, fixed
target and the Fed’s current primary focus should be on prices. Credit and loan
markets show little sign of policy tightening and financial conditions are not
restrictive; interest rates are the Fed’s “main tool.” Warsh said the
probability of substantially stronger growth has risen, Main Street and Wall
Street has shown surprising resilience, and the labor market is relatively
stable. He flagged artificial intelligence as a new variable for the economy and
policy implementation, and described early engagement with working-group leaders
on Reforms are encouraging.
