Federal Reserve Chairman Jerome Powell used a celestial metaphor to center his remarks at the recent Jackson Hole summit. The Fed’s decisions, he noted, are often based on the distance of inflation, unemployment and growth from their long-run equilibria. In modeling shorthand, these long-run levels are known as “stars.”
Key takeaways in navigating by these “stars”:
- By all measures and accounts, the U.S. labor market is very tight
- The yield curve’s value as a cycle indicator has been vigorously debated within the Fed
- Challenges in emerging markets do not yet present a serious threat to U.S. growth
- There is no further need for accommodative monetary policy