{"id":294,"date":"2014-08-22T18:56:20","date_gmt":"2014-08-22T22:56:20","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=294"},"modified":"2014-08-22T18:56:20","modified_gmt":"2014-08-22T22:56:20","slug":"fed-chair-yellen-talk-at-jackson-hole-conference","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=294","title":{"rendered":"Fed Chair Yellen Talk at Jackson Hole Conference"},"content":{"rendered":"

In a Nutshell:<\/strong> \u00e2\u20ac\u0153\u00e2\u20ac\u00a6 if progress in the labor market continues to be more rapid than anticipated by the Committee, then increases in the federal funds rate target could come sooner than the Committee currently expects … Of course, if economic performance turns out to be disappointing \u00e2\u20ac\u00a6 then the future path of interest rates likely would be more accommodative than we currently anticipate.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

If you don\u00e2\u20ac\u2122t like two armed economists, you will truly dislike the talk that Fed Chair Janet Yellen gave today at the Federal Reserve Bank of Kansas City\u00e2\u20ac\u2122s Economic Symposium in Jackson Hole, Wyoming.<\/p>\n

The greatly anticipated speech delved into the details of the labor markets, the impact of wages on inflation and the way that monetary policy should react.\u00c2\u00a0 Of course, being a good economist and academic, Chair Yellen discussed all sides of the issues.\u00c2\u00a0 For example, is the decline in the participation a result of changing structural factors such as the aging workforce or is a cyclical decline due to frustration that will unwind once the labor market firms more?\u00c2\u00a0 The answer is, of course, yes.\u00c2\u00a0 That is, it could be one, or the other or even both, which it likely is.<\/p>\n

Similarly, there were discussions about wage pressures, how long it could take for wages to rise faster and when rising labor costs would actually translate into rising inflation.\u00c2\u00a0 As any economist will tell, the answer is hardly clear since there are multiple competing factors.\u00c2\u00a0 Thus, wage pressures could ignite quickly or be delayed.\u00c2\u00a0 Rising wages could signal future increases in inflation, or maybe not.\u00c2\u00a0 The Fed should react quickly to rising wages or maybe wait if the wage increases are temporary.\u00c2\u00a0 In other words, the answer is any or all of the above.<\/p>\n

So, given the talk, is there anything to take away from the speech?\u00c2\u00a0 Yes.\u00c2\u00a0 First, the Fed members recognize that we are a lot closer to their desired goals than they had projected.\u00c2\u00a0 Second, the lack of wage inflation is not necessarily a good sign for future inflation.\u00c2\u00a0 The apparent current slack in the labor market could disappear more quickly than expected.\u00c2\u00a0 In the past, the Fed Chair had generally been on the side that current labor market conditions argue for keeping rates low for an extended period.\u00c2\u00a0 Now, those same conditions need to be watched more carefully.<\/p>\n

If Janet Yellen was viewed believing the labor market had plenty of slack and wage pressures would not build anytime soon, that perception has to change.\u00c2\u00a0 She recognizes that the risks are more balanced.\u00c2\u00a0 That means she will be more willing to move rapidly if the economy continues to improve surprisingly quickly.\u00c2\u00a0 Thus, investors should not assume any time frame for Fed rate hikes.\u00c2\u00a0 It is easy for economists and market analysts outside the Fed to pick a date.\u00c2\u00a0 But today\u00e2\u20ac\u2122s talk makes it clear that if the Fed has to move sooner or deems it necessary to wait longer, the Fed Chair is totally prepared to go in that direction, whatever it may be.<\/p>\n","protected":false},"excerpt":{"rendered":"

In a Nutshell: \u00e2\u20ac\u0153\u00e2\u20ac\u00a6 if progress in the labor market continues to be more rapid than anticipated by the Committee, then increases in the federal funds rate target could come sooner than the Committee currently expects … Of course, if economic performance turns out to be disappointing \u00e2\u20ac\u00a6 then the future path of interest rates … Continue reading Fed Chair Yellen Talk at Jackson Hole Conference<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-294","post","type-post","status-publish","format-standard","hentry","category-federal-reserve-policy"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/294","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=294"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/294\/revisions"}],"predecessor-version":[{"id":295,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/294\/revisions\/295"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=294"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=294"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=294"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}