Journalist: Jay Powell speaks Friday at Jackson Hole. Will you give us an idea of what you plan to do?
Gordon Gekko: Yes. It is the ideal platform. You can speak long and lying. And the Fed chose the subject of the symposium with extraordinary sense of opportunity.
Q.: This year the labor market will be discussed.
GG: That’s how it is. Emphasizing its transition stadium and the incidence of demography, productivity and macroeconomic politics. You couldn’t have chosen a better agenda. Although it is not explicitly mentioned, Trump’s immigration policy has a central role in the analysis.
Q.: There is a lot of talk of the rise of tariffs and very little of the reduction of the hand of foreign work and the consequent loss of dynamism of the labor offer.
GG: But its consequences were seen in the July work report. The creation of new jobs dried in May, June and July. And that dynamic is what those who ask for an urgent rates are indicated. Except Trump, of course, that he argues that the economy is wonderful and that what is wrong is the calculation of statistics.
Q.: If the Fed chose this theme, it is because it considers it very relevant for its decision making. Do you think Powell will make us understand that labor market status justifies resume rates in September?
GG: It would be a surprise. Do not leave rates that is the most likely settled scenario long ago. Yes, that Powell commits in advance. If the Fed is dependent data, there is a lot of relevant data that will be known after the conference and before the meeting of September 16 and 17.
Q.: Starting with the August Employment Report.
GG: Clue. May and June were very bad. They generated 19 thousand and 14 thousand net positions. In July 73 thousand were added. And all, more thousand more, in the private sector. August, confirm that improvement? Another mass review of the data awaits us. July (and June) will be corrected down? They are important details, do not forget that the Fed is offside with respect to the inflation goal. And what is still unknown, will be known when defining the decision.
Q.: Trump’s policies lead Fed to a muddy land. Tariff rise makes higher inflation fear, even if it is a transitory phenomenon. But also harms production. And permanently. The expulsion of undocumented workers – and the effective closure of migratory flows – changes the strength of all these years of the labor offer. We cannot expect the economy to grow as before or that so many jobs are generated. It is a structural change, and a different new balance.
GG: It is a real change. It will not be resolved by a low rate, of course.
Q.: Jackson Hole is supposed to be the scope to discuss how monetary policy will respond to these vertiginous removals of reality. It is the tribune, which is used once a year, to explain the agenda of monetary policy – and its sensitivity – before public opinion. Although now the White House wants to impose its criteria. What do you think Powell will say? Will it be as aggressive as it is feared? How far can Trump’s incessant pressure limit it?
GG: It is a very interesting moment. There is an ongoing stapling shock that operates on an economy still in full employment. And, in parallel, there is a political interference shock that already produced unemployment in the Board of Governors of the Fed.
Q.: Refers to Adriana Kugler’s resignation.
GG: Clear. Powell has no future beyond May when his mandate expires at the head of the Fed. He could stay as a simple governor, but he will not. His with Trump has no arrangement.
Q.: History is repeated as happened with Janet Yellen. The executioner, Trump, is the same. At the time, he benefited, now he will roll his head.
GG: Under those conditions, or he leaves as Kugler did, or stays to defend the Fed Independence Flag. So I think we will listen to a very genuine Powell. He will emphasize, I imagine, in the importance of monitoring the unemployment rate more than the evolution of employment. And in the transitory character, yes, of inflation that tariffs can generate, but in the vital importance of not being ruined in inflation expectations.
Q.: That will sound hard. The consumer’s inflation expectations were shot at 4.9%.
GG: It is not necessary to exaggerate. It can point to those that arise from taking bond market prices (although bonds are also anesthetized by treasure refinancing policy).
Q.: Think that Powell will force to recalculate the expectations of low rate.
GG: I don’t think too much. Powell will tell us what he thinks, not what he will do. It can be aggressive if you want. The quarterly projections of the Fed will serve as a counterweight. They are not going to retouch a couple of casualties before the end of the year. And the September 17 decision will be agreed. It is Powell’s responsibility to forge a solution can be shared and does not thunder the credibility of the Central Bank. It will most likely be a low -quarter rate decline, with asteristics. As if it is understood as a lonely bird and not as the omen of a flock of cuts on the way.
Source: Ambito
