MNI POLICY:Powell's Jackson Hole Speech Follows Trade Flare-Up

By Evan Ryser

     WASHINGTON (MNI) - The Federal Reserve's annual symposium at Jackson Hole

will offer fresh insights into how Chair Jay Powell's thinking has evolved since

Washington and Beijing escalated their trade war this month and inverted

Treasury yield curves rattled markets worldwide.

     Powell said in July the quarter-point rate cut was part of a "mid-cycle

adjustment in policy," but investors are keen to see if he will deviate from

that message.

     A detailed agenda for the symposium will be released Thursday night at 8:00

pm EST with Powell to deliver a keynote speech Friday at 10:00 am EST entitled

"Challenges of Monetary Policy."

     Here are items to consider:

     --Trade. The minutes of the July FOMC meeting released Wednesday cited

trade tensions as a reason for the July rate cuts from a "risk-management

perspective." Overall, the minutes noted "trade" 32 times. Investors will be

watching to see whether Powell echoes San Francisco Fed President Daly from

earlier this month and says he is focusing his attention on trade headwinds.

     --Inverted Yield Curve. The Fed's minutes this week noted that a "few

participants" expressed concern over inversion of the Treasury yield curve,

"which could indicate that market participants anticipated weaker economic

conditions in the future and that the Federal Reserve would soon need to lower

the federal funds rate substantially in response." With inversion of the 10-year

yield and the 2-year yield in mid-August and again Wednesday following the

release of the minutes, be on the lookout for comments from Powell on how he

views the issue.

     --Celestial Stars. At last year's Jackson Hole, Powell voiced doubts over

the usefulness of some key economic measures officials have relied on to guide

interest rate policy for years. Powell indicated some mistrust of being guided

too strictly by concepts like the neutral rate of interest or estimates of a

theoretical level of full employment, r-star and u-star.

     --Policy Reset. Jackson Hole has been used occasionally as a venue to reset

policy frameworks. Former Chair Bernanke from 2010 to 2012 announced new rounds

of stimulus: QE2 in November 2010, Operation Twist in September 2011, and QE3 in

September 2012. Former Chair Yellen in 2016 used the opportunity to say the case

for higher rates had strengthened, ahead of the Fed's rate increase several

months later. Powell may offer his own hints of actions to come in months ahead.

     --Attendees. In addition the remainder of the FOMC, the ECB's Benoit

Coeure, Philip Lane, and Sabine Lautenschlager, the BOJ's Masazumi Wakatabe, and

the Riksbank's Stefan Ingves are also expected to be in attendance this weekend.

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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