Central Markets by Robert Lloyd, CFA

The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the  information cannot be guaranteed. All opinions and outlooks are subject to change.

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Fed Chairman Jerome Powell Gives a Speech


Federal Reserve Chairman Jerome Powell normally comes across as a mild mannered Wall Street lawyer. That is not the face he showed to the world on August 26th in Jackson Hole. Rather, he had tough words for the markets and the economy. These words matter because they are an indication of future Fed interest rate policy and the associated implications for employment, earnings and GDP growth.


In his 9 minute speech, he had 3 "lessons" to share with the audience:

  • Lesson #1: Central banks can and should take responsibility for low and stable inflation. The responsibility to deliver price stability is unconditional (ie employment pain doesn't matter).

  • Lesson #2: Inflation expectations matter a lot. If consumers come to expect higher inflation in the future, the pain to correct that situation is higher than normal. Paul Volcker was quoted twice in this short speech.

  • Lesson #3: The employment cost of bringing down inflation increases with time. This was a key lesson of the 1970s: the longer the central bank takes to deal with inflation, the higher the unemployment cost when the bill comes due.

Additionally, he stated that restoring price stability will require time, higher interest rates, slower growth, and a softening labor market. This will bring pain to households and businesses, but a failure to restore price stability will mean far greater pain. (Note: Powell himself uses the word "pain" twice in the speech.)


This was not the speech Wall Street was expecting from Jerome Powell.


Robert Lloyd, CFA®

Chief Investment Officer

Lloyds Intrepid Wealth Management

Lloyds Intrepid LLC is doing business as Lloyds Intrepid Wealth Management. Lloyds Intrepid LLC offers investment advisory services in the State of Texas where registered and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. Lloyds Intrepid LLC and its advisers do not provide legal, tax or accounting advice. Lloyds Intrepid LLC formulates retirement plans, investment strategies, portfolio construction and investment due diligence for clients with signed investment advisory agreements with us. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. All opinions and outlooks are subject to change.


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