Ahead of Jackson Hole, Fed officials differ over how much current rates restrain demand and what July inflation is signalling. Their remarks do not settle September policy; they offer competing ways to judge the policy rate's present effect.
Kansas City Fed President Jeffrey Schmid said he could not see what policy was restraining with rates at 3.5–3.75 per cent. He called inflation sticky; the report says core PCE rose 3.3 per cent year on year in July and unemployment was 4.1 per cent. That is Schmid's assessment that current settings may not be slowing demand enough.[1]
Boston Fed President Susan Collins said July inflation's headline was a little higher than expected but that she saw encouraging detail underneath it. She highlighted monthly inflation in market-priced goods and services near the 2 per cent target. Her reading looks beyond one headline number to the composition of price pressure.[3]
Fed Chair Kevin Warsh is due to give his first major address in the role at Jackson Hole. NPR reported the preferred inflation gauge at 3.7 per cent year on year in July: above target but below May's 4.1 per cent. The speech may show how the committee weighs inflation's sources rather than deliver a firm rate promise. Fed officials nevertheless face a practical comparison: evidence on prices, labour demand and borrowing must be read together, while no one indicator mechanically determines the next meeting’s decision.[2]
