FOMC Committee

What We Learned From Wyoming

Financial Commentary
August 29, 2022
Jonathan SmithBy Jonathan Smith
Securities Analyst

In the financial world, the news is dominated by the current sensational headlines. The big event last week was the 2022 Jackson Hole Economic Symposium. Bankers from across the world descend annually in Wyoming to discuss important ideas related to the current conditions of their economies. Investors watch this symposium to seek clues from central bank leaders on the direction of their economies and paths for monetary policy. Most notably, investors around the globe were curious to hear Federal Reserve Chairman Jerome Powell’s speech regarding inflation and interest rates.

Why Wyoming?

Wyoming is not known for being a financial hub, so many people wonder why this location was chosen for their symposium. The forum has been held annually in Jackson Hole since 1982. At that time, the Kansas City Fed leaders learned it was the best way to ensure the Fed chairman, Paul Volcker, would accept an invite to the event…because there was good fly fishing. This time of year, Wyoming traditionally has beautiful weather and great scenery that the central bankers all embrace. In their leisure time, they enjoy hikes, outdoor sports such as fishing, and the Western atmosphere in the state.

What Did Powell Communicate on Friday?

Friday morning at the forum, Chairman Jerome Powell communicated the Fed’s commitment to bringing inflation down closer to their 2% target. He stated, “While the lower inflation readings for July are welcome, a single month's improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down.” While the CPI report showed inflation ease from 9.1% in June to 8.5% in July, the Fed is not convinced that inflation has peaked. We will get two key inflation reports in September before the Fed’s next meeting, which will give more specific direction and insight into any trends they see.

While the labor market still remains tight, the Fed does not anticipate stopping interest rate hikes soon. Powell stated, “With inflation running far above 2% and the labor market extremely tight, estimates of longer-run neutral are not a place to stop or pause.” Officials still estimate that the long-run target for interest rates will settle between 2.25% to 2.5%. An unemployment rate of 3.5% gives the Fed more flexibility to raise interest rates in the short term.

Chart

After Powell’s speech on Friday, investors are betting on another interest rate increase at the September 15-16th meeting. The chart above indicates a 62.5% probability that the Fed will raise interest rates by another 0.75%, as fed officials hint that more aggressive rate hikes may be needed to tame inflation.

While an interest rate increase seems imminent in September, as high inflation continues, we focus on positioning our portfolios to provide long-term results through times of economic uncertainty. If you have questions regarding how your portfolio is positioned in these current conditions,reach out today  to discuss your portfolio with an SNB wealth management advisor. Your financial success matters to us!

 

PHOTO INFO: John C. Williams, president and chief executive officer of the Federal Reserve Bank of New York, Lael Brainard, vice chair of the Board of Governors of the Federal Reserve, and Jerome Powell, chair of the Federal Reserve, walk in Teton National Park where financial leaders from around the world gathered for the Jackson Hole Economic Symposium outside Jackson, Wyoming, U.S., August 26, 2022. REUTERS/Jim Urquhart

About the Author

Jonathan Smith

Jonathan Smith is a Securities Analyst for the Security National Wealth Management team. He has more than 10 years of experience in the investment and financial field. A graduate of Briar Cliff University, Jonathan also serves on the Fiscal and Public Policy Commission for the City of Sioux City, where he lives with his wife and growing family.

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