CoinDesk’s First Mover Editor, Bradley Keoun, has already laid out the implications for the crypto space – you can read his article here.
We’ll be updating live through the event, and you can watch the livestream here.
BK (9:16): Powell notes that interest rates are close to the “lower effective bound” i.e. zero “even in good times” – while noting that productivity growth has declined in recent years – the ultimate driver of underlying economic growth.
ND (9:11): Powell is opening his remarks by explaining the history of the Fed’s current inflation targets and why the central bank has approached previous targets the way it has.
“Inflation targeting was also associated with increased communication and transparency, designed to clarify the central bank’s policy intentions,” he said. Bit of tea-leaf reading but it sounds like he’s expecting a change.
And of course, monetary policy has evolved, he noted.
BK (9:11): Nothing new from Powell so far. He’s just walking through the recent history of monetary policy
BK (8:40): The Federal Reserve has pumped about $3 trillion into the financial system this year to help markets recover from the devastating economic toll of the coronavirus. So far, consumer prices have stayed muted, perhaps due to the deflationary impact of slowing demand for goods and services from households and businesses. Powell is expected to discuss whether to explicitly embrace a new policy of allowing inflation to run above the central bank’s 2% annual target. That way, above-target inflation would offset periods of time (such as most of the past decade) where price rises have undershot the target.
Such an explicit commitment would imply to traders that the Fed would stay unusually dovish on inflation for years to come — letting inflation run hot, which likely could push up prices dollar-denominated assets like stocks, gold and bitcoin, since the currency’s purchasing power would be weakening by definition.
Bloomberg News reported on Wednesday that the Fed might keep short-term interest rates close to zero for five years or more, under a policy that could be unveiled as soon as next month.
ND (8:40): Thirty minutes before Powell opens at the Jackson Hole Fed symposium, hosted by the Kansas City Fed, and the big question in and out of crypto will remain the economy. While Powell’s keynote remarks are likely to draw the most attention, it’ll be just as interesting to see what the panelists and guest speakers through the rest of the two-day symposium say.
Last year saw now-former Bank of England governor Mark Carney discuss the need for a financial system which moves away from the dollar. That’s significant in and of itself, but he coupled the suggestion with the idea that a synthetic hegemonic currency, created through a network of central bank digital currencies, could act as the dollar’s replacement (among other alternatives). Carney’s successor, Andrew Bailey, will take the virtual stage Friday.