More than ever, the time is right for Janet Yellen to preserve her options.
That’s why when the Federal Reserve chair speaks Friday in Jackson Hole, Wyoming, any description she offers of the U.S. economy will probably be crafted to keep an interest-rate rise on the table for the central bank’s policy meeting next month — without committing it to act.
Either way, September will be important for many of the world’s central bankers gathering at their annual mountain retreat this week, as near zero or negative policy rates struggle to lift global growth. The Bank of Japan is due to conclude a policy review and the European Central Bank will likely gauge the impact of the U.K.’s vote to leave the European Union and whether any stimulus response is necessary.
The formal topic of Yellen’s speech is the “monetary policy toolkit” and the conference itself, hosted by the Kansas City Fed Aug. 25-27, is “Designing Resilient Monetary Policy Frameworks for the Future.”
Both imply an academic focus on the challenges confronting policy makers that have prompted a rethink of conventional wisdom about the relationships between unemployment, inflation and interest rates, as well as the best tools to tackle the next recession.