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The Time Has Come
September 6, 2024
I remember traveling as a young boy on long trips and asking my parents, “Are we there yet?” I was later punished for this annoying behavior by having my own children ask me the same question over and over.
On a national scale, we have been asking the same of the Fed. Now I think we can confidently say, “We’re here.” Barring unusual events, the Federal Reserve will finally start loosening its grip this month. Jerome Powell himself, speaking at the Fed’s Jackson Hole conference, all but promised rate cuts are imminent.
Powell’s iconic line, “The time has come for policy to adjust,” grabbed all the headlines but his speech had other interesting points. It was also admirably free of the Fed doublespeak that often leaves us even more confused. Powell seemed to relish the chance to finally deliver what he feels is good news.
He wasn’t wrong. Inflation, while still too high, is much improved. Unemployment is up almost 1 percentage point from last year’s low, but still lowish. The Fed has room to lighten up a bit. Yet it won’t change our path toward a severe debt crisis in the next few years. One problem may be passing but a much greater one lies ahead.
To me, the most interesting part of Powell’s speech was his review of this inflation cycle’s origin and the Fed’s response. Some of it has a “victory lap” feel I’m not sure is justified. It’s still an interesting glimpse into his thinking and, I suspect, his desire to shape how history will record this period. Today we’ll review...
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