Encouraging news out of the 2024 Jackson Hole Economic Symposium; the annual international conference hosted by the Federal Reserve Bank of Kansas City every August in Jackson Hole, Wyoming.

This year’s symposium was held from August 22^nd to August 24^th on the theme of “Reassessing the Effectiveness and Transmission of Monetary Policy”.

The agenda for the event explored several key topics:

• Insights from the 2020’s Inflation Surge
• Government Debt in Mature Markets
• Panel: Financial Markets and the Transmission of Monetary Policy
• Changing Perceptions and the Transmission of Monetary Policy
• The Transmission of Monetary Policy through Bank Balance Sheets
• Reassessing the Effectiveness and Transmission of Monetary Policy

Handouts and papers from the meeting presentations can be found on the agenda website.

The most anticipated presentation of the of the meeting was Jerome Powell, Chair of the Federal Reserve who gave the Opening Remarks. (Written remarks) (Video Remarks)

In his remarks he addressed the current economic situation and the path ahead for monetary policy. He described the near-term outlook for policy. Below is an excerpt from his remarks.

“Our restrictive monetary policy helped restore balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remained well anchored. Inflation is now much closer to our objective, with prices having risen 2.5 percent over the past 12 months.

After a pause earlier this year, progress toward our 2 percent objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2 percent.

Today, the labor market has cooled considerably from its formerly overheated state. The unemployment rate began to rise over a year ago and is now at 4.3 percent—still low by historical standards, but almost a full percentage point above its level in early 2023.

Overall, the economy continues to grow at a solid pace. But the inflation and labor market data show an evolving situation.

The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.

We will do everything we can to support a strong labor market as we make further progress toward price stability. With an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to 2 percent inflation while maintaining a strong labor market.”

With this statement Chair Powell signaled that the Federal Reserve would change policy and begin a series of rate cuts. At the meeting other central bankers agreed that interest rates will be moving lower.

The Federal Open Market Committee (FOMC) has its September meeting September 17^th and 18^th Many economists believe that they will begin cutting rates in a series of gradual moves over the next 18 months. There is a consensus that there will be a 25-basis point rate cut in September, followed by smaller cuts in December and 2025. These cuts will likely translate into a decline in 30-year mortgage rates to around 5.9%-6.2% in 2025. The next two years may be a good time to refinance your mortgage if you have recently purchased a home and have a higher interest rate mortgage.

With these cuts, bond values will increase, and the stock market will likely view these changes positively.

The Federal Reserve will continue to watch the data closely to determine its policy. They aim to keep inflation around 2% and employment growth steadily increasing.

Ralph Broadwater, M.D., CFP®

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