INSUBCONTINENT EXCLUSIVE:
By Craig TorresJerome Powell laid out a doctrine of basing monetary policy as much on how the economy performs in reality as on the
prescriptions of academic models as his Federal Reserve tries to extend a nearly decade-long expansion.
In his first speech as Fed chief at
an annual conference in Jackson Hole, Wyoming, Powell defended his gradualist approach and, in the process, hardened expectations for a
September interest-rate increase
In addition, he stressed that estimates of how the economy works -- like those followed by Ph.D
The approach means that because policy makers often operate amid uncertainty they need to feel their way rather than rush to tighten because
Powell defined it, is to be aware of how these estimates are changing and not take them as set in stone
The chairman reminded his audience of central bankers and economists that if the Fed stubbornly tried to defend a previous estimate for full
employment -- a term economists refer to as U-star -- the cost would be 1.6 million jobs.
Just this week, a paper by Fed economists warned
Securities LLC and a former Fed board staff economist
policy has attracted the ire of President Donald Trump, who nominated Powell to the top Fed job and has since complained about his rate
different it will be from his predecessors.
Under chairs Ben Bernanke and Janet Yellen, the case for holding off on rate hikes was simple as
the unemployment rate declined from a devastating peak of 10 percent in 2009 with an economy still scarred by the financial crisis.
Powell
took over from Yellen in February in the midst of a mature expansion that was given a big boost by Republican tax cuts and a higher federal
Unemployment stood at 3.9 percent in July, well below 4.5 percent that the Fed sees as consistent with full employment in the longer
run.
Still, central bankers have shown patience, raising rates at a careful pace while inflation has slowly moved higher
the amount of slack remaining in the economy
-- keeping inflation expectations low and stable
Measures of what the public expects longer-run inflation to be can be somewhat hazy, but most gauges show them at low and stable rates
