JUSA - Powell Kicks 'Taper Timing' Down The Road At Jackson Hole

• In his speech on Friday, Fed Chair Jerome Powell stressed that inflationary pressures are cooling and getting closer to the Fed’s 2% target rate. Powell also acknowledged that some inflation is a “cause for concern” and implied that higher prices could be more permanent than he expected.
• The ECB and the Fed have diverged on their respective monetary policies. While the ECB recently increased QE, the latest FOMC minutes reveal that the Fed wants to announce that it will begin tapering in 2022.
• It will be interesting to see how long the U.S. can sustain its 6% GDP growth rate, forecasted to persist through Q3. In addition to robust consumer spending, there is a massive order backlog due to supply chain glitches. Furthermore, robust job growth continues to add new consumers, who are expected to continue to boost retail sales.
• The inflation bubble that easy monetary policy created is expected to ease somewhat in the fall, especially as demand for crude oil and natural gas ebbs. Unfortunately, much of the wholesale inflation that rippled through the U.S. economy were service costs that are not expected to diminish, so some recent inflation is here to stay.

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