Speculation is mounting that Powell will use the annual Jackson Hole conference to announce a revamp of how monetary policy is set. The speech, scheduled for the first day of the economic symposium later today, could outline a shift by the Fed towards average inflation targeting.
If the yields on long-dated Treasury notes shoot higher after the speech, likely lifting the $ up as well, that would imply..
...investors don’t think Fed has gone far enough in reassuring markets that i/r will remain low for a very long period of time if they anticipate that the new policy would push up inflation in the long run.
Fundamentally for the Fed, which has a dual mandate of max employment + price stability, a more flexible policy would allow it to keep i/r low..
...until the unemployment rate has fallen substantially from the current double-digit levels without worrying about overshooting its inflation goal.
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