Publications

Jackson Hole Recap

TRANSCRIPT
THE LEADERBOARD REPORT

Release Date: 9/22/2021
Participants: Scott Carrithers, Aaron Hemphill
Topic: Jackson Hole Recap

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Scott Carrithers:

Welcome to the September issue of The Leaderboard Report. I’m Scott Carrithers, managing director for Country Club Bank’s Capital Markets Group.

In today’s Report, Aaron Hemphill of our Tulsa office will provide us with an update on the recent Jackson Hole Federal Reserve Economic Policy Conference.
 

Aaron Hemphill:

Thank you, Scott.

Every year the Federal Reserve Bank of Kansas City holds an economic policy conference where a limited number of invited attendees meet to discuss current economic conditions and concerns. The event is held in Jackson Hole, Wyoming, and attendees represent numerous industries and countries from around the world. There are usually around 120 attendees who are experts in the fields of economics, financial markets, academia—and even representatives from the U.S. government. 

This year’s conference was held on August 27, 2021. The topic for discussion was “Macroeconomic Policy in an Uneven Economy.” 

Today we would like to discuss a few of the items from Federal Reserve Chair Jerome Powell’s portion of the conference:

Powell began by reviewing the economic challenges the U.S. has faced over the last 17 months as a result of the COVID-19 pandemic. The support from the Federal Reserve during this time has been unprecedented, and Powell reiterated the economy has and will continue to have the Fed’s full support. We have seen tremendous improvements in many areas of the economy following the Fed’s stimulus measures. The recovery has been substantial, but not without turbulence.

Though most areas of the economy are back to normal, performing near or even better than pre-pandemic levels in some cases, the two primary focal points of the Fed at this point are employment and inflation.

Nearly 30 million have people dropped from the workplace during the first couple months of the pandemic. However, employment levels have since recovered to within 6 million of the February 2020 level. The majority of those unrecovered positions continue to be primarily within the services sector. Although the unemployment rate has declined to 5.4%, the long-term unemployment level remains high, and there is still a considerable level of slack in the labor market.

Concerning inflation, we have seen a sharp increase over the last 12-month period, with the headline inflation level over 4%. Businesses and consumers continue to see strong price pressures on goods, materials and wages. 

Powell emphasized that this spike in price inflation is primarily being caused by a “narrow” group of goods and services. These consist of durable goods—such as furniture, appliances, and automobiles—as well as energy and travel items—such as hotels, rental cars and airline rates. Powell reiterated the Fed’s overall stance: Current inflation levels are likely to prove short-lived or “transitory” and will return to the long-run Fed objective of 2%.

Powell concluded his talk with comments on the Fed’s asset purchase plan. The balance sheet of the Federal Reserve has doubled over the last 18 months from $4 trillion in early 2020 to well over $8 trillion today. Banks and other financial market participants have significant interest in  the decisions the Fed makes with these monthly purchases because it will have direct, and likely substantial, effect on market interest rates. 

Powell’s position is the economy and inflation levels have made substantial progress during this recovery, and the Fed may consider it appropriate to begin reducing the monthly asset purchases before the end of this year. 

There are a lot of moving parts involved in the recovery of our nation’s economy, and community banks have played a vital role. At Country Club Bank, we continue to look for ways to provide valuable products and services that enable you to serve your communities better. 

If you have thoughts or concerns related to today’s topic and would like to know how your bank and investment portfolio could be impacted by the Fed’s upcoming policy decisions, please contact your Country Club Bank representative to discuss ideas and strategies for your bank. Thank you for your time.

 

Link to Powell’s speech transcript:

https://www.federalreserve.gov/newsevents/speech/powell20210827a.htm

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