Fed Chair Powell to speak on Fed’s framework review next Thursday By Reuters

Fed Chair Powell to speak on Fed's framework review next

© Reuters. Federal Reserve Chairman Jerome Powell testifies on Capitol Hill

By Ann Saphir

(Reuters) – Federal Reserve Chair Jerome Powell could deliver a sneak peak into the U.S. central bank’s efforts to revamp its approach to monetary policy next Thursday when he addresses the Kansas City Fed’s annual central banking conference.

Powell will discuss the Fed’s monetary policy framework review at 9:10 EDT (1310 GMT) on the opening day of the conference, the Fed said on Thursday.

It will be Powell’s first public appearance since the central bank’s policy meeting in late July, when the Fed reiterated its commitment to use all its tools to support an economy whose outlook is very much dependent on the course of the novel coronavirus.

Investors have been eagerly awaiting details on possible changes to how the Fed targets inflation that, in the current environment, could mean the Fed sticks with aggressive stimulus measures longer than under its previous rubric.

Minutes of the Fed’s July meeting, released on Wednesday, showed policymakers are nearing agreement on refinements to the Fed’s framework, though they did not provide any detail.

U.S. central bank chiefs have in the past used the annual gathering, usually convened in Jackson Hole, Wyoming, to signal important policy shifts.

This year the conference, entitled “Navigating the Decade Ahead: Implications for Monetary Policy,” will take place in a virtual and public format because of the coronavirus pandemic, giving the chair an even bigger megaphone than usual.

Fed policymakers have been working on a new framework since late 2018. Low inflation and low interest rates globally, they worried, would make combating future recessions using their existing strategies more difficult.

When the pandemic sent the world’s biggest economy into its sharpest downturn since the 1930s, the Fed went big, slashing rates to zero and buying trillions of dollars of bonds to boost investment and hiring. With the U.S. unemployment rate at 10.2% and the virus continuing to spread, some Fed policymakers are advocating even more stimulus.

Any changes to the Fed’s overarching framework may have little short-term impact on Fed policy, but could signal a readiness to take even more aggressive action ahead.

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