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The Fed’s Jackson Hole Conference

I think the best summation of last week’s Fed conference at Jackson Hole was “No Action, More Talk at Jackson Hole” (Barron’s).

But that was to be expected. The media spent much of last week speculating about what rabbits Fed Chairman Ben Bernanke was going to pull out of his hat, but all of that cogitation was misguided. In reality a speech at Jackson Hole is not typically the platform for any major policy changes…that sort of announcement would be made at the Fed’s FOMC meeting.

And the door for such an announcement was left wide open. Next months FOMC meeting was expanded to two days to allow the committee to evaluate additional easing. And “the Fed has a range of tools that could be used to provide additional monetary stimulus”, according to Bernanke.

But the takeaway from the speech was that the Fed Chairman placed the burden of bolstering the economy on Congress: “most of the policies that support robust economic growth in the long run are outside the province of the central bank”. In other words, it is fiscal, not monetary, policy that the economy needs right now.

Bernanke’s speech was more political than it was economic. But the bottom line is that the Fed already made the unprecedented move of indicating a time frame for its interest rate policy at its last meeting, so while there was ‘no action, more talk at Jackson Hole’… I would say there was no action yet.

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