Halyard’s Weekly Wrap – 08/26/22 – Jackson Hole lotta BS!

The economic data this week continued to portray a deceleration in the economy, but the most anticipated highlight was Chairman Powel’s comments at the Jackson Hole Symposium. We’ve always had a distaste for the symposium. We view it as a Davos-like affair, attended by an elite group that considers themselves above their constituents. To us, that sends the wrong message about the mission of the Central Bank. Especially given the mess the Federal Reserve has created with excessively easy monetary policy.

We’d describe the speech as being saccharine-like in the in description of the current inflationary impulse. The speech didn’t follow the post-FOMC press conference structure in which a question & answer period followed. Because of that, there were whispers that Powell would offer a mea culpa to the mess that he oversaw, but that was not to be. Instead, he painted a “Pollyanna” picture of the current state of affairs. Of that, there were 3 “jaw dropping” quotes that we need to bring to your attention. They are, in chronological order of their mention in the speech, “The absence so far of broad-based inflation pressures,” “longer-term inflation expectations have moved much less than actual inflation…suggesting that households, businesses, and market participants also believe that current high inflation readings are likely to prove transitory,” and finally, “Today we see little evidence of wage increases that might threaten excessive inflation.”

Let’s start with the “broad based” comment. Does the Chairman not leave his house? Virtually every item in the CPI is moving higher. The average consumer usually isn’t interested in perusing the sub-categories of the monthly CPI release, but everyone knows that everything is more expensive. The current state of inflation can only be described as broad based.

Secondly, His “inflation expectations” quote is at best, a half-truth. It’s true that expectations for future inflation are below the 8.5% year-over-year touched in July, but as we’ve written repeatedly, the consumer expectations surveys all continue to move higher with each passing month. We were shocked that he actually described expectations as “transitory.” One would think that he’d strike that work from his vocabulary forever. In a word, it represents an absolute failing on his part as guardian of the economy. Unbelievable!

Finally, “little evidence of wage increases.” Just a few short years ago there was lively debate about boosting the minimum wage to $15 an hour, and what that would do to small businesses. That debate has come and gone, and the de facto minimum wage is now $15 an hour. The question of how small businesses would handle the increase in wages has been answered; they can offset that cost by raising prices, directly contributing to the rise in prices.

So much for Mea Culpa. This speech was just shy of the Chairman declaring “mission accomplished!”