On Yellen at Jackson Hole

http://trendmacro.com/system/files/reports/20160826TrendMacroLuskin-AH.pdf
Donald L. Luskin
Friday, August 26, 2016
Some rote hawkishness. But she’s hearing Leftist critics who say a hike is “a terrible idea.”
Strategic view: 

Yellen’s Jackson Hole speech began with a rote phrase that “the case for an increase in the federal funds rate has strengthened in recent months.” But the “strengthened” case is still no case at all, with inflation expectations at the lowest in the history of the data, and millions dropped out of the labor force and the labor statistics. Such rote phrases seem to be part of a campaign of forward guidance, perhaps to prevent “risky imbalances.” But now the Fed faces political pressure coming from the Left, arguing, quite rightly, “I don’t want to be sacrificed in your war against an inflation enemy that isn’t here.” Deeper in the speech, Yellen admitted that the neutral rate may be zero, in which case current policy is not especially accommodative. We reiterate that December is the very soonest for a hike, and very probably not even then.

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