On Powell at Jackson Hole (Virtually)

Powell’s Jackson Hole speech was hawkish relative to expectations set in the minutes of the July FOMC in that it brings forward in time the likely onset of starting to taper asset purchases, from the December meeting to November. Powell cushioned the blow by saying that, at the conclusion of tapering, the Fed’s portfolio would not be reduced. Most important, he set a very high bar for lift-off from near-zero policy rates, and effectively recommitted to last year's policy shift to abandon the Phillips Curve. This confirms market expectations that, as with the tapering of QE3, lift-off would come something like two years after announcement of tapering.