On Powell's Debut at Jackson Hole

Powell disappointed Fed-watchers expecting a bold and hawkish policy message in his first speech at Jackson Hole, perhaps in part to assert independence in the face of dovish interference from Trump. But he surprised and delighted us with his best-ever public statement, a clarion call for humility, skepticism and gradualism in policy. This is a dovish message that should improve inflation expectations and lead to higher 10-year yields, and a steeper curve. The longer-term problem is Powell leaves the markets without much of an idea of the basis, if any, on which he will make future policy decisions. The default would seem to be some form of inflation-targeting.