On Powell at Jackson Hole

Powell says conditions "may warrant a shift in policy stance," but no promise for September and nothing different than already promised in the "dot plots" posted at both the March and June FOMCs. While stocks are jubilant, that is likely only because in this political environment for Powell, and with so much key economic data seemingly in conflict, there was a chance he would recant the "dot plots," and he did not. The Statement on Longer-Run Goals and Monetary Policy Strategy recants the prior version from 2020, when "flexible average inflation targeting" was introduced and a focus on "shortfalls" from maximum employment effectively abandoned the deeply flawed Phillips Curve concept. Both proved to be embarrassments  in the post-pandemic inflation crisis. Average inflation targeting was a flawed idea to begin with, supported by the misconception that the Fed needed to harm the economy every day with above-zero inflation so that it could save the economy every ten years by cutting rates, without hitting the Effective Lower Bound. The shortfall approach was excellent policy, as the Phillips Curve concept is not supported empirically and is ethically bankrupt. But none of this matters -- both moves were clearly signaled in the minutes of the March and May FOMC meeting, and the Fed had already de facto abandoned the policies that it is now officially abandoning.