Federal Reserve Chair Janet Yellen’s remarks at the annual Jackson Hole Economic Policy Symposium delved into history but offered few clues about the future course of Fed policy. She first reviewed the causes of the 2007–2009 financial crisis and then devoted the bulk of her comments to an overview of the subsequent changes in U.S. financial regulation that policymakers implemented in response to the crisis.
Remarks on financial regulation
While this focus was in keeping with the theme of this year’s conference (“Fostering a Dynamic Global Economy”), Yellen chose not to provide further insights into the Fed’s current thinking about how much of a factor – if any – financial stability and, more broadly, financial conditions are in setting the appropriate path for policy rates and balance sheet normalization. The chair did spend some time discussing how the Fed thinks about the costs and benefits of financial regulation in the context of the cost and availability of credit to sound borrowers. While she acknowledged the need for further research, the essence of her speech was that today’s post-crisis financial system is more resilient and does not ration credit to sound borrowers.
See you in September
So those listening for the Fed chair’s views on monetary policy – especially the path for interest rate hikes in a time of below-target inflation – will just have to wait until September 20: Yellen’s press conference after the next Fed meeting.
Visit PIMCO’s Rise Above Rates page for our most up-to-date outlook for interest rates and insight into how we expect financial markets to be affected.
Richard Clarida is PIMCO’s global strategic advisor and a frequent contributor to the PIMCO Blog.