Fed's Powell in Jackson Hole spotlight with speculation on rates

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Kansas City Fed president undecided on 50, 75 basis point rate hike ahead of meeting

FOX Business’ Edward Lawrence speaks with Federal Reserve Bank of Kansas City President Esther George from Jackson Hole, Wyoming, about the economic outlook for the remainder of the year.

It may be considered Jerome Powell's most significant speech of the year.

The Federal Reserve chairman's remarks to investors and economists will be the marque event at the Fed's annual symposium at Jackson Hole.

People will be looking for clues on where the Fed is heading on interest rates, mainly how big and for how long.

With inflation around 9%, Powell will likely stress that the Fed is determined to bring it down to its 2% target, no matter what it takes. 

THE FED IS AIMING TO ‘MEANINGFULLY DECELERATE’ INFLATION BY TIGHTENING POLICY, KANSAS CITY FED PRESIDENT SAYS

Federal Reserve Chairman Jerome Powell speaks during a news conference at the Federal Reserve Board building in Washington. ( (AP Photo/Manuel Balce Ceneta) / AP Newsroom)

The Fed's rate hikes may well defeat inflation in time. But there are fears that they may cause a recession in the process.

The conference of central bankers is the first held in person since 2019 after being virtual during the COVID-19 pandemic.

To battle inflation, the Fed has lifted its benchmark rate by 2 full percentage points in just four meetings, to a range of 2.25% to 2.5%.

The Grand Teton mountain range is seen from the Jackson Lake Lodge during the Jackson Hole economic symposium, sponsored by the Federal Reserve Bank of Kansas City. (David Paul Morris/Bloomberg via Getty Images / Getty Images)

Those hikes have raised the cost of mortgages, car loans and other consumer and business borrowing. 

GDP SHRANK AT REVISED 0.6% RATE IN SECOND QUARTER, SIGNALING US REMAINS IN TECHNICAL RECESSION

Where does the Fed go from here? At a news conference following its July meeting, Powell suggested that the Fed might decide to slow its rate hikes after having imposed two straight three-quarter-point increases — historically large moves — in June and July.

Fed-watchers hope Powell will send some signal Friday on what are the next steps.

A man walks into a restaurant displaying a “Now Hiring” sign. (AP Photo/Elise Amendola / AP Newsroom)

This week's data adds to the puzzle. On Thursday, the government said the economy shrank at a 0.6% annual rate, marking a second straight quarter of contraction. 

But hiring remains high and layoffs are relatively low.

Inflation is still crushingly high, though it has shown some signs of easing, because of lower gas prices.

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On Friday, Powell may also address how the pandemic caused a range of supply problems for the economy and what it could mean for Fed policy. COVID-19 shutdowns led to shortages of semiconductors and other components as well as workers. Many of those supply shortages persist. 

The Associated Press contributed to this report.

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