Jackson Hall Conference and Fed Policy
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The Jackson Hole Meeting this year was held on video from August 27th to 28th. This article deals with disinflation and yield curve control issues presented in the minutes of the Federal Open Market Committee (FOMC) in July this year. This has a great influence on the monetary policy of the US central bank (Fed, FED). Let's take a brief look at the related content.
Contents
Jackson Hole Meeting / Economic Crisis and US Fed Monetary Policy / Double-sided Policy and Disinflation / Forward Guidance and Yield Curve Control / US-China Trade Negotiations and Additional Stimulus Measures / Jackson Hole Meeting and US Stock Market / Recovery of Market Economy and Real Economy
Jackson Hole Meeting
The Jackson Hall Meeting is an annual economic policy symposium hosted by the Federal Reserve Bank of Kansas City, one of the Federal Reserve Banks in the United States, at Jackson Hall, Wyoming, since 1978. This is particularly attracting attention as it can gauge the direction of monetary policy of the Federal Reserve (FED). For reference, Jackson Hole is a quiet mountain village in Wyoming, on the way from San Francisco to Yellowstone, a national park, and is the best in the United States.
It is one of the ski resorts. The reason why this is famous is that every August, a conference is held by central bank governors, scholars, and investors who dominate the global financial market. In 2010, when the global financial crisis that occurred in the United States was in full swing, the chairman of the Federal Reserve Bernanke made a speech here and brought out the second quantitative easing policy, attracting world attention.
Economic Crisis and Fed Monetary Policy
From an economic point of view, all crisis pathways usually go through in the order of liquidity crisis, system crisis, and real economy crisis. Likewise, overcoming the economic crisis is possible only when smoothly implemented at each stage. However, since the 1990s, the Asian financial crisis, the 2008 financial crisis, etc.
The tablets expose many side effects. Looking at the situation so far since the 2008 US financial crisis, which has become a benchmark for the FED's monetary policy right after the coronavirus in China, the traditional monetary policy premised on the operation of the system in the early days of the outbreak was rather watered by boiling oil. There is an evaluation that it is a pouring price. So, the FED embarrassed moves the standard interest rate in the interest rate policy-usually 0.25% at a time.
In a big step method that goes down three or four steps at a time, the liquidity control policy shifts to Quantitative Easing. The problem is that even though the liquidity crisis is in the final stage, it does not go smoothly to the stage of overcoming the system crisis and the real economic crisis. Accordingly, the new corona crisis overlaps in the process of delaying the implementation of the exit strategy to normalize non-traditional monetary policy.
Double-sided policy and disinflation
After the FOMC meeting in July of this year, the FED, which had been providing unlimited currency enough to be criticized for giving up its role as a final lender in the face of the novel Corona 19 crisis, fell into trouble in this regard, and the content is the disinflation phenomenon. For reference, disinflation is a phenomenon in which inflation continues to rise, but the rate of increase is slowing.
Say. If left unattended for a long time, both the growth rate and inflation will worsen due to deflation, falling to a negative phase. In particular, it occurs when non-traditional monetary policies are promoted, such as immediately after the financial crisis and the novel coronavirus infection (Wuhan pneumonia). As if you were in a hurry and if you put too much welcome, all policies
Both sides exist. Bubbles in the price of assets such as stock prices will intensify if the inflation rate has slowed as it is now and continues to maintain an unlimited currency supply stance to prevent deflation that may occur. It is unlikely that the real economy will recover as excessive financial support will dampen the motives of economic players. Yes, the corona crisis
Reverting to the previous one is expected to have an adverse effect of non-traditional monetary policy, so it has a greater side effect than the case of continuing the monetary policy base of unlimited supply of money after the FOMC emergency meeting in March this year. I am concerned. Therefore, the FED's monetary policy should also change in the current circumstances where disinflation is a concern.
Posted Using LeoFinance
