JACKSON HOLE, Wyoming — Federal Reserve Chair Jerome Powell will give a speech this morning that, for global investors, is the most consequential one of the week. (No offense, Kamala Harris). The central bank’s annual confab in Grand Teton National Park offers the Fed chief a venue to speak with a wider lens about what’s ahead for the world’s largest economy, and for the past couple of years, that has put inflation center stage. No more. Fed officials are increasingly confident that inflation is moving back to their 2 percent target, and that means Powell will likely focus much of his remarks on prospects for the job market instead. Remember, we haven’t actually heard from him since we got the last monthly employment report – a disappointing number that sparked market turbulence worldwide – nor since the Labor Department said it probably overstated job growth by more than 800,000 over the 12 months ending in March. That latter point might not matter hugely to the Fed’s outlook — officials including Powell in recent months have said they thought those numbers were probably overstated. But it still adds to a picture of a job market that’s weakening, even if unemployment is still low by historical standards. Nela Richardson, chief economist at ADP, told MM said she hoped that Powell would provide more clarity on what a healthy picture on inflation and employment looks like to the Fed, given the upside-down world we find ourselves in — where 4.3 percent unemployment looks worse because it was previously as low as 3.4 percent. “Give us a sense of what we’re shooting for,” she said. Your MM host landed in Jackson, Wyo., to see smoke from wildfires clouding the vista — perhaps a metaphor for the hazy outlook as the central bank transitions away from its inflation fight. The Fed is almost certain to cut interest rates in September, though to what extent will depend on how much the data worsens between now and then. We’ve got another jobs report in a couple of weeks, after all. Rate cuts would offer some much-needed relief to the housing market — data last week showed monthly housing starts at their lowest level since May 2020. But lower rates would also provide a boost to household borrowers paying down credit card balances. It would make it easier for businesses to refinance existing debt and lower government borrowing costs. Or, to put it more simply, it would begin to ease some of the strain that the Fed’s restrictive policies had placed on the economy. Which brings us to the 2024 presidential campaign: After two months of turmoil, Harris formally ascended to the top of the Democratic ticket on Thursday night. The race will now increasingly be defined by how she and former President Donald Trump articulate their plans to guide the economy through the post-inflation era. Their plans might not matter much. Instead, that era will be defined by how Powell & Co. navigate interest rate policy over the next several months. “Harris has gotten a lot of attention for the policy proposals she’s rolled out over the past two weeks, but she’s not realistically going to be able to do most of what she’s proposing,” said Tobin Marcus, head of U.S. policy and politics at Wolfe Research and a former adviser to President Joe Biden. “Powell, on the other hand, is making decisions in real-time with major implications for the economy—but he probably won’t have 20 million-plus viewers tuning in!” IT’S FRIDAY — Morning Money’s off next week. But your hosts are still (mostly) working. If you’ve got tips, send those to Victoria at vguida@politico.com and Sam at ssutton@politico.com.
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