JACKSON HOLE, Wyo.—While the world’s central bankers are finally getting their wish and seeing a cooling in inflation, they are also worried it won’t last, according to a new report.
“That apprehension explained the uneasy optimism underlying their discussions here in the Wyoming mountains this weekend about whether interest rates have reached a summit,” noted the Wall Street Journal, referring to the recent meeting of central bankers hosted by the Kansas City Fed in Jackson Hole, Wyo. “Federal Reserve officials are grappling with new economic crosscurrents. U.S. consumer spending has grown faster than they expected in recent months, buoyed by higher inflation-adjusted wages. Stronger demand prompted concerns that it might prevent inflation from falling further.”
The Wall Street Journal analysis added the recent surge in long-term government bond yields combined with weakening growth in other countries could combine to create a U.S. economic slowdown, which Fed officials have been trying to engineer by raising rates aggressively over the past 18 months.
‘Close to a Good Point’
“We are very close to a good point, and then we’ll let the economy tell us” how long to keep rates high, Cleveland Fed President Loretta Mester said in an interview following two days of presentations, discussions, dinner-table conversation and hiking at the event.
During an interview with the Journal, Kristin Forbes, a professor at the Massachusetts Institute of Technology, compared the job facing central bankers to hiking a mountain where the trail disappears above the tree line.
“You know where you want to go. You know where the summit is, but there are no more markers and you have to feel your way,” Forbes said in the Journal interview. “And even though you’ve covered most of the distance, that can be the hardest part. It’s steeper. It’s rockier.”
The Fed’s next meeting is Sept. 19-20.
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