Esther George started her career in 1982 at the Federal Reserve Bank of Kansas City - yes the regional Fed bank that organizes and hosts the annual symposium at the Jackson Lake Lodge - and held several leadership positions within the bank, topping it all off to serve as its president from 2011 to 2023.
As for what mattered most at this year’s K.C. Fed event she summed it up nicely, saying that everyone was waiting to how Chair Jay Powell “would characterize the economy today, how he would talk about the balance of risk between inflation that continues to run over their target, a labor market where we saw revisions and less job growth than we had seen last year.”
Esther agrees with conference participants as well as economists and markets around the world that are now betting that Powell’s comments on what looks like a weakening labor market could mean “happy days might be here again with rate cuts” while adding that “this is not yet decided.”
In her view it’s too soon to say the inflation problem has been solved even before tariffs are put in the mix. “I think the chairman was right to say we expect those are already beginning to show through. But the truth is, before any tariff effects came into play, inflation looks sticky. And so it will be very difficult I think to disentangle that. And you've got to keep your eye on price stability.”
So dive in and hear what Esther has to say on the forces that could drive the Fed to a rate cut at the September meeting, and the reasons it may not happen yet.
How about the ongoing attack on Powell’s policy path by President Trump? She’s putting her bets on Fed officials’ determination to do what’s good for the public, and that’s what will carry them through it all.
Jackson Hole is special 00:01:02:20
What's so special about Jackson Hole? Yeah, it is a special event, Kathleen. And like you, I've been to many events, I think for this symposium. Its history is important and really the focus what some people call the secret sauce is this idea that you want to bring central bankers together, you want to bring academics and research, and you want there to be a conversation that really challenges the thinking, brings new insights. And while you're doing that, you're in a setting where people can peel off of that conference and have a chance to engage in conversations, either about what they heard, where they're going to be seeing each other again..
Powell’s swan song...and policy pitch 00:02:25:11
It has been an important format, I think, to inform central bankers of the important work they do You know, supporting him (Powell) whether you agree with this policy or not. And what do you think is the message he was trying to send? Well, I think when the Chairman, started his speech, of course, the group recognized that this could be his last, speech. I expect it will be, he acknowledged, the role of the very first Chairman to speak at this conference, Paul Volcker. And his honor to continue that tradition. So I thought it was a very nice introduction to his comments, but, of course, widely anticipated to listen to how he would characterize the economy today, how he would talk about the balance of risk between inflation that continues to run over their target, a labor market where we saw revisions and less job growth than we had seen last year
Powell handicaps the outlook…00:03:13:
And so he really laid out, a baseline and then got into what he thought that meant for monetary policy. Well, the markets, took it to mean happy days might be here again with rate cuts. Yeah. And I think he opened that door clearly. And one of the main things Jay Powell focused on was, oh, the labor market looks like it's weakening. And if you're arguing for a rate cut or rate cuts, whatever. That's the main reason you're giving because inflation has not been so well behaved. Right. So I think a couple of things came out in his remarks.
A risk management rate cut for the labor market? 00:04:17:06
He talked about how growth had really slowed this year. And that combined with the labor market, that I think he used the word curious in terms of the supply demand dynamics. We were seeing. And so I took his comments about the labor market, to say that curious aspect of the labor market was leaning in the direction of needing to do a risk management cut, if you will.
Still no clue on what the Fed does when mandated goals conflict 00:04:43:19
I think it is. It is going to be a challenge, depending on how the data comes in, though, because again, I thought was very clear in the chairman's speech also that maximum employment had to take place in the context of price stability. And so the Fed is defining price stability as 2%. And I think that's going to raise more questions… looking more carefully at what that means as we go forward when you have upside risk to that inflation forecast.
The door is open 00:05:33:05
And, the door may be open, but this is not yet decided. Well, I think if you factor in the amount of anticipation ahead of these remarks, it was going to probably always have a market reaction. True. And since it wasn't dismissed as a possibility right then, I think the door was, was more open than ever maybe than intended and than what people even expected.
The New Frameworks sems to get back to original basics 00:06:20:20
There was a former review that led to these changes. Well, we can overshoot right on our inflation targets, etc.. We have to have maximum employment before we move. And that's been questioned ever since. So I liked the recalibration of this framework review because it feels and looks more like the one that I was first involved with in 2012. It was a it was a framework that really was intended to be broad, to be able to anticipate a variety of, of scenarios, I think. And of course, we went through a period where it looked like the world had changed, and it led to some of the revisions that happened, in 2020 <the second framework>. So I thought this was appropriately recalibrated to say, we know what happens under different scenarios.
Emphasis on inflation expectations is good 00:07:15:20
We need to be clear. And I really liked, the emphasis on anchoring inflation expectations in this, in this framework review as a way to describe the commitment to the inflation target.
Transparency is good 00:07:59:09
Yeah. So I think it's important and it depends on who your audience is. So for people on the committee where you are really committed to thinking about your inflation target, thinking about how your decisions are being made, it is really intended to codify some of that thinking. And in that respect, I didn't think the 2020 framework pushed us in a certain direction versus if we had used different words on the paper. I think its real value is communicating publicly. It's being very transparent and as clear as you can be about what factors you were taking into account when you were making decisions. And I hope this version does that better than the last one, because we ran into a situation where it got interpreted differently. Even though, I'm not sure, it would have led the committee to react differently.
Inflation, tariffs, & policy 00:09:05:07
I've heard several of the participants, express their preference. And I think for me, it would be too soon for me to feel like that the inflation, problem had been solved. Tariffs aside, yes. I think the chairman was right to say we expect those are already beginning to show through. But the truth is, before any tariff effects came into play, inflation looks sticky. And so it will be very difficult I think to disentangle that. And you've got to keep your eye on price stability.
How the tariff impact evolves is key to the final result 00:10:10:22
Well, I think they (retailers) are going to play a noticeable part in inflation. And I think the American public has just come off a period, as we heard today in those Fed listening sessions, that they hope people do not like inflation. And that's the one, the one thing you hear people continuing to be concerned about. So, retailers are signaling they're going to need to pass on those prices. And that's where I think you have to worry about inflation expectations. Because once people begin to think this isn't going to stop….this could be an ongoing thing… people that are trying to maintain their margins and run their businesses are going to be thinking about how they pass along those costs. So, the question is how fast and how long do those persist?
Confident in how this will work 00:11:38:04
And so that raises, I think, the stakes for people to say what is going on? How will this play out? I remain confident that the individuals around that FOMC table are squarely focused on the job they have to do for the American public, and that's what you want to have hold as we go through what could be, a difficult time for them in the public sector?
Esther L. George
George was born in St. Joseph, Missouri, and grew up on her family's farm in nearby Faucett. She holds a bachelor's degree in business administration from Missouri Western State University and a master's in business administration from the University of Missouri-Kansas City. She is also a graduate of the American Bankers Association Stonier Graduate School of Banking and the Stanford University Executive Program.
George joined the Kansas City Fed in 1982 and was appointed to the official staff in 1995. She has held various leadership positions with the Bank, including in the Bank's research support functions, Public Affairs and Human Resources.
Before being appointed president on October 1, 2011, George had been the Kansas City Fed's first vice president and chief operating officer since August 2009, where she was responsible for directing the Bank's operations throughout the Tenth Federal Reserve District. Additionally, she has served as the acting director of the Federal Reserve's Division of Banking Supervision and Regulation at the Board of Governors of the Federal Reserve System in Washington, DC.
In January 2009, George was named executive vice president in charge of the Kansas City Fed's Division of Supervision and Risk Management, a division she led as senior vice president since 2001. In that position, she was responsible for the supervision and regulation of the Tenth District's 170 state-chartered member banks and nearly 1,000 bank and financial holding companies, as well as the Bank's discount window and risk management functions. During her tenure in banking supervision, she was directly involved in the banking supervision and discount window lending activities during the banking crisis of the 1980s and post-9/11. She is a former chair of the Federal Reserve System's Community Banking Organizations Management Group.
Beyond the Tenth Federal Reserve District, George's experience in international central banking issues includes involvement with the Bank for International Settlement's Financial Stability Institute programs in Lima, Peru, and Abu Dhabi, United Arab Emirates. She has also served as the Tenth District's lead officer for international partnership programs involving the central banks of Morocco and Iraq. Additionally, she hosts the Kansas City Fed's annual economic policy symposium in Jackson Hole, Wyoming, that is attended by central bankers from around the globe.
George retired in January 2023 after reaching the mandatory retirement age for Reserve Bank presidents.
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