Esther George appears to be in her element as the Federal Reserve Bank of Kansas City’s Annual Jackson Hole Economic Symposium. From 2011 to 2023 she was president of the K.C. Fed and now she is attending the event as an honored past president, greeting friends and colleagues from around the world in what is considered the most important and prestigious central bank gathering in the world.
She is also taking time out of this busy three-day conference to speak with me about the issues we always have discussed in past interviews: the economy, inflation and what the Fed might be doing next on interest rates. This as Fed Chair Jay Powell has rocked markets in a speech that pretty clearly signaled the Fed will cut its key rate at its meeting in September. What does she think of his message?
”My own view is that the economy has done very well with interest rates where they are,” she says. “I think certainly you have seen moderation come in. So we have seen the labor market soften in the sense of more supply has come in, which has caused the unemployment rate to rise, but spending has held up well. People still have jobs around that. And so inflation is coming down,”
”I think the real risk as I see it is maybe starting the rate cutting cycle is okay in September but I think after that you are not really influencing a change in direction for that inflation because they haven’t landed at the target yet.”
Esther stresses that once once the Fed starts a rate cutting cycle it has to be very careful. “I don’t think we know yest what a natural rate of unemployment would be because it’s always in the context of a that 2% inflation target. So declaring victory right now, I think would be premature.”
So take the time to hear what she says. As Powell pushes for rate cuts get perspective from a seasoned policy maker who still has been known to question the accepted wisdom on the best path for Fed policy, and make it interesting as she does.
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