All Things in Moderation

Vital Statistics:

Stocks are higher this morning as we await Jerome Powell’s Jackson Hole speech. Bonds and MBS are down.

I haven’t seen the prepared remarks for Powell’s speech at 10:00 am. The Washington Post thinks “Powell may stop short of declaring mission accomplished. Fed officials have long said that they will not let up prematurely, and they could push even harder to snuff the remaining inflation out of the economy.”

The Boston Fed President Susan Collins said “We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” she said in an interview with Yahoo! Finance from Jackson Hole. I do think it’s extremely likely that we will need to hold for a substantial amount of time but exactly where the peak is, I would not signal right at this point,” she said. “We may be near but we made we may need to increase a little bit further,” said Collins, who doesn’t vote on policy this year.

Former Treasury Secretary Larry Summers urged continued hawkishness in an editorial in the Washington Post. He talks about how the current path of inflation mirrors the the inflation of the 1970s.

Of course a big reason why we saw massive inflation in the 1970s was because oil went from $27 a barrel to $150 a barrel, which isn’t similar to today, at all.

We got a new Atlanta Fed GDP Now estimate yesterday, with its model seeing 5.9% GDP growth in Q3. FWIW, this number simply seems wrong considering the other economic data we are seeing. Aside from the jump associated with re-opening the economy after COVID, the last time we saw that high of a jump was in the early 80s, coming out of the severe 81-82 recession. Even during the Roaring 90s, GDP growth topped out around 5%.

Don’t forget student loan repayments start in October, and many haven’t paid a cent for 3 years. That will be a big contractionary pulse in the economy.

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