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Federal Reserve Chairman Jerome Powell.
Win McNamee / Getty Images
When the Federal Reserve on Friday rejected plans in person for its Jackson Hole symposium, it sent a signal that investors should heed it.
“Because of Covid-19’s newly high level of health risk,” the Federal Reserve Bank of Kansas City said in a statement on its website, its annual economic policy conference will be called virtually on Friday. August 27th. and after Teton County, Wyo., where dozens of central bankers, policymakers and economists normally gather for the event, changed its level of transmission risk to “high.”
The Fed’s decision to cancel its own face-to-face event is representative of a broader decline in economic activity as virus problems increase. Recent Transportation Safety Administration data show a slowdown in travel, with a 10% decrease in the number of people passing through TSA checkpoints on Friday, from the recent mid-July high. Meanwhile, the OpenTable data booked by the restaurant reflects a further decline in bookings. Oxford Economics economists say its recovery tracker, a set of about two dozen indicators, has stalled as consumers become more cautious and overall mobility declines.
The Fed’s decision is also a real-time reflection of how officials see the biggest wildcard in the economy. Since the outbreak of the pandemic, Federal Reserve Chairman Jerome Powell has said the path of the economy will depend on the course of the virus. In his press conference last Wednesday, he said that the successive Covid waves have had a diminishing economic impact, but acknowledged the risk posed by the Delta variant and future mutations.
“As long as Covid is loose around here, as long as there is time and space for the development of new strains, no one is really safe,” said Powell, who noted that any activity recedes in activity, from indoor dining halls to at school openings, it can affect the economy. “We don’t have a strong idea of how this could work, so we’ll just monitor it carefully,” he said.
The move to a virtual symposium has an effect, albeit a small one, on the local economy. Cory Carlson, regional director of marketing for the Four Seasons Resort and Residences in Jackson Hole, said his hotel has had a lot of cancellations due to the Fed’s change of plans. “This definitely has a short-term impact on the local economy,” he says, adding that the event usually involves a swarm of symposium attendees and journalists conducting interviews and broadcasting speeches. Meanwhile, a worker at the Parkway Inn in Jackson Hole said customers withdrew reservations early last week as Covid cases increased.
At the same time, the change of plans gives investors an obvious clue ahead of Powell’s speech on Friday morning.
Wall Street investors and economists have been looking at the Jackson Hole summit for months to get an update on the Fed’s plans to begin ending the emergency bond-buying program it launched in response to the pandemic. The minutes released last week of the July Fed meeting showed that officials began debating when and how to reduce the Treasury’s $ 120 billion monthly and purchases with mortgages, even as officials left. divide when starting to reduce these purchases and how aggressively they should do so.
It is now clear that in the weeks following the July political meeting, officials have become more appalled by the recovery. Central bankers already inclined to delay purchase cuts will likely argue that infections are growing and hospitalization rates justify more patience, while those on the fence have a reason to join the dovish camp. Even Dallas Fed Chairman Robert Kaplan (the first official to say publicly that the Fed should start cutting asset purchases sooner rather than later) recently said he might change his mind if the Delta variant stops the economic recovery.
It is difficult to argue that increasing Covid cases do not affect recovery when the policymakers themselves cancel travel plans. Investors worried about a reduced official announcement in September should find some relief in the Fed’s decision to hold a virtual Jackson Hole, although the reverse is a bearish message, involuntary or not, about the state of the same economy.
Write to Lisa Beilfuss at [email protected]