Fed’s Powell to begin hard sell for higher inflation

On Thursday, Fed Chair Jerome Powell will undertake a tough task, convincing the public that the central bank can and will deliver in the wake of a pandemic that has arguably eroded trust in U.S. institutions and put a huge chunk of the labor force on the unemployment rolls.

Powell has the duty of telling Americans that higher inflation will be good for them in the long run and analysts have already begun second-guessing whether a new Fed “framework” will fare any better than the current one in an environment where monetary policy may be nearing the limit of what it can do to help the economy.

“The situation is really perilous right now and there is little that monetary policymakers at this point have left in their arsenal,” said David Wilcox, former head of the Fed’s research division and now a senior fellow at the Washington-based Peterson Institute for International Economics.

Wilcox said he feared the Fed’s new framework, expected to be unveiled soon, will seem abstract unless it is coupled with new steps to enforce it, such as massive new bond-buying or the setting of explicit unemployment goals.

The minutes from the Fed’s last policy meeting indicated those steps may be coming further down the road, giving the central bank time to see how the economy behaves at this stage of the coronavirus pandemic. It has already chopped interest rates to zero, started some bond-buying, and approved massive lending programs.

Powell, in online remarks on Thursday to the Kansas City Fed’s annual economic symposium, will speak about the central bank’s framework review, an initiative that included public hearings and research to explore how monetary policy should adapt to changes in the economy.

Normally held at the mountain resort of Jackson Hole, Wyoming, but being conducted virtually this year because of the pandemic, the symposium has been used in the past by Fed chiefs to signal policy shifts, and that will be the expectation when Powell begins speaking at 9:10 a.m. EDT (1310 GMT) on Thursday.

Fed Vice Chair Richard Clarida and Fed Governor Lael Brainard also are scheduled to speak next week in events sponsored by think tanks in Washington.