Fed Chair Warsh’s actual guidance from Jackson Hole may be buried in the footnotes – LPL Financial’s Roach
Fed Chairman Kevin Warsh's speech from Jackson Hole this morning will likely be light on details and new insights, but the footnotes could offer important clues about his thinking, according to Jeffrey Roach, chief economist at LPL Financial.
“Chair Warsh will likely stick to broad themes, but the footnotes, citations, and references may reveal what he's reading, who is influencing his thinking, and where policy discussions could be headed,” Roach said in a note shared with Kitco News. “For example, Powell's 2024 Jackson Hole speech never explicitly mentioned the Phillips Curve, yet he cited three papers on the topic. One argued that monetary policy can reduce inflation without triggering a significant recession when labor market conditions are exceptionally tight, such as when job openings far exceed the number of unemployed workers.”
Roach said market participants should listen for any discussion of Fed credibility, criticism of excessive communication, and references to market prices as important sources of information.
“Given this year's conference theme of financial innovation, listen for clues about whether stronger productivity growth can offset inflation pressures and whether AI could reduce the need for highly restrictive monetary policy,” he said. “One particularly market-sensitive topic would be Warsh's views on Treasury buybacks and the role of term premia in shaping long-term interest rates.”
Roach does not expect Warsh to provide a roadmap for upcoming policy meetings, however. “Investors should focus on how he connects inflation, productivity, and the bond market,” he said. “If the speech itself is short on specifics, the references and citations may offer the clearest clues about where the new Fed chair intends to take the institution.”
Spot gold slid as low as $4,571.66 per ounce overnight, and last traded at $4,592.07 per ounce for a loss of 0.22% on the session.
