Economist Paul Krugman Says Kevin Warsh "Sounded Utterly Conventional" at Jackson Hole, Despite Promising a Break From Fed Tradition. Does That Continuity Mean Rate Policy Won't Change Much Under Him?

Federal Reserve Chairman Kevin Warsh spoke at the Jackson Hole economic symposium and appeared to offer little in the way of a departure from traditional Fed policy, according to economist Paul Krugman. Krugman found Warsh's remarks at the event to be "utterly conventional." Warsh suggested the Fed's practice of providing forward guidance had "outstayed its welcome," proposing the Fed retain more flexibility and focus more on current economic and market data.

However, Warsh reaffirmed the Fed's 2% inflation target and emphasized the importance of the Personal Consumption Expenditures Index in measuring inflation. While Warsh noted inflation remained the biggest challenge, his comments on interest rates suggested continuity rather than significant change. Following his speech, markets anticipated a 55% chance of a September rate hike, up from around a third the day before.

Warsh's speech may alter the Fed's communication strategy, but it appears unlikely to fundamentally alter the way it sets interest rates.