The Economic Week Ahead: August 21-25

It's a very light week for US economic indicators. But the BIG event will occur on Friday when Fed Chair Jerome Powell will speak at the Fed's annual Jackson Hole Conference. He will undoubtedly say that the inflation rate remains too high above the Fed's 2.0% target. However, he will probably acknowledge that the CPI inflation rate has moderated significantly since last summer, especially excluding the shelter component, which is likely to fall in coming months (chart). He is also likely to reiterate that the target is meant to be achieved by 2025 not this year or even next year.

The big question is whether Powell will try to calm the bond market. The 10-year Treasury yield is back to last year's high of 4.25%. If it keeps moving higher, defaults will increase especially in commercial real estate mortgages. Powell could say that if inflation continues to moderate, the Fed might have to lower the federal funds rate next year so that monetary policy doesn't get even more restrictive.