As Fed Gathers in Jackson Hole, No Clear Views on Economy

President Trump has told Fed Chair Jerome Powell in no uncertain terms to cut interest rates, which the Fed already did back in July.

Now, at their annual academic conference in Jackson Hole, Wyoming, central bankers are again tussling with the idea of lowering rates, even though the U.S. economy appears steady.

The disconnect between a stable economy and the pressure to cut rates is causing problems for investors as well as policy makers.  No one knows what to expect.

Perhaps more than at any time in the last few years, the data flowing into the Fed isn’t telling a clear story, partly because of contradictory signals – rising employment but slowing factory output, for example – but also because everything may be clouded by a trade war that shows no signs of ending.

Of late, when economic data has come in outside consensus forecasts, the surprises have been to the downside.

Deciding what it all means is not straightforward, particularly at a time when the Fed is less confident about some of its underlying ideas about how the economy works, and also has to think not just about today, but about how its current actions may shape the economy a year or more down the road.

The inverted yield curve could be a signal investors are losing faith, a result of the trade war pushing money into “safe” U.S. bond markets, or just a reaction to negative bond yields in Germany, where the government just sold 30-year bonds that pay back investors less than they invested.

The difference between U.S. and German interest rates could be a sign of how much better things are here at home.

Consumer spending is so strong many think a U.S. recession is still a distant threa

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