What the Hawks didn’t get in Jackson Hole


Jackson Hole is an unlikely place to look for rebels. The titans of global monetary policy have sent a largely unchallenged message since the Federal Reserve’s summer retreat in Wyoming: inflation is far too high and must be crushed, almost at any cost to growth. Amidst this festival of warmongering, there were nuanced and important voices from Asia that risk getting lost in all the harsh talk. Fed Chairman Jerome Powell dominated the show, warning that interest rates will rise for longer. European Central Bank officials seemed equally resolute. Where there was shade, it tended to come from places like Japan, New Zealand and South Korea. No refutation, but above all refinements. Still, they stood out and are significant given all the chest pounding and aversion to any indication of weakness.

Bank of Japan Governor Haruhiko Kuroda has expressed resolve, but of a very different nature than his Group of Seven counterparts. Inflation has topped the BOJ’s 2% target for some time. months, but Kuroda is not particularly impressed and the ultra-loose policy still reigns. “We have no choice but to continue easing until wages and prices rise in a stable and sustainable way,” Kuroda told a panel.

This is in line with Kuroda’s comments after recent BOJ tariff decisions – remarkable in themselves. During his visit to the United States in April, he took a different position. In a speech at Columbia University, Kuroda appeared to abandon the bank’s forward guidance that the policy would be further relaxed if needed. He said the economy was not vulnerable enough to warrant such a measure. Whatever his intention then, there is little ambiguity about his position now. Any tightening may have to wait until the end of his second term next year.

One of the first rate hikers went so far as to suggest that most of his heavy lifting could be done. Adrian Orr, Governor of the Reserve Bank of New Zealand, said that after four consecutive increases in the benchmark rate of half a percentage point, “we are in a much more comfortable position.” Orr told Bloomberg Television’s Kathleen Hays that the ongoing downturn is “a good signal that monetary policy is biting and we’re doing our job.” But Kiwi policymakers were moving against inflation before Powell, ECB President Christine Lagarde or Bank of England Governor Andrew Bailey. The ability to slow down quickly – even halt rate hikes – is the reward; private sector economists predict cuts as early as next year.

Bank of Korea Governor Rhee Chang-yong was careful not to rule out a sharp upside. But that failed to support a return to giant adjustments. Rhee caused a stir shortly after his appointment when the BOK broke a trend of quarter-point boosts with a 50 basis point move in July. Hours before he boarded the plane, BOK policymakers returned to small steps at their August meeting. Changing course again would not feel like a resolution, but like there was no plan or strategy. The bank has already reached what it considers to be a neutral rate level range. Reach the upper end and Seoul will assess whether further work is needed. Rhee also told the Jackson Hole audience that Asia can return to the days of low inflation that prevailed before Covid and its aftermath. Not that Asian economies can fend for themselves entirely. What happens in the United States can stimulate or shake them. The path of the Fed has a huge influence on exchange rates; the dollar is on one side of nearly 90% of currency transactions. As major exporters, Asian countries are sensitive to the ebb and flow of economic cycles, which US monetary policy greatly shapes. If places like Korea and New Zealand had been late in raising interest rates, as the Fed and the ECB have been, Orr and company might well have made Powell blush for their hawkishness. None of this suggests a wish for inflation. Kuroda, who has struggled to drive up inflation during his nine years on the job, would prefer it not to be driven by soaring global energy and commodity prices. Rhee and Orr could soon see the dividends start early, if they can pause by the end of the year. Don’t expect them to buy into that notion too hard, though. In this inflation-fighting age, there are limits to what can be said in good company.

Powell has done everything to discourage the idea that the Fed will withdraw next year, as some traders have bet. He could gaze across the Pacific with some envy.

More from Bloomberg Opinion:

• Powell is best when he sticks to the script: Jonathan Levin

• The fault line in China’s economic prudence: Daniel Moss

• Inflation overshoot in Japan. Not much: Moss and Reidy

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was Bloomberg News’ economics editor.

More stories like this are available at bloomberg.com/opinion

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