University of Michigan Ford School of Public Policy Dean Susan Collins discusses why the Federal Reserve's upcoming meeting at Jackson Hole, Wyo., is important.
Later this week, all eyes are going to be focused on what is happening in Jackson Hole, Wyoming, which is where the Kansas City Fed will be hosting its annual conference of central bankers.
It brings together about 125 academics, policy leaders, financial industry experts, and it really is one of the times that there is a meeting of minds of those people who look at the critically important monetary and financial issues from different perspectives and also from all around the world.
The theme of this year's conference is unconventional monetary policy in a global environment. It's an extremely timely theme because the Federal Reserve, like central banks around the world, have been employing very unusual policy such as massive purchases of assets to try to keep longer term interest rates down in an environment in which the short-term interest rate has been maintained at near zero levels for a long time and also an increasing reliance on what the Fed calls "forward guidance," and by that they mean, explaining to the public where monetary policy is going in the future.
The discussion at the last Jackson Hole meeting really helped to move the Fed forward defining on that contingency phased approach instead of announcing simply dates where they would revisit massive asset purchases and low interest rates.
The Federal Reserve has a dual mandate for price stability and maximum employment, and while inflation is clearly well below the 2 percent target, the unemployment rate remains above the 7 percent threshold that the Fed has set and although the official unemployment rate is now down to 7.4 percent, there are so many pieces of information about labor markets that make it clear that labor market conditions are much weaker than that 7.4 percent suggests in terms of extremely high long-term unemployment, and the very low percent of the population that's of working age that is actually in the labor force.