Now Donald Trump calls the Fed’s chairman an “enemy”

Editor’s note (August 23rd): This piece has been updated following President Donald Trump's announcement of increased tariffs on Chinese goods.

EVERY AUGUST a who’s who of economists and central bankers gathers in the shadow of the Teton mountains in Jackson Hole, Wyoming. Ostensibly, they convene to discuss new monetary research; occasionally, the meeting has broader significance. In 2010, as the American economy seemed to be stumbling into a “double-dip” recession, Ben Bernanke, then head of the Federal Reserve, reassured markets that the Fed was prepared to unleash a new round of stimulative asset-purchases. It proved a turning point for markets and the economy.

The remarks by Jerome Powell, the Fed’s current chairman, on August 23rd, were perhaps the most eagerly awaited since then. Markets are unsettled. The global economic outlook is cloudy. There is disagreement within the Fed over interest rates. And the Fed and Mr Powell himself have been subjected to Twitter tirades from President Donald Trump, who wants interest rates to be cut hard and cut fast. In the event, Mr Powell said very little that was new—but that was enough to provoke Mr Trump to alarming levels of invective, bracketing Mr Powell with China’s president, Xi Jinping, as an “enemy”.

The Fed cut interest rates by a quarter of a percentage point in July—the first reduction since 2008—to help America’s economy weather the “crosswinds” of a global manufacturing and trade slump. The task facing Mr Powell and his colleagues has since become harder. Mr Trump’s trade war with China has intensified; indeed, scarcely an hour before Mr Powell spoke, China announced new tariffs to hit $75bn-worth of American exports, in retaliation for a round of tariff increases authorised by Mr Trump shortly after the Fed’s July meeting (Mr Trump then promptly announced his own retaliatory tariffs against China—covering almost all American imports from the country). Markets have signalled deepening anxiety, and were further rattled by a series of intemperate tweets from Mr Trump on Friday. Still, economic data do not suggest that America is sliding into recession. Although inflation remains low and manufacturing activity is weakening, consumers keep spending and there is little sign that unemployment is about to rise.

Some on the Fed’s monetary-policy committee see a clear case for further rate cuts. But the minutes of July’s meeting and recent remarks from the Fed’s more hawkish voices show that not everyone is convinced. “Don’t feed the bears,” joked Esther George, president of the Federal Reserve Bank of Kansas City and the host of the conference, in her opening remarks in Jackson Hole. She may not have been referring only to the furry mammals that roam the Tetons. Ms George has argued that further rate cuts when markets are jittery might fuel financial instability.

Mr Powell’s speech resembled others he has given recently. He noted the value to the economy of a hot labour market: low unemployment forces firms to work harder to compete for and train workers. He spoke of the difficulty the Fed faced in assessing and responding to Mr Trump’s trade war. And he mentioned that if interest rates globally remain near zero, then central banks may need new policies. But on the subject of the moment—what the Fed will do next—he gave little away. “We will act as appropriate to sustain the expansion, with a strong labour market and inflation near its symmetric 2% objective,” he said.

Mr Powell may have felt he could say little more, given the disagreement within the Fed. But both the recent minutes and the speech today devoted more words to the possibility that low rates might contribute to financial instability than has recently been the norm in the Fed’s discussions. That may be a sign of more determined opposition to additional easing than recognised hitherto.

At least one observer felt the hawkish overtones of the speech to be crystal clear. “As usual, the Fed did NOTHING!” Mr Trump tweeted after Mr Powell’s remarks. “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” The president thus cast a longer shadow than the Tetons over the day’s events.