KPMG – Economic Compass, 2023

The KPMG's "Economic Compass, 2023" discusses the discussions and themes at the Kansas City Fed's annual Jackson Hole Symposium. Federal Reserve Chairman Jay Powell and European Central Bank President Christine Lagarde expressed uncertainty about the outlook and consequences of their actions in relation to inflation. They agreed that inflation is still too high and rejected the idea of lifting the 2% inflation target. The changing physical landscape at the conference symbolized the ongoing economic shifts. The winter of 2023 brought record snowfall and some positive signs of recovery, but storm clouds rolled in as a reminder of the potential difficulties ahead. Discussions at the conference also focused on the relatively muted impact of interest rate hikes compared to historical trends, with many individuals and countries being able to weather the rate hikes due to savings accumulated during the pandemic and low-interest rates. The preliminary data for the third quarter suggests growth could reach a 4% annual rate, with increased spending online and indoors, boosted by heatwaves. However, the weak spots in the economy remain trade and the housing market. Growth is expected to slip below 1% over the coming months, and the Fed is expected to pause on rate hikes for now, with the possibility of a rate cut in May 2024.