.jpg "Impacts: A ‘hole’ new conundrum for central bankers, and real estate markets, at Jackson Hole")
In a blog written this time last year, we highlighted the importance of the Jackson Hole Economic Policy Symposium in setting the tone for global monetary policy. The main event is always the chair of the US Federal Reserve’s (Fed) speech, which will be delivered for the last time by the somewhat embattled incumbent Jerome Powell, before his term ends in May 2026. It is often market moving: in the wake of his comments in 2022, which outlined the “forceful and rapid steps” needed to restore price stability, the S&P 500 fell by nearly 7%.
The actions of the Fed also matter greatly to the rest of the world. Its own research shows that the impact of a US rate increase on the GDP of foreign countries is similar in magnitude as that on the domestic economy. Meanwhile, as the global safe haven asset, volatility in US Treasuries often reverberates through global bond markets, irrespective of the underlying cause.
Last year, Powell struck a decidedly dovish tone, announcing that “the time has come for policy to adjust.” The Fed subsequently cut rates by 50 basis points (bps) in September, initiating an easing cycle that has, so far, seen two further rate reductions. His rhetoric was shared at the time by other global central bankers, paving the way for a pick-up in risk sentiment that spread through global markets in late 2024, including the real estate sector.
Looking back, Powell’s job was relatively straightforward. While US inflation was not back to the 2% target, it was most of the way there, slowing from in excess of 9% to less than 3% by mid-2024. Meanwhile, the pace of US job growth had fallen amidst signs that the economy was slowing. It was time to cut rates, and the central bank duly delivered.
But things have not quite gone to plan. It’s been a long 12 months, and Powell’s job is decidedly more challenging today. The Fed is mandated to achieve both price stability and maximum employment. However, the spectre of stagflation looms large; while inflation is rising again, the labour market is cooling. Powell and his colleagues are thus conflicted, and also divided, with two policymakers recently dissenting in the first non-unanimous policy decision in nearly six years.
For real estate capital markets, many pre-conditions for recovery remain in place, including improved sentiment, price stability, and broad occupational strength. But deal activity is largely treading water, with global investment in H1 2025 largely unchanged on the year.
The interest rate environment remains a key impediment. Long-term interest rates remain stubbornly elevated, as concerns over fiscal sustainability and future inflation have offset the impact of central bank policy easing. Since the Fed first cut rates in September 2024, the US 10-year Treasury yield has actually risen by around 50bps. Similar trends are evident in other major markets.
The hope is that Jackson Hole will bring some clarity to the outlook. Markets expect another dovish speech, and emphasis on preventing an economic slowdown. This could set the stage for another positive end to the year for financial markets, and would certainly receive the President’s approval. But likewise, it would be remiss to ignore Powell’s 2022 comments, that “without price stability, the economy does not work for anyone.” Either way, to reiterate the point from last year, there’s good reason to pay attention.
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