Goldmans on Jackson Hole

GS on Jackson Hole: GS expect the FOMC to adopt average inflation targeting (AIT) They think AIT will mean aiming for 2-2.5% inflation when the economy is at or near full employment, but not explicitly tracking and committing to make up for past downside misses.

In the tools section of the review, we expect the FOMC to note that front-end yield caps or targets (YCT) could be useful in the future in certain circumstances, but without expressing any intention to implement them anytime soon. In the communication practices section of the review, GS think the FOMC might aim to better convey the flexibility of the reaction function. GS continue to expect changes to the forward guidance and asset purchase n program to come at the November FOMC meeting, but it has become a closer call versus the September meeting. They expect the FOMC to adopt outcome-based forward guidance that delays liftoff until the economy achieves both full employment and 2% inflation, and to transition to a more traditional asset purchase program that aims to ease financial conditions and tilts purchases toward longer maturities.