LONDON — The great and the good of global central banking has descended on the exclusive ski resort of Jackson Hole in the remote US state of Wyoming for one of the benchmark events of its calendar.
Every year, the Federal Reserve Bank of Kansas City — one of 12 city based outposts of the USA’s central bank — hosts the Jackson Hole Economic Symposium, aiming to bring together central bankers from the world over to discuss the biggest challenges facing the global economy.
The symposium — which is said to have been first held in Jackson Hole during the 1980s to try and lure then Fed Chairman Paul Volcker away from Washington DC with the promise of good trout fishing alongside policy discussions — will this year focus on “Fostering a Dynamic Global Economy.”
While the event is largely focused on allowing the world’s monetary policymakers to meet behind closed doors and discuss the big issues of the day away from the political glare of their everyday workings, it also has an outward looking role to play, with major bankers almost always giving major speeches, and frequently signalling future policy intentions.
This year perhaps the two most important global central bankers, Fed Chair Janet Yellen, and ECB President Mario Draghi will both speak publicly, and in the late-August news lull, their comments will be keenly watched.
To give a flavour of what to expect from Draghi and Yellen, Business Insider has rounded up forecasts from a handful of banks, market analysts, and commentators. Check them out below:
Craig Erlam, senior market analyst at OANDA focuses on Mario Draghi’s speech later on Friday:
“The ECB has become obsessed, it seems, with the euro rate and bond yields, and the unintentional tightening in financial conditions that these could trigger. At the end of June, Draghi suggested that recent progress could allow the central bank to pull back on unconventional measures — a clear reference to tapering of asset purchases — and markets were quick to respond.
“It seems likely that Draghi will very much keep to the script during his appearance at Jackson Hole and, unfortunately for us, I expect this script will be rather uneventful. Not only will the next ECB meeting in September come with new macroeconomic projections that will shape their decision on QE after December, but his speech also falls at a relatively illiquid time of the day and month.
“If anything, Draghi may deliver a rather dovish message that still leaves the door open to tapering at the end of the year while carefully managing the euro lower.
Ryan Wang, Simon Wells, and James Lee at HSBC look at Yellen’s upcoming speech:
“Fed Chair Janet Yellen’s speech is entitled “Financial Stability.” The minutes of the 25-26 July FOMC meeting, released last week, showed an extensive discussion on asset valuations and financial stability considerations.”
“Financial markets will watch closely to see if there has been any evolution in how Ms. Yellen views the recent slowdown in inflation. A portion of the inflation weakness since March has reflected “transitory factors,” such as those affecting wireless telephone services and prescription drug prices.
However, the repeated downside surprises to inflation have also highlighted softness in other areas, which could prove to be longer-lasting. In her remarks, Ms. Yellen could underscore the FOMC’s commitment to its 2% inflation target and indicate the Committee’s intention to carefully monitor incoming information on the inflation outlook before raising the federal funds rate any further.”
Vincent Juyvns of JPMorgan Asset Management believes market reaction to Jackson Hole will be largely muted:
“We expect Jackson Hole to be a non-issue for the markets but the speeches from the conference will broadly highlight the positives of global monetary policy intervention in the past few years. Central bankers will point out that deflation risk is receding and that economic fundamentals are strong. But central banks aren’t and shouldn’t be the only game in town and the path to sustainable growth globally will only be achieved through adaptive fiscal stimulus policies globally, the likes that we hope to see in the US and that we are finally starting to see in Europe.
“Central bankers will not wish to give the impression that they will hike rates in a synchronised way and risk threatening global liquidity. Some divergence in monetary policy is actually helpful to stabilise the environment. Until now the tightening in the US has had only limited impact on financial conditions globally, so a certain desynchronisation will help the Fed.
“Continued low bond yields reflect the fact that investors aren’t expecting market moving hints from Jackson Hole and they do anticipate a dovish tone.”
The global economics team at Citi are of broadly the same opinion:
“This week’s Economic Policy Symposium in Jackson Hole (24-26 August) will be the next major date for central bank watchers. Both Fed Chair Yellen and ECB President Draghi are scheduled to speak on 25 August, even though we do not expect either of them to signal major policy changes.
“The ECB’s next policy meeting will feature new macroeconomic forecasts, which will be one of the major inputs into the ECB’s decision of how many assets to buy in 2018 (which it will likely announce at the 26 October meeting). The Fed will likely announce the start of balance sheet reduction on 20 September.”