The Kansas City Fed’s annual Jackson Hole Economic Policy Symposium has been closely watched in recent years as central banks dominated the global market landscape and investors listened to Fed Chairman Ben Bernanke — the keynote speaker — for signals of upcoming policy changes. Key central bankers came from around the globe to convene for three days and discuss monetary policy.
This year, Bernanke is skipping the conference, and so is European Central Bank President Mario Draghi and Bank of England Governor Mark Carney, as well as a few others who would normally attend.
As such, market participants don’t really have as much of a reason to pay attention to the conference this weekend, because there probably won’t be any market-moving headlines.
The good news is that for those interested in monetary policy, there’s still a lot to look forward to.
BofA Merrill Lynch economists Ethan Harris and Michael Hanson highlight what to look out for in a note to clients:
The chairman’s opening remarks almost always have been the top news out of the conference. Some of the papers can get some headlines, but it is hard to connect the dots from an academic paper to the near-term policy outlook. Nonetheless, this conference is loaded with topical papers that could gather some attention. Based on the titles of the sessions, we would suggest looking out for the following:
“The Transmission of Unconventional Monetary Policy” by Arvind Krishnamurthy at Northwestern is scheduled for Friday morning. The effectiveness of QE versus forward-guidance is a hot topic of debate on the FOMC, especially as most Fed officials now appear to favour the latter over the former. An argument for a limited impact of QE would likely be interpreted by the markets as suggesting the Fed should (and will) taper quickly and end QE3 sooner rather than later. Any discussion of the relative merits of MBS versus Treasury purchases would also garner attention.
A panel discussion on “Monetary Policy Tools and Options” will be held Friday morning, but the applicability to the Fed may not be clear, as there are two EM participants (the Governor of the Bank of Mexico and an academic from China) and the research director from the ECB. We would expect this discussion to be anti-QE and pro-forward guidance, on balance, given the participants.
The global dimension of QE policy will likely be addressed by two papers on Saturday: “Global Liquidity” by Jean-Pierre Landau of Princeton and “Cross- Border Capital Flows” by Hélène Rey of London Business School. As the Fed does not wish to be the central bank of the world, international spillovers are unlikely to move the debate on the FOMC, but commentary on either of these papers may get some notice, particularly in the FX market.
The panel discussion on Saturday features the Governors of the central banks of Japan and Brazil and the deputy governor of the Bank of England. No topic has been given, suggesting the potential for a wide-ranging discussion that is likely to generate at least a few headlines.
“Despite an interesting docket of speakers and presenters from a central banking perspective, with no major Fed officials scheduled to speak, the markets are likely to pay a lot less attention to Jackson Hole than in the past,” say Harris and Hanson. “The biggest effect may be on vacation rentals that third week of August.”
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