Investors worldwide are eyeing the Jackson Hole Symposium 2022 intently to gauge signs of what the near future might look like. The key challenge for the top central bankers, academics and market participants from around the world will be the fight against inflation, as is suggested in the theme of this year's meeting — Reassessing Constraints on the Economy and Policy.
First up, what is the Jackson Hole Economic Symposium all about?
The Jackson Hole Economic Symposium has been an annual event held in Jackson Hole, Wyoming, since 1981 and is one of the longest-standing central banking conferences in the world. The conference is sponsored by the Federal Reserve Bank of Kansas City.
The conference hosts about 120 attendees annually, including central bankers, academics, financial market participants, and finance ministers worldwide.
Some of the past topics of consideration at the conference included:
Macroeconomic policy in an uneven economy (2021)
Implications of monetary policy (2020)
Challenges for monetary policy (2019)
Changing market structures and implications for monetary policy (2018)
Fostering a dynamic global economy (2017)What is expected this year?
The meeting starts today (August 25) and will go on till August 27. It will see US Federal Reserve chair Jerome Powell address the current global economic challenges, and it is widely expected that the tone will be "hawkish".
The direction taken by the US Fed generally percolates down to what the other central banks decide about their key economic policies, especially the lending rate, which is a key tool in fighting inflation. Central banks globally have been revising lending rates upwards periodically after the COVID-19 pandemic started ebbing to control the rising prices.
Speaking to CNBC-TV18, Mark Matthews of Bank Julius Baer & Co said the global economy was slowing down, which will reflect in the US Fed Chair's speech. “I think that on Friday, Jerome Powell will deliver a hawkish speech because to declare victory now will encourage stock markets to go up, even more, stimulating the economy and making inflation go up,” he said.
The
July minutes of the Federal Open Market Committee, or the FOMC, released a few days back show that the bulk of the statements by members saying that they won't pull back until inflation comes down substantially.
Setting expectations
The US Fed Chair's speech gives a chance to Powell to "reset expectations in financial markets", according to a Bloomberg report. He will likely stop short of signalling how much the Fed will raise rates come September.
Inflation versus recession
Economists generally believe that the US Fed Chair will stress bringing down the high US inflation rate even if it means a recession. A MarketWatch report quoted Lou Crandall, chief economist of Wrightson ICAP, as saying, “The core message will be the Fed’s dogged determination to bring inflation down even though they know they’ll be running substantial risks of a weaker short-term growth outlook than they would like.”
Policy rate: Guidance outlook
It is not expected there will be much guidance given on the policy rate. A Reuter's report reasons that anything more than spelling the fight against inflation, especially on quantitative tightening and reducing the US Fed's near-$9 trillion balance sheet, will be avoided.
First Published: Aug 25, 2022 12:59 PM IST
