Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

No Fed fireworks, but plenty of clues, expected at Jackson Hole

Published 17/08/2014, 10:04
No Fed fireworks, but plenty of clues, expected at Jackson Hole

By Andy Bruce LONDON (Reuters) - Flashes of illumination rather than fireworks are expected at this week's annual meeting of top central bankers and economists in Jackson Hole, Wyoming.

Few predict anything so momentous as the speech by Federal Reserve chairman Ben Bernanke two years ago that paved the way for an unprecedented $85 billion per month stimulus plan.

But policymakers will discuss at length their thinking around the labour markets of major economies at the Aug. 21-23 meeting, perhaps dropping clues about the path for monetary policy in the months ahead.

The spotlight will be on Janet Yellen, who will speak on Friday in her first appearance at Jackson Hole as Fed chair.

"I don't think she's going to go anywhere close to monetary policy," said Stephen Lewis, chief economist at ADM Investor Services.

"The theme of the meeting is going to be dynamics of the labour market, which is a subject very close to her heart, and it is a key question for the Fed as it tries to work out what its policy should be over the next few months."

Lewis said he expected a speech similar to one given by Bernanke in March 2012, when he outlined what he thought of the various indicators of the labour market.

Other speakers include Bank of Japan Governor Haruhiko Kuroda, Central Bank of Brazil Governor Alexandre Antonio Tombini and Bank of England Deputy Governor Ben Broadbent.

Further policy hints might also come in the form of minutes from the Fed and BoE's last monetary policy meetings, due to be published on Wednesday.

"We look for new clues on how the Fed plans to gain greater control of the Fed funds rate as it tightens policy, while the system is still swimming in reserves as a result of the three quantitative easing programmes undertaken," said Victoria Clarke, economist at Investec.

The BoE minutes will be examined for concrete signs of dissent among members of the Monetary Policy Committee, after the Bank last week seemed to push back the prospect of a rate hike this year.

"With spare capacity being rapidly used up, we expect (MPC member) Martin Weale to have dissented in favour of a rate hike this month," said Philip Rush, economist at Nomura.

If the minutes do not reveal the first dissenting vote to hike rates since July 2011, that would make predictions for a November rate hike from the BoE a tough ask, added Rush.

PRICE PRESSURES

U.S. inflation figures for July due on Monday will also flavour the debate about the Fed's monetary policy outlook next week, with some signs emerging that price pressures are building slowly as the world's largest economy recovers.

Still, few economists polled by Reuters expect any surprises.

"We expect inflation data to test monetary policymakers' resolve before the end of the year, but do not expect that challenge to begin with the July report," said Brian Jones, economist at Societe Generale.

Purchasing managers' indexes (PMIs) from Europe will also offer an early look at how the euro zone economy has fared this month, after data last week showed the region effectively stagnated in the second quarter.

While a weaker euro and improving credit conditions ought to boost business activity, the European Central Bank will come under more pressure to act if the PMIs - which have a good relationship with economic growth - disappoint.

"If we see any signs of softness, whether through domestic weakness or growing concerns about the Russia-Ukraine crisis, then that would really reinvigorate worries about the outlook for Europe," said James Knightley, economist at ING.

Rising tension in Ukraine last Friday drove major government bond yields to their lowest level in more than a year, and the crisis could make for a volatile week ahead for financial markets.

"Even if the issues today are resolved and there isn't a shooting war, that ongoing tension between the Ukraine and Russia puts an underlying bid into the Treasury market," said Lou Brien, market strategist at DRW Trading in Chicago.

(Additional reporting by Sam Forgione; Editing by Sonya Hepinstall)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.