Jackson Hole, location of the Federal Reserve Bank of Kansas City’s annual retreat, might not be the most obvious spot for a major economic symposium. Chosen by former Fed chair Paul Volcker for its high-quality fly-fishing, the Wyoming valley has became an increasingly crucial part of the calendar for central bankers.
After an opening reception last night, Fed chair Jerome Powell will kick off proceedings with a keynote speech today.
This year, Mr Powell is in the spotlight: his speech, due at 3pm London time, is expected to offer a defence of the Fed’s decision to make a 0.25pc cut to US interest rates at the end of last month. That decision — controversial even within the Fed itself — and the way it was positioned as a “mid-cycle adjustment” made Mr Powell few friends.
What he says could today could end up majorly dictating how nervous US markets move.
The conference, which is on the theme of ‘Challenges to Monetary Policy’, will host speeches by major figures from the worlds of academia and central banking, under a series of broad themes. Today, after Mr Powell speaks, attendees will hold a discussion over three papers:
- Monetary policy divergence
- Monetary policy spillovers to advanced and emerging market economies
- What does it mean to be a data-dependent central banker?
Bank of England governor Mark Carney will then round things off with his Luncheon Address.
Tomorrow, the conference will pick up again with several more general discussions, including ones on the state of the markets, and tackling commodity price shocks. The main event is likely to be an afternoon panel, featuring Philip Lowe, governor of the Reserve Bank of Australia, and Amir Yaron, governor of the Bank of Israel, and Gita Gopinath, chief economist of the International Monetary Fund.
Who will be there?
Though the slew of international governors are the biggest hitters in attendance, there will also be a mass of US and foreign central bankers in attendance. That includes all four other Fed governors alongside Mr Powell, and all but one of the US’s reserve bank presidents.
They’ll be joined by policymakers, economists and several government officials. And academics — lots of them.
Who won’t be there?
Notable absences from the meeting include European Central Bank chair Mario Draghi, and Bank of Japan governor Haruhiko Kuroda.
Also not attending is anyone from the Trump administration — for the second year in a row.
What will happen?
Right now, that is anyone’s guess. There’s been an increasing sense of unease from central banks lately, with Federal Reserve moving timidly around a hectoring Donald Trump, and the ECB worried investors are losing confidence in its ability to prop up the eurozone economy.
The most solid carrot Mr Powell could dangle is that a second rate cut is coming this year: that would likely send equities shooting up, unless investors are already too nervous.
Deutsche Bank analysts say:
If Powell sticks to the old language, as is most likely, it would affirm that he is still confident that the strength of consumption, in combination with modest Fed easing, will be sufficient to keep the recovery broadly on track.