It is probably the highest profile event on the Fed calendar: the chair’s opening speech at the Kansas City Fed’s symposium in Jackson Hole, Wyoming. The setting is spectacular; the audience runs the world’s central banks. Markets go on high alert for new guidance on policy. To add to the sense of occasion this year, it will be Janet Yellen’s first visit as Fed chair.
The oddity is that Jackson Hole’s reputation as a market mover is largely accidental. It is not an obvious venue for the Fed to communicate policy: what, in fact, could seem more out-of-touch than proclaiming the nation’s economic path from a gorgeous mountain resort in one of the richest zip codes in the USA? It is most likely, therefore, that Yellen’s speech on Labour Markets (the title has been announced) will contain a lot of important analysis but much less red meat on policy. Read more
Janet Yellen’s speech this Friday at the annual Jackson Hole symposium is titled, with understated simplicity and brevity, “Labor Markets”. The wider symposium is itself themed, “Re-Evaluating Labor Market Dynamics”.
And it’s no wonder. Even now, after more than a year of monetary policymakers and academics arguing about the amount of labour market slack and how much it should matter, most of the known unknowns in the debate remain, well, unknown.
In anticipation of the speech, the economics team at Credit Suisse has rounded up some of Yellen’s quotes on the labour market since she became Fed chair earlier this year (emphasis in the original, and my own thoughts follow the excerpt):
tl;dr –> possibly not much, though the conference has sprung surprises before and there’s an interesting paper being presented on Friday to watch for. Here’s our previous “reporting” on why Bernanke won’t be attending.
For the longer version, below is an excerpt from a note by Goldman’s economics team: Read more
It’s no secret that we’re big fans of Andy Haldane on this blog.
Exhibit A — a paper given to this year’s Jackson Hole conference by the Bank of England’s executive director for financial stability, and Vasileios Madouros (also of the Bank). Read more
It’s what you’ve been waiting for. Read more
Londoners are off today and many Wall Streeters are stuck at home because of ongoing New York transit problems, so if you’re bored and in need of reading material, below you’ll find links to the papers along with brief excerpts from their abstracts and conclusions.
(These are the academic papers, not the speeches given by Bernanke, Trichet and Lagarde.) Read more
There are literally a thousand notes in our inbox this Jackson-Hole Friday morning, going something like:
“Bernanke unlikely to pave the way for QE3“ Read more
Asian stocks swung between gains and losses, US futures rose and the dollar retreated from a one-week high against the euro, Bloomberg says, ahead of a speech by Federal Reserve Chairman Ben S. Bernanke later on Friday, and US economic data. Earlier, stocks on Wall Street had fallen on Thursday as investors lowered their expectations around measures Mr Bernanke might signal in the speech. The president of the St Louis Fed told the FT on Thursday that further quantitative easing would be the US Federal Reserve’s most effective tool if it needs to do more to stimulate the US economy, but an “Operation Twist” to extend the maturity of its balance sheet might not have much effect. “I think QE is our most potent weapon,” said James Bullard. “It carries risks, as we’ve experienced over the last year, but if you wanted to take that further and take further risks on inflation, then you could do that.” Meanwhile Thomas Hoenig, president of the Kansas City Federal Reserve Bank, told Reuters he did not see a double-dip recession, and downplayed the significance of recent negative reports on manufacturing.
While the world seems divided on whether Friday’s Jackson Hole meeting will result in the announcement of a fresh round of quantitative easing or not — we thought we’d run with the premise that QE in its conventional form is now redundant or impossible.
(For why we think this, see here and here.) Read more
Alternative working title: How QE2 went wrong.
In order to understand what’s really at stake at Jackson Hole on Thursday we need first to understand how the Fed’s thinking has evolved post 2008. Read more
Some believe that of all the emergency facilities initiated by global central banks in 2008 the most helpful was in fact the introduction of unlimited FX swap lines.
As the Bank of International Settlements wrote in May 2010: Read more
Markets will hush when Federal Reserve chairman Ben Bernanke makes a speech on Friday at the annual monetary policy forum in Wyoming’s Jackson Hole, says Reuters, with participants hoping for a sign of more easing. However, no grand new plan is expected to be hatched at this year’s meeting, in part because the Fed already unveiled a new policy tool this month when it pledged to keep interest rates near zero into 2013. The FT says the fervent anticipation is the legacy of the last four years’ of Jackson Hole speeches, particularly the 2010 speech, which came to be seen as a promise of more Fed easing on the way. Barring an unscheduled and unlikely meeting of the rate-setting federal open market committee (FOMC), Mr Bernanke cannot make policy announcements, but only set out his analysis of the economy, the Fed’s options and what he currently thinks about them. The bar to the most drastic option – a so-called QE3 – remains high because of the Fed’s concerns about an eventual exit or upsetting public expectations of inflation increase the larger its balance sheet becomes. Barclays says yields indicate traders have already priced in about $500bn to $600bn of Treasury purchases by the Fed, reports Bloomberg.
Here’s an interesting graphic from Nomura’s fixed income team for bubble addicts.
It shows the pain thresholds for QE3. Read more
Looks like there’ll be no sleep at Jackson Hole.
Courtesy of Morgan Stanley’s global economics team, two tables that list and rank each major central bank’s current “challenges”. Read more
As Mark Thoma notes, the Kansas City Fed has an inexplicable (and seemingly indefensible) policy of withholding from the public the research papers that are presented at Jackson Hole until after the conference is over.
Well, it’s over. For your skimming pleasure, below we provide links to the papers and excerpts from their abstracts and conclusions. Read more
Markets are braced for a week of key economic data that could decide the Federal Reserve’s next move, after chairman Ben Bernanke said at the weekend the Fed would ease policy if the outlook deteriorated “significantly”, reports the FT. Attention will focus on US jobs figures due on Friday, which could reinforce signs of a US slowdown. But analysts warned there was no guarantee of early Fed action, despite Bernanke’s pledge at the Fed’s Jackson Hole conference in Wyoming that it would “do all that it can” to boost the faltering recovery. Lex concludes that “no one really knows what is to be done”, while Pimco chief Mohamed El-Erian, writing for FT Alphaville, airs some “open questions” for Bernanke et al.
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, reacts to Fed chairman Ben Bernanke’s Jackson Hole speech.
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One to add to the US Treasuries bubble meme.
RBC Capital Markets’ head of US rates strategy and former BofA-er, Michael Cloherty, ask whether yields are now reaching such low levels they’re about to displace some of their own buyers. Read more
Further to our recap of the economic warning signs facing the Fed, here’s a round-up of economists’ advice for what Ben Bernanke should say in his Jackson Hole speech on Friday.
Below we list a few of the latest previews, with links and excerpts: Read more
It is now 17 days since the eagerly-awaited FOMC statement in which Ben Bernanke announced the plan to re-invest the repayments from the Fed’s MBS holdings into long-dated treasuries.
Given all the interest in his speech at Jackson Hole on Friday, we thought it would be worth looking back on some of the key economic news in the US, most of it really quite bad, that’s come out since the FOMC statement. Read more
This is becoming something of a trend.
An ever-increasing number of strategists - George Magnus excepted – are taking the view that another dose of QE won’t work. In fact — it could make things worse. Read more
The world’s central bankers on Sunday signalled their belief that interest rates could stay at ultra-low levels for some time without generating excess inflation, as they left the US Federal Reserve’s annual retreat in Jackson Hole, Wyoming. Some senior officials used the platform of the conference to push back against calls for early implementation of “exit strategies” that would reverse the current extraordinary degree of monetary stimulus.