Markets globally are keeping a close watch on US Federal Reserve Chairman Jerome Powell’s remarks during the upcoming Jackson Hole Economic Policy Symposium 2022. The Federal Reserve Bank of Kansas City will convene the annual event in Wyoming during 25-27 August. The event, which marks the Symposium’s 45th year, will focus on the theme “Reassessing Constraints on the Economy and Policy”.
According to the official page, this year’s theme will explore the emergence of economic constraints during the pandemic and how supply considerations have returned to center stage. Prominent central bankers, finance ministers, academics, and financial market participants from around the world will meet at the event to discuss the burning economic and financial issues, including inflation.
Bottlenecks and shortages have choked economic supply even as historic levels of fiscal and monetary accommodation have led to a surge in demand. This has resulted in an imbalance that has pushed inflation up globally, and is expected to be a prominent discussion topic at the Symposium. Additionally, “the extraordinary and often innovative global policy response to the pandemic invites questions on what constraints bind macroeconomic policy, such as concerns over fiscal sustainability and the ultimate size of central bank balance sheets,” said the Federal Reserve Bank of Kansas City website.
What is Jackson Hole Symposium?
Since 1978, the Federal Reserve Bank of Kansas City has sponsored a symposium on an important economic issue facing the U.S. and world economies. Beginning in 1982, the Symposium was hosted at the Jackson Lake Lodge at Grand Teton National Park, which is located in Wyoming – one of the seven states served by the Tenth Federal Reserve District. Each year, the event provides a venue for international central bankers, Federal Reserve officials, other policymakers and academics to discuss issues of mutual concern.
When and where to watch the Jackson Hole Symposium
The full agenda will be available at the Federal Reserve Bank of Kansas City website at 5:30 am IST on Friday. Federal Reserve Chairman Jerome Powell’s remarks will be streamed on the Kansas City Fed’s YouTube channel named KansasCityFed on Friday, August 26 at 7:30 pm IST. Papers and other materials will be posted on the Kansas City Fed’s website as they are presented during the event.
Why markets, economists are eyeing Powell’s address
According to experts, Powell, with his address, is expected to correct market expectations from the last Fed meeting in July. In July’s meeting, the Fed recognised that some ‘recent indicators of spending and production have softened’. This led to some saying that the Fed has taken a dovish shift. There was then a run in equities, a drop in the US Dollar as well as treasury yields as markets looked for a ‘dovish pivot’. Powell is likely to correct this perception with a more hawkish stance in his speech, according to economists, market analysts.
Inflation still under watch
Economists also believe that Powell might use his closely-watched speech to stress that the central bank is going to bring 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.” Crandall was further quoted saying that in Powell’s speech, the Fed’s determination to hold the line in the face of a weak economy and weak labor market will be front and center. “Inflation has gotten to the point where they have no choice but to accept that risk,” Crandall added.
Wall Street will closely watch the event, searching for clues about where the Fed might head next in its attempts to tame rising prices. “It’s interesting how this August speech of the Fed chair at Jackson Hole has become such an important platform for the Fed to influence market expectations about policy. It becomes a self-fulfilling prophecy,” David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, was quoted saying in a CNN Business report.
According to Kenneth Kuttner, an economics professor at Williams College, Fed chair’s speeches at Jackson Hole events are “much meatier than the usual policy speech, so there’s much more to chew on”.
Powell’s previous Jackson Hole addresses
Two years ago, Powell used his address at Jackson Hole to announce that the US Fed had a new model for assessing how and when to raise interest rates, saying it would no longer do so just because joblessness was falling and inflation was expected to heat up. In his last year’s address, he laid out the reasons that inflation at the time might prove to be a temporary phenomenon, resulting in large part from the reopening of the global economy after the pandemic. However, the Fed’s view on inflation is starkly different this year, and investors, economists are eager to hear Powell and glean any sense of the path of future interest rate increases by the central bank.