Why Jackson Hole matters and what to expect?

While the 3 day Jackson Hole symposium will start on 25th August and conclude on 27th August, the big item on the agenda will be the speech by Jerome Powell. His speech is slated to be delivered on the last day of the 3-day gathering. Jackson Hole is located in Wyoming state and this annual gather has been organized by the Federal Reserve Bank of New Kansas City. The symposium is normally a gathering of central bankers from across the world, leading academicians, bankers and some of the top notch macro consultants in the world.

Why does the Jackson Hole meet matter a lot this year?

As stated earlier, the importance of the Jackson Hole symposium will largely be on account of the presentation of Jerome Powell amidst heightened uncertainty. Here are the key points you must know about he Powell address expected to be made on 27th August.  

    • The presentation of Powell at the meeting is expected to give a leg up on the upcoming Fed policy. Powell will be forced to spell out clearly when the Fed will stop raising rates. That will give a lot of clarity to the global markets.

    • The analysts would also be keen to understand as to whether the Fed really plans to restart the Fed cuts, once the hikes are done with and inflation has come under control. The latter part of the action will be of specific interest at Jackson Hole.

    • With Powell admitting that the Fed should have started earlier, the markets will be keen to hear if he plans to front load the entire rate hike in 2022 itself so that 2023 offers enough time to review and take necessary corrective action.

    • In fact, the real areas of interest would be to see what is the stance of the Fed on core inflation. After all, food inflation and energy inflation is not something where the Fed has too much of control over. However, core inflation is something they can adopt fiscal strategies to address. 

    • What the markets would really look to hear in the Jackson Hole symposium is how the dichotomy of high inflation and low unemployment rate would be sorted out. Unemployment is still at around 3.5%, which is too low even you factor in the fact that much of the inflation has been caused by supply chain shortages.

    • With so many central banks under one roof, the big question will be whether the US Fed would risk monetary divergence. The other central banks are not as hawkish as the Fed and the Bank of England. ECB is tentative, Bank of Japan is neutral while Peoples Bank of China is still dovish. It remains to be seen how this dichotomies are addressed.