Jackson Hole, the most awaited Congress by economists. Waiting for Powell’s speech


From George Pirani
Aug 22, 2023 9:18 am

The annual economic policy symposium Federal Reserve Bank of Kansas Citykept in the area Jackson Hole in Wyoming, begins Thursday, August 24th and will run through August 26th.

The meeting of government experts and academics on the subject of economics, including many central bankers from around the world, is this year more awaited by the financial markets than ever such a complex historical moment for the global economy.

There is great interest, particularly in the words of Jerome H Powell, Chairman of the Federal Reserve, to understand the Fed’s next steps in raising interest rates to curb runaway inflation. This year’s meeting is entitled “Structural Changes in the World Economy”.

Jackson Hole, what it is and its importance

The congress took place for the first time in 1978 and at that time already gained special importance because it served to deal with urgent economic issues. It is also often the stage for important announcements and the presentation of relevant ideas on the global financial landscape. Like last year, when Powell shocked financial markets by firmly announcing that the Federal Reserve will do so faced inflation with determinationregardless of the circumstances.

Now, a year later, inflation has fallen significantly to two-thirds of its previous level. Meanwhile, the US economy continues to expand but the Fed appears to be on the right track bring the price increase back to the target of 2% per yearThe way ahead remains characterized by uncertainty and risks.

Investors are therefore eagerly awaiting the Jackson Hole Symposium, where Jerome Powell is expected to speak Friday, August 25 from 10.05 (16:05 GMT) which will be the climax as investors seek clarity on the economic outlook and the future direction of interest rates.

In recent years, Powell’s speeches have always immediately led to major movements on the American stock markets: according to ReutersLast year US markets closed at -3.4% just after the Fed President confirmed the hard line on inflation by shutting down bourses from Europe to Wall Street. However, closures have been positive for the past two years, +0.9 in 2021 and 0.2 in 2020, only to collapse again in 2019 at -2.6%.

what will he say Jerome Powell at Jackson Hole 2023

There’s no certainty about what Powell will say this year. It will certainly provide an overview of the current economic outlook and clarify whether it is necessary further restrictions in monetary policy to counter inflation. Alternatively, he could discuss whether progress to date is sufficient to justify sticking with interest rates. His thoughts are also likely to reflect the recent sharp rise in Treasury yields, with a focus on longer maturities.

According to an analysis by Bank of America, it appears the Federal Reserve Chairman could use the symposium to reiterate the central bank’s commitment to implementation the inflation target of 2%. This could mean maintaining a prudent approach to monetary policy and hence prolonging the tightening policy. Powell might emphasize the importance of data in Fed decisions, pointing out that each session is driven by the current situation. If he expresses confidence in the current pace of rate hikes, markets could take this as a signal of a possible pause in September and a likely rate hike in November.

But we can’t help but mention what’s been happening in China with the real estate crisis of the past few days. This scenario has conjured up memories of the collapse of Lehman Brothers fifteen years ago, a comparison that many may find bold but one that cannot be ignored. The China question, including the growth restrictions deliberately imposed by large financial institutions, will certainly be a central theme in bankers’ speeches.

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