Fed’s Jackson Hole Conference Is Here: What to Expect

The markets are watching closely and are set to move in line with the messages delivered in the conference. 

Key Takeaways

➔ The annual conference will include the US, UK, EU, and more central bank executives.

➔ Economists will also deliver four research papers during the conference.

➔ The decisions taken will be of great interest to investors worldwide.

On Thursday, the Federal Reserve Bank of Kansas City began its annual symposium against the picturesque view in Jackson Hole, Wyoming. The event's opening dinner hosted central bankers, economists and journalists from all over the world. Here’s what to expect from the three-day conference:

• Powell’s speech on Friday at 10 AM  

New York time is likely the most anticipated for investors and those closely following the Fed. This comes as the Fed is set to cut interest rates for the first time in over two decades, and Powell’s remarks will be closely watched for clues on the number, size, and frequency of rate cuts. Any comments he may make on the labour market and the prospect of more weakness versus inflation risks will also be noted.  

The markets expect a quarter-point cut at the Fed’s meeting scheduled for September 17-18 but almost a full percentage point of cuts by the end of the year. Although no regional bank presidents or other Fed officials are scheduled to speak during the main programme, all will be present and available for media interviews.  

• Andrew Bailey, the director of the Bank of England, will deliver a speech at 3 PM Eastern on Friday  

This will be his first comments since August 1, when the Bank of England announced its first interest rate cut since the coronavirus outbreak. Investors who anticipate further easing in the year's second half will focus on his view on inflation data that came in slightly softer than anticipated and employment figures.  

The panel discussion on Saturday will present the opinions of central bankers from various parts of the world on assessing the conditions of monetary policy implementation and transmission. Brazil’s Roberto Campos Neto will speak at 12:25 PM Eastern time with Norges Bank’s Ida Wolden Bache and the European Central Bank’s Philip Lane.  

Other participants are Mario Centeno from Portugal, Olli Rehn from Finland, Robert Holzmann from Austria, Klaas Knot from the Netherlands, Pierre Wunsch from Belgium, Rosanna Costa from Chile and Tiff Macklem from Canada. Others present include Indermit Gill from the World Bank, Pierre-Olivier Gourinchas from the International Monetary Fund, and Jared Bernstein, the chair of the White House’s Council of Economic Advisers.  

Related: US Fed Holds Rates, BoE Makes Its First Cut Since 2020

Panels and Papers to be Presented

Economists will also deliver four research papers during the conference. The first speaker is Gauti Eggertsson from Brown University, whose paper on the determinants of inflation will be presented at 10:30 AM Eastern time on Friday. Other speakers and papers that will be presented include:

• Hanno Lustig of Stanford University delivers his paper on fiscal shocks and monetary policy.  

• Anil Kashyap of the University of Chicago.  

• Eric Swanson of the University of California.

• Patricia Mosser of Columbia University’s School of International and Public Affairs will discuss financial markets and policy transmission.  

On Saturday, Carolin Pflueger of the University of Chicago, who focuses on transmission and policy perceptions, will present the first paper at 10 AM Eastern. New York University’s Philipp Schnabl will also discuss the balance sheet in monetary policy and what has been learned.  

S&P 500 Moved During the Jackson Hole Conference Through the Years  

Big moves in the market during the Jackson Hole symposium are not common, but they do happen.

• 2009: S&P 500 index climbed by 1.8% when then-Fed Chair Ben Bernanke predicted a rapid return to global growth following the Global Financial Crisis.  

•  2010: S&P 500 index gained 1.6% after Bernanke said that the central bank might have to increase bond purchases further.  

• 2019: S&P 500 index fell by 2.6% because the trade tensions between the US and China deteriorated sharply on the day Powell spoke.  

• 2020: S&P 500 stocks index increased slightly by 0.2% when Powell told investors that the Fed would not raise interest rates just because the labour market was doing well.  

• 2022: S&P 500 index fell to 3.4% on the day Powell talked about the consequences of fighting inflation.

The most common question seems to be whether the rate cut will be a quarter point or half point. This is like the age-old debate of whether to nudge or shove the economy. This decision will be of great interest to investors worldwide, as it will give an idea of the Fed’s perception of the present economic situation and its plans for the future.