Jackson Hole provides little in the way of monetary policy update

Monetary policy: US, EurozoneUS and Eurozone monetary conditions

On the whole, the Jackson Hole symposium provided very little in the way of fresh indications on either the Fed or the ECB’s monetary policy, market experts say.

ECB President Mario Draghi was widely expected to keep a low profile during the event. However, there had been hopes Fed chair Janet Yellen would give some clues on the timing of further rate hikes. Or on the proposed reduction of the central bank’s balance sheet.

Yellen “fully avoided any discussion” on either issue, Julius Baer economist David A. Meier says. But he flags that:

We continue to expect a next Fed rate hike in December, based on cyclical strength and a recovery in inflation.

Intermoney agrees the contributions made by the main protagonists at Jackson Hole were, overall, “far removed from what investors are concerned about in the short-term…As a result, the dollar fell nearly 1% against the euro to 1,192.”

The dollar’s dip was further supported by comments from Fed governor Jerome H. Powell, Intermoney says. In a television interview with Bloomberg on the conference sidelines, Powell called for “patience with respect to further rate moves.”

But while the dollar weakened after Draghi and Yellen’s key speeches, the euro went higher. Julius Baer’s Meier explains:

Draghi’s luncheon address did not cause the breadcrumbs to stick in his listeners’ throats. But he reassured there will eventually be an end to the ECB’s asset purchase programme, albeit slow as inflation is still lagging.

Whatsmore, the ECB President did not show any concern about the current strong euro, Meier says. “We continue to believe the euro strength expresses exaggerated expectations on ECB monetary policy normalisation.”

Draghi defended the ECB’s asset purchases programme, while also stressing he is confident its inflation target (of 2%) will be achieved, Intermoney flags.

Both Julius Baer and Intermoney highlight the warning from Draghi and Yellen that deregulation could be a risk to financial stability in times of loose monetary conditions.