Christian Gattiker, Head of Research, Julius Baer │It is about time: central bankers present their take on the current mess at the Jackson Hole meeting, the prime plat-form for this. The more concerned they are the better. We think concerted central bank action will still avoid a global recession. Warming up to fiscal easing, as in Germany, is the icing on the cake.
This was heard at Jackson Hole: “The cyclical recovery was gathering both pace and geographical breadth, thanks in part to the stimulus efforts of central bankers, the European Central Bank president said, adding that even if inflation remained low, the euro area economy was “gaining ground”. The Fed and the ECB feel they have done all they could. What a cop-out!
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.
US Fed chair Janet Yellen and ECB President Mario Draghi will both be speaking at the Jackson Hole conference later this week. They will be under close scrutiny from investors for any clues on future monetary policy decisions. Analysts believe the Fed should matter more than the ECB at this week’s event.
Stock market analysts have turned the annual central bankers’ meeting in Jackson Hole into a boiling pot of speculation regarding what message Fed Chair Janet Yellen will transmit. The markets are not expecting a rate hike in September, but are hoping for some guidance from Yellen’s speech today about how she sees the US economy, the key factor which will determine whether there will be a rate move before year-end.
On the eve of the Jackson Hole Fed gathering, the San Francisco Reserve Bank Chairman, John Williams, has launched an enlightening debate on the challenge raised by protracted natural interest rates. The so-called r-star would rank now close to zero in the US and below that threshold in the Eurozone.
By James Alexander via Historinhas | Although it appeared that the VSPs gathered in Jackson Hole could only worry about non-existent inflation, I detected a defensiveness too.
Jackson Hole does not clear up the doubts over whether or not there will be a rate hike in September.
And what if there is no lift-off in September?
LONDON | By Rajiv Setia and Anshul Pradhan at Barclays | Developed rates markets rallied globally over the past week, led by the long end, largely in response to the across-the-board underperformance of risk-assets. Figure 1 shows changes in ED-implied rates on the day of the September FOMC meeting, as well as the change from pre-FOMC levels to now.