Jackson Hole Symposium Preview
Formally known as the Economic Policy Symposium, The Jackson Hole is a yearly gathering organized by the Federal Reserve Bank of Kansas City. Held in Jackson Hole USA.
The symposium brings together central bankers, finance ministers, and other economic and financial workers from all around the world.
The symposium’s main focus is to discuss economic policy issues, mainly those affecting monetary policy and the financial stability of the world. Each year, the symposium addresses a specific theme, for example, inflation, global trade, economic growth, and financial crises.
The big guns that are joining among other financial workers are BoE, BoA, BoJ, ECB, and more.
This symposium gives us an understanding of the global economic situation and is an important moment to follow as it shows the direction of the monetary trajectories of the major central banks.
The theme for the 2024 Jackson Hole Economic Symposium is “Reassessing the Effectiveness and Transmission of Monetary Policy.”
It is all about looking at how well the central bank’s decisions on interest rates and other monetary policies work in the real world and will focus on understanding whether these tools are effective for improving the global financial state.
Powell may say that the economic situation is growing more confident, that inflation has been moderated and the goal to hit 2% with an interest cut is preferable.
This could suggest that the Fed is preparing to begin cutting interest rates, but the pace and timing of these cuts will depend on upcoming economic data, especially related to the election and unemployment rates, to not trigger higher inflation.
Powell is expected to discuss the recent unemployment which has slightly been rising, as this could affect how fast and how aggressive these cuts will be.
As much as Powell has pressure to cut interest rates and hit the 2% target in September as recently hinted, there are a few factors that can put this on pause:
- Preventing relapse by making sure the inflation is under control before taking any bigger steps.
- Global factors as if other major commodities are suffering higher rates can give the Fed more room to adjust their affairs with other countries.
- If the economy is doing well with less unemployment and growing businesses, there is no need for a rate cut.
- Good to have some room for rate cuts later in the future if there would ever be a need rather than to cut it now if the economy is strong enough to survive without it.
- Powell might want to wait to do any cuts until he has received further economic data, to make sure the rate cut is the right move.
- Higher inflation, making the cheaper borrowing mute as prices go up.
If the unemployment rate does not go down and the economy hasn’t shown any signs of improvement in the wanted speed, together with the pressure of a rate cut in September there is a big chance Fed Powell could confirm the impending rate cut.
In my opinion, worst case he will hold off until early November to have further information on economic data. So we are now looking for clues from Fed Chair Powell and we want to know if the Fed is going to cut and by how much. Markets have priced in 25bps, but could we get any indication that the Fed may be more aggressive with the cutting cycle this time round.
