Jackson Hole The Main Event

Right, let's have a look at the main event this week. JayPow and the Jackson Hole Symposium.

Sounds like a film title. Here's the plot;

Powell will speak at 14.10 BST. The full schedule of speakers is due to be released tonight at 8PM ET. I'll put the schedule in the discord once it's released. ScotiaBank sum things up well;

A main point of sensitivity is potential alteration to the inflation language that would leave it more open to an averaging and overshooting approach in light of the years of undershooting.

That said, we’ve probably learned most of what we need to already. The FOMC views negative rates unfavourably.

It has generally dismissed yield caps on longer term maturities and views yield caps or targets on shorter term maturities as unnecessary in the current environment.

So, what do we "know" heading into the event?

  • Negative Rates Are Off The Table

  • Will Change To Average Inflation Targeting Above 2%

  • Too Soon For Yield Curve Control - Clues For Future?

Can Powell can surprise the market?Probably not. There's a pretty big risk he underwhelms by saying nothing new. The market may have to wait until the next Fed meeting on September 16th.

If Powell is very explicit e.g. - Need to let inflation run above 2% for some time - Keeping rates unchanged until inflation sustainably exceeds the target- Factor in lower unemployment as a condition to meet before raising ratesEquity longs will want to see the Fed stay the course, lower for longer. The more hurdles between "now" and rate hikes, the better it is for equities.  

Say it quietly, but I'm actually looking forward to BOE's Bailey far more.Because of his engaging conversational style and humorous quips?  Errr. No. Purely because his track record suggests he might let something slip.  More QE? Negative Rates? They're in the toolbox, but "not yet" was the last we heard. What about the path to normalisation?  OK, maybe a few years too early.

Whatever happens, Bailey has a little more room to surprise the markets. Agree/disagree? Anything I've forgotten?  

Post your questions in the discord!