Jackson Hole central bankes summit(s)
Jackson Hole Fed Meeting: What You Need to Know
Questions on Fed succession nag in background at Jackson Hole
Former U.S. Treasury Secretary Lawrence Summers never came near the Federal Reserve's annual monetary policy symposium in Jackson Hole this weekend, but his name was often raised on the sidelines amid speculation over his possible selection as the next Fed chairman.
How would Summers, a Harvard professor with a formidable reputation for brilliance but no patience for people he disagrees with, treat his Fed colleagues?
How was fellow candidate Fed Vice Chair Janet Yellen, who moderated the discussion on Saturday, standing up to the pressure of competing with him?
When will President Barack Obama make up his mind on who he wants to nominate, and has the drawn-out process over the selection done any harm to the institution's morale?
Summers, Yellen and former Fed Vice Chair Don Kohn are among the candidates Obama is considering to replace Fed chief Ben Bernanke when his terms ends in January.
At the prestigious central banker's retreat in Wyoming's stunning Grand Teton National Park which wrapped up on Saturday, both Yellen and Kohn, who also attended, steered away from discussing Bernanke's succession with reporters.
Yellen, clearly aware of being under intense media scrutiny, seemed determined not to say anything that could be construed as news in her public remarks.
The rules of the event dictate that anything said during the sessions is on the record, and everything else is off the record, unless otherwise agreed.
Kohn joked with reporters about the lack of campaigning on his behalf, in contrast to the full-scale lobbying being done for Summers and Yellen, but otherwise declined to comment.
Here's Comes The Moment That Fed Watchers Have All Been Waiting For
Flashes of illumination rather than fireworks are expected at this week's annual meeting of top central bankers and economists in Jackson Hole, Wyoming.
Few predict anything so momentous as the speech by Federal Reserve chairman Ben Bernanke two years ago that paved the way for an unprecedented $85 billion per month stimulus plan.
But policymakers will discuss at length their thinking around the labor markets of major economies at the Aug. 21-23 meeting, perhaps dropping clues about the path for monetary policy in the months ahead.
The spotlight will be on Janet Yellen, who will speak on Friday in her first appearance at Jackson Hole as Fed chair.
"I don't think she's going to go anywhere close to monetary policy," said Stephen Lewis, chief economist at ADM Investor Services.
"The theme of the meeting is going to be dynamics of the labor market, which is a subject very close to her heart, and it is a key question for the Fed as it tries to work out what its policy should be over the next few months."
Lewis said he expected a speech similar to one given by Bernanke in March 2012, when he outlined what he thought of the various indicators of the labor market.
Other speakers include Bank of Japan Governor Haruhiko Kuroda, Central Bank of Brazil Governor Alexandre Antonio Tombini and Bank of England Deputy Governor Ben Broadbent.
Further policy hints might also come in the form of minutes from the Fed and BoE's last monetary policy meetings, due to be published on Wednesday.
"We look for new clues on how the Fed plans to gain greater control of the Fed funds rate as it tightens policy, while the system is still swimming in reserves as a result of the three quantitative easing programmes undertaken," said Victoria Clarke, economist at Investec.
The BoE minutes will be examined for concrete signs of dissent among members of the Monetary Policy Committee, after the Bank last week seemed to push back the prospect of a rate hike this year.
"With spare capacity being rapidly used up, we expect (MPC member) Martin Weale to have dissented in favour of a rate hike this month," said Philip Rush, economist at Nomura.
If the minutes do not reveal the first dissenting vote to hike rates since July 2011, that would make predictions for a November rate hike from the BoE a tough ask, added Rush.
Again
And again we are going to be told a bunch of lies. A bunch of CBs at one place - there is only one way how it can be useful
Today’s Mindless Rally: Its Jackson Hole, Stupid!
There is no reason rooted in the real world for today’s frothy stock market rally. In every single region of the planet, the post-crisis, central bank fueled expansion cycle—-tepid as it was in the global aggregate—is faltering badly.
Japan’s economy is only a hair bigger than 5 quarters ago (0.8%) before Abenomics supercharged the BOJ printing presses. Meanwhile, even as real wages in Japan plummet to modern lows, the BOJ’s balance sheet has now reached 55% of its GDP—–a ratio that would have been unimaginable even a decade ago.
Likewise, notwithstanding Mario Draghi’s “whatever it takes” bluster, the only thing that has happened in perpetually recessionary Europe is a short lived stampede of the fast money into peripheral debt. And that was on the tenuous predicate that the debt issued by basket cases like Italy and Spain can only go up because Mario might be buying it sometime down the road. Soon it will be apparent, however, that the Euro area economy benefited not a wit from Mario’s monetary magic, and that the hedge fund punters can dump their rented bonds as fast as they piled on.
And the schizoid policy of the comrades in Beijing needs no elaboration. Stabilizing China’s tottering tower of $25 trillion in debt is far beyond the pay and grade of people who believe with Mao that power comes out of the barrel of a gun, and with Wall Street Keynesian’s that prosperity comes out of the end of a printing press.
And now the usual Wall Street suspects are also busily marking down their US GDP numbers for Q2 and their outlook for the balance of the year. What was supposed to be the year of 3%+ “escape velocity” is heading for the lowest rate of GDP growth—about 1.5% at best—-since the 2009 bottom. And even that depends upon believing that the Commerce Department’s GDP deflator is actually only running at a 1.4% annual rate. There’s not a chance that’s true for households which consume energy, food, health care, transportation and educational services, not iPads.
So with the global expansion cycle faltering, profit ratios at all-time highs and PE multiples in the nose-bleed section of history—nearly 20X reported earnings for the S&P 500—there is only one thing left for the Wall Street robots to do. Namely, vigorously buy the latest dip because the Fed has yet another new sheriff heading for Jackson Hole purportedly bearing dovish tidings. To wit, after 6 years of pinning money market rates to the economic floorboard at zero, Janet Yellen espies an economy still encumbered by “slack”, and will therefore be inclined to keep Wall Street gamblers in free money for a while longer.
This is just more Keynesian bathtub economics, but the Wall Street Journal does have a pretty cogent take on Yellen’s pending utterances. It seems that after $3.5 trillion of balance sheet expansion, the US economy has not yet achieved the performance metrics—especially in the labor market—that was exhibited during the last central bank fueled expansion cycle of 2002-2007:
Consensus is that she will likely highlight that the alternative measures of labour market slack in evaluating the ongoing significant under-utilisation of labour resources (eg, duration of employment, quit rate in JOLTS data) have yet to normalise relative to 2002-2007 levels.
Now that is downright insulting! The phony prosperity that the Fed unleashed through the Greenspan housing and credit bubble was the exact cause of the 2008 financial crisis and recessionary spiral which followed hard-upon it. So why in the world would the Fed want to push its money printing campaign to the edges of sanity in order to replicate its last disaster?
The answer is not hard to find. Yellen has no clue that the US economy has stalled out because it has reached a condition of peak debt saturation. Indeed, the 2002-2007 benchmark now being proffered by Yellen was actually fueled by the final blow-off phase of a 30-year national LBO.
As shown below, between 2002-2007 credit market debt outstanding—-public and private—soared by the incredible sum of $21 trillion while nominal GDP grew by only $3.5 trillion. And that was the end of the road in terms of the Fed’s patented formula of cheap debt fueled expansion of domestic consumption and nominal GDP.
Ever since the crisis, in fact, the Fed has been pushing massively on the credit string, but nearly the entire flow of liquidity has never left the canyons of Wall Street. Instead, it is parked in the excess reserve accounts at the New York Fed, having cycled through the money markets and pinned the cost of carry-trade gambling at zero percent.
So the casino is having yet another bullish moment because it expects they new monetary sheriff to keep the gamblers in poker chips for another go-round.
Confused How To Trade Jackson Hole? Goldman Explains
Because when in doubt, just listen to Goldman and do the opposite.
And now you know.With opinions mixed as to whether or not Jackson Hole will be the forum for Yellen to say something new, many are trying to figure out if it is a buy the rumor and then buy more after the fact event, a buy the rumor sell the fact event, or a do nothing with the rumors and then buy the fact if the USD is actually rallying after the fact event.
Jackson Hole Guide: Investors Seek Yellen Job-Market View
Here’s what to look for from the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming, which runs Aug. 21-23.
-- Yellen’s keynote: The highlight will be Fed Chair Janet Yellen’s speech Aug. 22 on labor markets at 10 a.m. New York time. She’ll probably reiterate the Fed’s view that there is plenty of room for improvement in the labor market, according to Dean Maki, chief U.S. economist at Barclays Plc in New York.
-- In July, the Federal Open Market Committee changed the language of its policy statement to highlight “significant underutilization of labor resources” as a justification for continued easy-money policies, even though the unemployment rate has fallen faster than Fed officials had forecast. The Fed chief will probably “point to measures like the elevated number of workers that are employed part time for economic reasons as evidence” of continued slack, Maki said.
-- Yellen “would like to move away from this being a market-moving policy speech and get it back to being more of an academic exercise,” said Michelle Girard, chief U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “I don’t think that she will use this as a tool to signal anything in terms of the Fed’s thinking, or certainly any meaningful change in the Fed’s thinking.”
-- Wage focus: Tepid growth in wages is one area Yellen could choose to explore in more detail if she wants to advance the conversation, said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York.
Wonder what type of disaster they prepared for us this time
USD: Is Jackson Hole THAT Big Of A Deal?
Dollar Performance Table: Is Jackson Hole Really THAT Big of a Deal?
For the past 36 years, central bankers around the world have gathered in Jackson Hole Wyoming for an annual conference to discuss the world economy. In certain years there were pressing issues to talk about including the coordination of global monetary policy but this year, central banks are moving in different directions. However, that does not mean that investors are not watching the meeting closely. Both Fed Chair Janet Yellen and ECB President Mario Draghi are scheduled to speak Friday and while we have a pretty good idea of what Draghi will say, the latest FOMC minutes has investors eager to see if Yellen adopts a less dovish stance. The dollar traded sharply higher on Wednesday but Friday, profit taking caused the greenback to give up its against most of the major currencies. Even back-to-back upside surprises in U.S. data failed to extend the rally in the dollar. Investors are worried that Yellen could maintain her dovish stance and downplay the Fed minutes, which raised the possibility of a change in their view on labor market underutilization and the likelihood of an earlier rate rise. This has happened before so if she refrains from taking a more hawkish stance, investors would respond by selling dollars. If she acknowledges the improvement in the labor market and suggests that they could change their guidance as Quantitative Easing comes to an end, it could be just what investors need to hear to resume their purchases of U.S. dollars. Both Bernanke and Greenspan have signaled major shifts in policy at Jackson Hole so it would not be out of line for Yellen to do so as well.
However as traders first and analysts second, we always think about what type of impact this event risk can have on currencies. The Wall Street Journal republished an article earlier this week that talked about how the Dow generally experienced triple digit gains on the day of the Fed Chairman's Jackson Hole speech so we decided to see if there was any consistency in the dollar's performance during this same period. Unfortunately the following table shows one of two things. First, there's no consistency in the direction of the dollar and for the most part, the moves were relatively modest even when Bernanke was clear on where monetary policy was headed next. While it is possible for the dollar to experience a big move Friday, chances are that its magnitude will fall short of expectations. We expect Mario Draghi to maintain his cautious outlook on the Eurozone economy and use Friday's speech as an opportunity to remind investors that they stand ready to increase stimulus if necessary.
Yellen speech on labor market to be Jackson Hole highlight
In the not-too-distant-past, Fed watchers had to divine U.S. central bank strategy from a trickle of information.
No longer. And on Friday, there will be a firehose of Fed speakers for the markets to digest.
Fed Chairwoman Janet Yellen will give her latest views on the health of the labor market at 10 a.m. Eastern on Friday. In previous speeches, Yellen has laid out a dashboard of indicators, including wages and the number of people working part time who want to work full-time, to gauge the health of the labor market.
Economists expect Yellen to note that several indicators of labor market strength, including the unemployment rate are getting better, but stick to her guns that the central bank can be patient before moving to hike interest rates.
On top of Yellen’s latest views, several regional Fed presidents, including San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart, Charles Plosser of the Philadelphia Fed and St. Louis Fed President James Bullard will be offering their own views on the likely future path of monetary policy. The presidents have already started giving out interviews with the three cable business channels and more are expected Friday morning before Yellen speaks.
The minutes of the last Fed policy meeting reveal a sharpening debate at the central bank between those who want the central bank to get a move on hiking interest rates and the “core” of the committee including Yellen, who think moving too quickly would be the biggest mistake the central bank could make.
“They took the gloves off and fought it out,” said Robert Brusca, chief economist at FAO Economics.
The focus at Jackson Hole will be the health of the labor market.
Yellen and her allies believe the Fed can help bring people back into the labor market. On the other hand, the hawks tend to agree with Esther George, the president of the Kansas City Fed, who told the Fox Business Network Thursday “other factors” besides Fed policy are headwinds for the labor market and “many of those are beyond the reach of monetary policy to fix.”
Tom Porcelli, chief U.S. economist at RBC Capital Markets, said that Yellen is looking more isolated in her labor market stance. But he said investors are likely to focus solely on the Fed chairwoman’s remarks and “then try to enjoy one of the last weekends of the summer.”
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Central bankers from around the globe gather later this weekend in Jackson Hole in Wyoming.
But for once, the absence of the Federal Reserve chairman means their annual get-together is not likely to spoil the summer holidays of traders on Wall Street.
Fed chief Ben Bernanke declined his annual invitation, breaking a 25-year tradition, and Fed Vice Chair Janet Yellen - a top contender to replace Bernanke in January 2014 - will only be moderating a panel.
As a result, there is no keynote Fed speech to open the conference, and the chances of a deliberate effort to signal an upcoming change in US monetary policy have been lowered dramatically.
In prior years, Bernanke has used the venue to prepare financial markets for shifts in the Fed's policy stance.
Despite his absence, Bernanke very likely will be at the centre of the chatter on the sidelines of the conference, as delegates ponder who will replace him when his term expires.
US President Barack Obama has said both Yellen and his former economic adviser Lawrence Summers are top candidates for the job, and he will make up his mind in the autumn. Summers is also not attending the summit.
Despite the absence of Bernanke, the event will still be the best place to hear high-powered, informed debate about the latest thinking in global central banking.
This year's conference focuses on unconventional monetary policy and the evidence on whether quantitative easing, forward guidance or a combination of both provide policymakers with the most firepower with interest rates cut to near zero.
The discussion could not be more timely, coming just a few weeks after the Bank of England and European Central Bank followed the Fed by providing guidance on how long they would keep interest rates low.
However, neither Bank of England chief Mark Carney nor ECB President Mario Draghi will attend this year. But Bank of Japan Governor Haruhiko Kuroda will be there, and the Bank of England's scond in charge Charles Bean and ECB Vice President Vitor Constancio will also make the trip.
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