Here Comes Powell But Draghi And Kuroda Strangely Absent From Jackson Hole

While political turmoil may have preoccupied the market for most of this week, the market's focus for today and into Saturday will turn back to monetary policy with the Fed’s annual Jackson Hole symposium due to kick off today and continue into the weekend.

As DB's Jim Reid reminds us, the topic of this year’s conference is the rather vague “Changing Market Structure and Implications for Monetary Policy” and what it means for competition, consumers and workers if a a few superstar firms such as control ever-larger market shares in many industries. Amazon chief economist Patrick Bajari has been invited, perhaps to give some color on why "superstar" firms account for 60% of profit margin growth in the past 20 years.

Fed Chair Powell is due to speak this afternoon at 10.00am EDT (link to full program here) on the even more vague “Monetary Policy in a Changing Economy”.

Powell has been a regular attendee since joining the Fed’s board as a governor in 2012, but this will be his first appearance since becoming the Fed’s leader in February. While Powell isn’t likely to say anything about it, his public appearance will be the first since President Trump criticized the Fed’s campaign to raise interest rates, first last month and also last week when he told donors he hoped Powell wouldn’t disappoint him.

One notable feature of this year's central bank outing is that as Bloomberg notes, Powell won’t be kept company by his European Central Bank and Bank of Japan counterparts at this year’s Jackson Hole policy symposium, with Mario Draghi and Haruhiko Kuroda’s names both missing from the list of attendees. In fact, it appears that the ECB is boycotting the event altogether, as none of the ECB’s executive board members will make the trip to the central banker gathering in Wyoming’s Grand Teton National Park. That said, appearances by Carstens, the former head of Mexico’s central bank, and BOC's Poloz will provide an opportunity for international perspectives on the Trump administration’s aggressive trade posture.

While the ECB and BOJ are sitting this one out, Powell will be joined by both current Fed governors, Lael Brainard and Randal Quarles, as well as Fed governor nominee Marvin Goodfriend according to Bloomberg. All 11 current regional Fed presidents will be there.

The list of invitees also includes a handful of former and current government officials, including Keith Hall, director of the Congressional Budget Office; Jason Furman, former chairman of the Council of Economic Advisers under President Barack Obama; Ron Jarmin, acting director of the U.S. Census Bureau; and Glenn Hubbard, who was chairman of the Council of Economic Advisers under President George W. Bush.

While the title of Powell’s speech gives few clues away, Deutsche Bank economists believe that he is unlikely to move market expectations in either a more hawkish or dovish direction. That said, he could discuss some market relevant topics, including:

  • the flattening of the yield curve;
  • uncertainty around estimates of the natural rate of unemployment;
  • the potentially flatter Philips curve;
  • the outlook for inflation;
  • the ongoing balance sheet runoff process;
  • changes to how monetary policy is implemented by the Open Markets Desk (i.e. floor versus corridor system);
  • macroprudential regulatory adjustments (e.g. countercyclical capital buffer, or CCyB); or
  • changes to the Fed's monetary policy framework (e.g. price level targeting).

Another topic which does not feature on the agenda, but which is likely to get attention is the turmoil gripping emerging markets. While the US economy remains robust, the global outlook is far less rosy. As the latest FOMC minutes explicitly warned, Trump’s trade war threatens China, while Turkey and other vulnerable emerging markets have been buffeted by financial market turmoil. Trump has also turned his ire on the Fed chief, who he picked, for raising interest rates.

Meanwhile, even as Trump complains about rate hikes, the FOMC minutes released Wednesday showed that the Fed was on track to move in September, with a September rate hike priced in with 100% certainty, while odds of a December hike are a robust 68%.

Finally, there will be occasional TV appearances by Fed members, as noted below courtesy of RanSquawk