Global Central Bank Leaders to Join Jackson Hole, Powell's Speech Key
The Jackson Hole schedule was released last night, revealing that Norges Bank Governor Ida Wolden Bache and Bank of Brazil Governor Roberto Campos Neto will join ECB Board Member Philip Lane on the Saturday panel discussion. Both Wolden Bache and Campos Neto have recently emphasized the importance of exchange rate fluctuations in policy transmission. Wolden Bache has resisted calls for Norges Bank to more tightly control the exchange rate, arguing that currency flexibility is crucial for a small, open economy. The depreciation of the krone is a significant factor in the Bank's NEMO model, influencing their decision to maintain current interest rates. Additionally, Norges Bank has shown concern over how varying housing market structures impact monetary policy and recently adjusted their estimate of the neutral rate slightly upward, focusing on global factors. Campos Neto also discussed structural contributors to Brazil's high neutral rate, which have been exacerbated by COVID-related issues like subsidized credit, debt trajectory, and productivity changes during a panel discussion at Sintra. Typically, panelists give brief speeches before the broader discussion begins.
Federal Reserve Chair Powell is set to deliver his speech on the economic outlook at 10:00 am ET, which will be available via webcast. Bank of England Governor Bailey will provide the luncheon address at 3:00 pm ET. The texts of papers and speeches will be published on the website as each event starts.
Several Fed officials will also be giving interviews throughout the day. Here is the current Fed speaker schedule:
- 8:00 am: Fed's Bostic on CNBC
- 9:00 am: Fed's Bostic on Bloomberg Television
- 10:00 am: Fed's Powell on Economic Outlook
- 11:00 am: Fed's Harker on Bloomberg Television
- 12:30 pm: Fed's Goolsbee on CNBC
- 1:45 pm: Fed's Goolsbee on Fox Business
- 2:15 pm: Fed's Goolsbee on Bloomberg TV
Yesterday, Collins and Harker gave interviews with Bloomberg, CNBC, MNI, and Fox Business. Harker suggested that the Fed "needs to start a process of moving rates down" in September but needs a few more weeks of data to determine whether a 25bp or 50bp cut is warranted. Collins echoed that it might soon be appropriate to begin easing policy and emphasized that data will guide the pace. ECB's Martins Kazaks also expressed openness to discussing another rate cut in September based on recent data.
Goldman Sachs' U.S. economics team expects Chair Powell to express greater confidence in the inflation outlook and highlight downside risks in the labor market, aligning with their forecast of three consecutive 25bp cuts in September, November, and December.
Attention will be on Powell's remarks regarding the size of the upcoming September rate cut—whether it will be 25bps or 50bps. The event, known for steering policy direction, will be closely watched for updates on the U.S. economic state and the trajectory of monetary policy. Last month, Powell mentioned that if inflation and the labor market continued to cool, a rate cut could be appropriate at the September 18th FOMC meeting. Markets are currently pricing in a 25bps cut with a possibility of a larger 50bps reduction. The dovish sentiment has decreased recently as inflation cools and the labor market remains resilient.
Bank of America suggests Powell may offer a straightforward update similar to his post-July FOMC press conference, possibly signaling that the committee is nearing a consideration of easing measures. If Powell emphasizes avoiding unexpected labor market weakness, it could indicate a shift towards easing. Barclays notes concerns among investors about the Fed being 'behind the curve' and the focus on the new equilibrium policy rate. Jackson Hole has become a significant market-moving event, with recent years showing larger volatility-adjusted moves in markets compared to the past. Futures indicate a sharp rise in risk due to expectations of a dovish speech, though past Powell speeches have sometimes led to market downturns.
Lastly, BofA's Michael Hartnett warns that 5 of 6 Powell Jackson Hole speeches have led to a 7.5% drop in the S&P 500 on average over the following three months, signaling caution for the market.