Forecast: "Jackson Hole is shaping up to be the anticlimax"

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Forecast: "Jackson Hole is shaping up to be the anticlimax"
Credit: © Reuters.

By Laura Sánchez 

Investing.com - This is the quote of the week and of the month. The Jackson Hole symposium, which takes place between August 26 and 28, focuses the eyes of investors, especially the appearance of Jerome Powell, president of the US Federal Reserve (Fed), this Friday.

But, as the days go by and we learn more opinions from the FOMC members, it is not clear to the experts that Powell is going to offer many details about the Fed's plans on the start of tapering.

Garrett Melson, Portfolio Manager at Natixis (PA: CNAT ) IM Solutions, explains that “Jackson Hole is shaping up to be anti-climax this year. Earlier this year, many market participants anticipated that Jackson Hole would be the place where Powell would likely announce his downsizing plans. But that opinion had two flaws”.

According to Melson, “Jackson Hole has rarely been a key event for the market and secondly, most importantly, Powell has been clear that the tapering plans would be telegraphed well in advance once the FOMC determined they would be. it has made substantial progress toward its dual-mandate goals. Listening to the main voting members of the Fed, it is clear that Jackson Hole will not be the place where this fact is recognized. "

According to Nelson, “Jackson Hole has rarely been a key event for the market and secondly, Most importantly, Powell has been clear that the tapering plans would be telegraphed well in advance once the FOMC determined that substantial progress had been made toward its dual-term goals.

On the other hand, the Natixis IM Solutions expert points out that “tapering probably has no consequences for the markets. It only matters to the extent that market participants consider it important. And even that is much less than it has been in the past."

“Everybody knows what is coming. Whether it has been announced or not doesn't really matter, as it has been known for months that it is on the horizon. The Fed has been doing exactly what it said it was going to do. Notifying well in advance. Pivoting slowly into tapering with more time between the announcement and the actual start of a slow, measured tapering, ”Melson concludes.

Shared opinion by Chris Iggo, CIO Core Investments of the fund manager AXA (PA: AXAF ) Investment Managers. "Jackson Hole is not the right time to announce a policy change. At best it is an opportunity to steer market expectations towards what will likely be an announcement of a reduction in monetary policy in the coming months," Iggo said.

An advertisement that, when produced, "could have a relatively limited effect. The devil will be in the details (how much and in what time frame). The medium-term impact is that it changes the relative balance of supply and demand in the US Treasury market ", which should "mean higher bond yields," adds this expert.

On the other hand, Iggo warns that "the ECB still faces an economy in the area of the euro which has a large output gap and the inflation is coming least the medium-term objective of the ECB. The growth is weaker than in the US, structural unemployment is higher and inflation lower. "

In addition, the expert points out that "the debate around fiscal policy in Germany and other northern European member states suggests that monetary policy will have to continue bearing the weight of the economic stimulus."

Therefore, Iggo anticipates that this meeting of central banks in Jackson Hole "could be used to describe where the Federal Reserve believes the US economy is in terms of the recovery from COVID, what is the updated thinking on inflation and what should be the proper outlook for monetary policy. "

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