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Central Bank Views are On Deck at Jackson Hole

David Becker
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Central Bank Views are On Deck at Jackson Hole

The Jackson Hole central banker conference will highlight the week with speeches that begin on Friday. Investor worries over a slowdown in global growth were exacerbated by the threat of a full blown war in Ukraine. The resulting flight into sovereign bonds saw yields drop to fresh lows for the year, and a record low 0.95% on the Bund. With the major central banks now focused on slack in the labor market and soft wage trends, monetary policy should remain accommodative and further underpin bond gains.

Speeches from Fed Chair Yellen and ECB President Draghi (Friday) will highlight the conference, titled “Re-Evaluating Labor Market Dynamics.” The FOMC highlighted slack in the labor market in its latest policy statement, countering the acknowledgement of an improved economy, and allaying fears the FOMC could hike rates sooner than expected. Concurrently, the ECB is increasingly challenged by slowing growth, if not outright contraction in some countries, and is moving closer to QE. Meanwhile, the BoE looks to be stepping back from a rate hike this year after the Inflation Report reflected a dovish shift and Governor Carney fretted over “remarkably weak” earnings.

On Wednesday the markets await the FOMC Minutes, followed by the Jackson Hole central banker conference (Thursday-Saturday) for further insight on monetary policy amid an increasing unstable global environment. Of paramount importance to investors are the first and second order effects on growth from the turmoil in Ukraine especially, and the impact from sanctions on Russia.

The Minutes are likely to reflect a less dovish stance than Yellen as it will include commentary from the various hawks on the Committee, including Philly Fed’s Plosser who dissented against the forward guidance at the July 29, 30-policy meeting. While the FOMC seems a little more even handed in its economic outlook, Yellen and her doves ruled the roost by including the statement that a range of labor market indicators are still showing “significant underutilization of labor resources.”

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