Jackson Hole, Wyoming, becomes the center of the economic policy world this week as the annual symposium gets underway, but anyone expecting big news out of Federal Reserve chief Janet Yellen — or any other central bankers — is likely to be disappointed.
True, Jackson Hole was a favorite place for former Federal Reserve head Ben Bernanke to lay out policy, but no one expects anything market-shaking from current head Janet Yellen this year.
The Kansas City Federal Reserve has been hosting this meeting of global central bankers, economists and academics since 1978. (It moved to Jackson Hole permanently in 1982 to lure then-Federal Reserve chairman Paul Volcker, who’s an avid fly fisherman.) Formally known as the The Federal Reserve Bank of Kansas City’s Jackson Hole Economic Policy Symposium (woof), it’s the most exclusive and important meeting of central bankers of the year.
But that doesn’t mean it delivers something important every year — or that the really important papers and speeches are even recognized at the time.
Ben Bernanke made Jackson Hole central to current FOMC policy when he used his appearance there in 2010 to telegraph the implementation of quantitative easing. Four long years later, the Fed is slowing unwinding its bond purchases — as Bernanke hinted it would back then — but the future of short-term interest rates is still up in the air.
Eyes on Jackson Hole for Rate Policy
More than anything, the market wants to know when and by how much the FOMC will raise the federal funds rate from historical lows of 0% to 0.25%. After all, it has been stuck at that level since 2008, distorting markets in ways that won’t become apparent until after it goes up.
Fed-watchers expect Janet Yellen to urge patience at this year’s Jackson Hole speech. More than anything, Yellen is using the labor market as a yardstick for when to raise rates, and it’s not nearly healthy enough yet, in her estimation.
True, the headline unemployment rate has come down dramatically, but too many other measures reveal too much slack in the labor market. From the hires rate to the quit rate to the broadest measure of unemployment known as U6, the economy isn’t ready for the Federal Reserve to back off, Yellen has said.
The labor market hasn’t changed enough for the Federal Reserve to revise its stance. Besides, it has been pretty clear about when the market can expect a rate hike.
The FOMC says it will happen a “considerable time” after its bond-buying program comes to and end, and putting higher rates sometime in the second half of next year.
With that, Janet Yellen is expected to offer a conceptual, high-level discussion of labor market dynamics — the kind of wonky stuff Jackson Hole was known for before the Great Recession.
If nothing else, that would be another welcome return to normalcy.
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