On Thursday and on Friday, the financial elite of this world meet once again in the Rocky Mountains. Discussions abound. Nevertheless, the Central bankers will avoid any clear Signal to the markets.
Tucked between the snow-capped mountain in the Rocky Mountains to the peaks of the leading Central Bank governors of this world are to meet on Thursday and Friday in the 10,000-souls-Village of Jackson, located in the valley of Jackson Hole in Wyoming. The famous Hotel the Jackson Lodge is situated in almost 2000 meters of altitude and offers only scant comfort. Spa, Fitness and hair, there is not, and TV on the rooms, in vain. “The Lodge provides stunning views of Jackson Lake and the Teton stick Range, a mountain range of the Rocky Mountains,” writes DW correspondent Sophie Schimansky.
The conference participants will have plenty of time and opportunity for the future direction of monetary policy this side of the Atlantic to exchange. “A dynamic world economy”, is the Motto of this year’s conference. Since the year 1978 by the Federal Reserve Bank of Kansas, organized the event is considered to be the most important regular monetary policy meeting. Also, the European Central Bank is trying to establish in the Portuguese town of Sintra, an annual meeting similar heavy-caliber, but so far with moderate success. US Central Bank chair Janet Yellen had been in this year, at the end of June, a conference in London, the Sintra preference.
Jackson Hole with views of Grand Teton Range
Yellen and Draghi to speak
This year, Jackson Hole will hold, however, both Yellen, as well as ECB President Mario Draghi made a speech. A few weeks ago it looked as if it could Draghi in the Rocky Mountains in a keynote speech to a monetary policy reversal by the ECB to announce that in the autumn by the Central Bank Council decided to. Now it’s Draghi will speak in Jackson Hole on the long-term challenges of monetary policy and only then to the current monetary policy is to Express, if you discussed the Central Bank Council.
Consequently, Folker bright Meyer, chief analyst of the Bremer Landesbank expects that this year, no signals of the ECB’s Jackson Hole, which could give the financial investors new clues on the future course of the ECB. “By the ECB, we know that Mario Draghi does not want to Express explicitly the interest rate and monetary policy of the ECB,” writes bright Meyer in a Blog. “From different governors of the Federal Reserve were heard in the recent time different Statements about the future path of the US interest rate adjustments. The probability, that at this point in Jackson Hole ultimate clarity, is manageable.”
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Topic: Long-Term Perspectives
For Draghi there is, according to the “börsen-Zeitung” also a second reason to hold back: “In Germany, the Bundestag election is coming up in the next month. Draghi & Co to be determined later not to be accused of that you have made in this or that respect, to influence.”
Ostensibly you will not get in Jackson over the short – or medium-term monetary policy, but over the long-term challenges to discuss, concerning the self-understanding of the Central banks and their monetary policy strategies. Economists have been watching for years – mostly moderate – economic growth at astonishing low Inflation. Productivity growth has been falling since the 50s of the last century, the digital Revolution of the past two decades has affected at least not significantly to the progress in Productivity.
In addition, States and companies are accumulating high debt at low interest rates. And if the demographic change in many industry companies, a dividend, or additional costs, is not yet evident. All of the questions, the concern among many Economists, the Monetary policy makers.
To get to Sintra: The competition event, Jackson has not established itself properly yet
Indicators still appropriate?
It is sufficient in such times, to just look at the labour market and Inflation, as does the US Central Bank? Or to look at the economic activity and Inflation in the Euro zone, as it makes the ECB? In the meantime, there are a number of Economists, who put no great confidence in these indicators. Many think that the inflation target of the Fed and the ECB by just under two per cent is entirely arbitrary.And: “In a month, the jobs data are good, then maybe worse,” says Economist Allan Meltzer, the Central Bank could only turn like a flag in the Wind.
As different as the US labour market data, as different are the opinions of the US Central bankers over the future course of monetary policy by the Fed. The chief of the Fed-district of Dallas, Robert Kaplan warns, for example, patience in tightening monetary policy. Before a further increase in the interest rate support, first of all, evidence is required that the inflation rate, which last stood at 1.5 per cent, “it attracts in the medium term”.
The Fed had raised the policy rate last in June to the current level of 1.0 to 1.25 per cent and a further increase this year indicates. The Head of the Central Bank district of Cleveland, Loretta Mester, want to hold on to in spite of the low price pressure at the targeted Interest rate hikes for the time being.
Waiting for the Start
Because the economic engine is currently running around, you want evaporation, the Central Bank strongly swollen Portfolio. In the fight against the consequences of the world financial crisis has inflated the balance sheet in the past few years to 4.5 trillion dollars. The responsible for monetary policy is the Fed’s open market Committee wants to tackle the melting “relatively soon”. In the markets, it is expected that at the September meeting, a start time is called.
In addition, the US will have to take into account Central bankers in the definition of the time plan, there are also political factors. Because in Congress, a decision on raising the debt ceiling is once again. The negotiations on raising could go on and on. Currently the Limit is at 19.9 trillion dollars. The American government could not, therefore, assume that in October the financial blow when Congress acts in the meantime. This process is not want to influence the Fed through interest rate increases.
Europe Bonds-Vacuum Cleaner
In the Euro area of 2.28 trillion euros, heavy borrowing, however, is purchase program is currently the strongest weapon the ECB in the fight against from your point of view is still to low Inflation. Since March 2015, it acquires, in Association with the national Central banks of Euro-Zone government bonds and other securities. Banks should be encouraged with the acquisitions, to invest less in this title, and to award more credit to the economy. Economists expect the Central Bank reduced the transactions at the earliest in January 2018.
The next ECB interest-rate meeting will take place on 7. September. According to earlier information by insiders, the following interest rates shall apply under the members of the Council, however, meet on the 26. October as the most likely date for a decision on the further progress of the bond purchases. Conclusion: In Jackson Hole this time, presumably, much will be discussed about basic and long-term developments. Who notes on the current monetary policy is expected but this side of the Atlantic, is likely to be disappointed and must have up to the autumn of of patience.