Friday, August 24, 2018

What to Watch for at Fed’s Jackson Hole Symposium

Fed Chairman Jerome Powell’s speech on Friday is the main event

Jackson Lake Lodge in Jackson Hole. Federal Reserve Bank of Kansas City’s annual economic symposium runs Thursday through Saturday.



Nick Timiraos

Aug. 23, 2018 5:30 a.m. ET

Central bankers and economists from around the world will gather in the mountain resort of Jackson Hole, Wyo., beginning Thursday for the Federal Reserve Bank of Kansas City’s annual economic symposium.

The theme of this year’s conference, “Changing Market Structure and Implications for Monetary Policy,” highlights the challenges to the economy stemming from monopoly power and corporate consolidation, including slower wage growth and capital investment. The conference is also set to cover issues such as the potential for technology to reshape how retailers set prices and the trade-offs between stability and competition in the banking sector.

The main event will be a speech by Fed Chairman Jerome Powell at 10 a.m. Eastern on Friday. Stephen Poloz, the governor of the Bank of Canada, is set to participate in a panel discussion on Saturday afternoon. The full program—including other speakers, notable attendees and the topics of panel discussions and research papers—is scheduled to be released Thursday at 8 p.m. Eastern.

Here’s what to watch for during the conference, which wraps up Saturday afternoon.
Powell’s First Rodeo as Chairman

Mr. Powell is no stranger to the annual retreat, but his speech Friday will be his first there as Fed chairman. The big question is whether he will use it to provide more clues about the Fed’s interest-rate-setting path.

Jackson Hole has received lots of attention in recent years because it has often preceded Federal Open Market Committee meetings at which officials weighed decisions to launch new bond-buying programs or to proceed with raising rates from very low levels.

But the conference itself has been “fairly boring” from a market perspective, said Roberto Perli, an analyst at Cornerstone Macro, because to the extent possible, Fed chiefs Ben Bernanke and Janet Yellen avoided announcing big policy shifts.

Mr. Powell’s speech is titled “Monetary Policy in a Changing Economy.” Investors will look for any clues that emerging-market turmoil, concentrated for now in Turkey and Argentina, has raised concerns about spillovers that could prompt the Fed to pause its rate-increase plans.

Another big question: Does strong U.S. growth keep the Fed on track to lift interest rates not only to a neutral setting that neither spurs nor slows growth but beyond that, to a level that restricts growth? Mr. Powell has largely shied away from saying much on this subject, and with market expectations of a rate increase intact for September, it is possible the Fed chairman won’t feel compelled to shed more light on questions that don’t seem to require immediate answers.

Complicating the communications challenge: President Trump has in recent weeks directly criticized Mr. Powell and the Fed’s short-term rate increases.

Trade Tensions

In past years, Jackson Hole has offered U.S. policy makers an opportunity to meet with their global counterparts. This year, the Trump administration’s threats of tariffs in pursuing better trade terms with China, Mexico, Canada and the European Union represent a major source of economic uncertainty and concern.

Mr. Powell, in congressional testimony last month, expressed concern over trade tensions. “The bottom line is a more protectionist economy is…less competitive. It’s less productive,” he said.

The conference could offer clues on how trade policy would influence Fed officials’ plans. They could discuss how to respond to challenges such as higher inflation resulting from tariffs, weaker productivity from supply-chain disruptions, and changes in borrowing costs from a stronger dollar that weighs on U.S. exporters and emerging-market currencies.

Currency Undercurrents

Investors are also uneasy that a global trade dispute could spill over into currency markets, given the rise in the value of the U.S. dollar and the weakening of China’s yuan. President Trump highlighted this potential when, in the midst of a collapse in the Turkish lira this month, he announced a doubling of steel and aluminum tariffs, which deepened the currency rout.

“In addition to a trade war, we might have something like a currency war,” even if it isn’t intentional, said European Central Bank governing council member Ewald Nowotny, who heads Austria’s central bank, at a conference in Zurich in July.

Market Structure

The theme of the academic presentations at this year’s conference will call attention to a long-running conversation about the economic effects of increasing corporate concentration and waning competition.

Those problems present distinct challenges because they potentially limit central bankers’ ability to use interest rates to boost growth. If online retailers, for example, pioneer changes in how businesses set prices, policy might need to adjust faster to shocks. Meanwhile, if corporate concentration is responsible for muted business investment, regulatory and antitrust policy might play a greater role in boosting growth than monetary policy.

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