What is Jackson Hole Speech? Markets on Edge Ahead of Central Bankers' Meeting

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Financial markets are edgy ahead of Friday's Jackson Hole speech by Federal Reserve Chairma Jerome Powell. The expectation that the Fed chair will signal more interest-rate hikes to fight inflation has spooked the markets as the rate hikes will make it harder for the struggling economy to recover from the pandemic crisis.

US stocks ended marginally high on Wednesday after choppy trading, but the gains were due mainly to bargain hunting by investors. While the Dow Jones Industrial Average index rose 0.18 percent, the S&P500 index was up 0.29 percent.

Jackson Hole symposium
Jackson Hole symposium Kansas City Fed

The market participants generally stayed away ahead of what is dubbed as the 'all-important' central bank economic symposium at Jackson Hole. The financial conference will take place in Wyoming on Friday, and the main draw is the speech Fed Chair Jerome Powell.

Famed Fed leaders like Paul Volcker and Allen Greenspan made policy proclamations at the Jackson Hole conference, which is arguably the world's biggest congregation of central bankers and policymakers.

What is Jackson Hole Symposium?

The Federal Reserve Bank of Kansas City organizes its Economic Policy Symposium in Jackson Hole, Wyoming. It is known as one of the longest-standing central banking conferences in the world. The event has been held in Jackson Hole since 1982. Besides central bankers, economists, financial market participants, academics and US officials participate in the event.

About 120 people generally attend a year, representing a variety of backgrounds and industries, according to Investopedia. The Federal Reserve Bank of Kansas City selects specific topics for each year's discussion.

Some of the topics in recent years have been 'Changing Market Structures and Implications for Monetary Policy' (2018) and 'Central Bank Balance Sheets and Financial Stability' (2016)

This year, the symposium organized around the topic 'Reassessing Constraints on the Economy and Policy'. The event will take place between August 25 and 27.


Why is Jackson Hole Speech Important?

The US Federal Reserve leaders typically use the Jackson Hole symposium to make important announcements that lay down financial policy. The first US central bank chief to attend the event was the legendary Paul Volcker. Since then all Fed bosses have been attending the event. "Traditionally Fed chairs have used the Jackson Hole Symposium to provide an update on economic conditions and also give an indication of any policy shifts that may be expected. Since we are now in a downturn and talk of a looming recession, the symposium will be a landmark event for investors," says Viram Shah, Co founder and CEO of Vested Finance.

What is Expected this Year?

Financial markets are eagerly awaiting the words of Fed Chairman Jerome Powell at the Jackson Hole meeting. His speech is expected to throw light on Fed policy on inflation and rate hikes in the coming months. The markers will also want to know how the Fed responds to the 'recession' scenario and its take on the US economy's growth.

US inflation
US inflation Wikimedia Commons

The Fed's language will help investors gauge the incoming trend on interest rate policy. According to some experts the Fed is likely to slow down the pace of rate hikes. If this is going to be the case, the Fed Chair will leave significant clues in the speech at Jackson Hole. The markets will be eagerly waiting to listen to him on plans to tame inflation and limit the damage on the economy.

"[These speeches are] much meatier than the usual policy speech, so there's much more to chew on," said Kenneth Kuttner, an economics professor at Williams College, according to CNN.

This article was first published on August 25, 2022