October 1, 2022
The market is awaiting signs of the direction of the global crisis at the Jackson Hole Symposium in the United States

The market is awaiting signs of the direction of the global crisis at the Jackson Hole Symposium in the United States

NEW YORK — Wall Street only has eyes for the small town Jackson HoleIn rural Wyoming, the America, which will bring together central bankers and economists in a traditional meeting on monetary policy this week. From the symposium returning to face-to-face format for the first time since the coronavirus Covid-19Expectations are for clear evidence of interest rate hikes in major economies, particularly in the US Central Reserve (Fed, US central bank) focuses on controlling inflation even at the expense of growth in the world’s largest economy.

With the theme “Re-evaluation of Controls on Economy and Politics”, the event is taking place in its 45th edition between August 25 and 27. Organized by the Kansas City Fed, the symposium is one of the oldest central bank conferences in the world and brings together leading economists, respected names in financial markets, academics and government representatives from various countries, including Brazil, to discuss. The future of global monetary policy.

The Federal Reserve is expected to focus on controlling inflation even as it grows the world’s largest economy. Photo: Paulo Vitor / Estado

Despite major global central bankers, the central bank and the European Central Bank (ECB), have abandoned forward guidance, that is, guidance on the next steps of their monetary policies, in their last meetings, a concern for the symposium. Investors and analysts are looking for signs of tightening financial conditions in major developed economies. However, Andrew Hunter, chief US economist at Capital Economics, does not expect “fireworks” from Jackson Hole, a clear sign that part of the market’s expectations may be dashed.

The most awaited moment of the Symposium was the speech delivered by Federal Reserve Chairman Jerome Powell under the theme “Economic Perspectives”. He will be speaking on Friday the 26th at 11am Brasilia time. Economists consulted through Estado/Broadcast The hawks’ leader is expected to reiterate his focus on reining in the rise in inflation, despite a slowdown in July as the world’s largest economy continues to grapple with underlying pressures even at the cost of growing below its potential. , including the impending recession.

According to Andrew Hollenhorst, Citi’s chief US economist, there is a risk that Powell will give a tough speech on reining in inflation in Jackson Hole. They emphasized the urgent need to bring US inflation under control. In an interview, he says, “I don’t think there is certainty, but at least there is a risk”. Estado/Broadcast.

Hollenhorst explains that the prospects for inflation in the US make him too bullish about Jackson Hole, but prefers to wait for new data from the US economy, suggesting Powell should not go in that direction. “So we may have a more neutral Jackson Hole, and then we’ll get a tougher signal in September,” the Citi economist said, weighing concerns about the strength of the US labor market to withstand more rate hikes.

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Overall, Wall Street expects Powell to be cautious in his speech in Jackson Hole and avoid early celebrations after July data showed U.S. inflation had passed its peak. San Francisco Fed President Mary Daly warned in a recent interview with the British Financial Times that it was still too early for the authority to “declare victory” in the fight against hyperinflation.

“The minutes of the July meeting are likely to be the main theme of the Jackson Hole Symposium: Managing the risks of declaring a premature victory on inflation,” also reinforces British Barclays in a comment to clients.

Because new data from the US, including prices and the behavior of the labor market in August, are expected before the next meeting of the Federal Open Market Committee (FOMC) in September. Without them, Powell may want to be more relaxed in his speech at Jackson Hole, as he adds weight to the health of the economy to the pace of monetary tightening in the United States.

“We expect continued increases to be appropriate. The pace of these increases will continue to depend on incoming data and the evolving outlook for the economy,” Powell told a news conference after the July meeting.

Brown Brothers Harriman (BBH) estimates that, unlike in recent years, the Fed used the Jackson Hole Symposium to recommend changes to its monetary policy, and now, it does not intend to do so before the next meeting in September. “Instead, we expect the central bank to try to manage market expectations,” he says.

Ahead of the next FOMC meeting in November, the market is split, leaning to one side or the other depending on new US data. At least so far, a majority (54.5%) expect a third 75 basis point hike, while a smaller 50 basis point hike is expected at 45.5%, according to the CME Group survey. The scenario has changed since the odds were 47% and 53% respectively last week.

From a capital economy perspective, the Fed should slow the pace of monetary tightening in the US, raising interest rates by 50 basis points at its September meeting to a range between 3.75% and 4.00% in early 2023. “No it seems necessary to adjust expectations when President Powell speaks in Jackson Hole next Friday,” says Capitol’s Hunter.

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In addition to the pace of US interest rates, Bank of America says it does not expect a center in the central bank’s stance in terms of possible rate cuts on the horizon. In the Wall Street giant’s view, Powell will have to repeat the message that an accommodative policy is needed until there is “clear and convincing” evidence that US inflation will reach the 2% target over time.

Brazil in Jackson Hole

Brazil will be represented by Fernando Curtado, Director of International Affairs and Corporate Risk Management at the Central Bank (BC), at the Jackson Hole Symposium starting next Thursday, the 25th. A matter of agenda.

Guardado will attend the event, but no speaking engagements are scheduled at the event. In the past, the head of Brazilian power was a regular at Jackson Hole. However, in recent years, this has changed, and other representatives of the bureaucracy have begun to represent Brazil in the traditional monetary policy forum.

The BC President participated in the 2020 edition, the event being held in virtual format for the first time due to the coronavirus pandemic. Last year, under the tutelage of the Federal Reserve Bank of Kansas City, the organization of the event considered returning to a head-to-head format, but due to the delta variation, the numbers worsened. Covid-19. Sometimes, direct sampling was repeated. In 2019, the first year of Jair Bolsonaro’s government representing the country, Carlos Viana de Carvalho, who was director of economic policy at BC, left the body at the time.

With Brazil in the midst of an election race, the focus is domestically despite the country’s potential impact on an eventual U.S. recession after the U.S. hiked interest rates to curb more than four decades of high inflation. Leaders of the polls, President Jair Bolsonaro and former President Luiz Inacio Lula da Silva, have already signaled that Campos will stay on until at least 2024, as provided for in the BC Autonomy Act approved by the current government. Chances of attending Jackson Hole are slim.