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 Few predict anything so momentous as the speech by Federal Reserve
chairman Ben Bernanke two years ago that paved the way for an
unprecedented $85 billion per month stimulus plan.
But policymakers will discuss at length their thinking around the
labor markets of major economies at the Aug. 21-23 meeting, perhaps
dropping clues about the path for monetary policy in the months
ahead.
The spotlight will be on Janet Yellen, who will speak on Friday in
her first appearance at Jackson Hole as Fed chair.
"I don't think she's going to go anywhere close to monetary policy,"
said Stephen Lewis, chief economist at ADM Investor Services.
"The theme of the meeting is going to be dynamics of the labor
market, which is a subject very close to her heart, and it is a key
question for the Fed as it tries to work out what its policy should
be over the next few months."
Lewis said he expected a speech similar to one given by Bernanke in
March 2012, when he outlined what he thought of the various
indicators of the labor market.
Other speakers include Bank of Japan Governor Haruhiko Kuroda,
Central Bank of Brazil Governor Alexandre Antonio Tombini and Bank
of England Deputy Governor Ben Broadbent.
Further policy hints might also come in the form of minutes from the
Fed and BoE's last monetary policy meetings, due to be published on
Wednesday.
"We look for new clues on how the Fed plans to gain greater control
of the Fed funds rate as it tightens policy, while the system is
still swimming in reserves as a result of the three quantitative
easing programmes undertaken," said Victoria Clarke, economist at
Investec.
The BoE minutes will be examined for concrete signs of dissent among
members of the Monetary Policy Committee, after the Bank last week
seemed to push back the prospect of a rate hike this year.
"With spare capacity being rapidly used up, we expect (MPC member)
Martin Weale to have dissented in favour of a rate hike this month,"
said Philip Rush, economist at Nomura.
If the minutes do not reveal the first dissenting vote to hike rates
since July 2011, that would make predictions for a November rate
hike from the BoE a tough ask, added Rush.
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PRICE PRESSURES
U.S. inflation figures for July due on Monday will also flavor the
debate about the Fed's monetary policy outlook next week, with some
signs emerging that price pressures are building slowly as the
world's largest economy recovers.
Still, few economists polled by Reuters expect any surprises.
"We expect inflation data to test monetary policymakers' resolve
before the end of the year, but do not expect that challenge to
begin with the July report," said Brian Jones, economist at Societe
Generale.
Purchasing managers' indexes (PMIs) from Europe will also offer an
early look at how the euro zone economy has fared this month, after
data last week showed the region effectively stagnated in the second
quarter.
While a weaker euro and improving credit conditions ought to boost
business activity, the European Central Bank will come under more
pressure to act if the PMIs - which have a good relationship with
economic growth - disappoint.
"If we see any signs of softness, whether through domestic weakness
or growing concerns about the Russia-Ukraine crisis, then that would
really reinvigorate worries about the outlook for Europe," said
James Knightley, economist at ING.
Rising tension in Ukraine last Friday drove major government bond
yields to their lowest level in more than a year, and the crisis
could make for a volatile week ahead for financial markets.
"Even if the issues today are resolved and there isn’t a shooting
war, that ongoing tension between the Ukraine and Russia puts an
underlying bid into the Treasury market," said Lou Brien, market
strategist at DRW Trading in Chicago.
(Additional reporting by Sam Forgione; Editing by Sonya Hepinstall)
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