For a view from the central banker’s chair, head to Jackson Hole

If filmmakers flock to Cannes, and billionaires dovetail at Davos, then economists and central bankers make for Jackson Hole in Wyoming. Ahead of US elections, all eyes are on the Federal Reserve

Eduardo Ramon

Economists and central bankers converge on Jackson Hole in Wyoming every year. Ahead of the US election, all eyes are on the Fed.

For a view from the central banker’s chair, head to Jackson Hole

Khaled Kassar

last update on 18 Aug 2024

Every year, a three-day symposium is held in a beautiful mountainous area of the United States, just south of Yellowstone National Park. Jackson Hole, sat in a valley with an historic town square, hosts skiers in the winter, central bankers in the summer.

For those interested in macroeconomics, these are often the key discussions, whether it is on the effect of central banks’ balance sheets on financial stability, the effect of tech giants on the economy, or the causes of inflation.

It is also where announcements are made. For instance, in 2020, US Federal Reserve Board chairman Jerome Powell announced a new policy for raising interest rates that was not simply based on joblessness or inflation expectations. The importance of these meetings often be seen in the reactions of stock markets and bond markets.

This year’s meeting, from 22-24 August, comes after a spate of turmoil in the financial markets at the beginning of August, as panic spread following the publication of a US jobs report and signs that Japan was tightening its monetary policy. Vast amounts vanished overnight, before a partial correction the following day.

Keep calm and carry on

All eyes had been on the US Federal Reserve (aka ‘the Fed’) in anticipation of an emergency interest rate cut to reassure markets, after it was accused of lagging behind other major central banks, such as the Bank of England.

Mandel Ngan/AFP — The US Federal Reserve building in Washington, DC, on January 30, 2024.

But the Fed remained calm, instead insisting on its upcoming scheduled meetings to discuss the interest rate issue, set for September.

Investors are among the groups who want to know the overall economic direction, to inform their decisions. The Jackson Hole meetings help them decide whether to be bullish or bearish, buy or sell, seek stocks or bolt for bonds.

Talks can cover the effect of central banks' balance sheets on financial stability, the effect of tech giants on the economy, or the causes of inflation

This year, the markets seemed to determine that for themselves and the Fed was accused of inaction, but it was cautious in responding to market demands stems for several good reasons.

First, the market's reaction to the US employment report was exaggerated and did not rely on comprehensive analysis. Analysts at Goldman Sachs soon showed that various factors contributed to a small rise in unemployment—and that recession was not one.

Second, the current economic data do not justify an emergency rate cut. Further, any rapid action in this regard could trigger a new round of market panic.

David Paul Morris/Bloomberg via Getty Images — Christine Lagarde of the European Central Bank (L), Kazuo Ueda of the Bank of Japan (C), and Jerome Powell of the US Federal Reserve (R) at Jackson Hole in 2023.

Third, the Fed's legally mandated tasks involve tailoring its policy to serve employment and price stability, as stated by the President of the Federal Reserve Bank of Chicago, Austan Goolsbee. Maintaining financial market stability is not a listed task.

Despite this, Powell may still meet expectations by starting to lower interest rates and confirm this in his speech at Jackson Hole next Thursday.

Digging into the Hole

Meetings are traditionally tracked by economists, finance ministers, academics, policymakers, financial experts, investors, and central bankers, including the Fed with its 12 branches, the European Central Bank, and those of England, Switzerland, Canada, and Australia, to name but a few.

Participants from more than 70 countries are typically expected, keen not to miss the train of monetary and financial policies that establish global stability, even though these are short-term tactics often swept away by global political and economic changes.

Michael Santiago/Getty Images via AFP — Federal Reserve chairman Jerome Powell's speech is seen on a television screen as traders work on the New York Stock Exchange floor during morning trading on August 25, 2023.

The meetings feature in-depth discussions, potentially on the financial restructuring of countries, national monetary policies, or global economic growth prospects. They touch on issues like natural resources, particularly water and agriculture—problems that have yet to find sustainable solutions.

Since 1978, the Jackson Hole meetings have been organised by the Federal Reserve Bank of Kansas City in the United States. Ironically, Jackson Hole was a haven for outlaws in the 1920s.

Delegates can discuss countries' financial restructuring, national monetary policies, global growth prospects, or natural resources like water and agriculture

A New York Times press report at the time conveyed that "whenever a serious crime was committed between the Mississippi River and the Pacific Coast, it was pretty safe to guess that the man responsible for it was either headed for Jackson Hole or already had reached it".

Today, it hosts these meetings at an elegant hotel donated to the surrounding national park by a member of the Rockefeller family.

Ray Geiger/Shutterstock — Lakeside view of the mountains in Grand Teton National Park near Jackson Hole, Wyoming.

Interest in the meetings deepened after the global financial crisis of 2008, when central banks saved markets and supported economies in ways that expanded their influence.

History repeats itself

Most of the topics discussed since the 1980s remain relevant today, because crises recur, perhaps in different circumstances, but the response is often the same.

Last year, with the ongoing Russian-Ukrainian war, and while inflation rates remained high despite a global tightening of monetary policies, Wall Street focused on Powell's speech: would interest rates keep rising amidst the uncertainty?

After rising by 14% during the first seven months of the year, the S&P 500 index dropped by about 4% following the meeting, as investors and traders sold off their shares for fear of further monetary tightening. Even hints can have a ripple effect.

Monetary policies did remain tight, colliding last October with the bloodbath in the Middle East, then by the Red Sea crisis, which forced operators to take extended routes that suddenly hiked the price of shipping.

Ritzau Scanpix/Mikkel Berg Pedersen via Reuters — Danish shipping company AP Moeller-Maersk is one of several big operators to have redirected their cargo around Africa, rather than risk attack by the Houthis.

The Fed had wanted to start cutting interest rates in early 2024, but this confluence of factors from across the seas put a stop to those plans. Interest rates have now remained unchanged since July 2023, despite rising uncertainty.

Horizon scanning

The theme of the upcoming 2024 meetings is 'reassessing the effectiveness and transmission of monetary policy.' After more than two years of pursuing a tight monetary policy in the United States and elsewhere, the topic is justified.

The Fed had wanted to start cutting interest rates in early 2024, but a confluence of factors from across the seas put a stop to those plans

Bankers and others will seek to evaluate the resulting reduction in inflation and the success in protecting economies from recession or collapse. But the elephant in the room will be the US presidential election in November.

If Donald Trump returns to the White House, his plans could throw a spanner in the works. These include exclusive cryptocurrency mining in the United States, weakening the dollar to serve US trade interests, and igniting economic conflict with China on all fronts, especially technology.

This year's Jackson Hole discussion will break from tradition and expand beyond the normal strict financial and monetary confines to include the digital world, encryption, and AI, given how important these are to the global economy.

The skies over this part of Wyoming are big and clear, but plenty see storm clouds on the horizon, with gold prices and China's central bank policies the early gusts. It may feel like a long time before the ski season arrives.

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