Jackson Hole Without Bernanke Focuses on Global PolicySteve Matthews and Joshua Zumbrun
The Federal Reserve’s annual monetary conference in Jackson Hole, Wyoming, will probably focus on global central banks as Ben S. Bernanke becomes the first Fed chairman to pass up the meeting since 1988.
“In recent years we’ve all been looking for clues and signals from the Fed, and that won’t happen this time,” said Eric Green, global head of research for TD Securities in New York and a former New York Fed economist. “It will be a very international view of monetary policies,” with a focus on how “global reflation is persisting at a slower rate.”
Bank of Japan Governor Haruhiko Kuroda and Bank of Mexico Governor Agustin Carstens are among the speakers at the three-day symposium held by the Kansas City Fed that started today, entitled “Global Dimensions of Unconventional Monetary Policy.” With Bernanke staying away, there will be no keynote address.
As the Fed debates the timing of tapering record stimulus, other central banks are pumping up accommodation. Kuroda aims to shake off deflation by doubling Japan’s monetary base by the end of 2014. European Central Bank President Mario Draghi has pledged to hold euro-area monetary policy “accommodative for as long as necessary,” and Bank of England Governor Mark Carney has said he doesn’t expect to raise rates until at least 2016.
Neither Carney nor Draghi is on the list of conference attendees. Bank of England Deputy Governor Charles Bean and Frank Smets, research director from the ECB, are scheduled to give remarks.
Fed Vice Chairman Janet Yellen and former Bank of Israel Governor Stanley Fischer will moderate discussions. Christine Lagarde, managing director of the International Monetary Fund, will give a lunch-time address on the first full day of the meeting tomorrow.
Kansas City Fed President Esther George said today in brief opening remarks that the global focus of the conference was “certainly timely.” She didn’t discuss the outlook for monetary policy or the economy.
The Fed said in April that Bernanke, who has given the introductory speech every year since becoming Fed chairman in 2006, won’t attend the conference because of a personal scheduling conflict. Bernanke’s term expires in January, and President Barack Obama is considering candidates to succeed him, including Fed Vice Chairman Janet Yellen and former Treasury Secretary Lawrence Summers.
While Bernanke won’t attend, his unprecedented easing policies are at center stage as Fed officials debate when to start reducing $85 billion in monthly bond buying.
Emerging-market stocks dropped today to a six-week low after minutes yesterday from the Fed’s July 30-31 meeting showed broad support for Bernanke’s plan to begin reducing bond purchases this year and halt them around mid-2014 if the U.S. economy performs in line with Fed forecasts. Speculation Bernanke will dial down quantitative easing has helped erase about $1 trillion from the value of developing-nation equities this year.
The Brazilian real dropped to a four-year low yesterday. Brazil’s central bank sold $1.8 billion of currency swaps to stem the real’s biggest decline in 20 months, and central bank President Alexandre Tombini canceled plans to attend the Jackson Hole conference to monitor markets.
U.S. stocks gained today on data showing improvement in manufacturing and the labor market. The dollar rose as signs of an improving global economy increased speculation the Fed will dial down stimulus.
The Standard & Poor’s 500 Index rose 0.9 percent today to 1,656.96 in New York trading, while the yield on the 10-year Treasury note was little changed at 2.88 percent after hitting a two-year high this week. The Bloomberg U.S. Dollar Index increased 0.2 percent after a 0.6 percent advance yesterday.
Bernanke, like his predecessors Alan Greenspan and Paul Volcker, has used the conference in the Grand Tetons to set his policy agenda. In 2010 and 2012, he signaled new rounds of bond buying aimed at fueling growth and combating unemployment. The purchases have helped balloon Fed assets to a record $3.65 trillion.
Policy makers from Latin America and Asia criticized the second round of purchases, which totaled $600 billion, as a threat to local economies, a spur to inflation and the start of a competitive devaluation of the dollar.
Brazilian Finance Minister Guido Mantega, at a 2010 event in Sao Paolo, coined the term “currency war” to characterize the harm to emerging market economies.
Even without Bernanke, the Kansas City Fed’s gathering will probably retain its role as a forum for monetary officials to incubate policy ideas and debate next steps, Green said.
“Jackson Hole really tries to hit the themes du jour, and the issue right now is different central banks are at different stages of their cycle,” he said.
The conference will continue to provide academics an opportunity to showcase their latest research. Columbia University’s Michael Woodford urged central bankers last August to set economic thresholds such as nominal gross domestic product that would prompt an increase in interest rates.
After Woodford’s call for “forward guidance,” the FOMC in December 2012 pledged to keep interest rates near zero at least as long as unemployment exceeds 6.5 percent and inflation doesn’t rise above 2.5 percent.
“I am sure that my paper last year got much more attention as a result of having been presented at Jackson Hole,” Woodford said. The Fed adopted a policy based on “consideration of arguments made in my Jackson Hole paper,” and other central banks probably followed in turn, he said.
The meeting “brings in top-notch research often right on subject for the FOMC,” St. Louis Fed President James Bullard said last week after a speech in Paducah, Kentucky. “It will be as usual a really good exchange of ideas.”