Updated: Aug 30, 2019
The Federal Reserve annual symposium.
Is there a "Black Swan" heading for Jackson Hole?
Each year in late August the Federal Reserve Bank of Kansas City hosts dozens of central bankers, policymakers, academics and economists from around the world at its annual economic policy symposium, Aug. 22-24, 2019, in Jackson Hole, Wyoming.
This years theme,
"Challenges for Monetary Policy"
Ten years after the financial crisis monetary policymakers face a range of challenges as they pursue their mandates.
Different rates of recovery have led central banks to chart different courses for the normalization of monetary policy following a period in which most central banks used both conventional and unconventional monetary policy tools in response to the Great Recession. Whereas some central banks are approaching a neutral policy setting, others have yet to begin the process of removing policy accommodation.
Differences in economic conditions across countries and the associated settings for monetary policy present a range of challenges for policy makers.
First, the different trajectories of monetary policy paths across countries in recent years has contributed to a divergence in interest rates across countries. This divergence has implications for exchange rates, trade, and ultimately economic activity in the global economy.
Second, monetary policy actions and the buildup and eventual unwinding of central banks’ balance sheets from QE also have implications for capital markets and financial flows for advanced and emerging market economies as shifts in monetary policy in one country can create spillovers through financial markets affecting others.
Third, the path for policy normalization looks very different relative to previous normalization periods as the natural rate of interest is viewed by most policymakers as being lower than in the past and many central banks are also faced with unwinding unconventional policy actions taken during the financial crisis.
And finally, in the midst of charting a course for monetary policy to pursue their mandates, policymakers also must take into account influences of commodity and financial markets that can provide headwinds or tailwinds to economic activity and inflation dynamics.
Investopedia, a website that I've had the privilege of working with that focuses on investing and finance education defines a "Black Swan" as an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight
"Trial Balloons" have been the norm in recent trading days. Everything from the possibility of a payroll Tax Cut to concerns of premature interest rate reductions that would take away the dry powder that the Fed may need in the future.
As the world continues with near zero to negative interest rates growth around the globe remains elusive.
All eyes will certainly be upon Federal Reserve Board Chairman Jerome Powell as he begins to speak later this week.
If you have questions about your investments, or where the best areas to put new money to work may be. Reach out for a free consultation and free financial review.