What will central bankers say at this year’s Jackson Hole summit?


Updates on the global economy

What will central bankers say at this year’s Jackson Hole summit?

Central bankers from around the world will meet this week in Jackson Hole, Wyoming, to discuss monetary policy as the global economy enters month 21 of the coronavirus pandemic.

Of particular interest to market participants will be the speech by Federal Reserve Chairman Jay Powell and any clues he could offer as to when the central bank could start cutting its monthly purchases of $ 120 billion in public debt. The minutes of the Fed’s July meeting showed disagreement among officials, although a majority believe the reduction could begin later this year.

“Jackson Hole is becoming more important now with the Fed’s indecision as to when they will decline,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.

Other strategists say typing talk won’t be the only goal. HSBC’s Steven Major argues that a discussion of income inequality could potentially have an effect on bond yields as well. Economic inequality “is one of the longer-term structural drivers that have helped rates get so low,” he wrote in a note last week.

At last year’s meeting, Powell revealed the bank’s new inflation policy under which it would target average inflation of 2 percent, allowing prices to rise for a while. Kate Duguid

Is the UK’s economic recovery stumbling?

Those looking to see if the UK’s economic recovery falters will have their eyes on next week’s Composite Purchasing Managers Index, a key indicator of manufacturing and services activity.

Britain has suffered the double impact of the spread of the Delta coronavirus variant and the ‘pingemia’, as dozens of workers have been forced to self-isolate after being alerted by the UK testing system and of traceability.

Analysts are now expecting a third consecutive decline in the IHS Markit Composite Purchasing Managers Index, which measures the level of business activity. A reading above 50 indicates that a majority reported an expansion in activity. Last month it fell to 59.2 from 62.2 in June, and below consensus expectations of 61.5.

Nonetheless, he remains well above his 23-year average of 53.7. It is one of the most optimistic indicators of the UK economy, and it is heavily influenced by sentiment, so its trajectory is often more important than its level.

Kieran Tompkins of consultancy Capital Economics expects a slight dip to 57.5 as the easing of the Covid alert system is offset by a drop in manufacturing.

Like their overseas counterparts, UK companies are facing disruptions in their supply chains due to the lingering effects of the pandemic. “These problems show little sign of abating given the recent outbreak of Covid in China and other key manufacturing regions in Asia,” said James Smith, developed markets economist at ING bank. Federica cocco

Is the Eurozone’s summer growth spurt continuing?

Eurozone businesses recorded their fastest expansion in more than two decades last month. Purchasing manager surveys this week will give investors the first clue as to whether they repeated the trick in August, despite the spread of the Delta coronavirus variant and signs of slowing growth from states United and China.

The closely watched manufacturing and services indicators are expected to drop very slightly to 62.4 and 59.7 respectively, according to economists’ forecasts compiled by Refinitiv.

Some of that strength reflects the fact that the eurozone has rebounded more slowly from the pandemic than other major economies and still has room to catch up. “We have experienced high growth but from an exceptionally low base,” said George Buckley, chief eurozone economist at Nomura.

The surveys also include a balance of input and output prices that could show to what extent supply chain problems continue to dampen output in the manufacturing sector and drive inflation up, Buckley said.

The euro fell to a nine-month low of $ 1.166 against the dollar last week, in part due to the prospect of rising U.S. interest rates at a time when the European Central Bank is expected to maintain its rates at record levels for years to come. Analysts say the expectation of relatively robust growth as the eurozone catches up with other economies has prevented the common currency from falling more sharply, so any sign of weakness or easing inflationary pressures could see it. lower more. Tommy stubbington


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