It’s that time of the year again! Every year since 1978, central bankers from the world over come to Jackson Hole, Wyoming to talk about the current economic issues.
This weekend, on September 1 and September 2, hotshots in the financial world will once again gather for the symposium. Among a long list of topics to be discussed, investors will definitely be on their toes for the plans of two major central banks: the ECB and the Fed.
Bond buying from the ECB?
In recent weeks, there have been speculations that the ECB would intervene in bond markets by buying bonds of peripheral EZ countries to keep their borrowing costs from rising.
Market junkies were hoping to get more clues on the issue at this week’s summit.
However, the ECB announced yesterday that head honcho Mario Draghi will not attend the meeting due to a heavy workload in the coming days. In fact, no one from the ECB executive board will make it to the conference!
However, don’t get too excited just yet. Some analysts warn that Draghi will not let us in on his plans before the German Constitutional Court passes its rule on the legality of the ESM on September 12. That said, I doubt we’ll hear any details about bond buying and a yield cap this weekend.
Bernanke Comments on QE3
With the U.S. economy down in the dumps, Bernanke announced that the Fed would be introducing another round of quantitative easing measures which infamously became known as QE2. Two years later, could history repeat itself?
Not so fast, my young padawan economists. As it turns out, many doubt that Bernanke will go so far as to use the symposium as a signaling event for the Fed’s future monetary policy plans. With the August NFP figures not due until next week, it is unlikely that Bernanke will take a strong position on QE3.
How will the financial markets react?
However, I’ve got a feeling that many market participants will be disappointed by the results of the symposium. If and when this happens, we could see the dollar rally as optimism for more liquidity dies down.
On the other hand, if there’s even the slightest hint that the ECB will push through with putting a yield cap on bond yields, or if Bernanke signals that the Fed is ready to dump billions into the economy, we could see a strong risk rally take place.
In any case, make sure you tune in every now and then and see what’s developing at the Jackson Hole Symposium! You never know when a game-changer may rock the markets!