European Central Bank President Mario Draghi will not deliver a new policy message at the U.S. Federal Reserve’s Jackson Hole conference, two sources familiar with the situation said, tempering expectations for the bank to start charting the course out of stimulus.
An ECB spokesman said that Draghi will focus on the theme of the symposium, fostering a dynamic global economy, in his Aug. 25 remarks, while the sources added that he was keen to hold off on the policy discussion until the autumn, as agreed at the last rate-setting meeting in July.
Expectations for the speech had been building in recent weeks with investors pointing to next Friday’s event as the likely kick off in the ECB’s debate how to recalibrate monetary policy given solid growth, rapidly falling unemployment but persistently weak underlying inflation.
In 2014, the last time Draghi spoke at Jackson Hole, considered the world’s top central banking get-together, he laid the foundations for the ECB’s quantitative easing scheme, also fueling expectations for a major speech this year.
“Expectations that this will be a big monetary policy speech are wrong,” one of the sources said.
Another source said while the speech was initially seen as an ideal slot for a major address, Draghi told rate setters at the last policy meeting that he would honor the Governing Council’s decision to hold off on the discussion until the autumn.
Draghi may have decided to skip the Jackson Hole opportunity as markets interpreted his speech at a similar conference in Sintra, Portugal very differently than the ECB hoped, sending markets on a rollercoaster and instilling an added sense of caution at the bank.
Draghi then hoped to strike a balanced tone but noted that better growth would provide increased support to the economy, letting the ECB claw back its own stimulus to keep the overall level of accommodation broadly unchanged.
That was seen as a hawkish message, paving the way to reducing and then ending asset purchases.
The ECB’s asset buys, aimed at reviving inflation, expire at the end of the year but policymakers from the 19-country currency bloc agreed last month to put off talks on the next steps for now, keeping their timetable intentionally vague and giving themselves a wide window between September and December to decide.
Policymakers speaking to Reuters on condition of anonymity earlier said that October is the likely date for the most substantial decision given the incoming data schedule, particularly on wages.
The ECB’s big dilemma is that while the euro zone economy has grown for 17th straight quarters and employment is rising faster than expected, wage growth remains anemic, keeping a lid on consumer prices.
Economists are now trying to figure out whether wages are showing an unexpectedly delayed response or whether wage setting dynamics may have fundamentally changed in the post-crisis, globalized economy.