US futures are flat ahead of the open on Friday, in keeping with moves seen elsewhere in the markets as we await comments from two of the world’s most influential central bankers later on in the session.
Key Speakers on Show at Jackson Hole
The Jackson Hole Symposium is widely regarded as one of the most notable annual events, not only because of the speakers it attracts but also because it has been used as a platform to warn of upcoming policy announcements. In the past it has been Janet Yellen’s predecessors – Alan Greenspan and Ben Bernanke – that have delivered such warnings, the question today is whether she will do the same.
The final months of the year are going to be very interesting as far as the Fed and the ECB are concerned which makes today’s appearances from Fed Chair Yellen and ECB President Mario Draghi all the more interesting. Both central banks have started the process of tightening monetary policy, although the ECB would probably claim it’s more a case of removing accommodation. Either way, with the process underway, investors are keen to know what they plan next.
Will Yellen Divulge Interest Rate Plans?
The Fed is already well underway with its rate hikes, having started almost two years ago and having raised three more times since (so four in total). With inflation still lagging well below target though, there is growing unease within the central bank about whether the current pace is appropriate.
Investors have long been unsure that there’ll be another rate hike this year and the message seems to finally be filtering through to the Fed. It will be interesting to see whether Yellen will address this today or instead focus on balance sheet reduction, which is expected to be announced in September and doesn’t interest investors in the same way.
Draghi Likely to Remain Tight Lipped
The ECB is taking a far more cautious approach having dealt with a far more severe crisis for the last decade, one that the region is only just starting to truly recover from. The central bank announced one reduction on asset purchases last December and it’s expected to announce another in the coming months.
While investors are desperate to get more information on this, I think it’s highly unlikely given the ECBs unease at past market reactions. I think the central bank will prefer to address this after the meeting next month on home turf and won’t want to risk further tightening of financial conditions in the meantime, with the euro having already sharply appreciated this year.
For a look at all of today’s economic events, check out our economic calendar.