What exactly is Jackson Hole?
The Kansas City Fed began organizing an economics conference in 1978, and in 1982, the meeting was relocated to Jackson Hole (JH) in Wyoming. For quite some time, the annual conference has been held in the last days of August.
What is the backstory to it?
The economics meeting at Jackson Hole began like any other. Given the importance of agriculture in this region of the country, the first four conferences focused on it. It hosted the inaugural conference on monetary policy issues, titled “Monetary Policy Issues in the 1980s,” in 1982.
The conference has been held 41 times since 1982, including the 2021 session. Themes have typically revolved around macroeconomics, monetary policy, long-term growth, and policy, with the theme for 2021 being “Macroeconomic Policy in an Uneven Economy.”
What is it about Jackson Hole that makes it so unique?
It has shaped star economists and set the agenda for monetary policy in many cases.
• The issue of price stability was emphasised in the 1996 version.
• The link between monetary policy and asset markets was underlined in the 1999 edition.
• Greenspan’s initiatives were lauded in the 2005 edition, only to be tarnished during the 2008 financial crisis.
• The 2007 edition focused on housing and monetary policy, with chair Ben Bernanke expressing optimism that subprime housing markets would not lead to a crisis, only to be proven incorrect a year later.
• The 2008 financial crisis prompted a greater focus on financial stability, which was a theme in both the 2008 and 2009 editions.
• As monetary policy has struggled to raise inflation to the 2% target (in the United States), there have been discussions about unconventional monetary policy (2013), developing resilient monetary policy frameworks (2016), and monetary policy problems in the coming decade (both 2010 and 2020).
• In 2020, Fed Chair Jerome Powell announced a new monetary policy framework called Average Inflation Targeting, which has sparked a lot of debate among central bankers.
2021 Jackson hole meeting
The Fed has been buying $120 billion in assets per month to help the US economy recover from the coronavirus pandemic, including at least $80 billion in Treasury bonds and at least $40 billion in agency mortgage-backed securities.
In this meeting, Powell said the US central bank had fulfilled the first of two goals it wanted to achieve before lowering its monthly $120 billion asset buy programme in a widely watched virtual speech at the Jackson Hole summit of central bankers on Friday.
Powell stated in his address at the Jackson hole meeting that he was among the meeting’s majority participants who believed that if the economy progressed generally as expected, it may be prudent to begin reducing asset purchases this year. More progress has been made in the interim month, with a solid July employment report, as well as the Delta variation, spreading further.
However, when it comes to the pandemic, the United States is not yet out of the woods. COVID- 19 cases of the highly contagious Delta variant are on the rise in some places, particularly among the unvaccinated.
Impact of Jackson Hole meeting on Gold
Gold surged to its highest level in two weeks after Federal Reserve Chairman Jerome Powell said the reduction could be appropriate this year, assuaging fears that policymakers will tighten monetary policy soon. The central bank may start cutting its monthly bond purchases this year, but it will take its time hiking interest rates after that.
Another major milestone on the chart, slightly ahead of Gold prices, is a price that Gold has been unable to break despite two different efforts in July and early August. This appears at Rs 48300. The most pressing question is whether bulls can succeed following three failed tries in recent months. Additional USD weakening will almost certainly be required, and if recent drivers are to be believed, this will most likely come in the shape of further dovish FOMC surprises.
For gold to break far higher, we would need a miss in next week’s jobs report, a comeback of the Delta variation, or geopolitical worries with additional news from Afghanistan. And market expectations for Nonfarm payroll next week are high, with markets expecting +728k new jobs to be added, as well as a drop in the unemployment rate to 5.2 percent from the current 5.4 percent.