The attention lavished on the symposium last week revealed an unhealthy obsessionby Paul Wallace / August 30, 2017 / Leave a comment
The gathering of central bankers at Jackson Hole in late August has become one of the fixed points in the economic calendar. An informal meeting of monetary policymakers and prominent economists, it has been staged by America’s central bank since the early 1980s at a resort overlooked by mountains in Wyoming—and often offers a juicy story to a news-starved financial press. Mario Draghi, president of the European Central Bank (ECB), notably used the venue in 2014 to make the case for drastic action to stimulate the moribund eurozone economy and avert the risk of deflation. That paved the way for the ECB’s momentous introduction of quantitative easing (QE) in early 2015, when it finally adopted the post-crisis policy of buying financial assets with freshly created central-bank money which was pioneered by America’s Federal Reserve in late 2008.
This month’s symposium offered more modest fare. Since the Fed phased out its QE purchases of financial assets in 2014 and is poised to reduce its holdings, most eyes were on Draghi again, looking for hints about when the ECB might in turn start to taper away its QE buying programme now that the eurozone economy is doing so much better. On this occasion he disappointed the watchers—though they won’t have to wait that long, since the ECB’s governing council will hold its next monetary-policy meeting on 7th September, after which Draghi will be quizzed by the press. For her part, Janet Yellen, head of the Fed, revealed little new other than deep disquiet about the Trump administration’s misconceived plans to loosen the regulatory reins on banks that were belatedly tightened after the financial crisis of 2007-08.
The “investors braced for Yellen and Draghi signals,” in a Financial Times headline, could have spared themselves the trouble and sat back in their seats. Yet the attention lavished on Jackson Hole in the run-up as well as during the actual event shows once again just how crucial central bankers have become in post-crisis economies. If the financial press slavishly covers every word that they utter this is because the markets hang on every small nuance that may reflect a change in policy direction. A speech given in June by Draghi at the ECB’s version of Jackson Hole, held in the Portuguese resort town of Sintra, reverberated through bond and currency markets fearful that it indicated an earlier than expected reduction in monetary stimulus, forcing officials at the central bank hastily to insist his remarks had been misinterpreted.