Fed's Jackson Hole Is Coming: Here's What to Expect

As central bankers from around the world descend on Jackson Hole, Wyoming, for the first in-person annual conference since 2019, Markets are bracing for Friday's speech by Federal Reserve Jerome Powell.

Here's what to expect from the two-day conference featuring central bankers from around the world:

Powell is scheduled to speak from Jackson Hole, Wyo., on Friday at 10 a.m. Eastern. In addition to Powell, Fed Vice Chair Lael Brainard, three other governors and all 12 regional Fed presidents will attend. The conference will also be attended by the Bank of Japan Governor and England Governor, and several other ECB officials, as well as policymakers from Africa, Latin America and elsewhere.

Four academic papers will be presented Friday and Saturday, which will look at topics including maximum employment, potential output, fiscal constraints and central bank balance sheets, and there will be panel discussions featuring policy makers each day as well.

Economists are split on whether Powell gives any guidance about the size of the expected September hike at Jackson Hole.

"The case that a hawkish shock is to come is that the Chair most frequently has to speak publicly on behalf of the [policy-setting Federal Open Market] Committee, and this is his opportunity to slant his remarks towards his own personal bias," Deutsche Bank's Wessel, Reid and Allen wrote in a note Wednesday. Powell "may well personally weigh the balance of risks toward worse inflation outcomes, but let's see if his lean is strong enough to satiate the market's appetite."

"I think he will lay out a case, as he did in his last press conference, for slowing the pace of increases," said Hatzius of Goldman Sachs.

"We had two 75-basis-point moves. Our expectation would be, barring significant data surprises, that the September move is 50," Hatzius said. "I don't think he will be specific about the number, but I do think he will be saying there is a risk of over-tightening, and therefore it makes sense to go a little bit more slowly than the outsized increases."

Citigroup economist Andrew Hollenhorst stated in a notice: "A committee that values its 'resolve' in fighting inflation is unlikely to turn substantially more dovish so long as underlying inflation remains well above target and is not convincingly slowing."

Carl Tannenbaum, the Chief economist at Northern Trust, said he thinks Powell will try to make the case for another 75 percentage point move in September. "I think Powell will say with passion and back it up with the fact, that, in the long run, being really tough now is going to be much better for employment, much better for markets and much better for growth," Tannenbaum said.

Stephen Stanley, the chief economist at Amherst Pierpoint, said he expects Powell to take a broader perspective and not focus on the next policy meeting. "If I were him, I would not center my speech on whether I'm going 50 or 75 in September," Stanley said.

A potential reason for past lacklustre equity gains during the summit might be related to seasonal trends. Much of Wall Street and Main Street takes time off for the last hurrah at this time of year.

This year, however, could be different. Many of the world's biggest central banks have been tapering loose monetary policies this year, but at the same time trying not to derail their economies. The fight against high inflation has been complicated by soaring energy prices as a result of Russia's war in Ukraine.