What should you pay attention to at next week's Jackson Hole conference?

Author: Wall Street Journal

Next week, global economists and central bank officials will gather in Jackson Hole, Wyoming, for the Federal Reserve's annual economic policy symposium. As central bank communication has been relatively calm in August and the autumn interest rate decision-making cycle restarts, this global central bank annual meeting will become an important window for the market to capture policy signals.

This year's market focus is undoubtedly on Federal Reserve Chairman Waller. According to the trading desk, on August 28 (Friday) at 10 AM Eastern Time, Waller will deliver a keynote speech, marking his first appearance at Jackson Hole since taking office as Fed Chairman. Compared to the theme of the conference itself, Waller's statements on the economic outlook and future interest rate path are more likely to become the core of market pricing.

Goldman Sachs reports that historically, keynote speeches at Jackson Hole often significantly amplify volatility in the foreign exchange market. Especially when Waller's policy stance is not yet fully clear, EUR/USD may become one of the most sensitive trading windows for the market. However, historical data shows that while speeches can easily amplify volatility, there is no stable one-sided direction for the dollar.

Waller's debut, speech content remains a mystery

The complete conference agenda will be announced on August 27 (Thursday) at 8 PM Eastern Time, with confirmed major guests including European Central Bank Governing Council member Schnabel, Chilean Central Bank President Rosanna Costa, and Reserve Bank of New Zealand Governor Adrian Orr.

Among them, Waller's keynote speech is the most anticipated part of the entire conference and is the only speech to be broadcast live on television. However, there will be no Q&A session after the speech, while other conference speeches, although not broadcast live, will have Q&A sessions afterward, and relevant content will be conveyed to the market through media reports.

What is special this year is that Waller has previously made it clear that he has not yet decided whether this speech will focus on the macroeconomic "big picture" or, like traditional Jackson Hole speeches, provide guidance for the policy path from September to December.

Goldman Sachs believes that this uncertainty means that the market's sensitivity to changes in wording may significantly increase. Waller has stated that he hopes to clarify major issues with the "high mountain air" of Jackson Hole (located in the mountainous region of Wyoming, at a high altitude), which further increases external attention to his policy statements.

Not only focusing on Waller's speech, off-stage statements from officials are also key

If the keynote speech determines market sentiment, then television interviews may be a more direct channel for judging recent policy direction.

During the Jackson Hole conference, major financial media usually arrange for Federal Reserve officials to participate in off-stage interviews. Starting from Wednesday as attendees arrive, related interviews will continue until Friday, with about five Federal Reserve officials expected to be interviewed by different media on Friday, and some officials may appear multiple times.

It is particularly noteworthy that Federal Reserve Board officials typically wait until after Waller's speech to accept interviews, while the President of the Kansas City Fed, which is hosting this meeting, may speak first before the official start of the conference on Wednesday.

Goldman Sachs reports that due to Waller's cautious attitude towards forward guidance, other officials' off-stage statements may carry more policy signal transmission functions. Therefore, instead of solely waiting for Waller's speech, investors may need to pay more attention to the continuous statements from Federal Reserve officials throughout the conference.

Financial innovation becomes this year's theme

This year's Jackson Hole annual meeting theme is "Financial Innovation: Impacts on Payments and Policy."

From the conference topics, discussions will focus more on financial innovation and its long-term effects on monetary policy, with potential topics including artificial intelligence, digital assets, and changes in financial markets.

However, in terms of short-term market trading, the importance of academic papers and conference discussions may be lower than that of public statements from central bank officials. In other words, what the market should really focus on this year at Jackson Hole remains Waller's speech and the policy signals released by central bank officials during the conference.

Additionally, although Jackson Hole is the annual gathering of global central banks, it is not the only window with an absolutely special status in the year's policy communication. As the September Federal Reserve meeting approaches, the market will ultimately return to data such as employment, inflation, and economic growth, and reprice the interest rate path accordingly.