Who is missing at Jackson Hole? For the first time in 25 years, the chairman of the Fed will be absent from the annual economic symposium


Click to follow
The Independent Online

Back in 2010, the chairman of the US Federal Reserve, Ben Bernanke, used his speech at the annual economic symposium hosted by the Federal Reserve Bank of Kansas City near Jackson Hole, Wyoming, to signal the American central bank's willingness to adopt additional stimulus measures, paving the way for a second round of quantitative easing.

The remarks came against the backdrop of a gloomy economic outlook. If anyone was in any doubt about the key issue of the day, the theme of the 2010 conference said it all: "Macroeconomic Challenges: The Decade Ahead."

This year, as the Fed comes up against another fork in the road, the topic of the symposium is "Global Dimensions of Unconventional Monetary Policy", an apt formulation as American central bankers consider when and how to begin withdrawing the extraordinary measures implemented in recent years.

But unlike previous years, many of the key players will be missing from the gathering, which kicked off with the arrival of delegates yesterday and concludes over the weekend.

Mr Bernanke is absent owing to a scheduling conflict, the first time in a quarter of a century that a Fed chairman has skipped the gathering. The newly installed Governor of the Bank of England, Mark Carney, is also staying away, as is Mario Draghi, the head of the European Central Bank.

Along with Mr Bernanke, a number of senior Fed policymakers will miss the conference, though Janet Yellen, the Fed chair's number deputy, will be in attendance (the lack of top central bank chiefs reportedly led economists at Bank of America Merrill Lynch to quip in a recent note to clients that, instead of driving the markets as snippets of the speeches and presentations filter out, "the biggest effect" of this year's gathering "may be on vacation rentals that third week of August").

From the UK, the Bank of England's deputy governor for monetary policy, Charlie Bean, will stand in for Mr Carney. Similarly from Europe, the ECB vice-president Vitor Constâncio is making the trip to Wyoming in lieu of Mr Draghi.

The heads of the Bank of Japan and the Bank of Mexico will be on hand, however, as will the former governor of the Israeli central bank, Stanley Fischer, and Christine Lagarde, the head of the International Monetary Fund.

They will have a lot to talk about, with the markets anticipating a change in Fed policy as early as next month. Already, the prospect of a reduction in the bank's stimulus measures has triggered sharp swings on markets in the US and abroad, hitting stocks, bonds and currencies alike as investors parse policymakers' statements for clues about the exact timing of a shift.

The key question is whether the world's largest economy is strong enough to withstand a reduction in the value of the Fed's programme of buying up government- and mortgage-related bonds, currently worth $85bn month. Related to that are questions about how fast the Fed should wind down the programme, and when.

The minutes of the bank's last policy meeting, published earlier this week, left investors uncertain about the exact timing, though they did reinforce the view that the Fed was on track to begin rolling back the programme sometime later this year and potentially bring it to a complete halt by the middle of next year.

They showed that "almost all" Fed policymakers were "broadly comfortable" with the timeline, first floated in public by Mr Bernanke at a press conference earlier this year.

With these issues in mind, much attention is likely to be paid to what Arvind Krishnamurthy from Northwestern University has to say about the impact of unconventional monetary policy. Along with his colleague Annette Vissing-Jorgensen, he has been working on the effect of asset purchases on long-term interest rates, and his presentation is likely to be closely watched as the Fed considers whether, as a first step, it should begin the tapering process by cutting its purchases of government or mortgage-related bonds.

But this year's conference isn't just about policy. Another major topic of discussion among the assembled policymakers will be the identity of the Mr Bernanke's successor. He is widely expected to stand down when his current term concludes at the beginning of next year, and President Obama is likely to name his successor in coming months.

Until the summer, it was assumed that Ms Yellen would be elevated to the top job. A respected economist who has been the vice-chair of the Fed since 2010, she is a favourite of both many outside academics and Wall Street.

But recent debate in Washington has thrown up the name of Larry Summers, the former US Treasury secretary, who is said to be keeping away from the symposium. A polarising figure with a controversial record, he faces a challenge in the form of deep opposition among the Democratic Party ranks in the Senate, something that is likely to make for a rocky confirmation process. But he is believed to have the support of a number of key White House advisers.