The marquee event in the new week is obviously Jackson Hole. It’ll be hosted virtually (again) due to “elevated COVID-19 health risk in Teton County.”
Esther George said she’s “disappointed that health conditions will prevent us from being able to gather in person at the Jackson Lake Lodge,” but noted that guest safety and that of the community takes precedence. Precedence over pictures of policymakers meandering about, framed by majestic mountains ascending into cotton candy skies.
Oh, how we miss the old “normal.”
Jerome Powell speaks on Friday at 10 AM ET. It’ll be livestreamed on YouTube. That’s new “normal.”
Maybe the Fed can monetize the views with ads, although somehow, I doubt Powell would make it onto the “trending” videos list.
The July FOMC minutes stoked more speculation about the taper timeline. As Goldman noted, it may be a mistake to take the Fed’s “this year” language too literally, but one thing seems clear enough: The Fed is keen to at least unveil the schedule for paring monthly asset purchases by the end of the year. Opinions vary on which meeting they’ll choose.
Read more: Wall Street Moves Up Taper Timeline As Fed ‘Taken Literally’
Some market participants expect Powell to “fill in some of the blanks” on Friday (as one economist put it), but the very fact that the event was forced onto YouTube is a testament to the notion that risks to the recovery from the virus remain.
“We suspect the Chair will leave ample room for ambiguity to ensure flexibility as concerns continue to mount regarding the most recent wave of the pandemic,” BMO’s Ian Lyngen and Ben Jeffery said, noting that in their view, “the extent to which the Delta variant can impact tapering at this stage is limited to at most delaying the announcement by a meeting or two.”
If the Fed wants to unveil a taper schedule at next month’s SEP meeting, Powell will have to telegraph it in fairly explicit terms this week. If he wanted to lean dovish instead, I suppose he could cite the fact that he’s delivering his speech virtually as evidence that the outlook still admits of considerably uncertainty.
The figure (below) is a hypothetical taper schedule that’s generally consistent with Wall Street’s projected timeline(s).
Around 75% of economists in a Bloomberg poll expect the Fed will let markets know something about the timeline between now and the end of next month.
“Fed officials are generally in agreement that tapering should start fairly soon, although most appear to favor deliberating for at least a few more months before initiating action,” TD said. “Specifically, they want to see further improvement in the labor market, and we don’t think the August employment report alone will be sufficient, even if it is quite strong.” The bank “doesn’t expect any new definitive signal at Jackson Hole.”
On Friday, Robert Kaplan suggested the Delta variant could alter his view on tapering monthly bond-buying if the situation worsens. “I’ve got to be agile, open-minded [and] avoid being rigid,” he said, during remarks for an online event hosted by Texas Tech University.
You’re reminded that just last week, the Delta variant delayed tightening in New Zealand. “If I saw that the Delta variant was going to be persistent enough… and be more challenging to where it starts to affect demand… I’ve got to take that into account, and will adjust my views accordingly,” Kaplan added.
Still, most analysts doubt the Fed will be dissuaded this early in what policymakers imagine will be a real tightening cycle. “We struggle to see the Committee’s concern about the economic fallout from Delta being sufficient to derail the well telegraphed plans to scale back bond buying,” BMO’s rates team said, in the same noted cited above. “The economic fallout is unlikely to result from official lockdown[s], but rather from the unwillingness on the individual level to reengage in the in-person, real economy until there has been meaningful progress made on limiting the spread of the latest strain.”
Of course, that’s a question of somehow reducing vaccine hesitancy. And that moves us into the realm of politics.
Live Stream!? Cool
This will give me a chance to test the new StarLink connection.
Even though the actual content will just be a financial fantasy show.
Wall street analyst groups continue to overestimate their ability to model the virus’ effect on the economy. The virus is a lot more unpredictable than most folks think. We are now heading towards some sort of booster shot and much of the world still is not vaccinated. We are all connected in this. A realistic assessment might be something like – we are optimistic in the medium term, but realize that the recovery is not likely to be linear. That is my take, but unlike wall street analysts my confidence level in this forecast is low.