Monetary policy

Caution expected as Draghi, Yellen head to Jackson Hole

Central bank chiefs from the world's wealthiest economies will face pressing policy questions when they address an annual economists' confab in Wyoming on Friday.

Analysts expect Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi to tread carefully to avoid creating market jitters at what are crucial junctures for both leaders
Analysts expect Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi to tread carefully to avoid creating market jitters at what are crucial junctures for both leaders (AFP)

NEW YORK - Central bank chiefs from the world's wealthiest economies will face pressing policy questions when they address an annual economists' confab in Wyoming on Friday.
But analysts expect Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi to tread carefully to avoid creating market jitters at what are crucial junctures for both leaders.
Central bankers from around the world are gathering for a symposium in the mountain resort of Jackson Hole, which is held by the Kansas City Federal Reserve Bank and where speeches by Yellen and Draghi on Friday will be the main events.

The theme for the conference is "Fostering a Dynamic Global Economy" and Draghi is expected to stick to it, even though global investors will be keen to have clues as to when the European Central Bank will begin winding down its $2.6 trillion bond-buying program.
Known as "quantitative easing" and adopted as a stimulus program in the wake of the global financial crisis, its end could herald a seismic shift on markets.
"Mr. Draghi is unlikely to provide clues on QE this week but he could try to talk the euro lower," said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.
Yellen for her part is due to discuss financial stability, a topic in President Donald Trump's crosshairs, with the White House having vowed to roll-back regulations adopted in the wake of the 2008 financial meltdown.
That takes the discussion away from the Fed's main job, which is overseeing monetary policy -- an area now shrouded in doubt -- and suggests Yellen may avoid the topic altogether.

Hoping to avoid headlines?
The Fed has hiked interest rates twice this year despite flagging inflation, which has remained weak despite strong job gains and slowly rising wages -- leaving economists to scratch their heads.
"If she gets no headlines, she might consider it a victory," Ted Truman, a former long-time staff economist at the Fed, told AFP.
Trump has said excessive banking regulation is stifling economic activity and floated the possibility of naming economic advisor Gary Cohn, a former president of Goldman Sachs, to replace Yellen as Fed chair.
But Truman, now a senior fellow at the Peterson Institute for International Economics, said Yellen could highlight the benefits of regulation and stability to economic growth, or even avoid the question of regulation altogether.
"Janet is always very well prepared and can be firm and is not a push over," said Truman. "On the other hand, she's not going to give a speech in which she sticks her finger in the eye of the deregulation people."
Fed members have signaled they could support some regulatory changes, such as limiting the number of banks subject to so-called stress tests of their capital positions, but believe wholesale deregulation would be dangerous.
But Truman said the Trump administration had yet to advance any specific proposals.
"In that sense, this conversation is still going on at the level of generalities."