What will Jay Powell say at Jackson Hole?

Chris Giles (0:06)

Pushkin.

Katie Martin (0:09)

It's that time of year again when, if you're into markets like at all, all you hear is Jackson Hole, Jackson Hole, all eyes on Jackson Hole. Big week for markets. Well, Jackson what? Holy who? What's going on? Don't worry, we've got your back. We're here to answer the questions that you're afraid to ask. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist at the FT here in London, and I'm joined in real life in the studio by Chris Giles, Central Banking nerd supremo. Chris, thanks so much for coming along.

Chris Giles (0:45)

It's a pleasure, Katie.

Katie Martin (0:47)

So Chris Jackson Hole, it's one of these kind of big set piece Central Banker shindigs. It's right up there with Sintra and Humphrey Hawkins and all these kind of old school phrases that get kicked around. What actually is it?

Chris Giles (1:01)

Let's talk about being in or outside the club. People talk about it because they want a lingo and if you don't know what it is, you feel excluded. So this is our opportunity to get everyone inside the club because it's all rather silly. What it is, is essentially a conference. It just happens to be in the middle of nowhere. So a little bit like Davos. So people have to go there.

Katie Martin (1:25)

What is it with that? Why do we send important people into the wilderness to talk about important things?

Chris Giles (1:30)

They like it because they're away from their normal work environment. When these things started, they would have been away, fully away, communications and everything. So they can also go and have informal chats, learn stuff. It's not open invite conference. It's very much an invited audience. A bunch of central bankers, bunch of academics, almost no market economists there. So they keep it away from that. So they can have a rarefied discussion and they go, they go hiking. So they have the meeting in the morning and every afternoon they go hiking and chatting.

Katie Martin (2:06)

And it's in the mountains of Wyoming, right?

Chris Giles (2:08)

Yeah, the mountains, the Teton Mountains. It's in the Jackson Lake Lodge in Wyoming. And it is two hours time difference from New York, seven hours from London, eight hours from Frankfurt. And so when Jay Powell speaks on Friday morning at 8 a.m. in mountain time, that is 11 p.m. in Tokyo.

And in the afternoon in Europe.

Katie Martin (2:31)

Yeah, and it looks really pretty on the telly.

Chris Giles (2:33)

It's lovely. I've never been invited, so I feel as a club, we're NFI'd completely.

Katie Martin (2:41)

Yeah, so it's a very kind of exclusive invite list. It's Fed rate setters, right? It's US monetary policy setters. But are there other kind of central bankers there?

Chris Giles (2:52)

Yeah, so there's normally other central bankers. So this year, Andrew Bailey, governor of the Bank of England, is going to be there last year. Christine Lagarde and Ueda from the Bank of Japan were there. So it is bigger than just the Fed, but the Fed is the centerpiece and everyone pays attention because quite often it is a set piece speech from the Federal Reserve Chair, and these things can change policies. So it's where Jay Powell announced flexible average inflation targeting just before it became a bad idea. It seemed a good idea at the time, but then inflation took off and he didn't really want to wait until the average inflation moved up a lot. And so one of the things this year is, is he going to kill it? I doubt he is going to kill it. And last year, just a few words from the Fed Chair, because it's seen as one of the set piece events of the year, even if it's not very different from his six weekly press conferences, it can be more important for markets, and it's also August and so it's the only thing that's happening.

Katie Martin (3:54)

Yeah, we need something interesting to happen in August. But yeah, last year, Jay Powell, Chairman of the Fed, was saying inflation is too high. And that proved to be kind of a big moment for markets, because suddenly everyone flipped into this view that, you know, crikey, they're really serious about this higher for longer thing, because they'd refused to listen for months and months and months. They were like, nah, they're bluffing, they're going to cut rates again as soon as they can. Little comments like that from the Fed Chair can make you really rethink things. So, and also the timing is interesting, right? Because unless we're all completely wrong, then the Fed is going to start cutting interest rates within weeks.