Fed Chair Janet Yellen is set to speak at the Federal Reserve Bank of Kansas annual Economic Policy Symposium in Jackson Hole on Friday and there have been ripples of uncertainty in the market. There had been very light trading on the S&P500 and DJ30 earlier this week on the run-in to the speech. But with the NASDAQ100 and S&P500 closing near record highs yesterday due to a housing boost and $14 billion buyout of Biotech by Pfizer (NYSE:PFE) on Monday, the markets are gripped and waiting for what’s to come.
With Fed Vice Chair Stanley Fischer speaking last weekend and suggesting the idea that the Fed is close to raising rates, along with New York Fed President William Dudley saying the Fed could hike in September, these main members of the Fed could be trying to take the sting out of the market if Yellen does mention a hike.
Does it seem likely to be mentioned on Friday?
With Job growth on the rise but monetary policy not being as effective as hoped, it seems unlikely that rate hikes would do anything but hinder the growth already achieved and possibly be a step in the wrong direction.
The Fed chair discussions at this symposium in other years have provided key signals in terms of interest rates, but with 2016 being a very significant year in American politics, does Yellen really want the Fed to get dragged into the ‘scare mongering’ tactics of what is surely going to be a vicious presidential race, one week before the first debate? Probably not. With consensus being that the Fed will get a rate hike done this year, it would make December a far better candidate.
The discussion topic of this year’s symposium is titled, “Designing Resilient Monetary Policy Frameworks for the Future”, the feeling here is longer term issues will be the topics on the table rather than next month’s interest rates release.