Coping with Inflation, Recession Fears, All Eyes on Jackson Hole
The Jackson Hole Symposium is one of the longest-running international central banking gatherings. The conference, which is sometimes referred to as “Davos for Central Bankers,” brings together 140 central bankers, Nobel laureates, and leading academics from over 40 nations.
As a result of the present economic crisis, investors and traders are afraid that the Federal Reserve will likely continue to hike interest rates, which would harm consumers.
If the mood does not improve, and the decline persists, the indexes may revisit their lows from earlier this year. Suppose, however, that economic data does not indicate any severe downturn or demonstrates some strength. If this is the case, we may not witness large drops in the foreign exchange markets, but rather turbulent conditions.
Jackson Hole Symposium
Traders are keen to see the results of the three-day Jackson Hole Symposium starting on Thursday, which will reveal how the Federal Reserve aims to return inflation to normal levels. The Fed is projected to continue raising rates in the near future.
Forex markets are even pricing in the Fed’s decision to cease increasing interest rates while inflation remains over 2 percent. Powell will have the chance to clarify any misconceptions at the symposium.
This gathering in Jackson Hole will also provide the Federal Reserve a chance to improve its image after its mistake when it deemed inflation temporary and allowed it to reach the current level.
Fed officials will likely utilise this occasion to underline their resolve to avoid future errors. They will do everything necessary to return inflation to its average level. The majority of investors anticipate that increased inflation will likely remain for many years.
When is the 2022 Jackson Hole Economic Symposium?
The three-day conference will take place from Thursday, August 25 through Saturday, August 27.
Fed Chairman Jerome Powell is slated to offer the most anticipated speech, since he has not addressed the public since the FOMC meeting on July 27. Powell is scheduled to speak on Friday, August 26 at 2 pm GMT
What should Forex traders watch for in the Jackson Hole Economic Symposium 2022?
This conference’s main subject, “Reassessing Constraints on the Economy and Policy,” is predictably unclear. In truth, though, it will be about how central banks can tackle the most dramatic inflation in the developed world in decades. This week, traders will be focused on closely monitoring the many crucial economic developments dominating the next few days, as discussed below..
US GDP
Thursday’s US Preliminary GDP figures will be an important indicator of market sentiment. With two consecutive quarters of negative GDP growth, the United States is technically in a recession.
Initial GDP estimates for the second quarter indicate that the US economy dropped by 0.9% in the second quarter, after a decline of 1.6% in the first quarter. During the second quarter, investment and inventories seem to have been restrained by an increase in inflation, which also contributed to the decrease in output. There was a decline of 13.5% in total domestic private investment.
Despite a 1% rise in total consumer expenditure, durable goods consumption fell by 2.6% during the quarter.
During the three months ending in June, it is not anticipated that the US GDP would vary considerably from the first estimate. However, the GDP data is anticipated to improve, with a -0.8 percent fall predicted, compared to a -0.9 percent decrease in the previous estimate.
Core PCE Data
On the second day of the symposium, participants are anticipated to examine the July reading of the core PCE price index. Following a decline to 4.7% in May, it rose to 4.8% in June.
Commodities
Traders anticipate that weaker economic growth will have a negative impact on oil prices this week. The three-day increase in oil prices that we saw last week has lost steam.
If the Fed maintains its hawkish monetary policy, it might have a negative impact on oil, adding more impediments to US economic development. Traders are also keeping an eye on the power supply limits in China, as the southwestern province of Sichuan has begun reducing electric power supplies in an effort to control economic activity.
Any movement on this front would have a detrimental influence on oil prices, as rising interest rates could trigger a recession and cut demand for fuel.
Bottom line
A combination of sluggish growth and rising prices is now having a negative impact on the global economy. Governments have reduced the global financial crisis by increasing interest rates and other budgetary measures.
The 45th annual economic symposium of the Federal Reserve will begin on Thursday, August 25 with a three-day discussion of the most pressing economic challenges confronting the United States and the rest of the world.
The focus of the conference, “Reevaluating Constraints on the Economy and Policy”, will examine how supply issues have grown increasingly important during the epidemic. Attendees will gather in person for the first time in three years since the start of the worldwide epidemic.
The European Central Bank’s Christine Lagarde will be notable among the central bankers not attending.
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Adnan Rehman
Market Analyst
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