The center of power for the financial world shifts 2,000 miles west this week when global central bankers and other financiers gather for an annual conference in Wyoming.
The talk among the soaring Tetons will be about inverted yield curves, escalating tariffs and rising fears of recessions.
The Federal Reserve Bank of Kansas City has invited preeminent economic policymakers to its Jackson Hole conference for more than 40 years. They are joined by global business titans hoping to hear morsels of future monetary policy decisions. This year’s theme is well timed: Challenges for monetary policy.
Those challenges have been brought into stark relief for investors with the bond market rally sending interest rates to historic lows, stoking economic worries and leading to a down draft in the stock market.
Central bankers do not like being seen as reacting to market fluctuations. They prefer to appear to operate at a cool distance from the heat of the daily investment markets. Still, they won’t be able to escape the investment volatility and growing economic worries as they gather in the Rocky Mountains on Thursday.
The Federal Reserve’s first interest rate cut since the Great Recession is less than one month old. Its last interest rate hike was less than a year ago. This policy reversal has sown uncertainty about how well bankers appreciate economic headwinds brought on by the trade war and softening business investment. Right now, the market expects another rate cut in September.
The Fed focuses on maximum employment (check, July unemployment was 3.7 percent), and stable prices (eh, kind-of, but inflation is below the Fed’s target). Yet this economic environment is presenting different challenges for monetary policymakers including an erratic presidential Twitter feed that moves markets and isn’t bashful about castigating the Fed.