Last Jackson Hole Symposium as Fed chair—perhaps
US Federal Reserve Chair Janet Yellen confirmed that she will be attending the 2017 Jackson Hole Symposium at the last minute—only one week before the symposium was set to begin. This could be Yellen’s last outing at the Jackson Hole Symposium as Fed chair, as her term is due to expire in February 2018, and it’s uncertain if President Donald Trump will reappoint her.
Still, Yellen’s views on the US economy and the future path toward policy normalization will be of top interest to market participants.
Her views on Inflation should be observed
Aside from lower levels of inflation (TIP), many economic indicators in the US economy continue to impress. Yellen could comment on the rebound in US economic performance and the fall in US unemployment. Her views on stubbornly low inflation (VTIP) will be of importance to financial markets.
After the recent FOMC (Federal Open Market Committee) meeting, the probability of another rate hike by the end of this year has dropped below 40%. If Yellen suggests that inflation is likely to pick up in coming months—and if she sounds hawkish about the US economy—odds for a December 2017 rate hike could go up.
Possible market reaction
If Janet Yellen continues with her hawkish view on US inflation and economic growth, bond (BND) yields, which have dropped lower in the recent weeks, could pick up, while bond (AGG) prices would fall. Volatility in the bond and currency (UUP) markets could reignite based on Yellen’s comments as well.
Yellen might also discuss a balance sheet unwinding program, which is expected to be announced at the next FOMC meeting in September 2017. The FOMC July statement clearly laid out a plan of unwinding the Fed’s balance sheet, and so there won’t likely be any major impact if Yellen discusses the Fed’s balance sheet unwinding program at Jackson Hole this year.