Here is Bank of America / Merrill Lynch with a preview of the Jackson Hole Symposium
The focus will be on the future
On August 25-27, many key economists and policymakers will be gathering in a serene mountainside resort in Jackson Hole, Wyoming, for the annual economic symposium. The topic is "Designing Resilient Monetary Policy Frameworks for the Future", which will likely include lessons learned from the crisis and expectations for the future conduct of monetary policy. Although market participants will be on the lookout for clues about the timing of the next hike from the Fed, we think they will be difficult to find.
The latest star at the Fed
Fed Chair Yellen is scheduled to talk on Friday, the 26th (the timing of her speech has not yet been released). She is likely to spend time discussing the latest star at the Fed - R*, which is the equilibrium Fed funds rate. The short-term R*, which represents the equilibrium rate impacted by current headwinds, is believed to be about 0% in real terms. With the real Fed Funds rate running below, Yellen will likely argue that policy is still accommodative. We expect Yellen to reiterate the desire to keep policy simulative, given a "risk-management" approach. There is asymmetry to policy when so close to the zero bound - hiking too quickly could derail the economy, but going slowly will simply mean a risk of having to play catchup. In this context, Yellen might argue that conditions are increasingly being met to further normalize rates before the end of the year, consistent with the latest communication from the FOMC. However, we do not expect guidance on the exact timing of the next hike.
The new regime
The more in-depth conversation is likely to be over how policymakers should calibrate policy going forward, assuming that R* is permanently lower and central bank balance sheets are permanently larger. This goes back to the topic of the conference - designing resilient frameworks. We think this will include debates about financial stability concerns, global central bank policy coordination, benefits/costs of negative rates and the effectiveness of forward guidance. We also suspect that there will be a conversation about inflation targeting, perhaps echoing some of the comments made from San Fran Fed Williams in his recent paper, where he made a case for considering price level targeting or nominal GDP targeting (NGDP) in an effort to allow an overshoot of inflation.
A shallow path
The acceptance of a R* that is permanently low and an emphasis on prudent risk management makes the case for policymakers to tread carefully toward the exit. In other words, central bankers should want to prolong this business cycle, with hopes that R* can head higher. From the Fed's perspective, this will involve balancing near-term data, which call for hikes (sub-5% unemployment rate), with longer-term concerns, which require patience. The result is a very shallow Fed hiking cycle. We think this will be a theme of the Jackson Hole Conference, which means we should not expect much insight into the timing of the next Fed rate hike.
Where's that pic .... ah yes, here we go:
(Added - some calendars listing her speech time as 10am ET Friday - h/t BigWhale in the comments)