Central Bank Leaders Gather Virtually for Their Annual Summit
A Summit Like No Other
Today and tomorrow, central bank leaders from around the world will meet virtually to discuss the future of monetary policy. This summit has been held in Jackson Hole, Wyoming, every August since 1981, but this year moved online because of the pandemic.
Policymakers across the globe have been struggling to keep their countries’ economies afloat during an unprecedented downturn. The Federal Reserve and other central banks have pumped trillions of dollars in liquidity and credit into the global economy.
The central banks’ actions have been impactful, though it has also become clear that they cannot manage the business cycle without help from policy makers. In the US, for example, Congress is still locked in debates about another stimulus package, and the Federal Reserve can only do so much while it waits for their decision.
What to Expect From Jerome Powell’s Remarks Today
Jerome Powell, Chairman of the Federal Reserve, will address the conference today. Investors will be eager to see if Powell will provide details about how the Fed plans to deal with economic damage and low inflation. Several members of the Fed’s leadership said that in order to make up for periods of low inflation, they would be willing to let inflation rise higher than the Fed’s target of 2%.
Since 2012, the Fed’s preferred inflation measure has come in at an average of 1.4%. This target, and low economic growth, have kept interest rates historically low. Low interest rates reduce the Fed’s ability to fight recessions, and the current economic downturn has brought this to light. Even when the central bank cut interest rates to zero, it was not enough to counter the downturn.
What to Expect From Central Bank Leaders Around the World
The European Central Bank’s Chief Economist Philip Lane will address the convention about the future of the Eurozone economy. The ECB will likely expand its emergency bond-buying program, but not until December. Andrew Bailey, Governor of the Bank of England, may discuss the benefits of cutting interest rates below zero. Though the ECB does not have specific plans to do this, Bailey said that it is an option. Leaders from the Bank of Japan will also speak at the conference and may touch on some of the bank’s recent strategies like large asset-buying programs, yield curve control, and negative rates.
Investors will be eager to see what other insights about monetary policy may come out of the summit. The virtual format of the meeting will be unique, as will the circumstances and strategies the central bank leaders will be discussing.
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