Markets pumped up for Jackson Hole event, risk disappointment – ADMISI

The popular belief is that The Fed symposium in Jackson Hole has been used by central bank chiefs to make important pronouncements. However, Marc Ostwald, Strategist at ADM Investor Services International, rightly points out to the fact that Yellen is likely to talk long-term and markets risk reading something that was entirely unintended.

Ostwald details why the likelihood of Yellen hinting a policy move is very low and also weighs in on the rise in Libor rate due to money market reforms.

Key points

Risk is markets pumped up for Jackson Hole, rather too much in term of there is going to be a signal about what the Fed is going to do during the rest of the year

Bernanke never gave away hints of next move in policy at Jackson Hole event except once – Operation twist

When Fed talks about international risks – It is more worries about negative feedback loop to US financial system

Yellen likely to talk about the change in long term inflation targets and whether they should include macro prudential considerations

Fed risks painting itself into a corner, where they are paralyzed by every concern they could have

Real normalization of policy would be Fed backing away from too much forward guidance seen during post GFC years

Fed VP Fischer was hawkish yesterday when he said we are having a discussion on the overheating of the economy

Rising Libor rates is mainly due host of money market reforms and has got nothing to do with rate hike expectations