Author: Wall Street Journal

Next week, global economists and central bank officials will gather in Jackson Hole, Wyoming, to participate in the Federal Reserve's annual economic policy symposium. As central bank communication remains relatively calm in August and the fall interest rate decision-making cycle restarts, this global central bank annual meeting will become an important window for the market to capture policy signals.

This year, the focal point of the market is undoubtedly Federal Reserve Chairman Waller. According to the market trading desk, at 10 AM Eastern Time on August 28 (Friday), Waller will deliver a keynote speech, marking his first appearance at Jackson Hole since taking office as chairman of the Federal Reserve. Compared to the conference theme itself, Waller's stance on the economic outlook and future interest rate path is more likely to become the core of market pricing.

Goldman Sachs reports that, historically, keynote speeches at Jackson Hole often significantly amplify volatility in the foreign exchange market. Especially when Waller's policy stance is not yet fully clear, EUR/USD may become one of the most sensitive trading windows in the market. However, historical data shows that while speeches can easily amplify volatility, there is no stable unidirectional movement of the dollar.

Waller's Debut, Speech Content Still Uncertain

The complete conference agenda will be announced at 8 PM Eastern Time on August 27 (Thursday), and the main confirmed guests include European Central Bank governing council member Schnabel, Central Bank of Chile President Rosanna Costa, and Reserve Bank of New Zealand Governor Adrian Orr.

Among them, Waller's keynote speech is the most anticipated segment of the entire conference and the only speech to be broadcast live on television. However, there will not be a Q&A session after the speech, while other conference speeches, although not broadcast live, will have Q&A sessions after they conclude, with relevant content conveyed to the market through media reports.

This year is unique in that Waller himself has previously made it clear that he has not yet decided whether this speech will focus on the macroeconomic "big picture," or, like traditional Jackson Hole speeches, provide guidance on the policy path from September to December.

Goldman Sachs believes that this uncertainty means that the market's sensitivity to changes in wording may increase significantly. Waller has stated that he hopes to clarify major issues using the "mountain air" of Jackson Hole (located in the mountainous region of Wyoming, USA) which further heightens the attention on his policy statements.

Not Just Watching Waller's Speech, Officials' Responses Are Critical Too

If the keynote speech determines market sentiment, then television interviews during the meeting may be a more direct channel for assessing recent policy directions.

During the Jackson Hole conference, major financial media typically arrange for Federal Reserve officials to undergo off-camera interviews. Starting from Wednesday when participants begin to arrive, related interviews will continue until Friday, with about five Federal Reserve officials expected to be interviewed by different media outlets on Friday; some officials may appear multiple times.

It is particularly noteworthy that officials from the Federal Reserve Board usually wait until after Waller's speech to accept interviews, while the president of the Kansas City Fed, which is hosting the conference, may speak first before the formal start of the Wednesday meeting.

Goldman Sachs reports that due to Waller's cautious attitude toward forward guidance, other officials’ off-camera statements may undertake more of the role of conveying policy signals. Therefore, investors may need to pay more attention to the continuous statements of Federal Reserve officials throughout the conference rather than just waiting for Waller's speech alone.

Financial Innovation Becomes This Year’s Theme

This year's Jackson Hole conference theme is "Financial Innovation: Its Impact on Payments and Policy."

From the agenda of the conference, discussions will focus more on financial innovation and its long-term influence on monetary policy, with potential topics including artificial intelligence, digital assets, and changes in financial markets.

However, in terms of short-term market trading, the importance of academic papers and conference discussions may be lower than the public statements made by central bank officials. In other words, what the market truly needs to focus on this year at Jackson Hole is still Waller's speech and the policy signals released by central bank officials during the conference.

Additionally, while Jackson Hole is the annual grand event for central banks globally, it is not the only unique window for policy communication throughout the year. As the September Federal Reserve meeting approaches, the market will ultimately return to data on employment, inflation, and economic growth, and re-evaluate the interest rate path accordingly.

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