The Jackson Hole Summit could Reveal Central Banks’ Rate Hike Plans

• Hello, Jim. Thank you for joining Dukascopy TV today, it’s always a pleasure to speak with you. And today we’re going to have a look at the Jackson Hole event which will be taking place from Thursday to Saturday.

How important is this event in the economic calendar?

Jim Hyerczyk, FXEmpire:  I think it’s important from the standpoint that we are into the second half of the year and that there is activity at the ECB and at the Fed and I think it’s a good, kind of an end of the summer wrap-up for investors to kind of get a feel for how to play this last quarter of the year.

• And so moving on, Janet Yellen, Mario Draghi will both be giving speeches. What do you expect to hear from these two?  Are you expecting quite an upbeat tone?

Jim Hyerczyk, FXEmpire: Well I expect Draghi to be downbeat. I think he learned from his speech a couple of weeks in Portugal that he’s got to tone it down because the market will get a little too excited. So if you start to see the Euro edge up to 1.19 or 1.20 area while he’s speaking, I think he’s going to try to talk that currency down.

I don’t think the ECB wants the currency higher so he’s not going to say anything that’s too bullish. So I expect him to stick to the guidelines that his PR people put out that he’s going to talk about the Euro Zone’s role in the global recovery, but he’s not going to mention anything specific about growth in the Euro Region, or tapering of the stimulus, or anything like that. I think he’s learned his lesson. They want that currency lower and they will do whatever they can to minimalize any comments he has.

• And Yellen, what do you expect to hear from her?

Jim Hyerczyk, FXEmpire: Well, I expect Yellen to stay the course. Mention concerns over inflation. If she does talk about monetary policy, she’s going to focus on the Fed’s plan to begin trimming its balance sheet. I think that’s is not what the market’s more interested in. They have until December to decide the next interest rate hike. September’s pretty much a done deal. They are not going to raise rates.

And I think right now if she’s going to put any emphasis on any major project it’s going to be the beginning of the trimming of the $4.5 trillion balance sheet. And she’s probably going to announce that it’s going to begin right at the end of the September meeting. So that’s what should have an impact on the market.

I don’t expect her to all of a sudden say anything that wasn’t in its minutes or to contradict any of the other Fed speakers that have been downplaying a rate hike later this year.

• You mention rate hike there. Do you think this Jackson Hole Summit could reveal any details regarding central bank plans regarding rate hikes going forward? Or are we saying not to really see any?

Jim Hyerczyk, FXEmpire:  I think they are going to, Yellen and Draghi, are both going to shy away from mentioning anything about rate hikes. Yellen may be pressed if there is a press conference about what she feels, but it’s all out there. It’s all out in the minutes. Inflation is slow and she needs to see more evidence has been the common theme for months now. Like I said, her focus will probably be on the trimming process, the trimming of the balance sheet process.

And Draghi himself is just not going to talk at all about monetary policy, tapering or interest rates.

• Jim, thank you so much. It’s always a pleasure to speak to you. And thanks for your insight.

Jim Hyerczyk, FXEmpire:  Great, thanks for the opportunity.

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