For Wall Street, the Jackson Hole Global Central Bank Annual Meeting hosted by the Federal Reserve of Kansas City every year is perhaps the most noticeable macro-monetary policy level.

The Jackson Hole Symposium is one of the oldest central bank conferences in the world and is also known as the 'Davos Forum for Central Bank Governors'. Since 1978, the Kansas Fed has been responsible for hosting this annual economic policy conference, at which central bank officials from around the world, Nobel laureates, and top scholars gather in this small town in Wyoming, United States, every August and September to discuss the most urgent global economic and monetary policy issues.

This year's Jackson Hole global central bank symposium will be held on August 22-24 Eastern Time. The full schedule will be released on Thursday night, August 22 in New York time. According to previous schedules, Thursday, August 22 is usually the opening dinner of the global central bank symposium, and a series of formal seminars and roundtable meetings often begin on Friday. This includes Federal Reserve Chairman Powell, who is confirmed to appear on Friday Beijing time.

What are the highlights of the Jackson Hole Symposium this year?

This year, the focus of the central bank symposium is once again on dealing with challenges posed by the economic recovery after the epidemic and high interest rates and geopolitical tensions, with the theme being 'Reevaluating the Effectiveness and Transmission Mechanisms of Monetary Policy'.

Undoubtedly, given the concerns about the global economic downturn and the policy turning point of global central banks, this symposium is highly anticipated.

Of all the central bank officials who will speak, Federal Reserve Chairman Powell is clearly the most anticipated 'keynote speaker.' He will deliver the keynote address at 10 a.m. Eastern Time on August 23 (10 p.m. Beijing Time on Friday), which will be live streamed, but there will be no Q&A session.

It is worth mentioning that although the theme of this year's conference is 'Reevaluating the Effectiveness and Transmission Mechanisms of Monetary Policy,' Powell recently revealed that 'it (the speech) does not have to relate to the conference's theme.' It is reported that Powell may attempt to give a speech focusing on the current economic outlook and provide some higher-level points.

Looking back in history, in August 2022, Powell gave a concise nine-minute speech at Jackson Hole, which was one of the shortest speeches given by a Federal Reserve chairman in recent years, but it was also one of the most powerful--his words dampened investor hopes for a swift end to the rate-hike cycle, and the S&P 500 plunged 3.4% in a single day.

Last year, the market volatility caused by Powell's conference speech was relatively muted. Powell at the time said that inflation rates were still too high, and if necessary, officials would remain open to further interest-rate hikes. He also suggested that rates could remain elevated for some time in the foreseeable future, as recent signs suggested that the economic slowdown might not be as severe as officials had anticipated.

It can now be foreseen that with US inflation continuing to cool, Powell's speech this year is bound to be different from the speeches during the 'tightening cycle' of the past two years.

How will he signal the pace of future Fed rate cuts and evaluate the current US employment market and inflationary trends? These issues will undoubtedly be of particular interest.

Other participating central bank 'big shots' include Bank of England Governor Bailey, who will deliver a lunchtime speech at 15:00 Eastern Time on Friday, and European Central Bank Chief Economist Philip Lane, who will participate in the Saturday conference summary panel, where he may share his views on economic topics with central bank governors and leaders of international organizations from emerging markets.

Of course, the regrettable news is that BOJ Governor Kuroda has been asked to attend a Japanese parliamentary meeting scheduled for August 23 to discuss recent rate-hike decisions, so he may not be able to attend this year's Jackson Hole central bank symposium in person. However, given that Kuroda and Powell are scheduled to speak one after the other on the same day, how their speeches will affect yen carry trades is likely to remain a focus of market attention.

Will the global market be in turmoil again?

According to Citigroup's data, based on the cost of in-the-money put options and call options, options traders are currently expecting a fluctuation of more than 1% in the S&P 500 index on Friday. It is not difficult to see that any subtle details in Powell's wording may become a new catalyst for global market trends at the end of this week, as the focus of the global financial market gradually shifts from 'Will the Fed cut interest rates?' to 'How much will the interest rates be cut?'.

Currently, some industry insiders are concerned that there may be some gap between Powell's actual speech content and market expectations. Eric Beiley, Managing Director of Steward Partners Global Advisory, said, 'If traders hear Powell say explicitly that rate cuts are imminent, the stock market will react positively, while if they don't hear the information they want, it will trigger massive selling.'

Especially for fund managers who recently invested heavily in large-cap tech stocks and drove the S&P 500 index to further highs, this will be a challenge. The S&P 500 index finally ended its four-week decline last week, surging 3.9% for the week, the best week since November last year. As volatility decreases, investors are free from worries about the US economic downturn in the near term. Bank of America cited data from EPFR Global, showing that investors poured $5.5 billion into the US stock market in the week ending last Wednesday.

'The market firmly believes that rate cuts will come soon,' said Beiley, 'but if Powell doesn't reinforce this, it will be a huge surprise.'

At present, the interest rate futures market has fully anticipated that the Fed will begin cutting interest rates at the September meeting, and the difference lies only in whether it will cut interest rates by 25 or 50 basis points. CME Group's FedWatch tool shows that interest rate market traders currently expect a 71.5% chance that the Fed will cut interest rates by 25 basis points and a 28.5% chance that it will cut interest rates by 50 basis points at the time.

But some industry insiders speculate that Powell may still be unwilling to disclose the timing of the rate cut in his speech on Friday. According to his habitual characteristics, he is also likely to adopt a cautious and vague approach to reveal how much the interest rates may fall after the Fed completes its easing. If this happens, the market rebound may be in jeopardy.

Goldman Sachs has pointed out that the market may receive signals of 'confidence in rate cuts' and 'data dependence' on Friday, and it is expected that Powell's information and off-site interviews will be similar to what has been heard in recent weeks, namely, the Fed is now close to cutting interest rates, but the degree of easing will depend on the data to come.

Bill Dudley, the former No. 3 of the Fed and former president of the New York Fed, said over the weekend that the Fed chairman may suggest that there is no longer any reason to implement a tightening monetary policy. But Dudley does not believe that Powell will disclose the magnitude of the first rate cut, especially considering that the employment report will be released on September 6 and the Fed's next policy meeting will be on September 18.

Tom Hainlin, an investment strategist at Bank of America Wealth Management, said, 'Based on Powell's previous speeches, we are unlikely to get very clear answers from him. 'We want to know what the Fed's interest rate path is- will it cut rates once per meeting or still depend on employment and inflation data. But he may not say it so clearly. Traders are more likely to get this information at the Fed's September meeting.'

Stephanie Lang, Chief Investment Officer of Homrich Berg, pointed out that Powell's tone is crucial. If he surprises the market and appears hawkish, the stock market will react negatively.

Historically, Fed Chair's speeches at Jackson Hole have not had a significant catalyst effect on the stock market unless there is a critical shift in monetary policy- such as now. Data compiled by the industry shows that since 2000, the S&P 500 index has risen an average of 0.4% in the week after the meeting.

Editor/ping