This hole is not a dark a dark one. This is Jackson Hole. And the spotlight on this annual gathering of financiers shines brighter than ever. The tune has changed markedly with the usual Wall Street pundits being excluded for the first time: A strong signal that the emphasis is on policy rather than peddling fund managers’ views and depriving them of one of their most important and effective promotional tools. This is good news. The Hole is filling up! And, judging by its performance so far, it has not disappointed.
The two most powerful central bankers in the world, US Fed chairwoman Janet Yellen and her counterpart at the European Central Bank, Mario Draghi, have both delivered polished performances. The consensus appears to be that the duo has steadied market nerves by indicating that interest rates are likely to remain on hold until the economy is more firmly grounded and employment prospects pick up further. Mr Draghi’s message is the old one: The ECB stands ready with further measures to stimulate growth, consistent with his now famous “whatever it takes” line. Whatever this means, so far only words but no action. This is in stark contrast to Mrs Yellen who added that US monetary policy was “not a preset path”. The formidable lady might yet spring a surprise on us. To describe her as a ‘dove’ would be foolish to say the least: She has rejected the labels of dove & hawk and being a pragmatist, she will turn the screws when necessary and that’s when the music will stop! Unlike Mr Draghi, she has kept the trumps up her sleeve, letting sleeping dogs lie. And the dogs clearly are sleeping… . What a contrast to the Governor of the Bank of England who appears to be in a state of utter confusion, oscillating between ‘forward guidance’ (i.e. crystal ball gazing) and ‘policy-driven’ (i.e. ditching the ideology behind the Five-Year Plans for the National Economy of the former Soviet Union, first created in 1928.). Last but not least, Stanley Fisher, the Fed’s recently appointed vice chairman, last year wisely commented on the merits of forward guidance: “You can’t expect the Fed to spell out what it’s going to do. Why? Because it doesn’t know.” Ignore the double-act Yellen-Fisher at your peril! One thing is for sure: Janet Yellen is pursuing a policy driven agenda and not afraid to change her mind without giving notice. She understands that policy needs to be changed when circumstances change. Simple, powerful and making an awful lot of sense. The lady’s for turning and thank God for that!