Global economic focus switches to Fed's Ben Bernanke at Jackson Hole
Leading figures across the economic world will be waiting for the details of a key speech from the head of the US central bank, Ben Bernanke, at a meeting in Jackson Hole, Wyoming, later today.
Last year, he used the same meeting to make a speech that led to a further injection of liquidity into the US economy, with $600 billion of quantitative easing (QE) added to try and bolster the US economy. It is unlikely that Mr Bernanke will make any specific big announcements in his speech today, but what he does say will be closely analysed for any hints that the speech may contain about future changes in monetary policy.
However, this year Mr Bernanke’s policy options are seen as even more limited due to the dire state of the US economy and the fact that the Federal Reserve has already announced earlier this month that it will keep interest rates close to zero until at least mid-2013.
However, this announcement had little effect as rates were already very low. The last round of QE also had a limited effect on boosting the economy.
A former member of the Bank of England’s Monetary Policy Committee, David Blanchflower said: “Fiscally, the US is doing exactly the wrong thing. The US faces a liquidity trap. [The federal government] should be doing huge fiscal stimulus to reverse that problem. But they're not. So monetary policy is the only show in town."
The US economy and its performance has such an important effect on the economic performance of other nations and their markets that any sign that a new stimulus package is being prepared will send important signals to other leading economies.
Many analysts say that global markets will only stabilise from their recent volatility if they see policy announcements from both the US and the eurozone that investors believe in and this is what the global economy will be watching closely for today.
The most likely announcement that investors and economists expect to see as a result of the meeting in Wyoming is a further round of QE to help the ailing US economy.
Markets across the globe have had a good week helped by the anticipation they feel of what today’s meeting could bring. This has led to the value of gold slipping slightly in recent days after reaching a record value on Tuesday.
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