Interest rates may be ultra-low, but the focus of the global markets will be more than a mile high in the week ahead, and searching for some clarity.
Each year for three days in late August, central bankers, regulators and financiers converge on Jackson Hole, Wyoming. The town is tucked into a valley of the Teton Mountain Range. As mountains go, the Tetons are young and steep. It's an apt geologic setting to listen for clues about a monetary policy that is old (measured in economic time) and flat.
While the Federal Reserve has raised interest rates in the past year, it was a small move and since then, nothing. The central bank hasn't acted thanks to a list of worries including the stock market drop at the beginning of the year, softer economic data this spring and the Brexit vote uncertainty. On Friday, Chairman Janet Yellen is due to speak to the assembled group in Wyoming.
Her words will echo far beyond the valley walls, though they may ring hollow. Since raising rates in December, the Fed has said any future change in interest rates will rest on "incoming data." While that's prudent and expected, the agency also has been signaling a series of rate hikes this year. So far, there have been none. Instead, market interest rates are lower today then when the Fed actually raised its target.
Navigating this for investors isn't easy. According to the minutes of the Fed's July interest rate meeting, some in the group "judged that another increase ... was or would soon be warranted." The Fed seems to be searching for its economic compass. Perhaps Chairman Yellen will point the way more clearly among the mountains.
