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28 Aug 2015
FX Set-up: All about Inflation & the Jackson Hole Symposium - TDS
FXStreet (Mumbai) - Analysts at TD Securities believe that the Jackson Hole Symposium will be the major focus today and over the weekend with the topic on inflation dynamics and monetary policy.
Key Quotes:
“Perhaps the most compelling argument as to why the Federal Reserve should stay side-lined is that there is little inflationary pressure in the pipeline.”
“In a world where global negative output gaps persist, this is true. Financial market volatility can dampen the inflation outlook further through the wealth channel as an adverse shock would likely reduce the marginal propensity to consume and lower aggregate demand.”
“And with labor market slack eroding (the U6-U3 unemployment gap is near its historical average), one could say the Fed has reached its employment mandate.”
“As such, the emphasis is now on inflation developments where the core PCE measure has steadily decelerated to 1.3% y/y.”
“We are in line with the market in expecting core PCE to remain steady at 1.3% y/y today but this will be the key measure to watch moving forward as it is the Fed’s preferred metric.”
“This is what will make the Jackson Hole Symposium so closely watched where the theme will be on inflation dynamics and monetary policy.”
“We will hear from a confluence of central bankers, including Vice Chair Fischer, on “US Inflation Developments”.
“While he has typically been a more closely guarded member of the Federal Reserve, the discussion from the Symposium may frame the debate for inflation at future policy meetings.”
Key Quotes:
“Perhaps the most compelling argument as to why the Federal Reserve should stay side-lined is that there is little inflationary pressure in the pipeline.”
“In a world where global negative output gaps persist, this is true. Financial market volatility can dampen the inflation outlook further through the wealth channel as an adverse shock would likely reduce the marginal propensity to consume and lower aggregate demand.”
“And with labor market slack eroding (the U6-U3 unemployment gap is near its historical average), one could say the Fed has reached its employment mandate.”
“As such, the emphasis is now on inflation developments where the core PCE measure has steadily decelerated to 1.3% y/y.”
“We are in line with the market in expecting core PCE to remain steady at 1.3% y/y today but this will be the key measure to watch moving forward as it is the Fed’s preferred metric.”
“This is what will make the Jackson Hole Symposium so closely watched where the theme will be on inflation dynamics and monetary policy.”
“We will hear from a confluence of central bankers, including Vice Chair Fischer, on “US Inflation Developments”.
“While he has typically been a more closely guarded member of the Federal Reserve, the discussion from the Symposium may frame the debate for inflation at future policy meetings.”