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It's August. It only means one thing. Economists and policymakers have descended on the mountains of Wyoming's Gran Teta National Park this week for the annual Symposium of Jackson Hall. More than one hundred participants, including several Central bank officials. Of course, gather market watchers are paying close attention. So today on the show, what do you need to know as this important economic event kicks off? And what signals
could central bankers be sending to their economies. This is in the City.
Welcome to the City of London, the.
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Welcome to in the.
City, sand clear of the doors and fronts and lack one with me back from holiday in the city and voter nomics host like Ra Stratton, Hello with us in the studio and in the city. Favorite senior reporter Phil Aldrich also newly back from holiday. Hey not on Jackson HOLWAYO mean, I love Jackson HOLWAYO mean, because something always happens. There's a big palsy speech. But also you see these you know central bankers that we talk about day and day out and casual wear.
Do they do it well?
I mean I think they do. They have like the dad jeans, dad sneakers. I actually want to buy a pair of jeans that really really sad. Phil's just looking perplexed.
Fashion fishing, you know, the sophisticated wellies in rivers and things like that.
I'm sure. Actually we've seen pictures of you know, chairman of Wall Street Banks with fly fishing waiters. Would you call them? I think what we need?
Don't narry here, he's our resident fishing.
Yeah.
I've seen pictures of Dave in Waiders, haven't you. Yeah? This varying non essential economic commentary.
Or is it?
A lot of the focus FILT will be on, of course, you know, the US economy. A lot of it will be on all the other economies. But we had a crazy couple of days at the beginning of August because we were worried that suddenly this Goldilock scenario for the US economy would come crashing down, and I don't know whether that would have taken the UK economy.
Was it? Yeah, it was, it was crazy. It kind of unraveled and then it re raveled within the space of a week or they say there was that there was a shock jobs jobs report, and then all the economists, as far as I could tell, thought that Psalm rule was the sort of catchual for you know, the future outlook for the world. And obviously the Song rule was signaling that there's going to be a recession in the US. But yeah, the the UK seems to be going the
other way at the moment, doesn't it. I mean, labor parties, you know, the inheritance is terrible. The fiscal inheritance is still looking pretty dismal, but the economic inheritance in terms of the pickup in growth has been pretty good this year. So we seem pretty resistant.
To feel is that the story out of Jackson Hole this year that previously they've been aligned and this year they are going to be coming with different conversation pieces.
Well, yeah, I mean the story has been that there was a difference between Europe and the UK on one side and the US on the other. The US was like gangbusters economy and Europe and the UK were significantly slower and in the UK like consumption hasn't even really got back to pre pandemic levels. So there was always that kind of divergence, but it's now it's sort of switching track. Now the American economy looks like it's now on a downswing and the UK economy was on an
upstream upswing. Europe is sort of in the middle. So I think that that divergence point will definitely be a discussion topic there. And so what would the policy response and how would the divergent policy responses be. But obviously, you know, and when it comes to interest rate trajectory, it's all the same way. It's all down from here.
So why does Jackson Hole matter? I mean, there's a handful of these retreats where a lot of the top central bankers meet. But so you have the beautiful mountains, you have the fishing. It's a bit of a retreat. But then you could also, I guess, have big policy speeches.
Yeah, you know, historically there have been major policy speeches there which have been hugely influential. But the other thing is it's the end of the summer. We're resetting for you know, the rest of the year and into early twenty twenty five, and so this is kind of an agenda. It's always been an agenda setting conference. Well, actually there was.
It was it was a bit of an irrelevancy until Paul Volka went and he was there was when he was doing his uh you know, attack on inflation and raising interest rates aggressively and basically the whole world seemed to be lined up against him, and he went along
to Jackson Hole that year. It was very early on in the in the in these events, and the entire economic fraternity seemed to just turn on him and he was aggressively attacked, and that's what sort of made Jackson Hole this kind of moment, This moment in the calendar was this kind of uh, you know, the excitement. Then I guess the way it works and is quite interesting is all these central bankers that they've got to kind
of show off to each other. They've got to say, look, my brain is bigger than yours, and I've got my policy ideas that are going to be more transformative. So there's a you know, you know, economies are meant to be competitive, and this is like competitive economists, you know, trying to trying to be trying to come up with the new policies.
With this year. Might you see or hear a little bit of humility that they don't necessarily feel that it's completely obvious the direction of travel and what they should do. Yes, yes, you're right when you said earlier the direction. It's all down from here. But isn't there a question about when and speed?
And yeah, so that's where Yeah, you're right in terms of the divergent aspect of things. I think one of the big questions that they've they've they've got to answer, and again you'll see different answers, is you know now that we are cutting rates, when do you stop cutting? Where is the neutral rate? And no one has really set that out. And if you came out of Jackson Hole still with your finger in the air, you know, after this this week and just wondering where are we
going to end up? And I think that would be a bit of a disappointment. And I'm not saying that they have to set specific numbers, but if that's the real big question that's coming for the next few months and there and they don't get ahead of that, that would be I think a little bit of a failure on the policy making front.
I mean, I guess, as you know, J. Pewell's character is usually quite coy and we've moved away from a lot of forward guidance because in the past it hasn't worked out. But I spent a lot of time just wondering why it's so difficult to model all these things, right, I mean, I know we're data dependent, but we've gone through the fastest hiking cycle, you know, in the US, in the UK and in Europe probably in modern history.
And they don't really know when the right time to cut is because they're waiting on monthly jobs data and inflation data. I mean, it feels a bit weird, doesn't it, Phil.
Yeah, because especially as central banks are supposed to be looking forward two years, so that so all of their actions are really anticipating where life will be, inflation will be in a couple of years times. So they should they should have a framework with which they can decide that it is time to go at You know, whether you move one month or the next, I suppose doesn't really make an awful lot of difference. But if you're delaying for ages.
But is it that it's more difficult to read the economy that now that it was in the past, or that because you raise rates so quickly, you don't really know where it lands.
I don't think the economy is more difficult to read than it than it used to be. I don't think anyone would sit that. I guess what has been different is that the speed and pace of rate rises did not result in these sort of outcomes that people were anticipating before they started to do this. So here in the UK we started, we've done the first quarter point cut, and the sort of markets are now expecting a move every quarter rather than every meeting, and so that in
itself causes a complication. So when you start cutting normally, you just go sequentially because you're cutting into a recession. This time, we're kind of sort of feeling our way back to the neutral rate. We're on a rate cutting cycle, but we're not going to cut rates now. We're going to wait. But then why are you waiting? And how do you organize the vote structure within the nine member
Monetary Policy Committee to make sure that you do this? Yeah, it all becomes a bit strange and a bit of a sort of awkward process to manage.
But the economy is okay, and that's quite surprising. We were talking like three four months ago about it possible, you know, really slowing down and the numbers are you know, have come in stronger than expected. So I don't know whether it's now time to worry about overheating or whether we should just enjoy the UK economy relatively stronger than other economies.
Yeah, I think there's not really any signs of overheating because consumers spending hasn't hasn't taken off or anything. But and government spending is still a significant important part of the growth that we've been seeing. Business investment is picking up, which is it, Which is a good thing, But yeah, it could change where you think that find the glidepath to what it changes the what in that glidepath potentially where does where do interest rates end up?
But it all goes back to also that you know, the fiscal event when we have the budget. So if you're in the Bank of England right now, you're not grappling in the dark, but you just don't really know some of the policies that the new government will put in place and what happens to taxation and what that means for inflation.
Yeah, well there's I mean there's sort of suggestions that that Rachel Res may try and worry about twenty billion pounds more by maybe changing the debt rules or you know, changing arrangements around the Bank of England. Bizarrely, the growth
has not delivered much stronger public finances. The public finances are getting worse, so it looks like she's going to have to borrow more as well as to tax cut tax rises to compensate for higher spending plans for all these these pay rises for public set to workers, So you could you could see this kind of inflationary stimulus caused by extra borrowing on top of the public set to pay rises which do have a have an impact on general demand a bit, and then on the minimum
wage which comes into effect next year if they do push it up by about ten percent, which it looks like they're signaling for signaling. So the October budget is obviously going to be a critical moment, and it comes just a day before the Bank of Day or two before the Bank of England's November rate decision, which is the next one moment. Yeah, it's the next one which they're supposed there was expected to cut out, so you know that could that could prove quite a quite quite a lively meeting.
So if you're so, if you're Andrew Bailey and you're at Jackson Hole, in your in your cools, in your core trainers and your cool. So you've probably got some advisor right now running around trying to source you something, something that will meet friends.
Let's I don't think I've seen I don't think i've seen anyone.
What what will? What will fran Lack will approve of? So if you are Andrew Bailey and you're at Jackson Hole, what what? How will people be approaching him so people say, oh, your experience is interesting and talk us through it, or or is there still a perception that everything is too unique to the UK for that too much we'll read across.
No, I think I think the UK experience will I mean to the point of these divergent economies, So what the UK has experienced so far could be feeding into there will be lessons learned for America if it is about to is about to go on to slow down the coordination of monetary policy between central bankers, which you know, God does go on behind the scenes, that's obviously going to be critical, just to so that others get a
sense of I don't know that. I mean, we've had quantitative easing we've What we've had here is a is a very transparent exposure of the fiscal risks of quantitative easing, which which the accounting in Europe and America really conceals to a degree. So but it's still it's you know, it is still the same problem, just hidden away there a bit. So there may be some discussions about we've had time to learn the full lessons the more of
the full lessons of quantative easing. What our takeaway is, And of course that was the Bananky review, wasn't there for you know that? And like what the Bank of England is doing to upgrade its systems and to overhaul its practices.
And there's a piece phil that I thought was great by Mohammadalarian, who often goes to Jackson holl And he was basically saying that you know that he's he's been certainly critical of the FED, and he said, look, the stakes are high for j. Powell at this Jackson Hole meeting because he needs to get ahead of the communication issue. So he needs Mohammadalau and believes that JA power needs
to regain control of the economic and policy narrative. Is that true for all central banks, including the Bank of England. It's all now just communication to make sure that the markets don't go off rail so then need to come back when they kind of call them back to order.
Yeah, I think this is quite a different policy loosening situation, like the communication is going to be is will be quite difficult, particularly in the US and in Europe. They're also moving slowly. I mean so far they've the Guard
has handled that process. That's very well. Yeah, with the FED is it is definitely a lot more complicated because that market reaction to that Job's report and the assumption that you know, the US is headed for recession, you know, was you know, we'll put the frighteners on on the FED. You know, the UK economy is recovering, so you can cut rates more slowly into a recovering economy than you would do into a into a shrinking economy. You know,
the trajectory in America is that way. The introject to me is downwards. So the pressure to do more rapid rate cuts in America would definitely be greater than it is here. And yet the economy is still very strong and there's still signs of inflationary pressures in places say that that is a much more tricky communication problem in the US that they face than we have here. I think, I think we we can't justify this kind of gradualism more easily.
Thank you, Phil. So it's light there with a bit more nesto. Thanks Phil, Thanks Phil, Thank you, Thanks very much, Thanks.
Very much, Phil.
Thanks for listening to this week's In the City from Bloomberg. This episode was hosted by me Francin LaQuan and Allegra Stratton. It was produced by Summersati Production support and sound designed by Moses and Brandon. Francis Newman is our executive producer. Sh Bauman is Head of Podcasts Special thanks to Phil Aldric. Please subscribe, rate, and review wherever you listen to podcasts.