A cold Chinese wind brought the chill of winter early to the Jackson Hole ski resort in Wyoming in time to greet the central bankers of the world for their annual symposium.
The week had seen a black Monday for Chinese equities and global panic that the world’s 2nd largest marketplace was in a spiralling decline that would dent demand for Western imports. The Chinese government responded by cutting interest rates and using other stimuli to kick start their stock markets until a sense of global sanity prevailed and things started to level out – at least for now.
There were a couple of speeches of note from the symposium, one from the head of the New York Fed and the other from the head of the Bank of England. As usual both said everything and caveated it with nothing…
Many analysts had believed that the Fed would begin a rate rising cycle at their September meeting-but following black Monday many discounted that possibility only for the New York Fed’s Fischer to speak in a hawkish tones and put at least the possibility of September hike back on the table.
Not to be outdone the Governor of the Bank of England, Mark Carney, also tried to distance the MPC from China and hinted that an early rate rise could be on the cards.
To be honest we learned very little except maybe that if the Fed wants the markets to take it seriously it makes use of speakers like Fischer rather than Fed Chairman Yellen who seems to play second fiddle these days.
In fairness the central bankers have a real dilemma on their hands – they need to try and predict where the economies of the world will be 6 – 12 months down the road. However. Just two weeks ago nobody was forecasting black Monday so given the uncertainty and volatility out there it seems a safer bet to leave rates on hold nearer to the start of 2016. In this case it is must better to be a bit late rather than risk deflation and the embarrassment of having to change direction and cut rates again.
For FX traders that means more uncertainty, more volatility more opportunities but with more risk – so stock up on rabbits feet, four leaf clover and ulcer medication and you will be fine.