No Small Talk at Fed’s Stay-at-Home Symposium: Eco Week Ahead

Federal Reserve Chairman Jerome Powell and fellow central bankers from the U.S. and abroad will still meet this week for the annual Jackson Hole conference, albeit from their screens at home rather than in the shadow of Wyoming’s Teton mountains.

There could still be news. On Thursday, Powell will speak to the event about the Fed’s long-awaited monetary policy framework review, which has focused on a new inflation strategy.

Prompted by worryingly low weak consumer prices and interest rates that eroded the central bank’s ability to fight recessions, the Fed spent all of 2019 and much of this year conducting its first such comprehensive review of its framework.

Policy makers have discussed a more relaxed approach to inflation, one that would call for it to sometimes exceed the 2% target in order to achieve average outcomes closer to that objective.

The stage is thus set virtually for Powell to start describing what officials are thinking ahead of a formal gathering of the Federal Open Market Committee in September where a more detailed plan is anticipated.

What Bloomberg’s Economists Say…

“The latest Fed communications suggest the new framework may incorporate average inflation targeting to replace the current inflation targeting approach. This method would call for the Fed to take the past into account. If inflation undershot for a given period, the Fed would try to compensate by letting it overshoot for a certain amount of time.”

–Yelena Shulyatyeva, Andrew Husby and Eliza Winger. Click here for full preview

Elsewhere, central banks in Israel, South Korea and Hungary hold rate decisions and France is scheduled to present a new stimulus package.

Click here for what happened last week and below is our wrap of what else is coming up in the world economy.

U.S. and Canada

This week investors will be watching out for data on pending and new home sales as real estate has been one of the strongest sectors of the economy during the pandemic. Other reports to watch out for include those on durable goods orders, personal income and spending, and the latest jobless claims after an unexpected pickup in filings Thursday.

Canada is set to announce second-quarter GDP figures on Friday. Economists expect it to have had its largest one-quarter contraction on record during the pandemic.

  • For more, read Bloomberg Economics’ full Week Ahead for the U.S.

Europe, Middle East, Africa

French Finance Minister Bruno Le Maire is expected to unveil the next round of the government’s stimulus measures to revive growth on Tuesday, an event that gained importance after last week’s data showed the rebound there already stalled. The Ifo survey in Germany on the same day will give clues about the trajectory of Europe’s largest economy.

Norway will also announce its economic output data for June and the second quarter, with the figures expected to show that the oil-rich economy has weathered the Covid-19 storm better than most.

Ukrainian lawmakers will gather for emergency meeting as President Volodymyr Zelenskiy urged them to approve a bill on raising minimum wage by 5.6%.

Data on Monday will probably show Nigeria’s economy, the biggest in Africa, contracted in the second quarter for the first time in more than three years. On Wednesday, South African inflation data for July will show the rate rising back toward the central bank’s target band of 3% to 6%.

Three central banks in the region — Israel, Iceland and Hungary — are scheduled to hold decisions, with all of them expected to leave policy rates unchanged.

  • For more, read Bloomberg Economics’ full Week Ahead for EMEA

Asia

The Bank of Korea is likely to hold rates at a record low on Thursday to support a budding recovery amid a flare-up in virus cases and damaging summer floods. Investors will look to Governor Lee Ju-yeol’s post-decision comments for the central bank’s view of the recovery and any hints of possible new support measures. In Japan, Tokyo consumer-price figures due Friday will offer a signal of whether a slump in nationwide inflation is likely to ease further.

  • For more, read Bloomberg Economics’ full Week Ahead for Asia

Latin America

Mid-month consumer-price data from Latin America’s two biggest economies this week will show inflation pushing toward the top of the target range in Mexico and hovering below just below it in Brazil.

On Wednesday, the final reading of Mexico’s second-quarter economic output may see some of the finer points revised, but not the major takeaway: it was the economy’s worst quarter since 1993. That afternoon, Banco de Mexico’s quarterly inflation report will update estimates on both the recession and likely recovery scenarios. Perhaps more telling still, Thursday’s release of the minutes of Banxico’s Aug. 13 meeting may offer much-sought guidance ahead of its September policy decision.

  • For more, read Bloomberg Economics’ full Week Ahead for Latin America

— With assistance by Rene Vollgraaff, Alaa Shahine, Malcolm Scott, Robert Jameson, Vince Golle, Peggy Collins, and Theophilos Argitis

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