Mint Explainer: What is Jackson Hole conference and why does it matter?

What is the Jackson Hole conference?

A conference of less than 150 people in a mountain resort far away from Wall Street and Washington DC hosted by a regional federal bank has become over its 45 years of history the most prestigious economic event.

Called the Jackson Hole Economic Policy Symposium, the annual conference is hosted by the Federal Reserve Bank of Kansas City which selects a topic every year and invites dozens of central bankers, economists, financial market participants, academics, US government representatives as well as select news media to discuss long-term policy issues. The Kansas City Fed asks experts to write papers on related subtopics which along with the transcripts of the proceedings are published online. According to the Kansas City Fed, the goal of the conference is to provide a vehicle for promoting public discussion and exchanging ideas. Throughout the event’s history, attendees from 70 countries have gathered to share their diverse perspectives and experiences.

The ‘fishy’ history

When it began in 1978, it was what it was expected to be—just another regional conference of economists. Aiming to lift the profile of the conference, the Kansas City Fed held it at a scenic location in Colorado in 1981. That made little difference but did not discourage the organisers from trying some more the next year. In 1982, they thought a high-profile attendee could get the conference more attention.

The best candidate for that role would be the chairman of the US Fed who was Paul Volcker at that time. They devised a little stratagem to draw him in. Volcker was fond of fly-fishing. So, the organisers decided to host the conference at the best fly-fishing spot in their region which happened to be in the Jackson Hole valley. Volcker took the bait and came to attend, setting a precedent for every chair of the US Fed after him. Slowly, the conference attracted the biggest names in the world in policymaking and academics.

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Jackson Hole conference is not a dry affair as such events must be. The tradition that began with fly-fishing also came to include fun events such as barbecues where central bankers appeared in cowboy attire and—since rodeo is part of Jackson Hole’s cowboy tradition—even a roping contest.

Why is it so important?

Jackson Hole is where central bankers let their hair down and let important words escape their lips. If you put so many of the most powerful people at one place and let them freely discuss the most important issues, you are bound to get some hint of the things to come. That’s why investors parse sentences that emerge from Jackson Hole conference. Knowing that the whole world is listening, Fed chairpersons have often used this opportunity to provide hints about policy shifts.

The conference has not only provided clues to future policy but also to big things in the offing. In 2005, Raghuram Rajan, the former chairman of the RBI who was then the IMF chief economist, kicked up a storm at Jackson Hole with his paper ‘Has financial development made the world riskier?’. The symposium was a sort of farewell to Greenspan who was going to retire after presiding over a market that had turned extremely risky due to his easy money policies. Rajan became a butt of jokes at the conference when he warned about the danger posed by complex derivative products. Former treasury secretary Larry Summers called him a Luddite. A few years later, Rajan was proved true when financial crisis struck in 2008.

In 2007, the theme for the conference ‘Housing, Housing Finance and Monetary Policy’ was viewed by some invitees as boring at the time of its announcement, according to the Kansas City Fed. However, when the event kicked off in August, the housing market had collapsed, making this topic both relevant and timely.

What’s up this year?

This year the theme is ‘Reassessing Constraints on the Economy and Policy’. The theme will explore the emergence of economic constraints during the pandemic and how supply considerations have returned to center stage.

However, investors as well as businesses look forward to what Fed chairman Jerome Powell has to say. Reuters has reported investors expect Powell to deliver an aggressive tightening message and dash hopes for a rate cut next year.

But since the minutes of the July Fed meeting suggested that the Fed recognized that too much tightening can curb economic activity, some believe Powell would signal some sort of softening. Goldman Sachs chief economist Jan Hatzius has told Bloomberg on Tuesday that Powell could lay out a case for slowing the pace of rate hikes.

Differing expectations from Powell have raised interest in his Friday speech at the conference. That’s how Jakcson Hole conference has come to be so important.

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