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Posted on: 02 September 2016


In this edition of The Commentary we consider the discussions and meetings held at last week’s Jackson Hole Symposium - an annual gathering of prominent central bankers, finance ministers and academics from the major world economies, in the picturesque Wyoming countryside. The Symposium is an opportunity for key figures to talk about the world economy in a low key environment and provides useful insight into how this may affect future economic policy. We look at some of the key themes raised and ask what their implications might mean for investments under management. 


Designing resilient frameworks – the main topic for discussion 

This year’s main topic for discussion was how to design resilient monetary policy frameworks for the future.

In her main speech the Chair of the Federal Reserve, Janet Yellen, took the opportunity to talk about the relatively new measures central bankers used to stave off crises. This included the use of quantitative easing and forward guidance, used to combat the global financial crisis. Yellen suggested that these strategies would likely remain part of central bank toolkits in crises of the future.


Limitations to monetary policy frameworks

With the strong possibility that, for the foreseeable future, interest rates are likely to remain lower than they have done for the last several decades – there was a general acceptance amongst participants that monetary policy can only do so much to stimulate economic growth in times of crisis.  Interest rate cuts, an early lever pulled by central bankers when economies near recession, have less of an impact when rates are already low, and so Yellen believed it necessary for governments to contribute to recoveries through fiscal policy. Unemployment benefits and taxes are two such measures, helping reduce economic volatility overall and stimulating consumers during tough times. These measures are often politically unpopular, but could make a positive contribution.


The outlook for US interest rates

Stanley Fisher, the Vice Chairman of the Federal Reserve, indicated at the Symposium that August’s US job figures, out today, would be instrumental in whether or not the Federal Reserve chooses to raise interest rates again at their September meeting.  

If we see a very strong jobs report, the probability of an interest rate increase in September increases.  If there is any uncertainty about the health of the jobs market the Fed may choose to delay until December.

In an uncertain environment such as this it is important for our client portfolios to remain well diversified and insulated against a wide range of outcomes.

All data has been compiled by Duncan Lawrie from sources believed to be reliable. Full details of sources are available on request.

The comments and figures in this document are generally applicable but you should always take specific advice to suit your individual circumstances before taking any action. Errors and omissions excepted.
The value of investments and income generated may fall as well as rise, and investors may not get back the amount invested. Past performance is not a reliable indicator of future results.