What did they talk about in Jackson Hole?
Once more this year, the symposium of the most important central bankers in the world was held in Jackson Hole from August 24 to 26. Under scrutiny were Janet Yellen, the Chair of the U.S. Federal Reserve and Mario Draghi, President of the European Central Bank. Their words gave no indications of any changes with respect to the future of monetary policy.
Representatives from central banks, the financial industry, finance ministers, academics and experts in economics and finance, meet every year in Jackson Hole. For 40 years it has been one of the most publicized forums for debate on the economy.
The title theme of this year's symposium was "Fostering a Dynamic Global Economy". However, what generated most interest was listening to the two principal central bankers in the world, to see whether they gave any hints about the outlook for monetary policy in the United States and the Eurozone. Neither of the speakers, however, revealed any major new points. Their words did trigger a rise in the euro to its highest levels since January 2015, at over 1.19 dollars.
Janet Yellen began her speech with a reference to the decade that has passed since the financial crisis that affected the global economy, outlining the reforms that were carried out. She also stressed the current resilience of the banks and the importance of the role of financial regulatory reform for economic growth. However, in her opinion, the problem has not yet been fully resolved, and she undertook in the name of the Fed to continue with the supervision of financial stability.
"Loss-absorbing capacity among the largest banks is significantly higher, with Tier 1 common equity capital more than doubling from early 2009 to now," she said.
Yellen stressed that experience has made the financial system substantially safer, as can be seen in the latest stress-testing exercises on banks in the United States. In short, the economy is better protected. She also commented on Donald Trump's current policy with respect to the Dodd-Franck Act, which limits risks through greater transparency and financial stability. For his part, the U.S. President has hinted at who Yellen's replacement at the Fed could be: Gary Cohn.
In his speech, Mario Draghi stressed the importance of multilateral cooperation. He also focused on the effect on global growth of the threat being posed to open trade. "The euro area experienced first-hand the risks of a diverging supervisory and regulatory framework for cross-border finance... Safety was restored by elevating supervision and resolution to the European level with the banking union," he explained.
We should not repeat the mistakes of the crisis, according to Draghi. To do so, we have to ensure constant growth through a dynamic global economy.
Reactions have varied. According to the Financial Times, the speech by the ECB President on the strength of the euro was eclipsed by Yellen's words. The British daily also highlights the mutual support provided by the two on some of the issues such as financial regulation and free trade.
The Wall Street Journal notes that the interest generated by Jackson Hole has been dissipated by other issues such as the economic consequences of Hurricane Harvey, which include falling oil prices due expectations of short-term changes in demand.