Fed Watch – Jackson Hole Edition

Today the financial markets await, with great anticipation, the speech to be given by Fed Chairman Bernanke. With the cream of the economics and financial journalism worlds assembled amid the splendor of the Grand Tetons, the world’s most influential central banker will speak. How much will it matter?

Ahead of the event itself, opinions are, as you might expect, all over the map. My take: with ZIRP and QE already in place, there is little he could say that would move markets very much. The alternate scenario, very unlikely in my view, is that he comes out with something really outside the range of expectations, and the markets go off hysterically.

The bond market is positioned for something in the range of very slow growth to outright recession, and the stock and commodity markets are feeling it. Certainly there must be political pressure to do something about unemployment, but there isn’t much more to be done at this point – within the parameters of conventional central banking.

The big question: will that political pressure move the Fed outside those parameters? In the (unlikely) event of that scenario, how would markets react? I don’t have answers, but do have some suspicions. But I’m not looking for that to happen today. Instead, expect some low key central banker speak, that amounts to nothing much for the markets to chew on.

[UPDATE…Bernanke: “Growth has been disappointing, but everything will be fine.” Stock Market: “Woo Hoo!”]

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