Watch Jackson Hole, Fed minutes, Mexico GDP

Genevieve Signoret & Patrick Signoret

Macro Views

Next week: the highlights

• Wednesday 20. USA: Monetary policy meeting minutes (Jul 29-30). On the Fed’s to-do list for the next 12 months are the following tasks: decide how exit from extraordinary stimulus, in what sequence to do it, how to signal to and teach markets about its exit strategy, and precisely what policy framework to adopt in place quantitative easing. Then execute the transition without destabilizing markets or derailing U.S. economic expansion or the house sector’s recovery. That’s all!
• Thursday 21. USA: Kansas City Fed annual economic policy symposium in Jackson Hole, Wyoming (Thursday–Saturday). The theme this year is labor market dynamics. FOMC members and the Fed’s research staff need to decide whether falling labor market participation rates mean that the U.S. potential GDP growth rate is not smaller. If so, then, for the same growth rate, inflation pressures will be higher. This would suggest that the Fed must move to a tighter stance sooner to ward off a burst of inflation. A related question is whether in a post-crisis world, our old ways of measuring labor market slack (summarized in the unemployment rate) still pertain. Markets and we will be keen to discover how Chair Yellen, the FOMC, and people who influence them are thinking about these matters. Our central-scenario view is that the Fed will start to normalize its policy rates and stance in Q3 of next year, but that normalization will not imply a shift to a tight stance—we expect rates to go no higher than 1% and to stay low for a long time.
• Thursday 21. Mexico: GDP (Q2). TransEconomics estimate: 2.0% year on year. Consensus: 2.25% (from 1.80% in Q1).

Next week in detail

Events in red are those most likely to shake markets.

Monday 18

• Euro Area: Foreign trade (Jun).

Tuesday19

• UK: Consumer prices (Jul).
• USA: Consumer prices (Jul).

Wednesday 20

• Japan: Foreign trade (Jul).
• UK: Monetary policy meeting minutes (Aug 7). We look with baited breath for clues as to when precisely the Bank of England will raise rates for the first time. It’s relevant not only for sterling-pound–denominated asset valuations and the British economy but also for insights as to how the Fed might normalize its only policy framework and stance.
• USA: Monetary policy meeting minutes (Jul 29-30). See comments above.

Thursday 21

• Global: Markit manufacturing PMI (Aug, flash)
• Indonesia: Electoral court decides on Indonesian presidential election (Aug 16).
• USA: Kansas City Fed annual economic policy symposium in
• Jackson Hole, Wyoming (Thursday–Saturday). See comments above. Unemployment claims (Aug 16).
• Mexico: GDP (Q2). TransEconomics estimate: 2.0% year on year. Consensus: 2.25% (from 1.80% in Q1). Global Economic Activity Indicator (Jun).

Friday 22

• Mexico: Unemployment rate (Jul), consumer prices (1H Aug).
• USA: Fed Speech: Yellen at the Federal Reserve Bank of Kansas City Economic Symposium: Re-Evaluating Labor Market Dynamics. See comments above.