Review of central bankers' annual Jackson Hole retreat.
At their annual retreat in Jackson Hole, the tension between threats to financial stability and subdued inflation posed an acute dilemma for the world’s leading central bankers. Despite robust euro-area growth and steady US expansion, inflation remains below the 2% targets of the US Federal Reserve (Fed) and the ECB. The cyclical and structural forces suppressing inflation, including slack in Europe’s labour market and the impact of technology on pricing power, vie with lofty asset prices as the key determinants of the timing and pace of monetary stimulus withdrawal.
The euro-dollar rate is at its highest since 2015, threatening growth and posing a dilemma as policy withdrawal speculation drives the euro.
Escalating tensions on the Korean peninsula are fuelling market volatility, pushing down yields on 10-year German and US sovereign bonds.
Outflows from highly speculative exchange traded funds have increased recently, and capital flows to emerging markets will remain volatile.
