Good morning, and welcome to our rolling coverage of the global economy, the financial markets, business, and the global economy - because why do one when you can do all four?
All eyes are on a mountain valley in Wyoming today, as central bankers and economists gather close to Yellowstone National Park for a top-level symposium. Nothing says 'serious economic policy' like a bunch of people in suits staring at geysers.
Inflation, and the bond market, top the agenda at the annual Federal Reserve symposium at Jackson Hole this year, as the Iran war puts pressure on the global economy. Because when the world is on fire, what better place to discuss it than a picturesque valley?
Jackson Hole has been dubbed the 'Davos for central bankers,' which means it's a place where the world's financial elite gather to ski, network, and occasionally decide the fate of the global economy. Today, the financial markets are bracing for a speech from the world's most powerful central bank chief, Kevin Warsh, at 3pm UK time (10am Eastern). No pressure, Kevin.
Warsh is under pressure to provide clarity on how the Federal Reserve, which he leads, should deal with inflation if price pressures don't abate. Last month, he created uncertainty by suggesting that the markets, not the Fed, should take the lead on tightening financial conditions. Because nothing says 'central bank independence' like outsourcing your job to the markets.
But investors also hope to hear Warsh's view on the recent interference in the bond markets by Treasury Secretary Scott Bessent, who has been trying to push down US long-term borrowing costs by buying long-dated bonds. Because what could possibly go wrong with the Treasury and the Fed playing tug-of-war with the economy?
Bessent's move appears to put the Treasury on a collision course with the Fed - lower borrowing costs will spice up the economy, undermining the battle against inflation. It's like trying to cool a boiling pot by turning up the stove.
Ipek Ozkardeskaya, senior analyst at Swissquote, says the stakes are high for Warsh's speech, for three reasons: It will be Kevin Warsh's first as Fed Chair, at a time when inflation remains stubbornly above target and long-term yields have been under pressure. Kevin Warsh is trying to change the way the Fed functions and communicates its policy to the market (or whether it communicates at all!). Investors are questioning, since the Treasury announced last week that it would increase its longer-term bond buybacks to tame borrowing costs, how the Fed will respond to the Treasury's intervention in the bond market, which - if successful - could interfere with the Fed's policy path and the transmission of its policy to the economy. So, just a few minor things to address.
Last month, Warsh said he wanted his speech to focus on important points such as AI and productivity, demographic changes, and the global economy's response to shocks from the Iran war. So we shall see! Maybe he'll also fit in a discussion on the mating habits of mountain goats.
Today's schedule: 10am: Eurozone inflation report for August. 1.30pm: Canadian GDP for the second quarter. 3pm UK (10am EDT): Fed Chairman Kevin Warsh delivers the keynote address at Jackson Hole Economic Policy Symposium in the US. 3pm: University of Michigan consumer sentiment index. Because nothing says 'consumer sentiment' like a bunch of economists in a mountain retreat.
Meanwhile, across the pond, Andy Burnham's latest 'everyday fix' to ease the cost of living will be to clamp down on rogue bailiffs, amid concerns that vulnerable people are being overcharged and face aggressive behaviour. The prime minister said on Friday that he was strengthening the rules that apply to bailiffs in England and Wales to better protect people in debt. It comes two months after the Guardian revealed that the government had been accused of dragging its feet on the issue. The industry collects more than £1bn annually - but enforcement companies are not required to be authorised by the Enforcement Conduct Board (ECB) and some have refused to sign up. The government said private bailiffs will need to be accredited by the ECB, or work for an enforcement company that is. 'Private bailiffs will be held to consistent professional standards, and those facing enforcement action will have access to an independent complaints process - strengthening the rights of the most vulnerable.' Translation: If you're going to be nasty to people in debt, at least get a licence.
Back on this side of the pond, revised economic figures show that France only narrowly avoided a recession in the first half of the year. Economic output shrank 0.2% in the first quarter and flatlined in the second, according to the statistics agency Insee. Note: It had previously estimated just a 0.1% decline in January to March, and 0.2% growth in April to June. So, the French economy went from 'slightly less bad' to 'slightly worse' - a classic Gallic shrug.
The French government has been vocal about its goal of reducing the budget deficit - which is when a government spends more money on public services, healthcare, and infrastructure than it collects in taxes and other income. It has previously said it wants to bring the deficit to below 5% of GDP next year. But it also has to balance that with pressure across Europe to spend more on defence, as well as AI spending. Lower GDP forecasts will only make that more difficult. French Minister for Finance Roland Lescure said on Friday the figures showed how this summer's heatwave had hit the economy, calling it 'the first impact from the horrible summer we have had.' Because nothing ruins an economy like a bit of sunshine.
Today is the second day of the Jackson Hole conference - here are the Fed chiefs arriving for dinner yesterday. First, the man of the moment, Kevin Warsh. And a few more arrivals, including Fed Governor Lisa Cook, who remains the subject of Donald Trump's plans to oust her over allegations of mortgage fraud - despite a US Supreme Court decision that said she should remain. Cook received a letter from the White House earlier this month that accused her of falling 'well short of the standard' required of a sitting Fed governor and requested a written response to the same mortgage fraud allegations as before. The Supreme Court in June ruled 5-4 that Cook was entitled to stay on as Fed governor while she fights the allegations, writing that Trump 'failed to afford Cook the procedural protections to which she was entitled by statute.' Cook's lawyers called the allegations 'as baseless now as they were a year ago.' Because if at first you don't succeed, try, try again - with the same baseless allegations.
And here is the president of the Kansas City Fed, Jeffrey Schmid, enjoying the scenery. Someone has to enjoy it, given the economic outlook.
There is some speculation that Kevin Warsh won't give much forward-looking policy indications at all… That is because he's previously said he doesn't think forward signals like this are useful outside of economic crises. Kathleen Brooks, research director at the trading firm XTB, reckons: 'This speech could focus on bigger issues, such as how he plans to run the world's most important central bank, and also what changes he will make and when. While not offering direct guidance on the future of interest rates, everything he says will be scrutinised by investors, and changes that he plans to make could still trigger market volatility.' So, he might not say anything, but it could still move markets. That's the power of the Fed.
Warsh said in July that he still hadn't decided 'whether it's going to be a big-picture speech' or something more traditional. Reminder: Fed governors usually use Jackson Hole to signpost where monetary policy will go in the future, and that is a key indicator for financial markets. Deutsche Bank wrote in a note to clients on Friday: 'That leaves him a few options for today. According to our US economists, they think that a 'big-picture' speech could include a discussion of the Fed's taskforces, or potentially on AI's economic impact. Alternatively, the 'more traditional' speech might see Warsh do a 'cleanup' of the July press conference, and he may wish to counter one market narrative that Fed policy actions could be delayed until the task forces have completed their work.' In other words, he could talk about anything, and the markets will hang on his every word.
Warsh was accused by investors of sending confusing signals in his first press conference as Fed chair in July, after he expressed his commitment to curbing inflation without giving details. Because why be clear when you can be ambiguous? That's the central banker's way.