Expectations of a surprise have been gradually suppressed by low inflation numbers and mixed economic growth statistics. Suggestions that Mario Draghi would lay out detailed plans for tapering quantitative easing (QE) have dropped away and markets seem more relaxed than they were. This seems to be more the case after Mr. Draghi’s meeting in Germany.
The chances are that any signs of a hawkish bias from either Mr. Draghi or Janet Yellen on Friday could cause a bit of an upset. With the Federal Reserve’s plan to start quantitative tightening (QT) likely to be announced in September and then started in October being well known, the only way Ms. Yellen could surprise the markets is to suggest a rate hike in December, which is more likely than the forecasters currently believe.
Mr. Draghi, on the other hand, has plenty of time to communicate the European Central Bank’s (ECB) further gradual reduction in QE and does not need the Jackson Hole event as a platform, even though that has not stopped him from grabbing the headlines in the past.
Paul Brain is head of fixed income at Newton Investment Management