20160829-招商证券_香港_-Jackson_Hole_takeaways__steady_monetary_policy_guidance_and_increased_calls_for_fiscal_policy_coordination_21页_571kb_571kb

Macro Report Summary: Jackson Hole 2016

Core Content

The Jackson Hole Economic Policy Symposium 2016 provided insights into the monetary policy outlook of the world's major central banks, with a focus on the Federal Reserve (Fed), the Bank of Japan (BoJ), and the European Central Bank (ECB). The report highlights the central banks' approaches to policy tools, inflation targets, and the potential for fiscal policy coordination.

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Main Points

Federal Reserve (Fed)

• Policy Outlook: The Fed is expected to raise interest rates within the year, with a December rate hike being more likely than a September hike.
• Yellen's Speech: Highlighted the strengthening case for rate hikes due to solid labor market performance and moderate GDP growth. The Fed emphasized the need for a resilient monetary policy toolkit to address future downturns.
• Monetary Policy Toolkit:
  • Expanded tools include interest on excess reserves (IOER), large-scale asset purchases, and forward guidance.
  • The Fed is cautious about selling assets due to potential market instability and limited understanding of long-term interest rate trends.
  • Inflation remains below target, reducing the urgency for a September rate hike.
  • Rate hike expectations increased following Yellen's speech, with September odds rising to 33% and December to 59.1%.
  • The Fed is likely to continue using quantitative easing (QE) and forward guidance as primary tools for policy accommodation.

Bank of Japan (BoJ)

• Policy Outlook: The BoJ is expected to increase monetary easing as early as September 2016.
• Kuroda's Speech: Reinforced the 2% inflation target, despite ongoing sliding inflation in Japan.
• Market Impact: The BoJ's bond purchases have significantly distorted the Japanese bond market, and its ownership stake in Japanese ETFs is already over 50%, with potential for further growth.
• Monetary Tools: The BoJ is likely to continue quantitative easing and may expand its asset purchase program to support inflation and economic growth.

European Central Bank (ECB)

• Policy Outlook: The ECB remains ready to act but is calling for fiscal policy coordination with member states.
• Cœuré's Speech: Avoided specific policy announcements but emphasized the efficacy of current monetary policy and the need for fiscal support.
• Negative Rates: Evidence suggests negative rate policy may be less effective in the long run, with loan recovery being a circumstantial factor.
• Liquidity Constraints: The ECB may face liquidity challenges in the coming months, particularly in August and December, which are typically low liquidity periods.

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Key Information

• Market Reaction: The symposium was closely watched for potential surprises, but no major policy shifts were announced.
• Policy Divergence: The Fed, BoJ, and ECB are continuing to follow different monetary strategies, with the Fed more hawkish, the BoJ more dovish, and the ECB maintaining a cautious stance.
• Inflation and Growth:
  • U.S. inflation is expected to rise to 2% over the next few years.
  • Japan's inflation is still well below target, and the ECB's inflation outlook is modest.
• Fiscal Coordination: The ECB and other central banks are increasingly emphasizing the importance of fiscal policy in supporting economic recovery and stability.

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Figures Summary

1. Figure 1: September Fed rate hike odds spiked after Yellen's speech.
2. Figure 2: December rate hike odds now reflect a significant chance of a rate hike within the year.
3. Figure 3: Inflation remains below target, reducing the urgency for a rate hike.
4. Figure 4: Inflation expectations have been declining for three consecutive months.
5. Figure 5: Kuroda renewed commitment to the 2% inflation target, despite inflation being far below it.
6. Figure 6: The BoJ's bond purchases have caused significant market distortion.
7. Figure 7: The BoJ is the top shareholder in a large portion of Japanese ETFs.
8. Figure 8: The BoJ's asset purchases and forward guidance are seen as effective tools for supporting economic activity.
9. Figure 9: The ECB is confident in its policy toolkit, but negative rate efficacy is questioned.
10. Figure 10: The ECB may face liquidity constraints in the coming months.

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Key Forecasts

Metric	2016 Forecast	2017 Forecast
U.S. GDP	2.4%	2.1%
U.S. CPI	0.1%	1.7%
U.S. Unemployment	5.3%	4.7%
U.S. Current Account / GDP	-2.7%	-3.4%
U.S. Fiscal Balance / GDP	-2.6%	-2.7%
U.S. Policy Rate	0.50%	0.75%
Dollar Index	98.7	101.0
Eurozone GDP	1.6%	1.4%
Eurozone CPI	0.0%	0.5%
Eurozone Unemployment	10.9%	10.4%
Eurozone Current Account / GDP	3.2%	2.7%
Eurozone Fiscal Balance / GDP	-2.1%	-1.8%
Eurozone Policy Rate	0.05%	0.00%
EUR/USD	1.09	1.05
Japan GDP	0.5%	0.4%
Japan CPI	0.8%	0.3%
Japan Unemployment	3.4%	3.4%
Japan Current Account / GDP	3.3%	2.4%
Japan Fiscal Balance / GDP	-6.7%	-7.2%
Japan Policy Rate	0.1%	0.0%
USD/JPY	120.2	110.0

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Conclusion

The Jackson Hole symposium reinforced the divergence in monetary policy approaches among the major central banks. The Fed is likely to raise rates in December, the BoJ is expected to continue easing, and the ECB is prepared to act but prefers fiscal support. The use of non-traditional tools such as IOER, QE, and forward guidance is seen as critical for future policy flexibility. The report also highlights the importance of fiscal coordination and the uncertainty surrounding long-term interest rates.