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Jackson Hole, Fed minutes dominate week
08-19-2013, 10:20 AM,
Jackson Hole, Fed minutes dominate week
Jackson Hole, Fed minutes dominate week

When central bankers and economists gather near Jackson Hole, Wyo., for their
summer retreat this week, they know that most of the action will be 2,000 miles
to the east, where President Barack
Obama is considering his choice to replace Federal Reserve Chairman

The retreat, at Jackson Lake Lodge in Grand Teton
National Park, will feature speculation — some informed, some maybe not — on
Obama’s deliberations over the next top central banker. And there will be an
active debate among participants over whether, how and when the Fed should pull
back from its $85 billion-per-month asset-purchase plan.


Bernanke has decided to skip the Jackson Hole retreat
this year, so there will be no celebration of his legacy as there was for former
Fed Chair Alan
Greenspan in 2005.

Vice Chair Janet
Yellen, one of the two leading candidates to replace Bernanke, will
attend, moderating a panel discussion on Saturday. She’s not expected to make
substantive comments.

Summers, the former Treasury secretary and Obama confidant, will not

The media, market economists and academics who attend the
Jackson Hole event will press U.S. central bankers for the policy makers’ views
on tapering.


Most top Fed officials who have spoken since the Fed’s
last meeting have not ruled out a September tapering. St. Louis Fed President
James Bullard is the only one making a strong case for waiting for either the
October or December meetings.

According to The Wall Street Journal’s latest poll, 53%
of economists surveyed expect the taper to begin in the third quarter and 36%
expect it to begin in the fourth quarter.

There could be some more information about the central
bankers views even before the retreat starts in the minutes of the July 30-31
policy meeting to be released on Wednesday at 2 p.m. Eastern.


The document could show how many policy makers were
prepared to slow asset purchases, economists said.

“The July minutes may give some insight into just how
strong the conviction level at the Fed is for tapering in September,” said Ethan
Harris, chief U.S. economist at Bank of America Merrill

“If the Fed is close to a September taper, then we would
expect some discussion of operational details in the minutes, such as how much
to taper and in which assets—mortgage-backed securities or Treasuries,” he said.

The Fed’s July policy statement seemed dovish, with the
central bank highlighting higher mortgage rates and the risks of persistent low

“The minutes could explain why policy makers saw weaker
growth, and how concerned they were over the impact of higher mortgage rates on
the housing recovery,” said Jennifer Lee, senior economist at BMO Capital

The minutes of the prior Fed meeting in mid-June showed
that half of the senior Fed officials wanted to end asset purchases by the end
of 2013 but were talked out of it.

Bernanke has laid out a timetable where the Fed will
start tapering sometime later this year and end it in mid-2014 if the economy
picks up as the central bank expects.

But data over the last two months has been mixed, leading
to competing views on when the Fed should move. Some say September is a good
starting point, but others want the Fed to wait until there is evidence that
better growth is in place and not just a forecast.

It is a light week for economic data, with most of the
focus on two housing reports.

Existing home sales are expected to rebound 0.8% in July
after falling 1.2% in June. The National
Association of Realtors will release the existing-home-sales report
at 10 a.m. on Wednesday.

Economists expect new home sales fell 2.4% in July to
485,000 units after surging 8.3% to a five-year high in the prior month. The
Department will release the data at 10 a.m. on Friday.



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