In more than 40 previous Economic Policy Symposiums in Jackson Hole, Wyoming, the event hosted by the Federal Reserve Bank of Kansas City has examined a range of topics, including changing market structure related to monetary policy, financial markets and stability, the role of the housing market and other issues important to central bankers worldwide.
This year’s event took place Aug. 22-24 and was titled “Challenges for Monetary Policy.” The symposium examined how 10 years after the financial crisis, monetary policymakers still face a range of challenges as they pursue their mandates.
Each year, the Kansas City Fed’s Economic Research staff develops the topic and agenda for the symposium in consultation with Bank President Esther L. George, who is the host of the event. The 2019 symposium included 16 presenters and discussants who shared in-depth research and commentary on the challenges policymakers face. More than 35 countries were represented this year.
Among challenges faced by policymakers are different rates of recovery. These differences have led central banks to chart different courses for normalizing monetary policy after utilizing both conventional and unconventional monetary policy tools in response to the Great Recession. Although some central banks are approaching a neutral policy setting, others have yet to start the process of removing policy accommodation.
On the first day of the symposium, George addressed several questions in a wide-ranging interview with CNBC, including “Why are United States interest rates so much higher than Europe, where they’re zero?”
“I think if you look at the underlying performance of those other economies, you will see the
U.S. is performing better than, for example, Europe and other parts of the world,” George said. “And that accounts for why we have higher interest rates.”
Differences in economic conditions across countries and the associated settings for monetary policy present a range of issues for policymakers, which they discussed during the symposium. First, different trajectories of monetary policy paths across countries have contributed to a divergence in interest rates across countries, which has implications for exchange rates, trade and economic activity.
Second, monetary policy actions and the buildup and eventual unwinding of central banks’ balance sheets from quantitative easing also have implications for capital markets and financial flows for advanced and emerging market economies as shifts in monetary policy in one country can create spillovers through financial markets affecting others.
Third, the path for policy normalization looks very different relative to previous normalization periods as most policymakers view the natural rate of interest as being lower than in the past. And finally, policymakers, while charting a course for monetary policy to pursue their mandates, also must account for influences of commodity and financial markets that can provide headwinds or tailwinds to economic activity and inflation dynamics.