August 1982. Unemployment was over 10%, inflation was running in the low teens, the prime interest rate peaked at a record 21.5%, and banks were failing at the highest rate since the Great Depression. This month in market history, the Federal Reserve's Jackson Hole Symposium, hosted by the Kansas City Fed, took on new importance, becoming a key event watched by investors across the globe.
At the time, the Fed needed to address the soaring rates that were crippling the economy, but the Federal Open Market Committee wasn’t meeting until September. Meanwhile, the Federal Reserve Bank of Kansas City was trying to draw attention to its annual economic conference. The two-day gathering, which started in 1978 and was held at different cities within the bank’s district, drew little attention beyond the tightly knit economic community.
This was the year organizers kicked it up a notch by getting Federal Reserve chairman Paul Volcker to attend.
Enter Grand Teton National Park near Jackson Hole Valley, Wyoming. The home of some of the best trout fishing in America was picked as the new location in order to lure in the Fed chief known for his love of fly-fishing.
Once they reeled him in, Volcker came under fire for his fierce efforts to reign in inflation, setting the stage for a tradition of spirited debate in an otherwise tranquil setting.
The Fed’s “Jackson Hole Economic Symposium” was reborn.
Volcker’s successors delivered keynote speeches almost every year, often signaling upcoming shifts in policy. While they spoke, financial markets around the globe listened to the agenda set in Jackson Hole.
In 2005 outgoing Chairman Alan Greenspan famously declared inflation all but dead while lauding the economy's ability to withstand dislocations just years before the financial meltdown. In 2010 current Fed head Ben Bernanke raised the idea of a bond purchase program called quantitative easing. In 2011, there was chatter about a bond-swapping program from the 1960s called Operation Twist. And we twisted again just a month later.
And just last year, Bernanke hinted that, yes, QE3 was on the table.
Such is the importance of Jackson Hole, when a Fed spokesman said Bernanke will not attend this year, it was widely viewed as an unofficial announcement that he won’t seek a third term as chairman.
Thirty-one years later, the symposium draws 140 central bankers, Nobel Prize winners, and top academics from more than 40 countries. It is now one of the most closely scrutinized policy gatherings in the world.
This year’s event begins on August 22nd. No official agenda has been announced, but it’s safe to say there will be hiking, fly fishing and quite possibly an economic announcement that will rock the financial world.
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