The news out of Jackson Hole

Probably the only ‘news’ out of Jackson Hole is that it appears there is a high likelihood of a significant Fed monetary policy action to be announced in the statement after the next FOMC meeting, which is now scheduled for 2 days, on Sept. 20 and 21.

To infer that there is a high likelihood of action it is necessary to read the report of Jon Hilsenrath of the WSJ, found here:
Bernanke to Markets: Stay Tuned

Here are the ‘money quote(s)’ from that article (in bold):

He does note that Fed policy makers will be discussing their options at a September policy meeting which has been expanded to two days instead of one to explore whether the Fed should do more. “The committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability,” he says.

Mr. Bernanke doesn’t want to get ahead of his colleagues, and he doesn’t want to make promises on what the Fed will do next. …

Still, it is worth remember, when the Fed has said it is prepared to act during this long-running economic crisis, it generally has acted.

There is plenty of time, and economic indicator releases, between now and the meeting dates, so there is a possibility that further action will be seen as unwarranted, but the likelihood of further action has increased significantly (and, yes, I am aware of the intense political pressures Bernanke is now under to do nothing more … but Bernanke is a man with the will to do his job as he sees fit).

So, plenty of time between now and then, and plenty of market action to come. I do expect, though, a better bid tone in the market in the weeks ahead (and please remember that the markets are not linear, there will be volatility, especially out of Europe news).

EDIT – just noticed that Krasting is making similar points over at the ZH blog.

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