The Annual Jackson Hole Economic Symposium

By Jake Rickman​

What do you need to know this week?

Beginning tomorrow, 25 August, central bankers from around the world will convene in a small mountain time in the US state of Wyoming in what is known as the annual Jackson Hole Economic Symposium.

Since 1978, the Federal Reserve Bank of Kansas City (FRBKC) — one of the 12 constituent central banks that makes up the US Federal Reserve — has invited the world’s most influential central bankers, financial policymakers, economists, and academics to gather and discuss a topical economic paper selected by the FRBKC. This year’s paper is “Reassessing Constraints on the Economy and Policy”. Last year’s was “Macroeconomic Policy in an Uneven Economy.”

Why is this important for your interviews?

Given the macroeconomic uncertainty related to energy price volatility and inflation, this year’s symposium is under additional scrutiny. This time last year, the general consensus among central bank policymakers was that inflation was “transitory” and would resolve itself, as Jay Powell, the chair of the US Federal Reserve stated in his keynote address. Yet a year later and several interest rate hikes demonstrate otherwise.

The perception that central bankers should have done more has recently become a political plank in its own right, something we discussed last week. This sentiment is not restricted to a single country: as the Financial Times notes, politicians around the world are criticising central banks for failing to act quickly or aggressively enough.

The mood and tone of the symposium might determine market conditions for the next six to twelve months. Because the symposium’s attendees hold considerable influence on monetary policy — that is, setting the interest rate and managing the price stability of the market — market analysts and financial commentators will be scrutinising the attendees’ comments to see if they contain any hints about future policy changes.

At the very least, the attendees are likely to use their stage to re-establish their credibility and the merits of their independence from politicians. Central bankers may point to the multitude of factors contributing to economic uncertainty as evidence of the limits of monetary policy. That is, raising interest rates cannot stave the fundamental effects of war, pestilence, and political instability.

How is this topic relevant to law firms?

On the other hand, given that the global banking giant Citigroup forecasts that the UK’s inflation will exceed 18% by January, there is a reasonable chance central bankers may suggest that they are prepared to force the economy into a recession to stabilise costs. In the short term, this would almost certainly diminish the market’s appetite for big-ticket M&A acquisitions, resulting in fewer fees for law firms used to advising on such deals.

Even if the top global law firms have robust counter-cyclical practice areas, such as teams advising special situations investment funds on distressed acquisitions or debtors on restructurings, a deep recession would cut into law firms’ revenue and likely lead to downsizing.