As expected this year Jackson Hole annual conference did not bring any new piece of information to the market place. Federal Reserve officials are on track to begin scaling back one of their major economic stimulus programs but divisions remain over the timing of the changes.
At the conference, some Fed members said economic growth may be strong enough now to start trimming sooner rather than later, while others prefer to wait until indicators leave little doubt the recovery is on more solid, sustainable ground. Some conference participants said that while earlier rounds of bond purchases may have helped the economy and the financial system, QE is now of limited benefit or ineffective. They worry extended QE could begin destabilizing financial markets and sow the seeds of high inflation.
A research paper presented at the conference reported that Fed purchases of Treasury bonds helped to lower borrowing costs for the federal government but did not do much to lower interest rates for businesses. However, researchers found Fed purchases of bonds backed by mortgages helped reduce rates on home loans “substantially.”