By Karen Pierog and Saqib Iqbal Ahmed
CHICAGO/NEW YORK (Reuters) -Despite weeks of anticipation, investors have lowered their expectations for Friday's Jackson Hole event https://www.reuters.com/world/us/feds-jackson-hole-shift-shows-delta-variants-ability-skew-plans-2021-08-23, saying that U.S. Federal Reserve Chair Jerome Powell has little reason to rock the boat.
Some market-watchers had seen the conference as a potentially key moment when Powell could give hints about tapering https://www.reuters.com/world/us/fed-minutes-likely-detail-bond-buying-taper-talks-inflation-worries-2021-08-18 the Fed's $120 billion in monthly asset purchases that have propped up the market after COVID-19 hit.
However, with a consensus still forming among Fed members on when to taper, some see scant market-moving revelations by Powell in his speech, contending the Fed will want to see upcoming jobs and inflation data and more information on how the coronavirus Delta variant impacts the economy.
"It does feel like the markets and investors are basically going into this event with more of a neutral stance and not taking any big bets one way or another," said Anders Persson, Nuveen's chief investment officer.
Amid many characterizations of the conference as a potential "yawner," U.S. stock indexes have hit record highs and derivatives markets are shrugging it off, although bond markets have been a bit more volatile.
Meanwhile, tapering views may be evolving due to the Delta variant with Dallas Federal Reserve President Robert Kaplan saying last week he may need to adjust his call for reducing asset purchases this fall.
Even when tapering does start, some say the Fed is unlikely to generate a "taper tantrum" https://www.reuters.com/business/post-fed-taper-tantrum-not-this-time-market-strategists-say-2021-07-08 similar to 2013 when Fed chief Ben Bernanke told lawmakers the central bank could slow its pace of asset purchases, sending yields sharply higher.
Goldman Sachs in a research note estimates the magnitude of moves versus 2013 "is likely to be smaller" given how well-telegraphed the policy change is likely to be.
Powell in July edged closer to unveiling plans to taper, going so far as to describe the Fed's July gathering as the "talking-about talking-about meeting."
“We were always in the nothing-burger camp and at this point we think that ... the Fed has talked about tapering for quite some time and so if you aren't expecting it you live under a rock," said Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions.