The annual Jackson Hole symposium of central bankers kicks off in earnest this morning with Fed Chairman Bernanke. The fear among market participants ahead of his talk is that Bernanke and Co have used up their bullets and are now are victims of circumstance. That said, the Fed has come up with several innovative funding schemes in recent months that the market did not foresee, so don’t be so sure the Fed is without ammunition.
Expect to hear lots of talk about “challenges” ahead, but what the market will be most focused on is his approach to inflation. Talk of a willingness to address inflation before financial markets normalize will be a strong positive for the dollar.
