ET in the classroom: Why all eyes are on Jackson Hole?

Prominent global central bankers, finance ministers and academicians will meet at Jackson Hole, in the western US state of Wyoming, on Friday. This gathering will be keenly watched for what Federal Reserve chairman Ben Bernanke says on quantitative easing. Here's more on the annual meeting:

WHAT IS THE JACKSON HOLE SYMPOSIUM?

The Federal Reserve Bank of Kansas City hosts an annual economic policy conference that is now popularly called the Jackson Hole Symposium. Held every year since 1978, the conference usually debates topics that relate to emerging issues and trends and may not necessarily focus on current problems. Participation and media attendance is restricted in the interest of encouraging meaningful dialogue. Every invitee has to pay a fee to attend the conference and the proceeds are used to recover the expenses. All the paper and transcripts of proceedings are available online or in print, free of charge, from the Federal Reserve Bank of Kansas City.

WHAT IS ITS SIGNIFICANCE?

Investors and markets closely follow the statements made at Jackson Hole for understanding the possible direction of policy. The restricted nature of discussion encourages free thought, which can at times provides glimpse into what policymakers are thinking. However, opinion is divided on whether the statements made at the meeting are long-term ideas or something that would lead to action sooner.

WHY HAS ITS IMPORTANCE INCREASED THIS TIME?

The symposium comes amid visible deterioration in the global economy, with many of Europe’s bigger economies contracting and the US slowing down. The markets are now looking for some hints from Ben Bernanke whether the US Fed will embark on a third round of quantitative easing. The US economy expanded 1.7 per cent in the April-June quarter but some encouraging data has dampened the case for further bond purchases by the US central bank to pump more money into markets to push growth. The European Central Bank is also working on a bond-buying plan to ease the debt crisis in the region.

WHAT IS QUANTITATIVE EASING?

Central banks buy government securities or other bonds from the market and financial institutions. This increases the money supply and also makes funds available to lenders for giving out loans to consumers and investors. It is hoped that this extra liquidity and lending will spur the real economy.