Therefore, European Central Bank President Mario Draghi will be a highlight when he speaks at Jackson Hole Friday afternoon.
Interest rates in Europe have moved lower as the weak economy stirs expectations for ECB action. Investors drove German bund yields to record lows in the past week, and some shorter duration yields turned negative. On a relative basis, buyers found U.S. Treasurys more attractive, driving yields sharply lower. The 10-year Treasury yield fell as low as 2.31 percent Friday, the lowest level since June, 2013. Weaker economic reports, including this week's flat retail sales, and short covering were blamed for the move, in addition to the move in European yields and concerns about global growth.
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"We're back to the bond yield knocking on the door of rates that prevailed before the taper tantrum a year ago," McCarthy said. "It's hard to see that that could be sustainable but there aren't too many people willing to get in front of a fast-moving train … I think some of the hawkish comments by (Dallas Fed President Richard) Fisher, (Philadelphia Fed President Charles) Plosser and (St. Louis Fed President James) Bullard are trying to be pre-emptive."
George Goncalves, head of interest rate strategy at Nomura, expects the Fed to give a nod to geopolitical issues, particularly the situation with Ukraine. "I can't imagine them coming out and then looking aloof to all these crises going on.
They can't act in a vacuum. They know if this thing continues, U.S. growth would slow down. If these kind of confidence destroying news headlines continue and people start to assess their business needs going forward, the U.S. is not immune," Goncalves said.
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Goncalves said it would help if Yellen would explain what's actually on her dashboard and what metrics she is watching that make her see so many negatives about the labor market. "We've had some improvements. She can't say it's all bad. There's some metrics that don't look so good but one could argue the slack is not as bad as it was before," he said.
"But really, is this the symposium where once and for all, the academics start to agree or go in one direction on structural versus cyclical? Are the people really off line that lost their jobs that are never going to come back? Or are they going to come back once the labor market improves?"
Pimco strategist Tony Crescenzi said the minutes of the Fed's last meeting may actually be more market moving than what comes out of Jackson Hole. At the July 30 meeting, the Fed agreed to taper back another $10 billion from its bond buying program, but there was no press briefing or change in forecasts.
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"At the end of the day, investors will be looking at whether there's any indication of a time line" on rate hikes, Crescenzi said. He said the market often reacts negatively to the Fed minutes. "It tends to fall on the day of the release of the minutes because markets sense that the Fed is getting closer and closer to raising rates."
McCarthy said the minutes should be interesting. "They do tend to sanitize them … I suspect there will be some lively discussion. They key thing is, are they making progress in agreeing on a policy normalization strategy."