Don't expect major news from Jackson Hole meet: Glassman

Speaking about the volatility seen in the global markets and his expectations from US Federal Reserve, James Glassman, Senior Economist, JPMmorgan Chase Bank said it is unlikely that one would hear anything concrete on what Fed will be doing at the upcoming annual Jackson Hole meeting. “I hope we don’t hear a message that makes market anxious,” he said.According to him the best thing Central Bankers can to do in the current situation is stay true to their own view of what is going on in the economy and not react to market volatility.  With regards to Fed rate hike decision, he said if they do it in an orderly manner then it would be good and he does not expect  much market volatility because of that because Fed has indicated whenever  they hike rates it would be in a gradual manner.Talking about China economy, he said Chinese government has enough resources to avoid hard landing and wouldn’t be surprised if the economy starts recovering within the next six months.Below is the transcript of James Glassman’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18.Latha: How should we read this bounce back in the US markets, have markets had their fill of pessimism over China or is this a dead-cat-bounce and markets will now continue to discount bad news from China? A: I think Haruhiko Kuroda (BOJ Governor) is exactly right. We don’t fully understand why markets have been the way they have over the last several days. I am pretty sure it is probably exaggerated by a lot of the computer trading and he is right that no one understands China. We do know that the government of China has fair amount of resources and ability to manage the system there so I think that the best thing that central bankers can do is to stay true to their own view of what is going on in the economy and be steady and consistent and not overreact to market volatility. What we will see is some reversal of this and the truth is, it is going to refocus as on the economic developments here in the US for example and the real story behind central bank actions is – for Fed policy for example it is no longer so much about the data, it is more about a concept that policy rates are extremely low, they need to be slowly over time move back to something more normal and if you can do it in a orderly way that is much better for everybody. It is much better for markets and this experience, the volatility in the markets, is a reminder that markets can be very jumpy. So, steady hand by the central banks is the most positive thing that the central bank can do and I think the bankers and Governor is exactly right.Latha: In the past we have noticed that steady voices from the central banker have not been heeded and the most obvious example that comes to the mind was Alan Greenspan saying that there is irrational exuberance in the market. But markets went on to make multi-year highs after that statement. What are the chances that these calming voices will be ignored and this time markets continue to move in the opposite direction?A: It is really more than the voices; it is more that the actions are steady and  consistent with the reality that that is not any more important than just words that try to calm the market. The central banks cannot be therapists for the market. The market has to sort of make up its own mind. But if it is true that in the US, the economy is doing fine as many of us believe and if it is true that we no longer need interest rates below inflation then the best thing that the central bank can do is to begin to move interest rates in a direction that I think is more appropriate. And I think actions are more powerful than words. So, my guess is that the coming policy meeting of the Fed is going to be very important because the Fed has been hinting for some time that they were getting very close to doing something and we expect that to happen.  I think the market turbulence is not going to change that, unless it is signaling a new problem emerging in the global economy, I do not think so. I think this is probably an overreaction to the things that are going on in China that we do not really understand. And possibly a reaction to a fear of what the Fed is going to do.I do not think many people worry about what the Fed is going to do; they have made it very clear they are going to be moving policy in a very gradual way.Sonia: I know it is very hard to understand what is going on in China, but the fact is that Beijing has already pumped in about USD 140 billion to prop up the markets. But most of those measures have failed to have a major impact. In your assessment is there still a possibility of a hard landing in China?A: I do not think so. I think social stability is an important criterion for the government. I think they have a lot of tools – fiscal actions, reserve requirement issues. It is very difficult for investors to move money in and out of the country, so the Chinese government still has awful lot of control over how things evolve. So, a hard landing scenario in China is something that you might think about if you were talking about a market economy that is where the government does not really have that many resources. But in the case for China, that is not the case and they have a long game that we need to be focused on and they have a long way to go. So, what we are going to find out that the actions that have taken or maybe taking will be sufficient to support the recovery, the growth.I would not be surprised that six months from now, we find out that Chinese economy is picking up speed again from the current slow pace that everybody thinks is going on.Latha: Anything specific that you will look forward to from Jackson Hole, considering that Yellen is not there would it still have any market moving statements?A: It could. I hope that we don’t hear a message that shows anxiety about the market. The central bankers’ job is to steer policy in a way that is consistent with the economy. I think because we have an important round of reports coming up next week, I think most of the commentaries have to be going to be very cautious and not want to hint at anything. The one reason why central bankers, the Fed reserves maybe wanting to hold up would only be if the markets continue to be turbulent. However, with important news right around the corner I doubt that we will hear anything very concrete about what Fed is going to do.