The key focus of the coming week in financial markets will be the speech of Fed chairman Ben Bernanke at the Jackson Hole conference on Friday. Last year, the same speech was taken as confirmation that the Fed intended to embark on QE2, and this eventually triggered a 30 per cent rise in risk assets over the next six months. With the economy still weakening, the Fed is once again in easing mode, and some in the markets are hoping for another full dose of QE. They are likely to get something rather different. Read more

Risk assets like global equities have had a very bad day, but they are still trading fairly close to their highs for the year. This is surprising, given the continuing slowdown in the global economy, and the failure of policy makers in Europe and the US to come to terms with the serious problems facing them.

Particularly worrying is the growing evidence that the US economy is struggling even to hold unemployment constant, while fiscal and monetary policy have both become moribund for the time being. The markets still seem confident that US growth will spontaneously reignite in coming months, without requiring any help from expansionary policy. If they are wrong, there are few signs that US policy would be able to respond quickly or coherently. Read more

In this blog in the Wall Street Journal, Sudeep Reddy reminds us of a Bernanke speech in 2004, in which the now-chairman of the Fed used a golf analogy to justify making a series of gradual changes in monetary policy when the authorities are unsure about the effectiveness of the policy weapon in use at the time. Read more