Global economic policymakers and experts are gathering this week in Jackson Hole, Wyoming, for the Kansas City Federal Reserve's annual economic policy symposium. Bank of America has framed the event as a "significant risk event" for financial markets, with the meeting taking place just after the U.S. Treasury completed a major intervention in the bond market.

Central bank officials, policymakers, and economists will convene on Thursday in Jackson Hole, Wyoming, for the Kansas City Fed's annual economic policy conference. With U.S. long-term borrowing costs hitting a near 20-year high last week and the Treasury rolling out a heavy-handed bond market intervention, market participants are closely watching the meeting ahead of Federal Reserve Chair Kevin Warsh's keynote address. Warsh is set to speak on Friday, and market observers believe his remarks—or his silence—could reshape investor expectations for Fed policy and potentially trigger trading volatility.

Last week, the U.S. Treasury announced an expansion of its long-dated bond repurchase program, with the cap on buyback operations set to at least double to $4 billion starting September 9. Some investors and analysts have interpreted the move as an attempt to push down U.S. Treasury yields, and the operation has helped stem a recent selloff in the bond market. That selloff had been driven by rising concerns over inflation and the U.S. fiscal deficit, with the 30-year Treasury yield briefly touching a 19-year high. However, Treasury Secretary Scott Bessent's plan has also drawn criticism from several prominent market figures, who argue that expanding buybacks could weigh on the economy, interfere with the Fed's inflation-fighting mandate, and pile more pressure on a central bank that is supposed to remain independent.

Inflation remains above target. Data released on Wednesday showed that the Fed's preferred inflation gauge, the personal consumption expenditures price index, rose 3.7% year over year in July. In a research note on Wednesday, Bank of America's FX strategists said the dollar index is "highly stretched" ahead of Jackson Hole, and if Warsh's speech "disappoints the market," the dollar could face a deep selloff. The bank noted that one of the main themes in the FX market since the last Federal Open Market Committee meeting in July has been a partial unwinding of long dollar positions.

The strategists had previously flagged the Jackson Hole symposium as a "key risk event" for both bonds and the dollar. They said that following the Treasury's intervention, the Fed could also "play its part" in curbing long-end yields by either adopting a more hawkish policy stance or offering clearer guidance on the inflation outlook and its policy reaction function. "We expect Chair Warsh to adjust his communication tone to help discipline the bond market. If not, we fear long-end yields could quickly push above 5.5%," they wrote. The note also said, "If his speech focuses only on broad structural themes like productivity and demographics, the market could read that as a dovish signal."

Early Wednesday morning, the 30-year Treasury yield was at 5.173%, while the benchmark 10-year yield sat around 4.64%. Bank of America's strategists added that the FX market is also "passively positioned" heading into Jackson Hole. "Following the Treasury's announcement of expanded bond buybacks last week, the dollar depreciated broadly. The dollar has acted as a pressure release valve in this effort to actively push down U.S. Treasury yields," they said. "A string of dollar-negative events have piled up recently, including the surprise dovish signal from the July FOMC meeting and a run of weaker U.S. economic and inflation data through August."

Some institutions, however, believe Warsh may not offer any clues on the policy path in the coming days. Morgan Stanley's economists wrote in a Monday note: "We believe Chair Warsh genuinely wants to reduce his public communications. We do not expect him to provide any clear insight into the near-term economic and monetary policy outlook."

Stifel, in a note this week, said, "We expect Jackson Hole to deliver a dovish signal, a steeper yield curve, and a weaker dollar."

Benjamin D. Jones, global head of research at Invesco, said in a Wednesday note: "The tone of Warsh's speech at Jackson Hole this week could determine how far the 10-year Treasury yield is from the key 5% threshold. I will focus on three things: how he weighs economic growth against inflation; whether he acknowledges the rise in term premia; and whether he believes financial innovation is changing the transmission mechanism of monetary policy." Jones said a dovish speech would be positive for the short end of the yield curve but would push up long-end yields and inflation expectations, while further pressuring the dollar and boosting gold prices, steepening the yield curve. He added that a hawkish speech could restore some policy credibility and support the long end of the bond market, but would tighten financial conditions in some consumer sectors already hit by high oil prices.

"Whatever he says, I think higher yields remain the path of least resistance," Jones said. "Multiple forces are pushing long-term yields higher: nominal economic resilience, lingering inflation risks, massive sovereign funding needs, rising yields in Japan, and capital competition from the AI investment boom." Jones noted that while many market participants underestimate the likelihood of the 10-year yield breaking above 5%, he believes a break above 5% would not be devastating for the economy or the stock market. He said the Treasury's recent move to expand long-dated bond buybacks is "very telling," indicating that U.S. officials are uneasy about rising long-end yields. "If Warsh shares that view, his speech is more likely to lean hawkish."