While Asian stocks edged a tad higher on Thursday, they clung to fairly narrow trading ranges ahead of the Jackson Hole gathering and a much-awaited speech by Fed Chair Janet Yellen.

Japan's Nikkei index was slightly down, pressured by losses on Wall Street overnight and increasing investor caution ahead of Yellen's address to central bankers on Friday. Germany's DAX and the EuroStoxx50 both lost about 1 percent in early trading.

Market expectations have increased that Yellen might indicate a clearer timeframe for the next US rate hike after strong housing data this week and hawkish comments by other Fed officials.

William Dudley, president of the New York Fed, had suggested a rate hike was possible in 2016. And Dennis Lockhart of the Atlanta Fed claimed there could even be two.

Treading water

But while all members of the Federal Open Market Committee agree that interest rates will have to rise further, there's definitely no agreement on when exactly this should happen.

The US central bank already retreated earlier this year from its announced course of gradual increases, fearing for the resilience of the US economy in the face of Brexit worries and slowing Chinese growth.

Futures traders reflect just how divided the financial world is on the question of rate hikes, or rather their timing. Traders currently put the likelihood of at least one rate increase by December at 51 percent.

"I don't think the Fed will want to introduce market volatility in the run-up to the G20 summit [in China in early September], Bank of Nova Scotia strategist Gao Qi said in a statement.

And so, the new normal that policy makers and economists are confronted with is a protracted period of predominantly low interest rates, while rising employment fails to produce the expected gains in inflation and GDP growth.

Market pundits would surely welcome a clear signal from Janet Yellen in Jackson Hole. All the more so since investors are not watching a game they're used to.

"Rules that made sense 10 years ago don't make sense right now," Jared Bernstein, former economic advisor to Vice President Joe Biden, told AFP, indicating that Fed members were themselves searching for answers.

hg/sri (Reuters, AFP)