The US Federal Reserve has promised further interest rate hikes in the fight against inflation. “Restoring price stability will likely require continued tightening monetary policy for some time,” Fed Chair Jerome Powell said yesterday during his much-anticipated speech at the Jackson Hole Fed conference.
Historical experience speaks against easing monetary policy too early, Powell said, but gave no clear signals for the next interest rate meeting of the central bank. “Our decision at the September meeting will depend on the aggregate of incoming data and the evolving outlook,” said the Fed chairman. However, another “extraordinarily large” rate hike could become necessary.
The US Federal Reserve raised its key interest rate by 0.75 percentage points to between 2.25 and 2.5 percent at the most recent meeting in July. It was the fourth increase in the key interest rate since the beginning of the corona pandemic and the second increase in a row by 0.75 percentage points. The reason for the decisive action of the central bank is the very high inflation. The annual rate was 8.5 percent in July. The Fed is targeting a rate of 2 percent.
Powell’s speech was not well received on the international stock exchanges. The leading Austrian index ATX lost 1.33 percent at the end of the trading day after being in positive territory over the course of yesterday’s trading day. The US stock exchanges also lost some significantly. “We continue to expect that the Fed will raise key interest rates from the current 2.50 percent to four percent this year. However, the strong tightening of monetary policy is likely to trigger a recession next year,” wrote Christoph Balz from Commerzbank in a first statement yesterday Reaction.
The US economic data published before the speech was not exactly promising either. Consumers increased their spending in July by just 0.1 percent from the previous month, according to the Washington Department of Commerce. In June there was an increase of one percent.
The Fed is apparently willing to continue fighting inflation by any means necessary, regardless of the US economy. Fed Chair Powell appears to be ready for a recession.
Source: Nachrichten
