The Fed arrives at the conclave of central banks with more doubts than certainties about interest rates and a possible last adjustment in 2023.
Investor Key: Market Bets Awaiting Powell’s Speech
As the annual conference of central banks approaches in jackson holean event that brings together financial experts and economists from around the world, the attention of the financial and media community focuses on the speech of the president of the US Federal Reserve, Jerome Powell.
Over the years, the Friday morning presentation is the highlight, so it generates expectations and reactions in the markets and public opinion. This year, in particular, the president of the fed is in a highly complex and dynamic context, with economic and political challenges of great magnitude.
Historically, the presidents of the Federal Reserve have adopted one of three approaches in his speeches jackson hole.
- Some have chosen to point to imminent measures of monetary politicsfocusing on the short term and interest rates.
- Others have delved into questions of long-term monetary policy, considering the adequacy of the objectives of inflation and the adaptation of institutional frameworks to economic and technological changes.
- And finally, there is the strategy of focusing on specific economic issues that have few immediate implications, which could Be cautious in certain contexts.
Jackson Hole: the background
In the last speech of Powell in Jackson Holethe Fed chair opted for a short-term approach, highlighting the potential costs of rreduce inflation through measures like interest rates higher. However, this narrative did not materialize in practice, as the US economy experienced strong growth and historically low unemployment. This raises the question of whether Powell should consider a longer-term perspective this time around.
The Fed operates under a “new monetary framework” that needs constant review and adaptation to be relevant today. Industrial policy and structural changes in the economy pose significant challenges in terms of objectives of inflationadaptation of fiscal and monetary policies, and the need to evaluate past errors to maintain the credibility of the central bank and its independence.
jerome powell
In that context, Powell You have a wide range of topics to consider in your speech.
While all three strategies have their pros and cons, at this economic, political, and institutional juncture, it might be prudent to go with the third approach: focus on a specific economic issue that has few immediate implications.
This could not only help to avoid misunderstandings and overreactions in the marketsbut could also allow for a deeper exploration of fundamental issues facing the economy both nationally and globally.
Ultimately, Powell’s Jackson Hole speech will be a reflection of your strategic decisions and its risk analysis. Regardless of the approach you choose, your message will resonate with markets and the economic community, and will have an impact on the financial perspectives and decision-making in the coming months.
Source: Ambito
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