Jerome Powellpresident of the Federal Reserve of the US (Fed), presented a clear picture in his keynote address at the annual meeting of central bankers in jackson holeWyoming.
Powell reaffirmed the possibility of ffuture interest rate increases before the end of the year, underscoring the Fed’s willingness to take “necessary measures”.
In this crucial event that brings together the leaders of the main central banks worldwide and is very watched by marketsPowell made it clear that the Fed is committed to contain inflation through a “restrictive” interest rate policy.
Although inflation has shown some decline since its peak, Powell noted that it is still at elevated levels and requires attention.
In view of the next meeting of the body’s Monetary Policy Committee (FOMC), which will take place in a month, Powell indicated that they are willing to raise rates further if necessary. The Fed’s stance will continue to be “restrictive” in terms of monetary policy until they are sure that inflation is in line with your goals.
To achieve sustainable inflation of 2%, POwell emphasized that a period of economic growth below the current trend will be necessary, as well as a moderation in labor market conditions. It is clear that higher-than-expected growth could hamper progress in inflation control and require adjustments in monetary policy.
During the past 18 months, the Fed has maintained a firm focus on raising rates to prevent the consolidation of persistently high inflation expectations, which could represent important risks for the economy. Since March 2022, have made 11 consecutive raisestaking rates from levels close to zero up to the range of 5.25%-5.50%.
This increase in rates has a direct effect on the increase in the cost of credit, which in turn discourages consumption and investment, easing pressure on prices. After peaking in June 2022, close to 9% per year, inflation has gradually decreased and stood at 3% in June, according to the PCE index, which is widely followed by the Fed. Getting inflation to 2%, however, can be a significant challenge.
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He European Central Bank (ECB), under the direction of its President christine lagardefaces similar challenges. inflation in the euro zone it is moderating, albeit at a slow pace, holding at 5.3% as measured in July.
However, there is a considerable disparity between the member countries of the European Union, where some are below 2% while others, like Germany and Francehave higher rates and even Slovakia exceeds the 10%
Within the Fed, there are divergent views on whether to stop or continue rate hikes. While some believe that much of the work has already been done, others, more in favor of traditional approaches, They advocate continuing to raise rates.
Despite the series of rate hikes, the US economy continues to demonstrate resilience. Markets anticipate, with a consensus of 78% (it was previously 80% before the speech), that there will be a pause in the monetary tightening at the next Fed meeting scheduled for September 20, according to data provided by CME Group.
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