Jerome Powell's Speech at Jackson Hole: US economy, inflation, and the Fed's next move

2023-08-25 00:39:29

New York, Aug 24 (EFE).- The president of the United States Federal Reserve (Fed), Jerome Powell, will return this Friday to the town of Jackson Hole (Wyoming), where the famous economic conference of the same is held every year name, with inflation finally going down but far from the regulators’ target of 2%.

Still, the head of the US central bank has reason to celebrate: after embarking on a series of hikes in the official interest rate that have brought it to its highest level in two decades, the country’s economy is showing signs of resilience and seems to enter that “soft landing” (soft landing) that many economists saw as unlikely.

The latest inflation data, that of July, was 3.2%, slightly above that registered in June but well below the maximum of 9.1% reached just a year ago -while core inflation, the most Control the Fed, keep going down.

Meanwhile, the unemployment rate remains at a solid 3.5%, a situation generally considered full employment, despite new job creation slowing as high interest rates cool the economy. US.

COLDER YET?

But how much cooling is needed to keep inflation subdued without ripping the labor market’s hot streak? That is Powell’s main challenge, and businessmen and economists around the world will be scrutinizing his speech, scheduled for 14:05 GMT on Friday, for clues as to where the Fed will go in the coming months.

Even more so when it is barely a few months since the first big scare since the central bank began raising rates: the collapse of the firms Silicon Valley Bank and Signature Bank (and, later, the First Republic) after being beset by problems of liquidity exacerbated by the transition to a restrictive monetary policy.

The bank panic was then mitigated thanks, in part, to the speed and forcefulness of the Fed and the Treasury Department, which intervened in risky firms and approved new credit instruments to ensure bank liquidity.

However, fear of the ever-present 2008 crisis led many analysts to speculate that the Fed may end its rate hikes to ensure stability in the sector.

They weren’t far off the mark: in June, the central bank made a point and continued with its restrictive rate policy, pausing the increases for the first time since March of last year while assessing their effects on the economy.

But the restraint did not last long and the Fed governors decided to continue their hikes a month later, raising rates by 0.25 percentage points in July, to a range between 5.25 and 5.5%.

This figure is in line with the estimates of the central bank itself, which in its latest forecast report suggested that the rate will stand at 5.5% by the end of the year – somewhat above its March estimates, a sample of what persistent inflation.

Depending on what the Fed governors read of the economic situation, July could be the last rate hike. Or it could also be the beginning of the last push by the authorities to reach that long-awaited 2% inflation that some experts already consider a chimera.

In addition to Powell’s speech, the President of the European Central Bank (ECB), Christine Lagarde (on Friday at 19:00 GMT), the Deputy Governor for Monetary Policy of the Bank of England Ben Broadbent (on Saturday at 16.25 GMT), and the Governor of the Bank of Japan, Kazuo Ueda (also on Saturday, at the same time).