Washington: american central banker The same message is sending door-to-door: interest rates will go up until inflation comes down. but financial Market Keep expecting to hear a different tune, indicating that the rate increase will slow down.
All eyes will be on this week’s annual meeting of policymakers in Jackson Hole, Wyoming federal Reserve Chair Jerome Powell Explain your stance – again – expect market watchers to find something more to their liking.
The Fed may be a victim of its own success.
A sharp rise in prices, which hit a 40-year high following Russia’s invasion of Ukraine, prompted the central bank to take aggressive action, after keeping the benchmark lending rate at zero throughout the pandemic.
In a fight to control red-hot inflation, which topped nine percent in June, the Fed has raised rates four times, including massive, three-quarter point hikes in June and July – the early 1980s Unheard moves.
But price pressures and signs of a slowing economy in recent weeks, along with falling energy costs and signs that the global supply chain has slackened, have left financial markets optimistic that the Fed will dial back or even cut rates. Growth will halt – and may even begin to cut – next year.
Stocks on Wall Street have risen for four weeks in a row, despite repeating the message from a string of executives that rates will continue to rise, even as annual inflation slowed in July as oil prices fell.
While the annual gathering often becomes a place for global central bankers to signal transfer policy, Powell is expected to repeat that message on Friday – though he may acknowledge the recession will come later in the year.
Barclays’ Jonathan Miller said, “It seems from what we’ve heard from Powell so far that it’s a pretty high bar for him to transition from aggressive increases” to a slower pace of 25 basis point steps.
Miller, who served as a Fed economist and forecaster under four central bank chiefs, told AFP that markets were looking ahead, predicting that rate hikes would be successful in slowing inflation.
But for policymakers “one thing they want to point out for sure is that they focus too heavily on price stability issues and that they look very carefully at any signs of improvement in inflation data.” Will react.”
This means that there are signs of further downside in prices and not just because of falling oil.
“Managing market expectations” is really a task, Miller said. “They have to enforce that credibility.”
But he, like other economists, believes the Fed’s policy-making Federal Open Market Committee (FOMC) will raise 0.5 percentage points at its September meeting, raising the prime lending rate range from 2.75 to 3.0 percent. , which is to be followed. With quarter-point growth in November and December.
While confirming the Fed’s resolve, the dilemma for Powell is to recognize progress in achieving a soft landing – pushing inflation back toward the two percent target without derailing economic growth, said Cathy Bosjanic of Oxford Economics.
“He continues to walk a narrow line,” she told AFP. “You don’t want to be too pessimistic.”
And with his rapid cooling of housing prices and sales as well as other encouraging data “has the wind on his back.”
But she added, “the message they really have to give is that we are still trying to raise rates to a restrictive level to make sure inflation is still our number one priority.”
The annual monetary policy symposium, hosted by the Kansas City Federal Reserve Bank, runs August 25-27. It is often a place for executives around the world to discuss policy changes at work, but Powell is virtually the only major global central bank chief confirmed to speak at the event.
European Central Bank chief Christine Lagarde does not plan to attend, Bank of England governor Andrew Bailey is expected to be there but cannot speak. Bank of France Governor Francois Villeroy de Galhau is due to deliver a speech on Saturday.
All eyes will be on this week’s annual meeting of policymakers in Jackson Hole, Wyoming federal Reserve Chair Jerome Powell Explain your stance – again – expect market watchers to find something more to their liking.
The Fed may be a victim of its own success.
A sharp rise in prices, which hit a 40-year high following Russia’s invasion of Ukraine, prompted the central bank to take aggressive action, after keeping the benchmark lending rate at zero throughout the pandemic.
In a fight to control red-hot inflation, which topped nine percent in June, the Fed has raised rates four times, including massive, three-quarter point hikes in June and July – the early 1980s Unheard moves.
But price pressures and signs of a slowing economy in recent weeks, along with falling energy costs and signs that the global supply chain has slackened, have left financial markets optimistic that the Fed will dial back or even cut rates. Growth will halt – and may even begin to cut – next year.
Stocks on Wall Street have risen for four weeks in a row, despite repeating the message from a string of executives that rates will continue to rise, even as annual inflation slowed in July as oil prices fell.
While the annual gathering often becomes a place for global central bankers to signal transfer policy, Powell is expected to repeat that message on Friday – though he may acknowledge the recession will come later in the year.
Barclays’ Jonathan Miller said, “It seems from what we’ve heard from Powell so far that it’s a pretty high bar for him to transition from aggressive increases” to a slower pace of 25 basis point steps.
Miller, who served as a Fed economist and forecaster under four central bank chiefs, told AFP that markets were looking ahead, predicting that rate hikes would be successful in slowing inflation.
But for policymakers “one thing they want to point out for sure is that they focus too heavily on price stability issues and that they look very carefully at any signs of improvement in inflation data.” Will react.”
This means that there are signs of further downside in prices and not just because of falling oil.
“Managing market expectations” is really a task, Miller said. “They have to enforce that credibility.”
But he, like other economists, believes the Fed’s policy-making Federal Open Market Committee (FOMC) will raise 0.5 percentage points at its September meeting, raising the prime lending rate range from 2.75 to 3.0 percent. , which is to be followed. With quarter-point growth in November and December.
While confirming the Fed’s resolve, the dilemma for Powell is to recognize progress in achieving a soft landing – pushing inflation back toward the two percent target without derailing economic growth, said Cathy Bosjanic of Oxford Economics.
“He continues to walk a narrow line,” she told AFP. “You don’t want to be too pessimistic.”
And with his rapid cooling of housing prices and sales as well as other encouraging data “has the wind on his back.”
But she added, “the message they really have to give is that we are still trying to raise rates to a restrictive level to make sure inflation is still our number one priority.”
The annual monetary policy symposium, hosted by the Kansas City Federal Reserve Bank, runs August 25-27. It is often a place for executives around the world to discuss policy changes at work, but Powell is virtually the only major global central bank chief confirmed to speak at the event.
European Central Bank chief Christine Lagarde does not plan to attend, Bank of England governor Andrew Bailey is expected to be there but cannot speak. Bank of France Governor Francois Villeroy de Galhau is due to deliver a speech on Saturday.