U.S. Federal Reserve Chairman Jerome Powell will speak at the annual meeting of global central banks in Jackson Hole next Friday (26), and economists believe Powell will take advantage of the high-profile opportunity , expressing a hawkish stance that it will work hard to suppress inflation even in a recession.
The three-day annual meeting of global central banks will be held in Jackson Hole, Wyoming, the United States next week. Powell is scheduled to give a speech at 10 a.m. on Friday (10 p.m. on the 26th in Taiwan), and is expected to try to play down the market’s interest in policy changes. Dove expectations, and this move is bound to trigger market volatility.
“(Ball’s) core message will be to demonstrate the Fed’s firm determination to rein in inflation, even if they know it will run a huge risk that the short-term growth outlook will be weaker than they expect,” said Lou Crandall, chief economist at Wrighton ICAP.
He sees a grim test for the stock market ahead of Ball’s speech.
Before Ball’s speech and the opening of US stocks that day, the US will announce the annual growth rate of the core personal consumption expenditures price index (PCE), an inflation indicator that the Fed’s decision-making preference refers to. Data earlier this month showed U.S. consumer price inflation edged down to an annualized 8.5 percent in July, but still more than four times the Fed’s 2 percent target.
three themes
Bloomberg columnist Bill Dudley said Ball’s “inflation tentative” at last year’s annual meeting proved to be completely wrong in hindsight, making it harder for him to convince his audience this year. Many have dismissed his recent warnings of a strong fight once morest inflation, arguing that as long as economic growth slows, the Fed will cut rates even before inflation returns to 2%.
Dudley predicts three major themes will be emphasized in Ball’s speech this year. The first is that the economy still has forward momentum, the labor market is extremely tight, and inflation is unacceptably high. % inflation target, will not relax.
To deliver those messages truthfully, Powell must convince the market that the Fed will soon end the tightening. While the Fed’s July meeting minutes released on Wednesday were clearly hawkish, U.S. stocks cheered the day that rate hikes might eventually be slowed.
Therefore, Dudley believes that Powell must make it clear that even if the Fed moves to a smaller rate hike in the next few months, it does not necessarily mean that the end rate level is lower.
May avoid talk of September gains
Investors are debating whether the Fed will raise interest rates for a third time by 75 basis points (3 yards) at its Sept. 20-21 meeting, but economists are divided on whether Powell will mention the matter next week.
Over the past two weeks, several Fed officials have said they have a consensus on continuing to raise interest rates, but disagree on whether to raise rates by 2 or 3. Economic data between the end of the Jackson Hole annual meeting and the meeting in late September will be the focus of observation.
U.S. stocks slumped on Friday amid talk of officials raising interest rates.S&P 500 IndexIt closed down 1.3%, the largest one-day decline since June, and this week also closed in the black, ending a four-week winning streak.
Stephenn Stanley, chief economist at Amherst Pierpoint, predicts that Powell will discuss broader aspects and will not focus on the September meeting. In addition, Powell may emphasize that there will be a long period of time between the last rate hike and the first rate cut following that.
In response to the impact of the long-term inflationary war on the economy, Avery Shenfeld, chief economist of CIBC global markets, said that the US economy still has the possibility of a soft landing, that is, inflation will decline in 2023 without causing a recession, but for the Fed, More worrying is whether 2023 will be enough to keep inflation low in 2024.
