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Jackson Hole (USA): Central bankers, at their grand annual meeting next Thursday and Friday in the American city of Jackson Hole, are discussing the dilemma of the need to raise interest rates in the face of inflation, but not so much to avoid pushing the economy into recession.
The Grand Teton Mountains (Wyoming) host this meeting every year, led by the US Federal Reserve (Fed), since the era of its former president, Paul Volcker.
The speech of US Federal Reserve Chairman Jerome Powell, which he will deliver on Friday at 2:00 GMT, will be the most awaited moment in this “symposium”.
European Central Bank President Christine Lagarde will not travel to the United States to participate in the event, but Isabelle Schnabel, a German member of the European Central Bank’s Executive Board, will travel there, where she will participate on a committee Saturday.
In turn, Andrew Bailey, Governor of the Bank of England, confirmed that he would be present in Jackson Hole to observe the discussions without participating in them.
“The cards on the table on the economic level are this: a common enemy is inflation and the risk of the economy slowing too much. You have to choose between the two,” Grigory Volokhin, portfolio manager for Mischaert Financial Services, told AFP.
He notes, however, that “the Fed cannot say that it should choose (…) to raise unemployment to reduce inflation, but that is its option.”
Anti-inflation
This meeting is taking place at a time when central banks around the world are tightening their fiscal policies to combat inflation, with the risk of derailing the recovery.
The US Federal Reserve has raised interest rates four times since March. It started with a quarter of a percentage point, before accelerating the pace.
Inflation also began a welcome slowdown in July to 8.5 percent on an annual basis, following surpassing in June a record price increase in more than forty years, to more than 9.1 percent.
Attention now turns to the next monetary meeting on September 20-21, when another sharp rate hike by half or even three-quarters of a percentage point will be proposed.
“It is unlikely that the Jackson Hole conference will bring real news regarding the Fed’s plans for a future rate hike,” says Carola Bender, who studies economics at Haverford University (Pennsylvania).
The rates range between 2.25 and 2.50 percent, meaning they are close to the so-called “neutral” level that neither stimulates nor slows the economy, which is evaluated between 2 and 3 percent.
Jonathan Millar, an economist at Barclays, notes that Jerome Powell “will seek (in his speech) to shed light on the potential shift in monetary policy in the future. One of the things they want to communicate is that they remain very focused on price stability problems.”
Mazen Issa, foreign exchange specialist at TD Securities, expects “Jackson Hole to be very important to highlight” the theory of maintaining high rates, despite the economic slowdown.
financial policies
US GDP did indeed contract in the first two quarters of the year, in keeping with the classic definition of a recession.
But economists consider that the case is not the case today in the United States, and this is especially due to the solidity of the labor market, which returned in July to the pre-epidemic level, where the unemployment rate reached 3.5 percent, and all jobs that witnessed severe damage were re-created. .
A year ago, during this “forum”, Jerome Powell referred to “temporary factors” and warned of the dangers of premature tightening of fiscal policies. But since then, inflation has turned out to be stronger than expected, surpassing central bankers’ expectations.
In the Eurozone, the price hike reached a new record high of 8.9 percent, while Britain is also witnessing inflation reaching 10.1 percent.
Therefore, in an interview with AFP, Carola Bender notes that “there has to be a lot of discussion regarding whether there is significant damage to credibility”, given the miscalculation of the inflation trajectory, and regarding “what can be done to fix it”.
