2023-08-26 03:00:09
The Western world is not done with high interest rates: the message, coming from the main big moneymakers of the planet, was unambiguous, Friday August 25, during the annual conference of the American Federal Reserve (Fed) in Jackson Hole, in the heart of the Wyoming mountains. Its president, Jerome Powell, as well as his counterpart from the European Central Bank (ECB), Christine Lagarde, repeated that the fight against soaring prices still had to continue. “Although inflation has come down from its peak, which is good news, it is still too high”Mr. Powell explained. “The fight against inflation is not yet won”added M.me Lagarde.
A year ago, the previous Jackson Hole symposium marked a turning point. The Fed, the ECB and the Bank of England were surprised by their determination to bring inflation down to 2%, their official target, at all costs, saying they were ready to stifle growth if necessary. The era of exceptionally low interest rates, which began with the 2008 financial crisis, was closing. All in all, the Fed raised its rate from zero to 5.25%, the ECB from −0.5% to 3.75%, and the Bank of England from 0.1% to 5.25%. Monetary tightening of this magnitude and at this speed had not been implemented since the 1980s.
But, for the past few months, the signs that inflation has started to ebb have multiplied. In the United States, the rise in prices fell from a peak of 9.1% in June 2022 (on an annual basis) to 3.2% in July 2023. In the euro zone, the movement, which began a few months after that of the United States, is not quite as advanced, but is following the same trend: inflation fell from 10.6% in October 2022 (year-on-year) to 5.3% in July 2023. In this context , the question in Jackson Hole was whether central banks would take a break.
“We will act with caution”
Probably not yet, replied Mr. Powell on the American side. “We are ready to raise rates further if appropriate and we plan to maintain the policy [monétaire] at a restrictive level until we are confident that inflation is heading sustainably towards our target. » Sign of an inflection, however, he is cautious: “We sail by starlight under cloudy skies. We will proceed with caution. »
The financial markets derive a mixed message from this: “A further rate hike remains highly uncertain – I suspect there won’t be one – but traders are beginning to accept that rates will stay where they are for longer than they anticipated”, said Craig Erlam, an analyst at Oanda, a brokerage platform.
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