Jerome Powell Delivers a Speech at the Jackson Hole Symposium at 3:05 BST. Key insights from the Federal Reserve Chairman, Jerome Powell:
- In the face of persistent growth above the trend, there may be a need to tighten monetary policy.
- Powell focuses on the PCE inflation, which has not fallen as sharply as other measures of price pressure in the economy.
- The Fed is ready to raise rates further, and will maintain policy levels until inflation aligns with their objective.
- There may be a need for tightening measures in the face of persistent above-trend growth
- The dollar depreciated at the beginning of the speech but then began to strengthen again, and EUR/USD is now below the level from before the speech
- US rate futures slightly pare back chances of rate hike in November and December after Fed's Powell speech - FedWatch
- Inflation challenges: challenges like strong demand, pandemic-induced supply constraints, and external events like Russia's war in Ukraine have influenced inflation.
- Factors driving inflation: factors include supply-demand imbalances for goods like vehicles due to semiconductor shortages, impacts on housing due to mortgage rate changes, and service inflation (e.g., healthcare, accommodations)
- Jerome Powell highlights that the FED observes deteriorating US macro indicators, such as industrial production and residential investment. However, they also see other strong parts of the US economy which could exert pressure on future inflation data. Job openings remain high but are trending lower. Overall GDP growth has been robust and above expectations.
- The Fed observes a slight normalization of the labor market following strong post-pandemic data but overall the labor market still still remians tight, and adjustments are essential for price stability
- Fed Swaps are steady, and price around 20% odds of 25 bps September rate hike
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