Jerome Powell, Chairman of the Federal Reserve, said, “Time has come,” effectively indicating that the interest rate will be cut at the September Federal Open Market Committee (FOMC) meeting. Following Chairman Powell’s remarks, the New York stock market rose in unison and Treasury yields plummeted. However, Chairman Powell did not specifically mention the timing or scale of the cut, which was the focus of the market’s attention that day.
Chairman Powell said this at the Jackson Hole Economic Symposium held in Grand Teton National Park, Wyoming, in the northwestern U.S. on the 23rd (local time), saying, “Inflation has declined significantly and the labor market is no longer overheated. The balance of risks to our two missions (of price stability and employment stability) has shifted.”
The Jackson Hole Economic Symposium is an annual meeting of central bankers from around the world held at the end of August, hosted by the Federal Reserve Bank of Kansas City. The keynote speech of this event is given by the Chairman of the Federal Reserve, and the world’s attention has been focused on this speech every year, as it provides insight into the direction of the Fed’s important monetary policies. This year, in particular, the market’s keen interest was focused on whether Chairman Powell would end the era of high interest rates that has continued for two and a half years since March 2022, and if so, to what extent.
In his speech on the topic of “Effectiveness and Delivery of Monetary Policy,” Chairman Powell said, “The path forward is clear, and the timing and pace of rate cuts will depend on incoming data, changing outlook, and the balance of risks.” He said, “Our goal is to restore price stability while maintaining a strong labor market and avoid a sharp increase in the unemployment rate,” and “The task is not over, but we have made significant progress toward that outcome.”
The speech came at a time when the US inflation rate has entered the ‘2% range’ but has not yet reached the ‘2%’ target that has been set. Personal consumption expenditures (PCE), the Fed’s preferred indicator for measuring inflation, was 2.5% year-on-year as of June, a significant drop from the 7% range in 2022. On the other hand, the unemployment rate began to rise a year ago and recently rose to 4.3%, up about 1 percentage point from last year. Powell interpreted that “the rise in the unemployment rate is not due to the large-scale increase in layoffs that occurs during a recession,” but “rather, it is caused by a significant increase in the labor supply and a slowdown from the previous rapid hiring pace.”
Powell was optimistic that the Fed’s appropriate easing of policy could help the economy return to 2% inflation while maintaining a strong labor market. He said, “The current policy rate level gives policymakers ample room to respond to all the risks we might face.” Regarding the recent years of inflation, he said, “Most of the inflation has been driven by the intense conflict between temporarily overheated and distorted demand and limited supply due to the pandemic.” He added, “The important lesson from recent experience is that active central bank action can lower inflation expectations without an economic recession.”
“The pandemic has made it clear that our (traditional economic) knowledge has its limits,” he said in closing remarks. “We need to learn from the lessons of the past and apply them flexibly to the challenges of the present.”
New York = Correspondent Im Woo-sun [email protected]
-
- great
- 0dog
-
- I’m sad
- 0dog
-
- I’m angry
- 0dog
-
- I recommend it
- dog
Hot news right now
2024-08-24 07:49:17