2023-08-26 11:00:45
The difficult balance that currently corresponds to the monetary politics To combat inflation with interest rate rises without strangling the growth of the economy and employment is even more complicated on this side of the Atlantic, in Europe, than on the United States. The rise in rates seeks to curb consumption and investment to stop inflation, but going too far could lead to the drama of recession.
At the informal annual meeting, which has been held in Jackson Hole (Wyoming) since 1982, the Chairman of the Federal Reserve, Jerome Powell, has hinted that the US economy can still take a further turn of the screw without strangulation. The truth is that despite the fact that interest rates have risen 5.25 points since March 2022, the US economy is growing at quarterly rates above 0.5%, with a tiny unemployment rate of 3.5% and an inflation that has yielded to around 3%. If Powell wants to keep screwing inflation, he possibly can do it without the economy falling into a destructive recession (at most a slight recession is expected in the latter part of the year).
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In Europe, with deeper wounds from the consequences of the Russian invasion of Ukraine, the situation is more delicate. The euro zone economy has barely dodged the technical recession in the first part of the year and a possible decline in GDP is projected in the second half of the year, at a time when Germany is more of a drag than a locomotive. After a rate hike of 4.25 points in one year, inflation is still at 5.3% with an economy on the edge.
There was a question as to whether the mountains of Jackson Hole were going to become the stage this year in which Powell and/or Christine Lagarde They could give clues as to when the cycle change in interest rates will come, putting an end to the rises and opening the way for falls. It hasn’t been like that. The dilemma is inflation or recession.
#inflation #recession