Fed president makes it clear that the fight against inflation is the priority goal for the organization and the losses are imposed on the stock markets
Loud and clear message from US Federal Reserve (Fed) President Jerome Powell to the global economy: the priority of the monetary organization remains the fight against inflation, even if that path eventually leads to a recession.
The idyllic mountains of Jackson Hole, where the world’s major central bankers gather this Thursday, has not dampened Powell’s spirit, who in an unusual six-page speech – repeating the word inflation up to 47 times – assured that “another unusual big walk may be needed” at the next meeting in September. That’s another 75 basis points higher.
The official thus ended the market’s hopes that the agency could start slowing the pace of rate hikes, especially after noting the July inflation rate, which fell to 8.5%, showing that the price rise could have reached the ceiling in the first world power. But not for them. “While July’s inflation reading is welcome, just one month of improvement is not enough for the Committee to be confident that inflation is falling,” he said during his speech.
It’s more. He is confident that higher interest rates, lower growth and easing labor market conditions will help ease inflationary pressures. But he acknowledges that, as a toll to be paid, “they will hurt families and businesses as well.”
An expression that has taken the market by surprise, which is well aware that private consumption accounts for nearly 70% of US GDP. Powell acknowledged that “reducing inflation from current levels will entail a sustained period of below-average growth”. But he assures that any “failure” on the path to achieving price stability “would do much greater damage”.
In an effort to prevent investors from viewing his speech as a message of doom and gloom rather than a show of hardness, Powell also noted that if monetary policy tightening continues, “it will be appropriate to slow down.”
Despite this nod to the market, the downward reaction was not long in coming, after a few days of some moves in which investors were practically paralyzed in anticipation of this important event. The declines were accentuated on Wall Street with losses of more than 500 points (-1.65%) for the Dow Jones, while the S&P 500 and Nasdaq lost more than 2%.
Losses in Europe were also high, albeit more moderate than on the other side of the Atlantic. They exceed 2% in the case of the German Dax and the Italian FTSE MIB, while the Ibex-35 leaves 1.5% on the brink of losing even 8,000 points.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
