Federal Reserve Chairman Jerome Powell announces it’s time to cut interest rates

Once again, the governors of the world’s largest central banks met in the paradise city Jackson Holein the state of Wyoming, at the foot of Grand Teton National Park.

1. Jerome Powell’s Speech
2. Assistants
3. The Importance of Jackson Hole
4. The Future of Types

This meeting, organized annually, Bank Kansas City Federal Reserve Since 1982, it has included, in addition to representatives of central banks, the president Federal Reserve System An American at the helm, to economists, experts and the specialized press.

Jerome Powell’s Speech

As every year, the strong point is undoubtedly Speech by the President of the Federal Reserve System of the United States. Jerome Powellwho is participating in this forum for the seventh time. His intervention was the most anticipated, as it was expected to confirm a change in the upward trend in the monetary policy of central banks from 2022.

And Powell did not disappoint analysts; in his speech, he noted that “the economy continues to grow at a solid pace. But inflation and labor market data show developments. Risks of rising inflation have diminished. And risks of falling employment have increased.”

The diagnosis that led to the expected announcement: “It’s time to adjust monetary policy. The direction ahead is clear, and the timing and pace of rate cuts “They will depend on new data, evolving prospects and the balance of risks.”

The decision to begin cutting rates was motivated by the recent deterioration in economic data in the US, particularly rising inflation and worsening situation on the labor market. Powell said, “We will do everything we can to support a strong labor market while continuing to move toward price stability. With appropriate monetary easing, there is good reason to believe that the economy will again reach 2% inflation, while maintaining the strength of the labour market. “The current level of our policy rate gives us ample room to respond to any risks we may face, including the risk of further unwelcome weakening of labour market conditions.”

It is important to remember that The Fed began raising interest rates in March 2022 from levels close to zero.which was adopted to overcome the economic crisis caused by the pandemic. Currently, the Federal Reserve rates are between 5.25% and 5.5% – a level they have maintained for a year.

Assistants

In addition to US Federal Reserve President Jerome Powell, whose speech is the highlight of the forum, and Jeffrey Schmid, President and CEO, Federal Reserve Bank of Kansas CityThe event was organized by representatives of various banking organizations.

From the side European Central Bank was present Philip Lane, Member of the Executive Councilwho represented President Christine Lagarde, who was present at other editions of the forum.

was also present Andrew Bailey, Governor of the Bank of Englandwhich was the first among Western central banks to begin cutting interest rates by 0.25%, to 5%.

Bailey himself pointed out to the press a few months ago that “there is no law that says the Federal Reserve has to act first and everyone else, including us, has to act later.”

Other banking representatives present at this edition of Jackson Hole were Andrea Meckler, Deputy Director General of the Bank for International Settlements (BIS); Ida Wolden Bach, Governor of Norges Bank (Norway); and Roberto Campos Neto, Governor of the Bank of Brazil.

In addition, it was attended by various professors and experts from the universities of Harvard, MIT, Stanford, Duke, Chicago, Columbia, California and others.

The Importance of Jackson Hole

Historically, this forum has been used to analyze the effectiveness of central banks’ monetary policies and to put forward new proposals. But for the press and analysts, the most important thing is that in the speeches of governors and presidents you can see How will global monetary policy develop in the coming months and what will happen to interest rates?.

The direction that markets take in the coming months depends on the findings of Jackson Hole and, especially, the speech of the Federal Reserve President.

A moderate speech like Powell’s about adjusting interest rates to the needs of the economy, fighting inflation and stimulating the labor market would serve to calm stock markets after the turmoil of recent weeks.

The Future of Types

In any case, we will have to watch future changes in US interest rates. Before Jackson Hole, market rates were based on up to six rate cuts at next Fed meetings through January.

After Powell’s speech, it seems that the market was right, although everything will depend on the results that the US economy will offer, which, let’s not forget, is very well aware of the election race. And this ultimately affects world markets. As the saying goes, if America sneezes, the world will catch a cold.