Powell acknowledges that inflation is out of control. Slowing growth in the United States
The head of the US Federal Reserve acknowledged that inflation in the United States is out of control and that returning it to normal rates will take longer than expected. He also indicated that the measures needed to combat inflation would be harsh and uncertain, negatively affecting the labor market and causing increased pressures on people with low incomes.
He has explicitly admitted that monetary policy will be tighter in the coming months in an attempt to curb inflation and reduce it to the target level of 2%, but in the same sentence he also said that interest rates will remain high for a longer period than was previously expected and that they are likely to reach Approximately 4% by the end of the year 2023.
“While the lower inflation readings for July are welcome, the improvement in one month is much less than what the committee will need to see before we can be confident of lower inflation.” — Jerome Powell. He also said, “Our decision at the September meeting will depend on the totality of incoming data and changing expectations. At some point, as the monetary policy stance tightens, it will probably become appropriate to slow the pace of increases.”
But when taking into account the analytical view of Jerome Powell’s speech, the lack of confidence in the text of the speech was clear, and the duplicity of orientation and the lack of clarity of the way was unclear, as he showed a neutral tone when talking about the future trend in the rates of raising interest rates, and this sparked a fit of anxiety after he showed Strong tone at the beginning of the speech.
Both bonds and stocks seemed to be shaken by Powell, who made candid comments about the central bank’s commitment to lower high inflation Friday during a speech at the Federal Reserve’s annual symposium in Jackson Hole, Kansas City.
Powell said the Fed will continue to fight even if it means pain for US families and businesses, and his comments appear to frustrate investor feedback about the next pivot away from aggressive rate hikes.
Stocks had a boost for the second week in a row last Thursday, but the bearish reaction to Paul Jackson Hole’s speech pushed the market decisively into the red.
loss of momentum
Markets have lost the momentum they gained after Powell’s comments, said Chris Larkin, managing director of e-commerce trading firm E-Trade of Morgan Stanley, and Larkin said Powell also referred to a resilient job market, indicating that he is willing to allow unemployment to rise.
This means that another strong reading of the job growth situation in August could help strengthen the Fed’s resolve, Ipek Ozkardskaya, chief analyst at Swissquote, said in a note to clients.
The chief analyst at Swissquote added that even if the data comes in below economists’ expectations, investors should not expect to see any change in the Fed’s outlook.
“Going forward, we expect to see a deeper downward correction in equities, and a further correction of the summer rally,” Ozkardskaya continued.
dollar now
And after a violent awakening of the US dollar index against a basket of major currencies during last Friday’s trading, which continued in early trading on Monday.
The dollar index fell from a 20-year peak to fall below 109.48 levels, down to levels near 108.5 points, against a basket of major currencies during these moments of Monday’s trading.
gold shine
While the dollar was riding a horse of gains, gold prices rebounded, which headed in early trading towards the 1720-dollar area, which is the lowest for the yellow metal in more than a month.
And the prices of XAU/USD – the spot gold contracts for the US dollar, rose during these moments of trading today, Monday, to levels of $1,742.55 an ounce, an increase of around $4.
