Fed chairman Jerome Powell began his speech in Jackson Hole, Wyoming. Here are the highlights of what Powell said at the economics symposium.
- We are prepared to raise interest rates further if appropriate.
- We intend to keep interest rates at a restrictive level until we are confident that inflation has come down to 2% sustainably.
- The FED will decide on the next rate move based on the data.
- Economic uncertainty requires 'agile' decisions.
- The FED will act 'cautiously' in deciding whether to raise interest rates again or to hold them steady.
- Persistent growth above the trend may require tightening.
- Two months of good data is just the beginning of what we need to build confidence on the inflation path.
- Policy is restrictive, but the Fed is unsure what the neutral rate level is.
- After the Fed's Powell speech, US futures contracts slightly reduced the possibility of a rate hike in November and December.
- Above-trend growth may require further rate hikes.
- The FED is aware that monetary policy faces risks on both sides.
- We have to proceed carefully.
- Inflation data is more positive, but there is a long way to go.
- Our inflation target is still at two percent and will remain so.
Bitcoin's price action during Powell's speech:
The Fed Chairman's speech at the annual central bankers conference coincides with a time of heightened uncertainty over the economy and interest rate policies. Businesses are still hiring, and consumer spending remains resilient even as inflation slows to 3.2% from its June 2022 peak of 9.1%.
At the same time, “core” inflation, which excludes fluctuating food and energy prices, remained high at 4.7% despite the Fed's series of 11 rate hikes that began in March 2022. The Fed has made borrowing much more expensive for consumers and businesses by raising the basic interest rate from near zero to a 22-year high of 5.4%.
Surprisingly, despite the Fed's aggressive rate hikes, the U.S. unemployment rate stands exactly where it was when Powell spoke last year: 3.5, just above the 50-year low.
A year ago, again in Jackson Hole, Powell warned that the Fed's rate hikes “will bring some pain to households and businesses”, possibly in the form of job losses and a potential recession.
*Not investment advice.
