Chief of the Fed navigates unsafe political and economic waters

Fed chair Jerome Powell’s highly anticipated speech: what to expect

Fed chair Jerome Powell’s highly anticipated speech: what to expect

Powell's speech at the annual symposium of central bankers in Jackson Hole was always slated as a likely pivotal moment for the Dollar, largely due to a more temperate outlook for the USA and global economies, risks stemming from the so-called "trade war" with China and a recent rout in emerging markets.

Federal Reserve chair Jerome Powell sees plenty of reasons the US economy's strong run will continue.

Even so, Fed watchers fully expect another quarter-point hike in the federal funds rate at the September meeting.

In an address, Powell stayed resolutely focused on the policy debate and the challenges facing the Fed's rate-setting Federal Open Market Committee (FOMC) and made it clear officials were focused on the economic data.

Kaplan, a centrist who has always voted with the majority at the Fed, said he thinks the central bank needs to raise rates three or four more times over the next nine to 12 months to prevent overheating an economy with an already-low unemployment rate of 3.9 per cent and expected strong economic growth of three per cent this year.

Although Trump appointed Powell, he criticised the Fed chairman for not doing enough to support trade negotiations around the world by setting monetary policy to support the U.S. economy.

The Fed should raise rates further this year and probably next year as well, despite Trump's opposition to tighter policy, Kansas City Fed President Esther George said in interviews aired on Thursday.

Policy Mistake Powell said the FOMC must balance the threat of moving too fast and shortening the expansion, or moving too slowly and allowing for overheating.

The week began with U.S. President Donald Trump saying he was "not thrilled" with the Federal Reserve under his own appointee, Chairman Jerome Powell, for raising interest rates.

In his remarks, Powell discussed the 1 percentage point decline in Fed policymakers' assessment of the natural rate of unemployment and the neutral interest rate since the US central bank began raising rates in December 2015. "The unemployment rate has declined steadily for nearly nine years and, at 3.9 percent, is now near a 20-year low".

Analysts said growing USA political uncertainty, reinforced by the criminal convictions of two of Trump's ex-advisors this week, was keeping the dollar under pressure, despite the United States embarking on greater monetary tightening than elsewhere.

St. Louis Fed President James Bullard said earlier on Friday he'd prefer a pause on the rate hikes, given that the economic stimulus from the Trump administration's tax cuts and a budget agreement that boosts government spending will likely fade next year.

Questioning Fed actions is normally off limits for U.S. politicians, since it could raise fears central bankers would feel political pressure and fail to act to head off rising inflation. He insisted that it was the Fed's policy to support continued growth rather than attempt to slow down the economy. Most people who want jobs can find them.

Trump believes that rate hikes would hinder economic growth and put a cap on the bullish US stock market. Pearce said he saw Powell's comments as signaling that the central bank will continue raising rates gradually over the next year. Trump was once again scolded by the press for criticizing the Fed a second time.

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