Speeches in Jackson Hole vanquish investor hopes

2023-08-29
Summary:

On Tuesday, the head of the central bank stated at the meeting that interest rates will remain high for a longer period of time.

There was little surprise in Jackson Hole as central bankers signaled interest rates will likely stay higher for longer. The Fed Chair Jerome Powell indicated that the US could hike interest rates again.


In his address at the symposium, he said that the Fed is ‘prepared to raise rates further if appropriate,’ even as he stressed that monetary policy will continue to be set meeting by meeting.


Meanwhile, ECB President Christine Lagarde warned that they are ‘extremely attentive that greater volatility in relative prices does not creep into medium-term inflation through wages repeatedly chasing prices’.


The German economy has struggled for three consecutive months and a recent surveys point to euro zone’s fresh downturn, which raises doubts whether the ECB could have more rate hikes without causing unbearable pain for businesses and individuals.


However, Lagarde added that the inflation number would ‘look significant different from what we have at the moment though dependence on Russian oil and proximity to the war created unique challenges with regards to taming price pressures.


Eurozone inflation has halved from last year’s peak of 10.6 per cent, and economists polled by Reuters forecast it to slow to 5 per cent in August. But the reading stays well above that in the US which has dipped below 4%.

USDJPY

BOJ Governor Kazuo Ueda did not comment on foreign-exchange rates, but said price growth remains slower than the central bank’s goal. A widely-anticipated intervention now seems more unlikely as he tired to defend the existing ultra-low monetary policy.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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