The wait is over and today the long-awaited kicks off Jackson Hole Symposiuma summit scheduled until Saturday in the Wyoming mountain resort in which a large group of experts, from bankers to investors, economists, to members of the Biden administration will discuss the current economic environment.
Of the various speeches, undoubtedly the most awaited one is from the Fed Chairman Jerome Powell scheduled for tomorrow, Friday 26 August. From his words, the most attentive observers will try to steal anticipations on the next FOMC meeting on September 20-21, which will almost certainly lead to a rate hike. Faced with prices still on the rise, the Fed announced on Wednesday 27 July in fact a or sharp increase in the reference rates of 0.75 points. President Powell anticipated that a further “unusually high” rate hike may be needed at the next Fed meeting in September. And right in Jackson Hole, he should give more information on his intentions than him.
Jackson Hole harbinger of another rate hike?
According to Luke Bartholomew, a senior economist at abrdn, “it is hard to believe that the Fed is satisfied with the financial conditions that have become much more accommodative in the last month, as a result Powell will use his speech as an opportunity to counter the more dovish interpretation. of the Fed’s policy that has recently emerged ”. “If he doesn’t do it, the expert continues, the markets will interpret it as a green light for a further rebound in risky assets, which will likely lead to the Fed having to raise interest rates further.”
The predictions of the experts in any case have already started. First, the president of the Federal Reserve Bank of Atlanta, Raphael Bostic, told the Wall Street Journal that the US central bank still has some way to go for a further hike in interest rates this year while warning that it is too early to say that the surge in inflation has reached the his peak, although he noted that there are some hopeful signs on this front. “All of us, as policymakers, are aware that inflation is a big problem and a challenge that we will do everything we can to manage,” Bostic said in an interview on Wednesday.
Bostic said he has not yet decided whether the Fed should raise interest rates by 50 or 75 basis points at next month’s policy meeting. St. Louis Fed Governor James Bullard told the Wall Street Journal last week that as the economy is doing well and inflation remains high, he is leaning towards another 75 basis point move. next month. He is betting on a flurry of new rate hikes Nikolaj Schmidt, Chief International Economist, di T. Rowe Price. “In the eyes of the Fed, the current situation calls for resolute action in the form of an interest rate hike,” says the expert who advises taking cover as “a wild ride awaits us!”
But while everyone watches Powell’s speech, the surprise could come from ECB officials. According to John Plassard, Director & Investment Specialist del Gruppo Mirabaud, in fact, in recent weeks they have been very quiet. “We recall that the expectations of a rate hike for the next ECB meeting are very high and that more and more often Christine Lagarde is asked to become even more hawkish now that Mario Draghi is no longer at the helm of the Italian government. Furthermore, if the eurozone goes into recession before the end of the year, it is likely that the ECB will be able to accelerate the pace of rate hikes to have some ‘ammunition’ ”.
In conclusion, there is no doubt that the Jackson Hole meeting will be extremely timely this year. Amid the confusion over the Fed’s targets, central banks absolutely need to give investors answers within weeks of their upcoming meetings, which are considered crucial.