It was fireworks on Wall Street: the Nasdaq, the tech-rich index, jumped 4.06% on Wednesday July 27 while the S&P 500, which represents large American companies, rose 2.62 %: in question, the reassuring remarks of Jerome Powell, the chairman of the Federal Reserve on the American economy, which gives hope that the worst of inflation is over and that the recession can be avoided.
Admittedly, the monetary policy committee decided to increase as planned and for the second time in a row the key rates of the central bank by 0.75 points. The short-term interest rate is now in a range between 2.25% and 2.5% from just above zero in March 2022, and has been since the onset of the coronavirus pandemic. Covid-19. “The labor market is extremely tight and inflation is far too high”explained Jerome Powell.
However, the president of the institution did not rule out slowing the pace of monetary tightening. “At some point, it will be appropriate to slow down…. We could make another unusually large increase [en septembre] but it is not at all a decision that we have made, we will be guided by the data. » By the next meeting in September, the central bank will have unemployment and price inflation figures for August and September on the table. It will be able to know if it can slow the credit crunch.
The markets are anticipating that inflation will subside on its own, since ten-year rates are only 2.8% while inflation is above 9%. Long rates had reached 3.5% in June, at the worst of concerns, when the May inflation was published, just before the previous Fed meeting.
Demand Cooling
A few positive signs are appearing: the cost of raw materials, particularly energy, is falling – the price of a gallon of gasoline is only $4.30 after having exceeded $5. The price craze in air transport is fading. There is no inflation-salary spiral in the United States, which undermines purchasing power but gives hope of getting out of inflation.
Above all, Mr. Powell noted a cooling in demand: American consumers, whose morale is at an all-time low, have reoriented towards basic products. They dip into their savings, affected by the fall in the stock market and the end of the federal Covid-19 aid programs. The real estate market is about to turn around, due to the rise in mortgage rates. The job market is rebalancing somewhat in favor of companies. Finally, business investment seems to have fallen in the second quarter.
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It was fireworks on Wall Street: the Nasdaq, the tech-rich index, jumped 4.06% on Wednesday July 27 while the S&P 500, which represents large American companies, rose 2.62 %: in question, the reassuring remarks of Jerome Powell, the chairman of the Federal Reserve on the American economy, which gives hope that the worst of inflation is over and that the recession can be avoided.
Admittedly, the monetary policy committee decided to increase as planned and for the second time in a row the key rates of the central bank by 0.75 points. The short-term interest rate is now in a range between 2.25% and 2.5% from just above zero in March 2022, and has been since the onset of the coronavirus pandemic. Covid-19. “The labor market is extremely tight and inflation is far too high”explained Jerome Powell.
However, the president of the institution did not rule out slowing the pace of monetary tightening. “At some point, it will be appropriate to slow down…. We could make another unusually large increase [en septembre] but it is not at all a decision that we have made, we will be guided by the data. » By the next meeting in September, the central bank will have unemployment and price inflation figures for August and September on the table. It will be able to know if it can slow the credit crunch.
The markets are anticipating that inflation will subside on its own, since ten-year rates are only 2.8% while inflation is above 9%. Long rates had reached 3.5% in June, at the worst of concerns, when the May inflation was published, just before the previous Fed meeting.
Demand Cooling
A few positive signs are appearing: the cost of raw materials, particularly energy, is falling – the price of a gallon of gasoline is only $4.30 after having exceeded $5. The price craze in air transport is fading. There is no inflation-salary spiral in the United States, which undermines purchasing power but gives hope of getting out of inflation.
Above all, Mr. Powell noted a cooling in demand: American consumers, whose morale is at an all-time low, have reoriented towards basic products. They dip into their savings, affected by the fall in the stock market and the end of the federal Covid-19 aid programs. The real estate market is about to turn around, due to the rise in mortgage rates. The job market is rebalancing somewhat in favor of companies. Finally, business investment seems to have fallen in the second quarter.
You have 49.3% of this article left to read. The following is for subscribers only.
