🚨SUMMARY OF FED CHAIR POWELL'S SPEECH 23/9🚨
Powell's speech in Rhode Island
1️⃣ On monetary policy
- Short-term risks regarding inflation are tilted towards the upside, while risks to the labor market are tilted towards the downside – a challenging situation.
- In this context, the Fed is forced to balance two objectives: maximum employment and price stability.
- The increasing risks to the labor market have led the Fed to lower interest rates by an additional 25 basis points to 4 – 4.25%.
- Powell assesses that the current policy is still "somewhat tight" but flexible enough to respond to new developments.
2️⃣ On economic outlook
- GDP in the first half of the year increased by 1.5% (lower than 2.5% last year)
- Job growth has sharply decreased, averaging 29,000 jobs/month in the last 3 months
- The unemployment rate rose to 4.3% in August
- Both labor supply and demand have weakened
- Overall PCE YoY for August increased by 2.7% (compared to 2.3% in the same period last year)
- Core PCE increased by 2.9%
👉 Recent data indicate that growth momentum has stalled. Inflation has significantly decreased from the peak in 2022 but remains above the long-term target of 2%.
3️⃣ Direction of the Fed
- Powell noted that recent tax hikes are likely to only cause a "one-time" effect on the price level, but will spread through the supply chain in the coming quarters. The Fed will closely monitor to prevent a "one-time price increase" from turning into prolonged inflation.
- The Fed's policy does not follow a predetermined path but will continue to rely on data and outlooks for decision-making. The Fed remains committed to bringing inflation down to 2% and sustaining maximum employment in a sustainable manner.
