Fed’s Powell to Address Uncertainty in U.S. Monetary Policy
Federal Reserve Chair Jerome Powell will provide insights on the current U.S. economic landscape during his speech in New York on Thursday.
Powell’s colleagues at the central bank seem to agree on maintaining interest rates at their current levels during the next meeting in two weeks. However, there is still a great deal of uncertainty about future decisions.
Set to speak at the Economic Club of New York at 12 p.m. (1600 GMT), Powell will summarize the events that followed the last meeting in mid-September. The Federal Reserve opted to keep benchmark lending rates unchanged to assess the evolving economy.
Since then, unexpected job growth, resilient retail sales, and conflicting inflation signals have added to the complexity of the decision-making process. In addition, the bond market is experiencing turbulence, leading to tightening financial conditions.
Before Powell’s speech, the latest labor market data showed a decrease in new claims for unemployment benefits. However, the sell-off in the bond market continues, raising concerns that the yield on the 10-year Treasury note may exceed 5% for the first time since 2007.
Powell faces the challenging task of striking the right balance in his remarks. He must avoid sounding overly confident or doubtful, as either extreme could have undesired effects on financial markets.
The timing of Powell’s speech is significant, as it falls just before the quiet period preceding the Federal Open Market Committee’s meeting at the end of October. His remarks will set the tone for policy expectations, and the financial markets will closely analyze his every word.
Analysts anticipate Powell to echo Vice Chair Philip Jefferson’s message, emphasizing the need to observe the strength of the economy and the impact of previous rate hikes. The majority of economists polled expect no rate increase at the upcoming meeting, and many believe that the Fed’s rate hikes are coming to an end.
While inflation has decreased since its peak in June, progress has been uneven. The Fed aims to assess whether its previous tightening measures will effectively control inflation without causing a recession.
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