Powell says the economic risks are in Jackson Hall’s speech with eye rate discounts

Federal Reserve Chairman Jerome Powell On Friday, he said that “the risk balance appears to be transformed” in the American economy, where central policy makers weigh on the labor market and inflation data before the next interest rate decision in mid -September.

Powell spoke at the annual monetary policy conference hosted by Kansas City in Jackson Hall and Wyoming, while his final speech in this event is expected to be as head of a engine. This event comes after a series of sacrifices that show that consumer prices are heading higher and farther from the goal of the Federal Reserve by 2 %, in addition to the weakest July job report than expected, which included large declining reviews to employment in May and June.

the Federal Reserve The president said that the negative risks facing the labor market are increasing while the economic growth slowed in the first half of the year due to the slow spending, and added that the customs tariff had begun to pay consumer prices up-which increases the risk of high inflation, although the long-term inflation expectations are still well designed.

“Although the labor market is in a state of balance, it is a kind of strange balance that results from a noticeable slowdown in both supply and demand for workers,” said Powell. “This unusual situation indicates that the negative risks of employment are increasing, and if these risks are fulfilled, they can do this quickly in the form of sharply higher discharge and high unemployment.”

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“the The effects of definitions On consumer prices are now clear. We expect these effects to accumulate in the coming months, with high uncertainty about both timing and quantities. Powell said that the question that concerns monetary policy is whether the price increases are likely to increase the risk of a problem in continuous inflation.

He said, “The reasonable foundation is that the effects will be relatively short -term, and it turns once at the price level. Of course, there was not once at one time. Time will continue to increase time for customs tariff increases on their way through supply chains and distribution networks.

“It is also possible that the upward pressure on the front tariffs may be more stimulating Dynamic inflationThis is a risk that must be evaluated and managed. ”

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Powell said that the risk of a vortex of wage prices is led by workers who ask for higher wages to make up laboratory conditions. He added that the long -term inflation expectations remained “well designed and consistent with the long -term inflation goal by 2 %.”

Powell added: “Of course, we cannot allow the stability of inflation expectations as a Muslim.

So, assembling the pieces together, what are the effects of monetary policy? In the short term, the risks tend to inflation to the upward trend and the risks of employment on the negative side – a difficult position.

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Powell pointed out that after the FOOC Open Market Committee (FOMC) reduced the standard federal funds rate by 100 basis points last year, the Federal Reserve has a space for maneuver because it restores prices to a neutral level with the labor market continues to strain on the basis of some standards.

“The price of our policy is now 100 basis points closer to a neutral than it was a year ago, stability Unemployment He explained that other labor market measures allow us to move forward carefully because we are thinking about changes in our position on politics, however, politics in restrictions, basic expectations and the balance of variable risks may require controlling our position on politics. “

“Monetary policy is not on a prior path. FOMC members will make these decisions only depend on their evaluation of data and their effects on economic expectations and balance of risk. We will never report this approach,” Powell said.

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The stock market increased in response to Powell’s speech, as the main indexes rose by more than 1 % with high interest rates in September.

“It seems that the weak labor market has outperformed the risk of inflation on the Federal Reserve, and the primary response to the markets speaks for itself,” said Ellen Zenner, the chief economist of Murgan Stanley for the management of wealth. “In the long term, the discussion on the extent and speed of reducing federal reserve rates began at rates. The Chairman of the Board of Directors again confirmed the goal of inflation by 2 %, and with the continued customs tariffs on its way through the economy, the Federal Reserve avoided a victory over this part of its mandate.”

Sima Shah, the chief global strategic expert in the management of the main assets, said that although Powell’s speech “clearly bend Duofish, his observations indicate that cutting the 25-Basis point is valid, but the reduction of 50 Pasis points is not.”

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“Certainly, although the mitigation state is enhancing, there is a little economic justification to reduce the basis of 50. If the Federal Reserve chooses such a step, the markets may explain that it is a sign of political impact rather than making decisions that depend on data. This may lead to pushing inflation and prior range in the long term, which leads to reducing the same conditions that support risk assets,” Shah explained.

Futures markets showed the possibilities of A. 25 Passis cut points I went to the top after Powell, as it rose from 75 % yesterday to 89.2 % after Powell, according to the CME Fedwatch tool. The chances of staying in the current range of 4.25 % decreased to 4.5 % from 25 % yesterday to 10.8 % after speaking, while the possibility of reducing 50 Basis points at scratch.