Federal Reserve (Fed) chair Jerome Powell confirmed the bank will continue fighting inflation by increasing the US interest rate. Powell was speaking at the Jackson Hole Symposium in Wyoming. According to Bloomberg, the central banker’s speech was tinged with a hint of hawkishness.
“We will proceed carefully,” Powell said of the decision to raise or pause interest rates. He added that food and energy prices remain volatile and that inflation remains too high despite progress in the last 17 months.
Bitcoin Spikes as Central Bank Targets Softer Economy
“Although inflation has moved down from its peak – a welcome development – it remains too high.”
To get inflation back to 2%, the economy will need to undergo a period of sustained below-growth trend and a softer labor market, Powell said. Despite an initial decline, the cost of shelter is rising, which could affect future rate decisions.
“Given how far we have come, at upcoming meetings, we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks.”
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Stocks rose ahead of Federal Reserve chairman’s speech.
During Powell’s speech, the Nasdaq100 was up three-tenths of a percent while Bitcoin increased to $26,300 before falling back to just under $26,100. Ethereum (ETH) also increased to around $1,676 but dropped back to $1,661.23.
Analyst Says Future Fed Interest Rate Policy Decisions Will be Tricky
Earlier, analysts doubted the meeting would significantly alter investor sentiment. However, some noted the potential for positive outcomes.
Christopher Smart of an investment consultancy, the Arbroath Group, said recession threats have all but diminished as the economy prepares for a relatively soft landing. Interest rates have declined from 9% to 3% in 12 months, while employment is reaching its Goldilocks moment as job supply and demand slowly equalize.
He said questions remain on whether current market disruptions may require revision. He argues that several geopolitical forces and technological advancements complicate the long-term outlook.
The recent Russia-Ukraine war, the breakneck advancement of artificial intelligence (AI) technologies, and the threat of de-dollarization suggest the Fed’s model may be outdated and in need of revision.
“Today’s headlines suggest an extended battle to drive inflation back to the 2% target. But the truth is that there is more uncertainty than ever around whether the Fed should adopt a structural bias that leans against deflation or tilt fundamentally in a new direction.”
Other speakers at the event include the president of the European Central Bank, Christine Lagarde, and the governor of the Bank of Japan, Kazuo Ueda. In September, the Federal Reserve will vote on whether to increase or pause interest rates.
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