Powell Signals Further Hikes Will Come If Needed

Powell Signals Further Hikes Will Come If Needed (10:05 a.m. NY)

Federal Reserve Chair Jerome Powell signaled the US central bank is prepared to raise interest rates further if needed and keep borrowing costs high until inflation is on a convincing path toward the Fed’s 2% target.

“Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in the text of his speech at the conference. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

The Fed chief welcomed the slower price gains the US economy has achieved thanks to tighter monetary policy and further loosening of supply constraints after the pandemic. However, he cautioned that the process “still has a long way to go, even with the more favorable recent readings.”

IMF Chief Sees Monetary Policy Divergence After Inflation Fight (Aug. 25, 8:45 a.m. NY)

International Monetary Fund Managing Director Kristalina Georgieva expects global monetary policies to diverge after most major central bankers have spent the last year tightening credit conditions to slow price gains.

“We’re going to see after a period of convergence in monetary policy action — tightening rates, fighting inflation — some divergence” as, for instance, the US economy grows faster than the European Union, Georgieva said in an interview with Bloomberg Television on Friday.

“Central bankers will have to recognize that some specificity in how they approach the fight against inflation — and how they link this to their role in supporting growth and employment — how they approach that is going to be a matter of thorough assessment of national data.”

ECB’s Vujcic Says More Data Needed to Call Rate Peak (Aug. 24, 8:45 p.m. NY)

European Central Bank Governing Council member Boris Vujcic said officials need more data about the trajectory of inflation to judge whether interest rates have risen far enough.

“We are now certainly in the restrictive territory,” the head of Croatia’s central bank told Bloomberg TV. “Whether we are in a restrictive-enough territory remains to be seen. And this is something that you will only see from the inflation data that will come in the next prints.”

While the data suggest that economic activity is cooling, “we don’t see that much of it in the inflation rates,” Vujcic said. The question for the coming months will be whether services inflation eases sufficiently and “whether we will feel the consequences of the slowdown in the labor market.”

Vujcic said he thinks the euro-zone economy can avoid a “real recession” and that a soft landing is still achievable.

Thailand Needs Tighter Fiscal Stance, Central Banker Says (7:40 p.m. NY)

Thailand’s central bank wants the new government led by Srettha Thavisin to pursue fiscal consolidation in tandem with monetary policy to avoid fueling inflation in the economy.

That’s part of Bank of Thailand Governor Sethaput Suthiwartnarueput’s wish-list as he seeks to mitigate the impact of tighter US interest rates on Southeast Asia’s second-largest economy. The BOT is already near where it wants to be rate-wise to support economic growth and check prices after delivering 175 basis points of moves, he said.

“The important thing on policy front, both on monetary and fiscal sides is to try to normalize the policies and get some more consolidation,” he said in an interview with Bloomberg Television’s Haslinda Amin.

ECB’s Nagel Says Too Early to Consider Rate Pause (6:30 p.m. NY)

European Central Bank Governing Council member Joachim Nagel said that he’s not convinced inflation is under control enough for a halt in interest rate hikes, with his decision hinging on additional data in the coming weeks.

“It’s for me much too early to think about a pause,” the Bundesbank chief told Bloomberg TV at Jackson Hole Thursday, adding that he’ll wait for additional figures before making a decision. “We shouldn’t forget inflation is still around 5%. So this is much too high. Our target is 2%. So there’s some way to go.”

While economic activity is slowing, core inflation remains sticky and the labor market is “really pretty good,” he said.

Nagel said he doesn’t expect Europe’s biggest economy to fall into a recession, citing a better outlook for next year despite a weak third quarter.

“I hear a lot of talk about Germany, the sick man of Europe. This is definitely not the case,” Nagel said, citing stable private consumption and higher wages for workers. “I’m still pretty optimistic that we will have a soft landing.”

Collins Says Rate Peak Near (11:34 a.m. NY)

Federal Reserve Bank of Boston President Susan Collins said the US central bank may need to raise its benchmark interest rate further and that she wasn’t prepared to signal the peak point.

“We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” she said in an interview with Yahoo! Finance from Jackson Hole.

“I do think it’s extremely likely that we will need to hold for a substantial amount of time but exactly where the peak is, I would not signal right at this point,” she said. “We may be near but we made we may need to increase a little bit further,” said Collins, who doesn’t vote on policy this year.

ECB’s Centeno Says Downside Risks Materializing (11:27 a.m. NY)

ECB Governing Council member Mario Centeno said officials should be cautious in deciding on the next steps as risks for the economy that have previously been identified are now becoming reality.

The transmission of the ECB’s monetary tightening campaign is “up and running” and inflation’s retreat has been faster than its rise, the Bank of Portugal governor told Bloomberg Television in Jackson Hole.

“We have to be cautious this time around because downside risks that we identified in June in our forecast have materialized,” said Centeno, who also heads Portugal’s central bank. “This is an inversion of what happened throughout the pandemic recovery because usually we have been surprised on the upside.”

Harker Sees Rate Hikes on Hold (10:17 a.m. NY)

Federal Reserve Bank of Philadelphia President Patrick Harker said he sees interest rates on hold for the rest of this year, and that policymakers have likely undertaken sufficient tightening.

“Right now, I think that we’ve probably done enough because we have two things going on,” he said in an interview with CNBC. “The Fed funds rate increases — they are at a restrictive level, so let’s keep them there for a while. And also we are continuing to shrink our balance sheet that is also removing accommodation.”

“I see us staying steady throughout the rest of this year,” he said, adding that policymakers will watch how data evolve after that.

If the rate of inflation comes down quicker than expected, “we might cut sooner rather than later, but I think we have to let that play out,” he said.

Bullard Sees Strong Economy Altering Fed Plan (8:20 a.m. NY)

Former Federal Reserve Bank of St. Louis President James Bullard said a pickup in economic activity this summer could delay plans for the central bank to wrap up interest-rate increases.

“This reacceleration could put upward pressure on inflation, stem the disinflation that we’re seeing and instead delay plans for the Fed to change policy,” Bullard said Thursday during an interview with Bloomberg Television ahead of the Kansas City Fed’s symposium.

Bullard, who resigned last month to become dean of Purdue University’s business school, was an influential voice at the Fed who called for aggressive interest-rate hikes to fight the recent inflation surge.

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