Jay Powell will deliver his much-anticipated speech Friday as the Federal Reserve seeks to combat the worst inflation in 40 years without sending the world’s largest economy into recession.
of Federal Reserve Bank The chair will speak at 10 a.m. ET at the first in-person meeting of the annual Jackson Hole conference since the coronavirus pandemic began.
The event, which brings together central bankers from all over the world, comes as they grapple with questions about the Fed’s determination to squeeze enough of the U.S. economy. eradicate inflation.
In a speech at Jackson Hole last year, Powell devoted himself to supporting the Fed’s argument that the surge in consumer prices was a temporary phenomenon caused by supply chain-related problems. But then it became clear that price pressure was more demand-driven and therefore likely to last longer.
The Fed, which is now embarking on its most aggressive tightening cycle since 1981, must decide whether to maintain this pace or instead start reducing the scale of rate hikes. handedness risk.
Financial markets have rallied in recent weeks amid hopes that the Fed may ease its efforts to cut demand as economic data further deteriorates ahead.
Last month, the central bank raised rates by 0.75% for the second time in a row, raising the federal funds rate to a new target range of 2.25% to 2.50%.
Fed officials debate whether such a one-third adjustment is necessary at the September meeting or whether a half-point adjustment is more appropriate.
Atlanta Fed President Rafael Bostic said the decision amounted to a coin flip. interview The Wall Street Journal and on Thursday.
Officials say their commitment to restoring price stability is “unconditional,” suggesting they are willing to allow unemployment to rise.
James Bullard, president of the St. warned that there is inflation It seems likely that it will last longer.
He added that he supports the federal funds rate, which will reach 3.75% to 4% by the end of the year.
Most officials still insist they can control inflation without causing a painful recession. But this goes against the consensus view among Wall Street economists, who are predicting a mild recession at least sometime next year.
Economists also expect the unemployment rate to rise above the 4.1% widely expected by FOMC members and regional bank governors in June. The current bright spot in the U.S. economy, the unemployment rate, is hovering at 3.5%, its lowest level in decades.