In the United States, the central bankers’ seminar in Jackson Hole, at the foot of the stunning mountains of Grand Teton, Wyoming, usually marks the start of the economic year, and this summer was to be one of normalcy. Alas, everything is failed, and the seminar will ultimately be held at a distance, due to the proliferation of the Delta variant, and mainly between Americans.
While Wall Street continues to break records, the world of finance is impatiently awaiting the speech that the President of the Federal Reserve (Fed, American central bank), Jerome Powell will give on Friday, August 27, while employment is got off to a good start in July, but growth appears to have hiccupped in August. In this fall, three questions arise: when will the Fed raise its rates? ; when will it reduce its support for the economy by buying corporate and bank debt? ; who will be the captain, as the term of Jerome Powell, a moderate Republican, expires in early February?
The issue of rates is that of inflation. The bank’s key rates have been at zero since the start of the crisis caused by Covid-19, while the rise in consumer prices reached 5.4%, over one year, in July. It’s high, but there are signs that the movement is slowing down. Above all, most of this price increase is due to bottlenecks, whether it be the global shortage of microprocessors, the disruption of supply chains or the lack of raw materials.
No spiral of inflation and wages
There is no index of a spiral of inflation and wages, on the contrary, since the purchasing power of employees is declining in real terms – only employees in tourism and catering manage to gain it. Some people wonder about the sustainability of bottlenecks, but it is not with a rise in rates that we fight a supply shock. In June, seven of the eighteen members of the Fed’s board envisioned a rate hike as early as 2022, and thirteen predicted one or two hikes in 2023.
The stake, in the shorter term, is that of the repurchases of corporate and financial securities carried out on a massive scale by the bank. These operations, by allowing companies to access credit, have saved many companies rolled over by the Covid-19 crisis, such as Carnival, the world leader in cruises, located in Miami, whose floating cities are gradually taking to the sea.
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