Jerome Powell got straight to the point. For the opening, Friday, August 26, of the Jackson Hole symposium, the major annual meeting of the planet’s central bankers, in Wyoming (western United States), the chairman of the Federal Reserve (Fed) went held, unusually, to a short ten-minute statement. His message could not have been clearer: he will do everything to bring inflation back to its target of 2%. “We must continue [la hausse des taux d’intérêt] until the job is done”he launched.
He recalled that this task was currently “primary objective” of the central bank. “Price stability is the responsibility of the Federal Reserve and serves as the foundation of the economy. Without price stability, it does not work for anyone. (…) Restoring it will take time and requires using our tools forcefully. » Since March, the Fed has already raised its interest rate from a range of between 0% and 0.25% to a range of 2.25% to 2.5%. In her last two meetings, in particular, she acted without shaking, each time increasing her rate by 0.75 points.
However, at his last press conference on July 27, Mr Powell had made remarks that suggested he would slow down. Shortly after, the statistics finally brought some good news: inflation on the other side of the Atlantic fell slightly, from 9.1% in June to 8.5% in July (over twelve months). The United States has notably benefited from the fall in the cost of a barrel of oil, which remains at a high level, but has fallen in recent months, to now reach 92 dollars (92.10 euros). Moreover, the world’s largest economy, not being dependent on Russian supplies, is suffering much less than Europe from the surge in gas prices.
Uncompromising speech
These signals were taken by the financial markets as the possibility of a turning point. After a decline of 24% between January and mid-June, the S&P 500, one of the main American stock market indices, rebounded by 11%. Mr. Powell was careful not to give false impressions: there is no question, for the moment, of slowing down. And who cares if rising interest rates cause the economy to slow down?
“Reducing inflation probably implies a sustained period of growth below the long-term trend. Rising interest rates, weaker growth and tougher labor market conditions will no doubt bring down inflation, but they will also be painful for households and businesses,” affirmed the president of the Fed, saying to assume this choice. “Failing to bring back price stability will be much more trying. »
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