Quick Facts Jackson Hole: Powell keeps rate hike open, Lagarde says rates will be as high as necessary to keep inflation under control

Author: Sina Finance

On August 24-26, the 2023 Jackson Hole Global Central Bank Annual Conference will be held with the theme of "Structural Changes in the World Economy". Central bankers from around the world gathered in Jackson Hole, Wyoming, for the Kansas City Fed's annual symposium. During the meeting, investors will look to their speeches for clues on the outlook for interest rates.

European Central Bank President Christine Lagarde said borrowing costs would be set as high as needed to bring inflation back down to target, and for as long as necessary.

Federal Reserve Chairman Jerome Powell said in a speech earlier Friday local time that the central bank is ready to raise interest rates further if necessary and intends to keep rates high until inflation remains convincingly close to the 2% target. on the road.


ECB President Lagarde: Will set interest rates as high as necessary to control inflation

Lagarde said borrowing costs would be set as high as needed and for as long as necessary to bring inflation back to target.

Describing an "era of uncertainty", Lagarde said it was important for central banks to provide an anchor for the economy and ensure price stability was consistent with their respective mandates.

Lagarde said in a speech in Jackson Hole, Wyoming on Friday, "In the current environment, for the ECB, this means setting interest rates at a sufficiently restrictive level for as long as necessary to maintain bring inflation back to our medium-term target of 2 percent in a timely manner."

Cleveland Fed President Mester: Not enough tightening is a worse mistake

Cleveland Fed President Loretta Mester said in an interview that not enough tightening was a "worse" mistake than raising rates a little too much.

Policy actions have moved the FOMC into "restrictive territory," she said, and the job now is to "calibrate to ensure we are on a sustainable and timely downward path toward 2 percent inflation."

Chicago Fed President Goolsbee: FOMC is on the way to a soft landing

Chicago Fed President Austan Goolsbee said the central bank is already part of the path to a soft landing.

“Keeping inflation down without causing a deep recession is usually not an option for central banks,” he said in an interview. "It's going to be a big win for the Fed and everybody. There's almost no precedent. But we're already on the road, and we keep getting good news. We're just going to have to keep getting good news."

ECB Governing Council Holzmann says further rate hikes may be needed

According to the Austrian media Die Presse, European Central Bank Governing Council Robert Holzmann said that interest rates may have to be raised "more or less" to bring inflation in the euro zone back down to the target level.

There is "no sign of the all-clear yet" on consumer prices, Holzmann, who is also the governor of the Austrian central bank, told the newspaper in an interview published on Friday. "My guess is that we should raise rates a bit more. But that will be determined by the data."

Former U.S. Treasury Secretary Summers: The Fed may need to raise interest rates at least once

Summers said it was possible the Fed would need to raise rates at least one more time. He also cautioned that not enough attention has been paid to the impact of the U.S. fiscal deficit.

"My best estimate is that we're going to need to raise rates further," Summers said in an interview. He said the economic slowdown currently "in the making" was modest, with estimates suggesting the U.S. economy grew by more than 5 percent this quarter.

Gross says Powell means rates will be "higher for longer"

After Powell's speech at the Jackson Hole annual meeting, Bill Gross posted on social media X (formerly known as Twitter) that the US 10-year Treasury bond may rise to 4.50% in the future, while short-term bond interest rates are expected to remain relatively stable.

Gross said rates "higher for longer" was a "somewhat euphemistic message" he got from Powell's speech.

Cleveland Fed President Mester: There is still work to be done

Cleveland Fed President Loretta Mester said core inflation remains too high and policymakers must be careful in trying to bring it steadily down to 2%.

"We probably have more work to do," Mester said in an interview. "I think it's very important that we be cautious now. We have to be very careful. We don't want to tighten too much. We don't want to not tighten up enough."

Mester said her outlook has not changed much since June, when she projected two rate hikes this year and no cuts next year.


Powell: Will raise interest rates if necessary and will maintain interest rates at high levels

Federal Reserve Chairman Jerome Powell said the central bank is prepared to raise interest rates further if necessary and intends to keep rates high until inflation remains convincingly on track toward its 2% target.

“While inflation has come off its peak, which is a welcome development, it remains too high,” Powell told the Fed’s annual meeting in Jackson Hole, Wyoming, on Friday. "We are prepared to raise rates further as appropriate and intend to keep policy at restrictive levels until we are confident that inflation is sustainably moving downward toward our objective."

The Fed chairman welcomed the slowdown in price gains from tighter monetary policy and a further easing of supply bottlenecks in the wake of the pandemic, but warned that "although recent data has been more favorable, the process still has a long way to go." .”

At the same time, Powell signaled that the Fed may keep interest rates on hold at its next meeting in September, as investors expect.

"Given how far we have come, in future meetings we can proceed with caution in order to assess incoming data and the changing outlook and risks," he said.

ECB Governing Council Vujcic: Need more data to judge interest rate peaks

European Central Bank Governing Council member Boris Vujcic said officials would need to see more data on the trajectory of inflation before they could judge whether rate hikes were enough.

“We are definitely in a restrictive zone right now,” the Croatian central bank governor said. "Whether we are in a sufficiently restrictive zone remains to be seen. That can only be judged by the upcoming inflation data."

While the data showed that economic activity was cooling, "we didn't see that clearly in the inflation rate," Vujcic said. The question in the coming months is whether service sector inflation will ease sufficiently and "whether we will feel the effects of the slowing labor market".

Vujcic believes that the euro zone economy can avoid a "real recession" and a soft landing is still achievable.

BoT Governor: Thailand needs to tighten fiscal policy stance

The Bank of Thailand hopes that the new government led by Seta will carry out fiscal consolidation in conjunction with monetary policy to avoid fueling inflation.

It's one of the wish lists of Bank of Thailand Governor Sethaput Suthiwartnarueput, who wants to mitigate the impact of U.S. rate hikes on Southeast Asia's second-largest economy. He said that after a cumulative rate hike of 175 basis points, the Bank of Thailand is close to the ideal (39.26, 0.43, 1.11%) interest rate level that can support economic growth and (5.2,0.02,0.39%) curb inflation.

“In terms of policy, whether it’s monetary or fiscal policy, the important thing is to normalize policy and do some more consolidation,” he said in an interview.

ECB Nagel: It's 'premature' to consider pausing rate hikes

ECB Governing Council member Joachim Nagel said he was not convinced inflation was contained enough to halt rate hikes and his decision depended on more data in the coming weeks.

“It’s too early for me to think about pausing rate hikes,” Nagel, who also serves as Bundesbank president, said in Jackson Hole on Thursday. He added that he would wait for more data before making a decision. "We shouldn't forget that inflation is still around 5 per cent, so it's still too high, and our target is 2 per cent, so there's still some way to go."

While economic activity is slowing, core inflation remains stubborn and labor market conditions are "very good," he said.

Nagel said he did not expect Germany to slip into recession, citing better prospects for next year despite a weak third quarter.

Boston Fed President Collins: The Fed may need to raise interest rates further and interest rates may be close to the peak

Boston Fed President Susan Collins said the central bank may need to raise its benchmark interest rate further and that she is not prepared to signal that rates have peaked.

"We may need to add a little more, and we are probably very close to a level where we can keep rates unchanged for a long time," she said in an interview.

"I think it's very likely that we'll get to the point where we can stay on hold for quite some time, and I'm not going to give any hints about where the top is at this point," she said. Collins has no monetary policy vote this year.

ECB Governing Council Centeno: Downside risks become reality

European Central Bank Governing Council member Mario Centeno said officials should be cautious in deciding their next steps because previously identified economic risks had now materialized.

The Portuguese central bank governor told the media that the ECB's tightening monetary policy is working and that inflation is falling faster than it is rising.

"This time we have to be cautious because the downside risks identified in June have materialized," he said.

Philadelphia Fed President: Fed 'probably has done enough' on interest rates

Philadelphia Fed President Patrick Harker said the central bank "probably has done enough" and should keep interest rates at restrictive levels while assessing the impact on the economy.

He said in an interview, "I think we have done enough, there are two things going on now, one, the federal funds rate is in a restrictive area, so let it stay for a while. Two, we are Continue to shrink the balance sheet and reduce the looseness of monetary policy."

"I think we're going to keep policy steady for the rest of the year," Harker said, while keeping an eye on economic data.

If inflation falls faster than expected, "we should probably cut rates sooner rather than later," he said.

Bullard: A strong economy is changing the Fed's plans

Former St. Louis Fed President James Bullard said a pick-up in economic activity over the summer could delay the Fed's plans to end rate hikes.

“This re-acceleration of the economy could put upward pressure on inflation and prevent it from falling back, which in turn could affect the timing of the Fed’s policy change,” he said in an interview.

Former St. Louis Fed President James Bullard said a "re-acceleration" in U.S. economic growth this summer could delay the Fed's plans to end rate hikes.