Jerome Powell, the chairman of the Fed, the US Federal Reserve, thinks that unemployment is reduced enough in the United States to be able to start reducing this year the massive support for the economy put in place since the start of the pandemic of Covid-19 by the repurchase of the debt of banks and companies. He did not consider the Delta variant to be a major obstacle to recovery.
This moderate Republican does not detect overheating either: he believes that the inflation that the United States is experiencing is temporary and does not want to raise the central bank’s key rates so as not to break the recovery. These are the lessons of the long-awaited speech held on Friday, August 27, by the chairman of the Federal Reserve, the American central bank, at the forum in Jackson Hole, Wyoming, which was held at a distance due to the pandemic .
This measured message satisfied the financial markets, which ended the day higher (+ 0.88% for the S&P 500 and + 1.23% for the Nasdaq, the technology-rich index), once again breaking their historical records. . The S&P 500 has gained 20% since the start of the year, the Nasdaq 17.4%.
Mr Powell has made it clear that the bank will reduce purchases of securities intended to support the economy before the end of 2021. “We said we would continue our asset purchases at the current pace until we see further substantial progress towards our maximum employment and price stability targets,” recalled Mr. Powell, who believes that this time is approaching, while the unemployment figures for July were excellent (943,000 jobs created). “There has been clear progress towards full employment. In July [lors de la dernière réunion de politique monétaire]I was of the opinion that, if the economy were to go largely as expected, it might be appropriate to start reducing the pace of asset purchases this year. ” It will remain to be applied gently so as not to bring down the markets, as the Fed did in 2013 after the financial crisis.
No rate hike yet
However, any rate hike is postponed indefinitely. Mr Powell admittedly agreed that inflation was at levels well above his 2% target at the end of July (4.2% and 3.6% excluding energy and food), but it is caused by limited bottlenecks, while the comparison is unfavorable with 2020, when prices fell in the midst of a pandemic recession. “We are starting to see moderation in some cases as the shortages ease. Used car prices [qui avaient augmenté de 40 % sur un an], for example, seem to have stabilized ”, said the president of the Fed.
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