What is happening in the world economy: questions for the Fed

Hello. Today we look at questions revolving around the Federal Reserve, the big events in the world economy this week and whether the US jobs gap is tied to working moms.

a communication challenge

Federal Reserve Chairman Jerome Powell has something to explain.

Ten months after the central bank changed its strategy to gain broad and inclusive gains in the labor market, investors are asking whether it will do so after last week’s decision to raise inflation forecasts and accelerate the pace of projected interest rate hikes. How dedicated is the work?

Powell gets a chance to cordon off when he appears before lawmakers on Tuesday. Colleagues including New York Fed Chairman John Williams and Boston’s Eric Rosengren are among several officials speaking this week who may provide more clarity.

here is According to what investors want to know Craig Torres and Katrina Saraiwa.

  • What’s up with the dot plot? Fed policymakers median two possible rate hikes in 2023 after they did not submit them in March.

Deutsche Bank senior economist Brett Ryan observes that “Powell acknowledged that we want to be a little more balanced in our inflation communication than blankly dismiss everything as fleeting.”

  • Is inflation still fleeting? Powell and most Fed officials have bet that it will be resolved soon when the economy reopens, arguing supply bottlenecks. But showing they are aware of inflation risks provides them with some insurance and can help moderate inflation expectations.
  • Is full employment really achievable? The Fed’s defensiveness on inflation also raised questions about its optimistic forecasts for hiring, which wants to be as broad as possible.
    “The low-hanging fruit has already been picked up and we are now facing the hassle of rehiring millions of people,” said Constance Hunter, chief economist at KPMG.

A bright spot for Powell is that his communications over the past week have helped push The 30-year Treasury yield is below 2% for the first time since February. As Craig and Caterina have noted, in times of rising prices and public inflationary expectations, a central banker may want to see a similar outcome.

simon kennedy

coming week

Central Bank rate decision this week

The Bank of England’s chief economist is set to sound alarm bells on inflation before leaving the building. Andy Haldane, attending his final Monetary Policy Committee decision on Thursday, is likely to emphasize the risk of price growth spiraling out of control. He has been the only advocate on the panel to reduce the incentives.

Elsewhere, central bankers in Hungary and the Czech Republic are set to raise interest rates. The Flash Purchasing Managers’ Indexes provide a snapshot of the state of the economy around the world.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *