One of the key events this afternoon was the speech of the Chairman of the US Federal Reserve Jerome Powell, because the situation in the markets has recently started to change dynamically, and investors have not had the opportunity to hear what the Fed chairman is thinking.
Jerome Powell in his speech referred to the trade war and stated that we do not know how and when these problems will be solved. We closely observe the implications of these changes for the US economic outlook and, as always, we will act accordingly to maintain our expansion, with a strong labor market and inflation close to our symmetrical 2 percent target.
Powell spoke today at a conference organized by the Chicago FED on the monetary policy strategy and added that his comments today, like this conference, will focus on long-term issues that will remain, even if issues related to the given moment will evolve. Along with the growing economy, low unemployment and low and stable inflation, this is the right time for broad public involvement in these matters - said the Fed Chairman.
"My colleagues at FOMC and I have to take seriously the risk that inflation shortages, which persist even in a strong economy, can cause a hard-to-stop drift down inflation expectations," Powell added. Meanwhile, the use of monetary policy to press the labor market hard enough to raise inflation may pose a risk of destabilization in the financial markets.
Looking at the market reaction, it seems that the Fed chairman has failed to reduce investors' expectations for interest rate cuts in the US. 2-3 cuts are still estimated this year and the dollar has remained relatively weak.
“My FOMC colleagues and I must take seriously the risk that inflation shortfalls that persist even in a robust economy could precipitate a difficult-to-arrest downward drift in inflation expectations” Powell added. Meanwhile, the use of monetary policy to strongly influence the labor market to raise inflation may pose a risk of destabilization in the financial markets.
Looking at the market reaction, it seems that the Fed chairman has failed to reduce investors' expectations for interest rate cuts in the US. 2-3 cuts are still estimated this year and the dollar has remained relatively weak.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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