China remains embedded in US supply chains even as American firms have taken steps to reduce direct imports from the Asian country, according to a paper presented at the Federal Reserve’s conference in Jackson Hole, Wyoming.
Policymakers from around the world have traveled to the resort town for a two-day economic symposium hosted by the Kansas City Fed. In a speech to the gathering on Friday, Fed Chair Jerome Powell said the US central bank is prepared to raise interest rates further should the economy and inflation fail to cool.
A trio of legislation championed by Biden – stepped-up infrastructure spending, increased investment in a green economy and a build-up in semiconductor manufacturing – helped galvanize demand in the second quarter and is likely to have a bigger impact going forward. “It’s critically important that inflation expectations remain anchored at 2%,” said said in the BTV interview.Former Federal Reserve Bank of Kansas City President Esther George said central banks have to wait and see whether they have done enough to curb inflation and that they can’t yet declare victory.
“I’ve joined with a number of Kansas Citians there to make sure that the city is ready to be on the world stage for that and I’m enjoying that,” she said, adding she will be a referee in one of the games.European Central Bank Governing Council member Martins Kazaks said it’s better to err on the side of tighter monetary policy than allow the risk of reaccelerating inflation.
“In the current environment, this means — for the ECB — setting interest rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target,” Lagarde said in her speech at Jackson Hole.Cleveland Fed President Loretta Mester said not raising interest rates sufficiently to curb inflation would be “a worse mistake” than raising them too much.
“It’s not normally an option for central banks, that you could get inflation down without a big recession,” he said in an interview on BTV. “That’d be a major triumph for the Fed or anybody. It’d be virtually without precedent. But we’re part of the way down that road and we’ve been getting good news. We just have to keep getting good news.
Asked whether the Fed should change its inflation target from 2% given that annual price growth has slowed, Goolsbee said: “I think not — inflation’s not fully down to 3%.” Mester said not much has changed in her outlook since June, when she penciled in two more rate increases for this year — one of which was rolled out in July — and did not anticipate any rate cuts next year.
“We are focused on the outlook for the South African economy for both growth and inflation. The job is not yet done,” Lesetja Kganyago said on BTV. “The decline in inflation is welcome. But we’ve just had two good prints of inflation. That does not mean that the inflation monster has been conquered. There are still risks on the horizon and we will watch that very closely.”
Asked when rates cuts would start, the Philadelphia Fed chief said “clearly not until next year at the earliest, and when next year? Again, the data will have to dictate that.”Central bank interest-rate increases have a substantial impact on innovation, which in turn can impact the productive capacity of an economy, according to a paper presented at the symposium.
The Fed chief welcomed the slower price gains the US economy has achieved thanks to tighter monetary policy and further loosening of supply constraints after the pandemic. However, he cautioned that the process “still has a long way to go, even with the more favorable recent readings.
While the data suggest that economic activity is cooling, “we don’t see that much of it in the inflation rates,” Vujcic said. The question for the coming months will be whether services inflation eases sufficiently and “whether we will feel the consequences of the slowdown in the labor market.” “It’s for me much too early to think about a pause,” the Bundesbank chief told Bloomberg TV at Jackson Hole Thursday, adding that he’ll wait for additional figures before making a decision. “We shouldn’t forget inflation is still around 5%. So this is much too high. Our target is 2%. So there’s some way to go.”
“We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” she said in an interview with Yahoo! Finance from Jackson Hole.
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