Here’s what to expect from US Fed chair Jerome Powell’s speech on Friday

Here’s what to expect from US Fed chair Jerome Powell’s speech on Friday

Market enthusiasts are keenly fixing their gaze at US Federal Reserve Chair Jerome Powell’s speech, scheduled to be held at the Jackson Hole symposium, Wyoming, at 10 AM (New York Time), 7:35 pm (IST), on Friday.

The Fed Chair is likely to give clues about inflation and interest rates, factors that can trigger market changes in the rest of the world too.

The Fed Chair can take a hawkish stance, which can shake global markets for some time at least, if not in the long run.

The last time the chair delivered a speech, on August 26, 2022, the S&P 500 fell 3.4 per cent.

The tremors of the fall in the US market were felt across global markets at that time.

Zee Biz tell you the possible concerns that Powell can raise during the symposium meeting.

The speech, which may also be livestreamed on the Kansas City Fed’s YouTube channel, is eagerly awaited worldwide as global market sentiments are largely based on it.

Going by history, the Fed chair’s speeches in the last 11 years have drawn sharp market reactions and set the tone for different markets across the globe.

Given strong US economic data, the chair is expected to deliver a balanced speech this year.

However, Zee Business expects a hawkish stance from Powell. But there are ample clues that he may not be in a hurry and can delay his mission of targeting inflation, say analysts.

For the same reason, he may not prefer jumping the gun and may hold rates for the moment. However, if that happens, it is highly likely that he would give indications of increases in near future. 

Current State of the US Economy

The dollar index on Thursday (August 25, 2023) crossed 104 for the first time since June 8.

The headline inflation rate has also improved from 9.1 per cent in June 2022 to a little over 3 per cent now.

Last month, the Fed raised interest rates for the 11th time in a row, to a range of 5.25 per cent to 5.50 per cent.

It was their highest level since 2001.

However, a clue that could possibly prompt the Fed Chair to increase rates is that the US’ long-term treasury yields are at a 15-year high.

US Market Ends Lower Ahead of Speech

Market sentiment in the US were subdued on the eve of Powell’s speech as were subdued on the eve of the speech as the S&P 500 dropped 1.3 per cent for its worst loss in three weeks.

The decline came after the blowout profit report from Nvidia and mixed reports on the U.S. economy.

The slide almost wiped out its gain for the week, which had been a bright spot in what’s been a rough August. The Dow Jones Industrial Average was down 373 points, or 1.1 per cent, and the Nasdaq composite sunk 1.9 per cent. 

Following the faded show of the US market, Asian shares also fell on Friday.

Japan’s benchmark Nikkei 225 dropped 1.8 per cent to 31,713.24 in morning trading; Australia’s S&P/ASX 200 dipped nearly 1.0 per cent to 7,111.60; South Korea’s Kospi was down 0.6 per cent to 2,522.09. Hong Kong’s Hang Seng slipped 1.0 per cent to 18,035.97, while the Shanghai Composite shed 0.3 per cent to 3,073.25.

(With inputs from AP)