February 3, 2023

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Powell opens on a lowered hike in US interest rates in early December: Wall Street cuts – Corriere.it

The Fed could lower the pace of rate hikes, very soon, even as early as December: Fed Chair Jerome Powell broke a delay, relieving markets, while warning that the fight against inflation is far from over and key questions remain. Unanswered, including how much prices should be raised and for how long. It makes sense to ease the pace of rate hikes, as we approach a level of tightening sufficient to bring down inflation. In his much-anticipated speech at the Hutchins Center for Fiscal and Monetary Policy in Washington, he said the time to ease the pace of rate hikes may come as early as the December meeting. In the past four meetings, the Fed decided to raise interest rates by 75 basis points each time, but now it can settle for fifty basis points.

However, Powell specified that it is likely that in order to restore price stability, it will be necessary to maintain a restrictive policy for some time. History warns us against easing monetary policy prematurely. We will stay on track until the job is done. And to restore price stability, according to the Fed chair, there is a long way to go. He concluded that despite policy tightening and growth slowing over the past year, we did not see clear progress in slowing inflation last year.

We need to raise interest rates hard enough to bring inflation back to 2%. There is a great deal of uncertainty as to what level will be sufficient, but we’ve undoubtedly made great progress in getting rates up. Powell said the current interest rate increases are appropriate and it looks like the final level of the rate should be higher than expected in September. He stressed that inflation is still very high, saying that rates should be raised in 2023 from what was expected in September. . He said that given the progress in tightening monetary policy, the timing of such easing is far less important than the extent to which we will need to raise interest rates to bring inflation under control and the time it will take to keep policy tight. Spare.

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Powell’s comments boosted Wall Street’s indices. The Dow Jones and S&P 500, previously negative, turn positive, while the Nasdaq, already higher, consolidates gains. Close higher: the Dow Jones rose 2.16% to 34,587 points, the Nasdaq rose 4.41% to 11,468 points, and the S&P rose 3.02% to 4,077 points. On the stock front, it is worth noting the excellent performance of Microsoft (+6.16%), Apple (+4.86%) and Intel (+4.05%). Salesforce (+5.47%) and Walt Disney (+3.36%) also performed well. Tesla shines (+7.67%) after China Merchants International Bank said Tesla sales in China in November were boosted by price cuts and incentives offered for the Model 3 and Model Y. The Beige Book, the document the Fed publishes eight times a year that will form the basis for the next meeting For monetary policy, it was also released.

In the update to the end of November, it was indicated that economic activity remained flat or increased slightly compared to the previous report, down from the modest average growth rate for the previous period. It also shows that five regions witnessed a slight or modest increase in activity, while the other regions witnessed no change or a slight or modest decline. Interest rates and inflation continued to influence activity, and inflation in particular prompted low- and middle-income consumers to substitute increasingly low-priced goods. Consumer prices rose at a moderate to strong pace in most of the Fed’s twelve regions. However, the pace of price increases has slowed overall, reflecting a combination of improvements in supply chains and weaker demand. Retail prices have been under downward pressure due to consumers’ increased search for discounts. Prices of some basic commodities have fallen, including lumber and steel, but food prices have risen more or remained high in some areas. Home rental growth has begun to moderate in some areas, and home prices have grown less quickly or declined altogether due to weaker demand.

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Inflation is expected to remain stable or moderate in the future. Employment in the 12 US Federal Reserve districts rose slightly in most counties, according to the Beige Book, but two districts saw headcount declines and overall labor demand weakened. Hiring and retention pressures have eased further, although labor markets are still described as tight. Isolated layoffs have been reported in the technology, finance and real estate sectors. However, some contacts have expressed their reluctance to dismiss employees in light of recruitment difficulties, even if their manpower needs have decreased. Wages increased on average at a moderate pace, but there was at least some relief from wage pressure in some areas. Views on the outlook point to stable or slowing employment growth and at least a modest increase in wage growth. Federal Reserve Governor Jerome Powell said in response to a question at the Hutchins Center for Fiscal and Monetary Policy in Washington that it is very difficult to know whether the current economic environment will be a new normal. Powell added: We tend to believe that things will return to the way they were, but not yet, who still sees the conditions for a soft or relatively soft landing in order for the economy to return to normal.