At the Jackson Hole Meeting, Central Bankers are Hawkish

Credit: LinkedIn of Christine Lagarde

Central bankers maintain a hawkish stance at the annual Jackson Hole summit, highlights an Engine news source.

European central banks

Leaders of both the US and the European central banks have signaled more hikes in their key interest rates to alleviate high inflation.

US Federal Reserve (Fed) chairman Jerome Powell and European Central Bank (ECB) president Christine Lagarde virtually echoed each other at the annual Fed symposium in Jackson Hole, Wyoming. They both highlighted the need to maintain high borrowing rates until inflation is lowered to 2% in the medium term.

“It is the Fed’s job to bring inflation down to our 2 percent goal, and we will do so. We have tightened policy significantly over the past year. Although inflation has moved down from its peak—a welcome development—it remains too high,” Powell said. 

“We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” he said.

Improving the housing market and a tight labour market

Powell’s comments were primarily based on an improving housing market and a tight labour market. The two factors indicate that the economy may be stronger than expected and warrant a hawkish monetary policy response, he argued.

“Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

ECB’s Lagarde struck a similar tone as she argued that the central bank would keep its key interest rate as high as possible to contain inflation in the eurozone.

“We have faced the pandemic, resulting in a partial shutdown of the global economy. We are confronting a war in Europe and a new geopolitical landscape, leading to profound changes in energy markets and trade patterns. And climate change is accelerating, compelling us to do all we can to decarbonise the economy,” Lagarde said.

However, these factors altered the economic landscape and contributed to the return of high inflation globally as well as the onset of an “era of uncertainty” in the economy, she warned.

According to her, the ECB’s interest rate policy must remain “sufficiently restrictive for as long as is necessary” to keep inflation in check at 2% over the medium term.


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Source: Engine


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