Federal Reserve Update

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Even before the annual Jackson Hole Central Bank Symposium began, the economic impact of the spread of the delta variant of the coronavirus in the United States was already apparent. Health officials in Wyoming County, where the resort is located, changed the method of assessing the risk of the virus, placing Jackson Hole as the highest category, and conducting face-to-face meetings according to guidance.The meeting will start on Thursday and it will now be a Completely virtual thing For the second year in a row.

Another wave of viruses will further complicate the economic outlook facing the Fed. Thanks to the combination of vaccines and vaccines, total expenditures have recovered strongly from the collapse caused by the pandemic last year. Very financial And monetary stimulus.At the same time, supply constraints range from labor shortages in the hotel industry to Global semiconductor chip shortage Fueled inflation for automakers.

The biggest question facing the Fed and investors who must predict its decisions is whether the rise in inflation is temporary. In the dovish view, rising inflation reflects the economy’s freedom from a deep freeze: as workers and jobs gradually match, labor shortages will ease, and as production catches up with the rebound in spending, supply constraints will disappear.For the hawks, however, the surge in inflation is only the first sign of continued growth, thanks to the complacent central bank’s pursuit of Monetary Policyy Too loose, even if the price pressure comes back.

However, another wave, Add a new element To the debate. As the rate of vaccination in the United States has stagnated below that of other countries, and the number of the most vulnerable people being stabbed has decreased, the delta change is likely to curb consumer spending. Many Americans may once again stay away from crowded restaurants, shops, and even workplaces—just as the Jackson Hole meeting moved online.recent Data from the United StatesAnd elsewhere, it shows that the pace of recovery has slowed: consumer confidence collapsed, and retail sales in July were unexpectedly low last week.

Therefore, variants should change the content of the keynote speech, not just their way of expression. Last week, after the minutes of the Fed’s July meeting showed that most officials of the Fed’s Monetary Policy Committee supported the reduction of this year’s asset purchase plan, the market fell. This small change in the Fed’s ultra-loose monetary policy was enough to cause the market to fall and cause bond sales. Delta changes may cause some officials to reduce their enthusiasm for cutting stimulus measures and adopt a more wait-and-see attitude. Jay Powell’s speech on Friday will be the most watched to understand the clarity of the pace of austerity and what data central bank officials will pay close attention to to gauge the strength of the recovery.

Powell’s speech last year revealed a huge change in the Fed’s monetary policy approach. The Fed’s chairman stated that the Fed’s current goal is to limit the lack of full employment, rather than treating overemployment as a problem that needs to be resolved. It will also tolerate more inflation.Powell’s speech this year may not be Send such fireworks, But this does not reduce its challenge. The Fed faces a very uncertain outlook, but it can at least provide more clarity to the market.