Markets had been awaiting a signal from the chair of the US central bank, and they got it. “The balance of risks appears to be shifting,” Jerome Powell said on Friday, August 22, at the opening of his speech in Jackson Hole (Wyoming), kicking off the annual Federal Reserve (“Fed”) symposium. The statement was widely interpreted as confirmation that the current trend leaned toward an interest rate cut at the next meeting in mid-September. Wall Street welcomed the move Friday morning, with major stock indexes immediately rising.
After defending the institution’s cautious monetary policy in recent months, the chair placed greater emphasis on the slowdown in growth and the labor market. Job creation numbers have been weak, while at the same time, the number of unemployed people has not risen sharply due to a dramatic drop in immigration. “It is a curious kind of balance,” he said: “This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.”
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