“We’ve loaded these very large rate increases, and now we’re getting close to where we need to be,” Fed Chairman Jerome Powell told reporters.
What came next: Investors cheered Powell’s clear pivot. The S&P 500 rose, posting its best month since November 2020, and financial conditions eased. Mortgage rates fell below 5% for the first time since mid-April.
Now, Fed officials are trying to get things right. Not wanting the markets to change course so sharply, and reversing the effects of their hard work thus far, they spoke forcefully once again.
“We need to see really convincing evidence that inflation is trending downward, and my view is that we haven’t seen that yet,” Meester said.
As the Fed tries to cut demand again until it stops rising against limited supply – driving up prices – it is keeping a close eye on the labor market, which has remained strong.
The news poured cold water on the theory that the Fed will dramatically change its approach anytime soon. The central bank actually wants to see some weakness in the labor market. When there are a lot of open roles, wages rise quickly, which can make economy-wide inflation worse.
“This is not the news the Fed wanted to hear, and it will probably cause interest rates to be pushed higher and faster,” said Robert Frick, company economist at Navy Federal Credit Union.
coming: The next big data release is the Consumer Price Index, which is used to track inflation in the United States. Economists surveyed by Refinitiv expect to know that prices rose 8.7% in the year through July, down slightly from June. But barring volatile food and energy prices, inflation may have picked up gradually.
The strong dollar in America is hurting others
The most recent: The dollar has appreciated more than 10% in 2022 compared to other major currencies – near a two-decade high – as investors worried about a global recession scrambled to cash in on dollars, considered a safe haven in turbulent times. .
Travelers in the US may rejoice that a night in Rome that used to cost $100 now costs about $80, but it’s a more complex picture for multinationals and foreign governments.
Dollar gains are already hurting some weak economies.
“It was a challenging environment,” William Jackson, chief emerging markets economist at Capital Economics told me.
Monday: Earnings from BioNTech, Palantir, Tyson Foods, Novavax, and News Corp. and Take-Two Interactive and SmileDirectClub
Tuesday: Earnings from Dine Brands, Hyatt, Spirit Airlines, Coinbase, Roblox, and Wynn Resorts
Wednesday: US Consumer Price Index for July; Earnings from Disney, Fox Corporation, Wendy’s and Bumble
Thursday: OPEC monthly report. US Producer Price Index for July; Earnings from the brands Utz, Warby Parker and Wheels Up
Friday: the gross domestic product of the United Kingdom; University of Michigan Consumer Survey