Powell Predictably Didn’t Pull Any Punches in Jackson Hole Speech
August 26, 2022
The tone of Fed Chairman Powell’s keynote address today at the Jackson Hole Symposium was hawkish in spite of data released earlier in the day that revealed a larger July downtick in inflation than was forecast. Monetary policy will err toward restraint until officials are very sure that inflation is returning all the way to its target. A third straight 75-basis point interest rate hike appears just as likely as a 50-bp move at the next FOMC meeting.
The U.S. personal consumption price deflator, which in June had jumped 1.0% on month (most in 201 months) fell by 0.1% in July, resulting in a half-percentage point drop in its 12-month rate of rise to 6.3%. The core PCE deflator’s inflation rate subsided from a 485-month high of 4.8% in June to 4.6% last month. Growth in U.S. personal income of 0.2% on month and personal spending of 0.1% were also sharply slower than in June.
The dollar fell back 0.9% against the euro overnight, 0.3% relative to the Swiss franc and sterling and 0.6% on a weighted DXY basis.
Stock markets are down in Europe and the United States but closed up in Japan and Australia.
The ten-year German bund yield rose nine basis points. Comparable U.S. and British yields rose much less sharply.
WTI oil is up 0.4%, while the price of gold slid that amount.
The U. Michigan monthly measure of U.S. consumer sentiment for August was revised significantly higher to a 3-month high but still-weak reading of 58.2 from 55.1 reported initially.
German consumer confidence fell to a record low this month. At -36.5, such compared with a December 2021 reading of +10.
French consumer confidence rose unexpectedly to a 2-month high in August of 82 versus 99 a year earlier.
Italian consumer sentiment also improved in August and, at 98.3 was six index points better than expected. Business confidence among Italian manufacturers, however, fell to a 17-month low.
The early estimate of the July U.S. merchandise trade deficit declined to a 9-month low of $89.1 billion from $98.6 billion in June and $126.8 billion in March.
Brazilian producer price inflation eased marginally to 18.0% in July from 18.8% in June and 33.1% in July 2021.
Swedish PPI inflation of 20.4% last month was down from a record high of 25.6% in June and the fifth straight reading of more than 20%.
Tokyo consumer price inflation in August accelerated 0.4 percentage points to 2.9% and was accompanied by a higher core CPI rate of 2.6%. Core CPI includes energy, however, and when that item as well as fresh food are excluded, producer price inflation remains very low at 0.6%. The Bank of Japan notably is not joining in the rate tightening of other central banks.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German and French consumer confidence, Powell speech, U.S. personal income and spending
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