The Chairman of the Federal Reserve warns that the Fed may need to take precautionary action if an oversupply in the labor market puts pressure on inflation.
Mr. Powell's comments emphasize that the employment index exceeding the sustainable maximum does not necessarily require tightening policy, but a tight labor market can still pose risks to price stability.
MAIN CONTENT
The Fed may proactively adjust policy if a tight labor market poses inflation risks.
Employment exceeding the threshold does not automatically lead to interest rate hikes.
The market reacted by predicting two interest rate cuts this year.
How does the Fed Chairman explain the state of the labor market and inflation?
Mr. Powell expressed the view that a tight labor market, when employment exceeds the sustainable maximum, can put pressure on prices. This is a warning sign for the Fed about the risk of losing control over inflation if appropriate actions are not taken.
Additionally, he also noted that a high employment index is not sufficient grounds for the Fed to immediately tighten monetary policy. This is to avoid overreacting when estimates are still quite volatile, helping to maintain a balance between supporting growth and controlling long-term inflation.
Why does the financial market react to Mr. Powell's remarks by anticipating interest rate cuts?
The Fed Chairman's statements have created expectations that despite the possibility of interest rate increases in the future, the market still expects a trend of easing policy as risks from labor factors and inflation are controlled.
This has led traders to price in the possibility of the Fed reducing interest rates twice before the end of the year to boost economic growth and stabilize financial markets, indicating more careful consideration in managing monetary policy.
"The Fed may need to take precautionary action if a tight labor market poses risks to price stability, but sustainable employment exceeding the maximum does not necessarily require immediate tightening of policy."
– Jerome Powell, Chairman of the Federal Reserve, August 22, 2023
How will the Fed adjust monetary policy in the current context?
The Fed's consideration of monetary action based on labor market developments and inflation data will be very flexible. This helps avoid pushing the economy into slow growth or uncontrolled high inflation.
Investors and experts expect the Fed to continue closely monitoring actual data to determine the appropriate timing for increasing or decreasing interest rates, ensuring economic stability and supporting sustainable employment.
How can investors monitor the Fed's policy in the coming period?
Investors should pay attention to monthly employment reports and inflation data to predict the Fed's policy trends. Statements from Fed officials and minutes from meetings are also important sources of information for assessing trends.
At the same time, the financial market often reflects this expectation through fluctuations in stock, bond, and cryptocurrency prices, so monitoring these movements helps to update investment strategies in a timely manner.
Frequently Asked Questions
What did Mr. Powell say about risks from the labor market?
He emphasized that a tight labor market can put inflationary pressure, requiring the Fed to consider precautionary actions to maintain price stability.
Does sustainable employment exceeding the maximum require the Fed to raise interest rates?
No, Mr. Powell believes this is just a reference factor and not sufficient for the Fed to tighten policy immediately.
What are the market expectations regarding interest rate policy in 2023?
The market expects the Fed to cut interest rates twice before the end of the year to support the economy as risks are controlled.
How can investors capture the Fed's monetary policy developments?
Monitoring employment reports, inflation, Fed statements, and financial market reactions is the most effective way.
Why is the market's reaction important to monetary policy?
Market reactions indicate investor expectations, affecting interest rate decisions and the direction of policy in the future.
Source: https://tintucbitcoin.com/nha-dau-tu-du-bao-2-cat-lai/
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