Hopes for a late August bloom in world markets were put on hold as investors hunkered down for a sobering assessment of the long-term interest rate trajectory from the Federal Reserve boss later on Friday — sending the dollar soaring again in the process. Fed Chair Jerome Powell will deliver a keynote address to the annual Central Banking symposium in Jackson Hole at 1405 GMT. Trepidation about the speech largely stemmed from fresh evidence that the U.S. economy is losing momentum while the European Union is slowing down, underlined by this week’s August business surveys.
Amid growing signs of a global economic slowdown, many investors suspect the Fed will soon shift to a more “dovish” policy stance and pause its current cycle of gradual rate hikes, which have raised borrowing costs for consumers and businesses. “With a strong dollar, weakening trade, and sluggish consumer demand, the Fed may be in no hurry to raise rates again,” said Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management.
Investors also are keen to hear more details from Powell about the recent turmoil in markets triggered by the collapse of Silicon Valley Bank. The Fed is expected to raise rates by a quarter point this afternoon. Powell also will answer questions at a press conference afterward.
The Fed’s next move could be another hike, or it may lower rates, depending on how well the economy is doing in the coming months. The central bank’s monetary policy committee is scheduled to meet again in September.
In addition to the two vacancies on the Board of Governors, which the president nominates and the Senate confirms, Powell holds three separate positions at the Fed: governor of the Fed (appointed by the president and confirmed by the Senate), chairman of the Board of Governors and head of the Fed’s policy-making committee (separately appointed by the president and the Senate) and the Federal Open Market Committee’s vice chair.
Despite Trump’s frequent criticism of the Fed, it is unclear how much influence he has over Powell or the decision-making at the central bank. The Fed’s independence from political interference is enshrined in the Constitution, though Powell has said he doesn’t regret taking on the job. Several other Fed officials have expressed similar sentiments. Nevertheless, the president has been pushing for lower interest rates. At a fundraiser on Thursday, he told wealthy Republicans that the Fed’s rate increases are hurting the economy. He added that the economy would soar like a rocket if the Fed cut rates dramatically. He also reiterated his support for former New Jersey Gov. Chris Christie, a fierce critic of the Fed’s policies.