Quick Take
Federal Reserve Chairman Jerome Powell delivered a key speech at the ongoing Jackson Hole conference, providing his views on the current economic situation and the Fed's outlook. Reflecting on the waning effects of the COVID-19 pandemic, Chairman Powell said:
“Four and a half years after the arrival of COVID-19, the worst of the economic distortions related to the pandemic are fading.”
Chairman Powell addressed inflation and the labor market, emphasizing that inflation has fallen significantly and the labor market has cooled.
“Inflation has come down significantly. The labor market is no longer overheated.”
Powell stressed that conditions are easier than they were before the pandemic. He acknowledged that inflation is causing great hardship for the most vulnerable, and reiterated the Federal Open Market Committee's focus on keeping inflation under control.
Chairman Powell noted that inflation is approaching the Fed's target, job growth is strong but slowing, and job openings have fallen and the job openings-to-unemployment ratio has returned to pre-pandemic levels. Despite these developments, Chairman Powell warned of shifting economic conditions, noting that while risks to higher inflation have decreased, risks to employment have increased.
Powell’s comments had an immediate impact on financial markets, as Bitcoin surged to $62,000 before dropping to $61,000 and the US Dollar Index (DXY) fell below 101. CME futures are still heavily pricing in a 25 bps rate cut at the September meeting.
