Battling the highest inflation in a decade, policymakers in Europe and the United States are raising interest rates sharply, scrapping proposals that would fall if their economies slow. while cost pressures are increasing.
The world’s main central bank has sent a strong and unified message about the need to curb inflation, telling Jackson Hole that the base is broad and that it needs to work hard to stay here.
Several policymakers from the Bank of England, the Swiss National Bank, the Bank of Japan, the Bank of Korea, and the European Central Bank spoke at the Kansas City Fed’s annual retreat at Wyoming’s Grand Teton National Park.
The news came after Fed Chairman Jerome Powell said yesterday that the US central bank is likely to increase interest rates until inflation stabilizes.
Policymakers in Europe and the United States, facing the highest inflation in decades, have sought to raise interest rates, dismissing the perception that inflationary pressures are rising when their economies are slowing down.
The meeting in Jackson Hole – the first since the outbreak of the disease in 2020 – is a meeting for investors to do their best to follow the risks.
The most anticipated speaker of the day, the member of the Governing Board of the ECB Isabelle Schnabel, urged her colleagues to do more to reduce inflation, which is close to 10 percent in Europe and 8 percent in the United States.
“Both the bigger inflation and the price are based on larger expectations,” says Schnabel. In this circumstance, the central bank must make a quick decision. It has to adapt to the anger of people who start to doubt the long-term nature of our fiat currency.”
He also acknowledged the risk of a recession but told policymakers that “even if we end up in a recession, we have no choice but to continue with the correction” -The descent continues, “it will take a long time to reduce the increase.” celebrate the day before.
ECB officials discussed the extent of the rate hike at their September meeting, with some suggesting a 75-point increase was part of the discussion. The ECB Council raised the key interest rate by half in July.
ECB Councilor Francois Villeroy de Galhau, speaking on the same panel as Schnabel, said policymakers must decide to fight record inflation to avoid drastic rate changes ” very cruel”.
There is also speculation about how long inflation will last. The Governor of the Swiss National Bank, Thomas Jordan, said that the structural factors of the economy can help to maintain and share high inflation in the coming years.
“He issued a warning: “There are indications that inflation is extending to goods and services unrelated to the pandemic or the conflict in Ukraine.”.
Others said so on Friday.
Geeta Gopinath, Deputy Managing Director of the International Monetary Fund, said that US inflation will remain stable for at least a year or two.
The head of the Bank for International Settlements, Augustin Carstens, warned that the global economy would collapse if monetary policymakers did not work with governments to heal the side effects that could increase.
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“The central bank does not intend to eliminate all pockets of economic problems, but to keep inflation low and stable,” Carstens said”Monetary policy must address the significant obstacles it has in addressing the current inflation danger.”
The central bank expressed the need for clear and simple communication. That sentiment was reflected in Powell’s speech, which was five pages shorter than in previous years. ECB Governing Council member Joachim Nagel said policymakers are sometimes pressured by messages.