The Fed votes for Kamala. Before the November vote, a couple of interest rate cuts will come, putting an end to a tightening that has brought the cost of money to its highest level in twenty years. In this way, the US economy, which is showing some signs of slowing down, should regain strength, satisfying the needs of the current Democratic team that leads the White House. The first reduction will come in September. This was announced by Jerome Powell, chairman of the Fed, at the conclave of the elite of global finance held in Jackson Hole, Wyoming. “The time has come for an adjustment of monetary policy,” said Powell, “the direction is clear.” The president of the American central bank assures that “confidence has increased that inflation is on a sustainable path and will return to 2%,” the objective set by the Fed’s mandate.
The markets have welcomed these announcements with enthusiasm: the Nasdaq gains about 1.5%, and the S&P 500 1.1%. Milan is the best in Europe with a step forward of 1.15%.
With these increases, the markets wanted to underline their satisfaction for the clarity of Powell’s speech. In fact, there was a widespread fear of a more cautious communication. Instead, the indications are clear. The priority is no longer inflation but economic recovery. This means that the US could get to the November elections without difficulties on the production front. A nice presentation for Kamala. In this regard, we must not forget that Trump from the White House had not spared criticism of Powell, judging him too cautious in terms of monetary policy.
In explaining the rate decision, Powell noted that the latest economic data is mixed. While manufacturing weakens further below the 50 level, service activity remains strong at 55.2. However, Thursday’s labor data paints a somewhat dull but still solid employment picture. Initial jobless claims rose slightly to 232,000, but are still among the lowest levels in six weeks. Continuing claims are also up, but still below July’s peak.
