Stock market traders are watching the speech of US central bank president Jerome Powell today. In this semi-annual statement, he addresses the US Senate about the economic state of affairs and the future interest rate policy of the central bank.
Even before Powell could start his speech, tempers within the Chamber were running high over the skyrocketing inflation. The Democrats believe that the high inflation is due to the companies, while the Republicans blame the government. ‘It immediately started with fireworks,’ says economist Han de Jong. Powell emphasized in his speech that in light of the current situation, the bank is forced to continue with rate hikes.
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During the Fed boss’s speech, it seemed as if the stock markets were moving, but according to De Jong it is difficult to attribute these short-term movements to this. “If something shocking happens, you’re more likely to see it in the bond market, which is calm for now.”
‘Inflation will probably only come down once the market relaxes a bit.’
However, De Jong emphasizes that anything can still happen. He predicts three more rate hikes to come. ‘That is partly due to a strange problem in the American labor market, which is even tighter than in the Netherlands.’ For example, Americans resigned en masse during the pandemic, but have never returned. The so-called ‘Great Resignation’ can still be felt, because four million hands are currently short of keeping the economy going. ‘Inflation will probably only come down once the market relaxes a bit.’
