(Washington) The President of the Federal Reserve (Fed) was open on Friday open to a next drop in interest rates, a relaxation claimed at COR and CRI by Donald Trump who does not loosen the pressure on American central bankers.
The United States is approaching the moment when the FED will have to lower its interest rates to support employment, said Jerome Powell in a much anticipated speech, from the annual meetings of Jackson Hole, in Wyoming (West).
The boss of the monetary institution, which approaches the end of his mandate, is constantly flooded by the American president, who wants to see interest rates decrease quickly and reshape the Council of Governors so that he is more in line with his vision of the economy.
Donald Trump thus assured Friday that he was ready to dismiss one of the governors of the Federal Reserve (Fed), Lisa Cook, if she did not resign herself.
PHOTO JONATHAN ERNST, ARCHIVES REUTERS
Lisa Cook
First African-American woman appointed to this post, Mme Cook is accused by a relative of the Republican of having falsified documents to obtain a mortgage.
“What she did is very bad so I will fire her if she does not resign,” Trump told a press briefing in Washington.
“Delicate situation”
Since Wyoming, Mr. Powell has kept any political commentary, confining himself to the borders of his mandate: fixing the interest rates of the Fed so that inflation remains stable (around 2 %) and that full employment is assured.
However, the customs duties set up by the republican billionaire since his return to the White House shake up the American economy, which has clearly slowed down in recent months.
A “rapid” degradation of the American labor market is not to be excluded and could “justify” a relaxation of monetary policy, and therefore interest rates, noted Jerome Powell.
He added that the Fed was in a “delicate situation” because the new taxes on imported products are starting to be passed on to consumers paid at the risk of reviving inflation at the same time.
“The impact of customs duties on consumer prices is now clearly visible,” he said.
In theory, the risk of an inflation thrust encourages central bankers to leave their guiding rates unchanged at least. But if they believe that it is necessary to support the activity to avoid layoffs, they tend to lower the rates, which guide the cost of credit for companies and individuals.
“The risks weighing on the job market increase. And if these risks come to materialize, they can rapidly translate to redundancies and unemployment, “observed Mr. Powell.
The president of the federal reserve never firmly engages on a trend, but one of his missions is to manage the expectations of the markets, indicating in which direction the next decisions of the Central Bank could go.
In this case, his speech was interpreted by investors as a way of preparing the ground for a drop in rate in September.
He immediately dropped the borrowing rates of the American debt: the two -year yield – the most sensitive to monetary developments – thus passing in a few minutes from 3.78 % to 3.69 %. The dollar also fell, dropping approximately 0.95 %, lower rates being likely to lead the course of a currency.
On the other hand, Wall Street applauded the words of the Fed boss, the main American stock market indexes evolving sharply.
And the number of investors anticipating a drop in rates in September has increased significantly, according to the CME monitoring tool, Fedwatch: they are now an overwhelming majority (more than 90 %).
