Powell delivers his speech and restores stability on Wall Street

At the annual economic conference in Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell delivers his speech, indicating that the time has come for the central bank to lower its key policy rate. This statement aligns with widespread expectations that borrowing costs will be reduced starting next month. Powell’s address emphasized his commitment to preventing further cooling in the labor market, signaling a pivotal shift in monetary policy.

Timing and Pace of Rate Cuts

Powell clarified that although the direction of policy adjustments is clear, the timing and pace of rate cuts will depend on incoming data. Evolving economic outlooks and the balance of risks will also influence these decisions. His statement that inflation-fighting efforts have been successful helped stabilize financial markets. These markets had recently experienced a brief panic following weaker-than-expected labor data.

Market Reactions and Wall Street Gains

Following Powell’s speech, market stability has returned, with the S&P 500 nearing an all-time high. Exchange-traded funds tracking Treasuries and corporate bonds have risen, and the VIX index, Wall Street’s fear gauge, has settled well below anxiety-indicating levels. This positive reaction reflects increased investor confidence amid the expected changes in Fed policy.

Global Central Bank Coordination

Investor concerns have eased due to the anticipated start of rate cuts and alignment among major global central banks. On Friday, officials from three major central banks indicated their readiness to lower or continue reducing interest rates in the coming months. This move signals the end of the high borrowing cost era as the global economy transitions past post-Covid inflation.

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Uncertainty and Risks Ahead

Despite the promising signals, significant uncertainty and risks remain. Neither Powell nor his counterparts provided detailed guidance on the exact pace of future rate cuts. This lack of clarity introduces an element of unpredictability into the economic outlook, keeping investors on alert.

Harris Envisions New Leadership

In a separate but notable political development, US Vice President Kamala Harris, in her nomination acceptance speech on Thursday night, called for a new direction for the country. She envisioned a future with a woman leading as commander-in-chief. Harris’s 40-minute address, delivered with presidential poise, interwove personal stories from her career and her time in the White House. She defended democracy and expressed pride in the nation’s global influence.

Conclusion

Powell’s remarks and the broader central bank movements have set the stage for potential economic shifts, with positive implications for financial markets. Meanwhile, Harris’s speech highlights ongoing political dynamics as the nation considers its future leadership.

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