Central bankers finalize their artillery to face the slowdown of the world economy
The evocative landscapes of Jackson Hole, with its mountains and lakes surrounded by greenery, are probably the greatest element of calm that markets will perceive during the
- EU.The ECB pays the ground to reactivate the stimuli in the Eurozone
The evocative landscapes of Jackson Hole , with its mountains and lakes surrounded by greenery, are probably the greatest element of calm that the markets will perceive during the annual summit held these days in this place in Wyoming (USA). Banks, investors and governments look at this place since yesterday hoping to find answers or, at least, some keys to the steps that central banks study to face the increasingly pronounced curves of the global economy.
In previous appointments, the meeting has served to advance the measures that would be implemented, but this year is of special importance, since it coincides with an increase in global risks and uncertainties: the global economic slowdown, the slowdown in Europe and Germany, the doubts of Brexit and, above all, the confrontation of the commercial war between the US and China.
Although the main protagonist on this occasion will be monetary policy . 2019 was presented as the year of normalization , but the scenario has turned around and the biggest concern of the markets now is to know what artillery the central banks will use to face the global slowdown. The title of the symposium, Challenges for monetary policy , makes clear the axes in which Jackson Hole will move. That is why the appearance of Jerome Powell , the president of the US Federal Reserve (Fed), whose speech could contain clues about the policies that the American central bank will apply in the coming months, is expected with special interest.
In July, the entity lowered interest rates for the first time in 10 years. It did 0.25% in a movement that many link to the pressure that the US president, Donald Trump has been exercising for months. The question now is whether the Fed will continue the downward path or wait for more blunt signs of deceleration for a new cut in the price of money. The minutes of its last meeting make it clear that this dilemma already exists among the members of the Federal Reserve, so it is expected that Powell's speech will clarify whether he will follow the path of monetary expansion or, conversely, will continue to challenge the patience of Trump
The president has been disqualifying the Fed president for months and asking him to lower interest rates. The president believes that the dollar is too strong and reduces competitiveness with respect to other countries. That would explain, according to many analysts, that it continues to raise the tone of its commercial confrontation with China to levels that put global economic stability at risk.
And that would also explain his latest outings against Powell, who is responsible for the cooling of the US economy. "The only problem we have is Jay Powel and the Federal Reserve," he wrote on Twitter a few days ago. Powell "is like a golfer who cannot give a soft blow, he has no tact," he added.
But not everything goes through the US. Markets also expect to find signs about the stimulus plan advanced by the ECB at its July meeting. It has not yet been revealed if Mario Draghi will go to Jackson Hole, but the ECB representatives who attend are expected to offer some detail on the battery of measures in which the institution works.
Among other tools, Draghi opened the door to a further drop in rates in the Eurozone , but the risk of this type of rebates is that central banks run out of arms to face the next recession. According to the minutes of the last meeting published yesterday, the Board agreed to start work on a new asset purchase program, as well as to create a mechanism that mitigates the impact of negative rates on banks.
If necessary, the ECB could even consider buying shares of listed companies, as advanced by Olli Rehn , governor of the Central Bank of Finland and member of the Board of Governors of the entity, in a recent interview with The Wall Street Journal .
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