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Home » Jerome Powell is on the verge of lowering borrowing costs

Jerome Powell is on the verge of lowering borrowing costs

jerome powell

Federal Reserve officials in the United States are hinting at perhaps lower borrowing rates in the coming several months. Anticipated to be disclosed by Chair Jerome Powell, this action reflects worries about a strong but moderate job market. Though interest rates have been maintained for the past year at a two-decade high, most analysts believe the Fed will hold rates the same for their next two-day meeting; a probable rate decrease in September is projected.

Recent financial figures show a mixed but encouraging picture. Although economic growth is still strong and inflation seems to be decreasing, the Fed wants more confirmation that inflation will keep dropping toward the 2% objective. The Fed’s dual mandates—maximum employment and stable prices—have been brought into closer equilibrium by the interaction between diminishing price pressures and a little increase in unemployment. The Fed is still wary, though, about allowing sustained high rates for too long causing too much harm to the labor market.

The next employment report, which should show a slowing down in hiring, now takes front stage. Forecasts point to a solid but slowed-down gain in nonfarm payrolls—178,000. Although the unemployment rate has been rising steadily over the previous three months, it is expected to level at 4.1%. Hurricane Beryl, which just struck Texas, might possibly affect these numbers by cutting hours worked.

Along with the Conference Board’s consumer confidence index, other economic indicators to monitor include job postings and leaving rates; fresh data coming on Tuesday. These revelations will provide a fuller picture of consumer attitude and manufacturing sector health; the latter will be especially comprehensive in the Thursday factory report of the Institute for Supply Management.

North American Forecasts for the Economy

Gross domestic product (GDP) figures for May should indicate a meager 0.2% monthly growth in Canada. Furthermore, a preliminary estimate for June will help one understand whether the second quarter’s 1.5% annualized growth prediction for the Bank of Canada fits the state of the affairs.

Asian Economic Dynamics

One of the biggest events in Asia is the next policy meeting of the Bank of Japan. Authorities have announced intentions to lower monthly bond purchases, therefore indicating a movement towards quantitative tightening. With a possible halving over two years, economists estimate that bond purchases from 6 trillion yen ($32.72 billion) will drop to 5 trillion yen. Although a rate increase is seen as a danger, for just around 30% of analysts it is the base case scenario.

Regarding other policy developments, Pakistan’s central bank is set to lower its benchmark rate to 19.5%. Australia’s June consumer inflation statistics, expected on Wednesday, would also inspire the Reserve Bank of Australia toward a rate increase should the numbers above forecasts. Closely watched for inflation movements will also include China’s July buying managers’ index, South Korea’s consumer pricing data, and Vietnam’s CPI report.

Trade statistics from Australia, Thailand, South Korea, Sri Lanka, Pakistan, and Kazakhstan as well as industrial production figures from Japan and South Korea will offer more light on regional economic situation.

Middle Eastern, European, and African Economic Indicators

With a possible rate drop on the horizon for the first time in over four years, the Bank of England’s (BOE) next rate decision is much awaited. The BOE is close-called; analysts project a narrow vote, and accompanying fresh inflation and GDP projections will accompany the choice. The aim of Chancellor Rachel Reeves’ speech to the House of Commons was to highlight the dire state of the United Kingdom’s public finances and cast doubt on the future prosperity of the nation.

The main emphasis in the euro region will be GDP and inflation numbers. With growth predicted at 0.2% for the second quarter, Tuesday’s report is anticipated to reveal a slow down in the 20-member bloc. Wednesday’s inflation figures probably show that although core inflation dropped to 2.8%, general inflation was constant at 2.5%.

Saudi Arabia’s plan to lower oil output is projected to cause a continuous reduction in economic statistics from the nation. Still, the government’s emphasis on non-oil development retains first importance. As inflation remains under control, Mozambique’s central bank is expected to lower rates for a fourth straight year.

The State of Latin American Economics

Despite possible obstacles, Tuesday’s Mexican flash production figures for Latin America is projected to indicate continuous upward progress in the second quarter. Reports on unemployment from Brazil, Mexico, Chile, and Colombia will provide light on the state of the labor market in each country; high informality levels in Brazil’s statistics probably will obfuscate it.

While Colombia’s central bank will provide its quarterly monetary policy report, Brazil will also publish June industrial output numbers. While Colombia and Brazil are anticipated to keep their present rates in view of growing inflation worries, Chile’s central bank is projected to decrease rates for the ninth straight time.

Central bank choices remain vital in determining economic environments even as world economies negotiate the complexity of monetary policy changes. With major consequences for both regional and global markets, the interaction of inflation, employment, and growth indicators will still influence these important decisions.

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