Opposition crushed!

The main news. On Friday, Federal reserve Chairman Powell spoke at the annual seminar in Jackson Hole. The event turned out to be exceptionally “dovish”, with bonds and precious metals starting to rise on the back of his comments.

Powell: “The situation shows the risks of a decline in employment… Changing the balance of risks may require policy adjustments.“

Thus, we can say that the anti-inflationary policy is giving way to a stimulating one. As Trump demanded.

Key quote: In the near term, the risks to inflation are shifted upward, and the risks to employment are shifted downward, which creates a difficult situation. When our goals are in such conflict, our vision requires us to balance both sides of our dual mandate.

Our discount rate is now 100 basis points closer to the neutral level than a year ago, and the stability of the unemployment rate and other labor market indicators allows us to act cautiously when considering changes in our policy.

However, given the restrictive nature of the policy, the underlying outlook and changing risk ratios may require adjustments to our policy.”

The details are in the last section of the Review.

Macroeconomics. Norway’s GDP is -2.1% per year, the 3rd negative in a row:

German GDP -0.3% in the quarter – the pause in decline was short:

The balance of industrial orders in Britain is -33%, the 37th negative in a row:

Previously, there was a longer period of negative data only in 1998/2004:

The incoming price component of the regional index of manufacturing activity in the United States from the Federal Reserve Bank of Philadelphia 66.8 is the top in more than 3 years.;
before the covid-19 inflationary surge of 2021/22, such a value was only once in 2008; similar levels were constant only 45 years ago:

Building permits in the United States dropped to 2017/19 levels; not counting covid, they are at the bottom in 6 years:

The US housing market index continues to decline – it is only 1-2 points away from the 13-year lows of 2020 and 2022:

Prices of new buildings in Canada -1.04% per year, the worst dynamics since the fall of 2009:

PPI (Industrial Inflation Index) Germany -1.5% per year, 13-month low:

The very value of this price index has been at the bottom since the spring of 2022:

This is a very interesting moment, a clear deflation. In fact, this means that domestic demand in Germany is falling faster than social support is growing. And, of course, exports are falling.

CPI (Consumer inflation index) Britain (+3.8% per year) at its peak in 1.5 years:

https://tradingeconomics.com/united-kingdom/inflation-cpi
Japan’s CPI excluding food and fuel (+3.4% per year) has been at its peak since the early 1980s, except for the surge in 2023 (however, its peaks are already close):

Salaries under collective agreements in the eurozone are accelerating again (+3.95% per year):

That is, there is an increase in consumer inflation. In the late 70s, this was called stagflation, a sign of a structural crisis (see M.Khazin, “Memories of the Future. The ideas of modern economics”).

The number of recipients of unemployment benefits in the United States continues to update 4-year peaks (excluding covid – 7.5-year-olds):

The Central Bank of China has kept its monetary policy unchanged, although there were hopes for further easing, given recent data.

The Central Bank of Indonesia reduced the key rate by 0.25% to 5.00%.

The Central Bank of New Zealand cut the rate by 0.25% to 3.00%; the decision was not unanimous (4 against 2), so new interest cuts are far from predetermined.

The main conclusions. The topic of controlling the FRS is becoming one of the most important for Trump. His conflict with Euro-Atlantic elites (especially after meeting with Putin in Anchorage and unsuccessful attempts to force Ukrainian dictator Zelensky to accept the position agreed upon there) is possible only because the Fed allows itself to finance the Bank of England and the ECB independently of the US leadership.

Accordingly, the pressure of the Trump administration on the Fed leadership is constantly increasing. And, apparently, the threat of direct criminal prosecution played a role, Powell “broke down.” At the same time, the macroeconomic data gave him serious reasons to insist on continuing the anti-inflationary policy.

Jerome Powell said yesterday that current conditions “may justify” cutting interest rates.

“In a policy environment in restrictive territory, the underlying prospects and the changing balance of risks may require an adjustment to our policy position,” Powell said in prepared remarks. According to him, stable employment conditions and other dimensions of the labor market may allow the Fed to “proceed cautiously” as policymakers consider changes in the central bank’s policy stance.

In fact, there was a rejection of the policy that the same Powell announced five years ago, in 2020, at a similar seminar in Jackson Hole. If a decision is made at the next meeting of the Open Market Committee to lower the rate, this will clearly demonstrate a change in macroeconomic policy. But how this will affect the US economy is still a question, here we need to closely monitor the situation.

It is very likely that inflation in the United States will start to rise, and the industry will continue to fall, but nothing can be guaranteed now. So we wish our readers to take a sober look at the situation, for which it is advisable to have a good rest on the weekend and not overwork during the working week!