Markets Focus On Powell, Lagarde Comments And UK Elections

July 3, 2024 10:43 am

Comments coming from the Federal Reserve (Fed) head Jerome Powell and the European Central Bank (ECB) Christine Lagarde regarding monetary policies as well as the upcoming UK parliamentary elections due on July 4th are drawing the attention of investors and traders.

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Fed Jerome Powell: Need More Confidence Before Cutting Rates

Delivering his remarks at the ECB Forum in Portugal, the Fed’s head Jerome Powell said that “we want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.” Powell stressed that the US central bank has made quite a bit of progress bringing inflation close to target readings. 

Jerome Powell expressed his will to wait for more progress regarding consumer prices before moving forward with further monetary policy adjustments, adding that “we’re well aware that if we go too soon, that we can undo the good work we’ve done. If we do it too late, we could unnecessarily undermine the recovery and the expansion.”

ECB Christine Lagarde: Complex Journey Towards Inflation Target

European Central Bank (ECB) President Christine Lagarde discussed monetary policy outlook at the ECB Forum on Central Banking in Sintra, Portugal. The ECB’s head said that inflation is heading in the right direction, adding that the ECB is “very advanced” on the disinflationary path.

Lagarde predicted that inflation would hover slightly above 2% in 12 months’ time before hitting the ECB’s 2% target in the second half of next year. Commenting on services inflation which remains stubbornly high, the French banker mentioned that “we don’t need to have services at 2% because manufacturing goods are below 2%,” noting the various factors that have an impact on the prices of these components and how understanding them could be the key to solving the problem.

The ECB’s president stressed that future monetary policy decisions will continue to be data-dependent: “It’s not a predetermined path… it’s a step that would be followed by further review of data.”

US Nonfarm Payrolls June 2024 Report

On Friday, the US Bureau of Labour Statistics (BLS) is expected to publish June’s Nonfarm Payrolls (NFP) figures. Market analysts suggest that the NFP figure could come in at 190,000, much lower than the 272,000 recorded in May. A higher than anticipated figure could put the Fed’s monetary policy stance in question, strengthening the US dollar, while a lower-than-expected reading could weaken the US currency against its competitors.  

Today, the United States (US) Automatic Data Processing (ADP) Research Institute will release its monthly report on June’s private sector job creation figures. The ADP Employment Change report is expected to show that the US private sector added 160,000 new positions in June after adding 152,000 in May.

Eurozone CPI Inflation Lowers In June

A survey published by Eurostat showed that eurozone CPI inflation fell to 2.5% on a yearly basis in June. The figure was in line with market analysts’ expectations. However, core inflation, excluding energy, food, alcohol and tobacco, stayed at 2.9%, unchanged from May, missing the 2.8% analyst forecast.

Economists speaking on CNBC noted that services inflation remained elevated in June, coming in at 4.1%, way higher than the ECB’s target. With services inflation at high levels, they suggest that the central bank’s board would consider pausing any plans for rate cuts, especially when taking into account rising wages and falling unemployment.

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