He Federal Reserve Chairman Jerome Powellexplains the decision to keep the monetary policy rate, the federal funds rate, unchanged in the range of 5.25% – 5.5% and answers questions at the press conference after the meeting.
Featured Statements
“The improvement in inflation has come from the reversal of the distortions of the pandemic, complemented by monetary policy.”
“Inflation is also improving due to a positive supply shock.”
“These inflation dynamics may continue.”
“We don’t know if we’ve reached the point where demand determines inflation.”
“We are getting good results so far, reducing inflation with a gradual cooling of the economy“
“The housing situation is complicated.”
“Ultimately, the best thing we can do for the housing market is reduce inflation.”
“The banking system has been solid, strong and well capitalized.”
“Wages remain above a sustainable path.”
“Wages are not the main cause of inflation, but they need to fall for overall inflation to return to 2%“
Inflation FAQs
Inflation measures the rise in prices of a representative basket of goods and services. General inflation is usually expressed as a month-on-month and year-on-year percentage change. Core inflation excludes more volatile items, such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the target level of central banks, which are mandated to keep inflation at a manageable level, typically around 2%.
The Consumer Price Index (CPI) measures the variation in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage of inter-monthly and inter-annual variation. Core CPI is the target of central banks as it excludes food and fuel volatility. When the underlying CPI exceeds 2%, interest rates usually rise, and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually translates into a stronger currency. The opposite occurs when inflation falls.
Although it may seem counterintuitive, high inflation in a country drives up the value of its currency and vice versa in the case of lower inflation. This is because the central bank will typically raise interest rates to combat higher inflation, attracting more global capital inflows from investors looking for a lucrative place to park their money.
Gold was once the go-to asset for investors during times of high inflation because it preserved its value, and while investors often continue to purchase gold for its safe haven properties during times of extreme market turmoil, this is not the case. most of the time. This is because when inflation is high, central banks raise interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity cost of holding Gold versus an interest-bearing asset or placing money in a cash deposit account. On the contrary, lower inflation tends to be positive for Gold, as it reduces interest rates, making the shiny metal a more viable investment alternative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
