InstaForex

August 25, 2021

Experts no longer expect strong statements from Jerome Powell on Friday

 US stock indexes closed yesterday with a new update of their own records. As we have already said, there is nothing stopping the US stock indices from continuing to grow, since there is more and more money in the economy every month, thanks to the Fed. Is it surprising that many large companies only continue to rise in price and increase their own capitalization? In addition, yesterday, quite positive statistics on home sales in the primary market were released in America. In July, its volumes increased by 1.0%, as expected by market participants. Thus, so far, the US stock market is looking just fine, although some experts have been talking about a "bubble" for more than a year. However, it should be understood that as long as the Fed continues to pour $120 billion a month into the economy (at least), the growth of stock indices is unlikely to stop. Therefore, it is also very important for the NASDAQ, Dow Jones, and S&P 500 stock indexes to understand when the Fed is going to stop its monetary injections into the economy.


It's no secret that the key event of the week is Jerome Powell's speech at the Jackson Hole symposium, which is scheduled to take place on Friday. However, last week, Powell was literally required to give explanations about the change in the parameters of monetary policy related to the QE program this Friday, but now many experts have changed their point of view. First, just a few days ago, Robert Kaplan said that he was ready to change his mind about the need to complete the QE program as soon as possible, since there is again an increase in cases of the COVID virus and its strains in the United States. Secondly, many experts also note that a new wave of the pandemic has begun in the country, which poses a threat to the economy and its recovery. Thus, most economists are now inclined to believe that Powell and the company will wait for the situation to develop and will not rush to make loud and decisive statements. Most likely, the Fed will monitor the dynamics of the spread of the virus in the coming weeks, and also wait for the next reports on NonFarm Payrolls and inflation. And on the basis of them, make decisions at the next meeting and then voice them publicly. Thus, Powell may touch on the topic of quantitative stimulation in Jackson Hole, but it is unlikely that he will announce its curtailment.