On Friday, Fed Chairman Jerome Powell indicated that the central bank is likely to begin tapering before the end of the year. However, he said rate hikes aren’t imminent as there is still “much ground to cover” before the economy hits full employment. Powell said reversing stimulus too soon could be harmful. The coronavirus is not the only threat to our economy. Experts believe Hurricane Ida will also take a toll on the energy, chemical, and shipping industries. Yet, economists said the impact on the overall U.S. economy should be modest so long as damage estimates don’t rise sharply and refinery shutdowns are not prolonged.

 

CNBC/Jeff Cox
Powell sees taper by the end of the year, but says there’s ‘much ground to cover’ before rate hikes

Federal Reserve Chairman Jerome Powell indicated Friday that the central bank is likely to begin withdrawing some of its easy-money policies before the end of the year, though he still sees interest rate hikes off in the distance.

In a much-anticipated speech as part of the Fed’s annual Jackson Hole, Wyoming, symposium, Powell said the economy has reached a point where it no longer needs as much policy support.

That means the Fed likely will begin cutting the amount of bonds it buys each month before the end of the year, so long as economic progress continues. Based on statements from other central bank officials, a tapering announcement could come as soon as the Fed’s Sept. 21-22 meeting.

However, it does not mean that rate increases are looming.

You can read the full story, here.

 

Kitco News/David Lin
Fed announced taper timeline, here’s why market ‘tantrum’ didn’t hit yet – Steve Hanke

Fed Chair Jerome Powell announced on Friday at the Jackson Hole Symposium that the U.S. central bank will consider tapering by the end of the year since the economy is on track to meet full employment and hit the Fed’s inflation targets.

The reason that stock markets did not react adversely to the announcement is that Powell’s speech is actually quite dovish, if reads in between the lines and concludes that they haven’t made any definitive plans to taper yet, said Steve Hanke, professor of applied economics at Johns Hopkins University.

Hanke noted that in the past, interest rates have gone up before a reduction in asset purchases, or tapering, happens, but this time the Fed is doing the reverse; they are announcing plans to taper before a making lift-off commitments, which require more stringent economic conditions, according to Powell’s speech.

Continue reading, here.

 

AP/Martin Crutsinger
Ida: Economists foresee only modest damage to US economy

Hurricane Ida is sure to take a toll on the energy, chemical and shipping industries that have major hubs along the Gulf Coast, but the impact on the overall U.S. economy should be modest so long as damage estimates don’t rise sharply and refinery shutdowns are not prolonged, economists suggested.

Ida, which made landfall Sunday, is tied it for the fifth-strongest hurricane to ever hit the mainland. More than a million customers in Louisiana and Mississippi were without power Monday according to PowerOutage.US, which tracks outages nationwide.

Oil prices weren’t showing a spike in reaction to Ida on Monday even as the storm raged. Prices on the New York Mercantile Exchange were flat, down a bare 0.1% at $68.69 per barrel.

Mark Zandi, chief economist at Moody’s Analytics, said Sunday the disruptions caused by Ida will likely lead him to downgrade his forecast for annual U.S. economic growth in the current July-September quarter by a few tenths of a percentage point. But that economic loss, he said, could be reversed in the final quarter of the year as a result of the rebuilding from the hurricane’s damage that will likely follow.

Read the full story, here.

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