The Chairman of the FOMC delivered his crucial speech at the Jackson Hole G7 symposium, which was titled: “Challenges for Monetary Policy”. The speech provoked many commentaries in Washington, most notably by Donald Trump, as Powell delineated on the FED’s stance on the so-called currency war.
Later Trump asked ‘my only question is, who is our bigger enemy, Jay Powell or Chairman Xi?’ on his Twitter account. Interestingly he expressed his ‘great respect’ for Xi just three days later on Monday, by saying that he is ‘So impressed that they (President Xi & his Representatives) are willing to come out & state the facts so accurately (talking about calm resolution to the trade deadlock)’.
At any rate, Powell's speech proved quite insightful and demonstrated the FED's accomplishments over the years and their clear desire to preserve what has been already achieved. In the report, it was stated that:
“This year's symposium topic is "Challenges for Monetary Policy," and for the Federal Reserve, those challenges flow from our mandate to foster maximum employment and price stability.[…] after a decade of progress toward maximum employment and price stability, the economy is close to both goals. Our challenge now is to do what monetary policy can do to sustain the expansion so that the benefits of the strong jobs market extend to more of those still left behind, and so that inflation is centered firmly around 2 percent.” [source]
Thus, the most fundamental takeaway from his statement appears to be the expressed commitment by the FED to change its stance on monetary policy from one that accommodates expansion to a more supportive one.
The immediate market reaction was felt in the EURUSD FX pair, which tumbled with 0.66 per cent in the few hours following the release of the statement. The US dollar was also hampered by the news of the additional Chinese tariffs on US products, which were publicized after Powell was done.
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