Written by 2:22 pm Europe Economy

Powell’s Jackson Hole speech in focus

People take photos of the Grand Tetons in Grand Teton National Park where financial leaders from around the world are gathering for the Jackson Hole Economic Symposium, outside Jackson, Wyoming, August 25, 2022.

Jim Urquhart | Reuters

LONDON — European markets slid lower on Friday afternoon as U.S. Federal Reserve Chairman Jerome Powell warned of “some pain” ahead in the fight against inflation.

The pan-European Stoxx 600 was down 0.5% following the comments at the central bank’s Jackson Hole economic symposium. Most sectors turned red in afternoon trade, with retail stocks losing 2%. Basic resources rose 1%.

Powell on Friday reiterated his commitment to halting inflation, warning that he expects the Fed to continue raising interest rates in a way that will cause “some pain” to the U.S. economy.

He added that the bank will “use our tools forcefully” to attack inflation, which is still running near its highest level in more than 40 years.

While some investors were hopeful of comments pointing toward a future dovish pivot, many analysts expected the chairman to adopt a hawkish tone and reiterate the Fed’s commitment to dragging inflation back toward target.

“Powell is likely to push back on premature expectations of a dovish pivot, reiterating the focus on the fight against high inflation and the Fed’s data-dependency,” said Silvia Dall’Angelo, senior economist at Federated Hermes.

“While the latest data on U.S. inflation has been encouraging, suggesting headline inflation might have peaked in June, the Fed is not out of the woods: inflation is still very elevated, there are still price pressures in the pipeline and the outlook for commodity prices is uncertain amid persistent geopolitical tensions.”

U.S. stocks turned negative on the comments. Meantime, shares in Asia-Pacific ended higher Friday afternoon.

Back in Europe, a German consumer sentiment reading for September was due Friday along with French and Italian consumer confidence data for August.

U.K. energy regulator Ofgem also announced its latest increase in the country’s energy price cap, offering a bleak insight into the path of the deepening cost of living crisis and the U.K. inflation outlook.

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