Global central bankers follow US Fed Chair to give hawkish message

The world’s top central bankers delivered a stern and unified message on the need to curb inflation, declaring at Jackson Hole that it is broad based, here to stay and will require their forceful action. 

The heads of the Bank of England, Swiss National Bank, Bank of Japan, Bank of Korea and several European Central Bank policy makers spoke on Saturday at the Kansas City Fed’s annual retreat in the Grand Teton National Park in Wyoming. 
 

Their statements follow remarks by Fed Chair Jerome Powell Friday that sought to unequivocally commit the US central bank to raising interest rates until inflation meaningfully slows.

Policy makers in Europe and the US, battling the hottest inflation in decades, are resolutely raising rates and pushed back against suggestions they will waver if their economies falter while price pressures remain too high. 
 

The gathering at Jackson Hole — the first in person since the pandemic spread in 2020 — was a platform to convince investors that they would follow through even if it caused pain.

ECB Executive Board member Isabel Schnabel, the day’s most anticipated speaker, urged her colleagues to act with determination to slow price increases that in Europe are nearing 10 per cent and in the US are above 8 per cent. “Both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high,” Schnabel said. “In this environment, central banks need to act forcefully. They need to lean with determination against the risk of people starting to doubt the long-term stability of our fiat currencies.”

She also acknowledged there was a risk of recession, but told her fellow policy makers that “even if we enter a recession, we have basically little choice than to continue our normalisation path” — chiming with Powell’s remarks the day before that “reducing inflation is likely to require a sustained period of below-trend growth.”

ECB officials are debating what size of interest rate increase may be appropriate at their September meeting, with some arguing that a 75-basis-point increase should at least be part of the discussion. 

Swiss National Bank President Thomas Jordan said that structural factors in the economy may contribute to persistently high inflation for years to come, and that it’s becoming more broad based.