Higher for longerLast Friday, Federal Reserve (Fed) Chair Jerome Powell made his much-awaited keynote speech at the Jackson Hole economic symposium. Woodstock for economistsThe annual symposium in Jackson Hole is considered the holy grail for economists and central bankers. It is, therefore, essential for investors to take their cues from Powell’s latest Jackson Hole statement. The hawkish stance of central bankers, coupled with the recent credit rating downgrades (see Fitch downgrade hurts markets, Aug. 7, 2023; Moody’s downgrades US banks, Aug. 14, 2023) results in a scenario where interest rates will remain higher for longer. Higher interest rates would indeed tame inflation eventually, but these would also hamper economic growth, increase recession risk, and usher financial market volatility.
