- Central bank bosses to discuss monetary policy collectively in the ECB forum.
- Divergence in recent monetary policy between the Fed, ECB, BoE and BoJ makes the event particularly interesting.
- Jerome Powell’s comment will be particularly scrutinized ahead of the July policy meeting.
Jerome Powell, Chairman of the Federal Reserve System (Fed), and Christine Lagarde, European Central Bank (ECB) President, will speak at the 2025 ECB Forum on Central Banking at 13:30 GMT on Tuesday, July 1.
Alongside Fed Chairman Powell and ECB President Lagarde, Bank of England (BoE) Governor Andrew Bailey and Bank of Japan (BoJ) Governor Kazuo Ueda will also be taking part in the same panel.
The Fed left its policy rate unchanged in the range of 4.25%-4.5% following the June policy meeting, and the revised Summary of Economic Projections (the so-called dot-plot) showed that policymakers were still projecting the Fed to cut the policy rate twice this year. While testifying about the Semiannual Monetary Policy Report before the US Congress, Powell explained that the reason they adopt a cautious approach to policy-easing is that forecasts in and out of the Fed expect a meaningful increase in inflation this year due to tariffs.
The ECB lowered its key rates by 25 basis points (bps) in June, and ECB President Lagarde hinted that they might be at the end of the easing cycle. Meanwhile, the BoE maintained its policy rate at 4.25% after the June meeting, but three members of the Monetary Policy Committee (MPC) voted in favor of a 25 bps rate cut, citing material further loosening in the labour market, subdued consumer demand and pay deals near sustainable rates. Finally, BoJ Governor Kazuo Ueda reiterated that they will continue to raise rates if the economy and prices move in line with their forecasts after leaving the short-term interest rate target unchanged in the range of 0.4%- 0.5% in June.
About Jerome Powell (via Federalreserve.gov)
“Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System’s principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028.”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
