LONDON – European stocks closed higher on Friday after Federal Reserve Chairman Jerome Powell confirmed that interest rates will be cut in the future.
Despite the volatility seen in early August, the Stoxx 600 closed 0.5% higher, moving further away from levels seen at the start of the month. Sterling rose 0.8% against the dollar to trade above $1.319, its highest level since March 2022, while the euro rose 0.58% to $1.118.
“The time has come for policy adjustments… The way forward is clear, and the timing and pace of rate cuts will depend on incoming data,” Powell said in his highly anticipated keynote address at the Fed’s annual retreat in Jackson Hole, Wyoming. , the changing outlook, and the balance of risks.
Powell said that inflation has fallen “significantly” and the central bank can now focus equally on supporting a strong labor market.
After Powell’s speech, the market has fully priced in expectations of a rate cut by the Federal Reserve in September, and believes that the probability of a 25 basis point rate cut instead of 50 basis points is 67.5%.
U.S. stocks rose on Friday morning on the speech.
Bank of England Governor Andrew Bailey will also speak in Jackson Hole on Friday.
Bailey will point to progress on UK inflation and the effectiveness of tightening monetary policy, saying so-called “second-round effects” such as wage growth and price setting pose less risks to the outlook than expected a year ago.
However, he also warned that less “benign” conditions remained, which would require the Bank of England to “maintain restrictions for longer.”
He is expected to say that these “suggest that structural changes are taking place in product and labor markets, leading to changes in the supply side of the economy that are a lasting legacy of the major shocks we have experienced”.
In Europe, stocks nestle The company’s shares fell nearly 4% before trimming its losses slightly after the company announced it would replace CEO Mark Schneider with company veteran Laurent Freixe. Shares were last trading down 0.45% at 3:50 pm in London.
Meanwhile, Hugo Boss’s share price rose 6% after Frasers, its second largest shareholder, made a request to acquire more shares. Reuters.
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