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[Quick Facts]

1. Summers says the Fed probably needs at least one more rate increase.

2. McCarthy suggests Biden impeachment inquiry is a "natural step forward."

3. Lagarde's policy silence keeps the ECB rate interest debate raging.

4. Japanese government's August economic report shows improving exports.

5. ECB Holzmann says inflation hasn't been defeated, and another rate hike is likely in September.

[News Details]

Summers says the Fed probably needs at least one more rate increase

Jerome Powell didn't explicitly acknowledge that the neutral rate would be higher, but he noted that "given the extent to which current interest rates are being pushed up, the economy is growing much faster than many expect." "This will reinforce the market's view that the Fed is regaining its anti-inflation credibility," he argued.

Speaking on the Fed's interest rate outlook, Lawrence Summers said the Fed needed to raise rates further. There aren't many signs of an economic slowdown. Some forecasts point to growth of more than 5% this quarter.

Powell's comments at the Jackson Hole meeting suggest that the Fed is open to the possibility that the neutral rate could be higher than it has been in the past, Summers added.

McCarthy suggests Biden impeachment inquiry is a natural step forward

"If you look at all the information we have been able to gather so far, it is a natural step forward that you would have to go to an impeachment inquiry," said Kevin McCarthy, a Republican and current speaker of the U.S. House of Representatives, talking about the investigation into Biden family's finances by the House Republicans when he was asked whether the U.S. Congress would launch an impeachment inquiry against Joe Biden in September after the end of the summer recess.

The investigation into the Biden family centers around the business practices of Biden's son, Hunter Biden, at a Ukrainian energy company during Biden's previous tenure as U.S. vice president.

Recently, the Republican investigation against the Biden family escalated again. U.S. Attorney General Merrick Garland announced on Aug. 11 local time that a special prosecutor had been appointed to investigate the case of Hunter Biden, the son of President Joe Biden. Reports said this is considered a major escalation of the investigation into Hunter Biden before the 2024 U.S. presidential election.

Lagarde's policy silence keeps ECB rate interest debate raging

Last week, European Central Bank President Christine Lagarde avoided giving clear signals on her policy intentions, which has intensified the debate over the central bank's interest rates. According to some economists, while there is still a big question mark over whether the ECB will raise rates in September, the Bank is expected to focus on core inflation and raise interest rates. However, economists at Berenberg Bank, led by Holger Schmieding, changed their forecast even before Lagarde's speech. They raised the likelihood that the central bank would pause on a rate hike to 60% from 40%. They said most central bank officials emphasized that their decisions will depend on data. The ECB seems more likely to leave rates unchanged in September if real economic data slumps while there is no surprise uptick in inflation in August.

Japanese government's August economic report shows improving exports

The judgment in the August report on Japan's economic fundamentals remained largely unchanged as in July, reiterating that the economy is slowly recovering. The policy stance was basically unchanged that the Bank of Japan can achieve its 2% inflation target in the form of rising wages in a sustained and stable manner.

Compared with July, the assessment of exports in the August report was changed from "stabilizing" to "improving recently."

ECB Holzmann says inflation hasn't been defeated, and another rate hike is likely in September

The economy is not at risk of recession, and the tight labor market may cause unions to ask for a substantial pay rise, said ECB member Robert Holzmann in an interview. If there are no big surprises, I think there is a case for continuing to raise rates, instead of a rate pause.

In an interview at the annual meeting in Jackson Hole last week, Bundesbank President Joachim Negel and ECB Governing Council member Martins Kazaks said they also favored another rate hike, while the more dovish Banco de Portugal Governor Mário Centeno countered that emerging downside risks need to be treated with caution.

But Holzmann argued that it is not the time to hesitate. It would be better to reach the highest rate faster, which means that rate cuts could start sooner. It's harder for markets to digest a stop-and-go interest rate path. The ECB is still "a bit lagging" in the fight against inflation. When asked if this meant that rate hikes could continue beyond September, he said that once we get to 4%, we'll talk about it again.

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