In Powell's 8-Minute Speech Repeating "Inflation" 45 Times... "Global Market Cap of 7,000 Trillion Disappeared"

On the 29th of last month (local time), traders were handling their tasks on the trading floor of the New York Stock Exchange (NYSE) in the United States. [Image source=Yonhap News]

[Asia Economy Reporter Hwang Sumi] Following Federal Reserve (Fed) Chair Jerome Powell's indication of a high-intensity financial tightening, foreign media reports have emerged stating that the global stock market capitalization has significantly decreased.

Earlier, on the 26th of last month (local time), Powell emphasized the importance of price stability and demonstrated a strong tightening stance at the Economic Policy Symposium held in Jackson Hole, Wyoming. The tightening policy refers to reducing the money supply in the market, primarily aimed at curbing inflation.

During his brief eight-minute speech, Powell mentioned inflation, which signifies rising prices, approximately 45 times. He stated, "We will continue to raise interest rates until we are confident that inflation is under control." Although raising the benchmark interest rate inevitably causes pain to households and businesses, he explained that the Fed will keep increasing rates until the U.S. inflation rate approaches the target of 2%.

Powell's speech appeared to impact the global stock market capitalization as well. On the 4th, Japan's Nihon Keizai Shimbun (Nikkei) reported that in the week following the Jackson Hole speech until the 2nd, the global stock market capitalization decreased by approximately $5 trillion (about 6813 trillion KRW).

This represents the second-largest decline since mid-June, when major central banks consecutively raised benchmark interest rates and initiated financial tightening. According to the report, U.S. stocks fell by $3 trillion (about 4100 trillion KRW) to $42.7 trillion, while European stocks decreased by $500 billion (about 681 trillion KRW) to around $13.8 trillion.

The newspaper evaluated that Powell's eight-minute speech, which suggested a high-intensity rate hike, instantly changed market sentiment. Typically, when indicators show the robustness of the U.S. economy, stock prices tend to rise, but recently, with growing expectations of rate hikes, stocks have been sold off.

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), is holding a press conference after concluding the Federal Open Market Committee (FOMC) regular meeting at the Federal Reserve headquarters in Washington DC last July. [Image source=Yonhap News]

Meanwhile, with expectations that the Fed will continue high-intensity tightening, the U.S. dollar has maintained its strength. According to financial sources on the 4th, the won-to-dollar exchange rate in the Seoul foreign exchange market closed at 1362.6 won, up 7.7 won from the previous day on the 2nd. The exchange rate surpassing 1360 won is the first time in about 13 years and 4 months since April 2009 (1367 won) during the financial crisis.

As this strong dollar phenomenon is expected to persist for a considerable period, voices calling for countermeasures are emerging. In a report titled "Evaluation of Recent Exchange Rate Increases," the Korea Chamber of Commerce and Industry's SGI assessed, "Due to global recession concerns and the normalization of U.S. monetary policy, the U.S. dollar continues to strengthen, and this phenomenon is unlikely to be resolved in the short term."

This content was produced with the assistance of AI translation services.