Fed Chairman Jerome Powell has said that “some pain” for the US Economy is ahead, as the Fed continues to fight rising inflation. On Friday, Powell spoke at Jackson Hole, Wyoming, giving his annual policy speech.
In the speech, he explains the pain coming to the economy from the central bank as they raise interest rates. Powell affirms in the speech that the Fed will “use our tools forcefully” to attack inflation, which has grown to its highest in 40 years.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said in his remarks. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
There have already been four interest rate increases totaling 2.25 percentage points. However, Powell said this is “no place to stop or pause.”
Powell’s speech was much briefer than anticipated, with the focus solely on fighting inflation. “Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy,” he said. “Without price stability, the economy does not work for anyone.”
Markets are awaiting the Fed’s next meeting in September. They will see if the rate-setting Federal Open Market Committee will enact a third consecutive 0.75 percentage point increase. Doing so will hurt the economy as it already battles inflation. However, Powell says that it is up to these increases and the central banks to manage the increase in inflation.