In a widely anticipated address in Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell remained hawkish in his resolve to restrict inflation, sending markets tumbling Friday morning. Powell noted that history “cautions strongly against prematurely loosening policy.”
His speech at the Jackson Hole Economic Symposium was notably briefer than previous years, as the globe faces inflationary pressures not seen in 40 years.
“While the lower inflation readings for July are certainly welcome, a single month improvement falls far short of what the committee will need to see before we are confident that inflation is moving down,” he said.
In July, inflation held steady for the first time in many months, but still marked an annual rise of 8.5% in consumer prices. The Fed’s target inflation rate is 2%.
The Fed has four times raised its benchmark interest rate to cool inflation. While some investors hoped to see an eventual pause in rate hikes, Powell warned against it, noting he is taking lessons from the ‘70s and ‘80s, when consumer prices peaked near 15%.
“A lengthy period of very restrictive monetary policy was ultimately needed to stem high inflation,” he said. “Our aim is to avoid that outcome by acting with resolve now.”
Still, he noted that those moves come with pain.
“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. These are the unfortunate costs of reducing inflation,” he said.
