Filed Under: Business

Powell warns of ‘pain to households and businesses’ in bringing down inflation

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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.

SIMONE DEL ROSARIO:
THIS WEEK – THE CENTER OF THE BUSINESS UNIVERSE IS NOT NEW YORK CITY. NO, FOR THAT WE GO TO

JACKSON HOLE WYOMING FOR AN ECONOMIC SYMPOSIUM, WHERE THE ENTIRE GLOBE WAITED TO HEAR WHAT FEDERAL RESERVE CHAIR JEROME POWELL HAD TO SAY.
JEROME POWELL:

Today, my remarks will be shorter, my focus narrower and my message more direct.

SIMONE DEL ROSARIO:

POWELL STAYED HAWKISH IN HIS HIGH-PROFILE SPEECH…NOTING THERE’S NO SLOWING DOWN, THE FED PLANS TO CONTINUE MOVING PURPOSEFULLY TOWARD RESTRICTIVE MONETARY POLICIES.

JEROME POWELL:

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.

SIMONE DEL ROSARIO:

AND THOSE MOVES COME WITH A WARNING.

JEROME POWELL:

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.

SIMONE DEL ROSARIO:

POWELL NOTED HE’S DRAWING FROM HARSH INFLATION LESSONS LEARNED IN THE 70S AND 80S, WHEN CONSUMER PRICES PEAKED NEAR 15%. TODAY’S INFLATION IS 8.5.

JEROME POWELL:

A lengthy period of very restrictive monetary policy was ultimately needed to stem high inflation. Our aim is to avoid that outcome by acting with resolve now.

SIMONE DEL ROSARIO:

AND THAT RESOLVE SENT MARKETS SINKING.

I’M SIMONE DEL ROSARIO AND IT’S JUST BUSINESS.

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.

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