Powell warns of ‘some pain’ ahead as Fed struggles to bring down inflation

“We will use our tools aggressively to attack inflation”
Powell warns of ‘some pain’ ahead as Fed struggles to bring down inflation
Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell made a firm commitment Friday to stem inflation, warning that he expects the central bank to continue raising interest rates in a way that will cause “some pain” to the US economy.

In his much-anticipated annual policy address in Jackson Hole, Wyoming, Powell asserted that the Fed would “use its tools aggressively” to attack inflation which is still near its highest levels in more than 40 years.

Even with a series of four consecutive interest rate increases totaling 2.25 percentage points (225 basis points), Powell said there was “nowhere to stop” even though benchmark rates may be around a range that is neither stimulating nor restricting to growth.

In prepared, extraordinarily succinct remarks, Powell said: “While high interest rates, slow growth, and weak labor market conditions will lower inflation, they will cause some pain for households and businesses. These are the unfortunate costs of lowering inflation. But failure to restore price stability would mean much more pain.”

These comments come amid signs that inflation may have peaked but shows no noticeable signs of declining.

However, Powell said the central bank will continue moving forward until inflation drops close to its long-term target of 2 percent.

“We are purposefully moving our policy position to a level that is restrictive enough to bring inflation back to 2 percent,” he added.

Looking ahead, the US central bank chief said, “Restoring price stability is likely to require maintaining a restrained political stance for some time. The historical record strongly cautions against premature easing.”

Powell introduced his speech by noting that “my remarks will be very short, and my message is direct.”

“Price stability is the responsibility of the Federal Reserve and it is the bedrock of our economy,” he said. “Without price stability, the economy doesn’t work for anyone.”

And James Bullard of the Federal Reserve Branch in St. Louis, Missouri, a hawk, had predicted Thursday that interest rates would reach 4 percent by the end of the year, he told CNBC.

Kansas City Fed President Esther George, who is hosting the Jackson Hole conference and a member of the monetary committee, confirmed to CNBC that “there is still more work to be done” and that “at least three months of slowdown” needs to be recorded to see ” convincing trend” to lower prices.