Federal Reserve Chair Jerome Powell spoke at Jackson Hold Friday morning—promising continued monetary tightening as inflation endures.
- Powell acknowledged that the resilience of the U.S. economy is a positive sign but that there is “A long way to go, even with the more favorable recent readings.”
- He suggests that these trends could create pressures that keep inflation high thanks to high spending.
- He suggested that the Fed will continue to maintain restrictive monetary policy and will likely continue raising rates to meet its mandate of 2% annual inflation.
- Powell did not mention the possibility of eventually cutting interest rates in his speech, despite Wall Street analysts expecting cuts by early 2024.
- The Bureau of Labor Statistics reports the July Consumer Price Index as 3.2%, rising slightly from June’s annual 3% increase.
Why It’s News
Friday marks the annual meeting known as “Jackson Hold,” a two-day symposium hosted by the Kansas City Federal Reserve in Jackson Hole, Wyoming, that plays host to central banking chairs worldwide and is used for making major policy announcements. At last year’s event, Powell promised an extended period of restrictive monetary policy, which he argued was necessary to slow the intensity of inflation while acknowledging it could cause a recession or spike in unemployment in the short term.
“My remarks this year will be longer, but the message is the same. It is the Fed’s job to bring inflation down to our 2% goal, and we will do so. Although inflation has moved down from its peak—a welcome development—it remains too high. We are prepared to raise rates further where appropriate and hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” says Powell.
Investors and analysts went into the speech hotly anticipating any news on interest rates, with rates currently sitting at their highest range of the past 22 years—5.25% to 5.5%. Powell previously suggested at the Fed’s July meeting that it is likely to analyze economic news month-to-month and hike accordingly to continue fighting entrenched inflation. It remains possible that the Fed will hike rates again at the September 19–20 Fed meeting.
“Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment. Doing too much can do too much unnecessary harm to the economy. As is often the case, we navigate by the stars under cloudy skies. In such circumstances, risk-management considerations are critical. At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks,” he says.