Federal Reserve Chair Jerome Powell said that interest rates would keep rising ‘sharply’ for quite some time as the Fed worked to rein in stubbornly high inflation.
‘Our responsibility to deliver price stability is unconditional,’ Powell said, adding that restoring price stability would take ‘some time.’
Inflation has been running hot and remained near a 40-year high at 8.5 percent in July, despite a rapid series of jumbo interest hikes that have taken the Fed’s policy rate from near zero to 2.5 percent.
The July rate was a slight dip from June’s high consumer price index of 9.1 percent.
But ‘a single month’s improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down,’ Powell said, referring to the central bank’s policy-setting Federal Open Market Committee.
Powell warned that Americans would feel the effects of reining in prices.
‘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 highly anticipated remarks at the Kansas Federal Reserve’s Jackson Hole, Wyo. symposium.
‘These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.’
Stocks dipped after Powell’s hawkish address – the Dow Jones Industrial Average dropped 302 points, or 0.91 percent. The S&P 500 fell 1.11 percent and the Nasdaq Composite slid 1.34 percent.