Federal Reserve Chair Jerome Powell says interest rates will keep rising ‘sharply’ for some time because of persistently high inflation
Fed 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 of 9.1 percent. ‘Lower ratings for July are certainly welcome, but fall far short of what committee will need to see,’ to stop tightening monetary policy, Powell said in highly anticipated remarks at the Kansas Federal Reserve’s Jackson Hole, Wyo. symposium. 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. ‘These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.’ ‘The historical record cautions strongly against prematurely loosening policy,’ Powell said, harkening back to former Fed Chair Paul Volcker, who reined in over-10 percent inflation of the early 1980s. He quoted the hawkish inflation fighter who has said that ‘inflation feeds on itself.’ ‘So part of the job of returning to a more stable and more productive economy must be to break the grip of inflationary expectations,’ Powell added. ‘The longer inflation lasts, the greater the chance it will become entrenched,’ Powell said, explaining that if the public believes inflation is here to stay then it will be. Powell did not hint at what the Fed might do at its upcoming Sept. 20-21 policy meeting. Officials are expected to approve either a 50-basis-point or 75-basis-point rate increase. The Fed chair promised to fight ‘forcefully’ against price increases until inflation was back down to its target two percent. And despite low 3.5 percent unemployment, Powell issued a warning about the labor market: ‘The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceeding the supply of available workers.’ NN: They really blew it this time.. And as usual the little guy muss suffer……….. So be it! I am telling you sooner or later the masses will rise up with pitch forks and touches.