On Friday, August 26, Federal Reserve Chairman Jerome Powell warned that combating high inflation will likely mean higher interest rates “for some time. The historical record cautions strongly against prematurely loosening policy.”
Speaking at the annual Jackson Hole Economic Policy Symposium, Powell didn’t rule out another sizable increase in the federal funds rate. He noted that at July’s meeting of the Federal Open Market Committee, “I said then that another unusually large increase could be appropriate at our next meeting. We are now about halfway through the intermeeting period. Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook.”
Reducing inflation will likely mean “a sustained period of below-trend growth,” he said. “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,” Powell added.