The Federal Reserve will continue raising
interest rates to curb inflationary pressures, despite the “unfortunate costs”
that will come as these measures take hold, Fed chair Jerome Powell said
Friday at the annual Jackson Hole Economic Symposium 2022.  

“Restoring price stability will likely require maintaining
a restrictive policy stance for some time,” Powell continued, adding, “The historical record cautions strongly against
prematurely loosening policy.”

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Here are the 5 key takeaways from Fed Chair Jerome Powell’s speech:

1. Powell acknowledged that while the US economy is clearly slowing and inflation eased off in July, “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”. The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched, he added.

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2. He didn’t offer specifics as to how high the central bank will increase interest rates at its next policy meeting in September, except to say that “another unusually large increase could be appropriate.”

3. He pointed out that, historically, the job market has tended to take a greater hit when the Fed hasn’t acted forcefully and swiftly enough to control inflation. “Our aim is to avoid that outcome by acting with resolve now,” he said.

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4. Powell stressed a need to rein in inflation expectations because of the way they influence consumer sentiment and can turn in fuel price pressures further. He cited former Fed Chairman Paul Volcker in saying that part of the central bank’s job in returning the economy to price stability “must be to break the grip of inflationary expectations.”

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He acknowledged how Volcker was ultimately successful in his own fight against sky-high prices through what he called “a lengthy period of very restrictive monetary policy.” The central bank is expecting to act strongly now in order to avoid such an outcome, Powell added.

5. Powell said the Fed is taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply, and to keep inflation expectations anchored. “We will keep at it until we are confident the job is done,” Powell noted.