The Federal Reserve is committed to fighting surging inflation through restrictive monetary policy even as the US economy slows, Chair Jerome Powell said at the annual Jackson Hole Economic Symposium 2022.

In a speech of 10 minutes, Powell warned that “restoring price stability will likely require maintaining a restrictive policy stance for some time.” The historical record cautions strongly against prematurely loosening policy, he added.

Powell acknowledged that the Fed’s continued tightening of credit will cause pain for many households and businesses as its higher rates further slow the economy and potentially lead to job losses. These are the unfortunate costs of reducing inflation but a failure to restore price stability would mean far greater pain.

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Powell’s message disappointed investors who were hoping for a signal that the Fed might soon moderate its rate increases later this year if inflation were to show further signs of easing. In response, stocks tumbled while yields across the US treasury curve climbed as markets digested what higher-for-longer rates might mean for this and next year.

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Here’s what economists said after Powell’s address:

“This was a very clear pushback on market expectations of a pivot from the Fed in 2023. This means taking rates above neutral through more outsize hikes in coming meetings and then holding them there for some time – likely through the whole of next year,” said Brian Coulton, chief economist at Fitch Ratings.

According to Win Thin, global head of currency strategy at Brown Brothers Harriman and Co, this was short and straight to the point. No doubts should remain that the Fed is nowhere close to stopping its drive to lower inflation. The swaps market is pricing in higher odds of a 4% terminal rate and that is likely to continue. “It’s no coincidence that Fed officials keep bringing up Paul Volcker — the implications are clear,” he added.

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Powell’s remarks were in line with what we expected. In contrast to the 2021 Jackson Hole speech where inflation was thought to be transient this time the focus was on getting inflation under control even at the expense of inflicting short-term pain on the economy, said April LaRusse, head of investment specialists at Insight Investments.

“His comments regarding the need to potentially keep rates high for some time indicated that the market is mistaken in trying to price in rate cuts as soon as late 2023”.

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“He basically said there will be pain and that they won’t stop and can’t stop hiking until inflation moves a lot lower,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “It was a mercifully short speech and to the point. Powell didn’t really break new ground, which is good since Jackson Hole isn’t a policy meeting”.

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Powell’s speech made clear that the Fed will accept weaker growth for a while for the sake of getting inflation under control. He reiterated that the Fed is concerned about rising prices and getting inflation under control is job number one.

Some analysts said Powell’s comments gave investors hope that inflation expectations aren’t accelerating. If that were to happen, it could cause a self-perpetuating cycle that worsens inflation.