Fed Chairman Jerome Powell was all out in his speech at the Jackson Hole Economic Symposium, pledging to use all available tools to fight against decades-high inflation. He also reinforced the notion that the Fed remains committed to returning inflation to the central bank’s 2% target.
Powell further stated that some households might feel pain from elevated interest rates as the economy cools. Although they raised the Fed Funds rate by 225 basis points over the last four policy meetings, the current level of rates is “no place to stop or pause,” with policy potentially heading to restrictive territory by year-end.
The PCE data at 8:30 EST, which was softer than expected, initially providing a boost to risk assets, preceded today’s speech at Jackson Hole. Stocks reversed as Powell began speaking, as US Treasury yields shot higher.
The recent inflation data for July swells optimism that inflation might have reached its peak. However, Powell indicated that the recent data simply is not enough “for the Fed to be sure that inflation is falling. He said, “We (the Fed) are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%.”
The short speech began with Powell’s remarks saying, “will be shorter, my focus narrower, and my message more direct.” Chair Powell reflected on what past inflation battles have taught the Fed, stating that expectations remain critical and that the Fed must “keep at it until the job is done.”