Fed Chair Jerome Powell Pledges to “Act With Resolve” to Beat Inflation – Mish Talk

In Jackson Hole, Wyoming, Fed Chair Jerome Powell gave a hawkish speech today on Monetary Policy and Price Stability.

Key Highlights 

• Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance.
• Reducing inflation is likely to require a sustained period of below-trend growth.
• There will very likely be some softening of labor market conditions. 
• 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. A failure to restore price stability would mean far greater pain.
• The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceeding the supply of available workers. Inflation is running well above 2 percent, and high inflation has continued to spread through the economy. 
• While the lower inflation readings for July are welcome, 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.
• Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy. 
• The successful Volcker disinflation in the early 1980s followed multiple failed attempts to lower inflation over the previous 15 years. A lengthy period of very restrictive monetary policy was ultimately needed to stem the high inflation and start the process of getting inflation down to the low and stable levels that were the norm until the spring of last year. Our aim is to avoid that outcome by acting with resolve now.