Fed chairman says focus now is on bringing US inflation to 2%

The chairman of the Federal Reserve (Fed, the US central bank), Jerome Powell, said this Friday (26), that the focus of the monetary authority is to bring inflation to the target of 2% per year and that the task restoring price stability in the United States will still take “some time”.

According to him, this will lead to a period of low growth for the world’s largest economy and will bring “some pain” to US families and businesses.

“Inflation is well above 2% and has continued to spread through the economy, while lower inflation readings for July are certainly welcome,” Powell said during a speech at the Jackson Hole Symposium, an event, which brings together the cream of central bankers.

“A single month improvement is far short of what the Committee will need to see before we can be confident that inflation is falling,” he amended.

Powell, who spoke for about ten minutes at the Symposium, opened his speech by saying that his remarks would be “shorter.”

“My focus narrows on my message that we are directing the Federal Open Market Committee’s overarching focus now to bring inflation back to 2%,” he said.

“Without price stability in the economy it doesn’t work for anyone in particular, without price stability we will not achieve a sustained period of strong labor market conditions,” he added.

Dependency on September data

The Federal Reserve chairman said further rate hikes would be appropriate to rein in the US price hike after the 75 basis point hike at the July meeting.

The pace of monetary tightening at the September meeting, however, will depend on the “totality of data” and the “evolving prospects” of the US economy, he explained.

“The July target range increase was the second increase of 75 basis points in as many meetings, and I said then that another unusually large increase might be appropriate at our next meeting,” Powell said.

“Our decision at the September meeting will depend on the totality of the data received and on the evolution of the outlook”, added the president of the US central bank, noting that there is about half of the period left between the Fed’s monetary policy meetings.

According to him, at some point, as the monetary policy stance becomes even more restrictive, it will probably be appropriate to decelerate the pace of price increases. Fed Fundswhich is the US base rate.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said, adding that the “historical record strongly warns against premature loosening of policy.”

“Unconditional” commitment to price stability

Powell also said that the commitment to price stability in the US is “unconditional”.

Despite noting that the rise in inflation reflects a scenario of high demand and restricted supply, he said that nothing mitigates the authority’s responsibility to achieve price stability.

“There is clearly work to be done on moderating demand to better align with supply. We are committed to doing that work,” the Fed chairman said.

According to him, the longer the current crisis of high inflation continues in the United States, the greater the chance that higher inflation expectations will consolidate in the country.

“History shows that employment costs to reduce inflation are likely to rise with a delay as high inflation becomes more rooted in wages and prices,” he said.

Powell also highlighted the monetary authority’s measures to contain demand in the world’s largest economy.

“We are taking strong and quick steps to moderate demand to better align with supply and to keep inflation expectations anchored,” he said.

“We will continue like this until we are sure that the job is done,” he concluded, speaking at the symposium of central bankers.