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Fed's Powell Says Taming Inflation Could Lead to 'Some Pain'

Economy Aug 26, 2022 10:10AM ET
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By Liz Moyer

Investing.com -- Federal Reserve Chair Jerome Powell said the central bank’s efforts to quash inflation will require a “sustained period of below-trend growth” that will lead to pain for households and businesses.

“These are the unfortunate costs of reducing inflation,” Powell said during a speech at the Fed’s annual meeting in Jackson Hole, Wyo. “But a failure to restore price stability would mean far greater pain.”

Last year, Fed officials insisted inflation would be temporary, but high prices have persisted far longer than they expected, something that has forced policymakers to act aggressively to cool the economy.

Powell has said the central bank is determined to tame inflation, even at the risk of a recession.

He said Friday that the economy continues to show strong underlying momentum but the labor market is "clearly out of balance, with demand for workers substantially exceeding the supply of available workers." Powell's message was that the Fed would continue to fight inflation to get it back to its targeted 2%, and would keep at it until the job is done.

There is debate on just how far the Fed will go at the next policy meeting in September.

The futures market indicates a 58.5% chance of another 0.75-percentage point increase, which would be the third such increase in a row. There’s a 41.5% chance the Fed makes a smaller, 0.5-point increase.

"Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook," Powell told the audience Friday.

There is some evidence inflation is leveling off, especially as energy prices have come down in recent weeks.

The housing market is also cooling as rising interest rates and high sales prices push would-be buyers to the sidelines for now. But as earnings reports from retailers showed, consumers feeling pressured by rising food prices are putting off purchases of other items, such as clothing and electronics.

A key set of data came out earlier Friday. The Fed’s preferred measure of inflation, the core personal consumption expenditures index, was up 0.1% in July from 0.6% in June and was up 4.6% for the year through July, both less than analysts expected.

It was also far lower than June’s readings, an indication inflation is cooling. The core number excludes food and energy prices, which tend to be more volatile.

“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,” Powell said Friday.

"In current circumstances, with inflation running far above 2% and the labor market extremely tight, estimates of longer-run neutral are not a place to stop or pause," he said.

Fed's Powell Says Taming Inflation Could Lead to 'Some Pain'
 

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Comments (80)
Stefan Krantz
SharpSthlm Aug 28, 2022 5:58AM ET
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when earnings come in For q4 market will crash. We have not started to see effects of tightning and inflation for the people. No private one will spend money on tech or extra stuff. This has not started to hit companys yet. Winter is coming!
Ian Just
Ian Just Aug 28, 2022 3:12AM ET
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Hahaha tech and crypto bubbles will continue to shrink or burst Time to invest in real economy and real undervalued businesses 😎
James Hilsher
JCH007 Aug 27, 2022 2:44PM ET
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Just as POTUS should never say any that would affect the stock market, either positively or negatively, nor should anyone working for the FED. Just do your job and keep your mouth shut. If Powell does what needs to be done, we'll see it transpire. Quit spewing speculation, and instilling FUD into the market.
James Hilsher
JCH007 Aug 27, 2022 2:44PM ET
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say *anything
Dave Jones
Dave Jones Aug 27, 2022 5:09AM ET
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I think mr mcgoo had the stern glasses on today...
Maximus Maximus
Maximus Maximus Aug 27, 2022 12:30AM ET
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stop panicking and sit still, we're on the way up, not down
CT OREN
CT OREN Aug 27, 2022 12:30AM ET
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We want market down ! Down ! Down!
jamie
jamie Aug 27, 2022 12:30AM ET
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If opec declare cut prodution in coming meeting next week, inflation will rocket again in front of winter season. Did you think about it? Too many uncertainties are waiting to US economy and it's not a time to cheer up.
Kris Jay
Kris Jay Aug 27, 2022 12:30AM ET
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your thesis is that with fed raising interest rates and QT, removing $90+B from the economy every month starting in September that things are rosy and sales/earnings will be on a growth trajectory?  I suspect you were not born during the last prolonged fed tightening policy that lasted years.
Samer Diab
Samer Diab Aug 27, 2022 12:30AM ET
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we are in a bull market. expect lots of volatility though
Jeremy Thornton
Jeremy Thornton Aug 27, 2022 12:30AM ET
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Hahaha! Now we are not in a bull market! What charts are you looking at?
jamie
jamie Aug 26, 2022 9:55PM ET
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Mr. Powell did his job well done. He cut the illogical greed in market to prevent soaring inflation again.
Trade the Trent
Trade the Trent Aug 26, 2022 9:55PM ET
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Top Comment of the dat
Kris Jay
Kris Jay Aug 26, 2022 9:55PM ET
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he's not addressing the market, the market responds to the fed rate hikes and QT as both of those are designed to slow growth and slow the economy.  market falls based on no one wanting to pay 40x earnings when earnings are stagnant or negative.
Dodol Meong
Dodol Meong Aug 26, 2022 9:42PM ET
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hahaha no wonder..... actually Powell is forex player.... he was sell gold at 1760 and will buy next week....
Dodol Meong
Dodol Meong Aug 26, 2022 9:41PM ET
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hahaha no wonder..... actually Powell is forex player.... he was sell gold at 1760 and will buy next week....
Murali Krishna
Murali Krishna Aug 26, 2022 9:08PM ET
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This is the perfect time for Putin OPEC to reduce oil output to rub salt into the wounds and further pain.
jamie
jamie Aug 26, 2022 8:00PM ET
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Powell did his job properly at this time. Look at those misunderstanding rally in july and even yesterday. That was only for wallstreet not for US.
 
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