US Federal Reserve Governor Jerome Powell gave a long-awaited speech at the annual meeting of central bankers in Jackson Hole, Wyoming. And he reiterated his determination to continue tightening the monetary policy screws.
“Reducing inflation will very likely require a period of time when economic growth is below its long-term trend,” Federal Reserve Governor Jerome Powell said during a speech on Friday.
Tight monetary policy will cause an economic downturn
According to him, the Fed is ready to continue to pursue tighter monetary policy, which will be reflected in easing labour market tensions and slowing economic growth. “Reducing inflation will cause some pain to households and businesses,” Powell said.
The Fed chief believes that this is a cost, but one that must be incurred. Failure to restore price stability now would mean much greater costs and painful measures in the future.
Fed may cut inflation to two percent
Powell reiterated that the Fed is prepared to bring inflation down to two percent. He also indicated that the magnitude of the September interest rate hike would depend on current economic data. He stressed that the Fed would learn from the experience gained in the 1970s and 1980s, the last time the US faced such high inflation.
