Powell Rules Out Easing U.S. Interest Rate

Federal Reserve Chairman Jerome Powell is sticking to his guns and telling bankers that he would continue to forcefully combat inflation and acknowledged that rising rates would be painful, the New York Times reported.

Photo Insert: “The historical record cautions strongly against prematurely” lowering interest rates, Powell said. “We must keep at it until the job is done.”

Speaking at the Federal Reserve Bank of Kansas City’s annual conference near Jackson Hole, Wyoming, used his most closely watched speech of the year to underline both the Fed’s dedication to bringing inflation back under control and to emphasize that its policy moves so far are not enough to achieve that goal — more will need to be done to beat back rapid price increases.

“These are the unfortunate costs of reducing inflation,” he said in a high-profile speech at the Fed’s annual economic symposium in Jackson Hole. “But a failure to restore price stability would mean far greater pain,” Christopher Rugaber of the Associated Press (AP) quoted Powell as saying.

After hiking its key short-term rate by three-quarters of a point at each of its past two meetings — part of the Fed’s fastest series of rate increases since the early 1980s — Powell said the Fed might ease up on that pace “at some point” — suggesting that any such slowing isn’t near.

Powell said the size of the Fed’s rate increase at its next meeting in late September — whether one-half or three-quarters of a percentage point — will depend on inflation and jobs data.

An increase of either size, though, would exceed the Fed’s traditional quarter-point hike, a reflection of how severe inflation has become.

The Fed chair said that while lower inflation readings that have been reported for July have been “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.”

He noted that the history of high inflation in the 1970s, when the central bank sought to counter high prices with only intermittent rate hikes, shows that the Fed must stay focused. “The historical record cautions strongly against prematurely” lowering interest rates, he said. “We must keep at it until the job is done.”

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