“Price stability serves as the bedrock of our economy,” Federal Reserve Chair Jerome Powell said Friday at the Kansas City Fed’s Jackson Hole Economic Symposium.
“Restoring price stability will take some time,” he said. “Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions,” The remarks demonstrate the central bank’s focus on price stability over its employment mandate as inflation is still elevated.
And here’s Powell telling the markets not to expect a pause or rate cuts anytime soon: “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy,” he said.
Note that after July personal consumption expenditure price index data came in slightly cooler than expected, the CME FedWatch tool puts a 59.5% probability on a 50-basis-point hike at the next Fed meeting. That’s a flip from a 64% probability of a 75-bp rate hike on Thursday.
Before Powell’s speech, Fed watchers were expecting the Fed chair to push back on the markets’ expectations for a rate hike pause in coming months.