The entity’s chairman, Jerome Powell, has warned that in order to bring inflation down to about 2%, a restrictive monetary policy will have to be extended for a period of time. Dow Jones is down 1.5% after Powell’s long-awaited speech.
US Federal Reserve (Fed) president Jerome Powell has warned that businesses and households will have to endure “some pain” as a result to ease the high inflation the country has been experiencing for months.
In the traditional summer speech at the Fed’s monetary policy symposium in Jackson Hole, Powell indicated that failing to contain price escalation “would mean a lot more pain.”
Stock markets have already responded to Powell’s speech. Dow Jones, the leading indicator on Wall Street, was down about 1.5% after 5pm. The Ibex was in the same line, with losses of about 1.5%, before the end.
“Restoring price stability will take time and requires us to use our instruments vigorously to better balance supply and demand,” Powell said.
“Reducing inflation will likely require a sustained period of below-trend growth. In addition, there will most likely be an easing of labor market conditions. While higher interest rates, lower growth and easing working conditions will cause lower inflation, they will also lead a pain for households and businesses,” the central banker emphasized.
The Fed president has assured that the monetary entity is clearly moving its policy to a “restrictive enough” level to bring inflation back to the 2% target.
In that sense, Powell warned that restoring this stability will likely require restrictive monetary policy for some time. In addition, he stressed that the historical experience “warns against a premature easing of monetary policy”.
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Source: EITB
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
