The chairman of the US Federal Reserve said there will be more interest rate hikes, slow growth and “pain” for households and businesses

US Federal Reserve Chairman Jerome Powell (Brendan Smialowski/Pool via REUTERS/File)

The US economy will need a tight monetary policy “for some time” before inflation is under controlwhich will mean slower growth, a weaker labor market and “some pain” for households and businesses, the Federal Reserve Chairman said on Friday. Jerome Powellwarning that there is no quick cure for skyrocketing prices.

Reducing inflation is likely to require a sustained period of below-trend growth. In addition, labor market conditions are very likely to weaken. While higher interest rates, slower growth and weaker labor market conditions will reduce inflation, they will also cause some pain for households and businesses. Powell said in remarks prepared for a speech at the central banking conference in Jackson Hole, Wyoming.

financial world opened this friday mixed terrain and its main indicator, the Dow Jones Industrials, rose a slight 0.10% at the startbefore Jerome Powell’s speech. However, after his words, the main indicators began to decline.

At 14:40 GMT, the S&P fell 1.18%, the Dow 30 fell almost 1%, the Nasdaq fell 1.59% and the Russell 200 also fell around 0.60%.

These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean much greater pain.Powell added.

The Fed has been on an aggressive campaign to raise interest ratesand Powell made it clear that the fight against inflation is not over. “Restoring price stability will take some time and requires using our tools aggressively to better balance supply and demand,” he said at the meeting, held against the backdrop of the majestic Grand Teton Mountains.

Operators work at the New York Stock Exchange (REUTERS / Brendan McDermid)
Operators work at the New York Stock Exchange (REUTERS / Brendan McDermid)

Modest signs of a slowdown in the world’s largest economy and easing price pressures generated hope in the financial markets that the central bank could ease its aggressive rate hikes, and perhaps even start to reverse course next year.

But Powell dashed those hopes.making it clear that the Fed’s policy and benchmark lending rate would have to remain “restrictive enough” for inflation to return to its two percent target.

Fed officials raised interest rates by 0.75 percentage point at each of their last two meetings, most recently in July, to a range between 2.25% and 2.5%.

At its meeting in late September, the Fed is expected to raise rates, the question being whether it will do so by 0.5 percentage point or 0.75 point.

While, 12-month inflation in the United States moderated slightly in July to 6.3% against 6.8% in Juneaccording to index PCE published this Friday by the Department of Commerce. Excluding volatile energy and food prices, inflation was 4.6% in July against 4.8% the previous month.

In July, prices fell 0.1% compared to June, when they had risen 1% compared to May. These figures are somewhat better than expected by analysts.

Consumer income and spending advanced less than expected in July instead, 0.2% and 0.1%, respectively.

(With information from Reuters and AFP)

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