Interest rates currently hovering in the 2.2% to 2.5% range could be up to 3.8% by the end of the year, with Federal Reserve Chairman Jerome Powell warning that inflation is still not under control.
Speaking in Jackson Hole, Wyoming at the Kansas City Fed’s annual policy forum, Powell remarked that “restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.”
The Fed Chairman also noted that “while the lower inflation readings for July are welcome,” just a single month’s performance is not enough to convince members of the Federal Open Market Committee that the trend lines are substantially moving in the right direction.
“Without price stability, the economy does not work for anyone,” Powell continued. “In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all.”
Powell added: “The burdens of high inflation fall heaviest on those who are least able to bear them.”
In analyzing Powell’s remarks, the publication Forbes said, “For investors, this means that there is likely to be a lot of central bank intervention to come, with the aim of getting inflation back under control.”
Noting that the Dow Jones Industrial Average dropped more than 1,000 points in the aftermath of Powell’s speech, the Wall Street Journal said the chairman’s remarks “disappointed investors who had hoped inflation had peaked and the Fed would shift from raising rates to lowering them sometime next year.”
Last month, the Consumer Price Index pegged the national inflation rate at 8.5%. While that is a decrease over June’s numbers, when the rate had reached its highest in decades at 9.0%, it is still significantly up from last year at this time when the rate stood at 5.3%.
By Garry Bolard
