ANKARA: Higher interest rates, slower growth and softer labour market conditions will reduce inflation while causing some pain to households and businesses, the head of the US Federal Reserve said Friday.
Jerome Powell said price stability is the Fed’s responsibility as he discussed the bank’s current monetary policy at the Jackson Hole Economic Policy Symposium that was hosted by the Kansas City Fed.
He said price stability forms the basis of the economy. “Without price stability, the economy does not work for anyone,“ Anadolu Agency reported Powell said.
He said the Federal Open Market Committee’s overarching focus right now is to bring inflation down to our 2 per cent goal.
“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,“ he said. “While the latest economic data have been mixed, in my view our economy continues to show strong underlying momentum.”
He said the Fed deliberately moved its policy stance to a level that would be restrictive enough to reduce inflation to 2 per cent and acknowledged the rate hike at the July meeting was the second 75 basis points increase and an unusually large increase might be more appropriate at the next meeting.
“Our decision at the September meeting will depend on the aggregate of incoming data and the evolving outlook,“ said Powell.
According to the report, he reiterated that at some point it would be appropriate to slow the pace of increases as the monetary policy stance tightens further.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy,“ he added. – Bernama
