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Powell Remains Steadfast in Inflation Fight

By:
S.J. Steinhardt
Published Date:
Sep 8, 2022

At a conference on Wednesday, Federal Reserve Board Chair Jerome H. Powell continued to affirm his resolve to raise interest rates as a necessary tool in the Fed’s fight against inflation, The New York Times and others reported.

“The longer inflation remains well above target, the greater the risk that the public sees higher inflation as the norm,” Powell said at a virtual monetary conference sponsored by the Cato Institute. “History cautions strongly against prematurely loosening policy.”

Powell's statement is consistent with remarks he made at an economic policy symposium in Jackson Hole, Wyo., last month.

“Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance,” he said at the time. “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.”

Powell reached back to the 1970s, and the actions taken by one of his predecessors, Paul Volcker, to counter the perception that households and business should not just accept rising prices as  a way of life.

“The longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm and that has the capacity to really raise the costs of getting inflation down,” The Wall Street Journal quoted him as saying.

Powell's strategy was reinforced by the Fed’s vice chair, Lael Brainard, in a speech at the Clearing House and Bank Policy Institute 2022 Annual Conference on Wednesday in New York.

“We are in this for as long as it takes to get inflation down,” she said.

Some investors and economists are predicting an interest rate rise of 75 basis points when the Fed’s Open Market Committee meets on Sept. 20 and 21, the Journal reported. The U.S. Bureau of Labor Statistics’ latest Consumer Price Index Summary is due out next Tuesday, and economists surveyed by Bloomberg forecast an 8.1 percent rise for the 12-month period for August, compared to 8.5 percent in July.

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