Dow plunges 1,000 points after Fed chief Powell warns of inflation ‘pain’

theguardian.com:

US stock markets nosedived on Friday after Federal Reserve chair, Jerome Powell, warned of “pain” ahead as the central bank struggles to bring down inflation from a 40-year high.

Powell’s highly anticipated speech was more hawkish than had been expected, with the Fed chair pledging to do all he could to end rising prices. The Dow Jones Industrial Average lost just over 1,000 points, 3%, the S&P fell 3.3% and the Nasdaq dropped almost 4%.

Speaking at the Kansas City Fed’s annual meeting of the world’s central bankers in Jackson Hole, Wyoming, Powell said the Fed’s “overarching focus right now is to bring inflation back down”.

The Federal Reserve has been raising interest rates rapidly in an attempt to slow inflation. Powell said the Fed would continue to use its tools “forcefully” until prices were under control. “We must keep at it until the job is done,” said Powell.

Powell warned there would be consequences to these actions, namely job losses and slower growth.

“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. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” he said.

“These are the unfortunate costs of reducing inflation,” he added.

The Fed was slow to react to rising inflation. At last year’s meeting, Powell dismissed rising prices as a “transitory” phase triggered by supply chain problems related to the coronavirus pandemic.

But as prices have risen at rates unseen since the 1980s the Fed has moved to hike interest rates aggressively and is all but guaranteed to do so again when its committee meets again in September.

At each of its