Powell warns of 'some pain' ahead as the Fed fights to bring down inflation

cnbc.com:

Federal Reserve Chairman Jerome Powell delivered a stern commitment Friday to halting inflation, warning that he expects the central bank to continue raising interest rates in a way that will cause «some pain» to the U.S. economy.

In his much-anticipated annual policy speech at Jackson Hole, Wyoming, Powell affirmed that the Fed will «use our tools forcefully» to attack inflation that is still running near its highest level in more than 40 years.

Even with a series of four consecutive interest rate increases totaling 2.25 percentage points, Powell said this is «no place to stop or pause» even though benchmark rates are probably around an area considered neither stimulative nor restrictive to 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,» he said in prepared remarks. «These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.»

Stocks fell after the Powell speech, with the Dow Jones Industrial Average off more than 500 points. Treasury yields were off their highs of the session.

The remarks come amid signs that inflation may have peaked but is not showing any marked signs of decline.

Two closely watched gauges, the consumer price index and the personal consumption expenditures price index, showed prices little changed in July, owing largely to a steep drop in energy costs.

At the same time, other areas of the economy are slowing. Housing in particular is falling off rapidly, and economists expect that the huge surge in hiring over the past year and a half is likely to cool.

However, Powell cautioned that the Fed's focus is broader