The U.S. economy will need tight monetary policy for some time before inflation is under control, Federal Reserve Chair Jerome Powell said on Friday.
During a speech at the Jackson Hole central banking conference in Wyoming, Powell said that slower growth is ahead, along with a weaker job market and “some pain” for households and businesses.
“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. 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 said.
The Fed’s head explained that failure to restore price stability would mean far greater pain.
Powell gave no indication on Friday of how high interest rates might rise, only that they will move as high as needed to bring back inflation to the 2% target.
Despite recent data showing some small decline in inflation, Powell said more is yet to be done.
“A single month’s improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down,” Powell said.