Inflation, Fed raises rates again: “Pain for families and businesses”

The Federal Reserve should continue to raise interest rates and keep them at a higher level until it “is confident that inflation is under control, aware that such a process risks causing some distress to households and businesses.” ”. This was said by Fed Chair Jerome Powell in an expected speech at the Jackson Hole symposium: “While – Powell said – higher interest rates, slower growth and weaker labor market conditions will reduce inflation, they will also cause some suffering to families and businesses. These are the unfortunate costs of reducing inflation. But failure to restore price stability would mean far greater pain.”

Fed officials raised the Fed Funds benchmark rate by 0.75 percentage point at each of the last two meetings, the last one in July, to a range of 2.25% to 2.5%. The current pace represents the fastest rise in short-term interest rates since the central bank began targeting the federal funds rate in the early 1990s. The FOMC agreed at last month’s meeting that it will need to continue raising interest rates. fees. But he signaled greater caution on the pace of future increases, with some officials more nervous about the very aggressive tightening. They should consider whether to raise rates by half a point or 0.75 point at their next meeting on Sept. contain investments, expenses and hiring. In his speech today, Powell emphasized that the economy “continues to show strong underlying momentum” despite some mixed signs of growth. Inflation slowed in July, with global prices down 0.1% since June, according to the Fed’s preferred indicator arrived today, the personal consumer spending price index. But Powell said the one-month improvement “is not far below” what the Fed “will have to see before it can be sure that inflation is coming down.”

The reaction of the markets was immediate, with European stocks increasing their losses and not even the US stock market is smiling. The Nasdaq is down 3.94% to 12,141 points, the Dow is down 3.03% to 32,383 points, while the S&P 500 is down 3.37% to 4,057 points.