Powell Brutally Honest

If there’s one positive about today’s post-Powell comments, it’s that he was direct. Remember when the talking point was ‘transitory inflation,’ and anyone with a smidge of Economics 101 knew that was a bunch of B.S.? Not this time around. 

The comments from the Fed Chair were not reserved. They were not constrained. They were direct. Ok, maybe he could have been more straightforward, but considering Jackson Hole is the most important economic get-together of the year, the statesmen-like language and format are expected. 

And that makes his speech all the more important. It is pretty clear what the Federal Reserve’s intentions are. Here are some of the key points in his speech:

Pro-tip: Read Powell’s full speech here.

“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.” 

“History shows that the employment costs of bringing down inflation are likely to increase with delay. Our aim is to avoid that outcome by acting with resolve now.”

“The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched.”

“Central banks can and should take responsibility for delivering low and stable inflation. Our responsibility to deliver price stability is unconditional.

“…historical record cautions strongly against prematurely loosening policy.”

It sounds like Powell’s intention is to rip the bandaid off fast. He made it clear that he wants to avoid a repeat of the fifteen-year inflation battle between the 1970s and 1980s. We’ll see if some sharp pain for a short time versus a dull ache over a long time is preferable. 😭

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