Stocks Plummet As Powell Doubles Down On Fed's Inflation Fight Until 'The Job Is Done'

Federal Reserve Chair Jerome Powell was among the most anticipated speakers at the Economic Symposium in Jackson Hole, Wyoming Friday. Here’s a look at what Powell said in the fight against inflation.

What Happened: Powell said the Federal Reserve’s goal remains getting inflation back down to a goal of 2%.

“Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy,” Powell said. “Without price stability, the economy does not work for anyone.”

Powell said the impact of inflation and the labor market often falls heaviest on those who are least able to bear it.

The Fed is using the tools it has forcefully to bring inflation down, he said. 

The result could be periods of a softening of the labor market and “pain to some households,” he said, calling this the “unfortunate costs” of reducing inflation.

“Reducing inflation is likely to require a sustained period of below trend growth.”

Powell said without restoring price stability, there would be “greater pain.”

The Fed chair shared three lessons in his speech. 

The first lesson: central banks should take responsibility for stability. The second lesson was the role the public plays in inflation.

“The more inflation rose, the more people came to expect it to remain high.”

As a result of this, inflation was built into wage and price decisions, he said. 

“The public’s expectations about future inflation can play an important role.”

The third lesson: the role of the Federal Reserve keeping at it until the job is done.

Powell quoted former Fed chairs Alan Greenspan, Paul Volcker and Ben Bernanke in his speech.

“These lessons are guiding us as we use our tools to bring inflation down.”

Related Link: Powell's Jackson Hole Speech Among Biggest Macro Catalysts Today 

What’s Next: Powell spoke about the U.S. economy slowing based on historical data.

The central banker pointed to strong underlying momentum being seen by experts and the labor market being “particularly strong” of late. 

In the labor market, demand is exceeding supply, he said. 

Powell highlighted the Fed raising the fed funds rate by 75 basis points in July. Powell said it could be appropriate to increase by the same level in September, depending on data and the outlook.

“We are now about halfway through the intervening period, our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook,” Powell said.

Powell said restoring price stability could require “maintaining a restrictive policy stance for some time.”

SPY Price Action: The SPDR S&P 500 ETF Trust is down 1.4% to $413.63 on Friday versus a 52-week range of $362.17 to $479.98.