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Powell: restrictive monetary policy will have to be maintained “for a while”

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The president of the Federal Reserve (Fed), Jerome Powell, acknowledged this Friday that restoring price stability “will probably require” maintaining a monetary stance “restrictive for some time”.

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In his opening speech to the economic leaders meeting in Jackson Hole, Wyoming, USA, Powell nevertheless admitted that “sometime” it will be advisable to go “moderating the pace of uploads” of interest rates.

Powell recalled that in July, after raising rates 0.75 points, he warned of another possible “unusually large increase” in September, but today it conditioned the possible increase to the evolution of the data and the economic perspectives.

In his speech, the president of the US central bank admitted that restoring price stability “it will take some time” and use “energetic” of the tools to achieve it will cause a period of sustained growth “under” than estimated.

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With higher interest rates, slower growth and a slack in the labor market, this situation will bring some “problems to households and businesses”, he acknowledged.

Despite this, do not take action “it would mean much greater pain”. “Historical records strongly caution against premature easing of monetary policies”, he added.

We must keep going until the job is done”, stressed Powell, who in his macroeconomic analysis considered that the US economy continues to show a moment “strong” How strong is your labor market.

He did warn, however, that there is still an imbalance in the labor market at the moment, because the jobs that companies have to cover are “substantially” more than the number of workers available to fill them.

He further noted that “history has shown” that the employment costs of policies aimed at reducing inflation tend to increase, especially if high inflation is prolonged over time. “Our goal is to avoid that possibility by acting to solve the problem now.”, he concluded.

Source: Gestion

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