Fed Chair Powell: US inflation is concerning, price stability is our mission

Federal Reserve Chair Jerome Powell has signaled a continued commitment to combating inflation, emphasizing that price stability remains a core mission for the central bank.

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One of our most important tasks, in terms of our dual mandate, is price stability. The relevant indicators are concerning.

Speaking at the Jackson Hole Economic Policy Symposium, Powell stated that current inflation indicators are "concerning" from the perspective of price stability. He suggested that the Federal Reserve must be confident that core inflation is moving sustainably toward its 2% target. "If we are not confident, we will do more," Powell asserted, indicating a willingness to raise interest rates further if necessary.

Powell also assessed that current financial conditions are "difficult to say are restrictive," implying that they may not be sufficiently tight to curb inflationary pressures. He noted that progress on bringing down core inflation has been "slight" over the last two years, and recent data does not indicate a meaningful improvement in the underlying trend.

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We need to be confident that inflation is moving sustainably toward our goal. If we are not confident, we will not hesitate to do more.

The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 3.7% year-over-year in the latest reported month, matching June's increase and exceeding market expectations. The core PCE index, excluding volatile food and energy prices, increased by 3.3% annually and 0.2% monthly, underscoring the persistent nature of price pressures.

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It is difficult to say that current financial conditions are restrictive.

While Powell did not provide specific forward guidance or a "reaction function" detailing economic signals for future rate adjustments, his remarks underscored the Fed's resolve to achieve its inflation mandate. The central bank's focus remains on ensuring inflation returns to the 2% target, even if it requires further policy tightening.

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The progress on bringing down core inflation has been modest over the last two years. Recent indicators do not suggest that the underlying trend is improving meaningfully.