Jerome Powell, chairman of the Federal Reserve, has warned of “some pain” for the US economy and said he expects the central bank to keep raising interest rates to tame rampant inflation.
In his highly anticipated speech from Jackson Hole, Wyoming, Powell made a firm commitment to halting inflation.
“While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
Despite the Fed having made four consecutive interest rate hikes totaling 2.25 percentage points, Powell said this is “no place to stop or pause”.
The Dow Jones Industrial Average dropped 407 points, or 1.22 per cent following the speech. The Nasdaq Composite slid 1.84 per cent and the S&P 500 fell 1.5 per cent.
All eyes are now on the Fed, which meets on 20-21 September to decide how sharp the next interest rate rise will be.
Sign up for our FREE Reaction Weekend Email
Read the week's best-read articles on politics, business and geopolitics
Receive offers and exclusive invites
Plus uplifting cultural commentary