On Friday, at the Kansas City Federal Reserve’s Annual Policy Forum in Jackson Hole, Wyoming, Federal Reserve Chair, Jerome Powell, stated that the central bank will not be backing off in its fight against inflation. Chair Powell reiterated a tough stance on combatting inflation, causing investors to second guess whether the Federal Reserve will continue hiking rates beyond September and exceeding already lofty interest rate estimates. As a result of his speech, which was scheduled for 30 minutes but only lasted 8 minutes, all major indices declined more than 3% on the day with the S&P 500 declining 4% and the Nasdaq declining 4.2% on the week.
In a hotly anticipated address, the Fed chair said successfully reducing inflation would probably result in lower economic growth for “a sustained period”. To do that, interest rates would need to stay at a level that restrains growth “for some time”, he warned. Powell predicted there would “very likely be some softening of labor market conditions” and “some pain” for households and businesses. “A failure to restore price stability would mean far greater pain,” he added. Yields on short-dated US government debt climbed. On the policy-sensitive two-year Treasury note, the yield increased 0.01 percentage points to 3.38 percent. The yield on the 10-year note — which moves with growth and inflation expectations — was flat at 3.03 percent. Yields rise when a bond’s price falls.
