Powell's Speech: Short & Hawkish

Fed Chair Jerome Powell's speech today at the Fed's Jackson Hole conference was short and hawkish. He reiterated that the Fed's job is to bring inflation down even though doing so is bound to weigh on economic growth and cause some weakness in the labor market. He quashed any lingering expectations that the Fed would pause its tightening and might lower interest rates next year. Here are the highlights followed by our QuickTakes:

(1) "The Federal Open Market Committee's (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal." [Getting inflation down is Job #1 for the Fed.]

(2) "Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth." [The goal is to bring inflation down with slow growth rather than a recession.]

(3) "The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceeding the supply of available workers." [The Fed is aiming to reduce the demand for workers to bring wage inflation down.]

(4) "July's increase in the target range [for the federal funds rate] was the second 75 basis point increase in as many meetings, and I said then that another unusually large increase could be appropriate at our next meeting." [Odds are the Fed will hike again by 75bps to a range of 3.00%-3.25% at the next FOMC meeting on September 21.]