Powell Speech Summary: Potential Inflation Must Be Clearly Defined and Swiftly Return to 2%, Primary Focus on Price Stability

BlockBeats News, August 28th - Federal Reserve Chair Kevin Wash delivered his first Jackson Hole speech, stating that we must be sure that underlying inflation is moving towards our target, or else we have work to do. It is hard to describe the financial conditions as restrictive. Inflation data has not shown a trend of significant improvement; the Fed's current key focus should be on prices. The role of forward guidance should be limited. The possibility of the economy achieving significantly higher growth is rising. Market participants should focus on real information in the economy. Forward-looking policies should not be based on outdated or inaccurate data.

Wash reiterated that the Fed will bring the inflation rate back to the 2% target. He stated that this is a clear and fixed target. Wash said, "My standard is that we must be sure that potential inflation is moving toward our target, and the pace must be clear and fast enough. Otherwise, we have work to do. That is our responsibility." Wash also stated that the current financial conditions are not restrictive, and interest rates are the Fed's "key tool" in fulfilling its duties.

Wash said, "Although the PCE and CPI data announced this summer were better than expected, they did not convince me that there had been a meaningful improvement in the potential trend of inflation." "Market prices reflect that the market believes we will achieve price stability. I can assure you that the market's judgment is correct." Wash then stated that in the case of inflation above 2%, the Fed's "current primary focus should be prices." He said, "Let us be equally clear on another aspect of the target: price stability will not be achieved automatically, and inflation may not necessarily regress on its own. Achieving price stability is the Fed's responsibility."

Wash stated that he is "impressed by the overall economic performance, and the economy seems to have strengthened." He added, "One measure of economic strength is its performance under pressure, under shock. In this regard, the real economy and Wall Street have both demonstrated remarkable resilience. Given the current market interest rates and the Fed's short-term policy rate unchanged since last December, credit and loan markets have shown little sign of policy constraint."