Fed to continue interest rate hikes

Federal Reserve Chair Jerome Powell said Friday that the Fed will continue sharp interest rate hikes in an attempt to fight inflation. Powell spoke at the central bank’s annual symposium in Jackson Hole, Wyo. In his speech, Powell acknowledged that the interest rate hikes will be painful for many in the form of lost jobs and a weaker economy, but said those pains were the cost of fighting inflation and that it would be far more painful not to get control of prices.

Will the hikes cause a recession? Some on Wall Street expect that the economy will tumble into a recession later this year or in early 2023. They predict that the Fed will then reverse itself and reduce rates. But Eric Winograd, an economist at asset manager AllianceBernstein, thinks the Fed is unlikely to rapidly pivot on the interest rates question, staying “tight even when it hurts.” Stock prices fell after Powell’s remarks and bond yields rose, signaling that many investors see a recession on the horizon.

Dig deeper: Listen to Nick Eicher’s conversation with David Bahnsen on The World and Everything in It podcast about how to check the health of the economy.