“It is the Fed's job to bring inflation down to our 2 per cent goal, and we will do so,” Powell said while addressing the Jackson Hole symposium recently.

“We have tightened policy significantly over the past year. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” he said.

Although further unwinding of pandemic-related distortions should continue to put some downward pressure on inflation, restrictive monetary policy will likely play an increasingly important role, he said.

Getting inflation sustainably back down to 2 per cent is expected to require a period of below-trend economic growth as well as some softening in labour market conditions, he said.

Restrictive monetary policy has tightened financial conditions, supporting the expectation of below-trend growth.

The rebalancing of the labour market has continued over the past year but remains incomplete, he noted.

Labour supply has improved, driven by stronger participation among workers aged 25 to 54 and by an increase in immigration back toward pre-pandemic levels.

The labour force participation rate of women in their prime working years reached an all-time high in June. Demand for labour has moderated as well, he said.

“We see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring, and inflation. But we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint,” he added.

Fibre2Fashion News Desk (DS)