Fed Chairman Powell made hawkish remarks at the Jackson Hole annual meeting.

On August 26, Fed Chairman Powell delivered a speech titled "Monetary Policy and Price Stability" at the Jackson Hole Global Central Bank Annual Conference. He reiterated the Fed's stance on continuing to raise interest rates to curb inflation and stated that there would be no rush to cut rates even after reaching a restrictive level.

Powell emphasized that the Fed's top priority is to reduce the inflation rate to the target of 2%. Although the inflation data in July showed some improvement, he believes it is not enough to change the Fed's policy path. He stated that the Fed will not be swayed by one or two months of data, and the current inflation situation remains severe.

Regarding the interest rate hike in September, Powell did not provide specific numbers but stated that decisions would be based on overall economic data and outlook. He hinted at the possibility of another "exceptionally large" rate increase.

Powell warned that continuing to raise interest rates could bring "some pain" to the economy, but he believes it is a necessary cost to reduce inflation. He stated that restoring price stability might require a period of below-trend economic growth, and the labor market may also experience some softness.

It is worth noting that Powell directly refuted the market's expectations for interest rate cuts starting in the second half of 2023. He expects the median federal funds rate to be slightly below 4% by the end of 2023.

Powell also emphasized the importance of managing inflation expectations, stating that it is key to avoiding a repeat of the drastic interest rate hikes of the 1980s that led to a recession. He indicated that the Fed is committed to completing the work of reducing inflation and will see it through to the end.

Nevertheless, Powell still mentioned that at some point, as the monetary policy stance tightens further, it may become appropriate to slow down the pace of interest rate hikes.

Powell's hawkish comments have led to a rapid cooling of risk sentiment in financial markets. Major U.S. stock indices fell sharply, U.S. Treasury yields rose, the U.S. dollar index stopped falling and turned to rise, and gold prices declined. Bets in the futures market on a 75 basis point rate hike by the Fed in September have also significantly increased.