• US stock markets concluded the week substantially down after remarks from the Fed’s chief.
• Jerome Powell, the bank’s chairman, said interest rates must be raised to prevent inflation from becoming permanent.
• His statements sent US markets 3% down.

US stock markets concluded the week substantially down after remarks from the Fed’s chief. Jerome Powell, the bank’s chairman, said interest rates must be raised to prevent inflation from becoming permanent. His statements sent US markets 3% down. Americans are paying more for basics. U.S. inflation is at a four-decade high.

In a speech in Wyoming on Friday, Mr Powell said the Federal Reserve will likely raise interest rates in the coming months and keep them high “for some time.” “Reducing inflation will require below-trend growth,” he said in Jackson Hole.

If economic growth falters, investors fear increased interest rates would cause a recession. Getting inflation under control would cost American people and companies, but Mr. Powell said it’s worth it. Higher interest rates, weaker growth, and a softer labour market would cut inflation but hurt households and companies, he added.

“Reducing inflation has its consequences, but failing to stabilise prices would be considerably worse.” Mr. Powell wants to curb inflation. If individuals feel inflation will be high, they’ll act accordingly, creating a self-fulfilling prophesy. Someone who expects costs will increase 3% next year may want a 3% pay hike. Last time this occurred, Paul Volcker, Mr. Powell’s predecessor, had to raise interest rates considerably, pushing the country into recession.

In March, the Federal Reserve’s main interest rate was practically zero; it’s now 2.25 to 2.5% to combat inflation.

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