Fed Chairman Powell speaks at a symposium in Jackson Hole

At a gathering of the world's foremost central bank governors, Fed Chairman Powell gave a much-anticipated address.

The dollar was invigorated by the head of the regulator's speech.

Since the start of June, the dollar index has seen new highs above 104.4.

At the economic policy symposium in Jackson Hole on Friday, Jerome Powell, the Federal Reserve chief, gave a speech entitled "Inflation: progress and the way forward" in which he discussed the economic outlook.

The head of the Fed declared that the Federal Reserve's mission is to reduce inflation to the desired rate of 2%. In the past twelve months, the policy has been significantly tightened, and while inflation has decreased from its peak (which is a positive sign), it is still too high.

He stated that the regulator is willing to increase rates if needed, and will maintain a tight policy until it is certain that inflation is heading towards the desired rate.

PCE core inflation reached its highest point of 5.4% in February 2022, and has since decreased to 4.3% by July. Despite this decrease, Federal Reserve Chairman Jerome Powell noted that core inflation remains high.

It is anticipated that a drop in inflation to 2% will necessitate a period of economic growth that is lower than the average, as well as some relaxation of labor market conditions.

If further evidence of the economy's sustained growth above the trend is found, it could put inflation in jeopardy and necessitate a stricter monetary policy.

Over the past year, the labor market has been rebalancing, which has helped to reduce the strain on wages. However, it appears that the labor market is no longer becoming less tense, which may necessitate a response from monetary policy.

Powell stated that it is impossible to accurately pinpoint a neutral interest rate, thus leaving an element of doubt as to the degree of monetary policy control.

The complexity of this evaluation is increased by the lack of clarity regarding the duration of the delays between monetary tightening and its effects on the economy and inflation in particular.

It is challenging to find the right balance between the risk of over-tightening monetary policy and the risk of not tightening it enough, due to both existing and emerging uncertainties.

At our upcoming meetings, we will assess our progress by looking at the data, outlook, and risks. After this evaluation, Powell concluded that we should be careful in deciding whether to raise the discount rate or keep it the same and wait for more data.