Friday marked a highly-anticipated day for Wall Street as Federal Reserve Chair Jerome Powell delivered remarks at the central bank's Jackson Hole Economic Symposium. He struck a stern tone that many predicted, saying the U.S. economy and consumers can continue to expect pain as rate hikes will continue in order to bring inflation down. Danielle DiMartino Booth, CEO and Director of Intelligence at Quill Intelligence and former advisor at the Dallas Fed, joins Closing Bell to discuss Powell's remarks, how high the Fed will likely raise rates again in September, and more.  

Closing Bell

Fed Chair Powell Warns of Coming 'Pain' as the Central Bank Continues to Fight Inflation

Well, while the Federal Reserve Jackson Hole, annual economic symposium kicked off yesterday today was the day that everyone was really waiting for Fed chair jerome Powell delivering remarks about the central bank's path forward to fight inflation. And he didn't mince words about the situation that the U. S. Economy is in. While higher interest rates, slower growth and softer labor market conditions will bring down inflation. They will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation, but a failure to restore price stability would mean for greater pain. Okay, so joining me now is Danielle DiMartino Booth Ceo and director of intelligence at Quill Intelligence and a former adviser at the Dallas Fed Danielle, thanks for coming on. So there was a lot of speculation about what exactly Powell would say today, we all expected that he would tackle inflation and interest rates. Do you think his comments surprised the market with stops in a market meltdown? Yeah, it's pretty clear the way markets are behaving, that they had already more than priced in the assumption that Powell was prepared to pivot, which is the word. That's been on everybody's lips for the past few months actually and today he showed much more resolved. His comments were extremely brief. 8.5 minutes. I think uh he didn't take any questions and the message he delivered was not only are we going to continue tightening, tightening policy raising interest rates were going to keep it up, We're going to keep them high for a long time. I think that that's the element right now that really is scared markets okay. So is the expectation Danielle that we could see another 75 basis point rate rise come the Fed's next meeting in september there was this big debate, would it be 50 basis points or 75 basis points? Well, I think, I think that the Fed does remain data dependent. So if we get some crazy employment report a week from today, nonfarm payroll Friday uh if it's crazy crazy week then you might say 50 basis points. But right now the markets are saying it is 75 basis points, Paul made that very clear. He didn't didn't use any numbers. But what did he talk tough well and it seems like maybe he wants the jobs market to slow down even more. I think we saw a lot of positive data for july we had another inflation indicator this morning for the month of july it was a bit backward looking, but one of the really strong reports for the month of july was that employment jobs report that was more than double expectations. More than half a million jobs created in july do you think the Fed chair wants to see less activity on that front in the jobs market in hopes that that can fix the inflation picture. I think that that is the case. I think when he uses the word pain over and over again and he used that word pain. Um I think that that means pain, pain in the sense of people are gonna lose their jobs and to be fair, you know, it's already working because we we have seen layoff announcements go up appreciably and there's there's certainly a lag in the data, but the number of americans working two full time jobs is at a record high right now. So there's there's already pain out there. I think a lot of people scratching their heads, why didn't the Fed act sooner? Was it behind the curve? And then of course the big announcement this week that tens of millions, more than 40 million americans will have between $30,000 in student loan debt wiped away off of their balance sheet. Perhaps leading to more inflation is their finger pointing to be had here. I mean, how did the economy get in this situation where it is gonna be painful to move forward? Well, there was complicity right there. There were the fiscal stimulus plans and the Fed monetized every penny of that. So they were kind of working hand in hand to create this extraordinary inflation. You know, you don't like to see announcements like the one that we saw about student loans because it a it sends the wrong message period end. But b it also could potentially be inflationary in a time that we've got, you know inflation up to our eyeballs. We we need to be moving in the other direction. But yes, I think the Fed has Some blame to take and they certainly waited too long to start tightening policy. We should have been having this discussion in a year ago. Okay. So based on the data that we do have and based on the Fed comments this morning from the chair, Jerome Powell, how long do you think this tightening cycle last Danielle, perhaps another 75 basis-point rate rise in September? We've got two more meetings this year after that. Is this gonna stretch all the way into and perhaps throughout 2023 more rate rises. So I think that the odds are pretty high that they do hike into the rest of the year at the november and december meetings, they might not be of the same magnitude if the Fed sees that they're there, the effect of tightening is causing pain. But again, he reiterated today and Raphael Bostic followed him in a subsequent interview that once interest rates get as high as they are, the Fed is not going to be lowering them any time soon. So you could be looking at a 2023 where you have consistently high interest rates and that is certainly not something that investors are accustomed to Danielle. You're the expert here. How long do you think it's going to take for inflation to cool to the Feds? Long term 2% target Gracious. I mean, it's so hard to say. We haven't seen rental inflation come down. That's that's one of the key drivers. I would suspect that we're not gonna see a 2% number for a good long time. It might even be through the middle of 2023 before we see three and 4%. So it depends on how deep this recession gets really because we are seeing things like used cars, things like airfares, things that people spend their money on in a discretionary way as opposed to the essentials. We are seeing those prices come down and come down in a hurry. All right. Danielle, DiMartino Booth Ceo and director of intelligence at Quill Intelligence and former adviser at the Dallas Fed Danielle. Thank you.