Fed chief says inflation needs to be eased

Federal Reserve Chair Jerome Powell warned on Wednesday that there is no guarantee that the central bank will be able to bring inflation to heel without sacrifices in the job market while reaffirming policymakers' aim to rein in surging prices.

Powell said at the European Central Bank policy conference in Portugal that supply and demand are really out of balance in many parts of the U.S. economy, and pointed out the labor market as an example of that. He said that imbalances need to be evened out in order to bring inflation down.

ACUTELY FOCUSED We think there are pathways for us to achieve that, to get back to 2% inflation while still retaining a strong labor market. Powell said that achieving that is going to be quite challenging and that it has been made even more difficult by Russia's war on Ukraine, which has exacerbated supply chain issues and shortages, and that it has caused prices for food and gasoline to go up even higher.

He said it's gotten harder. The pathways have gotten narrower. The Fed chief admitted that there is a risk that the central bank could slow the economy more than necessary to achieve its target of 2% inflation, but he said that the bigger mistake would be to fail to restore price stability.