(CNSNews.com) - The Federal Reserve "is strongly resolved to bring inflation down to 2 percent, and we will keep at it until the job is done," Fed Chairman Jerome Powell told a news conference on Wednesday.
To bring down inflation, Powell announced the Fed is hiking the federal funds rate by three quarters of a percentage point, "and we anticipate that ongoing increases will be appropriate," he said.
"The pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy. With today's action, we have raised interest rates by three percentage points this year."
Powell noted that inflation causes "significant hardship" by eroding purchasing power. But the cure for inflation will also create hardship: "Reducing inflation is likely to require a sustained period of below-trend growth, and there will very likely be some softening of labor market conditions," he said.
A softening labor market means less job creation and higher unemployment. So, are we heading toward recession?
"We don't know, no one knows whether this process will lead to a recession or, if so, how significant that recession would be," Powell said:
"That's going to depend on how quickly wage and price inflation -- inflation pressures come down, whether expectations remain anchored, and whether, you know, also do we get more labor supply, which would help as well.
"In addition, the chances of a soft...landing are likely to diminish to the extent that policy needs to be more restrictive or restrictive for longer. Nonetheless, we're committed to getting inflation back down to 2 percent because we think that a failure to restore price stability would mean far greater pain later on."
Powell said there is no painless way to reduce inflation, nor is there any point in wishing it away:
"We have to get supply and demand back into alignment. And the way we do that is by slowing the economy," which brings unavoidable pain -- job losses, higher interest rates, Powell admitted:
"You know, higher interest rates, slower growth, and a softening labor market are -- are all painful for the public that we serve. But they're not as painful as failing to -- to restore price stability and then having to come back and do it, you know, down the road again; and doing it at a time when actually now people have really come to expect, you know, high inflation.
"If the -- if the concept of high inflation becomes entrenched in people's economic thinking about their decisions, then -- then sort of getting back to price stability, the cost of getting back to price stability just rises. And so we want to avoid that. We want to -- we want to act aggressively now and get this job done and keep at it until it's done."
Higher mortgage rates already are slowing the housing market, Powell noted. He said he expects "shelter inflation" to "remain pretty high for a while."
Powell also pointed to a "big imbalance between supply and demand" in the housing market:
"For the longer term, what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again. And I think we -- so we probably in the housing market have to go through a correction to get back to that place."
In the next breath, Powell said it would be a "difficult correction," but one that is necessary to put the housing market back into "better balance."
Criticism of the Fed's latest action came from both the left and the right.
Sen. Rick Scott (R-Fla.) tweeted: "The Federal Reserve has spent months silently endorsing @JoeBiden's reckless spending agenda, instead of acting in America's best interests. Now, the American people are going to pay the price of soaring inflation as the FED is forced to raise rates."
Sen. Elizabeth Warren (D-Mass.) tweeted: "@federalreserve’s Chair Powell just announced another extreme interest rate hike while forecasting higher unemployment. I’ve been warning that Chair Powell’s Fed would throw millions of Americans out of work — and I fear he’s already on the path to doing so."