"We need to act now, forthrightly and strong" to avoid the kind of inflation that became embedded in expectations in the 1970s, Federal Reserve Chair Jerome Powell said Thursday in a moderated conversation at the Cato Institute monetary policy conference."We are strongly committed to this project and we will keep at it until we get the job done," he added.The inflation of the 1970s and early '80s "followed several failed attempts to bring inflation under control," and that led people to assume that high inflation was the norm, Powell explained. In other words, history has taught today's policymakers not to loosen policy too early."Today, demand continues to be very strong, he said. "What we hope to achieve is a period of growth below trend" that will bring labor market back into balance, Powell said. "The shock to the labor supply that we got from the pandemic was large and persistent." The increase in labor force participation that was seen in August's jobs report was welcome, but it's still a percentage point below prepandemic levels.Update at 9:22 AM ET: There are different theories on what caused the recent high inflation, he said. "The relationship between money supply and inflation has been unstable" for years. He doesn't find money supply to be a good predictor of inflation. "Monetary aggregates don't play a key role" in the Fed's policy.9:23 AM ET: When asked if it makes sense for the Fed's dual mandate to include full...
