Takeaways from Fed Chair Powell's speech at Jackson Hole

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell all but proclaimed victory in the fight against inflation and signaled that interest rate cuts are coming in a much-anticipated speech Friday in Jackson Hole, Wyoming.

Under Powell, the Fed raised its benchmark rate to the highest level in 23 years to subdue inflation that two years ago was running at the hottest pace in more than four decades. Inflation has come down steadily, and investors now expect the Fed to start cutting rates at its next meeting in September — an expectation that essentially got Powell's endorsement Friday.

“My confidence has grown that inflation is on a sustainable path back to 2%,” Powell said in his keynote speech at the Fed’s annual economic conference in Jackson Hole.

He noted that inflation, according to the Fed's preferred gauge, had fallen to 2.5% last from a peak of 7.1% two years ago. Measured by the better known consumer price index, inflation has dropped from a peak 9.1% in mid-2022 to 2.9% last month. Both are edging closer to the Fed's 2% target.

Powell sounded confident that the Fed would achieve a so-called soft landing — containing inflation without causing a recession. "There is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market,'' he said.

Higher rates contributed to progress against inflation, as did the easing of supply chain bottlenecks and worker shortages that caused shipping delays and higher prices as the economy bounded back with unexpected strength from COVID-19 lockdowns.

Powell suggested Friday that rate cuts are all but inevitable. "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” he said.

Last year, the Fed had predicted that it would trim rates three times this year. But the cuts kept getting pushed back as the progress against inflation faltered early in 2024. Since then, the steady drop in inflation has resumed, giving the Fed more confidence that victory was in sight.

Powell acknowledged that he and his Fed colleagues misjudged the inflationary threat when it emerged in early 2021. At the time, they expected the flareup of higher prices to be short-lived — the temporary consequence of pandemic-related supply chain disruptions. The pressure, they thought, would fade "fairly quickly without the need for a monetary policy response — in short, that the inflation would be transitory.''

They weren't alone in their optimism. “The good ship Transitory was a crowded one,'' Powell said, ”with most mainstream analysts and advanced-economy central bankers on board.''

But the word “transitory″ came back to haunt the Fed as inflation proved more intractable than expected. It spread from goods that were subject to supply chain backlogs into services, where it is harder to dislodge without raising rates and risking severe economic pain in the form of layoffs and higher unemployment. The Fed proceeded to raise rates 11 times in 2022 and 2023.

Powell admitted that policymakers and economists have struggled to understand and respond to an economy that has been unpredictable since COVID-19 hit in early 2020. First, the pandemic shut down commerce and companies collectively slashed millions of jobs. Then the economy roared back with unexpected vigor, setting off inflationary pressures that been dormant since the early 1980s. When the Fed belated responded with aggressive rate hikes, economists predicted the hiring borrowing costs would cause a painful recession. But it didn't.

"The limits of our knowledge — so clearly evident during the pandemic — demand humility and a questioning spirit focused on learnings lessons form the past and applying them flexibly to our current challenges,'' Powell said.

Federal Reserve Chairman Jerome Powell, left, Governor of the Bank of Canada Tiff Macklem, center, and Governor of the Bank of England Andrew Bailey chat outside the Jackson Hole Economic Symposium at Jackson Lake Lodge in Grand Teton National Park near Moran, WY on Aug. 23, 2024. (AP Photo/Amber Baesler)

Federal Reserve Chairman Jerome Powell, left, speaks with Governor of the Bank of Canada Tiff Macklem outside of the Jackson Hole Economic Symposium at Jackson Lake Lodge in Grand Teton National Park near Moran, Wyo., on Aug. 23, 2024. (AP Photo/Amber Baesler)

FILE - A bank of television screens on the floor of the New York Stock Exchange, shows Federal Reserve Chairman Jerome Powell, July 31, 2024. (AP Photo/Richard Drew., File)

BOSTON (AP) — A study that explores the feasibility of using pigeons to guide missiles and one that looks at the swimming abilities of dead fish were among the winners Thursday of this year’s Ig Nobels, the prize for comical scientific achievement.

Held less than a month before the actual Nobel Prizes are announced, the 34th annual Ig Nobel prize ceremony at the Massachusetts Institute of Technology was organized by the Annals of Improbable Research magazine’s website to make people laugh and think. Winners received a transparent box containing historic items related to Murphy’s Law — the theme of the night — and a nearly worthless Zimbabwean $10 trillion bill. Actual Nobel laureates handed the winners their prizes.

“While some politicians were trying to make sensible things sound crazy, scientists discovered some crazy-sounding things that make a lot of sense,” Marc Abrahams, master of ceremonies and editor of the magazine, said in an e-mail interview.

The ceremony started with Kees Moliker, winner of 2003 Ig Noble for biology, giving out safety instructions. His prize was for a study that documented the existence of homosexual necrophilia in mallard ducks.

“This is the duck,” he said, holding up a duck. “This is the dead one.”

After that, someone came on stage wearing a yellow target on their chest and a plastic face mask. Soon, they were inundated with people in the audience throwing paper airplanes at them.

Then, the awards began — several dry presentations which were interrupted by a girl coming on stage and repeatedly yelling “Please stop. I'm bored.” The awards ceremony was also was broken up by an international song competition inspired by Murphy's Law, including one about coleslaw and another about the legal system.

The winners were honored in 10 categories, including for peace and anatomy. Among them were scientists who showed a vine from Chile imitates the shapes of artificial plants nearby and another study that examined whether the hair on people's heads in the Northern Hemisphere swirled in the same direction as someone's hair in the Southern Hemisphere.

Other winners include a group of scientists who showed that fake medicine that causes side effects can be more effective than fake medicine that doesn't cause side effects and one showing that some mammals are cable of breathing through their anus — winners who came on stage wearing a fish-inspired hats.

Julie Skinner Vargas accepted the peace prize on behalf of her late father B.F. Skinner, who wrote the pigeon-missile study. Skinner Vargas is also the head of the B.F. Skinner Foundation.

“I want to thank you for finally acknowledging his most important contribution,” she said. “Thank you for putting the record straight.”

James Liao, a biology professor at the University of Florida, accepted the physics prize for his study demonstrating and explaining the swimming abilities of a dead trout.

“I discovered that a live fish moved more than a dead fish but not by much,” Liao said, holding up a fake fish. “A dead trout towed behind a stick also flaps its tail to the beat of the current like a live fish surfing on swirling eddies, recapturing the energy in its environment. A dead fish does live fish things.”

Professor James Liao displays a stuffed fish while accepting a prize for physics for demonstrating and explaining the swimming abilities of a dead trout during a performance at the Ig Nobel Prize ceremony at Massachusetts Institute of Technology in Cambridge, Mass., Thursday, Sept. 12, 2024. (AP Photo/Steven Senne)

A team of researchers perform a demonstration during a performance showing that many mammals are capable of breathing through their anus while accepting the 2024 Ig Nobel prize in physiology at the Ig Nobel Prize ceremony at Massachusetts Institute of Technology, in Cambridge, Mass., Thursday, Sept. 12, 2024. (AP Photo/Steven Senne)

People in the audience throw paper airplanes toward the stage during a performance at the Ig Nobel Prize ceremony at Massachusetts Institute of Technology in Cambridge, Mass., Thursday, Sept. 12, 2024. (AP Photo/Steven Senne)

FILE - Students walk past the "Great Dome" atop Building 10 on the Massachusetts Institute of Technology campus in Cambridge, Mass, April 3, 2017. (AP Photo/Charles Krupa, File)