JACKSON HOLE, Wyo. — The Federal Reserve won't stop raising interest rates until the economy is under control, central bank chief Jerome Powell said Friday - even though officials expect wrestling inflation to normal levels will slow the economy enough to cause "some pain" for households and businesses and, probably, weaken the job market.

In perhaps the most important policy speech of his career, Powell acknowledged that the central bank's rate hikes would sting as the economy slows down. But he said officials were unwilling to allow the "far greater pain" that would result from letting inflation continue at record rates.

The remarks, given at the annual Jackson Hole Economic Symposium, were unusually direct for Powell, who faces the enormous challenge of lowering the highest inflation in 40 years without causing a recession or undermining the still-churning job market. The speech aimed to cement Powell's own credibility and secure the trust of financial markets - and the American people - that the Fed would not let inflation spiral further out of control, despite getting its initial prognosis that price hikes wouldn't last wrong.

"There will very likely be some softening of labor market conditions," Powell said. "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 far greater pain."

Recession fears have eased in recent weeks, as the stock market has rebounded, gas prices have fallen and the economy added far more jobs than expected in July. But all of that could give Fed officials even more reason to be wary that inflation isn't close to being tamed. Many economists and Wall Street analysts say the bank has only slim odds of achieving what's known as a "soft landing" - especially because the central bank has rarely managed to launch full cycles of rate hikes to combat inflation without causing a recession.

Powell's speech could serve as a warning to businesses and households that the economy has yet to feel the full consequences of rising interest rates. More interest rate hikes are all but certainly on the way.

The expectation of pain ahead left markets reeling in the short term: By midday, major stock indexes were all down by more than 2 percentage points.

"Fantasies of a soft landing are just that: Fantasies," said Diane Swonk, chief economist at KPMG. "The challenge the Fed faces is to hammer demand in line with a more supply constrained world. Their tools can't affect supply, only demand. [Powell's speech] was short, to the point, sobering and solemn."

Powell insisted that the central bank would not prematurely decide its work was done.

"We are taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply, and to keep inflation expectations anchored," he said. "We will keep at it until we are confident the job is done."

In remarks for the conference last year, Powell had doubled down on his belief that inflation would be temporary, even as prices continued climbing by the month. The speech did not age well, and the Fed was sharply criticized for sticking to a message that was increasingly out of step with how Americans were experiencing the economy.

"The Fed feels like a passenger on the bus, along with Wall Street and investors and economists. The Fed doesn't feel like the driver of the bus," said Michael Strain, director of economic policy studies at the conservative American Enterprise Institute. "A way that you assert yourself as a driver of the bus is by stating clearly what you got wrong, explaining why you got it wrong, and communicating how you're going to do things differently in the future."

To lower inflation from 40-year highs, the Fed must rely on one powerful tool: interest rates. Higher rates are designed to slow demand by making a host of loans, like for cars or mortgages, more expensive. The housing market, for example, is cooling, as a run-up in mortgage rates causes aspiring homeowners to bow out.

Inflation eased a bit in July, clocking in at 8.5% compared with the past year - down from the previous month's high - as dropping gas prices helped lower overall costs. But Fed leaders say they need to see months of sustained improvement before knowing if rate hikes are working. On Thursday, new inflation data using Fed's preferred gauge also showed prices dipped slightly in July.

Compounding the challenge is that rate hikes operate with a lag, and the increases the bank makes now could slow down economic activity much more later this year or early next year. Already, the U.S. economy shrank in the first two quarters of 2022, raising fears of a recession and suggesting the economy is already slowing markedly, even while inflation remains high.

"While the lower inflation readings for July are welcome, a single month's improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down," Powell said.

Part of the problem is that interest rates are a blunt tactic, and they cannot address all the ways people feel inflation in their daily lives. Rate hikes can't build new homes or keep gas prices low. And they can't boost consumer sentiment, especially at a time when many families and business owners do not feel the economy is working for them, despite a strong job market and resilient consumer spending.

Politically, high inflation has weighed down President Joe Biden's approval ratings and complicated the Democratic Party's legislative agenda. That's not strictly a problem for the Fed, which is designed to be independent and whose officials serve terms that don't directly line up with presidential administrations. But it does put the central bank's work under closer scrutiny from politicians.

Earlier this month, the White House and congressional Democrats secured a major win with the passage of the Inflation Reduction Act, which focuses on the climate crisis, lowering health-care costs and raising taxes on large corporations. But Republicans continue to hammer Democrats for hefty stimulus packages earlier in the pandemic, and argue that any more federal spending or cancellation of student loan debt will overheat the economy further.

For the Fed officials descending on Jackson Hole this week, the past few years have been dizzying. It remains exceedingly difficult for officials to get a clear read on the economy. And the cost of getting those assessments wrong has been high.

After misjudging inflation last year, the central bank is now in a race to rein in inflation that has risen higher and spread further throughout the economy. Supply chain snarls, high consumer demand and Russia's invasion of Ukraine have kept prices high for gas, groceries, rent and everything in between. And suddenly, the central bank has been hiking rates at its most aggressive pace in decades.

"Jay is excellent at meeting the moment," said Claudia Sahm, founder of Sahm Consulting and former Federal Reserve economist. "The Fed makes mistakes, but it learns."

The Fed has raised rates four times this year, most recently by three-quarters of a percentage point in July. The widespread expectation is that more increases will follow and the Fed will hike rates again at policy meetings in September, November and December. But it's unclear whether central bankers will keep up with such sharp increases, or if they will decide to scale down the hikes to avoid slowing the economy too abruptly and causing a recession.

Powell was not expected to use his speech to outline exactly what the Fed plans to do next month. He said Fed officials would have to rely on data still to come before the Sept. 20-21 policy meeting. He said that "at some point" it would be appropriate to slow the pace of rate hikes, but did not offer a timeline.

Stocks fell on Powell's message that more rate hikes are to come, with the Dow Jones industrial average dropping more than 700 points by midafternoon.

"He has wanted to tell a somewhat hopeful story: 'This is something we can accomplish,'" said Tim Duy, a Fed expert at the University of Oregon and chief economist at SGH Macro Advisors. "'We know that inflation is hurting all of you, and we want to rectify that situation, but we don't want to do it in such a way that creates more pain.'"