Powell warns that the Federal Reserve's inflation struggle could result in "pain" and job losses.

 JACKSON HOLE, Wyo. (AP) Federal Reserve Chair Jerome Powell issued a stern warning on Friday about the Fed's intention to combat inflation with further rate hikes: It will almost certainly cost Americans pain in the shape of a weakened economy and job losses.

The message hit Wall Street with a blow, sending the Dow Jones Industrial Average down more than 1,000 points for the day.

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"These are the terrible costs of lowering inflation," Powell said at the Fed's annual economic conference in Jackson Hole. "However, failing to restore pricing stability would cause far more hardship."

Investors were hoping for a signal from Powell that the Fed might soon slow its rate hikes later this year if inflation continued to fall. However, the Fed chair signalled that this time may not be near, and markets fell as a result.

Even if the jobless rate has plummeted to a half-century low of 3.5 percent, runaway price hikes have soured most Americans on the economy. It has also posed political dangers for President Joe Biden and congressional Democrats in the next elections, with Republicans taking advantage of the situation.

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The Dow Jones Industrial Average fell 3% on Friday, its lowest day in three months. The Nasdaq composite, which is heavily weighted toward technology, fell over 4%. Short-term Treasury yields rose as traders increased their wagers on the Fed remaining aggressive with interest rates.

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Some on Wall Street believe the economy will enter a recession later this year or early next year, after which the Fed will reverse course and lower interest rates.

However, a number of Fed officials have rebuffed that concept. Powell's words hinted that the Fed intends to raise its benchmark rate — to around 3.75 percent to 4 percent by next year — but not so much as to devastate the economy, in the goal of slowing growth long enough to overcome high unemployment.