U.S. Federal Reserve Chairman Jerome Powell on Friday warned that efforts to bring down inflation through interest rate hikes will inflict "some pain" on the economy, but said the strategy would avert far worse outcomes.

Higher interest rates, slower growth and softer labor market conditions are the "unfortunate costs of reducing inflation," Powell said in a speech at a symposium in Jackson Hole, Wyoming, after data showed the U.S. economy shrank for the second straight quarter from April to June, a factor that could typically constitute a recession.

U.S. Federal Reserve Chairman Jerome Powell (Kyodo)

The administration of President Joe Biden, however, has played down fears of recession in the world's largest economy, citing the strong labor market.

While acknowledging that the U.S. economy is slowing from the historically high growth rates of 2021, which reflected the reopening of the economy following the coronavirus pandemic recession, Powell said the labor market is "particularly strong."

He also welcomed lower inflation readings for July, but noted that a single month's improvement falls "far short of" what the U.S. central bank will need to see before it can feel confident that inflation is moving down.

The Fed in July raised the benchmark interest rate by a massive 0.75 percentage point for the second straight meeting, with Powell at that time signaling the possibility of "another unusually large increase" in the next meeting slated for September.

The Fed chief said in his speech on Friday that the decision at the September meeting will depend on "the totality of the incoming data and the evolving outlook," while noting that slowing the pace of rate increases will become appropriate "at some point."

Facing the highest inflation in about 40 years on the back of Russia's war in Ukraine, the Fed in May lifted the target range for the federal funds rate by a half-point for the first time since 2000, after ending in March near-zero interest rates.

In the June meeting, the Fed decided on its largest interest-rate hike since November 1994, moving ahead with a 0.75 point increase.

When raising the interest rates, the U.S. central bank usually moves the figure by 0.25 point at a time.

The venue of the Federal Reserve's Jackson Hole meeting is pictured on Aug. 25, 2022, in Jackson Hole, Wyoming. (Kyodo) ==Kyodo