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By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – Calling stable prices the “bedrock” of the economy, Federal Reserve Chair Jerome Powell said on Thursday that the U.S. central bank’s battle to control inflation would “include some pain” as the impact of higher interest rates is felt, but that the worse outcome would be for prices to continue speeding ahead.

“We fully understand and appreciate how painful inflation is,” Powell said in an interview with the Marketplace national radio program, repeating his expectation that the Fed will raise interest rates by half a percentage point at each of its next two policy meetings while pledging that if data turn the wrong way “we’re prepared to do more.”

“Nothing in the economy works, the economy doesn’t work for anybody without price stability,” Powell said. “We went through periods in our history where inflation was quite high … The process of getting inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels, and we know what that’s like. And that’s just people losing the value of their paycheck.”

The U.S. economy is facing its toughest inflation problem since the 1970s and early 1980s, when prices at one point rose at an annual rate of 14.5% and then-Fed chief Paul Volcker used punishing interest rates to twice throw the economy into recession. The unemployment rate climbed above 10%.

Powell, who was confirmed earlier on Thursday to a second four-year term as Fed chief on a bipartisan 80-19 vote in the U.S. Senate, has paid frequent homage to Volcker’s commitment to beating inflation, while also saying he believes the U.S. central bank this time can navigate the economy to a “soft landing” where inflation falls without a downturn or significant increase in joblessness.

Interest rates are rising sharply as a result of the policy steps engineered by Powell. While neither inflation nor borrowing costs are approaching Volcker-era levels, the quick run-up in the cost of food, gas, housing and other daily staples has become a politically explosive issue for President Joe Biden’s administration. Consumer prices in April were 8.3% higher than a year ago.

Biden now has filled the top two Fed jobs and seen two of his other appointees confirmed to the central bank’s seven-seat Board of Governors. The president made clear this week he was giving them full sway to try to lower inflation.

“Tackling inflation is my top domestic priority,” Biden said following Powell’s confirmation by the Senate. The Fed “will bring the skill and knowledge needed at this critical time for our economy and families across the country.”

Powell, who opened a news conference after last week’s policy meeting by saying he wanted to “restore price stability on behalf of American families,” used the radio interview on Thursday to amplify that broad message to the public.

(Reporting by Howard Schneider; Editing by Paul Simao)