The S&P 500 is down 5% since Federal Reserve chair Jerome Powell's Friday speech asserting the central bank's absolute determination to bring inflation down.

• And that's just the way many at the central bank want it, according to a top Fed official and Axios' reporting.

Why it matters: As long as inflation remains the predominant economic concern, the Fed can be expected to push back on any surge in asset prices. For now, that creates a cap on how big — and justified — a market rally can be.

Driving the news: Neel Kashkari, president of the Minneapolis Fed, told Bloomberg's Odd Lots podcast yesterday that he was "actually happy" to see how Powell's speech was received.

• "I certainly was not excited to see the stock market rallying after our last Federal Open Market Committee meeting," Kashkari said. "Because I know how committed we all are to getting inflation down. And I somehow think the markets were misunderstanding that."
• In numerous conversations with current and former central bankers at Jackson Hole, we heard no angst over the selloff that took place after Powell's speech, but rather a sense that it was exactly what was needed to help tame prices.

State of play: Fed policy works in large part through shaping financial conditions, which means influencing the price of credit and availability of capital across the economy.

• That can be measured in a lot of ways, including through metrics like credit spreads — the premium riskier companies must pay to borrow — and whether banks are making it harder (or easier) to borrow money.
• But stock prices are the single most visible indicator of whether financial conditions are getting tighter (falling stocks) or looser (rising stocks).

Between the lines: Fed officials like to insist that they don't target stocks, which may be true in a narrow sense. But they are closely attuned to financial conditions overall, so the loosening since mid-June has been hardly welcome.

• It has reflected a growing view in markets that inflation is dissipating on its own, and that the Fed will halt rate increases and maybe even cut interest rates in the not-too-distant future.
• But ironically, the more markets price that type of future in, the less likely the Fed is to achieve the goal of bringing down inflation.

Loose financial conditions make it less likely that companies and individuals will pull back on their spending, helping to line up economic demand with supply.

One lesson of Fed communications in the last several weeks: If officials give any hint of an off-ramp from monetary tightening — something other than a major drop in inflation that prompts them to relent on rate hikes — markets will interpret it as a lack of resolve.

The bottom line: Expect the tough talk to continue, even if it saddens investors.

The Fed's best-case scenario is to slow demand by bringing down the level of job openings, without causing a big rise in unemployment. But current job openings are cutting against the central bank's strategic grain.

• July's labor market dynamics were remarkably similar to that of months past, according to this morning's JOLTS report. Job vacancies are historically high, layoffs are near an all-time low, and quits are still elevated.

Why it matters: The job market is extremely tight, despite the Fed's efforts to loosen it up. Labor-hungry employers continue to compete for a limited supply of workers.

By the numbers: There were 11.2 million job openings in July, slightly higher (+200,000) than June. Most sectors continued to post more jobs than they did in June — a sign of voracious demand for workers.

• Durable goods manufacturing was among the few industries with decreasing job openings, a possible byproduct of the demand slowdown for these products.
• There are about two open jobs for each unemployed worker, an unprecedented phenomenon (at least in this data set, which goes back to 2000).

The bottom line: The data is backward-looking, but it's the latest indication of the Fed's tough road ahead.