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Thanks for the question, Chair Powell. Edward Lawrence with Fox Business. So I want to focus back in on oil prices. We’re seeing oil prices, as you mentioned, move up, and that’s pushing the price of gas. So how does that factor into your decision to raise rates or not—because in the last two inflation reports, PCE and CPI, we’ve seen, the overall inflation has actually risen?
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EDWARD LAWRENCE
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"content": "Thanks for the question, Chair Powell. Edward Lawrence with Fox Business. So I want to focus back in on oil prices. We’re seeing oil prices, as you mentioned, move up, and that’s pushing the price of gas. So how does that factor into your decision to raise rates or not—because in the last two inflation reports, PCE and CPI, we’ve seen, the overall inflation has actually risen?",
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"content": "Right. So, you know, energy prices are very important for the consumer. This, this can affect consumer spending. It certainly can affect consumer sentiment. I mean, gas prices are one of the big things that, that affects consumer sentiment. It, it really comes down to how persistent—how sustained these energy prices are. The reason why we look at core inflation, which excludes food and energy, is that energy goes up and down like that. And it doesn’t—energy, energy prices mostly, mostly don’t contain much of a signal about how tight the economy is, and hence don’t tell you much about where inflation’s really going. However, we’re well aware, though, that, that, you know, if energy prices increase and stay high, that’ll have an effect on spending. And, and it may have an effect on, on consumer expectations of inflation—things like that. That’s just things we have to monitor.",
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"content": "On the consumer—they’re putting more and more of this on their credit card. The consumer is seeing, you know, record credit spending. How long do you think the consumer can manage that debt at higher interest rates now? And are you concerned about a, a debt bubble related to that?",
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"content": "So, to, to finish my prior thought, I was saying that’s why we tend to look through energy moves that we—that we can see as, as short-term volatility. You know, turning to consumer credit, you know—of course, we watch that carefully. Consumer distress— measures of distress among consumers were at historic lows quite recently, you know, after— during and after the, the pandemic. They’re now moving back up to normal. We’re, we’re watching that carefully. But, at this point, these, these readings are not at troublingly high levels. They’re, they’re just moving back up to what was the typical level in the pre-pandemic era.",
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Hi. Jean Yung with MNI Market News. Yields along the Treasury curve have risen to their highest in years. What is the Fed’s view about what’s been driving that increase in recent weeks, and how much of it can be attributed to macro explanations—and how much to technical factors?
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JEAN YUNG
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"content": "Hi. Jean Yung with MNI Market News. Yields along the Treasury curve have risen to their highest in years. What is the Fed’s view about what’s been driving that increase in recent weeks, and how much of it can be attributed to macro explanations—and how much to technical factors?",
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"content": "So you’re right. You know, rates have moved up significantly. I think it’s always hard to say precisely, but it’s—most, most people do a common decomposition of the increase, and they’ll, they’ll—the view will be, it’s not—it’s not mostly about inflation expectations. It’s mostly about other things, you know—either term premium or real yields— and it’s, it’s hard to be precise about this. Of course, everyone’s got models that’ll give you a very precise answer, but they give you different answers. So—but, essentially, they’re, they’re moving up because—it’s not because of inflation. It’s because probably—it’ll probably have something to do with stronger growth, I would say—more, more supply of Treasuries. You know, the common explanations that you hear in the markets make sense.",
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Kyle Campbell, American Banker. Thank you for taking the questions—just two on, on housing. You’ve said slower shelter cost growth is in the pipeline and will reflect in inflation readings as new leases are signed, but there’s also some questions out there about the way housing costs are measured, particularly the use of rental equivalents, which are estimates from homeowners about what their homes would rent for if they were in the rental market. So my question is, how much of the effort to tame inflation, both as it’s measured and felt by the broader public, hinges on housing supply? And then as far as a constrained housing supply being exacerbated by this lock-in effect of mortgages being higher now than they were at their recent historic lows, how is that going to impact future thinking about taking interest rates to that lower bound in the future?
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KYLE CAMPBELL
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"content": "Kyle Campbell, American Banker. Thank you for taking the questions—just two on, on housing. You’ve said slower shelter cost growth is in the pipeline and will reflect in inflation readings as new leases are signed, but there’s also some questions out there about the way housing costs are measured, particularly the use of rental equivalents, which are estimates from homeowners about what their homes would rent for if they were in the rental market. So my question is, how much of the effort to tame inflation, both as it’s measured and felt by the broader public, hinges on housing supply? And then as far as a constrained housing supply being exacerbated by this lock-in effect of mortgages being higher now than they were at their recent historic lows, how is that going to impact future thinking about taking interest rates to that lower bound in the future?",
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"content": "So on the supply point—of course, supply is very important over time in, in setting house prices and, and, for that matter, rents. And so—and supply is structurally constrained. But in terms of, of where inflation’s going in the near term, though, as, as you obviously know, a lot of it is, is leases that are running off and then being re-signed or re- leased at a level that’s, that’s not as—it won’t be that much higher. A year ago, it would have been much higher than it was a year before; now it may be below or at the same level. So as those leases are rolling over, we’re, we’re seeing what we expect, which is measured housing services inflation coming down. Your second question was the lock-ins. How much is that affecting things, really?",
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"content": "Is that going to affect your decisions to potentially bring rates down to their lower bound in the future, creating that bubble of buying and then a lock-in that sort of stagnates the housing market?",
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"content": "I, I think we look at the—I would look at the lock-in, the, the idea being that people are in, in very low mortgage—very low-rate mortgages, and if—even if they want to move now, they—it would be hard because the new mortgage would be so expensive. And that’s explaining some of the—that’s one of the explanations for what’s happening broadly in the labor market. Would that play a role in, in our future decisions—in a—in a future tight— in a future loosening cycle about whether we would cut rates? No, I, I don’t think it would. I mean, I don’t think that’s—I, I think we’d be looking at, what, you know, fundamentally, what, what rates does the economy need? And, and, you know, in, in an emergency like the pandemic or during the Global Financial Crisis, you, you know, the, the—you have to cut rates to the point that—you have to do, do what you can to support the economy. So I wouldn’t—I wouldn’t think would be a reason for us not to do that. It’s not something we’re thinking about at all right now. But, down the road, I wouldn’t think so.",
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-GENZER. Hi. Nancy Marshall-Genzer with Marketplace. Chair Powell, you’ve mentioned several things that would possibly weigh on consumer confidence, maybe cut back consumer spending—possible government shutdown, high gas prices. At this point, would the Fed welcome a decrease in consumer spending? Would that help you get inflation closer to your 2 percent target?
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NANCY MARSHALL
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[
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"content": "-GENZER. Hi. Nancy Marshall-Genzer with Marketplace. Chair Powell, you’ve mentioned several things that would possibly weigh on consumer confidence, maybe cut back consumer spending—possible government shutdown, high gas prices. At this point, would the Fed welcome a decrease in consumer spending? Would that help you get inflation closer to your 2 percent target?",
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"content": "I, I wouldn’t say it that way. We’re not looking for a decrease in consumer spending. It’s, it’s a good thing that the economy’s strong. It’s a good thing that the economy has been able to hold up under, under the tightening that we’ve done. It’s a good thing that the labor market’s strong. The, the only concern—it, it just means this: If the economy comes in stronger than expected, that just means we’ll have to do more in terms of monetary policy to get back to 2 percent—because we will get back to 2 percent. Does that answer your question?",
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"content": "-GENZER. Yeah. And I guess, on the other hand, would you worry could contribute to an economic slowdown or even a recession?",
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"content": "Well, that’s always a concern. I mean, concern number one is, is restoring price stability, because in the long run, that’s, that’s something we have to do so that we can have the economy we really want, which is one with sustained period of tight labor market conditions that benefit all, as I—as I’ve said a couple times. So that, that said—of course, you know—we, we also now, given how far we’ve come with our rate hikes and how quickly we’ve come here, we do have the ability to be careful as we move forward because of that consideration.",
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Thank you, Chair Powell. Simon Rabinovitch with the Economist. One of the factors in the economic resilience to date appears to be a lesser degree of rate sensitivity than in the past. Obviously, we’ve talked about households with long fixed-rate mortgages—also companies that refinanced before last year. What is your thinking about the efficacy of rates and how that’s changed? And then, related to that, how do you think about the distributional consequences in the sense that if you’re a relatively wealthy household with a long fixed-rate mortgage, the past year has not been all that tough with rates going up, whereas if you’re relying on your credit card for supporting your consumption, in fact, times are getting a lot tougher a lot more quickly? Thanks.
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SIMON RABINOVITCH
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"content": "Thank you, Chair Powell. Simon Rabinovitch with the Economist. One of the factors in the economic resilience to date appears to be a lesser degree of rate sensitivity than in the past. Obviously, we’ve talked about households with long fixed-rate mortgages—also companies that refinanced before last year. What is your thinking about the efficacy of rates and how that’s changed? And then, related to that, how do you think about the distributional consequences in the sense that if you’re a relatively wealthy household with a long fixed-rate mortgage, the past year has not been all that tough with rates going up, whereas if you’re relying on your credit card for supporting your consumption, in fact, times are getting a lot tougher a lot more quickly? Thanks.",
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"content": "So, what—I guess it’s fair—it’s fair to say that the economy has been stronger than many expected, given, given what’s been happening with, with interest rates. Why is that? Many candidate explanations—possibly—a number of them make sense. One, one is just that household balance sheets and business balance sheets have been stronger than we had understood, and so that, that spending has held up—and that thing. We’re not sure about that. The savings rate for consumers has come down a lot. The question is whether that’s sustainable. That could—it could just mean that the—that the date of effect is, is later. It could also be that for other reasons, the neutral rate of interest is, is higher for—for various reasons. We don’t know that. It could also just be that policy hasn’t been restrictive enough for long enough. And it’s—there are many candidate explanations. We have to, in, in all this uncertainty, make policy, and I, you know, I feel like what we have right now is what’s still a very strong labor market—but that’s coming back into balance. We were making progress on inflation. Growth is strong. But I think by many forecasts—many, many, many forecasts call for growth to, to moderate over the course of the next year. So that’s where we are, and, you know, we have to—we have to deal with what comes. On your second question, which was— sorry, your second question was distributional, but can you—can you be a little clearer about that?",
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"content": "Yeah. My point there was that if you’re somebody who has a long fixed-rate mortgage, you’ve been able to endure the higher rates relatively easily. If you’re somebody who’s living month to month off of your credit card, current financing rates are, are punitive.",
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"content": "Yes. And so the point I would make there is that we’re trying to get inflation back down. The people who are most hurt by inflation are the people who are on a fixed income. If you’re a person who spends all of your income, you don’t really have any meaningful savings. You spend all your income on the basics of life—clothing, food, transportation, heating—the basics—and prices go up by 5, 6, 7 percent, you’re in trouble right away, whereas even, even middle-class people have some savings and some ability to absorb that. So it is for those people as much as for anybody that we need to restore price stability, and, and we, we want to do it as quickly as possible. Obviously, we—we’d like to do that. We’d like the current trend to continue, which is that we’re making progress without seeing the increase in unemployment that we’ve seen past—in past things. But you’re right, though. When we raise rates, people who are, you know, living on credit cards and, and borrowing are going to feel that more. They are. And, of course, people with, with lots of savings also have a—have a much lower marginal propensity to consume, and so they’re not going to—it’s not going to affect them as much.",
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Thank you, Chair Powell. Greg Robb from MarketWatch. In the Beige Book recently, you can tell that the Fed has been surveying nonprofits and community groups about the economic health of low-income Americans—moderate-income Americans. I have two questions about this. Are you going to use that data to maybe come up with like a quarterly survey of those groups—like the senior loan officer survey? And from your—and also the second question is, from your recent look—readings of these surveys, how are low and moderate Americans doing? Is there this thing where, like, the GDP is strong because of wealthy Americans driving things? I just want to get your sense of the health of that sector. Thank you.
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GREG ROBB
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"content": "Thank you, Chair Powell. Greg Robb from MarketWatch. In the Beige Book recently, you can tell that the Fed has been surveying nonprofits and community groups about the economic health of low-income Americans—moderate-income Americans. I have two questions about this. Are you going to use that data to maybe come up with like a quarterly survey of those groups—like the senior loan officer survey? And from your—and also the second question is, from your recent look—readings of these surveys, how are low and moderate Americans doing? Is there this thing where, like, the GDP is strong because of wealthy Americans driving things? I just want to get your sense of the health of that sector. Thank you.",
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"content": "So I, I don’t know about the quarterly survey. That’s an idea we can—we can take away and think about. In terms of how low and moderate Americans—you know, they’re clearly—were suffering from, from high inflation. I think during the pandemic, the, the government transfers that happened were very meaningful. And, you know, if the—the surveys that we take showed that—showed that low- and moderate-income people were actually in very, very strong financial condition. I think now it’s a very “hot” labor market, and you’re seeing high growth in nominal wages, and you’re starting to see that growth rates of real wages are now positive by most—by most measures. So I, I think, overall, households are in good shape. Surveys are a different thing. So surveys are showing dissatisfaction, and I think a lot of that is just, people hate inflation—hate it. And that, that causes people to say, “The economy’s terrible.” But, at the same time, they’re spending money. Their behavior is, is not exactly what you would expect from the surveys. That’s a, a guess at what the answer might be. But I, I think there’s a lot of good things happening on household balance sheets—and, certainly, in the labor market and with wages. The biggest wage increases having gone to relatively low- wage jobs—and now with inflation coming down—you’re seeing increases in real wages, which is a good thing. Thanks very much.",
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Thank you, Michelle. And thank you, Chair Powell, for taking our questions. When it comes to the taper and, eventually, to any rate increases, I’m wondering if you can walk us through what “substantial further progress” looks like, given the latest batch of projections that have PCE inflation coming in a little higher than the June projection, the unemployment rate also being higher than June, as well as the change to GDP lower than June. If you could help us make sense of all those things as you sort through what “substantial further progress” looks like, that would be great.
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RACHEL SIEGEL
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"content": "Thank you, Michelle. And thank you, Chair Powell, for taking our questions. When it comes to the taper and, eventually, to any rate increases, I’m wondering if you can walk us through what “substantial further progress” looks like, given the latest batch of projections that have PCE inflation coming in a little higher than the June projection, the unemployment rate also being higher than June, as well as the change to GDP lower than June. If you could help us make sense of all those things as you sort through what “substantial further progress” looks like, that would be great.",
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"content": "Sure. So the test for beginning our taper is that we’ve achieved substantial further progress toward our goals of 2 percent inflation and maximum employment. And for inflation, we appear to have achieved more than significant progress—substantial further progress. So that part of the test is achieved, in my view and in the view of many others. So the question is really on the maximum-employment test. So if you look at a good number of indicators, you will see that, since last December, when we articulated the test, and the readings today, in many cases more than half of the distance, for example, between the unemployment rate in December of 2020 and typical estimates of the natural rate—50 or 60 percent of that road has been traveled. So that could be substantial further progress. Many on the Committee feel that the “substantial further progress” test for employment has been met. Others feel that it’s close, but they want to see a little more progress. There’s a range of perspectives. I guess my own view would be that the test—the “substantial further progress” test for employment is all but met. And so, once we’ve met those two tests, once the Committee decides that they’ve met them—and that could come as soon as the next meeting; that’s the purpose of that language, is to put notice out could come as soon as the next meeting. The Committee will consider that test, and we’ll also look at the broader environment at that time and make a decision whether to taper.",
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Thanks, Chair Powell. Thanks, Michelle. So, looking at the SEPs, we got now basically four years of inflation above target, and policy never gets to the long-run rate. I’m wondering if you could address that from two perspectives: one, within the new framework that the Fed adopted last year and, second, from the perspective of the average household that’s now being asked to pay higher prices and increasingly higher prices for four years running when, for some this year, real wages have actually gone down.
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HOWARD SCHNEIDER
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"content": "Thanks, Chair Powell. Thanks, Michelle. So, looking at the SEPs, we got now basically four years of inflation above target, and policy never gets to the long-run rate. I’m wondering if you could address that from two perspectives: one, within the new framework that the Fed adopted last year and, second, from the perspective of the average household that’s now being asked to pay higher prices and increasingly higher prices for four years running when, for some this year, real wages have actually gone down.",
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"content": "Sure. So, as you can see, the inflation forecasts have moved up a bit in the outyears. And that’s really, I think, a reflection of—and they’ve moved up significantly for this year. And that’s, I think, a reflection of the fact that the bottlenecks and shortages that are being—that we’re seeing in the economy have really not begun to abate in a meaningful way yet. So those seem to be going to be with us at least for a few more months and perhaps into next year. So that suggests that inflation’s going to be higher this year, and a number—I guess the inflation rates for next year and 2023 were also marked up, but just by a couple of tenths. Why—those are very modest overshoots. You’re looking at 2.2 and 2.1, you know, two years and three years out. These are very, very—I don’t think that households are going to, you know, notice a couple of tenths of an overshoot. That just happens to be people’s forecasts. You know, we want to foster a strong labor market, and we want to foster inflation averaging 2 percent over time, and I think we’re very much on track to achieve those things. In terms of the framework, I see this as very consistent with the framework. We want inflation expectations to be anchored at around 2 percent. We want, we’re—that’s really the ultimate test of whether we’re getting this done under the framework. And, you know, we do want inflation to run moderately above 2 percent. I wouldn’t put too much on a couple of tenths over 2 percent in 2023 and ’24—one-tenth in ’24. But you’re right, those are the numbers.",
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Chair Powell—thank you, Michelle. Chair Powell, you mentioned ongoing discussions about the tapering timeline, and I’m wondering what the contours of that debate have been. For those that want to move a bit more quickly, is it about maintaining optionality for a 2022 interest rate increase? Or is it about financial stability risks? Or concerns about the efficacy of asset purchases at a time when we have supply constraints? Thank you.
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COLBY SMITH
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"content": "Chair Powell—thank you, Michelle. Chair Powell, you mentioned ongoing discussions about the tapering timeline, and I’m wondering what the contours of that debate have been. For those that want to move a bit more quickly, is it about maintaining optionality for a 2022 interest rate increase? Or is it about financial stability risks? Or concerns about the efficacy of asset purchases at a time when we have supply constraints? Thank you.",
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"content": "So let me say that there’s very broad support on the Committee for this plan, both as to the timing and as to the pace of the taper. So this was a unanimous vote today, and I’d say quite broad support for this approach. You’re correct that there are some who would prefer to have gone sooner, and they’ve made their arguments publicly. For some of them, it’s a financial stability concern. And for others, it’s other concerns. They can make their own arguments. This is an approach that the Committee will broadly support, and it will put us having completed our taper sometime around the middle of next year, which seems appropriate. You know, the asset purchases, as I mentioned, were very, very important at the—in the early stages of the crisis. They were essential in restoring market function in the Treasury and other markets. Then, as the recovery got going, they supported aggregate demand, as they will do. And now we’re in a situation where they still have a use, but it’s time for us to begin to taper them. Their usefulness is much less as a tool than it was at the very beginning. And, of course, this leaves the whole question of rate increases ahead, which is really where the framework—the framework is all about how we deal with rate increases and that thing. So we think this is the appropriate way to go. And, again, broad support on the Committee.",
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Hi, Nick Timiraos of the Wall Street Journal. Chair Powell, you have said the test for liftoff is more stringent than the test for tapering. But if the near-term projections today are credible, more of your colleagues seem to think that rate liftoff, and not just a taper, may be closer at hand. Does the Committee have a different opinion than you do about the threshold for liftoff that you’ve articulated? Or do they believe that either inflation or economic growth will necessitate a rate increase sooner than you do?
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NICK TIMIRAOS
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"content": "Hi, Nick Timiraos of the Wall Street Journal. Chair Powell, you have said the test for liftoff is more stringent than the test for tapering. But if the near-term projections today are credible, more of your colleagues seem to think that rate liftoff, and not just a taper, may be closer at hand. Does the Committee have a different opinion than you do about the threshold for liftoff that you’ve articulated? Or do they believe that either inflation or economic growth will necessitate a rate increase sooner than you do?",
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"content": "Well, so, again, substantial further progress toward our goals is the test for beginning the taper. And the taper takes some months in everyone’s figuring. So you’re going to be well away from satisfying the liftoff test when we begin the taper. So in terms of the liftoff test, though, you know, it’s what we adopted last September. It’s labor market conditions consistent with maximum employment. And while we have interesting signs that, in many ways, the labor market’s very tight, we also have lots of slack in the labor market, and we think that those imbalances will sort themself out. Inflation at 2 percent and on track to achieve it, moderately higher inflation over 2 percent—you know, that really depends on the path of inflation. If inflation remains higher during the course of 2022, then we may already have met that test by the time we reach liftoff. So I just think, if you look at what people are writing down for year-end 2022 numbers, some people are writing down very low unemployment rates. And that’s only one indicator, but it suggests a very strong labor market. And I think they’re writing down in good faith what they see as meeting the test. There’s a range of perspectives about where the economy will be, but— by the way, all but one participants have us lifting off during 2023. So it’s not really an unusually wide array of views about this.",
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Hey, Chair Powell—thank you for taking our questions. Prior to recent media reports, were you aware of the security buying and selling that Presidents Kaplan and Rosengren were participating in last year? And I wonder if you thought those were appropriate.
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JEANNA SMIALEK
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"content": "Hey, Chair Powell—thank you for taking our questions. Prior to recent media reports, were you aware of the security buying and selling that Presidents Kaplan and Rosengren were participating in last year? And I wonder if you thought those were appropriate.",
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"content": "So, no, I was not aware of the specifics of what they were doing. So let me just say a couple things about this subject. We understand very well that the trust of the American people is essential for us to effectively carry out our mission. And that’s why I directed the Fed to begin a comprehensive review of the ethics rules around permissible financial holdings and activity by Fed officials. So those rules are, in many respects, the same as those for government agencies, plus a number of things that apply specifically to us because of our business. One of those is—sort of, three things I would point to in terms of specific restrictures. One is, ownership of certain assets is not allowed, and that’s bank securities and other things. Secondly, there are times when we’re not allowed to trade at all or to, you know, buy and sell financial assets. And that’s the period immediately before and during an FOMC meeting. And, third, there’s regular disclosure. So all of these—everyone’s, you know, ownership and activities are all disclosed on an annual basis. So, you know, I would have had to go back and read people’s financial disclosures to know what their activities have been. This has been our framework for a long time, and I guess you’d say it’s served us well. The other thing you would say—that it is now clearly seen as not adequate to the task of really sustaining the public’s trust in us. We need to make changes, and we’re going to do that as a consequence of this. This will be a thoroughgoing and comprehensive review. We’re going to gather all the facts and look at ways to further tighten our rules and standards.",
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Thank you. Thank you, Mr. Chairman. I want to follow up on Jeanna’s question, the issue of ownership of these stocks and trades. Do you think it’s appropriate for Federal Reserve officials to be owning the same assets that the Federal Reserve is buying? Is that one of the modifications that you’re looking at? And in that these—you said yourself, they’re clearly not seen as appropriate. In that the Fed’s code of conduct says Fed officials should avoid even the appearance of the, of conflict, do those trades, in fact—and holdings—violate the Fed’s code of conduct? Finally, do you have a timeline as to when you might get—be done with your review? Thank you, sir.
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STEVE LIESMAN
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"content": "Thank you. Thank you, Mr. Chairman. I want to follow up on Jeanna’s question, the issue of ownership of these stocks and trades. Do you think it’s appropriate for Federal Reserve officials to be owning the same assets that the Federal Reserve is buying? Is that one of the modifications that you’re looking at? And in that these—you said yourself, they’re clearly not seen as appropriate. In that the Fed’s code of conduct says Fed officials should avoid even the appearance of the, of conflict, do those trades, in fact—and holdings—violate the Fed’s code of conduct? Finally, do you have a timeline as to when you might get—be done with your review? Thank you, sir.",
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"content": "Don’t have a timeline yet; we can start with that. So, well, let me address the muni question, since that’s in there. You know, I personally owned municipal securities for many, many years, and in 2019, I froze that. Meaning I—they’re no—I’m holding all those securities, my wife and I, to maturity. And munis were always thought to be a pretty safe place for a Fed person to invest because, as you know, the lore was that the Fed would never buy municipal securities. So it was not an uncommon thing. And so then comes the, you know, the COVID crisis, and I reversed that policy, and I did it without hesitating. And the reason was that the financial markets, including the municipal financial market, were very much on the verge of collapse. And it was time to go, and we did. But we also checked with the Office of Government Ethics and—who looked carefully at it and said that I didn’t have a conflict. So that’s one answer that I wanted to share with you. Secondly, you’re right, though, as—we’re going to be looking at all those things. I don’t want to get ahead of the process here and speculate about particular outcomes. But this, again, comprehensive and deliberate process—we’re going to make changes. I want to be able to look back on this years from now and know that we rose to meet this challenge and handled the situation well, and that what we did made a lot of sense and protected the public’s interest and the institution that we’re all a part of.",
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"content": "I’m sorry, Chair Powell—I just want to follow up. You said I was right. When you said “right,” about that the Feds should not own—Federal Reserve officials should not own the same assets they’re buying? Is that—",
"role": "user"
},
{
"content": "I think that’s a reasonable thing. Yeah, and, of course, for the most part, we don’t. I mean, it was a real coincidence; I happened to pre-own these munis. They were bought many years ago, actually. And so we started buying munis as part of the Municipal Liquidity Facility. So it was really not a—it just was an unforeseen event. And I couldn’t sell them, so what I did was, I just held them, checked with the ethics people, and went ahead. So, but as a general principle, yeah, that makes a lot of sense.",
"role": "assistant"
}
] |
Thank you. Thank you. Thank you, Chair Powell. Wider question about jobs and the Fed’s schedule—the Fed’s policy framework that you laid out here. You and other Fed officials have often talked about expecting a job market pickup in September as more children return to school, freeing up more parents to work, COVID abating. You mentioned in the past the extra unemployment benefits expiring. There’s some real-time data suggesting that we may not be seeing much of a return of labor supply. So do you still expect to see that in the next couple of jobs reports? And how would a relatively weak jobs report in September affect your plans? Thank you.
|
CHRIS RUGABER
|
[
{
"content": "Thank you. Thank you. Thank you, Chair Powell. Wider question about jobs and the Fed’s schedule—the Fed’s policy framework that you laid out here. You and other Fed officials have often talked about expecting a job market pickup in September as more children return to school, freeing up more parents to work, COVID abating. You mentioned in the past the extra unemployment benefits expiring. There’s some real-time data suggesting that we may not be seeing much of a return of labor supply. So do you still expect to see that in the next couple of jobs reports? And how would a relatively weak jobs report in September affect your plans? Thank you.",
"role": "user"
},
{
"content": "So, you’re right, we have a—really, I’ll call it a unique situation where, by many measures, the labor market is tight. And 11 million job openings, very widespread reports from employers all over the economy saying it’s quite difficult to hire people, wages moving up, and that kind—so, quite a tight labor market. So our view, I think— widespread view a few months ago was that several things were coming together in the fall, including kids back to school, which would, you know, which would lighten caregiving duties, including the expiration of unemployment—extra unemployment benefits, and other things would come together to provide an increase in labor supply, and so we’d get out of this strange world where there’re lots of unemployed people and a high unemployment rate but a labor shortage. And so what happened was, Delta happened. And you had this very sharp spike in Delta cases. And I think, so that affects—for example, when schools are open 60 percent of the time or when they’re always at a threat of being closed because of Delta, the Delta variant, you know, you might want to wait. Rather than going ahead and taking a job and starting work only to have to quit it three weeks later, you’re going to wait until you’re confident of that. So some of that may not have happened. Also, people didn’t, you know—as you know, hiring and spending in these face-to-face service industries, travel and leisure, it just stopped during those months. So we—so that—really, the big shortfall in labor, in jobs, was largely in travel and leisure, and that’s because of—clearly because of Delta. So that all happened. And so what we—we know things that didn’t happen. I think there’s still—it may just be that it’s going to take more time. But it still seems that, inexorably, people will—these are people who were largely working back in February of 2020. They’ll get back to work when it’s time to do that. It just may take a longer time. You’re right, though—it didn’t happen with any force in September, and a lot of that was Delta. In terms of the—you asked also about the test for November. I think if the economy continues to progress broadly in line with expectations, then I think—and also the overall situation is appropriate for this, then I think we could easily move ahead at the next meeting. Or not, depending on whether we feel like that, those tests are met.",
"role": "assistant"
},
{
"content": "Well, just a quick—if I could just quickly follow up, I mean, what, how much of that will depend on what jobs report we get for September? And, I mean, is it, you know, are you in a data-dependent phase here where you need to see certain numbers going ahead? Or are we at a point where you’ve accumulated enough progress that—",
"role": "user"
},
{
"content": "So it is, it’s accumulated progress. So, you know, for me, it wouldn’t take a knockout, great, super strong employment report. It would take a reasonably good employment report for me to feel like that test is met. And others on the Committee—many on the Committee feel that the test is already met. Others want to see more progress. And, you know, we’ll work it out as we go. But I would say that, in my own thinking, the test is all but met. So I don’t personally need to see a very strong employment report, but I’d like to see a good—a decent employment report. I mean, it’s not, it’s, again, it’s not to be confused with the test for liftoff, which is so much higher.",
"role": "assistant"
}
] |
Hi, Chair Powell. So I wanted to ask about the Vice Chair of Supervision position and just—I was wondering if you could speak about how you view that role and the extent to which you defer to that person on regulatory policy. And then, just a related question: As you know, Randy Quarles’s vice chairmanship ends next month, and I was wondering if he’s going to retain the supervisory portfolio until he’s replaced in that role.
|
VICTORIA GUIDA
|
[
{
"content": "Hi, Chair Powell. So I wanted to ask about the Vice Chair of Supervision position and just—I was wondering if you could speak about how you view that role and the extent to which you defer to that person on regulatory policy. And then, just a related question: As you know, Randy Quarles’s vice chairmanship ends next month, and I was wondering if he’s going to retain the supervisory portfolio until he’s replaced in that role.",
"role": "user"
},
{
"content": "Sure. So Dodd-Frank created this position, Vice Chair for Supervision, and it’s, there’s actually a specific assignment in the Dodd-Frank language, as I’m sure you know. And, effectively, what it means is that the Vice Chair for Supervision is charged with setting the regulatory agenda. And, you know, it’s a specific grant of authority. And in the 10 years, almost, that I’ve been at the Fed, that person has really done that. Dan Tarullo certainly did it, and Vice Chair Quarles did it as well. And I would, I think—I respect that authority. I respect ’s the person who will set the regulatory agenda going forward, and I would accept that. And, furthermore, you know, it’s fully appropriate to look at—for a new person to come in and look at the current state of regulation and supervision and suggest appropriate changes, and I welcome that. In terms of Vice Chair Quarles’s term, we’re not currently in that situation, and I actually don’t have any updates for you on that today. We’ll keep you posted on that.",
"role": "assistant"
}
] |
Thank you. Chair Powell, I wanted to ask about the inclusive monetary policy framework. In particular, Bloomberg surveyed economists, and we found that they predict liftoff will happen when the U.S. unemployment rate is 3.8 percent but the Black unemployment rate is 6.1 percent. And I’m wondering if a 6.1 percent unemployment rate for African Americans is consistent with full employment or whether it would need to be lower as part of your inclusive growth strategy.
|
STEVE MATTHEWS
|
[
{
"content": "Thank you. Chair Powell, I wanted to ask about the inclusive monetary policy framework. In particular, Bloomberg surveyed economists, and we found that they predict liftoff will happen when the U.S. unemployment rate is 3.8 percent but the Black unemployment rate is 6.1 percent. And I’m wondering if a 6.1 percent unemployment rate for African Americans is consistent with full employment or whether it would need to be lower as part of your inclusive growth strategy.",
"role": "user"
},
{
"content": "Right, so the point of the broad and inclusive goal was not to target a particular unemployment rate for any particular group. Really, we look at a broad range of—a very broad range of metrics when we think about what maximum employment is. And one of the things we look at is unemployment rates and participation rates and wages for different demographic and age groups and that thing. So we will do all of that. So I think if you look back, what were we really thinking? So we all saw the benefits of a strong labor market. If you look at the last two or three years of, before the pandemic hit, you saw—after a lot of long progress, you saw a really strong labor market. And you saw wages at the low end moving up faster than everywhere else—something that’s great to see. We also saw the lowest unemployment rates for minorities of various, you know, for African Americans, for example, and also participation rates. We saw a really, really healthy set of dynamics. And, by the way, we also—there was no reason why it couldn’t continue. There were no imbalances in the economy, and then along came the pandemic. We were not—there was nothing in the economy that looked like a buildup of imbalances that could cause a recession. So I was very much thinking that the country would really benefit from a few more years of this. It would have been—so we’re all quite eager to get back to that. We also said we wouldn’t raise rates just in response to very low unemployment, in the absence of inflation. So that was another aspect of it, because we saw really benefited labor market participants in a broad and inclusive way. That’s, of course, not the current situation. We have significant slack in the economy and inflation well above target, not moderately above target. So that’s, really, how we think about it. It isn’t really just targeting the headline numbers, but it’s about taking all of those things into account in your thinking about what constitutes maximum employment.",
"role": "assistant"
},
{
"content": "Just to follow up, should there be a significant gap between Black unemployment and overall unemployment for structural reasons that are outside of the control of the Fed that other people should be doing something about? Or should that be— should the gap be narrowed, if not down to zero?",
"role": "user"
},
{
"content": "Well, you really—I mean, first of all, ideally, there wouldn’t be any gap, of course. We would all love to see no such gap. This is a persistent gap, and it’s very hard to explain based on typical metrics. It’s just, it’s quite troubling, but it really is—you know, we have, you know, famously broad and blunt tools. I think eliminating inequality and racial discrimination and racial disparities and that thing is really something that fiscal policy and other policies—frankly, education policies and that thing—are better at focusing on. I think we’ve identified the part that we can do, and we’ll do that part. But I’ve always been clear that it’s going to take policies broadly across society to work on these problems.",
"role": "assistant"
}
] |
—a plan for dealing with a debt default that included prioritization, that included changes in bank regulations and possibly selling defaulted—or, nondefaulted Treasuries and buying those who are—that are. Are any or all of those still on the table? Do you think any of those would work? And what would happen to the economy, in your view, should the debt ceiling not be raised?
|
MICHAEL MCKEE
|
[
{
"content": "—a plan for dealing with a debt default that included prioritization, that included changes in bank regulations and possibly selling defaulted—or, nondefaulted Treasuries and buying those who are—that are. Are any or all of those still on the table? Do you think any of those would work? And what would happen to the economy, in your view, should the debt ceiling not be raised?",
"role": "user"
},
{
"content": "So, I missed the first few words, but I think I got your question. So it’s just very important that the debt ceiling be raised in a timely fashion so that the United States can pay its bills when and as they come due. That’s a critically important thing. The failure to do that is something that could result in severe reactions, severe damage to the economy and to the financial markets. And it’s just not something that we could contemplate, that we should contemplate. I’m not going to comment on particular tactics or things like that. I’m just going to say that I think we can all agree that the United States shouldn’t default on any of its obligations—should pay them when and as due. And that, you know, no one should assume that the Fed or anyone else can protect the markets or the economy in the event of a failure—fully protect in the event of a failure to, you know, to make sure that we do pay those debts when they’re due.",
"role": "assistant"
},
{
"content": "Good. If I could follow up, have you discussed options with members of Congress?",
"role": "user"
},
{
"content": "You know, I don’t generally ever talk about the conversations I have with elected officials or other appointed officials. But, look, you can see that this is a major focus among those who have responsibility for it, and—including elected people.",
"role": "assistant"
}
] |
Hi—thanks so much. Senator Warren sent you a letter last week urging the Fed to break up Wells Fargo, citing what she called “ungovernable behavior” from the bank. I’m just curious, under what circumstances would the Fed actually consider revoking a financial holding company’s license? And if the indiscretions at Wells Fargo, in your opinion, warrant such an action?
|
HANNAH LANG
|
[
{
"content": "Hi—thanks so much. Senator Warren sent you a letter last week urging the Fed to break up Wells Fargo, citing what she called “ungovernable behavior” from the bank. I’m just curious, under what circumstances would the Fed actually consider revoking a financial holding company’s license? And if the indiscretions at Wells Fargo, in your opinion, warrant such an action?",
"role": "user"
},
{
"content": "So we’re, of course, very closely monitoring Wells Fargo’s efforts to fix its widespread and pervasive problems. They represent a serious matter to us, and the firm is required to remediate them. And we will take appropriate supervisory action if the firm fails to meet our expectation. We continue to hold the firm accountable for its deficiencies with an unprecedented asset cap that will stay in place until the firm has comprehensively fixed its problems. And we’re not going to remove that asset cap until that’s done. So bottom line is, we’ll take strong supervisory action if a firm is engaging in unsafe and unsound practices or violating laws. But I can’t speak to our confidential supervisory assessments of any individual bank.",
"role": "assistant"
}
] |
Thank you for taking my question. You noted earlier in the press conference that you weren’t aware of the trading activity of the Boston and Dallas Fed Bank presidents. As you know, those, all 12 regional Fed Bank presidents just went through the renomination process earlier this year. And Governor Brainard described it as a rigorous process at the time. So I want to know, did anybody know—did anybody at the Board level know about the stock trading activity? And, going forward, do you still have confidence in the Dallas and Boston Fed Bank presidents to do their job?
|
MICHAEL DERBY
|
[
{
"content": "Thank you for taking my question. You noted earlier in the press conference that you weren’t aware of the trading activity of the Boston and Dallas Fed Bank presidents. As you know, those, all 12 regional Fed Bank presidents just went through the renomination process earlier this year. And Governor Brainard described it as a rigorous process at the time. So I want to know, did anybody know—did anybody at the Board level know about the stock trading activity? And, going forward, do you still have confidence in the Dallas and Boston Fed Bank presidents to do their job?",
"role": "user"
},
{
"content": "So these, I don’t need to tell you, we file, people file these reports annually. And I think they were just quite recently filed for 2020. So I don’t have any reason to think people at the Board would have known about particular trading that’s going on. They will see that—there are people at the Fed who see the, you know, see the trading reports when they’re, you know, when they’re annually filed. You know, in terms of having confidence and that thing, I think no one is happy, no one on the FOMC is happy to be in this situation, to be having these questions raised. It’s something we take very, very seriously. This is an important moment for the Fed, and I’m determined that we will rise to the moment and handle it in ways that will stand up over time. I’m very reluctant to get ahead of the process and speculate, though, about different things. And, you know, when we have things to announce, we’ll go ahead and do that, but that’s really what I have for today.",
"role": "assistant"
},
{
"content": "One small follow-up. I mean, I know that you didn’t have the 2020 forms in hand, but you would have had past-year forms in hand. And at least in the case of, like, the Dallas disclosure forms, similar trading activity was shown in years past. So that, in theory, could have been something that came up in the renomination process.",
"role": "user"
},
{
"content": "So that’s, yeah, that’s a good question. So, you know, the five-year review that we do under this unusual provision of law where all of the Reserve Bank presidents are reviewed for reappointment at the same time every five years, that is really a broad review about their leadership of the institution, their performance on the FOMC, all of those things. And if there were a concern—a public concern or a private concern—about something that someone had done, we wouldn’t wait for the five-year. We wouldn’t wait that day if there were concerns. You’re right, though, these—as I mentioned, we have had a framework for a long time, and it’s similar to what other government agencies have, only it’s a little stricter. And it is that you can trade financial instruments, but not specific ones like bank debt. You can’t trade during the FOMC period and during the meeting—the blackout period and then during the meeting. And then you disclose all this, and we have disclosed it for years. So all of these things have been going—to the extent they’ve been going on, they’ve been a matter of public record. And, you know—but, nonetheless—so that—you know, it was seeming to work just okay. And now you look at it, and you see this, and you think, “We need to do better.” And we will. But you’re right, but it has not been part of the process. And, appropriately, I don’t think it should have been. I mean, I wouldn’t blame the people who conduct that review. I really think, if someone had raised concerns or if we’d had concerns, then it would have been, but it wouldn’t have been part of that process. It would have been raised instantly, rather than once every five years.",
"role": "assistant"
}
] |
Thank you, Michelle. Chair Powell, I wanted to ask about how the Fed would balance the two parts of its dual mandate if inflation stays elevated but we still have a labor shortage and participation remains lower than ideal. Would you hold off on raising rates? Or how would you think about that? Thank you.
|
JEAN YUNG
|
[
{
"content": "Thank you, Michelle. Chair Powell, I wanted to ask about how the Fed would balance the two parts of its dual mandate if inflation stays elevated but we still have a labor shortage and participation remains lower than ideal. Would you hold off on raising rates? Or how would you think about that? Thank you.",
"role": "user"
},
{
"content": "Well, let me say one thing. You’re looking for conditions consistent with maximum employment to lift off, and those conditions can change over time. So you’re not necessarily bound by a particular level of the unemployment rate or the participation rate or anything else like that, which can change over time. But more to your point, really, we actually have a paragraph in our framework, and something like this has been there for a long time. It’s, I think it’s paragraph six. And you’re talking about a situation in which the two goals are not complementary; they’re somehow in tension. And if we judge that’s effect—that is the case, what it says is, we take into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the mandate. So, we used to call that the balanced-approach paragraph because it had those words. So it’s a very difficult situation for any central bank to be—pardon me—to be in a situation where the two goals are in tension. And that paragraph tries to address it by saying we would weigh the equities between the two. How long will it take, and how big are the gaps, and that thing. We don’t really think we’re in that—we’re in that situation, I’d say, in a short-term way. But we think, we do expect that this is sort of—because of the COVID shock and the reopening and all that, you’re seeing this temporarily.",
"role": "assistant"
}
] |
Thank you, Michelle. Thank you, Mr. Chairman, for taking the question. So on corporate debt, what happened with Evergrande that we’ve been watching, could that be—is that a preview of what could happen with the amount of corporate debt that’s out there? In the past you’ve said you’re watching the level of corporate debt. So is, what’s your level of concern right now? And would you consider the Evergrande Group issue a warning signal?
|
EDWARD LAWRENCE
|
[
{
"content": "Thank you, Michelle. Thank you, Mr. Chairman, for taking the question. So on corporate debt, what happened with Evergrande that we’ve been watching, could that be—is that a preview of what could happen with the amount of corporate debt that’s out there? In the past you’ve said you’re watching the level of corporate debt. So is, what’s your level of concern right now? And would you consider the Evergrande Group issue a warning signal?",
"role": "user"
},
{
"content": "About the United States, no. Corporate defaults are very low in the United States right now. Corporate leverage built up over the course of the long expansion that ended with the pandemic. We were very concerned in the last year or so. We were concerned in the last year or so, and then I’d say very concerned at the beginning of the pandemic that, if you’ve got a highly leveraged company and your revenue stops for an uncertain period, as things happened at the beginning of the crisis, we were very concerned that there would be a wave of defaults. It didn’t happen, potentially—I mean, to a significant extent because of the CARES Act and the response that we undertook and all that. It was a, you know, a much stronger response than we’ve ever had. And I think for whatever reason now, you have very, very low default rates now among corporate debt. You know, the Evergrande situation seems very particular to China, which has very high debt for an emerging market economy, really the highest that any emerging market economy has had. And the government has been working to get that under control. This is part of that effort. The government put new strictures in place for highly leveraged companies. And Evergrande is dealing with those strictures, and it’s something they’re managing. In terms of the implications for us, there isn’t, there’s not a lot of direct United States exposure. The big Chinese banks are not tremendously exposed. But, you know, you would worry that it would affect global financial conditions through confidence channels and that thing. But I wouldn’t draw a parallel to the United States corporate sector.",
"role": "assistant"
}
] |
Hi, Chairman Powell. Just wondering if you could give us an update on whether or not you’ve had conversations with the White House about a possible reappointment. And then whether or not you would like to be reappointed as this chatter builds up. Thanks.
|
BRIAN CHEUNG
|
[
{
"content": "Hi, Chairman Powell. Just wondering if you could give us an update on whether or not you’ve had conversations with the White House about a possible reappointment. And then whether or not you would like to be reappointed as this chatter builds up. Thanks.",
"role": "user"
},
{
"content": "I think the phrase goes: “I have nothing for you on that today.” Sorry. I’m focused on doing my job—",
"role": "assistant"
}
] |
Thanks. Thanks for taking my question, Chair Powell. I was wondering if, in your discussion about the tapering that—you said that officials think it’s appropriate to end around the middle of the year—if there was any discussion about what happens to the balance sheet then. I’ve heard some Fed officials say that they wouldn’t shrink the balance sheet. Was that discussed? And what’s your stance on shrinking the balance sheet? Thanks.
|
GREG ROBB
|
[
{
"content": "Thanks. Thanks for taking my question, Chair Powell. I was wondering if, in your discussion about the tapering that—you said that officials think it’s appropriate to end around the middle of the year—if there was any discussion about what happens to the balance sheet then. I’ve heard some Fed officials say that they wouldn’t shrink the balance sheet. Was that discussed? And what’s your stance on shrinking the balance sheet? Thanks.",
"role": "user"
},
{
"content": "So my thinking on this has been: Let’s get through the taper decision, and then let’s turn to those issues. There are a number of related issues that—you mentioned one, Greg, but, you know, and—which you need to start to think about, and we’ll do that. But I want to get, we want to get through this taper decision, and then turn to those issues, rather than start, you know, thinking about them now and having the minutes discuss them and get people thinking that we are, you know, focused on those issues, because we’re really not. And, you know, we do have the experience of what we did last time. We’ve watched other countries and what they’ve done. So I think we’ll be able to get to sensible decisions fairly expeditiously when it’s time. But it’s just not time yet, in my thinking.",
"role": "assistant"
}
] |
Thank you, Mr. Chairman. You talked a little bit about inflation expectations. And there does seem to be something of a divide between market expectations and the views of professional economists—which are pretty much in line with the FOMC members—and laypeople’s expectations, at least as reflected in the recent New York Fed survey. How much weight do you put on laypeople’s expectations? And what do you think accounts for that divide?
|
SCOTT HORSLEY
|
[
{
"content": "Thank you, Mr. Chairman. You talked a little bit about inflation expectations. And there does seem to be something of a divide between market expectations and the views of professional economists—which are pretty much in line with the FOMC members—and laypeople’s expectations, at least as reflected in the recent New York Fed survey. How much weight do you put on laypeople’s expectations? And what do you think accounts for that divide?",
"role": "user"
},
{
"content": "So within—let’s just take the household surveys generally. The New York Fed survey, let me talk about that specifically, and this is from the New York Fed. It’s only an eight-year-old survey, and it does seem as though the, they’re looking three years out. And it seems like there’s a high correlation between three-year and one-year. For the most part, surveys are showing that households expect higher inflation in the near term but not in the longer term. And that’s also what expectations are showing. So there are many, many different inflation measures, of course. And that’s why we have this thing called the CIE, which is the, it’s an index of—it’s market-based measures, it’s professional forecasters, and it’s household surveys. And you just put them all—it’s not, you know, it doesn’t have a lot of grand theory about it. You put them all in, and you measure the change. So you should be—and, also, you measure things like the dispersion and that thing, so you can look at all that. And, you know, it tells a story of inflation expectations moving up. Many of the different measures will also show inflation expectations moving back up to where they were in, say, 2013, which was before the really—the drop in inflation expectations broadly happened in ’14 and ’15—around then. So that’s not a troubling thing. But, you know, inflation expectations are terribly important. We spend a lot of time watching them. And if we did see them moving up in a troubling way and running persistently above levels that are really consistent with our mandate, then, you know, we would certainly react to that. But we don’t really see that now. We see more of a moderate increase that is—the first part of which is welcome. And because, you know, inflation expectations had drifted down, and it was good to see them get back up a bit. But, again, we watch carefully.",
"role": "assistant"
}
] |
Hi. Sorry, you caught me off guard. Thank you, Chair Powell, for taking my question. I really appreciate it. Again, on the taper timing. You say it’s going to last to the middle of next year. But with your concerns about the potential for upside risks to inflation, would you think you might need to have liftoff happen before you finish the tapering?
|
HEATHER SCOTT
|
[
{
"content": "Hi. Sorry, you caught me off guard. Thank you, Chair Powell, for taking my question. I really appreciate it. Again, on the taper timing. You say it’s going to last to the middle of next year. But with your concerns about the potential for upside risks to inflation, would you think you might need to have liftoff happen before you finish the tapering?",
"role": "user"
},
{
"content": "That’s not my expectation. Of course, we can always—we haven’t decided to taper yet, and we haven’t decided the pace yet. So, you know, it’s not my expectation that we would have to. We can certainly speed up or slow down the taper if we—if it becomes appropriate, though. Absolutely. In fact, back in ’13, when we tapered, we always said we weren’t on a preset course. I think this will be a shorter period. The economy’s much farther along than it was when we tapered in 2013. So it makes sense to allow the runoff to happen. It’s a very gradual taper. It will be when we agree on it. And, but we certainly have the freedom to either speed it up or slow it down if that becomes appropriate.",
"role": "assistant"
},
{
"content": "But you wouldn’t expect rate liftoff to happen until you’re finished with that process?",
"role": "user"
},
{
"content": "You wouldn’t, no, because, you know, when you’re—as long as you’re buying assets, you’re adding accommodation, and it wouldn’t make any sense to, you know, then lift off. I mean, what you would do is, you’d speed up the taper, I think, if that were the situation you’re in. Not—we don’t expect to be in that situation, but I do think it would be wiser at that point to go ahead and speed up the taper, just because the two are then working in the same direction.",
"role": "assistant"
}
] |
Thank you, Mr. Chairman, for taking the question. I just wanted to check in with you to see if you have an update at all on the efforts from the Fed to develop a central bank digital currency. I believe that the report was supposed to come this summer, and indications that it’s going to come this month. But the drumbeat seems to be getting louder to see where the Fed’s heading on this, and just wondering if you can provide some update there.
|
JEFF COX
|
[
{
"content": "Thank you, Mr. Chairman, for taking the question. I just wanted to check in with you to see if you have an update at all on the efforts from the Fed to develop a central bank digital currency. I believe that the report was supposed to come this summer, and indications that it’s going to come this month. But the drumbeat seems to be getting louder to see where the Fed’s heading on this, and just wondering if you can provide some update there.",
"role": "user"
},
{
"content": "Sure, I’d be glad to. So we think it’s really important that the central bank maintain a stable currency and payment system for the public’s benefit. That’s one of our jobs. We also live in a time of transformational innovation around digital payments, and we need to make sure that the Fed is able to continue to deliver to the public a stable and trustworthy currency and payment system. So there’s extensive private innovation, a lot of which is taking place outside the regulatory perimeter. And innovation is fantastic. Our economy runs on innovation. But where the public’s money is concerned, we need to make sure that appropriate regulatory protections are in place, and today they really are not in some cases. So with that in mind and with the creation of myriad private currencies and currency-like products, we’re working proactively to evaluate whether to issue a CBDC and, if so, in what form. We have two broad workstreams, one of which is really technology, both at the Board and in the Federal Reserve Bank of Boston’s work with MIT—the other of which is to identify, scope out, deal with, analyze the various public policy issues. As you mentioned, we do intend to publish a discussion paper soon that will be the basis for a period of public engagement— engagement with many different groups, including elected officials, around these issues. We think it’s our obligation to do the work, both on technology and public policy, to form a basis for making an informed decision. The ultimate test we’ll apply when assessing a central bank digital currency and other digital innovations is: Are there clear and tangible benefits that outweigh any costs and risks? We’re also, as you know, investing heavily right now in building a new settlement system for instant payments in the U.S. It’ll be the first such major expansion of our core payment system since the 1970s. We found the case for this quite compelling—for consumers, businesses, and just ensuring that all financial institutions have access to that payment system. So, bottom line, we haven’t made a decision about the CBDC, but we will be issuing a discussion paper soon in order to form the basis of this public interaction that we’ll have. Thank you very much.",
"role": "assistant"
},
{
"content": "If I could have a quick—could I get a quick follow on that? Thank you. I was just wondering if—okay—are you concerned at all with falling behind in the global race for digital currencies?",
"role": "user"
},
{
"content": "I think it’s important that we get to a place where we can make an informed decision about this and do so expeditiously. I don’t think we’re behind. I think it’s more important to do this right than to do it fast. We are the world’s reserve currency. And I think we’re in a good place to make that analysis and make that decision—by the way, which will be a governmentwide decision. We would do this, we would have to have a meeting of the minds with the Administration and also probably with Congress. We would really like to have broad support for this. It’s a very important innovation. And I think we would need that to go ahead, and that’s the process we’re engaged in. Thanks very much.",
"role": "assistant"
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] |
Steve Liesman, CNBC. Thank you, Mr. Chairman, for taking our questions. In July, you said you weren’t necessarily thinking about a 50. You didn’t want to be specific, but you said you weren’t thinking about a 50. The inflation data last week came out a little firmer than expected. Retail was strong, third-quarter GDP running 3 percent. So what changed that made the Committee go 50, and how do you respond to the concerns that perhaps it shows the Fed is more concerned about the labor market? And I guess, should we expect more 50s in the months ahead? And based on what should we make that call? Thank you.
|
STEVE LIESMAN
|
[
{
"content": "Steve Liesman, CNBC. Thank you, Mr. Chairman, for taking our questions. In July, you said you weren’t necessarily thinking about a 50. You didn’t want to be specific, but you said you weren’t thinking about a 50. The inflation data last week came out a little firmer than expected. Retail was strong, third-quarter GDP running 3 percent. So what changed that made the Committee go 50, and how do you respond to the concerns that perhaps it shows the Fed is more concerned about the labor market? And I guess, should we expect more 50s in the months ahead? And based on what should we make that call? Thank you.",
"role": "user"
},
{
"content": "So, okay, a lot of questions in there. Let me jump in. So, since the last meeting—okay, the last meeting we have had a lot of data come in. We’ve had the two employment reports, July and August. We’ve also had two inflation reports, including one that came in during blackout. We had the QCEW report, which suggests that maybe—that not maybe, but suggests that the payroll report numbers that we’re getting may be artificially high and will be revised down. You know that. We’ve also seen anecdotal data, like the data collected in the Beige Book. So we took all of those, and we went into blackout. And we thought about what to do, and we concluded that this was the right thing for the economy, for the people that we serve, and that’s, that’s how we made our decision. So that’s one question. What was the second and third?",
"role": "assistant"
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{
"content": "How do we make the—sorry, thank you, sir. How do we figure out in the months ahead, is there another 25 or 50 coming in based on what should we make that call? Thank you.",
"role": "user"
},
{
"content": "Sure. So a couple things. A good place to start is the—is the SEP, but let me start with what I said, which was that we’re going to be making decisions meeting by meeting based on the incoming data, the evolving outlook, the balance of risks. If you look at the SEP, you’ll, you’ll see that it’s, it’s a process of recalibrating our policy stance away from where we had it a year ago, when inflation was high and unemployment low, to a place that’s more appropriate given where we are now and where we expect to be. And that process will take place over time. There’s nothing in the—in the SEP that suggests the Committee is in a rush to get this done. This, this process evolves over time. Of course, that’s a projection. That’s a baseline projection. We know, as I mentioned in my remarks, that the actual things that we do will depend on the way the economy evolves. We can go quicker if that’s appropriate. We can go slower if that’s appropriate. We can pause if that’s appropriate. But that’s, that’s what we are contemplating. Again, I would point you to the SEP as just an assessment of where—what the Committee is thinking today—what the individual members, rather, of the Committee are thinking today, assuming that their particular forecasts take—you know, are realized.",
"role": "assistant"
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] |
Hi. Chris Rugaber at Associated Press. Thank you. The projections show that the Fed—Fed officials expect the fed funds rate to still be above their estimate of long-run neutral by the end of next year. So does that suggest that you see rates as restrictive for that entire period? Does that threaten the weakening of the job market that you said you’d like to avoid? Or does it suggest that maybe people see the short-run neutral as a little bit higher? Thank you.
|
CHRIS RUGABER
|
[
{
"content": "Hi. Chris Rugaber at Associated Press. Thank you. The projections show that the Fed—Fed officials expect the fed funds rate to still be above their estimate of long-run neutral by the end of next year. So does that suggest that you see rates as restrictive for that entire period? Does that threaten the weakening of the job market that you said you’d like to avoid? Or does it suggest that maybe people see the short-run neutral as a little bit higher? Thank you.",
"role": "user"
},
{
"content": "I think it would—the way I would really characterize it is this: I think people write down their estimate, individuals do. I think every single person on the Committee, if you asked them, what’s your level of certainty around that, they would say there’s a wide range where that could fall. So I think we don’t know. There are model-based approaches and empirically based approaches that estimate what the neutral rate will be at any given time. But, realistically, we know it by its works. So that leaves us in a place where we’ll be—where we expect, in the base case, to be continuing to remove restriction, and we’ll be looking at the way the economy reacts to that. And that’ll be guiding us in our thinking about the question that we’re asking at every meeting, which is, is our policy stance the appropriate one? We know—if you go back, we know that the policy stance we adopted in July of 2023 came at a time when unemployment was 3½ percent and inflation was 4.2 percent. Today, unemployment is up to 4.2 percent; inflation’s down to a few tenths above 2. So we know that it is time to recalibrate our policy to something that is more appropriate given the progress on inflation and on employment moving to a more sustainable level. So the balance of risks are now even. And this is the beginning of that process I mentioned, the direction of which is toward a sense of neutral, and we’ll move as fast or as slow as we think is appropriate in real time. What you have is our individual—accumulation of individual estimates of what that will be in the base case.",
"role": "assistant"
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] |
Howard Schneider with Reuters. How close was this in terms of the decision? You do have the first dissent by a Governor since 2005, I think. Was the weight clearly in favor of a 50, or was this a very close decision?
|
HOWARD SCHNEIDER
|
[
{
"content": "Howard Schneider with Reuters. How close was this in terms of the decision? You do have the first dissent by a Governor since 2005, I think. Was the weight clearly in favor of a 50, or was this a very close decision?",
"role": "user"
},
{
"content": "I think we had a good—a good discussion. You know, if you go back, I talked about this at Jackson Hole, but I didn’t address the question of the size of the cut and left it open, and I think we left it open going into blackout. And so there was a lot of discussion back and forth, good diversity of—excellent discussion today. I think there was also broad support for the decision that the Committee voted on. So I would add, though, look at the SEP. All 19 of the participants wrote down multiple cuts this year. All 19. That’s a big change from June, right? Seven of the—seven of them wrote down three or more and—sorry, 17 of the 19 wrote down three or more cuts, and 10 of the 19 wrote down four or more cuts. So, you know, there is a dissent, and there’s a range of views, but there’s actually a lot of common ground as well.",
"role": "assistant"
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{
"content": "Follow-up to that. Now that this is in the books, can you give us some guidance as a follow-up to Steve on the pacing here? Would you expect this to be running every other meeting once we get into next year?",
"role": "user"
},
{
"content": "We’re going to take it meeting by meeting, as I mentioned. There’s no sense that the Committee feels it’s in a rush to do this. We made a good, strong start to this, and that’s really, frankly, a sign of our confidence—confidence that inflation is, is coming down toward 2 percent on a sustainable basis. That gives us the ability. We can, you know, make a good, strong start. But—and I’m very pleased that we did. To me, the logic of this, both from an economic standpoint and also from a risk-management standpoint, was clear. But I think we’re going to go carefully, meeting by meeting, and make our decisions as we go.",
"role": "assistant"
}
] |
Hi, Chair Powell. Jeanna Smialek, New York Times. Thanks for taking our questions. You and your colleagues in your economic projections today see the unemployment rate climbing to 4.4 percent and staying there. Obviously, historically, when the unemployment rate climbs that much over a relatively short period of time, it doesn’t typically just stop—it continues increasing. And so I wonder if you can walk us through why you see the labor market stabilizing, what’s the mechanism there? And what do you see as the risks?
|
JEANNA SMIALEK
|
[
{
"content": "Hi, Chair Powell. Jeanna Smialek, New York Times. Thanks for taking our questions. You and your colleagues in your economic projections today see the unemployment rate climbing to 4.4 percent and staying there. Obviously, historically, when the unemployment rate climbs that much over a relatively short period of time, it doesn’t typically just stop—it continues increasing. And so I wonder if you can walk us through why you see the labor market stabilizing, what’s the mechanism there? And what do you see as the risks?",
"role": "user"
},
{
"content": "So, again, the labor market is actually in solid condition, and our intention with our policy move today is to keep it there. You can say that about the whole economy. The U.S. economy is in good shape. It’s growing at a solid pace, inflation is coming down, the labor market is in a strong pace, we want to keep it there. That’s, that’s what we’re doing.",
"role": "assistant"
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] |
Nick Timiraos of the Wall Street Journal. Chair Powell, does today’s action constitute a catch-up in action given recent substantial revisions to the employment data, or is this larger-than-typical rate cut a function of the elevated nominal level of the policy rate such that an accelerated cadence could be expected to continue?
|
NICK TIMIRAOS
|
[
{
"content": "Nick Timiraos of the Wall Street Journal. Chair Powell, does today’s action constitute a catch-up in action given recent substantial revisions to the employment data, or is this larger-than-typical rate cut a function of the elevated nominal level of the policy rate such that an accelerated cadence could be expected to continue?",
"role": "user"
},
{
"content": "Okay, multiple questions in there. So I would say we don’t think we’re behind. We do not think—we think this is timely, but I think you can take this as a sign of our commitment not to get behind. So it’s, it’s a strong move. Sorry, your other question was?",
"role": "assistant"
},
{
"content": "It was, is this about what happened in the employment data between this meeting and the last meeting? Or is this about the level of the funds rate—the high nominal level of funds rate relative to what might be expected if you’re trying to maintain equilibrium?",
"role": "user"
},
{
"content": "So I think it’s about—we come into this with a policy position that was put in place, as you know, I mentioned, in July of 2023, which was a time of high inflation and very low unemployment. We’ve been very patient about, about reducing the policy rate. We’ve waited. Other central banks around the world have cut, many of them several times. We’ve waited, and I think patience has really paid dividends in the form of our confidence that inflation is moving sustainably under 2 percent. So I think that is what enables us to take this, this strong move today. I do not think that anyone should look at this and say, “Oh, this is the new pace.” You know, you have to think about it in terms of the base case. Of course, what happens will happen. So, so, in the base case, what you see is—look at the SEP, you see cuts moving along. The sense of this is we’re recalibrating policy down over time to a more neutral level. And we’re moving at the pace that we think is appropriate given developments in the economy and the base case. The economy can develop in a way that would cause us to go faster or slower, but that’s what the base case is.",
"role": "assistant"
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"content": "And, if I could follow up on the balance sheet, in 2019, when you did the mid-cycle adjustment, you ceased the balance sheet runoff. With a larger cut today, is there any—should there be any signal inferred about how the Committee would approach “end state” on the balance sheet policy?",
"role": "user"
},
{
"content": "So, in the current situation, reserves have really been stable. They haven’t come down. So reserves are still abundant and expected to remain so for some time. As you know, the shrinkage in our balance sheet has really come out of the overnight RRP facility. So I think what that tells you is, we’re not thinking about, about stopping runoff because of this at all. We know that these two things can happen side by side. In a sense, they’re both a form of normalization, and so, for a time, you can have the balance sheet shrinking but also be cutting rates.",
"role": "assistant"
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] |
Thank you. Colby Smith with the Financial Times. Just following up on Jeanna’s question on rising unemployment. Is it your view that this is just a function of a normalizing labor market amid improved supply, or is there anything to suggest that something more concerning perhaps is taking place here, given that other metrics of labor demand have softened too? And I guess, in direct follow-up to Jeanna, do you not—why should we not expect a further deterioration in labor market conditions if policy is still restrictive?
|
COLBY SMITH
|
[
{
"content": "Thank you. Colby Smith with the Financial Times. Just following up on Jeanna’s question on rising unemployment. Is it your view that this is just a function of a normalizing labor market amid improved supply, or is there anything to suggest that something more concerning perhaps is taking place here, given that other metrics of labor demand have softened too? And I guess, in direct follow-up to Jeanna, do you not—why should we not expect a further deterioration in labor market conditions if policy is still restrictive?",
"role": "user"
},
{
"content": "So I think what we’re seeing is, clearly labor market conditions have cooled off by any measure, as I talked about in Jackson Hole, and—but they’re still at a level— the level of those conditions is actually pretty close to what I would call maximum employment. So you’re close to mandate, maybe at mandate, on that. So what’s driving it? Clearly, clearly payroll job creation has moved down over the last few months, and this bears watching. Many— By many other measures, the labor market has returned to or below 2019 levels, which was a very good, strong labor market, but this is more 2018, ’17. So the labor market bears close—bears close watching, and we’ll be giving it that. But ultimately, we think—we believe, with an appropriate recalibration of our policy, that we can continue to see the economy growing, and that will support the labor market. In the meantime, if you look at the growth in economic activity data, retail sales data that we just got, second-quarter GDP—all of this indicates an economy that is still growing at a solid pace. So that should also support the labor market over time. So—but again, we’re—it bears watching. And we’re watching.",
"role": "assistant"
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{
"content": "And just on the point about starting to see rising layoffs, if that were to happen, wouldn’t the Committee already be too late in terms of avoiding a recession?",
"role": "user"
},
{
"content": "So we’re—that’s—you know, our plan, of course, has been to begin to recalibrate and we’re—as you know, we’re not seeing rising claims, we’re not seeing rising layoffs, we’re not seeing that, and we’re not hearing that from companies ’s something that’s getting ready to happen. So we’re not waiting for that, because, you know, there is—there is thinking that the time to support the labor market is when—is when it’s strong and not when we begin to see the layoffs. There’s some lore on that. So that’s the situation we’re in. We have, in fact, begun the cutting cycle now, and we’ll be watching—and that’ll be one of the factors that we consider. Of course, we’re going to look at the totality of the data as we make these decisions meeting by meeting.",
"role": "assistant"
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] |
Michael McKee with Bloomberg TV and Radio. To follow up on that, what would constitute for you and the Committee a deterioration in the labor market? You’re pricing in, basically by the end of next year, 200 basis points of cuts just to maintain a higher unemployment rate. Would you be moving to a more preemptive monetary policy style— rather than, as you did with inflation, waiting until the data gave you a signal?
|
MICHAEL MCKEE
|
[
{
"content": "Michael McKee with Bloomberg TV and Radio. To follow up on that, what would constitute for you and the Committee a deterioration in the labor market? You’re pricing in, basically by the end of next year, 200 basis points of cuts just to maintain a higher unemployment rate. Would you be moving to a more preemptive monetary policy style— rather than, as you did with inflation, waiting until the data gave you a signal?",
"role": "user"
},
{
"content": "We’re going to be watching all of the data, right? So if—as I mentioned in my remarks, if the labor market were to slow unexpectedly, then we have the ability to react to that by, by cutting faster. We’re also going to be looking at our other mandate, though. We are more—we have greater confidence now that inflation is moving down to 2 percent, but, at the same time, our plan is that we will be at 2 percent, you know, over time. So—and policy, we think, is still restrictive, so that should still be happening.",
"role": "assistant"
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"content": "I’m just curious as to how sensitive you’ll be to the labor market, since you forecast we are going to see higher unemployment and it is going to take a significant amount of monetary easing to just maintain it.",
"role": "user"
},
{
"content": "So, you know, what I would say is, we don’t think we need to see further loosening in labor market conditions to get inflation down to 2 percent. But we have a dual mandate, and I think you can take this whole action as—take a step back, what have we been trying to achieve? We’re trying to achieve a situation where we restore price stability without the painful increase in unemployment that has come sometimes with disinflation. That’s what we’re trying to do. And I think you can take today’s action as a sign of our strong commitment to achieve that goal.",
"role": "assistant"
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] |
Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. You’re describing this view that you don’t think you’re behind when it comes to the job market. Can you walk us through the specific data points that you found to be most helpful in the discussions at this meeting? You’ve mentioned a couple, but would you be able to walk us through what that dashboard told you, as far as what about the job market now?
|
RACHEL SIEGEL
|
[
{
"content": "Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. You’re describing this view that you don’t think you’re behind when it comes to the job market. Can you walk us through the specific data points that you found to be most helpful in the discussions at this meeting? You’ve mentioned a couple, but would you be able to walk us through what that dashboard told you, as far as what about the job market now?",
"role": "user"
},
{
"content": "Sure. So we’ll start with unemployment, which is the single most important one probably. You’re at 4.2 percent. That’s, you know—I know it’s higher than we were used to seeing, numbers in the mid- and even below mid-3s last year, but, if you look back over the sweep of the years, that’s, that’s a low. That’s a very healthy unemployment rate. And anything in the low 4s is, is a really—is a good labor market. So that’s one thing. Participation is at high levels. It’s, you know—we’ve had—we’re right—adjusted for demographics for aging, participation’s at pretty high levels. That’s a good thing. Wages are still a bit above what would be their—wage increases, rather, are still just a bit above where they would be over the very longer term to be consistent with 2 percent inflation, but they’re very much coming down to what that sustainable level is. So we feel good about that. Vacancies over—per unemployed is back to what is still a very strong level. It’s not as high as it was. That number reached two to one, two vacancies for every unemployed person. As measured, it’s now below—it’s around one. But that’s still—that’s still a very good number, I would say. You know, quits have come back down to normal levels. I mean, I could go on and on. There are many, many employment indicators. What do they say? They say this is still a solid labor market. The question isn’t the level; the question is that there has been change, particularly over the last few months, and, you know, so what we say is, as the risks, the upside risks, to inflation have really come down, the downside risks to employment have increased. And, and because we have been patient and held our fire on cutting while, while inflation has come down, I think we’re now in a very good position to manage the risks to both of our goals.",
"role": "assistant"
},
{
"content": "And what do you expect to learn between now and November that will help inform the scale of the cut at the next meeting?",
"role": "user"
},
{
"content": "You know, more data, the usual. Don’t look for anything else. We’ll see another labor report. We’ll see another jobs report. I think we get a—we might, actually— we get two—we get a second jobs report on the day of the meeting, I think, or no, no, on the Friday before the meeting. So—and inflation data. We’ll get all this data. We’ll be watching. You know, it’s always a question of, look at the incoming data and ask what are the implications of that data for the evolving outlook and the balance of risks and then go through our process and think, what’s the right thing to do? Is policy where we want it to be to foster the achievement of our goals over time? So that’s what it is, and that’s what we’ll be doing.",
"role": "assistant"
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] |
Thanks. Hi, Chair Powell. Neil Irwin with Axios. We’ve only been running a little above 100,000 jobs a month on payroll the last three months. Do you view that level of job creation as worrying or alarming, or would you be—would you be content if we were to stick at that level? And relatedly, you know, one of the welcome trends of the last couple of years has been labor markets seen coming out through job openings falling, rather than job losses. Do you think that trend has further to run, or do you see risk that further labor market cooling will have to come through job losses?
|
NEIL IRWIN
|
[
{
"content": "Thanks. Hi, Chair Powell. Neil Irwin with Axios. We’ve only been running a little above 100,000 jobs a month on payroll the last three months. Do you view that level of job creation as worrying or alarming, or would you be—would you be content if we were to stick at that level? And relatedly, you know, one of the welcome trends of the last couple of years has been labor markets seen coming out through job openings falling, rather than job losses. Do you think that trend has further to run, or do you see risk that further labor market cooling will have to come through job losses?",
"role": "user"
},
{
"content": "So, on the job creation, it depends on—it depends on the inflows, right? So, if you’re having millions of people come into the labor force then, and you’re creating 100,000 jobs, you’re going to see unemployment go up. So it really depends on what’s the trend underlying the volatility of people coming into the country. We understand there’s been quite an influx across the borders, and that has actually been one of the things that’s, that’s, that’s allowed the unemployment rate to rise. And the other thing is just the slower hiring rate, which is something we also watch carefully. So it does depend on what’s happening on the supply side. On the Beveridge curve question, yes, so we all felt, on the Committee, not all, but I think everyone on the Committee felt that job openings were so elevated that they could fall a long way before you hit the part of the curve where job openings turned into higher unemployment, job loss. And yes, I mean, I think we are—it’s hard to know that—you can’t know these things with great precision, but certainly it appears that we’re very close to that point, if not at it, so that further declines in job openings will translate more directly into unemployment. But it’s been— it’s been a great ride down. I mean, we’ve seen a lot of, of tightness come out of the labor market in that form without it resulting in lower employment.",
"role": "assistant"
}
] |
Thanks, Chair Powell. Edward Lawrence with Fox Business. So we’ve heard some speculation that you may be going with the federal funds rate to 3½, maybe under 4 percent. There’s basically an entire generation that has experienced zero or near- zero federal funds rate, and some think we’re heading in that direction again. What’s the likelihood that cheap money is now the norm?
|
EDWARD LAWRENCE
|
[
{
"content": "Thanks, Chair Powell. Edward Lawrence with Fox Business. So we’ve heard some speculation that you may be going with the federal funds rate to 3½, maybe under 4 percent. There’s basically an entire generation that has experienced zero or near- zero federal funds rate, and some think we’re heading in that direction again. What’s the likelihood that cheap money is now the norm?",
"role": "user"
},
{
"content": "So this is a question—and you mean after we get through all of this? It’s just—great question that we just, we can only speculate about. Intuitively, most—many, many people anyway, would say we’re probably not going back to that era where there were trillions of dollars of sovereign bonds trading at negative rates—long-term bonds trading at negative rates. And it looked like the neutral rate was—might even be negative, so—and it was—people were issuing debt at negative rates. It seems that’s so far away now. My own sense is that we’re not going back to that. But, you know, honestly, we’re going to find out. But, you know, it feels—it feels to me that the neutral rate is probably significantly higher than it was back then. How high is it? I don’t—I just don’t think we know. It’s—again, we only know it by its works.",
"role": "assistant"
},
{
"content": "And one more, how do you respond to the criticism that will likely come that a deeper rate cut now, before the election, has some political motivations?",
"role": "user"
},
{
"content": "Yeah, so, you know, this is my fourth presidential election at the Fed, and, you know, it’s always the same. We’re always—we’re always going into this meeting, in particular, and asking, what’s the right thing to do for the people we serve? And we do that, and we make a decision as a group, and then we announce it. And it’s—that’s always what it is. It’s never about anything else. Nothing else is discussed, and I would also point out that the things that we do really affect economic conditions for the most part with a lag. So, nonetheless, this is what we do. Our job is to support the economy on behalf of the American people. And, if we get it right, this will benefit the American people significantly. So this really concentrates the mind, and, you know, it’s something we all take very, very seriously. We don’t put up any other filters. I think if you start doing that, I don’t know where you stop. And so we just don’t do that.",
"role": "assistant"
}
] |
Thank you, Chair Powell. I’m Jo Ling Kent with CBS News. My first question is, very simply, what message are you trying to send American consumers, the American people, with this unusually large rate cut?
|
JO LING KENT
|
[
{
"content": "Thank you, Chair Powell. I’m Jo Ling Kent with CBS News. My first question is, very simply, what message are you trying to send American consumers, the American people, with this unusually large rate cut?",
"role": "user"
},
{
"content": "I would just say that, you know, the U.S. economy is in a good place, and, and our decision today is designed to keep it there. More specifically, the economy is growing at a solid pace, inflation is coming down closer to our 2 percent objective over time, and the labor market is still in solid shape. So our intention is really to maintain the strength that we currently see in the U.S. economy. And we’ll do that by returning rates from their high level, which has really been—the purpose of which has been to get inflation under control. We’re, we’re going to move those down over time to a more normal level over time.",
"role": "assistant"
},
{
"content": "Just have a follow-up to that. Listening to you talk about inflation moving meaningfully down to 2 percent, is the Federal Reserve effectively declaring a decisive victory over inflation and rising prices?",
"role": "user"
},
{
"content": "No, we’re not. So inflation, you know—what we say is we want inflation—the goal is to have inflation move down to 2 percent on a sustainable basis. And, you know, we’re not really—we’re close, but we’re not really at 2 percent. And I think we’re going to want to see it be, you know, around 2 percent and close to 2 percent for some time, but we’re certainly not doing—we’re not saying “mission accomplished” or anything like that. But I have to say, though, we’re encouraged by the progress that we have made.",
"role": "assistant"
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] |
Hi. Catarina Saraiva with Bloomberg News. I just would love to know how the Committee is thinking about the persistence we’ve seen in housing inflation. You know, do you think you can return to 2 percent with housing inflation where it is? Yeah.
|
CATARINA SARAIVA
|
[
{
"content": "Hi. Catarina Saraiva with Bloomberg News. I just would love to know how the Committee is thinking about the persistence we’ve seen in housing inflation. You know, do you think you can return to 2 percent with housing inflation where it is? Yeah.",
"role": "user"
},
{
"content": "So housing inflation is the—is the one piece that is dragging a bit, if I can say. We know that market rents are doing what we would want them to do, which is to be moving up at relatively low levels, but they’re not rolling over—the leases that are rolling over are not coming down as much and OER is coming in high. So, you know, it’s been slower than we expected. I think we now understand that it’s going to take some time for those lower market rents to get into this. But, you know, the direction of travel is clear, and as long as market rents remain, you know, relatively low inflation, over time that will show up, just the time it’s taking now, several years rather than just one or two cycles of annual lease renewals. So that’s—I think we understand that now, but I don’t think the outcome is in doubt again. As long as market rents remain under control, the outcome is not as in doubt. So I would say it’s—the rest of the portfolio—or of the elements that go into core PCE inflation have behaved pretty well. You know, they’re all—they all have some volatility. We will get down to 2 percent inflation, I believe, and I believe that, ultimately, we’ll get what we need to get out of the housing services piece, too.",
"role": "assistant"
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"content": "Some of your colleagues have expressed concern that, with starting to cut rates, you could re-ignite demand in housing and see prices go up even more. What’s the likelihood of that, and how would you react to that?",
"role": "user"
},
{
"content": "The housing market, it’s hard to—it’s a game that—the housing market is in part frozen because of lock-in with low rates. People don’t want to sell their homes. So, because they have a very low mortgage, it would be quite expensive to refinance. As rates come down, people will start to move more, and that’s probably beginning to happen already. But remember, when that happens, you’ve got a seller, but you’ve also got a new buyer in many cases. So it’s not, you know, obvious how much additional demand that would make. I mean, the real issue with housing is that we have had, and are on track to continue to have, not enough housing. And so it’s going to be challenging. It’s hard to find—to zone lots that are in places where people want to live. It’s—all of the aspects of housing are more and more difficult, and, you know, where are we going to get the supply? And this is not something that the Fed can, can really fix. But I think, as we normalize rates, you’ll see the housing market normalize. And, I mean, ultimately by getting inflation broadly down and getting those rates normalized and getting the housing cycle normalized, that’s the best thing we can do for house holders. And then the supply question will have to be dealt with by the market and also by government.",
"role": "assistant"
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] |
Hi. Victoria Guida with Politico. Just following up on some of the labor market talk earlier, you know, monetary policy operates with long and variable lags, and I’m wondering how much you see being able to keep the unemployment rate from raising too much comes from the fact that you’re starting to act now and that’s going to give people more room to run versus just the labor market is strong. And then, also, if I could, following up on Nick’s question, do you see today’s 50 basis point move as partially a response to the fact that you didn’t cut in July and that gets you to the same place?
|
VICTORIA GUIDA
|
[
{
"content": "Hi. Victoria Guida with Politico. Just following up on some of the labor market talk earlier, you know, monetary policy operates with long and variable lags, and I’m wondering how much you see being able to keep the unemployment rate from raising too much comes from the fact that you’re starting to act now and that’s going to give people more room to run versus just the labor market is strong. And then, also, if I could, following up on Nick’s question, do you see today’s 50 basis point move as partially a response to the fact that you didn’t cut in July and that gets you to the same place?",
"role": "user"
},
{
"content": "So you’re right about lags, but I would just point to the overall economy. You have an economy that is growing at a solid pace. If you look at forecasters or talk to companies, they’ll say that they think 2025 should be a good year, too. So there’s no sense—the U.S. economy is basically fine if you talk to market participants, I mean, you know, business people who are actually out there doing business. So I think, you know, I think our move is timely. I do. And, as I said, you can—you can see our, our 50 basis point move as a commitment to make sure that we don’t fall behind. So you’re really asking about—your second question, you’re asking about July. And I guess if you ask if we’d gotten the July report before the meeting, would we have cut? We might well have. We didn’t make that decision, but we might well have. I think that’s not—you know, that doesn’t really answer the question that we ask ourselves, which is, let’s look, you know—at this meeting we’re looking back to the July employment report, the August employment report, the two CPI reports, one of which came, of course, during blackout, and all of the other things that I mentioned. We’re looking at all of those things, and we’re asking ourselves, what’s the right—what’s the policy stance we need to move to? We knew—it’s clear that we—clearly, literally, everyone on the Committee agreed that it’s time to move. It’s just how big—how fast do you go, and what do you think about the paths forward. So this decision we made today had broad support on the Committee, and I’ve discussed the path ahead.",
"role": "assistant"
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] |
Thank you, Chair Powell. Elizabeth Schulze with ABC News. Mortgage rates have already been dropping in anticipation of this announcement. How much more should borrowers expect those rates to drop over the next year?
|
ELIZABETH SCHULZE
|
[
{
"content": "Thank you, Chair Powell. Elizabeth Schulze with ABC News. Mortgage rates have already been dropping in anticipation of this announcement. How much more should borrowers expect those rates to drop over the next year?",
"role": "user"
},
{
"content": "Very hard for me to say. That’s—from our standpoint, I can’t really speak to mortgage rates. I will say that’ll depend on how the economy evolves. Our intention, though, is—we think that our policy was appropriately restrictive. We think that it’s time to begin the process of recalibrating it to a level that’s more neutral, rather than restrictive. We expect that process to take some time, as you can see in the projections that we released today. And as—if things work out according to that forecast, other rates in the economy will come down as well. However, the rate at which those things happen will really depend on how the economy performs. We can’t see—we can’t look a year ahead and know what the economy is to be doing—going to be doing.",
"role": "assistant"
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"content": "What’s your message to households who are frustrated that home prices have still stayed so high as rates have been high? What do you say to those households?",
"role": "user"
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{
"content": "Well, what I can say to the public is that we had the highest—we had a burst of inflation. Many other countries around the world had a similar burst of inflation, and, when that happens, part of the answer is that we raise interest rates in order to cool the economy off in order to reduce inflationary pressures. It’s not something that people experience as pleasant, but, at the end, what you get is low inflation restored, price stability restored. And a good definition of price stability is that people in their daily decisions, they’re not thinking about inflation anymore. That’s where everyone wants to be, is back to what’s inflation, you know? Just keep it low, keep it stable. We’re restoring that. So what we’re going through now really restores—it will benefit people over a long period of time. Price stability benefits everybody over a long period of time, just by virtue of the fact that they don’t have to deal with inflation. So that’s what’s been going on, and I think we’ve made real progress. I completely—we don’t tell people how to think about the economy, of course. And, of course, people are still experiencing high prices, as opposed to high inflation. And we understand that’s painful.",
"role": "assistant"
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] |
Hi, Chair Powell. Greg Robb from Marketwatch. com. I was wondering if you could go through—you said just at the beginning that, coming into the blackout, there was like an open thought of 25 or 50—you know, the Fed could move either 25 or 50. I would argue that when we had those two last speeches by Governor Waller and New York Fed President John Williams, that they were saying that maybe a gradual approach was going to win the day. I mean, I sort of want to ask a seven-part question about this. But, I mean, could you talk— would you have cut rates by 50 basis points if the market had been pricing in, like, low odds of a 50 point move like they were last Wednesday, you know, after the CPI number came out? It was a really small probability of a 50 point cut. Does that play in your consideration at all? Just talk a little bit about that. Thank you.
|
GREG ROBB
|
[
{
"content": "Hi, Chair Powell. Greg Robb from Marketwatch. com. I was wondering if you could go through—you said just at the beginning that, coming into the blackout, there was like an open thought of 25 or 50—you know, the Fed could move either 25 or 50. I would argue that when we had those two last speeches by Governor Waller and New York Fed President John Williams, that they were saying that maybe a gradual approach was going to win the day. I mean, I sort of want to ask a seven-part question about this. But, I mean, could you talk— would you have cut rates by 50 basis points if the market had been pricing in, like, low odds of a 50 point move like they were last Wednesday, you know, after the CPI number came out? It was a really small probability of a 50 point cut. Does that play in your consideration at all? Just talk a little bit about that. Thank you.",
"role": "user"
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{
"content": "We’re always going to try to do what we think is the right thing for the economy at that time. That’s what we’ll do. And that’s what we did today.",
"role": "assistant"
}
] |
Thank you, Chair Powell. Simon Rabinovitch with the Economist. You’ve mentioned how closely you’re watching the labor market, but you also noted that payroll numbers have been a little bit less reliable lately because of the big downward revisions. Does that put your focus overwhelmingly on the unemployment rate? And given the SEP projection of 4.4 percent basically being the peak in the cycle, would going above that be the thing that would trigger another 50 basis point cut?
|
SIMON RABINOVITCH
|
[
{
"content": "Thank you, Chair Powell. Simon Rabinovitch with the Economist. You’ve mentioned how closely you’re watching the labor market, but you also noted that payroll numbers have been a little bit less reliable lately because of the big downward revisions. Does that put your focus overwhelmingly on the unemployment rate? And given the SEP projection of 4.4 percent basically being the peak in the cycle, would going above that be the thing that would trigger another 50 basis point cut?",
"role": "user"
},
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"content": "So we will continue to look at that broad array of labor market data, including the payroll numbers. We’re not discarding those. I mean, we’ll certainly look at those, but we will mentally tend to adjust them based on the QCEW adjustment, which you referred to. There isn’t a bright line. You know, it will be—the unemployment rate’s very important, of course, but there isn’t a single statistic or single bright line over which that thing that might move that would dictate one thing or another. We’ll look at—each meeting, we’ll look at all the data on inflation, economic activity, and the labor market, and we’ll make decisions about, is our policy stance where it needs to be to foster over the medium term our mandate goals? So I can’t—I can’t say we have a bright line in mind.",
"role": "assistant"
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] |
Thanks, Chair Powell. Matt Egan from CNN. I know that you discussed earlier how the Fed does whatever the right thing is and nothing else factors in. But, in general, can you talk about whether or not you believe a sitting U.S. president should have a say in Fed decisions on interest rates? Because that’s something that former President Trump, who obviously appointed you, has previously suggested. And I know the Fed is designed to be independent, but why? Can you tell the public why you view that as so important?
|
MATT EGAN
|
[
{
"content": "Thanks, Chair Powell. Matt Egan from CNN. I know that you discussed earlier how the Fed does whatever the right thing is and nothing else factors in. But, in general, can you talk about whether or not you believe a sitting U.S. president should have a say in Fed decisions on interest rates? Because that’s something that former President Trump, who obviously appointed you, has previously suggested. And I know the Fed is designed to be independent, but why? Can you tell the public why you view that as so important?",
"role": "user"
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"content": "Sure. So countries that are—democracies around the world, countries that are like the United States, all have what are called independent central banks. And the reason is that people have found over time that insulating the central bank from direct control by political authorities avoids making monetary policy in a way that favors maybe people who are in office as opposed to people who are not in office. So that’s the idea, is that— you know, I think the data are clear that countries that have independent central banks, they get lower inflation. And so we’re, we’re not—we do our work to serve all Americans. We’re not serving any politician, any political figure, any cause, any issue, nothing. It’s just maximum employment and price stability on behalf of all Americans. And that’s how the other central banks are set up, too. It’s a good institutional arrangement, which has been good for the public and I hope—and I hope and strongly believe that it will continue.",
"role": "assistant"
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] |
Kyle Campbell for American Banker. Thanks for taking the questions, Chair Powell. A couple regulatory developments in the past week that I want to ask you about. First, last week Vice Chair for Supervision Michael Barr outlined his views for the changes to the Basel III endgame. I’m wondering if you are in alignment with him on what those changes should be, if those have support on the Board in the broad way that you’re looking for, and if you think the other agencies are also fully onboard with that approach. And then yesterday, other banking regulators—
|
KYLE CAMPBELL
|
[
{
"content": "Kyle Campbell for American Banker. Thanks for taking the questions, Chair Powell. A couple regulatory developments in the past week that I want to ask you about. First, last week Vice Chair for Supervision Michael Barr outlined his views for the changes to the Basel III endgame. I’m wondering if you are in alignment with him on what those changes should be, if those have support on the Board in the broad way that you’re looking for, and if you think the other agencies are also fully onboard with that approach. And then yesterday, other banking regulators—",
"role": "user"
},
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"content": "You know what, hold the second question.",
"role": "assistant"
},
{
"content": "Right. And then, yesterday. there were merger reform finalizations from the other bank regulators. What does the Fed have to do to align itself on a merger?",
"role": "user"
},
{
"content": "You know, I would—I would bounce that question to Vice Chair Barr. It’s a good question, but I don’t have that today. Thanks.",
"role": "assistant"
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] |
Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. You said earlier that the decision today reflects with appropriate recalibration strength in the labor market that could be maintained in the context of moderate growth, even though the policy statement says you view the risks to inflation and job growth as roughly balanced. Given what you’ve said, though, today, I’m curious, are you more worried about the job market and growth than inflation? Are they not roughly balanced?
|
JENNIFER SCHONBERGER
|
[
{
"content": "Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. You said earlier that the decision today reflects with appropriate recalibration strength in the labor market that could be maintained in the context of moderate growth, even though the policy statement says you view the risks to inflation and job growth as roughly balanced. Given what you’ve said, though, today, I’m curious, are you more worried about the job market and growth than inflation? Are they not roughly balanced?",
"role": "user"
},
{
"content": "No, I think—I think, and we think, they are now roughly balanced. So if you go back for a long time, the risks were on inflation. We had a historically tight labor market, historically tight. There was a severe labor shortage, so very hot labor market. And we had inflation way above target. So, you know, that said to us, concentrate on inflation, concentrate on inflation. And we did for a while, and we kept at that, that the stance that we put in place 14 months ago was a stance that was focused on bringing down inflation. Part of bringing down inflation, though, is cooling off the economy and a little bit cooling off the labor market. You now have a cooler labor market, in part because of our activity. So what that tells you is, it’s time to change our stance. So we did that. The sense of the change in the stance is that we’re recalibrating our policy over time to a stance that will be more neutral. And today was—I think we made a good strong start on that. I think it was the right decision, and I think it should send a signal that we, you know, that we’re committed to coming up with a good outcome here.",
"role": "assistant"
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"content": "Is the economy more vulnerable to a shock now that could tip it into recession?",
"role": "user"
},
{
"content": "I don’t think so. I don’t—there’s—as I look—well, let me look at it this way: I don’t see anything in the economy right now that suggests that the likelihood of a recession—sorry, of a downturn is elevated, okay? I don’t see that. You see—you see growth at a solid rate, you see inflation coming down, and you see a labor market that’s, that’s still at very solid levels. So, so I don’t really see that, no. Thank you.",
"role": "assistant"
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] |
Hi. Nick Timiraos of the Wall Street Journal. Chair Powell, the markets anticipate you will raise rates once or twice next year. Are they wrong?
|
NICK TIMIRAOS
|
[
{
"content": "Hi. Nick Timiraos of the Wall Street Journal. Chair Powell, the markets anticipate you will raise rates once or twice next year. Are they wrong?",
"role": "user"
},
{
"content": "So I would say it this way. We try to focus on what we can control—and that is how to communicate as clearly as possible, in this highly uncertain world, how we’re thinking about the economic outlook and the balance of risks and how policy will evolve in that case and also in the cases, which are frequent, where the economy evolves in unexpected ways. So the focus at this meeting is on tapering asset purchases, not on raising rates. It is time to taper, we think, because the economy has achieved substantial further progress toward our goals, measured from last December. We don’t think it’s time yet to raise interest rates. There is still ground to cover to reach maximum employment, both in terms of employment and in terms of participation. Getting to your question, our baseline expectation is that supply bottlenecks and shortages will persist well into next year, and elevated inflation as well, and that, as the pandemic subsides, supply chain bottlenecks will abate—and job growth will move back up. And as that happens, inflation will decline from today’s elevated levels. Of course, the timing of that is highly uncertain. But, certainly, we should see inflation moving down by the second or third quarter. The time for lifting rates and beginning to remove accommodation will depend on the path of the economy. We think we can be patient. If a response is called for, we will not hesitate. So, what I will tell you is, we will be watching carefully to see whether the economy evolves in line with our expectations, and policy will adapt appropriately. And that’s what I would say.",
"role": "assistant"
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"content": "Based on—if I could follow up, based on your current outlook for the labor market, do you think it’s possible—or likely, even—that maximum employment could be achieved by the second half of next year?",
"role": "user"
},
{
"content": "So if you look at the progress that we’ve made over the course of the last year, if that pace were to continue, then the answer would be: “Yes, I do think is possible.” Of course, we measure maximum employment based on a wide range of figures, but it’s certainly within the realm of possibility.",
"role": "assistant"
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] |
Hi, Chair Powell. I was wondering if you could detail a little bit how you’re thinking about wages at this moment. Obviously, we’re seeing strong wage growth, particularly for people in lower-income fields. I wonder if you see that as a positive thing or as a potential start to a wage–price spiral and how you sort of delineate those two things.
|
JEANNA SMIALEK
|
[
{
"content": "Hi, Chair Powell. I was wondering if you could detail a little bit how you’re thinking about wages at this moment. Obviously, we’re seeing strong wage growth, particularly for people in lower-income fields. I wonder if you see that as a positive thing or as a potential start to a wage–price spiral and how you sort of delineate those two things.",
"role": "user"
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"content": "So wages have been moving up strongly, very strongly. And, in particular, I would point to the employment compensation index reading that we got last Friday. Now, in real terms, they’ve been—they had been running a little bit below inflation, so real wages were not really increasing. I think, with the ECI reading, it becomes close to maybe not increasing, but close to back to zero in terms of the real increase. So wages moving up, of course, is how standard of living increases over the years for generation upon generation. It’s very important, and it’s generally a good thing. You know, the concern is a somewhat unusual case where, if wages were to be rising persistently and materially above inflation and productivity gains, that could put upward pressure on, or downward pressure on margins and cause companies to—or employers, really—to raise prices as a result, and you can see yourself, find yourself in what we used to call a wage–price spiral. We don’t have evidence of that yet. Productivity has been very high. The ECI reading is just one reading. Again, if you look back, we—so we’ll be watching this carefully. But I would say that, at this point, we don’t see troubling increases in wages. And we don’t expect those to emerge, but we’ll be watching carefully.",
"role": "assistant"
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] |
Thank you, Mr. Chairman. I wonder if you could perhaps give us your thinking about the tradeoffs between inflation and unemployment. You talked about the shortfall of unemployment—reemployment relative to before the pandemic, and yet you have inflation, which is affecting everybody. Are we at, or close to, a point where the risk of inflation is greater than the benefit that you’d—for recovering these lost jobs so that now, from a risk- management standpoint, it makes sense to move more aggressively on rate hikes? And a related question: The statement today says you’ll keep policy accommodative until you hit that 2 percent inflation target. Our surveys show looking for 5 percent inflation this year, 3½ percent next year—it sure seems like you’re on track to modestly or moderately exceed that 2 percent target. Thanks.
|
STEVE LIESMAN
|
[
{
"content": "Thank you, Mr. Chairman. I wonder if you could perhaps give us your thinking about the tradeoffs between inflation and unemployment. You talked about the shortfall of unemployment—reemployment relative to before the pandemic, and yet you have inflation, which is affecting everybody. Are we at, or close to, a point where the risk of inflation is greater than the benefit that you’d—for recovering these lost jobs so that now, from a risk- management standpoint, it makes sense to move more aggressively on rate hikes? And a related question: The statement today says you’ll keep policy accommodative until you hit that 2 percent inflation target. Our surveys show looking for 5 percent inflation this year, 3½ percent next year—it sure seems like you’re on track to modestly or moderately exceed that 2 percent target. Thanks.",
"role": "user"
},
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"content": "Yes. So I’m not sure I totally got your first question, but I would say—in fact, could you just quickly, succinctly, say your first question again?",
"role": "assistant"
},
{
"content": "Sure. The idea that the tradeoff between inflation and unemployment, that you would keep policy accommodative to put this 5 million folks, or find these 5 million jobs again, at the same time all Americans will be suffering from higher inflation—is that tradeoff worth it, or is it better or smarter to raise rates right now to combat inflation and perhaps not lean so heavily on the employment side of the mandate?",
"role": "user"
},
{
"content": "Yes, so, you know, this isn’t the traditional Phillips curve situation where there’s a direct tradeoff, where that’s really what we’re talking about. The inflation that we’re seeing is really not due to a tight labor market. It’s due to bottlenecks, and it’s due to shortages, and it’s due to very strong demand meeting those. So I think it’s not the classical situation where you have that precise tradeoff. But, you know, in this situation, we do have a provision in our Statement on Longer-Run Goals, as you know, that says when those two things are in tension, what we do is, we take into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the mandate. So we used to call that the “balanced approach” paragraph. We have to think about the amount of the deviation, we have to think about the time it will take, and we have to make policy in a world where the two goals are in tension. It’s very difficult. But what it really boils down to is something that’s common sense. And that is risk management. We have to be aware of the risks that we’re—particularly now the risk of significantly higher inflation. We see shortages and bottlenecks persisting into next year, well into next year. We see higher inflation persisting, and we have to be in position to address that risk should it become really a threat to—should it create a threat of more persistent, longer-term inflation. And that’s what we think our policy is doing now. It’s putting us in a position to be able to address the range of plausible outcomes.",
"role": "assistant"
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] |
Thank you. Chair Powell, what are the economic conditions that would perhaps warrant a faster pace of tapering? And I’m wondering how you would also characterize the risks that the Fed may actually need to accelerate that process eventually. Thank you.
|
COLBY SMITH
|
[
{
"content": "Thank you. Chair Powell, what are the economic conditions that would perhaps warrant a faster pace of tapering? And I’m wondering how you would also characterize the risks that the Fed may actually need to accelerate that process eventually. Thank you.",
"role": "user"
},
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"content": "So I guess, as I said in my opening remarks, assuming the economy performs broadly as expected, the Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, and we’re prepared to deviate from that path if warranted by changes in the economic outlook. So I’m not going to give you a lot more detail on what that might be. Of course, if we do see something like that happening, if it becomes a question, then we’ll communicate very transparently and openly about that. But I’m just going to leave it with the words that are in the statement. Sorry, was there a second part?",
"role": "assistant"
},
{
"content": "Yes. It’s just on characterizing the risks that you might actually have to do so later on.",
"role": "user"
},
{
"content": "You know, I would just leave you with the words we have here. We are prepared to speed up or slow down the pace of reductions in asset purchases if it’s warranted by changes in the economic outlook. And, again, if we feel like something like that’s happening, then we’ll be very transparent about it. We wouldn’t want to surprise markets. We’ll say, in light of this factor or these factors, we are considering doing this, and then we would either do it or not do it. But so—but I’m not going to, you know, start making up examples of what that might be today. Thanks.",
"role": "assistant"
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] |
Hi, Chair Powell. Thank you so much for taking our questions. You mentioned at the beginning that the Fed understands the difficulties that high inflation poses for individuals and families, especially those with limited means. What is your message to those families or consumers that are struggling with higher prices right now, and do you feel that your expectations around transitory inflation, that message is reaching them? Thank you.
|
RACHEL SIEGEL
|
[
{
"content": "Hi, Chair Powell. Thank you so much for taking our questions. You mentioned at the beginning that the Fed understands the difficulties that high inflation poses for individuals and families, especially those with limited means. What is your message to those families or consumers that are struggling with higher prices right now, and do you feel that your expectations around transitory inflation, that message is reaching them? Thank you.",
"role": "user"
},
{
"content": "Yes. So, first of all, it is our job to—and we accept responsibility and accountability for inflation in the medium term. We’re accountable to Congress and to the American people for maximum employment and price stability. The level of inflation we have right now is not at all consistent with price stability. By the way, we’re also not at maximum employment, as I mentioned. So I would want to assure people that we will use our tools as appropriate to get inflation under control. We don’t think it’s a good time to raise interest rates, though, because we want to see the labor market heal further. And we have very good reason to think will happen as the Delta variant declines, so—which it’s doing now. So “transitory” is a word that people have had different understandings of. For some, it carries a sense of “short lived,” and that’s, you know, there’s a real time component—measured in months, let’s say. Really, for us, what “transitory” has meant is that if something is transitory, it will not leave behind it permanently or very persistently higher inflation. So that’s why we, you know, we took a step back from “transitory.” We said “expected to be transitory,” first of all, to show uncertainty around that—we’ve always said that, by the way, in other contexts; we just hadn’t done it in the statement—but also to acknowledge, really, that it means different things to different people. And then we added some language to really explain more what we’re talking about in paragraph two and paragraph three. We said that “supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases,” and we said, “Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation.” So we’re trying to explain what we mean and also acknowledging more uncertainty about “transitory.” So it’s, I mean, it’s become a word that’s attracted a lot of attention that maybe is distracting from our message, which we want to be as clear as possible. Ultimately, the only other thing I would say is, look, we understand completely that it’s particularly people who are living paycheck to paycheck or seeing higher grocery costs, higher gasoline costs—when the winter comes, higher heating costs for their homes. We understand completely what they’re going through. And, you know, we will use our tools over time to make sure doesn’t become a permanent feature of life. Really, that’s one of our principal jobs, along with achieving maximum employment. And that’s our commitment.",
"role": "assistant"
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] |
Great. Thank you, Michelle. Thank you, Chair Powell. Well, I wonder if you could update us. You talked about getting back to full employment, and so could you update how you define that? I mean, you’ve, you know—a few months ago, yourself and other Fed officials talked about getting back to the pre-COVID labor market. There were even hints you might try to do something better than that. Now we heard talk of, as you mentioned, people retiring, and there’s talk of not being able to get back as—all the jobs back because of that and other trends. You did mention the prime-age folks. So can you give us some examples of things you're looking at, specifically, to measure full employment? Will you be looking at prime-age employment population ratio, for example, and, if so, do you need to see it get back to pre-COVID levels to achieve maximum employment, or is there something short of would work? Thank you.
|
CHRIS RUGABER
|
[
{
"content": "Great. Thank you, Michelle. Thank you, Chair Powell. Well, I wonder if you could update us. You talked about getting back to full employment, and so could you update how you define that? I mean, you’ve, you know—a few months ago, yourself and other Fed officials talked about getting back to the pre-COVID labor market. There were even hints you might try to do something better than that. Now we heard talk of, as you mentioned, people retiring, and there’s talk of not being able to get back as—all the jobs back because of that and other trends. You did mention the prime-age folks. So can you give us some examples of things you're looking at, specifically, to measure full employment? Will you be looking at prime-age employment population ratio, for example, and, if so, do you need to see it get back to pre-COVID levels to achieve maximum employment, or is there something short of would work? Thank you.",
"role": "user"
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"content": "Thanks. So maximum employment is, it’s a broad—what would we say?—broad-based and inclusive goal that’s not directly measurable and changes over time due to various factors. You can’t specify a specific goal. So it’s taking into account quite a broad range of things, and, of course, employment—levels of employment—and participation are a part of that. But, in addition, there are other measures of what’s going on in the labor market, like wages is a key measure of how tight the labor market is—the level of quits, the amount of job openings, the flows in and out of various states. So we look at so many different things, and you make an overall judgment. Now, the temptation at the beginning of the recovery was to look at the data in February of 2020 and say, well, that’s the goal because we didn’t know any—that’s what we knew. We knew that was achievable in a context of low inflation. I think we’re in a, you know, we’re learning that. We have to be humble about what we know about this economy, which is still very, you know, COVID-affected, by the way. A lot of what we’re seeing in the last 90 days is because of Delta. We were on a path to a very different place. Delta put us on a different path. And we see these things. But, so I think we’re going to have to—ideally, we would have, we would see further development of the labor market in a context where there isn’t another COVID spike, and then we would be able to see, I think, a lot. We would see whether—how does participation react in that world, in that post-COVID world? Right now, people are staying out of the labor market because of caretaking and because of fear of COVID to a significant extent. You know, we thought that schools reopening and elapsing unemployment benefits would produce some additional labor supply. That doesn’t seem to have been the case, interestingly. So I think there’s room for a whole lot of humility here, as we try to think about what maximum employment would be. We’re going to have to see some time post-COVID so that we know—or post-Delta, anyway—to see what is possible. And I think the learning for those of us who lived through the last cycle is that, over time, you can get to places that didn’t look possible. Now, what we also have now, though, is, we have high inflation. So we have a completely different situation now where we have high inflation, and we have to balance that with what’s going on in the employment market. So it’s a complicated situation, and I would say, we will, we hope to achieve significantly greater clarity about where this economy is going and what the characteristics of the post-pandemic economy are over the first half of next year.",
"role": "assistant"
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] |
Thanks, and thanks for doing this. So, given that answer about employment, I would like to get back to Steve’s question a little bit. On a headline basis, just as it’s evolved this year, do you feel that the two tests on inflation have been met?
|
HOWARD SCHNEIDER
|
[
{
"content": "Thanks, and thanks for doing this. So, given that answer about employment, I would like to get back to Steve’s question a little bit. On a headline basis, just as it’s evolved this year, do you feel that the two tests on inflation have been met?",
"role": "user"
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"content": "Sorry, the two tests?",
"role": "assistant"
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{
"content": "The two tests in the statement—the guidance that it has to hit 2 percent and be on track to moderately be above 2 percent. Has the economy cleared that?",
"role": "user"
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{
"content": "That’s a decision for the Committee. I would put it to you this way. When we reach maximum employment, when we reach a state where labor market conditions are at maximum employment in the Committee’s judgment, it’s very possible that the inflation test will already be met. We’re aware language sounds, it sounds a little out of touch with what’s going on, but, you know, we’re not at maximum employment. When that is the case, we’ll look to see whether the inflation test is met, and there’s a good chance that it will be if you look at how inflation has evolved in the last year and a half.",
"role": "assistant"
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"content": "So, to follow up, so you’re not willing to commit that the current levels of inflation and their persistence have met “moderately” and “for some time.” So, given that, I mean, how should we wonder what “moderately” over and “for some time” mean?",
"role": "user"
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"content": "What I’m really saying is, that question is not before us right now. You know, we had the question on when to taper. We’ve now answered that question and the speed of it and all that. We have not focused on whether we meet the liftoff test, because we don’t meet the liftoff test now because we’re not at maximum employment. What I’m saying is, given where inflation is and where it’s projected to be, let’s say we do meet the maximum-employment test. Then the Committee—the question for the Committee at that time will be, has the inflation test been met? And, you know, I don’t want to get ahead of the Committee on that, but the answer may very well be “Yes, it’s been met.” But we’re not asking that question today, because we’re not running a liftoff test. We’re not evaluating the liftoff test today. We didn’t have that discussion at today’s meeting. We did talk about the economy and the development of the economy, but we didn’t ask ourselves whether the liftoff test is met, because, you know, it’s clearly not met on the maximum-employment side.",
"role": "assistant"
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] |
Hi, Chair Powell. Matthew Boesler with Bloomberg. So, when you’re looking at this question of assessing whether or not the U.S. economy is at maximum employment, do you have a framework for making that judgment that is independent of what inflation is doing? And, if not, does it complicate that assessment, given all of the uncertainty about inflation right now and the inclination to believe that, you know, the high inflation we’re seeing is not related to capacity utilization in the labor market? Thank you.
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MATTHEW BOESLER
|
[
{
"content": "Hi, Chair Powell. Matthew Boesler with Bloomberg. So, when you’re looking at this question of assessing whether or not the U.S. economy is at maximum employment, do you have a framework for making that judgment that is independent of what inflation is doing? And, if not, does it complicate that assessment, given all of the uncertainty about inflation right now and the inclination to believe that, you know, the high inflation we’re seeing is not related to capacity utilization in the labor market? Thank you.",
"role": "user"
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"content": "So we don’t actually define maximum employment as—we define it in terms of inflation, but, of course, there is a connection there. Maximum employment has to be a level that is consistent with stable prices. But that’s not really how we think about it. We think about maximum employment as looking at a broad range of things. You can’t just look at— unlike inflation, where you can have a number. But with maximum employment, you could be in a situation, hypothetically, where the unemployment rate is low, but there are many people who are out of the labor force and will come back in. And so you wouldn’t really be at maximum employment, because there’s this group that isn’t counted as unemployed. So we look at a range of things. So the thing is, by many measures, we are at a very tight labor market. I mentioned quits and job openings and wages and things. Many of them are signaling a tight labor market, but the issue is, how persistent is that? Because you have people who are held out of the labor market, you know, of their own—they’re holding themselves out of the labor market because of caretaking needs or because of fear of COVID, or, for whatever reason, they’re staying out. And it’s clear that there are, you know—with tremendous demand for workers and wages moving up, it does seem like we’re set up to go back to a higher job- creation rate. So that would suggest that you’re not at maximum employment. So, at the end of the day, it is a judgment thing. But, of course, at the end of it, it also has to be a level of employment that’s consistent with price stability.",
"role": "assistant"
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"content": "And if I could just follow up briefly, you know, you’ve talked a little bit about this possibility that the two goals might be in tension and how you would have to balance those two things. Could you talk a little bit about what the Fed’s process for balancing those two goals would be in the event that, say, come next year, you decide there’s a serious risk of persistent inflationary pressures despite ongoing employment shortfalls?",
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"content": "Yes. I mean, again, it’s a risk-management thing. It’s not—I can’t reduce it to an equation, but, ultimately, it’s about risk management. So you want to be in a position to act, to cover the full range of plausible outcomes, not just the base case. And in this case, the risk is skewed. For now, it appears to be skewed toward higher inflation. So we need to be in a position to act in case it becomes necessary to do so or appropriate to do so, and we think we will be. So that’s how we’re thinking about it. And I think, though, that, judgmentally, too, it’s appropriate to be patient. It’s appropriate for us to see what the labor market and what the economy look like when they heal further. We know that we were on a path to a different place, as I mentioned, when Delta arrived. And Delta stopped, it stopped job creation. It stopped that transition away from a goods-focused economy where there’s excess demand for goods because there—services are not available. People are not traveling. That transition itself could help bring inflation down, because, presumably, people would spend a little less on goods while they start spending more on travel and all sorts of travel services and things like that. So we want to see that healthy process unfold as we decide what the true state of the economy is, and we think it will evolve in a way that will mean lower inflation. Bottlenecks should be abating. We start to see that now with some of them, but, overall, they haven’t gotten better overall, and, you know, we’re very aware of that. So that’s really how we’re thinking about it. We’re thinking that time will tell us more. In the meantime, we don’t think it’s time to raise rates now. You know, if we do conclude that it’s necessary to do so, then we’ll be patient, but we won’t hesitate.",
"role": "assistant"
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] |
Thank you, Mr. Chairman, for taking the call. So the Federal Reserve—I want to talk about climate change. The Federal Reserve released a statement today—says “the Federal Reserve supports the efforts... to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory” outcomes. Is this putting us on the path to regulate what banks can offer loans on or invest in, like coal plants or fossil fuels?
|
EDWARD LAWRENCE
|
[
{
"content": "Thank you, Mr. Chairman, for taking the call. So the Federal Reserve—I want to talk about climate change. The Federal Reserve released a statement today—says “the Federal Reserve supports the efforts... to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory” outcomes. Is this putting us on the path to regulate what banks can offer loans on or invest in, like coal plants or fossil fuels?",
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"content": "So that’s not a decision for bank regulators or for any agency. That’s a decision for elected representatives. So we feel that any role that we have—and we do think we have a role in climate change. It relates to our existing mandates, and our existing mandates are, really, prudential regulation of financial institutions. We expect them, and the public will expect us to expect them, to understand and be in a position to manage their risks. So that’s physical risk, and it’s transition risk for climate. And, by the way, the large financial institutions are doing this already, and, you know, we think that’s right within our mandate. There’s also a financial stability question, the overall stability of the financial system. And so, from that standpoint, we can do research. We can try to help understand what will the pathways be through which climate change effects the economy—both physical risk and transition risk. That’s what we can do, and that’s what we will do. And we’ll do it well. Within the frame of our existing mandates, we’ll do it well. We’re not the people who will decide the national strategy on climate change. That has to be elected people, and not so much us. We feel like we have that narrow mandate, and we will do it well.",
"role": "assistant"
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] |
Hi, Chair Powell. So the Fed recently announced that there is going to be new conflict-of-interest rules for investments by Fed officials, and this follows, obviously, the resignation of two regional Fed presidents. And I’m just wondering, do you think that there is more that you will need to do to rebuild the credibility of the Fed, such as, you know, requiring officials to put their assets in blind trusts? And also, if you could speak to whether you have any concerns that any rules or laws were broken by Fed officials. Thank you.
|
VICTORIA GUIDA
|
[
{
"content": "Hi, Chair Powell. So the Fed recently announced that there is going to be new conflict-of-interest rules for investments by Fed officials, and this follows, obviously, the resignation of two regional Fed presidents. And I’m just wondering, do you think that there is more that you will need to do to rebuild the credibility of the Fed, such as, you know, requiring officials to put their assets in blind trusts? And also, if you could speak to whether you have any concerns that any rules or laws were broken by Fed officials. Thank you.",
"role": "user"
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"content": "So we, you know, we—let me just say that this system, the ethics system we had in place had been in place for decades and had, as far as we know, served us well, and then that was no longer the case. And so we had no moment of denial about that. As a group, we stepped in, and we took the actions that we took. And, you know, within one FOMC cycle, we announced a new set of rules to, you know, to try to put us back where we need to be, which is, we need to have the complete trust of the American people that we’re working in their interest all the time—absolutely critical to our work, as it is for any government agency. And I feel like this called that into question. So we reacted, I would characterize it, strongly and forcefully. If there were other things that we could do that were reasonable, we would certainly do them. So you asked me about blind trusts. You know, the overall authority for ethics around these issues in the federal government is the Office of Government Ethics, OGE. And they have a long-held position which is not favorable to blind trusts. They do not encourage them. They don’t think they’re effective. They think they’re cumbersome. And they think there are better ways to get at the things that need to be done. And those are the things that we’re actually doing. So I don’t know that there are any blind trusts, for that reason, because they are the, they’re the regulator. They say this on their website, if you look. In terms of laws broken, you know, I asked the inspector general to look to see whether there were rules broken and whether there were laws broken, and I won’t speculate on that. But that is with the inspector general now and, of course, out of my hands.",
"role": "assistant"
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] |
Mr. Chairman, the critics of your patience policy argue that, given the long and variable lags with which monetary policy works, that you are likely to end up, given inflation, by having to raise rates faster and farther than you would have liked and, therefore, send the economy into recession. Given the fact that, basically, your forecast has been chasing inflation over the last year, and now you’re talking about it not coming down until the second or third quarter, why would they be wrong in thinking that?
|
MICHAEL MCKEE
|
[
{
"content": "Mr. Chairman, the critics of your patience policy argue that, given the long and variable lags with which monetary policy works, that you are likely to end up, given inflation, by having to raise rates faster and farther than you would have liked and, therefore, send the economy into recession. Given the fact that, basically, your forecast has been chasing inflation over the last year, and now you’re talking about it not coming down until the second or third quarter, why would they be wrong in thinking that?",
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"content": "Well, so, let me say what’s happened—and we’re very, very straightforward about it—is that inflation has come in higher than expected, and bottlenecks have been more persistent and more prevalent. We see that just like everybody else does, and we see that they’re now on track to persist well into next year. That was not expected—not expected by us, not expected by other macro forecasters. Now, let me say, you know, it’s difficult enough to just forecast the economy in normal times. When you’re talking about, you know, global supply chains in turmoil, it’s a whole different thing. And you’re talking about a pandemic that’s holding people out of the labor force for reasons that we can sample, but we don’t have a lot of experience with this. So it’s very, very difficult to forecast and not easy to set policy. So we have to set policy, though. So that’s what we’re doing. And, you know, so, to look at your question this way, I don’t think that we’re behind the curve. I actually believe that policy is well positioned to address the range of plausible outcomes, and that’s what we need to do. I do think it would be premature to raise rates today. That’s not—I don’t think that’s controversial. Certainly, I don’t know anyone arguing for that today. And the reason is that there’s still ground to cover to get to maximum employment. And we don’t want to stop that when there’s good reason to think—there’s still good reason to think, although it’s been delayed, clearly, there’s good reason to think that the economy will reopen, particularly if we do get past, you know, significant outbreaks of COVID. That’s when we’re really going to see what the characteristics of the labor market are. And, you know, I think, you know, the bottlenecks that we’re seeing in global supply chains around goods and, frankly, now at our own domestic ports, because demand is stronger than the capacity of those ports—those things are going to work themselves out. We have a flexible economy. It’ll take some time, but, you know, it took—you know, the experts managed to create a vaccine faster than, certainly, than I expected. And I think this stuff will work itself out over the course of next year. That is my baseline understanding, and that’s a very widely held one among people. But, you know, we are prepared for different eventualities, and we will use our tools to achieve price stability and maximum employment. And we’re going to let the data lead us to where we need to go. Our policy will adapt—and has already adapted—to the changing understanding of inflation and of bottlenecks and the whole supply-side story—which is also partly a demand story. So our policy will continue to adapt as is appropriate.",
"role": "assistant"
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] |
-GENZER. Hi, Chair Powell. Thanks for taking our questions. So you announced that the Fed is going to taper at a rate of, starting at $15 billion a month, and that’s more than twice the pace of the last taper. So why are you tapering faster this time?
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NANCY MARSHALL
|
[
{
"content": "-GENZER. Hi, Chair Powell. Thanks for taking our questions. So you announced that the Fed is going to taper at a rate of, starting at $15 billion a month, and that’s more than twice the pace of the last taper. So why are you tapering faster this time?",
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"content": "The economy is in quite a different place than when we tapered back in, I guess it was, 2013. We were much farther away from maximum employment. Inflation was much lower. This is an economy where demand is very, very strong, very strong, and job openings substantially exceed the number of unemployed people. So the need for further stimulus is far less than it was in 2013, where we still had quite a ways to go. I mean, after we began that taper, it was still many years before we reached what I would characterize as conditions consistent with maximum employment, let alone price stability. So this is quite a different situation, and, you know, the Committee unanimously felt today that we had met the test that we’d articulated, and this was appropriate. And this is faster than, you know, than what people had expected six months ago. It’s earlier and faster, and that’s because our, as I mentioned, our policy has been adapting to the situation as it evolves, as it’s clarifying itself, and that’s partly because we see inflation coming in higher—so.",
"role": "assistant"
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] |
Yes, thank you for taking my question. I wonder if the Fed has given any thoughts yet to the endgame for the balance sheet in terms of, you know, once you get the taper process complete, will you hold the balance sheet steady, or will you allow it to start passively winding down? And then, in a related question, do you have any greater insight into what Fed bond buying actually does for the economy? In terms of its economic impact, have you been able to, you know, measure it or quantify it in any fashion, you know, because I’m sure there’s often been questions about, what is bond buying actually doing to help the economy?
|
MICHAEL DERBY
|
[
{
"content": "Yes, thank you for taking my question. I wonder if the Fed has given any thoughts yet to the endgame for the balance sheet in terms of, you know, once you get the taper process complete, will you hold the balance sheet steady, or will you allow it to start passively winding down? And then, in a related question, do you have any greater insight into what Fed bond buying actually does for the economy? In terms of its economic impact, have you been able to, you know, measure it or quantify it in any fashion, you know, because I’m sure there’s often been questions about, what is bond buying actually doing to help the economy?",
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"content": "Sure. So in terms of the balance sheet, those questions that you mention—we haven’t gone back to them. Now that we’ve tapered, I expect ’s exactly what we’ll do in coming meetings. And we’ll do it in an orderly fashion, and we’ll talk about reinvestment and all those things. And we don’t have to make decisions on those yet. But, you know, typically, when we’re doing a new subject like that, we’ll have a series of briefings and discussions. And that’s what we will now begin to do. In terms of the effect of asset purchases on the economy, so, there’s a tremendous amount of research and scholarship on this. And, you know, you can kind of—you can find different people coming out with different views. But I would say, the most mainstream view would be that you’re at the effective lower bound, so how do you affect longer-term rates? There are two ways. One, so you can’t lower rates—let’s say you can’t lower rates any further, hypothetically. So you can give forward guidance. You can say, we’re going to keep the rates low for a period of time, either for a specific period, or until certain conditions are met. The markets will do the math, and that’ll have an effect on longer-term borrowings even, you know, 10, 30 years out thing. So that’s one thing. The other thing you can do is, you just go buy those securities, buy longer-term securities. That will drive down longer-term rates and hold them lower, and, you know, rates right across the, right across the rate spectrum matter for borrowers. So lower rates encourage more borrowing, encourage more economic activity. People—you can service your debt. You have more free cash flow. You know, it’s not different from what we do at the short end. So that was discussed long before anybody did it. That was—I think Milton Friedman said was what you could do if you were pinned at the lower bound, many, many years ago. So, anyway, that’s how it’s supposed to work. And, you know, it’s quite hard to be precise about these things because, you know, you only have one economy, and you can’t run two different economies right next to each other and do a scientific experiment. But most people find—most of the findings are that it does support economic activity in the way that you would expect, which is to say, at the margin, more economic activity with lower rates, which is why we do what we do. More accommodative financial conditions lead to more economic activity, over time, with a lag. So I think that’s the main finding I would say on QE.",
"role": "assistant"
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] |
Chair Powell, Chair Powell, you’ve addressed already questions about the stock purchases that took place from some of the regional Fed presidents and, you know, addressing the American people to make sure that they can trust the Fed. I was wondering, also, in light of the fact that, you know, we now have questions about your own future, whether or not President Biden will nominate you for a second term, what would you say—to the President and to senators that, potentially, you know, will be voting on a renomination—about this, specifically with regards to your future as Fed Chair for a possible second term?
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PAUL LAMONICA
|
[
{
"content": "Chair Powell, Chair Powell, you’ve addressed already questions about the stock purchases that took place from some of the regional Fed presidents and, you know, addressing the American people to make sure that they can trust the Fed. I was wondering, also, in light of the fact that, you know, we now have questions about your own future, whether or not President Biden will nominate you for a second term, what would you say—to the President and to senators that, potentially, you know, will be voting on a renomination—about this, specifically with regards to your future as Fed Chair for a possible second term?",
"role": "user"
},
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"content": "So I’m not going to—I won’t have any—I will answer your question, Paul, but I’m not going to have any comment whatsoever on the renomination process at all.",
"role": "assistant"
}
] |
Hi. I wanted to ask about the supplementary leverage ratio. Is the Fed still planning on taking comment on ways to permanently address that, and how concerned are you, ultimately, about banks’ willingness to intermediate in the Treasury markets without a permanent fix?
|
HANNAH LANG
|
[
{
"content": "Hi. I wanted to ask about the supplementary leverage ratio. Is the Fed still planning on taking comment on ways to permanently address that, and how concerned are you, ultimately, about banks’ willingness to intermediate in the Treasury markets without a permanent fix?",
"role": "user"
},
{
"content": "So I don’t have anything for you on supplemental leverage ratio right now. We are looking at ways to, if there are ways we can address liquidity issues through that channel. We’re also—we also have a—there’s a working group headed by the Treasury about, over Treasury securities markets, and what happened in the acute phase of the pandemic, and what structural things may need to be done. So that would be part of that workstream, and I know that there’s a lot going on. I’m not sure when that report will be out. So it’s work under way. That’s one of the many issues that are part of that, along with things like central clearing of Treasuries, greater central clearing, and, you know, many other ideas. It’s important that we have a liquid Treasury securities market. It’s a huge public benefit that we do, and, you know, I think we need to do those things that enable that, you know, while also assuring the safety and soundness of our largest financial institutions, who tend to be the main dealers. So we have to make sure ’s always a first order of concern as well.",
"role": "assistant"
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] |
Hi, Chairman Powell. Brian Cheung, Yahoo Finance. So, just to expand on the ethics conversation, you talked about how you engage with people on Capitol Hill and in the Administration. You talked about what you’ve done already, but I’m just wondering if you can take a step back and just assess whether or not there was reputational damage as a result of that, either from the public’s view or from the financial community’s view of the Federal Reserve’s independence. And then, secondly, do you look back on the whole episode and have thoughts on your individual responsibility in preventing something like this from having happened?
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BRIAN CHEUNG
|
[
{
"content": "Hi, Chairman Powell. Brian Cheung, Yahoo Finance. So, just to expand on the ethics conversation, you talked about how you engage with people on Capitol Hill and in the Administration. You talked about what you’ve done already, but I’m just wondering if you can take a step back and just assess whether or not there was reputational damage as a result of that, either from the public’s view or from the financial community’s view of the Federal Reserve’s independence. And then, secondly, do you look back on the whole episode and have thoughts on your individual responsibility in preventing something like this from having happened?",
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"content": "You know, I think it’s too soon to say what the reputational damage is. I think, from the very beginning, my reaction was: We need to deal with this straightforwardly, transparently, and forcefully. And that’s what we’re going to do. I mean, it’s, it means everything to me that we do whatever it takes to make sure that nothing like this happens again, and I like to think we’ve made a real good start on that. If you think about it, you cannot execute a trade unless it’s precleared, and then you have to say, “Execute.” It’s not even a trade. Really, there’s no trading going on. This is for investment and, you know, getting liquidity for life’s expenses. But you then have to wait 45 days to actually execute that sale or purchase. So I think it’s a pretty good system. We’ll always be looking to make it better. So in terms of our independence, you know, look, I think we will address this, and I think we have. And I like to think it’s enough, but it’s going to, you know—we’re just beginning to implement it. We have to write the rules, which we’re doing, you know, as quickly as possible. We need more people. We’re going to have to resource this much more significantly here at the Board, and also, we’re going to need appropriate technology, because, you know, the Fed has more than—the System has more than 30,000 employees. Not all of them, far few of them, will be covered by this, but the senior officers, who will be covered by this, will, you know, will have to have technology access, and it’s going to have to work efficiently. So there’s a lot of work to do to implement. You know, again, I would just say, this system has been in place for decades. And it was in place when I took over. It was in place for the last, at least the last three or four Chairs. And, you know, it was what it was. And, you know, it proved to have weaknesses in it. And part of that was, it wasn’t uniformly enforced across the System. I’m a big believer in the value of the Federal Reserve System and the Reserve Banks. But you had 12 different ethics officers at 12 different Banks. And you had ethics people here. And, you know, compliance wasn’t, it wasn’t all exactly the same. It was a little bit different and uneven, and also, the rules were— you know, we didn’t imagine the problems that happened. And they may have actually been—I don’t know this—but they may actually have been in compliance with the specifics of our rules. They were clearly not in compliance with the part of our rules that said, don’t do anything that would create that appearance. I mean, that’s clear. This was a bad appearance. So, anyway, what can we do? We are where we are. It happened, and we just have to deal with it forthrightly and transparently and “own” it and step up to this, you know, meet this moment. I’m totally committed to doing that. And, again, if there are better ideas, I’d love to hear them, but I think we have so far made a good start.",
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"content": "When you say you spoke with Administration officials, did that include the President?",
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"content": "I’m not going to answer who I spoke to at all. I just, I’m not going to give you any names, so don’t take that as a “yes” or “no.” I’m just not going to start down that road.",
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] |
Yes, thank you. Chair, I just want to dig a little bit deeper on employment. We’ve seen what’s been called the great resignation, folks leaving their jobs in record numbers. Is there any feeling there that maybe you’ve been accused of “fighting the last war”—that perhaps the labor dynamics have changed in the post-COVID environment and that full employment may not look like what it looked like before?
|
JEFF COX
|
[
{
"content": "Yes, thank you. Chair, I just want to dig a little bit deeper on employment. We’ve seen what’s been called the great resignation, folks leaving their jobs in record numbers. Is there any feeling there that maybe you’ve been accused of “fighting the last war”—that perhaps the labor dynamics have changed in the post-COVID environment and that full employment may not look like what it looked like before?",
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"content": "Yes. So, what’s happening is, people are leaving their jobs. They’re quitting their jobs in all-time-high numbers—but, in many cases, going back into employment and getting higher wages. So a lot of the higher wages you’re seeing are for job switchers rather than incumbents. So that’s just, that’s a sign of a really strong labor market, as opposed to people just running off and quitting. There have also been—there are a significant number of retirements, and we’ll just have to see what that means. So, toward the end of the last cycle, which was the longest in our recorded economic history, we did see labor force participation moving up well above what economists estimate was the trend, and part of that was people staying in the labor force or just not retiring at the rates they were expected to retire. So maybe this was just catch-up on that. I am a believer that, over time, you won’t know how far—you won’t know what can happen with labor force participation in advance. You’re just going to have to give it some time, because we saw that over and over again. There are things that we can, where we can say, you know, this is where the limit is. Labor force participation is a much more flexible subject for me, and so I do think we need to be humble about what the limits are of labor force participation. But we expect labor force participation to pick up. We don’t know the pace at which it will do so. So in terms of full employment, as I discussed earlier, I think, at the very beginning of the recovery, the natural thing to do was to look back at labor conditions, labor market conditions in February of 2010, at the end of the longest expansion in our history. There was so much to like about that labor market, a really historically good labor market—never perfect, but a good labor market. We’re in a different world now. This is a—it’s just very different. The pandemic recession was the deepest, and the recovery has been the fastest. And wages didn’t really go down. And, you know, real incomes were more than fully replaced by fiscal policy support. All of this is completely unusual. You know, an economy where inflation was driven by services is now inflation where—all the inflation is in goods, which have had negative inflation for a quarter-century. So you ask about full employment. I think we have to—I’m very open to the thought that it’s going to be an empirical question of where it is located, and we’re just going to learn more and more. I mean, one thing we’ll learn, I think, I hope we’ll learn in the next, in the near term is, once the Delta variant really does continue to decline, what’s going to happen to employment? Are we going to start to see over the winter, you know, significant increases in jobs again? If you look back, the three-, six-, and nine-month average job creation is between 550,000 and 600,000. So if you think of that as a stronger—you don’t have to think back to the million-job months of June and July. You can just think, okay, 550 to 600—if we should get back on that path, then we would be making good progress, and we like to see that, of course. So we’ll know so much more. And, believe me, we understand. It’s a different world in so many ways. And we’re very open to that.",
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Hi, Chair Powell. Thank you for taking our questions. Jeanna Smialek from the New York Times. I wonder if you could give us a little detail around how you’ll know when to slow down these rate increases and how you’ll eventually know when to stop.
|
JEANNA SMIALEK
|
[
{
"content": "Hi, Chair Powell. Thank you for taking our questions. Jeanna Smialek from the New York Times. I wonder if you could give us a little detail around how you’ll know when to slow down these rate increases and how you’ll eventually know when to stop.",
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"content": "So I will answer—I will answer your question directly, but I want to start here today by saying that my main message has not changed at all since Jackson Hole. The FOMC is strongly resolved to bring inflation down to 2 percent, and we will keep at it until the job is done. So the way we’re thinking about this is, the overarching focus of the Committee is getting inflation back down to 2 percent. To accomplish that, we think we’ll need to do two things, in particular: to achieve a period of growth below trend; and also some softening in labor market conditions to foster a better balance between demand and supply in the labor market. So on the first, the Committee’s forecasts and those of most outside forecasters do show growth running below its longer-run potential this year and next year. On the second, though, so far there’s only modest evidence that the labor market is cooling off. Job openings are down a bit, as you know; quits are off their all-time highs; there’s some signs that some wage measures may be flattening out but not moving up; payroll gains have moderated but not much. And in light of the high inflation we’re seeing, we think we’ll need to—and in light of what I just said, we think that we’ll need to bring our funds rate to a restrictive level and to keep it there for some time. So, what will we be looking at, I guess, is your question. So we’ll be looking at a few things. First, we’ll want to see growth continuing to run below trend, we’ll want to see movements in the labor market showing a return to a better balance between supply and demand, and, ultimately, we’ll want to see clear evidence that inflation is moving back down to 2 percent. So that’s what we’ll be looking for. In terms of reducing rates, I think we’d want to be very confident that inflation is moving back down to 2 percent before we would consider that.",
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Thank you, Mr. Chairman. Steve Liesman, CNBC. Can you talk about how you factor in the variable lags on inflation and the extent to which the outlook for rates should be seen as linear in the sense that you keep raising rates? Well, can you envision a time when there’s a pause to look at what has been wrought in the economy from the rate increases? Thank you.
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STEVE LIESMAN
|
[
{
"content": "Thank you, Mr. Chairman. Steve Liesman, CNBC. Can you talk about how you factor in the variable lags on inflation and the extent to which the outlook for rates should be seen as linear in the sense that you keep raising rates? Well, can you envision a time when there’s a pause to look at what has been wrought in the economy from the rate increases? Thank you.",
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"content": "Sure. So, of course, monetary policy does, famously, work with long and variable lags. The way I think of it is, our policy decisions affect financial conditions immediately. In fact, financial conditions have usually been affected well before we actually announce our decisions. Then, changes in financial conditions begin to affect economic activity fairly quickly, within a few months. But it’s likely to take some time to see the full effects of changing financial conditions on inflation. So we are very much mindful for that. And that’s why I noted in my opening remarks that, at some point, as the stance of policy tightens further, it will become appropriate to slow the pace of rate hikes while we assess how our cumulative policy adjustments are affecting the economy and inflation. So that’s how we think about that. Your second question—sorry—was?",
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"content": "Is there a point in time you could see pausing? Is it linear? Do you keep raising rates, or is there—oh, sorry, I should know better than to not talk with a microphone.",
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"content": "I should know better than to answer your second question.",
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"content": "Well, there you go. Is it linear? Do you keep raising rates, or is there a pause that you could envision where you figure out what has happened to the economy and give time to catch up in the real economy—the rate increase time to catch up in the real economy? Thank you.",
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"content": "So I think it’s very hard to say with precise certainty the way this is going to unfold. As I mentioned, what we think we need to do and should do is to move our policy rate to a restrictive level that’s restrictive enough to bring inflation down to 2 percent, where we have confidence of that. And what you see in the SEP numbers is people’s views as of today, as of this meeting, as to the levels that will be appropriate. Now, those will evolve over time, and I think we’ll just have to see how that goes. There is a possibility, certainly, that we would go to a certain level that we’re confident in and stay there for a time. But we’re not at that level. Clearly, today we’re, we’ve just moved, I think, probably, into the very lowest level of what might be restrictive, and, certainly, in my view and the view of the Committee, there’s a ways to go.",
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] |
Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. The projections show the unemployment rate rising to 4.4 percent next year, and, historically, that rise in the unemployment rate would typically bring a recession with it. Should we interpret that to mean no soft landing, and is that rise necessary to get inflation down?
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RACHEL SIEGEL
|
[
{
"content": "Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. The projections show the unemployment rate rising to 4.4 percent next year, and, historically, that rise in the unemployment rate would typically bring a recession with it. Should we interpret that to mean no soft landing, and is that rise necessary to get inflation down?",
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"content": "Right. So you’re right—in the SEP, there’s what I would characterize as a relatively modest increase in the unemployment rate from a historical perspective, given the expected decline in inflation. Now, why is that? So, really, that is what we generally expect because we see the current situation as outside of historical experience in a number of ways, and I’ll mention a couple of those. First—and these—but first, job openings are incredibly high relative to the number of people looking for work. It’s plausible, I’ll say, that job openings could come down significantly—and they need to—without as much of an increase in unemployment as has happened in earlier historical episodes. So that’s one thing. In addition, in this cycle, longer-run inflation expectations have generally been fairly well anchored, and, as I’ve said, there’s no basis for complacency there. But to the extent that continues to be the case, that should make it easier to restore price stability. And I guess the third thing I would point to that’s different this time is that part of this inflation is caused by this series of supply shocks that we’ve had, beginning with the pandemic, and, really, with the reopening of the economy, and more recently amplified and added to by Russia’s invasion of Ukraine—have all contributed to the sharp increase in inflation. So these are the kinds of events that are not really seen in prior business cycles, and, in principle, if those things start to get better—and we do see some evidence of the beginnings of that. It’s not much more than that, but it’s good to see that. For example, commodity prices look like they may have peaked for now; supply chain disruptions are beginning to resolve. Those developments, if sustained, could help ease the pressures on inflation. So let me just say, how much these factors will turn out to really matter in this sequence of events—it remains to be seen. We have always understood that restoring price stability while achieving a relatively modest decline—or, rather, increase—in unemployment and a soft landing would be very challenging. And we don’t know—no one knows whether this process will lead to a recession or, if so, how significant that recession would be. That’s going to depend on how quickly wage and price inflation pressures come down, whether expectations remain anchored, and whether, also, do we get more labor supply, which would help as well. In addition, the chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive or restrictive for longer. Nonetheless, we’re committed to getting inflation back down to 2 percent—because we think that a failure to restore price stability would mean far greater pain later on.",
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"content": "Just to follow up on one small thing—are vacancies still at the top of your list in terms of understanding the labor market and how much room there is there?",
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"content": "Yes, vacancies are still almost a 2-to-1 ratio to unemployed people. That and quits are really very good ways to look at how tight the labor market is and how different it is from other cycles, where, generally, the unemployment rate itself is the single best indicator. We think those things have, for quite a time now, really added value in terms of understanding where the labor market is.",
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] |
Nick Timiraos of the Wall Street Journal. You said not too long ago, in describing the policy destination, there’s still a way to go. But I imagine you have to have some idea about how you’re thinking about your destination, whether it’s a stopping point or a pausing point. And so I was wondering if you could discuss how you are thinking about, as the data come in, where that destination is, how it’s moving up. If inflation doesn’t perform as you expect, do you want to have a policy rate that’s above the underlying inflation rate, for example, and do you have an estimate for where you think the underlying inflation rate might be in the economy right now?
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NICK TIMIRAOS
|
[
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"content": "Nick Timiraos of the Wall Street Journal. You said not too long ago, in describing the policy destination, there’s still a way to go. But I imagine you have to have some idea about how you’re thinking about your destination, whether it’s a stopping point or a pausing point. And so I was wondering if you could discuss how you are thinking about, as the data come in, where that destination is, how it’s moving up. If inflation doesn’t perform as you expect, do you want to have a policy rate that’s above the underlying inflation rate, for example, and do you have an estimate for where you think the underlying inflation rate might be in the economy right now?",
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"content": "Well, so, again, we believe that we need to raise our policy stance overall to a level that is restrictive—and by that I mean, is meaningfully, putting meaningful downward pressure on inflation. That’s what we need to see in the stance of policy. We also know that there are long and variable lags, particularly as they relate to inflation. So it’s a challenging assessment. So, what do you look at? You look at broader financial conditions, as you know; you look at where rates are, real and nominal in some cases; you look at credit spreads; you look at financial conditions indexes. We also, I would think—and you see this in the—this is something we talked about today in the meeting and talk about in all of our meetings. And you see this, I think, in the Committee forecast. You want to be at a place where real rates are positive across the entire yield curve. And I think that would be the case if you look at the numbers that we’re writing down and think about—you measure those against some forward-looking assessment of inflation, inflation expectations. I think you would see at that time—you’d see positive real rates across the yield curve, and that is also an important consideration.",
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] |
Hi. Howard Schneider with Reuters. Thanks for the opportunity. I just want to be clear on the SEPs. You say it’s meeting by meeting, but it sure looks like we’re going 75–50–25. Is 75 next month the baseline?
|
HOWARD SCHNEIDER
|
[
{
"content": "Hi. Howard Schneider with Reuters. Thanks for the opportunity. I just want to be clear on the SEPs. You say it’s meeting by meeting, but it sure looks like we’re going 75–50–25. Is 75 next month the baseline?",
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"content": "So we make one decision per meeting, and the decision we made today was to raise the federal funds rate by 75 basis points. You’re right that the median for the year-end suggests another 125 basis points in rate increases, but there’s also, there’s another fairly large group that saw a 100 basis points addition to where we are today. So that would be 25 basis points less. So we’re going to make that decision at the meeting. We didn’t make that decision today; we didn’t vote on that. I would say that we’re committed to getting to a restrictive level for the federal funds rate and getting there pretty quickly, and that’s what we’re thinking about.",
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"content": "So, just as a follow-up to that, I’m wondering about the risk-management considerations here, given there’s some discussion now of overdoing it. What’s the incentive to continue front-loading right now? Is it lack of progress on inflation seen in the CPI reports? Or is it a motivation to get as much done while the job market is still as strong as it is?",
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"content": "So, what we’ve seen is, inflation has—our expectation has been that we would begin to see inflation come down, largely because of supply-side healing. By now we would have thought that we’d have seen some of that. We haven’t. We have seen some supply- side healing, but inflation has not really come down. If you look at core PCE inflation, which is a good measure of where inflation is running now, if you look at it on a 3-, 6-, and 12-month trailing annualized basis, you’ll see that inflation is at 4.8 percent, 4.5 percent, and 4.8 percent. So that’s a pretty good summary of where we are with inflation. And that’s not where we expected or wanted to be. So, what that tells us is that we need to continue, and we can—keep doing these, and we did today—do another large increase as we approach the level that we think we need to get to. And we’re still discovering what that level is. But people are writing that down in their SEP where they think policy needs to be. So that’s how we’re thinking about it.",
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] |
Thank you. Colby Smith with the Financial Times. Chair Powell, how should we interpret the fact that core inflation is still not forecast in the SEP to be back to target in 2025, and yet the dot plot projects cuts as early as 2024? And does that mean there’s a level of inflation above the 2 percent target that the Fed is willing to tolerate?
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COLBY SMITH
|
[
{
"content": "Thank you. Colby Smith with the Financial Times. Chair Powell, how should we interpret the fact that core inflation is still not forecast in the SEP to be back to target in 2025, and yet the dot plot projects cuts as early as 2024? And does that mean there’s a level of inflation above the 2 percent target that the Fed is willing to tolerate?",
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"content": "So I guess core is at 2.1 in 2025—in the median—and headline is at 2.0, so that’s pretty close. I mean, we write down our forecasts, and we figure out what the median is, and we publish it. So it’s not—I mean, I would say that if, actually, if the economy followed this path, this would be a pretty good outcome. But you’re right—it is a tenth higher than 2 percent.",
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"content": "Okay. Just as a quick follow-up: I mean, if the concern is that underlying inflation is becoming more entrenched, perhaps, each month, then why forgo the more aggressive 100 basis point increase today, and does that risk having to do more later on?",
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"content": "Yeah. So we, as we said at the last press conference and in between that one and this one, we said that we would make our decision based on the overall data coming in. So, if you remember, we got a surprisingly low reading in July and then a surprisingly high reading for August. So I think you have to—you can’t really—you never want to overreact too much to any one data point. So if you look at them together—and, as I just mentioned, if you really look at this year’s inflation, 3-, 6-, and 12-month trailing, you see inflation is running too high. It’s running 4.5 percent or above; you don’t need to know much more than that. If that’s the one thing you know, that this Committee is committed to getting to a meaningfully restrictive stance of policy and staying there until we feel confident that inflation is coming down. That’s how we think about it.",
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] |
Hi. Victoria Guida with Politico. I wanted to ask about the balance sheet. You all have left open the possibility that you might sell mortgage-backed securities, but we’ve seen significant slowing in the housing market. Mortgage rates have gone up significantly, and I’m just wondering whether conditions there might affect your plans for how quickly you have the runoff on the MBS side.
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VICTORIA GUIDA
|
[
{
"content": "Hi. Victoria Guida with Politico. I wanted to ask about the balance sheet. You all have left open the possibility that you might sell mortgage-backed securities, but we’ve seen significant slowing in the housing market. Mortgage rates have gone up significantly, and I’m just wondering whether conditions there might affect your plans for how quickly you have the runoff on the MBS side.",
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"content": "So we, what we said, as you know, was that we would consider that once balance sheet runoff is well under way. I would say it’s not something we’re considering right now and not something I expect to be considering in the near term. It’s just, it’s something I think we will turn to, but that time, the time for turning to it, has not come and is not close.",
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"content": "Will conditions in the housing market affect that decision?",
"role": "user"
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"content": "I think a number of things might affect that decision, really. The main thing is, we’re not considering that decision, and I don’t expect that we will any time soon.",
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] |
Thanks. Neil Irwin with Axios. A number of commentators have come to the view, including over at the World Bank, that simultaneous global tightening around the world is, creates a risk of a global recession that’s worse than is necessary to bring inflation down. How do you see that risk? How do you think of coordination with your fellow central bankers? And is there much risk of overdoing it on a global level?
|
NEIL IRWIN
|
[
{
"content": "Thanks. Neil Irwin with Axios. A number of commentators have come to the view, including over at the World Bank, that simultaneous global tightening around the world is, creates a risk of a global recession that’s worse than is necessary to bring inflation down. How do you see that risk? How do you think of coordination with your fellow central bankers? And is there much risk of overdoing it on a global level?",
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"content": "So we, actually, my colleagues and I, a number of my FOMC colleagues and I, just got back from one of our frequent trips to Basel, Switzerland, to meet with other senior central bank officials from around the world. We are in pretty regular contact, and we exchange, of course—we all serve a domestic mandate, domestic objectives—in our case, the dual mandate, maximum employment and price stability. But we regularly discuss what we’re seeing in terms of our own economy and international spillovers, and it’s a very ongoing, constant a process. So we are very aware of what’s going on in other economies around the world and what that means for us, and vice versa. The forecasts that we put together, that our staff puts together, and that we put together on our own always take all of that—try to take all of that into account. I mean, I can’t say that we do it perfectly, but it’s not as if we don’t think about the policy decisions—monetary policy and otherwise—the economic developments that are taking place in major economies that can have an effect on the U.S. economy. That is very much baked into our own forecast and our own understanding of the U.S. economy, as best we can. It won’t be perfect. So I don’t see—it’s hard to talk about collaboration in a world where people have very different levels of interest rates. If you remember, there were coordinated cuts and raises and things like that at various times, but, really, we’re all, we’re in very different situations. But I will tell you, our contact is more or less ongoing, and it’s not coordination, but there’s a lot of information sharing. And we all, I think, are informed by what other important economies— economies that are important to the United States—are doing.",
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] |
Craig Torres from Bloomberg. Chair Powell, you talked about some ways the higher interest rates are affecting the economy, but we’ve also seen a resilient labor market with durable consumption, strong corporate profits, and I’m wondering what your story is on the resilience of the economy. After all, you and your colleagues said, “Well, we started tightening in March when we were talking about interest rates in the future.” And, indeed, Treasury rates moved up, so we should have had a lot of tightening taking effect. Why is the economy, in your view, so resilient, and does it mean that we might need a possibly higher terminal rate?
|
CRAIG TORRES
|
[
{
"content": "Craig Torres from Bloomberg. Chair Powell, you talked about some ways the higher interest rates are affecting the economy, but we’ve also seen a resilient labor market with durable consumption, strong corporate profits, and I’m wondering what your story is on the resilience of the economy. After all, you and your colleagues said, “Well, we started tightening in March when we were talking about interest rates in the future.” And, indeed, Treasury rates moved up, so we should have had a lot of tightening taking effect. Why is the economy, in your view, so resilient, and does it mean that we might need a possibly higher terminal rate?",
"role": "user"
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"content": "You’re right, of course—the labor market, in particular, has been very strong. But there are—the sectors of the economy that are most interest rate sensitive are certainly showing the effects of our tightening, and, of course, the obvious example is housing, where you see declining activity of all different kinds and house price increases moving down. So we’re having an effect on interest-sensitive spending. I think, through exchange rates, we’re having an effect on exports and imports. I think—so all of that’s happening, but you’re right, and we’ve said this: This is a strong, robust economy. People have savings on their balance sheet from the period when they couldn’t spend and where they were getting government transfers. There’s still very significant savings out there, although not as much at the lower end of the income spectrum—but still, some savings out there to support growth. The states are very flush with cash, so there’s good reason to think that this will continue to be a reasonably strong economy. Now, the data are showing that growth is going to be below trend this year. We think of trend as being about 1.8 percent, or in that range. We’re forecasting growth well below that, and most forecasters are. But you’re right—there’s certainly a possibility that growth can be stronger than that. And that’s a good thing, because that means the economy will be more resistant to a significant downturn. But, of course, we are focused on the thing I started with, which is getting inflation back down to 2 percent. We can’t fail to do that. I mean, if we were to fail to do that, that would be the thing that would be most painful for the people that we serve. So for now, that has to be our overarching focus, and you see that, I think, in the SEP, in the levels of rates that we’ll be moving to reasonably quickly, assuming things turn out roughly in line with the SEP. So that’s how we think about it.",
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] |
Thank you, Mr. Chairman. In a world of euphemisms that we live in here, with “below-trend growth” and “modest increase in unemployment,” I’m wondering if I can ask you a couple of direct questions for the American people. Do the odds now favor, given where you are and where you’re going with interest rates, favor a recession? Four point four percent unemployment is about 1.3 million jobs. Is that acceptable job loss? And then, given that the data you look at is backward looking, and the lags in your policy are forward looking, and you don’t know what they are, how will you know, or will you know, if you’ve gone too far?
|
MICHAEL MCKEE
|
[
{
"content": "Thank you, Mr. Chairman. In a world of euphemisms that we live in here, with “below-trend growth” and “modest increase in unemployment,” I’m wondering if I can ask you a couple of direct questions for the American people. Do the odds now favor, given where you are and where you’re going with interest rates, favor a recession? Four point four percent unemployment is about 1.3 million jobs. Is that acceptable job loss? And then, given that the data you look at is backward looking, and the lags in your policy are forward looking, and you don’t know what they are, how will you know, or will you know, if you’ve gone too far?",
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"content": "So I don’t know what the odds are. I think that there’s a very high likelihood that we’ll have a period of what I’ve mentioned is below-trend growth, by which much lower growth, and we’re seeing that now. So the median forecast, I think, this year among my colleagues and me was 0.2 percent growth. So that’s very slow growth. And then below trend next year. I think the median was 1.2, also well below. So that’s a slower, that’s a very slow level of growth, and it could give rise to increases in unemployment. But I think that’s, so that is something that we think we need to have, and we think we need to have softer labor market conditions as well. We’re never going to say that there are too many people working, but the real point is this: Inflation—what we hear from people when we meet with them is that they really are suffering from inflation. And if we want to set ourselves up, really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn’t. So, what we need to do is get rates up to the point where we’re putting meaningful downward pressure on inflation, and that’s what we’re doing. And we certainly don’t hope, we certainly haven’t given up the idea that we can have a relatively modest increase in unemployment. Nonetheless, we need to complete this task.",
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"content": "But how will you know, or will you know, if you’ve gone too far?",
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"content": "It’s hard to hypothetically deal with that question. I mean, again, our really tight focus now continues to be ongoing rate increases to get the policy rate up where it needs to be. And, as I said, you can look at this SEP as today’s estimate of where we think those rates would be. Of course, they will evolve over time.",
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Thanks. Chris Rugaber, Associated Press. I wanted to follow up with what you just mentioned about the labor market. You’ve said several times that to have the labor market we want, we need price stability, and you suggested maybe there isn’t a tradeoff in the long run. But in the short run, there is a lot of concern, as people have been expressing here, about higher unemployment as a result of these rate hikes or as a result of rate hikes. So can you explain, though, what about high inflation now threatens the job market? I mean, you seem to suggest inflation, high inflation, will eventually lead to a weaker job market. So can you spell that out a little more for the general public on how that would work?
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CHRIS RUGABER
|
[
{
"content": "Thanks. Chris Rugaber, Associated Press. I wanted to follow up with what you just mentioned about the labor market. You’ve said several times that to have the labor market we want, we need price stability, and you suggested maybe there isn’t a tradeoff in the long run. But in the short run, there is a lot of concern, as people have been expressing here, about higher unemployment as a result of these rate hikes or as a result of rate hikes. So can you explain, though, what about high inflation now threatens the job market? I mean, you seem to suggest inflation, high inflation, will eventually lead to a weaker job market. So can you spell that out a little more for the general public on how that would work?",
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"content": "So, for starters, people are seeing their wage increases eaten up by inflation. So if your family is one where you spend most of your paycheck, every paycheck cycle, on gas, food, transportation, clothing, basics of life, and prices go up the way they’ve been going up, you’re in trouble right away. You don’t have a cushion, and this is very painful for people at the lower end of the income and wealth spectrum. So that’s what we’re hearing from people is, you know, very much—that inflation is really hurting. So how do we get rid of inflation? And, as I mentioned, it would be nice if there were a way to just wish it away, but there isn’t. We have to get supply and demand back into alignment, and the way we do that is by slowing the economy. Hopefully, we do that by slowing the economy, and we see some softening in labor market conditions, and we see a big contribution from supply-side improvements, and things like that. But none of that is guaranteed. In any case, we, our job is to deliver price stability, and I think—you can think of price stability as an asset that just delivers large benefits to society over a long period of time. We really saw that for a long time. The United States had 2 percent inflation, didn’t move around much, and that was enormously beneficial to the public that we serve. And we have to get back to that and keep it for another long period of time. To pull back from the task of doing that is, you’re just postponing—the record shows that if you postpone that, the delay is only likely to lead to more pain. So I think we’re moving to do what we need to do and do our jobs, and that’s what you see us doing.",
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Thank you for taking the question, Mr. Chairman. Edward Lawrence for Fox Business. So you had said that Americans and businesses need to feel some economic pain as we go forward. How long from here should Americans be prepared for that economic pain?
|
EDWARD LAWRENCE
|
[
{
"content": "Thank you for taking the question, Mr. Chairman. Edward Lawrence for Fox Business. So you had said that Americans and businesses need to feel some economic pain as we go forward. How long from here should Americans be prepared for that economic pain?",
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"content": "How long? I mean, it really depends on how long it takes for wages and, more than that, prices to come down for inflation to come down. And so what you see in our projections today is that inflation moves down significantly over the course of next year and then more the next year after that. And I think once you’re on that path, that’s a good thing. And things will start to feel better to people—they’ll feel lower inflation, they’ll feel that the economy is improving. And also, if our projections are close to right, you’ll see that the costs in unemployment are, they’re meaningful, and they’re certainly very meaningful to the people who lose their jobs. And we talk about that in our meetings quite a lot. But, at the same time, we’d be setting the economy up for another long period—this era has been noted for very long expansions. We’ve had three of the four longest in measured history since we got inflation under control. And that’s not an accident. So when inflation is low and stable, you can have these 9, 10, 11—10-year, anyway, expansions, and you can see what we saw in 2018, ’19, and ’20, which was very low unemployment, the biggest wage gains going to people at the low end of the spectrum, the smallest racial gaps that we’ve seen since we started keeping track of that. So we want to get back to that. But, to get there, we’re going to have to get supply and demand back in alignment, and that’s going to take tight monetary policy for a period of time.",
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"content": "As a follow-up, what is that economic pain in your mind? Is it job losses? Is it higher interest rates on credit cards? What is that economic pain?",
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"content": "So it’s all of those things. Higher interest rates, slower growth, and a softening labor market are all painful for the public that we serve. But they’re not as painful as failing to restore price stability and then having to come back and do it down the road again and doing it at a time when, actually, now people have really come to expect high inflation. If the concept of high inflation becomes entrenched in people’s economic thinking about their decisions, then getting back to price stability—the cost of getting back to price stability just rises, and so we want to avoid that. We want to act aggressively now and get this job done and keep at it until it’s done.",
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Thank you, Chairman Powell. Nicole Goodkind, CNN Business. Existing home sales have fallen for seven months straight, mortgage rates are at their highest level since 2008, yet mortgage demand increased this week, and housing prices are still elevated. Now, at the end of your June press conference, you mentioned plans to reset the housing market. I was wondering if you could elaborate on what you mean when you say “reset” and what you think it will take to actually get there.
|
NICOLE GOODKIND
|
[
{
"content": "Thank you, Chairman Powell. Nicole Goodkind, CNN Business. Existing home sales have fallen for seven months straight, mortgage rates are at their highest level since 2008, yet mortgage demand increased this week, and housing prices are still elevated. Now, at the end of your June press conference, you mentioned plans to reset the housing market. I was wondering if you could elaborate on what you mean when you say “reset” and what you think it will take to actually get there.",
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"content": "So when I say “reset,” I’m not looking at a particular, specific set of data or anything. What I’m really saying is that we’ve had a time of a red-hot housing market all over the country, where, famously, houses were selling to the first buyer at 10 percent above the ask, before even seeing the house. That thing. So there was a big imbalance between supply and demand. Housing prices were going up at an unsustainably fast level. So the deceleration in housing prices that we’re seeing should help bring prices more closely in line with rents and other housing market fundamentals, and that’s a good thing. For the longer term, what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level—at a reasonable pace—and that people can afford houses again. And I think we—so we probably, in the housing market, have to go through a correction to get back to that place. There’s also, there are also longer-run issues, though, with the housing market. As you know, we’re—it’s difficult to find lots now close enough to cities and things like that, so builders are having a hard time getting zoning and lots and workers and materials and things like that. But from a business cycle standpoint, this difficult correction should put the housing market back into better balance.",
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"content": "Just to follow, though, shelter made up such a large part of this hot CPI report that we saw. Do you think that there is a lag and that we will see that come down in the coming months? Or do you think that there’s still this imbalance that needs to be addressed?",
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"content": "I think that shelter inflation is going to remain high for some time. We’re looking for it to come down, but it’s not exactly clear when that will happen. So it may take some time, so I think, hope for the best, plan for the worst. So I think, on shelter inflation, you’ve just got to assume that it’s going to remain pretty high for a while.",
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] |
Hi. Jean Yung with Market News. You’ve talked about the need to get real rates into positive territory, and you said earlier that policy is just moving into that territory now. So I’m curious, how restrictive is rates at 4.6 percent expected—is that expected to be next year? How restrictive?
|
JEAN YUNG
|
[
{
"content": "Hi. Jean Yung with Market News. You’ve talked about the need to get real rates into positive territory, and you said earlier that policy is just moving into that territory now. So I’m curious, how restrictive is rates at 4.6 percent expected—is that expected to be next year? How restrictive?",
"role": "user"
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"content": "So I think if you look, when we get to—if we—let’s assume we do get to that level, which I think is likely. What you’re going to do is, you’re going to adjust that for some forward-looking measure of inflation. And that could be—you pick your measure. It could be—there are all kinds of different things you could pick and you get—but what you’ll get is a positive number. In all cases, you will get forward inflation expectations in the short term, I think, that are going to be, assuming that we’re doing our jobs appropriately, that will be significant. So you’ll have a positive real federal funds rate at that point, which could be 1 percent or so, but—I mean, I don’t know exactly what it would be. But it would be significantly positive when we get to that level. And let me say, we’ve written down what we think is a plausible path for the federal funds rate. The path that we actually execute will be enough. It will be enough to restore price stability. So this is something that, as you can see, they’ve moved up, and we’re going to continue to watch incoming data and the evolving outlook and ask ourselves whether our policy is in the right place as we go. Thank you very much.",
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] |
Thank you. Colby Smith with the Financial Times. On the need to slow the pace of rate increases at some point: Is a downshift contingent on a string of better inflation data specifically between now and, let’s say, the December meeting? Or is that something that the Fed could potentially proceed with, independent of that data, given the lagged effects that you mentioned?
|
COLBY SMITH
|
[
{
"content": "Thank you. Colby Smith with the Financial Times. On the need to slow the pace of rate increases at some point: Is a downshift contingent on a string of better inflation data specifically between now and, let’s say, the December meeting? Or is that something that the Fed could potentially proceed with, independent of that data, given the lagged effects that you mentioned?",
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"content": "So a couple things on that. We do need to see inflation coming down decisively, and good evidence of that would be a series of down monthly readings. Of course, that’s what we’d all love to see, but that’s—I’ve never thought of that as the appropriate test for slowing the pace of increases or for identifying the appropriately restrictive level that we’re aiming for. We need to bring our policy stance down to a level that’s sufficiently restrictive to bring inflation down to our 2 percent objective over the medium term. How will we know that we’ve reached that level? Well, we’ll take into account the full range of analysis and data that bear on that question, guided by our assessment of how much financial conditions have tightened, the effects tightening is actually having on the real economy and on inflation, taking into consideration lags, as I mentioned. We will be looking at real rates, for example, all across the yield curve and all other financial conditions as we make that assessment.",
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] |
Hi, Howard Schneider with Reuters. I’m sure there’s going to be tons of confusion out there about whether this means you’re going to slow in December or not. Would you say that the bias right now is not for another 75 basis point increase?
|
HOWARD SCHNEIDER
|
[
{
"content": "Hi, Howard Schneider with Reuters. I’m sure there’s going to be tons of confusion out there about whether this means you’re going to slow in December or not. Would you say that the bias right now is not for another 75 basis point increase?",
"role": "user"
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"content": "So, what I want to do is put that question of pace in the context of our broader tightening program, if I may, and talk about the statement language along the way. So I think you can think about our tightening program as really addressing three questions, the first of which was, and has been, how fast to go. The second is how high to raise our policy rate. And the third will be, eventually, how long to remain at a restrictive level. So on the first question—how fast to tighten policy—it’s been very important that we move expeditiously, and we have clearly done so. We’ve moved 3¾ percent since March, admittedly from a base of zero. It’s a historically fast pace, and that’s certainly appropriate given the persistence and strength in inflation and the low level from which we started. So now we come to the second question, which is how high to raise our policy rate. And we’re saying that we’d raise that rate to a level that’s sufficiently restrictive to bring inflation to our 2 percent target over time, and we put that into our postmeeting statement because that really does become the important question, we think now, is how far to go. And I’ll talk more about that. We think there’s some ground to cover before we meet that test, and that’s why we say that ongoing rate increases will be appropriate. And, as I mentioned, incoming data between the meetings, both a strong labor market report but particularly the CPI report, do suggest to me that we may ultimately move to higher levels than we thought at the time of the September meeting. That level is very uncertain, though, and I would say we’re going to find it over time. Of course, with the lags between policy and economic activity, there’s a lot of uncertainty, so we note that in determining the pace of future increases, we’ll take into account the cumulative tightening of monetary policy as well as the lags with which monetary policy affects economic activity and inflation. So I would say, as we come closer to that level, move more into restrictive territory, the question of speed becomes less important than the second and third questions. And that’s why I’ve said at the last two press conferences that at some point, it will become appropriate to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made. It is likely we’ll have a discussion about this at the next meeting, a discussion. To be clear, let me say again that the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restricted, which really will be our principal focus.",
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"content": "If I could follow up on that, to what degree was there an importance or weight given to a need to signal this possibility now, given all the concerns, really around the globe, about Fed policy driving ahead and everybody else dealing with their own stress as a result?",
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"content": "Well, I think I’m pleased that we have moved as fast as we have. I don’t think we’ve overtightened. I think there’s—very difficult to make a case that our current level is too tight, given that inflation still runs well above the federal funds rate. So I think that at this meeting, as in the last two meetings, as I’ve mentioned, I’ve said that we—that there would come a point, and this was a meeting at which we had a discussion about what that might mean. And we did discuss this, and, as I mentioned, we’ll discuss it again in December. But there’s no—I don’t have any sense that we’ve overtightened or moved too fast. I think it’s been good and a successful program that we’ve gotten this far this fast. Remember, though, that we still think there’s a need for ongoing rate increases, and we have some ground left to cover here, and cover it we will.",
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] |
Nick Timiraos of the Wall Street Journal. Chair Powell, core PCE inflation on a 3- or 6-month annualized basis and on a 12-month basis has been running in the high 4s, close to 5 percent. Is there any reason to think you won’t have to raise rates at least above that level to be confident that you are imparting enough restraint to bring inflation down?
|
NICK TIMIRAOS
|
[
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"content": "Nick Timiraos of the Wall Street Journal. Chair Powell, core PCE inflation on a 3- or 6-month annualized basis and on a 12-month basis has been running in the high 4s, close to 5 percent. Is there any reason to think you won’t have to raise rates at least above that level to be confident that you are imparting enough restraint to bring inflation down?",
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"content": "So this is the question of, does the policy rate need to get above the inflation rate? And I would say, there are a range of views on it. That’s the classic “Taylor principle” view. But I would think you’d look more at a forward, a forward-looking measure of inflation to look at that. But I think the answer is, we’ll want to get the policy rate to a level where it is, where the real interest rate is positive. We will want to do that. I do not think of it as the single and only touchstone, though. I think you put some weight on that; you also put some weight on rates across the curve. Very few people borrow at the short end—at the federal funds rate, for example. So households and businesses, if they’re borrowing—there are very meaningfully positive interest rates all across the curve for them, credit spreads are larger, so borrowing rates are significantly higher, and I think financial conditions have tightened quite a bit. So I would look at that as an important feature. I’d put some weight on it, but I wouldn’t say it’s something that is the single, dominant thing to look at.",
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"content": "If I could follow up: What is your best assessment, or the staff’s best assessment right now, of the current rate of underlying inflation?",
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"content": "I don’t have a specific number for you there. There are many, many models that look at that. And, I mean, one way to look at it is that it’s a pretty stationary object and that when inflation runs—above that level, for sure—substantially above for some time, you’ll see it move up, but the movement will be fairly gradual. So I think that’s what the principal models would tend to say. But I wouldn’t want to land on any one assessment. There are many different—as you know, many different people publish an assessment of underlying inflation.",
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] |
Hi, Chair Powell. Thank you for taking our questions. Jeanna Smialek with the New York Times. I wondered, do you see any evidence at this stage that inflation is, or is at risk of becoming, entrenched?
|
JEANNA SMIALEK
|
[
{
"content": "Hi, Chair Powell. Thank you for taking our questions. Jeanna Smialek with the New York Times. I wondered, do you see any evidence at this stage that inflation is, or is at risk of becoming, entrenched?",
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"content": "Is inflation becoming entrenched? So I guess I would start by pointing to expectations. So if we saw longer-term expectations moving up, that would be very troubling. And they were moving up a little bit at the middle part of this year, and they’ve moved now back down. That’s one piece of data. Shorter-term inflation expectations moved up between the last meeting and this meeting, and we don’t think those are as indicative, but they may be important in the wage-setting process. There’s a school of thought that believes that. So that’s very concerning. I guess the other thing I would say is that the longer we have—we’re now 18 months into this episode of high inflation, and we don’t have a clearly identified, scientific way of understanding at what point inflation becomes entrenched. And so the thing we need to do from a risk-management standpoint is to use our tools forcefully but thoughtfully and get inflation under control—get it down to 2 percent—get it behind us. That’s what we really need to do and what we’re strongly committed to doing.",
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] |
Hi, Chair Powell. Thank you for taking our questions. Rachel Siegel from the Washington Post. The statement points to lag times. I’m wondering if you can walk us through how you judge those lag effects, what that timeline looks like over the coming months or even a year, and where you would expect it to show up in different parts of the economy.
|
RACHEL SIEGEL
|
[
{
"content": "Hi, Chair Powell. Thank you for taking our questions. Rachel Siegel from the Washington Post. The statement points to lag times. I’m wondering if you can walk us through how you judge those lag effects, what that timeline looks like over the coming months or even a year, and where you would expect it to show up in different parts of the economy.",
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"content": "So the way I would think about that is, it’s commonly, for a long time, thought that monetary policy works with “long and variable lags,” and that it works first on financial conditions and then on economic activity and then perhaps later than that even on inflation. So that’s been the thinking for a long time. There was an old literature that made those lags out to be fairly long. There’s newer literature that says that they’re shorter. The truth is, we don’t have a lot of data consisting of inflation of rates this high in what is, now, the modern economy. One big difference now is that it used to be that you would raise the federal funds rate, financial conditions would react, and then that would affect economic activity and inflation. Now financial conditions react well before in expectation of monetary policy actions. That’s the way it has moved for a quarter of a century—in the direction of financial conditions, then monetary policy—because the markets are thinking, what is the central bank going to do? And there are plenty of economists that also think that once financial conditions change, that the effects on the economy are actually faster than they would have been before. We don’t know that. I guess the thing that I would say is: It’s highly uncertain—highly uncertain. And so from a risk-management standpoint—but we do need, it would be irresponsible not to, to ignore them. But you want to consider them but not take them literally. So I think it’s a very difficult place to be, but I would tend to be—want to be in the middle looking carefully at what’s actually happening with the economy and trying to make good decisions from a risk-management standpoint, remembering, of course, that if we were to overtighten, we could then use our tools strongly to support the economy, whereas if we don’t get inflation under control because we don’t tighten enough, now we’re in a situation where inflation will become entrenched and the costs, the employment costs in particular, will be much higher potentially. So from a risk- management standpoint, we want to be sure that we don’t make the mistake of either failing to tighten enough or loosening policy too soon.",
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"content": "And if I could follow up: Should we interpret the addition to the statement to mean that more weight is put into those lag effects than they would have been after previous rate hikes?",
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"content": "I think as we move now into restrictive territory, as we make these ongoing rate hikes and policy becomes more restrictive, it’ll be appropriate now to be thinking more about lags. Of course, we think about lags—the lags are just a basic part of monetary policy. But we will be thinking about them, but we won’t be—I think we’ll be considering them but because it’s appropriate to do so. Let me say this: It is very premature to be thinking about pausing. So people, when they hear lags, they think about a pause. It’s very premature, in my view, to think about or be talking about pausing our rate hike. We have a ways to go. Our policy—we need ongoing rate hikes to get to that level of sufficiently restrictive. And we don’t—of course, we don’t really know exactly where that is. We have a sense, and we’ll write down in September—sorry, in the December meeting, a new Summary of Economic Projections, which updates that. But I would expect us to continue to update it based on what we’re seeing with incoming data.",
"role": "assistant"
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] |
Thanks, Chair Powell. Neil Irwin, Axios. As you look around the economy, the clearest impact of your tightening so far has been on housing, maybe some venture-funded tech companies. It’s been relatively narrow in terms of the labor market, consumer demand; a lot of sectors, you don’t see a ton of effect. Is the pathway and channels through which monetary policy works changing? Is it narrower than it used to be? And on housing in particular, are you at all worried that you’re cramping housing supply in ways that might cause problems down the road?
|
NEIL IRWIN
|
[
{
"content": "Thanks, Chair Powell. Neil Irwin, Axios. As you look around the economy, the clearest impact of your tightening so far has been on housing, maybe some venture-funded tech companies. It’s been relatively narrow in terms of the labor market, consumer demand; a lot of sectors, you don’t see a ton of effect. Is the pathway and channels through which monetary policy works changing? Is it narrower than it used to be? And on housing in particular, are you at all worried that you’re cramping housing supply in ways that might cause problems down the road?",
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"content": "I don’t know that the channels through which policy works have changed that much. I would say a big channel is the labor market, and the labor market is very, very strong. Very strong. And households, of course, have strong balance sheets. So we go into this with a strong labor market and excess demand in the labor market, as you can see through many different things, and also with households who have strong spending power built up. So it may take time, it may take resolve, it may take patience. It’s likely to, to get inflation down. It may—I think you see, from our forecasts and others, that it will take some time for inflation to come down. It’ll take time, we think. So, sorry, was I getting to your question there?",
"role": "assistant"
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] |
Hi, Victoria Guida with Politico. I wanted to ask about the labor market. You mentioned early on, again, that job openings are very high compared to available workers, and I’m just curious to what extent you do and don’t draw signal from that. So, for example, if wage growth is slowing and if maybe the unemployment rate starts to tick up, will that make you decrease your focus on job openings? What do you see—are wages what’s really important? How are you thinking about the labor market as it relates to inflation?
|
VICTORIA GUIDA
|
[
{
"content": "Hi, Victoria Guida with Politico. I wanted to ask about the labor market. You mentioned early on, again, that job openings are very high compared to available workers, and I’m just curious to what extent you do and don’t draw signal from that. So, for example, if wage growth is slowing and if maybe the unemployment rate starts to tick up, will that make you decrease your focus on job openings? What do you see—are wages what’s really important? How are you thinking about the labor market as it relates to inflation?",
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"content": "So we talk a lot about vacancies in the—vacancy-to-unemployed rate, but it’s just one, it’s just another data series. It’s been unusually important in this cycle because it’s been so out of line. But so has quits. So have wages. So we look at a very wide range of data on the unemployment—on the labor market. So I’d start with unemployment, which is typically the single statistic you would look to, is at a 50-year low, 3½ percent. We’re getting really nothing in labor supply now. We had, I think, very small increase this year, which we had really thought, we thought we would get that back. Most analysts thought we would get some labor supply coming in. You mentioned wages, so I guess I would characterize that as a mixed picture. It’s true, with average hourly earnings, you see—so I would call it a flattening out at a level that’s well above the level that would be consistent over time with 2 percent inflation, assuming a reasonable productivity. With the ECI reading this week, again, a mixed picture. The headline number was a disappointment. Let’s just say it was high. It didn’t show a decline. There’s some rays of light inside that if you look at private-sector workers—that did come down, that compensation did come down. Overall, though, the broader picture is of an overheated labor market where demand substantially exceeds supply. Job creation still exceeds the level that would hold the market where it is. So that’s the picture. Do we see—we keep looking for signs that sort of the beginning of a gradual softening is happening. And maybe that’s there, but it’s not obvious to me, because wages aren’t coming down—they’re just moving sideways at an elevated level, both ECI and average hourly earnings. We want to see—we would love to see vacancies coming down, quits coming down. They are coming down. Vacancies are below their all-time high but not by as much as we thought, because—and the data series is volatile, we never take any one reading, we always look at two or three. So it’s a mixed picture. I don’t see the case for real softening just yet. But we look at, I guess as I just showed you, we look at a very broad range of data on the labor market.",
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"content": "So do you see wages as being a significant driver of inflation?",
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{
"content": "I think wages have an effect on inflation and inflation has an effect on wages. I think that’s always been the case. There’s always—going back and forth, the question is, is that really elevated right now? I don’t think so. I don’t think wages are the principal story of why prices are going up. I don’t think that. I also don’t think that we see a wage–price spiral, but, again, it’s not something you can—once you see it, you’re in trouble. So we don’t want to see it. We want wages to go up—we just want them to go up at a level that’s sustainable and consistent with 2 percent inflation. And we think we can—we do think that, given the data that we have, that this labor market can soften without having to soften as much as history would indicate through the unemployment channel. It can soften through job openings declining. We think there’s room for that. But we won’t know that—that’ll be, that’ll be discovered empirically.",
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Thank you so much. Kayla Tausche from CNBC. Earlier last month, the United Nations warned that there could be a global recession if central banks didn’t change course. The new U.K. prime minister warned of a profound economic crisis there. And I’m wondering how the Fed is weighing international developments in light of a very strong economy here in the U.S. that would seem to be bucking those trends.
|
KAYLA TAUSCHE
|
[
{
"content": "Thank you so much. Kayla Tausche from CNBC. Earlier last month, the United Nations warned that there could be a global recession if central banks didn’t change course. The new U.K. prime minister warned of a profound economic crisis there. And I’m wondering how the Fed is weighing international developments in light of a very strong economy here in the U.S. that would seem to be bucking those trends.",
"role": "user"
},
{
"content": "So, of course, we, we keep close tabs on economic developments and also geopolitical developments that are relevant to the economy abroad. We’re in very frequent contact with our foreign counterparts both through the IMF meetings and the regular meetings with central banks that we have, and I have one this weekend with many, many central bankers. So we’re in touch with all of that. So I guess what—it’s clearly a time, a difficult time in the global economy. We’re seeing very high inflation in Europe, significantly because of high energy prices related to the war in Ukraine. And we’re seeing China’s having issues with the zero-COVID policy and much slower growth than we’re used to seeing. So we’re seeing—we see those difficulties. The strong dollar is a challenge for some countries. But we haven’t—we take all of that into account in our models. We think about the spillovers and that thing. Here in the United States, we have a strong economy, and we have an economy where inflation is running at 5 percent. Core PCE inflation—which is a really good indicator of what’s going on for us, the way we see it—is running at 5.1 percent on a 12-month basis and similar to that on a 3-, 6-, and 9-month basis. So we know that we need to use our tools to get inflation under control. The world’s not going to be better off if we fail to do that. That’s a task we need to do. Price stability in the United States is a good thing for the global economy over a long period of time. Price stability is the thing that pays dividends for our economy—for decades, hopefully—even though it may be difficult to get it back. Getting it back is something that gives—that provides value to the people we serve for the long run.",
"role": "assistant"
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"content": "If I could just follow on that—thank you. The Fed has acknowledged in the past that the tools that you have don’t affect things like energy and food prices that stem from some of those conflicts overseas, and they’re some of the biggest pain points for consumers. So as you pursue the current path that you’ve outlined, is there a risk that some of those prices simply don’t come down?",
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"content": "So we don’t directly affect, for the most part, food and energy prices, but the demand channel does affect them just at the margin. The thing about the United States is that we also have strong—in many other jurisdictions, the principal problem really is energy. In the United States, we also have a demand issue. We’ve got an imbalance between demand and supply, which you see in many parts of the economy. So our tools are well suited to work on that problem, and that’s what we’re doing. You’re right, though. We don’t—the price of oil is set globally, and it’s not something we can affect. I think by the actions that we take, though, we help keep longer-term inflation expectations anchored and keep the public believing in 2 percent inflation by the things that we do, even in times when energy is part of the story of why inflation is high.",
"role": "assistant"
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] |
Hi, Chair Powell. Jonnelle Marte with Bloomberg. So the Fed is facing two more ethics-related incidents with the revision of the financial statements from President Bostic and President Bullard speaking at a closed event. So some senators, like Elizabeth Warren, are saying that this is a sign of greater ethics problems at the Fed. Could you talk about what this does to the public’s trust in the bank and what the Fed is doing to prevent this behavior from becoming common?
|
JONNELLE MARTE
|
[
{
"content": "Hi, Chair Powell. Jonnelle Marte with Bloomberg. So the Fed is facing two more ethics-related incidents with the revision of the financial statements from President Bostic and President Bullard speaking at a closed event. So some senators, like Elizabeth Warren, are saying that this is a sign of greater ethics problems at the Fed. Could you talk about what this does to the public’s trust in the bank and what the Fed is doing to prevent this behavior from becoming common?",
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"content": "Sure. So you’re right—the public’s trust is really the Fed’s and any central bank’s most important asset, and any time one of us, one of the policymakers, violates or falls short of those rules, we do risk undermining that trust, and we take that very seriously. We do. So at the beginning of our meeting yesterday, actually, we had a Committee discussion of the full Committee on the importance of holding ourselves individually and collectively accountable for knowing and following the high standard that’s set out in our existing rules with respect to both personal investment activities and external communications. And we’ve taken a number of steps, and I would just say we do understand how important those issues are. I would say that our new investment program that we have is up now and running, and, actually, it was through the problems with President Bostic’s disclosures were discovered, when he filed his new disclosure. We now have a central group here at the Board of Governors that looks into disclosures and follows them and approves people’s disclosures and also all of their trades. Any trade anyone has to make is covered, has to be approved, preapproved, and there’s a lag—it has to be preapproved 45 days before it happens, so there’s no ability to game markets. So it’s a really good system. It worked here. And we—I think we all said to each other today— yesterday, actually, yesterday morning, we recommitted to each other and to this institution to hold ourselves to the highest standards and avoid these problems.",
"role": "assistant"
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"content": "Do you have an update on the investigations that are pending?",
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"content": "I don’t. So, as you know, I referred the matter concerning President Bostic to the inspector general, and once that happens, I don’t discuss it with the inspector general or with anybody. It’s just—the inspector general has, he has the ability to do investigations. We don’t really have that. So that’s what he’s doing.",
"role": "assistant"
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] |
Michael McKee from Bloomberg Television and Radio. Earlier this year, you touted the three-month bill yield out to 18 months as the yield curve with 100 percent explanatory power. And you said, quote, “If it’s inverted, that means the Fed’s going to cut, which means the economy is weak.” That curve is only 2 basis points away from inversion now, so I’m wondering why you are so confident that you have not overtightened, particularly given that rates work with a lag.
|
MICHAEL MCKEE
|
[
{
"content": "Michael McKee from Bloomberg Television and Radio. Earlier this year, you touted the three-month bill yield out to 18 months as the yield curve with 100 percent explanatory power. And you said, quote, “If it’s inverted, that means the Fed’s going to cut, which means the economy is weak.” That curve is only 2 basis points away from inversion now, so I’m wondering why you are so confident that you have not overtightened, particularly given that rates work with a lag.",
"role": "user"
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"content": "Well, so we do monitor the near-term forward spread—you’re right. And it’s—that’s been our preferred measure. We think, just empirically, it dominates the ones that people tend to look at, which is 2s, 10s, and things like that. So it’s not inverted. And, also, you have to look at why things—why the rate curve is doing what it’s doing. It can be doing that because it affects—it expects cuts or because it expects inflation to come down. In this case, if you’re in a situation where the markets are pricing in significant declines in inflation, that’s going to affect the forward curve. So, yes, we monitor it. You’re right. And that’s what I would say.",
"role": "assistant"
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"content": "If I could follow up: You also said several meetings ago that the risk of doing too little outweighed the risk of doing too much. Is what you’re trying to tell us today is risk assessment has changed a little bit?",
"role": "user"
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"content": "Well, what’s happened is, time has passed, and we’ve raised interest rates by 375 basis points. I would not—I would not change a word in that statement, though. I think until we get inflation down, you’ll be hearing that from me. Again, if we overtighten—and we don’t want to, we want to get this exactly right—but if we overtighten, then we have the ability with our tools, which are powerful, to, as we showed at the beginning of the pandemic episode, we can support economic activity strongly if that happens, if that’s necessary. On the other hand, if you make the mistake in the other direction and you let this drag on, then it’s a year or two down the road, and you’re realizing, inflation behaving the way it can, you’re realizing you didn’t actually get it, you have to go back in. By then, the risk, really, is that it has become entrenched in people’s thinking. And the record is that the employment costs—the cost to the people that we don’t want to hurt—they go up with the passage of time. That’s really how I look at it. So that isn’t going to change. What has changed, though—you’re right—is, we’re farther along now. And I think as we’re farther along, we’re now focused on that. What’s the place, what’s the level we need to get to rates? And I don’t know what we’ll do when we get there, by the way. It doesn’t—we’ll have to see. There’s been no decision or discussion around exactly what steps we would take at that point. But the first thing is to find your way there.",
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] |
Thank you. Chris Rugaber at Associated Press. Just to go back to housing for a minute: You mentioned the impact that rate increases have had on housing—home sales are down 25 percent in the past year, and so forth—but none of this is really showing up in, as you know, in the government’s inflation measures. And as we go forward, private real-time data is clearly showing these hits to housing. Are you going to need to put a greater weight on that in order to ascertain things like whether there’s overtightening going on, or will you still focus as much on the more lagging government indicators?
|
CHRISTOPHER RUGABER
|
[
{
"content": "Thank you. Chris Rugaber at Associated Press. Just to go back to housing for a minute: You mentioned the impact that rate increases have had on housing—home sales are down 25 percent in the past year, and so forth—but none of this is really showing up in, as you know, in the government’s inflation measures. And as we go forward, private real-time data is clearly showing these hits to housing. Are you going to need to put a greater weight on that in order to ascertain things like whether there’s overtightening going on, or will you still focus as much on the more lagging government indicators?",
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"content": "So this is an interesting subject. So I start by saying, I guess, that the measure that’s in the CPI and the PCE, it captures rents for all tenants, not just new leases. And that makes sense, actually, because for that reason—conceptually, that is—that’s the right target for monetary policy. And the same thing is true for owners’ equivalent rent, which comes off of—it’s a reweighting of tenant rents. The private measures are, of course, good at picking up, at the margin, the new leases, and they tell you a couple things. One thing is, I think right now, if you look at the pattern of that series of the new leases, it’s very pro-cyclical, so rents went up much more than the CPI and PCE rents did. And now they’re coming down faster. But what you’re—the implication is that there are still, as people, as non-new leases roll over and expire, right, they’re still in the pipeline, there’s still some significant rate increases coming, okay? But at some point, once you get through that, the new leases are going to tell you—what they’re telling you is, there will come a point at which rent inflation will start to come down. But that point is well out from where we are now. So we’re well aware of that, of course, and we look at it. But I would say that in terms of—the right way to think about inflation, really, is to look at the measure that we do look at, but considering that we also know that at some point, you’ll see rents coming down.",
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"content": "Great, and just a quick follow. It looks like stock and bond markets are reacting positively to your announcement so far. Is that something you wanted to see? Is that a problem or what—how that might affect your future policy to see this positive reaction?",
"role": "user"
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"content": "We’re not targeting any one or two particular things. Our message should be—what I’m trying to do is make sure that our message is clear, which is that we think we have a ways to go, we have some ground to cover with interest rates before we get to, before we get to that level of interest rates that we think is sufficiently restrictive. And putting that in the statement and identifying that as a goal is an important step. And that’s meant to put that question, really, as the important one now, going forward. I’ve also said that we think that the level of rates that we estimated in September—the incoming data suggests ’s actually going to be higher, and that’s been the pattern. I mean, I would have little confidence that the forecast—if we made a forecast today, if we were doing an SEP today, the pattern has been that, one after another, they go up, and that’ll end when it ends, but there’s no sense that inflation is coming down. If you look at the—I have a table of the last 12 months of 12-month readings, and there’s really no pattern there. We’re exactly where we were a year ago. So I would also say, it’s premature to discuss pausing. And it’s not something that we’re thinking about. That’s really not a conversation to be had now. We have a ways to go. And the last thing I’ll say is that I would want people to understand our commitment to getting this done and to not making the mistake of not doing enough or the mistake of withdrawing our strong policy and doing that too soon. So those—I control those messages, and that’s my job.",
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] |
Edward Lawrence with Fox Business. Thank you, Fed Chairman. So how big of a headwind is all the fiscal spending to what the Federal Reserve’s trying to do to get inflation back to the 2 percent target?
|
EDWARD LAWRENCE
|
[
{
"content": "Edward Lawrence with Fox Business. Thank you, Fed Chairman. So how big of a headwind is all the fiscal spending to what the Federal Reserve’s trying to do to get inflation back to the 2 percent target?",
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"content": "In theory, it was a headwind this year, but I do think the broader context is that you have households that have these significant amounts of savings and can keep spending even in—so I think those two things do tend to wage—to counterbalance each other out. It appears, consumer spending is still positive—it’s at pretty modest growth levels. It’s not shrinking. The banks that deal with retail customers and many retailers will tell you that the consumers are still buying and they’re still—they’re fine. So I don’t know how big the fiscal headwinds are, and they haven’t shown up in the way that we thought they would in restraining spending. So it must have to do with the savings that people have.",
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"content": "So, what about the spending? There’s tens of billions yet to be spent, I mean, from the Inflation Reduction Act, the American Rescue Plan, CHIPS Act, bipartisan infrastructure bill. How does that play into your thinking about the future?",
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{
"content": "Demand is going to have some support from those savings and also from the strong demand that’s still in the labor market. We still see pretty significant demand and a tightening labor market in some respects, although I think, overall, I would say it’s not really tightening or loosening. So we see those things, and what those things tell us is that our job is going to require some resolve and some patience over time. We’re going to have to stick with this. And that’s just—we take all that as a given, but we know what our objective is, and we know what our tools can do, and that’s how we think about it.",
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] |
-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer from Marketplace. I’m wondering, has the window for a soft landing narrowed? Do you still think it’s possible?
|
NANCY MARSHALL
|
[
{
"content": "-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer from Marketplace. I’m wondering, has the window for a soft landing narrowed? Do you still think it’s possible?",
"role": "user"
},
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"content": "Has it narrowed? Yes. Is it still possible? Yes. We’ve always said it was going to be difficult, but I think to the extent rates have to go higher and stay higher for longer, it becomes harder to see the path—it’s narrowed. I would say the path has narrowed over the course of the last year, really. Hard to say. Hard to say. Again, I would say that the array of data in the labor market is highly unusual and, to many economists, there is a path to— ordinarily there’s a relationship to GDP going down and vacancies declining, translating into unemployment, or there’s Okun’s law. So all those things are relationships that are in the data, and they’re very real. Data’s a little bit different this time, though, because you have this tremendously high level of vacancies and, we think, on a very steep part of the Beveridge curve. All I would say is that the job losses may turn out to be less than would be indicated by those traditional measures, because job openings are so elevated and because the labor market is so strong. Again, that’s going to be something we discover empirically. I think no one knows whether there’s going to be a recession or not and, if so, how bad that recession would be. And our job is to restore price stability so that we can have a strong labor market that benefits all over time. And that’s what we’re going to do.",
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"content": "-GENZER. Just real quickly—why do you feel like the window has narrowed?",
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},
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"content": "Because we haven’t seen inflation coming down. The implication of inflation not coming down. What we would expect by now to have seen is that as the—really, as the supply-side problems have resolved themselves, we would have expected goods inflation to come down by now, long since by now. And it really hasn’t. Actually, it has come down, but not to the extent that we had hoped. At the same time, now you see services inflation, core services inflation moving up, and I just think that the inflation picture has become more and more challenging over the course of this year, without question. That means that we have to have policy be more restrictive, and that narrows the path to a soft landing, I would say. Thanks very much.",
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] |
Nick Timiraos, the Wall Street Journal. Chair Powell, the unemployment rate at 3.6 percent in March is now essentially at the level that the Committee had expected would prevail over the next three years and at the bottom end of FOMC participants’ projections for the longer-run rate that you submitted in the projections at the last meeting. How has your outlook for further declines in the unemployment rate changed since March? What does this imply for your inflation forecast? And how has your level of confidence changed with regard to the feasibility of slowing hiring without pushing the economy into recession? Thanks.
|
NICK TIMIRAOS
|
[
{
"content": "Nick Timiraos, the Wall Street Journal. Chair Powell, the unemployment rate at 3.6 percent in March is now essentially at the level that the Committee had expected would prevail over the next three years and at the bottom end of FOMC participants’ projections for the longer-run rate that you submitted in the projections at the last meeting. How has your outlook for further declines in the unemployment rate changed since March? What does this imply for your inflation forecast? And how has your level of confidence changed with regard to the feasibility of slowing hiring without pushing the economy into recession? Thanks.",
"role": "user"
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"content": "Thank you. So you’re right—3.6 percent unemployment is just about as low as it’s been in 50 years. And I would say that I expect, and Committee members generally expect, that we’ll get some additional participation. So people will be coming back into the labor force. We’ve seen that particularly among prime-age people. And that will, of course, tend to hold the unemployment rate up a little bit. I would also expect, though, that job creation will slow. Job creation has been, you know, more than half a million per month in recent months—very, very strong, particularly for this stage of the economy. And so we think— with fiscal policy less supportive, with monetary policy less supportive, we think that job creation will slow as well. So it is certainly possible that the unemployment would go down further. But so I would expect those to be relatively limited because of the additional supply and also just the slowing in job creation. Implications for inflation—really, the wages matter a fair amount for companies, particularly in the service sector. Wages are running high, the highest they’ve run in quite some time. And they are one good example, or good illustration, really, of how tight the labor market really is, the fact that wages are running at the highest level in many decades. And that’s because of an imbalance between supply and demand in the labor market. So we think through our policies—through further healing in the labor market, higher rates, for example, of vacancy filling and things like that, and more people coming back in—we’d like to think that supply and demand will come back into balance and that, therefore, wage inflation will moderate to still high levels of wage increases, but ones that are more consistent with 2 percent inflation. That’s our expectation. Your third question was?",
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"content": "Your level of confidence that you can slow hiring without pushing the economy into a downturn.",
"role": "user"
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"content": "So I guess I would say it this way: There’s a path. There’s a path by which we would be able to have demand moderate in the labor market and therefore have vacancies come down without unemployment going up, because vacancies are at such an extraordinarily high level. There’re 1.9 vacancies for every unemployed person, 11.5 million vacancies, 6 million unemployed people. So we haven’t been in that place on the vacancy, the vacancy/unemployed curve, the Beveridge curve. We haven’t been at that level of a ratio in the modern era. So, in principle, it seems as though by moderating demand, we could see vacancies come down and, as a result—and they could come down fairly significantly and, I think, put supply and demand at least closer together than they are. And that would give us a chance to get inflation down, get wages down, and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that. Now, I would say, I think we have a good chance to have a soft or softish landing or outcome, if you will. And I’ll give you a couple of reasons for that. One is, households and businesses are in very strong financial shape. You’re looking at, you know, excess savings on balance sheets—excess in the sense that they’re substantially larger than the prior trend. Businesses are in good financial shape. The labor market is, as I mentioned, very, very strong. And so it doesn’t seem to be anywhere close to a downturn. Therefore, the economy is strong and is well positioned to handle tighter monetary policy. So, but I’ll say, I do expect that this will be very challenging; it’s not going to be easy. And it may well depend, of course, on events that are not under our control. But our job is to use our tools to try to achieve that outcome, and that’s what we’re going to do.",
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] |
Steve Liesman, CNBC. Thanks for taking my question, Mr. Chairman. You talked about using 50-basis-point rate hikes or the possibility of them in coming meetings. Might there be something larger than 50? Is 75 or a percentage point possible? And perhaps you could walk us through your calibration. Why one month should—or one meeting should we expect a 50? Why something bigger? Why something smaller? What is the reasoning for the level of the amount of tightening? Thank you.
|
STEVE LIESMAN
|
[
{
"content": "Steve Liesman, CNBC. Thanks for taking my question, Mr. Chairman. You talked about using 50-basis-point rate hikes or the possibility of them in coming meetings. Might there be something larger than 50? Is 75 or a percentage point possible? And perhaps you could walk us through your calibration. Why one month should—or one meeting should we expect a 50? Why something bigger? Why something smaller? What is the reasoning for the level of the amount of tightening? Thank you.",
"role": "user"
},
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"content": "Sure. So a 75-basis-point increase is not something the Committee is actively considering. What we are doing is, we raised the funds rate by 50 basis points today. And we’ve said that, again, assuming that economic and financial conditions evolve in ways that are consistent with our expectations, there’s a broad sense on the Committee that additional 50- basis-point increases should be on the table for the next couple of meetings. So we’re going to make those decisions at the meetings, of course, and we’ll be paying close attention to the incoming data and the evolving outlook as well as to financial conditions. And, finally, of course, we will be communicating to the public about what our expectations will be as they evolve. So the test is really just as I laid it out—economic and financial conditions evolving broadly in line with expectations. And, you know, I think expectations are that we’ll start to see inflation, you know, flattening out—and not necessarily declining yet, but we’ll see more evidence. We’ve seen some evidence that core PCE inflation is perhaps either reaching a peak or flattening out. We’ll want to know more than just some evidence. We’ll want to really feel like we’re making some progress there. And we’re going to make these decisions, and there’ll be a lot more information. I just think we want to see that information as we get there. It’s a very difficult environment to try to give forward guidance 60, 90 days in advance. There are just so many things that can happen in the economy and around the world. So, you know, we’re leaving ourselves room to look at the data and make a decision as we get there.",
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"content": "I’m sorry, but if inflation is lower one month and the unemployment rate higher, would that be something that we would calibrate toward a lower increase in the funds rate?",
"role": "user"
},
{
"content": "I don’t think the one month is—no. No. One month’s reading doesn’t tell us much. You know, we‘d want to see evidence that inflation is moving in a direction that gives us more comfort. As I said, we’ve got two months now where core inflation is a little lower, but we’re not looking at that as a reason to take some comfort. You know, I think we need to really see that our expectation is being fulfilled—that inflation, in fact, is under control and starting to come down. But, again, it’s not like we would stop. We would just go back to 25-basis-point increases. It’ll be a judgment call when these meetings arrive. But, again, our expectation is, if we see what we expect to see, then we would have 50-basis-point increases on the table at the next two meetings.",
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] |
Thank you. Colby Smith from the Financial Times. Given the expectation that inflation will remain well above the Fed’s target at year-end, what constitutes a neutral policy setting in terms of the fed funds rate? And to what extent is it appropriate for policy to move beyond that level at some point this year?
|
COLBY SMITH
|
[
{
"content": "Thank you. Colby Smith from the Financial Times. Given the expectation that inflation will remain well above the Fed’s target at year-end, what constitutes a neutral policy setting in terms of the fed funds rate? And to what extent is it appropriate for policy to move beyond that level at some point this year?",
"role": "user"
},
{
"content": "So—neutral. When we talk about the neutral rate, we’re really talking about the rate that neither pushes economic activity higher nor slows it down. So it’s a concept, really. It’s not something we can identify with any precision. So we estimate it within broad bands of uncertainty. And the current estimates on the Committee are 2 to 3 percent. And also, that’s a longer-run estimate. That’s an estimate for an economy that’s at full employment and 2 percent inflation. So, really, what we’re doing is, we’re raising rates expeditiously to what we see as the broad range of plausible levels of neutral. But we know that there’s not a bright line drawn on the road that tells us when we get there. So we’re going to be looking at financial conditions, right? Our policy affects financial conditions, and financial conditions affect the economy. So we’re going to be looking at the effect of our policy moves on financial conditions. Are they tightening appropriately? And then we’re going to be looking at the effects on the economy. And we’re going to be making a judgment about whether we’ve done enough to get us on a path to restore price stability. It’s that. So if that path happens to involve levels that are higher than estimates of neutral, then we will not hesitate to go to those levels. We won’t. But, again, there’s a false precision in the discussion that we as policymakers don’t really feel. You know, you’re going to raise rates, and you’re going to be inquiring how that is affecting the economy through financial conditions. And, of course, if higher rates are required, then we won’t hesitate to deliver them.",
"role": "assistant"
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] |
Thanks, Chair Powell. Neil Irwin with Axios. Do you see evidence that inflationary psychology is changing in areas like workers’ wage demands, businesses’ willingness to raise prices? Do you see evidence that there is a psychological shift going inflation? Thanks.
|
NEIL IRWIN
|
[
{
"content": "Thanks, Chair Powell. Neil Irwin with Axios. Do you see evidence that inflationary psychology is changing in areas like workers’ wage demands, businesses’ willingness to raise prices? Do you see evidence that there is a psychological shift going inflation? Thanks.",
"role": "user"
},
{
"content": "We don’t really see strong evidence of that yet, but that does not in any way make us comfortable. I think if you look at short-term inflation expectations, they’re quite elevated. And you can look at that and say, “Well, that’s because people expect inflation to come down.” And, in fact, inflation expectations at longer horizons come down fairly sharply. Longer-term inflation expectations have been reasonably stable but have moved up to—but only to levels where they were in 2014, by some measures. So you can look at that. And I think that’s a fair description of the picture. But it’s really about the risks. We don’t see a wage–price spiral. We see that companies have the ability to raise prices, and they’re doing that, but there have been price shocks. So I just think it takes you back to the basic point—was that we know we need to expeditiously move our policy rate up to ranges of more normal, neutral levels. And we need to look around and keep going if we don’t see that financial conditions have tightened adequately or that the economy is behaving in ways that suggest that we’re not where we need to be. So, again, you don’t see those things yet, but I would say there’s no basis for feeling comfortable about that. It’s a risk that we simply can’t run. We can’t allow a wage–price spiral to happen. And we can’t allow inflation expectations to become unanchored. It’s just something that we can’t allow to happen, and so we’ll look at it that way.",
"role": "assistant"
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] |
Great. Thanks, Chair Powell. Jeanna Smialek with the New York Times. You mentioned in the statement both the upside risks to inflation from Russia and China. Obviously, those are very much supply shocks rather than demand side. And I wonder what you meant to convey by adding them—I wonder what you meant to convey by adding those.
|
JEANNA SMIALEK
|
[
{
"content": "Great. Thanks, Chair Powell. Jeanna Smialek with the New York Times. You mentioned in the statement both the upside risks to inflation from Russia and China. Obviously, those are very much supply shocks rather than demand side. And I wonder what you meant to convey by adding them—I wonder what you meant to convey by adding those.",
"role": "user"
},
{
"content": "Well. So our tools don’t really work on supply shocks. Our tools work on demand. And to the extent we can’t affect, really, oil prices or other commodity prices or food prices and things like that, so we can’t affect those. But there’s a job to do on demand. And that—you can see that in the labor market, where demand is substantially in excess of supply of workers. And you can see it in the product markets as well. But I guess I’m just pointing out that—a couple of things. For both the situation in Ukraine and the situation in China, they’re likely to, both, add to headline inflation. And people are going to be suffering from that, you know. People almost suffer more from food and energy shocks then, but—even though they don’t actually tell us much about the future path. So the second thing is that they’re both capable of preventing further progress in supply chains healing or even making supply chains temporarily worse. So they’re going to weigh on the process of global supply chain healing, which is going to affect broader inflation, too. So, in a way, they’re two further negative shocks that have hit really in the last, you know, 60 days, 90 days.",
"role": "assistant"
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] |
Hi. Victoria Guida from Politico. I want to follow up on that, because you all have obviously highlighted that there are both supply and demand issues at play in inflation. And I’m just wondering, you know, if these supply chain issues continue because of Russia, because of China, or just because these things take a while to work out, does getting back down to your 2 percent mandate require that the supply chain issues get resolved, since you can only handle the demand side, as you said? Or will you have to crimp demand maybe even further if the supply chain issues don’t resolve themselves, in order to try and get inflation back down to where you want it to be?
|
VICTORIA GUIDA
|
[
{
"content": "Hi. Victoria Guida from Politico. I want to follow up on that, because you all have obviously highlighted that there are both supply and demand issues at play in inflation. And I’m just wondering, you know, if these supply chain issues continue because of Russia, because of China, or just because these things take a while to work out, does getting back down to your 2 percent mandate require that the supply chain issues get resolved, since you can only handle the demand side, as you said? Or will you have to crimp demand maybe even further if the supply chain issues don’t resolve themselves, in order to try and get inflation back down to where you want it to be?",
"role": "user"
},
{
"content": "So, you know, I’ll just say: For now, we’re focused on doing the job we need to do on demand, and there’s plenty to be done there. Again, if you look at it, it’s essentially almost two to one, job vacancies to unemployed people. There’s a lot of excess demand. There’re more than 5 million more employed plus job openings than there are the size of the labor force. So there’s an imbalance there that we have to do our work on. A very difficult situation—you know, you would look at core inflation, which wouldn’t include the commodity price shocks. And, you know, that’s one of the reasons we would tend to focus on that, because we can have more of an effect on that, but it would be a very difficult situation. I mean, we have to be sure that inflation expectations remain anchored. And I mean, that’s part of our job, too, so we’d be watching that carefully. And it puts any central bank in a very difficult situation.",
"role": "assistant"
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] |
Howard Schneider with Reuters. And thanks, and nice to be back. So two questions. One quick one. You’ve cited the 1.9 to 1 figure so often now, I’ve got to ask you, what would be a good figure there? What would you like to see that come down think that you’re in a noninflationary vacancy-to-unemployed rate? And, secondly, on help from inflation, how much are you counting on wealth effects through stock market channels? Equity markets broadly down quite a bit since late fall, first of the year—how are you mapping that into household consumption? Have they come down enough? Do you need another leg down in equity values to think that households are going to stop spending at the rate we need them to stop spending?
|
HOWARD SCHNEIDER
|
[
{
"content": "Howard Schneider with Reuters. And thanks, and nice to be back. So two questions. One quick one. You’ve cited the 1.9 to 1 figure so often now, I’ve got to ask you, what would be a good figure there? What would you like to see that come down think that you’re in a noninflationary vacancy-to-unemployed rate? And, secondly, on help from inflation, how much are you counting on wealth effects through stock market channels? Equity markets broadly down quite a bit since late fall, first of the year—how are you mapping that into household consumption? Have they come down enough? Do you need another leg down in equity values to think that households are going to stop spending at the rate we need them to stop spending?",
"role": "user"
},
{
"content": "Okay, so in terms of the vacancies-to-unemployment ratio, we don’t have a goal in mind. There’s no specific number that we’re saying, “We’ve got to get to that.” It’s really, you’ve got to get to a place where the labor market appears to be more in balance. And that depends not only on the level of those things—it also, it depends on how well the matching functions in the labor markets are working. Because, you know, the longer these expansions go on, you can get very efficient with all of that, and the Beveridge curve shifts out. And that also tends to, you know, to help. So there isn’t a specific number. I will say we were— you know, I think, I think when we got to one-to-one in the, you know, in the late teens, we thought that was a pretty good number. But, again, we’re not shooting for any particular number. What we’d like to see is progress, but we’re not really looking at that. That’s an intermediate variable. We’re looking at wages, and we’re looking at, ultimately, inflation. So, you know, there are a bunch of channels through which policy works. You can think of it as, you know, interest-sensitive spending, and then you can think of another big one as asset values broadly. And, you know, there’re big models with, you know, a lot of different channels that are related to that. You know, we don’t focus on any one market—the equity market or the housing market—we focus on financial conditions broadly. So we wouldn’t be targeting any one market, as you suggest, for going up or down or taking a view on whether it’s at a good level or a bad level. We just would be looking at very broad measures of financial conditions—all the different financial conditions indexes, for example, which include equity. But they also include debt and other, many other things—credit spreads, things like that—too.",
"role": "assistant"
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] |
Hi, Chair Powell. Rachel Siegel here from the Washington Post. To follow up from your message from the very beginning, what is your message to the American people about when they will start to feel the effects of, say, a 50-basis-point rate hike or multiple hikes? How do you explain to them what that does to their grocery bill or their rent or their gas bill? Thank you.
|
RACHEL SIEGEL
|
[
{
"content": "Hi, Chair Powell. Rachel Siegel here from the Washington Post. To follow up from your message from the very beginning, what is your message to the American people about when they will start to feel the effects of, say, a 50-basis-point rate hike or multiple hikes? How do you explain to them what that does to their grocery bill or their rent or their gas bill? Thank you.",
"role": "user"
},
{
"content": "So, first, the first thing to say is that we understand. And some of us are old enough to have lived through high inflation, and many aren’t. But it’s very unpleasant. It’s just something people don’t—when they experience it for the first time, you’re paying more for the same thing. If you’re a normal economic person, then you probably don’t have that much extra to spend. And it’s immediately hitting your spending on groceries, on, you know, on gasoline, on energy, and things like that. So we understand the pain involved. So how do you get out of that? And it’s our job to make sure that inflation of that unpleasant, high nature doesn’t get entrenched in the economy. That’s what we’re here for, one of the main things we’re here for—perhaps the most fundamental thing we’re here for. And the way we do that is, we try to get supply and demand back in sync with each other, back in balance, so that the economy is under less stress and inflation will go down. Now, the process of getting there involves higher rates—so higher mortgage rates, higher borrowing rates, and things like that. So it’s not going to be pleasant either. But in the end, everyone is better off. Everyone— particularly people on fixed incomes and at the lower part of the income distribution are better off with stable prices. And so we need to do everything we can to restore stable prices. We’ll do it as quickly and effectively as we can. We think we have a good chance to do it without a significant increase in unemployment or, you know, a really sharp slowdown. But, ultimately, we think about the medium and longer term, and everyone will be better off if we can get this job done—the sooner, the better.",
"role": "assistant"
}
] |
Thank you, Chair Powell. Edward Lawrence with the Fox Business Network. So you’ve talked in the past about consumer spending and how that drives the economy. Are you concerned, with this high level of inflation, that the consumer will stop spending—and what’s the level of your concern—pushing us into a recession?
|
EDWARD LAWRENCE
|
[
{
"content": "Thank you, Chair Powell. Edward Lawrence with the Fox Business Network. So you’ve talked in the past about consumer spending and how that drives the economy. Are you concerned, with this high level of inflation, that the consumer will stop spending—and what’s the level of your concern—pushing us into a recession?",
"role": "user"
},
{
"content": "So the economy is doing fairly well. We expect growth to be solid this year. And we see, you know, household spending and business investment as fairly strong— and even in the first quarter, which was relatively slow on some other fronts. So, and the labor market—if you look at the labor market, for people who are out of work and looking, there are lots of job opportunities for—wages are moving up and at rates that haven’t been seen in quite a long time. So it’s a good time to be a worker looking to, you know, either change jobs or get a wage increase in your current job. So it’s a strong economy, and nothing about it suggests that it’s close to, or vulnerable to, a recession. Now, of course, given events around the world and fading fiscal policy effects and higher rates, you could see some slower economic activity. Certainly, it will not be—last year was an extraordinarily strong growth year as we recovered from the pandemic. As I mentioned, growth was over 5 percent. But most forecasters have growth this year at, you know, at a solid pace above 2 percent.",
"role": "assistant"
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{
"content": "But we’ve talked with economists who have advised Democrats and Republican Presidents who both said that the Fed is so far behind the curve on inflation that a recession is inevitable.",
"role": "user"
},
{
"content": "So, and as I said, I think we have a good chance to restore price stability without a recession—without, you know, a severe downturn; without materially high, higher unemployment. And I mentioned the reasons for that. So I see a strong economy now. I see a very strong labor market, for example. Businesses can’t find the people to hire—they can’t find them. So, typically, in a recession, you would have unemployment. Now you have surplus demand. So there should be room, in principle, to reduce that surplus demand without putting people out of work. The issue will come that we don’t have precision surgical tools. We have, essentially, interest rates, the balance sheet, and forward guidance, and they’re famously blunt tools. They’re not capable of surgical precision. So I would agree. No one thinks this will be easy, no one thinks it’s straightforward, but there is certainly a plausible path to this, and I do think we’ve got a good chance to do that. And, you know, our job is not to rate the chances—it is to try to achieve it. So that’s what we’re doing. There are a range of opinions, though, and that’s only appropriate.",
"role": "assistant"
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] |
Thanks. Steve Dorsey, CBS. You mentioned earlier, just now, fading fiscal policy. Do you feel that the Fed has been supported enough from policies at the White House and in Congress in combating inflation?
|
STEVE DORSEY
|
[
{
"content": "Thanks. Steve Dorsey, CBS. You mentioned earlier, just now, fading fiscal policy. Do you feel that the Fed has been supported enough from policies at the White House and in Congress in combating inflation?",
"role": "user"
},
{
"content": "You know, it’s really the Fed that has responsibility for price stability. And we take whatever arrives at the Fed in terms of fiscal activity, we take it as a given, and we don’t evaluate it—it’s not our job, really. We don’t have an oversight function there. And we look at it as our job, given all the factors that are happening, to try to sustain maximum employment and price stability. So if Congress or the Administration has ways to help with inflation, I would encourage that, but I’m not going to get into making recommendations or anything like that. It’s not, it’s really not our role—we need to stay in our lane and do our job. When we get inflation back under control, then maybe I can, you know, give other people advice. Right now, we need to focus on, just focus on doing our job. And I’ll stick to that. Stick in our lane.",
"role": "assistant"
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] |
Steve Matthews with Bloomberg News. A number of your colleagues have said that the rates will need to go above neutral into a restrictive territory to bring down inflation. One, do you agree with that? And, two, you’ve recently spoken in great praise of Paul Volcker, who had the courage to bring inflation down with recessions in the 1980s. And while it’s certainly not your desire—the soft landing is the big hope of everyone— would this FOMC have the courage to endure recessions to bring inflation down if that were the only way necessary?
|
STEVE MATTHEWS
|
[
{
"content": "Steve Matthews with Bloomberg News. A number of your colleagues have said that the rates will need to go above neutral into a restrictive territory to bring down inflation. One, do you agree with that? And, two, you’ve recently spoken in great praise of Paul Volcker, who had the courage to bring inflation down with recessions in the 1980s. And while it’s certainly not your desire—the soft landing is the big hope of everyone— would this FOMC have the courage to endure recessions to bring inflation down if that were the only way necessary?",
"role": "user"
},
{
"content": "So I think it’s certainly possible that we’ll need to move policy to levels that we see as restrictive as opposed to just neutral. We can’t know that today. That decision is not in front of us today. If we do conclude that we need to do that, then we won’t hesitate to do it. I’ll say again, there’s no bright line, you know, that you’re stepping over. You’re really looking at what our policy stance is and what the market is forecasting for it. You’re looking at financial conditions and how that’s affecting the economy and making a judgment. You know, we won’t be arguing about whose model of the neutral rate is better than the other one. It’s much more about a practical application of our policy tools. And we’re absolutely prepared to do that. It—wouldn’t hesitate if that’s what it takes. So I am, of course—who isn’t an admirer of Paul Volcker? I shouldn’t be singled out in this respect. But I knew him just a little bit and have tremendous admiration for him. And I— But I would phrase it this way: He had the courage to do what he thought was the right thing. That’s what it was. It wasn’t a particular thing. It was that he always did—he always did—what he thought was the right thing. If you read his last autobiography, that really comes through. So that’s what the test is. It isn’t, will we do one particular thing? I would say, we do see, though—we see restoring price stability as absolutely essential for the country in coming years. Without price stability, the economy doesn’t work for anybody, really. And so it’s really essential, particularly for the labor market. If you think about it, like if you look at the last cycle, we had a very, very—longest expansion cycle in our recorded history. In the last two, three years, you had the benefits of this tight labor market going to people in the lower quartiles. And it was, you know, racial, wealth, and income—not wealth, but income gaps were coming down, wage gaps. So it’s a really great thing. We’d all love to get back to that place. But to get back to anything like that place, you need price stability. So, basically, we’ve been hit by historically large inflationary shocks since the pandemic. This isn’t anything like regular business. This is, we have a pandemic, we have the highest unemployment, you know, in—since the Depression. Then we have this outsized response from fiscal policy and monetary policy. Then we have inflation. Then we have a war in Ukraine, which is cutting the commodity, you know, patch in half. And now we have these shutdowns in China. So it’s been a series of inflationary shocks that are really different from anything people have seen in 40 years. So we have to look through that and look at the economy that’s coming out the other side. And we need to somehow find price stability out of this. And it’s obviously going to be very challenging, I think, because you do have, you know, numerous supply shocks, which are famously difficult to deal with. So I guess that’s how I think about it.",
"role": "assistant"
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] |
Thank you. Chris Rugaber, Associated Press. Earlier, you just said that if necessary—I think were the words—that you would, or if it, if it turned out to be necessary, or you said that it’s possible that we’ll need to move policy to restrictive levels. Given where inflation is and the hot economy is—or, certainly, the hot labor market, as you described it—why still the hesitation? I mean, what else do you need to see in order to determine that? Wouldn’t the Fed naturally be looking to go to a restrictive level at this point? Thank you.
|
CHRISTOPHER RUGABER
|
[
{
"content": "Thank you. Chris Rugaber, Associated Press. Earlier, you just said that if necessary—I think were the words—that you would, or if it, if it turned out to be necessary, or you said that it’s possible that we’ll need to move policy to restrictive levels. Given where inflation is and the hot economy is—or, certainly, the hot labor market, as you described it—why still the hesitation? I mean, what else do you need to see in order to determine that? Wouldn’t the Fed naturally be looking to go to a restrictive level at this point? Thank you.",
"role": "user"
},
{
"content": "So I didn’t—if I said “necessary,” I meant to say “appropriate.” We’re not going to be erecting a high barrier for this. It’s more, if we think it’s appropriate. You know, the point is, we’re a very long way from neutral now. We’re moving there expeditiously, and we’ll continue to do so. And we can’t make that decision, really, today. The decision for about how high to go will be on the table to be made when we reach neutral. And, you know, I expect we’ll get there expeditiously, as I’ve mentioned. So it’s not that we don’t want to—making that decision today wouldn’t really mean anything. But I’ll say again, if we do believe that it’s appropriate to go to those levels, we won’t hesitate.",
"role": "assistant"
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] |
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