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You’ve been very clear about the Committee’s intention on rates not even thinking about thinking about raising rates and today showing low rates even as unemployment falls to 4 percent and inflation rises to 2 percent My question is about asset purchases Does the guidance today apply to the current asset purchase pace? Are there any macroeconomic conditions under which you would favor increasing the monthly pace of Treasury and MBS purchases? And under what conditions would a decrease in the monthly pace of purchases be appropriate? Thank you
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NICK TIMIRAOS
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[
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"content": "You’ve been very clear about the Committee’s intention on rates not even thinking about thinking about raising rates and today showing low rates even as unemployment falls to 4 percent and inflation rises to 2 percent My question is about asset purchases Does the guidance today apply to the current asset purchase pace? Are there any macroeconomic conditions under which you would favor increasing the monthly pace of Treasury and MBS purchases? And under what conditions would a decrease in the monthly pace of purchases be appropriate? Thank you",
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"content": "Thank you. So we say in our postmeeting statement that we’ll continue to increase our securities holdings “at least at the current pace” over coming months “to sustain smooth market functioning and help foster accommodative financial conditions.” That latter part is an updating of our guidance to reflect what I’ve been saying in these press conferences for some time and what other central banks have acknowledged, which is that the purchases are fostering accommodative financial conditions as well. That amounts to roughly $80 billion a month of Treasuries and $40 billion net per month for MBS. So we do—we do think that these purchases have been effective in, in restoring orderly market conditions and have supported the flow of credit to households and businesses, including by fostering more accommodative financial conditions, which, of course, we think is a good thing. So, in terms of going forward, I would just say this: There are various ways and margins that we can adjust our tools going forward, and we’ll continue to monitor developments. And we’re prepared to adjust our plans as appropriate.",
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"content": "If I could—if I could follow up I suppose the question I have is why give guidance on one policy tool but not give guidance on the other policy tool when the Fed has talked about those two policy tools working together?",
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"content": "So we, we think our—we think our policy stance is appropriate today, and we’re prepared to adjust it going forward as we, as we see appropriate. And today we believe that particularly this very strong forward guidance—very powerful forward guidance that we’ve announced today will provide strong support for the economy. Effectively, we’re saying that rates will remain highly accommodative until the economy is far along in its recovery, and that, that should be a very powerful statement in supporting economic activity. Now we’re buying $120 billion in securities per month across the—across the Treasury curve. That’s also adding to accommodation. We do have the flexibility to adjust that tool and, and the rate tool and, and other tools as well. But as for right now, we think—we think that our policy setting is appropriate to support the expansion. We did—we said from the beginning that we would first try to provide some support and stability and relief in the first phase of the crisis, the acute phase, and then we would support the expansion when it came. Well, it’s here. And it’s well along. And so that’s why we changed our guidance today, and we do have the flexibility to do more when we think it’s appropriate.",
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New York Times I was wondering you beefed up your language on financial stability in the long-run statement that you unveiled with your Jackson Hole speech last month I’m wondering if you could walk us through how you think about financial stability concerns as a factor in guiding and interpreting increases You know would financial stability concerns on their own be enough to merit changes in the fed funds rate? Or would they have to come in conjunction with an overheating on inflation or some dramatic drop in the unemployment rate? If you could give us an outline of your thinking there please
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JEANNA SMIALEK
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"content": "New York Times I was wondering you beefed up your language on financial stability in the long-run statement that you unveiled with your Jackson Hole speech last month I’m wondering if you could walk us through how you think about financial stability concerns as a factor in guiding and interpreting increases You know would financial stability concerns on their own be enough to merit changes in the fed funds rate? Or would they have to come in conjunction with an overheating on inflation or some dramatic drop in the unemployment rate? If you could give us an outline of your thinking there please",
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"content": "So what we said in our Statement on Longer-Run Goals and Monetary Policy Strategy was that the Committee’s policy decisions reflect “its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee’s goals.” So that’s what we said about financial stability. And today we said that we’d “be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of our the Committee’s goals.” But you asked specifically about, about financial stability. One thing I would say is that financial—that monetary policy should not be the first line of defense—is not the first line of defense on financial stability. We look to more appropriate tools in the first instance as a first line of defense, and those would be regulation, supervision, high capital, high liquidity, stress testing—all of those things, macroprudential tools. All of those things are, are really the first line of defense on financial stability. But we always leave open the idea that we will not ignore those kinds of risks and other kinds of risks, more broadly, that could impede the attainment of our goals in, in setting monetary policy. So that’s, that’s really how we think about it, but principally that, you know, other tools are the—are the frontline, as I mentioned.",
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"content": "if other tools aren’t forthcoming would financial stability concerns in and of themselves be enough to warrant a rate hike?",
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"content": "So, you know, what we said again in the Statement on Longer-Run Goals and Monetary Policy Strategy—you know, in our consensus statement is that we, you know—“policy decisions reflect … the balance of risks, including risks to the financial system that could impede the attainment of the Committee’s goals.” So the test would be, you know, does a majority of the Committee feel that, that monetary policy is, is triggering that? And that, that would be—that would be the test. And, you know, it’s not something that we’ve done. We do monitor financial stability concerns, of course, intensely and regularly. We try to use our other tools on them, but we, we do keep them in mind as we think about monetary policy.",
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I wonder if you could help me understand how the projections of the Committee line up with the goals of the Committee You’ve now altered the projections to—the statement to aim for inflation above 2 percent But when I look at the SEP I don’t see the Committee believing a single year in the next four years that you are ever above 2 percent In fact for each year you are below it until 2023 which is the first time that you actually hit 2 percent So do you think— you confident—is this just the Committee is not confident that not only can it not hit its 2 percent goal but that now it can’t hit its goal of being above 2 percent?
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STEVE LIESMAN
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"content": "I wonder if you could help me understand how the projections of the Committee line up with the goals of the Committee You’ve now altered the projections to—the statement to aim for inflation above 2 percent But when I look at the SEP I don’t see the Committee believing a single year in the next four years that you are ever above 2 percent In fact for each year you are below it until 2023 which is the first time that you actually hit 2 percent So do you think— you confident—is this just the Committee is not confident that not only can it not hit its 2 percent goal but that now it can’t hit its goal of being above 2 percent?",
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"content": "Not at all. And, you know, you don’t—you also don’t see people, by and large, lifting off or raising interest rates above zero. I guess there are 4 exceptions out of a Committee of 17 during that—during the forecast period. So we don’t reach 2 percent, but we get very close to it in the forecast. We reach 2 percent—I guess the median is 2 percent at the end of 2023. So, you know, what the guidance says. It says that we expect that the current setting of, of our rates will be—what we expect is that it will be appropriate until such time as we reach 2 percent inflation, that we feel that labor market conditions are consistent with our assessment of maximum employment, and that we’re on track to achieve inflation moderate—inflation moderately above. So that’s the test. So I don’t think there’s any conflict between those two because, you know, the, the way they’re set up, the projections don’t show the out years. You asked about confidence, and I would say that this, this very strong, very powerful guidance shows both our confidence and our determination. It shows our confidence that we can reach this goal and our determination to do so.",
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"content": "I’m sorry if I could just follow up without being simplistic about this But why wouldn’t—if the Committee was confident that it could reach its new goal of aiming for inflation above 2 percent why wouldn’t one of those years at least show inflation being above 2 percent on the median forecast?",
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"content": "Because it—we think, looking at everything we know about inflation dynamics in the United States and around the world over recent decades, we expect it will take some time. We expect that the economy will recover quickly now, but pace will slow as, as people go back to work. And we’ll still have an area of the economy—a big area of the economy—that struggles. There will be slack in the economy. The economy will be below maximum employment, below full demand. And that will tend to wear—to put downward pressure on inflation. So we think that once we get up closer to maximum employment, we think that inflation will come back, generally. And, I mean, that’s what happened during the last long expansion. It’s a slow process, but—but there is a process there. Inflation does move up over time. We do expect that will continue today, and we expect that our, our guidance is powerful and will help that outcome. We think that—that effectively saying that policy will remain highly accommodative until the economy is very far along in its recovery should provide strong support for the economy and get us there sooner rather than later.",
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Thanks very much for taking my question I wanted to ask if you anticipate a slowing in the pace of the recovery if there is not another stimulus package and specifically if there are particular holes still remaining in the economy that you think could be helped by more aid from Congress Thanks very much
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RACHEL SIEGEL
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"content": "Thanks very much for taking my question I wanted to ask if you anticipate a slowing in the pace of the recovery if there is not another stimulus package and specifically if there are particular holes still remaining in the economy that you think could be helped by more aid from Congress Thanks very much",
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"content": "Sure. So, first, if you look at the Summary of Economic Projections that my colleagues and I filed for this meeting, what you’ll see is an expectation that the recovery will continue—that it will continue at a reasonable pace through 2021, ’22, and ’23. We do expect pace will slow just because you would expect that the, the pace would be fastest right at the beginning of the—right at the beginning of the recovery, because you had such a sharp decline. You would expect that the third quarter should be the fastest gains, and that, after that, the pace should slow down to a more normal pace. So we do expect that. In terms of fiscal policy—you asked about fiscal policy. So, you know, one thing—I guess I would start by saying that the initial response from fiscal authorities was rapid. It was forceful and pretty effective. And we’re seeing the results of that in—today in income and household spending data, in the labor market data, in the construction data, in the data for business equipment spending, and the fact that businesses are staying in business, and, you know, the pace of default and things like that has really slowed. So there’s been a really positive effect. That said, my sense is that more fiscal support is likely to be needed. Of course, the details of that are for Congress, not for the Fed. But I would just say, there are still roughly 11 million people still out of work due to the pandemic, and a good part of those people were working in industries that are likely to struggle. Those people may need additional, additional support as they try to find their way through what will be a difficult time for them. We’ve also got struggling small businesses, especially those in the business of facing directly to the public. And we have state and local governments dealing with a drop in revenue at the same time spending has gone up, much of it related to the pandemic and economic effects. So, again, I would say, the fiscal support has been essential in, in the good progress we see now. And, finally, I’ll note that just about all—the overwhelming majority of, of private forecasters who, who project an ongoing recovery are assuming there will be substantial additional fiscal support.",
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Should we expect any further evolutions in forward guidance say maybe an adoption of something akin to the Evans rule that we had a few years ago? Or is there something else that the Fed might be considering in the future?
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MICHAEL DERBY
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"content": "Should we expect any further evolutions in forward guidance say maybe an adoption of something akin to the Evans rule that we had a few years ago? Or is there something else that the Fed might be considering in the future?",
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"content": "Well, so we think that the forward guidance we adopted today is appropriate and, as I mentioned, powerful. Effectively, what it says is that we’ll, we will keep policy where it is now—keep the rate policy where it is now until unemployment reaches the Committee’s assessments or levels that are—sorry, not unemployment, labor market conditions reach levels that are consistent with the Committee’s assessments of maximum employment, until inflation reaches 2 percent, and until it’s on track to go above 2 percent moderately for some time. So that’s very strong forward guidance, and we think will be durable guidance that will provide significant support to the economy in coming years. So that’s, that’s really our thinking on, on forward guidance on rates.",
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for doing this So to follow up on Mike’s question there since you described this guidance as durable you—you’ve set up a three-part test here for rate hikes: levels consistent with assessments of maximum employment inflation has risen to 2 percent and you’re on track to moderately exceed 2 percent for some time Each of these have modifiers and I wonder if you could explain them a little bit more How do we pin down assessments of maximum employment? When you say that “inflation has risen to 2 percent” does that mean 2 percent for a day a month six months? And when you say “on track to moderately exceed” how should we define “moderately”? And how should we define “for some time”?
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HOWARD SCHNEIDER
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[
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"content": "for doing this So to follow up on Mike’s question there since you described this guidance as durable you—you’ve set up a three-part test here for rate hikes: levels consistent with assessments of maximum employment inflation has risen to 2 percent and you’re on track to moderately exceed 2 percent for some time Each of these have modifiers and I wonder if you could explain them a little bit more How do we pin down assessments of maximum employment? When you say that “inflation has risen to 2 percent” does that mean 2 percent for a day a month six months? And when you say “on track to moderately exceed” how should we define “moderately”? And how should we define “for some time”?",
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"content": "So, as you know, maximum employment is not—is not something that can be reduced to a number the way inflation can. It’s a broad range of factors. It really always has been and, really, a substantial number of factors that we’ve indicated we would look at. So it’s broader labor conditions, consistent with our Committee’s assessment of maximum employment. So that would certainly mean low unemployment, it would mean high labor force participation, it would mean wages—it would be a whole range of things. And we’re not looking at a rule. We’re looking at a judgmental assessment, which I think we’ll be very transparent about as we—as we go forward. In terms of inflation, you know, this is a Committee that is both confident and committed to—and determined to reach our goals. And the idea that we would look for the, the quickest way out is just—it’s just not who we are. It’s not that—there’s no message of that here. We would not be looking for one month of 2 percent inflation; we said return to 2—to achieve 2 percent inflation. Okay. So just understand that, you know, we’re strongly committed to achieving our goals and the overshoot. So that should tell you about that. Oh, in terms of—okay, in terms of—so, what does “moderate” mean? It means not large. It doesn’t—it means not very high above 2 percent. It means moderate. I think that’s a fairly well-understood word. In terms of—in terms of “for a time,” what it means is not permanently and not for a sustained period. You know, we’re, we’re resisting the urge to try to create some a rule or a formula here. And I think the, the public will understand pretty well what we want. It’s actually pretty straightforward. We want to achieve inflation that averages 2 percent over time. And if we do that, inflation expectations will be right at 2 percent, and that’ll help us achieve 2 percent inflation over time and avoid the situation where the central bank loses its ability to support the economy.",
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Do you consider today’s enhanced forward guidance to have actual accommodation to the—to the US economy from a monetary perspective and deliver further support for the economy? Or is it just a tweak to your existing policy stance? And in terms of fiscal support do you assume in your own projections—not just private forecasters—that additional fiscal support will be forthcoming? Or do you expect weaker growth or a—or a larger contraction rather this year if no fiscal support is forthcoming?
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JAMES POLITI
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"content": "Do you consider today’s enhanced forward guidance to have actual accommodation to the—to the US economy from a monetary perspective and deliver further support for the economy? Or is it just a tweak to your existing policy stance? And in terms of fiscal support do you assume in your own projections—not just private forecasters—that additional fiscal support will be forthcoming? Or do you expect weaker growth or a—or a larger contraction rather this year if no fiscal support is forthcoming?",
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"content": "So, in terms of the effects, so I think what we’ve done is—is more or less aligned with the consensus statement today. So it’s, it’s in line with what, what might have been expected. As I mentioned, I think over time it will provide very powerful support for this economy as we move forward. In a sense, it’s consistent with expectations, so I don’t—I’m not looking for a big reaction right now. But I think, over time, again, guidance that we expect to retain the current stance until the economy is—has moved very far toward our goals is a strong and powerful thing. And I think that will be supportive of the economy over time. In terms of additional fiscal support, I guess your question is, what would happen if— yes, so, people have different assessments, and, and different participants in the FOMC made different assessments on their own. I think broadly, though, there is an expectation among private forecasters and among FOMC participants that there will be some further fiscal action. And there does seem to be an appetite on the part of all the relevant players to doing something. The question is, how much and when? And so I would just say that if—and it’s very hard to say. So, so far the economy has proven resilient to the—to the lapsing of the—to the, of the CARES Act unemployment— enhanced unemployment benefits. But there’s, there’s certainly a risk, though, that, that those who are unemployed have saved—appear to have saved some of those benefits, and they’ll, they’ll now spend them, and that, as the months pass, if, if there’s no follow-up on that, if there isn’t additional support and there isn’t a job for the—some of those people who are, are from industries where, where it’s going to be very hard to find new work, then you’ll—that will start to show up in economic activity. It’ll also show up in things like evictions and foreclosures and, and, you know, things that will scar and damage the economy. So that’s a downside risk. So I, I think the real question is, is, when and how much and what will be the—what will be the contents? And, you know, no one—no one has any certainty around that, but, broadly speaking, if we don’t get that, then there would certainly be downside risks through the— certainly through the channel I mentioned.",
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given the recent update to the policy framework and repeated calls for this in the Fed Listens events is the Fed open to other measures of the economy such as income inequality and affordability of housing?
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ANNEKEN TAPPE
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"content": "given the recent update to the policy framework and repeated calls for this in the Fed Listens events is the Fed open to other measures of the economy such as income inequality and affordability of housing?",
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"content": "So we—you know, we monitor everything we think is important in the U.S. economy. And in that—in a broad sense, all of it goes into thinking about monetary policy. You mentioned inequality. So, you know, disparities in, in income and in financial well- being by various demographic and racial categories is something we monitor carefully. Inequality, which I would point to—it’s a multifaceted thing. But I would point to the relative stagnation of incomes for people at the lower end of the income spectrum and also lower mobility. So those are things that hold back our economy. They are. The thing is, we don’t really have the tools to address those. We, we have interest rates and bank supervision and financial stability policy and things like that, but we can’t—we can’t get at those things through our tools. When we lower the federal funds rate, that supports the economy across a broad range of, of people and activities, but we can’t—we don’t have the ability to target particular groups. Notwithstanding that, we, we do talk about it, because these are important features of our economy. And we—you know, I, I think those are—those distributional issues are, are issues that are really for our elected officials. And I would say, I take them seriously as holding back our economy. The productive capacity of the economy is limited when not everyone has the opportunity, has the educational background and, and the health care and all the things that you need to be an active participant in our workforce. So I think we can—if we want to have the, the highest potential output and the—and the best output for our economy, we need that prosperity to be very broadly spread in the longer run. And I—again, I would just say, the Fed—you know, we can talk about those things a lot. And in, in—when we think about maximum employment in particular, we do look at individual groups. So high unemployment in a particular racial group like African Americans when—you know, we would look at that as we think about whether we’re really at maximum employment. We would look—we would look at that along with a lot of other data. So the answer is, we do look at all those things and, and do what we can with our tools. But, ultimately, these are issues for elected representatives.",
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for the question I just wanted some clarity here At what point do you think it’s prudent to shift the bond purchases from market stability—as you had said from the shorter-term maturities to more longer-term more stimulus-related?
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EDWARD LAWRENCE
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"content": "for the question I just wanted some clarity here At what point do you think it’s prudent to shift the bond purchases from market stability—as you had said from the shorter-term maturities to more longer-term more stimulus-related?",
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"content": "So, you know, we think our—we think that our asset purchases are doing both the thing—both those things today. We think, clearly, there’s been great progress, in terms of market function. If you remember, early in the spring when the acute phase of the pandemic hit, market function was very low. And it’s improved rapidly and, and in many respects is, is in a good place now. We also, though, think that these asset purchases, which total $120 billion a month—you know, which is much larger than, for example, the last asset purchase program during the Global Financial Crisis and the recovery therefrom—we think ’s also providing accommodative financial conditions and supporting growth. And we think that’s fine. We’re also aware that we, we—there are ways we can adjust that, you know, to do various things—you know, make it smaller, make it larger, and also target different sectors of the—of the curve. And, you know, we’re, we’re going to continue to monitor developments, and we’re prepared to adjust our plans as appropriate.",
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I wanted to ask about a couple of things First of all if we don’t get a vaccine until well into next year what does that mean for the economy? And then somewhat related I was wondering if you could provide any more detail about the stress scenarios that you all are going to release for the big banks and whether that is going to be another full-blown stress test whether we’re going to publicly see those results and what it might mean for bank payouts
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VICTORIA GUIDA
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"content": "I wanted to ask about a couple of things First of all if we don’t get a vaccine until well into next year what does that mean for the economy? And then somewhat related I was wondering if you could provide any more detail about the stress scenarios that you all are going to release for the big banks and whether that is going to be another full-blown stress test whether we’re going to publicly see those results and what it might mean for bank payouts",
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"content": "Great. So, on the first one, what’s happening is basically we’re learning to live with—right now, we're learning to live with COVID, which still spreads. And we’re learning to, to engage in economic activity. All of this recovery that we’ve seen is in a context where—you know, where people are still at risk of, of catching it, and yet we’re able to resume lots and lots of economic activities. And that involves, as I mentioned, you know—I think the more social distancing we can preserve as we go back into the workforce—wearing masks, keeping our distance, that thing—the better we’ll be able to get economic activity back up close to where it was. I do think, though, there are areas of the economy that are just going to really struggle until we have an—a vaccine that’s, that’s in wide—you know, wide usage and is, is widely trusted. And those are the ones where people were getting really closely—close together. I also think testing—to the extent you have cheap and rapid testing, you can do a lot with that in the workforce. You can—you can build confidence in the workforce if you have regular—very regular testing that doesn’t cost very much and you get the results really quickly. If you do that, you’ll be able to open a lot of workforces, particularly in cities where the overall case numbers are quite low. And that will help a lot. So I think we’re, we’re going to be finding lots and lots of ways to get out towards—you know, as far as we can. There’s always going to be that—for, for some time, there’s going to be certain activities that will be—that will be hard to, to resume. So I, I think that’s the only way I can say it. And I think trying to—you know, we all—when we make a forecast, we make assessments about that, but it’s really hard to say. There is no template here. There’s no—you know, there’s no experience with this. So, frankly, for the last 60 days or so, the economy’s recovered faster than expected. And that may continue or not. We just don’t know. And I think we should do those things that we control to make sure that we can recover as quickly as possible. And the main thing, again, is wearing a mask and keeping your distance while you’re in the workforce. That’s something we can all do that will limit the spread and let people go back to work, avoid major outbreaks, and things like that. In, in terms of the stress tests, so I really don’t have any—you know, we’re getting ready quite soon to be making announcements and saying things publicly. There’s not much I can say with you—nothing, really, that I can say that’s—on that today. I don’t have anything for you.",
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You have emphasized many times including today that the Fed can only lend and not spend and sometimes the latter is what’s really needed But to the extent that a $600 billion lending program for small and midsize companies could help what exactly is wrong with the design or function of the Main Street Lending Program which has purchased just I think $14 billion in loans so far? Eric Rosengren at the Boston Fed has said recently that Congress should clarify how much risk it wants the program to take But Congress has already appropriated substantial funds for the 13(3) programs and these are funds that are explicitly designed to absorb losses Meanwhile my colleagues who cover the banking sector say they’re being told by commercial banks that the Treasury Department is advising them to target zero losses—zero losses in Main Street Program loans So if I may why is it that the Federal Reserve the Congress and the Treasury apparently cannot agree on a loss tolerance that should be applied to the Main Street Lending Program in a way that would allow badly needed credit to reach these companies? Thank you
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CHRISTOPHER CONDON
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"content": "You have emphasized many times including today that the Fed can only lend and not spend and sometimes the latter is what’s really needed But to the extent that a $600 billion lending program for small and midsize companies could help what exactly is wrong with the design or function of the Main Street Lending Program which has purchased just I think $14 billion in loans so far? Eric Rosengren at the Boston Fed has said recently that Congress should clarify how much risk it wants the program to take But Congress has already appropriated substantial funds for the 13(3) programs and these are funds that are explicitly designed to absorb losses Meanwhile my colleagues who cover the banking sector say they’re being told by commercial banks that the Treasury Department is advising them to target zero losses—zero losses in Main Street Program loans So if I may why is it that the Federal Reserve the Congress and the Treasury apparently cannot agree on a loss tolerance that should be applied to the Main Street Lending Program in a way that would allow badly needed credit to reach these companies? Thank you",
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"content": "Sure. So, a couple things about Main Street. It, it reaches the whole nation. It’s got more than half of the banking industry assets signed up among the banks that are part of it, and it’s making loans. The number is more like—it’s close to $2 billion now. So the numbers are going up. Banks are joining; borrowers are coming. And it’s significant. It’s, it’s relatively small now, but it can scale up in response to economic conditions, should that be— should that be appropriate. You know, if you look out in the lending world, surveys generally find that, that firms are not citing credit constraints as a top problem. And that, that is a lot of PPP, bank credit lines, and syndicated loans. There’s a lot of credit being let out there. So—but you’re right. We, we are looking at some things. We’re looking at—some lenders are concerned about the underwriting expectations. So banks are going to—their approach is likely to be that they’re going to underwrite this loan roughly the same as they underwrite any loan. They’re keeping part of it, and, you know, what, what we want to do is make sure that—that they know that they should take the payment deferrals and other things in, in place, and also that—you know, it’s, it’s really—it’s really a, a facility for, for companies or borrowers that, that don’t have access to, to “regular way” borrowing now. Otherwise, why would we need Main Street? So that’s what we're working on. And we’ll be doing some, some—we’ll be making some changes in that respect. I don’t—I saw what President Rosengren said. I, I can’t really comment directly on that. I just would say that, you know, this is 13(3). If you look at the law under section 13(3), it’s very clear that we are to make loans only to solvent borrowers. And, and the CARES Act is quite specific in keeping all of the terms of, of section 13(3) in effect, including the requirement that we, you know, gather good evidence that the borrower is solvent. This was—this law was amended in, you know, under—in Dodd-Frank, and the idea was, was to make it challenging and put hurdles in place before we made loans—at the time, the thinking was to banks. So now we—now we’re using that same law for, for smaller business borrowers, and, you know, it doesn’t—it’s not a perfect fit. And, and, I would also just say, for many borrowers, they’re in a situation where their business is still relatively shut down, and they won’t be able to service a loan, and so they may need more fiscal support. Having said that, we’re, we’re continuing to work to, to improve Main Street, to make it more broadly available—make it pretty much to any company that needs it and that can service a loan.",
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"content": "And can you just very briefly address the reports that the Treasury is advising banks to target zero losses? Is that appropriate?",
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"content": "I can’t say. I don’t—I don’t know about that. I haven’t heard those reports. You know, again, if you think about it, we, we weren’t—we’re, we’re going to have to go through the banking system to do this. We—we’re not going to have a hundred thousand or a million loan officers working for the Fed and the Treasury. So we’re going to go through the banking system, and the banks—banks like to make good loans. That’s what they do. They’re trained to make good loans. So you should expect that they—and we expect that they will do some underwriting. We also want them to take some risk, obviously, because that was the point of it. And the question is, how do you dial that in? It’s, it’s not an easy thing to do. And, you know, we’re getting some loans made, and we’re hopeful that we’ll, that we’ll clarify this and that credit will continue to flow.",
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you’ve talked a couple of times about parts of the economy that may not recover as fast as we’ve seen so far Presumably you’re referring to airlines hotels other sections— parts of the economy that rely on close contact How are you thinking about that in terms of its overall impact? Is that sector large enough to say keep unemployment above— far above your maximum goals? Are you expecting that to come back with a vaccine? Or are a lot of those folks going to have to find you know new jobs in new industries? And should we expect the Fed will keep rates at zero until all of that reallocation is done? Thank you
|
CHRISTOPHER RUGABER
|
[
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"content": "you’ve talked a couple of times about parts of the economy that may not recover as fast as we’ve seen so far Presumably you’re referring to airlines hotels other sections— parts of the economy that rely on close contact How are you thinking about that in terms of its overall impact? Is that sector large enough to say keep unemployment above— far above your maximum goals? Are you expecting that to come back with a vaccine? Or are a lot of those folks going to have to find you know new jobs in new industries? And should we expect the Fed will keep rates at zero until all of that reallocation is done? Thank you",
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"content": "Yes, we—of course, we can’t be—we can’t be really sure we know the answers to those questions. But I would say, the, the likely path is that the—that the expansion will continue. And it’s, as I said, it’s well along, and it’ll move most easily through the parts of the economy—it’ll still take some time, but the parts of the economy that weren’t exactly directly affected, that didn’t involve getting people in large groups together to feed them, to fly them around, to put them in hotels, do entertainment, things like that—those are going to be the places that are—that are very challenging. So there will also be the—you know, the places that are affected that way. And that’s going to be challenging for, for some time. It just is. And we don’t really know how long that will be. It’s—you know, it’s millions of people. As I mentioned, we had 11 million—something like 11 million people in the payroll survey have gone back to work out of 22 million who went—who lost their jobs in March and April. So that’s half of them. So, 11 million— particularly if the pace of, of returning to work slows down, it’s going to leave a large—a large group of people. And it’ll be very meaningful from a macroeconomic standpoint. And our commitment is not to forget those people. As I mentioned, we want—you know, the sense of our forward guidance is that policy will remain, as we’ve said, highly accommodative until the— until the expansion is well along—really, very close to our goals. And even after, if we do lift off, we will keep policy accommodative until we actually have a moderate overshoot of inflation for some time. So those are powerful commitments that we think will, will support the full recovery, including those people, as long as it takes.",
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Based on what you were just saying about keeping policy accommodative for a very long time into the recovery lower-for-longer as far out as three years in your latest projections is that basically it for the Fed? In other words since interest rates are your main tool the things you can do would push down on interest rates But is it really—is it the case now that the only additional stimulus that can come to the economy is from the fiscal side?
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MICHAEL MCKEE
|
[
{
"content": "Based on what you were just saying about keeping policy accommodative for a very long time into the recovery lower-for-longer as far out as three years in your latest projections is that basically it for the Fed? In other words since interest rates are your main tool the things you can do would push down on interest rates But is it really—is it the case now that the only additional stimulus that can come to the economy is from the fiscal side?",
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"content": "Well, no, I wouldn’t—I certainly would not say that we’re out of ammo. Not at all. So, first of all, we, we do have lots of tools. We’ve got the lending tools, we’ve got the balance sheet, and we’ve got further forward guidance—further forward guidance. So we, we—there’s still plenty more that we can do. We do think that our—that our, our rate policy stance is an appropriate one to support the economy. We think it’s powerful. And, as I mentioned, you know, this is the guidance that will provide support for the economy over time, the idea being that policy will remain highly accommodative until the recovery is well along—really, very close to our goals—and then will remain accommodative even after we lift off. So I think that’s, that’s a really strong place for, for rate policy to be. But, again, we have the other margins that we can still use. So, no. Certainly, we’re not out of ammo.",
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"content": "in terms of the balance sheet are you concerned that your actions are more likely to produce asset price inflation than goods-and- services inflation? In other words are you risking a bubble on Wall Street?",
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"content": "You know, so, of course we monitor financial conditions very carefully. These are—these are not new questions. These were questions that were very much in the air a decade ago and more when, when the Fed first started doing QE. And, I would say, if you look at the long experience of, you know, the 10-year, 8-month expansion, the longest in our recorded history, it included an awful lot of quantitative easing and low rates for 7 years. And, I would say, it was notable for the lack of the emergence of, of some a financial bubble—a housing bubble or some a bubble, the popping of which could threaten the expansion. That didn’t happen. And, frankly, it hasn’t really happened around the world since then. That doesn’t mean that it won’t happen, but—and so, of course, it’s something that we monitor carefully. After the financial crisis, we started a new—a whole division of the Fed to focus on financial stability. We look at it in every—from every perspective. The FOMC gets briefed on a quarterly basis. At the Board here, we talk about it more or less on an ongoing basis, so it is something we monitor. But I don’t know that the—that the connection between asset purchases and, and financial stability is a particularly tight one. So—but again, we won’t be—we won’t be just assuming that. We’ll be checking carefully as we go. And, by the way, the kinds of tools that we would use to address those sorts of things are not really monetary policy. It would be more tools that strengthen the financial system.",
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I’d like to ask you about the labor market As in August there were about 30 million persons claiming unemployment benefits Yet the BLS jobs report for August showed about 13½ million unemployed only about 6 million more than before the pandemic I wonder how you reconcile that and what you think the actual labor market conditions are
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DON LEE
|
[
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"content": "I’d like to ask you about the labor market As in August there were about 30 million persons claiming unemployment benefits Yet the BLS jobs report for August showed about 13½ million unemployed only about 6 million more than before the pandemic I wonder how you reconcile that and what you think the actual labor market conditions are",
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"content": "So, I mean, I think the overall picture—take a step back from this. The overall picture is clear, and that is that the labor market has been recovering, but that it’s a long way—a long way from maximum employment. I think that’s, that’s the bottom line on it. So, within that, though—take claims in particular. The number of claims, the quantity of claims, and, frankly, the fact that PUA claims are new—the Pandemic Unemployment Assistance claims—that’s a new system that had to be set up. The actual counting of the claims is, is volatile, and, and it’s very difficult to take much signal about the particular level. So, you know, because people were setting those systems up, and when they got them set up, they counted them all at once and things like that. I think, though, what you’ve seen is that the level of—certainly the level of initial claims has declined very sharply from the very high levels of March and April and is now at a lower level—continues either to be flat or gradually decline. It’s worth noting—and that’s good—it’s worth noting level is maybe five times the level of what claims were. Claims were around 200,000; now they’re 900,000, in that range, weekly for, for initial claims. So that just tells you, the labor market has improved, but it’s a long, long way from maximum employment, and it will be some time getting back there. I think that’s the best way to think about it. In many parts of the economy there’s just a lot of disruption, and it’s, it’s really hard to say precisely where we are. I’ll give you another example with—you know, we say unemployment’s 8.4 percent. But if you count those who are—who are misidentified as, as employed when they’re actually unemployed and you add back some part of the participation number—so if you were—if you had a job and you were in the labor force in February and you lost it because of the pandemic, some of you are now being reported as out of the labor force. But I—you know, I would—I would more look at those people as unemployed. If you add those back, the level of unemployment’s probably 3 percent higher. On the other hand, by that metric, the, the unemployment rate would have been in the—in the 20s in, in April. So the improvement has been quite substantial under any measurement. But the level is still quite high.",
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"content": "is—is it the Fed’s aim to get back to 35 percent or even lower?",
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"content": "Yes, absolutely. You know, I, I can’t be precise about a particular number, but let me just say, there was a lot to like about 3½ percent unemployment. It’s not a magic number. No one would say that number is the touchstone or that is, you know, maximum employment. I would just say, you asked about 3½ percent. A 3½ percent unemployment rate showed, you know, gains being shared very widely across the income spectrum—in fact, going more to people at the bottom end of the spectrum. It showed labor force participation coming up as—up above many estimates of its trend, as people who’d been out of the labor force were being pulled into a tight job market. There’s a lot to like about a tough—a tight job market, particularly in a world where we didn’t see inflation. So, yes, we’d love to get back to that. I mean, I would say, we would like to get back—rather than to a particular number, we’d like to get back to a strong labor market where wages are moving up, where people can find work, where labor force participation is holding up nicely. That’s what we’d really love to get back to. Now, of course we would—we need inflation to perform in line with, with our framework. But the good news is, we think we can have quite low unemployment without raising troubling inflation.",
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I want to follow up on the wealth gap issue I know you were—that you have limited tools But are there things that you can do possibly in the area of research and maybe expand your research on racial economic gaps?
|
NANCY MARSHALL
|
[
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"content": "I want to follow up on the wealth gap issue I know you were—that you have limited tools But are there things that you can do possibly in the area of research and maybe expand your research on racial economic gaps?",
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"content": "You know, we do—we are gifted with a, a substantial group of researchers who really cover the waterfront. And we do a significant amount of research on racial disparities in—across multiple variables, including wealth, as you asked about. So we do that. And we also—remember, we have our Division of Consumer and Community Affairs, which is present in communities around the country. And the Reserve Banks all have very active community affairs groups. They’re present in communities around the country. So it wasn’t just the Fed—Fed Listens events. It’s more, just, over a long period of time we, we are in contact with people in those communities to understand their experience of the economy. We serve all Americans, and we know that. And we’re going to use our tools to, to reflect that fact. So the answer is “yes.” We do quite a bit of research, and I suppose we could do more, but we really do a lot. And we contribute to those fields and those assessments of, of the state of the economy. And we do that not just because it’s interesting and important, but because it’s important for the economy and important for our mandate. We are assigned “maximum employment.” Now, what does that mean? As I mentioned earlier, it doesn’t mean a particular headline unemployment number. What it means is maximum employment. So, you know, we look at—look at that in many, many different variables, and we ask ourselves whether those variables are—those labor market conditions are consistent with our assessments of what would constitute maximum employment. And that would include all of the things that we’re talking about.",
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I want to go back to the new forward guidance that you have And you said that it’s powerful but you’ve already have two dissent—two dissenting voters on it And I was wondering if there’s people who argued against it And what do you say to the two who dissented? It looks like President Kashkari wanted a simpler forward guidance and President Kaplan thought that the current guidance you have was fine for now So like how did you argue back on those on those arguments? Thank you
|
GREG ROBB
|
[
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"content": "I want to go back to the new forward guidance that you have And you said that it’s powerful but you’ve already have two dissent—two dissenting voters on it And I was wondering if there’s people who argued against it And what do you say to the two who dissented? It looks like President Kashkari wanted a simpler forward guidance and President Kaplan thought that the current guidance you have was fine for now So like how did you argue back on those on those arguments? Thank you",
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"content": "I wouldn’t—I don’t want to comment particularly on, on the two dissenters, but they, they consent—they dissented from, of course, different perspectives, and, and that should be clear. That’s their—they’re not they’re on, on two sides of the, of the discussion. But I would say this: I am blessed —with having a Committee of highly thoughtful people who bring diverse life experiences and diverse careers, and, of course, diverse views to our work. And I wouldn’t have it any other way. I wouldn’t. So, so I would just say, the right—in our discussions the last couple of days, the whole Committee, everybody on the Committee is very supportive of the Statement on Longer-Run Goals and Monetary Policy Strategy and what’s in there—very, very broad support, unanimous support for that. Everyone sees the, the changes in the underlying economy and sees, in their own way, the need to address those—and including the changes we made to the employment mandate and to inflation so that we’re now at flexible average inflation targeting. Of course, there would be—this is—you know, we’re the first major central bank to adopt this framework. There’s no cookbook, and we—you know, this is the first guidance under our new framework. So, of course there would be a wide range of views, and you would expect that. And it’s actually a healthy thing. So I welcome that discussion. I would also say this: You know, this is all about credibility, and we understand perfectly that we have to earn credibility. This, this facility—this, this framework has to—we have to support it with our actions. And I think today is a very good first step in doing that. It is strong, powerful guidance. It is—it ties in very nicely with the Statement of on Longer-Run Goals and Monetary Policy Strategy. We had quite a robust discussion, and there are, there are different ideas on how to do this, but I—that’s just, that’s just the way it is when you have a diverse group of highly thoughtful and effective people. And so I’m pleased with where it came out.",
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I wanted to ask about commercial real estate know you had mentioned before how you weren’t sure if there was a way the Fed could support CRE borrowers But I was just wondering if you had—if you’ve had any other continuing discussions on that and if there’s any potential way that the Fed could step that area
|
HANNAH LANG
|
[
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"content": "I wanted to ask about commercial real estate know you had mentioned before how you weren’t sure if there was a way the Fed could support CRE borrowers But I was just wondering if you had—if you’ve had any other continuing discussions on that and if there’s any potential way that the Fed could step that area",
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"content": "So thank you for that question. You know, we’ve actually spent quite a bit of time on this as Secretary Mnuchin, I think, mentioned the other day. And I’ll say just a couple things. First, you know, our facilities are essentially always—they have to be, under the law—broad based and not so much targeting any single sector. Also, it’s important to remember that CRE, commercial real estate, benefits from several of our existing facilities. So the TALF takes commercial mortgage-backed securities and SBA commercial real estate deals. And the New York Fed purchases agency CMBSs directly. In addition, I would say, Main Street helps businesses pay their rent, you know. So we’re, we’re helping real estate, you know, in a number of other ways—commercial real estate. Also, CMBS issuance has resumed. Spreads have tightened on CMBS. There are a couple of issues. One is just that commercial properties with CMBS loans often have covenants—uniformly, I think, have covenants that forbid them to take on more debt. So you have a situation, and you have a situation where, where you—without a legal change or some an innovation that defies discovery so far, you’re—you have a hard time providing mass relief with regard to real estate that’s in, in commercial mortgage-backed securities. So we’re still working on it. We’re still looking. I would say, it may be that further support for commercial real estate will require further action for Congress—from Congress.",
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So it seems like a lot of the new inflation framework is about shaping inflation expectations But the average American who might be watching this might be confused as to why the Fed is overshooting inflation So what’s your explanation to Main Street to average people what the Fed is trying to do here and what the outcome would be for those on Main Street? Thanks
|
BRIAN CHEUNG
|
[
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"content": "So it seems like a lot of the new inflation framework is about shaping inflation expectations But the average American who might be watching this might be confused as to why the Fed is overshooting inflation So what’s your explanation to Main Street to average people what the Fed is trying to do here and what the outcome would be for those on Main Street? Thanks",
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"content": "That’s a very, very important question, and I actually spoke about that in my Jackson Hole remarks a couple weeks ago. It’s not intuitive to people. It is intuitive that, that high inflation is a bad thing. It’s less intuitive that inflation can be too low. And the way I would explain it is, is that inflation that’s too low will mean that interest rates are lower. There’s an expectation of future inflation that’s built into every interest rate, right? And to the extent inflation gets lower and lower and lower, interest rates get lower and lower. And then the Fed will have less room to cut rates to support the economy. And this isn’t some idle, you know, academic theory. This is what’s happening all over the world. If you, if you look at many, many large jurisdictions around the world, you are seeing that phenomenon. So we want inflation to be—we want it to be 2 percent, and we want it to average 2 percent. So if inflation averages 2 percent, the public will expect that, and that’ll be what’s built into interest rates. And that’s just—that’s all we want. So we’re not looking to have high inflation. We just want inflation to average 2 percent. And that means that, you know, in a downturn, these days, what happens is, inflation, as has happened now—it moves down well below 2 percent. And that means that we’ve said for, for—we would like to see and we will conduct policies so that inflation moves, for some time, moderately above 2 percent. So it won’t be—these won’t be large overshoots, and they won’t be permanent but to help anchor inflation expectations at 2 percent. So, yes, it’s, it’s a challenging concept for a lot of people. But, nonetheless, the economic importance of it is, is large. And, you know, those are the people we’re serving, and, you know, we serve them best if we can actually achieve average 2 percent inflation, we believe. And that’s why we changed our framework.",
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and thank you Chair Powell for taking our questions I’m wondering if you can walk us through expectations you have specifically when it comes to the labor market going into 2023 And I’m curious about people who may have left the labor market who have yet to come back or who may face issues with childcare Perhaps they’ve retired early Any barriers that you see in keeping people from the labor market as you consider full employment going into 2023? Thank you
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RACHEL SIEGEL
|
[
{
"content": "and thank you Chair Powell for taking our questions I’m wondering if you can walk us through expectations you have specifically when it comes to the labor market going into 2023 And I’m curious about people who may have left the labor market who have yet to come back or who may face issues with childcare Perhaps they’ve retired early Any barriers that you see in keeping people from the labor market as you consider full employment going into 2023? Thank you",
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"content": "Thank you. So I would say, if you look at the labor market and you look at the demand for workers and the level of job creation and think ahead, I think it’s clear, and I am confident, that we are on a path to a very strong labor market—a labor market that, that shows low unemployment, high participation, rising wages for people across the spectrum. I mean, I think that’s, that’s shown in our projections, it’s shown in outside projections. And if you look through the current time frame and think one and two years out, we’re going to be looking at a very, very strong labor market. In terms of exactly what that means, we’ll, we’ll have to see how things evolve. I think we learned during the course of the last very long expansion, the longest in our history, that labor supply during a long expansion can exceed expectations, can move above its estimated trend. And, and I have no reason to think won’t happen again. At the same time, we have seen—in terms of participation, we’ve seen a significant number of, of people retire. And so we, we don’t actually know exactly what labor force participation will be as we go forward, but I, I would tend to, to look at it and think that it—that it can return to high levels, although it may take some time to do that. But overall, this is—this is going to be, you know, a very strong labor market. In terms of the near term, you ask as well—so we see a couple of things, a few things that seem likely to be holding back labor supply. There are very large amounts of job openings, and there are a very large number of people who, who are unemployed. And the pace of, of filling those jobs is—somehow feels slower than it might be. So I’d point to a number of things, the first of which is just that most of the, the act of going back to one’s old job—that’s already happened. So this is a question of people finding a new job. And that’s just a process that takes longer. There may be something of a speed limit on it. You’ve got to find a job where, where your skills match what, you know, what, what the employer wants. It’s got to be in the right area. There’s just a lot that goes into the function of finding a job. So that’s, that’s a natural thing. In addition, I would say that we, we look at, for example, a, a significant number of people still say that they’re concerned about going back to work in jobs where there’s a lot of public facing because of—because of COVID. So that’s clearly holding back some people, and that should diminish as vaccinations move ahead. There’s also the question of childcare. Many are engaged in, in caretaking. And as schools reopen and, and, and childcare/daycare centers open in the fall—in the fall, then we should see—we should see that supporting labor force participation by caretakers. Finally, unemployment insurance for something like 15 million people will either end or be diminished as we move through the summer and into, into, into the fall by the end of September, and I’d like some—that may also encourage some to go back in and take jobs. So you would think would add to an increase in job creation as well. So you put all those together, I would expect that we would see strong job creation building up over the summer and going into—going into the fall. I will also say, though, the last thing I’ll say is, this is an extraordinarily unusual time. And we, we really don’t have a template or, or, you know, any experience of, of a situation like this. And so I think we have to be humble about our ability to understand the data. It’s not a time to try to reach hard conclusions about the labor market, about inflation, about the path of policy. We need to see more data. We need to be a little bit patient. And I do think, though, that we’ll, we’ll, we’ll be seeing some things coming up in coming months that will—that will inform our, our thinking.",
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Your—the Committee’s median forecast on inflation seems to assume a tame outlook for the rest of the year As the three-month annualized rate for the past three months was I think 84 percent in the CPI And I’m just wondering how much longer we can sustain kinds of rates before you get nervous Thanks
|
PAUL KIERNAN
|
[
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"content": "Your—the Committee’s median forecast on inflation seems to assume a tame outlook for the rest of the year As the three-month annualized rate for the past three months was I think 84 percent in the CPI And I’m just wondering how much longer we can sustain kinds of rates before you get nervous Thanks",
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"content": "So inflation has come in above expectations over the last few months. But if you look behind the headline numbers, you’ll see that the incoming data are, are consistent with the view that prices—that prices that are driving that higher inflation are from categories that are being directly affected by the recovery from the pandemic and the reopening of the economy. So, for example, the experience with, with lumber prices is, is illustrative of this. The thought is that prices like have moved up really quickly because of the shortages and bottlenecks and the like, they should stop going up, and at some point, they, they, in some cases, should actually go down. And we did see that in the case of lumber. Another example where we haven’t seen that yet is prices for used cars, which accounted for more than a third of the total increase in core inflation. Used car prices are going up because of a perfect storm of very strong demand and limited supply. It’s going up at just an amazing annual rate. But we do think that it makes sense would stop, and that in fact it would reverse over time. So we think we’ll be seeing some of that. When will we be seeing it? We’re not sure. That narrative seems, still seems quite likely to prove correct, although, you know, as I pointed out at the last press conference, the, the timing of that is, is pretty uncertain, and so are the, the effects in the near term. But over time, it seems likely that these very specific things that are driving up inflation will be—will be temporary. And we’ll be, you know, we’re going to be looking. We’ll be looking at the monthly pricing data. I’ll, I’ll also say that the labor market is going to be important, both for the maximum- employment goal, but also for inflation. And we’ll be looking at that. And, and as I—as I mentioned, we expect and I expect that we’ll see increases in supply over coming months as the factors that we believe have been suppressing supply abate, wane, move down. So I, I can’t give you an exact number or an exact time, but I would say that we do expect inflation to move down. If you look at the—if you look at the forecast for 2021 and—sorry, 2022 and 2023 among my colleagues on the, on the Federal Open Market Committee, you will see that people do expect inflation to move down meaningfully toward our goal. And I think the full range of, of, of inflation projections for 2023 falls between 2 and 2.3 percent, which is consistent with our—with our goals.",
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for doing this My question for you is that you mentioned that your colleagues did have a discussion about the progress that you’re making toward goals in order to consider tapering your asset purchases In that discussion you said that you didn’t—haven’t made substantial progress yet but that you expect to continue to make progress In that discussion did you guys talk about a timeline for when you expect to see that progress be made and when you might consider starting to reduce those purchases?
|
YLAN MUI
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[
{
"content": "for doing this My question for you is that you mentioned that your colleagues did have a discussion about the progress that you’re making toward goals in order to consider tapering your asset purchases In that discussion you said that you didn’t—haven’t made substantial progress yet but that you expect to continue to make progress In that discussion did you guys talk about a timeline for when you expect to see that progress be made and when you might consider starting to reduce those purchases?",
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"content": "Right. So I, I expect that we’ll be able to say more about timing as we see more data. Basically, there’s not a lot of more light I can—I can shed on that. But you can think of this meeting that we had as the “talking about talking about” meeting, if you like. And I now suggest that we retire that term, which has—which has served its purpose well, I think. So Committee participants were of the view that since we adopted that guidance in December, the economy has clearly made progress, although we are still a ways from our goal of substantial further progress. Participants expect continued progress ahead toward that objective. And assuming that is the case, it will be appropriate to consider announcing a plan for reducing our asset purchases at a future meeting. So at coming meetings, the Committee will continue to assess the economy’s progress toward our goals, and we’ll give advance notice before announcing any decision. The timing, of course, Ylan, will depend on the pace of that progress and not on any calendar.",
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you mentioned—let me ask about inflation expectations You said they were—I think you mentioned in your opening statement that you saw them as within target Does that mean that some of the shorter-term measures we’ve seen out there such as the New York Federal Reserve’s three-year outlook which jumped a bit—should those be dismissed? And are we only looking at longer-term inflation expectations? And would you describe those as still well anchored at this point? And on a related note would the Fed consider publishing its index of common inflation expectations on a monthly basis? Thank you
|
CHRIS RUGABER
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[
{
"content": "you mentioned—let me ask about inflation expectations You said they were—I think you mentioned in your opening statement that you saw them as within target Does that mean that some of the shorter-term measures we’ve seen out there such as the New York Federal Reserve’s three-year outlook which jumped a bit—should those be dismissed? And are we only looking at longer-term inflation expectations? And would you describe those as still well anchored at this point? And on a related note would the Fed consider publishing its index of common inflation expectations on a monthly basis? Thank you",
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"content": "So we, we do tend to look at the longer-term inflation expectations, because that’s really, we think, what matters for, for inflation. So and, and, you know, the shorter-term ones do tend to move around based on, for example, gasoline prices. So you’ll see if gasoline prices were to spike, you’ll see the shorter-term inflation expectation measures, particularly the surveys, move up. And, and that’s, that’s maybe not a good signal for future inflation if, if gas happens to spike and then go back down again. So we—yes, I think if, if you look at the broad range of longer-term inflation expectations, they’ve moved up. They moved down during the beginning of the pandemic, you know, further exacerbating concerns that we might find ourselves where, for example, the ECB and the Bank of Japan have been, where you have expectations and inflation itself sliding down and you have a really hard time stopping that process once it begins. So that was a concern. So it’s, it’s good, actually, to see inflation—longer-term inflation expectations move back up to a range—it’s a range that’s consistent with what our objectives are. These are not precise measures, and that’s—and they, they contain risk premiums of various kinds. And that’s why we look at a broad range of them and tend to look at the movement of that broad range of, of, of indicators, which are from, you know, surveys of economists, surveys of the public, and also market based. It’s, it’s, it’s a wide index, as I’m sure you know. We look at that, and we see them back in the range where they were. And, by the way, they’ve been broadly higher than that, somewhat modestly higher than that, not so many years ago, at a time when inflation was, was, was still anchored at around 2 percent or maybe even a little bit below. So the answer is, yes, I think they are anchored and they’re at a good place right now. It’s gratifying to see them having moved up off of their pandemic lows. And, you know, as you know, it’s, it’s fundamental in our framework, our new framework, to, to assure that inflation—longer-term inflation expectations are anchored at a place that is consistent with our goal. We, we think that’s an important reason. If, if inflation expectations are not anchored at a place that’s consistent with your goal, it’s not clear why you would expect to hit your goal over the longer term. So it’s important.",
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Chair Powell—thanks Chair Powell Your economic projections today forecast 7 percent growth in 2022 unemployment at 4½ percent and core inflation of 3 percent If those conditions are achieved by the end of the year would that constitute substantial further progress in your mind? And more broadly when you look at the median forecast for interest rates in 2023 showing not one but two interest rate increases at the time is this kind of—can you describe the tone of the—of the discussion in the Committee? And are we really moving towards sort of a post-pandemic stance? Is there greater confidence that the recovery will be a full recovery sooner than expected?
|
JAMES POLITI
|
[
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"content": "Chair Powell—thanks Chair Powell Your economic projections today forecast 7 percent growth in 2022 unemployment at 4½ percent and core inflation of 3 percent If those conditions are achieved by the end of the year would that constitute substantial further progress in your mind? And more broadly when you look at the median forecast for interest rates in 2023 showing not one but two interest rate increases at the time is this kind of—can you describe the tone of the—of the discussion in the Committee? And are we really moving towards sort of a post-pandemic stance? Is there greater confidence that the recovery will be a full recovery sooner than expected?",
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"content": "On your first question, the judgment of when we have arrived at substantial further progress is one that the Committee will make. And it would not be appropriate for me to lay out particular numbers that do or do not—that do or do not qualify. That is—that is, you know, the process that we’re beginning now at the next meeting. We will begin, meeting by meeting, to, to assess that progress and talk about what we—what we think we’re seeing and, and just do all of the things that you do to clarify your thinking around the process of deciding whether and how to adjust the pace and composition of asset purchases. In terms of the, the, the two hikes—so let me say a couple things first of all, not for the first time, about the—about the dot plot. These are, of course, individual projections. They’re not a Committee forecast, they’re not a plan. And we did not actually have a discussion of whether liftoff is appropriate at any particular year, because discussing liftoff now would be— would be highly premature, wouldn’t make any sense. If you look at the transcripts from five years ago, you’ll see that sometimes people mention their rate path in their interventions. Often they don’t. And the last thing to say is, the dots are not a great forecaster of, of future rate moves. And that’s not because—it’s just because it’s so highly uncertain. There is no great forecaster of, of future dots. So, so dots to be taken with a—with a big, big grain of salt. However, so let me talk about this, this, this meeting. The Committee spelled out, as you know, in our FOMC statements the conditions that it expects to see before an adjustment in the target range is made. And it’s outcome based, it’s not time based. And, as I mentioned, it’s labor market conditions consistent with maximum employment, inflation at 2 percent and on track to exceed 2 percent. In the projections, it gives some sense of how participants see the economy evolving in their most likely case. And, honestly, the main message I would take away from the SEP is that participants—many, many participants are more comfortable that the economic conditions in the Committee’s forward guidance will be met somewhat sooner than previously anticipated. And that would be a welcome development. If such outcomes materialize, it means the economy will have made faster progress toward our goals. So the other thing I’ll say is, rate increases are really not at all the focus of the Committee. The focus of the Committee is the current state of the economy. But in terms of our tools, it’s about asset purchases. That’s what we’re thinking about. Liftoff is, is well into the future. The conditions for liftoff—we’re very far from maximum employment, for example. It’s, it’s a consideration for the future. So the near-term thing is really—the real near-term discussion, discussion that will begin is really about the, the path of asset purchases. And, as I mentioned, we had a discussion about that today and expect to, in future meetings, continue to think about our progress.",
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Continuing—Chair Powell continuing in that vein when you’re ready how will you go about signaling the start of tapering when you do decide to do that?
|
NANCY MARSHALL
|
[
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"content": "Continuing—Chair Powell continuing in that vein when you’re ready how will you go about signaling the start of tapering when you do decide to do that?",
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"content": "So our intention for this process is that it will be orderly, methodical, and transparent. And I can just tell you, we, we, we see real value in communicating well in advance what our thinking is. And we’ll try to be clear. And, as I mentioned, we’ll, we’ll give advance notice before announcing a decision to taper. And so all I can say is that we, we think it’s important—we think where the balance sheet’s concerned, a lot of notice, as much transparency as we can give, and as far—as far in advance as we can to give people a chance to adjust their expectations. And, you know, we expect to be in that business until we reach substantial further progress and then have a—have a decision. Again, I have nothing further on time. It wouldn’t be appropriate to say. We’re going to have to see more data. We’re a ways away from substantial further progress, we think. But we’re making progress.",
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"content": "So you can’t say generally how far in advance you would signal?",
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"content": "Again, as we—as we approach that goal, we’ll provide, you know, as much clarity as we can.",
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If I were a businessman looking at the forecast today I would ask how and when the Fed seeks to achieve an average of 2 percent inflation In other words does the FOMC have a look-back period? Or does it plan to suppress inflation in outer years because over the next three years you’re going to be above inflation? So what is your look-back period? Does the Committee have one? And if not why not? And if they don’t why isn’t this just flexible inflation targeting without an average in a range of 2 to 2¼ percent? Thanks
|
CRAIG TORRES
|
[
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"content": "If I were a businessman looking at the forecast today I would ask how and when the Fed seeks to achieve an average of 2 percent inflation In other words does the FOMC have a look-back period? Or does it plan to suppress inflation in outer years because over the next three years you’re going to be above inflation? So what is your look-back period? Does the Committee have one? And if not why not? And if they don’t why isn’t this just flexible inflation targeting without an average in a range of 2 to 2¼ percent? Thanks",
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"content": "You know, so as part of our year-and-a-half-long process, the review that we did and came out with at the end of that with the—with the new Statement on Longer- Run Goals and Monetary Policy Strategy, we looked carefully at the idea. We’ve all read all the literature around different formulas for makeup and things like that. And we concluded—and, you know, I strongly agree—that it’s not wise to, to wed yourself to a particular formulation of that. So we did adopt a discretionary—there’s an element of discretion in it. You know, it says that we will seek to—seek inflation that runs moderately above 2 percent for some time. And it’s, it’s meant to create a broad sense that we want inflation to average 2 percent over time. And that under the old—under the old formula, under the old framework, what was happening was, 2 percent was a ceiling because all of the errors were below. You were always getting back to 2 percent. So you were bouncing back and forth between 1½ and 2, and we wanted them to be centered around 2. So, so that’s, that’s the approach that we’re taking. And you’re right, it’s not—it’s not a formulaic approach. We were clear on that when we announced the framework. Was there another part of your question, Craig?",
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So I wanted to ask you about the reverse repo usage that we’ve seen lately I was curious if you are at all concerned about the level of money flowing into the reverse repo facility And do you believe that the changes in the Fed’s rate control toolkit today will have any impact on that? And then in a related question do you think that Fed asset purchases are taking too many safe assets out of the market right now and creating maybe some dislocations in the money markets?
|
MICHAEL DERBY
|
[
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"content": "So I wanted to ask you about the reverse repo usage that we’ve seen lately I was curious if you are at all concerned about the level of money flowing into the reverse repo facility And do you believe that the changes in the Fed’s rate control toolkit today will have any impact on that? And then in a related question do you think that Fed asset purchases are taking too many safe assets out of the market right now and creating maybe some dislocations in the money markets?",
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"content": "So on the—on the facility, we think it’s doing its job. We think it’s doing—the reverse repo facility is, is doing what it’s supposed to do, which is to provide a floor under money market rates and keep the federal funds rate well within its—well within its range. So we’re not concerned with it. It’s doing—you have an unusual situation where the Treasury General Account is, is shrinking and bill supply is shrinking. And so there’s, there’s downward pressure—we’re buying assets—there’s downward pressure on short-term rates, and that facility is, is doing what we think it’s supposed to do. Sorry, your second question was again?",
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"content": "the change in the rate control toolkit will that have any impact on—do you think that will reduce amount of money coming into reverse repos? Will that have any impact on money market conditions that beyond the fed funds rate setting?",
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"content": "It could have some impact. I think we’ll have to see empirically. But it’s designed to keep the federal funds rate, you know, within the range. And I do think it could have some effect on, on broader money market conditions below as it relates to, you know, the very low rates and the downward pressures.",
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"content": "And will it—do think it will lower uptake on the reverse repo facility or that’s just not even really a focus of what the change was?",
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"content": "It’s not, honestly. And, you know, the funny thing, you would think that it would, but we’ll have to see. It’s, it’s possible would not be the case. That’s going to be an empirical question.",
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I was wondering if you could follow up a little bit on your response to Rachel at the very beginning and talk a little bit about how we should understand what full employment means in a world that as you mentioned is pretty roiled All the data is pretty—has been pretty roiled by the pandemic and we’re not really sure where EPOP is going to settle in we’re not sure where participation is going to settle in And wages are already looking decent So I guess I wonder what full employment means in this context how you’re thinking about those wage data
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JEANNA SMIALEK
|
[
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"content": "I was wondering if you could follow up a little bit on your response to Rachel at the very beginning and talk a little bit about how we should understand what full employment means in a world that as you mentioned is pretty roiled All the data is pretty—has been pretty roiled by the pandemic and we’re not really sure where EPOP is going to settle in we’re not sure where participation is going to settle in And wages are already looking decent So I guess I wonder what full employment means in this context how you’re thinking about those wage data",
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"content": "Yeah. As, as you well know, there isn’t one indicator we can look to, and there’s no one number that we can therefore point to. We look at a range of indicators, and it’s a very broad range, you can count to a high number just quickly—but, but, certainly, it will include things like unemployment and participation and wages and many different flavors of that. So how do we think about it? A couple of things. We’re all going to be informed by what we saw in the last cycle, which was labor supply outperforming expectations over a long period of time. Now, that hadn’t happened in many other cycles, but this was a very long cycle. So we’re going to have to be alert to see whether that can happen again. It is a different—it’s a different economy. We, we have had a slew of retirements, and that may weigh on participation. That, that effect, though, should wear off in a few years and, and, you know, as you move through that window, because they would have—people would have retired anyway, and you’ll be back where you, you would have been. So I think we’re—I think that lesson number one is, is just to be careful about assessing maximum employment. And I think if you—during the last cycle, there were—there were waves of concern that we were reaching full employment as early, you know, as, as 2012, when I arrived at the Fed. And, you know—you know, nine years later— eight years later, we were still creating jobs. And, you know, it was quite remarkable. So we’re all going to be informed by that. At the same time, we understand this is a different economy. You know, the, the demographics are, people are getting older, and that should have a secular effect of, of reducing participation over time. So we have to be sensible about what, what can be done. But I think we’re going to be—we’re going to lean into that and be optimistic. You asked about wages. You know, we’re seeing wage increases. That’s, that’s a natural thing to be seeing in a strong economy. And what we’re seeing is—we don’t see anything that’s troubling in the sense of—what would be troubling would be, you know, very wide across the economy, wages at unsustainable levels without high inflation. In other words, wages in excess of productivity and inflation, you know, by a meaningful amount broadly across the economy, forcing companies to keep raising prices and getting into a wage–price cycle. That’s, that’s the old formula for—one of the old formulas for having high inflation. We don’t see anything like that now. We do see high wages. We see them for, for people who are mostly new, you know, entering into new jobs, many of them in low-skilled jobs. And, but we, we do think—you’ve got to—you’ve got to think in the labor market right now, where, where supply and demand are just not matched up well. And, you know, we think it’s a flexible economy and, and it will clear. There will—there will be a level at which supply and demand meet. And that’ll—we think that’ll, that’ll be happening in coming months. So—but the last thing I’ll say is, again, if you look at, at the forecasts, we are going to be in a very strong labor market pretty quickly here. There are still a big group of unemployed people. And, you know, we’re not going to forget about them. We’re going—we’re going to do everything we can to get people back into work and give them the chance to work. But there’s every reason to think that we’ll be in a—in a labor market with very attractive numbers, with low unemployment, high participation, and rising wages across the spectrum. So that’s, that’s a little bit how we’re looking at the—at the labor market.",
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I wanted to ask about the status of your thinking around the supplementary leverage ratio right now Is the Fed still thinking about ways to permanently adjust this to account for the high growth in deposits? And do you ultimately believe a permanent fix is needed? And any information on the timing around that would be—would be helpful
|
HANNAH LANG
|
[
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"content": "I wanted to ask about the status of your thinking around the supplementary leverage ratio right now Is the Fed still thinking about ways to permanently adjust this to account for the high growth in deposits? And do you ultimately believe a permanent fix is needed? And any information on the timing around that would be—would be helpful",
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"content": "What I can say is, we’re working on it. I don’t have anything to share with you in terms of the particulars or the timing right now, unfortunately. But we’ve, we’ve always—our position has been for a long time and, and it is now that we’d, we’d like the leverage ratio to be a backstop to risk-based capital requirements. When leverage requirements are, are, are binding, it does skew incentives for firms to substitute lower-risk assets for high-risk ones. It’s a straightforward thing. And because of the substantial increase in reserves, Treasuries, and other safe assets in the banking system, the SLR is rapidly ceasing to become— ceasing to be the intended backstop for big firms that we want it to be. So we do think it’s appropriate to consider ways to adapt it to this new high-reserves environment, and, and we’re looking hard at the issue. We would also, just to be really clear, we will take whatever actions are necessary to assure that any changes we do make or recommend do not erode the overall strength of bank capital requirements. Sorry, I can’t give you any more. That’s just something we’re working on.",
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the price jumps we’ve seen in some raw materials—lumber for example you mentioned that earlier—seem to be easing And it looks like we’re at the beginning of suppliers catching up with demand But I wonder if you’re worried at all if we’re going to end up with excess supply immediately after those shortages wear off and if we just continue this mismatch as we’re recovering and getting out of the pandemic economy And I wonder how that would affect the Fed’s outlook at all
|
ANNEKEN TAPPE
|
[
{
"content": "the price jumps we’ve seen in some raw materials—lumber for example you mentioned that earlier—seem to be easing And it looks like we’re at the beginning of suppliers catching up with demand But I wonder if you’re worried at all if we’re going to end up with excess supply immediately after those shortages wear off and if we just continue this mismatch as we’re recovering and getting out of the pandemic economy And I wonder how that would affect the Fed’s outlook at all",
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"content": "Well, that is really not the problem we’re having right now. But— and, actually, people who work in commodity industries are very focused on that, because they know that, you know, they don’t want to build, build capacity and then find out that it’s not necessary. So, really, the problem now is, is that demand is very, very strong. Incomes are high, people have money in their bank accounts. Demand for goods is extremely high, and it hasn’t— it hasn’t come down. We’re seeing the service sector reopening. And so you’re seeing prices are moving back up off their lows there. But in terms of, of overcorrecting, I mean, I think there, there is a possibility on the other side of this that, that inflation could be—could actually be quite low going forward. But that’s not—that’s not really where our focus is right now. Our focus right now is, we need to—our, our expectation is that these, these high inflation readings that we’re seeing now will start to abate. And that’s, that’s what we think. And it’ll be like the lumber experience, and like we expect the used car experience to be. With things like airplane tickets and hotels, which are the other two factors in the most recent CPI report that went up a lot, we expect that those prices will get back up to where they were, but there’s no reason to think that they’re going to keep going up a lot. Because if they are, people will build new hotels. There’s no reason for supply and demand to be out of whack in the hotel business over any period of time. So we think that’ll happen. I think in terms of the timing and the effects on inflation in the near term, there’s a lot of uncertainty. The overall story is one that, that we think is right, and we think the incoming data support it and, you know, so do many, many forecasters. And if you look at the forecasts on the FOMC, you will—you will see that as well. But we don’t—we don’t in any way dismiss the chance that it can work out that, that this goes on longer than expected. And the risk would be that over time, it does begin to affect inflation expectations. And if we see inflation expectations and inflation—or inflation moving up in a way that is really materially above what we—what we would see as consistent with our goals, and persistently so, we wouldn’t hesitate to use our tools to address that. Price stability is half of our mandate, and we would certainly do that. We do not expect that, though. That is not our base case. And, and in that we’re joined by many other forecasters, but there’s a lot to be humble about among forecasters. Forecasters have a lot to be humble about. It’s a—it’s a highly uncertain business. And we’re, we’re very much attuned to the risks and, and watching the data carefully. In the meantime, I would say, you know, we should—as I mentioned earlier, there’s so much uncertainty around this. It’s, it’s just a unique situation that we need to see how things evolve in coming months and, and see how that story holds up and act accordingly.",
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Reuters Thanks Chair Powell for taking this I don’t want to miss the moment here And I just—I noticed that in the statement you dropped the language saying that the pandemic is weighing on the economy So is this the effective end in your view of the pandemic as a constraint on economic activity even though it’s still cited as a risk?
|
HOWARD SCHNEIDER
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[
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"content": "Reuters Thanks Chair Powell for taking this I don’t want to miss the moment here And I just—I noticed that in the statement you dropped the language saying that the pandemic is weighing on the economy So is this the effective end in your view of the pandemic as a constraint on economic activity even though it’s still cited as a risk?",
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"content": "You know, it’s a—it’s a continuum, right? What you’ve seen with the pandemic is sharply declining cases, hospitalizations, and deaths. And that’s great. And, and, you know, that should continue. But, you know, you, you also saw in the United Kingdom, which has, I think, at least as high if not higher vaccination rates, they’ve had an outbreak of the Delta variety. And it’s—and it’s causing them to have to—to have to react to that. So you’re not—you’re not out of the woods at this point. And it would be premature to—in my thinking, it would be premature to declare victory. Vaccination still has a ways to go to get to levels—it would be good to see it get to a substantially higher level. And, you know, that can only help. So, look, I—but you’re right, the statement language is evolving. I would expect it to continue to evolve. There’s a lot of judgment in that. But you can expect us to drag our feet a little bit on that, because that’s what you do with statement language. It’s, it’s great to see the progress. But, again, I would not declare victory yet. I would say it is so great to see the reopening of the economy, though, and to see people out living their lives again. You know, who doesn’t want to see that? And it appears to be safe, and I just would encourage people to continue to get vaccinated.",
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"content": "if you—if you view this statement toto and the—and the dots and the substance as well do you think this is more a mark-to-market exercise around the improvement in health or around the inflation risks you see developing out there?",
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"content": "I think it’s both. You know, I think, clearly, since March what’s happened is, people have grown more confident in these very strong outcomes, that they’ll be achieved. Very strong outcomes in the economy will be achieved. There’s, there’s more grounds for comfort. We’ve seen growth coming higher than we expected. We’ve seen very strong labor demand. We’ve also seen—we have seen inflation above target, though, and I think even though, you know, in, in our forecasters’ case, they do see inflation coming back down over ’22 and ’23 into, into areas that are very consistent with our—with our mandate. Nonetheless, the risk is, is something that can factor into people’s thinking about appropriate monetary policy. The thing is, you know, these are 18 different forecasts, and I can’t stand here and say exactly what was in all 18 people’s minds. But that, that is something that I think can factor into things as well—factor into our forecast as well.",
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wanted to ask a little bit more about inflation to make sure I understand how you’re thinking about this So in the projections inflation is expected be high this year and then come back down next year and then maybe start to rise a little bit again enough for a liftoff in 2023 You know I know that’s obviously— take that with a grain of salt But that would suggest that you all could theoretically see inflation sustainably staying above 2 percent And so I guess my question is what would be causing that inflation? What would be—because it seems like you all now see a situation in which inflation would be rising in a way that isn’t caused by transitory factors in the—in the next couple of years So would that be the result of a tight labor market? Would that be because this whole situation has raised people’s inflation expectations? How are you thinking about that?
|
VICTORIA GUIDA
|
[
{
"content": "wanted to ask a little bit more about inflation to make sure I understand how you’re thinking about this So in the projections inflation is expected be high this year and then come back down next year and then maybe start to rise a little bit again enough for a liftoff in 2023 You know I know that’s obviously— take that with a grain of salt But that would suggest that you all could theoretically see inflation sustainably staying above 2 percent And so I guess my question is what would be causing that inflation? What would be—because it seems like you all now see a situation in which inflation would be rising in a way that isn’t caused by transitory factors in the—in the next couple of years So would that be the result of a tight labor market? Would that be because this whole situation has raised people’s inflation expectations? How are you thinking about that?",
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"content": "So what we’re seeing in the near term—again, our base case is that what we’re seeing in the near term is, is principally associated with, with the reopening of the economy and not with a tight labor market or tight resource constraints, really. So—but you’re right. When, when you get to—in, in the forecast, all of that, you know, supply and demand sides of the economy adapt. We have a very highly adaptive, you know, flexible economy, more so than most. And by 2023, those increases are really about, about, you know, rising resource utilization or, to put it a different way, you know, low unemployment, or high employment is a way to think about it. So that’s what that’s about. That’s about the broad inflationary pressure that results from, you know, a really strong expansion tightening up resource utilization across the whole economy and lifting, lifting up inflation. And that’s why—that’s why you would see it then, because by then, you know, in the forecast—and it’s just a forecast, they’re just individual forecasts. In people’s forecasts, that’s what’s happening.",
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"content": "So the change in the projections reflect the fact that you all are more optimistic about the economic outlook and not necessarily that you think that this will change the way people think about inflation?",
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"content": "Yeah, I think—there may be an element of the latter as well, because inflation expectations have continued to move up. You know, it’s all in people’s individual thinking, and you can’t—it’s hard to say. It’s not something the Committee debates in terms of, you know, what, what the outlook is for 2023. So I’m, I’m a little bit speculating, which I shouldn’t do. But it wouldn’t surprise me if there’s an element for some people in, you know, seeing the inflation performance that we’ve had and thinking that I have more confidence that we could see inflation above 2 percent, that it may not be as hard to do that as we thought, and that inflation expectations may move up to a—to a level—they were—they were really at a level that was a little below 2 percent. They might move up as a consequence of this or, or, or as a consequence of, of, of the new framework. You know, we did see inflation expectations moving up in the—in the wake of the announcement of the framework. But, you know, we don’t really know that. So, ultimately, I think it’s consistent with both those things.",
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I’m just looking at the forecast and one thing I just don’t think has been talked about all that much is how much you guys—the Fed thinks that the economy is going to slow next year are we looking at a scenario of a slowing economy next year with higher inflation? And what do you think about that?
|
GREG ROBB
|
[
{
"content": "I’m just looking at the forecast and one thing I just don’t think has been talked about all that much is how much you guys—the Fed thinks that the economy is going to slow next year are we looking at a scenario of a slowing economy next year with higher inflation? And what do you think about that?",
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"content": "We’re looking at an economy that will not have the degree of, of fiscal support. The fiscal support in the forecast is much less than it was this year. So—but you’ve, you’ve still got a very strong growth, well above the longer-run potential output of the— of the economy. You’ve got—you’ve got growth meaningfully above that, and inflation is lower next year in all of our—in all of our forecasts. I think the range of, of core PCE forecast for next year is 1.7 to 2.5 in 2022 and, and 2 to 2.3 in 2023. So you’re right, you’re seeing—I, I can’t remember the number, but it might be in the 3s—3, 3½ percent growth for next year. That’s, that’s a really good year—coming on the back of a 7 percent growth year, that’s a really good year. That’s, that’s a year with a lot of momentum. That’ll see—you know, that’ll cause significant job creation and, and it will—I mean, we would take 3½ percent. We didn’t have a 3½ percent growth year—we didn’t have a 3 percent growth year between the Global Financial Crisis and the end of the expansion. So that would be a good year.",
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Doesn’t it seem like there’s a risk like stagflation— where that—you’re going to go from 7 percent and down that means the economy’s really dropping in some way We haven’t seen that right?
|
GREGG ROBB
|
[
{
"content": "Doesn’t it seem like there’s a risk like stagflation— where that—you’re going to go from 7 percent and down that means the economy’s really dropping in some way We haven’t seen that right?",
"role": "user"
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"content": "Well, the economy’s not, not decel—the economy is still growing, and growing at a, at a very healthy rate. Our estimate—I mean, different people have different estimates—but, broadly speaking, economists think the economy has the potential to grow at around 2 percent per year. If you’re growing above that, then the unemployment rate should be declining, people should be being pulled into the labor force, wages should be going up, lots of things should be happening, businesses should be investing. So, you know, I guess to answer your question a different way, is there a risk that inflation will be higher than we think? Yes. As I said earlier, you know, we, we don’t have any certainty about the timing or the extent of these effects from reopening. And therefore we don’t—we don’t think that—we think it’s unlikely that they would materially affect the underlying inflation dynamics that the economy has had for a quarter of a century. The underlying forces around the globe that have created those dynamics are intact, and those are aging population, low productivity, globalization, all of those things that, that we think have, have, you know, really held down inflation. All that’s out there still. You know, when we get through this, we may well—we’ll be facing those same forces. Nonetheless, is there a risk that inflation will remain higher than we—than we thought? Yes. And if, if we see inflation moving above our goals in, in a time—sorry, to an extent, to a level or, or persistently—or persistently enough, you know, we would be prepared to use our tools to address that.",
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Yahoo Finance On that point you talked about maybe some of the more structural changes in that last answer with regards to productivity I noted that the median projection for r* the longer-term interest rate is still the same at 25 percent But there’s been some literature out there that maybe the COVID crisis could have actually changed some of the underlying fundamentals of the economy and maybe changed productivity in addition to combined with demographic changes that have already been in effect to suggest longer-term neutral rate or r* might be higher What would the implications of that be for monetary policy? Do you think that maybe the Fed could have the possibility of underestimating the long-run neutral rate? And what might be the impact of that?
|
BRIAN CHEUNG
|
[
{
"content": "Yahoo Finance On that point you talked about maybe some of the more structural changes in that last answer with regards to productivity I noted that the median projection for r* the longer-term interest rate is still the same at 25 percent But there’s been some literature out there that maybe the COVID crisis could have actually changed some of the underlying fundamentals of the economy and maybe changed productivity in addition to combined with demographic changes that have already been in effect to suggest longer-term neutral rate or r* might be higher What would the implications of that be for monetary policy? Do you think that maybe the Fed could have the possibility of underestimating the long-run neutral rate? And what might be the impact of that?",
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"content": "A higher neutral rate would mean that interest rates would run higher by that amount. And, and that would be a good thing from the standpoint of the economy, because it would give the Fed more room to cut rates. The problem with, with interest rates being close to the lower bound, of course, is that it really cuts into our ability to react to a downturn—for example, a pandemic. And if you look, for example, at the European Central Bank, their, their policy rate was well below zero when, when the pandemic hit. So we don’t want to be in a place where we can’t react. A higher neutral rate would, would be—from that narrow standpoint, would be a good thing for us. It would give us more room and, therefore, then, that would tend to result in better outcomes for the economy over time. You know, we, it’s—you can’t estimate it with great—with great precision. I think we would be alert to—I mean, studying r* is a—is a whole industry unto itself. And I, I think we would be alert to factors that might raise r*, the neutral rate of interest. And, you know, we, we try to keep up with that. And I think we’re, we’re, we’re all thinking about that and the possibility of that. You know, there are many—there are a lot of stories right now that could—that essentially could lead to higher productivity growth and higher r*. We don’t know which of those stories will come true. But, I mean, I’ll give you an example. It’s just there are—there are a lot of start-ups, a lot of early-stage companies. And is that going to have that effect? We don’t know. But we’ll be watching those things carefully.",
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of course you’ll be shocked to learn that you have some critics on Wall Street And I would like to paraphrase a couple of their criticisms and get your reaction to them One is that the new policy framework is that you react to actual data and do not react to forecasts yet the actual inflation data is coming in hot and you’re relying on the forecast that it will cool down in order to make policy I wanted to get your view on how you square that Another is that you have a long runway you’ve said for tapering with announcements But if the data keep coming in faster than expected are you trapped by fear of a taper tantrum from advancing the time period in which you announce a taper? And finally you’ve said the Fed knows how to combat inflation but raising rates also slows the economy And there’s a concern that you might be sacrificing the economy if you wait too long and have to raise rates too quickly
|
MICHAEL MCKEE
|
[
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"content": "of course you’ll be shocked to learn that you have some critics on Wall Street And I would like to paraphrase a couple of their criticisms and get your reaction to them One is that the new policy framework is that you react to actual data and do not react to forecasts yet the actual inflation data is coming in hot and you’re relying on the forecast that it will cool down in order to make policy I wanted to get your view on how you square that Another is that you have a long runway you’ve said for tapering with announcements But if the data keep coming in faster than expected are you trapped by fear of a taper tantrum from advancing the time period in which you announce a taper? And finally you’ve said the Fed knows how to combat inflation but raising rates also slows the economy And there’s a concern that you might be sacrificing the economy if you wait too long and have to raise rates too quickly",
"role": "user"
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"content": "So that’s a—that’s a few questions there. So let me say, first, I think people misinterpret the framework. I think the—there’s nothing wrong with the framework, and there’s nothing in the framework that would in any way, you know, interfere with our ability to pursue our, our goals. That’s for starters. All of our discussions and all of our thinking and planning are taking place in the context of our new framework. We’re strongly committed to it, we think it’s well suited to our goals, including in this—in this unique time. And I think if you look at the—look at the forecasts that we’ve written down, you know, our Committee is solidly behind them. The forecasts are all consistent with that. You know, your specific question, I guess, was, will we be behind the curve? And, you know, that’s, that’s not the situation we’re facing at all. The situation that we, we addressed in our—in our Statement on Longer-Run Goals and Monetary Policy Strategy was a situation in which employment was at very high levels, but inflation was low. And what we said was, we wouldn’t raise interest rates just because unemployment was low and employment was high if there was no evidence of inflation or other troubling imbalances. So that’s what we said. That is not at all the current situation. In the current situation, we have many millions of people who are unemployed, and we have inflation running well above our target. The question we face with this inflation has nothing to do with our framework. It’s a very different, very difficult version of a standard investment—sorry, a central banking question. And that is, how do you separate in inflation—how do you separate things that, that follow from broad upward price pressures from things that really are a function of, of idiosyncratic factors in a particular—due to particular things? I mean, a classic example was, to pick a narrow example, was the cellphone price war back in 2017. If you remember, there was—prices were incredibly low, and it held down core PCE by three-tenths or something for a year, and then it fell out. So this is much bigger than that. And, of course, it’s not—it’s not easy to tell in real time which is which, but that’s, that’s the question you would face under, really, any framework. And, you know, we’re trying to sort that out. I’ve tried to, to explain that today about how we think about that. And, you know, we do think that these are temporary factors, and that they’ll wane. We can’t be absolutely certain about the timing of that, and we’re prepared to use our tools as appropriate. Your second one was? Oh, you know, we will—we will taper when we feel that the economy has achieved substantial further progress. And we will communicate very carefully in advance on that. And that’s what we’re doing. That’s what we’re going to do, and, and we will follow through on that. There’s no—I mean, we will do what we can to avoid a market reaction. But, ultimately, when we achieve our macroeconomic goal, we will—we will taper as appropriate. The third thing was—what was the third thing?",
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"content": "If you raise rates to control inflation you also slow the economy And the history of the Fed is that sometimes you go too far",
"role": "user"
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"content": "That’s right. And we—look, we have to balance the two—the two goals: maximum employment and price stability. Often they are—they do pull in the same direction, of course. But when we—when we raise interest rates to control inflation, there’s no question that has an effect on activity. And that’s the channel—one of the channels through which we get to inflation. We don’t think that we’re in a situation like that right now. We think that the economy is recovering from a deep hole—an unusual hole, actually, because it’s to do with, with shutting down the economy. It turns out it’s a heck of a lot easier to create demand than it is to, you know, to bring supply back up to snuff. That’s happening all over the world. There’s no reason to think process will last indefinitely. But we’re going, you know, we’re going to watch carefully to make sure that, that evolving inflation and our understanding of what’s happening is, is, is right. And in the meantime, we’ll conduct policy appropriately.",
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] |
To what extent has the more limited impact from tariffs at this stage on inflation changed your view on what the ultimate economic fallout will be from these policies and the timing of when they will materialize in the data?
|
COLBY SMITH
|
[
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"content": "To what extent has the more limited impact from tariffs at this stage on inflation changed your view on what the ultimate economic fallout will be from these policies and the timing of when they will materialize in the data?",
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"content": "So we’ve had three months of, of favorable inflation readings since the high readings of January and February, and that’s, of course, highly welcome news. Part of that just is that services, core services—both housing services and nonhousing services have really been grinding down toward levels that are—that are consistent with 2 percent inflation. So that’s the good news. We’ve had goods inflation just moving up a bit, and, of course, we expect—as you—as you point out, we, we do expect to see more of that over the course of the summer. It takes some time for tariffs to work their way through the chain of distribution to the end consumer. A good example of that would be, goods being sold at retailers today may have been imported several months ago—before tariffs were imposed—so we’re beginning to see some effects. And we do expect to see more of them over coming months. We do—we do also see price increases in some of the relevant categories like personal computers and audio-visual equipment—things like are attributable to tariff increases. In addition, we look at surveys of businesses, and there, there are many of those. And, and, you, you do see a range of things, but, but many, many companies do expect to—to, to put all or—some or all of the effect of tariffs through to the next, next person in the—in the chain and, ultimately, to the consumer. Today—you know, the amount of these—the, the amount of the tariff effects, the size of the tariff effects, their duration, and the time it will take are all highly uncertain. So that, that is why we think the appropriate thing to do is to hold where we are as we learn more, and we think our policy stance is, is in a good place—where we’re well positioned to react to incoming developments.",
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"content": "So in terms of how we should interpret the rate cuts penciled into the SEP is this reflecting that there’s this expectation that underlying inflation will just stay well enough contained that allows the Committee to eventually move ahead with those cuts? Or is it about responding to a deterioration in economic activity let’s say? how should we make sense of the forecast?",
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"content": "So if you look at the forecast, you will see that people do generally expect inflation to move up and then to come back down. But we can’t just assume that. Of course, we don’t know that, and, you know, our, our job is to make sure—one of our jobs—to make sure that a one-time increase in inflation doesn’t turn into an inflation problem. And that, again—that will depend on the size of the effects, how long it takes for them to come in, and, and, ultimately, on, on keeping inflation expectations anchored.",
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] |
the rate path starting in December to today and adjust it over the full time horizon you’ve got there you’ve taken about ¼ point per year out of your projected path And you end at a higher rate in end-2027 than you were—would have in the prior forecast Is that a result a sense that tariffs will lead to more persistent inflation? Is it a result of reassessments of where your short-term neutral rate is? Is it— are you on a slower path now?
|
HOWARD SCHNEIDER
|
[
{
"content": "the rate path starting in December to today and adjust it over the full time horizon you’ve got there you’ve taken about ¼ point per year out of your projected path And you end at a higher rate in end-2027 than you were—would have in the prior forecast Is that a result a sense that tariffs will lead to more persistent inflation? Is it a result of reassessments of where your short-term neutral rate is? Is it— are you on a slower path now?",
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},
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"content": "So I would focus most on the—on the nearer term. As you think—as you get out to the—to the later years, it’s hard to—it’s hard for anybody to know where the economy is going. You didn’t see people moving their longer-term, you know, estimate of the neutral rate, for example, at this meeting. So—and those things are probably slow moving. So I think—I think if you look at what’s happening here since March—this is since March, right?— you see a little slower growth, just a tiny tick up, one-tenth tick up, in, in unemployment, and you see inflation moving up three-tenths. And by the way, it was—it was a similar move from the December SEP to the March. So that’s what you see. You see the, the effects of tariffs. I think we learned in April, after the March meeting, that substantially higher tariffs were likely, and then since then, the estimates of where the tariffs will be have actually moved back down, although still at an elevated level. So we’re adapting in real time, and what you see is, you know, an, an accumulation of individual assessments.",
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"content": "Okay, but you say in the statement that risks have diminished on that front, but the July 9, you know, drop-dead date for all the, the Liberation Day tariffs is still out there and unresolved. You’ve got now an exchange of missiles between two Middle East adversaries, with a possible U.S. involvement—how can you justify saying that risks have diminished?",
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"content": "So what we said was that uncertainty has, has—uncertainty about the economic outlook has diminished but remains elevated. Many, many surveys say that. They do. So—and, and, that’s—that’s actually a line from the Tealbook, which you can see in five years. Remember to check that.",
"role": "assistant"
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] |
Thank you. Chris Rugaber at Associated Press. There is an argument out there in favor of cutting rates more immediately. Inflation has continued to cool and is back at roughly 2 percent, despite the tariffs. And I guess I also wanted to ask about, you know, cracks in the job market, with gross hiring slowing—concentrated in just a few industries. We’ve seen some housing data, including this morning, that have been pretty weak. Do you see any concerns that, you know, the economy is weakening and that is a reason to cut rates going forward?
|
CHRISTOPHER RUGABER
|
[
{
"content": "Thank you. Chris Rugaber at Associated Press. There is an argument out there in favor of cutting rates more immediately. Inflation has continued to cool and is back at roughly 2 percent, despite the tariffs. And I guess I also wanted to ask about, you know, cracks in the job market, with gross hiring slowing—concentrated in just a few industries. We’ve seen some housing data, including this morning, that have been pretty weak. Do you see any concerns that, you know, the economy is weakening and that is a reason to cut rates going forward?",
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"content": "So we do—we do, of course, monitor all those things. I, I think if you look at the overall picture, you know, what you’re seeing is 4.2 percent unemployment and an economy that’s growing at a—at a rate hard to know, given the, the unusual flows in the first quarter. But it appears to be 1½, 2 percent—maybe a little better than that. Sentiment has come up off of its very low levels. It’s still—it’s still depressed. So, you know, you can—you can point to things—the housing market is a longer-run problem and also a short-run problem. I don’t think it’s indicative of—you know, basically, the situation is, we have a longer-run shortage of housing, and we also have high rates right now. I think the best thing we can do for the housing market is to restore price stability in a sustainable way and, and create a strong labor market, and that’s the best thing we can do for the housing market. You asked about the job market—again, look at labor force participation. Look at wages. Look at job creation. They’re all at healthy levels now. I, I would say you can see perhaps a very, very slow continued cooling, but nothing that’s troubling at this time. But, you know, we watch it—we watch it very, very carefully. So, overall, again, the current stance of monetary policy leaves us well positioned to respond in a timely way to economic developments, and—for now—and we’ll be watching the data carefully.",
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"content": "Well, just quickly on—given that, you know, there are concerns inflation will rise—but there is the alternate scenario that tariffs would create demand destruction and slow growth sufficiently and that would perhaps keep a bit of a lid on inflation. Do you see odds of that scenario, what odds do you see of that scenario coming true, and how many months of cool inflation would you need to see before concluding that maybe that lower-inflation scenario is taking place?",
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"content": "So this is very much the conversation we had today and yesterday. There, there are many, many different scenarios—many combinations of scenarios where inflation does or doesn’t prove out to be at the levels we think and where the labor market does or doesn’t soften. And I think what, what you see people doing is looking ahead at a time of very high uncertainty and writing down what they think the most likely case is. No one holds these, these rate paths with a great deal of conviction, and everyone would agree that they’re all going to be data dependent. And that—you can make a case for, for any of the rate paths, I think, that you see in, in the SEP. And, you know, we do this once a quarter. It’s—it’s a hard thing to do at this—particularly at this time. But it does reflect—you know, if you see somebody writing down, you know, a, a rate path that involves cuts, that’s them saying, “Yes, I think we will get to a place, more likely than not, where cuts will be appropriate.” And it could be—it could be a joint probability of a number of possible outcomes. Again, remember how much uncertainty we face, though.",
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] |
Thank you. Mr. Chair, I wonder if you could describe for us some of those scenarios. How do you get to a place—I’m noticing that the uncertainty levels in your forecast are very high. How do you get to a place where you have the confidence in the outlook for—say, inflation and/or growth or the unemployment rate—how many months does it take, and what do you want to see in the data to get to that level of confidence to actually reduce rates off the restrictive level?
|
STEVE LIESMAN
|
[
{
"content": "Thank you. Mr. Chair, I wonder if you could describe for us some of those scenarios. How do you get to a place—I’m noticing that the uncertainty levels in your forecast are very high. How do you get to a place where you have the confidence in the outlook for—say, inflation and/or growth or the unemployment rate—how many months does it take, and what do you want to see in the data to get to that level of confidence to actually reduce rates off the restrictive level?",
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"content": "So it’s—it’s—again, it’s very, very hard to say when that will happen. We know that the time will come; it come—could come quickly. It could not come quickly. As long as the economy is solid, though—as long as we’re seeing the labor market that we have and reasonably decent growth and inflation moving down, we feel like the right thing to do is to be where we are, with where our policy stance is, and just learn more. And in particular, we feel like we’re going to learn a great deal more over the summer on tariffs. We do—we hadn’t expected them to show up much by now, and they haven’t, and we will see whether—the extent to which they do over, over coming months. And I think that’s going to inform our thinking, for one thing. In addition, we’ll see how the labor market progresses. So, at some point, it will become clear. I can’t tell you exactly when that will be. And, you know, meanwhile, we’ll be watching, watching the labor market very carefully for signs of weakness and strength and tariffs for signs of, of what’s going to happen there. And, of course, there are many developments ahead, you know, even in the near term—developments are expected on tariffs. So I think we, we don’t yet know with any confidence where they will settle out. We have an estimate, and it’s a pretty—I think all estimates are now pretty close together. But it’s— it’s, yeah, highly uncertain.",
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"content": "When you say “estimate”—estimate of the impact of tariffs on the core PCE—is that what it is? And can you share that?",
"role": "user"
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"content": "Yeah, what you start with is, is—what’s the effective tariff rate overall? And people are managing to that. But, you know, the, the pass-through of tariffs to consumer price inflation is a whole process that’s very uncertain. You know, as you know, there are many parties in that chain: There’s the manufacturer, the exporter, the importer, the retailer, and the consumer, and each one of those is going to be trying not to be the one to, to pay for the tariff. But together, they will all pay for it together—or maybe one party will pay it all. But that process is very hard to predict, and we haven’t been through a situation like this, and I think we have to be humble about our ability to forecast it. So that’s why we need to see some actual data to have—to make better decisions. We, we’d like to get some, some more data, and, and, again, in the meantime, we can do that because the economy remains in solid condition.",
"role": "assistant"
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] |
Nick Timiraos of the Wall Street Journal. Chair Powell, I guess I’m wondering if you could explain a little more the divergence we see in the dot plot, particularly around the 2025 rate projections. I realize this is—you know, you have one group of officials that are putting down no cuts, another that are putting down more than one—and recognizing that could be difficult to summarize, but is it a matter of people having a different outlook or a different reaction function? A different commitment to defending against another inflation mistake? How, how did that play out over the last two days?
|
NICK TIMIRAOS
|
[
{
"content": "Nick Timiraos of the Wall Street Journal. Chair Powell, I guess I’m wondering if you could explain a little more the divergence we see in the dot plot, particularly around the 2025 rate projections. I realize this is—you know, you have one group of officials that are putting down no cuts, another that are putting down more than one—and recognizing that could be difficult to summarize, but is it a matter of people having a different outlook or a different reaction function? A different commitment to defending against another inflation mistake? How, how did that play out over the last two days?",
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"content": "So you’re right, we—and, as is often the case, we have a pretty healthy diversity of views on the Committee. We did have strong support for today’s decision and broad agreement that our policy stance does leave us in a good place. But I would point to two factors, and you mentioned them. The first is just that parties have a diversity of forecasts, and, and they do align with, with where—with where their dots are. So if you have a higher inflation forecast, you’re going to be less likely to be writing down, you know, more, more cuts. But as—remember, as we see more data, we’re going to learn more about where inflation is headed. And that means when it is time to look at, at normal—at sort of, at, you know— resuming our normalization process, the differences you may—you see should be smaller because we’ll have seen actual data. Right now, it’s just a forecast in a very foggy time. So that’s the first part—is forecast. Secondly, people can look at the same data, and they can evaluate the risks differently, as you know. And that includes, you know, the, the risk of higher inflation, the risk it’ll be more persistent, the risk that the labor market will weaken—people are going to have different assessments of that risk. So you put that in there, too. So those are the two ways that, that—the two things, I think, that drive these things. Remember, though, with—as I mentioned earlier— with uncertainty as elevated as it is, no one holds these rate paths with a lot of conviction. So that’s really where it is. It’s a function of those things, and I think as the data come in, you should see those differences diminish.",
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"content": "If I could follow up—you’ve said the policy is in a good place, and that it’s modestly restrictive. Given all the uncertainty—you just talked about tariff levels, uncertainty around the pass-through—is it price increases versus margin compression?—some of the softness that Chris talked about in, in labor and housing. Why wouldn’t it be better to have rates at a more neutral setting as the economy heads into this period of very high uncertainty?",
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{
"content": "So if you just look backward at the data, that, that’s what you would say, but that’s not—we have to be forward looking. And the thing that every forecaster—every outside forecaster and the Fed is saying is that we expect a meaningful amount of inflation to arrive in coming months, and we have to take that into account. So I think a backward-looking look would, would lead you to a neutral stance. But we, we can’t—we have to—we have to look at that. And because the economy is still solid, we can take the time to actually see what’s going to happen. It, it’s, you know, the—there’s a range of possibilities on how, how large the, the inflation effects and the other effects are going to be. So we’ll make smarter and better decisions if we just wait a couple of months or however long it takes to get a sense of, of really what, what is going to be the pass-through of inflation and what’re—what’s going to be the effects on spending and on hiring and all those things.",
"role": "assistant"
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] |
Michael McKee from Bloomberg Radio and Television. Your friend down at 1600 Pennsylvania Avenue continues to lob insults in your direction. And I’m wondering, given now that the Supreme Court has maybe carved out the Fed from some of the legal implications of that, whether this is just noise that the markets and everybody should ignore until your term is up or whether you worry that it could lead to more pressure on confidence on Wall Street—on consumers—about the outlook for the economy.
|
MICHAEL MCKEE
|
[
{
"content": "Michael McKee from Bloomberg Radio and Television. Your friend down at 1600 Pennsylvania Avenue continues to lob insults in your direction. And I’m wondering, given now that the Supreme Court has maybe carved out the Fed from some of the legal implications of that, whether this is just noise that the markets and everybody should ignore until your term is up or whether you worry that it could lead to more pressure on confidence on Wall Street—on consumers—about the outlook for the economy.",
"role": "user"
},
{
"content": "Okay, from my standpoint, it’s—it’s not complicated. What everyone on the FOMC wants is a good, solid American economy with a strong labor market and, and price stability. That’s what we want. We think our policy is well positioned to—right now to, to deliver that and, and to be able to respond in a timely way as the data lead us around. The economy’s been resilient, and part of that is our stance, and, again, we think we’re—we’re in a good place on that to respond to significant economic developments. That’s what matters. That is what matters to us—pretty much, that’s all that matters to us.",
"role": "assistant"
},
{
"content": "I need to ask—assuming you are not reappointed, would you stay on as Governor when your term as Chair ends?",
"role": "user"
},
{
"content": "I’m—I’m not thinking about that. I’m thinking about this.",
"role": "assistant"
}
] |
Thanks, Mr. Chairman. I guess with workplace raids increasing, picking up significantly—what effect would that have on the labor market in the short term?
|
ANDREW ACKERMAN
|
[
{
"content": "Thanks, Mr. Chairman. I guess with workplace raids increasing, picking up significantly—what effect would that have on the labor market in the short term?",
"role": "user"
},
{
"content": "Sorry, sorry—with what picking up?",
"role": "assistant"
},
{
"content": "Okay, thanks. The other thing I wanted to follow up on is if you could—if you could elaborate on the potential changes to the SEP that you suggested were part of the framework review, I think.",
"role": "user"
},
{
"content": "So the framework review really has two tracks, right? The first track is our—is our policy framework. That, that is reflected in the consensus statement. And we, we’ve said that we would finish that and announce it by the end of the summer. So we’re well along in that process. We’ve had the meetings that we need to have, and we’re now going to be going into cough—pardon me—into discussions about, you know, specific changes to language. So that’s—that’s the framework part of it. The second part of it is our communications tools and practices cough—pardon me—and that, that part comes next, okay? That’s what we’re going to do in the meetings this fall. Actually, what we did at this meeting, though, is we, we prepared the ground for that. We had a—we had a meeting where we talked at a high level about a number of ideas. The SEP is part of it—you know, other—many, many other ideas. It’s—it’s sort of— how do we think our communications can be improved? There are a number of ideas. People offered a really—it was a great conversation. Number of ideas—but we’re—we’re going to look at those with staff briefing and a lot of thought in the fall. And I would say, when it comes to changing communications, you know, I would only do—I would only support things really that only—implement things that have very broad support. And also, you want to be really careful, because I think our communications are pretty well received. They’re not broken, so more is not necessarily better—but better is better. So we’re going to be looking at ways to do—to do things that will improve the clarity of what we do for the benefit of, of the public.",
"role": "assistant"
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] |
Thank you, Chair Powell. So you’re saying that uncertainty has come down, the economy is moving at a solid pace, inflation has come down over the past three months, and this is all moving in the right direction. So are you indicating here that Americans should expect some economic pain in the second half of the year?
|
EDWARD LAWRENCE
|
[
{
"content": "Thank you, Chair Powell. So you’re saying that uncertainty has come down, the economy is moving at a solid pace, inflation has come down over the past three months, and this is all moving in the right direction. So are you indicating here that Americans should expect some economic pain in the second half of the year?",
"role": "user"
},
{
"content": "I’m not—I’m not saying that at all. You know, from our standpoint, what I can say is that the, the U.S. economy is in solid shape. Inflation has come down. The unemployment rate remains at 4.2 percent. As I mentioned, real wages are moving up. It’s a— it’s a good—job creation is at a healthy level. Unemployment, again, as I said, low—labor force participation at a good place. What we’re waiting for to reduce rates is, is to understand what will happen with, with, really, the tariff inflation. And there’s a lot of uncertainty about that. Every forecaster you can name who, you know—who is a professional, you know, forecaster with, with adequate resources and forecasts for a living is forecasting, you know, a pretty significant—everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs. And it will be someone in that chain that I mentioned: Between the manufacturer, the exporter, the importer, the retailer— ultimately, somebody putting it into a, a good of some kind or just the consumer buying it—and, you know, all through that, that chain, people will be trying not to be the ones who, who pick up the cost. But, ultimately, the cost of the tariff has to be paid. And some of it will fall on the end consumer. We know that because that’s what businesses say—that’s what the, the data say from past—so we know that’s coming. And we just want to see, see a little bit of that before we make judgments prematurely.",
"role": "assistant"
},
{
"content": "And follow-up on that—so you’ve spent years, though, talking about how, how you’re data dependent, and be a little more direct on this. You know, now you’re making decisions looking forward—doesn’t the data you’re seeing today indicate there should be a rate cut?",
"role": "user"
},
{
"content": "No, I mean, you’re—monetary policy has to be forward looking. That is elementary. You’ve got to be looking—I always—we always talk about the incoming data, the evolving outlook, and the balance of risks. We say that over and over and over again, right? So it’s always forward looking. You know, if you know—at the very beginning of the pandemic, you know, we cut rates to zero immediately. Nothing had happened. We just knew that it was going to be really bad, right? So we took very aggressive forward looking—because we knew things were going to be unusually difficult. So, of course, this, this is something we, we know is coming—we just don’t know the size of it. And, again, the economy seems to be in solid shape. So the labor market’s not crying out for a rate cut. Businesses, you know, were in a bit of shock after April 2. But you see business sentiment—you talk to business people now—there’s a very different feeling now that people are working their way through this. And they, they understand how they’re going to go, and it’s—it, it feels much more positive and constructive than it did three months ago, let’s say. So, again, we think that our current stance of monetary policy is in a good place.",
"role": "assistant"
}
] |
Thank you. Amara Omeokwe with Bloomberg. Chair Powell, in February, you told Congress that the Fed is “overworked, maybe, not overstaffed.” Then, in a memo to—a memo to staff in May announcing a deferred resignation program at the Fed, you said you wanted to ensure that the Fed was “right-sized.” Those two statements appear to be at odds with one another. Could you explain what changed in the roughly three months between those statements that made you decide that staff levels at the Fed should decline?
|
AMARA OMEOKWE
|
[
{
"content": "Thank you. Amara Omeokwe with Bloomberg. Chair Powell, in February, you told Congress that the Fed is “overworked, maybe, not overstaffed.” Then, in a memo to—a memo to staff in May announcing a deferred resignation program at the Fed, you said you wanted to ensure that the Fed was “right-sized.” Those two statements appear to be at odds with one another. Could you explain what changed in the roughly three months between those statements that made you decide that staff levels at the Fed should decline?",
"role": "user"
},
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"content": "I don’t see them at all as, as in tension. You know, so I was asked, “Is the Fed overstaffed?” And I said, “No.” You know, and I said as a pun, “Overworked, but not overstaffed.” People do work extremely hard at the Fed, and I know they work hard at Bloomberg, too. So—but we do. We work hard. But I would say this—so we are careful stewards of public resources, and sometimes you need to show that. So there’ve been several times in our history—modern history—where the Fed has said, “You know what? We’re going to do a buyout. We’re going to—going to show the public. We’re going to demonstrate that we are good stewards of public resources.” So we thought—and I, I thought— that this is a time when we can. You know, we’ve—we grow about—our headcount has grown at about 1 percent a year. So over the course of a couple of years, we’re going to—we’re doing a careful scrub of the Board and all of the Reserve Banks, and we’re going to find 10 percent of employees who can do something else. Where, where we can—we can streamline our operations—and we, we think we can get there in a year, in a couple of years. We think we can do that. And we think the—we think the, the—this is, this is without taking risk to carrying out our critical missions. So this is something you do very carefully—thoughtfully. And you do it, again, respecting that we have critical missions to carry out. I’ve had experience—a lot of experience—in my prior careers, you know, with headcount reductions and things like that, and this is how you do it professionally. You do it carefully—thoughtfully—with a lot of planning, and you do it over a period of time. And I, I think it’s—I think the Fed will be fine. I think no one will notice any decline in our ability to carry out our missions, and I think it’s just us wanting to demonstrate to the public that we are actually good stewards of their—of their resources. We’re—we’re effectively wiping out 10 years of headcount growth with this. So, I mean, we just—we wanted to show that, you know—that we’re good stewards.",
"role": "assistant"
},
{
"content": "How is progress on reducing the headcount going so far? Are you on track to meet the goal?",
"role": "user"
},
{
"content": "We’re just at the very beginning. As you know, we’re doing a buyout program. We’re going to—we’re going to hit that goal. I think many organizations find that they can—that they can do this. You don’t want to do it every year or anything, but you can do it at intervals. And you, you wind up not, you know—not interfering with your ability to perform your jobs.",
"role": "assistant"
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] |
Chair Powell, Claire Jones from the Financial Times. As you’re no doubt aware, the Senate Finance Committee has tabled its version of the reconciliation bill this week, and I was wondering if you could tell me a little bit about the tenor of the debate at the FOMC over the past few days on fiscal policy and the degree to which that influenced people’s projections for 2026 and beyond. Thank you.
|
CLAIRE JONES
|
[
{
"content": "Chair Powell, Claire Jones from the Financial Times. As you’re no doubt aware, the Senate Finance Committee has tabled its version of the reconciliation bill this week, and I was wondering if you could tell me a little bit about the tenor of the debate at the FOMC over the past few days on fiscal policy and the degree to which that influenced people’s projections for 2026 and beyond. Thank you.",
"role": "user"
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"content": "Yeah, so, you know, we don’t—we don’t sit around and debate or really discuss—we, we take fiscal policy as fully exogenous. And so we, we actually, you know, really didn’t talk about, about the bill or the contents of it. It’s still evolving. You know, when, when it gets close—closer—remember also we have a very, very large economy, and that the effects will be at the margin. And, you know, I, I expect that they’ll—they may already be in— but they will be in by the next meeting. We’ll make an estimate. But it’s not a major thing; it’s nothing that we discuss. It, it may have been mentioned a couple of times—but as something that’s coming in. But I think the outcome is—you know, we don’t know the outcome yet there—so, hard to be real specific.",
"role": "assistant"
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] |
Thanks, Chair Powell. Neil Irwin with Axios. There’ve been some cutbacks in economic statistics collection in the last few weeks—worries that long-running problems around funding and response rates may be getting worse. How much is this concern on your radar? How much confidence do you have that the gauges you’re watching to assess the economy are reliable right now?
|
NEIL IRWIN
|
[
{
"content": "Thanks, Chair Powell. Neil Irwin with Axios. There’ve been some cutbacks in economic statistics collection in the last few weeks—worries that long-running problems around funding and response rates may be getting worse. How much is this concern on your radar? How much confidence do you have that the gauges you’re watching to assess the economy are reliable right now?",
"role": "user"
},
{
"content": "You know, two things—one, the data we get right now—we, we can do our jobs. I’m not concerned that we can’t do our jobs. That’s not the—that’s not the point. The point, really, is that we are starting to see, you know, layoffs. And, and important gatherers of data are saying that they’re—they’re having to cut back on the size of their surveys. That’s going to lead to more volatility in the surveys. I think we should take a step back. And, you know, from our standpoint—and I think the standpoint of businesses and governments and everyone—having really good data on the state of the economy at any given time is a huge public good. It helps. It doesn’t just help the Fed. It helps the government, it helps Congress, it helps the executive branch. More importantly, really, it helps businesses. They need to know what’s going on in the economy. The United States has been a leader for many, many years in this whole project of measuring and understanding what’s happening in, in our very large and dynamic economy. And I hate to see—I hate to see us cutting back on that because it, it is a real benefit to the general public that people in all kinds of jobs have the best possible understanding of what’s happening in the economy and, and, hence, what’s likely to happen. It’s very hard to measure what’s going on in the U.S. economy. If, if you read—there was a book called—well, it’s really remarkable how many things you need to understand to estimate U.S. GDP. Very, very difficult—and it’s so important that we get it right. I just would—I just would say it’s not a place to—I would want to keep investing in that, you know, for the good of the general public.",
"role": "assistant"
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] |
Hi. Victoria Guida with Politico. So you’re conducting this monetary policy strategy framework review, but next year we’re supposed to have a new Fed Chair, and I’m wondering if that affects at all the way that you’re approaching this. How do you ensure that this framework will actually be durable?
|
VICTORIA GUIDA
|
[
{
"content": "Hi. Victoria Guida with Politico. So you’re conducting this monetary policy strategy framework review, but next year we’re supposed to have a new Fed Chair, and I’m wondering if that affects at all the way that you’re approaching this. How do you ensure that this framework will actually be durable?",
"role": "user"
},
{
"content": "You know, the framework goes back to—the framework document goes back to 2012, and it’s—it’s the Committee’s document. It’s not like we’re going to invent a brand new way to do things. It’s—it’s been an evolving document, so it shouldn’t depend on who the Chair is at all. It should depend on what’s happening in the economy and what the Committee wants to do. So, yeah, it isn’t really tied to any particular Chair, and, you know, we used to renew it every year. Now we do it every five years. So—but I, I don’t think anybody— I’ve never heard anyone raise this issue that, you know, a new Chair might want to come in and go in a completely different direction. I really—I really don’t think that’s right. But, you know, that’s not—not going to be up to me to decide.",
"role": "assistant"
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{
"content": "Is that affecting at all that you’re—who you’re consulting with—",
"role": "user"
},
{
"content": "No, not at all. Not in any way.",
"role": "assistant"
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] |
Thank you, Chair Powell. Matt Egan from CNN. Relatively low gas prices this year have helped drive down inflation in recent reports, but that trend is starting to reverse, given the crisis in the Middle East. How are you thinking about how the Israel–Iran conflict will impact the economy, especially inflation, and what lessons were learned during the 2022 period when another conflict, the Russia–Ukraine war, sent oil and gas prices skyrocketing?
|
MATT EGAN
|
[
{
"content": "Thank you, Chair Powell. Matt Egan from CNN. Relatively low gas prices this year have helped drive down inflation in recent reports, but that trend is starting to reverse, given the crisis in the Middle East. How are you thinking about how the Israel–Iran conflict will impact the economy, especially inflation, and what lessons were learned during the 2022 period when another conflict, the Russia–Ukraine war, sent oil and gas prices skyrocketing?",
"role": "user"
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"content": "So, of course, we’re watching—like everybody else is—what’s going on. I really don’t have any comment on that. You know, possible that, that we’ll see higher energy prices—what’s tended to happen is, when there’s turmoil in the Middle East, you may see a spike in energy prices—but tends to come down. Those things don’t generally tend to have lasting effects on inflation, although, of course, in the 1970s, they famously did, because you had a series of very, very large shocks. But we haven’t seen anything like that—that—like that now. The U.S. economy is far less dependent on foreign oil than it was back in the 1970s. So, but—",
"role": "assistant"
},
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"content": "A quick follow-up—I’ve just got to ask you about artificial intelligence. Some technology executives have recently been warning that AI could wipe out a large chunk of entry-level jobs and significantly increase the unemployment rate. I’m wondering how concerned you are, if at all, about the threat that AI poses to employment.",
"role": "user"
},
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"content": "So this is the question. The question really is, will AI be more augmenting labor or replacing labor? And I wouldn’t—I, I—we all see those announcements, including one today. I wouldn’t overread a, a couple of data points, because, you know, AI should be creating jobs at the same time. It may be replacing—it may be doing both. Anyone who’s done any work with it—with AI—will, will have been a little bit stunned at how capable it is. And it’s just a different thing. So I think this is something that certainly has transformational potential—and probably we’re in the very early stages of it. They say what you’re seeing now compared to what you’ll see in two years is, is going to be very different and even more effective. So I think it’s really hard to know. You know, of course, there are optimists who feel like it’s going to make everybody much more, you know—much more productive. And there are those who think it’s going to replace an awful lot of jobs right across the income spectrum—you know, white collar, blue collar, and everything. So I just don’t know. We don’t—we don’t have a “house view” on that. But this is—this is going to be a very important question for some time.",
"role": "assistant"
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] |
Thank you. Greg Robb from MarketWatch. I was wondering if you could step back a little bit, Chair Powell. You know, there’s a spate of articles and a lot of op- eds now in the newspapers saying that the U.S. economy and the global economy is going through this profound change, you know, akin to the end of the Bretton Woods era in the 1970s. And don’t you owe the American people, like, some sort of, like, explanation for what we’re going through? I mean, I, I noticed earlier this month when you, you talked about Bretton Woods a little bit, and you said that Bretton Woods—the Fed staff had to, like, change how they’ve—the dollar—movements of the dollar was impacting the economy. Are we going through something like that now—that, you know—are you having to change how you do monetary policy? Is it—is it that fundamental of a change under way? Thanks.
|
GREG ROBB
|
[
{
"content": "Thank you. Greg Robb from MarketWatch. I was wondering if you could step back a little bit, Chair Powell. You know, there’s a spate of articles and a lot of op- eds now in the newspapers saying that the U.S. economy and the global economy is going through this profound change, you know, akin to the end of the Bretton Woods era in the 1970s. And don’t you owe the American people, like, some sort of, like, explanation for what we’re going through? I mean, I, I noticed earlier this month when you, you talked about Bretton Woods a little bit, and you said that Bretton Woods—the Fed staff had to, like, change how they’ve—the dollar—movements of the dollar was impacting the economy. Are we going through something like that now—that, you know—are you having to change how you do monetary policy? Is it—is it that fundamental of a change under way? Thanks.",
"role": "user"
},
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"content": "It’s—it’s certainly a time of real change—you know, from a geopolitical standpoint, from a trade standpoint, from an immigration standpoint—you see this not just here, but everywhere. So there’s—there’s quite a lot going on. It doesn’t change the way we do monetary policy in the near term. I mean, but—and it doesn’t change our objectives or what we need to do. And, you know, these, these things are not really our issues—they’re really issues for elected governments. All of those issues are really for elected governments. But there’s no question it’s a time of, of real, real change—and very hard to see where that goes. Will it be—there have been many, many things written about how it’s going to be a more inflationary time. That’s possible; it’s not guaranteed. You know, AI could cut in a very other direction. AI could make people much more productive and—and push in the other direction. I don’t know, though. So you’re right, but, honestly, our focus is, is a much more practical one, and that is, how do we keep inflation low and, and employment high in the near term? That’s really what we’re about.",
"role": "assistant"
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] |
Thank you. Hello, Chairman Powell. Mark Hamrick with Bankrate. What is the view about the growing amount of slack in the job market, including the softening in payrolls, the forecast of a modest rise in the unemployment rate, and the ability of workers to demand wage hikes or not in this environment where you have inflation surging?
|
MARK HAMRICK
|
[
{
"content": "Thank you. Hello, Chairman Powell. Mark Hamrick with Bankrate. What is the view about the growing amount of slack in the job market, including the softening in payrolls, the forecast of a modest rise in the unemployment rate, and the ability of workers to demand wage hikes or not in this environment where you have inflation surging?",
"role": "user"
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"content": "I don’t, you don’t see—you don’t really see unemployment going up. You don’t see increased slack, really—I mean, at the margin. Remember, you’re at 4.2 percent unemployment. That, that was for many, many years—that was an extremely low level. It happens to have come up off of an even lower level. As we came out of the pandemic, we were as low as 3.4 percent. But 4.2 percent is probably at the low end of estimates of the longer-run, you know, sustainable level of natural rate of unemployment. So I wouldn’t—I guess I wouldn’t agree with that. And also, in terms of wages—you know, real wages after inflation have been moving up more than was consistent with 2 percent inflation. They’re still moving up at a—at a healthy clip—and I think much more consistent with 2 percent inflation, given, given a, a reasonable assessment of, of trend productivity. So it’s a pretty good labor market. You know, you’re right that the level of job creation has come down, but so has the supply of workers—the change in the supply—the, the new supply. So you’ve seen—you’ve seen the unemployment rate remain pretty stable at 4.2. It’s been as high as 4.3, but, you know, those are—those are good numbers. So it’s a pretty good labor market. There’s—the thing is, there’s—a more concerning thing is, there’s not—there are not a lot of layoffs, but there are not a lot of, of job creation. The number—if you’re out of work, it’s—it’s hard to find a job. But very few people are being laid off at this point. So that’s—an equilibrium we watch very, very carefully, because if there were to be, you know, significant layoffs and the job-finding rate were to remain this low, you would have a lot—you would have an increase in unemployment fairly quickly. But that hasn’t happened. It really hasn’t happened. We’re—so the U.S. economy has defied all kinds of forecasts for it to, to weaken, really, over the last three years, and it’s been remarkable to see—just again and again when people think it’s going to weaken out. Eventually it will, but we don’t see signs of that now.",
"role": "assistant"
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] |
Hi, Chair Powell. Jean Yung with MNI Market News. There’s been a lot of talk about cuts. I wanted to ask you—why do you think there are no forecasts for rates to rise or, or even to stay where they are next year, given that the projection for inflation is to rise to 3 percent and there’s a lot of—there’s some skepticism over whether those price hikes will be a one-time event?
|
JEAN YUNG
|
[
{
"content": "Hi, Chair Powell. Jean Yung with MNI Market News. There’s been a lot of talk about cuts. I wanted to ask you—why do you think there are no forecasts for rates to rise or, or even to stay where they are next year, given that the projection for inflation is to rise to 3 percent and there’s a lot of—there’s some skepticism over whether those price hikes will be a one-time event?",
"role": "user"
},
{
"content": "So there are a number of people on the Committee who wrote down no cuts this year but some cuts next year. So, look, I think, you know, people are writing down their most likely path, right? They’re not saying there’s zero possibility of other things, really. Really, it’s—think of it as the least unlikely path in a situation like this where uncertainty is very high. I, I think—again, people write—they write down their, their rate paths, and they do not have, like, a really high conviction that this is exactly what’s going to happen over the next two years. No one feels that way about their rate path. They feel like, “What am I going to write down?” I mean, what would you write down? It’s not easy to, to be—to do that with confidence. So I would just say it that way. We don’t rule things in or out—certainly, a hike is not the base case at all. It’s not something people are writing down. But, in the meantime, we do the best we can with these forecasts, and I, I think they’re—they’re representative of, you know, of the different forecasts and different reaction functions that people on the Committee have. So thank you very much. Thanks.",
"role": "assistant"
}
] |
Howard Schneider with Reuters. Thank you, Chair Powell, for doing this. To what—you referenced the rise in long-term bond yields—to what degree did that supplant action by the Fed at this meeting?
|
HOWARD SCHNEIDER
|
[
{
"content": "Howard Schneider with Reuters. Thank you, Chair Powell, for doing this. To what—you referenced the rise in long-term bond yields—to what degree did that supplant action by the Fed at this meeting?",
"role": "user"
},
{
"content": "Thanks for your question. So, I’ll talk about bond yields, but I want to take a second and just set the broader context in which we’re looking at that. So, if you—if you look at the situation—let’s look at the economy first. Inflation has been coming down, but it’s still running well above our 2 percent target. The labor market has been rebalancing, but it’s still very tight by many measures. GDP growth has been strong, although many forecasters are forecasting, and they have been forecasting, that it will slow. As for the Committee, we are committed to achieving a stance of monetary policy that’s sufficiently restrictive to bring inflation down to 2 percent over time, and we’re not confident yet that we have achieved such a stance. So that is the broader context into which this, this strong economy and all the things I said—that’s the context in which we’re looking at this question of rates. So, obviously we’re monitoring, we’re attentive to the increase in longer-term yields and—which have contributed to a tightening of broader financial conditions since the summer. As I mentioned, persistent changes in broader financial conditions can have implications for the path of monetary policy. In this case, the tighter financial conditions we’re seeing—coming from higher long-term rates, but also from other sources, like the stronger dollar and lower equity prices—could matter for future rate decisions, as long as two conditions are satisfied. The first is that the tighter conditions would need to be persistent. And that is something that remains to be seen. But that’s critical. Things are fluctuating back and forth—that’s not what we’re looking for. With financial conditions, we’re looking for persistent changes that are material. The second thing is that, that the longer-term rates that have moved up—they can’t simply be a reflection of, of expected policy moves from us that we would then—that if we didn’t follow through on them, then the rates would come back down. So, and I would say on that, it does not appear that an expectation of higher near-term policy rates is causing the increase in longer-term rates. So, in the meantime, though, perhaps the most important thing is that these higher Treasury yields are showing through to higher borrowing costs for households and businesses and those higher costs are going to weigh on economic activity to the extent this tightening persists and the mind’s eye goes to the 8 percent—near 8 percent mortgage rate, which could have pretty significant effect on housing. So that’s how I would answer your question.",
"role": "assistant"
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"content": "Just as a quick follow-on, to be clear on this: In your opening statement just now, you seemed to imply that you are not yet confident that financial conditions are restrictive enough to finish the fight. Is that true?",
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{
"content": "Yes. That’s exactly right. You know, to say it a different way: We haven’t made any decisions about, about future meetings. We have not made a determination, and we’re not—I will say that we’re not confident at this time that we’ve reached such a stance. We’re not confident that we haven’t; we’re not confident that we have. And that’s—that is—the way we’re going to be going into these future meetings is to be, you know, just determining the extent of any additional further policy tightening that may be appropriate to return inflation to 2 percent over time.",
"role": "assistant"
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] |
Hi, Chair Powell. Thank you so much for taking our questions. I wonder, you know, if you don’t raise interest rates in December, would the presumption be at that point that we should expect that rates are at their peak, or is there a possibility of restarting rate increases next year? And are there any costs to taking a more extended pause?
|
JEANNA SMIALEK
|
[
{
"content": "Hi, Chair Powell. Thank you so much for taking our questions. I wonder, you know, if you don’t raise interest rates in December, would the presumption be at that point that we should expect that rates are at their peak, or is there a possibility of restarting rate increases next year? And are there any costs to taking a more extended pause?",
"role": "user"
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{
"content": "So, let me start by saying we haven’t made a decision about September. You’re asking a hypothetical there. But we’re going into December meeting—we’ll get, as you know, two more inflation ratings, two more labor market readings, some data on, on economic activity, and so we’ll be taking—and also the broader situation, the broader financial condition situation and broader world situation. We’ll be looking at all those things as we make a decision in December. We haven’t made that decision. I would say, though, that, that the idea that if you—the idea that would—difficult to raise again after stopping for a meeting or two, it’s just not right. I mean, the Committee will always do what it thinks is appropriate at the time. And, again, we haven’t made any decisions about— at all about December. We didn’t even—we didn’t talk about making a decision in December today. Really, it was a decision for this meeting and understanding broader things.",
"role": "assistant"
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] |
Nick Timiraos, the Wall Street Journal. Chair Powell, did the Fed staff put a recession back into the baseline forecast in the materials for today’s meeting? And how much does this tightening and financial conditions substitute for rate hikes if the tightening is persistent? You had said it was worth maybe a ¼ point when we had the bank failures in the spring. What is it here on something that’s presumably more straightforward and more familiar to simulate?
|
NICK TIMIRAOS
|
[
{
"content": "Nick Timiraos, the Wall Street Journal. Chair Powell, did the Fed staff put a recession back into the baseline forecast in the materials for today’s meeting? And how much does this tightening and financial conditions substitute for rate hikes if the tightening is persistent? You had said it was worth maybe a ¼ point when we had the bank failures in the spring. What is it here on something that’s presumably more straightforward and more familiar to simulate?",
"role": "user"
},
{
"content": "So I guess I don’t want to answer your question about the—about the recession. But the answer is “no.” I think I have to answer it, since we did publicly say in the minutes—you’ll know anyway in the next minutes—the staff did not put a recession back in. I mean, it would be hard to see how you would do that if you look at the—look at the activity we’ve seen recently, which is not really indicative of a recession in the near term. In terms of how to think about translation into rate hikes, I think it’s just too early to be doing that, and the main reason is we just don’t know how persistent this will be. You can see how volatile it is. Different kinds of news will affect the level of rates, and I think any an estimate that was precise would hang out there and have a great chance of looking wrong very quickly. So I think what we can say is that financial conditions have clearly tightened, and you can see that in the rates that, that consumers and households and businesses are paying now. And over time, that will have an effect. We just don’t know how persistent it’s going to be, and it’s tough to try to translate that in a way that I’d be comfortable communicating into how many rate hikes that is.",
"role": "assistant"
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"content": "I’d like to follow up and ask what makes you confident—what makes you confident in the tighter financial conditions will slow above-trend growth when 500 basis points of rate hikes, QT, and a minor banking crisis have not thus far?",
"role": "user"
},
{
"content": "Well, I just—that’s, you know, the way our policy works is—and sometimes it works with lags, of course, which can be long and variable, but ultimately, if you raise interest rates, you do see those effects. And you see those effects in the economy now. You see what’s happening in the housing market. You’re seeing that now. You’ll see, if you look at surveys of people, it’s not a good time they think to buy durable goods of various kinds because rates are so high now. I mention again, we’re getting reports from housing that the effects of this—of this could be quite significant. But you’re right. This has been a resilient economy. And it’s, I think, been surprising in its resilience. And there are a number of possible reasons why that may be. Our job is to—is to achieve maximum employment and price stability, and so we take the economy as it comes. It has been resilient, so we just—we take it as it is.",
"role": "assistant"
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] |
Thank you. Colby Smith with the Financial Times. In terms of the thresholds that you’ve laid out of what could warrant further tightening, the additional evidence of persistently above-trend growth, or some reversal in the recent easing of labor market tightness—that seems to suggest something more powerful than just one more ¼ point rate hike would be necessary. And I’m just curious if that’s how the Committee sees it.
|
COLBY SMTH
|
[
{
"content": "Thank you. Colby Smith with the Financial Times. In terms of the thresholds that you’ve laid out of what could warrant further tightening, the additional evidence of persistently above-trend growth, or some reversal in the recent easing of labor market tightness—that seems to suggest something more powerful than just one more ¼ point rate hike would be necessary. And I’m just curious if that’s how the Committee sees it.",
"role": "user"
},
{
"content": "So we’ve identified those factors. Those were not meant to be the only factors or a specific test that we’re going to be applying with some metrics behind it. Really, we’re going to be looking at the broader picture. You know, what’s happening with our progress toward the 2 percent inflation goal? Is the labor market continuing to, broadly, cool off and achieve a better balance? We’ll be looking at that. You know, growth—we look at growth insofar as it has implications for our two mandate goals. We look at that, and we look at broader financial conditions. So we’ll be looking at all of those things as we reach a judgment, you know, whether we need to further tighten policy. And, if we do reach that judgment, then we will further tighten policy.",
"role": "assistant"
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] |
Okay. And just in terms of the tightening of financial conditions, if that is having some offsetting effect in terms of the need to potentially again raise rates, what then is the potential impact on the trajectory of rate cuts? Could we see those maybe pulled forward or have to see more than what the September SEP indicated?
|
COLBY SMITH
|
[
{
"content": "Okay. And just in terms of the tightening of financial conditions, if that is having some offsetting effect in terms of the need to potentially again raise rates, what then is the potential impact on the trajectory of rate cuts? Could we see those maybe pulled forward or have to see more than what the September SEP indicated?",
"role": "user"
},
{
"content": "So it’s, it’s—the fact is the Committee is not thinking about rate cuts right now at all. We’re not talking about rate cuts. We’re still very focused on the first question, which is, have we achieved a stance of monetary policy that’s sufficiently restrictive to bring inflation down to 2 percent over time sustainably? That is the question we’re focusing on. The next question, as you know, will be, for how long will we remain restrictive? Will policy remain restrictive? And what we’ve said there is that we’ll keep policy restrictive until we’re confident that inflation is on a sustainable path down to 2 percent. That’ll be the next question, but honestly, right now we’re really tightly focused on the first question. The question of rate cuts just doesn’t come up because I think the first—it’s so important to get that first question, you know, as close to right as you can.",
"role": "assistant"
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] |
Steve Liesman, CNBC. Mr. Chairman, I guess I had assumed that there was a tightening bias in the Committee. You say in the statement you’re looking to assess the appropriate stance of monetary policy, the extent to which you may need to hike additionally. You didn’t say earlier that you were sufficiently restrictive. There were forecasts for two rate hikes among most members of the Committee. But then you just said that, you know, we don’t—we haven’t made a determination. Would you say the bias right now is neutral, that there is no disposition to hike again and that the Committee largely has moved off of this forecast for two hikes? Sorry, one additional—
|
STEVE LIESMAN
|
[
{
"content": "Steve Liesman, CNBC. Mr. Chairman, I guess I had assumed that there was a tightening bias in the Committee. You say in the statement you’re looking to assess the appropriate stance of monetary policy, the extent to which you may need to hike additionally. You didn’t say earlier that you were sufficiently restrictive. There were forecasts for two rate hikes among most members of the Committee. But then you just said that, you know, we don’t—we haven’t made a determination. Would you say the bias right now is neutral, that there is no disposition to hike again and that the Committee largely has moved off of this forecast for two hikes? Sorry, one additional—",
"role": "user"
},
{
"content": "No. I wouldn’t say that at all. I would say—I mean, the language, looking at it here, “In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time.” That’s the question we’re asking.",
"role": "assistant"
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"content": "So is it right to think of that as a hiking bias is still in the Committee here?",
"role": "user"
},
{
"content": "We haven’t used that term, but it’s fair to say that’s the question we’re asking is, should we hike more? It’s not—it’s not, you know—that is the question, and you’re right that, in September, we wrote down one additional rate hike. But, you know—and we’ll each write down another forecast, as you know, in December.",
"role": "assistant"
}
] |
Thank you, Chris Rugaber, at Associated Press. Well, since the last meeting, the auto workers’ strike has finished, oil prices have leveled off, and yet, on the other hand, you have the outbreak of war between Israel and Hamas. How do you see all those factors, taken together, affecting the economy going forward? How are you thinking about those?
|
CHRIS RUGABER
|
[
{
"content": "Thank you, Chris Rugaber, at Associated Press. Well, since the last meeting, the auto workers’ strike has finished, oil prices have leveled off, and yet, on the other hand, you have the outbreak of war between Israel and Hamas. How do you see all those factors, taken together, affecting the economy going forward? How are you thinking about those?",
"role": "user"
},
{
"content": "So, there are significant issues out there, as you point out. Global geopolitical tensions are certainly elevated. And that goes for the war in Ukraine; it goes for the war between Israel and Hamas. We’re monitoring that. Our job is to monitor those things for their economic implications. So, the UAW strike, as you point out is—appears to be coming to an end. Oil prices have flattened out; they haven’t gone down. I guess they’ve gone down a little bit from their earlier peak. Another one is the possibility of government shutdown; we don’t know about that one. So there’s plenty of risk out there. But I would go back to—the bigger picture from our standpoint is, we’ve got a very strong economy, strong labor market, making progress on the labor market, making progress on inflation. And we’re very focused on getting confident that we have achieved a stance of monetary policy that is sufficiently restrictive. That’s really our focus.",
"role": "assistant"
},
{
"content": "Great. And just one quick thing: You, last month, had gone to York, Pennsylvania, where you talked to a lot of—or, yeah, last month, where you talked to a lot of small business owners. Just curious, what sentiments did you hear from them or what did you pick up on and what would you—was there anything that surprised you the most in terms of what they talked about?",
"role": "user"
},
{
"content": "I wouldn’t say I was terribly surprised. I was very impressed by York as a town with a real strategy. And I would say it’s very impressive what the people there have put together in the face of, you know, some difficult longer-run trends about offshoring of manufacturing and that thing. They’ve done a great job as a city, I think. You know, what you hear—and it’s consistent there—which is people are really suffering under high inflation. You were there. We talked to some people who, you know, were feeling that in their businesses and other people who were feeling it in their home lives as well. You know, it’s painful for people—particularly people who don’t have a lot of extra financial resources who are spending most of their incoming, you know, income on the essentials of life. So we know that. That wasn’t new. But that did come through very clearly in, in the conversations we had in York, and, you know, I walked away from that even—you know, I mean, just thinking that we really—the best thing we can do for the U.S. is to restore price stability—fully restore price stability and not fail in that task and do it as quickly as possible, but also with the least damage we can.",
"role": "assistant"
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] |
Hi Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. You’ve spoken before about the pain that would likely be coming for the economy in order to get inflation down. But since the economy has not responded to rate hikes in ways that would normally be expected, have you changed your views on that at all—on how necessary or inevitable that pain would be, say, for the labor market or overall growth?
|
RACHEL SIEGEL
|
[
{
"content": "Hi Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. You’ve spoken before about the pain that would likely be coming for the economy in order to get inflation down. But since the economy has not responded to rate hikes in ways that would normally be expected, have you changed your views on that at all—on how necessary or inevitable that pain would be, say, for the labor market or overall growth?",
"role": "user"
},
{
"content": "Well, I think everyone has been very gratified to see that we’ve been able to achieve, you know, pretty significant progress on inflation without seeing the increase in unemployment that has been very typical of rate hiking cycles like this one. So that’s, that’s a historically unusual and very welcome result. And the same is true of growth. You know, we’ve been saying that we need to see below-potential growth. And growth has been strong, but yet we’re still seeing this. I think I still believe, and my colleagues for the most part I think still believe, that is likely to be true. It is still likely to be true—not a certainty—but likely that we will need to see some slower growth and some softening in the labor market—in labor market conditions to get, you know, to fully restore price stability. So—but it’s only a good thing that we haven’t seen it, and I think we know why. You know, since, since we lifted off, we, we have understood that there are really two processes at work here. One of them—one of which is the unwinding of the distortions to both supply and demand that arose from the pandemic and the response to the pandemic. And the other is, is, you know, restrictive monetary policy, which is moderating demand and giving the supply side time to recover—time and space to recover. So you see those two forces now working together to bring down inflation. But it’s that first one can bring down inflation without the need for higher unemployment or slower growth, it’s just—it’s supply—you know, supply-side improvements like shortages and bottlenecks and that thing going away. It’s getting, you know, a significant increase in the size of the labor market now, both from labor force participation and from immigration. That’s a big supply-side, you know, gain that is really helping the economy, and it’s part of why—part of why GDP is so high is because we’re getting that supply. So, we welcome that. But I think those things will run their course, and we’re probably still going to be left—we think, and I think—we’ll still be left with some ground to cover to get back to full price stability. And that’s where monetary policy and what we do with demand is still going to be important.",
"role": "assistant"
},
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"content": "Against that backdrop, if you’ve gotten any clarity on lags—if you have an economy that’s been so resilient to high rate increases, does that suggest to you that there isn’t necessarily this huge wave of tightening that's still coming through the pipeline and that it may have already come into effect?",
"role": "user"
},
{
"content": "You know, I continue to think it’s very hard to say. So it’s been one year at this meeting—one year ago, this was the fourth of our 75 basis points hikes. So that’s a full year since then. I think we are seeing the effects of, of all the hiking we did last year and this year—we’re seeing it. It’s very hard to know exactly what that might be. But you can, for example—an example where you wouldn’t have felt this yet is, is debt that had been termed out. But it’s going to come due and have to get rolled over next year or the year after. So—and there are little things like that where the effects have just taken time to get into the economy. So I don’t—I think we have to make monetary policy under great uncertainty about how long the lags are. I think trying to make a clear—get a clear answer and say, “I’m just going to assume this is really not a good way to do it.” And this is one of the reasons why we have slowed the process down this year, was to give monetary policy time to get into the economy. And it takes time. We know that, and you can’t rush it. So, doing—slowing down is giving us, I think, a better sense of, of how much more we need to do, if we need to do more.",
"role": "assistant"
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] |
Michael McKee from Bloomberg Television and Radio. I’m trying to connect the dots here. One quick clarification I wanted to ask about Rachel’s question is, you said you need slower growth. You had always said before a period of lower-than-trend growth. Has that changed? And, two, it sounds to me like you’re basically saying here that the dot plot’s out the window, that every meeting is live with the possibility of a rate increase for right now—doesn’t matter about the turn of the year—and that there’s not an objective way to determine whether or not you’ve got enough tightening in the system. It’s just going to be a subjective judgment, meeting by meeting.
|
MICHAEL MCKEE
|
[
{
"content": "Michael McKee from Bloomberg Television and Radio. I’m trying to connect the dots here. One quick clarification I wanted to ask about Rachel’s question is, you said you need slower growth. You had always said before a period of lower-than-trend growth. Has that changed? And, two, it sounds to me like you’re basically saying here that the dot plot’s out the window, that every meeting is live with the possibility of a rate increase for right now—doesn’t matter about the turn of the year—and that there’s not an objective way to determine whether or not you’ve got enough tightening in the system. It’s just going to be a subjective judgment, meeting by meeting.",
"role": "user"
},
{
"content": "Well so, let’s talk about the dot plot first. So the dot plot is a picture in time of what the people in the Committee think is likely to be appropriate monetary policy in light of their own personal economic forecast. In principle, when things change, it’s not—that’s not, like, planned that anybody’s agreed to or that we will do. That’s a forecast that would change, for example—I mean, many things could change that would cause people to say, “I wouldn’t write down that dot six weeks later.” Think of the number of things that could change your mind on that. So I think the efficacy of the dot plot probably decays over the three-month period between that meeting and the next meeting. But, nonetheless, it’s out there. We don’t— we do personally update our forecast, but we don’t formally update the dot plot. So, you know, I think we try to be as transparent as we can about the way we’re thinking about these things. We’re laying out there our thinking, and, you know, as we approach the meeting, we’ll all be— my colleagues and I will be talking about how we’re processing that data. In terms of—so we’re not really changing the way—in terms of growth, what I said was “below potential.” So what you have here recently is growth that is—that is temporarily— potential growth is elevated for a year or two right now over its trend level. So the right way to think about it is, what’s potential growth this year? People think trend growth over a long period of time is a little bit less than 2 percent, or I would say just around 2 percent. But what we’ve had is, with the—with the, you know, improvement in the size of the labor force, as I mentioned, through both participation and immigration, and with the, the, you know, the better functioning in the labor market and with the—with the, you know, the unwinding of the supply chain and shortages and those kinds of things, you’re seeing actually elevated potential growth. There’s catch-up growth that can happen in potential. And that means that if you’re growing—you could be growing at 2 percent this year and still be growing below the increase in the potential output of the economy. I hope that’s clear. That’s really what’s going on. That’s why I would say it as below potential.",
"role": "assistant"
},
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"content": "But if you could clarify what I asked about the meeting by meeting, are we essentially now supposed to assume that it’s a meeting by meeting, live meeting with a chance of a rate increase that will be decided on subjective criteria rather than objective at each meeting?",
"role": "user"
},
{
"content": "I mean, I don’t know that I want to just accept anybody’s characterization, but I’ll tell you how we’re doing this. So, we’re going meeting by meeting. We’re asking ourselves whether we’ve achieved a stance of policy that is sufficiently restrictive to bring inflation down to 2 percent over time. That’s the question we’re asking. We’re looking at the full range of economic data, including financial conditions and all of those things that we look at, and then we’re, we’re—you know, we’ve, we’ve come very far with this rate hiking cycle, very far. And you saw the spread at the September meeting of—you know, it’s a relatively small spread of—people think one or two additional hikes. So you’re close to the—to the end of the cycle. That’s—that was an impression as of, I believe, as of September. It’s not a promise or a plan of the future. And so we’re going into these meetings one by one. We’re looking at the data. As I mentioned, we’re also—we’re being careful. We’re proceeding carefully because we can proceed carefully at this time. Monetary policy is restrictive. We see its effects, particularly in interest-sensitive spending and other channels. So that’s how I think about it.",
"role": "assistant"
}
] |
Thanks. Hi, Chair Powell. Neil Irwin with Axios. In light of the run-up in long-term yields we’ve seen the last several weeks, have you given any consideration to the pace of your asset runoff program? And if there were judgment that higher—that the higher- term premium was endangering the dual-mandate goals, would that be reason to think about slowing or suspending QT or should we think of that as a more technical question around reserves?
|
NEIL IRWIN
|
[
{
"content": "Thanks. Hi, Chair Powell. Neil Irwin with Axios. In light of the run-up in long-term yields we’ve seen the last several weeks, have you given any consideration to the pace of your asset runoff program? And if there were judgment that higher—that the higher- term premium was endangering the dual-mandate goals, would that be reason to think about slowing or suspending QT or should we think of that as a more technical question around reserves?",
"role": "user"
},
{
"content": "So the Committee is not considering changing the pace of balance sheet runoff. It’s not something we’re talking about or considering, and I know there are many candidate explanations for why rates have been going up. And QT is certainly on that list. It may be playing a relatively small effect, although I would say at $3.3 trillion in reserves, it’s not—I think—I think it’s hard to make a case that reserves are even close to scarce at this point. So that’s not something that we’re—that we’re looking at right now.",
"role": "assistant"
}
] |
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