FOMC Introductory Statement, March 20, 2024

good afternoon my colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people the economy has made considerable progress toward our dual mandate objectives inflation has eased substantially while the labor market has remained strong and that is very good news but inflation is still too high ongoing progress in bringing it down is not assured and the path forward is on certain we are fully committed to returning inflation to our 2% goal restoring price stability is essential to achieve a sustainably strong labor market that benefits all today the fomc decided to leave our policy interest rate unchanged and to continue to reduce our Securities Holdings our restrictive stance of monetary policy has been putting downward pressure on economic activity and inflation as labor market tightness has eased and progress on inflation has continued the risks to achieving our employment and inflation goals are moving into better balance I will have more to say about monetary policy after briefly reviewing economic developments recent indicators suggest that economic activity has been expanding at a solid Pace GDP growth in the fourth quarter of last year came in at 3.2% for 2023 as a whole GDP expanded 3.1% bolstered by strong consumer demand as well as improving Supply conditions activity in the housing sector was subdued over the past year largely reflecting High mortgage rates High interest rates also appear to have weighed on business fixed investment in our summary of economic projections committee participants generally expect GDP growth to slow from last year's Pace with a median projection of 2.1% this year and 2% over the next two years participants generally revised up their growth projections since December reflecting the strength of incoming data including data on labor Supply the labor market remains relatively tight but supply and demand conditions continue to come into better balance over the past 3 months payroll job gains averaged 265,000 jobs per month the unemployment rate has edged up but remains low at 3.9% strong job creation has been accompanied by an increase in the supply of workers reflecting increases in participation among individuals aged 25 to 54 years and a continued strong pace of immigration nominal wage growth has been easing and job vacancies have declined although the jobs to workers Gap has narrowed labor demand still exceeds the supply of available workers fomc participants expect the rebalancing in the labor market to continue easing upward pressure on inflation the median unemployment rate projection in the SCP is 4.0% at the end of this year and 4.1% at the end of next year inflation has eased notably over the past year but remains above our longer run goal of 2% estimates based on the Consumer Price Index and other data indicate that total pce Prices rose 2.5% over the 12 months ending in in February and that excluding the volatile food and energy categories core pce prices Rose 2.8% longer term inflation expectations appear to remain well anchored as reflected in a broad range of surveys of households businesses and forecasters as well as from measures from financial markets the median projection in the SCP for total pce inflation Falls to 2.4% this year 2.2% next year and 2% in 2026 the fed's monetary policy actions are Guided by our mandate to promote maximum employment and stable prices for the American people my colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power especially for those least able to meet the higher costs of Essentials like food housing and transportation we are strongly committed to returning earning inflation to our 2% objective the committee decided at today's meeting to maintain the target range for the federal funds rate at 5 and a quar to 5 a half% and to continue the process of significantly reducing our Securities Holdings as labor market tightness has eased and progress on inflation has continued the risks to achieving our employment and inflation goals are coming into better balance we believe that our policy rate is likely at its peak for this time lightning cycle and that if the economy evolves broadly as expected it will likely be appropriate to begin dialing back policy restraint at some point this year the economic Outlook is uncertain however and we remain highly attentive to inflation risks we are prepared to maintain the current target range for the federal funds rate for longer if appropriate we know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2% at the same time reducing policy restraint too late or too little could unduly weaken economic activity and employment in considering any adjustments to the target range for their federal funds rate the committee will carefully assess incoming data the evolving Outlook and the balance of risks the committee does not expect it will be appropriate to reduce the target range until it has G gained greater confidence that inflation is moving sustainably down toward 2% of course we're committed to both sides of our dual mandate and an an unexpected weakening in the labor market could also warrant a policy response we will continue to make our decisions meeting by meeting in our SCP fomc participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward if the economy evolves as projected the median participant projects that the appropriate level of the federal funds rate will be 4.6% at the end of this year 3.9% at the end of 2025 and 3.1% at the end of 2026 still above the medium medium longer term funds rate these projections are not a committee decision or plan if the economy does not evolve as projected the path for policy will adjust as appropriate to Foster our maximum employment and price stability goals turning to our balance sheet our Securities Holdings have declined by nearly 1.5 trillion doll since the committee began reducing our portfolio at this meeting we discussed issues related to slowing the pace of decline in our Securities Holdings while we did not make any decisions today on this the general sense of the committee is that it will be appropriate to slow the pace of runoff fairly soon consistent with the plans we previously issued the decision to slow the pace of runoff does not mean that our balance sheet will ultimately shrink by less than it would otherwise but rather allows us to approach that ultimate level more gradually in particular slowing the pace of runoff will help ensure a smooth transition reducing the possibility that money markets experience stress and thereby facilitating the ongoing decline in our Securities Holdings consistent with reaching the appropriate level of ample Reserves we remain committed to Bringing inflation back down to our 2% goal and to keeping our longer term inflation expectations well anchored restoring price stability is essential to set the stage for achieving maximum employment and price stability over the long term to conclude we understand that our actions affect communities families and businesses across the country everything we do is in service to our public Mission we at the FED will do everything we can to achieve our maximum employment and price stability goals thank you

Channel: Federal Reserve

Views: 8,687

Keywords: Federal Reserve, Federal Reserve Board, The Fed, FOMC, Jay Powell, Interest rates, Jerome Powell

Id: -R9qWZL5Thk

Length: 8min 31sec (511 seconds)

Published: Wed Mar 20 2024