Transcript of Chair Powell's
Press Conference May 1, 2024 CHAIR POWELL. 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 over the past year, while
the labor market has remained strong. And that's very good news. But inflation is still too high,
further progress in bringing it down is not assured, and the
path forward is uncertain. We are fully committed
to returning inflation to our 2 percent 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, though at a slower pace. Our restrictive stance of monetary policy has been
putting downward pressure on economic activity and
inflation, and the risks to achieving our employment and inflation goals have
moved toward better balance over the past year. However, in recent months,
inflation has shown a lack of further progress toward
our 2 percent objective, and we remain highly
attentive to inflation risks. I'll have more to say
about monetary policy after briefly reviewing
economic developments. Recent indicators suggest that
economic activity has continued to expand at a solid pace. Although GDP growth
moderated from 3.4 percent in the fourth quarter of
last year to 1.6 percent in the first quarter, private
domestic final purchases-which excludes inventory
investment, government spending and net exports, and usually
sends a clearer signal on underlying demand-was 3.1
percent in the first quarter, as strong as the
second half of 2023. Consumer spending
has been robust over the past several quarters, even as high interest rates
have weighed on housing and equipment investment. Improving supply conditions
have supported resilient demand and the strong performance of the U.S. economy
over the past year. The labor market remains
relatively tight, but supply and demand conditions have
come into better balance. Payroll job gains averaged
276,000 jobs per month in the first quarter, while the
unemployment rate remains low at 3.8 percent. Strong job creation over the
past year 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
eased over the past year and the jobs-to-workers
gap has narrowed, but labor demand still exceeds
the supply of available workers. Inflation has eased notably
over the past year but remains above our longer-run
goal of 2 percent. Total PCE prices
rose 2.7 percent over the 12 months
ending in March; excluding the volatile
food and energy categories, core PCE prices rose
2.8 percent. The inflation data received so far this year have
been higher than expected. Although some measures of short-term inflation
expectations have increased in recent months, 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 measures
from financial markets. 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 inflation to our 2 percent objective. The Committee decided
at today's meeting to maintain the target range for
the federal funds rate at 5¼ to 5½ percent and to
continue the process of significantly reducing
our securities holdings, though at a slower pace. Over the past year, as labor
market tightness has eased and inflation has declined, the risks to achieving
our employment and inflation goals have
moved toward better balance. The economic outlook
is uncertain, however, and we remain highly
attentive to inflation risks. We've stated that
we do not expect that it will be appropriate
to reduce the target range for the federal funds rate until we have gained
greater confidence that inflation is moving
sustainably toward 2 percent. So far this year, the
data have not given us that greater confidence. In particular, and
as I noted earlier, readings on inflation have
come in above expectations. It is likely that gaining such greater confidence
will take longer than previously expected. We are prepared to maintain
the current target range for the federal funds rate
for as long as appropriate. We're also prepared to respond to an unexpected weakening
in the labor market. We know that reducing
policy restraint too soon or too much could
result in a reversal of the progress we've
seen on inflation. 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 the federal funds rate, the Committee will carefully
assess incoming data, the evolving outlook,
and the balance of risks. Policy is well positioned
to deal with the risks and uncertainties that we face in pursuing both sides
of our dual mandate. We will continue to make
decisions meeting by meeting. Turning to our balance
sheet: The Committee decided at today's meeting to
slow the pace of decline in our securities holdings, consistent with the plans
we released previously. Specifically, the cap on Treasury redemptions
will be lowered from the current $60
billion per month to $25 billion per
month as of June 1. Consistent with the
Committee's intention to hold primarily Treasury
securities in the longer run, we're leaving the cap on agency
securities unchanged per month, and we will reinvest any
proceeds in excess of this cap in Treasury securities. With principal payments on agency securities
currently running at about $15 billion per month, total portfolio runoff
will amount to roughly $40 billion
per month. 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 its 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
that are consistent with reaching the appropriate
level of ample reserves. We remain committed to
bringing inflation back down to our 2 percent goal and to keeping longer-term
inflation expectations well anchored. Restoring price stability is
essential to set the stage for achieving maximum employment and stable prices
over the longer run. 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. I look forward to
your questions. MICHELLE SMITH. Howard. HOWARD SCHNEIDER. Thank you. Howard Schneider with Reuters. A question and follow-up
if I could, do you consider the current
policy rate still-are you confident that it's
sufficiently restrictive to get inflation
back to 2 percent? CHAIR POWELL. So I do think the evidence
shows, you know, pretty clearly that policy is restrictive
and is weighing on demand, and there are a few places
I would point to for that. You can start with
the labor market. So demand is still strong-the
demand side of the labor market, in particular-but it's cooled
from its extremely high level of a couple years ago, and
you see that in job openings. You saw it-more evidence
of that today in the JOLTS report,
as you'll know. It's still higher
than pre-pandemic. But it has been coming down both in the Indeed report
and the JOLTS report. That's, that's demand cooling. The same is true of
quits and hiring rates, which have essentially
normalized. I also look at the-we
look at surveys of workers and-pardon me-surveys
of workers and businesses, and [they] ask workers,
"Are jobs plentiful?" and ask businesses,
"Are workers plentiful? Is it easy to find workers?" And you've seen that the
answers to those have come back down to pre-pandemic levels. You also see in
interest-sensitive spending, like housing and
investment-you also see that higher interest rates are
weighing on those activities. So I do think it's clear that,
that policy is restrictive. HOWARD SCHNEIDER. Sufficiently restrictive,
I guess. CHAIR POWELL. So I would say that we
believe it is restrictive, and we believe [that]
over time it will be sufficiently restrictive. That will be a question that, that the data will
have to answer. HOWARD SCHNEIDER. So as a follow-up, if inflation
continues running roughly sideways as it has been, the job
market stays reasonably strong, unemployment low, and
expectations are anchored and maintained, would you
disrupt that for- CHAIR POWELL. Expectations are not anchored? HOWARD SCHNEIDER. Are anchored. CHAIR POWELL. Are anchored. HOWARD SCHNEIDER. Stable, roughly. Would you disrupt that for
the last half point on PCE? CHAIR POWELL. You know, I don't want to get
into complicated hypotheticals. But I would say that,
you know, we're committed to retaining our current
restrictive stance of policy for as long as is appropriate. And we'll do that. MICHELLE SMITH. Jeanna. JEANNA SMIALEK. Thanks for taking our
questions, Chair Powell. I wonder-you know, obviously
Michelle Bowman has been saying that there is a risk that rates
may need to increase further, although it's not
her baseline outlook. I wonder if you see that as
a risk as well, and, if so, what change in conditions would
merit considering raising rates at this point? CHAIR POWELL. So I think it's unlikely that the next policy
rate move will be a hike. I'd say it's unlikely. You know, our policy focus is
really what I just mentioned, which is-which is how long
to keep policy restrictive. You ask, what would it take? You know, I think we'd need
to see persuasive evidence that our policy stance is
not sufficiently restrictive to bring inflation sustainably
down to 2 percent over time. That's not-that's not what
we think we're seeing, as I-as I mentioned,
but that's-something like that is what it would take. We'd look at the totality of the
data in answer to that question. That would include inflation,
inflation expectations, and all the other data too. JEANNA SMIALEK. Would that be-would that be a
reacceleration in inflation? CHAIR POWELL. Well, I think, again, the
test-what I'm saying is, if we were to come
to that conclusion that policy weren't tight
enough to achieve that, so it would be the totality of all the things
we'd be looking at. It could be expectations. It could be a combination
of things. But, if we-if we reach that conclusion-and we don't
see evidence supporting that conclusion-that's
what it would take I think for us to take that step. MICHELLE SMITH. Chris. CHRISTOPHER RUGABER. Thank you, Chris Rugaber
at Associated Press. You didn't mention the idea
that rates are at a peak for the cycle and
didn't mention the idea that it might be appropriate
to cut rates later this year as you have in previous
press conferences. So has the Fed sort of
dropped its easing bias? Where are you standing on that? CHAIR POWELL. So, on-let me address cuts. So, obviously, our
decisions that we make on our policy rate are going
to depend on the incoming data, how the outlook is evolving, and
the balance of risks, as always. And we'll look at the
totality of the data. So I think, and we think,
that policy is well positioned to address different paths
that the economy might take. And we've said that we don't
think it would be appropriate to dial back our
restrictive policy stance until we've gained
greater confidence that inflation is moving down
sustainably toward 2 percent. So, for example, let me take
a path: If we did have a path where inflation proves more
persistent than expected and where the labor
market remains strong, but inflation is moving sideways and we're not gaining
greater confidence, well, that would be a case in
which it could be appropriate to hold off on rate cuts. I think there's also other paths
that the economy could take, which, which would cause us
to want to consider rate cuts. And those would be-two
of those paths would be that we do gain greater
confidence, as we've said, that inflation is moving
sustainably down to 2 percent, and another path could be, you
know, an unexpected weakening in the labor market,
for example. So those are paths in which
you could see us cutting rates. So I think it really
will depend on the data. In terms of peak rate,
you know, I think, really, it's the same question. I, I think the data will have
to answer that question for us. CHRISTOPHER RUGABER. And could you just follow-on the
path where you might not cut, is that-you mentioned that would
be inflation persistent-I mean, is inflation-would that
be the key data in making that decision, or could you
expand a bit more on that? Thank you. CHAIR POWELL. Again, it's, it's-we've set
ourselves a test that we-for us to begin to reduce
policy restriction, we'd want to be confident that
inflation is moving-you know, moving sustainably down to
2 percent, and, for sure, one of the things
we'd be looking at is the performance
of inflation. We'd also be looking at
inflation expectations. We'd be looking at
the whole story. But clearly, incoming,
incoming inflation data would be at the very heart
of that decision. CHRISTOPHER RUGABER. Thank you. MICHELLE SMITH. Nick. NICK TIMIRAOS. Nick Timiraos of the
Wall Street Journal. Chair Powell, to what
extent has the easing in financial conditions
since November contributed to the reacceleration in growth,
and do you now expect a period of sustained tighter financial
conditions will be needed to resume the sort of disinflation the
economy saw last year? CHAIR POWELL. So I think it's hard
to know that. I think we'll be able
to look back, you know, from down the road and look
back and understand it better. You know, if you look
at-let's look at growth. Really, what we've
seen so far this year in the first quarter is growth
coming in about consistent with where it was last year. I know GDP came in lower, but you don't see an
acceleration in growth. I mean, the thought would be that financial conditions
loosened in, in, December, and that caused an
uptick in activity, and that caused inflation. Presumably, that's what we're
tightening in the labor market. You don't really
see that happening. What you see is economic
activity at a level that's roughly
the same as, as last year. So, you know, what's
causing this inflation? You know, we'll, we'll have a
better sense of that over time. I don't know that there's
an obvious connection there, though, with easing of
financial conditions. In terms of tightening,
you're, you're right. Rates are certainly higher now
and have been for some time than they were before
the December meeting. And they're higher, and that's
tighter financial conditions. And, you know, that's
appropriate, given what inflation has
done in the first quarter. NICK TIMIRAOS. You've said in the past that stronger growth wouldn't
necessarily preclude rate cuts. I wonder, would continued
strength in the labor market
change your view about the appropriate stance
of policy if it was accompanied by signs the wage growth
was reaccelerating? CHAIR POWELL. So I just want to be careful that we don't target wage
growth or the labor market. And remember what we saw last
year: very strong growth, a really tight labor market, and a historically fast
decline in inflation. So-and that's because we
know there are two forces at work here. There's the unwinding of the pandemic-related
supply-side distortions and demand-side distortions, and
there's also monetary policy, you know, restrictive
monetary policy. So I wouldn't rule
out that something like that can continue. You know, I wouldn't
give up, at this point, on further things happening on
the supply side either because, you know, we do see that
companies still report that there are supply-side
issues that they're facing. And also, even when the
supply-side issues are solved, it should take some time for
that to affect economic activity and ultimately inflation. So there are still those things. So I don't like to say that
either strong-either growth or, or a strong labor
market, in and of itself, would automatically create
problems on inflation, because, of course, it didn't
do that last year. You ask about wages. We also don't-we
don't target wages. We target price inflation. It is one of the inputs. The point with wages is, of
course, we, like everyone else, like to see high
wages, but we also want to see them not eaten
up by high inflation. And that's really what
we're trying to do, is to cool the economy and
work with what's happening on the supply side to
bring-to bring the economy back to 2 percent inflation. Part of that will probably
be having wage increases move down incrementally toward levels
that are more sustainable. MICHELLE SMITH. Rachel. RACHEL SIEGEL. Hi, Chair Powell. Rachel Siegel from
the Washington Post. Thanks for taking our questions. You talked about needing
time to gain more confidence that inflation is sustainably
moving back down to 2 percent. It's May now. Do you have time this
year to cut three times, just given the calendar? CHAIR POWELL. Yeah. I'm not really
thinking of it that way. You know, the-what we
said is that we need to be more confident, and
we've said-my colleagues and I today said that
we didn't see progress in the first-in the
first quarter. And I've said that it
appears, then, that it's going to take longer for us to reach
that point of confidence. So I don't know how
long it'll take. You know, I can just say that
when we get that confidence, then rate cuts will be in scope. And I don't know exactly
when that will be. RACHEL SIEGEL. And, with hindsight, are there
any signs that you can look back on now, looking at the reports
from January or February or March, that suggested
something more worrying than just expected bumpiness? CHAIR POWELL. I-you know, not really. You know, what, what-so I
thought it was appropriate to reserve judgment until, until
we had the full quarter's data, until we saw the March data. And so take a step back. What do we now see
in the first quarter? We see strong economic activity, we see a strong labor
market, and we see inflation. We see three inflation
readings, and so I think you're at a point there where you
should take some signal. We don't like to react to
one or two months' data, but this is a full quarter. And I think it's appropriate
to take signal now, and we are taking signal. And the signal that we're
taking is that it's likely to take longer for us to
gain confidence that we are on a sustainable path down
to 2 percent inflation. That's the signal
that we're taking now. Yeah. MICHELLE SMITH. Steve. STEVE LIESMAN. Mr. Chair, if I could-Steve
Liesman, CNBC. If I could follow up on that:
What particular areas were sort of temporary or blips in the inflation data
in the first quarter? What's the dynamic by which
you expect them to work out in the coming
months and quarters? CHAIR POWELL. Yeah. So we will-you know, we will put the thing-we
have put the thing under a microscope. I will say, nothing is
going to come out of that that's going
to change the view. I think that, in fact,
we didn't gain confidence and that it's going
to take longer to get that confidence-but-confidence. I just think-you know the story. What's happened since December
is you've seen higher goods inflation than expected, and you've seen higher
nonhousing services inflation than expected. And those two are
working together to, to sort of be higher
than we had thought. And there are stories behind how
that happened, and, you know, we-I think-I think my
expectation is that we will, over the course of this year,
see inflation move back down. That's, that's my forecast. I think my confidence in
that is lower than it was because of the data
that we've seen. So, you know, we're
looking at those things. We also continue to expect,
and I continue to expect, that housing services inflation,
given where market rents are, those will show up in measured
housing services inflation over time. We believe that it will. It just-it looks like the
lag-that there are substantial lags between when, you know,
lower market rates turned up and-for new tenants and when
it shows up for existing tenants or for in-housing services. STEVE LIESMAN. If I could just follow up: Is
there a bit of a contradiction in the idea that you are
reducing quantitative tightening, which is
sort of an easing, while you're holding rates
steady at a restrictive rate to try to slow and cool
the economy and inflation? Thank you. CHAIR POWELL. I wouldn't say that. No. I mean, the active
tool of monetary policy is, of course, the interest rates. And this is-this is a long-a
plan we've long had in place to slow, really not in order to,
you know, provide accommodation to the economy but to-or to be
less restrictive to the economy. It really is to ensure
that the process of shrinking the balance
sheet down to where we want to get it is a smooth
one and doesn't wind up in-with financial market
turmoil the way it did the last-the last time we did this and the only other time
we've ever done this. MICHELLE SMITH. Craig. CRAIG TORRES. Craig Torres from Bloomberg. Two questions. First, a simple one. Given the run of data since
March, has the probability in your mind of no cuts
this year increased or stayed the same? That's the first question. Second question. Chair Powell, you
joined the Board in 2012, and I'm sure you
remember, as I do, what the jobless recovery was
like: lawyers, accountants, all kinds of highly qualified
people who couldn't get jobs. And given your history there,
I wonder if there's an argument for being more patient
with inflation here. We have strong productivity
growth that's helping wages grow up-go up. We have good employment. And so it seems to me there's a
lot of hysteria about inflation. I agree-you know, nobody likes
it, but is there an argument for being patient and working
with the economic cycle to get it down over time? Thank you. CHAIR POWELL. So, on your first question, I don't have a probability
estimate for you. But all I can say
is that, you know, we've said that we didn't think
it would be appropriate to cut until we were more confident that inflation was moving
sustainably down to 2 percent. We didn't get our confidence, in that [it] didn't increase
in the first quarter. And, in fact, what really
happened was we came to the view that it will take longer
to get that confidence. And I think there are-you know, I think it's-the economy
has been very hard for forecasters broadly to
predict-to predict its path. But there are paths
to, to not cutting, and there are paths to cutting. It's really going to
depend on the data. In terms of the employment
mandate, to your point, if you go back a
couple of years, our, our sort of framework document
says that, when you look at the two mandate goals, and
if one of them is further away from goal than the other,
then you focus on that one. It actually-it's the time to get
back there times the, you know, times how far it
is from the goal. And that was clearly inflation. So our focus was very
much on inflation. As-and this is what we
referred to in the statement. As inflation has come down,
now to below 3 percent on a-on a 12-month basis, it's become-we're now
focusing [on] the other goal. The employment goal now
comes back into focus. And so we are focusing on it. And, and that's how
we think about that. MICHELLE SMITH. Claire. CLAIRE JONES. Claire Jones, Financial Times. Thanks a lot for the opportunity
to ask the questions. Just to go back to the answer
before the previous one, it seemed to suggest that
you think the likeliest path of inflation is one that's going
to allow you to have a situation where rates are lower
at the end of the year than they are right now. It'd be good if you could
just confirm whether or not that's a correct reading. And the Q1 GDP print
has led to some-some to start mentioning
the term "stagflation" with respect to the
U.S. economy. Do you or anyone else on the
FOMC think this is now a risk? Thank you. CHAIR POWELL. Yeah. I'm not dealing
really in likelihoods. I think there are-there are
paths that the economy can take that would involve cuts and
there are paths that wouldn't. And I don't have great
confidence in which of those paths-I think I would
say my personal forecast is that we will begin to
see further progress on inflation this year. I don't know that it will
be enough, sufficient. I don't know that it won't. I think we're going to have to
let the data lead us on that. In terms of your question-your
second question was stagflation. I guess I would say I was around
for stagflation, and it was, you know, 10 percent-10
percent unemployment. It was high single-digits
inflation. Right now we have-and very slow
growth-so right now we have 3 percent growth, which
is, you know, pretty solid growth I
would say, by any measure, and we have inflation
running under 3 percent. So I don't-I don't
really understand where that's coming from. And, in addition, I would
say most forecasters, including our forecasting,
was that last year's level of growth was very high-3.4
percent in, I guess, the fourth quarter, you
know-and probably not going to be sustained and
would come down. But that would be-that
would be our forecast. That wouldn't be stagflation. That would still be to a
very healthy level of growth. And, of course, with
inflation, you know, our-we will return
inflation to 2 percent, and that won't be-so
I don't see the "stag" or the "flation," actually. [Laughter] MICHELLE SMITH. Michael McKee. MICHAEL MCKEE. Michael McKee from Bloomberg
Radio and Television. The Vice Chair of the FOMC
said recently that he's willing to consider the idea that
potential growth has moved up. And, of course, he's "Mr.
Potential Growth/r*." Do you share that view,
and would that imply that maybe policy
isn't tight enough? CHAIR POWELL. So I think I would take that
question this way: We saw a year of very high productivity growth
in 2023, and we saw a year of, I think, negative
productivity growth in 2022. So I think it's hard
to draw from the data. I mean, the question is, will productivity
run-there are two questions. One is: Will productivity
run persistently above its longer-run trend? I don't think we know that. In terms of potential
output, though, that's a separate question. We've had a-what amounts to
a, a significant increase in the potential output of the economy that's
not about productivity. It was about having more labor,
frankly, both through-in 2022, both through participation
and also through immigration. So we're very much-like
other forecasters and economists-getting our
arms around what that means for potential output this year and next year-and last
year for that matter, too. So I think-in that case, I think
you really do have a significant increase in potential output, but you've also got-so
you've got more supply. But those people also
come in, they work, they have jobs, they spend. So you've also got demand. So it-there may be-it may
be that you get more supply than you get demand at the
beginning, but, ultimately, it should be neither
inflationary nor disinflationary over, over a longer period. MICHAEL MCKEE. You said earlier
that, at this point, you're not really
considering rate increases. If growth is higher, but you're
not considering rate increases, does that imply that
you're more worried about causing the economy to
slow too much than you are about inflation taking
off again? CHAIR POWELL. No. I think we, we believe our
policy stance is in a good place and is appropriate to
the current situation. We believe it's restrictive,
and, you know, we-our evidence for that, I went over earlier. You see it in the labor market. You see it in
inflation-sensitive spending, where demand has
clearly come down a lot over the past few years. And that's, that's more
from monetary policy, whereas the supply
side of things that are happening are
more on the supply side. So that's how I would
think about it. MICHELLE SMITH. Edward. EDWARD LAWRENCE. Thank you, Mr. Chairman. Edward Lawrence from
Fox Business. So GDP growth is
about 2 percent. Inflation-[Un]employment
is about 4 percent. It feels a lot like
a steady state, and we have 3 percent inflation. So if the data remains the
same that you're seeing, and I know you said you don't
see a rate hike, but it stands to reason that you would need
a rate hike to get from 3 to 2 percent inflation. So was there any
discussion about a rate hike in today's meeting, and,
you know, are you satisfied with 3 percent inflation
for the rest of the year? CHAIR POWELL. Well, of course we're
not satisfied with 3 percent inflation. "Three percent" can't be in
a sentence with "satisfied." [Laughter] So we will return
inflation to 2 percent over time but over time. And we think our policy stance
is, is appropriate to do that. So if we were to conclude that policy is not
sufficiently restrictive to bring inflation
sustainably down to 2 percent, then that would be what
it would take for us to want to increase rates. We don't see that. We don't see evidence for that. So that's where we are. EDWARD LAWRENCE. Was there discussion
about a rate hike at all? CHAIR POWELL. So the policy focus has been
on-has really been on what to do about, about holding
the current-the current level of restriction. That's really-that's
part of the policy. That's where the policy
discussion was in the meeting. EDWARD LAWRENCE. I wanted to follow
[up] on the 3 percent. Is there a time frame
of persistent inflation that would trigger a rate hike? CHAIR POWELL. There isn't any rule. You can't look to a rule. You know, these are-these are
going to be judgment calls. You know, clearly restrictive
monetary policy needs more time to do its job. That, that is pretty clear,
based on what we're seeing. How long that will take and how
patient we should be is going to depend on the totality of the
data, how the outlook evolves. MICHELLE SMITH. Victoria. VICTORIA GUIDA. Hi. Victoria Guida
with Politico. You've talked about
your commitment to being apolitical
and nonpartisan. And I was just wondering, given
that it's an election year, is the bar for rate changes
higher close to an election? And, similarly, is there a
significant economic difference between, you know,
starting to cut in, say, September versus December? CHAIR POWELL. So we're, we're always going to
do what we think the right thing for the economy is when we
come to that consensus view that it's the right thing
to do for the economy. That's our record. That's what we do. We're not looking
at anything else. You know, it's hard enough to
get the economics right here. These are difficult things,
and if, if we were to take on a whole, another,
set of factors and use that as a new filter, it would
reduce the likelihood we'd actually get the
economics right. So that's how we think
about it around here. And, you know, we're
at peace over it. We know that we'll do what
we think is the right thing, when we think it's
the right thing. And we'll all do that. And that's, that's how
everybody around here thinks. So I can't say it enough, that we just don't-we just
don't go down that road. If you go down that
road, where do you stop? And, and so we're
not on that road. We're on the road where we're
serving all the American people and making our decisions
based on the data and how those data
affect the outlook and the balance of risks. VICTORIA GUIDA. And then, is there a significant
difference between, you know, whether you start in, say,
September versus December? CHAIR POWELL. There's- VICTORIA GUIDA. An economic difference. CHAIR POWELL. -a significant difference
between an institution that takes into account
all sorts of political events
and one that doesn't. That's where the significant
difference is, and, you know, we're-we just don't do that. I mean, you can go back
and read the transcripts for every-this is
my fourth election, fourth presidential
election here. Read all the transcripts,
and see if anybody mentions, in any way, the pending
election. It just isn't part
of our thinking. It's not what we're hired to do. If we start down
that road, again, I don't know how you stop. So. MICHELLE SMITH. Simon. SIMON RABINOVITCH. Thank you, Chair Powell. Question about the labor
market-you've mentioned a few times that the labor
market is normalizing. Certainly, today's JOLTS data
suggested that things are kind of getting back to
pre-pandemic levels. One thing that hasn't
normalized is wage growth, which is still quite
a bit stronger than before the pandemic. I wonder if you can
share your analysis of, of why that's happening. Is it a lagging indicator, or
is something else going on? CHAIR POWELL. So I think if you go back to where wages peaked-wage
increases peaked a couple, three years ago-essentially
all wage measures have come down substantially
[when compared] to that. But they are not, not down to where they were before
the pandemic. They're still roughly a
percentage point higher. And we've seen pretty consistent
progress but not uniformly. And you'll note the ECI reading
from Tuesday was-it was expected to be-to have come down, and,
essentially, it was flat year over year, you know,
I think roughly. So yeah, I mean, it's-that
part of it is bumpy. And, again, we don't target
wage increases, but, you know, in the longer run, if you have-if you have wage
increases running higher than productivity would
warrant, then, you know, there will be inflationary
pressures. Employers will raise prices
over time if that's the case. So we've seen progress. It has been inconsistent, but we have seen a
substantial decline overall. But we have a ways
to go on that. MICHELLE SMITH. Scott. Nancy. I'm sorry. NANCY MARSHALL-GENZER. Hey, Chair Powell. Nancy Marshall-Genzer
from Marketplace. You mentioned consumers, and
consumers are feeling the weight of interest rates right now. Mortgage rates are
up, as are rates for car loans, credit cards. People looking to borrow
are very discouraged. That's reflected in their
views on the economy. What would you say to them? CHAIR POWELL. Well, the thing that
hurts everybody, and particularly people in the lower-income
brackets, is inflation. If you're a person who's
living paycheck to paycheck, and suddenly all the things you
buy-the fundamentals of life-go up in price, you, you are
in trouble right away. And so, with those people
in mind, in particular, what we're doing is,
we're using our tools to bring down inflation. It will take some time,
but we will succeed. And we will bring inflation
back down to 2 percent, and then people won't have
to worry about it again. That's what we're doing, and we know that it's
painful and inconvenient. But the dividends will be
paid and will be very large. And, and everyone will
share in those dividends, and we've made quite
a lot of progress if you can think about it. I think core-I think
headline-core PCE [inflation] peaked at 5.8 [percent]. Now it's at-anyway,
headline peaked at 7.1. Now it's at 2.7. Don't want to get that wrong. NANCY MARSHALL-GENZER. No, you don't. Quick follow-up-are current
interest rates really doing that much, though, to
fight inflation right now for those consumers? CHAIR POWELL. Yes. I mean, I think-I think that restrictive monetary policy
is doing what it's supposed to do, and it's-but it's
also, in this case unusually, working alongside and with the
healing of the supply side. This, this-what was different
this time was that a big part of the source of the inflation and the reason why we're
having this conversation is that we had this supply-side
kind of collapse, with shortages and bottlenecks and
all that kind of thing. And so-and this was to do with
the shutting down and reopening of the economy and other things
that, that really raised demand. So, many factors did that. So I think now you see those
two things working together, the reversal of those supply
and demand distortions from the pandemic and
the response to it, along with restrictive
monetary policy. Those two things are working
to bring down inflation, and we've made a
lot of progress. Let's remember how
far we've come. And we have a ways to go. We've got work left to
do, but we're not looking at the very high inflation rates that we were seeing
two years ago. MICHELLE SMITH. Courtenay. COURTENAY BROWN. Courtenay Brown from Axios. Thanks for taking our
questions, Chair Powell. I wanted to follow up on something you mentioned
earlier on housing inflation. There's kind of been this
long-awaited disinflation in shelter that still
hasn't arrived. So I guess two questions, how do
you explain the substantial lags between some of the
private-sector data we're seeing and the government data,
and how confident are you that rents will be helpful on the inflation front
in the coming months? CHAIR POWELL. So, essentially, there
are-there are a number of places in the economy where there
are just lag structures built into the inflation process,
and housing is one of them. So when you have-when, when someone goes
to-a new person goes to rent an apartment,
that's called market rent, and you can see market rents
are barely going up at all. The inflation in those
has been very low. But it takes-before that,
they were incredibly high. They sort of led
the, the high part. So what happens is, those market
rents take years, actually, to get all the way
into rents for tenants who are rolling over
their leases. Landlords don't tend to
charge as much of an increase to a rollover tenant,
for whatever reason. And what that does is
it builds up a sort of an unrealized
portion of increases when there have been
big increases. And what happens is, you
know-it's complicated, but the story is it just takes
some time for that to get in. Now I am confident that, as
long as market rents remain low, this is going to show up
in measured inflation, assuming that market
rents do remain low. How-what will be the
exact timing of it? I think we've learned
that the lags are longer. We now think significantly
longer than we thought at the beginning, and so
confident that it will come but not so confident
in the timing of it. But, yes, I expect that,
that this will happen. COURTENAY BROWN. Thanks. MICHELLE SMITH. Nick Jasinski. NICHOLAS JASINSKI. Thank you, Chair Powell,
for taking the questions. This is Nicholas Jasinski
from Barron's Magazine. It seems that over the past
three or four years, economies and central banks in
developed markets, at least, have been on more or
less the same trajectory: easing during the
pandemic, fighting inflation with restrictive
policy on the way out. It feels like that may be
ending in 2024 based on some of the economic data from
Europe and the U.S. and Japan and statements from those
central banks as well. So my question is, what,
what considerations or risks does a period of
more divergent global economic trajectories and central bank
policies present for the FOMC? CHAIR POWELL. So that-you're right. I think that, that
may happen, and, you know that we all serve
domestic mandates, right? So I think the difference
between the United States and other countries that are
now considering rate cuts is that they're just not having
the kind of growth we're having. They have-their inflation is
performing about like ours or maybe a little better, but they're not experiencing
the kind of growth we're experiencing. So we actually have the
luxury of having strong growth and a strong labor market,
very low unemployment, high job creation, and all of
that, and we can be patient. And we will-we'll be
careful and cautious as we approach the
decision to cut rates, whereas I think other
jurisdictions may go before that. In terms of the implications,
you know, I think obviously
markets see it coming. It's priced in now. And so I think the markets
and economies can adapt to it. And I think, you know, we
haven't seen-in addition, for the emerging
market economies, we haven't seen the
kind of turmoil that was more frequent 20
years ago, 30 years ago. And that's, I think, partly because emerging
market countries, many of them have much better
monetary policy frameworks, much more credibility
on inflation. And so they're navigating
this pretty well this time. MICHELLE SMITH. Jennifer. JENNIFER SCHONBERGER. Thank you, Chair Powell. Jennifer Schonberger
with Yahoo Finance. You sort of backed
away from the notion that the economy would
need to encounter pain for inflation to come back down. But, given the sticky inflation
data in the first quarter, can disinflation still happen
along a relatively painless path for the economy, or is some
softening in the labor market and the economy likely needed
to bring inflation back down? CHAIR POWELL. So you're right. I think we thought, and most
people thought, there would have to be probably significant
dislocations somewhere in the economy, perhaps
the labor market, to get inflation all the way down from the very
high levels it was at at the beginning
of this episode. That didn't happen. That's a tremendous result. We're very, of course,
gratified and pleased that that hasn't happened. And, if you look at the dynamics
that enabled that, it really was that this, the-that so much of
the gain was from the unwinding of things that weren't to
do with monetary policy but the unwinding of the
distortions to the economy, you know, supply
problems-supply-side problems and also some, some
demand issues as well. The unwinding of those really
helped inflation come down. Now, as I've said, I'm
not giving up on that. So I think-I think
it is possible that, that those forces
will still work to help us bring inflation down. We can't-we can't be guaranteed
that that's true, though. And so we're-you know, we're
trying to use our tools in a way that keeps the labor market
strong, and the economy strong, but also helps bring
inflation back down to 2 percent sustainably. We will bring inflation down
to 2 percent sustainably. We hope we can do it
without, you know, without significant dislocations in the labor market
or elsewhere. JENNIFER SCHONBERGER. And speaking of dislocations
in the labor market: In terms of cutting, you
said, if there were weakness in the job market, that could
be a reason to cut rates. So if the unemployment rate
were to tick above 4 percent but inflation not back down
to your 2 percent target, how would you look at that? Would the unemployment
rate popping back above 4 percent catch
your attention? CHAIR POWELL. You know, I said "an unexpected
weakening" is what I-the way I characterized it. So, you know-and
I'm not going to try to define exactly
what I mean by that. But, you know, it would be-it
would have to be meaningful and get our attention
and lead us to think that the labor market was really
significantly weakening for us to want to react to it. A couple of tenths in the unemployment rate would
be-would probably not do that. But a broader-it would
be a broader thing that would-that would suggest that it would be appropriate
to consider cutting. I think whether you decide to
cut will depend on all the facts and circumstances,
not just that one. MICHELLE SMITH. Kyle. KYLE CAMPBELL. Chair Powell, thanks
for taking the question. Kyle Campbell with
American Banker. You've said that broad and
material changes are needed for the Basel III Endgame
proposal, and you've mentioned that a re-proposal is
something that's on the table. As you've had more
time to sort of sit with the public commentary,
process that, and understand the
options available to you, do you have a better sense of whether a re-proposal
will be necessary, and do you have a timeline
in mind for when, you know, some sort of movement
will be made on that front-either
a re-proposal or a move to finalize? CHAIR POWELL. So let me-let me start by saying
that the Fed is committed to, you know, completing
this process and carrying out Basel III Endgame in a
way that's faithful to Basel and also comparable to what
the other large comparable jurisdictions are doing. We haven't made any
decisions on, on policy or on process at all. Nothing. Nothing. No decisions have been made. I'll say again, though,
if we conclude that re-proposal is appropriate, we won't hesitate
to insist on that. KYLE CAMPBELL. And then do you need to resolve
issues with the capital proposal in order to advance other
parts of the regulatory agenda, or do you expect to
continue to make progress on those other agenda items? Thank you. CHAIR POWELL. You know, there's no
mechanical rule in place there. But I would say that the, you
know, the Basel III process is by far the most important
thing and really is, I think, occupying us at this
time in terms of what's, what's-what we're
moving ahead with. MICHELLE SMITH. Let's go to Mark for
the last question. MARK HAMRICK. Thank you. Mark Hamrick with Bankrate. Mr. Chairman, what can you
tell us about the approach that you take with your
role in the sense of trying to achieve consensus, which
you recently identified as a priority, while
allowing for a range of views or even dissent? We don't see many
dissenting votes in the official statements, even when more spirited
discussions are noted in the minutes after the fact. How do you avoid groupthink and avoid a higher risk
of a policy mistake? Thank you. CHAIR POWELL. So I think if you listen
to, and you all do, listen to my 18 colleagues
on the FOMC, you'll see that we do
not lack for a diversity of voices and perspectives. We really don't. And it's one of the
great aspects of the Federal Reserve System. We have 12 Reserve
Banks around the country where they have their own
economic staff, not the people who work here at the Board. There are different people. You know, and so each, each
Reserve Bank has its own culture around monetary policy
and its own approach and that kind of thing. It guarantees you a
diversity of perspectives. So I think that the
perspectives are very diverse. But-and, in terms of-in
terms of dissents, you know, we have dissents. And, you know, a thoughtful
dissent is a good thing, if someone really makes you
think, that kind of thing. But all I can say from my
standpoint is I try-I listen carefully to people. I try to incorporate their
thinking or do everything I can to incorporate their thinking
into what we're doing. And I think many people, if they
feel that's happening, you know, that for most people most of
the time, that'll be enough. And-but I'm not-I mean, it's,
it's not, you know, frowned upon or illegal or against the
rules or anything like that. It just is the way
things come out. And I mean, I think we
have a very diverse group of rounded people-frankly,
more diverse than it used to be in many dimensions, more
diverse from the obvious gender and demographic ways, but
also we have more people who are not Ph.D. economists. So we have people
from business and law and academia and
things like that. So I think we actually
do have quite a good diverse perspective. I think all of us read
these stories about the lack of diversity, and we
look around the room and say, "I don't understand. I really don't understand
what they're talking about." So-but I get the
question, though. Thank you very much.
