US Federal Reserve leaves key rate unchanged, signals future hikes | FULL

we understand the hardship that high inflation is causing and we remain strongly committed to Bringing inflation back down to our two percent goal price stability is the responsibility of the Federal Reserve without price stability the economy doesn't work for anyone in particular without price stability we will not achieve a sustained period of strong labor market conditions that benefit all since early last year the fomc has significantly tightened The Stance of monetary policy we have raised our policy interest rate by five percentage points and we've continued to reduce our Securities Holdings at a Brisk pace we've covered a lot of ground and the full effects of our tightening have yet to be felt in light of how far we've come in tightening policy the uncertain lags with which monetary policy affects the economy and potential headwinds from credit tightening today we decided to leave our policy interest rate unchanged and to continue to reduce our Securities Holdings looking ahead nearly all committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to two percent over time and I will have more to say about monetary policy after briefly reviewing economic developments the U.S economy slowed significantly last year and recent indicators suggest that economic activity has continued to expand at a modest pace although growth in consumer spending has picked up this year activity in the housing sector remains weak largely reflecting higher mortgage rates higher interest rates and slower output growth also appear to be weighing on business fixed investment committee participants generally expect to subdued growth to continue in our summary of economic projections the median projection has real GDP growth at 1.0 percent this year and 1.1 percent next year well below the median estimate of the longer run normal growth rate the labor market remains very tight over the past three months payroll job gains averaged a robust 283 000 jobs per month the unemployment rate moved up but remained low in May at 3.7 percent there are some signs that supply and demand in the labor market are coming into better balance the labor force participation rate has moved up in recent months particularly for individuals aged 25 to 54 years nominal wage growth has shown signs of easing and job vacancies have declined so far this year while the jobs to workers Gap has declined labor demand still substantially exceeds the supply of available workers fomc participants expect supply and demand conditions in the labor market to come into better balance over time easing upward pressures on inflation the median unemployment rate projection in the SCP Rises to 4.1 percent at the end of this year and 4.5 percent at the end of next year inflation remains well above our longer run two percent goal over the 12 months ending in April total pce process Prices rose 4.4 percent excluding the volatile food and energy categories core piece core pce prices Rose 4.7 percent in May the 12-month change in the Consumer Price Index came in at four percent and the change in the core core CPI was 5.3 percent inflation has moderated somewhat since the middle of last year nonetheless inflation pressures continue to run High and the process of getting inflation back down to two percent has a long way to go the median projection in the SCP for total pce inflation is 3.2 percent this year 2.5 percent next year and 2.1 percent in 2025. core pce inflation which excludes volatile in food and energy prices is projected to run higher than total inflation and the median projection has been revised in the SCP up to 3.9 percent this year despite elevated inflation 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 price and stable prices for the American people my colleagues and I are acutely aware that high inflation imposes 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 highly attentive to the risks that high inflation poses to both sides of our mandate and we are strongly committed to returning inflation to our two percent objective as I noted earlier since early last year we have raised our policy rate by five percentage points we have been seeing the effects of our policy tightening on demand in the most interest rate sensitive sectors of the economy especially housing and investment it will take time however for the full effects of monetary restraint to be realized especially on inflation the economy is facing headwinds from tighter credit conditions for households and businesses which are likely to weigh on economic activity hiring and inflation the extent of these effects remains uncertain in light of how far we've come in tightening policy the uncertain lags with which monetary policy affects the economy and potential headwinds from credit tightening the committee decided at today's meeting to maintain the target range for the federal funds rate at five to five and a quarter percent and to continue the process of significantly reducing our Securities Holdings as I noted earlier nearly nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year but at this meeting considering how far and how fast we've moved we judged it prudent to hold the target range steady to allow the committee to assess additional information and its implications for monetary policy in determining the extent of additional policy firming that may be appropriate to return inflation to two percent over time the committee will take into account the cumulative tightening of monetary policy the lags with which monetary policy affects economic activity and inflation and economic and financial developments in our SCP 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 5.6 percent at the end of this year 4.6 percent at the end of 2024 and 3.4 percent at the end of 2025. for the end of this year the median projection is a half percentage Point higher than in our March projections I hasten to add as always that 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 we will continue to make our decisions meeting by meeting based on the totality of incoming data and their implications for the outlook for economic activity and inflation as well as the balance of risks we remain committed to bring inflation bringing inflation back down to our two percent goal and to keeping longer-term inflation expectations well anchored reducing inflation is likely to require a period of below Trend growth and some softening of labor market conditions 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 at the FED is in service to our public mission we will do everything we can to achieve our maximum employment and price stability goals thank you and I look forward to your questions do Colby Smith with the financial times I'm curious what gives you and the committee the confidence that waiting will not be counterproductive at a time when the monthly pace of core inflation is still so elevated interest rate sensitive sectors like housing while they felt the drag of the past fed actions have started to recover in some regions and financial conditions you know most recently we're easing so I guess I would I guess I would go back to the beginning of this tightening cycle to address that so as we started our rate hikes early last year we said there were three issues that would need to be addressed kind of in sequence and that of the speed of tightening the level to which rates would need to go and then the period of time over which we'd need to keep policy restrictive so at the outset going back 15 months the key issue was how fast the move rates up and we moved very quickly by historical standards then last December after four consecutive 75 basis point hikes we moderated to a pace of 50 of a 50 basis point hike and then this year to three 25 basis point hikes at sequential meetings so it seemed to us to make obvious sense to moderate our rate hikes as we got closer to our destination so the decision to consider not hiking at every meeting and ultimately to hold rates steady at this meeting I would just say it's a continuation of of that process the main issue that we're focused on now is determining the extent of additional policy firming that may be appropriate to return inflation to two percent over time so that the pace of the increases and the ultimate level of increases are separate variables given how far it it we have come it may make sense for rates to move higher but at a more moderate pace I want to stress one more thing and that is that the committee decision made today was only about this meeting we didn't make any decision about uh going forward including what would happen at the next meeting including we did not decide or really discuss anything about going to in every other meeting kind of an approach or really any other approach we really were focused on what to do at this meeting know kind of in itial debate about the possibility of July any sense of the initial support at this stage for that move so again we didn't we didn't make a decision about July I mean of course it came up in the in the in the meeting from time to time but really the focus was on what to do today I would say about about July two things one decision hasn't been made to I do expect that it will be a live meeting power thanks Howard Schneider with Reuters I was just wondering if you could help us understand the narrative here because it feels like there's been a level shift in the in the dots um stronger GDP uh less of a hits on employment slower progress on inflation and I'm wondering in this sort of where's the disinflation coming from the labor Market's going to be stronger it looks like it's not coming from there demand is not coming down all that fast according to GDP you've doubled your your estimate of GDP so what's the what's the narrative here it seems like it's getting more Immaculate rather than more messy so you're right that the data came in I would say uh consistent with but on the high side of expectations so and if you go back to the old the former SCP um the last SCP in March you will see that growth moved up these are not huge moves but growth estimates moved up a bit unemployment estimates moved down a bit inflation estimates moved up a bit and you know the all three of those kind of point in the same direction which is you know that perhaps more restraint will be necessary than we had thought at the last meeting so although the level frankly is is pretty the level of 5.6 is pretty consistent if you think about it where the federal funds rate was trading before the bank incidents of early March so but so we've kind of gone back to that so your question is where is the where's the disinflation going to come from and you know I don't think the story has really changed we the committee has consistently said and believed that the process of getting inflation down is going to be a gradual one it's going to take some time and uh I think you go back to the to the three-part framework for core pce inflation which is we think of as good an indicators you can have for where inflation's going forward you start with Goods with Goods we need to see continued healing and Supply conditions supply side conditions they've definitely improved a substantial amount but if you talk to people in business they will say it's not back to where it was so that's that's one thing and that shouldn't enable Goods prices to continue good Goods inflation patient to continue to come down over time in terms of Housing Services inflation that's another big piece and and you are seeing there that new rents new new leases are are coming in at low levels and it's really a matter of time as that goes through the pipeline in fact I think any forecasts that people are making right now about inflation coming down this year will will contain a big dose of this year and next year we'll contain a a good amount of of uh disinflation from that source and and that's again probably going to come slower than we would affect that leaves you know the big sector which is a little more than half pardon me of the uh of core PC inflation that's non-housing services and you know we see only the earliest signs of disinflation there it's a sector it's a very Broad and diverse sector I would say in a number of the parts of that sector the largest cost would be wage costs it's the service sector so it's it's heavily labor intensive and I think many analysts would say that the key to getting inflation down there is to have a continuing loosening in labor market conditions which we have seen we have actually seen you know I go through a number of indicators suggesting there's been some listing in labor market conditions we need to see that continue I would almost say that the the conditions that we need to see in place to get inflation down are are coming into place and that would be growth meaningfully below Trend it would be a labor market that's loosening it would be good pipelines getting healthier and healthier and that kind of thing but there there the things are in place that we need to see but the process of that actually working on inflation is going to take some time Nick tamrose of the Wall Street Journal chair pal what's the value in pausing and signaling future hikes versus uh just hiking now I mean not to be flippant but I don't lose weight just by buying a gym membership I have to actually go to the gym 16 of your colleagues put down a higher year-end 23 rate today a majority of you think you're going to have to go up by 50 basis points this year so why not just rip off the Band-Aid and raise rates today so the first I would say that the the question of speed is a separate question from the question from the from from that of level okay so um and I think if you look at the SCP that is our estimate our individual is it's really accumulation of our individual estimates of how far to go I I mentioned how how we got to those numbers in terms of speed it's it's what I said at the beginning which is speed was very important last year as we get closer and closer to the destination and according to the SCP we're not so far away from the destination in most people's accounting uh it's it's reasonable it's common sense to go a little slower just as it was reasonable to go from 75 basis points to 50 to 25 at every meeting and so uh the committee thought overall that it was appropriate to moderate the pace if only slightly and their benefits to that so that gives us more information to make decisions we may try to make better decisions I think it allows the economy a little more time to adapt as we as we make our decisions going forward and we'll get to see uh you know we haven't really really we don't know the full extent of of the consequences of the banking turmoil that we've seen we it would be early to see those but we don't know what the extent is we'll have some more time to see that unfold I mean it's just the idea that we're trying to get this right and uh this is if you think of the two things as separate variables then I think I think that the the skip I shouldn't call it a skip the the decision um uh makes sense I know you said July is live with only one uh June employment uh with only the June employment and the CPI report for June uh due to be released before the July meeting you get the ECI after you get the senior loan officer survey after you get some Bank earnings at the end of next month what incremental information will the committee be using to inform their judgment on whether this is in fact a skip or a longer pause well I think you're adding that to the the data that we've seen since the last meeting too we you know we since we chose to maintain rates at this meeting is it'll really be a three-month period of data that we can look at I think that's a full quarter and I think you can you can draw more conclusions from that than you come from any six any six week period we'll look at those things we'll also look at the evolving risk picture we'll look at what's happening in the financial sector we'll look at all the data the evolving Outlook and we'll make a decision Gina thanks for taking our questions Gina smile like New York Times you obviously in your forecast marked up the sort of path for growth marked down the path for unemployment marked up the path for inflation pretty notably I wonder you know since March what has changed to make you think that the economy is a lot more resilient and inflation is going to be a lot more stubborn and given that you know why do you feel confident that this is as high as you're going to have to revise the federal funds rate or do you think it's possible we could have even a higher than 5.6 terminal by the end of this this cycle you know I I mean on the first part I just think we're following the data and also the Outlook the economy is the labor market I think has surprised many if not all analysts over the last couple of years with its extraordinary resilience really and um it's it's just remarkable and that's really if you think about it that's what's driving it's it's job creation it's it's uh wages moving up it's it's supporting spending which in turn is supporting hiring and it's it's really the engine it seems that is that is driving the economy so it's it's really the the data uh in terms of you know we we always write down at these meetings what we think the appropriate terminal rate will be at the end of this year that's that's how we do it um it's based on uh our our own individual assessments of what the most likely path of the economy is it can be it can actually in reality wind up being lower or higher and you know there's really no way to know but it's it's it is it's it's what people think as of today and as the as the data come in it it can move around during the intermediate period It could wind up back in the same place but it really will be data driven I can't I can't tell you that that I ever have a lot of confidence that we can see where the where the federal funds rate will be that far in advance Mr chairman thanks for taking my question um you had said back at the end of May that you thought risks were getting closer to being into balance is that still the case or has your mind changed about the balance of risks out there and also could you give us an idea of what would be a sufficiently restrictive funds rate is the obviously the current rate according to the committee is not sufficiently restrictive is it five six is it six words for sufficiently restrictive thank you um you know I I would say again that I think that over time the balance of risks as we've moved from very you know from interest rates at effectively zero now to five percentage points with with an SCP calling for additional hikes I think we've moved much closer to our destination which is that sufficiently restrictive rate uh and I think that means by almost by definition that the the risks of of sort of overdoing it and under underdoing it are are getting closer to being in Balance I still think and my my colleagues agree that that the risks to inflation are to the upside still so we don't we don't think we're there with inflation yet because we're just looking at the data if you look at the uh um at the full range of of inflation data particularly the core data you just you just aren't seeing a lot of progress over the last year headline of course inflation has come down materially but as you know we look at core as a better indicator of where inflation overall is going sufficiently so I think you know what what we'd like to see is credible evidence that inflation is topping out and then beginning to come down that's that's what we want to see of course that's what we want to see and um I I think it's also we understand that there are lags but remember that it's it's more than a year since Financial conditions began tightening I think it's I think the reason we're we're comfortable pausing is that we are still much of the tightening took place over last summer and later into the year and I think it's it's reasonable to think that some of that may come into effect so we're you know I think stretching out the into a more moderate pace is appropriate to to allow you to make that Judgment of sufficiency you know more with more data over time hi tur Powell Rachel Siegel from The Washington Post thanks for taking our questions I wanted to ask further on the lag effects when you're considering when you would hike again throughout the course of the year are there things that you would expect to kick in as those lag effects come come into effect that would inform your decisions have you learned things over the past year that give you some sense of timeline for when to expect those lags to come into effect yeah so it's a it's a challenging thing in economics it's it's sort of standard thinking that monetary policy affects economic activity with long and variable legs of course these days Financial conditions begin to tighten well in advance of actual rate hikes so if you look back when we were lifting off we started talking about lifting off by the time we had lifted off the two-year which is a pretty good estimate of where policy is going had gone from 20 basis points to 200 basis points so in that sense tightening happens much sooner than it used to in a world where where news was in newspapers and not you know not on on The Wire so that's that's different but it's still the case that what you see is intra-sensitive spending is affected very very quickly so housing and durable goods and things like that but broader demand and spending and and asset values and things like that they just take longer and you can pretty much find research to support whatever answer you would like on that so there's not any certainty or agreement in the profession on how long it takes so you know then that makes it challenging of course so we're we're looking at the calendar we're looking at what's happening in the economy we're having to make these judgments again it's one of the main reasons why it makes sense to go at a slightly more moderate Pace now as we seek that that uh ultimate yeah I can't point to um an ultimate endpoint I can't point to a specific data point I think we'll see it when we see inflation you know really really flattening out reliably and then starting to soften I think we'll know that we're that it's working and ideally by by taking a little more time we won't go well past the air the level where we need to go I was curious if you could get kids from March and how you're teasing that out apart from these lag effects so it's it's too early still to to try to assess the full extent of what that might mean uh and you know that's something we're going to be watching of course and you know if we were to see what we would view as significant tightening beyond what would normally be expected because of of this channel then you know we would factor that into account on on uh in in making raid decisions so that's um that's how we think about it uh thanks Christopher Gaber and Associated Press uh you mentioned that many of the trends are in place that you want to see uh core Services X housing has come in pretty low in the past couple of months and as you noted a significant portion of core inflation is now housing prices and then we've had some quirks in used car prices so given that these Trends are in place I guess I'm sort of asking the flip side of Nick's question why uh signal additional rate hikes aren't things headed in the direction you need why not simply give it even more time or um I mean it's surprising to see so much hawkishness in the dots uh given what we're seeing recently yeah so you know we've remember we've um were two and a half years into this or two and a quarter years into this and forecasters including fed forecasters have consistently thought that inflation was about to turn down and uh you know traditional not you know typically forecasted that it would and been wrong so I think if you I think if you look at the at core pce inflation overall look at it over the last six months you're just not seeing a lot of progress It's running and it's running at a level you know over four and a half percent far above our our Target and not really you know moving down we want to see it moving down decisively that's all we're you know of course we're going to get inflation down to two percent over time we we don't want to do we want to do that with the minimum damage we can to the economy of course but we have to get inflation out of two percent and we will and we just don't see that yet so hence you see today's policy decision both to write down for the rate hikes by the end of this year but also to you know to take uh to moderate somewhat the pace with which we're moving a quick follow-up I mean the last press conference you mentioned you didn't see wages driving inflation and you know there was some research from the San Francisco fed suggesting wages aren't necessarily key driver but you've talked about the labor market today and the need for softening can you give us a little more specifically of how you see the tight labor market driving inflation at this point thank you all right so um I'm not going to comment on on any particular paper but I would say that the I think the overall picture is that at the beginning in you know early 2021 inflation was really becoming from very strong demand for largely for goods people were still at home they had money in the bank and they wanted to spend and they spent a lot on goods and of course at the same time and because of that high demand to some extent Supply chains got all snarled up so prices went way up inflation went way up that was the the origin it wasn't really particularly about the labor market or wages but as you as you move into through 21 into 22 and now in 23 I think many many analysts believe that it will be important an important part of getting inflation down especially in the non-housing services sector uh getting wage inflation back to a level that is sustainable that is consistent with two percent inflation we actually have seen wages broadly moved down but just at a quite gradual pace so and that's you know that's a little bit of the uh the finding of the Bernanke paper with uh Blanchard of a few weeks ago which is very consistent with um with what I I would think Michael McKee from Bloomberg Radio and uh television you've said in the past that you don't like to surprise markets it's kind of been The fed's View Market should have an idea of what you're going to do before you go in you also said a number of times that it would take a while to bring inflation down you reiterated that again today and that we would get to a point where inflation could be sticky so I'm wondering as we go into the next meetings how Wall Street or others should look at your reaction function what will you be reacting to time or data in other words if nothing much changes if we're looking at the same sort of Labor Market the same sort of inflation levels in July or in September uh or November will you move because you've said you feel you need to is it time that's going to require additional movement or would it be reversal in inflation so I I don't want to deal with with hypotheticals about different ways data might move out so we you know we of course we're not we don't go out of our way to surprise markets or the public at the same time our main focus has to be on getting the policy right and that's that's what we're doing here and that's what we'll do for the upcoming meetings I will say the July meeting will be live and uh we'll just have to see I think you'll you'll see the data you'll hear fed people talking about it and and markets will have to make a make a judgment well do you think inflation is likely to continue coming down based on the lags and based on your threat of additional movement or are we going to be in a period where we're not going to know what's happening you know I think you if you look at uh if you just look at I'll just point you to the forecast so inflation is running core pce inflation is running at about four and a half a little higher than four and a half percent and the the median fomc participant thinks it'll go down to 3.9 on a 12 month basis this is by the end of this year so that's expecting pretty substantial progress that's that's that's a pretty significant decline for half a year so that that's that that's the forecast um you know we'll we do try to be transparent in our reaction function we're we're committed to getting inflation down and uh that's the number one thing so that's how I think about it um Victoria Guido with Politico okay I could talk about the balance sheet and how you're thinking about it um what would what are you looking for to judge whether we're approaching Reserve scarcity and is treasury issue it's going to affect that also are you considering lowering the RRP rate in order to take some pressure off Banks so let me say first of all on the treasury part of it if I can talk about that and then go back to the balance sheet so on that um of course we've been very focused on that for a couple of months as everyone has treasury has laid out its boring borrowing plans publicly uh I think we all saw I saw the secretary's comments yesterday to the effect that treasury has consulted widely with Market participants about how to avoid Market disruption and that they're going to watch carefully for that so that's that's from the treasury which actually sets the you know the the borrowings at the FED we'll be monitoring market conditions carefully as the treasury refills the TGA the adjustment process is very likely to involve both the reduction in the RRP facility and also in reserves it's really hard to say at the at the beginning of this which will be which will be greater we are starting at a very high level of reserves and still elevated over RRP to take up for that matter so we don't think reserves are likely to become scarce in the near term or even over the course of the year um so that's that's that's the that's the the treasury part of the answer we will of course continue to monitor um conditions in money markets and we're prepared to make adjustments to make sure that that monetary policy transmission works was there another part of your question uh yeah what um are you considering lowering the RRP rate to help take some pressure off Banks so we have a number of I would say the RRP doesn't look like it's it's pulling money out of out of the banking system it's actually been shrinking here lately uh so I don't think uh that's not something something we've we've thought about a lot over time it doesn't really look like that's that's something that we would do I think it's I think it's a tool that we have if we want to use it we can there are other tools we can we can use to address money market issues but I wouldn't say that that's something that's likely that we would do in the near term thumbnail Marte with Bloomberg have you seen sufficient Cooling in the housing market to bring inflation down for example how does the recent rebound affect your forecast and how does it factor into monetary policy so certainly housing very interest sensitive and it's the first place really or one of the first places that's either helped by low rates or or that is held back by by higher rates and we certainly saw that over the course of the last year we now see housing putting in a bottom and maybe even moving up a little bit um you know we're watching that situation carefully I do think uh we we will see rents rents and and house prices filtering into Housing Services inflation and uh I don't see them coming up quickly I do see them coming kind of wandering around at a relatively low level now and uh that's appropriate do you think you'll have to Target that with further rate increases well I think we we look at everything we don't just look at housing so I think you know the way it works is individual participants sit in their offices all over the country and they write down their their forecast and including their most likely forecast including their rate forecast and then they send it in on Friday afternoon and we accumulate it and then we publish it for you so that's how that's how they do that well I don't know that housing is is is itself going to be driving the rates picture but it's part of it thank you for taking the question um Mr chairman Edward Lawrence with Fox Business so I want to go back to comments you made about um in the past about unsustainable fiscal path the CBO projects the federal deficit to be 2.8 trillion uh in 10 years the CBO also says that federal debt will be 52 trillion by 2033 at what point do you talk more firmly with lawmakers about fiscal responsibility because I'm assuming monetary policy cannot handle alone the inflation or keep that inflation in check with the higher level spending I don't do that that's really not my job we we we hope and expect that other policy makers will respect our independence on on monetary policy and we don't see ourselves as uh as you know the judges of appropriate fiscal policy I will say and many of my predecessors have said that we are on an unsustainable fiscal path and that needs to be addressed over time but I think trying to get into uh into that with with lawmakers would be would be kind of uh inappropriate given our independence and our need to stick to our knitting this conversation then about the Federal Reserve financing some of that debt that we're seeing coming down the pike no under no circumstances thanks for taking our questions uh chair Powell um so looking at the SCP it looks like a GDP for this year was raised significantly your forecast for GDP this year uh the unemployment rate meanwhile was pulled downward and so should we take that as a sign that the committee is more confident about the prospects of a soft landing at least more uh at least as it relates to what you were expecting in in March you know I I would just say it this way I continue to think and this really hasn't changed that there is a path to uh getting inflation back down to two percent without having to see the kind of sharp downturn and large losses of employment that we've seen in so many past instances it's it's possible a in a way a strong labor market uh is uh that that gradually cools could it could Aid that along it could Aid that along but I I guess I want to come back to the the main thing which is though simply this we we see the committee as you can see from the SCP the committee is completely unified in the need to get inflation down to two percent and we'll do whatever it takes to get it down to two percent over time that is our plan and uh you know we we understand that allowing inflation to get entrenched into the in the U.S economy is the thing that we cannot cannot allow to happen for the benefit of today's workers and families and businesses but also for the future getting price stability back and and restored will benefit generations of people as long as it's sustained and it really is the Bedrock of the economy and and you should understand that that is our top priority just a quick follow-up on that I'm just a little confused because you said the committee will do whatever it takes to get inflation down over time but when I look at the SCP inflation is still projected to be elevated next year but the FED funds rate is lower than where it is now can you help me understand that sure so um you know if you look two and three years out with the forecast first of all I wouldn't I wouldn't put too much weight on forecasts even one year out because they're so highly uncertain but what they're showing is that as inflation comes down in the in the forecast if you don't lower interest rates then real rates are actually going up right so it just to maintain a real rate the nominal rate at that point two years out let's say should come down just to maintain real rates and if and actually you know since we we're we're probably gonna we're we're having real rates that are going to have to be meaningfully positive and significantly so for us to get inflation down that probably means that that certainly means that that it will be appropriate to cut rates at such time as inflation is coming down really significantly and again we're talking about a couple years out I think as anyone can see not a single person on the committee wrote down a rate cut this year nor do I think it is uh at all likely to be appropriate if you think about it inflation has not really moved down it is it is not uh so far reacted much to our to our existing rate hikes and so we're gonna have to keep at it um sorry thank you AFP news agency um the major reports showed a rebound in May in the black rockers and unemployment um is it consistent with the fed's maximum employment mandate are you worried about that about this rebound so we are of course worried about there there are long-standing difference differences in racial and ethnic groups across across our labor market that's a factor that we don't we can't really address with our tools but we do consider that when we're thinking about what constitutes maximum employment it is for us a broad and inclusive goal um and so we do watch that but remember uh all unemployment including black unemployment has been bouncing around right near historic lows historic modern lows here so we're still talking about I mean what is as strong a labor market as we've seen in you know a half century here in the United States so overall unemployment of 3.7 percent is is is three tenths higher than it was a measured to be at the last uh uh a month ago but still it's extraordinarily low uh uh and so it's a very very tight labor market thank you I want to follow up uh for us a little bit just on the rent question on housing we heard Governor Waller talk about how we I'll back up we haven't quite seen the slowdown in rent show up in CPI yet and we did hear Governor Waller talk about how an uptick in housing might mean that there's not going to be as much relief coming or a shorter uh bit of relief than we thought can you talk about how you're thinking about that and how that played into today's outcome I wouldn't say so that's you know as a factual matter that's correct we do need to see you know rents bottom out here or at least stay quite low in terms of their increases because we went we want the um you know we want inflation to come down and Rental uh is is a very large part of the CPI about a third and it's about half of that for the pce so it's important and so we're something that we're watching very carefully it's part of the overall picture I wouldn't say it's the decisive part but take a step back what you see is look at look at core inflation over the past six months a year you're just not seeing a lot of progress not the kind of progress we want to see and that that's it's hard to avoid that and you know the committee people in the committee the median went up significantly so that the median participant now thinks that core pce inflation on a 12-month basis will be 3.9 percent this year so once again every year for the past three years it's gone up over the course of the year and that's doing that again so we see that and we see that inflation forecasts are coming in low again and we see that that that tells us that we need to do more and so we're that's why you see the SCP with where it is could you also talk briefly about your outlook for wages and given the recent slowdown and core Services excluding housing how far you think we just might need to fall in order to to get inflation back in line so wages will continue to increase so we you know what we're talking about is having wage increases still at a very strong level but at a level that's consistent with two percent inflation over time and so I think we've seen some progress all of the major measures of wages have have moved down from extreme highly elevated levels a year or so ago and they're they're moving back down but but quite gradually and and you know we want to see that that process continue gradually with course it's great to see wage increases particularly for people at the lower end of the income Spectrum but we want that as part of the process of getting inflation back down to two percent which benefits everyone I mean inflation hurts those same people more than anyone else people on a fixed income are hurt the worst and the fastest by high inflation thank you so much chairpower Greg Robb from MarketWatch I just wondered if the committee has talked at all about the labor market and and there's strikes now in Hollywood and now the United Auto Workers are talking about a possible strike I mean aren't workers they we have some workers have power now and are going to be seeking higher wages does that come up in your discussions thanks so the topic of wages in the labor market and um Dynamics in the labor market could is about as Central a topic to our discussions as as anything I mean it's it's very labor economics you know and the labor market are utterly Central you know it's half of our mandate so we spend a lot of time talking about that I think um you know we there are structural issues that are really not for the fed and so we don't spend a lot of time although we take notice of of what's going on but we're not you know we're not involved in discussions or debates over over strikes and things like that but we you know we we look and we see what's going on and you know we're making judgments about what it will take to get inflation down to two percent in the Aggregate and as I said don't think that was about I didn't most folks would say now it wasn't really about that about wages at the beginning and it's becoming more about that as we as we get into really service sector inflation which is the part of the economy where we have seen the least progress Mark for the last question thank you Mr chairman Mark Hamrick with Bankrate wondering what your thoughts are now about systemic risk now that we're about three months past the failure of Silicon Valley Bank and also specifically what are the risks associated with commercial real estate as well as non-bank financials and could you further Elevate those risks with higher still rates possibly for longer so so um we're trying to think where to start I'll start with commercial real estate we of course were watching that situation very carefully there's a substantial amount of commercial real estate in the banking system a large part of it is in smaller Banks it's well distributed to the extent it's well distributed than the system could could take losses we do expect that there will be losses but they'll be there'll be banks that have concentrations and those banks will experience larger losses so we're well aware of that we're monitoring it carefully um you know it feels like it feels like something that will be around for some time uh as opposed to uh you know something that will suddenly hit and and you know work its way into systemic risk in terms of non-bank financials financial sector um there's been a ton of work and you know clearly in the um in the pandemic it really was uh it was the non-bank financial sector where where issues really arose and you know there's a lot of work going on in with the administration uh in particular leading that uh to try to address issues in the treasury market and and uh in all kinds of areas of non-bank financial Market but you know our jurisdiction at the FED is over Banks actually Bank holding companies and some banks so that's that's really our main focus um you know in terms of um the events of March as I mentioned earlier we will be carefully monitoring that situation you know our our job generally involves worrying about a lot of things uh that may go wrong that would include the banks it might be hard for me to identify something and that we don't worry about rather than that we do worry about so we're watching those things very carefully and as we see things uh unfold as we see what's happening with credit conditions and and also all the individual banks that are out there you know will be able to take to the extent it's appropriate we can take uh if they're macroeconomic implications we can take that into account in our rate setting and uh so I guess that's what I would say do you risk further exacerbating those issues if you get up to another 50 basis points so that's and I was I guess I meant to address that by saying as we as we watch we'll see what's happening and if we if we're seeing the kind of um tightening of conditions that that you could be referring to then we can factor that because really we use our our rate tool is is you know is it really has macroeconomic purposes so we'll take that into account of course we have responsibility for financial stability as well and that also is a factor that we're always going to be considering thank you very much

Channel: Global News

Views: 3,468

Keywords: global news, News, Jerome Powell, Powell, Jerome Powell address, Jerome Powell statement, Federal Reserve, US Federal Reserve, Interest rates US, Interest-rate hike, Interest-rate pause, Federal Government, Inflation, US inflation, Inflation 2023, Federal Reserve chairman, Financial crisis, US financing

Id: Dd_Njeu356k

Length: 48min 41sec (2921 seconds)

Published: Wed Jun 14 2023