Jerome Powell FED press conference data

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us—maximum employment and price stability. Since the beginning of the pandemic, we have taken forceful actions to provide some relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. Today my colleagues on the Federal Open Market Committee and I made some important changes to our policy statement, including an update to our guidance for the likely path of our policy interest rate. Guided by our new Statement on Longer-Run Goals and Monetary Policy Strategy that we announced a few weeks ago, these changes clarify our strong commitment over a longer time horizon. Before describing today’s policy actions, let me briefly review recent economic developments. Economic activity has picked up from its depressed second-quarter level, when much of the economy was shut down to stem the spread of the virus. With the reopening of many businesses and factories and fewer people withdrawing from social interactions, household spending looks to have recovered about three-quarters of its earlier decline. Nonetheless, spending on services that typically require people to gather closely, including travel and hospitality, is still quite weak. The recovery in household spending also likely owes to federal stimulus payments and expanded unemployment benefits, which provided substantial and timely support to household incomes. Activity in the housing sector has returned to its level at the beginning of the year, and we are starting to see signs of an improvement in business investment. The recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up since our June Summary of Economic Projections. Even so, overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain. In the labor market, roughly half of the 22 million jobs that were lost in March and April have been regained as many people returned to work. The unemployment rate declined over the past four months but remains elevated at 8.4 percent as of August. Although we welcome this progress, we will not lose sight of the millions of Americans who remain out of work. Looking ahead, FOMC participants project the unemployment rate to continue to decline; the median projection is 7.6 percent at the end of this year, 5.5 percent next year, and 4 percent by 2023. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the services sector, for women, and for African Americans and Hispanics. The economic dislocation has upended many lives and created great uncertainty about the future. The pandemic has also left a significant imprint on inflation. For some goods, including food, supply constraints have led to notably higher prices, adding to the burden for those struggling with lost income. More broadly, however, weaker demand, especially in sectors that have been most affected by the pandemic, has held down consumer prices, and overall, inflation is running well below our 2 percent longer-run objective. The median inflation projection from FOMC participants rises from 1.2 percent this year to 1.7 percent next year and reaches 2 percent in 2023. As the economy began its recovery, COVID-19 cases, hospitalizations, and deaths also rose. The reimposition of some social-distancing restrictions as well as more cautious behavior by many individuals have succeeded in slowing the spread of the virus. As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend in large part on our success in keeping the virus in check. All of us have a role to play in our nation’s response to the pandemic. Following the advice of public health professionals to keep appropriate social distances and to wear masks in public will help get the economy back to full strength. A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities. The path forward will also depend on the policy actions taken across all parts of the government to provide relief and to support the recovery for as long as needed. The Federal Reserve’s response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. We remain committed to using our full range of tools to support the economy in this challenging time. The changes we made in today’s policy statement reflect our strategy to achieve our dual- mandate goals by seeking to eliminate shortfalls from maximum employment and achieve inflation that averages 2 percent over time, as we articulated in our Statement on Longer-Run Goals and Monetary Policy Strategy. We view maximum employment as a broad-based and inclusive goal and do not see a high level of employment as posing a policy concern unless accompanied by signs of unwanted increases in inflation or the emergence of other risks that could impede the attainment of our goals. And we believe that achieving inflation that averages 2 percent over time helps ensure that longer-term inflation expectations remain well anchored at our longer-run 2 percent objective. In turn, well-anchored inflation expectations enhance our ability to meet both our employment and inflation objectives, particularly in the new normal in which interest rates are closer to their effective lower bound even in good times. Hence, as we say in our statement, with inflation running persistently below 2 percent, we “will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.” We expect “to maintain an accommodative stance of monetary policy until these outcomes”—including maximum employment—“are achieved.” With regard to interest rates, we now indicate that we expect it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.” In addition, over coming months we will continue to increase our “holdings of Treasury securities and agency mortgage-backed securities at least at the current pace.” These asset purchases are intended “to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses.” We believe the strong policy guidance we are providing today will serve the economy well by promoting our goals through the many possible paths the recovery may take. Of course, as we note in our policy statement, we “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of our [the Committee’s] goals.” The Federal Reserve has also been taking broad and forceful actions to more directly support the flow of credit in the economy for households, for businesses large and small, and for state and local governments. Preserving the flow of credit is essential for mitigating the damage to the economy and promoting a robust recovery. Many of our programs rely on emergency lending powers that require the support of the Treasury Department and are available only in very unusual circumstances, such as those we find ourselves in today. These programs serve as a backstop to key credit markets and appear to have restored the flow of credit from private lenders through normal channels. We have deployed these lending powers to an unprecedented extent, enabled, in large part, by financial backing and support from Congress and the Treasury. When the time comes, after the crisis has passed, we will put these emergency tools back in the toolbox. As I have emphasized before, these are lending powers, not spending powers. The Fed cannot grant money to particular beneficiaries. We can only create programs or facilities with broad-based eligibility to make loans to solvent entities with the expectation that the loans will be repaid. Many borrowers are benefiting from these programs, as is the overall economy. But for many others, getting a loan that may be difficult to repay may not be the answer. In these cases, direct fiscal support may be needed. Elected officials have the power to tax and spend and to make decisions about where we, as a society, should direct our collective resources. The fiscal policy actions that have been taken thus far have made a critical difference to families, businesses, and communities across the country. Even so, the current economic downturn is the most severe in our lifetimes. It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year, and it may take continued support from both monetary and fiscal policy to achieve that. We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. Finally, I would like to take a moment to recognize the passing of our friend and colleague, Thomas Laubach. His outstanding analysis and advice have been indispensable to the FOMC and have played a key role in the policy decisions that will define this era of the Federal Reserve. He will be remembered for his intellect, but also his kindness, his equanimity, and his dedication to achieving our mission on behalf of the American people. We will miss him. Thank you. I’ll now be glad to take your questions. <NAME>MICHELLE SMITH</NAME>. Thank you. Nick Timiraos. <NAME>NICK TIMIRAOS</NAME>. Good afternoon, Chair Powell. Nick Timiraos from the Wall Street Journal. You’ve been very clear about the Committee’s intention on rates, not even thinking about thinking about raising rates, and today showing low rates even as unemployment falls to 4 percent and inflation rises to 2 percent. My question is about asset purchases. Does the guidance today apply to the current asset purchase pace? Are there any macroeconomic conditions under which you would favor increasing the monthly pace of Treasury and MBS purchases? And under what conditions would a decrease in the monthly pace of purchases be appropriate? Thank you. <NAME>CHAIR POWELL</NAME>. Thank you. So we say in our postmeeting statement that we’ll continue to increase our securities holdings “at least at the current pace” over coming months “to sustain smooth market functioning and help foster accommodative financial conditions.” That latter part is an updating of our guidance to reflect what I’ve been saying in these press conferences for some time and what other central banks have acknowledged, which is that the purchases are fostering accommodative financial conditions as well. That amounts to roughly $80 billion a month of Treasuries and $40 billion net per month for MBS. So we do—we do think that these purchases have been effective in, in restoring orderly market conditions and have supported the flow of credit to households and businesses, including by fostering more accommodative financial conditions, which, of course, we think is a good thing. So, in terms of going forward, I would just say this: There are various ways and margins that we can adjust our tools going forward, and we’ll continue to monitor developments. And we’re prepared to adjust our plans as appropriate. <NAME>NICK TIMIRAOS</NAME>. If I could—if I could follow up, I suppose the question I have is, why give guidance on one policy tool but not give guidance on the other policy tool when the Fed has talked about those two policy tools working together? <NAME>CHAIR POWELL</NAME>. So we, we think our—we think our policy stance is appropriate today, and we’re prepared to adjust it going forward as we, as we see appropriate. And today we believe that particularly this very strong forward guidance—very powerful forward guidance that we’ve announced today will provide strong support for the economy. Effectively, we’re saying that rates will remain highly accommodative until the economy is far along in its recovery, and that, that should be a very powerful statement in supporting economic activity. Now we’re buying $120 billion in securities per month across the—across the Treasury curve. That’s also adding to accommodation. We do have the flexibility to adjust that tool and, and the rate tool and, and other tools as well. But as for right now, we think—we think that our policy setting is appropriate to support the expansion. We did—we said from the beginning that we would first try to provide some support and stability and relief in the first phase of the crisis, the acute phase, and then we would support the expansion when it came. Well, it’s here. And it’s well along. And so that’s why we changed our guidance today, and we do have the flexibility to do more when we think it’s appropriate. <NAME>NICK TIMIRAOS</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thanks for taking my question. Jeanna Smialek, New York Times. I was wondering, you beefed up your language on financial stability in the long-run statement that you unveiled with your Jackson Hole speech last month. I’m wondering if you could kind of walk us through how you think about financial stability concerns as a factor in guiding and interpreting increases. You know, would financial stability concerns on their own be enough to merit changes in the fed funds rate? Or would they have to come in conjunction with an overheating on inflation or some sort of dramatic drop in the unemployment rate? If you could, sort of, give us an outline of your thinking there, please. <NAME>CHAIR POWELL</NAME>. So what we said in our Statement on Longer-Run Goals and Monetary Policy Strategy was that the Committee’s policy decisions reflect “its longer-run goals, its medium-term outlook, and its assessment[s] of the balance of risks, including risks to the financial system that could impede the attainment of the Committee’s goals.” So that’s what we said about financial stability. And today we said that we’d “be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of our [the Committee’s] goals.” But you asked specifically about, about financial stability. One thing I would say is that financial—that monetary policy should not be the first line of defense—is not the first line of defense on financial stability. We look to more appropriate tools in the first instance as a first line of defense, and those would be regulation, supervision, high capital, high liquidity, stress testing—all of those things, macroprudential tools. All of those things are, are really the first line of defense on financial stability. But we always leave open the idea that we will not ignore those kinds of risks and other kinds of risks, more broadly, that could impede the attainment of our goals in, in setting monetary policy. So that’s, that’s really how we think about it, but principally that, you know, other tools are the—are the frontline, as I mentioned. <NAME>JEANNA SMIALEK</NAME>. Just to follow up quickly, if, if other tools aren’t forthcoming, would financial stability concerns in and of themselves be enough to warrant a rate hike? <NAME>CHAIR POWELL</NAME>. So, you know, what we said again in the [Statement on] Longer-Run [Goals and Monetary Policy Strategy]—you know, in our consensus statement is that we, you know—“policy decisions reflect … the balance of risks, including risks to the financial system that could impede the attainment of the Committee’s goals.” So the test would be, you know, does a majority of the Committee feel that, that monetary policy is, is triggering that? And that, that would be—that would be the test. And, you know, it’s not something that we’ve done. We do monitor financial stability concerns, of course, intensely and regularly. We try to use our other tools on them, but we, we do keep them in mind as we think about monetary policy. <NAME>MICHELLE SMITH</NAME>. Thank you. Steve Liesman. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, I wonder if you could help me understand how the projections of the Committee line up with the goals of the Committee. You’ve now altered the projections to—the statement to aim for inflation above 2 percent. But when I look at the SEP, I don’t see the Committee believing a single year in the next four years that you are ever above 2 percent. In fact, for each year, you are below it until 2023, which is the first time that you actually hit 2 percent. So do you think—are, are you confident—is this just the Committee is not confident that not only can it not hit its 2 percent goal, but that now it can’t hit its goal of being above 2 percent? <NAME>CHAIR POWELL</NAME>. Not at all. And, you know, you don’t—you also don’t see people, by and large, lifting off or raising interest rates above zero. I guess there are 4 exceptions out of a Committee of 17 during that—during the forecast period. So we don’t reach 2 percent, but we get very close to it in the forecast. We reach 2 percent—I guess the median is 2 percent at the end of 2023. So, you know, you know what the guidance says. It says that we expect that the current setting of, of our rates will be—what we expect [is] that it will be appropriate until such time as we reach 2 percent inflation, that we feel that labor market conditions are consistent with our assessment of maximum employment, and that we’re on track to achieve inflation moderate—inflation moderately above. So that’s the test. So I don’t think there’s any conflict between those two because, you know, the, the way they’re set up, the projections don’t show the out years. You asked about confidence, and I would say that this, this very strong, very powerful guidance shows both our confidence and our determination. It shows our confidence that we can reach this goal and our determination to do so. <NAME>STEVE LIESMAN</NAME>. I’m sorry, if I could just follow up without being simplistic about this. But why wouldn’t—if the Committee was confident that it could reach its new goal of aiming for inflation above 2 percent, why wouldn’t one of those years at least show inflation being above 2 percent on the median forecast? <NAME>CHAIR POWELL</NAME>. Because it—we think, looking at everything we know about inflation dynamics in the United States and around the world over recent decades, we expect it will take some time. We expect that the economy will recover quickly now, but that that pace will slow as, as people go back to work. And we’ll still have an area of the economy—a big area of the economy—that struggles. There will be slack in the economy. The economy will be below maximum employment, below full demand. And that will tend to wear—to put downward pressure on inflation. So we think that once we get up closer to maximum employment, we think that inflation will come back, generally. And, I mean, that’s sort of what happened during the last long expansion. It’s a slow process, but—but there is a process there. Inflation does move up over time. We do expect that will continue today, and we expect that our, our guidance is powerful and will help that outcome. We think that—that effectively saying that policy will remain highly accommodative until the economy is very far along in its recovery should provide strong support for the economy and get us there sooner rather than later. <NAME>STEVE LIESMAN</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Rachel Siegel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Thanks very much for taking my question. I wanted to ask if you anticipate a slowing in the pace of the recovery if there is not another stimulus package and, specifically, if there are particular holes still remaining in the economy that you think could be helped by more aid from Congress. Thanks very much. <NAME>CHAIR POWELL</NAME>. Sure. So, first, if you look at the Summary of Economic Projections that my colleagues and I filed for this meeting, what you’ll see is an expectation that the recovery will continue—that it will continue at a reasonable pace through 2021, ’22, and ’23. We do expect that that pace will slow just because you would expect that the, the pace would be fastest right at the beginning of the—right at the beginning of the recovery, because you had such a sharp decline. You would expect that the third quarter should be the fastest gains, and that, after that, the pace should slow down to a more normal pace. So we do expect that. In terms of fiscal policy—you asked about fiscal policy. So, you know, one thing—I guess I would start by saying that the initial response from fiscal authorities was rapid. It was forceful and pretty effective. And we’re seeing the results of that in—today in income and household spending data, in the labor market data, in the construction data, in the data for business equipment spending, and the fact that businesses are staying in business, and, you know, the pace of default and things like that has really slowed. So there’s been a really positive effect. That said, my sense is that more fiscal support is likely to be needed. Of course, the details of that are for Congress, not for the Fed. But I would just say, there are still roughly 11 million people still out of work due to the pandemic, and a good part of those people were working in industries that are likely to struggle. Those people may need additional, additional support as they try to find their way through what will be a difficult time for them. We’ve also got struggling small businesses, especially those in the business of facing directly to the public. And we have state and local governments dealing with a drop in revenue at the same time spending has gone up, much of it related to the pandemic and economic effects. So, again, I would say, the fiscal support has been essential in, in the good progress we see now. And, finally, I’ll note that just about all—the overwhelming majority of, of private forecasters who, who project an ongoing recovery are assuming there will be substantial additional fiscal support. <NAME>MICHELLE SMITH</NAME>. Thank you. Mike Derby. <NAME>MICHAEL DERBY</NAME>. [Inaudible] taking my question. Should we expect any further evolutions in forward guidance, say, maybe an adoption of something akin to the Evans rule that we had a few years ago? Or is there something else that the Fed might be considering in the future? <NAME>CHAIR POWELL</NAME>. Well, so we think that the forward guidance we adopted today is appropriate and, as I mentioned, powerful. Effectively, what it says is that we’ll, we will keep policy where it is now—keep the rate policy where it is now until unemployment reaches the Committee’s assessments or levels that are—sorry, not unemployment, labor market conditions reach levels that are consistent with the Committee’s assessments of maximum employment, until inflation reaches 2 percent, and until it’s on track to go above 2 percent moderately for some time. So that’s very strong forward guidance, and we think that that will be durable guidance that will provide significant support to the economy in coming years. So that’s, that’s really our thinking on, on forward guidance on rates. <NAME>MICHELLE SMITH</NAME>. Thank you. Howard Schneider. <NAME>HOWARD SCHNEIDER</NAME>. Thanks. Thanks, Chair Powell, for doing this. So to follow up on Mike’s question there, since you described this guidance as durable, you—you’ve set up a three-part test here for rate hikes: levels consistent with assessments of maximum employment, inflation has risen to 2 percent, and you’re on track to moderately exceed 2 percent for some time. Each of these have modifiers, and I wonder if you could explain them a little bit more. How do we pin down assessments of maximum employment? When you say that “inflation has risen to 2 percent,” does that mean 2 percent for a day, a month, six months? And when you say “on track to moderately exceed,” how should we define “moderately”? And how should we define “for some time”? <NAME>CHAIR POWELL</NAME>. So, as you know, maximum employment is not—is not something that can be reduced to a number the way inflation can. It’s a broad range of factors. It really always has been and, really, a substantial number of factors that we’ve indicated we would look at. So it’s broader labor conditions, consistent with our Committee’s assessment of maximum employment. So that would certainly mean low unemployment, it would mean high labor force participation, it would mean wages—it would be a whole range of things. And we’re not looking at a rule. We’re looking at a judgmental assessment, which I think we’ll be very transparent about as we—as we go forward. In terms of inflation, you know, this is a Committee that is both confident and committed to—and determined to reach our goals. And the idea that we would look for the, the quickest way out is just—it’s just not who we are. It’s not that—there’s no message of that here. We would not be looking for one month of 2 percent inflation; we said return to 2—to achieve 2 percent inflation. Okay. So just understand that, you know, we’re strongly committed to achieving our goals and the overshoot. So that should tell you about that. Oh, in terms of—okay, in terms of—so, what does “moderate” mean? It means not large. It doesn’t—it means not very high above 2 percent. It means moderate. I think that’s a fairly well-understood word. In terms of—in terms of “for a time,” what it means is not permanently and not for a sustained period. You know, we’re, we’re resisting the urge to try to create some sort of a rule or a formula here. And I think the, the public will understand pretty well what we want. It’s actually pretty straightforward. We want to achieve inflation that averages 2 percent over time. And if we do that, inflation expectations will be right at 2 percent, and that’ll help us achieve 2 percent inflation over time and avoid the situation where the central bank loses its ability to support the economy. <NAME>MICHELLE SMITH</NAME>. Thank you. James Politi. <NAME>JAMES POLITI</NAME>. Thanks for taking the question. James Politi with the Financial Times. Do you consider today’s enhanced forward guidance to have actual accommodation to the—to the U.S. economy from a monetary perspective and sort of deliver further support for the economy? Or is it just a tweak to your existing policy stance? And, in terms of fiscal support, do you assume in your own projections—not just, you know, private forecasters—that additional fiscal support will be forthcoming? Or do you expect weaker growth or a—or a larger contraction rather this year if no fiscal support is forthcoming? <NAME>CHAIR POWELL</NAME>. So, in terms of the effects, so I think what we’ve done is—is more or less aligned with the consensus statement today. So it’s, it’s in line with what, what might have been expected. As I mentioned, I think over time it will provide very powerful support for this economy as we move forward. In a sense, it’s consistent with expectations, so I don’t—I’m not looking for a big reaction right now. But I think, over time, again, guidance that we expect to retain the current stance until the economy is—has moved very far toward our goals is a strong and powerful thing. And I think that will be supportive of the economy over time. In terms of additional fiscal support, I guess your question is, what would happen if— yes, so, people have different assessments, and, and different participants in the FOMC made different assessments on their own. I think broadly, though, there is an expectation among private forecasters and among FOMC participants that there will be some further fiscal action. And there does seem to be an appetite on the part of all the relevant players to doing something. The question is, how much and when? And so I would just say that if—and it’s very hard to say. So, so far the economy has proven resilient to the—to the lapsing of the—to the, of the CARES Act unemployment— enhanced unemployment benefits. But there’s, there’s certainly a risk, though, that, that those who are unemployed have saved—appear to have saved some of those benefits, and they’ll, they’ll now spend them, and that, as the months pass, if, if there’s no follow-up on that, if there isn’t additional support and there isn’t a job for the—some of those people who are, are from industries where, where it’s going to be very hard to find new work, then you’ll—that will start to show up in economic activity. It’ll also show up in things like evictions and foreclosures and, and, you know, things that will scar and damage the economy. So that’s a downside risk. So I, I think the real question is, is, when and how much and what will be the—what will be the contents? And, you know, no one—no one has any certainty around that, but, broadly speaking, if we don’t get that, then there would certainly be downside risks through the— certainly through the channel I mentioned. <NAME>MICHELLE SMITH</NAME>. Thank you. Anneken, CNN. <NAME>ANNEKEN TAPPE</NAME>. Thanks for taking my question. Chairman Powell, given the recent update to the policy framework and repeated calls for this in the Fed Listens events, is the Fed open to other measures of the economy, such as income inequality and affordability of housing? <NAME>CHAIR POWELL</NAME>. So we—you know, we monitor everything we think is important in the U.S. economy. And in that—in a broad sense, all of it goes into thinking about monetary policy. You mentioned inequality. So, you know, disparities in, in income and in financial well- being by various demographic and racial categories is something we monitor carefully. Inequality, which I would point to—it’s a multifaceted thing. But I would point to the relative stagnation of incomes for people at the lower end of the income spectrum and also lower mobility. So those are things that hold back our economy. They are. The thing is, we don’t really have the tools to address those. We, we have interest rates and bank supervision and financial stability policy and things like that, but we can’t—we can’t get at those things through our tools. When we lower the federal funds rate, that supports the economy across a broad range of, of people and activities, but we can’t—we don’t have the ability to target particular groups. Notwithstanding that, we, we do talk about it, because these are important features of our economy. And we—you know, I, I think those are—those distributional issues are, are issues that are really for our elected officials. And I would say, I take them seriously as holding back our economy. The productive capacity of the economy is limited when not everyone has the opportunity, has the educational background and, and the health care and all the things that you need to be an active participant in our workforce. So I think we can—if we want to have the, the highest potential output and the—and the best output for our economy, we need that prosperity to be very broadly spread in the longer run. And I—again, I would just say, the Fed—you know, we can talk about those things a lot. And in, in—when we think about maximum employment in particular, we do look at individual groups. So high unemployment in a particular racial group like African Americans when—you know, we would look at that as we think about whether we’re really at maximum employment. We would look—we would look at that along with a lot of other data. So the answer is, we do look at all those things and, and do what we can with our tools. But, ultimately, these are issues for elected representatives. <NAME>MICHELLE SMITH</NAME>. Thank you. Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Yes, thank you, Chairman Powell, for the question. I just wanted some clarity here. At what point do you think it’s prudent to shift the bond purchases from market stability—as you had said, from the shorter-term maturities to more longer-term, more stimulus-related? <NAME>CHAIR POWELL</NAME>. So, you know, we think our—we think that our asset purchases are doing both the thing—both those things today. We think, clearly, there’s been great progress, in terms of market function. If you remember, early in the spring when the acute phase of the pandemic hit, market function was very low. And it’s improved rapidly and, and in many respects is, is in a good place now. We also, though, think that these asset purchases, which total $120 billion a month—you know, which is much larger than, for example, the last asset purchase program during the Global Financial Crisis and the recovery therefrom—we think that that’s also providing accommodative financial conditions and supporting growth. And we think that’s fine. We’re also aware that we, we—there are ways we can adjust that, you know, to do various things—you know, make it smaller, make it larger, and also target different sectors of the—of the curve. And, you know, we’re, we’re going to continue to monitor developments, and we’re prepared to adjust our plans as appropriate. <NAME>MICHELLE SMITH</NAME>. Thank you. Victoria. Victoria Guida. <NAME>VICTORIA GUIDA</NAME>. Hi. Thanks for taking my question. I wanted to ask about a couple of things. First of all, if we don’t get a vaccine until well into next year, what does that mean for the economy? And then, somewhat related, I was wondering if you could provide any more detail about the stress scenarios that you all are going to release for the big banks and whether that is going to be another full-blown stress test, whether we’re going to publicly see those results, and what it might mean for bank payouts. <NAME>CHAIR POWELL</NAME>. Great. So, on the first one, what’s happening is basically we’re learning to live with—right now, we're learning to live with COVID, which still spreads. And we’re learning to, to engage in economic activity. All of this recovery that we’ve seen is in a context where—you know, where people are still at risk of, of catching it, and yet we’re able to resume lots and lots of economic activities. And that involves, as I mentioned, you know—I think the more social distancing we can preserve as we go back into the workforce—wearing masks, keeping our distance, that kind of thing—the better we’ll be able to get economic activity back up close to where it was. I do think, though, there are areas of the economy that are just going to really struggle until we have an—a vaccine that’s, that’s in wide—you know, wide usage and is, is widely trusted. And those are the ones where people were getting really closely—close together. I also think testing—to the extent you have cheap and rapid testing, you can do a lot with that in the workforce. You can—you can build confidence in the workforce if you have regular—very regular testing that doesn’t cost very much and you get the results really quickly. If you do that, you’ll be able to open a lot of workforces, particularly in cities where the overall case numbers are quite low. And that will help a lot. So I think we’re, we’re going to be finding lots and lots of ways to get out towards—you know, as far as we can. There’s always going to be that—for, for some time, there’s going to be certain activities that will be—that will be hard to, to resume. So I, I think that’s the only way I can say it. And I think trying to—you know, we all—when we make a forecast, we make assessments about that, but it’s really hard to say. There is no template here. There’s no—you know, there’s no experience with this. So, frankly, for the last 60 days or so, the economy’s recovered faster than expected. And that may continue or not. We just don’t know. And I think we should do those things that we control to make sure that we can recover as quickly as possible. And the main thing, again, is wearing a mask and keeping your distance while you’re in the workforce. That’s something we can all do that will limit the spread and let people go back to work, avoid major outbreaks, and things like that. In, in terms of the stress tests, so I really don’t have any—you know, we’re getting ready quite soon to be making announcements and saying things publicly. There’s not much I can say with you—nothing, really, that I can say that’s—on that today. I don’t have anything for you. <NAME>MICHELLE SMITH</NAME>. Thank you. Chris Condon. <NAME>CHRISTOPHER CONDON</NAME>. Thank you, Michelle. Good afternoon, Chairman Powell. You have emphasized many times, including today, that the Fed can only lend and not spend, and sometimes the latter is what’s really needed. But to the extent that a $600 billion lending program for small and midsize companies could help, what exactly is wrong with the design or function of the Main Street Lending Program, which has purchased just, I think, $1.4 billion in loans so far? Eric Rosengren at the Boston Fed has said recently that Congress should clarify how much risk it wants the program to take. But Congress has already appropriated substantial funds for the 13(3) programs, and these are funds that are explicitly designed to absorb losses. Meanwhile, my colleagues who cover the banking sector say they’re being told by commercial banks that the Treasury Department is advising them to target zero losses—zero losses in Main Street Program loans. So, if I may, why is it that the Federal Reserve, the Congress, and the Treasury apparently cannot agree on a loss tolerance that should be applied to the Main Street Lending Program in a way that would allow badly needed credit to reach these companies? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So, a couple things about Main Street. It, it reaches the whole nation. It’s got more than half of the banking industry assets signed up among the banks that are part of it, and it’s making loans. The number is more like—it’s close to $2 billion now. So the numbers are going up. Banks are joining; borrowers are coming. And it’s significant. It’s, it’s relatively small now, but it can scale up in response to economic conditions, should that be— should that be appropriate. You know, if you look out in the lending world, surveys generally find that, that firms are not citing credit constraints as a top problem. And that, that is a lot of PPP, bank credit lines, and syndicated loans. There’s a lot of credit being let out there. So—but you’re right. We, we are looking at some things. We’re looking at—some lenders are concerned about the underwriting expectations. So banks are going to—their approach is likely to be that they’re going to underwrite this loan roughly the same as they underwrite any loan. They’re keeping part of it, and, you know, what, what we want to do is make sure that—that they know that they should take the payment deferrals and other things in, in place, and also that—you know, it’s, it’s really—it’s really a, a facility for, for companies or borrowers that, that don’t have access to, to “regular way” borrowing now. Otherwise, why would we need Main Street? So that’s what we're working on. And we’ll be doing some, some—we’ll be making some changes in that respect. I don’t—I saw what President Rosengren said. I, I can’t really comment directly on that. I just would say that, you know, this is 13(3). If you look at the law under section 13(3), it’s very clear that we are to make loans only to solvent borrowers. And, and the CARES Act is quite specific in keeping all of the terms of, of section 13(3) in effect, including the requirement that we, you know, gather good evidence that the borrower is solvent. This was—this law was amended in, you know, under—in Dodd-Frank, and the idea was, was to make it challenging and put hurdles in place before we made loans—at the time, the thinking was to banks. So now we—now we’re using that same law for, for smaller business borrowers, and, you know, it doesn’t—it’s not a perfect fit. And, and, I would also just say, for many borrowers, they’re in a situation where their business is still relatively shut down, and they won’t be able to service a loan, and so they may need more fiscal support. Having said that, we’re, we’re continuing to work to, to improve Main Street, to make it more broadly available—make it pretty much to any company that needs it and that can service a loan. <NAME>CHRISTOPHER CONDON</NAME>. And can you just very briefly address the reports that the Treasury is advising banks to target zero losses? Is that appropriate? <NAME>CHAIR POWELL</NAME>. I can’t say. I don’t—I don’t know about that. I haven’t heard those reports. You know, again, if you think about it, we, we weren’t—we’re, we’re going to have to go through the banking system to do this. We—we’re not going to have a hundred thousand or a million loan officers working for the Fed and the Treasury. So we’re going to go through the banking system, and the banks—banks like to make good loans. That’s what they do. They’re trained to make good loans. So you should expect that they—and we expect that they will do some underwriting. We also want them to take some risk, obviously, because that was the point of it. And the question is, how do you dial that in? It’s, it’s not an easy thing to do. And, you know, we’re getting some loans made, and we’re hopeful that we’ll, that we’ll clarify this and that credit will continue to flow. <NAME>MICHELLE SMITH</NAME>. Thank you. Chris Rugaber. <NAME>CHRISTOPHER RUGABER</NAME>. Hi, thanks for taking my question. Chair Powell, you’ve talked a couple of times about parts of the economy that may not recover as fast as we’ve seen so far. Presumably you’re referring to airlines, hotels, other sections—you know, parts of the economy that rely on close contact. How are you thinking about that, in terms of its overall impact? Is that sector large enough to say keep unemployment above—you know, far above your maximum goals? Are you expecting that to come back with a vaccine? Or are a lot of those folks going to have to find, you know, new jobs in new industries? And should we expect the Fed will keep rates at zero until all of that reallocation is done? Thank you. <NAME>CHAIR POWELL</NAME>. Yes, we—of course, we can’t be—we can’t be really sure we know the answers to those questions. But I would say, the, the likely path is that the—that the expansion will continue. And it’s, as I said, it’s well along, and it’ll move most easily through the parts of the economy—it’ll still take some time, but the parts of the economy that weren’t exactly directly affected, that didn’t involve getting people in large groups together to feed them, to fly them around, to put them in hotels, do entertainment, things like that—those are going to be the places that are—that are very challenging. So there will also be the—you know, the places that are affected that way. And that’s going to be challenging for, for some time. It just is. And we don’t really know how long that will be. It’s—you know, it’s millions of people. As I mentioned, we had 11 million—something like 11 million people in the payroll survey have gone back to work out of 22 million who went—who lost their jobs in March and April. So that’s half of them. So, 11 million— particularly if the pace of, of returning to work slows down, it’s going to leave a large—a large group of people. And it’ll be very meaningful from a macroeconomic standpoint. And our commitment is not to forget those people. As I mentioned, we want—you know, the sense of our forward guidance is that policy will remain, as we’ve said, highly accommodative until the— until the expansion is well along—really, very close to our goals. And even after, if we do lift off, we will keep policy accommodative until we actually have a moderate overshoot of inflation for some time. So those are powerful commitments that we think will, will support the full recovery, including those people, as long as it takes. <NAME>MICHELLE SMITH</NAME>. Thank you. Mike McKee. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, Michael McKee from Bloomberg Radio and Television. Based on what you were just saying about keeping policy accommodative for a very long time into the recovery, lower-for-longer as far out as three years in your latest projections, is that basically it for the Fed? In other words, since interest rates are your main tool, the things you can do would push down on interest rates. But is it really—is it the case now that the only additional stimulus that can come to the economy is from the fiscal side? <NAME>CHAIR POWELL</NAME>. Well, no, I wouldn’t—I certainly would not say that we’re out of ammo. Not at all. So, first of all, we, we do have lots of tools. We’ve got the lending tools, we’ve got the balance sheet, and we’ve got further forward guidance—further forward guidance. So we, we—there’s still plenty more that we can do. We do think that our—that our, our rate policy stance is an appropriate one to support the economy. We think it’s powerful. And, as I mentioned, you know, this is the kind of guidance that will provide support for the economy over time, the idea being that policy will remain highly accommodative until the recovery is well along—really, very close to our goals—and then will remain accommodative even after we lift off. So I think that’s, that’s a really strong place for, for rate policy to be. But, again, we have the other margins that we can still use. So, no. Certainly, we’re not out of ammo. <NAME>MICHAEL MCKEE</NAME>. Well, if I could follow up, in terms of the balance sheet, are you concerned that your actions are more likely to produce asset price inflation than goods-and- services inflation? In other words, are you risking a bubble on Wall Street? <NAME>CHAIR POWELL</NAME>. You know, so, of course we monitor financial conditions very carefully. These are—these are not new questions. These were questions that were very much in the air a decade ago and more when, when the Fed first started doing QE. And, I would say, if you look at the long experience of, you know, the 10-year, 8-month expansion, the longest in our recorded history, it included an awful lot of quantitative easing and low rates for 7 years. And, I would say, it was notable for the lack of the emergence of, of some sort of a financial bubble—a housing bubble or some kind of a bubble, the popping of which could threaten the expansion. That didn’t happen. And, frankly, it hasn’t really happened around the world since then. That doesn’t mean that it won’t happen, but—and so, of course, it’s something that we monitor carefully. After the financial crisis, we started a new—a whole division of the Fed to focus on financial stability. We look at it in every—from every perspective. The FOMC gets briefed on a quarterly basis. At the Board here, we talk about it more or less on an ongoing basis, so it is something we monitor. But I don’t know that the—that the connection between asset purchases and, and financial stability is a particularly tight one. So—but again, we won’t be—we won’t be just assuming that. We’ll be checking carefully as we go. And, by the way, the kinds of tools that we would use to address those sorts of things are not really monetary policy. It would be more tools that strengthen the financial system. <NAME>MICHELLE SMITH</NAME>. Thank you. Don Lee. <NAME>DON LEE</NAME>. Chair Powell, I’d like to ask you about the labor market. As you know, in August there were about 30 million persons claiming unemployment benefits. Yet the BLS jobs report for August showed about 13½ million unemployed, only about 6 million more than before the pandemic. I wonder how you reconcile that and what you think the actual labor market conditions are. <NAME>CHAIR POWELL</NAME>. So, I mean, I think the overall picture—take a step back from this. The overall picture is clear, and that is that the labor market has been recovering, but that it’s a long way—a long way from maximum employment. I think that’s, that’s the bottom line on it. So, within that, though—take claims in particular. The number of claims, the quantity of claims, and, frankly, the fact that PUA claims are new—the Pandemic Unemployment Assistance claims—that’s a new system that had to be set up. The actual counting of the claims is, is volatile, and, and it’s very difficult to take much signal about the particular level. So, you know, because people were setting those systems up, and when they got them set up, they counted them all at once and things like that. I think, though, what you’ve seen is that the level of—certainly the level of initial claims has declined very sharply from the very high levels of March and April and is now at a lower level—continues either to be flat or gradually decline. It’s worth noting—and that’s good—it’s worth noting that that level is maybe five times the level of what claims were. Claims were around 200,000; now they’re 900,000, in that range, weekly for, for initial claims. So that just tells you, the labor market has improved, but it’s a long, long way from maximum employment, and it will be some time getting back there. I think that’s the best way to think about it. In many parts of the economy there’s just a lot of disruption, and it’s, it’s really hard to say precisely where we are. I’ll give you another example with—you know, we say unemployment’s 8.4 percent. But if you count those who are—who are misidentified as, as employed when they’re actually unemployed and you add back some part of the participation number—so if you were—if you had a job and you were in the labor force in February and you lost it because of the pandemic, some of you are now being reported as out of the labor force. But I—you know, I would—I would more look at those people as unemployed. If you add those back, the level of unemployment’s probably 3 percent higher. On the other hand, by that metric, the, the unemployment rate would have been in the—in the 20s in, in April. So the improvement has been quite substantial under any measurement. But the level is still quite high. <NAME>DON LEE</NAME>. Well, if I could follow up, is—is it the Fed’s aim to get back to 3.5 percent or even lower? <NAME>CHAIR POWELL</NAME>. Yes, absolutely. You know, I, I can’t be precise about a particular number, but let me just say, there was a lot to like about 3½ percent unemployment. It’s not a magic number. No one would say that number is the touchstone or that is, you know, maximum employment. I would just say, you asked about 3½ percent. A 3½ percent unemployment rate showed, you know, gains being shared very widely across the income spectrum—in fact, going more to people at the bottom end of the spectrum. It showed labor force participation coming up as—up above many estimates of its trend, as people who’d been out of the labor force were being pulled into a tight job market. There’s a lot to like about a tough—a tight job market, particularly in a world where we didn’t see inflation. So, yes, we’d love to get back to that. I mean, I would say, we would like to get back—rather than to a particular number, we’d like to get back to a strong labor market where wages are moving up, where people can find work, where labor force participation is holding up nicely. That’s what we’d really love to get back to. Now, of course we would—we need inflation to perform in line with, with our framework. But the good news is, we think we can have quite low unemployment without raising troubling inflation. <NAME>MICHELLE SMITH</NAME>. Thank you. Nancy Marshall-Genzer. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Nancy Marshall-Genzer with Marketplace. Chair Powell, I want to follow up on the wealth gap issue. I know you were—that you have limited tools. But are there things that you can do, possibly in the area of research and maybe expand your research on racial economic gaps? <NAME>CHAIR POWELL</NAME>. You know, we do—we are gifted with a, a substantial group of researchers who really cover the waterfront. And we do a significant amount of research on racial disparities in—across multiple variables, including wealth, as you asked about. So we do that. And we also—remember, we have our Division of Consumer and Community Affairs, which is present in communities around the country. And the Reserve Banks all have very active community affairs groups. They’re present in communities around the country. So it wasn’t just the Fed—Fed Listens events. It’s more, just, over a long period of time we, we are in contact with people in those communities to understand their experience of the economy. We serve all Americans, and we know that. And we’re going to use our tools to, to reflect that fact. So the answer is “yes.” We do quite a bit of research, and I suppose we could do more, but we really do a lot. And we contribute to those fields and those assessments of, of the state of the economy. And we do that not just because it’s interesting and important, but because it’s important for the economy and important for our mandate. We are assigned “maximum employment.” Now, what does that mean? As I mentioned earlier, it doesn’t mean a particular headline unemployment number. What it means is maximum employment. So, you know, we look at—look at that in many, many different variables, and we ask ourselves whether those variables are—those labor market conditions are consistent with our assessments of what would constitute maximum employment. And that would include all of the things that we’re talking about. <NAME>MICHELLE SMITH</NAME>. Thank you. Greg Robb. <NAME>GREG ROBB</NAME>. Hi, Greg Robb from MarketWatch. Thanks for this. I want to go back to the new forward guidance that you have. And you said that it’s powerful, but you’ve already have two dissent—two dissenting voters on it. And I was wondering if there’s other, other people who argued against it. And what do you say to the two who dissented? It looks like President Kashkari wanted a simpler forward guidance, and President Kaplan thought that the current guidance you have was fine for now. So, like, how did you argue back on those, on those arguments? Thank you. <NAME>CHAIR POWELL</NAME>. I wouldn’t—I don’t want to comment particularly on, on the two dissenters, but they, they consent—they dissented from, of course, different perspectives, and, and that should be clear. That’s their—they’re not they’re sort of on, on two sides of the, of the discussion. But I would say this: I am blessed —with having a Committee of highly thoughtful people who bring diverse life experiences and diverse careers, and, of course, diverse views to our work. And I wouldn’t have it any other way. I wouldn’t. So, so I would just say, the right—in our discussions the last couple of days, the whole Committee, everybody on the Committee is very supportive of the Statement on Longer-Run Goals and Monetary Policy Strategy and what’s in there—very, very broad support, unanimous support for that. Everyone sees the, the changes in the underlying economy and sees, in their own way, the need to address those—and including the changes we made to the employment mandate and to inflation so that we’re now at flexible average inflation targeting. Of course, there would be—this is—you know, we’re the first major central bank to adopt this framework. There’s no cookbook, and we—you know, this is the first guidance under our new framework. So, of course there would be a wide range of views, and you would expect that. And it’s actually a healthy thing. So I welcome that discussion. I would also say this: You know, this is all about credibility, and we understand perfectly that we have to earn credibility. This, this facility—this, this framework has to—we have to support it with our actions. And I think today is a very good first step in doing that. It is strong, powerful guidance. It is—it ties in very nicely with the Statement of [on] Longer-Run Goals and Monetary Policy Strategy. We had quite a robust discussion, and there are, there are different ideas on how to do this, but I—that’s just, that’s just the way it is when you have a diverse group of highly thoughtful and effective people. And so I’m pleased with where it came out. <NAME>MICHELLE SMITH</NAME>. Thank you. Hannah Lang. <NAME>HANNAH LANG</NAME>. Hi, Chair Powell. Thanks so much for taking my question. I wanted to ask about commercial real estate. I, I know you had mentioned before how you weren’t sure if there was a way the Fed could support CRE borrowers. But I was just wondering if you had—if you’ve had any other continuing discussions on that and if there’s any potential way that the Fed could step in in that area. <NAME>CHAIR POWELL</NAME>. So thank you for that question. You know, we’ve actually spent quite a bit of time on this as Secretary Mnuchin, I think, mentioned the other day. And I’ll say just a couple things. First, you know, our facilities are essentially always—they have to be, under the law—broad based and not so much targeting any single sector. Also, it’s important to remember that CRE, commercial real estate, benefits from several of our existing facilities. So the TALF takes commercial mortgage-backed securities and SBA commercial real estate deals. And the New York Fed purchases agency CMBSs directly. In addition, I would say, Main Street helps businesses pay their rent, you know. So we’re, we’re helping real estate, you know, in a number of other ways—commercial real estate. Also, CMBS issuance has resumed. Spreads have tightened on CMBS. There are a couple of issues. One is just that commercial properties with CMBS loans often have covenants—uniformly, I think, have covenants that forbid them to take on more debt. So you have a situation, and you have a situation where, where you—without a legal change or some kind of an innovation that defies discovery so far, you’re—you have a hard time providing mass relief with regard to real estate that’s in, in commercial mortgage-backed securities. So we’re still working on it. We’re still looking. I would say, it may be that further support for commercial real estate will require further action for Congress—from Congress. <NAME>MICHELLE SMITH</NAME>. For the last question, we’ll go to Brian Cheung. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. So it seems like a lot of the new inflation framework is about shaping inflation expectations. But the average American who might be watching this might be confused as to why the Fed is overshooting inflation. So what’s your explanation to Main Street, to average people what the Fed is trying to do here and what the outcome would be for those on Main Street? Thanks. <NAME>CHAIR POWELL</NAME>. That’s a very, very important question, and I actually spoke about that in my Jackson Hole remarks a couple weeks ago. It’s not intuitive to people. It is intuitive that, that high inflation is a bad thing. It’s less intuitive that inflation can be too low. And the way I would explain it is, is that inflation that’s too low will mean that interest rates are lower. There’s an expectation of future inflation that’s built into every interest rate, right? And to the extent inflation gets lower and lower and lower, interest rates get lower and lower. And then the Fed will have less room to cut rates to support the economy. And this isn’t some idle, you know, academic theory. This is what’s happening all over the world. If you, if you look at many, many large jurisdictions around the world, you are seeing that phenomenon. So we want inflation to be—we want it to be 2 percent, and we want it to average 2 percent. So if inflation averages 2 percent, the public will expect that, and that’ll be what’s built into interest rates. And that’s just—that’s all we want. So we’re not looking to have high inflation. We just want inflation to average 2 percent. And that means that, you know, in a downturn, these days, what happens is, inflation, as has happened now—it moves down well below 2 percent. And that means that we’ve said for, for—we would like to see and we will conduct policies so that inflation moves, for some time, moderately above 2 percent. So it won’t be—these won’t be large overshoots, and they won’t be permanent but to help anchor inflation expectations at 2 percent. So, yes, it’s, it’s a challenging concept for a lot of people. But, nonetheless, the economic importance of it is, is large. And, you know, those are the people we’re serving, and, you know, we serve them best if we can actually achieve average 2 percent inflation, we believe. And that’s why we changed our framework. <NAME>MICHELLE SMITH</NAME>. Thank you very much. <NAME>CHAIR POWELL</NAME>. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us—maximum employment and price stability. Since the beginning of the pandemic, we have taken forceful actions to provide relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. Today my colleagues on the Federal Open Market Committee and I reaffirmed our commitment to support the economy in this challenging time. Economic activity has continued to recover from its depressed second-quarter level. The reopening of the economy led to a rapid rebound in activity, and real GDP rose at an annual rate of 33 percent in the third quarter. In recent months, however, the pace of improvement has moderated. Household spending on goods, especially durable goods, has been strong and has moved above its pre-pandemic level. In contrast, spending on services remains low, largely due to ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality. The overall rebound in household spending owes, in part, to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals. The housing sector has fully recovered from the downturn, supported in part by low mortgage interest rates. Business investment has also picked up. Even so, overall economic activity remains well below its level before the pandemic, and the path ahead remains highly uncertain. In the labor market, roughly half of the 22 million jobs that were lost in March and April have been regained, as many people were able to return to work. As with overall economic activity, the pace of improvement in the labor market has moderated. The unemployment rate declined over the past five months but remained elevated at 7.9 percent as of September. Although we welcome this progress, we will not lose sight of the millions of Americans who remain out of work. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the services sector, for women, and for African Americans and Hispanics. The economic dislocation has upended many lives and created great uncertainty about the future. The pandemic has also left a significant imprint on inflation. Following large declines in the spring, consumer prices picked up over the summer, in part reflecting a rise in durable goods prices. However, for those sectors that have been most affected by the pandemic, prices remain particularly soft. Overall, on a 12-month basis, inflation remains below our 2 percent longer-run objective. As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend in large part on the success of efforts to keep the virus in check. The recent rise in new COVID-19 cases, both here in the United States and abroad, is particularly concerning. All of us have a role to play in our nation’s response to the pandemic. Following the advice of public health professionals to keep appropriate social distances and to wear masks in public will help get the economy back to full strength. A full economic recovery is unlikely until people are confident that it’s safe to reengage in a broad range of activities. The Federal Reserve’s response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. As noted in our Statement on Longer-Run Goals and Monetary Policy Strategy, we view maximum employment as a “broad-based and inclusive goal.” Our ability to achieve maximum employment in the years ahead depends importantly on having longer-term inflation expectations well anchored at 2 percent. As we said in September and again today, with inflation running persistently below 2 percent, we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect that it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, over coming months we will continue to increase our holdings of Treasury securities and agency mortgage-backed securities at least at the current pace. These asset purchases are intended to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses. At this meeting, my colleagues and I discussed our asset purchases and the role they are playing in supporting the recovery. At the current pace, our holdings of securities are rising at a substantial rate of $120 billion per month—$80 billion per month of Treasuries and $40 billion per month of agency MBS. We believe these purchases, along with the very large purchases made to preserve financial stability in the depths of the crisis, have materially eased financial conditions and are providing substantial support to the economy. Looking ahead, we will continue to monitor developments and assess how our ongoing asset purchases can best support our maximum- employment and price-stability objectives as well as market functioning and financial stability. The Federal Reserve has also been taking broad and forceful actions to more directly support the flow of credit in the economy for households, for businesses large and small, and for state and local governments. Preserving the flow of credit is essential for mitigating damage to the economy and promoting a robust recovery. Many of our programs rely on emergency lending powers that require the support of the Treasury Department and are available only in very unusual circumstances, such as those we find ourselves in today. These programs serve as a backstop to key credit markets and have helped to restore the flow of credit from private lenders through normal channels. We have deployed these lending powers to an unprecedented extent, enabled in large part by financial backing and support from Congress and the Treasury. When the time comes, after the crisis has passed, we will put these emergency tools back in the toolbox. As I have emphasized before, these are lending powers, not spending powers. The Fed cannot grant money to particular beneficiaries. We can only create programs or facilities with broad-based eligibility to make loans to solvent entities with the expectation that the loans will be repaid. Many borrowers are benefiting from these programs, as is the overall economy. But for many others, getting a loan that may be difficult to repay may not be the answer. In these cases, direct fiscal support may be needed. Elected officials have the power to tax and spend and to make decisions about where we, as a society, should direct our collective resources. The fiscal policy actions that have been taken thus far have made a critical difference to families, businesses, and communities across the country. Even so, the current economic downturn is the most severe in our lifetimes. It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year, and it may take continued support from both monetary and fiscal policy to achieve that. I’d like to mention a couple of changes that we plan on making to our Summary of Economic Projections beginning in December. First, we will release the entire package of SEP materials at the same time that the FOMC statement comes out. Previously, some of these materials were released three weeks after the meeting as part of the minutes. This step will make more information available at the time of our policy announcements, including the distributions of forecasts and how participants judge the uncertainty and risks that attend their projections. Second, we will add two new graphs that show how the balance of participants’ assessments of uncertainty and risks have evolved over time. These changes to the SEP will provide a timely perspective on the risks and uncertainties that surround the modal or baseline projections, thereby highlighting some of the risk-management considerations that are relevant for monetary policy. 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 are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. It’s Rachel Siegel from the Washington Post. Thanks very much for taking my question. I’m wondering if you can speak specifically about what indicators you’re seeing that suggest the pace of improvement has moderated, including in the labor market, and how correlated those indicators are to the recent rise in COVID cases that we’ve seen going into flu season. Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So, of course. Let’s start with February. In February, we had an economy that was performing well. Then the pandemic hit, and we had a record decline in activity in March and April, and then we had a record bounceback in May and June. And so as I think would have been expected and was expected, the pace of improvement from May and June has now moderated, so it’s not unexpected. And I think if you look at just about anything, you know, for example, the payroll readings, the payroll job gains in May and June were just outsized. And they’re certainly still very large, but they’ve—but the pace of improvement has moderated. That’s the case for, for all different measures in the labor force—in the labor market, rather. Another would be claims. Just about all the data were—showed a big bounceback. But then, as you would expect, when, when you sort of had people—a lot of people go back to work at once, the pace will moderate. Same thing with economic activity. Most forecasts call for, you know, still a significant growth in the fourth quarter but not at the 33 percent annualized pace that we had in the third quarter. So, in a sense, that would be—that would be as expected. We have been concerned that the downside risks, though, are, are prevalent now, which are—which are really the risk of the further spread of the disease and also the risk that, that households will run through the savings they’ve managed to accumulate on their balance sheet and that that could weigh on activity. But what we see up to the present, really, is, continued growth, continued expansion, but at, at a gradually moderating pace. <NAME>MICHELLE SMITH</NAME>. Thank you. Marty Crutsinger, Associated Press. <NAME>MARTIN CRUTSINGER</NAME>. Thank you. Could you talk a little bit about where you think the stimulus package that is being debated in Congress is and how severe a threat that could be to the economy if it does not get passed, say, before January? <NAME>CHAIR POWELL</NAME>. So it is—obviously, it’s for Congress to decide the timing, size, and components of further fiscal support for the economy, and I will say that the support provided by the CARES Act was absolutely essential in supporting the recovery that we’ve seen so far, which has generally exceeded expectations. And I do think it’s likely that further support is likely to be needed for monetary policy and fiscal policy. I just mentioned the two risks that I think we, we face, and those would be well addressed through more fiscal policy. One is the further spread of the virus, and the other is the lapsing of the CARES Act benefits and the savings on people’s balance sheets that will dwindle. But I, you know, I think it’s appropriate for us not to try to prescribe for Congress exactly what they should do or what the timing of it should be or what the size of it should be and leave it at that. <NAME>MICHELLE SMITH</NAME>. Nick Timiraos. <NAME>NICK TIMIRAOS</NAME>. Thanks, Chair Powell. Nick Timiraos at the Wall Street Journal. To follow on Marty’s question, you really have been saying since April that more is needed on the fiscal policy front, and yet we don’t seem to be that much closer than we were in the spring or the summer to additional spending. Two questions: Would the lack of fiscal support compel the Fed to provide additional accommodation, and are you and your colleagues being more vocal about the need for fiscal support because the capacity for monetary policy to support growth is diminished here, given the low level of short- and long-term rates? Thank you. <NAME>CHAIR POWELL</NAME>. So on your first question, you know, we’ll take into account all external factors and, and do what we think we need to do with the tools that we have to pursue our goals. That’s what we will do. And I’ve said it on a couple of occasions that that will go better and move more quickly if we have a broad set of policies from across the government. And we’ve said this in the very beginning: It’s really, first and foremost, health-care policy, getting the—getting the spread of the virus under control and working on therapeutics and vaccines and that kind of thing, getting—so that—those are absolutely critical to the economy. Now, those are important, as well as health policies. They’re, they’re going to be critical to the economy. Fiscal policy can do what we can’t, which is to replace lost incomes for people who are out of work through no fault of their own. And then we—what we can do is, we can obviously support financial stability through our lending programs, and, and we can support demand through, through interest rates and asset purchases and that sort of thing. So we’re, we’re going to take the economy as it comes, including all external factors. So I think all of us lived through the experience of the—of the years after the Global Financial Crisis. And for a number of years there, in the middle of the recovery, fiscal policy was pretty tight. And. and I think I just would say that I think we’ll have a stronger recovery if we can just get at least some more fiscal support when it’s appropriate, you know, when it’s appropriate and in the size Congress thinks is appropriate. I do think that that will likely—and, by the way, you see, you know, a lot of discussion on both sides of the aisle, on both sides of the Hill that suggests generally that there will be something. <NAME>MICHELLE SMITH</NAME>. Thank you. Steve Liesman, CNBC. <NAME>STEVE LIESMAN</NAME>. Thank you. Mr. Chairman, also to follow up on sort of what Nick was talking about, two questions about quantitative easing. The first is, if the market is functioning better, as you and other Fed officials have said, and QE right now is designed for smooth market functioning, why haven’t you reduced QE that you’re doing if the market is functioning better already? The second question I have is, what good, for the broader economy, would additional QE do at this point, given that interest rates are already low and don’t seem to be rising even above 1 percent? Thank you. <NAME>CHAIR POWELL</NAME>. So, on the first—the first question, it’s—our asset purchases are serving both purchases, both—sorry, both purposes: financial market function and support for economic activity. So—and that’s really been true—I think in the very beginning of the crisis, the main focus was, obviously, financial, financial market function, particularly in, in, you know, some of the major markets. But after that period, we’ve, we’ve understood all along that our purchases are also supporting economic activity, and that’s important. And that need hasn’t dwindled at all. So, so we haven’t looked at reducing purchases. So in terms of what they can do, first I would just say, the purchases that we have in place are providing strong support to economic activity still. And, by the way, they’re sustaining the gains we’ve made in financial stability. You know, we don’t—we don’t take anything for granted. We, we don’t expect that things will deteriorate. But, nonetheless, we have a habit of keeping things in place for a while. So we’re not taking our gains in financial market function for granted, although, admittedly, they’ve been very large. So the asset purchases are just another very important piece of the accommodative policy stance that we have. And, you know, as you know, these—we’re buying $120 billion a month. That’s $1.44 trillion, if I remember my times tables. And it’s just providing a lot of support for, for economic activity and, by the way, removing just about the same amount of duration risk from private hands as QE3 did. So this is a big program, and it’s doing a lot of good. And we also, today, you know, we had a full discussion of the options around quantitative ease—not quantitative easing, the asset purchase program, and, you know, we understand the, the ways in which we can adjust the parameters of it to deliver more accommodation if it turns out to be appropriate. Right now, we think that this very large, effective program is delivering about the right amount of accommodation and support for the markets, and so it continues. <NAME>MICHELLE SMITH</NAME>. Thank you. Craig Torres, Bloomberg. <NAME>CRAIG TORRES</NAME>. Hi, Chair Powell. First, it’s great to see you’re okay. Chair Powell, what is the risk that we come out of this with lower productivity; weaker labor force attachment; slower growth; and, important for your tools, Chair Powell, a cycle of lower real interest rates? And if you think this type of scarring is a risk, then I’m wondering, what’s stopping the Federal Reserve from having a more explicit dialogue with Congress about the particular types of fiscal support we might need to avoid this outcome to make sure that you push away from the zero boundary or that the economy does when we exit this? Thanks. <NAME>CHAIR POWELL</NAME>. Thank you. So you did—you laid out nicely the, the risks of damage to the supply side of the economy, or “scarring,” as you put it. And we’ve been talking about those since the very beginning of the pandemic. The risk is that, for example, people are out of the labor force for an extended period of time. They lose their attachment to the labor force, and it’s harder to get back. Your skills atrophy. It’s harder to get back in. And the record is, if you don’t get back in very fairly quickly, it can be harder to get back in. And that holds down the whole economy. And, by the way, it also—it places enormous burdens on individuals who may have this happen to them at an important stage in their career. So it’s, it’s, it’s important. And, you know—so that is one of the reasons why our response was so strong and so urgent at the beginning and why we called this, this set of risks out. I don’t know how we could be much more vocal about it than we have been. Fortunately, for—you know, the economic recovery has exceeded, certainly, the downside cases that we were very concerned about and even, even exceeded—sort of exceeded the baseline expectations. Now, that’s so far. We are a long way from our goals. And, you know, we’re, we’re sort of halfway there on the labor market recovery at best. And, and there are parts of the economy where it’s going to be hard until there’s a vaccine—you know, the parts of the economy. So, you know, that’s the supply-side damage. That’s sort of the third thing that we talk about. The first, at the beginning, it was to provide relief and comfort. The second—then the second part was to provide support when—to the expansion when it came. And the third was to avoid longer-run damage to the economy, and that’s, that’s all of these things. I think we have been vocal. You know, we’ll, we’ll try to continue to do that. And, and those are—that’s again—that goes to keeping this episode as short as it can be and avoiding unnecessary business bankruptcies, unnecessary household bankruptcies, and unnecessary long- term stays of unemployment or supporting people through them so that they can maintain their financial footing and their lives and be able to go back to work in a productive way. It’s, it’s very important that—you know, there is a real threat here of those things, and, and, you know, we’re trying to do everything we can to minimize that threat. <NAME>MICHELLE SMITH</NAME>. [Inaudible] <NAME>JEANNA SMIALEK</NAME>. [Inaudible] —look like and whether you anticipate any consequences if they are not extended? <NAME>CHAIR POWELL</NAME>. Yes, thanks. So, first, let me say, we do think that the facilities have, have generally served their purposes well, particularly in supporting the flow of credit, particularly acting as backstops to private markets. So, overall, we think that the, the programs have, have gone well. In terms of the extension, we are, we are just now turning to that question. You know, we’ve had a lot of things to work our way through. Right now we’re just in the process of turning to that question and, of course, not made any decisions. And in terms of the process, this is a decision that, of course, we have to make and will make jointly with the Treasury Department. <NAME>MICHELLE SMITH</NAME>. Thank you. David Gura. <NAME>DAVID GURA</NAME>. [Inaudible] IMF Chief Economist Gita Gopinath wrote—Gita Gopinath wrote a piece this week in which she said, unequivocally, we’re in a global liquidity trap and talked about the limits of monetary policy right now. She said, “Fiscal policy will need to be the main game in town.” And it’s been a busy week. I don’t know if you were able to pick up the pink paper and read that piece, but she does say 97 percent of advanced economies have rates below 1 percent. And I just wonder if you’d agree with her, in principle, that we are in a global liquidity trap, and what the consequences of that would be. We’ve talked a lot about fiscal policy here domestically, and she talks about the need for sort of a global cohesive approach to, to fiscal policy. My second question is, you talk about how you follow the epidemiology. You’re, you’re looking [inaudible]. And I wanted to ask you about how you look at [inaudible] Christine Lagarde laying out what the ECB plans to do. As you lent an ear to what she had to say the dire warnings that she was making this morning as she looks at the situation that Europe’s i,n , what can you and your colleagues learn about the second wave or the third wave that you’ve talked about and, and we’ve all feared when it comes to a, a policy response? <NAME>CHAIR POWELL</NAME>. Okay, thanks. So two questions. First, I, I take the sense of your first question to be, is monetary policy out of power or out of ammo? And the answer to that would be “no,” I don’t think that. I think—I think that we are strongly committed to using these powerful tools that we have to support the economy during this difficult time for as long as needed, and no one should have any doubt about that. And we do not doubt the power of the things that we’ve already done or the things that we may, may do in the future. I do think there’s more that can be done. And I also think, if you look at the stock of assets that we’ve bought, if you look at the facilities and, and the way we’ve been able to keep accommodative financial— financial conditions accommodative, I think we’ve been able to do a lot of things that are providing very strong support for the economy. And we’re going to—we’re going to keep at that. I’ve said—we’ve said from the very beginning, though, that this is particular—that the particular situation we find ourselves in is one where there is a sudden loss of income on, on the part of millions and tens of millions of people. It’s not so much a typical recession where demand weakens, the Fed cuts interest rates, interest rates stimulate demand, and the economy recovers. It’s a sudden shock where tens of millions of people are out of work. And the fiscal response was, was frankly, I think, very good and very robust in the United States. And it’s certainly one of the main reasons why the recovery has been as good as it’s been so far. So I do think fiscal policy is absolutely essential here. You know, stimulating aggregate demand is one thing, but where there’s a part of the economy that kind of will be resistant to that, you also need fiscal policy. And, of course, you need health-care policy too. I didn’t see Madame Lagarde’s comments this morning, but I, I took the sense of that question to be the spread of the disease in Europe, and what do we think about that? Yes. So, as I mentioned in my—in my opening remarks, it’s a concern. We have a widespread spike in cases across the country, more in some regions than others. And even if we don’t have—and I don’t expect that we would—sort of government-imposed restrictions, it does seem likely, though, that people who have maybe begun to engage in activities that they had in flying, staying in a hotel, going to restaurants, going to bars, and, and things like that, that they may pull back in a situation where suddenly the cases are everywhere in your city, your state, your community. So I do think that that’s a risk that we have as we go into the fall now and, and the cases spike. That, that could weigh on economic activity. One would expect that it would. We thought the same thing, in fairness, about the wave we had this summer in the South and the West. And the economy, you know, seemed to move right through that. This one seems to be larger and more widespread. In any case, it’s a risk, is what I would characterize it—I would characterize it as a risk, as I did in my—in my comments. <NAME>DAVID GURA</NAME>. Can I ask a quick follow-up, just about the passions of the Fed Chairman? We’ve listened to your rhetoric over the course of this pandemic, and you talked about what the Fed was doing, the reasons for doing it at first. You talked about the balance between monetary and fiscal policy. I think in your recent comments and in Governor Brainard’s comments, certainly, there’s been more passion yet about the need for Congress to do more—I know that you’re limited in what you can say or the degree to which you’d want to advise Congress, but a simple question: Do you feel that you’re being heard? As you look at the prospects for this economy and potential need for more fiscal policy, do you feel like those who are crafting that policy, or could be, are listening to you and have a firm grasp of what you’re saying about how that might affect or improve the economy going forward? <NAME>CHAIR POWELL</NAME>. So let me—let me say, in the first instance, our, our main focus is on doing our job, and that is really what we’re, we’re focused on is using the tools that Congress has given us and the assignment they’ve given us. And I think we’re, we’re—that is the thing that we think about night and day. I just know from, from the experience of the last cycle, it helps to have the whole government working on these things, and this one is particularly that way. And I, I don’t—I think—you know, I, I don’t want to say whether I feel like I’m being heard or not. But, sure, I think there are plenty of people on Capitol Hill who, on both sides of the aisle, on both sides of the Hill, who see a need for further fiscal action and understand perfectly why that might be the case. <NAME>DAVID GURA</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Edward Lawrence, Fox Business. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman, for taking the question. So what would cause the Federal Reserve to shift more of its asset purchases towards the long-term securities and Treasuries and change the amount of spending there also? And as a second point onto that, you know, would—if there’s no fiscal stimulus package, would that then trigger buying of more long-term assets or change the asset purchases? <NAME>CHAIR POWELL</NAME>. So I don’t really have a specific hypothetical I would—I would put to you. I would just say that we, we understand that there are a number of parameters that we have where we can shift the composition, the duration, you know, the size, the life, life cycle of the program. All of those things are, are available to us as ways to deliver addition—you know, more accommodation if we think that’s appropriate. Right now, we, we like the amount of accommodation the program is, is delivering. And it will just depend on the—on the facts and circumstances. We may reach a view at some point that we need to do more on that front. Today’s meeting was about analyzing the—one of the things it was about was about analyzing the various ways and having a, you know, good discussion about how to think about those, those various parameters, which I, I thought was quite a useful discussion. <NAME>MICHELLE SMITH</NAME>. Thank you. Victoria Guida. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. Thanks for taking the question. I wanted to ask about climate change. FHFA Director Mark Calabria recently said that financial regulators need to account for financial change—climate change, I’m sorry. What are you all thinking of doing on that front beyond what you’re already doing, and do you have any plans for joining the network for greening the financial system? <NAME>CHAIR POWELL</NAME>. Yes. So I, I do think that the public, public will expect and has every right to expect that we—that in our oversight of the financial system, we will account for all material risks and try to protect the economy and the public from those risks. Climate change is, is one of those risks. It��s a relatively—the science and art of incorporating climate change into our thinking about financial regulation is relatively new, as you know. And we are, you know, very actively, in the early stages of this, getting up to speed, working with our central bank colleagues and other colleagues around the world to try to think about how this can be part of our framework. And we’re watching what other—what other countries are doing. We’re active participants, as you know, in the CG—no, the greening the financial system. And, you know, we haven’t, we hadn’t actually formally joined, but we’re there. We’re in the working groups, and we’re doing all of that. So we’re very much working with and monitoring the things other central banks are doing. You hear—you know, there’s lots of research going on at the various Reserve Banks and here at the Board in trying to understand this. These tend to be longer-term risks. But, of course, the longer term does arrive over time. And, you know, we take it as our obligation to—you know, to understand these risks and incorporate them into our— into the way we supervise and, and think about the, the overall financial system and the economy. <NAME>MICHELLE SMITH</NAME>. Thank you. Howard Schneider, Reuters. <NAME>HOWARD SCHNEIDER</NAME>. Quick follow-up from Gina’s question: Have you gotten a commitment from Secretary Mnuchin to extend the 13(3) facilities if you decide it’s necessary, and are you concerned what a lame-duck Trump Administration might do in that regard? And then, more broadly, on the state of the economy, are you comfortable now that the tail risk for worst-case outcomes has been kind of swept aside and minimized at this point? Are we down, in other words, to kind of household-level problems among a large set of households, perhaps, but that the financial crisis, double-dip recession sort of scenarios are, are off the table? <NAME>CHAIR POWELL</NAME>. So, on your first question, we, we really are just turning to this issue now, and we have not made any decisions. We, we are just getting started on it, and, and it’s a decision that we’ll make jointly with the Treasury Department. And that’s, that’s really all I can say today. That’s all I have for you on that today. In terms of the tail risks, I mean, I think clearly the tail risks that we were worried about have, have subsided. And, you know, we were worried about very negative potential outcomes. And that—you know, that’s, that’s—what is to be expected of us is, is to think about how things can go wrong as well as the way things that can go right. But we, we have to—we do make policy from a risk-management standpoint. We don’t just look at the most likely case. We, we ask, “How do you make policy in light of the risks?” and often it’s downside risks in a situation like this. I would not say that anybody’s feeling comfortable about this, though. You know, we’ve gotten through the first five, six months of the—of the expansion better than expected, but we do see in Europe—look what’s happening in Europe, look what’s happening here—another spike in cases as the cold weather arrives and people are inside more. So I think we have to be humble about where we are relative to this—to this disease. It hasn’t gone away. Clearly, you know, therapeutics are advancing, research on vaccines are advancing, death rates are way down, hospitalization rates are, are lower now, but—so we’re learning. But, I mean, we, we are so— we’re very far from saying that we think we’ve got this and eliminated the tail risks. But I think, clearly, the tail risks have, have diminished since—at least our perception of them has diminished since earlier in the year. <NAME>MICHELLE SMITH</NAME>. Thank you. Scott Horsley, NPR. <NAME>SCOTT HORSLEY</NAME>. Thank you, Mr. Chairman. Earlier this summer, I know that you formed a task force to look at the distribution of coins around the System. I wonder if you can give us an update on how that’s going. I know there’s been some, some public relations effort. I think October was “Get the Coins Moving” month. Has that—has that problem subsided? <NAME>CHAIR POWELL</NAME>. So let me say why it’s such an important—you know, in a world where so many payments are made digitally and all that, coins and currency are very important for the relatively low-income people. And so it’s a really incredibly important part of the payment system, and we do pay a lot of attention to it. And I actually just—I just caught up this morning with the—with the person who heads that operation here who, who says that, yes, things have really gotten significantly better on the coin front. So we worked very hard to increase the supply of coins and, even more than that, the distribution of coins around the System and are happy to say that that situation is well on the way to normalizing itself. So very pleased to report that. <NAME>MICHELLE SMITH</NAME>. Thank you. James Politi, FT. <NAME>JAMES POLITI</NAME>. Thanks very much for the—for the question, Chair Powell. We’ve just had a presidential election here in the United States. We still don’t know who the winner is. Are you concerned that perhaps tensions or uncertainty over the outcome of the presidential election could pose a risk to the economic outlook or trigger market turmoil? And has the Fed had any discussions, either internally or with the Treasury Department, about responding to that, should it happen? <NAME>CHAIR POWELL</NAME>. Thanks. So I’m very reluctant, as you will imagine, to comment on the election directly, indirectly, at all, other than just to say that it’s a good time to take a step back and let the institutions of our democracy do their jobs. So, at the Fed here, we will, as always, continue to do our jobs. Every day we’ll continue to serve the American people using our tools to support the economy during this difficult time. You know, the—you ask if we had discussions. I would say, you know, the meeting we just finished, for example, what we do is we talk about the economy and markets, domestically and around the world. We hear reports on how households and businesses are doing. We talk about risks to the outlook. We talk about what the right policy response might be. And the election comes up in some—you know, it comes up now and again, but it is not at all a central focus of the meeting. Not at all. So I, I’ll just leave it at that. Again, very reluctant to get into anything more than that. Thanks. <NAME>MICHELLE SMITH</NAME>. Thank you. Anneken, CNN. <NAME>ANNEKEN TAPPE</NAME>. Thank you for taking my question. Chairman Powell, can you tell us a little bit more about why the minimum loan size under the Main Street facility was reduced last week and why that was done now rather than earlier, seeing that small businesses are still— clearly still—struggling to make the change necessary? <NAME>CHAIR POWELL</NAME>. Sure. So, we have had very little demand below $1 million in loans. And part of that just is that the fee structure is what it is, and that’s the compensation that the banks get. And there’s a certain amount of work that they have to do to get—to get into the loan program and do—and to document the thing, the loans that they make because these are loans that, you know, go on their balance sheet. They keep 5 percent, so they actually have to underwrite the credit. And we’re relying on them, to some extent, for, for doing that. And so we were reluctant. We moved the minimum down to $250,000, and we were reluctant to go below that. But we heard, over and over again, that it would be great if we could reduce it to $100,000. So—and, you know, we’ve been saying we’d have to redesign the program. And I, I got the question in a—in an oversight hearing a month or so ago with the Secretary and said that. And I went back to the office and thought, you know, okay, so what would that look like if we were to redesign the program in a way—what’s the least thing we could do to redesign the program so that we could move to a lower level? And it—basically, we concluded we could just change the fee structure to create incentives for that, so we did that. We try to be responsive. We want, you know, qualifying businesses to be able to borrow. And we’ll see how much demand will come. You know, with, with these programs, why did it—why didn’t we do it right away? We tend to—it’s—there’s more work than one might—certainly than I imagined in setting up one of these facilities. And you, you just try to get it out there and get it working and not try to do everything before you start it because you’ll never start it if you do that. Then you get it started, and you make changes. And we’ve been willing to make changes. That’s the most recent set of ones that we’ve done. And, again, we hope—we hope that it will help some companies, and I guess we’ll find out. <NAME>MICHELLE SMITH</NAME>. Thank you. Heather. <NAME>HEATHER SCOTT</NAME>. Heather Scott this time, right? Thank you, Chair Powell, for taking the question. You say that you’re—that you’re not out of ammo. So I’m wondering, then, what is the next tool you expect to be able to roll out? Would you consider some sort of credit program for state and local businesses—state and local governments that are facing real budgetary pressures? <NAME>CHAIR POWELL</NAME>. So when I say we’re not out of ammo, I’m looking at, you know, a couple of our tools, mainly. As I mentioned, the asset purchase program—there’s a number of dimensions in which we can adjust that if we deem it to be appropriate. Right now, we like the job it’s doing. We could, you know, if, if the facilities are extended, we could certainly look at new facilities. If—you know, if things deteriorate, that would be the case where you’d want to maybe continue the facilities and, and, and maybe change them and maybe have new ones. Who knows? But, certainly, the facilities have been doing a lot of work and been very successful, I think, overall in accomplishing that job. So I do think there, there are things that we can do. But, remember, we’ve always said this will take a whole of government approach, including health-care policy and fiscal policy too. So it really is, if you—if you want to get the economy back as quickly as possible to where we want it to be, then, then really it should be all of government working together. <NAME>HEATHER SCOTT</NAME>. If I could just follow up on that quickly. I mean, you spoke [inaudible] about the small business lending program. But that has only reached 400—there’s only been 400 loans. When you say the programs are effective, do you not think there’s more that can be done with another type of program or another redesign either for small businesses or for assisting state and local governments? <NAME>CHAIR POWELL</NAME>. Yes. There’s a bunch of programs. I would say that the, you know, the corporate—the larger corporate market-based lending program has been very successful without making a single loan—I think, unambiguously, has been a big success. I think the success—I think the state and local government program has also restored market function so that—whereas, you know, there were the, the sort of individual investors who wind up funding loans in the muni market through. through mutual funds, they, they had withdrawn a lot of money, and, and that—we’ve had many weeks of consecutive, I believe, of, of inflows there, and you’re largely back to a normal functioning market. I think that’s also been a success. I think the other—certainly the, the funding market programs have been a big success. The—Main Street is just—is just a bigger challenge than all of them. Reaching out to small and medium-sized businesses through the banking system, which we had to do, is, is quite challenging. I do think, you know, the grant programs, the PPP, were, were a great way to reach smaller companies. You know, what you hear out there is that demand—you talk to banks, and they’ll say demand for loans is very, very low right now. Companies are not borrowing. And, and the reason is that, you know, activity’s at a relatively low level. They don’t want to run up their debt. You know, so I—we put, we put an awful lot into Main Street, and it is very challenging to reach a lot of those companies. But I—you know, I think we, we are reaching many of them now, and, and I hope that the new changes will help us reach more. <NAME>MICHELLE SMITH</NAME>. Thank you. Last question to Michael McKee, Bloomberg. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, there’s a small but growing number of people, including some former Fed economists, who say you should find ways to go beyond your mandate to provide additional support to the economy, which, in essence, would be fiscal support, since it hasn’t come from Congress. One of the suggestions is buying state and municipal securities directly. Another is perhaps following the BOE in increasing asset purchases to support additional fiscal programs or spending by the Treasury. Is there any circumstance under which you would consider those or those would be justified? How closely are you willing to work with Treasury? <NAME>CHAIR POWELL</NAME>. You know, so I’m going to take your question literally. And so if the idea is money-financed fiscal policy, that’s not something that we would consider. So that— what I mean by that is, is really, you know, the, the central bank is really funding fiscal activities of the government fairly directly. No, that’s not something we do. We have different jobs. That separation between those jobs is absolutely critical in our system of government. The—you know, the job of taxation and spending goes to people who have stood for election and been elected, and that’s the way it should be. There—they have to be responsible to the electorate. We have a specific, you know, job to do with, with a specific set of tools to support maximum employment, stable prices, financial stability, help the payment system, supervise banks—all the things we’re assigned to do. But we, we, we’re not going to get into financing the government and, and—by the way, when we buy government bonds, we don’t—it doesn’t actually, as you probably know, doesn’t change the amount of government debt outstanding. We issue a reserve to, to purchase a Treasury security, and that’s just another form—on the consolidated balance sheet of the federal government, that’s just another obligation. You change the—you change the, you know, the nature of the obligation, but not the total quantity of debt that the government has when you do these asset purchase programs. So I don’t know exactly what you’re referring to. But, you know, to—again, to take your question literally about financing fiscal activity, it’s really not something that we think the central bank should do and, and not something we’re looking at. <NAME>MICHAEL MCKEE</NAME>. If I could follow up, there is a suggestion that you buy state and municipal securities directly in the same way that you buy mortgage-backed securities, providing, then, cash to municipalities that are cash-strapped at this point. <NAME>CHAIR POWELL</NAME>. Well, we’re doing that with the Municipal Liquidity Facility now, so we’re, we’re buying, you know, with, with our own funds and with the CARES Act funds that, that we’ve gotten through Congress and the Treasury. We’re buying municipal securities of up to three years. So we’re doing that now as part of an emergency facility under section 13(3), you know, which has to meet the emergency requirements of exigent circumstances and which is all clearly laid out in the law. So we’re, we’re actually doing that now. But I, I see—what that is, from our standpoint, is a rare thing that we do under section 13(3) when regular intermediation in the capital markets or in the banking system has broken down. It’s no longer working. So we step in under 13(3), and we provide liquidity. What turns out to happen is, we announce a program, and the market starts working. So we only actually have to do a backstop. The amount of financing that’s happened in the municipal markets this year is much higher than it was the prior year, and, and we didn’t do it. We did—we’ve done a very small number of, of loans. But just the fact that we’re there as a backstop seems to—seems to get the private parties to get back together and, and get the market working again. So that’s what 13(3) is for. We’re not—that shouldn’t be a permanent thing where we’re just another federal financing agency that’s available to direct credit to—you know, to very worthy borrowers. That would be more along the lines of a GSE. That’s not what we do. We’re there to provide emergency liquidity when intermediation has broken down and then to pull back on that when— you know, when—as the markets normalize, we pull back and we put those tools away, as we did after the Global Financial Crisis and as we will here when the time comes. <NAME>MICHELLE SMITH</NAME>. Thank you very much. <NAME>CHAIR POWELL</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us—maximum employment and price stability. Since the beginning of the pandemic, we have taken forceful actions to provide relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. Today my colleagues on the FOMC and I reaffirmed our strong forward guidance for interest rates and also provided additional guidance for our asset purchases. Together, these measures will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete. Economic activity has continued to recover from its depressed second-quarter level. The substantial reopening of the economy led to a rapid rebound in activity, and real GDP rose at an annual rate of 33 percent in the third quarter. In recent months, however, the pace of improvement has moderated. Household spending on goods, especially durable goods, has been strong and has moved above its pre-pandemic level. In contrast, spending on services remains low, especially in sectors that typically require people to gather closely, including travel and hospitality. The overall rebound in household spending owes in part to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals. The housing sector has fully recovered from the downturn, supported in part by low mortgage interest rates. Business investment has also picked up. The recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up since our September Summary of Economic Projections. Even so, overall economic activity remains well below its level before the pandemic, and the path ahead remains highly uncertain. In the labor market, more than half of the 22 million jobs that were lost in March and April have been regained, as many people were able to return to work. As with overall economic activity, the pace of improvement in the labor market has moderated. Job growth slowed to 245,000 in November, and while the unemployment rate has continued to decline, it remains elevated at 6.7 percent. Participation in the labor market remains notably below pre-pandemic levels. Although there has been much progress in the labor market since the spring, we will not lose sight of the millions of Americans who remain out of work. Looking ahead, FOMC participants project the unemployment rate to continue to decline; the median projection is 5 percent at the end of next year and moves below 4 percent by 2023. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been the hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the service sector and for African Americans and Hispanics. The economic dislocation has upended many lives and created great uncertainty about the future. The pandemic has also left a significant imprint on inflation. Following large declines in the spring, consumer prices picked up over the summer but have leveled out more recently. For those sectors that have been most adversely affected by the pandemic, prices remain particularly soft. Overall, on a 12-month basis, inflation remains below our 2 percent longer-run objective. The median inflation projection from FOMC participants rises from 1.2 percent this year to 1.8 percent next year and reaches 2 percent in 2023. As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend in large part on the course of the virus. Recent news on vaccines has been very positive. However, significant challenges and uncertainties remain with regard to the timing, production, and distribution of vaccines as well as their efficacy across different groups. It remains difficult to assess the timing and scope of the economic implications of these developments. The ongoing surge in new COVID-19 cases, both here in the United States and abroad, is particularly concerning, and the next few months are likely to be very challenging. All of us have a role to play in our nation’s response to the pandemic. Following the advice of public health professionals to keep appropriate social distances and to wear masks in public will help get the economy back to full strength. A full economic recovery is unlikely until people are confident that it is safe to engage—reengage in a broad range of activities. As we previously announced, we are now releasing the entire package of our SEP materials at the same time as our FOMC statement. Included in these materials are two new exhibits that show how the balance of participants’ assessments of uncertainty and risks have evolved over time. Since the onset of the pandemic, nearly all participants continue to judge the level of uncertainty about the economic outlook as elevated. In terms of risks to the outlook, fewer participants see the balance of risks as weighted to the downside than in September. While a little more than half of participants now judge risks to be broadly balanced for economic activity, a similar number continue to see risks weighted to the downside for inflation. The Fed’s response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. As noted in our Statement on Longer-Run Goals and Monetary Policy Strategy, we view maximum employment as a broad-based and inclusive goal. Our ability to achieve maximum employment in the years ahead depends importantly on having longer-term inflation expectations well anchored at 2 percent. As we reiterated in today’s statement, with inflation running persistently below 2 percent, we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, as we noted in today’s policy statement, we will continue to increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals. We believe the increase in our balance sheet this year has materially eased financial conditions and is providing substantial support to the economy. Combined with our forward guidance for the federal funds rate, our enhanced balance sheet guidance will ensure that the stance of monetary policy remains highly accommodative as the recovery progresses. Our guidance is outcome based and is tied to progress toward reaching our employment and inflation goals. Thus, if progress toward our goals were to slow, the guidance would convey our intention to increase policy accommodation through a lower expected path of the federal funds rate and a higher expected path of the balance sheet. Overall, our interest rate and balance sheet tools are providing powerful support to the economy and will continue to do so. The Federal Reserve has also been taking broad and forceful actions to more directly support the flow of credit in the economy for households, for businesses large and small, and for state and local governments. Preserving the flow of credit is essential for mitigating damage to the economy and promoting a robust recovery. Many of our programs rely on emergency lending powers that require the support of the Treasury Department and are available only in very unusual circumstances, such as those we find ourselves in today. These programs serve as a backstop to key credit markets and have helped to restore the flow of credit from private lenders through normal channels. We have deployed these lending powers to an unprecedented extent, enabled in large part by financial backing and support from Congress and the Treasury. Although funds from the CARES Act will not be available to support new loans or new purchases after—of assets after December 31, the Treasury could authorize support for emerging lending facilities, if needed, through the Exchange Stabilization Fund. When the time comes, after the crisis has passed, we will put these emergency tools back in the box. As I have emphasized before, these are lending powers, not spending powers. The Fed cannot grant money to particular beneficiaries. We can only create programs or facilities with broad-based eligibility to make loans to solvent entities with the expectation that the loans will be repaid. Many borrowers are benefiting from these programs, as is the overall economy. But for many others, getting a loan that may be difficult to repay may not be the answer. In these cases, direct fiscal support may be needed. Elected officials have the power to tax and spend and to make decisions about where we, as a society, should direct our collective resources. The fiscal policy actions that have been taken thus far have made a critical difference to families, businesses, and communities across the country. Even so, the current economic downturn is the most severe of our lifetimes. It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year, and it may take continued support from both monetary and fiscal policy to achieve that. 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 are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Thank you. Rich Miller. <NAME>RICH MILLER</NAME>. Thank you very much, Mr. Chairman. Thank you, Michelle. I wonder if I could start with the, the SEP. We have—unemployment now is at 6.7, the SEP median sees, sees it falling to 5. Headline inflation is one time 1.2, the SEP median sees it rising to 1.8. And core inflation is 1.4, and the SEP sees it rising to 1.8 likewise. Would that constitute “substantial further progress” toward the Committee’s maximum-employment and price-stability goals? <NAME>CHAIR POWELL</NAME>. Yes. Well, so we’re not—we’re not going to be identifying specific—associating that test with, with specific numbers at this point. So, really, the question is, what do we mean by, by that language? And, really, the overarching message, Rich, is that our guidance for both interest rates and asset purchases will keep monetary policy accommodative until our maximum-employment and price-stability goals are achieved, and that’s, that’s a powerful message. So “substantial further progress” means what it says. It means we’ll be looking for employment to be substantially closer to assessments of its maximum level and inflation to be substantially closer to our 2 percent longer-run goal before we start making adjustments to our purchases. I would also point out that by increasing our asset holdings, we see ourselves as adding policy accommodation. There will come a time when the economy does not require increasing amounts of policy accommodation. And when that time comes—and that will be uncertain and, in any case, is, is some ways off. So I can’t give you an exact set of numbers. We will—of course, as we approach that point, we’ll be evaluating that. And when we see ourselves on a path to achieve that goal, then we will—we will say so undoubtedly well in advance of any time when we would actually consider gradually tapering the pace of purchases. <NAME>RICH MILLER</NAME>. Very quickly on, on that. You, you mentioned the next couple months are going to be very challenging. And regarding asset purchases, why not increase the duration of the asset purchases at this time, given what you see as a very challenging period ahead? <NAME>CHAIR POWELL</NAME>. So, you know, again, I would start with what we actually did at the meeting, which, which was, we provided this, this guidance about the path of asset purchases. And I just went through what, what they—what they—the guidance that we put forward. And, you know, so I guess since September we’ve now adopted a flexible average inflation-targeting framework. We have provided rate guidance that is tightly linked to the goals as expressed in that new framework. And now we’ve done the same for, for asset purchases. So, you know, we’ve, we’ve been sort of—as, as the future has become clearer and as we’ve absorbed new developments in medical—in the medical sphere and also in, in the economy, we have—began to be able to see further. So we’ve, we’ve started to be able to provide further important guidance. And we think that the—that the asset purchase guidance, guidance is very important. We think that the, the prior language of “in coming months” was obviously temporary. This links that guidance, those purchases, to actual “substantial further progress” toward our, our mandated goals. We think that’s important. And we think that that is important to have done. I, I would just add, though, that we also continue to think that our current policy stance is appropriate. We think it’s providing a great deal of support for the economy. Financial conditions are highly accommodative. And, you know, we monitor a range of financial condition indexes. There are many of them, and they’ll, they’ll all pretty much tell you that. You can—you can also look at the interest sensitive parts of the economy—for example, housing, durable sales, vehicle sales—those parts of the economy are, are performing very, very well. The parts of the economy that are weak are the service-sector businesses that involve close contact. Those are not being held back by financial conditions, but rather by the spread of the virus. And I’ll close by, by just saying, we do have the flexibility to provide more accommodation through the channel you mentioned and through other channels. And we recognize that circumstances could shift in a way that warrants our, our doing that, including by adjusting purchases. We are committed to using our full range of tools to support the U.S. economy to achieve our goals. We will continue to use our tools to support the economy for as long as it takes until the job is well and truly done. No one should doubt that. <NAME>RICH MILLER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Nick Timiraos. <NAME>NICK TIMIRAOS</NAME>. Thank you. Nick Timiraos, the Wall Street Journal. Chair Powell, a two-part question. What, if anything, would prompt the Fed to shift Treasury purchases toward the longer end of the curve as you did with your prior QE programs? And does your guidance today on asset purchases foreclose the possibility that you could, at some point, lengthen maturities while simultaneously tapering the monthly purchase amounts? <NAME>CHAIR POWELL</NAME>. Well, Nick, I—on, on the first part of the question, I, I don’t—I wouldn’t want to sort of talk about hypothetical situations. You know, we, we look at our overall stance of policy, we look at overall financial conditions, we look at what’s going on in the economy—different parts of the economy, and we ask ourselves, should we change our policy stance? We do that at every meeting. And we look at where financial conditions are now, and, and we, we feel that they are appropriate for now. Anytime we feel like the economy could, could use stronger accommodation, we would be prepared to provide it. We—but right now, we’re providing a great deal, and we think—we happen to think it’s the right amount. And, you know, you, you mentioned—I think you’re referring to the idea of maintaining the duration but, but reducing the quantity, which is sort of what the Bank of Canada did. And that, that is something that we—you know, that we talked about in the last meeting and was addressed in the minutes. And I would say, the views on that were mixed: Some thought it was an interesting idea, others not so much. I, I wouldn’t say that that’s something that’s, that’s high on our list of, of possibilities. <NAME>NICK TIMIRAOS</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Victoria Guida with Politico. I wanted to ask about the 13(3) facilities. Chair Powell, you’ve said that you accept Treasury Secretary Mnuchin’s interpretation of the statute of the CARES Act on, on what should happen with those programs. So, first of all, I’m curious whether under a new Treasury Secretary you will accept whatever legal interpretation they put forward for those programs. And then, also, given that there isn’t a statutory requirement for you to have financial backing from Treasury for 13(3) facilities, do you have any plans for any future facilities that don’t require Treasury backing? <NAME>CHAIR POWELL</NAME>. So on your—on your first question, we really have not thought about that. We’re, we’re very focused on—we have a lot to do now. We, we have not focused on, on that question, and I, I really have nothing to add on that. Your second question is—sorry. Oh, if there were no—yes. No, we, we would have the ability—certainly, we would have the ability to do facilities under 13(3) in some cases with no backing. But we can’t do any 13(3) facilities without the approval of the Treasury Secretary, right? But we did some facilities—I think one of our facilities this time didn’t have any Treasury backing. And I think some in the—in the round of—during the Global Financial Crisis also didn’t have any. <NAME>VICTORIA GUIDA</NAME>. So do you have any plans—like, would you consider doing more facilities if that became necessary without Treasury backing? <NAME>CHAIR POWELL</NAME>. I would say that we are—you know, we’re—we have the authorities we have. We will use them if, if they’re needed and if—and if the law permits us to do so. We would—we would always do that. We, we do not have any plans for, for the future about this. We—we’re very focused on, on getting through year-end. We’ve been very focused on, on the issues that are right in front of us. And, honestly, we’re not—we’re not planning on anything or having any discussions about what we might do down the road. <NAME>VICTORIA GUIDA</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Steve Liesman. <NAME>STEVE LIESMAN</NAME>. Thank you, Mr. Chairman, and happy New Year. I know how much you enjoy talking about fiscal stimulus, so let me ask you directly about fiscal stimulus. There’s talk right now of a $900 billion fiscal stimulus program in Congress. Is, is that sufficient? Is that what you’re looking for? Do you think that’ll be sufficient for helping the economy? Finally, you talked about the idea of how concerning the recent surge is. I wonder if you can put some detail on that. How much concern do you have in terms of, where could employment go? What could happen to GDP in the first quarter as a result of this surge? Thank you. <NAME>CHAIR POWELL</NAME>. Okay. So on, on fiscal policy, I would just say a couple of things. The case for fiscal policy right now is, is very, very strong. And I think that is widely understood, I would say, now. The details of it are entirely up to Congress. But with the expiration of unemployment benefits—some of the unemployment benefits, the expiration of eviction moratoriums with the virus spreading the way it is, there’s a need for households and businesses to have, have fiscal support. And I do think that—again, I think that is widely understood. So I think it would be—I, I certainly would welcome the work that Congress is doing right now. It’s not up to us to judge that work. It’s really, really theirs. And I, I don’t have a view for you on, on the size of it. It’s—you know, it’s obviously a substantial bill. On the surge, you know, so it’s a really interesting question. We have, and others too, have consistently expected there to be more economic—that, that cases would hold—growth in cases would hold back the economy more than it actually has. So we’ve overestimated the, the effects on the economy of, of these spikes we’ve been having. Now, this spike is so much larger that I think—and I think forecasters generally do think that there—that this will have an effect on suppressing activity, particularly activity that involves people getting together in bars and restaurants, on airplanes and hotels and things like that. And you’re starting to see that. In the—in the high-frequency data, you’re now beginning to see that show up. And I think if this is—the case numbers are so high and so widespread across the country that that, that seems like it must happen. Now, how big will it be? We don’t—we don’t really know. You know, there are—there are a lot of estimates. The general expectation is, you’re seeing some slowing now. And you’ll see the first quarter could well be—what, what we said is that coming months are going to be challenging. The first quarter will, will certainly show significant effects from this. At the same time, people are getting vaccinated now. They’re getting vaccinated. And by the end of the first quarter into the second quarter, you’re going to be seeing significant numbers of people vaccinated. And so then what will be—how will that play into economic activity? Again, we don’t have any experience with this. You have to think that sometime in the middle of next year, you will—you will see people feeling comfortable going out and engaging in a broader range of activities. And some people will be probably quick to do that. Some are doing it now without a vaccine—right?—in many parts of the country. So, nonetheless, my expectation—and I think many people have the expectation that the second half of next year should—the economy should be performing strongly. We should be— you know, we should be getting people back to work. Businesses should be reopening and that kind of thing. The issue is more the next four or five months—getting through the next four, five, six months. That is key. And, and, you know, clearly there’s going to be need for help there. And, and, you know, my sense and hope is that we’ll be getting that. <NAME>MICHELLE SMITH</NAME>. Thank you. Jeanna Smialek. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thank you for taking our questions. I was wondering if you could talk a little bit about house prices. They were mentioned in the most recent minutes as, you know, potentially a valuation concern, especially as it related to your mortgage-backed security purchases. And you mentioned earlier today that the housing market looks more or less fully healed. And so I guess I wonder, are you worried about valuation pressures there? And, if so, what can the Fed do to contain those? <NAME>CHAIR POWELL</NAME>. You know, so we monitor basically just about every asset price in the economy, and housing prices are something that we’ve been monitoring. And you see them moving up. You see very high demand. This, this is the housing market that people have been expecting since, you know, 2010. And, and then, you know, not many, when the—when the pandemic hit, thought, “Oh, this is what—this is what will produce that housing market,” but it has. Now, I would say, from a financial stability standpoint, housing prices are not—are not of a level of concern right now. That’s just reflective of a lot of demand. And, you know, builders are going to bring forth supply. There’s also a sense that this—some of this may be pent-up demand from when the economy was closed, which would imply that demand—once that demand is met, that the real level of demand will be more manageable. So it’s a—it’s a healthy economy now. We, we met recently with a bunch of homebuilders, and many of them in the business 30, 40 years said they’ve never seen the likes of it. But, no, housing prices themselves are not—are not a financial stability concern at the moment. We will watch that carefully. But in the near term, I wouldn’t think that that’s an issue that we’d be concerned about. <NAME>JEANNA SMIALEK</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Thank you. Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Thank you for the question, Mr. Chairman. So with the actions that you’ve currently taken, how do you—how do you further fight a slowdown that you’re seeing? We’ve talked about the retail sales numbers are a little bit sluggish this month, the unemployment, the job growth has slowed down. Is there more the Fed can do to fight this? Or is it now squarely in the Congress’s realm? <NAME>CHAIR POWELL</NAME>. There is more that we can do, certainly. We can—we can expand our, our asset purchase programs. We can focus them more on the longer end. There are a number of options we would have to provide more support to the economy. So I would—I would say, though, that in the near term, the help that people need isn’t just from low interest rates that stimulates demand over time and works with long and variable lags. It’s really support. As the—as—we’ve, we’ve talked about this as all of these government policies trying to work together to create a bridge across this chasm, economic chasm that was created by the pandemic. And for many Americans, that bridge is there and, and they’re across it. But there’s a group for, for which they, they don’t have a bridge yet. And that’s who we’re talking about here. It’s, it’s the 10 million people who lost their jobs. It’s people who may lose their homes. It’s—you know, you see the, the—many, many millions of Americans are, are waiting in food lines in their cars these days all over the country. So we know there’s need out there. We know there are small businesses all over the country that, that have been basically unable to really function, and they’re just hanging on. So—and, and they’re, they’re so critical to our economy. So—and, by the way, now that we can—we can kind of see the light at the end of the tunnel, it would be—it would be bad to see, you know, people losing their business, their life’s work in many cases, or even generations’ worth of work, because they couldn’t last another few months, which is what it amounts to. So we have more we can do. And we’ll—I, I think more the issue is, we’re going to need to continue to provide support to this economy for quite a period of time, because the, the economy will be growing in expectation. We should be growing at a fairly healthy clip by the second half of next year. But it’s going to be a while before we really are back to the levels of, of labor market—the, the sort of conditions in the labor market that we had in early this year and for much of the last couple of years. So that’s how I think about it. <NAME>EDWARD LAWRENCE</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Howard Schneider. <NAME>HOWARD SCHNEIDER</NAME>. Hi, Chair Powell. Thanks for doing this. And thanks, Michelle. Two, two quick questions. One, on the vaccine, do you have, or has the Fed modeled, sort of a working estimate of when the U.S. might reach something approaching herd immunity? And, secondly, if you could, please connect with me the lack of movement on the decision to maintain the current pace and quantities of bond purchases with the fact that the SEPs are showing three years with inflation not reaching 2 percent. Some might argue that you need to do more to start fixing those expectations, and to let this drift and say “We’re going to miss our target for another three years” doesn’t show a very firm commitment to the new framework. <NAME>CHAIR POWELL</NAME>. So, in terms of the vaccine, yes, you know, we do estimates of, of when the United States would reach herd immunity, and they’re, they’re going to be similar to what other people think. You know, it depends on your assumptions, such as how many people will actually take the vaccine and how fast will the rollout be. So it’s assumption based on assumption based on assumption. But, you know, sometime—it’s possible sometime in the middle or second half of next year. I’m not going to try to be precise, because it’s just another estimate. You know, our people are very good, but they’re looking at, at the same data as other people are. And so, you know, all the estimates are—it depends on what your assumptions are. But under a normal set of assumptions, it could happen as, as soon as the middle of next year. In terms of the, you know, inflation, a couple things—your second question. You know, we’re—I think you have to be honest with yourself about, about inflation these days. There are—there are significant disinflationary pressures around the world, and there have been for a while, and they persist today. It’s, is not going to be easy to have inflation move up. And it isn’t going to be just a question—it’s going to take some time. It took a long time to get inflation back to 2 percent in the last crisis. And, you know, we’re, we’re honest with ourselves and with you in the SEP that even with the very high level of accommodation that we’re providing both through low rates and very high levels of asset purchases, it will take some time, because that’s what we believe the underlying inflation dynamics are in our economy. And that’s sort of why we’re—one reason why we’re concerned about inflation is that we see that. And, and that’s why we have adopted the flexible average inflation-targeting framework. That’s why we’re aiming for an overshoot. But we’re, we’re honest with ourselves and with the public that it will take some time to get there. In terms of, you know, would, would it really speed it up a lot to, to move asset purchases, you know, I don’t think that would really be—I think it’s going to take a long time however you do it. And, you know, we’ve been having very long expansions since—in, in the last several decades because inflation has not—really, the old model was, inflation would come along and the Fed would tighten, and we’d have a recession. Now inflation has been low, and we haven’t had that dynamic. And the result has been three of the four longest expansions in, in modern history, in recorded history. So, you know, we’re, we’re thinking that this could be another long expansion, and that we’ll keep our—what we’re saying is, we’re going to keep policy highly accommodative until the expansion is well down the tracks. And we’re not going to preemptively raise rates until we see inflation actually reaching 2 percent and being on track to exceed 2 percent. That’s a very strong commitment, and we think that’s the right place to be. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Chris Rugaber. I’m sorry, Mr. Chair. <NAME>CHAIR POWELL</NAME>. I’m just going to add, markets have actually found this fairly credible. If you look at what—at inflation compensation and at the survey measures of, of when the Fed will lift off, everything has moved. There have been significant movements since we announced the framework in the direction that is consistent with the—with the framework being credible to market participants. So I, I don’t think it’s something that—I, I mean, I’m actually pleased by, by the reception it’s gotten in markets. And markets have moved in ways that suggest it is credible. <NAME>MICHELLE SMITH</NAME>. Thank you. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi, thank you. Yesterday, I guess, the Fed said that it is joining the international financial greening group. And I just wanted to see if you could expand on how the Fed is thinking about climate change and how it might affect Fed policy going forward. Specifically, I think Janet Yellen drew a distinction between considering climate change when it comes to financial regulation. But how do you see that also potentially affecting monetary policy? Obviously, there have been criticisms of the Fed for buying bonds of oil and gas companies. But leaving that specific case aside, I mean, are there—is there any way that climate change considerations could affect monetary policy going forward? <NAME>CHAIR POWELL</NAME>. So the—you’re, you’re talking about the—sorry, the Network [of Central Banks and Supervisors] for Greening the Financial System, which we joined this week. And I’ll just—I’ll just say a couple things about that. So, first, I’ll just start by saying that we’re going to move carefully and thoughtfully on developing an understanding of how climate change affects our work, including the areas you mentioned. We’re going to do so with a great deal of engagement with all of our external constituencies, including the public and their elected representatives who are charged with our oversight. We’ll do it with great transparency. Remember that we are a nonpolitical agency whose goals and authorities to achieve those goals are set by Congress. We have great responsibilities and strong authorities that we’ll use vigorously. We’re not the forum where all the great issues of the day are to be hashed out, debated, and addressed unless and only to the extent that those issues are directly relevant to our statutory goals and are addressable through our legal authorities. And because we have a narrow remit, and because we stick to it, Congress has given us a precious grant of independence from direct political control. So society’s broad response to climate change is for others to decide—in particular, elected leaders. But—so let me—let me get to your question. What does all that mean for an issue like climate change? And why did we join the NGFS? So Congress hasn’t explicitly assigned us or other financial regulators a role, and we’re not among the agencies who contribute to the National Climate Assessment—Climate Assessment, for example. But climate change is nonetheless relevant to our existing mandates under the law. And let me tell you why. One of our jobs is to regulate and supervise banks and to look after the stability of the financial system. That’s a responsibility we share with other agencies. The public will expect that we will—we will do that. So we’ll, we’ll expect that, that those important institutions will be resilient against the many resists—risks that they fake—face: credit risk, market risk, cyber risk. Climate change is an emerging risk to financial institutions, the financial system, and the economy. And we are, as so many others are, in the very early stages of understanding what that means, what needs to be done about it, and by whom. That’s why 83 central banks have joined together to share research and identify best practices in this important emerging area. We’ve been attending NGFS meetings as an observer for more than a year, taking part in the work. We had discussed that it was probably time to join as a member. I’ll just say that the financial system is really a global one. It’s important that we work and discuss best practices with peer agencies around the world, especially in a field where we’re just beginning to develop our, our understanding. You asked about monetary policy. You know, I—I’ll say this. We, we have historically shied away strongly from taking a role in credit allocation. In fact, our agreement with Treasury during the financial crisis from back in 2009 or ’10 says that we will avoid credit allocation. It’s something we’ve carefully avoided. So I, I would be very reluctant to see us move in that direction, picking one area as creditworthy and another not. So you asked about monetary policy. You know, it’s, it’s—for now, I would say the real—the real concern is—the real place to focus, for me, is supervision of financial institutions and then financial stability concerns. You can see a connection there. Monetary policy, maximum employment, stable prices—it’s less obvious to me. I can—I can, you know—I can make the argument, but it’s less obvious to me that those should be first-order things that we would look at in connection with climate change. But I think there’s—I think there’s work to be done to understand the connection between climate change and the strength and resilience of financial markets and financial institutions. I think that work is in its early days. And, again, we’ll be careful. We’ll be thorough and transparent and, and engage with the public on all that. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Rachel Siegel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Thanks very much for taking my question. And thank you, Michelle. I wanted to ask specifically about state and local aid. Just as one example, the governor of Illinois announced roughly $700 million in early anticipated budget cuts to close the budget deficit, and the latest bipartisan stimulus proposal that’s being debated this week seems to be leaving out state and local aid at this point. And I’m just curious if you can give some detail about the damage that these budget deficits or the lack of aid specifically to state and local governments will have on the recovery and, specifically, with the municipal lending facility set to expire, what more the Fed might be able to do to fill that specific hole. Thanks very much. <NAME>CHAIR POWELL</NAME>. Okay. So the state and local governments, they provide important critical services: safety, fire, police, health, all kinds of things like that. They’re, they’re really involved in people’s lives, state and local governments are, to, to a large extent. The decision whether to, to provide more fiscal support to them is entirely in the hands of Congress. And, you know, they’re in the middle of these discussions, and, and those, those are issues for them to decide. I would say that the picture is mixed. What’s happened is, if you’re a state that has a significant exposure to tourism or to extracting energy from the ground—oil from the ground, or gas—you are probably, at least in those industries, feeling a significant loss of revenue. A number of other states have been surprised on the upside, where—and that’s because goods sales, for example—property taxes are—don’t move much year to year. And, you know, the kind of sales taxes on goods—goods sales have been very high. Income has been more or less replaced by, by the CARES Act—fully replaced, more than, in many cases. So the concerns that we had at the very beginning of really serious, deep shortfalls and massive budget cuts on the part of state and local governments have not yet—have not yet occurred. What we’re seeing is, is that it’s different state to state. And some states are having significant difficulties, others not so much. The real concern, though, that still emerges is, state and local governments are very large employers, and—one of the largest. And so far, since the pandemic began, employment has dropped by 1.3 million in—of state and local government. So it’s, it’s a very large number of people to be—to be out of work from just that one source. It’s actually significantly more than lost their jobs during the Global Financial Crisis. So that is—that is a significant—a significant part of that group is, is in education. So when the schools reopen, a significant part of that 1.3 million would go back to work. Nonetheless, it’s a concern. We’re, we’re watching carefully to understand why that—why that many people have been let go and what are—really are the sources. So we’re monitoring it carefully, and it’s a mixed picture. And I, I just have to leave the question of what to do with fiscal policy on this to Congress. <NAME>MICHELLE SMITH</NAME>. Thank you. James Politi. <NAME>JAMES POLITI</NAME>. Thank you, Michelle. And thank you, Chair Powell. You and the Fed have consistently said that the Fed is ready to provide the economy with more monetary support if needed and really stressed to policymakers generally that the dangers of not doing enough outweigh the risks of doing too much in a situation where there’s so much suffering in the economy. The guidance today sort of cements asset purchases for a longer period of time but is not a big new easing step. Why was now, with the short-term outlook deteriorating due to the new coronavirus surges, not the moment for a big new easing step? And is it because of the medium-term outlook improving? Or is it because the Fed just doesn’t have the capacity to sort of build that bridge over the next four to five months for the—for the people who are struggling? <NAME>CHAIR POWELL</NAME>. Right. So I, I could go back, James, to what I said earlier, which is, this is—this is a very, very large asset purchase program. It’s providing a tremendous amount of, of support for the economy. If you look at the interest-sensitive parts of the economy, they’re performing very well. The parts that are not performing well are not struggling from high interest rates. They’re struggling from exposure to, to COVID, in a sense. These are—these are the businesses that, that are really hit hard by people’s reluctance to gather closely. So, so we, we do have the ability to—you know, to buy more bonds or to buy longer-term bonds. And, and we may—we may use it. I’m not saying we won’t—we won’t use that. It may well come to, to using that. But also, I would remind—I would also note, though, monetary policy works with “long and variable lags,” is the famous statement. So we think that the big effects from monetary policy are, you know, months and months into the future. So this looks like a—you know, it looks like a time when what is really needed is fiscal policy. And, and that’s why it is, is a very positive thing that, that we’re getting that. So we, we remain open to doing—you know, to, to either increasing the size of our asset purchases, if that turns out to be appropriate, or to just moving the maturities, moving to buying longer maturities, because that had—that also increases accommodation by taking more duration risk out of the market. But we think our current stance is appropriate. And we think that our— you know, that our, our guidance on asset purchases today will also provide support to the economy over time. Again, what we’ve—what we’ve done is, we’ve laid out a path whereby we’re going to keep monetary policy highly accommodative for a long time, really until—really until we reach very close to our goals, which is not, you know, not really the way it’s been done in the past. So that’s, that’s providing significant support for the economy now. We don’t think the economy suffers from a lack of, of highly accommodative financial conditions. We think it’s suffering from the pandemic and people wanting to not engage in certain kinds of economic activity. And we expect that, that with the virus, that that will improve—that condition will improve. Nonetheless, again, we will—are prepared to use our tools, and we will use them at such time and in such amounts as we—as we think would, would help. <NAME>MICHELLE SMITH</NAME>. Thank you. Scott Horsley, NPR. <NAME>SCOTT HORSLEY</NAME>. Thank you, Mr. Chairman. Some forecasters have suggested that there is a lot of pent-up demand for travel and entertainment and, and services and the like that might stop being pent up in a hurry if we do get to a point where the vaccine is widely distributed, and that the beaten-down service sector might have trouble meeting that demand in, in a hurry. How might that affect inflation, in your mind? And would that be just a transient problem or, or something that might warrant closer scrutiny? <NAME>CHAIR POWELL</NAME>. So that, that has all the markings of a transient increase in the price level. So you can imagine that as people really want to travel again—let’s say, you know, that airfare, airfares—I’m just imagining this, right?—that they go up. But what inflation is, is a process whereby they go up year upon year upon year upon year. And if—given the inflation dynamics that we’ve had over the last several decades, just a single, single sort of price-level increase has not resulted in ongoing price-level increases. And that, that was—the problem back in the 1970s was, it was the combination of two things. One, when unemployment went down and resources got tight, prices started going up. But the second problem was that that—that that increase was persistent, there was a level of persistence. So if prices went up 6 percent this year, they’d go up 6 percent next year, because people would internalize. I mean, really, really, that’s what happens is, people internalize that they can raise prices, and that it’s okay to pay prices that are going up at that rate. So that was the inflation—those are the inflation dynamics of that era. Those dynamics are not in place anymore. There—the connection between low unemployment or other resource utilization and inflation is so much weaker than it was. It’s still there, but it’s a—it’s a faint heartbeat compared to what it was. And the persistence of inflation, if you—if you get a—for example, oil prices go up, and that’ll send a temporary shock through the economy. The persistence of that into, into inflation over time is just not there. So they— what you describe may happen, and, of course, we would watch it very carefully. We, we understand that we will always be learning new things from the economy about how it will behave in certain cases. But I would—I would expect, though, going in that that would be a one-time price increase rather than an increase in underlying inflation that would be persistent. <NAME>SCOTT HORSLEY</NAME>. So not the kind of thing that the Fed would, would be trigger-happy to, to— <NAME>CHAIR POWELL</NAME>. No. <NAME>SCOTT HORSLEY</NAME>. —respond to? <NAME>CHAIR POWELL</NAME>. No, no. Definitely not. <NAME>MICHELLE SMITH</NAME>. Thank you. Michael Derby. <NAME>MICHAEL DERBY</NAME>. [Inaudible]—question. But what I wanted to ask was, you know, given the size of all the government borrowing and, you know, different regulatory changes in the financial sector, do you think that the Treasury market, long run, can operate smoothly without some sort of active Fed presence—you know, buying Treasury debt? You know, I’m referring back to [inaudible] Randal Quarles. He had some questions about it. So I wanted to know where you stood on that issue. <NAME>CHAIR POWELL</NAME>. Right. So—you were breaking up a little. I think—I think I got the sense of it, though. Yes, I, I don’t think it’s at all a foregone conclusion that there needs to be a permanent Fed presence. And we certainly don’t—you know, that’s not something we’re planning on or intending. Right now we’re buying assets because it’s a—you know, it’s a—it’s a time when the economy needs highly accommodative monetary policy, and we think our asset purchases are, you know, one of the main delivery mechanisms for that, the size of the balance sheet. You know, there’s lots of demand for, for U.S. Treasury paper all—from all over the world. And I, I think we need to be thoughtful about the structure of the Treasury market and look at ways to make sure that the capacity is there for it to be handled by the private sector. And there’s, there’s quite a lot of work going on on that front. But I, I don’t presume at all that, that this is something that needs to be—where the Fed needs to be in there at all. I, I would think that this should be handled by the private sector and can be. Institutions need to be able to hold this paper. And there may be—there may be a central clearing angle that would, you know, net a lot of risk. That’s, that’s yet to be proven. There are a lot of things that are being looked at right now. <NAME>MICHAEL DERBY</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Hannah Lang. <NAME>HANNAH LANG</NAME>. Hi, hi. Thanks so much for taking our questions. So, you know, as you know, the pandemic has really disproportionately impacted small and medium-sized businesses. And the Fed launched a few efforts this year to—through its 13(3) programs to reach out to those companies. But, you know, considering that some of those programs are ending, is there anything else that the Fed’s actions can do to provide support to those companies? Or is that solely Congress’s domain? <NAME>CHAIR POWELL</NAME>. I think the main thing that those companies need is a—is a robust recovery—a strong, robust recovery. And so we, we contribute to that through highly accommodative monetary policy, through accommodative financial conditions that are supporting economic activity. Health authorities are contributing to that through, through, you know, management of the spread of the virus and now through vaccines and the delivery of those vaccines. And Congress contributes, contributes to that by helping them make it through this very difficult time. And, and I think my understanding is that there’s support for small businesses in, in what’s being discussed on Capitol Hill. I would certainly think that would be something well worth looking at. <NAME>MICHELLE SMITH</NAME>. Thank you. Paul La Monica. <NAME>PAUL LA MONICA</NAME>. Hi, Chair Powell—hi, Chair Powell. I was wondering if you’ve had any conversations yet with any members of the incoming Biden Administration, particularly Janet Yellen, who obviously you can share some similar experience in running the Fed. So just curious to get your thoughts on how the relationship with Treasury and the new Administration might differ than the past couple of years. <NAME>CHAIR POWELL</NAME>. So, you know, we’ve had a—and I’ve had sort of the typical meetings with the transition team for Treasury. They’ve met with quite a lot of people in our agency and other agencies. And, really, it’s about learning what we do. And I, I really have only spoken to former Chair Yellen to congratulate her on being nominated and just to say that I look forward to working with her. You know, I did work very closely with her for five years before she left and have stayed in touch, you know. So I did that. But I have not discussed, you know, policy with her. And I, I’m not going to do that until she’s confirmed. <NAME>MICHELLE SMITH</NAME>. Great, thank you. Jeff Cox. <NAME>JEFF COX</NAME>. Yes. Chair, thank you for taking the question. You’ve been asked this question before in various forms. I’m going to try it a little bit differently now. The equity market and the bond market seem to be telling two different stories about where, where things are heading. We [inaudible] on the stock market, bond yields remain very low. Does that concern you at all? Are, are you getting any more concerned about asset valuations in, in light of the highly accommodative Fed policies? <NAME>CHAIR POWELL</NAME>. You, you were breaking up, but I, I think I got that. I think I got it. So, you know, financial stability—we, we look at a broad range of things. We actually have a framework so that we can, you know, be—evaluate changes in financial stability over time, and so that the public can evaluate whether we’re doing a job—a good job at it. We—so what do we look at? Asset prices is one thing that we look at. And, you know, we published a report a few weeks ago on that—maybe it was month or so ago. Anyway. And I think you’ll find a mixed bag there. It depends—with equities, it depends on whether you’re looking at P/Es or whether you’re looking at the premium over risk-free—over the risk-free return. If you look at P/Es, they’re historically high, but, you know, in a world where the— where the risk-free rate is sustain—is going to be low for a sustained period, the equity premium, which is really the reward you get for taking equity risk, would be what you’d look at. And that’s not at, at incredibly low levels, which would mean that they’re not overpriced in that sense. Admittedly, P/Es are high, but that’s—you know, that’s, that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically, from a—from a return perspective. You know, we look at—we also look at borrowing—leverage of financial institutions. We spent 10 years and the banks spent 10 years building up their capital. So far, they’ve been a source of strength through this crisis, and their capital has held up well. We look at leverage in the nonfinancial sector—that’s households and nonfinancial corporates. Nonfinancial corporate leverage is high. We’ve been watching that. But, you know, rates are really low. So—and so companies have been able to handle their debt loads even in weak periods, because rates are— rates are quite low. Your interest payments are low. Defaults and downgrades have, have declined since earlier in the year. Households came into this very strong, and there certainly has been a hit there for people who are unemployed. But, you know, with the CARES Act, Congress replaced a lot of lost income. You know, it’s very important that, that the economy gets strong again. I mean, the, the ultimate thing to support financial stability is a strong economy. The last thing is, is really funding markets. We found that there was a lot of unstable funding for companies, particularly financial companies. And that’s, that’s down to a—to a very low level these days. So the broad financial stability picture is, is kind of mixed, I would say. I would say, you know, asset prices are, are a little high in that metric and in my view. But, overall, you have a mixed picture. You, you don’t have, you know, a lot of red flags on that. So—and it’s—again, it’s something that we monitor essentially ongoing, almost daily. You know, we’re, we’re monitoring these prices for that and, and have published our, our framework, and, you know, we’ll be held accountable for what we saw and what we missed. So we work very hard at it. <NAME>MICHELLE SMITH</NAME>. Thank you. And for the last question we’ll go to Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, I have a couple of questions about the fiscal support for the economy. This year’s budget deficit is $3.1 trillion. And Republicans have argued they don’t want to spend more, because we can’t afford it. So I’m wondering if you can make the case for how much we can afford. At what point do deficits and the debt start to have an impact on the economy or on interest rates? And how would we know when we get there? <NAME>CHAIR POWELL</NAME>. So people who—people who run for elected office and win, they’re the ones—their reward is they get to make those very difficult decisions. And—you know, so we’re not charged with providing fiscal advice to, to Congress. But I, I would just say, as a general—as a general rule, it is important to be on a sustainable fiscal path. For my way of thinking and many others’, the time to focus on that is when the economy is strong and when unemployment is low and taxes are—you know, are, are pouring in, and there’s, there’s room to get on—get on a sustainable path, because the economy’s really doing well. You’re still now in the—in the, you know, some part of, of an economic crisis. And the fact that Congress is debating a fairly large bill today suggests that, that—you know, suggests that something fairly substantial is going to get done, we hope—that what’s being discussed is, you know, is, is of some size. In terms of what is a sustainable level, I think, you know, it’s—the question is—we’ve always looked at debt to GDP, and we’re very high by that measure. By some other measures, we’re actually not that high. In particular, you can look at the real interest rate payments, the amount of, what does it cost? And from that standpoint, if you—if you sort of take real interest costs of the federal deficit and divide that by GDP, we’re actually—you know, we’re actually on a more sustainable fiscal path if you look at it through those eyes. Again, these are—these are issues for Congress. But, you know, I’ll just say in the near term, I think fiscal—the case for, for fiscal is, is strong. And I’m certainly hoping—I think it will be very good for the economy if, if we did get something soon. <NAME>MICHAEL MCKEE</NAME>. Well, the argument for continuing to spend is that low interest rates make it affordable. Do you worry you get in a situation where you would have congressional interference in monetary policymaking or at least feel significant political pressure to keep rates low because the country can’t afford to pay a significant interest bill? <NAME>CHAIR POWELL</NAME>. Yeah, I mean, that’s—I think we’re a very, very long way from that. You know, the, the Congress has given the Fed independence on the condition that we stick to our knitting. We try very hard to do that. And I, I think that’s, that’s what people call fiscal dominance. And I, I think we’re just a very, very long way from that. I think, you know, if we—if we do our jobs well and support the economy and achieve maximum employment and stable prices, keep the financial system stable, I don’t think that that is something that will—that I would worry about, certainly not in the near term. <NAME>MICHELLE SMITH</NAME>. Thank you very much. <NAME>CHAIR POWELL</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Good afternoon.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Since the beginning of the pandemic, we have taken forceful actions to provide relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. Today my colleagues on the FOMC and I kept interest rates near zero and maintained our sizable asset purchases. These measures, along with our strong guidance on interest rates and our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete. The path of the economy continues to depend significantly on the course of the virus. A resurgence in recent months in COVID-19 cases, hospitalizations, and deaths is causing great hardship for millions of Americans and is weighing on economic activity and job creation. Following a sharp rebound in economic activity last summer, the pace of the recovery has moderated in recent months, with the weakness concentrated in the sectors of the economy most adversely affected by the resurgence of the virus and by greater social distancing. Household spending on services remains low, especially in sectors that typically require people to gather closely, including travel and hospitality. And household spending on goods has moderated following earlier large gains. In contrast, the housing sector has more than fully recovered from the downturn, supported in part by low mortgage interest rates. Business investment and manufacturing production have also picked up. The overall recovery in economic activity since last spring is due in part to federal stimulus payments and expanded unemployment benefits, which have provided essential support to many families and individuals. The recently enacted Coronavirus Response and Relief Act [Consolidated Appropriations Act, 2021] will provide additional support. Overall economic activity remains below its level before the pandemic, and the path ahead remains highly uncertain. As with overall economic activity, the pace of improvement in the labor market has slowed in recent months. Employment fell by 140,000 in December, as continued gains in many industries were outweighed by significant losses in industries where the resurgence of the virus has weighed further on activity. In particular, the leisure and hospitality sector lost nearly half a million jobs, largely from restaurants and bars. The unemployment rate remained elevated at 6.7 percent in December, and participation in the labor market is notably below pre-pandemic levels. Although there has been much progress in the labor market since the spring, millions of Americans remain out of work. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been the hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the service sector and for African Americans and Hispanics. The economic dislocation has upended many lives and created great uncertainty about the future. The pandemic has also left a significant imprint on inflation. Following large declines in the spring, consumer prices picked up over the summer but have leveled out more recently. For those sectors that have been most adversely affected by the pandemic, prices remain particularly soft. Overall, on a 12-month basis, inflation remains below our 2 percent longer-run objective. While we should not underestimate the challenges we currently face, several developments point to an improved outlook for later this year. Sufficiently widespread vaccinations would enable us to put the pandemic behind us and return to more normal economic activities. In the meantime, continued observance of social-distancing measures and wearing masks will help us reach that goal as soon as possible. Support from fiscal policy will help households and businesses weather the downturn as well as limit lasting damage to the economy that could otherwise impede the recovery. In addition, as we have seen since last summer, the economy has proved more resilient than expected, in part reflecting the adaptability of households and businesses. Finally, monetary policy is playing a key role in supporting the recovery and will continue to do so. The Fed’s response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. Today we unanimously reaffirmed our Statement on Longer-Run Goals and Monetary Policy Strategy, as we typically do each January. As we say in that statement, we view maximum employment as a “broad-based and inclusive goal.” Our ability to achieve maximum employment in the years ahead depends importantly on having longer-term inflation expectations well anchored at 2 percent. As the Committee reiterated in today’s policy statement, with inflation running persistently below 2 percent, we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, we will continue to increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals. The increase in our balance sheet since last March has materially eased financial conditions and is providing substantial support to the economy. The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. Our forward guidance for the federal funds rate, along with our balance sheet guidance, will ensure that the stance of monetary policy remains highly accommodative as the recovery progresses. Our guidance is outcome based and ties the path of the federal funds rate and the balance sheet to progress toward reaching our employment and inflation goals. Thus, if progress toward our goals were to slow, the guidance would convey our intention to increase policy accommodation through a lower expected path of the federal funds rate and a higher expected path of the balance sheet. Overall, our interest rate and balance sheet tools are providing powerful support to the economy and will continue to do so. We’ve also taken actions to more directly support the flow of credit in the economy, deploying our emergency lending powers to an unprecedented extent, enabled in large part by financial backing and support from Congress and the Treasury. Although the CARES Act facilities are no—are no longer open to new activity, our other facilities remain in place. 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 are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Thank you. Jeanna Smialek. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Jeanna Smialek from the New York Times. Thank you for taking our questions. I was hoping that you would first react to the wild ride that game stock—GameStop’s stock has had this week. And then, secondarily, you and your colleagues have repeatedly made it clear that you really plan to use macroprudential tools as the first line of defense when it comes to financial stability risks. But your macroprudential tools primarily apply to the banks. I’m wondering what your plan is, if you see some sort of large financial stability risk emanating from the nonbank financial sector in the coming months, especially as it relates to search-for-yield kind of activities. You know, what, what do you see as the solution there? Thanks. <NAME>CHAIR POWELL</NAME>. So, on, on your first question, I don’t want to comment on a particular company or, or day’s market activity or things like that. It’s just not really something that I would typically comment on. In terms of macroprudential policy tools, so, as you know, no doubt, we rely on sort of always-on, through-the-cycle macroprudential policy tools, particularly the stress tests and also the elevated levels of liquidity and capital and, and, and also resolution planning that we—that we impose on the largest financial institutions. We don’t use time-varying tests and tools as some other countries do. And we think it’s a good approach because—for us to use ones that are always-on—because we don’t really think we’d be successful in every case in picking the exact right time to intervene in markets. So that’s for banks. You really asked about nonbanks, the nonbank sector. And so we monitor financial conditions very broadly. And while we don’t have jurisdiction over, over many areas in the nonbank sector, other agencies do. And so we do coordinate through the Financial Stability Oversight Council and with other agencies who have responsibility for, for nonbank supervision. And, in fact, as you know, in the last crisis, the banking system held up fairly well so far. And, and the dislocations that we saw from the outsized economic and financial shock of the pandemic really appeared in the nonbank sector. So that’s—right now we are engaged in, in carefully examining, understanding, and thinking about what, what in the nonbank sector will need to be addressed in the next year or so. <NAME>MICHELLE SMITH</NAME>. Thank you. James Politi, FT. <NAME>JAMES POLITI</NAME>. Thank you so much, Michelle and Chair Powell. I had a question on fiscal policy. Last year you consistently said that the economy needed more fiscal support and, I believe, were pleased when the $900 billion package was approved in December. We have— now have a new, new President, a new Congress. We have a weakening short-term outlook. Do you believe the economy still needs additional support on the fiscal side? And in what areas? <NAME>CHAIR POWELL</NAME>. Thank you. So I guess I’d start by saying that the, the fiscal response that we’ve seen to this downturn has been strong, and I think we can say now that it’s been sustained after the passage of the—of the, the most recent act in, in late December. And that’s really a key reason why the recovery has been as strong as it’s been. Fiscal policy has been absolutely essential. When we look back on, on the history of this period, we’ll see a strong and sustained fiscal policy response. I would—I would add that we’re, as I mentioned, a long way from a full recovery. Something like 9 million people remain unemployed as a consequence of the pandemic. That’s as many people as lost their jobs at the peak of the Global Financial Crisis and the Great Recession. Many small businesses are under pressure, and there are other needs to be addressed. And the path ahead is still pretty uncertain. So, all of that said, the judgment on how much to spend and in what way is really one for Congress and the Administration and not for the Fed. And these discussions are going on right now. So there’s a discussion, as you know, right now around, around those precise questions, and, and that’s appropriate, but not for us to play a role in talking about specific policies. <NAME>MICHELLE SMITH</NAME>. Thank you. Steve Liesman. <NAME>STEVE LIESMAN</NAME>. Thank you, Mr. Chairman. I wonder if I could follow up on Jeanna’s question here. I understand that you do address issues of, of valuations through macroprudential policies in the first instance, but there’s a range of assets. And I know you do watch a range of assets. But from Bitcoin to corporate bonds to the stock market in general to some of these more specific meteoric rises in stocks like GameStop, how do you address the concern that super easy monetary policy—asset purchases and zero interest rates—are potentially fueling a bubble that could cause economic fallout should it burst? <NAME>CHAIR POWELL</NAME>. Let me—let me provide a little context. The shock that the—from the pandemic was unprecedented both in its nature and in its size and in the amount of unemployment that it created and in the shock to economic activity. There’s nothing close to it in our modern economic history. So our response was really to that. And we—we’ve done what we could, first, to restore market function and to provide a bit of relief, then to support the recovery. And, hopefully, we’ll be able to do the third thing, which is to avoid longer-run damage to the—to the economy. Our role assigned by Congress is maximum employment and stable prices and also look after financial stability. So, in a world where, almost a year later, we’re, we’re still 9 million jobs, at least—that’s one way of counting it; it can actually be counted much higher than that— short of maximum employment and people are out of the labor force who were in the labor force—the real unemployment rate is close to 10 percent if you include people that’ve left the labor force—it’s very much appropriate that monetary policy be highly accommodative to support maximum employment and price stability, which is getting inflation back to 2 percent and averaging 2 percent over time. So, on, on matters of financial stability, we have a framework. We don’t look at one thing or two things. We look at—and we made that framework public after the financial crisis so that it could be criticized and understood and we could be held accountable. And, you know, the things that we look at are—we do look at asset prices. We also look at leverage in the banking system. We look at leverage in the non—the nonbanking system, which is to say, corporates and households. And we look at also funding risk. And if you look at it across that range of, of, of readings, they’re each different, but we monitor them carefully. And I would say that financial stability vulnerabilities overall are moderate. Our overall goal is to assure that the financial system itself is resilient to, to shocks of all kinds, that it’s strong and resilient. And that includes not just the banks, but money market funds and, and all different kinds of nonbank financial structures as well. So when we get to the nonfinancial sector, we don’t—we don’t have jurisdiction over that. But—so I would just say that our—that there are many things that go in, as you know, to, to setting asset prices. So if you look at what’s really been driving asset prices, really, in the last couple of months, it isn’t monetary policy. It’s been expectations about vaccines. And it’s also financial—sorry, fiscal policy. Those are—those are the news items that have been driving, driving asset purchases—sorry, asset values in, in recent months. So I, I know that monetary policy does play a role there, but that’s how we look at it. And I think, you know, I think that the connection between low interest rates and, and asset values is probably something that’s not as tight as people think, because a lot of—a lot of different factors are driving asset prices at any given time. <NAME>STEVE LIESMAN</NAME>. Can I follow up, Michelle, if you don’t mind? Mr. Chairman, do you rule out or see as one of your tools in the toolkit the idea of adjusting monetary policy to address asset values? <NAME>CHAIR POWELL</NAME>. So, you know, that’s—as you know, that’s one of the very difficult questions in all of monetary policy. And we don’t rule it out as a theoretical matter, but we, we clearly look to macroprudential tools, regulatory tools, supervisory tools, other kinds of tools rather than monetary policy in, in addressing financial stability issues. It’s not—you know, the, the monetary policy we know strengthens economic activity and job creation through fairly well- understood channels. And a strong economy is actually a great supporter of financial stability. That will mean strong, you know, well-capitalized institutions, and, and households will be— will be working. And, and so we know that. We don’t actually understand the tradeoff between—the sense of it is, would you—if you raise interest rates and thereby tighten financial conditions and reduce economic activity now in order to address asset bubbles and things like that, what—will that even help? Will it—will it actually cause more damage, or will it help? So I think that’s unresolved. And I, I think it’s, it’s something we, we look at as not, not theoretically ruled out but not something we, we—we’ve ever done and not something we would plan to do. We would rely on macroprudential and other tools to deal with financial stability issues. <NAME>STEVE LIESMAN</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Michael Derby. <NAME>MICHAEL DERBY</NAME>. Yes. Thank you very much. I wanted to ask you, if there is a near- term rise in inflation related to the recovery, how will you determine whether or not it’s something that’s temporary or more enduring? And how much inflation is the Fed willing to tolerate before it acts to restrain price pressures? <NAME>CHAIR POWELL</NAME>. So, on inflation, a couple of things—there are a couple of things that are worth mentioning. One is just that we know that we measure inflation on a trailing 12-month basis. And as we—as we lap the very low inflation readings of March and April of last year, we’ll see measured 12-month inflation move up a few tenths. This is just—they’re called base effects, and, and that’s a—that’s a transient thing that we think will pass. There’s also the possibility—indeed, it’s in some forecasts—that as the economy fully reopens, there’ll be a burst of spending, and—because people will be enthusiastic that the pandemic is over, potentially, and that that could also create some upward pressure on inflation. Now, again, we would see that as something likely to be transient and not to be very large. In both cases, we don’t see those as either lasting or particularly large. So the way we would react is, we’re going to be patient. Expect us to wait and see and not react if we see small and what we would review—we would view as very likely to be transient effects on inflation. I think if you—you know, it helps to look back at, at the inflation dynamics that the United States has had now for some decades and notice that there has been, you know, significant disinflationary pressure for some time, for a couple of decades. Inflation has averaged less than 2 percent for a quarter of a century. And the inflation dynamics, with the flat Phillips curve and low persistence of inflation, is very much intact. Those things, they change over time. We understand that inflation dynamics evolve constantly over time, but they don’t change rapidly. So we think it’s very unlikely that anything we see now would result in, you know, troubling inflation. Of course, if we did get sustained inflation at a level that was uncomfortable, we have tools for that. It’s far harder to deal with, with too low inflation. We know what to do with higher inflation, which is, you know, should the need arise, we, we would have those tools. And we don’t expect to see that at all. In terms of how much, you know, what we’ve said is we’d like to see—because inflation has been running persistently below 2 percent, we’d like to see it run moderately above 2 percent for some time. We have not adopted a formula. We’re not going to adopt a formula. We’re going to—we, we use policy rules and formulas in everything we do, consult them constantly, but we don’t set policy by them. We don’t do that. And so we’re going to preserve an element of judgment. And, again, we’ll seek inflation moderately above 2 percent for some time. And we’ll, we’ll show what that means when we get inflation above 2 percent. The, the way to achieve credibility on that is to actually do it. And so that’s what we’re planning on doing. <NAME>MICHELLE SMITH</NAME>. Thank you. Rachel Siegel. <NAME>RACHEL SIEGEL</NAME>. Thank you, Michelle, and thank you, Chair Powell, for taking our questions. I have a two-pronged question about vaccines. So you specifically mentioned progress in the rollout of vaccines, but there is still plenty that we don’t know about supply over the coming weeks and months. So I’m curious how you and your colleagues are factoring in vaccine rollouts and funding for distribution in your forecasts and what that timeline looks like. And then, secondly, I’m wondering if you, yourself haven’t—has been—have been vaccinated, along with other FOMC members. Thank you. <NAME>CHAIR POWELL</NAME>. So, in terms of the rollout of the vaccines, we see what everyone else sees, right? We see that we’re, we’re vaccinating people and at a rate of about a million a day, apparently, and that it’ll take quite a while to get—to get to the numbers that the experts say are required to get to herd immunity. And we think it’s going to be a struggle. You’ll notice that we, we said that the, the pandemic still, still provides considerable downside risks to the economy. And that’s one of the reasons why, is that—is the slowness of the rollout. The other—another reason why is just the arrival of these new virus strains. We don’t know how to—we don’t know how to model that. You know, we can have a base case, but we realize no one knows how the—how this new vaccine will roll out, how successful it will be, how high we’ll be able to drive vaccination, and those sorts of things. So we have a base case, and we—but we always—we always look at, at the range of possibilities. In this case, we particularly look at the downside risks. You know, that’s really what we do is, we, we set policies so that we’re, we’re, you know, we’re going to remain accommodative until we actually see improvement in the economy and not just in the outlook, in the data. So that’s, that’s how we think about, about that. And I would—I would also add, there’s nothing more important to the economy now than, than people getting vaccinated. You know, if you—if you, you think about the places where the economy is weak—I mentioned bars and restaurants. That’s 400,000 jobs we lost last month, and that’s all because of the spread of the pandemic. Many other areas of the economy— actually, there was actually job creation in—you know, in goods production and in some service parts—industries as well. But we’re just not going to be able to get that last group of people back to work—and it’s a big group of people—until we get the pandemic behind us. We, we have not won this yet. We haven’t succeeded in doing this yet, and we need to stay focused on it as a country and, and get there. And, you know, we clearly can, but we’re going to have to stay focused. And that includes—you know, that includes us at the Fed, monetary policy. I, I have been vaccinated once, and I expect to get my second vaccine sometime soon. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. A question—I have a question that I was going to ask, but I need to follow up for a second on the questions about the markets and macroprudential, and that is, you have one tool you can use. Would you be discussing—have you discussed raising margin requirements under Regulation T? And, if not, why not? <NAME>CHAIR POWELL</NAME>. No, we haven’t—we haven’t done that. I mean, remember, we’re, we’re focused on maximum employment, price stability, financial stability as I defined it—the broad financial sector. And, and that—that’s not, you know—over the years, we, we consult the fact that we have that authority. But, no, it’s not something we’re looking at right now at all. <NAME>MICHAEL MCKEE</NAME>. All right. My follow-up question is, a lot of people in the markets think that you’re basically stuck right now, because you can’t really go lower with the zero bound, rejecting negative interest rates, and you can’t really go higher because of the threat of a taper tantrum. Is the Fed locked into a very narrow corridor now? And, if not, you did say you would signal any change in interest rates a long time ahead. But [former] New York Fed President Bill Dudley says there’s no way you can avoid a taper tantrum. So how do you do that? <NAME>CHAIR POWELL</NAME>. Well, first, I—we, we think our policy stance is, is just right. We think it’s providing significant support for economic activity and hiring. We, you know, we, we adopted a new monetary policy framework of flexible average inflation targeting in August. In September, we, we implemented rate guidance that, that was consistent with and based on that new framework. In December, we did the same for asset purchases. So we now have, you know, strong guidance on, on rates and on asset purchases that’s providing very strong support for economic activity. If you look at the sectors of the economy that are interest sensitive, you will see very strong activity: housing, durable goods, automobile sales. So, you know, our, our policies are working. And we think that, that they are—we think our policy stance is, is right. That said, there’s clearly more that we can do. With asset purchases, for example, we can, you know—that’s, that’s a tool we can do more—we can strengthen our guidance, too, if we were to think that that were appropriate. What you see is an economy where what’s holding it back is not the lack of, of policy support from the Fed. It’s the pandemic. It’s, it’s the spread of the disease and people’s reluctance or, or inability to partake in certain kinds of economic activities, which amount to a, a meaningful part of the economy. So that’s, that’s what I would say. We certainly have things that we can do, but we think we’re—we think we’re in the right place. You know, in terms of—in terms of tapering, it’s just premature. We just created the, the guidance. We said we’d want to see substantial further progress toward our goals before we modify our, our asset purchase guidance. It’s just too early to be talking about dates, which we should be focused on, on progress. We’ll need to see actual progress. And when, when we see ourselves getting to that point, we’ll communicate clearly about it to, to the public so nobody will be surprised when the time comes. And we’ll do that well in advance of actually considering what will be a pretty gradual taper. <NAME>MICHAEL MCKEE</NAME>. Well, if I might, you—your policies are working, and you can maybe do more. But the question is, can you stop doing it when it’s time? <NAME>CHAIR POWELL</NAME>. Yes. So, you know, I, I was here—we had all the same questions back in—after the Global Financial Crisis. We raised interest rates. We froze the balance sheet size, and then we shrank the balance sheet size. So there’s no reason why we, we won’t be able to do that again. In fact, we learned a lot from that experience. And, you know, we, we understand—as we understood then, but even more so—we understand that the—that the way to do it is to communicate well in advance, to, to do predictable things, and to move gradually. And that’s, that’s what we’re going to do. We’re going to be very transparent. But, honestly, no—you know, the whole focus on exit is premature, if I may say. We’re focused on finishing the job we’re doing, which is to support the economy, to give the economy the support it needs. There are people out there who’ve lost their jobs. It’s essential that we get them back to work as quickly as possible, and we want to do everything we can to do that. And that is our primary focus right now. It’s, it’s, it’s too soon to be—to be worried about that. You know, when we come to exit, we have a—we have an understanding of how to do that, and we’ll do it very carefully. But in the meantime, our focus is on giving the economy the support it needs. <NAME>MICHELLE SMITH</NAME>. Thank you. Victoria Guida. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I just wanted to go back to fiscal stimulus for a second. You know, we just had a $900 billion package, and now Congress is talking about doing more. Do you expect more aid directly to consumers to be inflationary? And, specifically, how worried should lawmakers be about, you know, causing concerning levels of inflation? <NAME>CHAIR POWELL</NAME>. I, I would say that, again, we have been struggling with disinflationary forces for some time. If you look around the world—look in Western Europe, look at Japan—around the world, large economies have, have felt much more downward pressure on inflation, have fallen short of their inflation goals, for some time now. That is the broad global macroeconomic context that we all live in. And we believe that those global forces—which are, you know, aging demographics, advancing technology, and globalization—those, those forces are still in effect. Now, they may slow down, and, and it’s, it’s an interesting question, the extent to which, for example, globalization may slow down or even reverse. Notwithstanding that, inflation dynamics in the United States have, have consisted of a flat Phillips curve and low persistence for, for a long time. We do not expect in the near term that that will change significantly. It may evolve over time, but significant time. You know, these things are—these things are, are changing, but they don’t change at a rapid rate. And there’s—I, I don’t believe that, that they will. So I wouldn’t—I’m, I’m not—I’m much more worried about falling short of a complete recovery and losing people’s careers and lives that they—that they built because they don’t get to work—back to work in time and things like that. I’m more concerned about that and the damage that will do not just to their lives, but to the United States economy, to the productive capacity of the economy. I’m more concerned about that than about the possibility, which exists, of higher inflation. Frankly, we welcome slightly higher inflation, somewhat higher inflation. The kind of troubling inflation that people like me grew up with seems, seems far away and unlikely in, in the both domestic and global context that we’ve been in for some time. <NAME>MICHELLE SMITH</NAME>. Thank you. Steve Matthews, Bloomberg. <NAME>STEVE MATTHEWS</NAME>. Chair Powell, Treasury Secretary Yellen, in a memo to her employees yesterday, spoke of the close working relationship with the Federal Reserve. And I’m wondering how you would describe the relationship with, with Treasury under Chair Yellen, if you’ve met with, with, with Treasury Secretary Yellen and, and/or President Biden since he has taken office. And, you know, secondly, about that, as you know, in the last four years, there was constant criticism from the—of the Fed from the President and from other officials of the Administration. Do you have any kind of assurance or expectation that this will now be more of a hands-off attitude, in terms of commenting on monetary policy from the Administration? <NAME>CHAIR POWELL</NAME>. Okay. So I have the highest respect and admiration for Secretary Yellen. And I’m, I’m sure that we’re going to have a, a good working relationship together. Absolutely sure. We’ll also have a good institutional relationship between the Fed and the Treasury. And I expect that that’ll be very good and, and very productive. It’ll be collaborative. We’ll work together. Now, the way that works is, is that, you know, we know—the agencies know each other well, and this is true of finance ministries and central banks around the world. We know to stay in our lanes. We know we have different authorities. We know that we work together on some things to—you know, for the benefit of the public. And I’m, I’m absolutely sure that we’re going to do that. I, you know, haven’t—I haven’t spoken to, to Secretary Yellen—I’m going to be calling her “Chair Yellen” most of the time, so you just have to be patient with me—Secretary Yellen. I haven’t spoken to her since I congratulated her on being nominated. I do expect very soon to begin our regular calls or—and, and ultimately meetings, which have gone on, really, for, you know, 70 years. The Treasury Secretary and the, and the Fed Chair have had weekly or so meetings, lunches, breakfast, calls, depending on the situation. So I expect that will—that will happen soon. I’ve—I have not met the, the President, President Biden. And just, you know, I, I, I don’t—I don’t have any comment on your—on your last question. I wouldn’t want to comment one way or the other. <NAME>STEVE MATTHEWS</NAME>. Just to follow up briefly, you have some 13(3) emergency programs that will expire March 31 that the Fed and the Treasury have worked on together. Do you have an expectation of whether those will be left, left to expire then or whether they will be extended? <NAME>CHAIR POWELL</NAME>. So I—I’ll just say that I think our facilities were very successful in supporting the economy during its darkest moments and I believe saved—protected the loss of millions of jobs. We’re going to continue to monitor financial and credit conditions throughout the economy. And, and if the kind of emergency conditions arise that are required under that law, then our emergency lending tools will remain available. Now, I’ve had no discussions with anybody at Treasury on that, because I haven’t had any discussions with anybody at Treasury other than meet—you know, high-level meetings with the—with the transition team a month or so ago. And once we start having those, those meetings, of course, I’ll observe, you know, the long-standing practice of not talking about confidential discussions. But as of now, there haven’t been any discussions at all. <NAME>MICHELLE SMITH</NAME>. Thank you. Howard Schneider, Reuters. <NAME>HOWARD SCHNEIDER</NAME>. Thanks, Chair Powell, for doing this. So a couple questions on timing. In the statement, you removed—regarding the coronavirus—you removed the time reference “short and medium term” when it comes to the risks to the economic outlook, and it simply now says “considerable risks to the economic outlook.” Should we read that as a sort of a positive change that you, you now see an end—sort of the endgame of this down the road? Or is it more that you’re, you’re worried it could last longer than you expect? And a related issue, have you given any guidance yet to the Fed staff or System on when the Fed itself might resume in-person events? <NAME>CHAIR POWELL</NAME>. Yes. So in the statement, on the language, we dropped “in the medium term,” because, really, the risks are, are in the near term, frankly. You know, as I mentioned, it’s the rollout of the vaccine. It’s the arrival of new strains that, that are more contagious and perhaps more virulent. And those are the—those are the—and also just the ongoing—third thing, of course, is the ongoing spread of the virus. It’s, it’s in the near term. It’s not in the medium term. We were thinking—when we were thinking “medium term,” we were thinking of longer-term scarring and things like that. Nonetheless, I mean, I think what—to go to your, your second question, and as I mentioned in my, in my opening remarks—there is good evidence to, to support a stronger economy in the second half of this year. In fact, if you look at, at—as we do—look at a range of private forecasters, what was their forecast in, in December, and what’s their forecast now? Right across the board: much higher forecasts for 2021 growth. And that’s because of the ongoing rollout of the vaccines and also because of fiscal policy, expectations, and the reality of, of the CRRA Act [Consolidated Appropriations Act, 2021] getting done. So there is—there is a positive case there. But that—think of that as—the sort of base case is, is a strong economy in the second half of the year. The language says that there’s still—I forget the exact language—downside risks. We used an adjective. It was “considerable”—“considerable risks to the economic outlook.” So there are considerable risks, risks to the economic outlook. Nonetheless, that is—that is a more positive outlook. And that’s really how, how I would—I would parse that for you. I don’t know when we’re going to come back to work, and I’m, I’m actually in the Eccles Building here today. And I don’t know when that’ll be. I mean, we—I can’t wait to be working in person again. But, you know, we—we’ve been able to work successfully remotely. We really have. And, you know, we’re not going to push people when they’re uncomfortable. We’re going to wait till people are comfortable and wait till it’s well and truly time to get back together in person. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Hannah Lang. <NAME>HANNAH LANG</NAME>. Hi, Chair Powell. Thank you so much for taking our questions. The Fed in December eased its restrictions on bank dividend payments and share repurchases. And so I wanted to ask what factors the Fed will be looking at to determine what level banks can pay out in the second quarter and when we can expect such a decision. <NAME>CHAIR POWELL</NAME>. Okay. So we’re, we’re monitoring that on an ongoing basis, continue to—continuing to evaluate our, our restrictions. And we haven’t made a decision about whether to continue them in the second quarter or not. We’re just going to look at bank—we’re going to look at the whole range of, of information, including economic activity, banking activity, the, the success in vaccination. All of those things will go into our assessment of what the right answer is to that question. I think we’ve been careful about, about rolling back those restrictions. And, and I’m pleased with where we are. Let’s remember that the banks—that the banks that are subject to the stress tests have taken very, very large reserves—very large loss reserves, and also increased their capital. They’ve actually had—they have higher capital ratios now than they had at the beginning of the pandemic. So the banking system has held up well here. And, and—but, you know, we’re going to be careful about this and, you know, move based on data, and all of the data, when we make that decision. <NAME>MICHELLE SMITH</NAME>. Thank you. Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Mr. Chairman, thank you for taking the question. So I’m interested in the housing sector. Home prices are rising, 9 percent in some areas, because of low interest rates. Are you concerned about a bubble forming there yet? And is there a price increase, you know, that you’re looking at where it might change the level of mortgage-backed securities the Fed is buying? And, as a continuation of that, is the bubble in the corporate debt cycle more concerning for you? <NAME>CHAIR POWELL</NAME>. So, on housing, you know, housing is now—the level of housing activity is at its highest level since before the Global Financial Crisis, in some measures. So we’ve had a very strong rebound in housing. Some of the, the tightness in housing markets, we think—which has led to the, the significant price increases this year—we think is, is a passing phenomenon. There was a lot of pent-up demand. There’s a one-time thing happening with people who are spending all of their time in their house, and they’re thinking either “I need a bigger house” or “I need another house and a different house—or a second house,” in some cases. So there’s just—there’s a—there’s a one- time shift in demand that we think will get satisfied—also, that will call forth supply. And that will—that will, we think—we think that those price increases are unlikely to be sustained for, for all of those reasons. So you asked about corporate debt, I guess? <NAME>EDWARD LAWRENCE</NAME>. Yes. I’m just concerned if that’s a bubble that you’re watching. <NAME>CHAIR POWELL</NAME>. So we, we monitor pretty much all of the big financial markets pretty carefully. And, you know, what’s happened in, in the corporate debt market, beginning with the announcement of our corporate credit facility, has been, you’ve seen lenders lending and borrowers borrowing. You’ve seen relatively significantly fewer defaults than we—than we expected. There were a lot of downgrades and some defaults at the beginning, and those have really slowed down. And, by the way, the same is true for bank loans. Banks are not experiencing the kinds of defaults that, that we all were concerned about in the early months of the pandemic. It’s just not materializing. So they’re having to reverse some of their loss reserves, actually. Debts—corporate debt spreads are, are tight. They’ve tightened. They were very broad—high—wide, of course, at the—during the acute phase of the pandemic, and they’ve— you know, they’re now at the lower end of their typical range. And we do monitor that. You know, it’s, it’s not something we can control or operate on directly, but we do—we do watch those things. And, you know, in a sense, it’s good that companies have been able to finance themselves during this period, because they—they’ve been able to stay in business. They’ve been able to keep their employees working. And, you know, that’s a good thing. And that’s, that’s part of highly accommodative financial conditions. <NAME>MICHELLE SMITH</NAME>. Thanks. Chris Rugaber. <NAME>CHRISTOPHER RUGABER</NAME>. Thanks. Can you—since you suggested that the concern from the pandemic is perhaps a shorter-term concern and that’s why you removed some of the language from the statement, can you talk about what kind of impact you’re seeing so far? Do you feel that structural impacts have been—how would you characterize those? I know that’s been a major concern—you’ve talked about at this press conference and others. Do we see longer-term damage to the job market? Have—or has there been some success in preventing that? And, compared to previous recessions, how would you characterize the damage to the job market here, in terms of things like, you know, permanent job loss, workers that need to shift industries, that kind of thing? <NAME>CHAIR POWELL</NAME>. You know, the, the, the big thing is that the jury’s out. And this has been a concern since the very beginning, is the concern that people—if, if they become disconnected from the industry or the job where—that they used to work in, it, it can be years or never when they get back into the labor force, particularly for people who are well along in their careers—the same kind of scarring for small businesses, which don’t have the kind of resources that you need to get through this. So we’ve, we’ve had a big concern about, about both of those. We haven’t seen as much of it as we—as we feared. And that’s a good thing. But as I said that, you know, the jury is out here—9 or 10 million people still out of work because of the pandemic. They’re—a big chunk of them are people who worked in public-facing jobs in the service sector. And, you know, they’ve gotten a lot of support from fiscal policy and some from monetary policy. But the question is getting them back to work. And, you know, it’s, it’s harder if you’re—it takes longer, empirically, to find that next job if you’re looking at a brand-new industry. It’s not easy to change careers completely midcareer. So that just, again, stresses the urgency that we feel and others feel at, at, you know, fully defeating the pandemic, finishing the job and getting back to a place where it’s safe to have these—you know, to, to, to stay in hotels, to fly on airplanes, to go to sporting events and movie theaters, and all of those things. So those people are still at risk. And we’re, we’re very, very focused on that group of people with our policy and, and, and, you know, the way we look at the economy. So many people have had that bridge across the pandemic. You know, we talked about that at the beginning. For many people, it’s clear that they’ve made it across, and their job is okay, and their house is okay. And, you know, it’s been terribly inconvenient and painful, and schools are closed and things like that. But there, there’s a bunch of people yet who haven’t found that bridge yet. And we’re, we’re very focused on that. Of course, the other thing is, we’re going to a different economy. And we’re going to be learning more about that as we go. But, clearly, we’re, we’re learning that things can be done from remote locations. We’re learning that technology can replace people even more than we thought. And some of that is happening. So I think as we, you know, as we get into this, you know, the phase after—even after the economy fully reopens, I think we’re still going to need to keep people in mind whose lives have been disrupted, because they’ve lost that—the work that they did. And I think it would be wise as a country, for the longer-run productive capacity of the country, if we were to look out for those people and help them find their way back into the labor force even if it means continuing support for an additional period of time. <NAME>CHRISTOPHER RUGABER</NAME>. Great. If I could ask this quick follow—yesterday Susan Rice, domestic policy advisor at the White House, talked about a Citigroup study that said closing racial economic gaps could add up to $5 trillion to the U.S. economy over the next five years and 6 million new jobs. Do you agree that racial disparities are currently a drag on the economy? And, if so, what can the Fed do proactively to narrow those racial gaps in income and wealth, including potentially through regulatory policy? <NAME>CHAIR POWELL</NAME>. I strongly agree with that, as a matter of fact. I think if you look at either—look at employment gaps or unemployment gaps or wage gaps, wealth gaps, homeowning gaps, all of those persistent gaps that exist even controlling for many other factors, you will see that they’re, they’re persistent, they’re—and they’re very difficult to explain. And so it’s—the reason we talk about inequality and, and racial inequality in particular, is that it goes to our job, which is to achieve maximum employment, which, which links up with, with—we want—we want the potential output of the United States to be as high as it can possibly be. We want—we want an economy where everybody can take part and everybody, everybody can put their labor in, and they can share in the prosperity of our great economy. That’s what we want. And that’s how the U.S. economy can be bigger, stronger, growing faster, is if we can achieve a more—a broader prosperity. So, now, in terms of our tools, you know, of course, that project that I just mentioned is one for the broader society, for the private sector, for fiscal policy, but we have a role to play. And, and that is, how we think about the labor market. Principally, when we say that the maximum employment is a, a broad and inclusive goal, what we’re—what we’re saying there is, we’re not just going to look at the headline—and we never did, really, but—we’re not going to just look at the headline numbers. We’re going to look at different demographic groups, including women, minorities, and others. And we’re not going to say that we’ve reached maximum employment, which is our statutory goal, until we’ve reached maximum employment. And you haven’t if, if there’s lots of pockets of, of people not participating in or not employed in the labor market. So those are the things that we can do. We also do a tremendous amount of research on these issues. You know, we do—we, we have such a focus on these issues now that we actually—we, we have a new, a webpage, relatively new, where you can access all of it. But it’s a lot of activities in our Division of Consumer and Community Affairs. It’s lots of research, and, and it’s also, you know, our enforcement of the fair lending laws and things like that. So I think everybody’s got a role to play here. It’s a—it’s a national goal and a national job, and we’re just going to do our part of the job. And it’s something we’re strongly committed to. <NAME>MICHELLE SMITH</NAME>. Thank you. For the last question, we’ll go to Scott Horsley at NPR. <NAME>SCOTT HORSLEY</NAME>. Thanks, Mr. Chairman. You said in your opening remarks that the, the economy in many ways had proven more resilient than, than people expected, and that that reflected the adaptability of both households and businesses. Are, are there adaptations that caught you by surprise, maybe related to remote work or new ways to do on-site work, in-person, face-to-face work that, that the economy’s proven tougher than, than you expected at the outset of this pandemic? <NAME>CHAIR POWELL</NAME>. Well, yes. So I think, if you go back to the—to the beginning, there was a real concern. I mean, just, just take the financial markets, for example. Suddenly, all of those big buildings all over the, the—New York City and all around the world where people work in the financial markets with terminals and everything, everybody had to go home, and they had to take their terminals with them. And I think there was a real concern that there would be a tremendous loss of functionality just at the time when the financial markets were under historically difficult conditions. And yet, it worked out okay. So I think people—many people in the financial sector are still working with their terminals at home, including people on trading floors or on virtual trading floors. Now, some of that’s reversing now. But we have definitely learned that we can do more work from home in many, many different lines of work. Of course, that’s not possible if your job involves being at a place, doing personal services. For many people, it’s not possible. And that’s very much something that skews to higher-income, higher-educated people being able to work from home and others not so much. So I think we’ve learned that. The other thing, though, even conditional on that, when we saw the wave in the South and the West, the wave of cases this summer, I think, intuitively, having seen what happened in March and April, we expected there to be a significant hit to economic activity. And people kind of just got on with their lives and went and, and dealt with it. And, and it didn’t actually—it had a much smaller effect on economic activity than we expected. Then comes the fall wave, which is just so much larger—a very, very large wave as, as was very much forecast. People going indoors, the cold weather, all of that. And even there, if you look at—I would say, look at the December jobs report. So, big job losses in, you know, in that part of the service sector. So I mentioned 400,000 jobs in bars and restaurants. There’s another 100,000 in similar kinds of activities. But if you go—if you look elsewhere, it’s not having an effect. You know, even purchasing manager index and sentiment indexes on, on areas of the economy that are not directly—really directly—exposed to the pandemic in their economic activity, they’re doing okay. They are. Housing is a great example. You know, the way—the way—the way the housing industry worked, that when you buy a house, there was a lot of in-person contact. They managed to pretty much immediately go to a more virtual—you know, with all the technology. They were able to completely avoid that. And the housing market has been really strong, notwithstanding that it’s, it’s now quite virtual rather than in person. So there’s been a lot of adapting, and—but you can’t adapt, you know, hotels, sporting venues, movie theaters, restaurants, bars. You just—you know, those are just going to—and that’s—again, that’s millions and millions of people. And so you’re just going to have to defeat the pandemic, which, as I mentioned, you know, we, we have a plan to do that, but we haven’t done it yet. And we need to—we need to finish the job. And we—it’s, it’s within our power to do that as a country this year. And I would just urge that—and I know people are working hard on that. But that, that is really the main thing about the economy, is, is getting the pandemic under control, getting everyone vaccinated, getting people wearing masks, and all that. That’s the single most important economic growth policy that we can have. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. I would like to start by noting that it has been a full year since the pandemic arrived with force on our shores. Looking back, it was clear that addressing a fast-moving global pandemic would be plainly and primarily the realm of health- care providers and experts, and we are grateful to them and to all the essential workers for their service and sacrifice. The danger to the U.S. economy was also clear. Congress provided by far the fastest and largest response to any postwar economic downturn, offering fiscal support for households, businesses, health-care providers, and state and local governments. Here at the Federal Reserve, we rapidly deployed our full range of tools to provide relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. We are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. The economic fallout has been real and widespread, but with the benefit of perspective, we can say that some of the very worst economic outcomes have been avoided by swift and forceful action—from Congress, from across government, and in cities and towns across the country. More people held on to their jobs, more businesses kept their doors open, and more incomes were saved as a result of these swift and forceful policy actions. And while we welcome these positive developments, no one should be complacent. At the Fed, we will continue to provide the economy the support that it needs for as long as it takes. Today the FOMC kept interest rates near zero and maintained our sizable asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete. The path of the economy continues to depend significantly on the course of the virus and the measures undertaken to control its spread. Since January, the number of new cases, hospitalizations, and deaths has fallen, and ongoing vaccinations offer hope for a return to more normal conditions later this year. In the meantime, continued observance of social-distancing measures and wearing masks will help us reach that goal as soon as possible. The economic recovery remains uneven and far from complete, and the path ahead remains uncertain. Following the moderation in the pace of the recovery that began toward the end of last year, indicators of economic activity and employment have turned up recently, although the sectors of the economy most adversely affected by the resurgence of the virus and by greater social distancing remain weak. Household spending on goods has risen notably so far this year. In contrast, household spending on services remains low, especially in services that typically require people to gather closely, including travel and hospitality. The housing sector has more than fully recovered from the downturn, while business investment and manufacturing production have also picked up. The overall recovery in economic activity since last spring is due importantly to unprecedented fiscal and monetary policy actions, which have provided essential support to households, businesses, and communities. The recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up notably since our December Summary of Economic Projections. In commenting on the stronger outlook, participants noted progress on vaccinations as well as recent fiscal policy. As with overall economic activity, conditions in the labor market have turned up recently. Employment rose by 379,000 in February, as the leisure and hospitality sector recouped about two-thirds of the jobs that were lost in December and January. Nonetheless, employment in this sector is more than 3 million below its level at the onset of the pandemic. For the economy as a whole, employment is 9.5 million below its pre-pandemic level. The unemployment rate remains elevated at 6.2 percent in February; this figure understates the shortfall in employment, particularly as participation in the labor market remains notably below pre-pandemic levels. Looking ahead, FOMC participants project the unemployment rate to continue to decline; the median projection is 4.5 percent at the end of this year and moves down to 3.5 percent by the end of 2023. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been the hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the service sector and for African Americans and Hispanics. The economic dislocation has upended many lives and created great uncertainty about the future. Overall inflation remains below our 2 percent longer-run objective. Over the next few months, 12-month measures of inflation will move up as the very low readings from March and April of last year fall out of the calculation. Beyond these base effects, we could also see upward pressure on prices if spending rebounds quickly as the economy continues to reopen, particularly if supply bottlenecks limit how quickly production can respond in the near term. However, these one-time increases in prices are likely to have only transient effects on inflation. The median inflation projection of FOMC participants is 2.4 percent this year and declines to 2 percent next year before moving back up by the end of 2023. The Fed’s response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the financial—the stability of the financial system. As we say in our Statement on Longer-Run Goals and Monetary Policy Strategy, we view maximum employment as a “broad- based and inclusive goal.” Our ability to achieve maximum employment in the years ahead depends importantly on having longer-term inflation expectations well anchored at 2 percent. As the Committee reiterated in today’s policy statement, with inflation running persistently below 2 percent, we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. I would note that a transitory rise in inflation above 2 percent, as seems likely to occur this year, would not meet this standard. In addition, we will continue to increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals. The increase in our balance sheet since last March has materially eased financial conditions and is providing substantial support to the economy. The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. Our forward guidance for the federal funds rate, along with our balance sheet guidance, will ensure that the stance of monetary policy remains highly accommodative as the recovery progresses. Our guidance is outcome based and ties the path of the federal funds rate and the balance sheet to progress toward reaching our employment and inflation goals. Overall, our interest rate and balance sheet tools are providing powerful support to the economy and will continue to do so. 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 are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. Thank you. I look forward to your questions. <NAME>JOE PAVEL</NAME>. Howard from Reuters. <NAME>HOWARD SCHNEIDER</NAME>. Hi, Chair Powell, and, and thanks for that. So could you talk us through how the, the forecasts for 2021 map into the “substantial further progress” definition—you know, 2.4 percent inflation—I understand that’s considered transitory. That still seems like some progress there, 4½ percent unemployment. Is it time to start talking about talking about tapering yet? <NAME>CHAIR POWELL</NAME>. [Laughter] Not yet. So, as you—as you pointed out, we’ve said that we would continue asset purchases at this pace until we see substantial further progress. And that’s actual progress, not forecast progress. So—and that’s a difference from, from our past approach. So—and what we mean by that is, is pretty straightforward. It is, we want to see that, that the labor markets have moved—labor market conditions have moved—you know, have made substantial progress toward maximum employment, and inflation has made substantial progress toward the 2 percent goal. That’s what we’re going to want to see. Now, that obviously includes an element of judgment. And when we see—we’ll be—we’ll be carefully looking ahead. We, we also understand that we, we will want to provide as much advance notice of any potential taper as possible. So when we see that we’re on track, when we see actual data coming in that suggests that we’re on track to perhaps achieve substantial further progress, then we’ll say so. And we’ll say so well in advance of any decision to actually taper. <NAME>HOWARD SCHNEIDER</NAME>. If, if I could follow up on that, this shift in the dots—why wouldn��t that suggest a weakening of the commitment here? An awful lot of people shifted into 2022, it seems. <NAME>CHAIR POWELL</NAME>. I, I don’t see that at all. You know, we, we have a, a range of perspectives on the Committee. I welcome that. And, you know, we, we have—we debate things, we discuss things, and we always come together around a—around a, a solution. But, you know, the, the strong bulk of the Committee is, is not showing a rate increase during this forecast period. And, you know, as, as data improve, as the outlook improves very significantly since the December meeting, you would expect forecasts to move up. It’s probably not a surprise that some people would bring in their estimate of the appropriate time for liftoff. Nonetheless, you know, the bulk of the Committee—the, the largest part by far of the Committee is, is—doesn’t show a rate increase during this period. And, again, part of that is wanting to see actual data rather than just a forecast at this point. We do expect that we’ll begin to make faster progress on both spending—you know, labor markets and inflation as the year goes on because of the progress with the vaccines, because of the fiscal support that we’re getting. We expect that to happen. But, you know, we’ll have to see it first. <NAME>MICHELLE SMITH</NAME>. Great, thank you. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I wanted to ask about the supplementary leverage ratio. You know, there’s been a lot of talk about what you all are going to do this month, which—I’m happy to hear an update if you have one. But just sort of more broadly, do you think, long term, that the leverage ratio poses problems for implementing monetary policy at a time when the reserve supply is going to remain large? And, if so, do you think the changes to the leverage ratio, including the SLR, are the way to deal with that problem? <NAME>CHAIR POWELL</NAME>. Victoria, we’ll have something to announce on that in coming days. And I’m not going to expound upon your questions. Why don’t you—why don’t you ask another question if you’d like to? Because, because that one—I’m just going to say that we’ll have something in coming days. <NAME>VICTORIA GUIDA</NAME>. Sure. Okay. Well, then I’ll ask about unemployment. You know, there’s—the unemployment rate is—you all have projections for the U-6 rate, but you’ve also been, you know, really emphasizing the fact that that’s not the only thing that you all are looking at. You’re also looking at labor force participation and things like that. So are you all looking at ways of maybe adding to how you’re projecting the unemployment rate to the Summary of Economic Projections? <NAME>CHAIR POWELL</NAME>. Well, let me say, as we say in our Statement on Longer-Run Goals and Monetary Policy Strategy, we look to a range of indicators on the labor market. We never only looked at the unemployment rate, which is the only indicator of, of labor market outcomes that’s in the SEP. We look at a very broad range. You hear us talk all the time about participation; about employment to population, which is the combination of the two; about different measures of, of unemployment. So it’s wages, it’s, it’s the job flows, it’s, you know, all of those things. They go into an assessment—disparities of various groups. All that goes into an assessment of maximum employment. The, the—trying to incorporate all of that into the Summary of Economic Projections would not be practical. You know, obviously, the thing that we do include is just the unemployment rate, and that’s a very insufficient statistic. So—it, it doesn’t include a lot of other things that we—that we do look at. And I, I wouldn’t want to say that we’re looking to include the other dozen things that we look at into the SEP. But at time—from time to time, we do look at, at adding different things. But I, I would just say the SEP is, it’s a summary. It’s one device. It’s not going to include all of the things that we look at. I think you know the things that we look at—we, we talk about them all the time. So we’re not actually looking actively at significantly broadening those indicators in the SEP right now. <NAME>MICHELLE SMITH</NAME>. Thank you. Chris Rugaber, Associated Press. <NAME>CHRIS RUGABER</NAME>. Thank you. Chair Powell, I wanted to ask about the forecast overall. You’re forecasting a very low unemployment rate next year and in 2023, you have inflation—or, the Fed overall is, in the SEP, forecasting inflation at or above 2 percent by 2023, yet no rate hike in any of this—in any of this forecast horizon. So is this telling us that we could see a higher inflation rate than was projected? Or do you not—as you’ve been talking about, is the unemployment rate insufficient? Or what is this telling us about the Fed’s reaction function, that it seems you’re meeting the Fed’s dual mandate by 2023, yet, again, no rate hike expected? <NAME>CHAIR POWELL</NAME>. So I guess the first thing to say is that the, the SEP is not a Committee forecast. It’s, it’s not something we sit around and debate and discuss and approve, and say, “This represents our, you know, our reaction function as a Committee.” It’s a compilation of projections from different people. And I—since we don’t debate it or discuss it, it would be hard for me to say why—exactly why each participant did what they were going to do. So all I would say about this is that we’ve—we laid out what I think is very clear guidance on liftoff. And it’s really three things: labor market conditions that are consistent with our estimates of maximum employment—and, as I mentioned, we consider a wide range of indicators in assessing labor market conditions, not just the unemployment rate; inflation that has reached 2 percent, and not just on a transitory basis; and inflation that’s on track to run moderately above 2 percent for some time. The first two of those three are very much data based; the third does have a little bit of a—of an element of expectations in it. So we are very much determined to implement this guidance in a robust way. It is the guidance that we chose carefully to implement our new framework. And to meet these standards, we’ll need to see data, as I mentioned. So what does—what does this, this SEP really say? It says that we’re committed to our framework and to the guidance we’ve provided to implement that framework. We will wait until the requirements set forth in that guidance are clearly met before considering a change in our policy rate. And the last thing I’ll say is this: The state of the economy in two or three years is highly uncertain, and I wouldn’t want to focus too much on the exact timing of a potential rate increase that far into the future. So that’s how I would think about the, the SEP. <NAME>MICHELLE SMITH</NAME>. Thank you. Paul Kiernan. <NAME>PAUL KIERNAN</NAME>. Thank you, Chairman Powell. My question is twofold. One, how high are you comfortable letting inflation rise? There, there is some ambiguity in, in your new target, as you mentioned, “expectations driven.” And, and do you think that that ambiguity might cause markets to price in a lower tolerance for inflation than the Fed actually has, thereby causing financial conditions to tighten prematurely? Is that a concern? Thanks. <NAME>CHAIR POWELL</NAME>. So we’ve said we’d like to see inflation run moderately above 2 percent for some time. And we’ve resisted, basically, generally, the temptation to try to quantify that. Part of that just is, talking about inflation is one thing; actually having inflation run above 2 percent is the real thing. So I—you know, over the years we’ve, we’ve talked about 2 percent inflation as a goal, but we haven’t achieved it. So I, I would say we’d like to, you know, perform. That’s what we’d really like to do, is to get inflation moderately above 2 percent. I don’t want to be too specific about what that means, because I think it’s hard to do that. And we haven’t done it yet. You know, when we’re actually above 2 percent, we can do that. I—look, I, I would say this. The fundamental change in, in our framework is that we, we’re not going to act preemptively based on forecasts for the most part. And we’re going to wait to see actual data. And I think it will take people time to, to adjust to that—and to adjust to that new practice. And the only way we can really build the credibility of that is by doing it. So that’s how I would think about that. <NAME>MICHELLE SMITH</NAME>. Thank you. Matthew Boesler. <NAME>MATTHEW BOESLER</NAME>. Hi, Chair Powell. This is Matthew Boesler with Bloomberg News. So there’s a widespread presumption at this point that the U.S. will reach herd immunity sometime this year. And all along, you’ve said that the path of the economy is going to be determined by the course of the virus. I’m curious, based on the projections that you released today that show unemployment will still be above estimates of maximum employment through the end of next year and perhaps sometime into 2023, do you think policymakers need to be doing more here to sort of align the herd immunity and full employment timelines, if you will? Thank you. <NAME>CHAIR POWELL</NAME>. So, on, on herd immunity, I, I’m really going to leave that question to the experts. We don’t control that. We’re not responsible for defining it. And we’ll, we’ll leave that whole discussion to the experts. I mean, we’re—what we’re focused on is, is the part that we control, which is the support that we provide to the economy. And there we’ve provided very clear guidance. And in the case of asset purchases, it’s at their current level until we make substantial further progress. There is an element of judgment in that, and we’ll, we’ll— therefore, we’ll supply clear communication well in advance of, of actually tapering, and we just went through, you know, the, the criteria for raising interest rates. They’re very specific. And, you know, we’re, we’re very much committed to having them fulfilled robustly. I, I would agree with you that the, the path of the virus continues to be very important. We, we have these, you know, new strains with—which, which can be quite virulent. And we’re not actually done yet. And I, I—we’re clearly on a good path with, with cases coming down, as I mentioned, but we’re not done. And I’d hate to see us take our eye off the ball before we actually finish the job. So that’s how I would look at that. <NAME>MATTHEW BOESLER</NAME>. If I could just briefly follow up, how do you see sort of the disconnect in terms of an economy that is expected to be widely reopened this year but full employment taking longer to achieve? Is it, is it the case that factors related to the virus will still be with us over the coming years? Is that how to interpret the forecasts? <NAME>CHAIR POWELL</NAME>. I think there’s some of that. Sure, there’ll be some of that. There will still be some social distancing. People may be, for example, going into spaces that, that, you know, that involve close contact with others. Some people will do that right away. Others will hold back. And so I think there’ll—there’ll be some of that. In addition, though, remember, there are—there are 10 million people—in the range of 10 million people who need to get back to work. And it’s going to take some time for that to happen. You know, it can—it can happen maybe, maybe more quickly than it has in the past, because it involves the reopening of a sector of the economy, as opposed to stimulating aggregate demand and waiting for that to produce job demand for workers. This could be a different sort of a process. And it could be quicker. We don’t know that. But it’s, it’s just a lot of people who have—who need to get back to work. And it’s not going to happen overnight. It would be—it’s going to take some time. No matter how well the economy performs, unemployment will take quite a time to go—to go down, and so will participation. So that’s all I can say. I think the faster the better; we’d love to see it come sooner rather than later. We’d welcome nothing more than that. But, realistically, given the numbers, it’s going to take some time. <NAME>MICHELLE SMITH</NAME>. Thank you, Steve Liesman. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, thank you. I wonder if you could—kind of a three- parter here, but all related. Would you comment on the current level of the 10-year yield and some other long rates out there, whether or not you think they would have a negative effect on the economy? And, if not, is there a level that would give you concern? And, finally, the third part: Other central bankers have expressed concern about what’s happened to yields in their countries and even some taken action, but not you. Could you give us your general idea or orientation towards the idea of, of coming into the market and affecting a particular tenor of the bond market? Do—do you like that idea? Do you not like it? Is it at the top of your toolbox, or is it something that you think is at the bottom of the toolbox? <NAME>CHAIR POWELL</NAME>. Sure. So we monitor a broad range of financial conditions, and we’re always attentive to market developments, of course. We’re still a long way from our goals, and it’s important that financial conditions do remain accommodative to support the achievement of those goals. And if you look at various indexes of financial conditions, what you’ll see is that they generally do show financial conditions overall to be highly accommodative. And that is appropriate. So that’s, that’s how we look at it. I would add, as I’ve said, I would be concerned by disorderly conditions in markets or by a persistent tightening of financial conditions that threaten the achievement of our goals. We think the stance of our—of monetary policy remains appropriate. Our guidance on the federal funds rate and on asset purchases is providing strong support for the economy. And we’re committed to maintaining that patiently accommodative stance until the job is well and truly done. <NAME>STEVE LIESMAN</NAME>. Could, could you give us an idea of how you sort of feel about that tool, of being able to come into a particular part of the market and either operating—doing an Operation Twist or something like that? Is that something you feel to be the top of your toolbox or something that you don’t really prefer? <NAME>CHAIR POWELL</NAME>. You know, we—the tools we have are the tools we have. What I’m telling you is that the stance of monetary policy we have today, we believe, is appropriate. We think that our asset purchases in their current form—which is to say, you know, across the curve, $80 billion in Treasuries, $40 billion in mortgage-backed securities on net—we think that that’s, that’s the right place for our asset purchases. Now, we can—we can change them, of course, in, in a number of different dimensions should we deem that that’s appropriate. But, for now, we think that our policy stance on that is appropriate. <NAME>MICHELLE SMITH</NAME>. Thank you. Rachel Siegel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Thanks very much for taking my question. You’ve spoken about the pandemic’s disproportionate toll on Black Americans, Hispanic Americans, Asian Americans, and other groups in the labor market. And I’m curious if you can speak to specific indicators that the Fed will be using to measure job gains for groups that have persistently higher rates of unemployment compared to white Americans. And, relatedly, since you’ve described vaccines as key to the economic recovery, is the Fed concerned about lower vaccination rates in communities of color? And what barriers do you think exist there? Thanks very much. <NAME>CHAIR POWELL</NAME>. So, which measures. So we, we do monitor and communicate very regularly about different labor market—disparities in the labor market, let’s say. So the African American unemployment rate is substantially elevated, and so is the Hispanic unemployment rate. So we look at those and we see those as, you know—it’s, it’s slack in the labor market. It’s, it’s sad to see, because those disparities had really come down to record lows since we started keeping the data that way. As recently as a year ago, February of last year, we had those, those disparities quite low. What happens in a downturn, though, is they move up at twice the speed of white unemployment. So we monitor those things. We—our tools, of course, affect unemployment generally, but we’re going to look at those as, as a form of slack in the labor market and hope that, you know, that there’s progress there. And, and this particular downturn, of course, was just a direct hit on, on a part of the economy that employs many minorities and lower-paid workers. The public-facing workers in the service industries in many cases don’t have a lot of financial assets, they’re not tremendously well paid, they might have other jobs, and things like that. So this was a direct hit on that part of the economy. And it’s the slowest part of the economy to recover. So, you know, we’d like to see those people continue to get supported, you know, as we—as the broader economy recovers, which, which it’s very much doing now. In terms of disparate levels of vaccination, that’s—those are facts and unfortunate facts. They’re really not something we, we have within our policy toolkit to address. But it is—it is true, though, that the data we have suggests that there are—there are significant disparities between different ethnic groups and—you know, but that’s, that’s not for us. That’s for fiscal authorities and the government more generally to, to work on. <NAME>MICHELLE SMITH</NAME>. Thank you. Jeanna Smialek. <NAME>JEANNA SMIALEK</NAME>. Hey, Chair Powell. Thanks for taking our questions. I was wondering if you could talk a little bit about how you see the fiscal policy support that has come down the line affecting the economy’s potential in the longer term, just in the sense that you’ve talked a lot about the potential for labor market scarring and how that might weigh on our, sort of, future prospects. And I wonder whether you see that sort of working in reverse. You know, if we put people back into the labor market more quickly, does that improve our chances? <NAME>CHAIR POWELL</NAME>. So I do think that fiscal policy overall will have really helped us to avoid much of the scarring that we were very, very concerned about at the beginning. And I think that’s just the size and the speed with which Congress has delivered—you know, with the CARES Act and since then, has—is going to wind up very much accelerating the return to full employment. It’s going to make a huge difference in people’s lives. And it has already. As I mentioned in my remarks—opening remarks, the recovery has been faster than we expected. Part of that just is, it’s very hard to predict, given we’ve never seen an event like this. But part of it is just the strength of the fiscal response, which I think will, will look good over the years. Longer term, you know, to, to really—that’s—the first part of it is about avoiding scarring, and I think we’ve not avoided all of the scarring, but we’ve probably avoided the worst cases there. And, and I hope we keep at it, and we will keep at it with our policies, of course, to do whatever we can to make sure that’s—that continues. Longer term though, what it takes to drive productive capacity per capita or per hour worked, to raise living standards over time, is investment: investment in people’s skills and aptitudes, investment in plant and equipment, investment in software. It takes a lot of investment to, to support a more productive economy and raise living standards. And that’s—you know, that hasn’t been the principal focus with these measures—our measures, certainly. And we don’t have those tools. But what Congress has been doing has mainly been replacing lost income and beginning to, you know, support people as the economy returns to normal. But there should be a focus on—a longer-term focus, I think, would be healthy on, on the investment front. <NAME>MICHELLE SMITH</NAME>. Thank you. James Politi. <NAME>JAMES POLITI</NAME>. Thank you, Chair Powell. I wanted to ask a question about the euro zone. While the outlook for the U.S. economy has much improved, progress in the euro zone has been far less encouraging. And it’s showing signs of serious weakness due, due to the slower vaccination rollout and renewed lockdowns and restrictions. How worried are you about transatlantic economic divergence and the possibility that, that trouble in the euro zone and weakness in the euro zone could, could drag down the U.S. recovery as it did, in a way, in the aftermath of the financial crisis? <NAME>CHAIR POWELL</NAME>. You’re right that the pace of the recovery is that we’re having diverging recoveries here, as we did after the last crisis. And in this case, as well as the other one, the U.S.’s recovery is, is leading the global recovery. And, you know, we conduct policy, of course, here. Our, our focus is on—our, you know—our, our objectives are domestic ones. It’s, it’s maximum employment and price stability here in the United States. We monitor developments abroad, and we know—because they know we know that they can—those can affect our outcomes. So I think U.S. demand—very strong U.S. demand, if, if—as the economy improves is going to support global activity as well over time. That, that’ll be through imports. And, you know, when the U.S. economy is strong, that strength tends to be—tends to support global, global activity as well. So that’s one thing. I don’t—I don’t worry in the near term. I mean, I’d love to see Europe growing faster. I’d love to see the vaccine rollout going more smoothly. But I don’t worry too much about us in the near term, because we’re, we’re on a very good track. Very strong fiscal support coming, now vaccination going quickly, and cases coming down. I think we’re—I think we’re in a good place. It’s all ahead of us, but the data should, should get stronger fairly quickly here and remain strong for some time here. <NAME>MICHELLE SMITH</NAME>. Thank you. Hannah Lang. <NAME>HANNAH LANG</NAME>. Hi, thanks so much for taking our questions. I wanted to ask if the Fed is planning on extending the same restrictions on bank dividends and share repurchases— I’m sorry, share repurchases that are currently in place into the second quarter, and if you’re considering at all the scenario analysis and midcycle stress tests that were in place last year, this year. And, kind of, what would make you consider doing something like that again? <NAME>CHAIR POWELL</NAME>. So we haven’t made a decision on that. We’re a couple weeks away from announcing that decision. I, I won’t foreshadow it here today. I will say, we’re going to continue our data-driven approach. You know that we restricted buybacks and dividends, so the firms are preserving capital. Through 2020, the banks actually increased their level of capital and their level of reserves. And the December stress tests showed that banks are strong and well capitalized under our hypothetical recessions that we—that we used in December, which were quite stringent. We’re right in the middle of our 2021 stress tests, and we’ll release those results before the end of June. And that layers, you know, very significant additional stress on top of the stress the banks have already absorbed over the past year, with the unemployment rate going to 11 percent and stock prices falling more than 50 percent. So—but all of that, you know, the results of the stress tests and the decision on distributions—all of that is to come fairly soon, as I mentioned. <NAME>MICHELLE SMITH</NAME>. Thank you. Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Thanks, Chair Powell, for taking these questions. You laid out the standards to lift off. And back in June of 2020, you said, you know, you’re not even thinking about thinking about raising rates. But I see seven members seeing liftoff in 2023 and 4 next year. How, how much debate—and how can you characterize that conversation—has there been about moving off the lower bound earlier than signaled? <NAME>CHAIR POWELL</NAME>. Well, you know, it all depends. We’ve set out very clear criteria for liftoff, right, where we’ve said we want to see labor market conditions that are consistent with our estimates of, of maximum employment. And that doesn’t just mean unemployment, it means a much broader set of criteria. We want inflation at 2 percent, and not on a transitory basis. And we want inflation on track to be moderately—to run moderately above 2 percent for some time. Those are the three conditions. Everybody on the Committee agrees to that, right? So it comes down to, what’s your projection for the economy? If you want to—if you want to—you know, people will have a range of, of assessments for how good the economy is going to be. And, you know, we, we don’t—I would say that we’re in a relatively highly uncertain situation. If you look at the uncertainty, people, people on the Committee broadly say that uncertainty about the forecast is, is very high compared to the normal level. We haven’t come out of a pandemic before. We haven’t had this kind of fiscal support before, totaling it all up. So you’re going to have different perspectives from Committee participants about how fast growth will be, how fast the labor market will heal, or how fast—sorry, inflation will move up. And those things are going to dictate where people write down an estimate of liftoff. Of course, this isn’t a decision to lift off now. We’ll make that decision then. But it’s an estimate based on—based on assumptions about growth. And it’s, it’s meant to be a tool to generally show the public how, how our objective function works, how we think about the future. It isn’t meant to actually pin down a time when we might or might not lift off. We—you know, we’re not going to make that decision for some time. The chances are that the economy in that time and place will be very different from the one we think it’ll be. So I—sometimes with the dots, I have to be sure to point out that they—they’re not a Committee forecast. And you know this, but it’s—they’re not a Committee forecast. It’s just compiling these projections, really, of individual people. We think it serves a useful purpose. It’s not meant to, to actually be a promise or even a prediction of when the Committee will act. That will be very much dependent on economic outcomes, which are highly uncertain. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Brian Cheung. <NAME>BRIAN CHEUNG</NAME>. Hey there, Chairman Powell. I wanted to elaborate a little bit on your commentary about the fiscal stimulus. So it sounds like you, I guess, see the case for even maybe more investment, at least from Congress, to support the more productive economy, as you answered to Jeanna’s question. So we just had $1.9 trillion dollars in spending. So where do you see the fiscal space right now? Do you still, I guess, maybe see the country in a place right now where it wouldn’t be a concern if there were to be more spending at this time? <NAME>CHAIR POWELL</NAME>. So, Brian, it’s not up to us to decide what, what Congress should spend money on or when. I was answering Jeanna’s question, which really was, how do we assure lack of damage to—scarring, for example, or lack of damage to the productive capacity of the economy? And I think what’s happened so far has done a pretty good job of that. But, really, I wanted to make the longer-run point that if—to work on the productivity—on productivity over longer periods, that is—that is—comes down to a number of things. But one of those things is investment: investment in people, in their skills, education, aptitude, all of those things. I’m not in any way suggesting that that’s something Congress should work on right now. Or that, you know, that’s just not my—that’s not our job. I’m just saying, that, that is what fiscal policy can do that, really, monetary policy can’t do—is, is invest in the future productive capacity of the economy, raise potential growth. Those things are completely tools that Congress has. And, again, I wasn’t making a comment at all on the current fiscal setting. <NAME>MICHELLE SMITH</NAME>. Thank you. Next to Michael Derby. <NAME>MICHAEL DERBY</NAME>. Thank you for taking my question. I just wanted to get your—an updated view on your sense of your view on financial stability risks and whether or not you see any pockets of excess out in financial markets that concern you, either, you know, specifically to that, that area of the market or as in terms of, like, the threat that it could pose to—propose to the overall economy. <NAME>CHAIR POWELL</NAME>. Sure. So, as you know, financial stability for us is, is a framework. It’s not one thing. It’s not a particular market or a particular asset or anything like that. It’s a framework that we, we have. We report on it semiannually, the Board gets a report on it quarterly, and we monitor every day. And it has—it has four pillars, and those are four key vulnerabilities: asset valuations, debt owed by businesses and households, funding risk, and leverage among financial institutions. Those four things. And I’ll just quickly touch on them. So if you look at asset valuations, you can say that by some measures, some asset valuations are elevated compared to history. I think that’s clear. In terms of households and businesses, households entered the, the crisis in very good shape by historical standards. Leverage in the household sector had been just kind of gradually moving down and down and down since the—since the financial crisis. Now, there was—there was some negative effects on that, people lost their jobs and that sort of thing, but they’ve also gotten a lot of support now. So the damage hasn’t been as, as bad as we thought. Businesses, by the same token, had a high debt load coming in. And—but—and many saw their revenues decline. But there’s—they���ve done so much financing, and there’s a lot of cash on their balance sheet. So nothing in those two sectors really jumps out as really troubling. Short term—I mentioned funding risk as the—as the last one. So we saw, again, in this crisis, breakdowns in parts of the short-term funding markets—came under a tremendous amount of stress. And they’ve been quiet since the spring. And, you know, we shut down our facilities and all of that. But we, we don’t—we don’t feel like we can let the moment pass without just saying again that we—that those—some aspects of the short-term funding markets and, more broadly, nonbank financial intermediation didn’t hold up so well under great stress—under tremendous stress. And we need to go back and look at that. So a very high priority for us as regulators and supervisors is going to be to go back—and this, this will involve all the other regulatory agencies; it does involve all of them as well—and see if we can strengthen those things. So that’s, that’s a—sort of a broader, detailed look. <NAME>MICHELLE SMITH</NAME>. Thank you. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, can you help me understand something about the, the SEP and your forecasts? The inflation that you’re talking about for this year, you say, is “transitory.” Then, by 2023, you’re back down to 2.1 percent. There’s no forecast for a rate increase for 2023. If you get to 3½ percent unemployment but inflation is only at 2 or 2.1 percent, are you willing to leave rates at zero going forward from there—or, roughly zero going forward from there? In other words, could we be in a Japan-like situation where rates just stay low because inflation does? <NAME>CHAIR POWELL</NAME>. Well, again, I wouldn’t read too much into, into the, the March 2021 SEP dot plot. Remember what it is: It’s a compilation of individual projections by individual members. They’re all making different assessments. They, they have different forecasts, economic forecasts. Some have more optimistic ones, some less optimistic. And they’re—also remember that the SEP doesn’t actually include all the things that go into maximum employment. Right? It’s, it’s only—it only includes unemployment. So I, I would just say, we’ve set out clear guidance. The—the message from the SEP that I would like to leave with people is, we set out clear guidance. I mentioned what it was. It’s inflation up to—no, sorry, it’s, it’s labor market conditions consistent with our estimates of maximum employment—and that’s not just unemployment, it’s all the other indicators, but, overall, totaling up to maximum employment; it’s inflation at 2 percent, and not on a transient basis; and inflation on track to exceed 2 percent for—moderately for some time. Those are the criteria. We’re committed to robustly implementing that guidance. And that’s what this—that’s what this says. That’s really all it says. We’re going to wait until those requirements are met. And, again, you know, the, the state of the economy in two or three years is highly uncertain. And I wouldn’t want to focus too much on the exact timing of a potential rate increase that far into the future. <NAME>MICHAEL MCKEE</NAME>. If I could follow up, I’m just wondering—before 2019, I would say you were focused on the problems with having interest rates too low. Now are you saying we’re willing to live with it until we reach these goals even if you get—meet your goal on maximum employment? <NAME>CHAIR POWELL</NAME>. So what I would say is, we’re committed to giving the economy the support that it needs to return as quickly as possible to a state of maximum employment and price stability. And, you know, to the extent having rates low and support for monetary policy broadly, to the extent that raises other questions, we think it’s absolutely essential to maintain the strength and stability of the—of the broader financial system and to carefully monitor financial stability questions if that’s what you’re getting at. You know, we, we do that. We will—we monitor them very carefully. I, I would point out that, over the long expansion—the longest in U.S. history, 10 years and 8 months—rates were very low for—they were at zero for, you know, 7 years and then—and then never got above, you know, 2.4 percent, roughly. During that, we didn’t see, actually, excess buildup of debt. We didn’t see asset prices form into bubbles that would threaten the progress of the economy. We didn’t see the things you—we didn’t see a housing bubble. You know, the things that have tended to really hurt an economy and have in recent history hurt the U.S., we didn’t see them build up despite very low rates. Part of that just is that you’re in a low- rate environment, you’re in a much lower rate environment, and the connection between low rates and the kind of financial instability issues is just not as tight as people think it is. That’s not to say we ignore it. We don’t ignore it. We, we watch it very carefully. And we don’t think—we think there is a connection. We say there is, but it’s not quite so clear. We actually monitor financial conditions very, very broadly and carefully. And we didn’t do that before the Global Financial Crisis 12 years ago. Now we do. And we’ve also, you know, put a lot of time and effort into strengthening the large financial institutions that form the core of our financial system—are much stronger, much more resilient. That’s true of the banks. I think it’s true of the CCPs. We want it to be true of, of other nonbank financial intermediation, markets, and, and institutions. So I think that’s, that’s—you know, monetary policy should be, to me, for, for achieving our macroeconomic aims. Financial regulatory policy and supervision should be for strengthening the financial system so that it is strong and robust and can withstand the kinds of things that it couldn’t, frankly—and we learned that in 2008, ’09, ’10. This time around, the regulated part of the financial system held up very well. We, we found some other areas that need strengthening, and that’s what we’re working on now. <NAME>MICHELLE SMITH</NAME>. Thank you. Anneken, CNN. <NAME>ANNEKEN TAPPE</NAME>. Thanks for taking my question. Chairman Powell, could you talk to us a little bit about the relationship between the persistent pandemic unemployment and the expected increase in, in inflation? Does the former offset the latter to some degree? <NAME>CHAIR POWELL</NAME>. I’m sorry, could you repeat that? You broke up there for a second. <NAME>ANNEKEN TAPPE</NAME>. Oh, no, I was hoping that wouldn’t happen. Can you hear me now? <NAME>CHAIR POWELL</NAME>. Yes, yes. <NAME>ANNEKEN TAPPE</NAME>. Okay, great. I was asking if you could talk to us a little bit about the relationship between the persistent pandemic unemployment and the expected increase in inflation. I’m wondering whether the former offsets the latter and to which degree you guys are monitoring this. <NAME>CHAIR POWELL</NAME>. You’re asking about the relationship between unemployment and inflation? Is that—is that the question? <NAME>ANNEKEN TAPPE</NAME>. Yes, exactly. <NAME>CHAIR POWELL</NAME>. Okay. <NAME>ANNEKEN TAPPE</NAME>. If they offset each other—the persistent pandemic unemployment. <NAME>CHAIR POWELL</NAME>. Yes, I think I’m hearing you correctly. So I would say a couple things. There was a time when there was a tight connection between unemployment and inflation. That time is long gone. We had extremely low unemployment in, in—not extremely low. We had low unemployment in 2018 and ’19 and the beginning of ’20 without having troubling inflation at all. We were at 3.5 percent. We were bouncing around with unemployment 3.5 percent to 4 percent. And it wasn’t just unemployment. Participation was high, wages were moving up. It was a very healthy thing. And we didn’t see price inflation move up. There is a relationship between wage inflation and unemployment. But that has not— what, what happens is that when wages move up because unemployment is low, companies have been absorbing that increase into their margins rather than raising prices. And that seems to be a feature of late-cycle behavior. So we’re, we’re not—when, when we—when we seek to achieve low unemployment, high levels of employment, which is our mandate, you know, we think we have the freedom to do that based on the data without worrying too much about inflation. <NAME>MICHELLE SMITH</NAME>. Thank you. Going to Greg Robb. <NAME>GREG ROBB</NAME>. Hi. Thanks for taking my question. I wanted to follow up a little bit. I, I understand what you’re saying about the dot plot and, and the message you’re trying to send with the dot plot. But does the same apply for the taper tantrum? You’ve said that it’s going to take “some time” to get some fundamental progress on your goals, but it seems like “some time” could now be any time. <NAME>CHAIR POWELL</NAME>. So we’ve said “substantial further progress.” Now, if you go back, October, November—sorry, November, December, and January, progress in the labor market slowed very sharply. So you had an average of 29,000 jobs per month. If you go back and look at the, the level of job creation before that, it was very, very high—very high. So we weren’t making any progress on the labor market from November through January. February, we saw a nice—a nice pickup, a good jobs report—379,465 private sector. So that’s good. It can go so much higher, though. And, and, you know, it would be nice to see—to really make faster progress that’s different from substantial progress, we’d like to see it be, be higher than that. And I think it will be. That’s—the expectation is, you’ll see now, I think, really strong job creation return—not as high as it was in the very early days of the recovery, the reopening of the economy, but, nonetheless, very strong. Okay. So what, what I’m saying is, to achieve substantial progress from where we are, having had three months of, of very little progress, is going to take some time. And it’s—we don’t want to get into—I don’t want to get into trying to put a pin on the calendar someplace, because it’s going to be data dependent. When we see—when we see ourselves on track to make substantial further progress, we’re going to—we’re going to say so. We understand fully that that test is one that involves judgment. If you remember, during the Global Financial Crisis recovery, we said quantitative easing, number three, was—the test was a substantial improvement in the outlook for the labor market. Well, what does that mean? Well, it means a substantial improvement in the outlook for the labor market. It meant we would communicate when we thought we had that. This is just like that, in a way. What we’re saying is, substantial further progress toward our goals. We’ll tell people when we think—until we—until we say—until we give a signal, you can assume we’re not there yet. And as we approach it, well in advance—well in advance—we will give a signal that, yes, we’re on a path to, to possibly achieve that, to consider tapering. So that’s, that’s how we’re planning to handle it. It’s not different, really, from, from QE3. And I think we’ve learned—what we’ve learned from the experience of these last dozen years is to communicate very carefully, very clearly, well in advance, and then follow through with, with your communications. In this case, it’s, it’s an outcome-based set of guidance, as our rate guidance is, and it’s going to depend on the progress of the economy. That’s why it’s not appropriate to start pointing at dates yet. <NAME>GREG ROBB</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Don Lee, L.A. Times. <NAME>DON LEE</NAME>. Hi, Chair Powell. As you know, households, households are sitting on a lot of excess savings. And I wonder if, combined with that, you have an unleashing of, you know, pent-up demand. How much do you think that would affect—that would affect inflation? And would you expect that to be transitory? <NAME>CHAIR POWELL</NAME>. We, you know, we and everyone who’s forecasting these—what, what we’re all doing is, we are looking at the—at the amount of savings. We’re looking at—you know, we have reasonably good data on that. And we’re looking at the government transfers that’ll be made as part of the various laws. And we’re trying to make an assessment on what will be the tendency of people to spend that money, the marginal propensity to consume. And from that, you can develop an estimate of the impact on spending, on growth, on hiring, and, ultimately, on inflation. So that’s, that’s what we’re all doing. And we have, you know, we have—we can look at history, and we can make estimates, and those are all very transparent and public. And you can compare one to the other. And, of course, we’ve all—we’ve all done that. And I think we’ve made very conservative assumptions and sensible mainstream assumptions at each step of that process. And what, what it comes down to is what I said before, which is, there very likely will be a step-up in inflation as March and April of last year drop out of the 12-month window, because they were very low inflation numbers. That’s a—that’ll be a fairly significant pop in inflation. It’ll wear off quickly, though, because it—just the way the numbers are calculated. Past that, as the economy reopens, people will start spending more, and then, you know, you can only go out to dinner once per night, but a lot of people can go out to dinner. And so— and they’re not doing that now. They’re not going to restaurants, not going to theaters. That part of the economy—and travel and hotels—that part of the economy is, is really not functioning at, at full capacity, right? But as that happens, people can start to spend. It’s also—wouldn’t be surprising if—and you’re seeing this now, particularly in the goods economy—there’ll be bottlenecks. They won’t be—they won’t be able to service all of the demand maybe, maybe for a period. So those things could lead to—and we’ve, we’ve modeled that. Other people have too. We’ve—and what we see is relatively modest increases in inflation. So—but those are not permanent things. You know, what’ll, what’ll happen is—the supply side—the supply side in the United States is very dynamic. People start businesses, they, they reopen restaurants, you know, the airlines are, will be flying again, all of those things will happen. And so it’ll turn out to be a one—a one-time sort of bulge in, in prices, but it won’t change inflation going forward, because inflation expectations are strongly anchored around 2 percent. We know that inflation dynamics do evolve over time. And there was a time when, when inflation went up, it would stay up. And, and that time is not now. That hasn’t been the case for some decades. And we think it won’t—it won’t—we won’t suddenly change to another regime. These things tend to change over time. And they tend to—tend to change when the central bank doesn’t understand that having inflation expectations anchored at 2 percent is the key to it all. The, the—having them anchored at 2 percent is what gives us the ability to push hard when the economy’s really weak. If we saw inflation expectations moving materially above 2 percent, of course, we would conduct policy in a way that would, would make sure that that didn’t happen. We’re committed to having inflation expectations anchored at 2 percent, not materially above or below 2 percent. So that’s—I think if you—if you look at the savings, look at all of that, model it, that’s, that’s kind of what comes out of our assessment. There are different possibilities. I think it’s, it’s a relatively unusual—very unusual situation to have all these savings and this, this amount of fiscal support and monetary policy support. Nonetheless, that, that is our most likely case. And you know, as the—as the data come in and the economy performs, we’ll of course adjust. Our outcome-based guidance will immediately adapt, we think, to meet whatever the actual path of the economy is. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Scott Horsley for the last question. <NAME>SCOTT HORSLEY</NAME>. Thanks, Chairman Powell. My question is about those supply chain bottlenecks, especially on the goods side. Are they getting better, or are they getting worse? We saw they were sort of a drag on the industrial production numbers we—that came out yesterday. And what do you expect them to do to prices in, in—just in the short run? <NAME>CHAIR POWELL</NAME>. You know, I have to say, I think it’s impossible to say, frankly, with any confidence, but I, I would expect it’s very possible—let’s put it that way—that you will see bottlenecks emerge and then clear over time. And you’ll probably see that over a period of time, because, you know, really, the, the strong data are ahead of us. You know, you’re, you’re—right now the, the checks are going out just, just now. And that’ll, that’ll add to spending. COVID cases are coming down. Vaccination is moving, now, quickly. You know, the, the really strong economic data is coming. It should be coming, assuming we stay on this track. And that’s when you’ll really know where, where the bottlenecks are. But you can see, though, that they’re not—these are not permanent. It’s not like the supply side will be unable to adapt to these things. It will—the market will clear. It just may take some time. And, and some of the answer to that may be price. In many cases, it won’t be price. You’ll see that people are reluctant to raise prices. You know, it’s a little bit the story about, you know, the wage—the wage Phillips curve does show that as unemployment goes down, wages move up. But companies choose not to try to, to pass that, that price increase along to their customers. So you’ll see a lot of that here too, I think. Anyway, we’ll, we’ll see. But that’s, that’s my basic, basic sense. Thank you very much. <NAME>MICHELLE SMITH</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today my colleagues on the FOMC and I kept interest rates near zero and maintained our sizable asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete. Widespread vaccinations, along with unprecedented fiscal policy actions, are also providing strong support to the recovery. Since the beginning of the year, indicators of economic activity and employment have strengthened. Household spending on goods has risen robustly. The housing sector has more than fully recovered from the downturn, while business investment and manufacturing production have also increased. Spending on services has also picked up, including at restaurants and bars. More generally, the sectors of the economy most adversely affected by the pandemic remain weak but have shown improvement. While the recovery has progressed more quickly than generally expected, it remains uneven and far from complete. The path of the economy continues to depend significantly on the course of the virus and the measures undertaken to control its spread. Since March, progress on vaccinations has limited the number of new cases, hospitalizations, and deaths. While the level of new cases remains concerning, especially as it reflects the spread of more infectious strains of the virus, continued vaccinations should allow for a return to more normal economic conditions later this year. In the meantime, continued observance of public health and safety guidance will help us reach that goal as soon as possible. As with overall economic activity, conditions in the labor market have continued to improve. Employment rose 916,000 in March, as the leisure and hospitality sector posted a notable gain for the second consecutive month. Nonetheless, employment in this sector is still more than 3 million below its level at the onset of the pandemic. For the economy as a whole, payroll employment is 8.4 million below its pre-pandemic level. The unemployment rate remained elevated at 6 percent in March, and this figure understates the shortfall in employment, particularly as participation in the labor market remains notably below pre-pandemic levels. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been the hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the service sector and for African Americans and Hispanics. The economic dislocation has upended many lives and created great uncertainty about the future. Readings on inflation have increased and are likely to rise somewhat further before moderating. In the near term, 12-month measures of PCE inflation are expected to move above 2 percent as the very low readings from early in the pandemic fall out of the calculation and past increases in oil prices pass through to consumer energy prices. Beyond these effects, we are also likely to see upward pressure on prices from the rebound in spending as the economy continues to reopen, particularly if supply bottlenecks limit how quickly production can respond in the near term. However, these one-time increases in prices are likely to have only transitory effects on inflation. The Fed’s response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. As we say in our Statement on Longer-Run Goals and Monetary Policy Strategy, we view maximum employment as a broad-based and inclusive goal. Our ability to achieve maximum employment in the years ahead depends importantly on having longer-term inflation expectations well anchored at 2 percent. As the Committee reiterated in today’s policy statement, with inflation running persistently below 2 percent, we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. I would note that a transitory rise in inflation above 2 percent this year would not meet this standard. In addition, we will continue to increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals. The increase in our balance sheet since March 2020 has materially eased financial conditions and is providing substantial support to the economy. The economy is a long way from our goals, and it is likely to take some time for substantial further progress to be achieved. Our guidance for interest rates and asset purchases ties the path of the federal funds rate and the size of the balance sheet to our employment and inflation goals. This outcome-based guidance will ensure that the stance of monetary policy remains highly accommodative as the recovery progresses. 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 support the economy for as long as it takes to complete the recovery. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Thank you, Mr. Chair. First we’ll go Paul Kiernan. <NAME>PAUL KIERNAN</NAME>. Hi, Chairman Powell. Thanks for doing this. I guess, since I’m first, I’ll go ahead and re-up Howard’s question from the last press conference: Is it time to start talking about talking about tapering yet? Have you and your colleagues had any conversations to this effect? Thanks. <NAME>CHAIR POWELL</NAME>. Thank you. So, no, it is not time yet. We’ve said that we would let the public know when it is time to have that conversation, and we said we’d do that well in advance of any actual decision to taper our asset purchases, and we will do so. In the meantime, we’ll be monitoring progress toward our goals. We first articulated this “substantial further progress” test at our December meeting. Economic activity and hiring have just recently picked up after slowing over the winter. And it will take some time before we see substantial further progress. <NAME>PAUL KIERNAN</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Jonnelle at Reuters. <NAME>JONNELLE MARTE</NAME>. Okay. Hi. Thank you so much. My question is about what’s going on with the virus, and what if we don’t reach a level of herd immunity, per se. So, in your scenario, thinking about the outlook and the economy, do you have some model where you might start to still normalize policy even if there’s like a baseline of infection still going on? Or how can you, you know, talk about how you’re weighing those things? <NAME>CHAIR POWELL</NAME>. Yes, so we have to leave questions about herd immunity and what that looks like to the health experts, but, but I would certainly say that what matters the most to the economic recovery continues to be controlling the virus. The economy can’t fully recover until people are confident that it’s safe to resume activities involving crowds of people. There may be people who are around the edges of the labor force who won’t come back in unless they feel really comfortable going back to their old jobs, for example, and there, there may be parts of the economy that will—that just won’t be able to, to really fully reengage until the pandemic is decisively behind us. But, you know, we’ve articulated particular guidance for tapering our asset purchases and for lifting off and raising interest rates. So for, for asset purchases, we’ve said that we would continue at the current pace of asset purchases until we see substantial further progress toward our goals. So—and that is, that is what it is, substantial further progress. For interest rates, as I—as I said a moment ago, we want to see labor market conditions consistent with maximum employment, we want to see inflation at 2 percent, and we want to see it on track to exceed 2 percent. So those are our tests. We don’t have an independent test to do with the virus. I will say, though, as I—as I started with, you know, the, the path of the virus is going to have an effect on our ability to achieve both of those tests. <NAME>MICHELLE SMITH</NAME>. Great. Thank you. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thanks for taking our questions. I wonder if you could talk a little bit about that test for raising interest rates that you just elaborated. You’ve obviously made it very clear that you want to see improvements in the real economy and the real data and not in just sort of expectations data before making that move. But I guess I wonder what happens if inflation expectations were to move up before you see some sort of return to full employment. You know, it seems like a lot of sort of the stability in inflation has been tied to the fact that those have been so low and stable, and I guess I wonder how, how your reaction would be—sort of how your reaction to that is, is—how you’re thinking about that. <NAME>CHAIR POWELL</NAME>. Right. So it seems unlikely, frankly, that we would see inflation moving up in a persistent way that would actually move inflation expectations up while there was still significant slack in the labor market. I won’t say that it’s impossible, but it, it seems—it seems unlikely. It’s much more likely that we would—having achieved maximum-employment conditions—we’d also be seeing 2 percent inflation and be on track to see inflation moving above 2 percent. They tend to move together. So that’s not to say inflation won’t—might not move up, but for inflation to move up in a persistent way that, that really starts to move inflation expectations up, that would have to—that would take some time. And you would think that, that it would be quite likely that, that we’d be in very strong labor markets for that to be happening. If it—if that actually were to happen, though, there is a—there’s a paragraph in the—in the Statement on Longer-Run Goals and Monetary Policy Strategy which says that when the two goals are somewhat in conflict, we weigh various factors, including the, the time it would take to get back and [so] forth. So we do—it doesn’t really tell you what to do, but it tells you that we will weigh those two factors and how far we are away from them and how long it would take to reach them were we to reach that sort of pretty unlikely state. <NAME>MICHELLE SMITH</NAME>. Thank you. Steve Liesman. <NAME>STEVE LIESMAN</NAME>. Thank you. Mr. Chairman, I want to follow up on Jonnelle’s question, and I wonder if you can help us understand better your thinking about how COVID infection rates and the virus calibrate with monetary policy. As you recall, we had a major resurgence in the virus last fall. And I’m wondering, would you need to be assured that there wasn’t such a resurgence coming before you began—I mean, for lack of a better term—thinking about thinking about tapering? And what kind of comfort level would you need? Would it be something that would be declared from the CDC or the, or the World Health Organization—for example, downgrading the virus from a pandemic—before you have the comfort level to reverse course on policy? Thank you. <NAME>CHAIR POWELL</NAME>. Yes. We, we really have—just articulated the goals that I’ve—that I’ve just mentioned a couple of times, which is substantial further progress toward our goals before we taper. Now, that’s very likely—for us to achieve that, it’s very likely going to be the case that we’ve also made really significant progress on controlling the virus through vaccination and, and other—it, it—you know, those two things should more or less coexist. We haven’t articulated a separate test for a state of the virus that we’d like to achieve because we’re not—you know, we’re not experts in that area. We’re, we’re really focused on the economic outcomes, and, again, my, my guess is that we—it’s very likely, it seems to me, that for us to achieve the economic outcomes, we would need to taper or to raise interest rates. We would also have to have made very substantial progress in getting the virus under control—not, not necessarily fully under control. There is a, a possibility, of course, that we will, will have ongoing outbreaks over the summer and various regional outbreaks and potentially next winter as well. But we’ll be looking for substantial progress toward our goal—substantial further progress toward our goals as we think about tapering asset purchases. <NAME>STEVE LIESMAN</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I wanted to ask, you’ve talked a lot during this crisis about the need to have a lot of help from fiscal policy and monetary policy to make sure that there’s not long-term scarring in the economy. And I was just wondering, you know, given all of the policies that have been put in place, do you expect there to still be some long-term scarring? And, if so, you know, what are you most worried about? Where are you most worried about that showing up? <NAME>CHAIR POWELL</NAME>. So I would say that we were very worried about scarring, both in the labor market from people being out of—out of the labor market for an extended period of time. The evidence is clear that it becomes much more difficult if you’re out for a long time to get back in and get back to the life that you had. Same thing with these small businesses, many of which are the work of generations. Were we going to wipe out many of those unnecessarily? That was a big concern. I would say that, so far, you know, here we are in late April of 2021. We haven’t experienced that level of scarring either in the labor market or among smaller businesses. So we’re not living that, that downside case that we were very concerned about a year ago. Notwithstanding that, we’re a long way from full employment. We’re—you know, payroll jobs are 8.4 million below where they were in February of 2020. We’ve got a long ways to go. And also, it’s going to be a different economy. So we’ve been hearing a lot from companies that they are—they’ve been looking at deploying better technology and perhaps fewer people, including in some of the service industries that have been employing a lot of people. You know, it, it may well be—it seems quite likely that a number of the people who, who had those service-sector jobs will struggle to find the same job and may need time to find work and get back to the working life they had. These were people who were working in February of 2020. They clearly want to work. So those people are going to need—they’re going to need help. And so, while I would say we haven’t seen really highly elevated levels of unemployment for—you know, up in the teens that we thought we might have for an extended period of time, we’ve still got a lot of people who are out to—out of work. We want to get them back to work as quickly as possible, and that’s really one of the things we’re trying to achieve with our policy. <NAME>MICHELLE SMITH</NAME>. Thank you. Rachel Siegel. <NAME>RACHEL SIEGEL</NAME>. Thank you, Michelle, and thank you, Chair Powell, for taking our questions. The housing market in many American cities is seeing booming prices, bidding wars, and all-cash offers well above asking price. And this is happening at the same time that housing is becoming much more expensive for lower-income Americans and people who are still struggling from the pandemic. Do you have concerns that there are localized housing bubbles or that there’s the potential for that, and what is the Fed doing to monitor or address this? Thank you. <NAME>CHAIR POWELL</NAME>. So we do monitor the housing market very carefully, of course. And I would say that, before the pandemic, it’s a very different housing market than it was before the Global Financial Crisis. And one of the main differences was that households were in very good shape financially compared to where they were. In addition, most people who got mortgages were people with pretty high credit scores. There wasn’t the subprime—you know, low-doc, no-doc lending practices were not there. So we don’t have that kind of thing where we have a housing bubble where people are overlevered and owning a lot of houses. There’s no question, though, that housing prices are going up, and so we’re watching that carefully. It’s, it’s partly because there’s, there’s clearly strong demand, and there’s just not a lot of supply right now. So builders are, you know, struggling to keep up with the demand, clearly. Inventories are tremendously low. We’re, we’re all hearing those stories. And if you’re—if you’re an entry level housing buyer, this is—this is a problem, because it just is going to be that much harder for people to get that first house, and that’s a problem. I mean, we—it’s part of a strong economy, with people having money to spend and wanting to invest in housing. So, in that sense, it’s good. It’s clearly the strongest housing market that we’ve seen since the Global Financial Crisis. And, you know, my hope would be that, over time, housing builders can react to this demand and, and come up with more supply and workers will come back to work in that industry. So, you know, it is—it’s not an unalloyed good to have prices going up this much, and we’re watching it very carefully. I don’t see the kind of financial stability current concerns, though, that really do reside around the housing sector. So many of the financial crackups in all countries, all western countries, that have happened in the last 30 years have been around housing. We don’t—we really don’t see that here. We don’t see bad loans and unsustainable prices and that kind of thing. <NAME>MICHELLE SMITH</NAME>. Thank you. Chris Rugaber, Associated Press. <NAME>CHRIS RUGABER</NAME>. Thanks for taking my question. I wanted to ask about the labor market. Do you—do you see things, such as in the Beige Book—you saw in the Beige Book anecdotes about businesses not able to find workers, [inaudible] back to the labor market for fear of getting sick, childcare concerns, and so forth. Do you see these as also just sort of temporary bottlenecks that won’t have much effect on the long-term health of the labor market? Or how are you thinking about these kinds of issues? <NAME>CHAIR POWELL</NAME>. Chris, you were breaking up a little there, but I think I did get your question. So I think there are a number of—a number of things going on there: the tension between a high level of unemployment and yet many, many companies saying they can’t find— an elevated number of companies saying that they can’t find workers. So, what’s really going on there? It, it should be a number of different things. There are workers who don’t actually have the specific skills that the employers are looking for. There may be geographical differences. It, it may also be that, for example, there—one big factor would be, schools aren’t open yet, so there are still people who are at home taking care of their children and would like to be back in the workforce but can’t be yet. There are people afraid of—there are virus fears that are weighing on people, so some—some people don’t want to go back to work. There are also a significant number of people who say they’ve retired—a large number of people that say that they’re retired. Now, it’s hard to say whether they will come back in as the labor market strengthens and as COVID, you know, becomes a—in the rearview mirror, in the history books, if you will. So—but clearly there’s something going, going on out there, as, as many companies are reporting labor shortages. We don’t see wages moving up yet, and presumably we would see that in a real—you know, in a really tight labor market. And we may well start to see that. I do think—so what will happen—what we saw during the last expansion, and it may be a different expansion, we don’t know, but, but what we saw was that labor supply generally showed up. In other words, if you were worried about there—about running out of workers, it seemed like we never did. You know, labor force participation held up. People came in the labor force. They stayed in the labor force longer than expected. So my guess would be that you will see people coming back into the labor force, and these jobs will be—the labor market will reach equilibrium. Maybe pay will go up. But I do think that—and I do think also that unemployment insurance benefits will run out in September, so to the extent that’s a factor, which is not clear, it will no longer be a factor fairly soon. So my guess is, it will come back to this economy where we have, you know, equilibrium between labor supply and labor demand. It may take some months, though. <NAME>MICHELLE SMITH</NAME>. Thank you. Heather Scott. <NAME>CHRIS RUGABER</NAME>. Could I do a quick follow-up? <NAME>MICHELLE SMITH</NAME>. I’m sorry. Go ahead. Go ahead, Chris. <NAME>CHRIS RUGABER</NAME>. Well [extended pause] <NAME>MICHELLE SMITH</NAME>. We, we lost you, Chris. Let’s go on to Heather. <NAME>HEATHER SCOTT</NAME>. Thank you. Good afternoon, Chair Powell. I wanted to ask you, you know, you’ve been hearing, of course, these concerns raised by Larry Summers and others about inflation and the fact that they think the Fed might be—might let things get out of hand with the new policy stance. So my question is, can you tell us, what is different this time versus previous periods like in the ’60s when inflation got out of control? Why are you confident with, with the lags in monetary policy that the Fed can get ahead of inflation and, and make sure it doesn’t go too far above the 2 percent target? <NAME>CHAIR POWELL</NAME>. Thanks for your question. So I actually have a couple things I’d like to say about inflation, including addressing your question. So let me start with just saying that we’re very strongly committed to achieving our objectives of maximum employment and price stability. Our, our price stability goal is 2 percent inflation over the longer run, and we believe that having inflation average 2 percent over time will help anchor long-term inflation expectations at 2 percent. With inflation having run persistently below 2 percent for some time, the Committee seeks inflation moderately above inflation for two times—above 2 percent for some time. So, with a, a little bit of context, we’re, we’re making our way through an unprecedented series of events, really, in which a synchronized global shutdown is now giving way to widespread reopening of economies in many places around the world. In the United States, fiscal and monetary policy continue to provide strong support: Vaccinations are now widespread, and the economy is beginning to move ahead with real momentum. During this time of reopening, we are likely to see some upward pressure on prices, and I’ll discuss why. But those pressures are likely to be temporary as they are associated with the reopening process. In an episode of one-time price increases as the economy reopens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation into the future— inflation at levels that are not consistent with our goal of 2 percent inflation over time. Indeed, it is the Fed’s job to make sure that that does not happen. If, if, contrary to expectations, inflation were to move persistently and materially above 2 percent in a manner that threatened to move longer-term inflation expectations materially above 2 percent, we would use our tools to bring inflation and expectations down to mandate-consistent levels. And I would say, if I may, that is a principal difference from—we’re all very familiar at the Fed with the history of the 1960s and ’70s, of course. And we know that our job is to achieve 2 percent inflation over time. We’re committed to that, and we will use our tools to do that. So that’s a very different situation than you had back in the 1960s—or many, many differences, actually. So let me talk quickly about the two reasons—two, or you could say three, but really two main reasons why we think inflation will move up in the near term. The first is the base effects. Twelve-month measures of inflation are likely to move well above 2 percent over the next few months as the very low inflation readings recorded in March and April of last year drop out of the calculation. That process has already started to show up. You saw it in the March CPI reading, and you’ll see it later this week in the PCE price data. These base effects will contribute about 1 percentage point to headline inflation and about 0.7 percentage point to core inflation in April and May. So, significant increases, and they’ll disappear over the following months. And they’ll be transitory. They carry no implication for the rate of inflation in later periods. So that’s base effects. The other big one I would talk about is bottlenecks. So this is what we’re seeing in supply chains in various industries, and we’re, we’re in close touch with all of these industries. You know, the Fed has a network of contacts that is unequaled in businesses and in nonprofits for that matter, too. So what do we mean by a bottleneck? A bottleneck really is a temporary blockage or restriction in the supply chain for, for a particular good or goods, something that slows down the process of producing goods and delivering them to the market. We think of bottlenecks as things that, in their nature, will be resolved as workers and businesses adapt, and we think of them as not calling for a change in monetary policy since they’re temporary and expected to resolve themselves. We know that the base effects will disappear in a few months. It’s much harder to predict with confidence the amount of time it will take to resolve the bottlenecks, or for that matter, the temporary effects that they will have on prices in the meantime. So, you know, I’ll just sum up and say, we understand our job. We will do our job. And we are, we are focused—as you’ve seen, for many years, we’ve been focused on inflation deviating below 2 percent, and we used our tools aggressively to keep it back up at 2 percent. If, if we see inflation moving materially above 2 percent in a persistent way that risks inflation expectations drifting up, then we will use our tools to guide inflation and expectations back down to 2 percent. No one should doubt that we will do that. This is not what we expect. But no one should doubt that, in the event, we would be prepared to use our tools. <NAME>MICHELLE SMITH</NAME>. Thank you. James Politi. <NAME>JAMES POLITI</NAME>. Chair Powell, you said a few weeks ago that it would—thank you, Chair Powell. You said a few weeks ago that it would take a string of months of job creation of about a million to achieve progress towards your goal. Can you define what your, what your definition of “a string of months” is more specifically? And, on inflation, the FOMC said the rise in inflation we’re beginning to see largely reflects transitory factors, as you just described. But why use the word “largely,” and what are the factors driving higher prices that may not be transitory, based on the initial data that you’re seeing? <NAME>CHAIR POWELL</NAME>. So, what is “a string”? What do I mean by “a string”? Well, I would say, what we have right now is one really good—I can tell you what it’s not. It’s not one really good employment reading, which is what we got in March. We got close to a million jobs in March and a very strong labor market reading. And I was just suggesting that we’d want to see more like that. We’re 8½ million jobs below where we were in February of 2020, and that doesn’t account for growth in the labor force and growth in the economy, that trend we were on. So we have—we’re a long way from our, our goals. And we don’t have to get all the way to our goals to taper asset purchases, we just need to make substantial further progress. It’s going to take some time. On, on “largely,” there are a bunch of factors. I was really thinking—we were thinking of the base effects and also the energy effects. I wasn’t meaning to say there are some real effects. I mean, there are always—there are always relative prices going up and down within inflation. You know, there’s a basket for CPI or PCE. There are, you know, many, many, many factors that go into it. Relative prices are always moving up and down. This, this—we think it’s, it’s very fair to say that the increases we see and, frankly, are about to see later this week are largely due to base effects. It would have been more contentious to say “entirely due to base effects” because there are some things that are always going up, and so we just said “largely.” <NAME>MICHELLE SMITH</NAME>. [Inaudible] <NAME>CATARINA SARAIVA</NAME>. Hi, Chair Powell. Thanks for taking our questions. Over the past decade, the Fed has invested significant resources in large-scale bank supervision—has completely overhauled that approach. And it’s even created a special committee that looks horizontally across the largest banks to find common risks. Did the Fed not see that multiple banks had large exposures to Archegos? If not, why not? And then, what regulatory changes would you like to see implemented to change that going forward? <NAME>CHAIR POWELL</NAME>. We’re, we, we supervise banks to make sure that they have risk- management systems in place so that they can spot these things. We don’t manage their companies for them or, or try to manage individual risks. In the grand scheme of these large institutions, the Archegos risks were not systemically important or were not of the size that they would have really created trouble for any of those institutions. What was troubling, though, was that this could happen in a business for a number of firms that is thought to be—to carry relatively well understood risks. The prime brokerage business is, is a well understood business, and so it was surprising that a number of them would have had this. And it was essentially, I believe, the fact that, that they had the same big risk position on with a number of firms, and they weren’t—some of the firms were not aware that there were other firms that had those things. I, I wouldn’t say it’s in any way an indictment of our supervision of these firms. It, it—in some cases, it may be they were—it seems as though there were risk-management breakdowns at some of the firms, not all of them. And that’s what we’re looking into. <NAME>MICHELLE SMITH</NAME>. Thank you. Nancy Marshall-Genzer. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. I—I’m wondering, are you planning to visit the homeless encampment that’s near the Fed in Washington that you drive by? Have you been invited, and if you went, what would you be looking to learn there? <NAME>CHAIR POWELL</NAME>. You know, frankly, yes. I have not had a chance to do it yet, but I’ve been very busy, but I will visit. I don’t want to visit it at a time of a lot of media attention, because I don’t want that to be part of the story. But I will—I will go visit when, when it’s no longer a, a news story. And I—you know, I—I’ve met with homeless people many times, a number of times, anyway, let’s say. And I, I think it’s always good to talk to people and hear what’s going on in their lives. What you find out is, they’re you. They’re just us. I mean, they’re, they’re—these are people who, in many cases, had jobs and, you know, they have lives, and they’ve just, they’ve just found themselves in this place. It’s, it’s a—it’s a difficult problem, though. You know, there are many, many facets of it, and I’m well aware that this is not something that the Fed has all the tools for or anything like that. But I, I will do that when, when the need arises and when, when it’s not so much, you know, in the public eye. <NAME>NANCY MARSHALL</NAME>-GENZER. And is there anything specifically that you would be looking to learn there? <NAME>CHAIR POWELL</NAME>. Not really. I mean, I, I think I know what I’ll find there. I, I think you, you connect with these people and what you—again, what you find is, they’re like you. That could be you. I mean, that could be your sister. That could be, you know, your kid. You, you always feel that way in that sort of an encounter, and, you know, it just is a—it’s a—it’s an important thing to engage in, I think. And I think, you know, we bring that understanding into our lives and, frankly, into our work—the work that we do as well. <NAME>MICHELLE SMITH</NAME>. Thank you. Hannah Lang. <NAME>HANNAH LANG</NAME>. Hi. I wanted to ask about digital currency. You previously said a few times that you think it’s important for the U.S. to get a central bank digital currency right rather than be first. But with countries like China moving very quickly on CBDC, I was wondering what you think the risks are of, of moving too slow on, on digital currency. <NAME>CHAIR POWELL</NAME>. Right. So I think the first thing to say is that we feel an obligation to understand the technology and all of the policy issues very, very well. Central bank digital currencies are now possible, and we’re going to see some of them around the world. And we need to understand whether that’s something that would be a good thing for the people that we serve. How would it work in our system? And there are some very, very difficult questions to answer, but I think we—and we are engaged in a serious program to understand both the technology and the policy issues. I am—I would say this: We’re the world’s reserve currency, and that means that the dollar is used in transactions all around the world, far more than any other currency. And that’s because of our rule of law; our democratic institutions, which are the best in the world; our economy; our industrious people; all the things that make the United States the United States. That’s why we’re the, the reserve currency. And, of course, we have open capital accounts, which is essential if you’re going to be the reserve currency. So those are the factors that make us the reserve currency. I am—I’m less concerned that someone—that another country might have a digital currency first. You know, ask yourself the question, does that mean that, if you were a company that’s doing international business, would you then suddenly start to use that currency to use your—do your international transactions, or would you still do them in dollars, where, where— which is what everyone does? And I’m not so concerned about, about that. I am really concerned about getting it right. It is—it is a—it is a tricky set of questions that we have to navigate in a world where we already have, remember, a highly evolved payment system. We have FedNow and other immediately available funds. Pretty soon everybody will be able to, to do what people do in other parts of the world, which is just use their phone to make immediately available payments all the time. It’ll be normal. And what would be the role of a central bank digital currency in that kind of an environment? Far more important to get it right than it is to do it fast or feel that we need to rush to reach conclusions because other countries are moving ahead. I mean, that—what the China—the currency that’s being used in China is not one that would—that would work here. It’s, it’s one that really allows the government to see every payment that’s used—for which it is used in real time. It’s much more to do with things that are happening within their own financial system than it is, I think, to do with, with the global—you know, sort of global competition. <NAME>MICHELLE SMITH</NAME>. Thank you. Michael Derby. <NAME>MICHAEL DERBY</NAME>. Thank you for taking my question. I wanted to ask you another question about inflation, and it has to do with inflation expectations. A number of different surveys and, and market indicators are showing, you know, multiyear highs in inflation expectations ratings. So I wondered, you know, if, if that was something that you saw consistent with your inflation outlook. Is that something that worries you, or do you see that as, maybe, you know, the success of the Fed’s new inflation framework, you know, making it out to the, to the broader public? <NAME>CHAIR POWELL</NAME>. Right. Inflation expectations before the pandemic hit—and here we think of survey, market based—survey being either households or, or economists and, and market based. You look at all of those, and I would say that they were at the low end of what would have been consistent with a 2 percent inflation target, particularly our 2 percent inflation target, which calls for 2 percent average inflation. So they’re at the low end. Inflation expectations actually went down a bit at the beginning of the pandemic, and now they’ve just moved back up to levels broadly—that, that are where they were in 2018, or in some cases 2014, and, I would say, more consistent with our mandate. And we want them to be—we want them to be higher and—you know, on a persistent basis. We want inflation to run a little bit higher than it has been running for the last quarter of a century. We want it to average 2 percent, not 1.7 percent. And for that, we need to see inflation expectations that are consistent with that, really well anchored at 2 percent. We don’t really see that yet, but I would say that, that, you know, breakevens have moved up, in a way. Breakevens are based on CPI, of course, but they’re, they’re now at levels that are—that are pretty close to mandate consistent, whereas before, they were below. We monitor inflation expectations very, very carefully, as you would obviously know. So that’s where—that’s where I would say it is. <NAME>MICHAEL DERBY</NAME>. Just one small follow-up. Do you have any redlines on inflation readings where if, you know, you hit, like, a certain number on, say, you know, core PCE, that would be, you know, a trigger response from the Fed? <NAME>CHAIR POWELL</NAME>. It doesn’t work that way. You know, we’re, we’re—inflation measures are always going to be a bit volatile. We expect—as I mentioned, we expect core and, and headline PCE to move up because of base effects, and—you know, I—and we expect that to go away. We, we also expect these, these bottleneck effects to come in. We don’t know how persistent they’ll be. We, we think they’ll—you know, it’s a matter of, of when they will pass through, not whether they will pass through. But we can’t be confident about the exact timing of that or the size of them. They don’t seem especially large at the moment, but, you know, we, we don’t know. I mean, you know, this is—this is all about the reopening of the economy. That’s what’s happening. We had it—we were in a deep, deep hole a year ago, and now, with a lot of help from fiscal policy, some additional help from monetary policy, and, you know, a great deal of help from vaccination, we’re seeing a strong rebound in activity. And what’s happening is, it’s, it’s—demand can be spurred with fiscal transfers and—the saved-up fiscal transfers and, and people going back to work and things like that. The supply side will take a little bit of time to adapt. New restaurants will have to be opened. The supply of various inputs into the goods part of the economy will have to be brought back up to speed. And you—you’re seeing some of that. That’ll happen over a period of time, over coming quarters. You’ll see some of the bottlenecks resolved, but the last one may not be resolved for some time. <NAME>MICHAEL DERBY</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Brian Cheung. <NAME>BRIAN CHEUNG</NAME>. Brian Cheung with—hi, Chairman Powell. Brian Cheung with Yahoo Finance. I wanted to ask about financial stability, which is a part of the Fed’s reaction function here. It seems like to people on the outside who might not follow finance daily, they’re paying attention to things like GameStop, now Dogecoin. And it seems like there’s interesting reach for yield in this market—to some extent, also Archegos. So does the Fed see a relationship between low rates and easy policy to those things, and is there a financial stability concern from the Fed’s perspective at this time? <NAME>CHAIR POWELL</NAME>. Right. So we look at—financial stability for us is really—we have a broad framework, so we don’t just jump from one thing to another. I know many people just look at asset prices, and they look at some of the things that are going on in the—in the equity markets, which, which I think do reflect froth in the equity markets. But really, it—really, we try to stick to a framework for financial stability so we can—so we can talk about it the same way each time and so we can be held accountable for it. So one of the areas is asset prices, and I would say some of the asset prices are high. You are seeing, seeing things in the capital markets that, that are—that are a bit frothy. That’s a fact. I won’t say it has nothing to do with monetary policy, but it also—it has a tremendous amount to do with vaccination and reopening of the economy. That’s really what has been moving markets a lot in the last few months is this turn away from what was a pretty dark winter to now a fast—a much faster vaccination process and a faster reopening. So that’s, that’s part of what’s going on. The other—the other things, though—you know, leverage in the financial system, is it— is, is not a problem. That’s a—that’s a—that was one of the four pillars. Asset prices was one. Leverage in the financial system is, is not an issue; we have very well capitalized large banks. We have funding risks for, for our largest financial institutions that are also very low. We do have some funding risk issues around money market funds, but I would say they’re not systemic right now. And, and the household sector is actually in pretty good shape. It was in—it was in a very good shape as a relative matter before the financial crisis—sorry, the pandemic crisis hit. There were real concerns, of course, with high levels of unemployment and loss of wages and all of that, that the—that the household sector would, would, would weaken dramatically. That hasn’t happened. So, with the fiscal transfers, money that’s on household balance sheets, they’re in good shape. You see relatively low defaults and that kind of thing. So the overall financial stability picture is mixed, but, on balance, it’s—you know, it’s manageable, I would say. And it’s—by the way, I think it’s appropriate and important for financial conditions to remain accommodative to support economic activity. Again, 8½ million people who had jobs in February don’t have them now, and, you know, there’s a long way to go until we reach our goal. So that’s what I would say. <NAME>BRIAN CHEUNG</NAME>. As a follow-up, you mentioned money market pressures. The Fed didn’t make changes to interest on reserves or excess reserves. What was the logic behind that? It seems like SOFR has been drifting closer to zero. So just hoping for clarification on that. <NAME>CHAIR POWELL</NAME>. Right. So the federal funds rate has been well within target and—at target range, and money market funds—money market conditions are, are fine. We have the ability to use our administrative tools to make sure that that remains the case. We do expect further downward pressure on, on rates through asset purchases and also the runoff in the—in the Treasury General Account. But, at this point, we didn’t see a need for—to, to deploy our tools to, to support rates. And, of course, we will do so if, if the need does arise. <NAME>MICHELLE SMITH</NAME>. Thank you. Jean Yung. <NAME>JEAN YUNG</NAME>. Hi, Chair Powell. I wanted to ask a, a similar question. We are seeing elevated market valuations, and some economists are concerned that the economy might overheat, at least for a period of time. So should the Fed and other regulators be thinking about tightening capital requirements or extending oversight to the nonbank sector so that financial stability risks stay as low as they have been? Thank you. <NAME>CHAIR POWELL</NAME>. So I think capital requirements for banks are, to me—went up tremendously, really, over the course of the 10 years between the financial crisis and the arrival of the pandemic. And the banks really made it through a real stress test very well and passed three, three of our—two of our stress tests, and that is another one that’s pending. So capital is, is in a good place, as far as I’m concerned, in the banking system. But, to your point, what we saw was—so what, what kind of happened during the pandemic crisis that, that requires attention, and number one is money market funds and corporate bond funds where we saw run dynamics again, and we need to—we’re, we’re looking at that. So we’re looking at ways, and people around the world are looking at ways, to make those vehicles resilient so that they don’t have to be, you know, supported by the government whenever there’s, you know, severely stressed market conditions. It’s a private business. They, they need to have the wherewithal to stay in business and not just count on the Fed and others to—around the world to come in. So that was that. The other one is Treasury market structure. Dealers are committing less capital to that activity now than they were 10 or 15 years ago, and the need for capital is higher because there’s so much more supply of Treasuries. And so there are some questions about Treasury market structure, and there’s a lot of careful work going on to understand whether there’s something we can do about this, because we—you know, the U.S. Treasury market is probably the most single important—single most important market in, in the economy and the world. It needs to be liquid. It needs to function well for the good of our economy and the good of our citizens. So it’s not clear what, what—where that takes you, but we, we are taking a careful look—and the Treasury Department is, is really going to be leading this—at, at Treasury market structure and all of the various aspects of that to make sure that we do have a resilient, strong Treasury market that can work even in difficult times. As, as you know, at the very beginning of the financial—of the—of this recent crisis, there was such a demand for selling Treasuries, including by foreign central banks, that, really, the dealers couldn’t handle the volume. And so what was happening was, the market was really starting to lose function, and that’s—that was a really serious problem which we had to solve through really massive asset purchases. And, you know, so we’d like to, we’d like to see if there isn’t something we can do to—is—do we need to build against that kind of an extreme tail risk, and if so, what would that look like? <NAME>MICHELLE SMITH</NAME>. Thank you. Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Fed Chairman, for the question. So I’m interested in your thoughts. There’s so much fiscal help and accommodation from the Federal Reserve. You said today the vaccinations will follow the normal economic conditions or, or lead to more normal economic conditions later this year. When do you see the economy being able to stand on its own feet, so to speak? And, along those lines, with the fiscal spending and the accommodation you talked about with transitory inflation, does more spending need to be injected into the system, or will that affect that transitory nation—nature of the inflation? Thank you. <NAME>CHAIR POWELL</NAME>. When will the economy be, be able to stand on its own feet? I’m not sure if—I’m not sure what the exact nature of that question is. <NAME>EDWARD LAWRENCE</NAME>. What, what I’m saying is, is, you know, when will the—when will you need to lower the, the amount of Treasuries you’re buying to sort of taper off a little bit? When can it stand without having that support from the monetary policy side? And then—and then, further, the transitory. <NAME>CHAIR POWELL</NAME>. Okay. Sorry. So we have—you know, we’ve articulated our test for that, as you know, and that is just, we’ll continue asset purchases at this pace until we see substantial further progress. And we’re, we’re going to communicate well in advance of any decision. We’re going to let, you know, the, the public know that that’s what we’re thinking. And, and so there’ll be a lot of warning and that kind of thing. But it’s about substantial further progress toward our goals. That’s, that’s really all it is. It doesn’t have any, any external, virus- related specific requirement, although, again, I do think it’ll—you know, the, the virus will need to continue to be controlled for us to achieve those economic goals. But it’s really the economic goals. Now, your second question. Sorry, just say again. I didn’t quite get that question. <NAME>EDWARD LAWRENCE</NAME>. Yes, sure. With all the fiscal spending that’s happened and the accommodation and—does, does the system need more spending either from the fiscal side or accommodation, or would more spending affect the transitory nature of the inflation and put those upward, upward pressures on inflation long term? <NAME>CHAIR POWELL</NAME>. So it’s really up to Congress. We—we’re not an adviser to Congress. You know, we don’t, we don’t weigh in on specific fiscal bills or proposals. That’s really between elected parties. You know, basically, fiscal policy is the province of people who stand for democratic election and win, and they get to make those very difficult decisions, and they get to be accountable to the voters. We didn’t do any of that, and we don’t have a seat at that table. We don’t seek a seat at that table. So that’s really something for Congress and the Administration to, to deal with. <NAME>MICHELLE SMITH</NAME>. Thank you. Greg Robb. <NAME>GREG ROBB</NAME>. Hi, Greg Robb from MarketWatch. Thank you—thank you so much for the—for the opportunity. I wanted to circle back to the housing market. It’s just kind of confusing that the question and your answer—you know, the housing market is strong, prices are up. And yet the Fed is buying $40 billion per month in mortgage-related assets. Why is that, and are those purchases playing a role at all in pushing up prices? Thank you. <NAME>CHAIR POWELL</NAME>. Yes. I, I mean, we’re—we started buying MBS because the mortgage-backed security market was, was really experiencing severe dysfunction, and we’ve sort of, sort of articulated, you know, what our exit path is from that. It’s not meant to provide direct assistance to, to the housing market. That was never the intent. It was really just to keep that as—it’s a very close relation to the Treasury market and a very important market on its own. And so that’s, that’s why we, we bought as we did during the Global Financial Crisis; we bought MBS too. Again, not, not an intention to send help to the housing market, which was, which was really not, not a problem this time at all. So—and, you know, it’s, it’s a situation where we will, we will taper asset purchases when the time comes to do that, and those, those purchases will come to zero over time. And that time is not yet. <NAME>GREG ROBB</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. And for the last question, we’ll go to Mike McKee. <NAME>MICHAEL MCKEE</NAME>. Thank you, Mr. Chairman. Since I am last, let me go back to Paul’s question, the first question, and ask him—ask you whether—not whether you’re thinking about thinking of tapering, but why you’re not. We’re seeing bank lending fall. The markets seem to be operating well. Are you afraid of a taper tantrum? Or is it, as one money manager put it, “If you get out of the markets, there aren’t enough buyers for all of the Treasury debt, and so rates would have to go way up”? The bottom-line question is, what do we get for $120 billion a month that we couldn’t get for less? <NAME>CHAIR POWELL</NAME>. So it’s really not more complicated than this. We, we articulated the “substantial further progress” test at our December meeting. And, really, for the next couple of months, we made relatively little progress toward our goals. And, remember, substantial further progress from December—from our December meeting. And then vaccination started to get more widespread. The economy reopened. We got a really nice job report for March. It doesn’t constitute substantial further progress. It’s not close to substantial further progress. We’re hopeful that we will see along this path a way to that goal. And we believe we will; it just is a question of when. And so, when that time—when the time comes for us to talk about talking about it, we’ll do that. And—but that time is not now. It’s—we’re just not—we’re not that far. We’ve had one great jobs report. It’s not enough. You know, we’re going to act on actual data, not on our forecast. And we’re just going to need to see more data. That’s—it’s no, no more complicated than that. <NAME>MICHAEL MCKEE</NAME>. Well, if you leave rates where they are, it doesn’t change anything. But does it change anything if you actually tapered a bit? If you spent less, would you still get the same effect on the economy? <NAME>CHAIR POWELL</NAME>. If we bought less? You’re, you’re very faint. So if someone has the volume, they can turn it up. But if we bought less, you know, no. I mean, I think the effect is proportional to the amount we buy. It’s, it’s really part of overall accommodative financial conditions. We, we have tried to create accommodative financial conditions to support economic activity, and we did that. And we articulated the—you know, the, the tests for withdrawing that accommodation. And we think, you know—so we’re waiting to see those tests to be fulfilled both for asset purchases and for liftoff of rates. And, you know, when the tests are fulfilled, we’ll, we’ll go ahead. As we—you know, we’ve done this before. We did it in, in the last—after the last crisis, and, you know, we’ll do it in, in maybe—we’ll do it—as those tests are satisfied, we’ll do it. And the—and the only thing that will guide us is, are the tests met? You know, that, that’s what we focused on: Is—have, have the macroeconomic conditions that we’ve articulated, have they been realized? That will be the test for, for tapering asset purchases and for raising interest rates. <NAME>MICHELLE SMITH</NAME>. Thank you very much. Take care. <NAME>CHAIR POWELL</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today the Federal Open Market Committee kept interest rates near zero and maintained our asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete. Widespread vaccinations, along with unprecedented fiscal policy actions, are also providing strong support to the recovery. Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades. Much of this rapid growth reflects the continued bounceback in activity from depressed levels. The sectors most adversely affected by the pandemic remain weak but have shown improvement. Household spending is rising at a rapid pace, boosted by the ongoing reopening of the economy, fiscal support, and accommodative financial conditions. The housing sector is strong, and business investment is increasing at a solid pace. In some industries, near- term supply constraints are restraining activity. Forecasts from FOMC participants for economic growth this year have been revised up since our March Summary of Economic Projections. Even so, the recovery is incomplete, and risks to the economic outlook remain. As with overall economic activity, conditions in the labor market have continued to improve, although the pace of improvement has been uneven. Employment rose 419,000 per month, on average, in April and May, with the leisure and hospitality sector continuing to post notable gains. Employment in this sector and the economy as a whole remains well below pre- pandemic levels. The unemployment rate remained elevated in May at 5.8 percent, and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year. Factors related to the pandemic, such as caregiving needs, ongoing fears of the virus, and unemployment insurance payments, appear to be weighing on employment growth. These factors should wane in coming months against a backdrop of rising vaccinations, leading to more rapid gains in employment. Looking ahead, FOMC participants project the labor market to continue to improve, with the median projection for the unemployment rate standing at 4.5 percent at the end of this year and declining to 3.5 percent by the end of 2023. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on lower-wage workers in the service sector and on African Americans and Hispanics. Inflation has increased notably in recent months. The 12-month change in PCE prices was 3.6 percent in April and will likely remain elevated in coming months before moderating. Part of the increase reflects the very low readings from early in the pandemic falling out of the calculation as well as the pass-through of past increases in oil prices to, to consumer energy prices. Beyond these effects, we are also seeing upward pressure on prices from the rebound in spending as the economy continues to reopen, particularly as supply bottlenecks have limited how quickly production in some sectors can respond in the near term. These bottleneck effects have been larger than anticipated, and FOMC participants have revised up their projections for, for inflation notably for this year. As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal, and the median inflation projection falls from 3.4 percent this year to 2.1 percent next year and 2.2 percent in 2023. The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic. As the reopening continues, shifts in demand can be large and rapid, and bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect. Our new framework for monetary policy emphasizes the importance of having well-anchored inflation expectations, both to foster price stability and to enhance our ability to promote our broad-based and inclusive maximum-employment goal. Indicators of longer-term inflation expectations have generally reversed the declines seen earlier in the pandemic and have moved into a range that appears broadly consistent with our longer-run inflation goal of 2 percent. If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we’d be prepared to adjust the stance of monetary policy. The pandemic continues to pose risks to the economic outlook. Progress on vaccinations has limited the spread of COVID-19 and will likely continue to reduce the effects of the public health crisis on the economy. However, the pace of vaccinations has slowed, and new strains of the virus remain a risk. Continued progress on vaccinations will support a return to more normal economic conditions. The Fed’s policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. As the Committee reiterated in today’s policy statement, with inflation having run persistently below 2 percent, we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect that it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. As is evident in the SEP, many participants forecast that these favorable economic conditions will be met somewhat sooner than previously projected; the median projection for the appropriate level of the federal funds rate now lies above the effective lower bound in 2023. Of course, these projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a couple of years from now. More important than any forecast is the fact that, whenever liftoff comes, policy will remain highly accommodative. Reaching the conditions for liftoff will mainly signal that the recovery is strong and no longer requires holding rates near zero. In addition, we are continuing to increase—continuing to increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals. The increase in our balance sheet since March 2020 has materially eased financial conditions and is providing substantial support to the economy. At our meeting that concluded earlier today, the Committee had a discussion on the progress made toward our goals since the Committee adopted its asset purchase guidance last December. While reaching the standard of “substantial further progress” is still a ways off, participants expect that progress will continue. In coming meetings, the Committee will continue to assess the economy’s progress toward our goals. As we have said, we will provide advance notice before announcing any decision to make changes to our purchases. On a final note, we made a technical adjustment today to the Federal Reserve’s administered rates. The IOER and overnight RRP rates were adjusted upward by 5 basis points in order to keep the federal funds rate well within the target range and to support smooth functioning in money markets. This technical adjustment has no bearing on the appropriate path for the federal funds rate or stance of monetary policy. 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 support the economy for as long as it takes to complete the recovery. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Rachel Siegel, the Washington Post. <NAME>RACHEL SIEGEL</NAME>. Thank you, Michelle, and thank you, Chair Powell, for taking our questions. I’m wondering if you can walk us through expectations you have, specifically when it comes to the labor market going into 2023. And I’m curious about people who may have left the labor market, who have yet to come back, or who may face issues with childcare. Perhaps they’ve retired early. Any barriers that you see in keeping people from the labor market as you consider full employment going into 2023? Thank you. <NAME>CHAIR POWELL</NAME>. Thank you. So I would say, if you look at the labor market and you look at the demand for workers and the level of job creation and think ahead, I think it’s clear, and I am confident, that we are on a path to a very strong labor market—a labor market that, that shows low unemployment, high participation, rising wages for people across the spectrum. I mean, I think that’s, that’s shown in our projections, it’s shown in outside projections. And if you look through the current time frame and think one and two years out, we’re going to be looking at a very, very strong labor market. In terms of exactly what that means, we’ll, we’ll have to see how things evolve. I think we learned during the course of the last very long expansion, the longest in our history, that labor supply during a long expansion can exceed expectations, can move above its estimated trend. And, and I have no reason to think that that won’t happen again. At the same time, we have seen—in terms of participation, we’ve seen a significant number of, of people retire. And so we, we don’t actually know exactly what labor force participation will be as we go forward, but I, I would tend to, to look at it and think that it—that it can return to high levels, although it may take some time to do that. But overall, this is—this is going to be, you know, a very strong labor market. In terms of the near term, you ask as well—so we see a couple of things, a few things that seem likely to be holding back labor supply. There are very large amounts of job openings, and there are a very large number of people who, who are unemployed. And the pace of, of filling those jobs is—somehow feels slower than it might be. So I’d point to a number of things, the first of which is just that most of the, the act of sort of going back to one’s old job—that’s kind of already happened. So this is a question of people finding a new job. And that’s just a process that takes longer. There may be something of a speed limit on it. You’ve got to find a job where, where your skills match what, you know, what, what the employer wants. It’s got to be in the right area. There’s just a lot that goes into the function of finding a job. So that’s, that’s sort of a natural thing. In addition, I would say that we, we look at, for example, a, a significant number of people still say that they’re concerned about going back to work in jobs where there’s a lot of public facing because of—because of COVID. So that’s clearly holding back some people, and that should diminish as vaccinations move ahead. There’s also the question of childcare. Many are engaged in, in caretaking. And as schools reopen and, and, and childcare/daycare centers open in the fall—in the fall, then we should see—we should see that supporting labor force participation by caretakers. Finally, unemployment insurance for something like 15 million people will either end or be diminished as we move through the summer and into, into, into the fall by the end of September, and I’d like some—that may also encourage some to go back in and take jobs. So you would think that that would add to an increase in job creation as well. So you put all those together, I would expect that we would see strong job creation building up over the summer and going into—going into the fall. I will also say, though, the last thing I’ll say is, this is an extraordinarily unusual time. And we, we really don’t have a template or, or, you know, any experience of, of a situation like this. And so I think we have to be humble about our ability to understand the data. It’s not a time to try to reach hard conclusions about the labor market, about inflation, about the path of policy. We need to see more data. We need to be a little bit patient. And I do think, though, that we’ll, we’ll, we’ll be seeing some things coming up in coming months that will—that will inform our, our thinking. <NAME>MICHELLE SMITH</NAME>. Thank you. Paul Kiernan. <NAME>PAUL KIERNAN</NAME>. Hi, Chairman Powell. Thanks for the question. Your—the Committee’s median forecast on inflation seems to assume a pretty, pretty tame outlook for the rest of the year. As you know, the three-month annualized rate for the past three months was, I think, 8.4 percent in the CPI. And I’m just wondering sort of how much longer we can sustain those, those kinds of rates before you get nervous. Thanks. <NAME>CHAIR POWELL</NAME>. So inflation has come in above expectations over the last few months. But if you look behind the headline numbers, you’ll see that the incoming data are, are consistent with the view that prices—that prices that are driving that higher inflation are from categories that are being directly affected by the recovery from the pandemic and the reopening of the economy. So, for example, the experience with, with lumber prices is, is illustrative of this. The thought is that prices like that that have moved up really quickly because of the shortages and bottlenecks and the like, they should stop going up, and at some point, they, they, in some cases, should actually go down. And we did see that in the case of lumber. Another example where we haven’t seen that yet is prices for used cars, which accounted for more than a third of the total increase in core inflation. Used car prices are going up because of sort of a perfect storm of very strong demand and limited supply. It’s going up at just an amazing annual rate. But we do think that it makes sense that that would stop, and that in fact it would reverse over time. So we think we’ll be seeing some of that. When will we be seeing it? We’re not sure. That narrative seems, still seems quite likely to prove correct, although, you know, as I pointed out at the last press conference, the, the timing of that is, is pretty uncertain, and so are the, the effects in the near term. But over time, it seems likely that these very specific things that are driving up inflation will be—will be temporary. And we’ll be, you know, we’re going to be looking. We’ll be looking at the monthly pricing data. I’ll, I’ll also say that the labor market is going to be important, both for the maximum- employment goal, but also for inflation. And we’ll be looking at that. And, and as I—as I mentioned, we expect and I expect that we’ll see increases in supply over coming months as the factors that we believe have been suppressing supply abate, wane, move down. So I, I can’t give you an exact number or an exact time, but I would say that we do expect inflation to move down. If you look at the—if you look at the forecast for 2021 and—sorry, 2022 and 2023 among my colleagues on the, on the Federal Open Market Committee, you will see that people do expect inflation to move down meaningfully toward our goal. And I think the full range of, of, of inflation projections for 2023 falls between 2 and 2.3 percent, which is consistent with our—with our goals. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to Ylan Mui at CNBC. <NAME>YLAN MUI</NAME>. Hi. Thank you, Chair Powell, for doing this. My question for you is that you mentioned that your colleagues did have a discussion about the progress that you’re making toward your, your goals in order to consider tapering your asset purchases. In that discussion, you said that you didn’t—haven’t made substantial progress yet, but that you expect to continue to make progress. In that discussion, did you guys talk about a timeline for when you expect to see that progress be made and when you might consider starting to reduce those purchases? <NAME>CHAIR POWELL</NAME>. Right. So I, I expect that we’ll be able to say more about timing as we see more data. Basically, there’s not a lot of more light I can—I can shed on that. But you can think of this meeting that we had as the “talking about talking about” meeting, if you like. And I now suggest that we retire that term, which has—which has served its purpose well, I think. So Committee participants were of the view that since we adopted that guidance in December, the economy has clearly made progress, although we are still a ways from our goal of substantial further progress. Participants expect continued progress ahead toward that objective. And assuming that is the case, it will be appropriate to consider announcing a plan for reducing our asset purchases at a future meeting. So at coming meetings, the Committee will continue to assess the economy’s progress toward our goals, and we’ll give advance notice before announcing any decision. The timing, of course, Ylan, will depend on the pace of that progress and not on any calendar. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to Chris Rugaber, AP. <NAME>CHRIS RUGABER</NAME>. Right. Thank you. Well, you mentioned—let me ask about inflation expectations. You said they were—I think you mentioned in your opening statement that you saw them as within target. Does that mean that some of the shorter-term measures we’ve seen out there such as the New York Federal Reserve’s three-year outlook, which jumped a bit—should those sort of be dismissed? And are we only looking at longer-term inflation expectations? And would you describe those as still well anchored at this point? And on a related note, would the Fed consider publishing its index of common inflation expectations on a monthly basis? Thank you. <NAME>CHAIR POWELL</NAME>. So we, we do tend to look at the longer-term inflation expectations, because that’s really, we think, what matters for, for inflation. So and, and, you know, the shorter-term ones do tend to move around based on, for example, gasoline prices. So you’ll see if gasoline prices were to spike, you’ll see the shorter-term inflation expectation measures, particularly the surveys, move up. And, and that’s, that’s maybe not a good signal for future inflation if, if gas happens to spike and then go back down again. So we—yes, I think if, if you look at the broad range of longer-term inflation expectations, they’ve moved up. They moved down during the beginning of the pandemic, you know, sort of further exacerbating concerns that we might find ourselves where, for example, the ECB and the Bank of Japan have been, where you have expectations and inflation itself sliding down and you have a really hard time stopping that process once it begins. So that was a concern. So it’s, it’s good, actually, to see inflation—longer-term inflation expectations move back up to a range—it’s a range that’s consistent with what our objectives are. These are not precise measures, and that’s—and they, they contain risk premiums of various kinds. And that’s why we look at a broad range of them and tend to look at the movement of that broad range of, of, of indicators, which are from, you know, surveys of economists, surveys of the public, and also market based. It’s, it’s, it’s a wide index, as I’m sure you know. We look at that, and we see them back in the range where they were. And, by the way, they’ve been broadly higher than that, somewhat modestly higher than that, not so many years ago, at a time when inflation was, was, was still anchored at around 2 percent or maybe even a little bit below. So the answer is, yes, I think they are anchored and they’re at a good place right now. It’s gratifying to see them having moved up off of their pandemic lows. And, you know, as you know, it’s, it’s fundamental in our framework, our new framework, to, to assure that inflation—longer-term inflation expectations are anchored at a place that is consistent with our goal. We, we think that’s an important reason. If, if inflation expectations are not anchored at a place that’s consistent with your goal, it’s not clear why you would expect to hit your goal over the longer term. So it’s important. <NAME>MICHELLE SMTH</NAME>. Okay, now we’ll go to James Politi with the FT. <NAME>JAMES POLITI</NAME>. Chair Powell—thanks, Chair Powell. Your economic projections today forecast 7 percent growth in 2022, unemployment at 4½ percent, and core inflation of 3 percent. If those conditions are achieved by the end of the year, would that constitute substantial further progress, in your mind? And kind of more broadly, when you look at the sort of median forecast for interest rates in 2023 showing not one but two interest rate increases at the time, I mean, is this kind of—can you describe the sort of tone of the—of the discussion in the Committee? And are we really moving towards sort of a post-pandemic stance? Is there greater confidence that, you know, the recovery will be, you know, a full recovery sooner than expected? <NAME>CHAIR POWELL</NAME>. On your first question, the judgment of when we have arrived at substantial further progress is one that the Committee will make. And it would not be appropriate for me to lay out particular numbers that do or do not—that do or do not qualify. That is—that is, you know, the process that we’re beginning now at the next meeting. We will begin, meeting by meeting, to, to assess that progress and talk about what we—what we think we’re seeing and, and just do all of the things that you do to sort of clarify your thinking around the process of deciding whether and how to adjust the pace and composition of asset purchases. In terms of the, the, the two hikes—so let me say a couple things first of all, not for the first time, about the—about the dot plot. These are, of course, individual projections. They’re not a Committee forecast, they’re not a plan. And we did not actually have a discussion of whether liftoff is appropriate at any particular year, because discussing liftoff now would be— would be highly premature, wouldn’t make any sense. If you look at the transcripts from five years ago, you’ll see that sometimes people mention their rate path in their interventions. Often they don’t. And the last thing to say is, the dots are not a great forecaster of, of future rate moves. And that’s not because—it’s just because it’s so highly uncertain. There is no great forecaster of, of future dots. So, so dots to be taken with a—with a big, big grain of salt. However, so let me talk about this, this, this meeting. The Committee spelled out, as you know, in our FOMC statements the conditions that it expects to see before an adjustment in the target range is made. And it’s outcome based, it’s not time based. And, as I mentioned, it’s labor market conditions consistent with maximum employment, inflation at 2 percent and on track to exceed 2 percent. In the projections, it gives some sense of how participants see the economy evolving in their most likely case. And, honestly, the main message I would take away from the SEP is that participants—many, many participants are more comfortable that the economic conditions in the Committee’s forward guidance will be met somewhat sooner than previously anticipated. And that would be a welcome development. If such outcomes materialize, it means the economy will have made faster progress toward our goals. So the other thing I’ll say is, rate increases are really not at all the focus of the Committee. The focus of the Committee is the current state of the economy. But in terms of our tools, it’s about asset purchases. That’s what we’re thinking about. Liftoff is, is well into the future. The conditions for liftoff—we’re very far from maximum employment, for example. It’s, it’s a consideration for the future. So the near-term thing is really—the real near-term discussion, discussion that will begin is really about the, the path of asset purchases. And, as I mentioned, we had a discussion about that today and expect to, in future meetings, continue to think about our progress. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Nancy Marshall-Genzer from Marketplace. <NAME>NANCY MARSHALL</NAME>-GENZER. Continuing—Chair Powell, continuing in that vein, when you’re ready, how will you go about signaling the start of tapering when you do decide to do that? <NAME>CHAIR POWELL</NAME>. So our intention for this process is that it will be orderly, methodical, and transparent. And I can just tell you, we, we, we see real value in communicating well in advance what our thinking is. And we’ll try to be clear. And, as I mentioned, we’ll, we’ll give advance notice before announcing a decision to taper. And so all I can say is that we, we think it’s important—we think where the balance sheet’s concerned, a lot of notice, as much transparency as we can give, and as far—as far in advance as we can to give people a chance to adjust their expectations. And, you know, we expect to be in that business until we reach substantial further progress and then have a—have a decision. Again, I have nothing further on time. It wouldn’t be appropriate to say. We’re going to have to see more data. We’re a ways away from substantial further progress, we think. But we’re making progress. <NAME>NANCY MARSHALL</NAME>-GENZER. So you can’t say generally how far in advance you would signal? <NAME>CHAIR POWELL</NAME>. Again, as we—as we approach that goal, we’ll provide, you know, as much clarity as we can. <NAME>MICHELLE SMITH</NAME>. Great, thank you. Going to Craig Torres at Bloomberg. <NAME>CRAIG TORRES</NAME>. Craig Torres at Bloomberg. If I were a businessman looking at the forecast today, I would ask how and when the Fed seeks to achieve an average of 2 percent inflation. In other words, does the FOMC have a look-back period? Or does it plan to suppress inflation in outer years because, over the next three years, you’re going to be above inflation? So what is your look-back period? Does the Committee have one? And if not, why not? And if they don’t, why isn’t this just flexible inflation targeting without an average in a range of 2 to 2¼ percent? Thanks. <NAME>CHAIR POWELL</NAME>. You know, so as part of our year-and-a-half-long process, the review that we did and came out with at the end of that with the—with the new Statement on Longer- Run Goals and Monetary Policy Strategy, we looked carefully at the idea. We’ve all read all the literature around different formulas for makeup and things like that. And we concluded—and, you know, I strongly agree—that it’s not wise to, to wed yourself to a particular formulation of that. So we did adopt a discretionary—there’s an element of discretion in it. You know, it says that we will seek to—seek inflation that runs moderately above 2 percent for some time. And it’s, it’s meant to create a broad sense that we want inflation to average 2 percent over time. And that under the old—under the old formula, under the old framework, what was happening was, 2 percent was a ceiling because all of the errors were below. You were always getting back to 2 percent. So you were bouncing back and forth between 1½ and 2, and we wanted them to be centered around 2. So, so that’s, that’s the approach that we’re taking. And you’re right, it’s not—it’s not a formulaic approach. We were clear on that when we announced the framework. Was there another part of your question, Craig? <NAME>CRAIG TORRES</NAME>. That pretty much answers it, Chair Powell. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to Michael Derby. <NAME>MICHAEL DERBY</NAME>. Thanks for taking my question. So I wanted to ask you about the reverse repo usage that we’ve seen lately. I was curious if you are at all concerned about the level of money flowing into the reverse repo facility. And do you believe that the changes in the Fed’s rate control toolkit today will have any impact on that? And then, in a related question, do you think that Fed asset purchases are taking too many safe assets out of the market right now and creating maybe some dislocations in the money markets? <NAME>CHAIR POWELL</NAME>. So on the—on the facility, we think it’s doing its job. We think it’s doing—the reverse repo facility is, is doing what it’s supposed to do, which is to provide a floor under money market rates and keep the federal funds rate well within its—well within its range. So we’re not concerned with it. It’s doing—you have an unusual situation where the Treasury General Account is, is shrinking and bill supply is shrinking. And so there’s, there’s downward pressure—we’re buying assets—there’s downward pressure on short-term rates, and that facility is, is doing what we think it’s supposed to do. Sorry, your second question was again? <NAME>MICHAEL DERBY</NAME>. Yeah, I mean, the change in the rate control toolkit, will that have any impact on—do you think that will reduce the, the amount of money coming into reverse repos? Will that have any impact on money market conditions that, you know, beyond the fed funds rate setting? <NAME>CHAIR POWELL</NAME>. It could have some impact. I think we’ll have to see empirically. But it’s designed to keep the federal funds rate, you know, within the range. And I do think it could have some effect on, on broader money market conditions below as it relates to, you know, the very low rates and the downward pressures. <NAME>MICHAEL DERBY</NAME>. And will it—do think it will lower uptake on the reverse repo facility, or that’s just not even really a focus of what the change was? <NAME>CHAIR POWELL</NAME>. It’s not, honestly. And, you know, the funny thing, you would think that it would, but we’ll have to see. It’s, it’s possible that that would not be the case. That’s going to be an empirical question. <NAME>MICHAEL DERBY</NAME>. Okay, cool. Thank you. <NAME>MICHELLE SMITH</NAME>. We’ll go to Jeanna Smialek, the New York Times. <NAME>JEANNA SMIALEK</NAME>. Hey, Chair Powell. Thank you for taking our questions. I was wondering if you could follow up a little bit on your response to Rachel at the very beginning and talk a little bit about how we should understand what full employment means in a world that, as you mentioned, is pretty roiled. All the data is pretty—has been pretty roiled by the pandemic, and we’re not really sure where EPOP is going to settle in, we’re not sure where participation is going to settle in. And wages are already looking, you know, decent. So I guess I wonder what full employment means in this context and, and sort of how you’re thinking about those wage data. <NAME>CHAIR POWELL</NAME>. Yeah. As, as you well know, there isn’t one indicator we can look to, and there’s no one number that we can therefore point to. We look at a range of indicators, and it’s a very broad range, you can count to a high number just quickly—but, but, certainly, it will include things like unemployment and participation and wages and many different flavors of that. So how do we think about it? A couple of things. We’re all going to be informed by what we saw in the last cycle, which was labor supply outperforming expectations over a long period of time. Now, that hadn’t happened in many other cycles, but this was a very long cycle. So we’re going to have to be alert to see whether that can happen again. It is a different—it’s a different economy. We, we have had a slew of retirements, and that may weigh on participation. That, that effect, though, should wear off in a few years and, and, you know, as you move through that window, because they would have—people would have retired anyway, and you’ll be back where you, you would have been. So I think we’re—I think that lesson number one is, is just to be careful about assessing maximum employment. And I think if you—during the last cycle, there were—there were waves of concern that we were reaching full employment as early, you know, as, as 2012, when I arrived at the Fed. And, you know—you know, nine years later— eight years later, we were still creating jobs. And, you know, it was quite remarkable. So we’re all going to be informed by that. At the same time, we understand this is a different economy. You know, the, the demographics are, people are getting older, and that should have a secular effect of, of reducing participation over time. So we have to be sensible about what, what can be done. But I think we’re going to be—we’re going to lean into that and be optimistic. You asked about wages. You know, we’re seeing wage increases. That’s, that’s sort of a natural thing to be seeing in a strong economy. And what we’re seeing is—we don’t see anything that’s troubling in the sense of—what would be troubling would be, you know, very wide across the economy, wages at unsustainable levels without high inflation. In other words, wages in excess of productivity and inflation, you know, by a meaningful amount broadly across the economy, sort of forcing companies to keep raising prices and getting into a wage–price cycle. That’s, that’s the old formula for—one of the old formulas for having high inflation. We don’t see anything like that now. We do see high wages. We see them for, for people who are mostly new, you know, entering into new jobs, many of them in low-skilled jobs. And, but we, we do think—you’ve got to—you’ve got to think in the labor market right now, where, where supply and demand are just not matched up well. And, you know, we think it’s a flexible economy and, and it will clear. There will—there will be a level at which supply and demand meet. And that’ll—we think that’ll, that’ll be happening in coming months. So—but the last thing I’ll say is, again, if you look at, at the forecasts, we are going to be in a very strong labor market pretty quickly here. There are still a big group of unemployed people. And, you know, we’re not going to forget about them. We’re going—we’re going to do everything we can to get people back into work and give them the chance to work. But there’s every reason to think that we’ll be in a—in a labor market with very attractive numbers, with low unemployment, high participation, and rising wages across the spectrum. So that’s, that’s a little bit how we’re looking at the—at the labor market. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to Hannah Lang at the American Banker. <NAME>HANNAH LANG</NAME>. Hi, I wanted to ask about the status of your thinking around the supplementary leverage ratio right now. Is the Fed still thinking about ways to permanently adjust this to account for the high growth in deposits? And do you ultimately believe a permanent fix is needed? And any information on the timing around that would be—would be helpful. <NAME>CHAIR POWELL</NAME>. What I can say is, we’re working on it. I don’t have anything to share with you in terms of the particulars or the timing right now, unfortunately. But we’ve, we’ve always—our position has been for a long time and, and it is now that we’d, we’d like the leverage ratio to be a backstop to risk-based capital requirements. When leverage requirements are, are, are binding, it does skew incentives for firms to substitute lower-risk assets for high-risk ones. It’s a straightforward thing. And because of the substantial increase in reserves, Treasuries, and other safe assets in the banking system, the SLR is rapidly ceasing to become— ceasing to be the intended backstop for big firms that we want it to be. So we do think it’s appropriate to consider ways to adapt it to this new high-reserves environment, and, and we’re looking hard at the issue. We would also, just to be really clear, we will take whatever actions are necessary to assure that any changes we do make or recommend do not erode the overall strength of bank capital requirements. Sorry, I can’t give you any more. That’s just something we’re working on. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to Anneken Tappe at CNN Business. <NAME>ANNEKEN TAPPE</NAME>. Hi there. Thanks for taking my question. Chairman Powell, the price jumps we’ve seen in some raw materials—lumber, for example, you mentioned that earlier—seem to be easing. And it looks like we’re at the beginning of suppliers catching up with demand. But I wonder if you’re worried at all, if we’re going to end up with excess supply immediately after those shortages wear off and if we just continue this mismatch, as we’re recovering and getting out of the pandemic economy. And I wonder how that would affect the Fed’s outlook at all. <NAME>CHAIR POWELL</NAME>. Well, that is really not the problem we’re having right now. But— and, actually, people who work in commodity industries are very focused on that, because they know that, you know, they don’t want to build, build capacity and then find out that it’s not necessary. So, really, the problem now is, is that demand is very, very strong. Incomes are high, people have money in their bank accounts. Demand for goods is extremely high, and it hasn’t— it hasn’t come down. We’re seeing the service sector reopening. And so you’re seeing prices are moving back up off their lows there. But in terms of, of overcorrecting, I mean, I think there, there is a possibility on the other side of this that, that inflation could be—could actually be quite low going forward. But that’s not—that’s not really where our focus is right now. Our focus right now is, we need to—our, our expectation is that these, these high inflation readings that we’re seeing now will start to abate. And that’s, that’s what we think. And it’ll be like the lumber experience, and like we expect the used car experience to be. With things like airplane tickets and hotels, which are the other two factors in the most recent CPI report that went up a lot, we expect that those prices will get back up to where they were, but there’s no reason to think that they’re going to keep going up a lot. Because if they are, people will build new hotels. There’s no reason for supply and demand to be out of whack in the hotel business over any period of time. So we think that’ll happen. I think in terms of the timing and the effects on inflation in the near term, there’s a lot of uncertainty. The overall story is one that, that we think is right, and we think the incoming data support it and, you know, so do many, many forecasters. And if you look at the forecasts on the FOMC, you will—you will see that as well. But we don’t—we don’t in any way dismiss the chance that it can work out that, that this goes on longer than expected. And the risk would be that over time, it does begin to affect inflation expectations. And if we see inflation expectations and inflation—or inflation moving up in a way that is really materially above what we—what we would see as consistent with our goals, and persistently so, we wouldn’t hesitate to use our tools to address that. Price stability is half of our mandate, and we would certainly do that. We do not expect that, though. That is not our base case. And, and in that we’re joined by many other forecasters, but there’s a lot to be humble about among forecasters. Forecasters have a lot to be humble about. It’s a—it’s a highly uncertain business. And we’re, we’re very much attuned to the risks and, and watching the data carefully. In the meantime, I would say, you know, we should—as I mentioned earlier, there’s so much uncertainty around this. It’s, it’s just a unique situation that we need to see how things evolve in coming months and, and see how that story holds up and act accordingly. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Howard Schneider at Reuters. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider, Reuters. Thanks, Chair Powell, for taking this. I don’t want to miss the moment here. And I just—I noticed that in the statement you dropped the language saying that the pandemic is weighing on the economy. So is this the effective end, in your view, of the pandemic as a constraint on economic activity, even though it’s still cited as a risk? <NAME>CHAIR POWELL</NAME>. You know, it’s a—it’s a continuum, right? What you’ve seen with the pandemic is sharply declining cases, hospitalizations, and deaths. And that’s great. And, and, you know, that should continue. But, you know, you, you also saw in the United Kingdom, which has, I think, at least as high if not higher vaccination rates, they’ve had an outbreak of the Delta variety. And it’s—and it’s causing them to have to—to have to react to that. So you’re not—you’re not out of the woods at this point. And it would be premature to—in my thinking, it would be premature to declare victory. Vaccination still has a ways to go to get to levels—it would be good to see it get to a substantially higher level. And, you know, that can only help. So, look, I—but you’re right, the statement language is evolving. I would expect it to continue to evolve. There’s a lot of judgment in that. But you can expect us to drag our feet a little bit on that, because that’s what you do with statement language. It’s, it’s great to see the progress. But, again, I would not declare victory yet. I would say it is so great to see the reopening of the economy, though, and to see people out living their lives again. You know, who doesn’t want to see that? And it appears to be safe, and I just would encourage people to continue to get vaccinated. <NAME>HOWARD SCHNEIDER</NAME>. If I could follow up on that, if you—if you view this statement in, in toto and the—and the dots and the substance as well, do you think this is more a mark-to-market exercise around the improvement in health or around the inflation risks you see developing out there? <NAME>CHAIR POWELL</NAME>. I think it’s both. You know, I think, clearly, since March what’s happened is, people have grown more confident in these very strong outcomes, that they’ll be achieved. Very strong outcomes in the economy will be achieved. There’s, there’s more grounds for comfort. We’ve seen growth coming higher than we expected. We’ve seen very strong labor demand. We’ve also seen—we have seen inflation above target, though, and I think even though, you know, in, in our forecasters’ case, they do see inflation coming back down over ’22 and ’23 into, into areas that are very consistent with our—with our mandate. Nonetheless, the risk is, is something that can factor into people’s thinking about appropriate monetary policy. The thing is, you know, these are 18 different forecasts, and I can’t stand here and say exactly what was in all 18 people’s minds. But that, that is something that I think can factor into things as well—factor into our forecast as well. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Victoria Guida with Politico. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I, I wanted to ask a little bit more about inflation to make sure I understand how you’re thinking about this. So in the projections, inflation is expected to, to be high this year and then come back down next year and then maybe start to rise a little bit again, enough for a liftoff in 2023. You know, I know that’s obviously—you know, take that with a grain of salt. But that would suggest that you all could theoretically see inflation sustainably staying above 2 percent. And so, I guess my question is, what would be causing that inflation? What, what would be—because it seems like you all now see a situation in which inflation would be rising in a way that isn’t caused by transitory factors in the—in the next couple of years. So would that be the result of a tight labor market? Would that be because this whole situation has raised people’s inflation expectations? How are you thinking about that? <NAME>CHAIR POWELL</NAME>. So what we’re seeing in the near term—again, our base case is that what we’re seeing in the near term is, is principally associated with, with the reopening of the economy and not with a tight labor market or tight resource constraints, really. So—but you’re right. When, when you get to—in, in the forecast, all of that, you know, supply and demand sides of the economy adapt. We have a very highly adaptive, you know, flexible economy, more so than most. And by 2023, those increases are really about, about, you know, rising resource utilization or, to put it a different way, you know, low unemployment, or high employment is a way to think about it. So that’s what that’s about. That’s about the kind of broad inflationary pressure that results from, you know, a really strong expansion tightening up resource utilization across the whole economy and lifting, lifting up inflation. And that’s why—that’s why you would see it then, because by then, you know, in the forecast—and it’s just a forecast, they’re just individual forecasts. In people’s forecasts, that’s what’s happening. <NAME>VICTORIA GUIDA</NAME>. So the, the, the change in the projections reflect the fact that you all are more optimistic about the economic outlook, and not necessarily that you think that this will change the way people think about inflation? <NAME>CHAIR POWELL</NAME>. Yeah, I think—there may be an element of the latter as well, because inflation expectations have continued to move up. You know, it’s all in people’s individual thinking, and you can’t—it’s hard to say. It’s not something the Committee debates in terms of, you know, what, what the outlook is for 2023. So I’m, I’m a little bit speculating, which I shouldn’t do. But it wouldn’t surprise me if there’s an element for some people in, you know, seeing the inflation performance that we’ve had and thinking that I have more confidence that we could see inflation above 2 percent, that it may not be as hard to do that as we thought, and that inflation expectations may move up to a—to a level—they were—they were really at a level that was kind of a little below 2 percent. They might move up as a consequence of this or, or, or as a consequence of, of, of the new framework. You know, we did see inflation expectations moving up in the—in the wake of the announcement of the framework. But, you know, we don’t really know that. So, ultimately, I think it’s consistent with both those things. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to Greg Robb at MarketWatch. <NAME>GREG ROBB</NAME>. Hi. Hi, thank you for taking my question. Chair Powell, I’m just looking at the forecast, and one thing I just don’t think has been talked about all that much is how much you guys—the Fed thinks that the economy is going to slow next year. I mean, are we looking at a scenario of a slowing economy next year with higher inflation? And, and what do you think about that? <NAME>CHAIR POWELL</NAME>. We’re looking at an economy that will not have the degree of, of fiscal support. The fiscal support in the forecast is much less than it was this year. So—but you’ve, you’ve still got a very strong growth, well above the longer-run potential output of the— of the economy. You’ve got—you’ve got growth meaningfully above that, and inflation is lower next year in all of our—in all of our forecasts. I think the range of, of core PCE forecast for next year is 1.7 to 2.5 in 2022 and, and 2 to 2.3 in 2023. So you’re right, you’re seeing—I, I can’t remember the number, but it might be in the 3s—3, 3½ percent growth for next year. That’s, that’s a really good year—coming on the back of a 7 percent growth year, that’s a really good year. That’s, that’s a year with a lot of momentum. That’ll see—you know, that’ll cause significant job creation and, and it will—I mean, we would take 3½ percent. We didn’t have a 3½ percent growth year—we didn’t have a 3 percent growth year between the Global Financial Crisis and the end of the expansion. So that would be a good year. <NAME>GREGG ROBB</NAME>. Doesn’t it seem like there’s a risk of, of, you know, like stagflation— where that—you’re going to go from 7 percent and down, that means the economy’s really, you know, dropping in some way. We haven’t seen that, right? <NAME>CHAIR POWELL</NAME>. Well, the economy’s not, not decel—the economy is still growing, and growing at a, at a very healthy rate. Our estimate—I mean, different people have different estimates—but, broadly speaking, economists think the economy has the potential to grow at around 2 percent per year. If you’re growing above that, then the unemployment rate should be declining, people should be being pulled into the labor force, wages should be going up, lots of things should be happening, businesses should be investing. So, you know, I guess to answer your question a different way, is there a risk that inflation will be higher than we think? Yes. As I said earlier, you know, we, we don’t have any certainty about the timing or the extent of these effects from reopening. And therefore we don’t—we don’t think that—we think it’s unlikely that they would materially affect the underlying inflation dynamics that the economy has had for a quarter of a century. The underlying forces around the globe that have created those dynamics are intact, and those are aging population, low productivity, globalization, all of those things that, that we think have, have, you know, really held down inflation. All that’s out there still. You know, when we get through this, we may well—we’ll be facing those same forces. Nonetheless, is there a risk that inflation will remain higher than we—than we thought? Yes. And if, if we see inflation moving above our goals in, in a time—sorry, to an extent, to a level or, or persistently—or persistently enough, you know, we would be prepared to use our tools to address that. <NAME>MICHELLE SMITH</NAME>. Thank you. Going to Brian Cheung with Yahoo. <NAME>BRIAN CHEUNG</NAME>. Chair Powell, Brian Cheung, Yahoo Finance. On that point, you talked about maybe some of the more structural changes in that last answer with regards to productivity. I noted that the median projection for r*, the longer-term interest rate, is still the same at 2.5 percent. But there’s been some literature out there that maybe the COVID crisis could have actually changed some of the underlying fundamentals of the economy and maybe changed productivity, in addition to combined with demographic changes that have already been in effect to suggest that that longer-term neutral rate or r* might be higher. What would the implications of that be for monetary policy? Do you think that maybe the Fed could have the possibility of underestimating the long-run neutral rate? And what might be the impact of that? <NAME>CHAIR POWELL</NAME>. A higher neutral rate would mean that interest rates would run higher by that amount. And, and that would be a good thing from the standpoint of the economy, because it would give the Fed more room to cut rates. The problem with, with interest rates being close to the lower bound, of course, is that it really cuts into our ability to react to a downturn—for example, a pandemic. And if you look, for example, at the European Central Bank, their, their policy rate was well below zero when, when the pandemic hit. So we don’t want to be in a place where we can’t react. A higher neutral rate would, would be—from that narrow standpoint, would be a good thing for us. It would give us more room and, therefore, then, that would tend to result in better outcomes for the economy over time. You know, we, it’s—you can’t estimate it with great—with great precision. I think we would be alert to—I mean, studying r* is a—is a whole industry unto itself. And I, I think we would be alert to factors that might raise r*, the neutral rate of interest. And, you know, we, we try to keep up with that. And I think we’re, we’re, we’re all thinking about that and the possibility of that. You know, there are many—there are a lot of stories right now that could—that essentially could lead to higher productivity growth and higher r*. We don’t know which of those stories will come true. But, I mean, I’ll give you an example. It’s just there are—there are a lot of start-ups, a lot of early-stage companies. And is that going to have that effect? We don’t know. But we’ll be watching those things carefully. <NAME>MICHELLE SMITH</NAME>. Great, thank you. For the last question, we’ll go to Michael McKee at Bloomberg TV. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, of course you’ll be shocked to learn that you have some critics on Wall Street. And I would like to paraphrase a couple of their criticisms and get your reaction to them. One is that the new policy framework is that you react to actual data and do not react to forecasts, yet the actual inflation data is coming in hot and you’re relying on the forecast that it will cool down in order to make policy. I wanted to get your view on how you square that. Another is that you have a long runway, you’ve said, for tapering with announcements. But if the data keep coming in faster than expected, are you trapped by fear of a taper tantrum from advancing the time period in which you announce a taper? And, finally, you’ve said the Fed knows how to combat inflation, but raising rates also slows the economy. And there’s a concern that you might be sacrificing the economy if you wait too long and have to raise rates too quickly. <NAME>CHAIR POWELL</NAME>. So that’s a—that’s a few questions there. So let me say, first, I think people misinterpret the framework. I think the—there’s nothing wrong with the framework, and there’s nothing in the framework that would in any way, you know, interfere with our ability to pursue our, our goals. That’s for starters. All of our discussions and all of our thinking and planning are taking place in the context of our new framework. We’re strongly committed to it, we think it’s well suited to our goals, including in this—in this unique time. And I think if you look at the—look at the forecasts that we’ve written down, you know, our Committee is solidly behind them. The forecasts are all consistent with that. You know, your specific question, I guess, was, will we be behind the curve? And, you know, that’s, that’s not the situation we’re facing at all. The situation that we, we addressed in our—in our Statement on Longer-Run Goals and Monetary Policy Strategy was a situation in which employment was at very high levels, but inflation was low. And what we said was, we wouldn’t raise interest rates just because unemployment was low and employment was high if there was no evidence of inflation or other troubling imbalances. So that’s what we said. That is not at all the current situation. In the current situation, we have many millions of people who are unemployed, and we have inflation running well above our target. The question we face with this inflation has nothing to do with our framework. It’s a very different, very difficult version of a standard investment—sorry, a central banking question. And that is, how do you separate in inflation—how do you separate things that, that follow from broad upward price pressures from things that really are a function of, of sort of idiosyncratic factors in a particular—due to particular things? I mean, a classic example was, to pick a narrow example, was the cellphone price war back in 2017. If you remember, there was—prices were incredibly low, and it held down core PCE by three-tenths or something for a year, and then it fell out. So this is much bigger than that. And, of course, it’s not—it’s not easy to tell in real time which is which, but that’s, that’s the question you would face under, really, any framework. And, you know, we’re trying to sort that out. I’ve tried to, to explain that today about how we think about that. And, you know, we do think that these are temporary factors, and that they’ll wane. We can’t be absolutely certain about the timing of that, and we’re prepared to use our tools as appropriate. Your second one was? Oh, you know, we will—we will taper when we feel that the economy has achieved substantial further progress. And we will communicate very carefully in advance on that. And that’s what we’re doing. That’s what we’re going to do, and, and we will follow through on that. There’s no—I mean, we will do what we can to avoid a market reaction. But, ultimately, when we achieve our macroeconomic goal, we will—we will taper as appropriate. The third thing was—what was the third thing? <NAME>MICHAEL MCKEE</NAME>. If you raise rates to control inflation, you also slow the economy. And the history of the Fed is that sometimes you go too far. <NAME>CHAIR POWELL</NAME>. That’s right. And we—look, we have to balance the two—the two goals: maximum employment and price stability. Often they are—they do pull in the same direction, of course. But when we—when we raise interest rates to control inflation, there’s no question that has an effect on activity. And that’s the channel—one of the channels through which we get to inflation. We don’t think that we’re in a situation like that right now. We think that the economy is recovering from a deep hole—an unusual hole, actually, because it’s to do with, with shutting down the economy. It turns out it’s a heck of a lot easier to create demand than it is to, you know, to bring supply back up to snuff. That’s happening all over the world. There’s no reason to think that that process will last indefinitely. But we’re going, you know, we’re going to watch carefully to make sure that, that evolving inflation and our understanding of what’s happening is, is, is right. And in the meantime, we’ll conduct policy appropriately. <NAME>MICHELLE SMITH</NAME>. Thank you, Mr. Chair.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today the Federal Open Market Committee kept interest rates near zero and maintained our asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to support the economy until the recovery is complete. Progress in vaccinations and unprecedented fiscal policy actions are also providing strong support to the recovery. Indicators of economic activity and employment have continued to strengthen, and real GDP this year appears to be on track to post its fastest rate of increase in decades. Much of this rapid growth reflects the continued bounceback in activity from depressed levels. The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered. Household spending is rising at an especially rapid pace, boosted by the ongoing reopening of the economy and ongoing policy support. The housing sector remains very strong, and business investment is increasing at a solid pace. In some industries, near-term supply constraints are restraining activity. These constraints are particularly acute in the motor vehicle industry, where worldwide shortages of semiconductors have sharply curtailed production so far this year. As with overall economic activity, conditions in the labor market have continued to improve. Demand for labor is very strong, and employment rose 850,000 in June, with the leisure and hospitality sector continuing to post notable gains. Nonetheless, the labor market has a ways to go. The unemployment rate in June—in June was 5.9 percent, and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year. Factors related to the pandemic, such as caregiving needs, ongoing fears of the virus, and unemployment insurance payments, appear to be weighing on employment growth. These factors should wane in coming months, leading to strong gains in employment. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on lower-wage workers in the service sector and on African Americans and Hispanics. Inflation has increased notably and will likely remain elevated in coming months before moderating. As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly because supply bottlenecks in some sectors have limited how quickly production can respond in the near term. These bottleneck effects have been larger than anticipated, but as these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal. Very low readings from early in the pandemic as well as the pass-through of past increases in oil prices to consumer energy prices also contribute to the increase, although these base effects and energy effects are receding. The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic. As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect. Our new framework for monetary policy emphasizes the importance of having well-anchored inflation expectations, both to, to foster price stability and to enhance our ability to promote our broad-based and inclusive maximum-employment goal. Indicators of long-term inflation expectations appear broadly consistent with our longer- run inflation goal of 2 percent. If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we’d be prepared to adjust the stance of policy. The effects of the pandemic on the economy have continued to diminish, but risks to the economic outlook remain. Progress on vaccinations has limited the spread of COVID-19. However, the pace of vaccinations has slowed, and the Delta strain of the virus is spreading quickly in some areas. Continued progress on vaccinations would support a return to more normal economic conditions. The Fed’s policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. As the Committee reiterated in today’s policy statement, with inflation having run persistently below 2 percent, we will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect that it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached level—levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, we are continuing to—continuing to increase our holdings of Treasury securities by at least $80 billion per month and of agency MBS by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price- stability goals. Our asset purchases have been a critical tool. They helped preserve financial stability and market functioning early in the pandemic and since then have helped foster accommodative financial conditions to support the economy. At our meeting that concluded earlier today, the Committee continued to discuss the progress made toward our—toward our goals since the Committee adopted its asset purchase guidance last December. We also reviewed some considerations around how our asset purchases might be adjusted, including their pace and composition, once economic conditions warrant a change. Participants expect that the economy will continue to move toward our standard of “substantial further progress.” In coming meetings, the Committee will again assess the economy’s progress toward our goals, and the timing of any change in the pace of our asset purchases will depend on the incoming data. As we’ve said, we will provide advance notice before making any changes to our purchases. On a final note, we announced the establishment of two standing repo facilities, a domestic one for primary dealers and additional banks and another for foreign and international monetary authorities. These facilities will serve as backstops in money markets to support the effective implementation of monetary policy and smooth market functioning. 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 support the economy for as long as it takes to complete the recovery. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Steve Liesman with CNBC. <NAME>STEVE LIESMAN</NAME>. Thank you very much. Mr. Chairman, I wonder if you might be able to put some, I don’t know, numbers or maybe more detail around this concept of “substantial further progress.” What counts as the progress numerically, if you will, or, or, or citing data, if you could, that you cited in the statement today? And if you could be more specific about what substantial further progress would look like and if that would then lead you to an announcement of an actual reduction in the purchases of your assets. Thank you. <NAME>CHAIR POWELL</NAME>. Great. Thank you. So more detail on substantial further progress. So let’s talk about the maximum-employment part of that. As you know, with maximum employment—unlike with, with price stability, where we can target a number of 2 percent on average—with maximum employment, there isn’t a single number that we can target. That the— we monitor a broad range of, of, of data about different aspects of the labor market. There’s unemployment, unemployment among different, different age groups, and such. There’s participation. There’s wages. There’s all kinds of flow data. And we look at all of it to try to arrive at a picture of what—of what is maximum employment. So there isn’t—I can’t give you a, a, a set of numbers—for example, a numerical threshold like we used for a time back in 2012, I guess it was. We didn’t do that here. What we said was substantial further progress toward our goals. And what we said was, we would keep, effectively, we’d—we would give advance warning as we—and, and, you know, more and more clarity—as, as we move forward. And that’s what we’re going to try to do. So what would substantial further progress be? I’d say we have some ground to cover on, on the labor market side. I think we’re, we’re some way away from, from having had substantial further progress with, with max—toward the maximum-employment goal. I would want to see some strong job numbers. And, and that’s, that’s kind of the idea. <NAME>STEVE LIESMAN</NAME>. If, if I could follow up, you talked about one side of the equation. You didn’t—does it mean you feel like you’ve reached your goal when it comes to the inflation side? Thank you. <NAME>CHAIR POWELL</NAME>. So inflation is running well above our 2 percent objective and has been for a few months and is expected to run up certainly above our objective for a few months before we believe it’ll, it’ll move back down toward our objective. The question whether we’ve met that objective formally is really one for the Committee to make. I can’t—I can’t do that by myself. But it’s clear that, at this time, inflation is actually running above 2 percent. And, and, again, has been and will be, at least we expect it will, in coming months before returning down toward our target. <NAME>MICHELLE SMITH</NAME>. Thank you. Ann Saphir with Reuters. <NAME>ANN SAPHIR</NAME>. Hello. Can you hear me? [No response] Hello. Can you hear me? I’m sorry. <NAME>CHAIR POWELL</NAME>. Yes, yes. We can hear you. <NAME>ANN SAPHIR</NAME>. I apologize. I—just to follow up on the question, I want to ask, you know, is it—is it correct to see this as the, the start of the advance notice process, you know, before a taper? And, and, and also, can you speak to how the recent surge in COVID factors into your thinking on, on the taper? Thanks. <NAME>CHAIR POWELL</NAME>. So, as you know, we’re, we’re in a process now where what we said is that as—at this meeting and in coming meetings, we’re going to be continuing to assess the economy’s progress toward our goals and give advance notice. We’ll be—try to provide additional clarity about our thinking, both in the—in the postmeeting statement and in the minutes and in the public comments that people make. You know, our, our approach here has been to be as transparent as we can. We have not reached substantial further progress yet. So we’re, we’re not there, and we see our ways as having some—we see ourselves as having some ground to cover to get there. So that’s what I would say. In terms of—in terms of, of COVID and the Delta strain, I’ll say a couple things. Of course, it will have significant health consequences for many. And we need to keep that in mind before we start—before we mention and move to the economic questions. This is a—rising cases in, in a number of parts of the country, and some forecasts are for them to rise quite significantly. We’ll see. What we’ve seen, though, is with successive waves of, of COVID over the past year and some months now, there has tended to be less economic—less in the way of economic implications from each wave. And we will see whether that is the case with the Delta variety. But it’s, you know, it’s a—it’s certainly a—not an unreasonable expectation. So it, it certainly is plausible if people would pull back from some activities because of the risk of infection. Dining out, traveling, schools might—some schools might not reopen. We may just—we may see economic effects from some of that, or it might weigh on, on the return to the labor market. Some people might choose—again, we, we don’t have a strong sense of how that might work out, so we’ll just be monitoring it—monitoring it carefully. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Nick Timiraos at the Wall Street Journal. <NAME>NICK TIMIRAOS</NAME>. Hi, Chair Powell. Nick Timiraos at the Wall Street Journal. In your opening statements in March and April, you noted that a transitory rise in inflation above 2 percent this year would not meet the threshold of moderately exceeding 2 percent for some time, and I noticed you didn’t repeat that qualification last month or today. And, and so, in your view, has the rise in inflation this year met the threshold of moderately exceeding 2 percent for some time? <NAME>CHAIR POWELL</NAME>. That, that would, again, be a question for the Committee. But I would really say, the guidance that you’re talking about is really the guidance to do with liftoff, right? That’s—what the guidance is for liftoff, we had to have labor market conditions consistent with full employment, inflation at 2 percent and on track to run—to run moderately above 2 percent for some time. It really isn’t relevant now. It—because we’re really—we’re looking at, at tapering asset purchases. We’re clearly a ways away from considering raising interest rates. It’s not something that, that is on our radar screen right now. You know, so when we get to that question, when we start to get to the question of, of liftoff, which, which we are not at all at now or near now, that’s when we’ll ask that question. That is when that, that will become a real question for us. <NAME>MICHELLE SMITH</NAME>. Thank you. Jeanna Smialek at the New York Times. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thank you for taking our questions. I wonder if you could talk a little bit about [inaudible] reacting [inaudible]. You know, does that affect, affect how you’re thinking about tapering? Does it affect how you’re thinking about, you know, potential liftoff down the road? And if you could, just talk a little bit about that. <NAME>CHAIR POWELL</NAME>. Jeanna, I’m sorry. For the first 15 seconds of your question, you froze. Could you—could you say that again? I apologize. <NAME>JEANNA SMIALEK</NAME>. Oh, yes. No. Sorry. Yes. So I was wondering if you could talk a little bit about how the divergence in global growth and the sort of multispeed recovery we’re seeing around the world impacts how the Fed thinks about its policies. So do you take into account that sort of multispeed recovery when you’re thinking about tapering QE, and do you take, take it into account when you’re thinking about liftoff? <NAME>CHAIR POWELL</NAME>. Thanks. So it’s an—it’s an important feature of this recovery is how uneven it is. And, in many cases, that’s related to the fact that some countries have had little in the way of access to, to vaccines. And so they’re seeing significant outbreaks, and it’s weighing on economic activity, whereas other countries—such as the United States, in particular—are having a very strong rebound. And, and now Europe is having a stronger rebound as well. So it’s a feature of our economy. Now, how does it affect our policy? In, in a couple of ways, potentially. One just is that, in general, economies—and through financial markets and through trade—are, are deeply interconnected now. And so a stronger global economy will lead to more U.S. exports. And, and, you know, that’ll help economic activity. To the extent the global economy is weak and the United States is strong, it’ll—we’ll wind up, you know, we’ll wind up exporting some of our demand through, through imports rather than having, having a lot of exports. That’s one way. Another way, though, is more on the risk side. And that is, as long as COVID is running loose out there, as long as there’s time and space for the development of new strains, no one’s really finally safe. These, these strains—there’s no reason they just can’t keep coming and one, you know, one more powerful than the next. We don’t know that. But that’s, that’s, that’s certainly a plausible outcome. Now, as, as vaccinations rise, we can nonetheless get back to our economic activity. But, you know, it, it is both the right thing to do and, and very much in our interest to make sure that vaccination happens broadly around the world, just for that reason. <NAME>MICHELLE SMITH</NAME>. Thank you. James at the FT. <NAME>JAMES POLITI</NAME>. Thank you very much. Chair Powell, how would you describe the risks to the outlook on inflation at the moment after the last data came out higher than expected? Do you believe the risks are, you know, tilted to the upside? And does the Committee share that view? Or are they in balance? Are you still worried that there could be a hit to demand from, from the Delta variant that could tilt them sort of to the downside again? If you could give us a sense of that, that would be very helpful. <NAME>CHAIR POWELL</NAME>. Sure. I’d be glad to. So if you look, again, if you look at the, the most recent inflation report, what you see is that it came in significantly higher than expected. But essentially all of the overshoot can be tied to a handful of categories. It isn’t the kind of inflation that’s spread broadly across the economy. It’s new, used, and rental cars. It’s airplane tickets. It’s hotels. And it’s a couple of other things. And each of those has a story attached to it that is—that is really about the reopening of the economy. So we look at that, and we think that those are temporary things because the, the supply side will respond. The economy will adapt. We have a very adaptive, adaptable, flexible economy and labor market. And it’s a real—a real asset that we have. And so we think that inflation should move down over time. Now, we don’t have any—much confidence, let’s say, in the timing of that or the size of the effects in the near term. I would say, in the near term, that the, the, the risks to inflation are probably to the upside. I, I, I have some confidence in the—in the medium term, that inflation will move back down. Again, it’s hard to say when that will be. I, I, I will say, though, that, you know, we—inflation is half of our mandate. Price stability is half of our mandate. And if we were to see inflation moving up to levels persistently that were—that were above, significantly, materially above our goal and particularly if inflation expectations were to move up, we would use our tools to guide inflation back down to 2 percent. So we won’t have an extended period of, of high inflation. We think that, that some of it will, will fall away naturally as the process of reopening the economy moves through. And it could take some time. In any case, we will use our tools over time as appropriate to make sure that we do have inflation that averages 2 percent over time. <NAME>MICHELLE SMITH</NAME>. Thank you. Victoria at Politico. <NAME>VICTORIA GUIDA</NAME>. Hi, Mr. Chairman. So bond market pricing seems to suggest that investors think the Fed might eventually overtighten. So my question is, do you think that markets have bought into the central bank’s new framework? And how do you balance that with managing inflation concerns? <NAME>CHAIR POWELL</NAME>. Well, so in terms of what’s been happening in bond markets, I don’t think there’s a real consensus on, on what explains the moves between the last meeting and this meeting. We’ve seen the long-term yields go down significantly. Some of it is a fall in real yields, which may have been connected to—some speculate—connected to sentiment around the, the spread of the Delta variant and concern about growth. There was also some decline in inflation compensation, which has significantly reversed. And there, there are also so-called technical factors, which is where you put things that you can’t quite explain. So I, I, I don’t see in any of that that there is really anything that challenges the credibility of our framework, if, if that’s really your question. We are committed to achieving 2 percent average inflation over time. What we said was that, in particular, when we see a very strong labor market, high levels of employment, low levels of unemployment, that won’t be enough for us to raise interest rates until we see some inflation. Of course, what we have today is kind of the opposite. We’ve got, you know, 7 or 8 million people, fewer people, at work than were at work before the pandemic. So we’re, you know, we’re, we’re a ways away from full maximum employment. But we have high inflation, so it’s kind of the opposite case. And we have to—we have to deal with that. Any central bank has to deal with that by looking at the inflation and asking whether it is broad based and likely to be persistent and, and, and whether inflation expectations are implicated in a way that, that could cause them to rise. So we’re monitoring that very carefully, and we’re prepared to use our tools as appropriate. But, again, I think our—I think our framework is pretty well understood. And, and I think the real test of it will be down the road when it’s time to think about raising interest rates and, and how we assess, assess that set of issues. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Rich at Bloomberg. <NAME>RICH MILLER</NAME>. Thanks very much, Michelle. Chairman Powell, you, you just alluded to the fact that you’re prepared to use your tools to slow the economy down if need be to—if inflation looks like it’s getting out of control. I want to just try to understand that in the context of the framework and the forward guidance. Does that mean you’d be prepared to raise interest rates even if we’re not at maximum employment at that point, should you see this danger of inflation? And, and, two, does it also mean you’d be prepared to raise interest rates even if you are still buying assets? Thank you. <NAME>CHAIR POWELL</NAME>. So there’s a—there’s a part in our Statement on Longer-Run Goals and, and Monetary Policy Strategy, which, Rich, I’m sure—I’m sure you’re familiar with, which, which talks about that case in which the two goals are in tension. Most of the time, if you have high inflation, you also have high employment—they, they tend to go together. This is a situation where they’re temporarily in different directions. We’re not at full employment, but we are having high inflation. We feel like we’re going to be making good progress over the next—over the course of the next year, couple of years, really, toward maximum employment. This is a very strong labor market. If you look at the number of job openings compared to the number of unemployed, it’s—we’re, we’re clearly on a path to a very strong labor market with high participation, low unemployment, high employment, wages moving up across the spectrum. That, that’s, that’s the path that we’re on, and, and it shouldn’t take that long in macroeconomic time to get there. So that’s, that’s what I think is, is really the likely case. And, again, it’s not—it’s not timely for us to be thinking about, about raising interest rates right now. What we’re doing is, we’re, we’re looking at our asset purchases and judging what is right for the economy and judging how we—how close we are to substantial further progress and then—and then tapering after that. The question you asked about, would we raise rates if we hadn’t finished cutting—hadn’t finished the taper, hypothetical question. You know, we’d, we’d face the circumstance at the time. We could always just—you know, one thing one could do would be to just cut asset purchases all the way to zero if you wanted to do that. But it’s, it’s, it’s just hard to—it’s hard to answer what you would do without knowing a lot more about the situation. Ideally, you wouldn’t be still buying assets and raising rates because, of course, you’re adding accommodation by buying and, and removing accommodation by raising rates. So that wouldn’t be ideal. I’ll say that. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Edward Lawrence at Fox Business. <NAME>EDWARD LAWRENCE</NAME>. So thank you, Mr. Chairman. Thank you, Mr. Chairman, for taking the question. Now, so you’re talking about jobs. You just said we’re on a path to a very strong job market. You know, we have 9.5 million people unemployed as of the last labor market survey and 9.2 million job openings. So what’s the—what’s the disconnect? Is it a skills gap? Is it the extended unemployment benefits? Is it the fact that people just aren’t willing to relocate? What is the disconnect there? <NAME>CHAIR POWELL</NAME>. It’s a—it’s a really unusual situation to have—to have the ratio of vacancies to unemployed be this high. And we think there are a number of things at work there. Maybe the place to start is, is just to say that this is now not so much about people going back to their old jobs. It’s about finding a new job. So that’s a time-intensive, labor-intensive process. And there may be a bit of a speed limit on that. There, there’s research that suggests that there is a speed limit on that. So it’s not like you can have millions of people at the beginning of the recovery going back in a single month because they’re just going back to their old job. This is about job selection, things like that. There may also be some factors that are—that are holding people back, and that’s—this is what surveys say. There are people who, who are reluctant to go back to work because they still feel exposed to COVID. These could be jobs where, where there was a lot of, of interaction with the public and where perhaps there’s a family member who’s vulnerable or for whatever reason. There’s also caretakers who are—where, where schools are not fully open and parents are at home or taking care of, of, of older people. And there’s also been very generous unemployment benefits, which are now rolling off. They’ll be—they’ll be fully rolled off in a couple of months. And all of those factors should, should wane. And, you know, we, we think we should see, because of that, we should see strong job creation moving forward. I mean, ultimately, it’s unusual to see aspects like the job openings number in a context where there are that many unemployed people. That many job openings would typically suggest a tight labor market. And, of course, we hear from businesses all over the country that it’s very hard to hire people. And that may be because people, people are shopping carefully for their next job. I mean, I, I, I think the bottom line on this is, people want to work. If you look at where labor force participation can get, people will go back to work unless they retire. Some people will retire. But, generally speaking, Americans want to work, and, and they’ll find their way into the jobs that they want. It may take some time, though. <NAME>MICHELLE SMITH</NAME>. Thank you. Rachel Siegel at the Washington Post. <NAME>RACHEL SIEGEL</NAME>. Thank you, Michelle. And thank you, Chair Powell, for taking our questions. I wanted to follow up on what you said about there tending to be less in the way of economic implications from each wave of COVID cases. Could you elaborate on what you’ve seen to that end during previous waves? And then, looking forward, how vulnerable is the labor market to the Delta variant? I’m thinking or wondering if you have concerns that jobs that may have come back in travel or tourism could be susceptible if people started reconsidering their travel plans or if caretakers were suddenly faced with the prospect of schools not reopening. How do you see some of those risks going forward? Thank you so much. <NAME>CHAIR POWELL</NAME>. Sure. So if you remember the, the summer wave last year of COVID, which was largely southern and western states, the economy just performed much better than anyone expected. You know, we, we were coming off the spring wave, where there were a lot of shutdowns. And then this big second wave hit, and I think the natural thing to do is to expect that, that it would have a real impact on the economy. And it was much less than, than people thought. People—what’s happened is, first of all, many people are vaccinated. They’re going on with their lives. Secondly, we’ve kind of learned to live with it. A lot of industries have, have kind of improvised their way around it—particularly, for example, buying a new home. That, that process of buying a new home very quickly moved to much more of a virtual process. And so they were able to, you know, to, to do that. And other industries as well have gone to take-out and, you know, no-contact things. It’s—so that can all—it seems like we’ve learned to, to handle this. Now, I think people would like to get back to, to, you know, the way things were. And I, I, I hope to some extent, we will over time. You know, of course, the big wave we had last winter did have significant employment effects, particularly in, you know, hospitality and leisure and other entertainment—other, other areas with a lot of direct contact. A lot of jobs were lost then because that was a very strong wave that happened in, in, in the winter months last year, just before the vaccines arrived. So with Delta, we’re just going to have to watch. Again, with, with, with a reasonably high percentage of the country vaccinated and the vaccine apparently being effective—we’re not experts on this—but it, it seems like the—a good—a good going-in estimate would be that the effects will probably be less. There probably won’t be significant lockdowns and things like that. But, again, those, those are not decisions for us or, or, or—nor is it something we’re be— we’d be expert in. In terms of the, the, the channels, you know, I—this is—this is kind of speculation, but it’s pretty—it just is that people, you could imagine school districts deciding to wait a month or two for the—for the—for the Delta wave to go. I’m not saying this’ll happen, but that it’s easy to imagine that. It’s also easy to imagine that some people might say, you know what? I’m just going to—I’m just going to wait a couple of months before going back to work. Wouldn’t be hard to imagine that happening. If, if schools don’t open, then caretakers have to stay home. And if people don’t go back into the labor force, then the job growth won’t be as strong, those kinds of things. So I don’t—it doesn’t—it doesn’t—again, sitting here today, not being able to really know the future—it doesn’t seem as though the effects will be very large. But there may be effects. And they—it may be that the effect is to slow the economy down just for a period of months—or not. There are many parts of the country where it might not have an effect, and we’re just going to have to, to see what the economic effects are. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to David Gura at NPR. <NAME>DAVID GURA</NAME>. Thank you, Mr. Chairman. I was going to ask if you’ve started drafting your Jackson Hole speech, but I’m going to go in a—in a different direction here. Steve Liesman asked you about semantics. I’m going to take a cue from him and ask you about the term “transitory,” because I think of you as somebody who’s so lucidly explained policies and programs in recent months and made a real concerted effort to explain them to, to the American public as a whole. I wonder about this term and what you would say to people who don’t know it definitionally, don’t know what it means, and see prices going up and wonder how long they’re going to have to wait. So just some broader definition from you—I’d like to hear just about what it means or how you understand it. And, and quickly as well, you’ve talked about vaccines a bit. And your colleague in Minneapolis has placed a mandate on vaccinating employees coming back to that Federal Reserve Bank. And I wonder if that’s something that you would like to see or expect to see Systemwide going forward. <NAME>CHAIR POWELL</NAME>. The concept of “transitory” is really this: It is that the increases will happen. We’re not saying they will reverse. That’s not what “transitory” means. It means that the increases in prices will happen, so there will be inflation but that the process of inflation will stop so that—so that there won’t be further—when, when we think of inflation, we really think of inflation going up year upon year upon year upon year. That’s inflation. When you have inflation for 12 months or whatever it might be—I’m just taking an example; I’m not making an estimate—then, then you have a price increase, but you don’t have an inflation process. And so part of that just is that, if it doesn’t affect longer-term inflation expectations, then it’s very likely not to infect—to affect the process of inflation going forward. So what, what I mean by “transitory” is just something that doesn’t leave a permanent mark on the inflation process. Again, we don’t mean—I don’t mean that, that, that, that, you know, producers are going to take those price increases back. That’s, that’s not the idea. It’s just that they won’t go on indefinitely. So to the extent people are, are, are implementing price increases because raw materials are going up or labor costs or something’s going up, you know, the question, really, for inflation really is, does that mean they’re going to go up the next year by the same amount? So you’re going to be in a process where inflation, the inflation process, gets going. And, and that happens because people’s expectations about future inflation move up. And we don’t think that’s happening. There’s no evidence that it’s happening. All the evidence is that it’s not happening. But, nonetheless, we have to watch this very carefully because this is—you know, we have two mandates: maximum employment and price stability. Price stability, for us, means inflation averaging 2 percent over time. And so we’ve got to be very careful about that. But, but I, I, I think it’s a good point that it’s, it’s a term—what it really means is temporary. But then you’ve got to understand that it doesn’t mean that the—that the increases will be taken back. Some of them will be, but, but that’s not really what it means. In terms of—so we’re, we’re working virtually here, and we’ll be coming back down the road in a couple of months, starting to bring people back here at the Board of Governors in Washington. And, you know, we’re going to follow public health guidance and things like that. We really haven’t made the fundamental decisions about exactly what that will look like. And it’ll depend on, to some extent, on what—on what, you know, CDC guidance looks like when we actually do bring people back in. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Michael McKee at Bloomberg TV. <NAME>MICHAEL MCKEE</NAME>. Chairman, I wanted to ask you a little bit about your taper timeline in the sense that you said you want a couple more months of data. And the statement says that the Fed is going to use—to, to evaluate the developments in the two markets, in jobs and inflation, in coming meetings. Does that suggest that we wouldn’t see anything before September or November in your meetings? And I know a lot of people on Wall Street have basically felt you’re going to lay out your taper plans at Jackson Hole. Is that—is that the plan, or are we not going to see anything until the fall? <NAME>CHAIR POWELL</NAME>. So in any decisions about the timing, and I did not—if I—if I said we’re looking at wanting a couple more months of data, I wasn’t—I’m not meaning to suggest anything about a particular time at which we might taper, because we really have not made that decision. All I’m saying is, is, we’re not at substantial further progress. There’s a range of views on, on what timing will be appropriate. And those views ultimately track, track back to people’s views about the economy and, and what will happen as we make progress towards, towards our—towards our goal. So that’s, that’s really what it is. And I, I—we will, of course, as we—you know, we’re going to continue to try to provide clarity as appropriate on, on timing, pace, and composition. But, today, I’ve, I’ve given you what I can give you because, again, this, this was the first, really, I would say, deep dive on the issues of timing, pace, and composition. And it was a good meeting. And—but no decisions are made, and, and I’m just not in a position to, to give you much guidance, really any guidance, on the actual timing. I—but I will say we’re making progress. We expect further progress. And we expect that, if, if things go well, then we will—we will reach that goal. And when we reach it and the Committee is comfortable that we have reached it, then, then we’ll taper at that point. I can’t, I really—there’s nothing I can say about Jackson Hole. You know, I’m in—we’re in the process of writing that speech. And I am going to give a speech, and—but I, I, I wouldn’t want to—I wouldn’t want to say what will be in there at this point. <NAME>MICHAEL MCKEE</NAME>. Well, if I could follow up, several people have recently noted that the Fed has got the markets working well. And you’ve got bank loans up. In other words, you’ve stimulated demand. But savers and companies, like insurance companies and pension funds, are getting hammered by the low rates. And they’re wondering if the balance hasn’t started to shift away from benefiting the economy to doing more harm than good. <NAME>CHAIR POWELL</NAME>. We—asset purchases were just a key part of our response to the critical phase of the crisis. They, they really helped us restore market function to these key markets, really, on which—on which, which are very, very important to our economy and the global economy. And then they were a big part of, of creating accommodative financial conditions to support demand. They were strongly needed. It was that commitment to continue asset purchases that provided strong support for the economy and, and has been a part of the story for why the economy is so strong right now. So we said we would taper when we—when we achieve substantial further progress. And, and, you know, we’re going to honor that commitment. I mean, it’s—and, and, again, we’re talking about it right now and meeting by meeting and, and moving in that direction. We will taper when we reach that goal. And we’ll provide more, you know, more clarity on that as we go, as is appropriate. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Hannah Lang at the American Banker. <NAME>HANNAH LANG</NAME>. Hi. You’ve been asked a lot previously if the Fed’s monetary policy at all contributes to inequality, but I was really curious to know where you think the Fed’s regulatory policy lands, particularly if you think that the Fed’s bank capital requirements have had the effect of penalizing lower-income households seeking loans. Basically, is it possible to achieve the balance of a safe banking system with one that also provides equitable loan access? Thanks. <NAME>CHAIR POWELL</NAME>. Well, I think strong capital requirements are essential for banks, particularly for the largest banks. And I think that an undercapitalized banking system, as we’ve seen, can be a real threat to the economy and most—mostly, or to, to the greatest extent, to people at the lower end of the income spectrum. So if you look back at not this previous—not this crisis but the previous one, the bank—the banking system was undercapitalized. So higher capital requirements are, are, you know, are, are really a good thing because they allow banks to weather downturns and continue to perform the functions that they perform. I think it’s other tools that we have to—and the Fed has some of these tools, Congress has some of these tools, other agencies have some of these tools—to assure or support the wide availability of credit, particularly to low- and moderate-income communities. So that’s CRA. We enforce CRA. We’re working on a—on a new CRA proposal right now with the other banking agencies, and we think it’s going to be—it’s going to be good and will support the flow of credit to low- and moderate-income households. It’s also the anti—anti– lending discrimination statutes that we enforce. And it’s some of the programs that Congress has in place to support the flow of credit to low- and moderate-income communities. I, I don’t think it’s capital standards at all. I think capital standards work the other way. Strong capital is what enables banks to continue to serve their communities, including low- and moderate-income communities. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Chris Rugaber at the AP. <NAME>CHRISTOPHER RUGABER</NAME>. Hi. Thank you for taking my question. Chair Powell, I guess I wanted to ask about the last—when you were before Congress earlier this month, you mentioned, I think, something along the lines of, it won’t take too long before we see if you’re right about inflation and its temporary aspect. You also mentioned learning a lot more in the next six months about the economy. Can you tell us a little more of what you mean by that? When do you think you’ll get a clean reading on inflation that is free of most of the distortions that we’re seeing now? <NAME>CHAIR POWELL</NAME>. Right. So with inflation, as I mentioned, we’re, we look not just at the headline number, but we look at all the components that go into the calculation of inflation. And if you do that, if you look under the hood, what you see is not that, widely, across the whole range of goods and services that, that are in the economy, we’re seeing upward, upward pressure on prices. That’s not really what we’re seeing. What we’re seeing is a handful of things that are really—that really account for the, the overshoot of inflation. And, as I mentioned, it’s things like cars. You know, new, used, and rental cars have moved up in price because of the car shortage because of the semiconductor shortage. And housing—sorry, hotels and air, air fares have moved back up, but that really just is retracing the very large downward movement in prices that they had before. So that’s, that’s a big, big part of, of why the inflation readings are so high. And those don’t—those, frankly, don’t carry significant implications in the long run for the—for inflation or for the American economy. So what I said was, we, we’re going to see whether these things—we don’t need to see everything do what lumber prices have done. So if you look at lumber prices, they went up and then they went down. So what we want to see is these other things. Do they—do they—do the prices flatten out? Do they actually move down? If they flatten out, then their, their contribution to inflation becomes zero over time so that they’re not contributing to inflation. And so, if we start to see those things happen fairly widely among the—among the things that have really moved up quickly, then we’ll, we’ll—they won’t all happen at once or happen quickly—but we’ll know that our basic understanding of the situation is broadly correct. And I don’t think it will take, or what I said was, I don’t think it’ll take a very long time to see whether that’s the case. It, it, it is probably the case that, frankly, the, the overall reopening of the economy is going to play out over a period of time. This is a historic, world historical event, that the global economy is now reopening. It’s not going to—it’s not going to happen quickly. It’s going to take some time. And it’s going to be very uneven, as we discussed before. But I think we will—we will know, you know, when we know. But I don’t think it will take that long. I don’t want to put a number on it. But I do think that, that, if we see those things happening, we’ll know that we have the story basically right. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Brian Cheung at Yahoo Finance. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. Brian Cheung, Yahoo Finance. I’m just wondering if you could provide a little bit more color in terms of how you’re thinking about mortgage-backed securities purchases as you inch towards taper. Within the context of home prices continuing to rise, we’ve heard a lot of people talk about the idea that maybe they’d like to cool off on, specifically, the MBS purchases. Is that more because of the optics, or is it because there’s an observed relationship from the Committee’s view between MBS purchases under QE and the hot housing market? Thanks. <NAME>CHAIR POWELL</NAME>. So a number of participants raised that—the questions around MBS and tapering at, at today’s meeting, as a matter of fact, and yesterday’s meeting. And I’ll just say that, generally speaking, I don’t think and—I don’t think that—I think that Treasury and MBS purchases affect financial conditions in very similar ways. There may be modest differences in terms of, of contribution to housing prices, but it’s, it’s not something that’s big. It’s not—it’s—so where I think we are is, there, there really is little support for the idea of tapering MBS earlier than Treasuries. I think we will taper them at the same time. It seems likely, based on where people are now. The idea of reducing MBS purchases at a somewhat faster pace than Treasuries does have some attraction for some people—others, not so much. And I think it’s something that we’ll be continuing to discuss. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Michael Derby. <NAME>MICHAEL DERBY</NAME>. Thank you very much. So I wanted to ask you about the standing repo facility and get your sense of what you think it will do for market trading conditions. And also, kind of in a similarly related point, the reverse repo numbers have just gotten even bigger since you raised the reverse repo rate at the last Fed meeting. And, you know, are you concerned to see, you know, nearly $1 trillion a day, you know, pouring in through that facility? <NAME>CHAIR POWELL</NAME>. So on the standing repo facility, what is it going to do? So it, it really is a backstop. So it’s, it’s set at 25 basis points, so out of the money, and it’s, it’s there to help address pressures in money market—money markets that could impede the effective implementation of monetary policy. So, really, it’s, it’s to support the function of—functioning of monetary policy and its, its effectiveness. That’s the purpose of it. And it’s set up with that purpose in mind. Your question on, on the, the [ON]RRP, so we think it’s doing what it’s supposed to do, what we expect of it to do, which is to help provide a floor for money market rates and help ensure that the federal funds, funds rate stays within the target range. You know, it’s essentially, essentially, what’s happening is that it just results in a lower aggregate amount of Federal Reserve liabilities that are in banks in the form of reserves and a higher amount of Federal Reserve liabilities in money market funds in the form of overnight RRP balances. So that, that’s all that’s really happening there. And we expect it to be high for some time. It’s being driven, of course, by, by the relatively lower quantity of Treasury bills and, and, and also the onset of the debt ceiling and the decline in the TGA, things like that. So we don’t— we don’t have a problem with, with what it’s doing. It’s kind of doing the job we expected. <NAME>MICHAEL DERBY</NAME>. And you don’t see any issues with, like, disaggregating, you know, markets from, you know, investing in private money market securities? You know, like, the idea that the Fed’s footprint in money markets is getting too big, you don’t see any issues there? <NAME>CHAIR POWELL</NAME>. Not, not really. Not at this point. I mean, money markets, private money market funds are, are choosing to, to invest because the rates are attractive. At some point, the rates will not be so attractive as, as the whole rate cluster normalizes, and, and you’ll see it shrink back down. <NAME>MICHAEL DERBY</NAME>. Okay. Thank you. <NAME>MICHELLE SMITH</NAME>. Thanks. Let’s go to Greg Robb at MarketWatch. <NAME>GREG ROBB</NAME>. Hi. Thanks for taking my question. Chair Powell, I was going to go back to inflation a little bit. I’m just kind of surprised by your tone. It, it seems like you’re just sort of warning that, if inflation gets too high, you know, the Fed will act. Isn’t it true that, I mean, a little inflation is good for the economy and, and that we—if somehow maybe we can get the economy out of this sort of place where we’re always going to be close to the zero lower bound, isn’t there a good story to tell, and you’re sort of panicking people? <NAME>CHAIR POWELL</NAME>. I certainly don’t, don’t have that in mind. No. Look, we—as you know, we’re targeting a moderate overshoot of 2 percent inflation for some time. We, we want inflation expectations to be centered on, on 2 percent. We feel like they may be a little bit below that. So the bigger picture is that, you know, that, that, that would be a healthy thing. This is a different thing. This is—this is not that. That was the kind of inflation we were thinking about that comes from, you know, from a very, very strong labor market and a—and a booming economy maybe. That, that was the kind of inflation—this, this is something different. This is really driven by the supply side, which is not able to hand—to handle this big spike in demand that we’re seeing. As the economy reopens with vaccination and fiscal support and monetary policy support, the supply side—just all over the world, you’re seeing the same thing, which is, it just can’t keep up. And there are labor shortages in, in a lot of places, the same sort of thing. So, you know, there’s, there’s absolutely no sense of panic. I just—I’ve explained, I think, several times here today that the best—my, my best estimate is that this is something that will pass. It’s really a shock to the economy that will pass through. And, you know, if you—if you look at where forecasters are—people who actually write down a forecast for a living—very, very strongly they see it that way. Now, we—but, you know, are—we’re actually responsible for this, though, so we have to take seriously the risk, the risk case, which is that inflation will be more persistent, that it might actually move inflation expectations up, and that we might—that the kind of things that might require a response. We, again, we don’t see that now. But we, we have to be on the alert for it. And people have to understand and believe that we will react if, if we need to. And we will. But, again, it’s not—it’s not my base case. My base case is that—is, as I’ve said repeatedly, is that inflation will move back down. And no, we’re not—we, we have not at all changed our view, and I haven’t changed my view that inflation running above 2 percent, moderately above 2 percent, is a desirable thing. This is not moderately above 2 percent. This is well above 2 percent. But it’s also not the kind of inflation we were looking for. This is really driven by a supply-side shock. <NAME>GREG ROBB</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Don Lee at the Los Angeles Times for the last question. <NAME>DON LEE</NAME>. Hi, Chair Powell. I wonder if you could talk about wages. Many workers seem to have gotten some good wage gains in, in recent months. What can workers generally expect going forward? And it doesn’t sound like you’re concerned about rising wages feeding into broader inflation. Is that right? <NAME>CHAIR POWELL</NAME>. So wages have moved up. A lot of that is driven by new hires. And it’s—a lot of it is driven at relatively low-paid jobs in the service industries as people come back. So that’s not troubling. And we, we don’t see—there, there is a form of wage inflation that can lead to price inflation, and we’re not seeing that right now. And that really is if what we call “unit labor costs” move up and, and, and, which really puts—move up in a way that is—that is hard for companies to manage and puts them in a situation where they have to accept substantially lower margins or raise prices. Now, when it happens gradually, when that—if you—we’ve seen in a long expansion, sometimes unit labor costs do move up and, and put some pressure on margins. In a long expansion, that’s been happening late in the expansion. That’s not a problem, either. The problem is if it happens in a way that pushes firms broadly into raising prices. It was called the “wage–price spiral.” We don’t see that now. This is something that was a feature of the high inflationary era of the Great Inflation, but it’s not a feature now. And we don’t see that now. Of course, we’ll be watching it. And this is one of the reasons why we’re watching so carefully to see whether labor force—whether people do come back and accept jobs. Given the very large number of job openings and the very large number of unemployed people, we’d like to see, you know, those— some matching going on there so people get back to work. We think labor supply would be— would be a healthy thing. You know, but wages moving up across the spectrum, consistent with inflation and productivity, is a—is a good thing. <NAME>MICHELLE SMITH</NAME>. Thank you, Chair Powell. And thank you all.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today, the Federal Open Market Committee kept interest rates near zero and maintained our current pace of asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to support the economy until the recovery is complete. Progress on vaccinations and unprecedented fiscal policy actions are also providing strong support to the recovery. Indicators of economic activity and employment have continued to strengthen. Real GDP rose at a robust 6.4 percent pace in the first half of the year, and growth is widely expected to continue at a strong pace in the second half. The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery. Household spending rose at an especially rapid pace over the first half of the year but flattened out in July and August as spending softened in COVID-sensitive sectors, such as travel and restaurants. Additionally, in some industries, near-term supply constraints are restraining activity. These constraints are particularly acute in the motor vehicle industry, where the worldwide shortage of semiconductors has sharply curtailed production. Partly reflecting the effects of the virus and supply constraints, forecasts from FOMC participants for economic growth this year have been revised somewhat lower since our June Summary of Economic Projections, but participants still foresee rapid growth. As with overall economic activity, conditions in the labor market have continued to improve. Demand for labor is very strong, and job gains averaged 750,000 per month over the past three months. In August, however, job gains slowed markedly, with the slowdown concentrated in sectors most sensitive to the pandemic, including leisure and hospitality. The unemployment rate was 5.2 percent in August, and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year. Factors related to the pandemic, such as caregiving needs and ongoing fears of the virus, appear to be weighing on employment growth. These factors should diminish with progress on containing the virus, leading to more rapid gains in employment. Looking ahead, FOMC participants project the labor market to continue to improve, with the median projection for the unemployment rate standing at 4.8 percent at the end of this year and 3.5 percent in 2023 and ’24. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on lower-wage workers in the service sector and on African Americans and Hispanics. Inflation is elevated and will likely remain so in coming months before moderating. As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly because supply bottlenecks in some sectors have limited how quickly production can respond in the near term. These bottleneck effects have been larger and longer lasting than anticipated, leading to upward revisions to participants’ inflation projections for this year. While these supply effects are prominent for now, they will abate, and as they do, inflation is expected to drop back toward our longer-run goal. The median inflation projection from FOMC participants falls from 4.2 percent this year to 2.2 percent next year. The process of reopening the economy is unprecedented, as was the shutdown at the onset of the pandemic. As the reopening continues, bottlenecks, hiring difficulties, and other constraints could again prove to be greater and longer lasting than anticipated, posing upside risks to inflation. Our framework for monetary policy emphasizes the importance of having well-anchored inflation expectations, both to foster price stability and to enhance our ability to promote our broad-based and inclusive maximum-employment goal. Indicators of longer-term inflation expectations appear broadly consistent with our longer-run inflation goal of 2 percent. If sustained higher inflation were to become a serious concern, we would certainly respond and use our tools to assure that inflation runs at levels that are consistent with our goal. The path of the economy continues to depend on the course of the virus, and risks to the economic outlook remain. The Delta variant has led to significant increases in COVID-19 cases, resulting in significant hardship and loss and slowing the economic recovery. Continued progress on vaccinations would help contain the virus and support a return to more normal economic conditions. The Fed’s policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. Our asset purchases have been a critical tool. They helped preserve financial stability and market functioning early in the pandemic and since then have helped foster accommodative financial conditions to support the economy. At our meeting that concluded earlier today, the Committee continued to discuss the progress made toward our goals since the Committee adopted its asset purchase guidance last December. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted. We also discussed the appropriate pace of tapering asset purchases once economic conditions satisfy the criterion laid out in the Committee’s guidance. While no decisions were made, participants generally view that, so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate. Even after our balance sheet stops expanding, our elevated holdings of longer-term securities will continue to support accommodative financial conditions. The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test. We continue to expect that it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Half of FOMC participants forecast that these favorable economic conditions will be fulfilled by the end of next year; as a result, the median projection for the appropriate level of the federal funds rate lies slightly above the effective lower bound in 2022. Participants generally expect a gradual pace of policy firming that would leave the level of the federal funds rate below estimates of its longer-run level through 2024. Of course, these projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. More important than any forecast is the fact that policy will remain accommodative until we have achieved our maximum-employment and price-stability goals. 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 support the economy for as long as it takes to complete the recovery. Thank you, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go first to Rachel Siegel. <NAME>RACHEL SIEGEL</NAME>. Thank you, Michelle. And thank you, Chair Powell, for taking our questions. When it comes to the taper and, eventually, to any rate increases, I’m wondering if you can walk us through what “substantial further progress” looks like, given the latest batch of projections that have PCE inflation coming in a little higher than the June projection, the unemployment rate also being higher than June, as well as the change to GDP lower than June. If you could help us make sense of all those things as you sort through what “substantial further progress” looks like, that would be great. <NAME>CHAIR POWELL</NAME>. Sure. So the test for beginning our taper is that we’ve achieved substantial further progress toward our goals of [2 percent] inflation and maximum employment. And for inflation, we appear to have achieved more than significant progress—substantial further progress. So that part of the test is achieved, in my view and in the view of many others. So the question is really on the maximum-employment test. So if you look at a good number of indicators, you will see that, since last December, when we articulated the test, and the readings today, in many cases more than half of the distance, for example, between the unemployment rate in December of 2020 and typical estimates of the natural rate—50 or 60 percent of that road has been traveled. So that could be substantial further progress. Many on the Committee feel that the “substantial further progress” test for employment has been met. Others feel that it’s close, but they want to see a little more progress. There’s a range of perspectives. I guess my own view would be that the test—the “substantial further progress” test for employment is all but met. And so, once we’ve met those two tests, once the Committee decides that they’ve met [them]—and that could come as soon as the next meeting; that’s the purpose of that language, is to put notice out that that could come as soon as the next meeting. The Committee will consider that test, and we’ll also look at the broader environment at that time and make a decision whether to taper. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Howard Schneider. <NAME>HOWARD SCHNEIDER</NAME>. Thanks, Chair Powell. Thanks, Michelle. So, looking at the SEPs, we got now basically four years of inflation above target, and policy never gets to the long-run rate. I’m wondering if you could address that from two perspectives: one, within the new framework that the Fed adopted last year and, second, from the perspective of the average household that’s now being asked to pay higher prices and increasingly higher prices for four years running when, for some this year, real wages have actually gone down. <NAME>CHAIR POWELL</NAME>. Sure. So, as you can see, the inflation forecasts have moved up a bit in the outyears. And that’s really, I think, a reflection of—and they’ve moved up significantly for this year. And that’s, I think, a reflection of the fact that the bottlenecks and shortages that are being—that we’re seeing in the economy have really not begun to abate in a meaningful way yet. So those seem to be going to be with us at least for a few more months and perhaps into next year. So that suggests that inflation’s going to be higher this year, and a number—I guess the inflation rates for next year and 2023 were also marked up, but just by a couple of tenths. Why—those are very modest overshoots. You’re looking at 2.2 and 2.1, you know, two years and three years out. These are very, very—I don’t think that households are going to, you know, notice a couple of tenths of an overshoot. That just happens to be people’s forecasts. You know, we want to foster a strong labor market, and we want to foster inflation averaging 2 percent over time, and I think we’re very much on track to achieve those things. In terms of the framework, I see this as very consistent with the framework. We want inflation expectations to be anchored at around 2 percent. We want, we’re—that’s really the ultimate test of whether we’re getting this done under the framework. And, you know, we do want inflation to run moderately above 2 percent. I wouldn’t put too much on a couple of tenths over 2 percent in 2023 and ’24—one-tenth in ’24. But you’re right, those are the numbers. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Colby Smith. <NAME>COLBY SMITH</NAME>. Chair Powell—thank you, Michelle. Chair Powell, you mentioned ongoing discussions about the tapering timeline, and I’m wondering what the contours of that debate have been. For those that want to move a bit more quickly, is it about maintaining optionality for a 2022 interest rate increase? Or is it about financial stability risks? Or concerns about the efficacy of asset purchases at a time when we have supply constraints? Thank you. <NAME>CHAIR POWELL</NAME>. So let me say that there’s very broad support on the Committee for this plan, both as to the timing and as to the pace of the taper. So this was a unanimous vote today, and I’d say quite broad support for this approach. You’re correct that there are some who would prefer to have gone sooner, and they’ve made their arguments publicly. For some of them, it’s a financial stability concern. And for others, it’s other concerns. They can make their own arguments. This is an approach that the Committee will broadly support, and it will put us having completed our taper sometime around the middle of next year, which seems appropriate. You know, the asset purchases, as I mentioned, were very, very important at the—in the early stages of the crisis. They were essential in restoring market function in the Treasury and other markets. Then, as the recovery got going, they supported aggregate demand, as they will do. And now we’re in a situation where they still have a use, but it’s time for us to begin to taper them. Their usefulness is much less as a tool than it was at the very beginning. And, of course, this leaves the whole question of rate increases ahead, which is really where the framework—the framework is all about how we deal with rate increases and that sort of thing. So we think this is the appropriate way to go. And, again, broad support on the Committee. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Nick Timiraos. <NAME>NICK TIMIRAOS</NAME>. Hi, Nick Timiraos of the Wall Street Journal. Chair Powell, you have said the test for liftoff is more stringent than the test for tapering. But if the near-term projections today are credible, more of your colleagues seem to think that rate liftoff, and not just a taper, may be closer at hand. Does the Committee have a different opinion than you do about the threshold for liftoff that you’ve articulated? Or do they believe that either inflation or economic growth will necessitate a rate increase sooner than you do? <NAME>CHAIR POWELL</NAME>. Well, so, again, substantial further progress toward our goals is the test for beginning the taper. And the taper takes some months in everyone’s figuring. So you’re going to be well away from satisfying the liftoff test when we begin the taper. So in terms of the liftoff test, though, you know, it’s what we adopted last September. It’s labor market conditions consistent with maximum employment. And while we have interesting signs that, in many ways, the labor market’s very tight, we also have lots of slack in the labor market, and we think that those imbalances will sort themself out. Inflation at 2 percent and on track to achieve it, moderately higher inflation over 2 percent—you know, that really depends on the path of inflation. If inflation remains higher during the course of 2022, then we may already have met that test by the time we reach liftoff. So I just think, if you look at what people are writing down for year-end 2022 numbers, some people are writing down very low unemployment rates. And that’s only one indicator, but it suggests a very strong labor market. And I think they’re writing down in good faith what they see as meeting the test. There’s a range of perspectives about where the economy will be, but— by the way, all but one participants have us lifting off during 2023. So it’s not really an unusually wide array of views about this. <NAME>NICK TIMIRAOS</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. We’ll go to Jeanna Smialek. <NAME>JEANNA SMIALEK</NAME>. Hey, Chair Powell—thank you for taking our questions. Prior to recent media reports, were you aware of the kind of security buying and selling that Presidents Kaplan and Rosengren were participating in last year? And I wonder if you thought those were appropriate. <NAME>CHAIR POWELL</NAME>. So, no, I was not aware of the specifics of what they were doing. So let me just say a couple things about this subject. We understand very well that the trust of the American people is essential for us to effectively carry out our mission. And that’s why I directed the Fed to begin a comprehensive review of the ethics rules around permissible financial holdings and activity by Fed officials. So those rules are, in many respects, the same as those for government agencies, plus a number of things that apply specifically to us because of our business. One of those is—sort of, three things I would point to in terms of specific restrictures. One is, ownership of certain assets is not allowed, and that’s bank securities and other things. Secondly, there are times when we’re not allowed to trade at all or to, you know, buy and sell financial assets. And that’s the period immediately before and during an FOMC meeting. And, third, there’s regular disclosure. So all of these—everyone’s, you know, ownership and activities are all disclosed on an annual basis. So, you know, I would have had to go back and read people’s financial disclosures to know what their activities have been. This has been our framework for a long time, and I guess you’d say it’s served us well. The other thing you would say—that it is now clearly seen as not adequate to the task of really sustaining the public’s trust in us. We need to make changes, and we’re going to do that as a consequence of this. This will be a thoroughgoing and comprehensive review. We’re going to gather all the facts and look at ways to further tighten our rules and standards. <NAME>MICHELLE SMITH</NAME>. Great. Thank you. We’ll go to Steve Liesman. <NAME>STEVE LIESMAN</NAME>. Thank you. Thank you, Mr. Chairman. I want to follow up on Jeanna’s question, the issue of ownership of these stocks and trades. Do you think it’s appropriate for Federal Reserve officials to be owning the same assets that the Federal Reserve is buying? Is that one of the modifications that you’re looking at? And in that these—you said yourself, they’re clearly not seen as appropriate. In that the Fed’s code of conduct says Fed officials should avoid even the appearance of the, of conflict, do those trades, in fact—and holdings—violate the Fed’s code of conduct? Finally, do you have a timeline as to when you might get—be done with your review? Thank you, sir. <NAME>CHAIR POWELL</NAME>. Don’t have a timeline yet; we can start with that. So, well, let me address the muni question, since that’s in there. You know, I personally owned municipal securities for many, many years, and in 2019, I froze that. Meaning I—they’re no—I’m holding all those securities, my wife and I, to maturity. And munis were always thought to be a pretty safe place for a Fed person to invest because, as you know, the lore was that the Fed would never buy municipal securities. So it was not an uncommon thing. And so then comes the, you know, the COVID crisis, and I reversed that policy, and I did it without hesitating. And the reason was that the financial markets, including the municipal financial market, were very much on the verge of collapse. And it was time to go, and we did. But we also checked with the Office of Government Ethics and—who looked carefully at it and said that I didn’t have a conflict. So that’s one answer that I wanted to share with you. Secondly, you’re right, though, as—we’re going to be looking at all those things. I don’t want to get ahead of the process here and speculate about particular outcomes. But this, again, comprehensive and deliberate process—we’re going to make changes. I want to be able to look back on this years from now and know that we rose to meet this challenge and handled the situation well, and that what we did made a lot of sense and protected the public’s interest and the institution that we’re all a part of. <NAME>STEVE LIESMAN</NAME>. I’m sorry, Chair Powell—I just want to follow up. You said I was right. When you said “right,” about that the Feds should not own—Federal Reserve officials should not own the same assets they’re buying? Is that— <NAME>CHAIR POWELL</NAME>. I think that’s a reasonable thing. Yeah, and, of course, for the most part, we don’t. I mean, it was a real coincidence; I happened to pre-own these munis. They were bought many years ago, actually. And so we started buying munis as part of the Municipal Liquidity Facility. So it was really not a—it just was an unforeseen event. And I couldn’t sell them, so what I did was, I just held them, checked with the ethics people, and went ahead. So, but as a general principle, yeah, that makes a lot of sense. <NAME>STEVE LIESMAN</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Chris Rugaber. <NAME>CHRIS RUGABER</NAME>. Thank you. Thank you. Thank you, Chair Powell. Wider question about jobs and the Fed’s schedule—the Fed’s policy framework that you laid out here. You and other Fed officials have often talked about expecting a job market pickup in September as more children return to school, freeing up more parents to work, COVID abating. You mentioned in the past the extra unemployment benefits expiring. There’s some real-time data suggesting that we may not be seeing much of a return of labor supply. So do you still expect to see that in the next couple of jobs reports? And how would a relatively weak jobs report in September affect your plans? Thank you. <NAME>CHAIR POWELL</NAME>. So, you’re right, we have a—really, I’ll call it a unique situation where, by many measures, the labor market is tight. And 11 million job openings, very widespread reports from employers all over the economy saying it’s quite difficult to hire people, wages moving up, and that kind—so, quite a tight labor market. So our view, I think— widespread view a few months ago was that several things were coming together in the fall, including kids back to school, which would, you know, which would lighten caregiving duties, including the expiration of unemployment—extra unemployment benefits, and other things would come together to provide an increase in labor supply, and so we’d get out of this strange world where there’re lots of unemployed people and a high unemployment rate but a labor shortage. And so what happened was, Delta happened. And you had this very sharp spike in Delta cases. And I think, so that affects—for example, when schools are open 60 percent of the time or when they’re always at a threat of being closed because of Delta, the Delta variant, you know, you might want to wait. Rather than going ahead and taking a job and starting work only to have to quit it three weeks later, you’re going to wait until you’re confident of that. So some of that may not have happened. Also, people didn’t, you know—as you know, hiring and spending in these face-to-face service industries, travel and leisure, it just kind of stopped during those months. So we—so that—really, the big shortfall in labor, in jobs, was largely in travel and leisure, and that’s because of—clearly because of Delta. So that all happened. And so what we—we know things that didn’t happen. I think there’s still—it may just be that it’s going to take more time. But it still seems that, inexorably, people will—these are people who were largely working back in February of 2020. They’ll get back to work when it’s time to do that. It just may take a longer time. You’re right, though—it didn’t happen with any force in September, and a lot of that was Delta. In terms of the—you asked also about the test for November. I think if the economy continues to progress broadly in line with expectations, then I think—and also the overall situation is appropriate for this, then I think we could easily move ahead at the next meeting. Or not, depending on whether we feel like that, those tests are met. <NAME>CHRIS RUGABER</NAME>. Well, just a quick—if I could just quickly follow up, I mean, what, how much of that will depend on what kind of jobs report we get for September? And, I mean, is it, you know, are you in a data-dependent phase here where you need to see certain numbers going ahead? Or are we at a point where you’ve accumulated enough progress that— <NAME>CHAIR POWELL</NAME>. So it is, it’s accumulated progress. So, you know, for me, it wouldn’t take a knockout, great, super strong employment report. It would take a reasonably good employment report for me to feel like that test is met. And others on the Committee—many on the Committee feel that the test is already met. Others want to see more progress. And, you know, we’ll work it out as we go. But I would say that, in my own thinking, the test is all but met. So I don’t personally need to see a very strong employment report, but I’d like to see a good—a decent employment report. I mean, it’s not, it’s, again, it’s not to be confused with the test for liftoff, which is so much higher. <NAME>CHRIS RUGABER</NAME>. Great. Thank you. <NAME>MICHELLE SMITH</NAME>. Okay. Thank you. We’ll go to Victoria Guida. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. So I wanted to ask about the Vice Chair of Supervision position and just—I was wondering if you could speak about how you view that role and the extent to which you defer to that person on regulatory policy. And then, just sort of a related question: As you know, Randy Quarles’s vice chairmanship ends next month, and I was wondering if he’s going to retain the supervisory portfolio until he’s replaced in that role. <NAME>CHAIR POWELL</NAME>. Sure. So Dodd-Frank created this position, Vice Chair for Supervision, and it’s, there’s actually a specific assignment in the Dodd-Frank language, as I’m sure you know. And, effectively, what it means is that the Vice Chair for Supervision is charged with setting the regulatory agenda. And, you know, it’s a specific grant of authority. And in the 10 years, almost, that I’ve been at the Fed, that person has really done that. Dan Tarullo certainly did it, and Vice Chair Quarles did it as well. And I would, I think—I respect that authority. I respect that that’s the person who will set the regulatory agenda going forward, and I would accept that. And, furthermore, you know, it’s fully appropriate to look at—for a new person to come in and look at the current state of regulation and supervision and suggest appropriate changes, and I welcome that. In terms of Vice Chair Quarles’s term, we’re not currently in that situation, and I actually don’t have any updates for you on that today. We’ll keep you posted on that. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Steve Matthews at Bloomberg. <NAME>STEVE MATTHEWS</NAME>. Thank you. Chair Powell, I wanted to ask about the inclusive monetary policy framework. In particular, Bloomberg surveyed economists, and we found that they predict liftoff will happen when the U.S. unemployment rate is 3.8 percent but the Black unemployment rate is 6.1 percent. And I’m wondering if a 6.1 percent unemployment rate for African Americans is consistent with full employment or whether it would need to be lower as part of your inclusive growth strategy. <NAME>CHAIR POWELL</NAME>. Right, so the point of the broad and inclusive goal was not to target a particular unemployment rate for any particular group. Really, we look at a broad range of—a very broad range of metrics when we think about what maximum employment is. And one of the things we look at is unemployment rates and participation rates and wages for different demographic and age groups and that kind of thing. So we will do all of that. So I think if you look back, what were we really thinking? So we all saw the benefits of a strong labor market. If you look at the last two or three years of, before the pandemic hit, you saw—after a lot of long progress, you saw a really strong labor market. And you saw wages at the low end moving up faster than everywhere else—something that’s great to see. We also saw the lowest unemployment rates for minorities of various, you know, for African Americans, for example, and also participation rates. We saw a really, really healthy set of dynamics. And, by the way, we also—there was no reason why it couldn’t continue. There were no imbalances in the economy, and then along came the pandemic. We were not—there was nothing in the economy that looked like a buildup of imbalances that could cause a recession. So I was very much thinking that the country would really benefit from a few more years of this. It would have been—so we’re all quite eager to get back to that. We also said we wouldn’t raise rates just in response to very low unemployment, in the absence of inflation. So that was another aspect of it, because we saw that that really benefited labor market participants in a broad and inclusive way. That’s, of course, not the current situation. We have significant slack in the economy and inflation well above target, not moderately above target. So that’s, really, how we think about it. It isn’t really just targeting the headline numbers, but it’s about taking all of those things into account in your thinking about what constitutes maximum employment. <NAME>STEVE MATTHEWS</NAME>. Just to follow up, should there be a significant gap between Black unemployment and overall unemployment for structural reasons that are outside of the control of the Fed that other people should be doing something about? Or should that be— should the gap be narrowed, if not down to zero? <NAME>CHAIR POWELL</NAME>. Well, you really—I mean, first of all, ideally, there wouldn’t be any gap, of course. We would all love to see no such gap. This is a persistent gap, and it’s very hard to explain based on typical metrics. It’s just, it’s quite troubling, but it really is—you know, we have, you know, famously broad and blunt tools. I think eliminating inequality and racial discrimination and racial disparities and that kind of thing is really something that fiscal policy and other policies—frankly, education policies and that kind of thing—are better at focusing on. I think we’ve identified the part that we can do, and we’ll do that part. But I’ve always been clear that it’s going to take policies broadly across society to work on these problems. <NAME>STEVE MATTHEWS</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Michael McKee. <NAME>MICHAEL MCKEE</NAME>. —a plan for dealing with a debt default that included prioritization, that included changes in bank regulations and possibly selling defaulted—or, nondefaulted Treasuries and buying those who are—that are. Are any or all of those still on the table? Do you think any of those would work? And what would happen to the economy, in your view, should the debt ceiling not be raised? <NAME>CHAIR POWELL</NAME>. So, I missed the first few words, but I think I got your question. So it’s just very important that the debt ceiling be raised in a timely fashion so that the United States can pay its bills when and as they come due. That’s a critically important thing. The failure to do that is something that could result in severe reactions, severe damage to the economy and to the financial markets. And it’s just not something that we could contemplate, that we should contemplate. I’m not going to comment on particular tactics or things like that. I’m just going to say that I think we can all agree that the United States shouldn’t default on any of its obligations—should pay them when and as due. And that, you know, no one should assume that the Fed or anyone else can protect the markets or the economy in the event of a failure—fully protect in the event of a failure to, you know, to make sure that we do pay those debts when they’re due. <NAME>MICHAEL MCKEE</NAME>. Good. If I could follow up, have you discussed options with members of Congress? <NAME>CHAIR POWELL</NAME>. You know, I don’t generally ever talk about the conversations I have with elected officials or other appointed officials. But, look, you can see that this is a major focus among those who have responsibility for it, and—including elected people. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Hannah Lang. <NAME>HANNAH LANG</NAME>. Hi—thanks so much. Senator Warren sent you a letter last week urging the Fed to break up Wells Fargo, citing what she called “ungovernable behavior” from the bank. I’m just curious, under what circumstances would the Fed actually consider revoking a financial holding company’s license? And if the indiscretions at Wells Fargo, in your opinion, warrant such an action? <NAME>CHAIR POWELL</NAME>. So we’re, of course, very closely monitoring Wells Fargo’s efforts to fix its widespread and pervasive problems. They represent a serious matter to us, and the firm is required to remediate them. And we will take appropriate supervisory action if the firm fails to meet our expectation. We continue to hold the firm accountable for its deficiencies with an unprecedented asset cap that will stay in place until the firm has comprehensively fixed its problems. And we’re not going to remove that asset cap until that’s done. So bottom line is, we’ll take strong supervisory action if a firm is engaging in unsafe and unsound practices or violating laws. But I can’t speak to our confidential supervisory assessments of any individual bank. <NAME>MICHELLE SMITH</NAME>. Thank you. Now we’ll go to Michael Derby. <NAME>MICHAEL DERBY</NAME>. Thank you for taking my question. You noted earlier in the press conference that you weren’t aware of the trading activity of the Boston and Dallas Fed Bank presidents. As you know, those, all 12 regional Fed Bank presidents just went through the renomination process earlier this year. And Governor Brainard described it as a rigorous process at the time. So I want to know, did anybody know—did anybody at the Board level know about the stock trading activity? And, going forward, do you still have confidence in the Dallas and Boston Fed Bank presidents to do their job? <NAME>CHAIR POWELL</NAME>. So these, I don’t need to tell you, we file, people file these reports annually. And I think they were just quite recently filed for 2020. So I don’t have any reason to think people at the Board would have known about particular trading that’s going on. They will see that—there are people at the Fed who see the, you know, see the trading reports when they’re, you know, when they’re annually filed. You know, in terms of having confidence and that sort of thing, I think no one is happy, no one on the FOMC is happy to be in this situation, to be having these questions raised. It’s something we take very, very seriously. This is an important moment for the Fed, and I’m determined that we will rise to the moment and handle it in ways that will stand up over time. I’m very reluctant to get ahead of the process and speculate, though, about different things. And, you know, when we have things to announce, we’ll go ahead and do that, but that’s really what I have for today. <NAME>MICHAEL DERBY</NAME>. One small follow-up. I mean, I know that you didn’t have the 2020 forms in hand, but you would have had past-year forms in hand. And at least in the case of, like, the Dallas disclosure forms, similar trading activity was shown in years past. So that, in theory, could have been something that came up in the renomination process. <NAME>CHAIR POWELL</NAME>. So that’s, yeah, that’s a good question. So, you know, the five-year review that we do under this unusual provision of law where all of the Reserve Bank presidents are reviewed for reappointment at the same time every five years, that is really a broad review about their leadership of the institution, their performance on the FOMC, all of those things. And if there were a concern—a public concern or a private concern—about something that someone had done, we wouldn’t wait for the five-year. We wouldn’t wait that day if there were concerns. You’re right, though, these—as I mentioned, we have had a framework for a long time, and it’s similar to what other government agencies have, only it’s a little stricter. And it is that you can trade financial instruments, but not specific ones like bank debt. You can’t trade during the FOMC period and during the meeting—the blackout period and then during the meeting. And then you disclose all this, and we have disclosed it for years. So all of these things have been going—to the extent they’ve been going on, they’ve been a matter of public record. And, you know—but, nonetheless—so that—you know, it was seeming to work just okay. And now you look at it, and you see this, and you think, “We need to do better.” And we will. But you’re right, but it has not been part of the process. And, appropriately, I don’t think it should have been. I mean, I wouldn’t blame the people who conduct that review. I really think, if someone had raised concerns or if we’d had concerns, then it would have been, but it wouldn’t have been part of that process. It would have been raised instantly, rather than once every five years. <NAME>MICHAEL DERBY</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Jean Yung. <NAME>JEAN YUNG</NAME>. Thank you, Michelle. Chair Powell, I wanted to ask about how the Fed would balance the two parts of its dual mandate if inflation stays elevated but we still have a labor shortage and participation remains lower than ideal. Would you hold off on raising rates? Or how would you think about that? Thank you. <NAME>CHAIR POWELL</NAME>. Well, let me say one thing. You’re looking for conditions consistent with maximum employment to lift off, and those conditions can change over time. So you’re not necessarily bound by a particular level of the unemployment rate or the participation rate or anything else like that, which can change over time. But more to your point, really, we actually have a paragraph in our framework, and something like this has been there for a long time. It’s, I think it’s paragraph six. And you’re talking about a situation in which the two goals are not complementary; they’re somehow in tension. And if we judge that’s effect—that is the case, what it says is, we take into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the mandate. So, we used to call that the balanced-approach paragraph because it had those words. So it’s a very difficult situation for any central bank to be—pardon me—to be in a situation where the two goals are in tension. And that paragraph tries to address it by saying we would sort of weigh the equities between the two. How long will it take, and how big are the gaps, and that kind of thing. We don’t really think we’re in that—we’re sort of in that situation, I’d say, in a short-term way. But we think, we do expect that this is sort of—because of the COVID shock and the reopening and all that, you’re seeing this temporarily. <NAME>MICHELLE SMITH</NAME>. Great. Thank you. We’ll go to Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Michelle. Thank you, Mr. Chairman, for taking the question. So on corporate debt, what happened with Evergrande that we’ve been watching, could that be—is that a preview of what could happen with the amount of corporate debt that’s out there? In the past you’ve said you’re watching the level of corporate debt. So is, what’s your level of concern right now? And would you consider the Evergrande Group issue sort of a warning signal? <NAME>CHAIR POWELL</NAME>. About the United States, no. Corporate defaults are very low in the United States right now. Corporate leverage built up over the course of the long expansion that ended with the pandemic. We were very concerned in the last year or so. We were concerned in the last year or so, and then I’d say very concerned at the beginning of the pandemic that, if you’ve got a highly leveraged company and your revenue stops for an uncertain period, as things happened at the beginning of the crisis, we were very concerned that there would be a wave of defaults. It didn’t happen, potentially—I mean, to a significant extent because of the CARES Act and the response that we undertook and all that. It was a, you know, a much stronger response than we’ve ever had. And I think for whatever reason now, you have very, very low default rates now among corporate debt. You know, the Evergrande situation seems very particular to China, which has very high debt for an emerging market economy, really the highest that any emerging market economy has had. And the government has been working to get that under control. This is part of that effort. The government put new strictures in place for highly leveraged companies. And Evergrande is dealing with those strictures, and it’s something they’re managing. In terms of the implications for us, there isn’t, there’s not a lot of direct United States exposure. The big Chinese banks are not tremendously exposed. But, you know, you would worry that it would affect global financial conditions through confidence channels and that kind of thing. But I wouldn’t draw a parallel to the United States corporate sector. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Brian Cheung. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. Just wondering if you could give us an update on whether or not you’ve had conversations with the White House about a possible reappointment. And then whether or not you would like to be reappointed as this chatter kind of builds up. Thanks. <NAME>CHAIR POWELL</NAME>. I think the phrase goes: “I have nothing for you on that today.” Sorry. I’m focused on doing my job— <NAME>MICHELLE SMITH</NAME>. Let’s go to Greg Robb. <NAME>CHAIR POWELL</NAME>. —I’m focused on doing my job every day for the American people, and I don’t have any comment on that, Brian. <NAME>MICHELLE SMITH</NAME>. Sorry about that. Let’s go to Greg Robb. <NAME>GREG ROBB</NAME>. Thanks. Thanks for taking my question, Chair Powell. I was wondering if, in your discussion about the tapering that—you said that officials think it’s appropriate to end around the middle of the year—if there was any discussion about what happens to the balance sheet then. I’ve heard some Fed officials say that they wouldn’t shrink the balance sheet. Was that discussed? And what’s your stance on shrinking the balance sheet? Thanks. <NAME>CHAIR POWELL</NAME>. So my thinking on this has been: Let’s get through the taper decision, and then let’s turn to those issues. There are a number of related issues that—you mentioned one, Greg, but, you know, and—which you need to start to think about, and we’ll do that. But I want to get, we want to get through this taper decision, and then turn to those issues, rather than start, you know, thinking about them now and having the minutes discuss them and get people thinking that we are, you know, focused on those issues, because we’re really not. And, you know, we do have the experience of what we did last time. We’ve watched other countries and what they’ve done. So I think we’ll be able to get to sensible decisions fairly expeditiously when it’s time. But it’s just not time yet, in my thinking. <NAME>GREG ROBB</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Scott Horsley. <NAME>SCOTT HORSLEY</NAME>. Thank you, Mr. Chairman. You talked a little bit about inflation expectations. And there does seem to be something of a divide between market expectations and the views of professional economists—which are pretty much in line with the FOMC members—and laypeople’s expectations, at least as reflected in the recent New York Fed survey. How much weight do you put on laypeople’s expectations? And what do you think accounts for that divide? <NAME>CHAIR POWELL</NAME>. So within—let’s just take the household surveys generally. The New York Fed survey, let me talk about that specifically, and this is from the New York Fed. It’s only an eight-year-old survey, and it does seem as though the, they’re looking three years out. And it seems like there’s a high correlation between three-year and one-year. For the most part, surveys are showing that households expect higher inflation in the near term but not in the longer term. And that’s also what expectations are showing. So there are many, many different inflation measures, of course. And that’s why we have this thing called the CIE, which is the, it’s an index of—it��s market-based measures, it’s professional forecasters, and it’s household surveys. And you just put them all—it’s not, you know, it doesn’t have a lot of grand theory about it. You put them all in, and you measure the change. So you should be—and, also, you measure things like the dispersion and that sort of thing, so you can look at all that. And, you know, it tells a story of inflation expectations moving up. Many of the different measures will also show inflation expectations moving back up to where they were in, say, 2013, which was before the really—the drop in inflation expectations broadly happened in ’14 and ’15—around then. So that’s not a troubling thing. But, you know, inflation expectations are terribly important. We spend a lot of time watching them. And if we did see them moving up in a troubling way and running persistently above levels that are really consistent with our mandate, then, you know, we would certainly react to that. But we don’t really see that now. We see more of a moderate increase that is—the first part of which is welcome. And because, you know, inflation expectations had drifted down, and it was good to see them get back up a bit. But, again, we watch carefully. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Heather Scott. <NAME>HEATHER SCOTT</NAME>. Hi. Sorry, you caught me off guard. Thank you, Chair Powell, for taking my question. I really appreciate it. Again, on the taper timing. You say it’s going to last to the middle of next year. But with your concerns about the potential for upside risks to inflation, would you think you might need to have liftoff happen before you finish the tapering? <NAME>CHAIR POWELL</NAME>. That’s not my expectation. Of course, we can always—we haven’t decided to taper yet, and we haven’t decided the pace yet. So, you know, it’s not my expectation that we would have to. We can certainly speed up or slow down the taper if we—if it becomes appropriate, though. Absolutely. In fact, back in ’13, when we tapered, we always said we weren’t on a preset course. I think this will be a shorter period. The economy’s much farther along than it was when we tapered in 2013. So it makes sense to allow the runoff to happen. It’s a very gradual taper. It will be when we agree on it. And, but we certainly have the freedom to either speed it up or slow it down if that becomes appropriate. <NAME>HEATHER SCOTT</NAME>. But you wouldn’t expect rate liftoff to happen until you’re finished with that process? <NAME>CHAIR POWELL</NAME>. You wouldn’t, no, because, you know, when you’re—as long as you’re buying assets, you’re adding accommodation, and it wouldn’t make any sense to, you know, then lift off. I mean, what you would do is, you’d speed up the taper, I think, if that were the situation you’re in. Not—we don’t expect to be in that situation, but I do think it would be wiser at that point to go ahead and speed up the taper, just because the two are then working in the same direction. <NAME>HEATHER SCOTT</NAME>. All right, thank you. <NAME>CHAIR POWELL</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Okay, for the last question, we’ll go to Jeff Cox. <NAME>JEFF COX</NAME>. Thank you, Mr. Chairman, for taking the question. I just wanted to check in with you to see if you have an update at all on the efforts from the Fed to develop a central bank digital currency. I believe that the report was supposed to come this summer, and indications that it’s going to come this month. But the drumbeat seems to be kind of getting louder to see where the Fed’s heading on this, and just wondering if you can provide some update there. <NAME>CHAIR POWELL</NAME>. Sure, I’d be glad to. So we think it’s really important that the central bank maintain a stable currency and payment system for the public’s benefit. That’s one of our jobs. We also live in a time of transformational innovation around digital payments, and we need to make sure that the Fed is able to continue to deliver to the public a stable and trustworthy currency and payment system. So there’s extensive private innovation, a lot of which is taking place outside the regulatory perimeter. And innovation is fantastic. Our economy runs on innovation. But where the public’s money is concerned, we need to make sure that appropriate regulatory protections are in place, and today they really are not in some cases. So with that in mind and with the creation of myriad private currencies and currency-like products, we’re working proactively to evaluate whether to issue a CBDC and, if so, in what form. We have two broad workstreams, one of which is really technology, both at the Board and in the Federal Reserve Bank of Boston’s work with MIT—the other of which is to identify, scope out, deal with, analyze the various public policy issues. As you mentioned, we do intend to publish a discussion paper soon that will be the basis for a period of public engagement— engagement with many different groups, including elected officials, around these issues. We think it’s our obligation to do the work, both on technology and public policy, to form a basis for making an informed decision. The ultimate test we’ll apply when assessing a central bank digital currency and other digital innovations is: Are there clear and tangible benefits that outweigh any costs and risks? We’re also, as you know, investing heavily right now in building a new settlement system for instant payments in the U.S. It’ll be the first such major expansion of our core payment system since the 1970s. We found the case for this quite compelling—for consumers, businesses, and just ensuring that all financial institutions have access to that payment system. So, bottom line, we haven’t made a decision about the CBDC, but we will be issuing a discussion paper soon in order to form the basis of this public interaction that we’ll have. Thank you very much. <NAME>JEFF COX</NAME>. If I could have a quick—could I get a quick follow on that? Thank you. I was just wondering if—okay—are you concerned at all with kind of falling behind in the global race for digital currencies? <NAME>CHAIR POWELL</NAME>. I think it’s important that we get to a place where we can make an informed decision about this and do so expeditiously. I don’t think we’re behind. I think it’s more important to do this right than to do it fast. We are the world’s reserve currency. And I think we’re in a good place to make that analysis and make that decision—by the way, which will be a governmentwide decision. We would do this, we would have to have a meeting of the minds with the Administration and also probably with Congress. We would really like to have broad support for this. It’s a very important innovation. And I think we would need that to go ahead, and that’s the process we’re engaged in. Thanks very much. <NAME>MICHELLE SMITH</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today, the FOMC kept interest rates near zero and, in light of the progress the economy has made toward our goals, decided to begin reducing the pace of asset purchases. With these actions, monetary policy will continue to provide strong support to the economic recovery. Given the unprecedented nature of the disruptions related to the pandemic and the reopening of the economy, we remain attentive to risks and will ensure that our policy is well positioned to address the full range of plausible economic outcomes. I will say more about our monetary policy decisions after reviewing recent economic developments. Economic activity expanded at a 6.5 percent pace in the first half of the year, reflecting progress on vaccinations, the reopening of the economy, and strong policy support. In the third quarter, real GDP growth slowed notably from this rapid pace. The summer’s surge in COVID cases from the Delta variant has held back the recovery in the sectors most adversely affected by the pandemic, including travel and leisure. Activity has also been restrained by supply constraints and bottlenecks, notably in the motor vehicle industry. As a result, both household spending and business investment flattened out last quarter. Nonetheless, aggregate demand has been very strong this year, buoyed by fiscal and monetary policy support and the healthy financial positions of households and businesses. With COVID case counts receding further and progress on vaccinations, economic growth should pick up this quarter, resulting in strong growth for the year as a whole. Conditions in the labor market have continued to improve, and demand for workers remains very strong. As with overall economic activity, the pace of improvement slowed with the rise in COVID cases. In August and September, job gains averaged 280,000 per month, down from an average of about 1 million jobs per month in June and July. The slowdown has been concentrated in sectors most sensitive to the pandemic, including leisure and hospitality and education. The unemployment rate was 4.8 percent in September. This figure understates the shortfall in employment, particularly as participation in the labor market remains subdued. Some of the softness in participation likely reflects the aging of the population and retirements. But participation for prime-aged individuals also remains well below pre-pandemic levels—in part reflecting factors related to the pandemic, such as caregiving needs and ongoing concerns about the virus. As a result, employers are having difficulties filling job openings. These impediments to labor supply should diminish with further progress on containing the virus—supporting gains in employment and economic activity. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. Despite progress, joblessness continues to fall disproportionately on African Americans and Hispanics. The supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors. In particular, bottlenecks and supply chain disruptions are limiting how quickly production can respond to the rebound in demand in the near term. As a result, overall inflation is running well above our 2 percent longer-run goal. Supply constraints have been larger and longer lasting than anticipated. Nonetheless, it remains the case that the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic—specifically, the effects on supply and demand from the shutdown, the uneven reopening, and the ongoing effects of the virus itself. We understand the difficulties that high inflation poses for individuals and families, particularly those with limited means to absorb higher prices for essentials such as food and transportation. Our tools cannot ease supply constraints. Like most forecasters, we continue to believe that our dynamic economy will adjust to the supply and demand imbalances and that, as it does, inflation will decline to levels much closer to our 2 percent longer-run goal. Of course, it is very difficult to predict the persistence of supply constraints or their effects on inflation. Global supply chains are complex; they will return to normal function, but the timing of that is highly uncertain. We are committed to our longer-run goal of 2 percent inflation and to having longer-term inflation expectations well anchored at this goal. If we were to see signs that the path of inflation, or [of] longer-term inflation expectations, was moving materially and persistently beyond levels consistent with our goal, we would use our tools to preserve price stability. We will be watching carefully to see whether the economy is evolving in line with expectations. The Fed’s policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. Our asset purchases have been a critical tool. They helped preserve financial stability early in the pandemic and since then have helped foster smooth market functioning and accommodative financial conditions to support the economy. Last December, the Committee stated its intention to continue asset purchases at a pace of at least $120 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals. At today’s meeting, the Committee judged that the economy has met this test, and decided to begin reducing the pace of its asset purchases. Beginning later this month, we will reduce the monthly pace of our net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. We also announced another reduction of this size in the monthly purchase pace starting in mid- December, since that month’s purchase schedule will be released by the Federal Reserve Bank of New York prior to our December FOMC meeting. If the economy evolves broadly as expected, we judge that similar reductions in the pace of net asset purchases will likely be appropriate each month, implying that increases in our securities holdings would cease by the middle of next year. That said, we are prepared to adjust the pace of purchases if warranted by changes in the economic outlook. And even after our balance sheet stops expanding, our holdings of securities will continue to support accommodative financial conditions. Our decision today to begin tapering our asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate. 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 complete the recovery in employment and achieve our price-stability goal. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Nick at the Wall Street Journal. <NAME>NICK TIMIRAOS</NAME>. Hi. Nick Timiraos of the Wall Street Journal. Chair Powell, the markets anticipate you will raise rates once or twice next year. Are they wrong? <NAME>CHAIR POWELL</NAME>. So I would say it this way. We try to focus on what we can control—and that is how to communicate as clearly as possible, in this highly uncertain world, how we’re thinking about the economic outlook and the balance of risks and how policy will evolve in that case and also in the cases, which are frequent, where the economy evolves in unexpected ways. So the focus at this meeting is on tapering asset purchases, not on raising rates. It is time to taper, we think, because the economy has achieved substantial further progress toward our goals, measured from last December. We don’t think it’s time yet to raise interest rates. There is still ground to cover to reach maximum employment, both in terms of employment and in terms of participation. Getting to your question, our baseline expectation is that supply bottlenecks and shortages will persist well into next year, and elevated inflation as well, and that, as the pandemic subsides, supply chain bottlenecks will abate—and job growth will move back up. And as that happens, inflation will decline from today’s elevated levels. Of course, the timing of that is highly uncertain. But, certainly, we should see inflation moving down by the second or third quarter. The time for lifting rates and beginning to remove accommodation will depend on the path of the economy. We think we can be patient. If a response is called for, we will not hesitate. So, what I will tell you is, we will be watching carefully to see whether the economy evolves in line with our expectations, and policy will adapt appropriately. And that’s what I would say. <NAME>NICK TIMIRAOS</NAME>. Based on—if I could follow up, based on your current outlook for the labor market, do you think it’s possible—or likely, even—that maximum employment could be achieved by the second half of next year? <NAME>CHAIR POWELL</NAME>. So if you look at the progress that we’ve made over the course of the last year, if that pace were to continue, then the answer would be: “Yes, I do think that that is possible.” Of course, we measure maximum employment based on a wide range of figures, but it’s certainly within the realm of possibility. <NAME>NICK TIMIRAOS</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Next, we’ll go to Jeanna at the New York Times. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. I was wondering if you could detail a little bit how you’re thinking about wages at this moment. Obviously, we’re seeing strong wage growth, particularly for people in sort of lower-income fields. I wonder if you see that as a positive thing or as a potential start to a wage–price spiral and sort of how you sort of delineate those two things. <NAME>CHAIR POWELL</NAME>. So wages have been moving up strongly, very strongly. And, in particular, I would point to the employment compensation index reading that we got last Friday. Now, in real terms, they’ve been—they had been running a little bit below inflation, so real wages were not really increasing. I think, with the ECI reading, it becomes close to maybe not increasing, but close to back to zero in terms of the real increase. So wages moving up, of course, is how standard of living increases over the years for generation upon generation. It’s very important, and it’s generally a good thing. You know, the concern is a somewhat unusual case where, if wages were to be rising persistently and materially above inflation and productivity gains, that could put upward pressure on, or downward pressure on margins and cause companies to—or employers, really—to raise prices as a result, and you can see yourself, find yourself in what we used to call a wage–price spiral. We don’t have evidence of that yet. Productivity has been very high. The ECI reading is just one reading. Again, if you look back, we—so we’ll be watching this carefully. But I would say that, at this point, we don’t see troubling increases in wages. And we don’t expect those to emerge, but we’ll be watching carefully. <NAME>JOE PAVEL</NAME>. Next, we’ll go to Steve Liesman from CNBC. <NAME>STEVE LIESMAN</NAME>. Thank you, Mr. Chairman. I wonder if you could perhaps give us your thinking about the tradeoffs between inflation and unemployment. You talked about the shortfall of unemployment—reemployment relative to before the pandemic, and yet you have inflation, which is affecting everybody. Are we at, or close to, a point where the risk of inflation is greater than the benefit that you’d—for recovering these lost jobs so that now, from a risk- management standpoint, it makes sense to move more aggressively on rate hikes? And kind of a related question: The statement today says you’ll keep policy accommodative until you hit that 2 percent inflation target. Our surveys show looking for 5 percent inflation this year, 3½ percent next year—it sure seems like you’re on track to modestly or moderately exceed that 2 percent target. Thanks. <NAME>CHAIR POWELL</NAME>. Yes. So I’m not sure I totally got your first question, but I would say—in fact, could you just quickly, succinctly, say your first question again? <NAME>STEVE LIESMAN</NAME>. Sure. The idea that the tradeoff between inflation and unemployment, that you would keep policy accommodative to put this 5 million folks, or find these 5 million jobs again, at the same time all Americans will be suffering from higher inflation—is that tradeoff worth it, or is it better or smarter to raise rates right now to combat inflation and perhaps not lean so heavily on the employment side of the mandate? <NAME>CHAIR POWELL</NAME>. Yes, so, you know, this isn’t the traditional Phillips curve situation where there’s a direct tradeoff, where that’s really what we’re talking about. The inflation that we’re seeing is really not due to a tight labor market. It’s due to bottlenecks, and it’s due to shortages, and it’s due to very strong demand meeting those. So I think it’s not the classical situation where you have that precise tradeoff. But, you know, in this situation, we do have a provision in our Statement on Longer-Run Goals, as you know, that says when those two things are in tension, what we do is, we take into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the mandate. So we used to call that the “balanced approach” paragraph. We have to think about the amount of the deviation, we have to think about the time it will take, and we have to make policy in a world where the two goals are in tension. It’s very difficult. But what it really boils down to is something that’s common sense. And that is risk management. We have to be aware of the risks that we’re—particularly now the risk of significantly higher inflation. We see shortages and bottlenecks persisting into next year, well into next year. We see higher inflation persisting, and we have to be in position to address that risk should it become really a threat to—should it create a threat of more persistent, longer-term inflation. And that’s what we think our policy is doing now. It’s putting us in a position to be able to address the range of plausible outcomes. <NAME>JOE PAVEL</NAME>. Thank you. Next, we’ll go to Colby Smith at the Financial Times. <NAME>COLBY SMITH</NAME>. Thank you. Chair Powell, what are the economic conditions that would perhaps warrant a faster pace of tapering? And I’m wondering how you would also characterize the risks that the Fed may actually need to accelerate that process eventually. Thank you. <NAME>CHAIR POWELL</NAME>. So I guess, as I said in my opening remarks, assuming the economy performs broadly as expected, the Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, and we’re prepared to deviate from that path if warranted by changes in the economic outlook. So I’m not going to give you a lot more detail on what that might be. Of course, if we do see something like that happening, if it becomes a question, then we’ll communicate very transparently and openly about that. But I’m just going to leave it with the words that are in the statement. Sorry, was there a second part? <NAME>COLBY SMITH</NAME>. Yes. It’s just on characterizing the risks that you might actually have to do so later on. <NAME>CHAIR POWELL</NAME>. You know, I would just leave you with the words we have here. We are prepared to speed up or slow down the pace of reductions in asset purchases if it’s warranted by changes in the economic outlook. And, again, if we feel like something like that’s happening, then we’ll be very transparent about it. We wouldn’t want to surprise markets. We’ll say, in light of this factor or these factors, we are considering doing this, and then we would either do it or not do it. But so—but I’m not going to, you know, start making up examples of what that might be today. Thanks. <NAME>COLBY SMITH</NAME>. Thank you. <NAME>JOE PAVEL</NAME>. Thank you. Next one, Rachel Siegel at the Washington Post. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Thank you so much for taking our questions. You mentioned at the beginning that the Fed understands the difficulties that high inflation poses for individuals and families, especially those with limited means. What is your message to those families or consumers that are struggling with higher prices right now, and do you feel that your expectations around transitory inflation, that message is reaching them? Thank you. <NAME>CHAIR POWELL</NAME>. Yes. So, first of all, it is our job to—and we accept responsibility and accountability for inflation in the medium term. We’re accountable to Congress and to the American people for maximum employment and price stability. The level of inflation we have right now is not at all consistent with price stability. By the way, we’re also not at maximum employment, as I mentioned. So I would want to assure people that we will use our tools as appropriate to get inflation under control. We don’t think it’s a good time to raise interest rates, though, because we want to see the labor market heal further. And we have very good reason to think that that will happen as the Delta variant declines, so—which it’s doing now. So “transitory” is a word that people have had different understandings of. For some, it carries a sense of “short lived,” and that’s, you know, there’s a real time component—measured in months, let’s say. Really, for us, what “transitory” has meant is that if something is transitory, it will not leave behind it permanently or very persistently higher inflation. So that’s why we, you know, we took a step back from “transitory.” We said “expected to be transitory,” first of all, to show uncertainty around that—we’ve always said that, by the way, in other contexts; we just hadn’t done it in the statement—but also to acknowledge, really, that it means different things to different people. And then we added some language to really explain more what we’re talking about in paragraph two and paragraph three. We said that “supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases,” and we said, “Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation.” So we’re trying to explain what we mean and also acknowledging more uncertainty about “transitory.” So it’s, I mean, it’s become a word that’s attracted a lot of attention that maybe is distracting from our message, which we want to be as clear as possible. Ultimately, the only other thing I would say is, look, we understand completely that it’s particularly people who are living paycheck to paycheck or seeing higher grocery costs, higher gasoline costs—when the winter comes, higher heating costs for their homes. We understand completely what they’re going through. And, you know, we will use our tools over time to make sure that that doesn’t become a permanent feature of life. Really, that’s one of our principal jobs, along with achieving maximum employment. And that’s our commitment. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Chris Rugaber of the Associated Press. <NAME>CHRIS RUGABER</NAME>. Great. Thank you, Michelle. Thank you, Chair Powell. Well, I wonder if you could update us. You talked about getting back to full employment, and so could you update how you define that? I mean, you’ve, you know—a few months ago, yourself and other Fed officials talked about getting back to the pre-COVID labor market. There were even hints you might try to do something better than that. Now we heard talk of, as you mentioned, people retiring, and there’s talk of not being able to get back as—all the jobs back because of that and other trends. You did mention the prime-age folks. So can you give us some examples of things you're looking at, specifically, to measure full employment? Will you be looking at prime-age employment population ratio, for example, and, if so, do you need to see it get back to pre-COVID levels to achieve maximum employment, or is there something short of that that would work? Thank you. <NAME>CHAIR POWELL</NAME>. Thanks. So maximum employment is, it’s a broad—what would we say?—broad-based and inclusive goal that’s not directly measurable and changes over time due to various factors. You can’t specify a specific goal. So it’s taking into account quite a broad range of things, and, of course, employment—levels of employment—[and] participation are a part of that. But, in addition, there are other measures of what’s going on in the labor market, like wages is a key measure of how tight the labor market is—the level of quits, the amount of job openings, the flows in and out of various states. So we look at so many different things, and you make an overall judgment. Now, the temptation at the beginning of the recovery was to look at the data in February of 2020 and say, well, that’s the goal because we didn’t know any—that’s what we knew. We knew that was achievable in a context of low inflation. I think we’re in a, you know, we’re learning that. We have to be humble about what we know about this economy, which is still very, you know, COVID-affected, by the way. A lot of what we’re seeing in the last 90 days is because of Delta. We were on a path to a very different place. Delta put us on a different path. And we see these things. But, so I think we’re going to have to—ideally, we would have, we would see further development of the labor market in a context where there isn’t another COVID spike, and then we would be able to see, I think, a lot. We would see whether—how does participation react in that world, in that sort of post-COVID world? Right now, people are staying out of the labor market because of caretaking [and] because of fear of COVID to a significant extent. You know, we thought that schools reopening and elapsing unemployment benefits would produce some sort of additional labor supply. That doesn’t seem to have been the case, interestingly. So I think there’s room for a whole lot of humility here, as we try to think about what maximum employment would be. We’re going to have to see some time post-COVID so that we know—or post-Delta, anyway—to see what is possible. And I think the learning for those of us who lived through the last cycle is that, over time, you can get to places that didn’t look possible. Now, what we also have now, though, is, we have high inflation. So we have a completely different situation now where we have high inflation, and we have to balance that with what’s going on in the employment market. So it’s a complicated situation, and I would say, we will, we hope to achieve significantly greater clarity about where this economy is going and what the characteristics of the post-pandemic economy are over the first half of next year. <NAME>JOE PAVEL</NAME>. Thanks. We’ll go to Howard Schneider at Reuters. <NAME>HOWARD SCHNEIDER</NAME>. Thanks, and thanks for doing this. So, given that answer about employment, I would like to get back to Steve’s question a little bit. On a headline basis, just as it’s evolved this year, do you feel that the two tests on inflation have been met? <NAME>CHAIR POWELL</NAME>. Sorry, the two tests? <NAME>HOWARD SCHNEIDER</NAME>. The two tests in the statement—the guidance that it has to hit 2 percent and be on track to moderately be above 2 percent. Has the economy cleared that? <NAME>CHAIR POWELL</NAME>. That’s a decision for the Committee. I would put it to you this way. When we reach maximum employment, when we reach a state where labor market conditions are at maximum employment in the Committee’s judgment, it’s very possible that the inflation test will already be met. We’re aware that that language sounds, it sounds a little out of touch with what’s going on, but, you know, we’re not at maximum employment. When that is the case, we’ll look to see whether the inflation test is met, and there’s a good chance that it will be if you look at how inflation has evolved in the last year and a half. <NAME>HOWARD SCHNEIDER</NAME>. So, to follow up, so you’re not willing to commit that the current levels of inflation and their persistence have met “moderately” and “for some time.” So, given that, I mean, how should we wonder what “moderately” over and “for some time” mean? <NAME>CHAIR POWELL</NAME>. What I’m really saying is, that question is not before us right now. You know, we had the question on when to taper. We’ve now answered that question and the speed of it and all that. We have not focused on whether we meet the liftoff test, because we don’t meet the liftoff test now because we’re not at maximum employment. What I’m saying is, given where inflation is and where it’s projected to be, let’s say we do meet the maximum-employment test. Then the Committee—the question for the Committee at that time will be, has the inflation test been met? And, you know, I don’t want to get ahead of the Committee on that, but the answer may very well be “Yes, it’s been met.” But we’re not asking that question today, because we’re not running a liftoff test. We’re not evaluating the liftoff test today. We didn’t have that discussion at today’s meeting. We did talk about the economy and the development of the economy, but we didn’t ask ourselves whether the liftoff test is met, because, you know, it’s clearly not met on the maximum-employment side. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Matthew Boesler at Bloomberg. <NAME>MATTHEW BOESLER</NAME>. Hi, Chair Powell. Matthew Boesler with Bloomberg. So, when you’re looking at this question of assessing whether or not the U.S. economy is at maximum employment, do you have a framework for making that judgment that is independent of what inflation is doing? And, if not, does it kind of complicate that assessment, given all of the uncertainty about inflation right now and the inclination to believe that, you know, the high inflation we’re seeing is not related to capacity utilization in the labor market? Thank you. <NAME>CHAIR POWELL</NAME>. So we don’t actually define maximum employment as—we define it in terms of inflation, but, of course, there is a connection there. Maximum employment has to be a level that is consistent with stable prices. But that’s not really how we think about it. We think about maximum employment as looking at a broad range of things. You can’t just look at— unlike inflation, where you can have a number. But with maximum employment, you could be in a situation, hypothetically, where the unemployment rate is low, but there are many people who are out of the labor force and will come back in. And so you wouldn’t really be at maximum employment, because there’s this group that isn’t counted as unemployed. So we look at a range of things. So the thing is, by many measures, we are at a very tight labor market. I mentioned quits and job openings and wages and things. Many of them are signaling a tight labor market, but the issue is, how persistent is that? Because you have people who are held out of the labor market, you know, of their own—they’re holding themselves out of the labor market because of caretaking needs or because of fear of COVID, or, for whatever reason, they’re staying out. And it’s clear that there are, you know—with tremendous demand for workers and wages moving up, it does seem like we’re set up to go back to a higher job- creation rate. So that would suggest that you’re not at maximum employment. So, at the end of the day, it is a judgment thing. But, of course, at the end of it, it also has to be a level of employment that’s consistent with price stability. <NAME>MATTHEW BOESLER</NAME>. And if I could just follow up briefly, you know, you’ve talked a little bit about this possibility that the two goals might be in tension and how you would have to balance those two things. Could you talk a little bit about what the Fed’s process for balancing those two goals would be in the event that, say, come next year, you decide there’s a serious risk of persistent inflationary pressures despite ongoing employment shortfalls? <NAME>CHAIR POWELL</NAME>. Yes. I mean, again, it’s a risk-management thing. It’s not—I can’t reduce it to an equation, but, ultimately, it’s about risk management. So you want to be in a position to act, to cover the full range of plausible outcomes, not just the base case. And in this case, the risk is skewed. For now, it appears to be skewed toward higher inflation. So we need to be in a position to act in case it becomes necessary to do so or appropriate to do so, and we think we will be. So that’s how we’re thinking about it. And I think, though, that, judgmentally, too, it’s appropriate to be patient. It’s appropriate for us to see what the labor market and what the economy look like when they heal further. We know that we were on a path to a different place, as I mentioned, when Delta arrived. And Delta stopped, it stopped job creation. It stopped that transition away from a goods-focused economy where there’s excess demand for goods because there—services are not available. People are not traveling. That transition itself could help bring inflation down, because, presumably, people would spend a little less on goods while they start spending more on travel and all sorts of travel services and things like that. So we want to see that healthy process unfold as we decide what the true state of the economy is, and we think it will evolve in a way that will mean lower inflation. Bottlenecks should be abating. We start to see that now with some of them, but, overall, they haven’t gotten better overall, and, you know, we’re very aware of that. So that’s really how we’re thinking about it. We’re thinking that time will tell us more. In the meantime, we don’t think it’s time to raise rates now. You know, if we do conclude that it’s necessary to do so, then we’ll be patient, but we won’t hesitate. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Edward Lawrence at Fox Business. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman, for taking the call. So the Federal Reserve—I want to talk about climate change. The Federal Reserve released a statement today—says “the Federal Reserve supports the efforts . . . to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory” outcomes. Is this putting us on the path to regulate what banks can offer loans on or invest in, like coal plants or fossil fuels? <NAME>CHAIR POWELL</NAME>. So that’s not a decision for bank regulators or for any agency. That’s a decision for elected representatives. So we feel that any role that we have—and we do think we have a role in climate change. It relates to our existing mandates, and our existing mandates are, really, prudential regulation of financial institutions. We expect them, and the public will expect us to expect them, to understand and be in a position to manage their risks. So that’s physical risk, and it’s transition risk for climate. And, by the way, the large financial institutions are doing this already, and, you know, we think that’s right within our mandate. There’s also a financial stability question, the overall stability of the financial system. And so, from that standpoint, we can do research. We can try to help understand what will the pathways be through which climate change effects the economy—both physical risk and transition risk. That’s what we can do, and that’s what we will do. And we’ll do it well. Within the frame of our existing mandates, we’ll do it well. We’re not the people who will decide the national strategy on climate change. That has to be elected people, and not so much us. We feel like we have that narrow mandate, and we will do it well. <NAME>EDWARD LAWRENCE</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Great, thank you. Victoria Guida at Politico. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. So the Fed recently announced that there is going to be new conflict-of-interest rules for investments by Fed officials, and this follows, obviously, the resignation of two regional Fed presidents. And I’m just wondering, do you think that there is more that you will need to do to rebuild the credibility of the Fed, such as, you know, requiring officials to put their assets in blind trusts? And also, if you could speak to whether you have any concerns that any rules or laws were broken by Fed officials. Thank you. <NAME>CHAIR POWELL</NAME>. So we, you know, we—let me just say that this system, the ethics system we had in place had been in place for decades and had, as far as we know, served us well, and then that was no longer the case. And so we had no moment of denial about that. As a group, we stepped in, and we took the actions that we took. And, you know, within one FOMC cycle, we announced a new set of rules to, you know, to try to put us back where we need to be, which is, we need to have the complete trust of the American people that we’re working in their interest all the time—absolutely critical to our work, as it is for any government agency. And I feel like this called that into question. So we reacted, I would characterize it, strongly and forcefully. If there were other things that we could do that were reasonable, we would certainly do them. So you asked me about blind trusts. You know, the overall authority for ethics around these issues in the federal government is the Office of Government Ethics, OGE. And they have a long-held position which is not favorable to blind trusts. They do not encourage them. They don’t think they’re effective. They think they’re cumbersome. And they think there are better ways to get at the things that need to be done. And those are the things that we’re actually doing. So I don’t know that there are any blind trusts, for that reason, because they are the, they’re the regulator. They say this on their website, if you look. In terms of laws broken, you know, I asked the inspector general to look to see whether there were rules broken and whether there were laws broken, and I won’t speculate on that. But that is with the inspector general now and, of course, out of my hands. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Mike McKee at Bloomberg. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, the critics of your patience policy argue that, given the long and variable lags with which monetary policy works, that you are likely to end up, given inflation, by having to raise rates faster and farther than you would have liked and, therefore, send the economy into recession. Given the fact that, basically, your forecast has been chasing inflation over the last year, and now you’re talking about it not coming down until the second or third quarter, why would they be wrong in thinking that? <NAME>CHAIR POWELL</NAME>. Well, so, let me say what’s happened—and we’re very, very straightforward about it—is that inflation has come in higher than expected, and bottlenecks have been more persistent and more prevalent. We see that just like everybody else does, and we see that they’re now on track to persist well into next year. That was not expected—not expected by us, not expected by other macro forecasters. Now, let me say, you know, it’s difficult enough to just forecast the economy in normal times. When you’re talking about, you know, global supply chains in turmoil, it’s a whole different thing. And you’re talking about a pandemic that’s holding people out of the labor force for reasons that we can sample, but we don’t have a lot of experience with this. So it’s very, very difficult to forecast and not easy to set policy. So we have to set policy, though. So that’s what we’re doing. And, you know, so, to look at your question this way, I don’t think that we’re behind the curve. I actually believe that policy is well positioned to address the range of plausible outcomes, and that’s what we need to do. I do think it would be premature to raise rates today. That’s not—I don’t think that’s controversial. Certainly, I don’t know anyone arguing for that today. And the reason is that there’s still ground to cover to get to maximum employment. And we don’t want to stop that when there’s good reason to think—there’s still good reason to think, although it’s been delayed, clearly, there’s good reason to think that the economy will reopen, particularly if we do get past, you know, significant outbreaks of COVID. That’s when we’re really going to see what the characteristics of the labor market are. And, you know, I think, you know, the bottlenecks that we’re seeing in global supply chains around goods and, frankly, now at our own domestic ports, because demand is stronger than the capacity of those ports—those things are going to work themselves out. We have a flexible economy. It’ll take some time, but, you know, it took—you know, the experts managed to create a vaccine faster than, certainly, than I expected. And I think this stuff will work itself out over the course of next year. That is my baseline understanding, and that’s a very widely held one among people. But, you know, we are prepared for different eventualities, and we will use our tools to achieve price stability and maximum employment. And we’re going to let the data lead us to where we need to go. Our policy will adapt—and has already adapted—to the changing understanding of inflation and of bottlenecks and the whole supply-side story—which is also partly a demand story. So our policy will continue to adapt as is appropriate. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Nancy Marshall-Genzer at Marketplace. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Thanks for taking our questions. So you announced that the Fed is going to taper at a rate of, starting at $15 billion a month, and that’s more than twice the pace of the last taper. So why are you tapering faster this time? <NAME>CHAIR POWELL</NAME>. The economy is in quite a different place than when we tapered back in, I guess it was, 2013. We were much farther away from maximum employment. Inflation was much lower. This is an economy where demand is very, very strong, very strong, and job openings substantially exceed the number of unemployed people. So the need for further stimulus is far less than it was in 2013, where we still had quite a ways to go. I mean, after we began that taper, it was still many years before we reached what I would characterize as conditions consistent with maximum employment, let alone price stability. So this is quite a different situation, and, you know, the Committee unanimously felt today that we had met the test that we’d articulated, and this was appropriate. And this is faster than, you know, than what people had expected six months ago. It’s earlier and faster, and that’s because our, as I mentioned, our policy has been adapting to the situation as it evolves, as it’s clarifying itself, and that’s partly because we see inflation coming in higher—so. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Mike Derby. <NAME>MICHAEL DERBY</NAME>. Yes, thank you for taking my question. I wonder if the Fed has given any thoughts yet to the endgame for the balance sheet in terms of, you know, once you get the taper process complete, will you hold the balance sheet steady, or will you allow it to start passively winding down? And then, in a related question, do you have any greater insight into what Fed bond buying actually does for the economy? In terms of its economic impact, have you been able to, you know, measure it or quantify it in any fashion, you know, because I’m sure you know there’s often been questions about, what is bond buying actually doing to help the economy? <NAME>CHAIR POWELL</NAME>. Sure. So in terms of the balance sheet, those questions that you mention—we haven’t gone back to them. Now that we’ve tapered, I expect that that’s exactly what we’ll do in coming meetings. And we’ll do it in an orderly fashion, and we’ll talk about reinvestment and all those things. And we don’t have to make decisions on those yet. But, you know, typically, when we’re doing a new subject like that, we’ll have a series of briefings and discussions. And that’s what we will now begin to do. In terms of the effect of asset purchases on the economy, so, there’s a tremendous amount of research and scholarship on this. And, you know, you can kind of—you can find different people coming out with different views. But I would say, the most mainstream view would be that you’re at the effective lower bound, so how do you affect longer-term rates? There are two ways. One, so you can’t lower rates—let’s say you can’t lower rates any further, hypothetically. So you can give forward guidance. You can say, we’re going to keep the rates low for a period of time, either [for] a specific period, [or] until certain conditions are met. The markets will do the math, and that’ll have an effect on longer-term borrowings even, you know, 10, 30 years out kind of thing. So that’s one thing. The other thing you can do is, you just go buy those securities, buy longer-term securities. That will drive down longer-term rates and hold them lower, and, you know, rates right across the, right across the rate spectrum matter for borrowers. So lower rates encourage more borrowing, encourage more economic activity. People—you can service your debt. You have more free cash flow. You know, it’s not different from what we do at the short end. So that was discussed long before anybody did it. That was—I think Milton Friedman said that that was what you could do if you were pinned at the lower bound, many, many years ago. So, anyway, that’s how it’s supposed to work. And, you know, it’s quite hard to be precise about these things because, you know, you only have one economy, and you can’t run two different economies right next to each other and do a scientific experiment. But most people find—most of the findings are that it does support economic activity in the way that you would expect, which is to say, at the margin, more economic activity with lower rates, which is why we do what we do. More accommodative financial conditions lead to more economic activity, over time, with a lag. So I think that’s the main finding I would say on QE. <NAME>MICHELLE SMITH</NAME>. Thank you. We’re going to go to Paul Lamonica at CNN. <NAME>PAUL LAMONICA</NAME>. Chair Powell, Chair Powell, you’ve addressed already questions about the stock purchases that took place from some of the regional Fed presidents and, you know, addressing the American people to make sure that they can trust the Fed. I was wondering, also, in light of the fact that, you know, we now have questions about your own future, whether or not President Biden will nominate you for a second term, what would you say—to the President and to senators that, potentially, you know, will be voting on a renomination—about this, specifically with regards to your future as Fed Chair for a possible second term? <NAME>CHAIR POWELL</NAME>. So I’m not going to—I won’t have any—I will answer your question, Paul, but I’m not going to have any comment whatsoever on the renomination process at all. <NAME>PAUL LAMONICA</NAME>. Fair enough. <NAME>CHAIR POWELL</NAME>. I will say, though, that I have briefed Administration officials, and I’ve briefed people on Capitol Hill in detail about what we did and why we did it, and seeking their feedback, getting their reaction. But, you know, this is—part of my job is—Congress has oversight over the Fed, and we take that very seriously. So if you’re on our, one of the two committees that has oversight over us, then I’m in regular contact with you, probably. And, you know, when something like this comes up, I’m on the phone. I’m offering to meet with you and explain it to you and answer your questions and identify any concerns people might have. That’s just part of my job. So I do that. I don’t talk about particular conversations. But you can assume I’ll always do that. And I certainly did it in this case. <NAME>PAUL LAMONICA</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Hannah Lang at the American Banker. <NAME>HANNAH LANG</NAME>. Hi. I wanted to ask about the supplementary leverage ratio. Is the Fed still planning on taking comment on ways to permanently address that, and how concerned are you, ultimately, about banks’ willingness to intermediate in the Treasury markets without a permanent fix? <NAME>CHAIR POWELL</NAME>. So I don’t have anything for you on supplemental leverage ratio right now. We are looking at ways to, if there are ways we can address liquidity issues through that channel. We’re also—we also have a—there’s a working group headed by [the] Treasury about, over Treasury [securities] markets, and what happened in the acute phase of the pandemic, and what structural things may need to be done. So that would be part of that workstream, and I know that there’s a lot going on. I’m not sure when that report will be out. So it’s work under way. That’s one of the many issues that are part of that, along with things like central clearing of Treasuries, greater central clearing, and, you know, many other ideas. It’s important that we have a liquid Treasury [securities] market. It’s a huge public benefit that we do, and, you know, I think we need to do those things that enable that, you know, while also assuring the safety and soundness of our largest financial institutions, who tend to be the main dealers. So we have to make sure that that’s always a first order of concern as well. <NAME>HANNAH LANG</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Brian Cheung at Yahoo Finance. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. Brian Cheung, Yahoo Finance. So, just to expand on the ethics conversation, you talked about how you engage with people on Capitol Hill and in the Administration. You talked about what you’ve done already, but I’m just wondering if you can take a step back and just assess whether or not there was reputational damage as a result of that, either from the public’s view or from the financial community’s view of the Federal Reserve’s independence. And then, secondly, do you look back on the whole episode and have thoughts on your individual responsibility in preventing something like this from having happened? <NAME>CHAIR POWELL</NAME> You know, I think it’s too soon to say what the reputational damage is. I think, from the very beginning, my reaction was: We need to deal with this straightforwardly, transparently, and forcefully. And that’s what we’re going to do. I mean, it’s, it means everything to me that we do whatever it takes to make sure that nothing like this happens again, and I like to think we’ve made a real good start on that. If you think about it, you cannot execute a trade unless it’s precleared, and then you have to say, “Execute.” It’s not even a trade. Really, there’s no trading going on. This is for investment and, you know, getting liquidity for life’s expenses. But you then have to wait 45 days to actually execute that sale or purchase. So I think it’s a pretty good system. We’ll always be looking to make it better. So in terms of our independence, you know, look, I think we will address this, and I think we have. And I like to think it’s enough, but it’s going to, you know—we’re just beginning to implement it. We have to write the rules, which we’re doing, you know, as quickly as possible. We need more people. We’re going to have to resource this much more significantly here at the Board, and also, we’re going to need appropriate technology, because, you know, the Fed has more than—the System has more than 30,000 employees. Not all of them, far few of them, will be covered by this, but the senior officers, who will be covered by this, will, you know, will have to have technology access, and it’s going to have to work efficiently. So there’s a lot of work to do to implement. You know, again, I would just say, this system has been in place for decades. And it was in place when I took over. It was in place for the last, at least the last three or four Chairs. And, you know, it was what it was. And, you know, it proved to have weaknesses in it. And part of that was, it wasn’t uniformly enforced across the System. I’m a big believer in the value of the Federal Reserve System and the Reserve Banks. But you had 12 different ethics officers at 12 different Banks. And you had ethics people here. And, you know, compliance wasn’t, it wasn’t all exactly the same. It was a little bit different and uneven, and also, the rules were— you know, we didn’t imagine the problems that happened. And they may have actually been—I don’t know this—but they may actually have been in compliance with the specifics of our rules. They were clearly not in compliance with the part of our rules that said, don’t do anything that would create that appearance. I mean, that’s clear. This was a bad appearance. So, anyway, what can we do? We are where we are. It happened, and we just have to deal with it forthrightly and transparently and “own” it and step up to this, you know, meet this moment. I’m totally committed to doing that. And, again, if there are better ideas, I’d love to hear them, but I think we have so far made a good start. <NAME>BRIAN CHEUNG</NAME>. When you say you spoke with Administration officials, did that include the President? <NAME>CHAIR POWELL</NAME>. I’m not going to answer who I spoke to at all. I just, I’m not going to give you any names, so don’t take that as a “yes” or “no.” I’m just not going to start down that road. <NAME>MICHELLE SMITH</NAME>. Okay. Thank you. We’re going to go to Jeff Cox for the last question. <NAME>JEFF COX</NAME>. Yes, thank you. Chair, I just want to dig a little bit deeper on employment. We’ve seen what’s been called the great resignation, folks leaving their jobs in record numbers. Is there any feeling there that maybe you’ve been accused of “fighting the last war”—that perhaps the labor dynamics have changed in the post-COVID environment and that full employment may not look like what it looked like before? <NAME>CHAIR POWELL</NAME>. Yes. So, what’s happening is, people are leaving their jobs. They’re quitting their jobs in all-time-high numbers—but, in many cases, going back into employment and getting higher wages. So a lot of the higher wages you’re seeing are for job switchers rather than incumbents. So that’s just, that’s a sign of a really strong labor market, as opposed to people just running off and quitting. There have also been—there are a significant number of retirements, and we’ll just have to see what that means. So, toward the end of the last cycle, which was the longest in our recorded economic history, we did see labor force participation moving up well above what economists estimate was the trend, and part of that was people staying in the labor force or just not retiring at the rates they were expected to retire. So maybe this was just catch-up on that. I am a believer that, over time, you won’t know how far—you won’t know what can happen with labor force participation in advance. You’re just going to have to give it some time, because we saw that over and over again. There are things that we can, where we can say, you know, this is where the limit is. Labor force participation is a much more flexible subject for me, and so I do think we need to be humble about what the limits are of labor force participation. But we expect labor force participation to pick up. We don’t know the pace at which it will do so. So in terms of full employment, as I discussed earlier, I think, at the very beginning of the recovery, the natural thing to do was to look back at labor conditions, labor market conditions in February of 2010, at the end of the longest expansion in our history. There was so much to like about that labor market, a really historically good labor market—never perfect, but a good labor market. We’re in a different world now. This is a—it’s just very different. The pandemic recession was the deepest, and the recovery has been the fastest. And wages didn’t really go down. And, you know, real incomes were more than fully replaced by fiscal policy [support]. All of this is completely unusual. You know, an economy where inflation was driven by services is now inflation where—all the inflation is in goods, which have had negative inflation for a quarter-century. So you ask about full employment. I think we have to—I’m very open to the thought that it’s going to be an empirical question of where it is located, and we’re just going to learn more and more. I mean, one thing we’ll learn, I think, I hope we’ll learn in the next, in the near term is, once the Delta variant really does continue to decline, what’s going to happen to employment? Are we going to start to see over the winter, you know, significant increases in jobs again? If you look back, the three-, six-, and nine-month average job creation is between 550,000 and 600,000. So if you think of that as a stronger—you don’t have to think back to the million-job months of June and July. You can just think, okay, 550 to 600—if we should get back on that path, then we would be making good progress, and we like to see that, of course. So we’ll know so much more. And, believe me, we understand. It’s a different world in so many ways. And we’re very open to that. <NAME>MICHELLE SMITH</NAME>. Thank you, Mr. Chair, and thank you all for joining us today. <NAME>CHAIR POWELL</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today, in support of these goals, the Federal Open Market Committee kept interest rates near zero and updated its assessment of the progress that the economy has made toward the criteria specified in the Committee’s forward guidance for interest rates. In addition, in light of the strengthening labor market and elevated inflation pressures, we decided to speed up the reductions in our asset purchases. As I will explain, economic developments and changes in the outlook warrant this evolution of monetary policy, which will continue to provide appropriate support for the economy. Economic activity is on track to expand at a robust pace this year, reflecting progress on vaccinations and the reopening of the economy. Aggregate demand remains very strong, buoyed by fiscal and monetary policy support and the healthy financial positions of households and businesses. The rise in COVID cases in recent weeks, along with the emergence of the Omicron variant, pose[s] risks to the outlook. Notwithstanding the effects of the virus and supply constraints, FOMC participants continue to foresee rapid growth. As shown in our Summary of Economic Projections (SEP), the median projection for real GDP growth stands at 5.5 percent this year and 4 percent next year. Amid improving labor market conditions and very strong demand for workers, the economy has been making rapid progress toward maximum employment. Job gains have been solid in recent months, averaging 378,000 per month over the last three months. The unemployment rate has declined substantially—falling 6/10 of a percentage point since our last meeting and reaching 4.2 percent in November. The recent improvements in labor market conditions have narrowed the differences in employment across groups, especially for workers at the lower end of the wage distribution, as well as for African Americans and Hispanics. Labor force participation showed a welcome rise in November—but remains subdued, in part reflecting the aging of the population and retirements. In addition, some who otherwise would be seeking work report that they are out of the labor force because of factors related to the pandemic, including caregiving needs and ongoing concerns about the virus. At the same time, employers are having difficulties filling job openings, and wages are rising at their fastest pace in many years. How long the labor shortages will persist is unclear, particularly if additional waves of the virus occur. Looking ahead, FOMC participants project the labor market to continue to improve, with the median projection for the unemployment rate declining to 3.5 percent by the end of the year. Compared with the projections made in September, participants have revised their unemployment rate projections noticeably lower for this year and next. Supply and demand imbalances related to the pandemic and [to] the reopening of the economy have continued to contribute to elevated levels of inflation. In particular, bottlenecks and supply constraints are limiting how quickly production can respond to higher demand in the near term. These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus. As a result, overall inflation is running well above our 2 percent longer-run goal and will likely continue to do so well into next year. While the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, price increases have now spread to a broader range of goods and services. Wages have also risen briskly, but, thus far, wage growth has not been a major contributor to the elevated levels of inflation. We are attentive to the risks that persistent real wage growth in excess of productivity [growth] could put upward pressure on inflation. Like most forecasters, we continue to expect inflation to decline to levels closer to our 2 percent longer-run goal by the end of next year. The median inflation projection of FOMC participants falls from 5.3 percent this year to 2.6 percent next year; this trajectory is notably higher than projected in September. We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. We will be watching carefully to see whether the economy is evolving in line with expectations. The Fed’s monetary policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people. In support of these goals, the Committee reaffirmed the 0 to ¼ percent target range for the federal funds rate. We also updated our assessment of the progress the economy has made toward the criteria specified in our forward guidance for the federal funds rate. With inflation having exceeded 2 percent for some time, the Committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment. All FOMC participants forecast that this remaining test will be met next year. The median projection for the appropriate level of the federal funds rate is 0.9 percent at the end of 2022, about ½ percentage point higher than projected in September. Participants expect a gradual pace of policy firming, with the level of the federal funds rate generally near estimates of its longer-run level by the end of 2024. Of course, these projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. At today’s meeting, the Committee also decided to double the pace of reductions in its asset purchases. Beginning in mid-January, we will reduce the monthly pace of our net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities. If the economy evolves broadly as expected, similar reductions in the pace of net asset purchases will likely be appropriate each month, implying that increases in our securities holdings would cease by mid-March—a few months sooner than we anticipated in early November. We are phasing out our purchases more rapidly because, with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support. In addition, a quicker conclusion of our asset purchases will better position policy to address the full range of plausible economic outcomes. We remain prepared to adjust the pace of purchases if warranted by changes in the economic outlook. And, even after our balance sheet stops expanding, our holdings of securities will continue to foster accommodative financial conditions. 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 complete the recovery in employment and achieve our price- stability goal. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Mr. Chair, we’ll go to Rachel from the Washington Post. <NAME>RACHEL SIEGEL</NAME>. Thank you very much, Michelle. And thank you, Chair Powell, for taking our questions. The latest FOMC materials say that the FOMC thinks it will be appropriate to keep rates near zero until labor market conditions reach levels consistent with maximum employment. And there are also three rate hikes penciled in the projections for next year. In order to set up those hikes, what will maximum employment have to look like? When will you know that that threshold has been met? And how will that be communicated? Thank you. <NAME>CHAIR POWELL</NAME>. So maximum employment, if you look at our Statement on Longer- Run Goals and Monetary Policy Strategy, maximum employment is something that we look at a broad range of indicators. And those would include, of course, things like the unemployment rate, the labor force participation rate, job openings, wages, flows in and out of the labor force in various parts of the labor force. We’d also tend to look broadly and inclusively at different demographic groups and not just at the headline and aggregate numbers. So that’s a—that’s a judgment for the Committee to make. The Committee will make a judgment that we’ve achieved labor market conditions consistent with maximum employment when it makes that—it is, admittedly, a judgment call because it’s a range of factors. Unlike inflation, where we have one number that sort of dominates, it’s a broad range of things. So, as I mentioned in my opening remarks, in my view, we are making rapid progress toward maximum employment. And you see that, of course, in some of the factors that I mentioned. <NAME>MICHELLE SMITH</NAME>. Great, thank you. Steve at CNBC. <NAME>STEVE LIESMAN</NAME>. All right. Thank you, Mr. Chairman. My question is: If—It’s often said that monetary policy has long and variable lags. How does continuing to buy assets now, even though it’s at a slower pace, address the current inflation problem? Won’t the impact of today’s changes not really have any impact for six months or a year down the road on the current inflation problem? And aren’t you actually lengthening that time by continuing to buy assets such that it could be not until the long and variable lag after you end purchases sometime in March that you’ll start to have any impact on the inflation problem? <NAME>CHAIR POWELL</NAME>. So, on the first part of your question, which is, “Why not stop purchasing now?,” I would just say this: We’ve learned that, in dealing with balance sheet issues, we’ve learned that it’s best to take a careful sort of methodical approach to make adjustments. Markets can be sensitive to it. And we thought that this was—this was a doubling of the speed. We’re basically two meetings away now from finishing the taper. And we thought that was the appropriate way to go. So we announced it, and that’s what will happen. You know, the question of long and variable lags is, is an interesting one. That’s, that’s Milton Friedman’s famous statement. And I do think that in this world, where everything is— where the global financial markets are connected together, financial conditions can change very quickly. And my own sense is that they get into—financial conditions affect the economy fairly rapidly, longer than the traditional thought of, you know, a year or 18 months. Shorter than that, rather. But in addition, when we communicate about what we’re going to do, the markets move immediately [in response] to that. So financial conditions are changing to reflect, you know, the forecasts that we made and basically, which was, I think, fairly in line with what markets were expecting. But financial conditions don’t wait to change until, until things actually happen. They, they change on the expectation of things happening. So I don’t think it’s a question of having to wait. <NAME>STEVE LIESMAN</NAME>. Can I just follow up? Thinking about having to wait, is it still the policy, or the position, of the Committee that you will not raise rates until the taper is complete? Thank you. <NAME>CHAIR POWELL</NAME>. Yes. The sense of that, of course, being that buying assets is adding accommodation and raising rates is removing accommodation. Since we’re two meetings away from completing the taper, assuming things go as, as expected, I think if we wanted to lift off before then, then, then what we—you would stop the taper potentially sooner. But it’s not something I expect to happen. But I do—I do not think it would be appropriate, and we—and we don’t find ourselves in a situation where we—where we might have to raise rates while we’re still purchasing assets. <NAME>MICHELLE SMITH</NAME>. Okay, let’s go to Colby at the FT. <NAME>COLBY SMITH</NAME>. Thank you, Michelle. Chair Powell, I’m curious exactly how much distance you think there should be between the end of the taper and the first interest rate increase. Back in 2014, the guidance was—that was given was for the fed funds rate to remain at the target level for a considerable time after the end of the asset purchase program. Is that an approach you support now? Or does the current economic situation warrant something a bit different? Thank you. <NAME>CHAIR POWELL</NAME>. So we, we haven’t made any decision of that nature. And so, no, I wouldn’t say that’s our position at all. We really haven’t taken a position on that. I will say that we did talk today–We had our first discussion about the balance sheet, for example. And we went through the way—the sequence of events regarding the runoff and that sort of thing with the balance sheet, last time. And I think people thought that was an interesting discussion. They thought that it was informative, but people pointed out that this is a significantly different economic situation that we have at the current time, and that those—the differences that we see now would tend to influence how we think about the balance sheet. And the same thing would be true about raising rates. I don’t—I don’t foresee that there would be that kind of very extended wait at this time. The economy is so much stronger. I was here at the Fed when we lifted off the last time. And the economy is so much stronger now, so much closer to full employment. Inflation is running well above target, and growth is well above potential. There wouldn’t be the need for that kind of long delay. Having said that, I—you know, we’ll make this decision in coming meetings, and it’s not—it’s not a decision that the Committee has really focused on yet. <NAME>MICHELLE SMITH</NAME>. Let’s go to Nick at the Wall Street Journal. <NAME>NICK TIMIRAOS</NAME>. Thank you, Nick Timiraos at the Wall Street Journal. Chair Powell, in March you answered a question about maximum employment like this: You said 4 percent would be a nice unemployment rate to get to, but it’ll take more than that to get to maximum employment. More recently, you have hinted at a possible distinction between the level of maximum employment that’s achievable in the short run versus in the long run. Has your view of the level of maximum employment changed this year? And if so, how? And how close is the economy right now to your judgment of the short-run level of maximum employment? Thank you. <NAME>CHAIR POWELL</NAME>. Right. So the—you know, the thing is, we’re not going back to the same economy we had in February of 2020. And I think early on, that was—the sense was that that’s where we were headed. The post-pandemic labor market, and the economy in general, will be different. And the maximum level of employment that’s consistent with price stability evolves over time within a—within a business cycle and over a longer period, in part reflecting [the] evolution of the factors that affect labor supply, including those related to the pandemic. So I would say: Look, we’re, we’re at 4.2 percent now and it’s been—the unemployment rate has been dropping very quickly. So we’re already in the vicinity of 4 percent. The way in which—The important metric that has been disappointing really has been labor force participation, of course, where we had widely thought—I had certainly thought— that, last fall, as unemployment insurance ran off, as vaccinations increased, [and] as schools reopened, that we would see a significant surge, if you will, or at least a surge, in labor force participation. So we’ve begun to see some improvement. We certainly welcome the 2/10 improvement that we got in the November report. But I do think that it’s—it feels likely now that the return to higher participation is going to take longer. And, in fact, that’s, that’s been the pattern in past cycles—that labor force participation has tended to recover in the wake of a strong recovery in unemployment, which is what we’re getting right now. So you—it could well have been that this cycle was different because of the short nature of it and the very strong—the number of job openings, for example, you would have thought that that would have pulled people back in. But, really, it’s the pandemic, it’s a range of factors. But the reality is, we don’t have a strong labor force participation recovery yet, and we may not have it for some time. At the same time, we have to make policy now. And inflation is well above target. So this is something we need to take into—take into account. <NAME>NICK TIMIRAOS</NAME>. If I could—if I could follow up, you’ve talked recently about risk management. And so does that mean that the Committee might feel compelled to raise interest rates before you’re convinced that you’ve achieved the employment test in your forward guidance? <NAME>CHAIR POWELL</NAME>. So this is—this is not at all a decision that the Committee has made. But you’re really asking a question about how our framework works. And, yes, there is a— there’s a provision, it used to be called the “balanced approach” provision, that says, in effect, that in situations in which the pursuit of the maximum-employment goal and [the pursuit of] the price-stability goal are not complementary, we have to take account of the distance from the goal and the—and the speed at which we’re approaching it. And so that is, in effect, an “off-ramp” which could, in concept, be taken and it’s in our framework, it’s been in our framework a long time. I’ve talked about it on a number of occasions. It, it is a provision that would enable us to, in this case, because of high inflation, move before achieving maximum employment. Now, we’re—as I said, we’re making rapid progress toward maximum employment in my—in my thinking, in my opinion. And I don’t at all know that we will—that we’ll have to invoke that, that paragraph. But just as a factual matter, that is part of our framework—and has been, really, for a very long time. <NAME>NICK TIMIRAOS</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thanks. We’ll go to Howard at Reuters. <NAME>HOWARD SCHNEIDER</NAME>. Thanks, as usual. So I guess I gotta ask about the elephant in the room, which is the Omicron variant. You know, this seems to already be pushing one of your colleagues, the Bank of England, off its course. Things have evolved very fast there. Hasn’t quite hit the shores of the U.S. in full force yet. But people seem to expect it to. So I’m wondering, in your feelings about this, are you convinced that this is going to be perhaps a more infectious, but less serious, variant of the virus? Or are you simply confident that the U.S. economy can continue its divorce from the pandemic? <NAME>CHAIR POWELL</NAME>. Well, I think there’s a lot of uncertainty, which is why we—why we called it out in our statement, our postmeeting statement, as a risk. It’s—we, we follow the same experts and I—we, we talk privately to the same experts that everyone else does and read the same articles in the paper and the same research and, you know, so the—you mentioned the early assessment is highly transmissible, perhaps not as severe, some continuing protection from, from existing vaccines and also existing immunity from having had the disease. That’s a first draft. We’re a long way from knowing what it will turn out to be. It may well come to the United States and replace Delta as the dominant variant fairly quickly. That could easily happen. I think there’s another step there, though—which is what’s going to be the effect on the economy. And that will depend, you know, on how much it suppresses demand as opposed to suppressing supply. It is not clear how big the effects would be on either inflation or growth or hiring on top of what’s already going on, which is quite a strong, you know, wave of Delta that’s hitting large parts of the country across the northern United States and all the way to the eastern seaboard and now coming down. We’re having quite a wave of Delta. So coming in on top of that, again, it’s very difficult to say what the economic effects would be. I do think, wave upon wave, people are learning to live with this. More and more people are getting vaccinated. So [vaccinated] people who get the new variant, it affects them much less than it tends to affect, in the aggregate, people who are not vaccinated. So the more people get vaccinated, the less the economic effect. It doesn’t mean it won’t have an economic effect. Delta had an effect of slowing down hiring. And it actually—it had an effect on global supply chains. And that sort of—that hurt the process of the global supply chains getting worked out. So it can have an economic effect. I just think, at this point, we don’t know much. We’ll know a whole lot more in three weeks, and we’ll know more than that in six weeks. <NAME>HOWARD SCHNEIDER</NAME>. But if I can follow up: You’re clearly, sort of from a risk standpoint, comfortable putting away one of your tools pretty soon. Which sort of implies that whatever Omicron brings, you’re comfortable the economy can handle it without quantitative easing. <NAME>CHAIR POWELL</NAME>. Yes. Yes, look, I think—if you look at the state of the economy and the amount—the strength of demand, the strength of just overall demand, and the strength of demand for labor, look at inflation, look at wages. I think moving, you know, moving forward the end of our taper by a few months is really—is really an appropriate thing to do. And I think, really, Omicron doesn’t really have much to do with that. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Let’s go to Jeanna at the New York Times. <NAME>JEANNA SMIALEK</NAME>. Hey, Chairman Powell. Thanks for taking our questions. I wonder if you could talk a little bit about what prompted your recent pivot toward greater wariness around inflation. <NAME>CHAIR POWELL</NAME>. Sure. So I guess I would go back and—you know, it’s been a continual process, really. Inflation really popped up, right? In the late spring last year. And we had a view—it was very, very widely held in the forecasting community—that this would be temporary. It was quite narrow, you know, a limited number of factors were causing it. And there was a decent amount of evidence to support that view, that it would be temporary or transitory, as we said. Certainly, we had five months of declining month on month—monthly readings of inflation, but we didn’t see much in the way of progress on labor supply or on other supply-side issues. Then in September, I’d say after Labor Day, we started to see—it started to become clear that this was both larger in its effect on inflation and more persistent. And, of course, I said so on many occasions, and one of the consequences of that is that we move the taper forward. We moved the taper forward and we—and it’s a much faster taper than had been planned. So we’ve been adapting—I’ve been saying we’re adapting our policy. So coming to your real question, we got the ECI reading on the eve of the November meeting—it was the Friday before the November meeting—and it was very high, 5.7 percent reading for the employment compensation index for the third quarter, not annualized, for the third quarter, just before the meeting. And I thought for a second there whether we—whether we should increase our taper, [We] decided to go ahead with what we had—what we had “socialized.” Then, right after that, we got the next Friday after the meeting, two days after the meeting, we got a very strong employment report and, you know, revisions to prior readings and, and no increase in labor supply. And the Friday after that, we got the CPI, which was a very hot, high reading. And I, honestly, at that point, really decided that I thought we needed to—we needed to look at, at speeding up the taper. And we went to work on that. So that’s, that’s really what happened. It was essentially higher inflation and faster—turns out much faster progress in the labor market. Really, what’s happening is the unemployment rate is catching up—seems to be catching up—with a lot of the other readings of a tight labor market, 6/10 [decline] over one cycle. So that’s really what happened and, you know, widely supported in the Committee today, as you can see—unanimous vote—but beyond that I think widely, widely supported, you know, this, this move. <NAME>JEANNA SMIALEK</NAME>. If I could just follow up quickly, you noted that the ECI was one of the things that made you nervous, but you also said earlier that you don’t see signs that wages are actually factoring into inflation yet. And I guess I wonder how you think about sort of the wage picture as, as you’re making these assessments. <NAME>CHAIR POWELL</NAME>. Right. So—but I said—you, you quoted me correctly. It’s, it’s—so far, we don’t see—wages are not a big part of the high-inflation story that we’re seeing. As you look forward, let’s assume that the goods economy does sort itself out, and supply chains get working again, and maybe there’s a rebalancing back to services and all that kind of thing. But what, what that leaves behind is the other things that can lead to persistent inflation. In particular—we don’t see this yet, but if you had something where wages were persistently— [increases in] real wages were persistently above productivity growth, that puts upward pressure on, on firms, and they raise prices. It would take something that was persistent and material for that to happen. And we don’t see that yet. But with the kind of hot labor market readings— wages we’re seeing, it’s something that we’re—that we’re watching. And the other thing, of course, is, is rents, which are very important. You know, owners’ equivalent rent. That’s another thing which is very economically sensitive. Unlike the things that are causing the inflation now, this is economically sensitive—and so would be expected to move up. And so as the—as some things go down, the question is: Where will we be when we come out the other side of this? And we need to keep our eyes on those things. <NAME>JEANNA SMIALEK</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thanks. We’ll go to Chris at the AP. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. Well, next year, you could see growth slowing, and you could see some disinflation, particularly if the Omicron variant does spread more widely. Would you delay rate hikes in that situation? And how would you think about that? And also, how would you explain rate hikes if you do follow through, in that kind of situation, with inflation fading and growth slowing? How would you explain rate hikes to the public, particularly those who may still be looking for work? <NAME>CHAIR POWELL</NAME>. Well, as you know, you know, the SEP is not a plan. It’s not something we debate, negotiate over, or really discuss in terms of what the right answer should be. People write down their, their assumptions—their assessment of appropriate policy based on their economic forecast. And so the median—what you’re talking about, the three rate increases, that’s the median of the Committee—the median of the Committee is also that growth will be 4 percent and then unemployment will be 3½ percent by the end of the year. So that’s a really strong economy. And, of course, if the—if the economy turns out to be quite different from that, then so will the rate. You know, we—no one will say, “Oh, we can’t change our policy because we wrote something down in December.” No one’s ever said that or will. It will—the actual rate decisions we make will depend on our evolving assessment of the forecast. So, for example, if, if the economy were to slow down significantly, then you would expect that that would have an effect of slowing down rate increases. But we’d have to—you know, we look at our two goals, maximum employment and price stability, and we make policy based on them, and not with respect to what we wrote down in a prior SEP. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Victoria Guida at Politico. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I wanted to follow up on maximum employment. So, you know, the new framework was basically designed, as I understand it, so that there was a de-emphasis on guessing where inflation would pick up because of employment. And, basically, you were going to wait until you saw the whites of the eyes of inflation. And that’s how you would kind of know that you reached maximum employment. So, I’m wondering, you know, you’ve talked a lot about the different ways that you might measure maximum employment. But from what I understand, that’s still basically: The way that you know that you’re there is inflation. So is that understanding correct? And how is—are those signals likely to be clear right now given that you have inflation that’s caused by, you know, these supply chain disruptions that might also lead to, you know, inflation in wages and those sorts of things? So how do you sort of, like, tease out the signal of maximum employment? <NAME>CHAIR POWELL</NAME>. Okay. So let me start by saying that the inflation that we got was not at all the inflation we were looking for or talking about in the framework. This was—it really was a completely different thing. It was to do with, you know, strong monetary policy and fiscal stimulus into an economy that was recovering rapidly, and in which there were these supply-side barriers which effectively led to, you know, in certain parts of the economy, what you might call a vertical supply curve. So, you know, automobile purchases are very interest rate-sensitive, and you would think demand would drive up the quantity of cars, But it can’t, because they don’t have semiconductors. So, so that—it was a very different kind of inflation. This is not the inflation we were looking for under our framework at all. It’s nothing to do with our framework. And our—the way we’ve approached it is really nothing to do with our framework. But coming to maximum employment, which is really your question. How do you know? So I think you look at, you know, prices and quantities. When you—if you want to look at maximum employment, you look at prices and quantities, and the main price you look at is wages. It’s one of the things you look at. And, you know, it’s—So I mentioned a number of other things. You can get to 20, if you wanted to, easily, but labor force participation, the unemployment rate, different age groups of—you know, prime-age labor force participation, in particular, gets a lot of focus, the JOLTS data get a lot of focus. And wages, that’s, that’s really one of the great signals. The quits rate is another one. The quits rate is really one of the very best indicators, according to a lot of labor economists, because people quit because they feel like they can get a better job. And there’s, you know, record amounts, historically high levels of that going on—suggesting, again, that you’ve got a very tight labor market. So on wages, that’s the price indicator we look at to tell us, along with all the other data, whether we’re—whether we have labor market conditions that are consistent with maximum employment. And so that’s, that’s how we think about it. But the—one of the complications is that, again, we’ve got to make policy in real time. So how do we think about that? Do we—if we think we can make labor, you know, participation might move up—if we, let’s say we knew that it would start to move up in two years, would we wait two years when inflation is running way above target? Probably not, you know, so you have to make an assessment that what’s max—what is the level of maximum employment that is consistent with price stability in real time is, is one way to think about it. <NAME>VICTORIA GUIDA</NAME>. Just to kind of follow up on that for a second, if you do raise interest rates next year and, you know, it’s—you’re not certain whether you’re at maximum employment, are you all going to point—when you raise interest rates, are you going to point to ways in which the labor market could still improve? <NAME>CHAIR POWELL</NAME>. Yes. I mean, I—absolutely. I, I think—well, whether or not we— whether or not we say “we’re at conditions—labor market conditions consistent with, with maximum employment” next year, we would all be open and I think expect, over time, that the level of maximum employment that’s consistent with price stability would increase further over time—for example, through increasing participation. So I—we would certainly—we would not, in any way, want to foreclose the idea that the labor market can get even better. But, again, with inflation as high as it is, we have to make policy in real time. We’ve got to make that assessment in real time. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Olivia from Bloomberg. <NAME>OLIVIA ROCKEMAN</NAME>. Thank you. Good afternoon, Chair Powell, and thank you for taking our questions. I wanted to follow up on some of your earlier comments about labor force participation. And I wondered, what do you think needs to change in the economy to kind of get a meaningful recovery in labor force participation, and also whether running the economy hot, like in the last expansion, is one way of doing that? <NAME>CHAIR POWELL</NAME>. Well, the labor market is, by so many measures, hotter than it ever ran in the last—in the last expansion, if you think about it. You know, the ratio of job openings, for example, to, to vacancies is at all-time highs. Quits, the wages—all those things are, are even hotter. But what would it take for labor force participation to move up more? You know, that’s—really, “Why is it low?” is the question. So there, there are a bunch of answers, and all of them probably have some, you know, some validity. Part of it will be that people—for certain people, they don’t want to go back in the labor force because either they’re medically vulnerable or they’re not comfortable going back while COVID is still everywhere. That’s one thing. The lack of availability of childcare made for caretakers is certainly part of it—not just for children, but for older people. It has been pointed out by many that the stock market is high, people’s portfolios are stronger—they may go back to being a one-income rather than a two-income family. The same thing with people’s houses. People buy—they have a mortgage, you know, with leverage, and the house price increases, the equity they have in their home might have doubled. And they might make—reach the same conclusion. So they’re—and people have savings on their balance sheet because of forced savings because they couldn’t spend on travel and things like that and also because of, you know, because of government transfers. So, for all of those reasons—and it’s hard to know exactly the part each of them plays— we, we have a situation where we’ve had a shock to labor force participation that is not unwinding as quickly as, as many, as expected. And people—in effect, a good part of it is voluntary. You know, people—and this is how they want to maximize their welfare and that’s, that’s their, certainly their choice. In other cases, it’s something that will abate very quickly if and when the pandemic gets under control. And the longer the pandemic goes on, you know, maybe the less likely that people will come back because they’re—you know, they get used to their new life and they lose contact with their old jobs. That’s, that’s what the evidence would say. So it’s a range of things. It isn’t that the economy lacks stimulus. You know, usually, in every other expansion, it’s that there aren’t enough jobs and people can’t find jobs and, you know, we’re stimulating demand and trying to get demand to come up. That’s not the problem here. The problem is a supply-side problem, which—what it would take to work it out, I think it’s going to be time. And the number-one thing would, would really be to have the pandemic get under control. That’s what everyone would really like to see: What does the labor force— what does the labor market look like in a world without COVID? That would be the thing that we’d really like to see but, you know, it doesn’t look like that’s coming anytime soon. <NAME>OLIVIA ROCKEMAN</NAME>. And just to quickly follow up on that: If some of the reason that labor force participation isn’t back to, you know, February 2020 levels is because people are voluntarily making life decisions that are different, does that make you think we’re going to end up at a lower rate overall? <NAME>CHAIR POWELL</NAME>. Well, there’s a demographic trend underlying all of this. And we actually got above the demographic trend at the end of the last expansion. But—so one would expect over time that labor force participation would, would move down because an aging population, the older people are, the lower their participation rate is. So you would expect that, that the trend would be lower and that, over time, participation would move down. The question of how much we can get back up closer to where we were in February of 2020—and, indeed, for the year or so before that—is a good one. And, I mean, I—What we can do is try to create the conditions. There’s a lot of good for society when you have a tight but stable labor market, where people are coming in, they’re getting into the labor force, they’re getting paid well. In the labor market we had before, we had, you know—the biggest wage increases were going to people at the bottom end of the wage spectrum for the last couple of years. There were just a lot of really desirable aspects of a labor market like that. Higher participation is one of them. And we’d love to get back there. But, again, ultimately, we have the tools that we have, which are essentially to stimulate demand and also to control inflation. I mean, really, it might be—one of the two big threats to getting back to maximum employment is actually high inflation, because, to get back to where we were, the evidence grows that it’s going to take some time. And what we need is another long expansion, like the ones we’ve been having. Over the last 40 years, we’ve had, I think, three of the four longest in our recorded history, including the last one, which was the longest in our recorded history. That’s what it would really take to get back to the kind of labor market we’d like to see. And to have that happen, we need to make sure that we maintain price stability. <NAME>MICHELLE SMITH</NAME>. Okay, let’s go to Edward Lawrence at Fox. <NAME>EDWARD LAWRENCE</NAME>. Thanks. Thanks, Michelle, and thanks for taking the question, Chair Powell. So I was looking at the consensus data for estimated monthly changes on sales. And what you’re seeing is fewer people spending at restaurants and drinking places, more people spending at grocery stores. You see electronic sales down 4.6 percent month over month, also department store sales down 5.4 percent month over month. How concerned or what is your level of concern the consumer may be turning away from this economy or pulling back because of inflation, the virus, or something else? Thank you. <NAME>CHAIR POWELL</NAME>. We see consumer expense as very strong in this quarter. I don’t know, Edward, whether you’re talking about more shopping online versus shopping in the store, but consumer demand is very strong, incomes are very strong, you know, because people are going back to work and they’re getting wage increases. Admittedly, some of the wage increases is being eaten away by inflation. But, nonetheless, incomes, overall, are going up really significantly because of increased employment and spending is—has been strong. There may be something in the seasonality that this year’s holiday spending may have been pulled forward. And, of course, there may be effects from, from Delta and there might be going forward from Omicron. But fundamentally, though, the consumer is really healthy, and we expect personal consumption expenditures to be pretty strong in the fourth quarter. <NAME>MICHELLE SMITH</NAME>. Okay, let’s go to Mike at Bloomberg. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, the median forecast for inflation in this month’s or this meeting’s economic projections has been revised up significantly for 2021 but barely moved for 2022 and 2023. You’ve said you expect inflation to fall significantly. Is that because you’re going to raise interest rates or because the virus is going to fade and the effects are going to fade? In other words, is it a question of when, not if, you raise interest rates? And does it suggest that maybe your critics are correct and you might be afraid you’re “behind the curve”? <NAME>CHAIR POWELL</NAME>. So, actually, I’m looking at the SEP here, and the median forecasts for core and headline inflation did move up by 4/10 each. So that’s a significant—you know, in an SEP, that’s a pretty significant move up. You know, it’s, it’s based on both of those things, I suppose. I do think there’s a broad expectation among forecasters, including our own, that the bottlenecks will alleviate sometime over the course of this year. If you look at where Blue Chip forecasts are—which is, you know, a group of well-resourced, large forecasting operations with a long track record—they’ll show inflation coming back down significantly toward the back-end of next year. I would say, though, as well that our policy should begin to have an effect. There will be a lag, but it should begin to have an effect on that as well. And, you know, that’s the most likely case. I guess what—the thing I would want to say, though, is we can’t act as though that’s a certainty, and we’re not going to act as though that’s a certainty. There’s a real risk now, we believe, I believe, that inflation may be more persistent and that may be putting inflation expectations under pressure, and that the risk of higher inflation becoming entrenched has increased. It’s certainly increased. I don’t think it’s high at this moment, but I think it’s increased. And I think that’s part of the reason behind our move today. [It] is to put ourselves in a position to be able to deal with that risk. And I think we are in a position to deal with that risk. We need to see more data. We need to see how the inflation data and the—all the data evolve in coming months, but we are prepared to, you know, to use our tools to make sure that higher inflation doesn’t get entrenched. For one reason, as I—as I just mentioned, it’s one of the two big threats, the other being the pandemic itself, to getting back to maximum employment. <NAME>MICHELLE SMITH</NAME>. Let’s go to Michael Derby at the Wall Street Journal. <NAME>MICHAEL DERBY</NAME>. Yeah. Thanks for taking my question. So as the Fed shifts towards an accelerated taper, I wonder what your read is on financial-stability risks right now. I mean, these periods can be—you know, it seems like the taper process has gone fairly smooth so far. But, you know, what do you see in terms of stability risks? Are there any parts of the financial sector that concern you right now? And are there any significant systemic issues that are on your radar, you know, maybe from the cryptocurrency sector or something like that? <NAME>CHAIR POWELL</NAME>. You know, we have—we have had now for a decade and more a four-part financial stability framework that we use so we can—we can hold ourselves to the same kind of framework and, you know, not just treat each event individually. And there are four key areas: asset valuations, debt owed by households and businesses, funding risk, and leverage among financial institutions. So I would say asset valuations—I’m going to go really superficially here, but asset valuations are somewhat elevated, I would say. Debt owed by businesses, you know, and households—households are in very strong financial shape. Businesses actually have a lot of debt, but their default rates are very, very low. But, nonetheless, it’s something we’re watching. Funding risk is, by and large, low among, among financial institutions. But we do see money market funds as a vulnerability and, and, you know, would applaud the SEC’s action this week. Leverage among financial institutions is low, in the sense that [their] capital is high. So, overall, you know, financial stability, that’s how—I wouldn’t make an overall characteristic, but we break it down into those pieces. In terms of the things, you know, that we’re—that we’re looking for, looking at, you know, it’s the—it’s the things we’ve already talked about, to some extent. It’s, it’s the emergence of a new variant that could, you know, that could lead to significant economic—if there were to be a variant, for example, [and if] that were quite resistant to vaccines, it could have another significant effect on the economy. We don’t see that. We don’t have any basis for thinking that the new variant that we have is that one, but it’s certainly one we’re looking at. I would say, you know, cyber risk, the risk of a successful cyberattack, is, for me, you know, always the most—you know, one that would be very difficult to deal with. I think we know how to deal with bad loans and things like that. I think more—a cyberattack that were to take down a major financial institution or financial market utility would be a really significant financial stability risk that we haven’t actually faced yet. So I could go on with a list of “horribles,” but I think that’s a decent picture of where I would start. <NAME>MICHAEL DERBY</NAME>. How about the cryptocurrency issues? Anything that worries you there that’s going on in there in terms of—you know, obviously a lot’s happening in that sector. Does that concern you at all? <NAME>CHAIR POWELL</NAME>. You know, I think the concerns there are not so much current financial-stability concerns. I, of course, would support the, the views expressed in the President’s Working Group report on stablecoins. Stablecoins can certainly be a useful, efficient, consumer-serving, part of the financial system, if they’re properly regulated. And, right now, they aren’t. And, and they have the potential to scale [up], particularly if they were to be, you know, associated with one of the very large tech networks that exist and you could have a payment network that was immediately systemically important—close to immediately systemically important that didn’t have appropriate regulation and protections. The public relies on the government—and [on] the Fed, in particular—to make sure that the payment system is safe and reliable, as well as the dollar and—you know, to provide a safe and reliable trusted currency. So—but I do think those are longer term. In terms of, you know, the more—the cryptocurrencies, you know, that are really speculative assets, I don’t see them as a financial-stability concern at the moment. I do think they are risky, they’re not backed by anything, and I think there’s big consumer—issues for consumers who may or may not understand what they’re getting. And there’s certainly developments in the—in the markets that are worth following, which are really not in our jurisdiction, but things like, you know, the kind of leverage that’s built into and those sorts of things is certainly worth, worth watching. <NAME>MICHELLE SMITH</NAME>. Let’s go to Nancy Marshall-Genzer at Marketplace. <NAME>NANCY MARSHALL</NAME>-GENZER. Chair Powell. Hi, Chair Powell, thanks for the question. Going back to inflation, is the Fed “behind the curve” on getting inflation under control? <NAME>CHAIR POWELL</NAME>. So I would say this. I actually think we are well positioned to deal with, with what’s coming, with the range of plausible outcomes that can come. I do. And I think if you look at how we got here, I do think we’ve, we’ve been adapting to the incoming data, really all the way along, and, you know, noticing and calling out that, that the—both the effects and the persistence of inflation of bottlenecks and labor shortages and things like that. So we’ve been calling out the fact that those were becoming longer, and more persistent, and larger. And now we’re in a position where we’re ending our taper within the next—well, by March, in two meetings, and we’ll be in a position to raise interest rates as and when we think it’s appropriate. And we will, if that—to the extent that’s appropriate. At the same time, we’re going to be seeing a few more months of data. I don’t actually think we’re out of position now. I think this was an important move for us to make. I think that the data that we got toward the end of the fall was a—was a really strong signal that inflation is more persistent and higher—and that the risk of it remaining higher for longer has grown. And I think we’re reacting to that now. And we’ll continue to adapt our policy. So I wouldn’t look at it that we’re “behind the curve.” I would look at it that we’re actually in position now to take the steps that we’ll need to take, you know, in a thoughtful manner to address all of the issues, including that of, of too-high inflation. <NAME>MICHELLE SMITH</NAME>. Let’s go to Evan at Market News. <NAME>EVAN RYSER</NAME>. Hi, Chair Powell. Thank you. I was wondering if we should still be seeing the taper and interest rate hikes as separate. And, secondly, in the last cycle, the Fed started shrinking the balance sheet when short-term interest rates were about 1 to 1¼ percent range. Do you think the FOMC might be able to potentially start running off assets before that this time? <NAME>CHAIR POWELL</NAME>. Are they separate? So our interest rate—I mean, they are separate tools. So the—you know, the, the asset purchases are a separate tool from interest rates. Stopping asset purchases does not remove accommodation. It just stops adding further accommodation. Whereas raising interest rates starts to remove accommodation from what is a highly accommodative stance. You know, the extent to which they’ll be separated in time is, is something we haven’t really discussed at the Committee [meetings] yet. We will be discussing that, obviously, in coming meetings. I don’t think that, that—the last cycle, there was quite a long separation before interest rates. I don’t think that’s at all likely in this cycle. We’re in a very, very different place with high inflation, strong growth, a really strong economy. You know, that—as I mentioned, the SEP medians are for 4 percent growth next year, 3½ percent— 3½ percent unemployment at the end of the year, and the, the—you know, headline inflation of 2.6 percent next year, core at 2.7. So this is a strong economy, one in which it’s appropriate for, for interest rate hikes. So they’re separate, I would say. Your—sorry, your second question was? <NAME>EVAN RYSER</NAME>. My second question was about runoff. <NAME>CHAIR POWELL</NAME>. Runoff. <NAME>EVAN RYSER</NAME>. In the last cycle. <NAME>CHAIR POWELL</NAME>. So, you know, with the balance sheet, we did have a balance sheet discussion, sort of a prelim—a first, first discussion of balance sheet issues today, [balance] sheet issues, at our meeting this week. We’ll have another at the next meeting and another at the meeting after that I suspect. These are interesting issues to discuss. [We] didn’t make any decisions today. We looked back at what happened in the last cycle, and people thought that was interesting and informative. And—but to one degree or another, people noted that this is just a different situation, and those differences should inform the decisions we make about the balance sheet this time. So [we] haven’t made any decisions at all about, about when runoff would start, but we’re—we’ll be continuing to—you know, in relation to when either liftoff happens or the end of the taper. But those are exactly the decisions we’ll be turning to in coming meetings. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Scott Horsley at NPR. <NAME>SCOTT HORSLEY</NAME>. Thanks, Mr. Chairman. I think you said a few minutes ago that the inflation that we got during the pandemic was not the inflation that we—that you anticipated when you crafted the framework. And you described it as a collision of a lot of monetary and fiscal stimulus with these supply-side hiccups. Does that mean the stimulus was mistaken, or is the inflation just a consequence of—that we have to put up with because of that? <NAME>CHAIR POWELL</NAME>. No, I’m not expressing any judgment about, about the stimulus in, in that comment. What I’m saying is, there’s a—there’s a sense among some that “you wanted inflation, this is what you wanted, how do you like it?,” you know? And the truth is, this is not the inflation that we were—what we were talking about in the—in the framework was inflation that comes from a tight labor market, right? So we had 3½ percent unemployment for a period, and we had inflation that was just barely getting to 2 percent. And I—you know, I think, in that setting, our thinking was, we can afford to wait to raise rates until we see actual inflation rather than [acting] preemptive[ly] because, you know, no one had seen what 3½ percent unemployment would look like—with high labor force participation, by the way. No one had seen what it would look—really look like for an extended period, for decades. And we didn’t know what the inflationary implications were. It turned out there was barely 2 percent inflation—and no sense that it was gaining momentum and that kind of thing. So we incorporated that into our framework. This is something completely different. You know, that’s a situation where you had a very, very high level of employment and low inflation. This is literally the opposite. Or, you know, it has been the opposite, where we have very high inflation and we’ve had it since the labor market was in terrible shape. It had nothing—so far, this inflation has really nothing to do with tightness in the labor market. It does have to do with, with strong demand, and strong demand was supported by the Fed, it was supported by Congress. I’m not making any judgments on Congress, it’s not my job. But I will just say, we’re coming out of a, you know, what we certainly hope will be a once in a lifetime, certainly historic—the first really global modern pandemic—which looked at the beginning like it might cause a global depression. And, you know, so we threw a lot of support at it [the economy]. And what’s coming out now is, is, you know, really strong growth, really strong demand, high incomes, and all that kind of thing. You know, people will judge in 25 years whether we—whether we overdid it or not, but, you know, the reality is, we are where we are. And, you know, we think our policy is, is the right one for the situation that we’re in. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Brian Cheung. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. Wanted to ask about the bond markets. When you see the 10-year at 146 basis points, do you have any sort of concerns about an environment by which you might be hiking interest rates into? Would you prefer the curve be a little bit steeper? What are you gleaning from the bond market actions over the last six weeks? <NAME>CHAIR POWELL</NAME>. So I, I think the short-end actions are easy to understand, which is, you know, they’re basically very [monetary] policy-sensitive rates at the short end, and it makes sense that it’s reacting to changes in expectations for policy. I think a lot of things go into the, you know, the long rates. And the place I would start is just look at global sovereign yields around the world. Look at JGBs, look at bunds, and they’re so much lower. You can get—you can get, you know, a much higher yield on U.S. Treasuries by buying USTs rather than bunds and you can—you can hedge, hedge the currency risk back into yen, back into euros and still be way ahead. So, in a way, it’s not surprising that there’s a lot of demand for, for U.S. sovereigns in a world—you know, in a risk-free world where, where there’s so much—they’re yielding so much more than bunds are, than JGBs. So that’s, that’s a big part of it. I also think, you know, there, there may be some assessment in there of what the neutral rate is or what the terminal rate is. I don’t know about that. But—and I would just say that we, you know, we write down our own estimates of the—of the terminal rate or the neutral rate of interest. Those are highly uncertain. And, you know, we’ll make policy based on what we’re seeing in the economy rather than based on what a neutral—what a model might say the neutral rate is. We, we all had the experience of the last cycle, where we all, through that cycle, were trying to estimate what the neutral rate was, and it turned out—you know, I think we learned a lot from seeing what happens. We ended up cutting rates three times after raising them to 2¼ to 2½ percent. So I’m not troubled by where the long bond [rate] is. You know, I see that it’s low. You know, I mean, we’re really focused on broader financial conditions, [and] we’re focused on maximum employment and price stability. <NAME>MICHELLE SMITH</NAME>. Thank you. For the last question, we’ll go to Greg Robb. <NAME>GREG ROBB</NAME>. Thank you very much. Chair Powell, I was wondering if—I wanted to give you the opportunity to talk about something that I’ve heard that’s been discussed—that, you know, your pivot towards a tighter policy, hawkish policy stance had something to do with the timing of your renomination by the President. Thank you. <NAME>CHAIR POWELL</NAME>. Sure, I’d be happy to talk about that. So, as I mentioned, we got the ECI reading just before the November meeting. We got the labor market report two days after the meeting. And then, one week after that, I think on the 12th of November, we got the CPI reading. It was really the CPI reading, in concert with those two, and I, I just came to the view over that weekend that we needed to speed up the taper. And we started working on that. That's a full 10 days or so before the President made a decision of renominating me. So, honestly, it had—it had nothing to do with that at all. And I just thought this is what we got to do. My colleagues were out talking about the—a faster taper. And that doesn’t happen by accident. They were out talking about a faster taper before the President made his decision. So it’s a decision that effectively was in—more than in train and, you know, to the point where people were talking about it publicly. So that’s what happened. And it had absolutely nothing to do with it whatsoever. We’re always going to just do what we think is the right thing, and I certainly will always just do what I think the right thing is for the economy and for the people that we serve. <NAME>GREG ROBB</NAME>. Just a quick follow-up. I guess that some people are saying that it was the, you know, the stimulus in March that was sort of over—we didn’t really need all that stimulus, and that there was talk even then that that would be a mistake and it would lead to higher inflation. And perhaps that you didn’t push back as much as you might have otherwise. <NAME>CHAIR POWELL</NAME>. I didn’t push back at all. And the reason I didn’t—and there was no—there was lots of talk about that, but not from the Fed, because that is not our job. We are not the CBO, and we’re not elected by anybody. So we take fiscal policy as it arrives at our front door, and we don’t comment—you know, we make our own assessments inside the Fed, but it’s really not our role. And I think, very important, that we stay out of that business, no matter who’s in the White House, who’s in Congress. It’s just—it’s just not our job and it’s something we avoid pretty, pretty assiduously. <NAME>GREG ROBB</NAME>. Thank you. <NAME>CHAIR POWELL</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you, Mr. Chair. Thank you, everyone.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today, in support of these goals, the Federal Open Market Committee kept its policy interest rate near zero and stated its expectation that an increase in this rate would soon be appropriate. The Committee also agreed to continue reducing its net asset purchases on the schedule we announced in December—bringing them to an end in early March. As I will explain, against a backdrop of elevated inflation and a strong labor market, our policy has been adapting to the evolving economic environment, and it will continue to do so. Economic activity expanded at a robust pace last year, reflecting progress on vaccinations and the reopening of the economy, fiscal and monetary policy support, and the healthy financial positions of households and businesses. Indeed, the economy has shown great strength and resilience in the face of the ongoing pandemic. The recent sharp rise in COVID cases associated with the Omicron variant will surely weigh on economic growth this quarter. High-frequency indicators point to reduced spending in COVID-sensitive sectors, such as travel and restaurants. And activity more broadly may also be affected as many workers are unable to report for work because of illness, quarantines, or caregiving needs. Fortunately, health experts are finding that the Omicron variant has not been as virulent as previous strains of the virus, and they expect that cases will drop off rapidly. If the wave passes quickly, the economic effects should as well, and we would see a return to strong growth. That said, the implications for the economy remain uncertain. And we have not lost sight of the fact that for many afflicted individuals and families, and for the health-care workers on the front lines, the virus continues to cause great hardship. The labor market has made remarkable progress and, by many measures, is very strong. Job gains have been solid in recent months, averaging 365,000 per month over the past three months. Over the past year, payroll employment has risen by 6.4 million jobs. The unemployment rate has declined sharply, falling 2 percentage points over the past six months to reach 3.9 percent in December. The improvements in labor market conditions have been widespread, including for workers at the lower end of the wage distribution, as well as for African Americans and Hispanics. Labor demand remains historically strong. With constraints on labor supply, employers are having difficulties filling job openings, and wages are rising at their fastest pace in many years. While labor force participation has edged up, it remains subdued, in part reflecting the aging of the population and retirements. In addition, some who would otherwise would be seeking work report that they are out of the labor force because of factors related to the pandemic, including caregiving needs and ongoing concerns about the virus. The current wave of the virus may well prolong these effects. Over time, there are good reasons to expect some further improvements in participation and employment. Inflation remains well above our longer-run goal of 2 percent. Supply and demand imbalances related to the pandemic and [to] the reopening of the economy have continued to contribute to elevated levels of inflation. In particular, bottlenecks and supply constraints are limiting how quickly production can respond to higher demand in the near term. These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus. While the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, price increases have now spread to a broader range of goods and services. Wages have also risen briskly, and we are attentive to the risks that persistent real wage growth in excess of productivity [growth] could put upward pressure on inflation. Like most forecasters, we continue to expect inflation to decline over the course of the year. We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. In addition, we believe that the best thing we can do to support continued labor market gains is to promote a long expansion, and that will require price stability. We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. And we’ll be watching carefully to see whether the economy is evolving in line with expectations. The Fed’s monetary policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people. As I noted, the Committee left the target range for the federal funds rate unchanged and reaffirmed our plan, announced in December, to end asset purchases in early March. In light of the remarkable progress we’ve seen in the labor market and inflation that is well above our 2 percent longer-run goal, the economy no longer needs sustained high levels of monetary policy support. That is why we are phasing out our asset purchases and why we expect it will soon be appropriate to raise the target range for the federal funds rate. Of course, the economic outlook remains highly uncertain. Making appropriate monetary policy in this environment requires humility, recognizing that the economy evolves in unexpected ways. We’ll need to be nimble so that we can respond to the full range of plausible outcomes. With this in mind, we will remain attentive to risks, including the risk that high inflation is more persistent than expected, and are prepared to respond as appropriate to achieve our goals. To provide greater clarity about our approach for reducing the size of the Federal Reserve’s balance sheet, today the Committee issued a set of principles that will provide a foundation for our future decisions. [In] these high-level principles, [we] clarify that the federal funds rate is our primary means of adjusting monetary policy and that reducing our balance sheet will occur after the process of raising interest rates has begun. Reductions will occur over time in a predictable manner primarily through adjustments to reinvestments so that securities roll off our balance sheet. Over time, we intend to hold securities in the amounts needed for our ample- reserves operating framework, and in the longer run, we envision holding primarily Treasury securities. Our decisions to reduce our balance sheet will be guided by our maximum-employment and price-stability goals. In that regard, we will be prepared to adjust any of the details of our approach to balance sheet management in light of economic and financial developments. The Committee has not made decisions regarding the specific timing, pace, or other details of shrinking the balance sheet. And we will discuss these matters in upcoming meetings and provide additional information at the appropriate time. 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 Federal Reserve will do everything we can to achieve our maximum-employment and price- stability goals. Thank you. I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Thank you. For the first question, we’ll go to Chris Rugaber at the Associated Press. <NAME>CHRISTOPHER RUGABER</NAME>. Thanks, Michelle. And thank you, Chair Powell. So it’s expected that the Fed will hike rates perhaps every other meeting, but certainly in the past, the Fed has hiked at every meeting. So I just wanted to ask, you know, are rate hikes at consecutive meetings on the table this year? Is every meeting a live—a live meeting? And, on that note, would the Fed consider front-loading some of its rate hikes, even if it doesn’t raise at every meeting? Thank you. <NAME>CHAIR POWELL</NAME>. Thanks. So, as I—as I referred to in my opening statement, it’s—it is not possible to predict with much confidence exactly what path for our policy rate is going to prove appropriate. And so, at this time, we haven’t made any decisions about the path of policy. And I stress again that we’ll be humble and nimble. We’re going to have to navigate crosscurrents and actually two-sided risks now. So—and, and I’ll say also that we’re going to be guided by the data. In fact, what I’ll say is that we’re going to be led by the incoming data and the evolving outlook, which we’ll try to communicate as clearly as possible, moving steadily and transparency—transparently. So more to your question, we know that the economy is in a very different place than it was when we began raising rates in 2015. Specifically, the economy is now much stronger. The labor market is far stronger. Inflation is running well above our 2 percent target, much higher than it was at that time. And these differences are likely to have important implications for the appropriate pace of policy adjustments. Beyond that, we haven’t made any decisions. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Victoria Guida at Politico. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I wanted to ask, you were talking about the health of the labor market. And I’m curious whether you would characterize where we’re at right now as maximum employment. And also, along those same lines, obviously rate hikes [are] on the table this year, do you think that the Fed can raise rates, bring inflation under control without hurting jobs and wages? <NAME>CHAIR POWELL</NAME>. Sorry. Just getting both, both parts of your question written down. So I would say—and this view is widely held on the Committee—that both sides of the mandate are calling for us to move steadily away from the very highly accommodative policies we put in place during the challenging economic conditions that the economy faced earlier in the pandemic. And I would say that most FOMC participants agree that labor market conditions are consistent with maximum employment in the sense of the highest level of employment that is consistent with price stability. And that is—that is my personal view. And, and, again, very broad support on the Committee for the judgment that it will soon be appropriate to raise the target range for the federal funds rate. The other thing is, maximum employment will, will evolve over time and through the course of the business cycle. In the particular situation we’re in now, it may well increase. Max—the level of maximum—of employment that’s consistent with stable prices may increase. And we hope that it will, as more people come back into the labor market, as participation gradually rises. And the policy path that we’re broadly contemplating would be supportive of that comment—that outcome as well. So the thing about the labor market right now is that there are—there are many millions of, of more job openings than there are unemployed people. So you ask whether we can— whether we can raise rates and, and move to less accommodative, and even tight, financial conditions without hurting the labor market. I think there’s quite a bit of room to raise interest rates without threatening the labor market. This is, by so many measures, a historically tight labor market. Record levels of job openings, of quits. Wages are moving up at the highest pace they have in decades. If you look at surveys of workers, they find jobs plentiful. Look at surveys of companies—they find workers scarce. And all of those readings are at levels, really, that we haven’t seen in a long time—and, in some cases, ever. So this is a very, very strong labor market, and my strong sense is that we can—we can—we can move rates up without, without having to, you know, severely undermine it. I also would point out that there are—there are other forces at work this year, which should also help bring down inflation, we hope, including improvement on the supply side, which will ultimately come. The timing and pace of that are uncertain. And also, fiscal policy is going to be less supportive of, of growth this year—not of the level of economic activity, but the fiscal impulse to growth will be significantly lower. So there are multiple forces—which should be working over the course of the year for inflation to come down. We do realize that the timing and pace of that are, are highly uncertain and that inflation has persisted longer than we—than we thought. And, of course, we’re prepared to use our tools to assure that higher inflation does not become entrenched. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Nick Timiraos at the Wall Street Journal. <NAME>NICK TIMIRAOS</NAME>. Good afternoon, Chair Powell. Nick Timiraos of the Wall Street Journal. I, I have a couple of questions on the balance sheet. The statement on the balance sheet today calls for “significantly reducing” your holdings. What does that mean? And then, apart from moving sooner and faster to shrink the holdings, are there any other ways in which you and your colleagues are seriously thinking about recalibrating this process? And, finally, how much disagreement is there around how you should use this tool, including active sales rather than passive sales or changes in the composition of reinvestments? Thank you. <NAME>CHAIR POWELL</NAME>. So I’m afraid to tell you that those are all great questions, and they’re questions that the Committee is just turning to now. So we had—we had a discussion, as you know, at the last meeting, an introductory discussion of the balance sheet and a teeing up of the issues. At this meeting, we’ve gone through and carefully put together a set of principles at a high level. And those are meant to guide the actual decisions we’ll make about the pace and about all of the questions that you’re, you’re asking. And I expect that this process will, will be something that we spend time on in coming meetings. I can’t tell you how many. I can’t tell you how long it will take. But—and then, you know, at the appropriate time, we’ll provide additional information. So I did—the last cycle when we—when we went through balance sheet issues, we did find that over, over the course of two or three meetings, for example, we did come to interesting and better answers, we thought. So we’re just in that process now. And at the next meeting, we’ll be turning to, you know, more of the details that you’re—that you’re asking about. I would say this. The balance sheet is, is much bigger. I’d say it has a shorter duration than the last time. And the economy’s much stronger, and inflation is much higher. So—and I think that leads you to—and I said, I’ve said this—being willing to move sooner than we did the last time and also perhaps faster. But beyond that, it’s really—it’s really not appropriate for me to speculate exactly what that would be. And, and—but I would point you to principle number one, which is “the Committee views changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy.” So we do want the federal funds rate—we, we want to operationalize that [as the primary means]. And we want the balance sheet to be declining in a predictable manner, and we want it to be declining primarily by adjusting reinvestments. <NAME>NICK TIMIRAOS</NAME>. So, if I could follow on that, raising rates and reducing the balance sheet both restrain the economy, both tighten monetary policy. How should we think about the relationship between the two? For example, how much passive runoff is equal to every ¼ percentage point increase in your benchmark rate? <NAME>CHAIR POWELL</NAME>. So, again, we think of the balance sheet as, as moving in a predictable manner, sort of in the background, and that the active tool meeting to meeting is not both of them, it’s the federal funds rate. There are—there are rules of thumb—I’m reluctant to land on one of them—that, that equate this. And—but there’s also an element of, of uncertainty around the balance sheet. I think we have a much better sense, frankly, of how rate increases affect financial conditions and, hence, economic conditions. Balance sheet [policy] is, is still a relatively new thing for, for the markets and for us, so we’re less certain about that. So, again, our—I think our—the pattern we’ll follow is to—is to arrive at a, you know, a timing and a pace and composition and all those things and then announce that with advance notice, and, and it will—it will start in the background. And then we’ll look to have that just running in the background and have—and have the interest rates, again, be the active tool of monetary policy. That’s, that’s at least the plan. I can’t tell you much more about any of the— any of the very good issues about size, pace, composition, those sorts of things. But we’ll be turning to all of those at coming meetings. <NAME>NICK TIMIRAOS</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thanks. Now we’ll go to Neil Irwin. <NAME>NEIL IRWIN</NAME>. Thank you, Chair Powell. It’s Neil Irwin from Axios. Glad to be back. Sir, I was wondering if the volatility we’ve seen in financial markets in the last few weeks strikes you as anything alarming or that might affect the trajectory of policy. Conversely, to the degree that financial conditions have tightened some, might that be desirable in some ways in achieving your, your tightening goals? <NAME>CHAIR POWELL</NAME>. So, as you know, the ultimate focus that we have is on the real economy: maximum employment and price stability. And financial conditions matter to the extent that they have implications for achieving the dual mandate. And you also know that we, we look at broader financial conditions, not one or two things, one or two markets. And what we’re always asking ourselves is, are we seeing changes that are both persistent and material enough that—of a change in financial conditions—that they are inconsistent with the achievement of our goals? So that’s how we’re looking at that. And I don’t want to comment on today’s financial conditions broadly, but we’re not looking at any one market or, or so. So that’s how we’re thinking. In terms of what we’ve seen, I would say this. We, you know, we said at our last meeting we published the Summary of Economic Projections, the median of which—the median participant expected three rate increases this year. And, you know, it’s six weeks, seven weeks later now. And you have seen that our communication channel with the markets is working. Markets are, are now pricing in a number of rate increases. Surveys show that market participants are expecting a balance sheet runoff to begin, you know, at the appropriate time, sometime later this year perhaps. We haven’t made that decision yet. So we, we feel like the communications we have with market participants and with the general public are working and that financial conditions are reflecting in advance the decisions that we make. And monetary policy works significantly through expectations. So that, that in and of itself is appropriate. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Howard Schneider. <NAME>HOWARD SCHNEIDER</NAME>. You know, for a year or so—Hi. Thanks, Chair Powell. Howard Schneider with Reuters. So for a year now, the statements referenced the benchmarks for this initial interest rate increase. Now that we’re approaching that moment, what are the benchmarks going to be for subsequent rate increases? I know you can’t stipulate the path, but how should we think about the criteria for the next step and the next step? <NAME>CHAIR POWELL</NAME>. Well, you’re right. We haven’t got—we haven’t gotten to that point yet. We haven’t made a decision yet, and we’ll make that decision at the March meeting. We’ll make a decision whether to raise the federal funds rate. I would say that the Committee is, is of a mind to, to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so. We have��we have our eyes on, on the risks, particularly around the world. But we do expect some softening in the economy from Omicron, but we think that that should be temporary. And we think that the economy should—the underlying strength of the economy should, you know, should, should—show through fairly quickly after that. <NAME>HOWARD SCHNEIDER</NAME>. If I could follow just on a related question, the December SEPs had this copacetic sort of set of circumstances where inflation comes down without the federal funds rate ever getting over the estimate of neutral. Given developments since then, do you still think that’s a credible narrative for the ultimate path of policy? <NAME>CHAIR POWELL</NAME>. I think the path is highly uncertain and that we’re committed to using our tools to make sure that inflation, high inflation that we’re seeing, does not become entrenched. So a number of factors would be—it’s not just monetary policy—a number of factors are supporting a decline in inflation, as I mentioned. Fiscal policy will be—will provide significantly less of an impulse to growth. We do expect this year—although we do expect now that it will come slower than, than we had expected and hoped—that there will be relief on the supply side. So that, too, should—should lower the supply-side barriers, which are a big part of the story of why inflation is high. In addition, monetary policy will be becoming significantly less accommodative. So the question is—you know, we’ll, we’ll be asking this question all year long, and that will be, are things turning out as we expect? There’s a case that, for whatever reason, the economy slows more and inflation slows more than expected; we’ll react to that. If, instead, we see inflation at a higher level or a more persistent level, then we’ll react to that. And, again, we’re, we’re well aware that this is a different economy than—than existed during the last tightening cycle, and our policy is going to reflect those differences. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Jeanna Smialek. Let’s go to Jeanna. [No response] Okay. Let’s go to Steve Liesman. <NAME>STEVE LIESMAN</NAME>. Thank you, Michelle. And thank you, Mr. Chairman. Mr. Chairman, I have one sort of technical question and one question on principle. The technical question is, if, if you’re going to discuss balance sheet at the next upcoming meetings and you won’t begin balance sheet reduction until after you begin rate hikes, it seems to technically mean that you won’t or can’t begin balance sheet reduction until the summer. Is that correct? That’s the first thing. Second of all, you suggested that, that the—with balance sheet running in the background—that you would possibly be raising rates and running off the balance sheet at the same time. That’s sort of the technical question part of it. The principal question I have is, you said it’s going to be running in the background. But the statement on the balance sheet principles says “the Committee is prepared to adjust any of the details of its approach” based on “economic and financial developments,” which suggests there’s something of a reaction function associated to the balance sheet and it won’t be running in the background. So can you give us any sense of the discussion or staff presentation on what is the reaction function surrounding the balance sheet? Thanks. <NAME>CHAIR POWELL</NAME>. So let me—let me—let me start by talking about that last paragraph. So you’ll remember during the last cycle that this process of building up and then shrinking the balance sheet is a complicated one, and it involves, inevitably, surprises. And so during, during the years, during the prior cycle, we amended our balance sheet principles a number of times. Now, we didn’t intend to do that. It just—events required us to do so. So we got a pretty robust paragraph there that says we’re free to do this at any time. And it doesn’t mean we’re going to, but if the situation turns out to be different than we had thought, we’re not going to be—we’re not going to stick with something that isn’t working. That’s all that’s saying. It’s meant to be quite a general statement rather than a, a hint. So, I mean, I like to think that our, you know, our philosophy of the balance sheet is, is embodied in these principles. So, you know, the idea that, for example, the federal funds rate is the primary means of adjusting the stance of policy, that we’ll use—determine the timing and pace of reducing the size of the balance sheet to foster the dual mandate, that we’ll begin to reduce the size after we begin the process of raising rates, and on and on like that. I mean, that— those are all the things that, that try to describe how we will proceed. But maybe at a higher level, to try to get at your question: You know, asset purchases were, were enormously important at the beginning of the recovery in terms of restoring market function, as they were at—right after the—in the critical phase of the Global Financial Crisis. And then after [that], they were a macroeconomic tool to support demand. And now the economy no longer needs this, this highly accommodative policy that we put in place. So it’s time to stop asset purchases first and then, at the appropriate time, start to shrink the balance sheet. Now, the balance sheet is, is substantially larger than it needs to be. We’ve identified the end state as—in amounts needed to implement monetary policy efficiently [and] effectively in the ample-reserves regime. So there’s a substantial amount of, of shrinkage in the balance sheet to be done. That’s going to take some time. We want that process to be orderly and predictable. And so those are some of the ways that I would think this, this lays out our, you know, the way we—the way we’re thinking about this. In terms of the timing, I can’t really help you. You know, it just says after, after we get under way. So we’re—I would say we are, we’re going to have another discussion at, at the next meeting. And my guess is, we’ll have at least one other discussion at the meeting after that. And, you know, we’ll, we’ll tell you as we make progress. And we’ll, you know, we’ll start the process of allowing runoff and shrinking the balance sheet at what we find to be the appropriate time. It’s—I wish I could say more. But, honestly, we haven’t made those decisions. And we actually haven’t even really had the, the important discussions on a lot of the details that we will have at coming meetings. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Craig Torres. <NAME>CRAIG TORRES</NAME>. Chair Powell, Chair Powell. Good afternoon, Michelle and Chair Powell. Craig Torres from Bloomberg. Chair Powell, at the beginning of the conversation, you said risks are two sided. And I’m wondering if you can elaborate on what are the risks to the elusive soft landing. Is Fed policy a risk? Overtightening? Or what are the risks? And then second, Chair Powell, I have a quick administrative question. You know, Robert Kaplan’s disclosure of his securities transactions—and in a couple of months, Chair Powell, or maybe sooner, you and I will file our tax returns. And we’ll list transactions and all kinds of things. And next to those transactions, we’ll put dates. And Bloomberg asked for the dates of Mr. Kaplan’s transactions. The Dallas Fed is not giving us the dates. And I don’t see why this is a matter for the inspector general or anybody else. I mean, why can’t he give us the dates? Will you help us get the dates of those transactions? Thanks. <NAME>CHAIR POWELL</NAME>. So you asked about the risks first. So I—you know, the one risk is that inflation risks are still to the upside in the views of most FOMC participants and, certainly, in my view as well. There’s a risk that, that the high inflation we’re seeing will be prolonged, and there’s a risk that it will move even higher. So we don’t—we don’t think that’s the base case, but you asked what the risks are. And that’s—we have to be in a position with our monetary policy to address all of the plausible outcomes. And that calls for us to be in position. We, we have an expectation about the way the economy is going to be evolved, but we’ve got to be in a position to, to address different outcomes, including the one where inflation remains higher. And, of course, that is a risk to the—to the—to the expansion. You know, we’ve been saying that what we need here is another long expansion, which is the kind of thing we saw over the last [one], which was a record long expansion. We saw labor force participation rise. We saw wages persistently higher for people at the lower end, and there, there really was no obvious imbalance in the economy that threatened that expansion. It could have gone on for years were it not hit by the pandemic. So we’d love to find a way to get back to that. That’s going to require price stability, and that’s going to require the Fed to tighten interest rate policy and do our part in getting inflation back down to our 2 percent goal. So I mentioned two-sided risks. You know, a couple things. One, Omi—COVID is not over. And COVID can continue to evolve, and it’s just—we have to accept that it’s not over, and the risks to it can slow down growth. And that would be—that’s sort of a downside risk from a growth standpoint. I would point to—you know, another, another risk is just further, further problems in the supply chains, which could slow down activity. And you see the situation in China as a situation there where that’s—their no-COVID policy may cause more lockdowns, is likely to, and that may play into—may play into more problems in supply chains. In addition, there’s what’s going on in Eastern Europe and things like that. So there’s plenty of risk out there. And we, you know, we can’t—we can’t forget that there are risks on both sides. So that’s, that’s there. That’s what I would say. I know you’ve been all over this issue with, with my colleagues, Craig, on the issue of, of information. We don’t—we don’t have that information at the Board. And, you know, I hand— I asked the inspector general to do an investigation, and that is out of my hands. I play no role in it. I seek to play no role in it. And I don’t—I really—I can’t help you here today on this issue. And I’m sorry I can’t. <NAME>CRAIG TORRES</NAME>. Okay, okay. <NAME>MICHELLE SMITH</NAME>. Thank you. We’ll go to Jeanna now. <NAME>JEANNA SMIALEK</NAME>. Thanks for taking our questions, Chair Powell. And sorry for my tech issues. I wonder if you could tell us a little bit about where your thinking on inflation stands today. You know, the last time we saw an SEP back in September, we saw that you and your colleagues were projecting that inflation would sort of sink back down quite close to target by the end of the year. And I wonder if you still think that projection from December is a reasonable one. And if your thinking has changed at all, I wonder how you’re thinking about that. And I also wonder if you could talk a little bit about the pathway to getting to that deceleration. Like, how do—how do we get from here, 7 percent CPI, to where you expect to be at the end of the year? <NAME>CHAIR POWELL</NAME>. So I’d say, you know, since, since the December meeting, I would say that the inflation situation is about the same but probably slightly worse. I’d be inclined to raise my own estimate of 2022 core PCE inflation—let’s just go with that—by a few tenths today. But we’re not writing, writing down an SEP at this meeting. But I think it’s—it hasn’t gotten better. It’s probably gotten just a—just a bit worse, and that’s been the pattern. That’s been the pattern. So I think if you look at the—the FOMC participants are—there’s a range there. And that range has been moving to the right for, for a year now. And, by the way, if you look at other forecasters, essentially all other macro forecasters who do this for a living, you’ve seen the same pattern. So, what do we think about that? Well, I think we, you know, we wrote down rate increases in the December meetings, each of us individually. And I think to the extent the situation deteriorates further, our policy will have to address that, if it deteriorates meaningfully further, either in the time dimension or in the size of the inflation dimension. So that’s how we’re thinking about it. I—as I mentioned, though, I think it’s—part of this will be that us, the Fed, moving away from a very highly accommodative policy to a substantially less accommodative policy and then, over time, to a policy that’s not accommodative, in time. I don’t know when that will be. That’s—those are the things that we’re—that we’re thinking about. That’s, that’s part of it. Another part of it is that fiscal policy provided an impulse to growth over the last two years. That impulse will be less, in fact, will be—will be negative this year. And so that’s another thing. The other one is, we will eventually get relief on the supply side. And, you know, the ports will be cleared up. And there will be semiconductors and things like that. Now, what we’re learning is, it’s just taking much longer, so I think—longer than expected. And that, I think, does raise, raise the risk that high inflation will be more persistent. I do think we’ll come off of the highs that we saw in the early part of this episode in the—in the spring last year. But, really, what’s—the question is going to be, what is inflation running at? And so we’ll be watching that. And I, you know, we—our objective is to get inflation back down to 2 percent. It’s also to provide enough support to keep the labor market healthy. The labor market is very, very strong right now, and I think that that strength will continue. There’s a—there’s really a shortage of workers. We see it particularly among production and nonsupervisory workers and people in the lowest quartile. You see very large wage increases. I mentioned some of the other indicators. So I think that’s, that’s what we’re looking at. And we’re also—you know, we realize, I think, as everyone does, that this outlook is quite uncertain and that we’re going to have to adapt. And we’re going to communicate as clearly as we can. But we’re going to have to be adaptable and, you know, move, move as appropriate. <NAME>JEANNA SMIALEK</NAME>. Great. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Colby Smith. <NAME>COLBY SMITH</NAME>. Thank you, Michelle. Chair Powell, when you talk about being humble and nimble about the path forward for monetary policy, does that also include the possibility of raising interest rates by larger increments and, say, doing a 50 basis point hike at some point if inflation does not moderate sufficiently? And should we interpret this approach as a departure from the gradual pace that we saw during the last hiking cycle? <NAME>CHAIR POWELL</NAME>. So, as I mentioned, we have not made these decisions. We really haven’t. And, and what I can tell you now, though, is that we fully appreciate that this is a different situation. If you look back to where we were in 2015, ’16, ’17, ’18 when we were raising rates, inflation was very close to 2 percent, even below 2 percent. Unemployment was, was not at our estimates of the natural rate. And growth was, you know, in the 2 to 3 percent range. Right now, we have inflation running substantially above 2 percent and, and, you know, more persistently than we would like. We have growth—even in forecasts, even in the somewhat reduced forecast for 2022—we still see growth higher than, substantially higher than what we estimate to be the potential growth rate. And we see a labor market where, by so many measures, it is historically tight. I think the—you know, in a way, the least tight aspect of it is, is looking at the unemployment rate, which is still below our median estimate of, of [the unemployment rate consistent with] maximum employment. If you look at things like quits and job openings, as I mentioned earlier, and wages, you’re seeing—and, and just the ratio of job openings to unemployed—you’re seeing a very, very tight labor market. Now, we also know that labor force participation is significantly lower. It’s 1½ percentage points lower than it was in February of 2020. Maybe a [full] percentage point of that is, is retirements. Some part of those retirements are, are, you know, related to COVID rather than just regular retirements. So we think there’s, there’s a pool of people out there who could come back into the labor force. But it’s not happening very quickly, and it may not—it may continue to not happen very quickly as long as the pandemic is on[going]. So that’s, that’s, that’s how we think about that. We haven’t made—to your specific question—we really have not addressed those questions. And we’ll begin to address them as we—as we move into the March meeting and meetings after that. <NAME>MICHELLE SMITH</NAME>. Let’s go to Rachel. <NAME>RACHEL SIEGEL</NAME>. Thank you, Michelle. And thank you, Chair Powell, for taking our questions. I’m wondering if you can talk to us about any metrics that the Fed uses to assess how inflation affects different groups of Americans, especially lower-, lower-income earners? And are you worried that the Fed underestimates, or can’t effectively measure, the impact of inflation on some of the most vulnerable households? Thank you. <NAME>CHAIR POWELL</NAME>. So it’s, it’s more a matter of—I think the problem that we’re—that we’re talking about here is really that people who are on fixed incomes who are living paycheck to paycheck, they’re spending most or all of their—of, of what they’re earning on food, gasoline, rent, heating their—heating, things like that, basic necessities. And so inflation right away, right away forces people like that to make very difficult decisions. So that’s really the point. I don’t—I’m not aware of, you know, inflation literally falling more on, on different socioeconomic groups. It’s—that’s not the point. The point is, some people are just really in a—prone to suffer more. I mean, for people who are economically well off, inflation isn’t good. It’s bad. High inflation is, is bad, but they’re going to be able to continue to eat and keep their homes and drive their cars and things like that. It’s more—so that, that’s really how I think of it. And, you know, we, we have to control inflation for the benefit of all Americans. But part of—part of it is just that it’s particularly hard on people with fixed incomes and low incomes who spent most of their—of their income on necessities, which are—which are experiencing high inflation now. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Thanks, Michelle, and thank you, Mr. Chairman, for taking the question here. So year over year, inflation’s at a 40-year high. The [increase in] input costs for producer price index for all of 2021 was the highest on record. Some investors fear that the Fed might be moving too late. Now, you said no decisions were made on the path of rate hikes, but was a rate hike more than 25 basis points discussed today? And as a follow to that—because I have problems with the mute button—as a follow to that, you testified that the supply chain issues could be worked out by the end of the year. You talked about that today. The CEO of Ford, though, told Fox Business today that the chip shortage will last into 2023. So today you said inflation will start to ease this year. I want to drill down and get a timeline that you see as to when we could see that relief. Thank you. <NAME>CHAIR POWELL</NAME>. So I, I would not say that I would expect the supply chain issues to be completely worked out by the end of this year. I do not expect them, and I have not expected them. What I would say, and I have been saying, is that I expect progress to be made in the second half of this year, mainly���progress because we’re not making much progress. If you look at a ton of metrics, you can find some that suggest that delivery times are shorter and inventories in some industries moving up. But, overall, we’re not—we’re not making progress. And, you know, things like the semiconductor issue are going to—they’re going to be quite a long time. I would think they’ll go more than through 2023. In terms of—so in terms of being too late, I would just say this. We—our policy needs to be positioned to address the full range of plausible outcomes, as I said, and particularly the possibility that inflation will continue to run higher, more persistently than we’d expected. And we think we are positioned to make the changes in our policy to do that, and, and we’re committed to doing that. And that’s, that’s really where we are. In terms of your, your question about the, the size of rate increases, we haven’t—we haven’t faced those decisions. We haven’t made them. It isn’t possible to sit down here today and tell you with any confidence what the—what the precise path will be. But in—as we work our way through this, meeting by meeting, we are aware that this is a very different, different expansion, as I’ve said a couple times, with higher inflation, higher growth, a much stronger economy. And I think those differences are likely to be reflected in—in the policy that we implement. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Mike McKee. <NAME>MICHAEL MCKEE</NAME>. Thank you, Mr. Chairman. I’d like to sort of weave some of the strands of your answers together and ask you, as you start to reverse policy, what your goal is. Are you going to be raising interest rates until you get inflation to 2 percent? Do you want to go below 2 percent so that, on average, you get a 2 percent inflation rate? And because you said we have to protect the employment part of your mandate, is there some sort of circuit breaker that would stop you from raising interest rates on the employment side? <NAME>CHAIR POWELL</NAME>. So, no. There’s no—there’s nothing in our framework about having inflation run below 2 percent so that we would do that, try to achieve that outcome. So the answer to that is, is “no.” What we’re trying to do is get inflation, keep inflation expectations well anchored at 2 percent. That’s, that’s always the, the ultimate goal. And we do that in the service of having inflation—we get to that goal by having inflation average 2 percent over time. And if inflation doesn’t average 2 percent over time, then it’s not clear why inflation expectations would be anchored at 2 percent. So that, that’s the way we think about that. You know, it—what was the last part of your—of your question? <NAME>MICHAEL MCKEE</NAME>. I was asking if you’re protecting the employment side of the mandate, whether there’s some sort of circuit breaker there. <NAME>CHAIR POWELL</NAME>. Nothing like that. I mean, I would say you have a tremendously strong labor market. And you have growth this year at—forecast to be well above—well above potential. I mean, people who are forecasting growth think potential growth is around 2 [percent]. Most forecasts [of actual growth] are significantly above that for 2022, and that’s even with, with policy becoming substantially less accommodative. So the labor market’s going to be strong for some time. We’re—ideally, what we’re trying to achieve is inflation getting back down to 2 percent. And we’re trying to do that in a process that, that, that accomplishes—you know, that will also leave the labor market in a very strong position. And no one really knows what that will take. Again, I would say that it isn’t just monetary policy that’s helping inflation get down. It’ll be supply-side improvements, and it’ll be less, less fiscal, you know, less fiscal impulse in all likelihood. So—but monetary policy will do our job. It is our job to get inflation down to 2 percent. And a situation where, where the two goals are—the two goals can be in tension is a difficult one. But I—but I don’t really think they are here, though, because I think a really significant threat to further strengthening in the labor market in the form of higher participation over time is high inflation. And also, high inflation is taking away the benefits of some of these larger wage increases that we’re seeing now. So we do hope to achieve, and our plan is to achieve, both of those goals. <NAME>MICHAEL MCKEE</NAME>. If I could—if I could follow up, does the danger of tightening too much as policy works its way into the economy with a lag mean that you should go back to being more forecast dependent in making decisions, rather than the state dependency you’ve been using as a framework for the last year and a half or so? <NAME>CHAIR POWELL</NAME>. State dependency was particularly around the thought that if we—if we saw a very strong labor market, we would wait to see actual inflation—actual inflation before we tightened. And so that was a very state-dependent thought because, for a long time, we’d been tightening on the expectation of high inflation, which never appeared. And that was the case for, for a number of years. So in this particular situation, we will be clearly monitoring incoming data as well as the evolving outlook. <NAME>MICHELLE SMITH</NAME>. Let’s go to Michael Derby. <NAME>MICHAEL DERBY</NAME>. Thank you for taking my question. I want to ask you, with the benefit of hindsight, and I realize, I mean, that is what it is. But do you feel that, you know, monetary policy and fiscal policy maybe did too much to react to the crisis and that part of the inflation problem that we’re having right now is because the government response, you know, collectively was more than what the economy ended up needing? <NAME>CHAIR POWELL</NAME>. So I think it’s too soon to write that history, really. But what I would say is this. The—if you remember what it felt like at the beginning of the pandemic, literally the global economy shutting down in large part, including our own economy, and people going to their homes for weeks on end in masks, and there are no vaccines, and it could be a really long time to get them, you know. And then, you know, you have—economic activity drops by a shocking amount in one—so there was a real risk of lasting damage. And I think Congress responded remarkably with the—with the CARES Act, incredibly timely and very powerful. People will—there’ll always be flaws in these things. But in real time, it was a remarkable achievement. And we responded. And what we were able to do was, you know, stave off a collapse of the financial system at the beginning and make time for what really needed to happen, which was the income replacement and then the recovery that Congress enabled with the CARES Act. So now, that was a lot of—that was a lot. And what we did was a lot. And, you know, now—so, what we have now is, we have the strongest recovery of any, any country. And we have—we have a recovery that looks completely unlike other recoveries that we’ve had, because we’ve, we’ve put so much support behind the recovery. And we’re managing the, the relatively high-class problems that come with that, which are high inflation and a labor shortage. So—and these are serious problems, very serious problems that we, you know, we’re working as hard as we can on. Was it too much? Again, I’m going to leave that to the historians. And—but look, in 25 years, we’ll look back at this incident, which will be a, you know, 2-, 3-, 4-, 5-year period. And we’ll say, you know, we’ll have a—we’ll have a much better basis to make a judgment about the actions that people took. But it was all founded, though, in a—in a very strong reaction to a, you know, to a unique historical event. And I guess I’ll have to leave it at that. I look for—I hope I’ll be around to see how that looks in 25 years. <NAME>MICHAEL DERBY</NAME>. Fair enough. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Jean Yung. <NAME>JEAN YUNG</NAME>. Thanks, Michelle. Chair Powell, some investors are expecting the yield curve could flatten, or even invert, after rate hikes begin. Would that worry you, and how important is that risk in the Fed’s consideration for adjusting policy? <NAME>CHAIR POWELL</NAME>. So we, we do monitor the slope of the yield curve, but we don’t control the slope of the yield curve. Many flat—many factors influence longer-term interest rates. But it is something that we watch, and, and you will know that from when we had this issue a few years ago. And we take it into account, along with many other financial conditions, as we try to assess the implications of all those conditions for the economic outlook. So that’s, that’s one thing I would say. Another is, currently, you’ve got a slope. If you think about 2s to 10s, 2-year Treasury to 10-year Treasury, I think that’s around 75 basis points. That’s well within the range of a normal—of a normal yield-curve slope. So it’s something we’re monitoring. We don’t think of it as—I don’t think of it as some kind of an iron law. But we do look at it and try to understand the implications and what it’s telling us. And it’s—but it’s one of many things that we monitor. <NAME>JEAN YUNG</NAME>. Can I follow up real quick and ask, if it—if it did invert, would you tie it to U.S. fundamentals? Or would it be driven by a much broader set of factors? <NAME>CHAIR POWELL</NAME>. We’d—that’s, that’s a good question in, in real time. Obviously, U.S. long-term sovereign debt is an—is an important global asset. And it—and the fact that our rates are so much higher than, than other risk-free sovereign rates around the world may put something of a ceiling on our—on our rates. I don’t know. But it would really depend on the— on the facts and circumstances at that time. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Brian Cheung for the last question. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. Brian Cheung, Yahoo Finance. Within the context of just the broad effort to normalize rates, would you describe what you want to do as a gradual hiking? And then, secondly, within the context of hiking cycles, it’s often the talking point for financial stability and wanting to make sure that asset bubbles don’t emerge. Is that something that has also factored into the conversation as you start to think about hiking rates? Thanks. <NAME>CHAIR POWELL</NAME>. I would describe what we’re doing along these lines. This is going to be a year in which we move steadily away from the very highly accommodative monetary policy that we put in place to deal with the—with the economic effects of the pandemic. And that’s going to involve a number of things. It’s going to involve and does involve finishing asset purchases. It’s going to involve lifting off. And it’s going to involve additional rate increases as appropriate. And we, we have—we’re going to write down in March our next assessment of what that might be. It’s going to continue to evolve as the data evolve. We need to be quite adaptable, I think, in our understanding of this. The last thing we’re going to do is, we’re going to have a couple more meetings, I think, to talk about allowing the balance sheet to begin to run off and [to] do so in a predictable manner. And that’s, that’s something that we will also be doing as appropriate. And I wouldn’t—I don’t think it’s possible to say exactly how this is going to go. And we’re, we’re going to need to be, as I’ve mentioned, nimble about this. And the economy is quite different this time. I’ve said this several times now. The economy is quite different. It’s stronger. Inflation is higher. The labor market is much, much stronger than it was. And growth is above trend, even this year, let alone last year. So all of those things are going to go into our thinking as we make—as we make monetary policy. And you asked about financial stability concerns. In connection with our policy–was that your question? <NAME>BRIAN CHEUNG</NAME>. Yes. Within the context of other hiking cycles, it seems like [a set of] worries about asset bubbles emerging as a result of easy rates has been part of that . I didn’t know if that was part of the discussion today. <NAME>CHAIR POWELL</NAME>. I would just say this. We, we, of course, have a financial stability framework. And what it shows is a number of, of positive aspects of financial stability. But you mentioned, really, [the behavior of] asset prices is one of the four. So asset prices are somewhat elevated, and they reflect a high risk appetite and that sort of thing. I don’t really think asset prices themselves represent a significant threat to financial stability, and that’s because households are in good shape financially than they have been. Businesses are in good shape financially. Defaults on business loans are low and that kind of thing. The banks are highly capitalized with high liquidity and quite resilient and strong. There are some concerns in the—in the nonbank financial sector around—still around money market funds, although the SEC is making—has made some very positive proposals there. And we also saw some things in the Treasury market during the acute phase of the crisis, which, which we’re looking at ways to address. But, overall, the financial stability vulnerabilities are manageable—are manageable, I would say. <NAME>MICHELLE SMITH</NAME>. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. I want to begin by acknowledging the tremendous hardship the Ukrainian people are suffering as a result of Russia’s invasion. The human toll is tragic. The financial and economic implications for the global economy and the U.S. economy are highly uncertain. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today, in support of these goals, the FOMC raised its policy interest rate by ¼ percentage point. The economy is very strong, and against the backdrop of an extremely tight labor market and high inflation, the Committee anticipates that ongoing increases in the target range for the federal funds rate will be appropriate. In addition, we expect to begin reducing the size of our balance sheet at a coming meeting. Economic activity expanded at a robust 5½ percent pace last year, reflecting progress on vaccinations and the reopening of the economy, fiscal and monetary policy support, and the healthy financial positions of households and businesses. The rapid spread of the Omicron variant led to some slowing in economic activity early this year. But cases have declined sharply since mid-January, and the slowdown seems to have been mild and brief. Although the invasion of Ukraine and related events represent a downside risk to the outlook for economic activity, FOMC participants continue to foresee solid growth. As shown in our Summary of Economic Projections, the median projection for real GDP growth stands at 2.8 percent this year, 2.2 percent next year, and 2 percent in 2024. The labor market has continued to strengthen and is extremely tight. Over the first two months of the year, employment rose by more than a million jobs. In February, the unemployment rate hit a post-pandemic low of 3.8 percent, a bit below the median of Committee participants’ estimates of its longer-run normal level. The improvements in labor market conditions have been widespread, including for workers at the lower end of the wage distribution as well as for African Americans and Hispanics. Labor demand is very strong, and while labor force participation has increased somewhat, labor supply remains subdued. As a result, employers are having difficulties filling job openings, and wages are rising at their fastest pace in many years. FOMC participants expect the labor market to remain strong, with the median projection for the unemployment rate declining to 3.5 percent by the end of this year and remaining near that level thereafter. Inflation remains well above our longer-run goal of 2 percent. Aggregate demand is strong, and bottlenecks and supply constraints are limiting how quickly production can respond. These supply disruptions have been larger, and longer lasting, than anticipated, exacerbated by waves of the virus here and abroad, and price pressures have spread to a broader range of goods and services. Additionally, higher energy prices are driving up overall inflation. The surge in prices of crude oil and other commodities that resulted from Russia’s invasion of Ukraine will put additional upward pressure on near-term inflation here at home. We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. We know that the best thing we can do to support a strong labor market is to promote a long expansion—and that is only possible in an environment of price stability. As we emphasize in our policy statement, with appropriate firming in the stance of monetary policy, we expect inflation to return to 2 percent while the labor market remains strong. That said, inflation is likely to take longer to return to our price-stability goal than previously expected. The median inflation projection of FOMC participants is 4.3 percent this year and falls to 2.7 percent next year and 2.3 percent in 2024; this trajectory is notably higher than projected in December, and participants continue to see risks as weighted to the upside. The Fed’s monetary policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people. Our policy has been adapting to the evolving economic environment, and it will continue to do so. As I noted, the Committee raised the target range for the federal funds rate by ¼ percentage point and anticipates that ongoing increases in the target range will be appropriate. The median projection for the appropriate level of the federal funds rate is 1.9 percent at the end of this year—a full percentage point higher than projected in December. Over the following two years, the median projection is 2.8 percent—somewhat higher than the median estimate of its longer-run value. Of course, these projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. Reducing the size of our balance sheet will also play an important role in firming the stance of monetary policy. At our meeting that wrapped up today, the Committee made good progress on a plan for reducing our securities holdings, and we expect to announce the beginning of balance sheet reduction at a coming meeting. In making decisions about interest rates and the balance sheet, we will be mindful of the broader context in markets and in the economy, and we will use our tools to support financial and macroeconomic stability. As we noted in our policy statement, the implications of Russia’s invasion of Ukraine for the U.S. economy are highly uncertain. In addition to the direct effects from higher global oil and commodity prices, the invasion and related events may restrain economic activity abroad and further disrupt supply chains—which would create spillovers to the U.S. economy through trade and other channels. The volatility in financial markets, particularly if sustained, could also act to tighten credit conditions and affect the real economy. Making appropriate monetary policy in this environment requires a recognition that the economy often evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook. And we will strive to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment. We are attentive to the risks of potential further upward pressure on inflation and inflation expectations. The Committee is determined to take the measures necessary to restore price stability. The American economy is very strong and well positioned to handle tighter monetary policy. 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. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Jeanna at the New York Times. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thank you so much for taking our questions. I wonder if you could detail your thinking a little bit about how you’re considering the, you know, the risks of going too fast and potentially tipping the economy into recession and how you’re weighing those risks against the possibility of going too slowly, allowing inflation to become embedded, and kind of getting “behind the curve.” <NAME>CHAIR POWELL</NAME>. So I guess I would start by saying that, in my view, the probability of a recession within the next year is not particularly elevated. And why do I say that? Aggregate demand is currently strong, and most forecasters expect it to remain so. If you look at the labor market, [you find that it is] also very strong. Conditions are tight, and payroll job growth is continuing at very high levels. Household and business balance sheets are strong. And so all signs are that this is a strong economy and, indeed, one that will be able to flourish—not to say withstand, but certainly flourish—as well in the face of less accommodative monetary policy. So I guess that’s how I would say I’m looking at that. Of course, the objective is to achieve price stability while also sustaining a strong labor market. And that is our overall objective. But we do feel the economy is very strong and well positioned to withstand tighter monetary policy. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Howard at Reuters. <NAME>HOWARD SCHNEIDER</NAME>. Hi, Chair Powell. I was wondering, in the SEPs, you have quite a markdown to GDP from 4 to 2.8 percent. I’m wondering, how much of that do you feel is the result of the Fed’s stiffer-than-expected action here? You talk about monetary policy operating with a lag, but is this going to bite quicker than expected? <NAME>CHAIR POWELL</NAME>. I don’t think that’s a big piece of it, actually. I think some of that is just an early assessment of the effects of spillovers from the war in Eastern Europe, which will hit our economy through a number of channels. Highly uncertain, but, you know, you’re looking at higher oil prices, higher commodity prices. It’ll be—we think that will weigh on GDP to some extent. So that’s part of what moved those assessments down. I don’t think—I mean, I think, generally, monetary policy works with a lag, so some of that would also be in there. But remember, as well, that 2.8 percent is still very strong growth. If we think that the potential growth rate of the economy is somewhere between, somewhere around 1.75 percent, 2.8 percent is strong economic growth. It would have been one of the strongest years, in fact, of the last expansion. So, while it’s lower than last year’s 5.8 percent, it’s still quite strong growth. So I would say it’s quite a strong forecast. <NAME>HOWARD SCHNEIDER</NAME>. So, in that context, what would trigger you to go faster or slower on the rate hikes? “Ongoing increases” doesn’t really tell us whether this is going to come in bigger chunks or evenly paced through the year. <NAME>CHAIR POWELL</NAME>. So, you know, the way we’re thinking about this is that every meeting is a live meeting. And we’re going to be looking at evolving conditions. And if we do conclude that it would be appropriate to move more quickly to remove accommodation, then we’ll do so. I can’t be perfectly specific about it, but that’s certainly a possibility as we go through the year. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Rachel at the Washington Post. <NAME>RACHEL SIEGEL</NAME>. Thank you, Michelle. And thank you, Chair Powell, for taking our questions. I’m curious if you can be specific on when you expect to see inflation will start to come down, especially with the combination of rates going up, fiscal aid dissipating from the economy, and supply chains getting better? And if you don’t start to see that, how will you signal it? What will you be looking for? And what will you be looking for over the course of the year? Thank you. <NAME>CHAIR POWELL</NAME>. So I guess I would say that at the—before the invasion of Ukraine by Russia—so let’s go back to that. I would have said that the expectation was that inflation would peak sometime in the first quarter, maybe the end of the first quarter of this year, and then maybe stay at that level or a little bit lower and then start to come down in the back half of the year. So now we’re, you know, we’re getting—we’re going—we’re already seeing a little bit of short- term upward pressure in inflation due to higher oil prices, natural gas [prices] a little bit but not so much for us since we have our own natural gas supply, other commodities prices. The other thing is that you’re seeing supply chain issues around shipping and around, you know, lots of countries and companies and people not wanting to touch Russian goods. So that’s going to mean more tangled supply chains. So that could actually push out [in time] the relief we were expecting on supply chains generally. So I guess I would say that the expectation is still that inflation will begin to come down in the second half of the year. But if you look at where I read the SEP headline median, we still expect inflation to be high this year, lower than last year, and then we expect—though, particularly with the effects of the war, but also the data we’ve seen so far this year—we expect inflation to remain high through the middle of the year, begin to come down, and then come down more sharply next year. <NAME>MICHELLE SMITH</NAME>. Let’s go to Nick at the Wall Street Journal. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, over the last six months, the Fed has shifted its policy stance quite a bit. Six months ago, you were still buying assets. Most officials weren’t projecting any interest rate increases this year. And yet, despite the shift over the last six months, real rates are as negative today as they were then. So how concerned are you that further inflation surprises will offset the effects of recent policy firming by leading real rates to stay at levels that do not actually provide much restraint to the economy? Thanks. <NAME>CHAIR POWELL</NAME>. So that’s one of many ways of capturing the situation, which is that we—the Committee really does understand that the time for rate increases and for shrinking the balance sheet has come. And I would just say, I would go back to “the economy is very strong,” as I mentioned. Tremendous momentum in the labor market. We expect growth to continue. As I—it’s clearly time to raise interest rates and begin the balance sheet shrinkage. And I just wanted to say that as I looked around the table at today’s meeting, I saw a Committee that’s acutely aware of the need to return the economy to price stability and [is] determined to use our tools to do exactly that. You couched it in terms of real rates. I would say, if you look at the SEP, you’ve got people getting close to or even above, in many cases, their estimate of the longer-run neutral rate. So I understand that doesn’t do it for real rates. But if you go out a year or two, many people are, in their forecasts, are having tight policy from a real interest rate standpoint. So that’s something that we’re focused on. Of course, it’s a highly uncertain environment. And, you know, we don’t know what’s going to happen. But we do know that we’re going to deploy our tools to achieve our goals—and that includes the price-stability goal. <NAME>MICHELLE SMITH</NAME>. Let’s go to Victoria at Politico. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. So, looking at the Summary of Economic Projections, you all have inflation coming down over the course of the year to 4.3 percent. And then you also have rates going up to what appears to still be below roughly what would be estimated to be the neutral rate, although I know that’s a little bit uncertain. So I was just wondering, how much of inflation coming down do you see as actually being as a result of the Fed itself raising rates? And then also, if I could just ask, given that Sarah Bloom Raskin withdrew her nomination, what do you expect to do with the regulatory portfolio? Do you expect to assign a Governor in charge of that? <NAME>CHAIR POWELL</NAME>. Okay, sorry. Tell me again your first question. <NAME>VICTORIA GUIDA</NAME>. My first question is, how much do you expect inflation to come down as a direct result of the Fed’s actions? <NAME>CHAIR POWELL</NAME>. Okay. So part of inflation coming down at the very beginning is clearly to do with factors other than our policy, and those would include, potentially, the supply chain is getting a little bit better, certainly base effects. You’re lapping—as you know, when you look at a 12-month trailing window, you’re lapping very high inflation in March, April, May, June of last year. So there should be some effects from that in the 12-month picture. Really what we’re looking for, though, is month-by-month inflation coming down. And so it’s really, it’s all the things we’ve been talking about, you know, that really haven’t helped much, including the shift away from goods and back to services, including supply chains getting better, including labor force participation—all those things that have been sticky and not happening. But a big part of it is, though, is the base effects I mentioned as well. You know, I think monetary policy starts to bite on inflation, and on growth, with a lag, of course. And so you would see that more in ’23 and ’24. But also, remember we started talking about rate increases last year. For some months now, financial conditions have already incorporated a significant number of rate increases. So it doesn’t start today. The effect, the moves are already priced into the market for a few months now. So the clock is running on that, and I think some of that will be seen in the second half of the year as well. So on the regulatory portfolio, I would just say this. You know, we have an obligation to carry out under the law in supervision and regulation, and we’re doing that. That’s what we’re doing. The committee is not active. So what’s happening is, things are coming to the full Board, and we’re voting on them. We’re getting our business done. You know, we got the stress tests done. We’ve looked at, you know, a number of proposals for mergers and things like that. So we’re working ahead. Of course, we don’t have a Vice Chair for Supervision, as you mentioned. But we’re making do with the situation we have. And a good number of things have come straight to the Board for approval. <NAME>MICHELLE SMITH</NAME>. Let’s go to Neil Irwin at Axios. [Pause] Let’s go to Neil Irwin. <NAME>NEIL IRWIN</NAME>. Hi, Chair Powell. It’s Neil Irwin at Axios. Thanks for taking our questions. In the statement of economic projections, we see a forecast of median 1.9 percent fed funds rate at the end of the year, 2.8 end of next year. Wondered whether that aligns with your own expectations, in particular on that point of overshooting the long-term neutral rate. And, also, if you can tell us anything about how that might be paced: front-loaded, back-loaded. How high is the bar for doing 50 at one meeting? <NAME>CHAIR POWELL</NAME>. So I don’t—Neil, I’ve never talked about my own SEP projection. It’s in there, but I, you know, I think Fed Chairs have generally not done that, because we just haven’t done it. It’s because we’re, you know, we have to put together the consensus on the Committee and present that consensus. So I wouldn’t talk about my individual one. And in terms of the pacing of it, I would just point out that that is—there’s seven remaining meetings this year. This isn’t something we discuss or debate or agree on. But there’s seven remaining meetings, and there’s seven rate hikes. I would add there’s also the shrinkage of the balance sheet, which, you people do the math different ways, but that might be the equivalent of another rate increase just from the runoff of the balance sheet. So I don’t—but I don’t know. We haven’t made any decisions on front-end loading or going steadily through the year. And, as I mentioned, you know, if you look at the SEP, a good number of participants do see more than seven or eight increases this year. And I can’t give you, I’m not going to try to give you a really specific test for what it would take to do that. But I will say this, that we’ll be looking at the data as they come in. We’ll be looking to see whether the data show expected improvement on inflation. We’ll be looking at the inflation outlook and making a judgement. And we’ll be going—each meeting is a live meeting. And if we conclude that it would be appropriate to raise interest rates more quickly, then we’ll do so. <NAME>MICHELLE SMITH</NAME>. [Long pause] One second. Okay. We’re going to try one more time. Colby Smith at the FT. [Long pause] Okay. We’ll come back to Colby. Let’s go to Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Yes. Thank you, Chair Powell. Thank you, Michelle, for the question. I have a more basic question. The last time the CPI inflation—I know you look at PCE, but CPI inflation—was as high as it is was July of 1981, when the effective federal funds rate was 19.2 percent. But given the current data, how far behind the curve of inflation do you believe the Federal Reserve is, in your mind? <NAME>CHAIR POWELL</NAME>. So I just would say a couple things. We have the tools that we need, and we’re going to use them. And, as you can see, we have a plan over the course of this year to raise interest rates steadily and also to run off the balance sheet. We will take the necessary steps to ensure that high inflation does not become entrenched, while also supporting a strong labor market. And, as I mentioned, if we conclude that it would be appropriate to move more quickly, we’ll do so. I’ll leave it to others to make the judgment you asked for. <NAME>EDWARD LAWRENCE</NAME>. And then just as a follow on that, I wanted to get you on the record on this. What impact has there been on your job, given the fact that [indaudible]— <NAME>CHAIR POWELL</NAME>. We lost you in the middle of the question. <NAME>MICHELLE SMITH</NAME>. Edward, can you repeat that question? <NAME>EDWARD LAWRENCE</NAME>. —the impact that—given you’re not actually confirmed and Governor Brainard is not actually confirmed, has there been any impact on your job or the Fed’s ability to handle inflation? <NAME>CHAIR POWELL</NAME>. None whatsoever. <NAME>MICHELLE SMITH</NAME>. Okay, let’s go to Colby Smith at the FT. <NAME>COLBY SMITH</NAME>. Thank you, Michelle. Chair Powell, how concerned is the Committee about the notable pickup in services inflation, which is perhaps less likely to self-correct? And to what extent does it alter both the Committee’s confidence that long-term inflation expectations will not de-anchor in the coming months as well as the balance of risks that the Fed may need to raise interest rates further above neutral than indicated in the dot plot? Thank you. <NAME>CHAIR POWELL</NAME>. Thank you. So, of course, that’s something we’re watching report by report. And we’re certainly, we noticed it in the last meeting. And it’s part of the overall picture. We have expected services inflation to move back up to where it was, and that’s part of what’s happening is, in the case of some services, prices are still getting back up to where they were before the crisis. In other cases, it’s pretty clear that inflation has spread more broadly across services. And, yes, that is concerning. In the meanwhile, we see some progress on the good side. But, really, in this latest report, it was confined to vehicles, which is, admittedly, a large category. So, you know, as I mentioned, the Committee acutely feels its obligation to move to make sure that we restore price stability and is determined to use its tools to do so. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Steve Liesman at CNBC. <NAME>STEVE LIESMAN</NAME>. Thank you. Mr. Chairman, I wonder if you can help me understand the kind of logic, if there is one, in the SEP here. As I look at the median forecast, for example, for unemployment, it runs for the three-year window below the long-run rate. I look at inflation being above, over the three-year window, the long-run—or call it the neutral—rate, so the economy still runs hot. And that is all true in a regime when you run at least for two years the funds rate above the long-run rate. I guess my question is this: Are you not create—giving a forecast here that essentially suggests you will be continuing to run further “behind the curve”—and never really get in front of inflation, because the economy will continue to run hot? And, kind of on a related issue: You said earlier [that] inflation will take longer to return to price stability than we had originally expected. Isn’t that a choice you’re making? And, if so, why are you making that choice to let inflation run above price stability longer than you’d like? <NAME>CHAIR POWELL</NAME>. Right. So our, if you look, our—first of all, there is no—you’re looking at medians. But understand that there’s no, it’s not something we voted on. It’s not a plan. But if you look, people do have their in—by the end of this year, broadly, people are at or close to or, in some cases, above their estimates of longer-run neutral interest rate. Okay. So that should stop pushing—that should, in other words, that should be a removal of accommodation for monetary policy, basically. At the same time, we will have done significant balance sheet runoff. And you can think of that as further. In the next year, and just looking at the median, you’re now above the, you know, above the, what people estimate to be the longer-run median. And also, in many people’s forecasts, that actually amounts to, you know, tight policy under, in real rates as well. So why does unemployment remain at 3.5 percent? You know, it—I mean, a couple points. One is the connection between—in the economy we had before the pandemic, the connection between inflation and the level of the unemployment rate was not very tight. But this is—clearly, what this is is an expectation that, really it amounts to that, the idea that wage increases, which are now running above the level that would be consistent over the long run with 2 percent inflation, will move back down to levels which are still very attractive, full-economy kind of—full-employment kind of wages, but not to a point where they’re pushing up inflation anymore. And, as I mentioned, there are a lot of factors causing inflation to come down. And, you know, the reality is, there are many, many moving pieces, and we don’t know what will actually happen. But no matter what happens, this is a Committee that is determined to use its tools to make sure that higher inflation does not become entrenched. And so we are determined on that front, and we’ll deal with what comes. This is a modal, or most likely, expectation. But we’ll deal with what comes, whether it’s better or worse. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Chris Rugaber at the AP. <NAME>CHRISTOPHER RUGABER</NAME>. Hi. Thank you. Well, let me follow up a bit on that. I mean, there are a lot of economists skeptical that you can reduce inflation as much as you’ve penciled in without raising the unemployment rate. And I’m wondering, just what are the mechanisms you see in reducing demand? I mean, outside housing and autos, how do higher fed [funds] rates reduce consumer demand unless it’s through higher unemployment? Thank you. <NAME>CHAIR POWELL</NAME>. Well, if you take a look at today’s labor market, what you have is 1.7-plus job openings for every unemployed person. So that’s a very, very tight labor market— tight to an unhealthy level, I would say. So, in principle, if you were—let’s say that our tools work about as you described, and the idea is, we’re trying to better align demand and supply, let’s just say in the labor market. So it would actually, if you were just moving down the number of job openings so that they were more like one to one, you would have less upward pressure on wages. You would have a lot less of a labor shortage, which is going on pretty much across the economy. We’re hearing from companies that they can’t hire enough people. They’re having a hard time hiring. So that’s really the thinking there, is, you know, these are fairly well-understood channels, interest sensitive. And, basically, across the economy, we’d like to slow demand so that it’s better aligned with supply; give supply, at the same time, time to recover; and get into a better, you know, a better alignment of supply and demand. And that, over time, should bring inflation down. And I’ll say again, though, you know, we don’t have a perfect crystal ball about the future, and we’re prepared to use our tools as needed to restore price stability. You know, as I mentioned in my opening remarks, without price stability, there—you really can’t have a sustained period of maximum employment. It’s our—one of our most fundamental obligations is to maintain and restore, in this case, price stability. So we’re very committed to that. Of course, the plan is to restore price stability while also sustaining a strong labor market. That is our intention, and we believe we can do that. But we have to restore price stability. <NAME>MICHELLE SMITH</NAME>. Okay. Let’s go to Scott Horsley at NPR. <NAME>SCOTT HORSLEY</NAME>. Thanks. And I apologize if this covers some of the same ground you just talked about, Mr. Chair. I think I missed some of your answer there. But I have a follow-up question on the labor force. We have seen some gains in the prime-age workforce in the last few months. I wonder what you anticipate when it comes to some of the older workers as the health outlook has changed. Are we going to see more recent retirees following Tom Brady back into the workforce? And what would that mean for wages and inflation? <NAME>CHAIR POWELL</NAME>. It’s hard to say. You know, what we saw in the last cycle was that, over the course of a long, steady expansion, labor force participation outperformed expectations. And that was just a, you know, it was a tight labor market, but it wasn’t—it was nowhere near as tight as this labor market. But it was a tight labor market, and so people stayed in the labor force longer. It wasn’t so much people coming back in the labor force after retirement. That’s not something that happens, in the aggregate, very much. But, so that’s what was happening. And, you know, more labor force participation is tremendously welcome. And, of course, our policy does not in any way preclude that. This is a situation where wages have moved up at the highest rate in a very long time. And people are able to quit their jobs and move to better-paying jobs in the same industry or different industries. So it’s a really attractive labor market for people. And once, you know, as we get past COVID well and truly, it becomes an even more attractive one. So we hope that that will lead to more labor supply. That’s a good thing for the country. It’s a good thing for people. And it also will, we think, help relieve some of the wage pressures that do put inflation more at risk. That last part is, we’ll have to see whether, empirically, it winds up, works out that way. But, in principle, it ought to help with inflation as well. It’s not the only thing we’re looking for, though, from inflation. We’re looking for help from a number of different places and, most importantly, from our own policy. <NAME>MICHELLE SMITH</NAME>. Okay. Let’s go to Rich Miller at Bloomberg. <NAME>RICH MILLER</NAME>. Thank you, Michelle. And thank you, Chair Powell. I’m sorry; I’m having some communication problems. So I missed some of the stuff you’ve said, and my apologies if this has been asked. Since the FOMC met last January, financial conditions have tightened markedly, equity prices down, Treasury yield’s up, bond spread’s risen, yield curve has flattened a lot, and even further just today, dollar’s up. Is that welcome? And would you like to see more in order to achieve your goals? Thank you. <NAME>CHAIR POWELL</NAME>. So, as you know, policy works through financial conditions. That’s how it reaches the real economy—by just the mechanisms you mentioned. And remember that the financial conditions we had for the last couple of years were a function not only of very aggressive, and appropriately so, fiscal policy, but also highly accommodative monetary policy—the monetary policy settings that we put in place at the worst parts of the pandemic. So it is very appropriate to move away from those. And, yes, that will lead to some tightening in financial conditions in the form of higher interest rates and just the sorts of things—we’re not targeting any one or more of those things, but financial conditions generally should move to a more normal level so that—because we know the economy no longer needs, or wants, these very highly accommodative, this stance, which, you know, so it’s time to move to a more normal setting of financial conditions, and we do that by moving monetary policy itself to more normal levels. <NAME>RICH MILLER</NAME>. When you say “move to a more normal setting” for financial conditions, that suggests to me that you want financial conditions to tighten further from where we are now. Am I drawing the right inference from that? <NAME>CHAIR POWELL</NAME>. Well, yes. So I would say, we look at a broad range of financial conditions. And, of course, when we tighten monetary policy, we do expect that they will adjust in sync over time with monetary policy. It’s not any particular financial condition, but a broad range of financial conditions. They will reflect to some extent—they reflect any number of things. But, yes, we need our policy to transmit to the real economy. And it does so through financial conditions, which means that, as we tighten policy or remove accommodation so that it’s at least less accommodative, that broader financial conditions will also be less accommodative. <NAME>MICHELLE SMITH</NAME>. Thank you. Just a little housekeeping note: Those of you in this call may be having some tech issues. If so, I understand the broadcast is coming through clearly on www.federalreserve.gov. You might go there for the audio. And now we’ll go to Jean Yung. <NAME>JEAN YUNG</NAME>. Hi, Chair Powell. I wanted to ask about the balance sheet discussion you had at this meeting. Can you give us any more details? Did you discuss whether to cap runoffs or whether to increase those caps over what period, if there were any details? <NAME>CHAIR POWELL</NAME>. Yes. Thank you for asking. So, at our meeting today and yesterday, we made excellent progress toward agreeing on the parameters of a plan to shrink the balance sheet. And I’d say we’re now in a position to finalize and implement that plan so that we’ll actually begin a runoff at a coming meeting. And that could come as soon as our next meeting in May. That’s not a decision that we’ve made. But I would say that that’s how well our discussions went in the last two days. So a couple things just to add. We’ll be mindful of the broader financial and economic context when we make the decision on timing, and we always want to use our tools to support macroeconomic and financial stability. We want to avoid adding uncertainty to what’s a highly uncertain situation already. So all of that will go into the thinking of the timing around this. In terms of the—I would say this. I don’t want to get too much into the details, because we’re literally just finalizing them. But the framework is going to look very familiar to people who are familiar with the last time we did this. But it’ll be faster than the last time. And, of course, it’s much sooner in a cycle than last time. But it will look familiar to you. And I would also say that there’ll be—I’m sure there’ll be a more detailed discussion of our—in the minutes to our meeting that come out in three weeks, where I expect that it will lay out, you know, pretty much the parameters of what we’re looking at, which I think will look quite familiar. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Michael McKee at Bloomberg TV. <NAME>MICHAEL MCKEE</NAME>. Mr. Chairman, since September of 2020, you’ve been operating on a monetary policy framework that let the economy run hot to bring unemployment down. That seems to be over. But I’m wondering how you would describe your reaction function now. What is it that the Fed is trying to do other than bring inflation down? In other words, is it, we’re going to keep raising rates until it comes down to an acceptable level? <NAME>CHAIR POWELL</NAME>. Yes. So I want to clear one thing up again. And that is that nothing in our new framework or in the changes that we made has caused us to wait longer to raise interest rates. What we said in the framework changes was—and this was really a reflection of what had happened for the preceding couple of decades, actually. What we said was, if we see, you know, low unemployment, high employment, but we don’t see inflation, then we’re not going to raise rates ’til we actually see inflation. That’s what we said, and that was the sense of it. There was no sense in which, if we got a burst of really high inflation, we would wait to raise rates. That’s simply not in the framework. In fact, quite the contrary. The framework is all about anchoring inflation expectations at 2 percent. So I do hear this, you know, that the framework—really, we can’t blame the framework. It was a sudden, unexpected burst of inflation. And then it was the reaction to it, and it was what it was. But it was not in any way caused by or related to the framework. So, come to today. You know, I think our vision on this on the Committee is very, very clear. What we see is a strong labor market. We see a labor market with a lot of momentum, great job creation. And we see the underlying economy’s strong. Balance sheets are strong. Yes, there are threats to growth from, you know, from what’s going on in Eastern Europe. And, but, nonetheless, in the base case, there’s a pretty broad expectation of strong growth. But inflation is far above our target. And, you know, the help we’ve been expecting and other forecasters have been expecting from supply-side improvement, labor force participation, bottlenecks, all those things getting better—it hasn’t come. And so we’re looking now to using our tools to restore price stability, and we’re committed to doing that. And you see that, I think, in the Summary of Economic Projections. And you see that in the decision we make, and you’ll continue to see it in the decisions we make, going forward. <NAME>MICHAEL MCKEE</NAME>. If I could follow up by asking—I guess what you’d call it is the “Paul Volcker” question: You don’t think unemployment is going to rise significantly, but, if it does, does that temper your desire to keep raising rates? <NAME>CHAIR POWELL</NAME>. The goal, of course, is to restore price stability while also sustaining a strong labor market. We have a dual mandate, and they’re sort of equal. But, as I said earlier, you know, price stability is an essential goal. In fact, it’s a precondition, really, for achieving the kind of labor market that we want, which is a strong and sustained labor market. We saw the benefits of a long expansion, a sustained labor market. It pulled people back in, and there were really no imbalances in the economy that threatened the long expansion. It, just, the pandemic arrived; it was just a completely exogenous event. So that’s how we’re thinking about it. We, of course, want to achieve, you know, price stability with a strong labor market. But we do understand also that, really, you can’t have maximum employment for any sustained period without price stability. So we need to focus on price stability particularly, because the labor market is so strong and the economy is so strong. We feel like the economy can handle tighter monetary policy. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Brian Cheung at Yahoo. <NAME>BRIAN CHEUNG</NAME>. Hi, Chair Powell. Hopefully no tech issues here on this front. Wanted to ask just kind of the broad question about how you are communicating what the Fed’s doing here today to the average American who might not be reading the dot plots or understanding what the SEP is. How is the 25 basis point hike today and then the signaling on future Fed policy going to address the inflation that they’re feeling at the stores on a daily basis? <NAME>CHAIR POWELL</NAME>. Sure. So I guess I’d start by just assuring everyone that we’re fully committed to bringing inflation back down and also sustaining the economic expansion. We do understand that these higher prices, no matter what the source, have real effects on people’s well- being. And, really, high inflation takes a toll on everyone. But it’s really, especially, on people who use most of their income to buy essentials like food, housing, and transportation, where—I mean, we’ve all seen charts that show, if you’re a middle-income person, you���ve got room to absorb some inflation. If you’re at the lower end of the income spectrum, it’s very hard because you’re spending most of your money already on necessities, and the price is going up. But it’s punishing for everyone. So it has been a difficult time for the economy. But we do anticipate that inflation will move back down, as I mentioned earlier. It may take longer than we like, but I’m confident that we’ll use our tools to bring inflation down. You asked about rates. So the way that works, I would explain, is, as we raise interest rates, that should gradually slow down demand for the interest-sensitive parts of the economy. And so what we would see is demand slowing down, but just enough so that it’s better matched with supply. And that brings—that will bring inflation down over time. That’s our plan. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Jo Ling Kent at NBC News. <NAME>JO LING KENT</NAME>. Hi, Chair Powell. Thank you so much for taking my question during this today. My question is a follow-up to what Brian just asked. What is your message to consumers out there who can no longer afford the basics due to this high inflation? <NAME>CHAIR POWELL</NAME>. Well, that is—yes, indeed. I mean, as I just said, you know, I think we do understand very much, and we very much take to heart, that it’s our obligation to restore price stability. And, you know, we’ve had price stability for a very long time and maybe come to take it for granted. But now we see the pain. I’m old enough to remember what very high inflation was like. And, you know, we’re strongly committed as a Committee to not allowing this higher inflation to become entrenched and to use our tools to bring inflation back down to more normal levels, which—our target is 2 percent inflation. So we will do that. And I just would want people to understand that, and that’s—but the way we do that is by raising interest rates and by shrinking our balance sheet. And so financial conditions will become, at the margin, less supportive of various kinds of economic activity. That will slow the economy, while also allowing the labor market to remain very strong. And, you know, the good news is, the economy and the labor market are quite strong. And that means the economy, we think, can handle interest rate increases. <NAME>JO LING KENT</NAME>. And as a quick follow-up to that, you know, obviously, the Federal Reserve walking this very complicated fine line, trying to avoid a recession. For the consumers out there who are worried about their jobs in a possible recession, what do you say to that? <NAME>CHAIR POWELL</NAME>. Well, I, you know, I say that our intention is to bring inflation back down to 2 percent, while still sustaining a strong labor market and that the economy is very strong. If you look at where forecasts are, people are forecasting growth that’s strong within the context of U.S. potential economic output. So—and we expect that to continue. And to the extent the data come in different, then, of course, our policy will adapt. But we do believe that our policy is the appropriate one for this forecast, and we believe that we can bring down inflation. We believe that we can do so while sustaining a strong labor market. The labor market is—it’s not strong in the ordinary sense of the word. We have not seen a labor market where there are 1.7 job openings for every unemployed person or where there, if you add job openings to those who are employed, that’s actually substantially a larger number than the size of the workforce, than the number of people who actually count themselves as in the workforce. So this is a situation where demand is higher than supply. And when that happens, prices go up. And they—so we need to use our tools to move supply and demand back. And we don’t think we need to do this alone. There will be other factors helping that happen. But we certainly are prepared to use our tools—and we will. <NAME>JO LING KENT</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Simon at the Economist. <NAME>SIMON RABINOVITCH</NAME>. Hi. Thank you, Michelle. Thank you, Chair Powell. Sorry to take you away from inflation for one minute. May I ask about the sanctions on Russia and, specifically, the freezing of the central bank assets? Of course, that raises a similar risk for other sovereigns around the world and their biggest companies, potentially. Any concerns about, in the long term, how this might affect the dollar’s status as the preeminent global reserve currency? And in the past couple of weeks, have you had to deliver any kinds of reassurance to other central bankers around the world? <NAME>CHAIR POWELL</NAME>. Well, so, of course, central bankers around the world are generally very in favor of these sanctions. But let me say this: Sanctions are really the business of the elected government, and that’s true everywhere. So the Administration and the Treasury Department, in particular, and other agencies—they create these sanctions. We’re there to provide technical expertise, but they’re not, it’s not our decisions. And so I’m reluctant to comment on sanctions really much because, again, they’re not for us [to decide]. We have a very specific mandate. And these are really the province of elected governments, as I mentioned. So I’d have to leave it at that. Sorry. <NAME>MICHELLE SMITH</NAME>. Thank you. Let’s go to Nancy Marshall-Genzer at Marketplace. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Thanks for taking the question. You’ve been talking a lot about rising wages, which, on the one hand, is a great thing, but are we possibly seeing the beginning of a wage–price spiral? <NAME>CHAIR POWELL</NAME>. So the way I would say it is this: We, first of all, I would agree with the premise that wages moving up is a great thing. You know, that’s how the standard of living rises over time. And, generally, it’s driven over long periods by rising productivity. But what we have now, if you look at these, the wage increases that we have, we look at a—we’re blessed with a range of measures of wages that all measure different things. But right now, they’re all showing the same thing, which is that the increases—not the levels, but the increases—are running at levels that are well above what would be consistent with 2 percent inflation, our goal, over time. And that may be—we don’t know how persistent that phenomenon will be. It’s very hard to say. And that’s really, I think, the sense of your question about a wage–price spiral; is that something that’s going to start happening and become entrenched in the system? We don’t see that. You can see, for example, in some sectors that got very high wage increases early on, those wage increases looked like they may have slowed down to a normal level. But it comes back to, you know, what I’m saying here—which is, there’s a misalignment of demand and supply, particularly in the labor market. And that is leading to wages moving up at ways that are not consistent with 2 percent inflation over time. And so we need to use our tools to, you know, guide inflation back down to 2 percent. And that would be in the context of an extraordinarily strong labor market. We think this labor market can handle, as I mentioned, tighter monetary policy. And the overall economy can as well. But, yes, wages are moving up faster than is consistent with 2 percent inflation, but it’s good to see that moving up. But it wouldn’t be sustainable over too long of a period to see them moving up that much higher. And that’s because of this misalignment between supply and demand. We expect to get more labor supply. We did last time. We got more than we expected during the last cycle. This time, we’ve gotten much less than expected. So it’s not easy to predict these things. But we do expect that we’ll get people coming back in the labor market, particularly as COVID becomes less and less of a factor in many people’s lives, something we all wish. But, so that’s how we think about it. <NAME>MICHELLE SMITH</NAME>. Thank you. For the last question, we’ll go to Don Lee at the L.A. Times. <NAME>DON LEE</NAME>. Hi, Chair Powell. I think you said to the Senate earlier this month that, in hindsight, the Fed should have moved earlier. And it sounds like today that you don’t think that the Fed is late. And, just wanted to get your clarification on that. And if it is, if you still think that the Fed is “behind the curve,” how much “behind the curve” is it? <NAME>CHAIR POWELL</NAME>. Right. So we are not—we don’t have the luxury of 20/20 hindsight in actually implementing real-time decisions in the world. So, you know, so the question is—the right question is, did you make the right decisions based on what you knew at the time? But that’s not the question I was answering, which is knowing what you know now. So I think if we knew now—of course, if we knew now that these supply blockages, really, and the inflation resulting from them in collision with, you know, very strong demand, if we knew that that was what was going to happen, then in hindsight, yes. It would have been appropriate to move earlier. Obviously, it would be. But, again, we don’t have that luxury. And then, so, but that’s a separate question from your other question, which is “behind the curve.” And, you know, I don’t have the luxury of looking at it that way. You know, we are, we have our tools—powerful tools—and the Committee is very focused on using them. We’re acutely aware of the need to restore price stability while keeping a strong labor market. And what I saw today was a Committee that is strongly committed to achieving price stability, in particular, and prepared to use our tools to do that. We’re not going to let high inflation become entrenched. The costs of that would be too high. And we’re not going to wait so long that we have to do that. No one wants to have to really put restrictive monetary policy on, in order to get inflation back down. So, frankly, the need is one of getting back up, getting rates back up to more neutral levels as quickly as we practicably can and then moving beyond that, if that turns out to be appropriate. And, as you can see, it is appropriate in the sense that, [in] people’s [contributions to the] SEPs, they do write down levels of interest rates that are above their estimate of the longer-run neutral rate. And there’s also a range of estimates, too, as you will see if you look at the details of the SEP. But thanks for your question. <NAME>MICHELLE SMITH</NAME>. Okay. Thank you all. Thanks, Mr. Chair. <NAME>CHAIR POWELL</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. It’s nice to see everyone in person for the first time in a couple years. Before I go into the details of today’s meeting, I’d like to take this opportunity to speak directly to the American people. Inflation is much too high, and we understand the hardship it is causing, and we’re moving expeditiously to bring it back down. We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses. The economy and the country have been through a lot over the past two years and have proved resilient. It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all. From the standpoint of our Congressional mandate to promote maximum employment and price stability, the current picture is plain to see: The labor market is extremely tight, and inflation is much too high. Against this backdrop, today the FOMC raised its policy interest rate by ½ percentage point and anticipates that ongoing increases in the target rate for the federal funds rate will be appropriate. In addition, we are beginning the process of significantly reducing the size of our balance sheet. I’ll have more to say about today’s monetary policy actions after briefly reviewing economic developments. After expanding at a robust 5½ percent pace last year, overall economic activity edged down in the first quarter. Underlying momentum remains strong, however, as the decline largely reflected swings in inventories and net exports—two volatile categories whose movements last quarter likely carry little signal for future growth. Indeed, household spending and business fixed investment continued to expand briskly. The labor market has continued to strengthen and is extremely tight. Over the first three months of the year, employment rose by nearly 1.7 million jobs. In March, the unemployment rate hit a post-pandemic, and near-five-decade, low of 3.6 percent. Improvements in labor market conditions have been widespread, including for workers at the lower end of the wage distribution as well as for African Americans and Hispanics. Labor demand is very strong, and, while labor force participation has increased somewhat, labor supply remains subdued. Employers are having difficulties filling job openings, and wages are rising at the fastest pace in many years. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in March, total PCE prices rose 6.6 percent; excluding the volatile food and energy categories, core PCE prices rose 5.2 percent. Aggregate demand is strong, and bottlenecks and supply constraints are limiting how quickly production can respond. Disruptions to supply have been larger, and longer lasting, than anticipated, and price pressures have spread to a broader range of goods and services. The surge in prices of crude oil and other commodities that resulted from Russia’s invasion of Ukraine is creating additional upward pressure on inflation. And COVID-related lockdowns in China are likely to further exacerbate supply chain disruptions as well. Russia’s invasion of Ukraine is causing tremendous loss and hardship, and our thoughts and sympathies are with the people of Ukraine. Our job is to consider the implications for the U.S. economy, which remain highly uncertain. In addition to the effects on inflation, the invasion and related events are likely to restrain economic activity abroad and further disrupt supply chains, creating spillovers to the U.S. economy through trade and other channels. 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, especially on 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 restoring price stability. Against the backdrop of the rapidly evolving economic environment, our policy has been adapting, and it will continue to do so. At today’s meeting, the Committee raised the target range for the federal funds rate by ½ percentage point and stated that it “anticipates that ongoing increases in the target range will be appropriate.” We also decided to begin the process of reducing the size of our balance sheet, which will play an important role in firming the stance of monetary policy. We are on a path to move our policy rate expeditiously to more normal levels. Assuming that economic and financial conditions evolve in line with expectations, there is a broad sense on the Committee that additional 50-basis-point increases should be on the table at the next couple of meetings. We will make our decisions meeting by meeting as we learn from incoming data and the evolving outlook for the economy. And we will continue to communicate our thinking as clearly as possible. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal. With regard to our balance sheet, we also issued our specific plans for reducing our securities holdings. Consistent with the principles we issued in January, we intend to significantly reduce the size of our balance sheet over time in a predictable manner by allowing the principal payments from our securities holdings to roll off the balance sheet, up to monthly cap amounts. For Treasury securities, the cap will be $30 billion per month for three months and will then increase to $60 billion per month. The decline in holdings of Treasury securities under this monthly cap will include Treasury coupon securities and, to the extent that coupon securities are less than the monthly cap, Treasury bills. For agency mortgage-backed securities, the cap will be $17.5 billion per month for three months and will then increase to $35 billion per month. At the current level of mortgage rates, the actual pace of agency MBS runoff would likely be less than this monthly cap amount. Our balance sheet decisions are guided by our maximum- employment and price-stability goals. And, in that regard, we will be prepared to adjust any of the details of our approach in light of economic and financial developments. Making appropriate monetary policy in this uncertain environment requires a recognition that the economy often evolves in unexpected ways. Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook. And we will strive to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain time. We are highly attentive to inflation risks. The Committee is determined to take the measures necessary to restore price stability. The American economy is very strong and well positioned to handle tighter monetary policy. 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, and I look forward to your questions. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, the unemployment rate at 3.6 percent in March is now essentially at the level that the Committee had expected would prevail over the next three years and at the bottom end of FOMC participants’ projections for the longer-run rate that you submitted in the projections at the last meeting. How has your outlook for further declines in the unemployment rate changed since March? What does this imply for your inflation forecast? And how has your level of confidence changed with regard to the feasibility of slowing hiring without pushing the economy into recession? Thanks. <NAME>CHAIR POWELL</NAME>. Thank you. So you’re right—3.6 percent unemployment is just about as low as it’s been in 50 years. And I would say that I expect, and Committee members generally expect, that we’ll get some additional participation. So people will be coming back into the labor force. We’ve seen that particularly among prime-age people. And that will, of course, tend to hold the unemployment rate up a little bit. I would also expect, though, that job creation will slow. Job creation has been, you know, more than half a million per month in recent months—very, very strong, particularly for this stage of the economy. And so we think— with fiscal policy less supportive, with monetary policy less supportive, we think that job creation will slow as well. So it is certainly possible that the unemployment would go down further. But so I would expect those to be relatively limited because of the additional supply and also just the slowing in job creation. Implications for inflation—really, the wages matter a fair amount for companies, particularly in the service sector. Wages are running high, the highest they’ve run in quite some time. And they are one good example, or good illustration, really, of how tight the labor market really is, the fact that wages are running at the highest level in many decades. And that’s because of an imbalance between supply and demand in the labor market. So we think through our policies—through further healing in the labor market, higher rates, for example, of vacancy filling and things like that, and more people coming back in—we’d like to think that supply and demand will come back into balance and that, therefore, wage inflation will moderate to still high levels of wage increases, but ones that are more consistent with 2 percent inflation. That’s our expectation. Your third question was? <NAME>NICK TIMIRAOS</NAME>. Your level of confidence that you can slow hiring without pushing the economy into a downturn. <NAME>CHAIR POWELL</NAME>. So I guess I would say it this way: There’s a path. There’s a path by which we would be able to have demand moderate in the labor market and therefore have vacancies come down without unemployment going up, because vacancies are at such an extraordinarily high level. There’re 1.9 vacancies for every unemployed person, 11.5 million vacancies, 6 million unemployed people. So we haven’t been in that place on the vacancy, sort of the vacancy/unemployed curve, the Beveridge curve. We haven’t been at that sort of level of a ratio in the modern era. So, in principle, it seems as though by moderating demand, we could see vacancies come down and, as a result—and they could come down fairly significantly and, I think, put supply and demand at least closer together than they are. And that would give us a chance to get inflation down, get wages down, and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that. Now, I would say, I think we have a good chance to have a soft or softish landing or outcome, if you will. And I’ll give you a couple of reasons for that. One is, households and businesses are in very strong financial shape. You’re looking at, you know, excess savings on balance sheets—excess in the sense that they’re substantially larger than the prior trend. Businesses are in good financial shape. The labor market is, as I mentioned, very, very strong. And so it doesn’t seem to be anywhere close to a downturn. Therefore, the economy is strong and is well positioned to handle tighter monetary policy. So, but I’ll say, I do expect that this will be very challenging; it’s not going to be easy. And it may well depend, of course, on events that are not under our control. But our job is to use our tools to try to achieve that outcome, and that’s what we’re going to do. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Thanks for taking my question, Mr. Chairman. You talked about using 50-basis-point rate hikes or the possibility of them in coming meetings. Might there be something larger than 50? Is 75 or a percentage point possible? And perhaps you could walk us through your calibration. Why one month should—or one meeting should we expect a 50? Why something bigger? Why something smaller? What is the reasoning for the level of the amount of tightening? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So a 75-basis-point increase is not something the Committee is actively considering. What we are doing is, we raised [the funds rate by] 50 basis points today. And we’ve said that, again, assuming that economic and financial conditions evolve in ways that are consistent with our expectations, there’s a broad sense on the Committee that additional 50- basis-point increases should be on the table for the next couple of meetings. So we’re going to make those decisions at the meetings, of course, and we’ll be paying close attention to the incoming data and the evolving outlook as well as to financial conditions. And, finally, of course, we will be communicating to the public about what our expectations will be as they evolve. So the test is really just as I laid it out—economic and financial conditions evolving broadly in line with expectations. And, you know, I think expectations are that we’ll start to see inflation, you know, flattening out—and not necessarily declining yet, but we’ll see more evidence. We’ve seen some evidence that core PCE inflation is perhaps either reaching a peak or flattening out. We’ll want to know more than just some evidence. We’ll want to really feel like we’re making some progress there. And we’re going to make these decisions, and there’ll be a lot more information. I just think we want to see that information as we get there. It’s a very difficult environment to try to give forward guidance 60, 90 days in advance. There are just so many things that can happen in the economy and around the world. So, you know, we’re leaving ourselves room to look at the data and make a decision as we get there. <NAME>STEVE LIESMAN</NAME>. I’m sorry, but if inflation is lower one month and the unemployment rate higher, would that be something that we would calibrate toward a lower increase in the funds rate? <NAME>CHAIR POWELL</NAME>. I don’t think the one month is—no. No. One month’s reading doesn’t tell us much. You know, we‘d want to see evidence that inflation is moving in a direction that gives us more comfort. As I said, we’ve got two months now where core inflation is a little lower, but we’re not looking at that as a reason to take some comfort. You know, I think we need to really see that our expectation is being fulfilled—that inflation, in fact, is under control and starting to come down. But, again, it’s not like we would stop. We would just go back to 25-basis-point increases. It’ll be a judgment call when these meetings arrive. But, again, our expectation is, if we see what we expect to see, then we would have 50-basis-point increases on the table at the next two meetings. <NAME>MICHELLE SMITH</NAME>. Okay. Let’s go to Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith from the Financial Times. Given the expectation that inflation will remain well above the Fed’s target at year-end, what constitutes a neutral policy setting in terms of the fed funds rate? And to what extent is it appropriate for policy to move beyond that level at some point this year? <NAME>CHAIR POWELL</NAME>. So—neutral. When we talk about the neutral rate, we’re really talking about the rate that neither pushes economic activity higher nor slows it down. So it’s a concept, really. It’s not something we can identify with any precision. So we estimate it within broad bands of uncertainty. And the current estimates on the Committee are sort of 2 to 3 percent. And also, that’s a longer-run estimate. That’s an estimate for an economy that’s at full employment and 2 percent inflation. So, really, what we’re doing is, we’re raising rates expeditiously to what we see as the broad range of plausible levels of neutral. But we know that there’s not a bright line drawn on the road that tells us when we get there. So we’re going to be looking at financial conditions, right? Our policy affects financial conditions, and financial conditions affect the economy. So we’re going to be looking at the effect of our policy moves on financial conditions. Are they tightening appropriately? And then we’re going to be looking at the effects on the economy. And we’re going to be making a judgment about whether we’ve done enough to get us on a path to restore price stability. It’s that. So if that path happens to involve levels that are higher than estimates of neutral, then we will not hesitate to go to those levels. We won’t. But, again, there’s a sort of false precision in the discussion that we as policymakers don’t really feel. You know, you’re going to raise rates, and you’re going to be kind of inquiring how that is affecting the economy through financial conditions. And, of course, if higher rates are required, then we won’t hesitate to deliver them. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks, Chair Powell. Neil Irwin with Axios. Do you see evidence that inflationary psychology is changing in areas like workers’ wage demands, businesses’ willingness to raise prices? Do you see evidence that there is a psychological shift going on on inflation? Thanks. <NAME>CHAIR POWELL</NAME>. We don’t really see strong evidence of that yet, but that does not in any way make us comfortable. I think if you look at short-term inflation expectations, they’re quite elevated. And you can look at that and say, “Well, that’s because people expect inflation to come down.” And, in fact, inflation expectations [at longer horizons] come down fairly sharply. Longer-term inflation expectations have been reasonably stable but have moved up to—but only to levels where they were in 2014, by some measures. So you can look at that. And I think that’s a fair description of the picture. But it’s really about the risks. We don’t see a wage–price spiral. We see that companies have the ability to raise prices, and they’re doing that, but there have been price shocks. So I just think it takes you back to the basic point—was that we know we need to expeditiously move our policy rate up to ranges of more normal, neutral levels. And we need to look around and keep going if we don’t see that financial conditions have tightened adequately or that the economy is behaving in ways that suggest that we’re not where we need to be. So, again, you don’t see those things yet, but I would say there’s no basis for feeling comfortable about that. It’s a risk that we simply can’t run. We can’t allow a wage–price spiral to happen. And we can’t allow inflation expectations to become unanchored. It’s just something that we can’t allow to happen, and so we’ll look at it that way. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Great. Thanks, Chair Powell. Jeanna Smialek with the New York Times. You mentioned in the statement both the upside risks to inflation from Russia and China. Obviously, those are very much supply shocks rather than demand side. And I wonder what you meant to convey by adding them—I wonder what you meant to convey by adding those. <NAME>CHAIR POWELL</NAME>. Well. So our tools don’t really work on supply shocks. Our tools work on demand. And to the extent we can’t affect, really, oil prices or other commodity prices or food prices and things like that, so we can’t affect those. But there’s a job to do on demand. And that—you can see that in the labor market, where demand is substantially in excess of supply of workers. And you can see it in the product markets as well. But I guess I’m just pointing out that—a couple of things. For both the situation in Ukraine and the situation in China, they’re likely to, both, add to headline inflation. And people are going to be suffering from that, you know. People almost suffer more from food and energy shocks then, but—even though they don’t actually tell us much about the future path. So the second thing is that they’re both capable of preventing further progress in supply chains healing or even making supply chains temporarily worse. So they’re going to weigh on the process of global supply chain healing, which is going to affect broader inflation, too. So, in a way, they’re two further negative shocks that have hit really in the last, you know, 60 days, 90 days. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida from Politico. I want to follow up on that, because you all have obviously highlighted that there are both supply and demand issues at play in inflation. And I’m just wondering, you know, if these supply chain issues continue because of Russia, because of China, or just because these things take a while to work out, does getting back down to your 2 percent mandate require that the supply chain issues get resolved, since you can only handle the demand side, as you said? Or will you have to crimp demand maybe even further if the supply chain issues don’t resolve themselves, in order to try and get inflation back down to where you want it to be? <NAME>CHAIR POWELL</NAME>. So, you know, I’ll just say: For now, we’re focused on doing the job we need to do on demand, and there’s plenty to be done there. Again, if you look at it, it’s essentially almost two to one, job vacancies to unemployed people. There’s a lot of excess demand. There’re more than 5 million more employed plus job openings than there are the size of the labor force. So there’s an imbalance there that we have to do our work on. A very difficult situation—you know, you would look at core inflation, which wouldn’t include the commodity price shocks. And, you know, that’s one of the reasons we would tend to focus on that, because we can have more of an effect on that, but it would be a very difficult situation. I mean, we have to be sure that inflation expectations remain anchored. And I mean, that’s part of our job, too, so we’d be watching that carefully. And it puts any central bank in a very difficult situation. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. And thanks, and nice to be back. So two questions. One quick one. You’ve cited the 1.9 to 1 figure so often now, I’ve got to ask you, what would be a good figure there? What would you like to see that come down to to think that you’re in sort of a noninflationary vacancy-to-unemployed rate? And, secondly, on help from inflation, how much are you counting on wealth effects through stock market channels? Equity markets broadly down quite a bit since late fall, first of the year—how are you mapping that into household consumption? Have they come down enough? Do you need another leg down in equity values to think that households are going to stop spending at the rate we need them to stop spending? <NAME>CHAIR POWELL</NAME>. Okay, so in terms of the vacancies-to-unemployment ratio, we don’t have a goal in mind. There’s no specific number that we’re saying, “We’ve got to get to that.” It’s really, you’ve got to get to a place where the labor market appears to be more in balance. And that depends not only on the level of those things—it also, it depends on how well the matching functions in the labor markets are working. Because, you know, the longer these expansions go on, you can get very efficient with all of that, and the Beveridge curve shifts out. And that also tends to, you know, to help. So there isn’t a specific number. I will say we were— you know, I think, I think when we got to one-to-one in the, you know, in the late teens, we thought that was a pretty good number. But, again, we’re not shooting for any particular number. What we’d like to see is progress, but we’re not really looking at that. That’s an intermediate variable. We’re looking at wages, and we’re looking at, ultimately, inflation. So, you know, there are a bunch of channels through which policy works. You can think of it as, you know, interest-sensitive spending, and then you can think of another big one as asset values broadly. And, you know, there’re big models with, you know, a lot of different channels that are related to that. You know, we don’t focus on any one market—the equity market or the housing market—we focus on financial conditions broadly. So we wouldn’t be targeting any one market, as you suggest, for going up or down or taking a view on whether it’s at a good level or a bad level. We just would be looking at very broad measures of financial conditions—all the different financial conditions indexes, for example, which include equity. But they also include debt and other, many other things—credit spreads, things like that—too. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel here from the Washington Post. To follow up from your message from the very beginning, what is your message to the American people about when they will start to feel the effects of, say, a 50-basis-point rate hike or multiple hikes? How do you explain to them what that does to their grocery bill or their rent or their gas bill? Thank you. <NAME>CHAIR POWELL</NAME>. So, first, the first thing to say is that we understand. And some of us are old enough to have lived through high inflation, and many aren’t. But it’s very unpleasant. It’s just something people don’t—when they experience it for the first time, you’re paying more for the same thing. If you’re a normal economic person, then you probably don’t have that much extra to spend. And it’s immediately hitting your spending on groceries, on, you know, on gasoline, on energy, and things like that. So we understand the pain involved. So how do you get out of that? And it’s our job to make sure that inflation of that unpleasant, high nature doesn’t get entrenched in the economy. That’s what we’re here for, one of the main things we’re here for—perhaps the most fundamental thing we’re here for. And the way we do that is, we try to get supply and demand back in sync with each other, back in balance, so that the economy is under less stress and inflation will go down. Now, the process of getting there involves higher rates—so higher mortgage rates, higher borrowing rates, and things like that. So it’s not going to be pleasant either. But in the end, everyone is better off. Everyone— particularly people on fixed incomes and at the lower part of the income distribution are better off with stable prices. And so we need to do everything we can to restore stable prices. We’ll do it as quickly and effectively as we can. We think we have a good chance to do it without a significant increase in unemployment or, you know, a really sharp slowdown. But, ultimately, we think about the medium and longer term, and everyone will be better off if we can get this job done—the sooner, the better. <NAME>MICHELLE SMITH</NAME>. Thank you. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Chair Powell. Edward Lawrence with the Fox Business Network. So you’ve talked in the past about consumer spending and how that drives the economy. Are you concerned, with this high level of inflation, that the consumer will stop spending—and what’s the level of your concern—pushing us into a recession? <NAME>CHAIR POWELL</NAME>. So the economy is doing fairly well. We expect growth to be solid this year. And we see, you know, household spending and business investment as fairly strong— and even in the first quarter, which was relatively slow on some other fronts. So, and the labor market—if you look at the labor market, for people who are out of work and looking, there are lots of job opportunities for—wages are moving up and at rates that haven’t been seen in quite a long time. So it’s a good time to be a worker looking to, you know, either change jobs or get a wage increase in your current job. So it’s a strong economy, and nothing about it suggests that it’s close to, or vulnerable to, a recession. Now, of course, given events around the world and fading fiscal policy effects and higher rates, you could see some slower economic activity. Certainly, it will not be—last year was an extraordinarily strong growth year as we recovered from the pandemic. As I mentioned, growth [was] over 5 percent. But most forecasters have growth this year at, you know, at a solid pace above 2 percent. <NAME>EDWARD LAWRENCE</NAME>. But we’ve talked with economists who have advised Democrats and Republican Presidents who both said that the Fed is so far behind the curve on inflation that a recession is inevitable. <NAME>CHAIR POWELL</NAME>. So, and as I said, I think we have a good chance to restore price stability without a recession—without, you know, a severe downturn; without materially high, higher unemployment. And I mentioned the reasons for that. So I see a strong economy now. I see a very strong labor market, for example. Businesses can’t find the people to hire—they can’t find them. So, typically, in a recession, you would have unemployment. Now you have surplus demand. So there should be room, in principle, to reduce that surplus demand without putting people out of work. The issue will come that we don’t have precision surgical tools. We have, essentially, interest rates, the balance sheet, and forward guidance, and they’re famously blunt tools. They’re not capable of surgical precision. So I would agree. No one thinks this will be easy, no one thinks it’s straightforward, but there is certainly a plausible path to this, and I do think we’ve got a good chance to do that. And, you know, our job is not to rate the chances—it is to try to achieve it. So that’s what we’re doing. There are a range of opinions, though, and that’s only appropriate. <NAME>MICHELLE SMITH</NAME>. Steve Dorsey. <NAME>STEVE DORSEY</NAME>. Thanks. Steve Dorsey, CBS. You mentioned earlier, just now, fading fiscal policy. Do you feel that the Fed has been supported enough from policies at the White House and in Congress in combating inflation? <NAME>CHAIR POWELL</NAME>. You know, it’s really the Fed that has responsibility for price stability. And we take whatever arrives at the Fed in terms of fiscal activity, we take it as a given, and we don’t evaluate it—it’s not our job, really. We don’t have an oversight function there. And we look at it as our job, given all the factors that are happening, to try to sustain maximum employment and price stability. So if Congress or the Administration has ways to help with inflation, I would encourage that, but I’m not going to get into making recommendations or anything like that. It’s not, it’s really not our role—we need to stay in our lane and do our job. When we get inflation back under control, then maybe I can, you know, give other people advice [laughter]. Right now, we need to focus on, just focus on doing our job. And I’ll stick to that. Stick in our lane. <NAME>MICHELLE SMITH</NAME>. Steve Matthews. <NAME>STEVE MATTHEWS</NAME>. Steve Matthews with Bloomberg News. A number of your colleagues have said that the rates will need to go above neutral into a restrictive territory to bring down inflation. One, do you agree with that? And, two, you’ve recently spoken in great praise of Paul Volcker, who had the courage to bring inflation down with recessions in the 1980s. And while it’s certainly not your desire—the soft landing is the big hope of everyone— would this FOMC have the courage to endure recessions to bring inflation down if that were the only way necessary? <NAME>CHAIR POWELL</NAME>. So I think it’s certainly possible that we’ll need to move policy to levels that we see as restrictive as opposed to just neutral. We can’t know that today. That decision is not in front of us today. If we do conclude that we need to do that, then we won’t hesitate to do it. I’ll say again, there’s no bright line, you know, that you’re stepping over. You’re really looking at what our policy stance is and what the market is forecasting for it. You’re looking at financial conditions and how that’s affecting the economy and making a judgment. You know, we won’t be arguing about whose model of the neutral rate is better than the other one. It’s much more about a practical application of our policy tools. And we’re absolutely prepared to do that. It—wouldn’t hesitate if that’s what it takes. So I am, of course—who isn’t an admirer of Paul Volcker? I shouldn’t be singled out in this respect. But I knew him just a little bit and have tremendous admiration for him. And I— But I would phrase it this way: He had the courage to do what he thought was the right thing. That’s what it was. It wasn’t a particular thing. It was that he always did—he always did—what he thought was the right thing. If you read his last autobiography, that really comes through. So that’s [what] the test is. It isn’t, will we do one particular thing? I would say, we do see, though—we see restoring price stability as absolutely essential for the country in coming years. Without price stability, the economy doesn’t work for anybody, really. And so it’s really essential, particularly for the labor market. If you think about it, like if you look at the last cycle, we had a very, very—longest expansion cycle in our recorded history. In the last two, three years, you had the benefits of this tight labor market going to people in the lower quartiles. And it was, you know, racial, wealth, and income—not wealth, but income gaps were coming down, wage gaps. So it’s a really great thing. We’d all love to get back to that place. But to get back to anything like that place, you need price stability. So, basically, we’ve been hit by historically large inflationary shocks since the pandemic. This isn’t anything like regular business. This is, we have a pandemic, we have the highest unemployment, you know, in—since the Depression. Then we have this outsized response from fiscal policy and monetary policy. Then we have inflation. Then we have a war in Ukraine, which is cutting the commodity, you know, patch in half. And now we have these shutdowns in China. So it’s been a series of inflationary shocks that are really different from anything people have seen in 40 years. So we have to look through that and look at the economy that’s coming out the other side. And we need to somehow find price stability out of this. And it’s obviously going to be very challenging, I think, because you do have, you know, numerous supply shocks, which are famously difficult to deal with. So I guess that’s how I think about it. <NAME>MICHELLE SMITH</NAME>. Chris Rugaber. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. Chris Rugaber, Associated Press. Earlier, you just said that if necessary—I think were the words—that you would, or if it, if it turned out to be necessary, or you said that it’s possible that we’ll need to move policy to restrictive levels. Given where inflation is and the hot economy is—or, certainly, the hot labor market, as you described it—why still the hesitation? I mean, what else do you need to see in order to determine that? Wouldn’t the Fed naturally be looking to go to a restrictive level at this point? Thank you. <NAME>CHAIR POWELL</NAME>. So I didn’t—if I said “necessary,” I meant to say “appropriate.” We’re not going to be erecting a high barrier for this. It’s more, if we think it’s appropriate. You know, the point is, we’re a very long way from neutral now. We’re moving there expeditiously, and we’ll continue to do so. And we can’t make that decision, really, today. The decision for about how high to go will be on the table to be made when we reach neutral. And, you know, I expect we’ll get there expeditiously, as I’ve mentioned. So it’s not that we don’t want to—making that decision today wouldn’t really mean anything. But I’ll say again, if we do believe that it’s appropriate to go to those levels, we won’t hesitate. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Mike McKee from Bloomberg Television and Radio. The balance sheet—why did you decide to wait until June 1st to begin letting securities roll off and not immediately start in the middle of this month, say? And do you have another, a newer or a better, estimate for the monetary policy impact of letting the balance sheet decline? And then, finally, I’m just curious why you felt the need to address the American people at the top of your remarks? Are you concerned about Fed credibility with the American people? <NAME>CHAIR POWELL</NAME>. So, why June 1? It was just, pick a date, you know, and that happened to be the date that we picked. It was—nothing magic about it. You know, it’s not going to have any macroeconomic significance over time. We just picked that. Sometimes we publish these calendars on the first day of the month, and that’s what we’re doing. I wouldn’t read anything into it. In terms of the effect, I mean, I would just stress how uncertain the effect is of shrinking the balance sheet. You know, we run these models—and everyone does in this field—and make estimates of what will be, how do you measure, you know, a certain quantum of balance sheet shrinkage compared to quantitative easing? And, you know, these are very uncertain. I really can’t be any clearer. There won’t be any clearer [estimates]. You know, people estimate that, broadly, on the path we’re on—and this will be taken, probably, too seriously—but sort of ¼ percent, one rate increase over the course of a year at this pace. But I would just say, with very wide uncertainty bands—very wide. We don’t really know. There are other estimates that are much smaller than that, by the way. And some of you may read about that. That’s kind of a mainstream estimate. We know that it is part of returning to more normal, more neutral financial conditions. And, you know, our strategy is to set up a plan and have it operate and really have, you know, have the interest rate be the active tool of monetary policy. In terms of speaking to the American people, so I feel like sometimes I just want to remind us, really, that that’s who we work for, and that it’s inflation that people are feeling all over the country. And it’s very important that they know that we know how painful it is and that we are working hard on fixing it. I thought it was quite important to do that. And so that was really the thinking behind that. <NAME>MICHAEL MCKEE</NAME>. Do you think the Fed has a credibility problem? <NAME>CHAIR POWELL</NAME>. No, I don’t. And a good example of why would be—in the fourth quarter of last year, as we started talking about tapering sooner and then raising rates this year, you saw financial markets reacting, you know, very appropriately. Not to bless any particular day’s measure, but the way financial markets, the forward rate curve has tightened in response to our guidance and our actions really amplifies our policy. It’s—monetary policy is working through expectations now, to a very large extent. We’ve only done two rate increases. But if you look at financial conditions, the two-year [rate] is at 280 [basis points] now. In September, I think it was at 20 basis points. And that’s all through the economy. People are feeling those higher rates already. And so that shows that the markets think that our forward guidance is credible. And I think we want to keep it that way. <NAME>MICHELLE SMITH</NAME>. Scott Horsley. [No response] Okay. Brian Cheung. <NAME>BRIAN CHEUNG</NAME>. Hi there. Brian Cheung with Yahoo Finance. To expand on Steve’s question about Paul Volcker, there was also a great pain that came with that as well—higher interest rates, obviously affecting households and businesses. I’m wondering how you kind of square what might be demand disruption. Are you already seeing that? Is the idea here to incentivize a lack of spending, to decrease consumption, to perhaps table business investments? Is that essentially what’s happening through this hiking cycle? Thanks. <NAME>CHAIR POWELL</NAME>. Well, so, as I mentioned, you can see places where the demand is substantially in excess of supply. And what you’re seeing as a result of that is prices going up and at unsustainable levels, levels that are not consistent with 2 percent inflation. And so what our tools do is that as we raise interest rates, demand moderates: it moves down. Interest rates, you know—businesses will invest a little bit less, consumers will spend a little bit less. That’s how it works. But, ultimately, getting those, getting supply and demand back, you know, back in balance, is what gives us 2 percent inflation, which is what gives the economy a footing where people can lead successful economic lives and not worry about inflation. I mean, so, yes, there may be some pain associated with getting back to that. But, you know, the big pain over time is in not dealing with inflation and allowing it to become entrenched. <NAME>MICHELLE SMITH</NAME>. Greg Robb. <NAME>GREG ROBB</NAME>. Thank you. Thank you, Chair Powell. Greg Robb from MarketWatch. I was wondering if you could take a step back and talk about, in March the dot plot had, you know, looked like steady quarter-point rate hikes, get the funds rate up to 2 percent at the end of the year. Now—where it seems like you’re much more aggressive. So could you talk about the thinking that’s behind that? Thank you. <NAME>CHAIR POWELL</NAME>. So, look, I think what you’ve seen is—really, I would say, in the middle of last fall—there was a time when our policy stance was still pretty much in sync with what the data were saying. If you remember, there were a couple of weak jobs reports. And inflation—month by month, inflation had come down till September, a few months in a row, stayed low. And then around the end of October, we got three or four really strong readings that just said, no, this is a much stronger economy. And by the way—then, with the restatement of the jobs numbers, it looked like the job market was much more even and stronger in the second half of the year. But that hadn’t happened yet. Anyway, we got an ECI reading—employment compensation, [employment cost] index reading—the Friday before the November meeting. Then we got a really strong jobs report. Then we got a really high CPI report. And so I think it became clear to the Committee that we needed to adjust and adapt. And we have. Ever since then, really ever since then, we’ve been adapting. We, you know—the Committee moved by the time of the December meeting to a median [in participants’ 2022 projections] of three rate increases, then to a median of seven increases at the March meeting. And that process is going on. And it’s clearly continuing. And that’s why I say—and I actually mentioned this at the March meeting—that no one should look at any single SEP as sort of a real resting place for 90 days, because we’re in a fast-evolving situation. And that’s what’s happened. You can see— unanimous vote today, of course. And I told you the guidance—that broad support on the Committee to have 50-basis-point hikes on the table at the next couple of meetings. So you’re right. And by the way, other forecasters have been doing the same thing. And it’s just us adapting to the data and to the situation and using our tools to deal with it. <NAME>MICHELLE SMITH</NAME>. Thanks. We’ll go to Nancy for the last question. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi. Nancy Marshall-Genzer with Marketplace. Chair Powell, I want to ask how you’re able to balance your dual mandate—stable prices and maximum employment—especially when the unemployment rate for Black workers is still roughly double, roughly twice the rate for white workers. <NAME>CHAIR POWELL</NAME>. So unemployment rates for all racial groups have come down a lot and are now much closer to where they were before the pandemic hit. So that’s one thing I would say. And that’s important. But the bigger point is this: I do not, at this time, see the two sides of the mandate as in tension. I don’t, because you can see that the labor market is out of balance. You can see that there’s a labor shortage. There aren’t enough people to fill these job openings. And companies can’t hire, and wages are moving up at levels that would not, over time, be consistent with 2 percent inflation over time. And, of course, everyone loves to see wages go up. And it’s a great thing, but you want them to go up at a sustainable level, because these wages are, to some extent, being eaten up by inflation. So, what that really means is, to get the kind of labor market we really want to get, we really want to have a labor market that serves all Americans, especially the people in the lower-income part of the distribution, especially them. To do that, you’ve got to have price stability. And we’ve got to get back to price stability so that we can have a labor market where people’s wages aren’t being eaten up by inflation and where we can have a long expansion, too. That’s—the good things you can have, as we have. We’ve had—several of the longest expansions in U.S. history have been in the last 40 years, and that’s because it’s been a time of low inflation. And long expansions are good for people and good for the labor market. So that’s the way I think about it. I think we—you know, our tools work. We have to think in the, in the medium and longer term. And I do think that the best thing for everyone is for us to get back to price stability to support, really, a sustained period of strong labor market conditions. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. I will begin with one overarching message: We at the Fed understand the hardship that high inflation is causing. We are strongly committed to bringing inflation back down, and we’re moving expeditiously to do so. We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses. The economy and the country have been through a lot over the past two and a half years and have proved resilient. It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all. From the standpoint of our congressional mandate to promote maximum employment and price stability, the current picture is plain to see: The labor market is extremely tight, and inflation is much too high. Against this backdrop, today the Federal Open Market Committee raised its policy interest rate by ¾ percentage point and anticipates that ongoing increases in that rate will be appropriate. In addition, we are continuing the process of significantly reducing the size of our balance sheet. I’ll have more to say about today’s monetary policy actions after briefly reviewing economic developments. Overall economic activity edged down in the first quarter, as unusually sharp swings in inventories and net exports more than offset continued strong underlying demand. Recent indicators suggest that real GDP growth has picked up this quarter, with consumption spending remaining strong. In contrast, growth in business fixed investment appears to be slowing, and activity in the housing sector looks to be softening, in part reflecting higher mortgage rates. The tightening in financial conditions that we’ve seen in recent months should continue to temper growth and help bring demand into better balance with supply. As shown in our Summary of Economic Projections, FOMC participants have marked down their projections for economic activity, with the median projection for real GDP growth running below 2 percent through 2024. The labor market has remained extremely tight, with the unemployment rate near a 50-year low, job vacancies at historical highs, and wage growth elevated. Over the past three months, employment rose by an average of 408,000 jobs per month, down from the average pace seen earlier in the year but still robust. Improvements in labor market conditions have been widespread, including for workers at the lower end of the wage distribution as well as for African Americans and Hispanics. Labor demand is very strong, while labor supply remains subdued, with the labor force participation rate little changed since January. FOMC participants expect supply and demand conditions in the labor market to come into better balance, easing the upward pressures on wages and prices. The median projection in the SEP for the unemployment rate rises somewhat over the next few years, moving from 3.7 percent at the end of this year to 4.1 percent in 2024, levels that are noticeably above the March projections. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in April, total PCE prices rose 6.3 percent; excluding the volatile food and energy categories, core prices rose 4.9 percent. In May, the 12-month change in the consumer price index came in above expectations at 8.6 percent, and the change in the core CPI was 6 percent. Aggregate demand is strong, supply constraints have been larger and longer lasting than anticipated, and price pressures have spread to a broad range of goods and services. The surge in prices of crude oil and other commodities that resulted from Russia’s invasion of Ukraine is boosting prices for gasoline and food and is creating additional upward pressure on inflation. And COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. FOMC participants have revised up their projections for inflation this year, particularly for total PCE inflation given developments in food and energy prices. The median projection is 5.2 percent this year and falls to 2.6 percent next year and 2.2 percent in 2024. Participants continue to see risks to inflation as weighted to the upside. 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, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. We are highly attentive to the risks high inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our 2 percent objective. Against the backdrop of the rapidly evolving economic environment, our policy has been adapting, and it will continue to do so. At today’s meeting, the Committee raised the target range for the federal funds rate by ¾ percentage point, resulting in a 1½ percentage point increase in the target range so far this year. The Committee reiterated that it anticipates that ongoing increases in the target range will be appropriate. And we are continuing the process of significantly reducing the size of our balance sheet—which plays an important role in firming the stance of monetary policy. Coming out of our last meeting in May, there was a broad sense on the Committee that a ½ percentage point increase in the target range should be considered at this meeting if economic and financial conditions evolved in line with expectations. We also stated that we were highly attentive to inflation risks and that we would be nimble in responding to incoming data and the evolving outlook. Since then, inflation has again surprised to the upside, some indicators of inflation expectations have risen, and projections for inflation this year have been revised up notably. In response to these developments, the Committee decided that a larger increase in the target range was warranted at today’s meeting. This continues our approach of expeditiously moving our policy rate up to more normal levels. And it will help ensure that longer-term inflation expectations remain well anchored at 2 percent. As shown in the SEP, the median projection for the appropriate level of the federal funds rate is 3.4 percent at the end of this year, 1.5 percentage points higher than projected in March and 0.9 percentage point above the median estimate of its longer-run value. The median projection rises further to 3.8 percent at the end of next year and declines to 3.4 percent in 2024, still above the median longer-run value. Of course, these projections do not represent a Committee plan or decision, and no one knows with any certainty where the economy will be a year or more from now. Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy. Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common. From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting. We will, however, make our decisions meeting by meeting, and we will continue to communicate our thinking as clearly as we can. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored. Making appropriate monetary policy in this uncertain environment requires a recognition that the economy often evolves in unexpected ways. Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook. And we will strive to avoid adding uncertainty in what is already an extraordinarily challenging and uncertain time. We are highly attentive to inflation risks and determined to take the measures necessary to restore price stability. The American economy is very strong and well positioned to handle tighter monetary policy. 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. And I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. Howard Schneider with Reuters. Two related questions. Chair Powell, do you feel you boxed yourself in with the language you used at the last press conference on 50 basis point hikes in June and July? And would you please give us as detailed a sense as you can of what role you played in reshaping market expectations so quickly on Monday? <NAME>CHAIR POWELL</NAME>. So, as you know, we always aim to provide as much clarity as we can about our policy intentions subject to the inherent uncertainty in the economic outlook, because we think monetary policy is more effective when market participants understand how policy will evolve, when they understand our objective function, our reaction function. And in the current highly unusual circumstances with inflation well above our goal, we think it’s helpful to provide even more clarity than usual—again, subject to uncertainty in the outlook. And I think over the course of this year, financial markets have responded and have, generally, shown that they understand the path we’re laying out. Of course, it remains data dependent. And so that’s what we generally think about guidance, and that’s why we offer it. And, of course, when we offered that—when I offered that guidance at the last meeting, I did say that it was subject to the economy performing about in line with expectations. I also said that if the economy performed—if data came in worse than expected, then we would consider moving even more aggressively. So we got the CPI data and also some data on inflation expectations late last week, and we thought for a while, and we thought, well, this is the appropriate thing to do. So then the question is, what do you do? And do you wait six weeks to do it at the next meeting? And I think the answer is, that’s not where we are with this. So we decided we needed to go ahead, and so we did. And that’s really—that’s really how we made the decision. <NAME>MICHELLE SMITH</NAME>. Okay. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Thanks for taking our questions. Jeanna Smialek with the New York Times. You—I guess I wonder if you could describe for us a little bit how you’re deciding how aggressive you need to be. So, obviously, 75 today. What did 75 achieve that 50 wouldn’t have, and why not just go for a full percentage point at some point? <NAME>CHAIR POWELL</NAME>. Sure. So if you take a step back, what we’re looking for is compelling evidence that inflationary pressures are abating and that inflation is moving back down. And we’d like to see that in the form of a series of declining monthly inflation readings— that’s what we’re looking for. And, by this point, we had actually been expecting to see clear signs of at least inflation flattening out and, ideally, beginning to decline. We’ve said that we’d be data dependent, focused on incoming data, highly attentive to inflation risks—the things that I mentioned to Howard moments ago. So contrary to expectations, inflation again surprised to the upside. Indicators—some indicators of inflation expectations have risen, and projections of [inflation] this year have moved up notably. So we thought that strong action was warranted at this meeting, and today we delivered that in the form of a 75 basis point rate hike, as I mentioned. So the point of it, really, is this: We’ve been moving rates up expeditiously to more normal levels, and over the course of the seven months since we pivoted and began moving in this direction, we’ve seen financial conditions tighten, and appropriately so. But the federal funds rate, even after this move, is at 1.6 percent. So, again, the Committee is moving rates up expeditiously to more normal levels, and we came to the view that we’d like to do a little more front-end loading on that. So I think that the SEP gives you the levels that people think are appropriate at given points in time. This was really about the speed in which we would get there. So, as I mentioned, 75 basis points today—I said the next meeting could well be about a decision between 50 and 75. That would put us, at the end of the July meeting, in that range—in that more normal range, and that’s a desirable place to be, because you begin to have more optionality there about the speed with which you would proceed going forward. Just talking about the SEP for a second: What it really says is that Committee participants widely would like to see policy at a modestly restricted—restrictive level at the end of this year. And that’s six months from now, and so much data [can accrue] and so much can happen, so remember how highly uncertain this is. But so that is generally a range of 3 to 3½ percent. That’s where people are, and that’s what they want to see, knowing what they know now and understanding that we need to be—we need to show resolve but also be flexible [in responding] to incoming data as we see it. If things are better, we don’t need to do that much, and if they’re not, then we either do that much or possibly even more. But in any case, it will be very data dependent. Then you’re looking at next year, and what you’re seeing is, people see more—a bit more tightening and a range of maybe 3½ to 4 percent. And that’s generally what people see as the appropriate path for getting inflation under control and starting back down and getting back down to 2 percent. So 75 basis points seemed like the right thing to do at this meeting, and that’s what we did. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Thank you for taking my question, Mr. Chairman. You have not used the phrase in a long time “monetary policy is in a good place,” which is a phrase that you used to use often. Now that the Committee is projecting 4 percent on a—or 3.8 percent next year in terms of the funds rate, which is similar to where the market is now, the futures market of 4 percent funds rate next year, do you think that’s a level that is going to be sufficiently high enough to deal with and bring down the inflation problem? And just as a follow-up, could you break that apart for me? How much of that is restrictive, and how much of that is a normal positive rate that ought to be embedded or not, in your opinion, in the funds rate? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So the question really is, how high does the rate really need to go? And this is—the estimates on the Committee are in that range of 3½ to 4 percent. And how do you think about that? Well, you can think about the longer-run neutral rate, you can compare it to that, and we think that’s in the mid-2s. You can look, frankly, at broader financial conditions. You can look at asset prices, you can look at the effect they’re having on the economy, rates, asset prices, credit spreads—all of those things go into that. You can also look at the yield curve and ask, all along the yield curve, where is the policy rate? So for much of the yield curve now, real rates are positive. That’s not true at the short end. At the short end of the yield curve in the early years, you don’t have real—you have negative rates still. So that really is one data point—it’s one part of financial conditions. So I think—I have to look at it this way: We move the policy rate. That affects financial conditions. And that affects the economy. We have, of course, ways—rigorous ways to think about it, but, ultimately, it comes down to, do we think financial conditions are in a place where they’re having the desired effect on the economy? And that desired affect is, we’d like to see demand moderating. Demand is very hot still in the economy. We’d like to see the labor market getting better in balance between supply and demand, and that can happen [as a result of developments coming] both from supply and demand. Right now, there’s—demand is substantially higher than available supply, though, so we feel that there’s a role for us in moderating demand. Those are the things we can affect with our policy tools. There are many things we can’t affect, and those would be, you know, the things—the commodity price issues that we’re having around the world due to the war in Ukraine and the fallout from that, and also just all of the supply-side things that are still pushing upward on inflation. So that’s really how I think—how I think about it. <NAME>STEVE LIESMAN</NAME>. But does 3.8 percent, 4 percent get it done? Does it get the job done on breaking the back of inflation? <NAME>CHAIR POWELL</NAME>. I think it’s certainly in the range of plausible numbers. I think we’ll know when we get there really. I mean, honestly, though, that would be—you would have positive real rates, I think, and inflation coming down by then. I think you’d have positive real rates across the [yield] curve. I think that the neutral rate is pretty low these days. So I would think it would, but you know what? We’re going to find that out empirically. We’re not going to be completely model driven about this. We’re going to be looking at this, keeping our eyes open, and reacting to incoming data both on financial conditions and on what’s happening in the economy. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Thanks. Nick Timiraos. Chair Powell, you’ve said that you like your policy to work through expectations. And now, obviously, this decision was something quite different from how you and almost all of your colleagues had set those expectations during the intermeeting period. And I know you just said that what changed was really the inflation data—the inflation expectations data. But I’m wondering, on the inflation expectations data, was there something you saw that was unsettling enough to risk eroding the credibility of your verbal guidance by doing something so different from what you had “socialized” before? <NAME>CHAIR POWELL</NAME>. So if you look at a broad range of inflation expectations—so you’ve got the public, you’ve got surveys of the public and of experts, and you’ve also got market based. And I think if you look across that broad range of data, what you see is that expectations are still in the place, very much in the place, where short-term inflation is going to be high but comes down sharply over the next couple of years. And that’s really where inflation expectations are. And also, as you get away from this episode, they get back down close to 2 percent. And so this is really very important to us—that that remain the case. And I think if you look for most measures, most of the time, that’s what you see. If we even see a couple of indicators that bring that into question, we take that very seriously. We do not take this for granted—we take it very seriously. So the preliminary Michigan [survey] reading—it’s a preliminary reading; it might be revised—nonetheless, it was quite eye-catching, and we noticed that. We also noticed that the index of common inflation expectations at the Board has moved up after being pretty flat for a long time, so we’re watching that, and we’re thinking, “this is something we need to take seriously.” And that is one of the factors, as I mentioned—one of the factors in our deciding to move ahead with 75 basis points today was what we saw in inflation expectations. We’re absolutely determined to keep them anchored at 2 percent. That was one of the reasons—the other was just the CPI reading. <NAME>NICK TIMIRAOS</NAME>. So if you saw a movement like that again, another tick-up in inflation expectations, would that put a 75 or even 100 basis point increase in play at your next meeting? <NAME>CHAIR POWELL</NAME>. We’re going to—I’ll just say, we’re going to react to the incoming data and appropriately, I think. So I wouldn’t want to put a number on what that might be. The main thing is to get rates up, and then pretty soon, we’ll be in an area where we’re—I think as you get closer to the end of the year, you’re in a range where you’ve got restrictive policy, which is appropriate. Forty-year highs in inflation—we think that policy is going to need to be restrictive, and we don’t know how restrictive. So I think that’s how we’ll take it. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Hi, Chair Powell. Neil Irwin from Axios. Thanks for taking our questions. The late-breaking kind of decision to go to 75 basis points—do you worry that that will make policy guidance a less effective tool in the future? And should we think of that as a kind of symmetrical reaction function if we start to get soft readings on inflation or if the labor market starts to roll over? <NAME>CHAIR POWELL</NAME>. To take your second question first, yes. I mean, I think we’re— again, we’re going, we’re resolved to take this on, but we’re going to be flexible in the implementation of it. Sorry—and your [first] question was [about] guidance. So, again, the overall exercise is that we try to be—provide as much clarity about our policy intentions as we can, because we think that makes monetary policy work better. There’s always a tradeoff, because you have to live with that guidance, and so you do it, and it helps a lot of the time. I, frankly, think this year has been a demonstration of how well it can work. With us having really just done very little in the way of raising interest rates, financial conditions have tightened quite significantly through the expectations channel, as we’ve made it clear what our plans are. So I think that’s been a very healthy thing to be happening. And I would hope that our—it’s always going to be—any guidance that we give is always going to be subject to things working out about as we expect. And, in this particular situation, you know, we’re looking for something specific, and that is progress on inflation. We want to see progress. We want to see—inflation can’t go down until it flattens out, and that’s what we’re looking to see. And if we don’t see that, then that’s the kind of thing that will—even if we don’t see progress for a longer period, that could cause us to react. But we will. Soon enough, we will be seeing some progress at some point. And we’ll react [as] appropriate to that, too. But I would like to think, though, that our guidance is still credible, but it’s always going to be conditional on what happens. This is an unusual situation, to get, you know, some data late in, during blackout, pretty close to—very close to our meeting. Very unusual to [have] one that would actually change the outcome. So I’ve only seen—in my 10-years-plus here at the Fed, I’ve only seen something like that, even close to that, one or two times. So I don’t think it’s something that’ll come up a great deal. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you so much for taking our questions. Colby Smith with the Financial Times. On the “clear and convincing” threshold for the inflation trajectory, what is the level of realized inflation that meets that criteria? And how is the Committee thinking about the potential tradeoff of much higher unemployment than even in what’s forecasted in the SEP if inflation is not moderating at this acceptable pace? <NAME>CHAIR POWELL</NAME>. The second part I didn’t get. <NAME>COLBY SMITH</NAME>. What’s the potential tradeoff with higher unemployment than even what’s forecasted in the SEP if inflation is not moderating at an acceptable pace? <NAME>CHAIR POWELL</NAME>. Right. So, what we want to see is a series of declining monthly readings for inflation, and we’d like to see inflation headed down. But, you know—and right now, our policy rate is well below neutral, right? So, soon enough, we’ll have our policy rate— let’s assume the world works out about like the SEP says: The policy rate will be up where we think it should be. And then the question would be: Do you slow down? Does it make you— you’ll be making these judgments about, is it appropriate now to slow down—from 50 to 25, let’s say—or speed up? So that’s the kind of thinking we’ll be doing, and, again, we’re looking—ultimately, we’re not going to declare victory until we see a series of these, really see convincing evidence, compelling evidence, that inflation is coming down. And that’s what I mean by—that’s what it would take for us to say, “Okay, we think this job is done.” Because we saw—and, frankly, we saw last year—inflation came down over the course of the summer and then turned right around and went back up. So I think we’re going to be careful about declaring victory. But our—again, the implementation of our policy is going to be flexible and sensitive to incoming data. <NAME>COLBY SMITH</NAME>. Are you more concerned now that to bring down inflation, it’s going to require more than just some pain at this point? <NAME>CHAIR POWELL</NAME>. Again, I think that—I do think that our objective, and this is what’s reflected in the SEP, but our objective, really, is to bring inflation down to 2 percent while the labor market remains strong. I think that what’s becoming more clear is that many factors that we don’t control are going to play a very significant role in deciding whether that’s possible or not. And there I’m thinking, of course, of commodity prices, the war in Ukraine, supply chain [developments], things like that, where we really—the monetary policy stance doesn’t affect those things. But having said that, there is a path for us to get there—it’s not getting easier; it’s getting more challenging because of these external forces—and that path is to move demand down, and you have a lot of surplus demand. Take, for example, in the labor market. So you have two job vacancies, essentially, for every person actively seeking a job, and that has led to a real imbalance in wage negotiating. You could get to a place where that ratio was at a more normal level, and you wouldn’t—you would expect to see those wage pressures move back down to a level where people are still getting healthy wage increases, real wage increases, but at a level that’s consistent with 2 percent inflation. So that’s a possibility. And you could say the same thing about some of the product markets where there’s just excess capacity and really where the strong demand has gone into—sorry, where they’re capacity constrained, right? So you have, effectively, what we think of as a vertical supply curve or close to it. So demand comes in, and it’s very strong, and it shows up in higher prices—not higher quantities, not more cars, because they can’t make the cars because they don’t have the semiconductors. So in principle, that could work in reverse. When demand comes down, you could see—and it’s not guaranteed—but you could see prices coming down more than the typical economic relationships that you see in the textbooks would suggest, because of the unusual situation we’re in on the supply side. So there’s a pathway there. It is not going to be easy, and there—again, it’s our objective, but, as I mentioned, it’s going to depend to some extent on factors we don’t control. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Thank you for taking our questions. Rachel Siegel from the Washington Post. So the new projections show the unemployment rate ticking up through 2024. Is a higher unemployment rate necessary in order to combat inflation? And what is lost if the unemployment rate has to go up and people lose their jobs in order to control inflation? Thank you. <NAME>CHAIR POWELL</NAME>. So you’re right. In the SEP, we have unemployment going up to 4 point—the median is 4.1 percent—of course, [there is] a range of actual forecasts. And I would characterize that, if you were to get inflation down to, you know, on its way down to 2 percent and the unemployment rate went up to 4.1 percent, that’s still a historically low level. We hadn’t seen—we hadn’t seen rates, unemployment rates below 4 percent until a couple years ago for—we’d seen it for, like, one year in the last 50. So the idea that—3.6 percent is historically low in the last century. So a 4.1 percent unemployment rate with inflation well on its way to 2 percent—I think that would be—I think that would be a successful outcome. So we’re not looking to have a higher unemployment rate. But I would say that I would certainly look at that as a successful outcome. <NAME>RACHEL SIEGEL</NAME>. Would that include people losing their jobs? <NAME>CHAIR POWELL</NAME>. We’re not—again, we’re not, we don’t seek to put people out of work, of course. We never think, “Too many people are working, and fewer people need to have jobs.” But we also think that you really cannot have the kind of labor market we want without price stability. And we have to go back and establish price stability so we can have that kind of labor market, and that’s a labor market where workers are getting wage increases—maybe the workers at the lower end of the spectrum are getting the biggest wage increases, as they were before the pandemic—where participation is high, where there’s lots of job opportunities, where it’s just a really—I mean, the labor market we had before the pandemic was—that’s what we want to get back to. And you see disparities between various groups at historic lows. We’d love to get back to that place. But, to get there—it’s not going to happen with the levels of inflation we have. So we have to restore that, and it really is in service, in the medium and longer term, of the kind of labor market we want and hope to achieve. <NAME>MICHELLE SMITH</NAME>. Matt. <NAME>MATTHEW BOESLER</NAME>. Hi, Chair Powell. Matthew Boesler with Bloomberg. So, as you just mentioned, the Committee is now projecting a ½ percentage point rise in the unemployment rate and the SEPs over the next couple of years, and it removed a line from its policy statement about thinking that the labor market can remain strong while it tightens policy. You just mentioned that that is still your objective, though, so I’m wondering if you could explain why that line was removed from the statement—also whether this means the FOMC is trying to induce a recession now to bring inflation down. <NAME>CHAIR POWELL</NAME>. Not trying to induce a recession now. Let’s be clear about that. We’re trying to achieve 2 percent inflation consistent with a strong labor market. That’s what we’re trying to do. So let me talk about that sentence. Clearly, it’s our goal to bring about 2 percent inflation while keeping the labor market strong, right? And that’s kind of what the SEP says. The SEP has inflation getting down to 2, a little above 2 percent in 2024, with unemployment at 4.1 percent. And this is a strong labor market—this is a good labor market. And, as I mentioned, there are pathways to do it. But those pathways have become much more challenging due to factors that are not under our control. Again, thinking here of the fallout from the war in Ukraine, which has brought a spike in prices of energy, food, fertilizer, industrial chemicals, and also just the supply chains more broadly, which have been larger and longer lasting than anticipated. So the sentence that we deleted said that we believe that appropriate monetary policy, effectively alone, can bring about the result of 2 percent inflation with a strong labor market. And so much of it is really not down to monetary policy. It just didn’t—the sentence isn’t—it kind of says on its face that monetary policy alone can do this. And that’s not—that just didn’t seem appropriate, so we took the sentence out. <NAME>MATTHEW BOESLER</NAME>. And given the new projections for the unemployment rate, could you talk a little bit about what accounts for such reduced confidence against, say, a month ago or three months ago that inflation will largely normalize on its own as these supply-side issues get worked out? Thanks. <NAME>CHAIR POWELL</NAME>. Well, yeah, I think you’ve seen—again, we’ve been expecting progress, and we didn’t get that. We got sort of the opposite. So I also think the situation, really—since the consequences of the Ukraine war become more and more clear, what you’re seeing is the situation getting more difficult. And you look around the world—I mean, lots of countries are—lots of countries are looking at inflation of 10 percent, and it’s largely due to commodities prices. But all over the world, you’re seeing these effects. And so—and we’re seeing them here: gas prices at all-time highs, and things like that. That’s not something we can do something about. So that is really—and, by the way, headline inflation, headline inflation is important for expectations. People—the public’s expectations, why would they be distinguishing between core inflation and headline inflation? Core inflation is something we [on the Committee] think about because it is a better predictor of future inflation. But headline inflation is what people experience. They don’t know what core is. Why would they? They have no reason to. So that’s—expectations are very much at risk due to high headline inflation. So it’s become—the environment has become more difficult, clearly, in the last four or five months, and hence the need for the policy actions that we took today. Hence our resolution to get rates up and, ultimately, get them to where we think they need to be in coming months. <NAME>EDWARD LAWRENCE</NAME>. Thanks, Chair Powell. Edward Lawrence with Fox Business. I wanted to ask you—you talked about CPI going to 8.6 percent, that retail sales surprised the market by falling and then revisions to the previous months were down. Are you hearing from contacts about consumers slowing spending or changing their habits? <NAME>CHAIR POWELL</NAME>. So we’re, of course, watching very, very carefully for that and looking at the retail—the big store numbers and all that kind of thing. And so I—but I think the fair summary of what we see is, you see continuing shifts in consumption, you see some things getting—sales going down, but overall spending is very strong. The consumer’s in really good shape financially. They’re spending. There’s no sign of a broader slowdown that I can see in the economy. People are talking about it a lot—consumer confidence is very low. That’s probably related to gas prices and also just stock prices to some extent for other people. But that’s what we’re seeing. We’re not seeing a broad slowdown. We see job growth slowing, but it’s still at quite robust levels. We see the economy slowing a bit but still growth levels—healthy growth levels. <NAME>EDWARD LAWRENCE</NAME>. So then as you are raising rates in this economy, how closely are you watching consumer spending, or is there something—another indicator that you’re watching more closely? <NAME>CHAIR POWELL</NAME>. It would be hard to watch anything much more closely than we watch consumer spending, but we watch everything. We watch business fixed investment, which actually has softened a bit. And we watch—we’re responsible for watching everything. Consumption is 60-some percent of the economy, two-thirds of the economy, so, naturally, we spend a lot of time on that. And, again, there’s a lot going on—there are a lot of flows back and forth—but, ultimately, it does appear that the U.S. economy is in a strong position and well positioned to deal with higher interest rates. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Thank you, Mr. Chairman. Michael McKee from Bloomberg Radio and Television. Are you targeting headline inflation now or core inflation? In other words, how far would you chase oil prices if they keep going up? If that’s going to be the component that drives expectations, would you risk recession for a headline rate if the core rate is holding steady or starting to go down? <NAME>CHAIR POWELL</NAME>. So the—we’re responsible for inflation in the law. And inflation means headline inflation. So that’s our ultimate goal. We, of course, like all central banks do, look very, very carefully at core inflation because it is—it’s a much better predictor, and it’s much—it’s a much better predictor of where inflation is going, and it’s also more relevant to our tools. As I mentioned, the parts that don’t go into core are mostly outside the scope of our tools, so we look at that. But it’s—the current situation is particularly difficult because of what I mentioned about expectations. We can’t affect, really—I mean, the energy prices are set by global commodity prices. And most of food—not all of it, but most food prices are pretty heavily influenced by global commodity prices, too. Also other things. So we can’t really have much of an effect. But we have to be mindful of the potential effect on inflation expectations [coming] from headline [inflation readings]. So it’s a very difficult situation to be in, and we— again, we can’t do much about the difference between [headline and core inflation rates due to] the elements that make up headline that are not in core. <NAME>MICHAEL MCKEE</NAME>. Could I just, as a follow-up, get a clarification on the SEP? When the members gave their forecasts, when were they inserted into the record? Were they revised after the CPI or Michigan numbers came out? In other words, does the SEP, as we have it now, reflect the same factors that led you to go to a 75 basis point move? <NAME>CHAIR POWELL</NAME>. The SEP is of one piece. It reflects all of the economic readings. It also reflects the 75 basis point increase. This is important. So people had that in hand when they—when their SEPs were submitted. So it’s—in other words, it’s not in addition to what’s in the SEP. The SEP—everyone’s SEP reflects their thinking about this rate increase and what’s going forward. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Victoria Guida from Politico. I wanted to ask about how you’re measuring progress, especially since you’ve now started front-loading rate hikes more. You’ve talked about how you want to see inflation coming down over a series of reports, and I guess I’m curious whether you think inflation data itself is a really good indicator or whether you might be concerned that it’s a lagging indicator or that it might send confusing signals given that, as you’ve talked about, there are sort of supply and demand aspects. And I guess my question is, do you think that inflation will tell you—inflation data will tell you when you’ve gone to where you need to go, or do you just feel like maybe it’s better to overshoot than to undershoot? <NAME>CHAIR POWELL</NAME>. So I think the role that we can play—maybe the way to get at this is to say that the role that we can play is around demand, right? And we’ll be able to see—the areas that we can affect are those associated with excess demand, and we’ll be able to see our effect on, for example, job openings in real time. And that would tell us what’s—that would tell us about wages. Wages are not principally responsible for the inflation that we’re seeing, but, going forward, they would be very important, particularly in the service sector. Sorry, I’m not sure I’m getting to your question. <NAME>VICTORIA GUIDA</NAME>. My question is, is inflation data itself the best indicator for when you’re getting to where you need to go, or might it lead you to go too far? <NAME>CHAIR POWELL</NAME>. There’s always a risk of going too far or going not far enough, and it’s going to be a very difficult judgment to make, or maybe not—maybe it’ll be really clear. But we’re—and we’re quite mindful of the dangers. But I will say, the worst mistake we could make would be to fail, which—it’s not an option. We have to restore price stability. We really do, because everything—it’s the bedrock of the economy. If you don’t have price stability, the economy’s really not going to work the way it’s supposed to. It won’t work for people—their wages will be eaten up. So we want to get the job done. This inflation happened relatively recently. We don’t think that it’s affecting expectations in any kind of fundamental way. We don’t think that we’re seeing a wage–price spiral. We think that the public generally sees us as very likely to be successful in getting inflation down to 2 percent, and that’s critical. It’s absolutely key to the whole thing that we sustain that confidence. So that’s how we’re thinking about it. <NAME>BRIAN CHEUNG</NAME>. Hi, Brian Cheung with Yahoo Finance. I just want to expand, I guess, on what you just said now about the general public feeling like you can get this done. You talk about consumer sentiment being down, also inflation expectations being up, recession just broadly being dinner table talk. Does the general feel among American households and also businesses square with your explanation of the economy, given that the description of inflation in the statement didn’t change between May and June? Thanks. <NAME>CHAIR POWELL</NAME>. So, clearly, people don’t like inflation—a lot. And many people are experiencing it, really, for the first time, because we haven’t had anything like this kind of inflation in 40 years. And it’s really something people don’t like. And they’re experiencing that, and that’s showing up in their—in surveys and in all kinds of ways. And we understand that, and we understand the hardship that people are experiencing from high inflation, and we’re determined to do what we can to get inflation back down. So that’s really what we’re saying. We’re not—I’m not—clearly, it’s an incredibly unpopular thing, and it’s very painful for people. I guess what I’m saying is, the question, the really critical question from the perspective of doing our job is making sure that the public does have confidence that we have the tools and will use them and they do work to bring inflation back down over time. It will take some time, we think, to get inflation back down, but we will do that. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. Chris Rugaber, Associated Press. You have talked about inflation a few times and mentioned oil prices, China lockdowns. But aside from rises in commodity prices such as gas prices, we’re also seeing stickier measures of inflation increasing, such as the Cleveland Fed’s median and trimmed mean CPIs. I mean, how persistent do you see those underlying measures of inflation, and how do you expect to—where do you see those going in the near future? <NAME>CHAIR POWELL</NAME>. So, as I mentioned, I think, in my opening statement, inflation has started—it started off in quite narrow, very directly pandemic-related areas, and it’s spread now broadly across the economy and into the services sector as well. It was really in the goods sector at the beginning. And, particularly, you’re seeing in travel now, if you’ve flown on a plane lately—planes are very full, and plane tickets are very expensive. Some of that will be pass- through of energy prices, but it’s—so you’re experiencing services inflation. Shelter inflation is high. So the question—and then you see the Cleveland measure going up, and many other measures are going up. So it’s a time when we’re not seeing progress and we want to see progress, and that’s really another part of why we did what we did today and why the SEP looks like it does. We see it as appropriate to get the policy rate up to restrictive levels, which would be, in the thinking of the Committee, somewhere in the range of 3 to 3½ percent by year-end. And then after that, you see what the rest of the SEP says. So I hope that’s responsive to your question. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. Do you still think a softish landing is possible, and how would you define that at this point considering the revised projections for unemployment, GDP, inflation? <NAME>CHAIR POWELL</NAME>. So I think what’s in the SEP would certainly meet that test. If you see—you’re looking at getting back down to almost a 2 percent inflation by 2024, and the unemployment rate is still as low as 4.1 percent. That would be—I would call that as meeting that test. Do I still think that we can do that? I do. I think there’s—I think there’s—I don’t want to be the handicapper here. I just—that is our objective, and I do think it’s possible. Like I said, though, I think that events of the last few months have raised the degree of difficulty, created great challenges. And, again, the answer to the question, can we still do it—there’s a much bigger chance now that it’ll depend on factors that we don’t control, which is, fluctuations and spikes in commodity prices could wind up taking that option out of our hands. So we just don’t know, but we’re focused on—very, very focused on getting inflation back down to 2 percent, which we think is essential for the benefit of the public and also to put us on a path back to a sustainably strong labor market like the one we had before the pandemic. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thank you. Greg Robb from MarketWatch. Chair Powell, I was wondering if you could talk a little bit more—economists are worried that you’re kind of hitting the economy with a sledgehammer and that now there’s even more risk of a recession than a 50–50 path of rates. So could you talk a little bit more about that? And what evidence would get you to stop rate hikes and maybe even reverse them? <NAME>CHAIR POWELL</NAME>. Sure. So, as I mentioned, financial conditions have tightened over the last seven months, and that’s a good thing, we think. But the federal funds rate, even after this increase, is at 1.6 percent. So it’s hard to see how that is too high of a rate. And even if we did another—so we’re going to get here by the end of the summer, somewhere in the 2s probably. Still, that’s still a low rate. So that’s not a rate that is calculated to bring a recession on. And we’ll—by then, we’ll have seen a whole lot more data. As I mentioned a couple times, the Committee’s views are around a modestly restrictive stance, which will be in the 3 to 3½ percent range by the end of this year, but that’s conditioned on that being the appropriate thing to do. If we see data going in a different direction, it’ll be reflected in our policy, as you see today. We’ll be watching—if things go in a direction we don’t expect, then we’re going to adapt. And I would say, this is a highly uncertain environment—extraordinarily uncertain environment. So, again, we’ll be determined and resolved, but flexible. <NAME>MICHELLE SMITH</NAME>. Okay. Evan. <NAME>EVAN RYSER</NAME>. Evan Ryser, Market News International. Thank you, Chair Powell. I was wondering if the Fed has initiated a review of the conduct of monetary policy over the last two years or so, given the inflation, and will that be shared with the public? And then, secondly, given the illiquidity and the extraordinary volatility in financial markets, are you concerned that QT will make that worse? <NAME>CHAIR POWELL</NAME>. Sorry, what was your question on QT? <NAME>EVAN RYSER</NAME>. Just given the illiquidity and extraordinary volatility in financial markets, whether QT will make things worse. <NAME>CHAIR POWELL</NAME>. So, of course, we’ve been looking very carefully and hard at why inflation picked up so much more than expected last year and why it proved so persistent. We— it’s hard to overstate the extent of interest we have in that question morning, noon, and night. But you have to understand the context. For—really, the context is this: For decades before the pandemic and the reopening, you had a world where inflation was dominated by disinflationary forces such as declining population or aging demographics, let’s call it that, globalization enabled by technology, other factors, low productivity. So and that’s how all the models work is, decades and decades of data—they look at that. It’s a very flat Philips curve world, and the supply shocks tend to be transient, right? So we have now experienced an extraordinary series of shocks, if you think about it: the pandemic, the response, the reopening, inflation, followed by the war in Ukraine, followed by shutdowns in China—the war in Ukraine potentially having effects for years here. So we’re aware that a different set of forces are driving the economy—we have been, obviously, for quite a while. But this is a different—these forces are different. Inflation is behaving differently, and, in our thinking, it really is a question of very strong demand. But you couldn’t get this kind of inflation without a change on the supply side, which is there for anybody to see, which is these blockages and shortages and people dropping out of the labor force and things like that. So that’s how we’re looking at it. And we’ve done a lot of work internally on, and thinking about, what all that means. You don’t—the thing is, you don’t know whether those forces are—to what extent are they going to be sustained? In other words, will we go back to a world where it looks a little more like the old world, or are we really going to be in a world where major supply shocks go on and on? The history is, you see these waves of supply shocks, as you did in the ’70s, and then they go away, and sort of there’s a “new normal,” and things settle down. But, honestly, we don’t know what that’s going to be. In the meantime, we have to find price stability in this new world and maximum employment in this new world where, clearly, inflationary forces are—you’re seeing them everywhere. Again, if you look around the world at where inflation levels are, it’s absolutely extraordinary. It’s not just here. In fact, we’re sort of in the middle of the pack, although I think we have, of course, a different kind of inflation than other people have, partly because our economy is stronger and more highly recovered. So that’s what we’re doing. We’ve done a lot of introspection and work on that and—sorry, on QT, we’ve communicated really clearly to the markets about what we’re going to do there. Markets seem to be okay with it. We’re phasing in—Treasury [security] issuance is down quite a lot, quite a lot from where it’s been, so I have no reason to think—markets are forward looking, and they see this coming. I have no reason to think it will lead to illiquidity and problems. It seems to be kind of understood and accepted at this point. <NAME>MICHELLE SMITH</NAME>. Thanks. For the last question, we’ll go to Mark Hamrick. <NAME>MARK HAMRICK</NAME>. Mr. Chairman, Mark Hamrick with Bankrate. I wonder what your assessment is about the outlook for the housing market, given the years-long increase in home prices and now the sharp rise in mortgage rates. And all that, of course, given the heightened sensitivity around the housing market given the fact that it was a trigger for the great financial crisis over a decade ago. Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So rates were very low—a good place to start is that rates were very, very low for quite a while because of the pandemic and the need to do everything we could to support the economy when unemployment was 14 percent and the true unemployment rate was well higher than that. And that was a—rates are low, and now they’re coming back up to more normal, or above, levels. So, in the meantime, while rates were low and while demand was really high, obviously demand for housing changed from wanting to live in urban areas to some extent to living in single-family homes in the suburbs, famously. And so the demand was just suddenly much higher. And we saw prices moving up very, very strongly for the last couple of years. So that changes now, and rates have moved up—we’re well aware that mortgage rates have moved up a lot—and you’re seeing a changing housing market. We’re watching it to see what will happen. How much will it really affect residential investment? Not really sure. How much will it affect housing prices? Not really sure. It’s—I mean, obviously, we’re watching that quite carefully. You would think over time—I mean, so there’s a tremendous amount of supply in the housing market of unfinished homes, and as those come on line—whereas the supply of finished homes, inventory of finished homes that are for sale, is incredibly low, historically low. So it’s still a very tight market. So prices may keep going up for a while even in a world where rates are up. So it’s a complicated situation. We watch it very carefully. I would say if you’re a homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again and mortgage rates are low again. So this will be a process whereby we—ideally, we do our work in a way that the housing market settles in a new place and housing availability and credit availability are at appropriate levels. So thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I are strongly committed to bringing inflation back down, and we’re moving expeditiously to do so. We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses. The economy and the country have been through a lot over the past two and a half years and have proved resilient. It is essential that we bring inflation down to our 2 percent goal if we are to have a sustained period of strong labor market conditions that benefit all. From the standpoint of our congressional mandate to promote maximum employment and price stability, the current picture is plain to see: The labor market is extremely tight, and inflation is much too high. Against this backdrop, today the FOMC raised its policy interest rate by ¾ of a percentage point and anticipates that ongoing increases in the target range for the federal funds rate will be appropriate. In addition, we are continuing the process of significantly reducing the size of our balance sheet. And I’ll have more to say about today’s monetary policy actions after briefly reviewing economic developments. Recent indicators of spending and production have softened. Growth in consumer spending has slowed significantly, in part reflecting lower real disposable income and tighter financial conditions. Activity in the housing sector has weakened, in part reflecting higher mortgage rates. And after a strong increase in the first quarter, business fixed investment also looks to have declined in the second quarter. Despite these developments, the labor market has remained extremely tight, with the unemployment rate near a 50-year low, job vacancies near historical highs, and wage growth elevated. Over the past three months, employment rose by an average of 375,000 jobs per month—down from the average pace seen earlier in the year, but still robust. Improvements in labor market conditions have been widespread, including for workers at the lower end of the wage distribution as well as for African Americans and Hispanics. Labor demand is very strong, while labor supply remains subdued, with the labor force participation rate little changed since January. Overall, the continued strength of the labor market suggests that underlying aggregate demand remains solid. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in May, total PCE prices rose 6.3 percent; excluding the volatile food and energy categories, core PCE prices rose 4.7 percent. In June, the 12-month change in the consumer price index came in above expectations at 9.1 percent, and the change in the core CPI was 5.9 percent. Notwithstanding the recent slowdown in overall economic activity, aggregate demand appears to remain strong, supply constraints have been larger and longer lasting than anticipated, and price pressures are evident across a broad range of goods and services. Although prices for some commodities have turned down recently, the earlier surge in prices of crude oil and other commodities that resulted from Russia’s war on Ukraine has boosted prices for gasoline and food, creating additional upward pressure on inflation. 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, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. We are highly attentive to the risks high inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by ¾ of a percentage point, bringing the target range to 2¼ to 2½ percent. And we’re continuing the process of significantly reducing the size of our balance sheet, which plays an important role in firming the stance of monetary policy. Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing increases in the target range for the federal funds rate will be appropriate; the pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy. Today’s increase is the—in the target range is the second 75 basis point increase in as many meetings. While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then. We will continue to make our decisions meeting by meeting and communicating—and communicate our thinking as clearly as possible. As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation. Our overarching focus is using our tools to bring demand into better balance with supply in order to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored. Making appropriate monetary policy in this uncertain environment requires a recognition that the economy often involves—evolves in unexpected ways. Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook. And we will strive to avoid adding uncertainty in what is already an extraordinarily challenging and uncertain time. We are highly attentive to inflation risks and determined to take the measures necessary to return inflation to our 2 percent longer-run goal. This process is likely to involve a period of below- trend economic growth and some softening in labor market conditions. But such outcomes are likely necessary to restore price stability and 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. <NAME>MICHELLE SMITH</NAME>. Let’s start with Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Thanks for taking our questions. Rachel Siegel from the Washington Post. I’m wondering if you can walk us through your thinking around the decision not to go for a full percentage point increase. We saw a ramp-up after the May CPI report came in hotter than usual and then, obviously, the June figure did, too. Was there any discussion of a stronger hike at this meeting? Yes. Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So we did judge that a 75 basis point increase was the right magnitude in light of the data and in the context of the ongoing increases in the policy rate that we’ve been making. I’d say that we wouldn’t hesitate to, to make an even larger move than we did today if the Committee were to conclude that that was—that that were appropriate. That was not the case at this meeting. There was very broad support for the move that we made. You mentioned the—the June meeting. We, we had said many times that we were prepared to move aggressively, more aggressively, if inflation continued to disappoint. And that’s why we did move to a more aggressive pace at the June meeting, as we said we would do. At this meeting, we continued at that more aggressive pace, as inflation has continued to disappoint, in the form of the June CPI reading. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you so much for taking our questions. Colby Smith with the Financial Times. As the Committee considers the policy path forward, how will it weigh the expected decline in headline inflation, which might come as a result of the drop in commodity prices, against the fact that we are likely to see some persistence in core readings, in particular? And given that potential tension and signs of, you know, any kind of activity weakening here, how has the Committee’s thinking changed on how far into restrictive territory rates might need to go? <NAME>CHAIR POWELL</NAME>. So I guess I’d start by saying we’ve been saying we would move expeditiously to get to the range of neutral. And I think we’ve done that now. We’re at—we’re at 2.25 to 2.5 [percent], and that’s right in the range of what we think is neutral. So the question is, how are we thinking about the path forward? So one thing that hasn’t changed is that—won’t change—is that our focus is continuing to—is going to continue to be on using our tools to bring demand back into better balance with supply in order to bring inflation back down. That’ll continue to be our overarching focus. We also said that we expect ongoing rate hikes will be appropriate and that we’ll make decisions meeting by meeting. So what are we going to be looking at? You know, we’ll be looking at the incoming data, as I mentioned, and that’ll start with economic activity. Are we seeing the slowdown that we—the slowdown in economic activity—that we think we need? And there’s some evidence that we are at this time. Of course, we’ll be looking at labor market conditions. And we’ll be asking whether we see the alignment between supply and demand getting better, getting closer. Of course, we’ll be looking closely at inflation. You mentioned headline and core. Our mandate is for headline, of course; it’s not for core. But we look at core because core is, is actually a better indicator of headline and of all inflation going forward. So we’ll be—we’ll be looking at both. And we’ll be looking at them for—at those both, really—for what they’re saying about the outlook rather than just simply for, for what they say. But we’ll be asking: Do we see inflationary pressures declining? Do we see actual readings of inflation coming down? So, in light of all that data, the question we’ll be asking is whether the stance of policy we have is sufficiently restrictive to bring inflation back down to our 2 percent target. And it’s also worth noting that these rate hikes have been large, and they’ve come—they’ve come quickly. And it’s likely that their full effect has not been felt by the economy. So there’s probably some additional tightening, significant additional tightening, in the pipeline. So where are we going with this? I think the best—I think the Committee broadly feels that we need to get policy to at least to a moderately restrictive level. And maybe the best data point for that would be what we wrote down in our SEP at the—at the June meeting. So I think the median [federal funds rate] for the end of this year, the median would’ve been between 3¼ and 3½ [percent]. And, then, people wrote down 50 basis points higher than that for 2023. So that’s—even though that’s now six weeks old, I guess, that’s—that’s the most recent reading. Of course, we’ll update that reading at the—at the September meeting in eight weeks. So that’s how we’re thinking about it. As I mentioned, as it relates to September, I said that another unusually large increase could be appropriate, but that’s not a decision we’re making now. It’s one that we’ll make based on the data we see. And we’re going to be making decisions meeting by meeting. We think it’s—we think it’s time to just go to a meeting-by-meeting basis and not provide, you know, the kind of clear guidance that we had provided on the way to neutral. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, you’ve said that your policy works through influencing expectations and that policy needs to be at least moderately restrictive, which means you need financial conditions to stay tight. Futures market pricing currently implies you will raise rates this year along the lines of your June SEP but then lower them a few months later next year. Are these expectations consistent with the need to keep financial conditions tight in order to moderate purchasing power and bring inflation back to 2 percent? <NAME>CHAIR POWELL</NAME>. So I’m going to start by pointing out that it’s very hard to say with any confidence in normal times—in normal times—what the economy’s going to be doing in 6 or 12 months. And to try to predict what the appropriate monetary policy would respond— response would be—of course, we do that in the SEP, but, nonetheless, you’ve got to take any estimates of what rates will be next year with a grain of salt, because there’s so much uncertainty. These are not normal times. There’s significantly more uncertainty now about the path ahead than I think there ordinarily is, and, ordinarily, it’s quite high. So, again, I would—the best data, the only data point I have for you really is the June SEP, which I think is just the most recent thing that the Committee’s done. Since then, inflation has come in higher; economic activity has come in weaker than expected. But at the same time, I would say that’s probably the best estimate of where the Committee’s thinking is still, which is that we would get to a moderately restrictive level by the end of this year—by which I mean somewhere between 3 and 3½ percent—and that when the Committee sees further rate increases in 2023, as I mentioned, we’ll update that, of course, at the September meeting. But that’s really the best I can do on that. <NAME>NICK TIMIRAOS</NAME>. You said inflation had been a little bit hotter than anticipated. Has your view of the terminal rate changed since June? <NAME>CHAIR POWELL</NAME>. So I wouldn’t say it was—I think we didn’t expect a good reading, but this one—this one was even worse than expected, I would say. I don’t talk about my own personal estimate of, of what the terminal rate would be. I do—I will write down that in—it’s going to evolve. Obviously, it has evolved over the course—I think, for all participants, it has evolved over the course of the year as we learn how persistent inflation’s going to be. And by the time of the September meeting, we will have seen two more CPI readings and two more labor market readings and a significant amount of readings about economic activity and perhaps geopolitical developments, who knows. It’ll be—it’ll be a lot. It’s an eight-week intermeeting period, so I think we’ll see quite a lot of data. And we’ll make our decision at that meeting based on that data. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thanks for taking our questions. Jeanna Smialek, New York Times. You kind of alluded to this earlier, but I wonder in the event that you see several months of very weak headline inflation numbers because oil prices are coming down so much, but core inflation continues to be strong or even picks up, I wonder how you would think about that. <NAME>CHAIR POWELL</NAME>. So it’s hard to deal with hypotheticals, but I just would say this. We, you know, we would look at both, and we would ask—we’d be asking ourselves, are we confident that inflation is on a path down to 2 percent? That’s really the question. And we’ll be making—you know, our policy stance will be set at a level, ultimately, at which we are confident that inflation is going to be moving down to 2 percent. So you would—it would depend on a lot of things. Of course, as I mentioned, core inflation is a better predictor of inflation going forward. Headline inflation tends to be volatile. So, in ordinary times, you, you look through volatile moves in commodities. The problem with the current situation is that, that if you have a sustained period of supply shocks, those can actually start to undermine or to work—to work on de-anchoring inflation expectations. The public doesn’t distinguish between core and headline inflation in their thinking. So it’s something we have to take into consideration in our policymaking even though our tools don’t really work on, on some aspects of this, which are the supply-side issues. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Thanks for taking my question, Mr. Chairman. Earlier this week, the President said, “We are not going to be in a recession.” So I have two questions off of that. Do you share the President’s confidence in not being in a recession? And, second, how would or would not a recession change policy? Is it a bright line, sir, where, where contraction of the economy would be a turning point in policy? Or is there some amount of contraction of the economy the Committee would be willing to abide in its effort to reduce inflation? <NAME>CHAIR POWELL</NAME>. So, as I—as I mentioned, we think it’s necessary to have growth slow down. And growth is going to be slowing down this year for a couple of reasons, one of which is that you’re coming off of the very high growth of the reopening year of 2021. You’re also seeing tighter monetary policy. And you should see some slowing. We actually think we need a period of growth below potential in order to create some slack so that—so that the supply side can catch up. We also think that there will be, in all likelihood, some softening in labor market conditions. And those are things that we expect. And we think that they’re probably necessary if we were to have—to get inflation—if we were to be able to get inflation back down on a path to 2 percent and ultimately get there. <NAME>STEVE LIESMAN</NAME>. The question was whether you see a recession coming and how that might or might not change policy. Thanks. <NAME>CHAIR POWELL</NAME>. So we’re going to be—again, we’re going to be focused on getting inflation back down. And we—as I’ve said on other occasions, price stability is really the bedrock of the economy. And nothing works in the economy without price stability. We can’t have a strong labor market without price stability for an extended period of time. We all want to get back to the kind of labor market we had before the pandemic, where differences between, you know, racial and gender differences and that kind of thing were at historic minimums, where participation was high, where inflation was low. We want to get back to that, but that’s not happening. That’s not going to happen without, without restoring price stability. So that’s something we see as, as something that we simply must do. And we think that in the—we don’t see it as a tradeoff with, with the employment mandate. We see it as a way to facilitate the sustained achievement of the employment mandate in the longer term. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. Particularly in regard to expectations, it’s been said the last few months that the risks of doing too little outweighed the lists—the risks of doing too much. Does that remain the bias? <NAME>CHAIR POWELL</NAME>. So we’re trying to do just the right amount, right? We’re not—we’re not trying to have a recession. And we don’t think we have to. We think that there’s a path for us to be able to bring inflation down while sustaining a strong labor market, as I mentioned, along with—in all likelihood—some, some softening in labor market conditions. So that is— that’s what we’re trying to achieve, and we continue to think that there’s a path to that. We know that the path has, has clearly narrowed, really based on events that are outside of our control. And it may narrow further. So, you know, I do think—as I said just now—that restoring price stability is just something that we have to do. There, there isn’t an option to fail to do that because that is the thing that enables you to have a strong labor market over time. Without restoring price stability, you won’t be able, over the medium and longer term, to actually have a strong—a sustained period of very strong labor market conditions. So, of course, we serve both sides of the dual mandate, but we actually see them as well aligned on this. <NAME>HOWARD SCHNEIDER</NAME>. But as a—as a follow-on to that, given the uncertainty and that sort of paradoxical flow of data you’ve been getting, if you’re going to make a mistake, would you rather make the mistake on doing too much, raising too much, than raising too little? <NAME>CHAIR POWELL</NAME>. We’re trying not to make a mistake. Let me put it this way: We do see that there are two-sided risks. There would be the risk of doing too much and, you know, imposing more of a downturn on the economy than, than was necessary, but the risk—the risk of doing too little and leaving the economy with this entrenched inflation, it only raises the cost. If you fail to deal with it in the near term, it only raises the cost of, of dealing with it later to the extent people start to see it as just part of their economic lives. They start to factor high inflation into their decisions—when that—on a sustained basis. When that starts to really happen, and we don’t think that’s happened yet, but when that starts to happen, it just gets that much harder. And the pain will be that much greater. So I really do think that it’s important that we—that we address this now and get it done. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks, Chair Powell. Neil Irwin from Axios. To build a little bit on what Steve was asking, do you believe the United States is currently in a recession? Will the GDP reading tomorrow affect that judgment one way or the other? And has your assessment of the risk of recession changed any in recent weeks? <NAME>CHAIR POWELL</NAME>. So I don’t—I do not think the U.S. is currently in a recession. And the reason is, there are just too many areas of the economy that are—that are performing, you know, too well. And, of course, I would point to the labor market, in particular. As I mentioned, it’s true that growth is slowing for reasons that we understand. Really, the growth was extraordinarily high last year, 5½ percent. We would have expected growth to slow. There’s also more slowing going on now. But if you look at the labor market, you’ve got growth—I think, payroll jobs averaging 450,000 per month. That’s a remarkably strong level for, for this state of, of affairs. The unemployment rate at near a 50-year low at 3.6 percent. All of the wage measures that we track are running very strong. So this is a very strong labor market, and it’s just not consistent with— you know, 2.7 million people hired in the first half of the year. It doesn’t make sense that the economy would be in recession with, with this kind of thing happening. So I don’t think the U.S. economy’s in recession right now. <NAME>NEIL IRWIN</NAME>. GDP? GDP tomorrow? <NAME>CHAIR POWELL</NAME>. Ah, haven’t seen it, and, and we’ll just have to see what it says. I don’t—I mean, I would say, generally, the GDP numbers do have a tendency to be revised pretty significantly. It’s just—it’s just that it’s very hard—it’s very hard to cumulate [to an estimate of] U.S. GDP. It’s a large economy. And a lot of—a lot of work and judgment goes into that. But you tend to take first GDP reports, I think, with a—with a grain of salt. But, of course, it’s something we’ll be looking at. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. Victoria Guida with Politico. I wanted to ask about the new conflict-of-interest rules that you all rolled out. Some senators have written asking for those rules to have more teeth and to have sort of more transparency about Fed’s financial—the Fed officials’ financial activity. I was wondering if you could speak to that and whether you intend on, you know, toughening those rules in any way. <NAME>CHAIR POWELL</NAME>. So those are—those are the toughest rules in place, you know, at any comparable institution that I’m aware of. We think—you know, we’ve thought about this carefully, and we put them in place. And we’re building the infrastructure so that—so that, you know, the enforcement will be tight, that, actually, you won’t be able to make trades unless they’re precleared. And the amount of trades you make, they’ll have to be 45 days or more before any FOMC meeting. It’s just—I think we’ve really, you know, created a very strong and robust set of rules that will, you know, support public trust in the institution. And, again, we’re just now—the system is just now up and running. And I’m proud of what we did. <NAME>MICHELLE SMITH</NAME>. Catarina. <NAME>CATARINA SARAIVA</NAME>. Hi, Chair Powell. Hi. Catarina Saraiva, Bloomberg News. I wanted to ask a little bit more about the 75 basis points versus 50 versus 25. Can you talk a little bit about what, what kind of goes into your thinking for, you know, making the decision on how much to raise rates and, you know, just talking about a very large amount that you alluded to? Could that possibly be 100 basis points? And then, kind of along those lines, is there any sort of weakness in the economy, outside of inflation measures, that would lead you to slow your hiking pace? <NAME>CHAIR POWELL</NAME>. So I’m going to—I’m going to take that as a question about the next meeting and thereafter. So, as I mentioned, we’re going to be looking at all of those things: activity, labor market, inflation. And we’re going to be thinking about our policy stance and where does it really need to be. And I also mentioned that, as this process—now that we’re at neutral—as the process goes on, at some point, it will be appropriate to, to slow down. And we haven’t made a decision when that point is, but intuitively that makes sense, right? We’ve been front-end-loading these very large rate increases, and now we’re getting closer to where we need to be. So that’s how we’re thinking about it. And in terms of September, we’re going—we’re going to watch the data and the evolving outlook very carefully and factor in everything and make a decision in September about what to do. And I’m not really going to provide any specific guidance about what that might be. So, you know, but I mentioned that we might do another unusually large rate increase. But that’s not a decision that we’ve made at all. So we are—you know, we’re going to be guided by the data. And I think you can still think of the, the destination as broadly in line with the September—sorry, the June SEP, because it’s only six weeks old. And sometimes, sometimes SEPs can get old really quick. I think in this one—this one I would say is probably, probably the best guide we have as to where the Committee thinks it needs to get at the end of the year and then into next year. So I would point you to that. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi. Thank you. Chris Rugaber, Associated Press. I wanted to ask about right now, there’s a sort of growing gap between the Fed’s preferred measure of inflation, the PCE, PCE index, and the one that’s followed by the public, the CPI, of course. How do you expect to handle this divergence if the PCE starts to come down enough for you to consider slowing rate hikes, even if the public is still seeing much higher CPI ratings? Thank you. <NAME>CHAIR POWELL</NAME>. So it’s an interesting, interesting situation. Of course, we’ve, we’ve long used PCE because we think it’s just better at capturing the inflation that people actually face in their lives. And I think that that view is pretty widely understood. That said, the public really reads about CPI. And the difference really is because the CPI has higher weights on things like food, gasoline, motor vehicles, and housing than the PCE index does. And so that accounts for a lot of the difference. However, over time, they tend to come together. You know, we—given the importance in the public eye of CPI, we are calling it out and noticing it and everything like that. But remember, we do target PCE. That is because we think it’s a better measure. They will come together eventually. The typical gap was really about 25 basis points for a very long time. And if it went—if it got to 40 basis points, that would be very noticeable. And now it’s—now it’s much larger than that because of the things I mentioned. So we’ll be watching both, but, again, the one that we think is the best measure always has been PCE, at least since I think we—some 20 plus years ago—moved to PCE. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. I’d like to weave a couple of things together, Mr. Chairman. Michael McKee from Bloomberg TV and Radio. You said that the destination pretty much remains the same in terms of your end-of-the-year target. But where are you in the journey? We’ve now seen the federal stimulus programs end. You mentioned consumer spending, business investment have slowed. Are they moving at a pace you would expect? Or is demand still greater than supply—too much greater than supply that you need to do significantly more? And I ask because there are lags in the impact of monetary policy, as you mentioned. And a lot of this might hit in 2023. The strong dollar effect may hit in 2023, when the economy might be weak. How, how do you know where you are and where you think you need to get to? <NAME>CHAIR POWELL</NAME>. Well, just talking about demand for a second: As I mentioned in my remarks, I think you pretty clearly do see a slowing now in demand in the second quarter— consumer spending, business fixed investment, housing, places like that. I think, you know, people widely looked at the first-quarter numbers and thought they didn’t make sense and might have been misleading in terms of the overall direction of the economy—[that was] not, not true of the second quarter. But at the same time, you have this labor market. So there are plenty of experiences where GDP has been reported as weak and the labor market as strong. And the economy has gone right through that and been fine. So that—that’s happened many times. And it used to happen—if you remember, in the first quarter of every year, for several years in a row, GDP was negative, and the labor market was moving on just fine. And it turned out to just be measurement error. It was called residual seasonality. We don’t know the situation. The truth is, though, we, we think that demand is moderating. We do. How much is it moderating? We’re not sure. We’re going to have to watch the data carefully. There are—there is a great deal of money on people’s balance sheets that they can spend. The unemployment rate is very low. The labor market’s very hot. There are many, many job openings. Wages are high. So it’s the kind of thing where you think that the—that the economy should actually be, be doing pretty well in the second half of the year. But we’ll have to see. We don’t know that because you do see a marked slowing in the second quarter that does—that is fairly broad. So we’ll be watching that. We’ll be watching that. Of course, as I mentioned, we do want to see demand running below potential for a sustained period to create slack and, and give inflation a chance to come down. <NAME>MICHELLE SMITH</NAME>. Nicole. <NAME>NICOLE GOODKIND</NAME>. Hi, thank you, Chairman. Nicole Goodkind, CNN Business. When does the Committee expect to see a meaningful slowdown in the labor market? And how much weakness will it accept with regard to slower job growth and higher unemployment before it pauses or begins to think about cutting rates? <NAME>CHAIR POWELL</NAME>. So I think you’re already seeing—you’ve seen, in the labor market, what you’ve seen is a decline from very high levels of job creation last year and earlier this year to modestly slower job creation—still, still quite robust, as I mentioned. So you’re seeing that. You’re seeing some increase—some increase in initial claims from insurance, although that may actually have to do with seasonal adjustments. We’re not sure that that’s actually real. There’s some evidence that wages—if you look at average hourly earnings, they appear to be moderating, not so yet from the other wage measures. And we’ll be getting the employment compensation index measurement, I think, on Friday, I guess. And that’s a very important one because it adjusts for compensation—composition. So I’d say you—and also, anecdotally, you hear much—the sort of level of concern on the part of businesses that they simply can’t find workers is probably down a little bit from what it was, say, for example, late in the latter parts of last year. So there’s a feeling that the labor market is moving back into balance. If you look at—if you look at job openings or quits, you see them moving sideways or perhaps a little bit down. But it’s only the beginning of an adjustment. But I think most—also, if you look at—I mean, once you start citing these things, you can’t stop. If you look at the household survey, you see much lower job creation, and the household survey can be quite volatile, but it has no jobs created in the last three months. So that might be a signal that job creation’s actually a little bit slower than we’re seeing in the—in the establishment survey. So executive summary [is]: I would say there’s some evidence that labor demand may be slowing a bit—labor supply, not so much. We have been disappointed that labor force participation really hasn’t moved up since January. That may be related to yet another big wave of COVID. And there’s evidence that that’s the case. But—So we’re not seeing much in the way of labor supply. Nonetheless, I would say some, some progress on demand and supply getting back in alignment. <NAME>NICOLE GOODKIND</NAME>. And then how much weakness would you be willing to accept before you think about pausing rate cuts? <NAME>CHAIR POWELL</NAME>. So I think we’re looking—we’re going to be looking at, at inflation as well. You know, as I mentioned, we need to see inflation coming down. We need to be confident that inflation is going to get back down to mandate-consistent levels. That’s not something we can avoid doing. That really needs to happen. And, but we do think, though, that the labor market can adjust because of the huge overhang of job openings, of excess demand, really. There should be able to be an adjustment that would have lower than—perhaps lower-than-expected increases in unemployment—lower than would be expected in the ordinary course of events because the level—the ratio of, of vacancies to unemployed is just out of keeping with historical experience. And that suggests that this time could be different. <NAME>MICHELLE SMITH</NAME>. Edward Lawrence. <NAME>EDWARD LAWRENCE</NAME>. Thanks, Mr. Chairman. Edward Lawrence from Fox Business. So you said that the path may be narrowed to avoiding a recession. So how, how close are we to a recession? And then how do forecasts of possible recession from banks and economists, how does that make a soft landing you’ve talked about more difficult? <NAME>CHAIR POWELL</NAME>. So as, as I mentioned, it doesn’t seem that the U.S. economy is in recession right now. And I think you do see weakening, some slowdown—let’s put it that way— in growth. And you see it across some of the categories that I mentioned. But there’s also just the very strong data coming out of the labor market, still. So, overall, you would say that, in all probability, demand is still strong, and, and the economy is still on track to continue to grow this year. But the slowdown in the second quarter is notable. And we’re—you know, we’re going to be watching that carefully. Sorry, what was the— <NAME>EDWARD LAWRENCE</NAME>. Forecasts. You know, how do bank forecasts of possible recessions, economists, does that affect the soft landing? <NAME>CHAIR POWELL</NAME>. Well, you know, we’ve said since the beginning, I think, that, that having a soft landing is what we’re aiming for. Of course, that has to be our goal. It is our goal. And we’ll keep trying to achieve it. I think—I do think events—at the beginning, we said it was not going to be easy. It was going to be quite challenging to do that. It’s unusual. It’s an unusual event. It’s not a typical event, given where we are. If there is a path to it, and we think there is, it is the one I mentioned, that the labor market actually is—has such a large amount of surplus demand that you could see—you could see that demand coming down in a way that didn’t translate into a big increase in unemployment as you would expect in the ordinary course because, frankly, the imbalance is so much greater. And, but we don’t know that. I mean, this is a—this is a case of first impression. So anyone who is really sure that it’s impossible or really sure that it will happen is probably underestimating the level of uncertainty. And so I would certainly say it’s an uncertain, uncertain thing. Nonetheless, it’s our goal to achieve it, and we’ll keep trying to do that. <NAME>MICHELLE SMITH</NAME>. Jean. <NAME>JEAN YUNG</NAME>. Thank you, Mr. Chairman. Jean Yung with Market News. I wanted to ask about the balance sheet reduction program. It’s been working for a couple months now and in a different environment than the last time the Fed did it. What are you learning about how it’s working and how markets are reacting? And is reaching the minimum level of reserves needed in the system still several years away at the current pace? <NAME>CHAIR POWELL</NAME>. So we think it’s working fine. As you know, we, we tapered up into it. And, and in September, we’ll go to full strength. And the markets seem to have accepted it. By all assessments, the markets should be able to absorb this. And we expect that’ll be the case. So I would say the plan is broadly on track. It’s a little bit slow to get going because some of these trades don’t settle until—for a bit of time. But it’ll be picking up steam. So I guess your second question was getting—the process of getting back down to the new equilibrium will take a while. And that time, it’s hard to be precise, but, you know, the model would suggest that it could be between two, two and a half years, that kind of thing. And this is a much faster pace than the last time. Balance sheet’s much, much bigger than it was. But we looked at this carefully, and we thought that this, this was the sensible pace. And we have no reason to think it’s not. <NAME>MICHELLE SMITH</NAME>. Brian. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. Brian Cheung, Yahoo Finance. Looking at financial conditions, it seems like the tightening has slowed as of late with the 10 year coming down, 30-year fixed mortgage rates also going a bit sideways, when we talk about a hot housing market still. Just wondering if you find financial conditions tight enough, especially as you continue to raise rates. <NAME>CHAIR POWELL</NAME>. So a big piece of that is inflation expectations—you know, breakevens coming down, which, you know, is a good thing. It’s a good thing that markets do seem to have confidence in, in the Committee’s commitment to getting inflation back down to 2 percent. So we like to see market-based, you know, readings of inflation expectations come down. You know, broader financial conditions have tightened, tightened a good bit. I mean, the way this works is we, we set our policy, and financial conditions react, and then financial conditions are what affects the economy. And we don’t control that second step. We’re just going to do what we think needs to be done. We’re going to—we’re going to get our policy rate to a level where we’re confident that inflation will be moving back down to 2 percent. Confident. So that’s how we’re going to take it. And, of course, we’ll be watching financial conditions to see that they are appropriately tight and that they’re having the effect that we would hope they’re having, which is to see demand moderate and inflationary pressures recede and, ultimately, inflation come down. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thank you, Chair Powell. Greg Robb from MarketWatch. I wonder if you can go back a little bit in time to before there was this outbreak of inflation, when the Committee put in place forward guidance on tapering asset purchases. I think it was December 2020. There’s a recent speech by Fed Governor Waller talking about that and saying that maybe that was too tight, that kind of condition, and it put you a little bit behind—not his words but maybe, you know, were kind of late to react to some of that inflation. So could you talk about that decision, and have you looked at it in hindsight at all? Thank you. <NAME>CHAIR POWELL</NAME>. So, yes, we said that we wouldn’t lift off until we had basically achieved our dual-mandate goals. And the reason we did it in real time was that, the first look at the new framework that we’d rolled out, plenty of people were saying, “It’s not credible. You’ll never get inflation to 2 percent.” Some of our critics now who say inflation’s too tight—too high were the same ones who were saying, “You’ll never get to 2 percent.” Well, but anyway, that’s what happened. So we, we thought we needed to really make a strong statement with that. It wasn’t part of the framework. The December ’20 guidance was not part of our overall new framework. It was just guidance that we put in place. So I would say two things. One, I don’t think that that has materially changed the situation. But I have to admit, I don’t think I would do that again. I don’t think I would do that again. We—you know, ultimately, the situation evolved in a highly unexpected way for all of us. And, you know, maybe the learning is that leave a little more flexibility than that. But did it matter in the end? You know, we—if you look at—I really don’t think it did. I’m not sure it would’ve mattered if we’d been raising rates three months earlier. Does anybody think that would’ve made a big difference? I mean, lots of central banks were raising rates three months earlier, and it didn’t matter. I mean, this is a—this is a global phenomenon that’s happening now—admittedly, different in the United States, but anyway. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>GREG ROBB</NAME>. Can I follow up? <NAME>MICHELLE SMITH</NAME>. Sorry about that, Greg. <NAME>GREG ROBB</NAME>. Just a lot of people talk about that time, and they talk about a taper tantrum. I know you haven’t talked about it too much but that you were worried at the time about repeating that taper tantrum that you had experienced as a Governor. So was that part of that? Where did that fit into all those decisions? Thank you. <NAME>CHAIR POWELL</NAME>. So I think we learned—there’ve been multiple taper tantrums, right? So there was the famous one in 2013. There’s what happened at the December ’18 meeting, where, you know, markets can ignore developments around the balance sheet for years on end and then suddenly react very sharply. So we just had developed a practice of moving predictably and doing it in steps and things like that. It was just like that’s how we did it. And so we did it that way this time. We were—we were careful to, to take steps and communicate and all that kind of thing. Yes, we were trying to avoid a tantrum because they can be quite destructive. They can tighten financial conditions and knock the economy off kilter. And, you know, when it happens, you have to—really, in both ’13 and ’18, it really had consequences for the real economy, you know, two, three, four months later. So we were trying to avoid that. That was part of it. Again, I don’t think that’s—the real issue of 2020 and ’21 was just trying to understand what was happening with the reopening economy. That, that was where the big uncertainty was. And, you know, our view was that these supply-side issues would get better: that people would go back to work, that labor force participation would come back, everyone would get vaccinated, schools would open, kids would be in school, and labor force participation would jump back up. That’s what we were—that was very broadly thought to be the case: these supply-side issues would get solved reasonably quickly. And they just haven’t. They still haven’t. So that’s really the learning, I think, is around how complicated these supply-side issues can be. We haven’t seen this before in a long, long time. And so that’s really, you know, what accounts for the pace at which we moved, and we did. When inflation changed direction, really, in October, we’ve moved quickly since then. I think people would agree. But before then, inflation was coming down month by month. And, you know, we kind of thought we had the story—probably had the story right. But then, I think in October, you started to see a range of data that said “No. This is a much stronger economy and much higher inflation than we’ve been thinking.” And, again, we’ve pivoted, and here we are. <NAME>GREG ROBB</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Nancy Marshall-Genzer with Marketplace. Chair Powell, I just want to pin you down a little bit more on the issue of recession. So if we get a negative GDP number tomorrow for the second quarter, would the Fed consider the U.S. in a recession? And just remind us, what is your definition for the start of a recession? <NAME>CHAIR POWELL</NAME>. So the Fed doesn’t make a—doesn’t make a judgment on that. You know, we’re focused on the dual mandate and using our tools to achieve maximum employment and price stability. We don’t—we don’t say “There is now a recession” and that kind of thing. So that wouldn’t be something we’d do. We would look at the data tomorrow—and no doubt, we’ll look at it very carefully—and draw whatever implications we can. As I mentioned, though, you know, if you think about what an inflation—sorry, what a recession really is, it’s a broad-based decline across many industries that, you know, is sustained for more than a couple of months, and there are a bunch of specific tests in it. And it just doesn’t—this just doesn’t seem like that now. What we have right now doesn’t seem like that. And the real reason is that the labor market is just sending such a signal of economic strength that it makes you really question the GDP data. But, again, that’s not a decision that we—that we make. And we won’t—we won’t reach a conclusion one way or another on that. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Thank you very much. Simon Rabinovitch with the Economist. You said that some softening in the labor market is needed. Within the Fed, there are staff economists who’ve argued that NAIRU, the noninflationary rate of unemployment, might be as high as 5 to 6 percent right now, which obviously is a lot higher than the current rate of 3.6. What’s your assessment of NAIRU? Is that something that came up in discussion with the Committee? <NAME>CHAIR POWELL</NAME>. So I think, broadly, a lot of economists think that the—that the natural rate of unemployment will have moved up to some significant extent above where we think it was before. And the reason is there’s—it’s the usual matching issue, where matching has become less effective, and that kind of thing when you have the kind of turbulent downturn and the big switches in demand from services to goods and all that. So it could be higher. And my own instinct is that the natural rate of unemployment is higher. Of course, I would add that we don’t know it. We can never know where these star variables are in real time with any confidence. But I would say it must have moved up materially. But the other side of that is, as all these jobs get created and people go back to work and unemployment is so low, I think you could, in principle, you could see it coming back down pretty significantly. And that would also, by the way, take pressure off of inflation because it’s that gap—it’s the gap between actual unemployment and the—and the natural rate that really is relevant for, you know, the negative slack we have in the economy with the overtight labor market. So if you were to—you wouldn’t observe this. It’s an unobservable, but you could actually be seeing inflationary pressures coming down if that does happen. And we don’t—we don’t control that. But that’s something that, logically, if the pandemic and the disorder in the labor market caused the natural rate to move up, then as the labor market settles down, in principle, you should see it move back down. <NAME>MICHELLE SMITH</NAME>. Jeff. <NAME>JEFF COX</NAME>. Thank you, Chair Powell. Jeff Cox from CNBC.com. Just a question about—hate to keep banging the drum about recession. But most of the polls that we’re seeing now from the public, people believe that we’re already in a recession or heading for one— economists, pretty much the same thing. They’re being told by folks like you and the Administration that we’re not in a recession, we’re not heading for a recession—frankly, coming from the same people who told them inflation was transitory, telling them now that we’re not heading for a recession. So what would you tell the public to reassure them now that you feel confident in your forecast going forward and the Fed is ready to respond to a—to a potential downturn in the economy? <NAME>CHAIR POWELL</NAME>. No, all I’ve really said is I don’t think it’s likely that the U.S. economy’s in a recession now. And I’ve explained why that is the case. It’s, it’s because you do see a very strong labor market. And I think the public will see that as well. You know, going forward, what we’ve seen is a—is a slowing in spending, as I mentioned. We’ve seen the very beginnings of perhaps a slight lessening in the—in the tightness of the labor market, but it would only be the beginnings. So, and I mentioned that, that—I also said that our goal is to bring inflation down and have a so-called soft landing, by which I mean a landing that doesn’t require a significant increase, a really significant increase in unemployment. We’re trying to achieve that. I have said, on many occasions, that we understand that’s going to be quite challenging and that it’s got more challenging over recent months. <NAME>MICHELLE SMITH</NAME>. Kyle. <NAME>KYLE CAMPBELL</NAME>. Thanks, Chair Powell. Kyle Campbell with American Banker. The FOMC has historically tried to avoid the kind of rapid monetary policy tightening that has happened so far this year. How concerned are you that the rate hikes that we’ve seen thus far might increase risks to financial stability not just domestically, but globally? <NAME>CHAIR POWELL</NAME>. I mean, there are precedents for the FOMC moving very quickly— for example, in 1994, and in 1980, even more so. So we’ve been known to do that when it’s the appropriate thing to do. And this year, it clearly is. I would say that, given how quickly we’ve moved, I’m gratified that while—that, basically, markets have been working. They’ve been orderly. There’s been some volatility, but that’s only to be expected. For a financial stability perspective, you know, asset values are down, which in some—in some sense lowers vulnerabilities. It’s when they’re really high that you would worry that they’re—that they’re vulnerable to a fall, actually. Many asset values have come down. I think you’ve got a well-capitalized banking system. I think you have—households are generally in about as strong as financial shape as they’ve been in a very long time or perhaps ever given the money that’s on people’s balance sheets. So you have a pretty—from a financial stability standpoint, you have a pretty decent picture. Now, the macroeconomic, there are plenty of macroeconomic issues that don’t rise to the level of financial stability concerns. By financial stability, you know, we think of that as things that might undermine the working of the financial system, so big, serious things. That’s not to say that people at the lower end of the income spectrum aren’t, aren’t suffering, because they are. They’re suffering from high inflation. They’re going to the—to the grocery store and finding that, in many cases, their paycheck doesn’t cover the food they’re accustomed to buying. We’re seeing actual, you know, real declines in food consumption. And, you know, it’s very concerning. It’s very unfortunate. And that’s why we’re—we’re really committed to bringing down inflation—one of the reasons. <NAME>MICHELLE SMITH</NAME>. Let’s go to Mark for the last question. <NAME>MARK HAMRICK</NAME>. Thank you, Mr. Chairman. Mark Hamrick with Bankrate. I can remember when you held your first news conference, and you vowed to be a very plainspoken Chairman, and we’re thinking today about the impacts of Fed policy on individuals as well. What would you say to individuals or households who may yet lose their jobs in this tightening cycle in the fight against inflation as they try to translate what Fed policy means to them in this complicated economic landscape? Thank you. <NAME>CHAIR POWELL</NAME>. So I guess the first thing I would say to, to every household is that we know that inflation is too high. We understand how painful it is, particularly for people who are living paycheck to paycheck and spend most of that paycheck on necessities, such as food and gas and heating their homes and clothing and things like that. We do understand that, that those people suffer the most. Middle-class and better-off people have some resources, where they can absorb these things. But people, many people, don’t have those resources. So, you know, we—it is our job. It is our institutional role. We are assigned uniquely and unconditionally the obligation of, of providing price stability to the American people. And we’re going to use our tools to do that. As I mentioned, there will be some, in all likelihood, some softening in labor market conditions. We need growth to slow to below potential growth. We don’t want to—we don’t want this to be bigger than it needs to be. But, ultimately, if you think about the medium and longer term, price stability is the thing that, that makes the whole economy work. It’s what can—it can give us a strong labor market and wages that aren’t being eaten up by high inflation. If you talk to people—again, people who are making, you know, wages, relatively low wages— they’re the ones who are suffering the most from inflation. So it’s all the more reason why we need to move, move on this. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I are strongly committed to bringing inflation back down to our 2 percent goal. We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. Today the FOMC raised its policy interest rate by ¾ percentage point, and we anticipate that ongoing increases will be appropriate. We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2 percent. In addition, we are continuing the process of significantly reducing the size of our balance sheet. I will have more to say about today’s monetary policy actions after briefly reviewing economic developments. The U.S. economy has slowed from the historically high growth rates of 2021, which reflected the reopening of the economy following the pandemic recession. Recent indicators point to modest growth of spending and production. Growth in consumer spending has slowed from last year’s rapid pace, in part reflecting lower real disposable income and tighter financial conditions. Activity in the housing sector has weakened significantly, in large part reflecting higher mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment, while weaker economic growth abroad is restraining exports. As shown in our Summary of Economic Projections, since June, FOMC participants have marked down their projections for economic activity, with the median projection for real GDP growth standing at just 0.2 percent this year and 1.2 percent next year, well below the median estimate of the longer-run normal growth rate. Despite the slowdown in growth, the labor market has remained extremely tight, with the unemployment rate near a 50-year low, job vacancies near historical highs, and wage growth elevated. Job gains have been robust, with employment rising by an average of 378,000 jobs per month over the last three months. The labor market continues to be out of balance, with demand for workers substantially exceeding the supply of available workers. The labor force participation rate showed a welcome uptick in August but is little changed since the beginning of the year. FOMC participants expect supply and demand conditions in the labor market to come into better balance over time, easing the upward pressure on wages and prices. The median projection in the SEP for the unemployment rate rises to 4.4 percent at the end of next year, ½ percentage point higher than in the June projections. Over the next three years, the median unemployment rate runs above the median estimate of its longer-run normal level. Inflation remains well above our 2 percent longer-run goal. Over the 12 months ending in July, total PCE prices rose 6.3 percent; excluding the volatile food and energy categories, core PCE prices rose 4.6 percent. In August, the 12-month change in the consumer price index was 8.3 percent, and the change in the core CPI was 6.3 percent. Price pressures remain evident across a broad range of goods and services. Although gasoline prices have turned down in recent months, they remain well above year-earlier levels, in part reflecting Russia’s war against Ukraine, which has boosted prices for energy and food and has created additional upward pressure on inflation. The median projection in the SEP for total PCE inflation is 5.4 percent this year and falls to 2.8 percent next year, 2.3 percent in 2024, and 2 percent in 2025. Participants continue to see risks to inflation as weighted to the upside. 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. But that is not grounds for complacency; the longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. 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 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 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by ¾ percentage point, bringing the target range to 3 to 3¼ percent. And we are continuing the process of significantly reducing the size of our balance sheet, which plays an important role in firming the stance of monetary policy. Over coming months, we will be looking for compelling evidence that inflation is moving down consistent with inflation returning to 2 percent. We anticipate that ongoing increases in the target range for the federal funds rate will be appropriate; the pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy. With today’s action, we have raised interest rates by 3 percentage points this year. At some point, as the stance of monetary policy tightens further, it will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation. We will continue to make our decisions meeting by meeting and communicate our thinking as clearly as possible. Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy. As shown in the SEP, the median projection for the appropriate level of the federal funds rate is 4.4 percent at the end of this year, 1 percentage point higher than projected in June. The median projection rises to 4.6 percent at the end of next year and declines to 2.9 percent by the end of 2025, still above the median estimate of its longer-run value. Of course, these projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. We are taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored. Reducing inflation is likely to require a sustained period of below-trend growth, and there will very likely be 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. We will keep at it until we are confident the job is done. 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, and I look forward to your questions. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thank you for taking our questions. Jeanna Smialek from the New York Times. I wonder if you could give us a little detail around how you’ll know when to slow down these rate increases and how you’ll eventually know when to stop. <NAME>CHAIR POWELL</NAME>. So I will answer—I will answer your question directly, but I want to start here today by saying that my main message has not changed at all since Jackson Hole. The FOMC is strongly resolved to bring inflation down to 2 percent, and we will keep at it until the job is done. So the way we’re thinking about this is, the overarching focus of the Committee is getting inflation back down to 2 percent. To accomplish that, we think we’ll need to do two things, in particular: to achieve a period of growth below trend; and also some softening in labor market conditions to foster a better balance between demand and supply in the labor market. So on the first, the Committee’s forecasts and those of most outside forecasters do show growth running below its longer-run potential this year and next year. On the second, though, so far there’s only modest evidence that the labor market is cooling off. Job openings are down a bit, as you know; quits are off their all-time highs; there’s some signs that some wage measures may be flattening out but not moving up; payroll gains have moderated but not much. And in light of the high inflation we’re seeing, we think we’ll need to—and in light of what I just said, we think that we’ll need to bring our funds rate to a restrictive level and to keep it there for some time. So, what will we be looking at, I guess, is your question. So we’ll be looking at a few things. First, we’ll want to see growth continuing to run below trend, we’ll want to see movements in the labor market showing a return to a better balance between supply and demand, and, ultimately, we’ll want to see clear evidence that inflation is moving back down to 2 percent. So that’s what we’ll be looking for. In terms of reducing rates, I think we’d want to be very confident that inflation is moving back down to 2 percent before we would consider that. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Thank you, Mr. Chairman. Steve Liesman, CNBC. Can you talk about how you factor in the variable lags on inflation and the extent to which the outlook for rates should be seen as linear in the sense that you keep raising rates? Well, can you envision a time when there’s a pause to kind of look at what has been wrought in the economy from the rate increases? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So, of course, monetary policy does, famously, work with long and variable lags. The way I think of it is, our policy decisions affect financial conditions immediately. In fact, financial conditions have usually been affected well before we actually announce our decisions. Then, changes in financial conditions begin to affect economic activity fairly quickly, within a few months. But it’s likely to take some time to see the full effects of changing financial conditions on inflation. So we are very much mindful for that. And that’s why I noted in my opening remarks that, at some point, as the stance of policy tightens further, it will become appropriate to slow the pace of rate hikes while we assess how our cumulative policy adjustments are affecting the economy and inflation. So that’s how we think about that. Your second question—sorry—was? <NAME>STEVE LIESMAN</NAME>. Is there a point in time you could see pausing? Is it linear? Do you keep raising rates, or is there—oh, sorry, I should know better than to not talk with a microphone. <NAME>CHAIR POWELL</NAME>. I should know better than to answer your second question. [Laughter] <NAME>STEVE LIESMAN</NAME>. Well, there you go. Is it linear? Do you keep raising rates, or is there a pause that you could envision where you kind of figure out what has happened to the economy and give time to catch up in the real economy—the rate increase time to catch up in the real economy? Thank you. <NAME>CHAIR POWELL</NAME>. So I think it’s very hard to say with precise certainty the way this is going to unfold. As I mentioned, what we think we need to do and should do is to move our policy rate to a restrictive level that’s restrictive enough to bring inflation down to 2 percent, where we have confidence of that. And what you see in the SEP numbers is people’s views as of today, as of this meeting, as to the kind of levels that will be appropriate. Now, those will evolve over time, and I think we’ll just have to see how that goes. There is a possibility, certainly, that we would go to a certain level that we’re confident in and stay there for a time. But we’re not at that level. Clearly, today we’re, we’ve just moved, I think, probably, into the very lowest level of what might be restrictive, and, certainly, in my view and the view of the Committee, there’s a ways to go. <NAME>MICHELLE SMITH</NAME>. Okay. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. The projections show the unemployment rate rising to 4.4 percent next year, and, historically, that kind of rise in the unemployment rate would typically bring a recession with it. Should we interpret that to mean no soft landing, and is that kind of rise necessary to get inflation down? <NAME>CHAIR POWELL</NAME>. Right. So you’re right—in the SEP, there’s what I would characterize as a relatively modest increase in the unemployment rate from a historical perspective, given the expected decline in inflation. Now, why is that? So, really, that is what we generally expect because we see the current situation as outside of historical experience in a number of ways, and I’ll mention a couple of those. First—and you know these—but first, job openings are incredibly high relative to the number of people looking for work. It’s plausible, I’ll say, that job openings could come down significantly—and they need to—without as much of an increase in unemployment as has happened in earlier historical episodes. So that’s one thing. In addition, in this cycle, longer-run inflation expectations have generally been fairly well anchored, and, as I’ve said, there’s no basis for complacency there. But to the extent that continues to be the case, that should make it easier to restore price stability. And I guess the third thing I would point to that’s different this time is that part of this inflation is caused by this series of supply shocks that we’ve had, beginning with the pandemic, and, really, with the reopening of the economy, and more recently amplified and added to by Russia’s invasion of Ukraine—have all contributed to the sharp increase in inflation. So these are the kinds of events that are not really seen in prior business cycles, and, in principle, if those things start to get better—and we do see some evidence of the beginnings of that. It’s not much more than that, but it’s good to see that. For example, commodity prices look like they may have peaked for now; supply chain disruptions are beginning to resolve. Those developments, if sustained, could help ease the pressures on inflation. So let me just say, how much these factors will turn out to really matter in this sequence of events—it remains to be seen. We have always understood that restoring price stability while achieving a relatively modest decline—or, rather, increase—in unemployment and a soft landing would be very challenging. And we don’t know—no one knows whether this process will lead to a recession or, if so, how significant that recession would be. That’s going to depend on how quickly wage and price inflation pressures come down, whether expectations remain anchored, and whether, also, do we get more labor supply, which would help as well. In addition, the chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive or restrictive for longer. Nonetheless, we’re committed to getting inflation back down to 2 percent—because we think that a failure to restore price stability would mean far greater pain later on. <NAME>RACHEL SIEGEL</NAME>. Just to follow up on one small thing—are vacancies still at the top of your list in terms of understanding the labor market and how much room there is there? <NAME>CHAIR POWELL</NAME>. Yes, vacancies are still almost a 2-to-1 ratio to unemployed people. That and quits are really very good ways to look at how tight the labor market is and how different it is from other cycles, where, generally, the unemployment rate itself is the single best indicator. We think those things have, for quite a time now, really added value in terms of understanding where the labor market is. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. You said not too long ago, in describing the policy destination, there’s still a way to go. But I imagine you have to have some idea about how you’re thinking about your destination, whether it’s a stopping point or a pausing point. And so I was wondering if you could discuss how you are thinking about, as the data come in, where that destination is, how it’s moving up. If inflation doesn’t perform as you expect, do you want to have a policy rate that’s above the underlying inflation rate, for example, and do you have an estimate for where you think the underlying inflation rate might be in the economy right now? <NAME>CHAIR POWELL</NAME>. Well, so, again, we believe that we need to raise our policy stance overall to a level that is restrictive—and by that I mean, is meaningfully, putting meaningful downward pressure on inflation. That’s what we need to see in the stance of policy. We also know that there are long and variable lags, particularly as they relate to inflation. So it’s a challenging assessment. So, what do you look at? You look at broader financial conditions, as you know; you look at where rates are, real and nominal in some cases; you look at credit spreads; you look at financial conditions indexes. We also, I would think—and you see this in the—this is something we talked about today in the meeting and talk about in all of our meetings. And you see this, I think, in the Committee forecast. You want to be at a place where real rates are positive across the entire yield curve. And I think that would be the case if you look at the numbers that we’re writing down and think about—you measure those against some sort of forward-looking assessment of inflation, inflation expectations. I think you would see at that time—you’d see positive real rates across the yield curve, and that is also an important consideration. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Hi. Howard Schneider with Reuters. Thanks for the opportunity. I just want to be clear on the SEPs. You say it’s meeting by meeting, but it sure looks like we’re going 75–50–25. Is 75 next month the baseline? <NAME>CHAIR POWELL</NAME>. So we make one decision per meeting, and the decision we made today was to raise the federal funds rate by 75 [basis points]. You’re right that the median for the year-end suggests another 125 basis points in rate increases, but there’s also, there’s another fairly large group that saw a 100 basis points addition to where we are today. So that would be 25 basis points less. So we’re going to make that decision at the meeting. We didn’t make that decision today; we didn’t vote on that. I would say that we’re committed to getting to a restrictive level for the federal funds rate and getting there pretty quickly, and that’s what we’re thinking about. <NAME>HOWARD SCHNEIDER</NAME>. So, just as a follow-up to that, I’m wondering about the sort of risk-management considerations here, given there’s some discussion now of overdoing it. What’s the incentive to continue front-loading right now? Is it lack of progress on inflation seen in the CPI reports? Or is it a motivation to get as much done while the job market is still as strong as it is? <NAME>CHAIR POWELL</NAME>. So, what we’ve seen is, inflation has—our expectation has been that we would begin to see inflation come down, largely because of supply-side healing. By now we would have thought that we’d have seen some of that. We haven’t. We have seen some supply- side healing, but inflation has not really come down. If you look at core PCE inflation, which is a good measure of where inflation is running now, if you look at it on a 3-, 6-, and 12-month trailing annualized basis, you’ll see that inflation is at 4.8 percent, 4.5 percent, and 4.8 percent. So that’s a pretty good summary of where we are with inflation. And that’s not where we expected or wanted to be. So, what that tells us is that we need to continue, and we can—keep doing these, and we did today—do another large increase as we approach the level that we think we need to get to. And we’re still discovering what that level is. But people are writing that down in their SEP where they think policy needs to be. So that’s how we’re thinking about it. <NAME>MICHELLE SMITH</NAME>. Let’s go to Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. Chair Powell, how should we interpret the fact that core inflation is still not forecast in the SEP to be back to target in 2025, and yet the dot plot projects cuts as early as 2024? And does that mean there’s a level of inflation above the 2 percent target that the Fed is willing to tolerate? <NAME>CHAIR POWELL</NAME>. So I guess core is at 2.1 in 2025—in the median—and headline is at 2.0, so that’s pretty close. I mean, we write down our forecasts, and we figure out what the median is, and we publish it. So it’s not—I mean, I would say that if, actually, if the economy followed this path, this would be a pretty good outcome. But you’re right—it is a tenth higher than 2 percent. <NAME>COLBY SMITH</NAME>. Okay. Just as a quick follow-up: I mean, if the concern is that underlying inflation is becoming more entrenched, perhaps, each month, then why forgo the more aggressive 100 basis point increase today, and does that risk having to do more later on? <NAME>CHAIR POWELL</NAME>. Yeah. So we, as we said at the last press conference and in between that one and this one, we said that we would make our decision based on the overall data coming in. So, if you remember, we got a surprisingly low reading in July and then a surprisingly high reading for August. So I think you have to—you can’t really—you never want to overreact too much to any one data point. So if you look at them together—and, as I just mentioned, if you really look at this year’s inflation, 3-, 6-, and 12-month trailing, you see inflation is running too high. It’s running 4.5 percent or above; you don’t need to know much more than that. If that’s the one thing you know, you know that this Committee is committed to getting to a meaningfully restrictive stance of policy and staying there until we feel confident that inflation is coming down. That’s how we think about it. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to ask about the balance sheet. You all have left open the possibility that you might sell mortgage-backed securities, but we’ve seen significant slowing in the housing market. Mortgage rates have gone up significantly, and I’m just wondering whether conditions there might affect your plans for how quickly you have the runoff on the MBS side. <NAME>CHAIR POWELL</NAME>. So we, what we said, as you know, was that we would consider that once balance sheet runoff is well under way. I would say it’s not something we’re considering right now and not something I expect to be considering in the near term. It’s just, it’s something I think we will turn to, but that time, the time for turning to it, has not come and is not close. <NAME>VICTORIA GUIDA</NAME>. Will conditions in the housing market affect that decision? <NAME>CHAIR POWELL</NAME>. I think a number of things might affect that decision, really. The main thing is, we’re not considering that decision, and I don’t expect that we will any time soon. <NAME>MICHELLE SMITH</NAME>. Thank you. Neil. <NAME>NEIL IRWIN</NAME>. Thanks. Neil Irwin with Axios. A number of commentators have come to the view, including over at the World Bank, that simultaneous global tightening around the world is, creates a risk of a global recession that’s worse than is necessary to bring inflation down. How do you see that risk? How do you think of coordination with your fellow central bankers? And is there much risk of overdoing it on a global level? <NAME>CHAIR POWELL</NAME>. So we, actually, my colleagues and I, a number of my FOMC colleagues and I, just got back from one of our frequent trips to Basel, Switzerland, to meet with other senior central bank officials from around the world. We are in pretty regular contact, and we exchange, of course—we all serve a domestic mandate, domestic objectives—in our case, the dual mandate, maximum employment and price stability. But we regularly discuss what we’re seeing in terms of our own economy and international spillovers, and it’s a very ongoing, constant kind of a process. So we are very aware of what’s going on in other economies around the world and what that means for us, and vice versa. The forecasts that we put together, that our staff puts together, and that we put together on our own always take all of that—try to take all of that into account. I mean, I can’t say that we do it perfectly, but it’s not as if we don’t think about the policy decisions—monetary policy and otherwise—the economic developments that are taking place in major economies that can have an effect on the U.S. economy. That is very much baked into our own forecast and our own understanding of the U.S. economy, as best we can. It won’t be perfect. So I don’t see—it’s hard to talk about collaboration in a world where people have very different levels of interest rates. If you remember, there were coordinated cuts and raises and things like that at various times, but, really, we’re all, we’re in very different situations. But I will tell you, our contact is more or less ongoing, and it’s not coordination, but there’s a lot of information sharing. And we all, I think, are informed by what other important economies— economies that are important to the United States—are doing. <NAME>MICHELLE SMITH</NAME>. Craig. <NAME>CRAIG TORRES</NAME>. Craig Torres from Bloomberg. Chair Powell, you talked about some ways the higher interest rates are affecting the economy, but we’ve also seen a resilient labor market with durable consumption, strong corporate profits, and I’m wondering what your story is on the resilience of the economy. After all, you and your colleagues said, “Well, we started tightening in March when we were talking about interest rates in the future.” And, indeed, Treasury rates moved up, so we should have had a lot of tightening taking effect. Why is the economy, in your view, so resilient, and does it mean that we might need a possibly higher terminal rate? <NAME>CHAIR POWELL</NAME>. You’re right, of course—the labor market, in particular, has been very strong. But there are—the sectors of the economy that are most interest rate sensitive are certainly showing the effects of our tightening, and, of course, the obvious example is housing, where you see declining activity of all different kinds and house price increases moving down. So we’re having an effect on interest-sensitive spending. I think, through exchange rates, we’re having an effect on exports and imports. I think—so all of that’s happening, but you’re right, and we’ve said this: This is a strong, robust economy. People have savings on their balance sheet from the period when they couldn’t spend and where they were getting government transfers. There’s still very significant savings out there, although not as much at the lower end of the income spectrum—but still, some savings out there to support growth. The states are very flush with cash, so there’s good reason to think that this will continue to be a reasonably strong economy. Now, the data sort of are showing that growth is going to be below trend this year. We think of trend as being about 1.8 percent, or in that range. We’re forecasting growth well below that, and most forecasters are. But you’re right—there’s certainly a possibility that growth can be stronger than that. And that’s a good thing, because that means the economy will be more resistant to a significant downturn. But, of course, we are focused on the thing I started with, which is getting inflation back down to 2 percent. We can’t fail to do that. I mean, if we were to fail to do that, that would be the thing that would be most painful for the people that we serve. So for now, that has to be our overarching focus, and you see that, I think, in the SEP, in the levels of rates that we’ll be moving to reasonably quickly, assuming things turn out roughly in line with the SEP. So that’s how we think about it. <NAME>MICHELLE SMITH</NAME>. Mike. Thank you. <NAME>MICHAEL MCKEE</NAME>. Thank you, Mr. Chairman. In a world of euphemisms that we live in here, with “below-trend growth” and “modest increase in unemployment,” I’m wondering if I can ask you a couple of direct questions for the American people. Do the odds now favor, given where you are and where you’re going with interest rates, favor a recession? Four point four percent unemployment is about 1.3 million jobs. Is that acceptable job loss? And then, given that the data you look at is backward looking, and the lags in your policy are forward looking, and you don’t know what they are, how will you know, or will you know, if you’ve gone too far? <NAME>CHAIR POWELL</NAME>. So I don’t know what the odds are. I think that there’s a very high likelihood that we’ll have a period of what I’ve mentioned is below-trend growth, by which I mean much lower growth, and we’re seeing that now. So the median forecast, I think, this year among my colleagues and me was 0.2 percent growth. So that’s very slow growth. And then below trend next year. I think the median was 1.2, also well below. So that’s a slower, that’s a very slow level of growth, and it could give rise to increases in unemployment. But I think that’s, so that is something that we think we need to have, and we think we need to have softer labor market conditions as well. We’re never going to say that there are too many people working, but the real point is this: Inflation—what we hear from people when we meet with them is that they really are suffering from inflation. And if we want to set ourselves up, really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn’t. So, what we need to do is get rates up to the point where we’re putting meaningful downward pressure on inflation, and that’s what we’re doing. And we certainly don’t hope, we certainly haven’t given up the idea that we can have a relatively modest increase in unemployment. Nonetheless, we need to complete this task. <NAME>MICHAEL MCKEE</NAME>. But how will you know, or will you know, if you’ve gone too far? <NAME>CHAIR POWELL</NAME>. It’s hard to hypothetically deal with that question. I mean, again, our really tight focus now continues to be ongoing rate increases to get the policy rate up where it needs to be. And, as I said, you can look at this SEP as today’s estimate of where we think those rates would be. Of course, they will evolve over time. <NAME>MICHELLE SMITH</NAME>. Chris Rugaber. <NAME>CHRIS RUGABER</NAME>. Thanks. Chris Rugaber, Associated Press. I wanted to follow up with what you just mentioned about the labor market. You’ve said several times that to have the labor market we want, we need price stability, and you suggested maybe there isn’t a tradeoff in the long run. But in the short run, there is a lot of concern, as people have been expressing here, about higher unemployment as a result of these rate hikes or as a result of rate hikes. So can you explain, though, what about high inflation now threatens the job market? I mean, you seem to suggest inflation, high inflation, will eventually lead to a weaker job market. So can you spell that out a little more for the general public on how that would work? <NAME>CHAIR POWELL</NAME>. So, for starters, people are seeing their wage increases eaten up by inflation. So if your family is one where you spend most of your paycheck, every paycheck cycle, on gas, food, transportation, clothing, basics of life, and prices go up the way they’ve been going up, you’re in trouble right away. You don’t have a cushion, and this is very painful for people at the lower end of the income and wealth spectrum. So that’s what we’re hearing from people is, you know, very much—that inflation is really hurting. So how do we get rid of inflation? And, as I mentioned, it would be nice if there were a way to just wish it away, but there isn’t. We have to get supply and demand back into alignment, and the way we do that is by slowing the economy. Hopefully, we do that by slowing the economy, and we see some softening in labor market conditions, and we see a big contribution from supply-side improvements, and things like that. But none of that is guaranteed. In any case, we, our job is to deliver price stability, and I think—you can think of price stability as an asset that just delivers large benefits to society over a long period of time. We really saw that for a long time. The United States had 2 percent inflation, didn’t move around much, and that was enormously beneficial to the public that we serve. And we have to get back to that and keep it for another long period of time. To pull back from the task of doing that is, you’re just postponing—the record shows that if you postpone that, the delay is only likely to lead to more pain. So I think we’re moving to do what we need to do and do our jobs, and that’s what you see us doing. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you for taking the question, Mr. Chairman. Edward Lawrence for Fox Business. So you had said that Americans and businesses need to feel some economic pain as we go forward. How long from here should Americans be prepared for that economic pain? <NAME>CHAIR POWELL</NAME>. How long? I mean, it really depends on how long it takes for wages and, more than that, prices to come down for inflation to come down. And so what you see in our projections today is that inflation moves down significantly over the course of next year and then more the next year after that. And I think once you’re on that path, that’s a good thing. And things will start to feel better to people—they’ll feel lower inflation, they’ll feel that the economy is improving. And also, if our projections are close to right, you’ll see that the costs in unemployment are, they’re meaningful, and they’re certainly very meaningful to the people who lose their jobs. And we talk about that in our meetings quite a lot. But, at the same time, we’d be setting the economy up for another long period—this era has been noted for very long expansions. We’ve had three of the four longest in measured history since we got inflation under control. And that’s not an accident. So when inflation is low and stable, you can have these 9, 10, 11—10-year, anyway, expansions, and you can see what we saw in 2018, ’19, and ’20, which was very low unemployment, the biggest wage gains going to people at the low end of the spectrum, the smallest racial gaps that we’ve seen since we started keeping track of that. So we want to get back to that. But, to get there, we’re going to have to get supply and demand back in alignment, and that’s going to take tight monetary policy for a period of time. <NAME>EDWARD LAWRENCE</NAME>. As a follow-up, what is that economic pain in your mind? Is it job losses? Is it higher interest rates on credit cards? What is that economic pain? <NAME>CHAIR POWELL</NAME>. So it’s all of those things. Higher interest rates, slower growth, and a softening labor market are all painful for the public that we serve. But they’re not as painful as failing to restore price stability and then having to come back and do it down the road again and doing it at a time when, actually, now people have really come to expect high inflation. If the concept of high inflation becomes entrenched in people’s economic thinking about their decisions, then sort of getting back to price stability—the cost of getting back to price stability just rises, and so we want to avoid that. We want to act aggressively now and get this job done and keep at it until it’s done. <NAME>MICHELLE SMITH</NAME>. Nicole, from CNN. <NAME>NICOLE GOODKIND</NAME>. Thank you, Chairman Powell. Nicole Goodkind, CNN Business. Existing home sales have fallen for seven months straight, mortgage rates are at their highest level since 2008, yet mortgage demand increased this week, and housing prices are still elevated. Now, at the end of your June press conference, you mentioned plans to reset the housing market. I was wondering if you could elaborate on what you mean when you say “reset” and what you think it will take to actually get there. <NAME>CHAIR POWELL</NAME>. So when I say “reset,” I’m not looking at a particular, specific set of data or anything. What I’m really saying is that we’ve had a time of a red-hot housing market all over the country, where, famously, houses were selling to the first buyer at 10 percent above the ask, before even seeing the house. That kind of thing. So there was a big imbalance between supply and demand. Housing prices were going up at an unsustainably fast level. So the deceleration in housing prices that we’re seeing should help bring sort of prices more closely in line with rents and other housing market fundamentals, and that’s a good thing. For the longer term, what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level—at a reasonable pace—and that people can afford houses again. And I think we—so we probably, in the housing market, have to go through a correction to get back to that place. There’s also, there are also longer-run issues, though, with the housing market. As you know, we’re—it’s difficult to find lots now close enough to cities and things like that, so builders are having a hard time getting zoning and lots and workers and materials and things like that. But from a sort of business cycle standpoint, this difficult correction should put the housing market back into better balance. <NAME>NICOLE GOODKIND</NAME>. Just to follow, though, shelter made up such a large part of this hot CPI report that we saw. Do you think that there is a lag and that we will see that come down in the coming months? Or do you think that there’s still this imbalance that needs to be addressed? <NAME>CHAIR POWELL</NAME>. I think that shelter inflation is going to remain high for some time. We’re looking for it to come down, but it’s not exactly clear when that will happen. So it may take some time, so I think, hope for the best, plan for the worst. So I think, on shelter inflation, you’ve just got to assume that it’s going to remain pretty high for a while. <NAME>MICHELLE SMITH</NAME>. Okay, we’ll go to Jean for the last question. <NAME>JEAN YUNG</NAME>. Hi. Jean Yung with Market News. You’ve talked about the need to get real rates into positive territory, and you said earlier that policy is just moving into that territory now. So I’m curious, how restrictive is rates at 4.6 percent expected—is that expected to be next year? How restrictive? <NAME>CHAIR POWELL</NAME>. So I think if you look, when we get to—if we—let’s assume we do get to that level, which I think is likely. What you’re going to do is, you’re going to adjust that for some forward-looking measure of inflation. And that could be—you pick your measure. It could be—there are all kinds of different things you could pick and you get—but what you’ll get is a positive number. In all cases, you will get forward inflation expectations in the short term, I think, that are going to be, assuming that we’re doing our jobs appropriately, that will be significant. So you’ll have a positive [real] federal funds rate at that point, which could be 1 percent or so, but—I mean, I don’t know exactly what it would be. But it would be significantly positive when we get to that level. And let me say, we’ve written down what we think is a plausible path for the federal funds rate. The path that we actually execute will be enough. It will be enough to restore price stability. So this is something that, as you can see, they’ve moved up, and we’re going to continue to watch incoming data and the evolving outlook and ask ourselves whether our policy is in the right place as we go. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I are strongly committed to bringing inflation back down to our 2 percent goal. We have both the tools that we need and the resolve it will take to restore price stability on behalf of American families and businesses. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. Today, the FOMC raised our policy interest rate by 75 basis points. And we continue to anticipate that ongoing increases will be appropriate. We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2 percent. In addition, we are continuing the process of significantly reducing the size of our balance sheet. Restoring price stability will likely require maintaining a restrictive stance of policy for some time. I will have more to say about today’s monetary policy actions after briefly reviewing economic developments. The U.S. economy has slowed significantly from last year’s rapid pace. Real GDP rose at a pace of 2.6 percent last quarter but is unchanged so far this year. Recent indicators point to modest growth of spending and production this quarter. Growth in consumer spending has slowed from last year’s rapid pace, in part reflecting lower real disposable income and tighter financial conditions. Activity in the housing sector has weakened significantly, largely reflecting higher mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment. Despite the slowdown in growth, the labor market remains extremely tight, with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated. Job gains have been robust, with employment rising by an average of 289,000 jobs per month over August and September. Although job vacancies have moved below their highs and the pace of job gains has slowed from earlier in the year, the labor market continues to be out of balance, with demand substantially exceeding the supply of available workers. The labor force participation rate is little changed since the beginning of the year. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in September, total PCE prices rose 6.2 percent; excluding the volatile food and energy categories, core PCE prices rose 5.1 percent. And the recent inflation data again have come in higher than expected. Price pressures remain evident across a broad range of goods and services. Russia’s war against Ukraine has boosted prices for energy and food and has created additional upward pressure on inflation. 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. But that is not grounds for complacency; the longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. 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 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 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by 75 basis points. And we are continuing the process of significantly reducing the size of our balance sheet, which plays an important role in firming the stance of monetary policy. With today’s action, we have raised interest rates by 3¾ percentage points this year. We anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. Financial conditions have tightened significantly in response to our policy actions, and we are seeing the effects on demand in the most interest-rate-sensitive sectors of the economy, such as housing. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. That’s why we say in our statement that in determining the pace of future increases in the target range, we will take into account the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation. At some point—as I’ve said in the last two press conferences—it will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2 percent goal. There is significant uncertainty around that level of interest rates. Even so, we still have some ways to go, and incoming data since our last meeting suggest that the ultimate level of interest rates will be higher than previously expected. Our decisions will depend on the totality of incoming data and their implications for the outlook for economic activity and inflation. We will continue to make our decisions meeting by meeting and communicate our thinking as clearly as possible. We are taking forceful steps to moderate demand so that it comes into better alignment with supply. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored. Reducing inflation is likely to require a sustained 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 in the longer run. The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done. 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, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. On the need to slow the pace of rate increases at some point: Is a downshift contingent on a string of better inflation data specifically between now and, let’s say, the December meeting? Or is that something that the Fed could potentially proceed with, independent of that data, given the lagged effects that you mentioned? <NAME>CHAIR POWELL</NAME>. So a couple things on that. We do need to see inflation coming down decisively, and good evidence of that would be a series of down monthly readings. Of course, that’s what we’d all love to see, but that’s—I’ve never thought of that as the appropriate test for slowing the pace of increases or for identifying the appropriately restrictive level that we’re aiming for. We need to bring our policy stance down to a level that’s sufficiently restrictive to bring inflation down to our 2 percent objective over the medium term. How will we know that we’ve reached that level? Well, we’ll take into account the full range of analysis and data that bear on that question, guided by our assessment of how much financial conditions have tightened, the effects that that tightening is actually having on the real economy and on inflation, taking into consideration lags, as I mentioned. We will be looking at real rates, for example, all across the yield curve and all other financial conditions as we make that assessment. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Hi, Howard Schneider with Reuters. I’m sure there’s going to be tons of confusion out there about whether this means you’re going to slow in December or not. Would you say that the bias right now is not for another 75 basis point increase? <NAME>CHAIR POWELL</NAME>. So, what I want to do is put that question of pace in the context of our broader tightening program, if I may, and talk about the statement language along the way. So I think you can think about our tightening program as really addressing three questions, the first of which was, and has been, how fast to go. The second is how high to raise our policy rate. And the third will be, eventually, how long to remain at a restrictive level. So on the first question—how fast to tighten policy—it’s been very important that we move expeditiously, and we have clearly done so. We’ve moved 3¾ percent since March, admittedly from a base of zero. It’s a historically fast pace, and that’s certainly appropriate given the persistence and strength in inflation and the low level from which we started. So now we come to the second question, which is how high to raise our policy rate. And we’re saying that we’d raise that rate to a level that’s sufficiently restrictive to bring inflation to our 2 percent target over time, and we put that into our postmeeting statement because that really does become the important question, we think now, is how far to go. And I’ll talk more about that. We think there’s some ground to cover before we meet that test, and that’s why we say that ongoing rate increases will be appropriate. And, as I mentioned, incoming data between the meetings, both a strong labor market report but particularly the CPI report, do suggest to me that we may ultimately move to higher levels than we thought at the time of the September meeting. That level is very uncertain, though, and I would say we’re going to find it over time. Of course, with the lags between policy and economic activity, there’s a lot of uncertainty, so we note that in determining the pace of future increases, we’ll take into account the cumulative tightening of monetary policy as well as the lags with which monetary policy affects economic activity and inflation. So I would say, as we come closer to that level, move more into restrictive territory, the question of speed becomes less important than the second and third questions. And that’s why I’ve said at the last two press conferences that at some point, it will become appropriate to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made. It is likely we’ll have a discussion about this at the next meeting, a discussion. To be clear, let me say again [that] the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restricted, which really will be our principal focus. <NAME>HOWARD SCHNEIDER</NAME>. If I could follow up on that, to what degree was there an importance or weight given to a need to signal this possibility now, given all the concerns, really around the globe, about Fed policy sort of driving ahead and everybody else dealing with their own stress as a result? <NAME>CHAIR POWELL</NAME>. Well, I think I’m pleased that we have moved as fast as we have. I don’t think we’ve overtightened. I think there’s—very difficult to make a case that our current level is too tight, given that inflation still runs well above the federal funds rate. So I think that at this meeting, as in the last two meetings, as I’ve mentioned, I’ve said that we—that there would come a point, and this was a meeting at which we had a discussion about what that might mean. And we did discuss this, and, as I mentioned, we’ll discuss it again in December. But there’s no—I don’t have any sense that we’ve overtightened or moved too fast. I think it’s been good and a successful program that we’ve gotten this far this fast. Remember, though, that we still think there’s a need for ongoing rate increases, and we have some ground left to cover here, and cover it we will. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, core PCE inflation on a 3- or 6-month annualized basis and on a 12-month basis has been running in the high 4s, close to 5 percent. Is there any reason to think you won’t have to raise rates at least above that level to be confident that you are imparting enough restraint to bring inflation down? <NAME>CHAIR POWELL</NAME>. So this is the question of, does the policy rate need to get above the inflation rate? And I would say, there are a range of views on it. That’s the classic “Taylor principle” view. But I would think you’d look more at a forward, a forward-looking measure of inflation to look at that. But I think the answer is, we’ll want to get the policy rate to a level where it is, where the real interest rate is positive. We will want to do that. I do not think of it as the single and only touchstone, though. I think you put some weight on that; you also put some weight on rates across the curve. Very few people borrow at the short end—at the federal funds rate, for example. So households and businesses, if they’re [borrowing]—[there are] very meaningfully positive interest rates all across the curve for them, credit spreads are larger, so borrowing rates are significantly higher, and I think financial conditions have tightened quite a bit. So I would look at that as an important feature. I’d put some weight on it, but I wouldn’t say it’s something that is the single, dominant thing to look at. <NAME>NICK TIMIRAOS</NAME>. If I could follow up: What is your best assessment, or the staff’s best assessment right now, of the current rate of underlying inflation? <NAME>CHAIR POWELL</NAME>. I don’t have a specific number for you there. There are many, many models that look at that. And, I mean, one way to look at it is that it’s a pretty stationary object and that when inflation runs—above that level, for sure—substantially above for some time, you’ll see it move up, but the movement will be fairly gradual. So I think that’s what the principal models would tend to say. But I wouldn’t want to land on any one assessment. There are many different—as you know, many different people publish an assessment of underlying inflation. <NAME>NICK TIMIRAOS</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thank you for taking our questions. Jeanna Smialek with the New York Times. I wondered, do you see any evidence at this stage that inflation is, or is at risk of becoming, entrenched? <NAME>CHAIR POWELL</NAME>. Is inflation becoming entrenched? So I guess I would start by pointing to expectations. So if we saw longer-term expectations moving up, that would be very troubling. And they were moving up a little bit at the middle part of this year, and they’ve moved now back down. That’s one piece of data. Shorter-term inflation expectations moved up between the last meeting and this meeting, and we don’t think those are as indicative, but they may be important in the wage-setting process. There’s a school of thought that believes that. So that’s very concerning. I guess the other thing I would say is that the longer we have—we’re now 18 months into this episode of high inflation, and we don’t have a clearly identified, scientific way of understanding at what point inflation becomes entrenched. And so the thing we need to do from a risk-management standpoint is to use our tools forcefully but thoughtfully and get inflation under control—get it down to 2 percent—get it behind us. That’s what we really need to do and what we’re strongly committed to doing. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Thank you for taking our questions. Rachel Siegel from the Washington Post. The statement points to lag times. I’m wondering if you can walk us through how you judge those lag effects, what that timeline looks like over the coming months or even a year, and where you would expect it to show up in different parts of the economy. <NAME>CHAIR POWELL</NAME>. So the way I would think about that is, it’s commonly, for a long time, thought that monetary policy works with “long and variable lags,” and that it works first on financial conditions and then on economic activity and then perhaps later than that even on inflation. So that’s been the thinking for a long time. There was an old literature that made those lags out to be fairly long. There’s newer literature that says that they’re shorter. The truth is, we don’t have a lot of data [consisting] of inflation of [rates] this high in what is, now, the modern economy. One big difference now is that it used to be that you would raise the federal funds rate, financial conditions would react, and then that would affect economic activity and inflation. Now financial conditions react well before in expectation of monetary policy [actions]. That’s the way it has moved for a quarter of a century—in the direction of financial conditions, then monetary policy—because the markets are thinking, what is the central bank going to do? And there are plenty of economists that also think that once financial conditions change, that the effects on the economy are actually faster than they would have been before. We don’t know that. I guess the thing that I would say is: It’s highly uncertain—highly uncertain. And so from a risk-management standpoint—but we do need, it would be irresponsible not to, to ignore them. But you want to consider them but not take them literally. So I think it’s a very difficult place to be, but I would tend to be—want to be in the middle looking carefully at what’s actually happening with the economy and trying to make good decisions from a risk-management standpoint, remembering, of course, that if we were to overtighten, we could then use our tools strongly to support the economy, whereas if we don’t get inflation under control because we don’t tighten enough, now we’re in a situation where inflation will become entrenched and the costs, the employment costs in particular, will be much higher potentially. So from a risk- management standpoint, we want to be sure that we don’t make the mistake of either failing to tighten enough or loosening policy too soon. <NAME>RACHEL SIEGEL</NAME>. And if I could follow up: Should we interpret the addition to the statement to mean that more weight is put into those lag effects than they would have been after previous rate hikes? <NAME>CHAIR POWELL</NAME>. I think as we move now into restrictive territory, as we make these ongoing rate hikes and policy becomes more restrictive, it’ll be appropriate now to be thinking more about lags. Of course, we think about lags—the lags are just sort of a basic part of monetary policy. But we will be thinking about them, but we won’t be—I think we’ll be considering them but because it’s appropriate to do so. Let me say this: It is very premature to be thinking about pausing. So people, when they hear lags, they think about a pause. It’s very premature, in my view, to think about or be talking about pausing our rate hike. We have a ways to go. Our policy—we need ongoing rate hikes to get to that level of sufficiently restrictive. And we don’t—of course, we don’t really know exactly where that is. We have a sense, and we’ll write down in September—sorry, in the December meeting, a new Summary of Economic Projections, which updates that. But I would expect us to continue to update it based on what we’re seeing with incoming data. <NAME>MICHELLE SMITH</NAME>. Neil Irwin. <NAME>NEIL IRWIN</NAME>. Thanks, Chair Powell. Neil Irwin, Axios. As you look around the economy, the clearest impact of your tightening so far has been on housing, maybe some venture-funded tech companies. It’s been relatively narrow in terms of the labor market, consumer demand; a lot of sectors, you don’t see a ton of effect. Is the pathway and channels through which monetary policy works changing? Is it narrower than it used to be? And on housing in particular, are you at all worried that you’re cramping housing supply in ways that might cause problems down the road? <NAME>CHAIR POWELL</NAME>. I don’t know that the channels through which policy works have changed that much. I would say a big channel is the labor market, and the labor market is very, very strong. Very strong. And households, of course, have strong balance sheets. So we go into this with a strong labor market and excess demand in the labor market, as you can see through many different things, and also with households who have strong spending power built up. So it may take time, it may take resolve, it may take patience. It’s likely to, to get inflation down. It may—I think you see, from our forecasts and others, that it will take some time for inflation to come down. It’ll take time, we think. So, sorry, was I getting to your question there? <NAME>NEIL IRWIN</NAME>. Housing. <NAME>CHAIR POWELL</NAME>. Oh, housing—the housing part of it. Yes, so we look at housing—of course, housing is significantly affected by these higher rates, which are really back where they were before the Global Financial Crisis—they’re not historically high, but they’re much higher than they’ve been. And you’re seeing housing activity decline, and you’re seeing housing prices growing at a faster rate and, in some parts of the country, declining. You know, I would say housing was—the housing market was very overheated for the couple of years after the pandemic as demand increased and rates were low. We all know the stories of how overheated the housing market was, prices going up. Many, many bidders and no conditions, that kind of thing. So the housing market needs to get back into a balance between supply and demand. We’re well aware of what’s going on there. From a financial stability standpoint, we didn’t see in this cycle the kinds of poor credit underwriting that we saw before the Global Financial Crisis. Housing credit was very carefully—much more carefully managed by the lenders. So it’s a very different situation and doesn’t present potential financial—doesn’t appear to present financial stability issues. But, no, we do understand that that’s really where a very big effect of our policy is. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Victoria Guida with Politico. I wanted to ask about the labor market. You mentioned early on, again, that job openings are very high compared to available workers, and I’m just curious to what extent you do and don’t draw signal from that. So, for example, if wage growth is slowing and if maybe the unemployment rate starts to tick up, will that make you sort of decrease your focus on job openings? What do you see—are wages what’s really important? How are you thinking about the labor market as it relates to inflation? <NAME>CHAIR POWELL</NAME>. So we talk a lot about vacancies in the—vacancy-to-unemployed rate, but it’s just one, it’s just another data series. It’s been unusually important in this cycle because it’s been so out of line. But so has quits. So have wages. So we look at a very wide range of data on the unemployment—on the labor market. So I’d start with unemployment, which is typically the single statistic you would look to, is at a 50-year low, 3½ percent. We’re getting really nothing in labor supply now. We had, I think, very small increase this year, which we had really thought, we thought we would get that back. Most analysts thought we would get some labor supply coming in. You mentioned wages, so I guess I would characterize that as sort of a mixed picture. It’s true, with average hourly earnings, you see—so I would call it a flattening out at a level that’s well above the level that would be consistent over time with 2 percent inflation, assuming a reasonable productivity. With the ECI reading this week, again, a mixed picture. The headline number was a disappointment. Let’s just say it was high. It didn’t show a decline. There’s some rays of light inside that if you look at private-sector workers—that did come down, that compensation did come down. Overall, though, the broader picture is of an overheated labor market where demand substantially exceeds supply. Job creation still exceeds sort of the level that would hold the market where it is. So that’s the picture. Do we see—we keep looking for signs that sort of the beginning of a gradual softening is happening. And maybe that’s there, but it’s not obvious to me, because wages aren’t coming down—they’re just moving sideways at an elevated level, both ECI and average hourly earnings. We want to see—we would love to see vacancies coming down, quits coming down. They are coming down. Vacancies are below their all-time high but not by as much as we thought, because—and the data series is volatile, we never take any one reading, we always look at two or three. So it’s a mixed picture. I don’t see the case for real softening just yet. But we look at, I guess as I just showed you, we look at a very broad range of data on the labor market. <NAME>VICTORIA GUIDA</NAME>. So do you see wages as being a significant driver of inflation? <NAME>CHAIR POWELL</NAME>. I think wages have an effect on inflation and inflation has an effect on wages. I think that’s always been the case. There’s always—going back and forth, the question is, is that really elevated right now? I don’t think so. I don’t think wages are the principal story of why prices are going up. I don’t think that. I also don’t think that we see a wage–price spiral, but, again, it’s not something you can—once you see it, you’re in trouble. So we don’t want to see it. We want wages to go up—we just want them to go up at a level that’s sustainable and consistent with 2 percent inflation. And we think we can—we do think that, given the data that we have, that this labor market can soften without having to soften as much as history would indicate through the unemployment channel. It can soften through job openings declining. We think there’s room for that. But we won’t know that—that’ll be, that’ll be discovered empirically. <NAME>KAYLA TAUSCHE</NAME>. Thank you so much. Kayla Tausche from CNBC. Earlier last month, the United Nations warned that there could be a global recession if central banks didn’t change course. The new U.K. prime minister warned of a profound economic crisis there. And I’m wondering how the Fed is weighing international developments in light of a very strong economy here in the U.S. that would seem to be bucking those trends. <NAME>CHAIR POWELL</NAME>. So, of course, we, we keep close tabs on economic developments and also geopolitical developments that are relevant to the economy abroad. We’re in very frequent contact with our foreign counterparts both through the IMF meetings and the regular meetings with central banks that we have, and I have one this weekend with many, many central bankers. So we’re in touch with all of that. So I guess what—it’s clearly a time, a difficult time in the global economy. We’re seeing very high inflation in Europe, significantly because of high energy prices related to the war in Ukraine. And we’re seeing China’s having issues with the zero-COVID policy and much slower growth than we’re used to seeing. So we’re seeing—we see those difficulties. The strong dollar is a challenge for some countries. But we haven’t—we take all of that into account in our models. We think about the spillovers and that sort of thing. Here in the United States, we have a strong economy, and we have an economy where inflation is running at 5 percent. Core PCE inflation—which is a really good indicator of what’s going on for us, the way we see it—is running at 5.1 percent on a 12-month basis and sort of similar to that on a 3-, 6-, and 9-month basis. So we know that we need to use our tools to get inflation under control. The world’s not going to be better off if we fail to do that. That’s a task we need to do. Price stability in the United States is a good thing for the global economy over a long period of time. Price stability is the kind of thing that pays dividends for our economy—for decades, hopefully—even though it may be difficult to get it back. Getting it back is something that gives—that provides value to the people we serve for the long run. <NAME>KAYLA TAUSCHE</NAME>. If I could just follow up up on that—thank you. The Fed has acknowledged in the past that the tools that you have don’t affect things like energy and food prices that stem from some of those conflicts overseas, and they’re some of the biggest pain points for consumers. So as you pursue the current path that you’ve outlined, is there a risk that some of those prices simply don’t come down? <NAME>CHAIR POWELL</NAME>. So we don’t directly affect, for the most part, food and energy prices, but the demand channel does affect them just at the margin. The thing about the United States is that we also have strong—in many other jurisdictions, the principal problem really is energy. In the United States, we also have a demand issue. We’ve got an imbalance between demand and supply, which you see in many parts of the economy. So our tools are well suited to work on that problem, and that’s what we’re doing. You’re right, though. We don’t—the price of oil is set globally, and it’s not something we can affect. I think by the actions that we take, though, we help keep longer-term inflation expectations anchored and keep the public believing in 2 percent inflation by the things that we do, even in times when energy is part of the story of why inflation is high. <NAME>MICHELLE SMITH</NAME>. Jonnelle. <NAME>JONNELLE MARTE</NAME>. Hi, Chair Powell. Jonnelle Marte with Bloomberg. So the Fed is facing two more ethics-related incidents with the revision of the financial statements from President Bostic and President Bullard speaking at a closed event. So some senators, like Elizabeth Warren, are saying that this is a sign of greater ethics problems at the Fed. Could you talk about what this does to the public’s trust in the bank and what the Fed is doing to prevent this kind of behavior from becoming common? <NAME>CHAIR POWELL</NAME>. Sure. So you’re right—the public’s trust is really the Fed’s and any central bank’s most important asset, and any time one of us, one of the policymakers, violates or falls short of those rules, we do risk undermining that trust, and we take that very seriously. We do. So at the beginning of our meeting yesterday, actually, we had a Committee discussion of the full Committee on the importance of holding ourselves individually and collectively accountable for knowing and following the high standard that’s set out in our existing rules with respect to both personal investment activities and external communications. And we’ve taken a number of steps, and I would just say we do understand how important those issues are. I would say that our new investment program that we have is up now and running, and, actually, it was through that that the problems with President Bostic’s disclosures were discovered, when he filed his new disclosure. We now have a central group here at the Board of Governors that looks into disclosures and follows them and approves people’s disclosures and also all of their trades. Any trade anyone has to make is covered, has to be approved, preapproved, and there’s a lag—it has to be preapproved 45 days before it happens, so there’s no ability to game markets. So it’s a really good system. It worked here. And we—I think we all said to each other today— yesterday, actually, yesterday morning, we recommitted to each other and to this institution to hold ourselves to the highest standards and avoid these problems. <NAME>JONNELLE MARTE</NAME>. Do you have an update on the investigations that are pending? <NAME>CHAIR POWELL</NAME>. I don’t. So, as you know, I referred the matter concerning President Bostic to the inspector general, and once that happens, I don’t discuss it with the inspector general or with anybody. It’s just—the inspector general has, he has the ability to do investigations. We don’t really have that. So that’s what he’s doing. <NAME>MICHELLE SMITH</NAME>. Michael. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Television and Radio. Earlier this year, you touted the three-month bill yield out to 18 months as the yield curve with 100 percent explanatory power. And you said, quote, “If it’s inverted, that means the Fed’s going to cut, which means the economy is weak.” That curve is only 2 basis points away from inversion now, so I’m wondering why you are so confident that you have not overtightened, particularly given that rates work with a lag. <NAME>CHAIR POWELL</NAME>. Well, so we do monitor the near-term forward spread—you’re right. And it’s—that’s been our preferred measure. We think, just empirically, it dominates the ones that people tend to look at, which is 2s, 10s, and things like that. So it’s not inverted. And, also, you have to look at why things—why the rate curve is doing what it’s doing. It can be doing that because it affects—it expects cuts or because it expects inflation to come down. In this case, if you’re in a situation where the markets are pricing in significant declines in inflation, that’s going to affect the forward curve. So, yes, we monitor it. You’re right. And that’s what I would say. <NAME>MICHAEL MCKEE</NAME>. If I could follow up: You also said several meetings ago that the risk of doing too little outweighed the risk of doing too much. Is what you’re trying to tell us today is that that risk assessment has changed a little bit? <NAME>CHAIR POWELL</NAME>. Well, what’s happened is, time has passed, and we’ve raised interest rates by 375 basis points. I would not—I would not change a word in that statement, though. I think until we get inflation down, you’ll be hearing that from me. Again, if we overtighten—and we don’t want to, we want to get this exactly right—but if we overtighten, then we have the ability with our tools, which are powerful, to, as we showed at the beginning of the pandemic episode, we can support economic activity strongly if that happens, if that’s necessary. On the other hand, if you make the mistake in the other direction and you let this drag on, then it’s a year or two down the road, and you’re realizing, inflation behaving the way it can, you’re realizing you didn’t actually get it, you have to go back in. By then, the risk, really, is that it has become entrenched in people’s thinking. And the record is that the employment costs—the cost to the people that we don’t want to hurt—they go up with the passage of time. That’s really how I look at it. So that isn’t going to change. What has changed, though—you’re right—is, we’re farther along now. And I think as we’re farther along, we’re now focused on that. What’s the place, what’s the level we need to get to rates? And I don’t know what we’ll do when we get there, by the way. It doesn’t—we’ll have to see. There’s been no decision or discussion around exactly what steps we would take at that point. But the first thing is to find your way there. <NAME>MICHELLE SMITH</NAME>. Chris Rugaber. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. Chris Rugaber at Associated Press. Just to go back to housing for a minute: You mentioned the impact that rate increases have had on housing—home sales are down 25 percent in the past year, and so forth—but none of this is really showing up in, as you know, in the government’s inflation measures. And as we go forward, private real-time data is clearly showing these hits to housing. Are you going to need to put a greater weight on that in order to ascertain things like whether there’s overtightening going on, or will you still focus as much on the more lagging government indicators? <NAME>CHAIR POWELL</NAME>. So this is an interesting subject. So I start by saying, I guess, that the measure that’s in the CPI and the PCE, it captures rents for all tenants, not just new leases. And that makes sense, actually, because for that reason—conceptually, that is—that’s sort of the right target for monetary policy. And the same thing is true for owners’ equivalent rent, which comes off of—it’s a reweighting of tenant rents. The private measures are, of course, good at picking up, at the margin, the new leases, and they tell you a couple things. One thing is, I think right now, if you look at the pattern of that series of the new leases, it’s very pro-cyclical, so rents went up much more than the CPI and PCE rents did. And now they’re coming down faster. But what you’re—the implication is that there are still, as people, as non-new leases roll over and expire, right, they’re still in the pipeline, there’s still some significant rate increases coming, okay? But at some point, once you get through that, the new leases are going to tell you—what they’re telling you is, there will come a point at which rent inflation will start to come down. But that point is well out from where we are now. So we’re well aware of that, of course, and we look at it. But I would say that in terms of—the right way to think about inflation, really, is to look at the measure that we do look at, but considering that we also know that at some point, you’ll see rents coming down. <NAME>CHRISTOPHER RUGABER</NAME>. Great, and just a quick follow. It looks like stock and bond markets are reacting positively to your announcement so far. Is that something you wanted to see? Is that a problem or what—how that might affect your future policy to see this positive reaction? <NAME>CHAIR POWELL</NAME>. We’re not targeting any one or two particular things. Our message should be—what I’m trying to do is make sure that our message is clear, which is that we think we have a ways to go, we have some ground to cover with interest rates before we get to, before we get to that level of interest rates that we think is sufficiently restrictive. And putting that in the statement and identifying that as a goal is an important step. And that’s meant to put that question, really, as the important one now, going forward. I’ve also said that we think that the level of rates that we estimated in September—the incoming data suggests that that’s actually going to be higher, and that’s been the pattern. I mean, I would have little confidence that the forecast—if we made a forecast today, if we were doing an SEP today, the pattern has been that, one after another, they go up, and that’ll end when it ends, but there’s no sense that inflation is coming down. If you look at the—I have a table of the last 12 months of 12-month readings, and there’s really no pattern there. We’re exactly where we were a year ago. So I would also say, it’s premature to discuss pausing. And it’s not something that we’re thinking about. That’s really not a conversation to be had now. We have a ways to go. And the last thing I’ll say is that I would want people to understand our commitment to getting this done and to not making the mistake of not doing enough or the mistake of withdrawing our strong policy and doing that too soon. So those—I control those messages, and that’s my job. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Edward Lawrence with Fox Business. Thank you, Fed Chairman. So how big of a headwind is all the fiscal spending to what the Federal Reserve’s trying to do to get inflation back to the 2 percent target? <NAME>CHAIR POWELL</NAME>. In theory, it was a headwind this year, but I do think the broader context is that you have households that have these significant amounts of savings and can keep spending even in—so I think those two things do tend to wage—to sort of counterbalance each other out. It appears, consumer spending is still positive—it’s at pretty modest growth levels. It’s not shrinking. The banks that deal with retail customers and many retailers will tell you that the consumers are still buying and they’re still—they’re fine. So I don’t know how big the fiscal headwinds are, and they haven’t shown up in the way that we thought they would in restraining spending. So it must have to do with the savings that people have. <NAME>EDWARD LAWRENCE</NAME>. So, what about the spending? There’s tens of billions yet to be spent, I mean, from the Inflation Reduction Act, the American Rescue Plan, CHIPS Act, bipartisan infrastructure bill. How does that play into your thinking about the future? <NAME>CHAIR POWELL</NAME>. Demand is going to have some support from those savings and also from the strong demand that’s still in the labor market. We still see pretty significant demand and a tightening labor market in some respects, although I think, overall, I would say it’s not really tightening or loosening. So we see those things, and what those things tell us is that our job is going to require some resolve and some patience over time. We’re going to have to stick with this. And that’s just—we take all that as a given, but we know what our objective is, and we know what our tools can do, and that’s how we think about it. <NAME>MICHELLE SMITH</NAME>. Thanks. We’ll go to Nancy for the last question. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer from Marketplace. I’m wondering, has the window for a soft landing narrowed? Do you still think it’s possible? <NAME>CHAIR POWELL</NAME>. Has it narrowed? Yes. Is it still possible? Yes. We’ve always said it was going to be difficult, but I think to the extent rates have to go higher and stay higher for longer, it becomes harder to see the path—it’s narrowed. I would say the path has narrowed over the course of the last year, really. Hard to say. Hard to say. Again, I would say that the sort of array of data in the labor market is highly unusual and, to many economists, there is a path to— ordinarily there’s a relationship to GDP going down and vacancies declining, translating into unemployment, or there’s Okun’s law. So all those things are relationships that are in the data, and they’re very real. Data’s a little bit different this time, though, because you have this tremendously high level of vacancies and, we think, on a very steep part of the Beveridge curve. All I would say is that the job losses may turn out to be less than would be indicated by those traditional measures, because job openings are so elevated and because the labor market is so strong. Again, that’s going to be something we discover empirically. I think no one knows whether there’s going to be a recession or not and, if so, how bad that recession would be. And our job is to restore price stability so that we can have a strong labor market that benefits all over time. And that’s what we’re going to do. <NAME>NANCY MARSHALL</NAME>-GENZER. Just real quickly—why do you feel like the window has narrowed? <NAME>CHAIR POWELL</NAME>. Because we haven’t seen inflation coming down. The implication of inflation not coming down. What we would expect by now to have seen is that as the—really, as the supply-side problems have resolved themselves, we would have expected goods inflation to come down by now, long since by now. And it really hasn’t. Actually, it has come down, but not to the extent that we had hoped. At the same time, now you see services inflation, core services inflation moving up, and I just think that the inflation picture has become more and more challenging over the course of this year, without question. That means that we have to have policy be more restrictive, and that narrows the path to a soft landing, I would say. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. Before I go into the details of today’s meeting, I would like to underscore for the American people that we understand the hardship that high inflation is causing and that we are strongly committed to bringing inflation back down to our 2 percent goal. Over the course of the year, we have taken forceful actions to tighten the stance of monetary policy. We have covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. 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. Today, the FOMC raised our policy interest rate by ½ percentage point. We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In addition, we are continuing the process of significantly reducing the size of our balance sheet. Restoring price stability will likely require maintaining a restrictive policy stance for some time. I will have more to say about today’s monetary policy actions after briefly reviewing economic developments. The U.S. economy has slowed significantly from last year’s rapid pace. Although real GDP rose at a pace of 2.9 percent last quarter, it is roughly unchanged through the first three quarters of this year. Recent indicators point to modest growth of spending and production this quarter. Growth in consumer spending has slowed from last year’s rapid pace, in part reflecting lower real disposable income and tighter financial conditions. Activity in the housing sector has weakened significantly, largely reflecting higher mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment. As shown in our Summary of Economic Projections, the median projection for real GDP growth stands at just 0.5 percent this year and next, well below the median estimate of the longer-run normal growth rate. Despite the slowdown in growth, the labor market remains extremely tight, with the unemployment rate near a 50-year low, job vacancies still very high, and wage growth elevated. Job gains have been robust, with employment rising by an average of 272,000 jobs per month over the last three months. Although job vacancies have moved below their highs and the pace of job gains has slowed from earlier in the year, the labor market continues to be out of balance, with demand substantially exceeding the supply of available workers. The labor force participation rate is little changed since the beginning of the year. FOMC participants expect supply and demand conditions in the labor market to come into better balance over time, easing upward pressures on wages and prices. The median projection in the SEP for the unemployment rate rises to 4.6 percent at the end of next year. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in October, total PCE prices rose 6 percent; excluding the volatile food and energy categories, core PCE prices rose 5 percent. In November, the 12-month change in the CPI was 7.1 percent, and the change in the core CPI was 6 percent. The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to give confidence that inflation is on a sustained downward path. Price pressures remain evident across a broad range of goods and services. Russia’s war against Ukraine has boosted prices for energy and food and has contributed to upward pressure on inflation. The median projection in the SEP for total PCE inflation is 5.6 percent this year and falls to 3.1 percent next year, 2.5 percent in 2024, and 2.1 percent in 2025; participants continue to see risks to inflation as weighted to the upside. 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. But that is not grounds for complacency; the longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. 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 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 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by ½ percentage point, bringing the target range to 4¼ to 4½ percent. And we are continuing the process of significantly reducing the size of our balance sheet. With today’s action, we have raised interest rates by 4¼ percentage points this year. We continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. Over the course of the year, financial conditions have tightened significantly in response to our policy actions. Financial conditions fluctuate in the short term in response to many factors, but it is important that, over time, they reflect the policy restraint that we are putting in place to return inflation to 2 percent. We are seeing the effects on demand in the most interest-sensitive sectors of the economy, such as housing. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, the Committee decided to raise interest rates by 50 basis points today, a step-down from the 75 basis point pace seen over the previous four meetings. Of course, 50 basis points is still a historically large increase, and we still have some ways to go. As shown in the SEP, the median projection for the appropriate level of the federal funds rate is 5.1 percent at the end of next year, ½ percentage point higher than projected in September. The median projection is 4.1 percent at the end of 2024 and 3.1 percent at the end of 2025, still above the median estimate of its longer-run value. Of course, these projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. Our decisions will depend on the totality of incoming data and their implications for the outlook for economic activity and inflation. And we will continue to make our decisions meeting by meeting and communicate our thinking as clearly as possible. We are taking forceful steps to moderate demand so that it comes into better alignment with supply. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored. Reducing inflation is likely to require a sustained 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. The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done. 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 will look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Thanks for taking my question, Mr. Chairman. You just talked about the importance of market conditions reflecting the policy restraint you put in place. Since the November meeting, the 10-year has declined by 60 basis points, mortgage rates have come down, high-yield credit spreads have come in, the economy’s accelerated, and the stock market’s up 6 percent. Is this loosening of financial conditions a problem for the Fed in its effort, and its fight, against inflation? And, if so, do you need to do something about that? And how would you do something about that? Thank you. <NAME>CHAIR POWELL</NAME>. So, as I mentioned, it is important that overall financial conditions continue to reflect the policy restraint that we’re putting in place to bring inflation down to 2 percent. We think that financial conditions have tightened significantly in the past year. But our policy actions work through financial conditions. And those, in turn, affect economic activity, the labor market, and inflation. So what we control is our policy moves in the communications that we make. Financial conditions both anticipate, and react to, our actions. I would add that our focus is not on short-term moves, but on persistent moves. And many, many things, of course, move financial conditions over time. I would say it’s our judgment today that we’re not at a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes would be appropriate. And I would point you to the SEP again for our current assessment of what that peak level will be. As you will have seen, 19 people filled out the SEP this time, and 17 of those 19 wrote down a peak rate of 5 percent or more—in the 5s. So that’s our best assessment today for what we think the peak rate will be. You will also know that, at each subsequent SEP during the course of this year, we’ve actually increased our estimate of what that peak rate will be. And today we’re—the SEP that was published shows again that, overwhelmingly, FOMC participants believe that inflation risks are to the upside. So I can’t tell you confidently that we won’t move up our estimate of the peak rate again at the next SEP. I don’t know what we’ll do. It will depend on future data. What we’re writing down today is our best estimate of what we think that peak rate will be, based on what we know. Obviously, if data—if the inflation data come in worse, that could move up. And it could move down if inflation data are softer. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek, New York Times. Thanks for taking our questions. The SEP, like you mentioned, suggests that the Fed will be making another ¾ percentage points worth of rate increases in 2023. I wonder if you would foresee that being in 25 basis point increments, 50 basis point increments—sort of how you see the speed playing out going forward. And then I wonder what you’re looking at as you determine when to stop. <NAME>CHAIR POWELL</NAME>. So, as I’ve been saying, as we’ve gone through the course of this year, as we lifted off and got into the course of the year and we saw the—how strong inflation was and how persistent, it was very important to move quickly. In fact, the speed—the pace with which we’re moving was the most important thing. I think now that we’re coming to the end of this year, we’ve raised 425 basis points this year, and we’re into restrictive territory. It’s now not so important how fast we go. It’s far more important to think, what is the ultimate level? And then it’s—at a certain point, the question will become, how long do we remain restrictive? That will become the most important question. But I would say the most important question now is no longer the speed. So—and that applies to February as well. So I think we’ll make the February decision based on the incoming data and where we see financial conditions, where we see the economy. And that’ll be the key thing, but—I mean, for that decision. But, ultimately, that question about how high to raise rates is going to be one that we make looking at our progress on inflation, looking at where financial conditions are, and making an assessment of whether policy is restrictive enough. [As] I’ve told you today, we have an assessment that we’re not at a restrictive enough stance, even with today’s move. And we’ve laid out our own—our individual assessments of what we would need to do to get there. At a certain point, though, we’ll get to that point. And then the question will be, how long do we stay there? And there, the strong view on the Committee is that we’ll need to stay there, you know, until we’re really confident that inflation is coming down in a sustained way. And we think that that will be some time. Now, why do I say that? If you look at—you can break inflation down into three, sort of, buckets. The first is goods inflation, and we see now, as we’ve been expecting, really, for a year and a half, that supply conditions would get better. And, ultimately, supply chains get fixed, and demand settles down a little bit and maybe goes back to services a little bit. And we start to see goods inflation coming down. We’re now starting to see that in this report and the last one. Then you go to housing services. We know the story there is that housing services inflation has been very, very high and will continue to go up, actually. As rents expire and have to be renewed, they’re going to be renewed into a market where rates are higher than they were when the original leases were signed. But we see that the new leases that are—that the rate for new leases is coming down. So, once we work our way through that backlog, that inflation will come down sometime next year. The third piece, which is something like 55 percent of the index, PCE core inflation index, is non-housing-related core services. And that’s really a function of the labor market, largely. The biggest cost, by far, in that sector is labor. And we do see a very, very strong labor market, one where we haven’t seen much softening, where job growth is very high, where wages are very high. Vacancies are quite elevated, and, really, there’s an imbalance in the labor market between supply and demand. So that part of it, which is the biggest part, is likely to take a substantial period to get down. The other—you know, the goods inflation has turned pretty quickly now after not turning at all for a year and a half. Now it seems to be turning. But there’s an expectation, really, that the services inflation will not move down so quickly, so that we’ll have to stay at it, so that we may have to raise rates higher to get to where we want to go. And that’s really why we are writing down those high rates and why we’re expecting that they’ll have to remain high for a time. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. Thanks for taking the question. You describe GDP growth in the SEPs as moderate or modest, I believe. Yet it’s really approaching stall speed. Half a percentage point is not much. You described labor market unemployment rate as representing some softening. But it’s nearly a full percentage point rise, and that’s well in excess of what has historically been associated with recession. Why wouldn’t this be considered a recessionary projection by the Fed? <NAME>CHAIR POWELL</NAME>. Well, I’ll tell you what the projection is. I don’t think it would qualify as a recession, though, because you’ve got positive growth. The expectations in the SEP are basically as you said, which is, we’ve got growth at a modest level, which is to say that ½ percentage point, that’s positive growth. It’s slow growth. It’s well below trend. It’s not going to feel like a boom. It’s going to feel like very slow growth, right? In that condition, labor market conditions are softening a bit. Unemployment does go up a bit. I would say that many analysts believe that the natural rate of unemployment is actually elevated at this moment. So it’s not clear that those forecasts of inflation are really much above the natural rate of unemployment. We can never identify its location with great precision. But that 4.7 percent is still a strong labor market. If you look—you know, you’ve got—the reports we get from the field are that companies are very reluctant to lay people off, other than the tech companies, which is, you know, a story unto itself. Generally, companies want to hold onto the workers they have because it’s been very, very hard to hire. So you’ve got all these vacancies out there—far in excess of the number of employed people. That doesn’t sound like a—you know, a labor market where a lot of people will need to be put out of work. So that we—you know, there are channels through which the labor market can come back into balance with relatively modest increases in unemployment, we believe. None of that is guaranteed, but that is what their forecast reflects. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Thanks. Nick Timiraos, Wall Street Journal. Chair Powell, I want to follow up on Jeanna’s question. The decision to step down the pace of rate increase—rate rises appears to have been socialized at your last meeting, largely before the past two CPI reports showed inflation decelerating in line with the Committee’s forecasts this year. You just now talked about making decisions meeting by meeting and being mindful of the lags of policy. Does that mean, all things equal, you would feel more comfortable probing where the terminal rate is by moving in 25 basis point increments, including beginning at your next meeting? <NAME>CHAIR POWELL</NAME>. So I haven’t made a judgment on what size rate hike to make at the last meeting. But, you know, what you said is broadly right, which is, having moved so quickly and having now so much restraint that’s still in the pipeline, we think that the appropriate thing to do now is to move to a slower pace. And, you know, that will allow us to feel our way and— you know, and get to that level, we think, and better balance the risks that we face. So that’s the idea. It makes a lot of sense, it seems to me—particularly if you consider how far we’ve come. But, again, I can’t tell you today what the actual size of that will be. It will depend on a variety of factors, including the incoming data in particular, the state of the economy, the state of financial conditions. <NAME>NICK TIMIRAOS</NAME>. With the CPI report, if it did come out last week, do you think it would have changed some of those forecasts in today’s estimate? <NAME>CHAIR POWELL</NAME>. No. Absolutely not. No. As a—just a matter of practice, the SEP reflects any data that’s—that comes out during the meeting. And participants know that they have the—they know this—that they can make changes to their SEP during the meeting, you know, well in advance of the press conference so that we’re not running around. But that’s not the case. It’s never the case that the SEPs don’t reflect an important piece of data that came in on the first day of the meeting. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. I’m wondering if we could talk about the projection for the unemployment rate. Why has the Fed raised its unemployment projection? Is it because the model suggests that a higher terminal rate would automatically cause a higher unemployment rate? Or are you seeing signs that the labor market isn’t quite as strong as we think it is now? Thanks. <NAME>CHAIR POWELL</NAME>. No. It’s not about the strength of the labor market. The labor market is clearly very strong. It is more just that, you know, by now, we had expected—we’ve continually expected to make faster progress on inflation than we have, ultimately. And that’s why the peak rate for this year goes up between this meeting and the September meeting. You see that—you see the fact that we’ve made less progress than expected on inflation. So that’s why that goes up. And that’s why unemployment goes up, because we’re having to tighten policy more. And so it didn’t go up by much in the meeting, I don’t think. But that’s the idea, is slower progress on inflation, tighter policy, probably higher rates probably held for longer just to get to where you—the kind of restriction that you need to get inflation down to 2 percent. <NAME>RACHEL SIEGEL</NAME>. Do you have a sense of, in order to get to that number, how much of that could be caused by layoffs versus vacancies, trimming, or changes to the labor force population rate? <NAME>CHAIR POWELL</NAME>. It’s very hard to say. You know, there—you can look at history, right? And history would, you know, would say that, in a situation like this, the declines in unemployment would be more meaningful, I think, than what you see written down there. But why do we think that is the case? So, I’ll give you a few reasons. First just is that there’s this huge overhang of vacancies, meaning that vacancies can come down a fair amount. And we’re hearing from many companies that they don’t want to lay people off—so that they’ll keep people because it’s been so hard. I mean, I think we’ve—it feels like we have a structural labor shortage out there where there are, you know, 4 million fewer people, a little more than 4 million who were in the workforce available to work than there’s demand for workforce. So the fact that there’s a strong labor market, you know, means that companies will hold on to workers. And it means that it may take longer, but it also means that the costs in unemployment may be less. Again, that we’re going to find out empirically. But I think that’s a reasonably possible outcome. And you do hear, you know, many, many labor economists believe that it is. So we’ll see, though. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. How should we interpret the higher core inflation forecast for 2023 in the SEP? Does that not then suggest that the policy rate currently forecasted for next year should actually be higher than the 5.1 median estimate penciled in? <NAME>CHAIR POWELL</NAME>. Well, I think that’s why one of the reasons it went up was that core came in stronger this year. Yeah. What you see is our best estimate, as of today—really, as of today—for how high we need to raise rates to—how much we need to tighten policy to create enough, you know, restrictive policy to slow economic activity and slow—soften the labor market and bring inflation down through those channels. That’s all—that is the estimate—best estimate—we make today. And, as I mentioned, we’ll make another estimate for the next SEP. And we’ll, you know, of course, between meetings, we do the same thing, but we don’t publish it. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to make sure I understand specifically what’s going on in the SEP, because you all expect rates to go higher, but you’re also more pessimistic about what inflation is going to look like next year. And I was just wondering, you know, given that we have seen some cooling in inflation, you know, is it—is that primarily because of wage growth, that you expect wage growth to be sort of a headwind? <NAME>CHAIR POWELL</NAME>. We’re going into next year with higher inflation than we had thought, right? So we’re actually moving down to—the level that we’re moving down to next year is still a very large drop in inflation from where inflation is running now, well more than 1 percent change in inflation. But remember that the jump[ing]-off point at the beginning of the year is higher. So, you know, we—we’re moving down still by a very large chunk. I don’t think it’s having—I don’t think the policy is having any less effect. It’s just starting from a higher level at the end of 2022. So we’re getting down. I believe the median is 3½ percent. That would be—that’s a pretty significant drop in inflation. And, you know, where’s it coming from? It’s coming from the goods sector, clearly. By the middle of next year, we should begin to see lower inflation from the housing services sector. And then, you know, the big question is, when we—how much will you see from the largest, the 55 percent of the index, which is the non-housing services sector? And, you know, that’s where you need to see—we believe you need to see a better balancing of supply and demand in the labor market so that you have—it’s not that we don’t want wage increases. We want strong wage increases. We just want them to be at a level that’s consistent with 2 percent inflation. Right now that—if you put into—if you factor in productivity estimates, standard productivity estimates, wages are running, you know, well above what would be consistent with 2 percent inflation. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks. Hi, Chair Powell. Neil Irwin with Axios. Some of your colleagues have been pretty explicit that they can’t imagine rate cuts happening in 2023. That’s certainly not implied by the SEP. But futures markets have priced in some easing in the back half of next year. What’s your view of the likelihood of any kind of rate cuts next year? What circumstances might make that plausible? <NAME>CHAIR POWELL</NAME>. You know, our focus right now is really on moving our policy stance to one that is restrictive enough to ensure a return of inflation to our 2 percent goal over time. It’s not on rate cuts. And we think that we’ll have to maintain a restrictive stance of policy for some time. Historical experience cautions strongly against prematurely loosening policy. I guess I would say it this way: I wouldn’t see us considering rate cuts until the Committee is confident that inflation is moving down to 2 percent in a sustained way. So that’s the test I would articulate. And you’re correct. There are not rate cuts in the SEP for 2023. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE MATTHEWS</NAME>. Steve Matthews with Bloomberg. Let me ask you about China. In the last few weeks, China has abandoned its COVID policy and been reopening pretty strongly. I’m wondering if you see that as disinflationary because you’re seeing supply chains improve or inflationary because it obviously brings a lot more demand globally, improves the global outlook for growth and for commodities prices. <NAME>CHAIR POWELL</NAME>. So you’re right. Those two things will offset each other. Weaker output in China will push down on commodity prices, but it could interfere with supply chains ultimately. And that could push inflation up in the West. It’s very hard to say, you know, how much—how those two will offset each other. And it doesn’t seem likely, actually, that the overall net effect would be material on us. But, to your point, China faces a very challenging situation in reopening. You know, we’ve seen, waves of COVID all around the world can interfere with economic activity. China, a very critical manufacturing—place for manufacturing and exporting. Their supply chain is very important. And China faces a reopening. They’ve— you know, they’ve backed away from their COVID restriction policies. There could be very significant increases in COVID. And we’ll just have to see. It’s a risky situation. It—but, again, it doesn’t seem like it’s likely to have material overall effects on us. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRIS RUGABER</NAME>. Hi. Chris Rugaber, Associated Press. Thank you for taking my question. I wondered if you could comment a bit more about yesterday’s inflation report. I mean, it showed inflation cooling in all three of the categories that you laid out at Brookings. Are you starting to see—are you confident that you’re seeing real progress on getting inflation under control? Are you still worried it could slip into some kind of unentrenched, you know, upward spiral? Thank you. <NAME>CHAIR POWELL</NAME>. Right. So the data that we’ve received so far for October and November, we don’t have the—some of the—we have some remaining data to get in November, but they clearly do show a welcome reduction in the monthly pace of price increases. As I mentioned in my opening statement, it will take substantially more evidence to give confidence that inflation is on a sustained downward path. So the way we think about this is this: This report is very much in line with what we’ve been expecting and hoping for. And what it does is, it provides greater confidence in our forecast of declining inflation. As I mentioned, we’ve been expecting significant—forecasting significant declines in overall inflation and core inflation in the coming year. And this is the kind of reading that it will take to support that. So, really, this gives us greater confidence in our forecasts rather than, at this point, changing our forecast. In terms of the pieces, we have been expecting goods inflation to come down as supply chain pressures eased. That’s happening now. Housing services—as I mentioned, there’s good news in the pipeline. As long as housing—new housing leases show declining inflation, that will show up in the measure around the middle of next year. So that should help. And the big piece, again, is core services, ex housing, which is very important. And we have a ways to go there. You do see some beginning signs there. But, ultimately, that’s the big—the more than half, as I mentioned, of PCE core index. And it’s very fundamentally about the labor market and wages. If you look at wages, look at the average hourly earnings number we got with the last payrolls report, you don’t really see much progress in terms of average hourly earnings coming down. Now, there may be composition effects and other effects in that. So we don��t put too much weight on any one report. These things can be volatile month to month. But we will be looking for wages moving, you know, down to more normal levels where workers are doing well and, ultimately, their gains are not being eaten up by inflation. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. There’s a—excuse me, Michael McKee from Bloomberg Radio and Television. There’s a little bit of a disconnect between the optimistic view you just expressed about the economy and the changes that you’ve made in the SEP. And I’m wondering if you’re reacting to the fact that the markets have loosened financial conditions or if you feel the Fed may be a little bit behind on inflation, whether the recent disinflation we’re seeing is transitory or not, and how this affects the idea of a soft landing if you’re projecting just ½ percent growth for this year. <NAME>CHAIR POWELL</NAME>. So if I—I think I got your question. So, you know, one thing is to say is, I think our policy’s in—getting into a pretty good place now. We’re restrictive, and I think we’re—you know, we’re getting close to that level of sufficient—we think—sufficiently restrictive. We laid out today what our best estimates are to get there. And, I mean, it boils down to, how long do we think this process is going to take? And, of course, we’re—we welcome these better inflation reports for the last two months. They’re very welcome. But I think we’re realistic about the broader project. So that’s all. That’s the point I would make. It’s—you know, we see goods prices coming down. We understand what will happen with housing services. But the big story will really be the rest of it, and there’s not much progress there. And that’s going to take some time. I think my view and my colleagues’ view is that this will take some time. We’ll have to hold policy at a restrictive level for a sustained period so that, you know, two good—you know, two good monthly reports are, you know, very welcome. Of course, they’re very welcome. But we need to be honest with ourselves that there’s, you know, inflation—12-month core inflation is 6 percent CPI. That’s three times our 2 percent target. Now, it’s good to see progress. But let’s just understand we have a long ways to go to get back to price stability. <NAME>MICHAEL MCKEE</NAME>. Well, do you think the soft landing is no longer achievable? <NAME>CHAIR POWELL</NAME>. No, I wouldn’t say that. No. I don’t say that. I mean, I would say this: You know, to the extent we need to keep rates higher and keep them there for longer and inflation, you know, moves up higher and higher, I think that narrows the runway. But lower inflation readings, if they persist, in time, could certainly make it more possible. So I just—I don’t think anyone knows whether we’re going to have a recession or not and, if we do, whether it’s going to be a deep one or not. It’s just, it’s not knowable. And certainly, you know, lower inflation reports, were they to continue for a period of time, would increase the likelihood of a— put it this way, of a return to price stability that involves significantly less of an increase in unemployment than would be expected given the historical record. <NAME>MICHELLE SMITH</NAME>. Brian. <NAME>BRIAN CHEUNG</NAME>. Hi, Chairman Powell. Brian Cheung, NBC News. You warned Americans of pain earlier this year as the Fed hikes rates. But with the Fed now expected to raise rates higher than you thought when you first said that, just wondering where we are in that pain. How would you describe that to Americans if the projections on unemployment find themselves—that’d be 1.6 million Americans out of jobs? <NAME>CHAIR POWELL</NAME>. So the largest amount of pain—the worst pain would come from a failure to raise rates high enough and from us allowing inflation to become entrenched in the economy so that the ultimate cost of getting it out of the economy would be very high in terms of employment, meaning very high unemployment for extended periods of time, the kind of thing that had to happen when inflation really got out of control and the Fed didn’t respond aggressively enough or soon enough in a prior episode, you know, 50 years ago. So that’s really—the worst pain would be if we failed to act. What we’re doing now is, you know, it’s raising interest rates for people. And so people are paying higher rates on mortgages and that kind of thing. There will be some softening in labor market conditions. And I wish there were a completely painless way to restore price stability. There isn’t. And this is the best we can do. I do think, though, that—and markets are pretty confident, it seems to me—that we will get inflation under control. And I believe we will. We’re certainly highly committed to do that. <NAME>MICHELLE SMITH</NAME>. Grady. <NAME>GRADY TRIMBLE</NAME>. Thank you, Mr. Chair. Grady Trimble with Fox Business. You’ve reiterated today and the Committee has reiterated its commitment to that 2 percent inflation target. I wonder, is there ever a point where you actually reevaluate that target and maybe increase your inflation target if it is stickier than even you think it is? <NAME>CHAIR POWELL</NAME>. That’s just—so, changing our inflation goal is just something we’re not thinking about, and it’s something we’re not going to think about. It’s—we have a 2 percent inflation goal, and we’ll use our tools to get inflation back to 2 percent. I think this isn’t the time to be thinking about that. I mean, there may be a longer-run project at some point. But that is not where we are at all. The Committee—we’re not considering that. We’re not going to consider that under any circumstances. We’re going to keep our inflation target at 2 percent. We’re going to use our tools to get inflation back to 2 percent. <NAME>MICHELLE SMITH</NAME>. Nicole. <NAME>NICOLE GOODKIND</NAME>. Thank you, Chairman Powell. Nicole Goodkind, CNN Business. As you monitor wage growth and unemployment data, I wonder if you’re paying close attention to a sector or even income level? Like, how do you factor potential exacerbations of inequality into your risk calculations, especially given the K-shaped recovery of 2020? <NAME>CHAIR POWELL</NAME>. So the—I would go back to the labor market that we had in 2018, ’19, ’20. So, what that looked like was, wage increases for the people at the lowest end of the income spectrum were the largest. The gaps between racial groups and gender groups were at their smallest in recorded history. That’s—and all of that because of a tight labor market, a tight labor market which had inflation running, you know, just a tick below 2 percent and the economy growing right at its potential. So that seems like something that would be really good for the economy and for the country, if we could get back to that. And so that’s what all of us want to do. We want to get back to a long expansion where the labor market can remain strong over an extended period of time. That’s a really good thing for workers in the economy. And we’d love to get back to that. That’s what our goal is. You know, there’s—in the near term, we have to use our tools to restore price stability. But we, you know, we can’t—what we have to think about is the medium and longer term. If you think about it, the country went through a difficult time—I think much more difficult than we can think it would happen here. But it really set up our economy for several decades of prosperity. So price stability is something that really pays dividends for the benefit of the economy and the people in it over a very, very long period of time. And so when it is lost, for whatever reason, it has to be restored and as quickly as possible—which is what we’re doing. <NAME>NICOLE GOODKIND</NAME>. In the short term, are you factoring in these exacerbations or potential exacerbations in the economy? Are you monitoring them? <NAME>CHAIR POWELL</NAME>. We do, yes. We absolutely do. We look at—it’s our regular practice to talk about unemployment rates by different groups, including racial groups and that sort of thing. We do. We keep our eye on that. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi. Nancy Marshall-Genzer with Marketplace. What would you do if the economy slows so much that we enter a recession before we see strong consistent signs that inflation is slowing—in other words, stagflation? <NAME>CHAIR POWELL</NAME>. So I don’t want to get into too many hypotheticals. But, you know, we’ll—it’s hard to deal with hypotheticals. So let me just say that we have to use our tools to support maximum employment and price stability. I’ve made it clear that right now, the labor market’s very, very strong. You’re near a 50-year low where you’re at or above maximum employment, a 50-year low in unemployment, vacancies are very high, wages—nominal wages are very high. So the labor market’s very, very strong. Where we’re missing is on the inflation side. And we’re missing by a lot on the inflation side. So that means we need to really focus on getting inflation under control, and that’s what we’ll do. I think, as the economy heals, the two goals come more into play. But right now, clearly, the focus has to be on getting inflation down. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thank you, Chairman Powell. Greg Robb from MarketWatch. You spoke a little bit ago. You said that the U.S. looks—it looks like we have a structural labor shortage in the economy. Could you expand on that, talk a little bit more about that? And, really, are you talking about getting Congress action on increasing, like, legal immigration, things like that? Thank you. <NAME>CHAIR POWELL</NAME>. So, what I meant by that, with “structural labor shortage,” is, if you look at where we are now, as I mentioned, there—if you just look at demand for labor, you can look at vacancies plus people who are actually working. And then you can take supply of labor by, “Are you in the labor market?” “Are you looking for a job or have a job?” And you’re 4— more than 4 million people short. We don’t see—despite very high wages and an incredibly tight labor market, we don’t see participation moving up—which is contrary to what we thought. So the upshot of all that is, the labor market is actually—it should—it’s 3½ million people, at least, smaller than it should have been based on pre-pandemic. Just assume population and reasonable growth and aging of the population; our labor force should be 3½ million more than it is. And that—there’re lots of easy ways to get to bigger numbers than that if you go back a few more years. So why is that? Part of it is just accelerated retirements. People dropped out and aren’t coming back at a higher rate than expected. Part of it is that we lost a half a million people who would have been work—close to half a million who would have been working died from COVID. And part of it is that migration has been lower. We don’t prescribe—you know, it’s not our job to prescribe things. But, you know, I think if you ask businesses, you know, pretty much everybody you talk to says there aren’t enough people. We need more people. So I tried to identify that in my—in a speech I gave a month ago, but I stopped short of telling Congress what to do because, you know, they gave us a job. And we need to, you know, do that job. <NAME>MICHELLE SMITH</NAME>. Thanks. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. You say you expect growth of just ½ percent next year. Given that you’ve said the process of raising rates and getting inflation back under control will be painful, have you had discussions within the Committee and addressed how long and/or how deep of a recession you would be willing to accept? <NAME>CHAIR POWELL</NAME>. No. I mean, what we do is, we make our forecasts, and we publish them quarterly. And, you know, if you look at those forecasts, those are forecasts for slow growth, for a softening labor market, by which I mean, unemployment goes up but not a great deal. And you see inflation coming down. You see rates going up a lot. You see inflation coming down. Those are those forecasts, and that’s really what they show. We’re not—of course, we don’t talk about, you know, this kind of a recession and that kind of a recession. We just, you know, we make those forecasts. The staff runs—and you will see this if you look at the old Tealbooks—runs alternative simulations of all different kinds at every meeting, and we look at those, too. And those will explore different things. But that’s just, you know, upside and downside scenarios. Of course, that’s a responsible practice that we’ve carried on for many decades. But, no, we don’t—we haven’t asked ourselves that question. <NAME>MICHELLE SMITH</NAME>. We’ll go to Jean for the last question. <NAME>JEAN YUNG</NAME>. Hi. Jean Yung with Market News. I wanted to ask about the SEP again. If you’re reaching peak rates around 5 percent in the first half of next year and inflation starts to decline materially, that would seem to make the real rate gradually more restrictive. Is that something that’s built into the projections and into models? Is that something you would want to see? <NAME>CHAIR POWELL</NAME>. So we do know that. Of course, that’s something that we know we’d see. But, as I mentioned, you know, we wouldn’t—I wouldn’t see the Committee cutting rates until we’re confident that inflation is moving down in a sustained way. That would be my test. I don’t see us as having a really clear and precise understanding of what the neutral rate is and what real rates are so that it would mechanically happen like that. It would—really, it’ll be a test of—for cutting rates, I think, in the event, it’ll be a question of, do we actually feel confident that inflation is coming down in a sustained way? Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon, and welcome. My colleagues and I understand the hardship that high inflation is causing, and we are strongly committed to bringing inflation back down to our 2 percent goal. Over the past year, we have taken forceful actions to tighten the stance of monetary policy. We have covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of labor market conditions that benefit all. Today, the FOMC raised our policy interest rate by 25 basis points. We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In addition, we are continuing the process of significantly reducing the size of our balance sheet. Restoring price stability will likely require maintaining a restrictive stance for some time. I will have more to say about today’s monetary policy actions after briefly reviewing economic developments. The U.S. economy slowed significantly last year, with real GDP rising at a below-trend pace of 1 percent. Recent indicators point to modest growth of spending and production this quarter. Consumer spending appears to be expanding at a subdued pace, in part reflecting tighter financial conditions over the past year. Activity in the housing sector continues to weaken, largely reflecting higher mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment. Despite the slowdown in growth, the labor market remains extremely tight, with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated. Job gains have been robust, with employment rising by an average of 247,000 jobs per month over the last three months. Although the pace of job gains has slowed over the course of the past year and nominal wage growth has shown some signs of easing, the labor market continues to be out of balance. Labor demand substantially exceeds the supply of available workers, and the labor force participation rate has changed little from a year ago. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in December, total PCE prices rose 5.0 percent; excluding the volatile food and energy categories, core PCE prices rose 4.4 percent. The inflation data received over the past three months show a welcome reduction in the monthly pace of increases. And, while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path. 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. But that’s not grounds for complacency. Although inflation has moderated recently, it remains too high. The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. 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 highly attentive to the risks that inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by 25 basis points, bringing the target range to 4½ to 4¾ percent. And we are continuing the process of significantly reducing the size of our balance sheet. With today’s action, we have raised interest rates by 4½ percentage points over the past year. We continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. We are seeing the effects of our policy actions on demand in the most interest-sensitive sectors of the economy, particularly housing. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, the Committee decided to raise interest rates by 25 basis points today, continuing the step-down from last year’s rapid pace of increases. Shifting to a slower pace will better allow the Committee to assess the economy’s progress toward our goals as we determine the extent of future increases that will be required to attain a sufficiently restrictive stance. We will continue to make our decisions meeting by meeting, taking into account the totality of incoming data and their implications for the outlook for economic activity and inflation. We have been taking forceful steps to moderate demand so that it comes into better alignment with supply. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep 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. The historical record cautions strongly against prematurely loosening policy. We will stay the course, until the job is done. 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, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Chris Rugaber, the Associated Press. Thank you for doing this. As you know, financial conditions have loosened since the fall with bond yields falling, which has also brought down mortgage rates, and the stock market posted a solid gain in January. Does that make your job of combating inflation harder? And could you see lifting rates higher than you otherwise would to offset the increase in—or to offset the easing of financial conditions? <NAME>CHAIR POWELL</NAME>. So it is important that overall financial conditions continue to reflect the policy restraint that we’re putting in place in order to bring inflation down to 2 percent. And, of course, financial conditions have tightened very significantly over the past year. I would say that our focus is not on short-term moves but on sustained changes to broader financial conditions. And it is our judgment that we’re not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate. Of course, many things affect financial conditions—not just our policy. And we will take into account overall financial conditions along with many other factors as we set policy. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell, thank you for taking our questions. Rachel Siegel from the Washington Post. Over the last quarter, we’ve seen a deceleration in prices, in wages, and a fall in consumer spending, all while the unemployment rate has been able to stay at a historic low. Does this, at all, change your view of how much the unemployment rate would need to go up, if at all, to see inflation come down to the levels you’re looking for? <NAME>CHAIR POWELL</NAME>. So I would say it is a good thing that the disinflation that we have seen so far has not come at the expense of a weaker labor market. But I would also say that that disinflationary process that you now see under way is really at an early stage. What you see is, really, in the goods sector you see inflation now coming down because supply chains have been fixed, demand is shifting back to services, and shortages have been abated. So you see that. In the other—in the housing services sector, we expect inflation to continue moving up for a while but then to come down, assuming that [rent increases associated with] new leases continue to be lower. So, in those two sectors, you’ve got a good story. The issue is that we have a large sector called nonhousing service—core nonhousing services, where we don’t see disinflation yet. But I would say that, so far, what we see is progress but without any weakening in labor market conditions. <NAME>RACHEL SIEGEL</NAME>. Has your—I’m sorry. <NAME>CHAIR POWELL</NAME>. Go ahead. <NAME>RACHEL SIEGEL</NAME>. Has your expectation for where the unemployment rate might go changed since December? <NAME>CHAIR POWELL</NAME>. No. We’re going to write down new forecasts at the March meeting, and we’ll see at that time. I will say that it is gratifying to see the disinflationary process now getting under way, and we continue to get strong labor market data. So—but, you know, we’ll update those forecasts in March. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Hi, Chair Powell. Neil Irwin with Axios. You and some of your colleagues have emphasized the possibility that job openings could come down and that would let some of the air out of the labor market without major job losses. We saw the opposite in the December JOLTS this morning. Job openings are actually rising. That also coincided with slowdown in wage inflation. Do you believe that openings are an important indicator to be studying to understand where the labor market is and where wage inflation might be heading? <NAME>CHAIR POWELL</NAME>. So you’re right about the data, of course. What we did see—we’ve seen average hourly earnings and now the employment cost index abating a little bit still off of their highs of six months ago and more but still at levels that are fairly elevated. The job openings number has—in JOLTS, has been quite volatile recently. Yeah, I did see that it moved up—back up this morning. I do think that it’s probably an important indicator. The ratio, I guess, is back up to 1.9 job openings to unemployed people, people who are looking for work. So it’s an indicator, but nonetheless, we—you’re right, we do see wages moving down. If you look across the rest of the labor market, you still see very high payroll job creation. And, you know, quits are still at an elevated level. So many, many—by many, many indicators, the job market is still very strong. <NAME>MICHELLE SMITH</NAME>. Colby, and then Howard. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. Given the economic data since the December meeting, is the trajectory for the fed funds rate in the most recent SEP still the best guidepost for the policy path forward? Or does ongoing now mean more than two rate rises now? <NAME>CHAIR POWELL</NAME>. So you’re right. At the December meeting, we all wrote down our best estimates of what we thought the ultimate level would be, and that’s obviously back in December. And the median for that was between 5 and 5¼ percent. At the March meeting, we’re going to update those assessments. We did not update them today. We did, however, continue to say that we believe ongoing rate hikes will be appropriate to attain a sufficiently restrictive stance of policy to bring inflation back down to 2 percent. We think we’ve covered a lot of ground, and financial conditions have certainly tightened. I would say we still think there’s work to do there. We haven’t made a decision on exactly where that will be. I think, you know, we’re going to be looking carefully at the incoming data between now and the March meeting and then the May meeting. I don’t feel a lot of certainty about where that will be. It could certainly be higher than we’re writing down right now. If we come to the view that we need to write down to, you know, to move rates up beyond what we said in December, we would certainly do that. At the same time, if the data come in, in the other direction, then we’ll, you know, we’ll make data-dependent decisions at coming meetings, of course. <NAME>COLBY SMITH</NAME>. Just as a quick follow-up, how are you viewing the kind of balance of risk between those two options of, you know, the likelihood of maybe falling short of that or going beyond that level? <NAME>CHAIR POWELL</NAME>. I guess I would say it this way. I continue to think that it’s very difficult to manage the risk of doing too little and finding out in 6 or 12 months that we actually were close but didn’t get the job done. Inflation springs back, and we have to go back in. And now, you really do worry about expectations getting unanchored and that kind of thing. This is a very difficult risk to manage, whereas I—of course, we have no incentive and no desire to overtighten. But we, you know, if we feel like we’ve gone too far, we can certainly—and inflation is coming down faster than we expect, then we have tools that would work on that. So I do think that, in this situation, where we have still the highest inflation in 40 years, you know, the job is not fully done. As I started to mention earlier, we have a sector that represents 56 percent of the core inflation index where we don’t see disinflation yet. So we don’t see it. It’s not happening yet. Inflation in the core services ex. housing is still running at 4 percent on a 6- and 12-month basis. So there’s not—nothing happening there. In the other two sectors representing, you know, less than 50 percent, you actually, I think, now have a story that is credible, that’s coming together, although you don’t actually see disinflation yet in housing services, but it’s in the pipeline, right? So, for the third sector, we don’t see anything here. So I think it would be premature—it would be very premature to declare victory or to think that we’ve really got this. We need to see—our goal, of course, is to bring inflation down. And how do we get that done? There are many, many factors driving inflation in that sector, and they should be coming into play to have inflation—the disinflationary process begin in that sector. But, so far, we don’t see that. And I think until we do, we see ourselves as having a lot of work left to do. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Hi, Howard Schneider with Reuters, and thanks as usual. So I just wanted to connect a couple of dots here. The statement made a number of changes that seem to be saying things are getting better. You’re saying inflation has eased That’s new. You’ve taken out references to the war in Ukraine that’s causing price increases. You’ve taken out references to the pandemic. You’ve eliminated all the reasons that you said prices were being driven higher, yet that’s not mapping to any change in how you describe policy. We still have ongoing increases to come. So I’m wondering, why is that the case? And does it have more to do with uncertainty around the outlook or more to do with you not wanting to give a very overeager market a reason to get ahead of itself and overreact? <NAME>CHAIR POWELL</NAME>. So I guess I would say it this way. We can now say, I think, for the first time that the disinflationary process has started. We can see that. And we see it, really, in goods prices so far. Goods prices is a big sector. We—this is what we thought would happen since the very beginning, and now here it is actually happening, and for the reasons we thought. We—you know, it’s supply chains, it’s shortages, and it’s demand revolving back towards services. So this is a good thing. This is a good thing. But that’s, you know, around a quarter of the PCE price index—core PCE price index. So the second sector is housing services, and that’s driven by very different things. And we—as I mentioned, with housing services, we expect, and other forecasters expect, that measured inflation will continue moving up for several months but will then come down, assuming that [rent increases associated with] new leases continue to be soft. And we do assume that. So we think that that’s sort of in the pipeline. And we actually see disinflation in the goods sector, and we see it in the pipeline for two sectors that amount to a little less than half. So this is good. And we note that when we say inflation is coming down that this is good. We expect to see that that disinflation process will be seen, we hope soon, in the core goods ex. housing—sorry, the core services ex. housing sector that I talked about. We don’t see it yet. It’s—you know, it’s seven or eight different kinds of services, not all of them are the same. And, you know, we have a sense of what’s going on in each of those different subsections. Probably the biggest part of it, probably 60 percent of that is, you know, research would show is sensitive to slack in the economy and so the labor market will probably be important. Some of the other ones it’s—the labor market is not going to be important. Many other factors will drive it. In any case, we don’t see disinflation in that sector yet. And I think we need to see that it’s the majority of the core PCE index, which is the thing that we think is the best predictor of headline PCE, which is [the price series that we associate with] our mandate. So it’s not that we’re not—we’re neither optimistic nor pessimistic. We’re just telling you that we don’t see inflation moving down yet in that large sector. I think we will fairly soon, but we don’t see it yet. Until we do, I think we—you know, we see ourselves, we’ve got to be honest with ourselves, but we see ourselves as having perhaps more persistent—we’ll see more persistent inflation in that sector, which will take longer to get down. And we’re just going to have to—we have to complete the job. You know, that’s what we’re here for. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, you observed several years ago that we learned we can have a low unemployment rate without above-target inflation. And we have learned lately that inflation can come down from its uncomfortably high level despite a historically low unemployment rate. Given that, and given how much you did over the last year, why do you think further rate increases are needed? Why not stop here and see what transpires in the coming months before raising rates again? <NAME>CHAIR POWELL</NAME>. So we’ve—you know, we’ve raised rates 4½ percentage points, and we’re talking about a couple of more rate hikes to get to that level we think is appropriately restrictive. And why do we think that’s probably necessary? We think, because inflation is still running very hot. We’re, of course, taking into account long and variable lags, and we’re thinking about that. It really—the story we’re telling about inflation is to ourselves, and the way we understand it is basically the three things that I’ve just gone through a couple of times. And, again, we don’t see it affecting the services sector ex. housing yet. But, I mean, I think our assessment is that we’re not very far from that level. We don’t know that, though. We don’t know that. So I think we’re—you know, we’re living in a world of significant uncertainty. I would look across the rate—the spectrum of rates and see that real rates are now positive by— you know, by an appropriate set of measures are positive across the yield curve. I think policy is restrictive. We’re trying to make a fine judgment about how much is restrictive enough. That’s all. And we’re going to—you know, that’s why we’re slowing down to 25 basis points. We’re going to be carefully watching the economy and watching inflation and watching the progress of the disinflationary process. <NAME>NICK TIMIRAOS</NAME>. Did you or your colleagues discuss the conditions for a pause at this meeting this week? <NAME>CHAIR POWELL</NAME>. We—you know, you’ll see that the minutes will come out in three weeks, and we’ll give you a lot of detail. I—you know, we spend a lot of time talking about the path ahead and the state of the economy. And I wouldn’t want to start to drive the—describe all the details there, but that was the sense of the discussion, was really talking quite a bit about the path forward. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I wanted to ask about the debt ceiling. Given that we’ve now hit up against it, I was wondering if the U.S. goes past the X date, will the Fed do whatever the Treasury directs as it relates to making payments as the fiscal agent or will it do its own analysis of any legal constraints? <NAME>CHAIR POWELL</NAME>. So your question is, would we—say your question again. <NAME>VICTORIA GUIDA</NAME>. Will the Fed do what Treasury directs as it relates to making payments or will it do its own analysis of any legal constraints? <NAME>CHAIR POWELL</NAME>. So you’re really asking about—you’re asking about prioritization, in effect, is what— <NAME>VICTORIA GUIDA</NAME>. Yes. Yes. <NAME>CHAIR POWELL</NAME>. Okay. So I feel like I have to say this. There’s only one way forward here, and that is for Congress to raise the debt ceiling so that the United States government can pay all of its obligations when due. And any deviations from that path would be highly risky and that no one should assume that the Fed can protect the economy from the consequences of failing to act in a timely manner. In terms of our relationship with the Treasury, we are their fiscal agent. And I’m just going to leave it at that. <NAME>VICTORIA GUIDA</NAME>. Are you actively doing any planning of what might happen in the event that that would happen? <NAME>CHAIR POWELL</NAME>. I’m just going to leave it at that. This is a matter that’s to be resolved between, really—it’s really Congress’ job to raise the debt ceiling. And I gather there are discussions happening, but they don’t involve us. We’re not involved in those discussions. So we’re the fiscal agent. <NAME>MICHELLE SMITH</NAME>. Jeanna and then Steve. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek from the New York Times. Thanks for taking our questions. I wonder, was there any discussion today of the possibility of pausing rate increases and then restarting them? Lorie Logan from the Federal Reserve Bank of Dallas seemed to suggest that would be a possibility in a recent speech. And I wonder if that view is broadly shared on the Committee. <NAME>CHAIR POWELL</NAME>. So the Committee obviously did not see this as the time to pause. We judged that the appropriate, you know, thing to do at this meeting was to raise the federal funds rate by 25 basis points. And we said that we continue to anticipate that ongoing increases in the target range will be appropriate in order to attain that stance of sufficiently restrictive monetary policy that will bring inflation down to 2 percent. So that’s the judgment that we made. You know, we’re going to write down new forecasts in March, and we’ll—you know, we’ll certainly be looking at the incoming data as everyone else will. <NAME>JEANNA SMIALEK</NAME>. Sorry, I should have been clearer. I mean, would it be possible to take a meeting off, for example, and then resume? You know, could you, rather than just doing at every meeting that move, go a little bit more slowly, take some gaps in between moves? <NAME>CHAIR POWELL</NAME>. I mean, I think this is not something that the Committee is thinking about or exploring in any kind of detail. In principle, though, you know, we used to—the thing we used to do was go every other meeting, if you remember, 25 basis points, and that was considered a fast pace. So I think a lot of options are available. And I mean, you saw what the Bank of Canada did and, you know, they left it that they’re willing to raise rates after pausing. But this is not something that the Federal Open Market Committee is on the point of deciding right now. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Mr. Chairman, the SEP has the PCE inflation rate in 2023 at 3.1 percent. Meanwhile, the three-month annualized PCE is 2.1 percent, and you’ve achieved this without going to your 5.1 percent funds rate, which is what you have penciled in for this year. And you’ve also achieved it without the 1 percentage point increase in the unemployment rate, which you have penciled in for this year. I’m wondering if you’ve considered the idea of whether or not your understanding of the inflation dynamic may be wrong, and it’s possible to achieve these things without raising rates that high and also without the surge in unemployment. And, specifically, I wonder if you might comment on the speech given by Vice Chair Lael Brainard, who said, “To the extent that inputs other than wages may be responsible in part for important price increases for some nonhousing services, an unwinding of these factors.” In other words, it may not be wages. The idea that it may not require unemployment rising to get this sector of inflation under control. Thanks. <NAME>CHAIR POWELL</NAME>. So a couple of things. First, on the forecast, if—you’re right—if you take very short-term three-month, say, measures of PCE—core PCE inflation, they’re quite low right now. But that’s because that’s driven by, you know, significantly negative readings from goods inflation. Most forecasters would think that the significantly negative readings will be transitory and that goods inflation will move up fairly soon, back up to its longer-run trend of something around zero, something like that. So a lot of forecasts would call for core PCE to go back up to 4 percent by the middle of the year, for example. So that’s really where the sustainable level is. It’s more like at 4 percent. So that would suggest there’s work left to do. You know, let’s say inflation does come down much faster than we expect, which is possible. As I mentioned, you know, obviously our policy is data dependent. We would take that into account. In terms of the non—sorry, the core nonhousing services, as I mentioned earlier, it’s a very diverse sector, six or seven sectors. And so sectors that represent 55 or 60 percent of that— subsectors of that sector are—we think are sensitive to slack in the economy, sensitive to the labor market in a way, but some of the other sectors are not. And, for example, you know, financial services is a big sector that’s really not driven by labor markets—wages. So that’s why I said there are a number of things that will affect—take restaurants, right? So, clearly, labor is important for restaurants but so are food prices. And, you know, transportation services is going to be driven by fuel prices, for example. So there are lots of things in that mix that will drive inflation. I would say overall, though, my own view would be that you’re not going to have, you know, a sustainable return to 2 percent inflation in that sector without a better balance in the labor market. And I don’t know what that will require in terms of increased unemployment, your question. I do think there are a number of dimensions through which the labor market can soften. And so far, we’ve got—as I mentioned, in goods, we have inflation moving down without the softening in the labor market. I think most forecasters would say that unemployment will probably rise a bit from here. But I still think—I continue to think that there’s a path to getting inflation back down to 2 percent without a really significant economic decline or a significant increase in unemployment. And that’s because the—you know, the setting we’re in is quite different. The inflation that we originally got was very much a collision between very strong demand and hard supply constraints, not something that you really have seen in prior— you know, in prior business cycles. And so now we see goods inflation coming down for the reasons we thought, and we understand why housing inflation will come down. And I think will—a story will emerge on the nonhousing services sector soon enough. But I think there is— there’s ongoing disinflation, and we don’t yet see weakening in the labor market. So we’ll have to see. <NAME>STEVE LIESMAN</NAME>. Can we get there with 5 percent? <NAME>CHAIR POWELL</NAME>. Certainly possible. Yeah. Absolutely it’s possible. You know, it’s a question—no one really knows. I think it’s because this is not like the other business cycles in so many ways. It may well be that as—yeah, as—that it will take more slowing than we expect—than I expect to get inflation down to 2 percent. But I don’t—that’s not my base case. My base case is that the economy can return to 2 percent inflation without a really significant downturn or a really big increase in unemployment. I think that’s a possible outcome. I think many, many forecasters would say it’s not the most likely outcome. But I would say there’s a chance of it. <NAME>MICHELLE SMITH</NAME>. Michael. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg TV and Radio. I’d like to pick up on what you were just saying about a substantial downturn and ask, with the full weight of your tightening not in place yet and with the progress against inflation, there’s still a lot of talk about very, very slow growth going forward in 2023. And the recession indicators are all suggesting that we are going to see recession this year. So I’m wondering if you’ve changed your view or you have a more nuanced view of what you think the danger to economic growth is going forward and whether you’re very close to perhaps tipping it into the wrong place, which calls for more restraint on your part. <NAME>CHAIR POWELL</NAME>. So I do think you—most forecasts and, you know, my own assessment would be that that growth will continue—positive growth will continue but at a subdued pace as it did last year. We had growth of—GDP growth of 1 percent last year and also final sales growth, which we think is a better indicator, of about 1 percent. I think, you know, most forecasts and certainly my assessment would be that growth will continue at a fairly subdued level this year. There are other factors, though, that need to be considered. You will have seen that the global picture is improving a bit, and that will matter for us, potentially. The labor market remains very, very strong, and that’s job creation, that’s wages. As inflation does come down, sentiment will improve. You also—state and local governments are really flush these days with, you know, money, and many of them are considering tax cuts or even sending checks. So I think that’s going to support—they’re also spending a lot. There’s a lot of spending coming in the construction pipeline, both private and public. And so that’s going to support economic activity. So I think there’s a good chance that those factors will help support positive growth this year. And that’s my base case, is that there will be positive growth this year. <NAME>MICHELLE SMITH</NAME>. Okay, Rich. <NAME>RICH MILLER</NAME>. Thank you. Rich Miller from Bloomberg. First off, how are you doing? <NAME>CHAIR POWELL</NAME>. Fine. Thanks. Fine. <NAME>RICH MILLER</NAME>. Good. Second off, I think, earlier on in the press conference, you said you need to see substantially more evidence of inflation coming down. Can you give us some idea of what you’re thinking of? You mentioned three months—that we’ve seen three months in a row. Governor Waller suggested he might want to see six months. And so is it just the inflation data, or do you have to see the labor market coming back into better balance to have that “substantially more evidence” metric? <NAME>CHAIR POWELL</NAME>. So I don’t think there’s, you know, going to be a light switch flipped or anything like that. I think it’s just an accumulating—accumulation of evidence. So, of course, we’ll be looking—by the time of the March meeting, we’ll have two more employment reports, two more CPI reports, and we’ll be looking at those carefully as all of us will. And we’ll be asking ourselves, what are they telling us? And soon after that, we’ll have another ECI wage report, which, as you know, is a report that we like because it adjusts for composition and it’s very complete. And, you know, the one we got, I guess it was yesterday, was some—was constructive. It’s—you know, it shows wages coming down but still at a high level. They’re still at a level that’s way above—well above where they were before the pandemic. So I don’t want to put a number on it in terms of months, but as the accumulated evidence comes in, it’s going to be reflected in our assessment of the outlook, and that will be reflected in our policy over time. But I will say, though, we—you know, it is our job to restore price stability and achieve 2 percent inflation for the benefit of the American public. We’re not—market participants have a very different job. It’s a fine job. It’s a great job. In fact, I did that job for years but in one form or another. But, you know, we have to deliver that. And so we are strongly resolved that we will, you know, complete this task because we think it has benefits that will, you know, support economic activity and benefit the public for many, many years. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Michelle. Thank you, Fed Chairman, for taking the questions. So you’ve talked about we had solid job growth. Edward Lawrence from Fox Business, by the way. We had solid job growth, a slight falling in the increase in consumer spending. It seems so far it’s been relatively mild from the economy to go to—from a 9.1 percent CPI inflation to 6.5 percent CPI inflation. Is the hard part yet to come to go from 6.5 to 2? <NAME>CHAIR POWELL</NAME>. I don’t think we know, honestly. You know, the—so we, of course, expected goods inflation to start coming down by the end of 2021, and it didn’t come down all through ’22. And now it’s coming down, and it’s come down pretty fast. So I would say these are—this is not a standard business cycle where you can look at the last 10 times there was a global pandemic and we shut the economy down and Congress did what it did and we did what we did. It’s just—it’s unique. So I think certainty is just not appropriate here. Inflation—it’s just harder to forecast inflation. It may come down faster. It may take longer to come down. And, you know, our job is to deliver inflation back to target, and we will do that. But I think we’re going to be cautious about declaring victory and, you know, sending signals that we think that the game is won because, you know, it’s—we’ve got a long way to go. It’s just—it’s the early stages of disinflation. And it’s most welcome to be able to say that we are now in disinflation, but that’s great. But we just see that it has to spread through the economy and that it’s going to take some time. That’s all. <NAME>EDWARD LAWRENCE</NAME>. Do you—how long do you see then, the federal funds rate remaining at this elevated level? <NAME>CHAIR POWELL</NAME>. You know, so—again, my forecast and that of my colleagues as you will see from the SEP and—I mean, there are many different forecasts, but, generally, it’s a forecast of slower growth, some softening in labor market conditions, and inflation moving down steadily but not quickly. And, in that case, if the economy performs broadly in line with those expectations, it will not be appropriate to cut rates this year, to loosen policy this year. Of course, other people have forecasts with inflation coming down much faster, that’s a different thing. You know, if that happens—inflation comes down much faster, you know, then we’ll be seeing that, and it will be incorporated into our thinking about policy. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Thank you, Chair Powell. Simon Rabinovitch with the Economist. May I ask a further question about the language around “ongoing increases?” That, of course, implies at least two further rate rises. If you look at fed fund and futures pricing, the implication is that you’ll raise rates one more time and then pause. Are you concerned about that divergence or do you think, if everything breaks right, is that a plausible outcome? <NAME>CHAIR POWELL</NAME>. I’m not particularly concerned about the divergence, no, because it is largely due to the market’s expectation that inflation will move down more quickly. I think that’s the bigger part of that. So, again, as I just mentioned, we—you know, our forecasts— different participants have different forecasts, but, generally, those forecasts are for continued subdued growth, some softening in the labor market but not a recession, not a recession. And we have inflation moving down, you know, into the—somewhere in the mid-threes or maybe lower than that this year. We’ll update that in March, but that’s what we thought in December. Markets are past that. They show inflation coming down, in some cases, much quicker than that. So we’ll just have to see. And we have a different view and—a different view, it’s a different forecast, really. And given our outlook, I just—I don’t see us cutting rates this year if we get—if our outlook turns true, as I mentioned just now. If we do see inflation coming down much more quickly, that’ll play into our policy setting, of course. <NAME>MICHELLE SMITH</NAME>. Scott. <NAME>SCOTT HORSLEY</NAME>. Hi, Chair Powell. Scott Horsley from NPR. One of the changes in the statement this month is that the Committee is no longer listing public health as among the data points you’ll consider in assessing conditions. What should we make of that? Does the Federal Reserve no longer see the pandemic as weighing on the economy? <NAME>CHAIR POWELL</NAME>. That’s the general sense of it. Look, we understand—I personally understand well that COVID is still out there, but that it’s no longer playing an important role in our economy. And, you know, we’ve kept that statement in there for quite a while, and I think we just—we knew we would take it out at some point. There’s never a perfect time, but we thought that—you know, people are handling it better, and the economy and the society are handling it better now. It doesn’t really need to be in a—you know, in the Fed’s monthly, you know, postmeeting statement as an ongoing economic risk as opposed to, you know, a health issue. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. I wanted to go back to another thing that Fed Vice Chair Lael Brainard said recently. She said she doesn’t see signs of a wage–price spiral, and I’m wondering if you agree with that. <NAME>CHAIR POWELL</NAME>. I do. Yeah, I do. You don’t see that yet. But the whole point is, you know, if you—once you see it, you have a serious problem. That means that, effectively, in people’s decisionmaking, inflation has become a really salient issue. And once that happens— that’s what we can’t allow to happen. And, you know, so that’s why we worry that the longer we’re at this and the longer people are talking about inflation all day long, every day, you know, the more risk of something like that. But no, there’s not much—it’s more of a risk. It always has been more of a risk than anything else. By the way, I think it’s becoming less salient. And people are—you know, we pick that up in conversations. And I’ve seen some data, too, that show people are, you know, gradually—they’re glad that inflation is coming down. People really don’t like inflation. And as we see it coming down, that could also add a boost to economic activity. You look at the sentiment surveys now, and they’re very, very low with 3½ percent unemployment and, you know, high wage increases nominally by historical standards. Why can that be? It has to be inflation, right? So I think once inflation is seen to be coming down in coming months, even you will also see a boost to sentiment, I hope. <NAME>NANCY MARSHALL</NAME>-GENZER. So that’s what you’re looking at most closely, is consumer expectations? <NAME>CHAIR POWELL</NAME>. That’s at the very heart, is consumers and businesses that, you know, are the—essentially, we believe that expectations of future inflation are a very important part of the process of creating inflation. That’s a sort of bedrock belief. In one way or another, it has to be. We think it’s important. And, in this case, I would say, the risk eight months ago or so, longer-term inflation expectations had moved up. We moved quite vigorously last year. Expectations are—seem to be well anchored, including at the shorter end now, not just the longer end. So it’s, you know—and that’s—I think that’s very reassuring. I think, you know, the markets have decided, and the public has decided, that inflation is going to come back down to 2 percent and it’s just a matter of us following through. That's immeasurably helpful to the process of getting inflation down. The fact that people now do generally believe that it will come down, that’ll be part of the process of getting it down. And it’s a very positive thing. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thank you, Chair Powell. Greg Robb from MarketWatch. In the minutes of the December meeting, there was a couple of sentences that struck people as important, when the Committee said participants talked about this unwarranted easing of financial conditions was a risk and it would make your life harder to bring inflation down. I haven’t seen—heard you talk much about that today or in the statement. So I was wondering, has that concern eased among members, or is that still something you’re concerned about? Thank you. <NAME>CHAIR POWELL</NAME>. I would put it this way. It’s something that we monitor carefully. Financial conditions didn’t really change much from the December meeting to now. They mostly went sideways or up and down but came out in roughly the same place. It’s important that the markets do reflect the tightening that we’re putting in place. As we’ve discussed a couple times here, there’s a difference in perspective by some market measures on how fast inflation will come down. We’re just going to have to see. I mean, I’m not going to try to persuade people to have a different forecast, but our forecast is that it will take some time and some patience and that we’ll need to keep rates higher for longer. But we’ll see. <NAME>MICHELLE SMITH</NAME>. Brendan, for the last question. <NAME>BRENDAN PEDERSEN</NAME>. Hi, Chair Powell. Brendon Pedersen with Punchbowl News. I wanted to ask if the Fed takes into account at all the debt ceiling when it comes to quantitative tightening, given the fact that rapid or faster quantitative tightening could bring us closer, faster to that drop-dead debt ceiling deadline. Could it play in effect as we get closer to that drop-dead deadline this summer? <NAME>CHAIR POWELL</NAME>. Look, I—it’s very hard to think about all the different possible ramifications. And I think the answer is, basically, I don’t think there’s likely to be any important interaction between the two, because I believe Congress will wind up acting, and—as it will and must, in the end, to raise the debt ceiling in a way that doesn’t risk, you know, the progress we’re making against inflation and the economy and the financial sector. I believe that that will happen. I believe it will happen. You know, we, of course, will monitor money market conditions carefully as—you know, as the process moves on. For example, the Treasury General Account will shrink down, and then it will grow back up. And we understand there’ll be lots of flows between there and the overnight repo facility and reserves. We understand all that. We’re watching it carefully. We’ll just be monitoring it. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. Before discussing today’s meeting, let me briefly address recent developments in the banking sector. In the past two weeks, serious difficulties at a small number of banks have emerged. History has shown that isolated banking problems, if left unaddressed, can undermine confidence in healthy banks and threaten the ability of the banking system as a whole to play its vital role in supporting the savings and credit needs of households and businesses. That is why, in response to these events, the Federal Reserve, working with the Treasury Department and the FDIC, took decisive actions to protect the U.S. economy and to strengthen public confidence in our banking system. These actions demonstrate that all depositors’ savings and the banking system are safe. With the support of the Treasury, the Federal Reserve Board created the Bank Term Funding Program to ensure that banks that hold safe and liquid assets can, if needed, borrow reserves against those assets at par. This program, along with our long-standing discount window, is effectively meeting the unusual funding needs that some banks have faced and makes clear that ample liquidity in the system is available. Our banking system is sound and resilient, with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound. In addition, we are committed to learning the lessons from this episode and to work to prevent episodes—events like this from happening again. Turning to the broader economy and monetary policy: Inflation remains too high, and the labor market continues to be very tight. My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of long—of strong labor market conditions that benefit all. The U.S. economy slowed significantly last year, with real GDP rising at a below-trend pace of 0.9 percent. Consumer spending appears to have picked up this quarter, although some of that strength may reflect the effects of swings in the weather across the turn of the year. In contrast, 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 subdued growth to continue. As shown in our Summary of Economic Projections, the median projection for real GDP growth stands at just 0.4 percent this year and 1.2 percent next year, well below the median estimate of the longer-run normal growth rate. And nearly all participants see the risks to GDP growth as weighted to the downside. Yet the labor market remains extremely tight. Job gains have picked up in recent months, with employment rising by an average of 351,000 jobs per month over the last three months. The unemployment rate remained low in February at 3.6 percent. The labor force participation rate has edged up in recent months, and wage growth has shown some signs of easing. However, with job vacancies still very high, labor demand 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 wages and prices. The median unemployment rate projection in the SEP rises to 4.5 percent at the end of this year and 4.6 percent at the end of next year. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in January, total PCE prices rose 5.4 percent; excluding the volatile food and energy categories. Core PCE—excluding those, core PCE prices rose 4.7 percent. In February, the 12-month change in the CPI came in at 6 percent, and the change in the core CPI was 5.5 percent. Inflation has moderated somewhat since the middle of last year, but the strength of these recent readings indicates that inflation pressures continue to run high. The median projection in the SEP for total PCE inflation is 3.3 percent for this year, 2.5 percent next year, and 2.1 percent in 2025. The process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy. 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 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 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 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by ¼ percentage point, bringing the target range to 4¾ to 5 percent. And we are continuing the process of significantly reducing our securities holdings. Since our previous FOMC meeting, economic indicators have generally come in stronger than expected, demonstrating greater momentum in economic activity and inflation. We believe, however, that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond. As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation; instead, we now anticipate that some additional policy firming may be appropriate. We will closely monitor incoming data and carefully assess the actual and expected effects of tighter credit conditions on economic activity, the labor market, and inflation, and our policy decisions will reflect that assessment. In our SEP, each FOMC participant wrote down an appropriate path for the federal funds rate based on what that 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 5.1 percent at the end of this year, 4.3 percent at the end of 2024, and 3.1 percent at the end of 2025. These are little changed from our December projections, reflecting offsetting factors. 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 meeting— decisions meeting by meeting, based on the totality of the vincoming data and their implications for the outlook for economic activity and inflation. We remain committed to bringing inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored. Reducing inflation is likely to require a period of below-trend growth and some softening in 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 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. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. How confident is the Committee that the recent stress that we’ve seen, and you’ve alluded to, is contained at this point and that deposit flight among midsize lenders in particular has ceased? <NAME>CHAIR POWELL</NAME>. Thanks. So I, I guess our view is that the banking system is sound and it’s resilient—it’s got strong capital [and] liquidity. We took powerful actions with [the] Treasury and the FDIC, which demonstrate that all depositors’ savings are safe and that the banking system is safe. Deposit flows in the banking system have stabilized over the last week. And the last thing I’ll say is that we’ve undertaken—we’re undertaking a thorough internal review that will identify where we can strengthen supervision and regulation. <NAME>COLBY SMITH</NAME>. Okay, just a quick follow-up: I mean, given all the stress and the uncertainty that you’ve also alluded to in the statement, how seriously was a—was a pause considered for this meeting? <NAME>CHAIR POWELL</NAME>. So we considered—we did consider that in the days running up to the meeting, and you see the decision that we made, which I’ll say a couple things about. First, it was supported by a very strong consensus, and I’ll be happy to explain why. And, really, it is that the intermeeting data on inflation and the labor market came in stronger than expected and, really, before the recent events, we were clearly on track to continue with ongoing rate hikes. In fact, as of a couple of weeks ago, it looked like we’d need to raise rates over the course of the year more than we had expected at the time of the SEP in December—at the time of the December meeting. We are committed to restoring price stability, and all of the evidence says that the public has confidence that we will do so—that we’ll bring inflation down to 2 percent over time. It is important that we sustain that confidence with our actions as well as our words. So we also assess, as I mentioned, that the events of the last two weeks are likely to result in some tightening credit conditions for households and businesses and thereby weigh on demand, on the labor market, and on inflation. Such a tightening in financial conditions would work in the same direction as rate tightening. In principle, as a matter of fact, you can think of it as being the equivalent of a rate hike or perhaps more than that; of course, it’s not possible to make that assessment today with any precision whatsoever. So our decision was to move ahead with the 25 basis point hike and to change our guidance, as I mentioned, from ongoing hikes to some, some additional hikes maybe—some policy firming may be appropriate. So going forward, as I mentioned, in assessing the need for, for further hikes, we’ll be focused as always on the incoming data and the evolving outlook and, in particular, on our assessment of the actual and expected effects of credit tightening. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, can you explain the difference between ongoing rate increases and firming? Does firming imply a rate increase per se, or could policy firm without you increasing rates? <NAME>CHAIR POWELL</NAME>. No, I think it’s, it’s meant to refer to our policy rate. Really, I would focus on, on the words “may” and “some,” as opposed to “ongoing.” Ongoing. So we, we clearly were—what we were doing there was taking onboard the—trying to reflect the uncertainty about what will happen. I mean, it, it’s possible that this will turn out to have very modest effects—that these events will turn out to be very, very modest effects on the economy, in which case inflation will continue to be strong—in which case, you know, the path will look— might look different. It’s also possible that this potential tightening will contribute significant tightening in credit conditions over time and, in principle, if that—that means that monetary policy may have less work to do. We simply don’t know. So. <NAME>STEVE LIESMAN</NAME>. Do you have concerns that the recent—that the hike you did today could further exacerbate the problem in the banks? <NAME>CHAIR POWELL</NAME>. No. I mean, with our monetary policy, we’re, we’re really focused on macroeconomic outcomes. In particular, we’re focused on, on this potential credit tightening and what can that produce in the way of tighter credit conditions. I think when we think about the situation with the banks, we’re focused on our—on our financial stability tools, in particular our lending facilities, the debt—sorry, the discount window, and also the new facility. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, in your testimony two weeks ago, you had indicated you thought the terminal rate would be higher. Obviously, that was before the stress in the banking sector. And I realize there’s a lot of uncertainty, but can you—can you explain at all to what extent your forecasts or those of your colleagues or those of the Board staff incorporated today a material tightening of credit availability because of the stress in the banking sector, or are you waiting to see it in the data before you incorporate that potential tightening into your forecasts? <NAME>CHAIR POWELL</NAME>. So, you know, we have just come from an FOMC meeting and, you know, the people who write the minutes will be very carefully counting, but I’ll tell you what I heard. What I heard was significant number of people saying that they anticipated there would be some, some tightening of credit conditions and that would really have the same effects as, as our policies do, and that therefore they were including that in their assessment and that if that did turn out not to be the case, in principle you would need more rate hikes. So some people did reflect that in their FOMC—in their SEP forecasts. I think there may also just have been— remember, this is 12 days ago. You know, we’re trying to assess something that just is so recent and it’s people—you know, it’s very difficult, there’s so much uncertainty. So December was a good place to start, and we wound up with—we wound up with very similar outcomes for December. And, you know, in a way, the early—the data in the first part—the first five weeks of the intermeeting period pointed to stronger inflation and stronger labor markets. So that pointed to higher rates. And then this, this latter part kind of—the possibility of credit conditions tightening really, really offset that, effectively. <NAME>NICK TIMIRAOS</NAME>. To follow up: Have you considered at all whether your primary tool, the funds rate, is going to be enough to sustain the kind of tighter financial conditions that you believe will be necessary without doing significant damage to the banking sector? Have you, for example, considered changing reserve requirements, selling assets out of the System Open Market Account, as a way to better achieve tighter financial conditions that don’t accelerate deposit erosion, for example, from banks? <NAME>CHAIR POWELL</NAME>. You know, we know that we have other, other tools in effect, but no, we think our monetary policy tool works, and we think, you know, many, many banks—our rate hikes were well telegraphed to the market, and many banks have managed to handle them. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to ask—you, along with the FDIC and the Treasury—the Fed Board decided to invoke the systemic risk exception to allow uninsured depositors to be protected at these two banks. I was just wondering if you could speak to why that decision was made. Was it purely a confidence issue, or was there a concern that there would be some sort of economic contagion or financial contagion from the failure of these banks? <NAME>CHAIR POWELL</NAME>. The issue was really not about those specific banks, but about the risk of a contagion to, to other banks and to the financial markets more broadly. That was the issue. <NAME>VICTORIA GUIDA</NAME>. Okay, and then can you also—just to follow up, can you speak to the role that you will be playing in the Fed’s internal investigation on its supervision and regulation? <NAME>CHAIR POWELL</NAME>. So Vice Chair Barr is, is of course leading that review. And he’s responsible for it in his capacity as Vice Chair for Supervision. We—I realized, you know, right away that, that there was going to be a need for review. I mean, the question we’re all asking ourselves over that first weekend was, how did this happen? And so what we did was, early Monday morning, we sat down and said, “Let’s do this.” And he, he was obviously going to lead it in his capacity. So I don’t—my role was to announce it, and I get briefed on it, but I’m not involved in, in the work of it. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Hi, Chair Powell. Howard Schneider from Reuters. So I want to go back to your February press conference. You mentioned the word “disinflation,” I believe, 9 or 10 times, a process that you felt was—I forget the word you used—but gratefully under way, or something like that. Is disinflation still occurring in the U.S. today? <NAME>CHAIR POWELL</NAME>. Yes. I mean, what actually happened, Howard, was I got the question 12 times, so it’s—maybe it’s a feature, not a bug. But, so, but yeah, absolutely the same—the story is intact, so it’s really three parts, right? Goods inflation has been coming down now for six months; it’s proceeding more slowly than we would have liked, but it’s certainly proceeding. Housing services is, is really a matter of time passing. We continue to see the new leases being signed at much lower levels of inflation. So that’s 44 percent of the—of the core PCE index, where you’ve got a story that’s ongoing. Where we didn’t have in February, and we still don’t have now, is a sign of progress in the nonhousing services sector. And that is, you know, that’s just something that will have to come through softening demand and perhaps some softening in labor market conditions. We don’t see that yet. And that’s, that’s of course 56 percent of the index. So the story is pretty much the same. I will say that the inflation data that we got, to your point, really pointed to stronger inflation. <NAME>HOWARD SCHNEIDER</NAME>. If I could follow up on that, I was curious why you don’t see more coming from the credit crunch, because it seems to me that’s something that you’d actually welcome to a degree and expect. And are you not seeing more coming from that because you don’t know, or because you just don’t want to have another round of wishful thinking? <NAME>CHAIR POWELL</NAME>. So it’s really just a question of not knowing at this point. There’s a great deal of literature on the connection between tighter credit conditions, economic activity, hiring, and inflation. Very large body of literature. The question is, how significant will this credit tightening be and how sustainable it will be? That’s, that’s the issue. And we don’t really see it yet, so, so people are making estimates, you know, people are publishing estimates, but it’s very kind of rule-of-thumb guesswork almost at this point. But we think it’s, it’s potentially quite real and that argues for, you know, being alert as we go forward. As we think about further rate hikes for us, we’ll be paying attention to the actual and expected effects from that. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Jeanna Smialek from the New York Times. Thank you for taking our questions. I wonder if you could talk a little bit—I know that you’ve got your internal review coming, but I wonder if you could talk a little bit about what you think happened with oversight at Silicon Valley Bank and whether this suggests that something about regulation and supervision needs to actually change going forward. And I wonder, you know, how can the American people have confidence that there aren’t other weaknesses out there in the banking system, given that this one got missed, as you noted? <NAME>CHAIR POWELL</NAME>. So let me say what, what I think happened, and then I’ll come to the questions around supervision. So, at a basic level, Silicon Valley Bank management failed badly—they grew the bank very quickly, they exposed the bank to significant liquidity risk and interest rate risk, didn’t hedge that risk. We now know that supervisors saw these risks and, and intervened. We know that the public saw all this. We know that SVB experienced an unprecedentedly rapid and massive bank run. So this is a—this is a very large group of connected depositors—concentrated group of connected depositors in a very, very fast run, faster than historical record would suggest. So as for us—so for our part, we’re doing a review of supervision and regulation. My only interest is that we identify what went wrong here. How did this happen is the question. What went wrong? Try to find that. We will find that. And then make an assessment of what are the right policies to put in place so that it doesn’t happen again, and then implement those policies. It would be inappropriate for me at this stage to offer my views on what the answers might be. You know, I simply can’t do that. Vice Chair Barr is leading this, and I think he’s testifying next week. So—but that will be up to him. So that’s really where it is. You know, the, the review is going to be thorough and transparent. It is clear—really to your last question—it’s clear that we do need to strengthen supervision and regulation. And I, I assume that there will be recommendations coming out of the report, and I, I plan on supporting them and supporting their implementation. <NAME>JEANNA SMIALEK</NAME>. And the final point—you know, can we feel confident that these weaknesses don’t exist elsewhere, given that they got missed at this bank? <NAME>CHAIR POWELL</NAME>. These are not weaknesses that are—that are at all broadly through the banking system. This was—this was a bank that was an outlier in terms of both its percentage of, of uninsured deposits and in terms of its holdings of duration risk. And again, supervisors did get in there, and, and they were, as you know, obviously, you know they were— they were on this issue, but nonetheless, this, this still happened. And so that’s really the nature of the interview—sorry, of the review—is to discover that. <NAME>MICHELLE SMITH</NAME>. Let’s go to Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. You’ve been very consistent in saying that the Fed would be raising interest rates and then holding them there for quite some time. Following today’s decision, the markets have now priced in one more increase in May, and then every meeting the rest of this year they’re pricing in rate cuts. Are they getting this totally wrong from the Fed, or is there something different about the way you’re looking at it, given that you’re now thinking that moves might be appropriate as opposed to ongoing? <NAME>CHAIR POWELL</NAME>. So we published an SEP today, as you will have seen, and it shows that basically participants expect relatively slow growth, a gradual rebalancing of supply and demand in the labor market, with inflation moving down gradually. In that most likely case, if that happens, participants don’t see rate cuts this year. They just don’t. I would just say: As always, the path of the economy is uncertain, and policy is going to reflect what actually happens rather than what we write down in the SEP. But that’s not our baseline expectation. <NAME>MICHAEL MCKEE</NAME>. Well, if I could follow up and ask, as you look forward into the rest of the year here, are you saying that what you see and the 5.1 percent basically consensus is based on being—it will be sufficiently restrictive? Or is it leavened by the idea of you don’t know what's going to happen? In other words, what should people think about in terms of how the Fed thinks about how far it is from the terminal? <NAME>CHAIR POWELL</NAME>. It’s going to depend. Remember, we’re looking—for purposes of our monetary policy tool, we’re looking at what’s happening among the banks and asking, is there going to be some tightening in credit conditions? And then we’re thinking about that as effectively doing the same thing that rate hikes do. So, in a way, that substitutes for rate hikes. So, the key is, we have to have—policy has got to be tight enough to bring inflation down to 2 percent over time. It doesn’t all have to come from rate hikes: It can come from, you know, from tighter credit conditions. So we’re looking at, and we, we—it’s highly uncertain how long the situation will be sustained or how significant any of those effects would be, so we’re just going to have to watch. In the meantime, you know—obviously, at the end of the day, we will do enough to bring inflation down to 2 percent. No one should doubt that. <NAME>MICHELLE SMITH</NAME>. Let’s go to Rachel Siegel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. I know we’ve talked a bit about how Silicon Valley Bank was unique to a certain sector of the economy, but there’s also growing concern that there are financial stability risks from the commercial real estate market and loans that will begin to roll over later this year and next, and that smaller regional banks also disproportionately hold those loans. Is there a risk that could mimic the kind of—what we saw with SVB to banks that disproportionately are focused in commercial real estate? <NAME>CHAIR POWELL</NAME>. So, you know, we’re well aware of the concentrations people have in commercial real estate. I really don’t think it’s comparable to this. The, the banking system is, is strong, it is sound, it is resilient, it’s well capitalized, and I really don’t see that as at all analogous to this. <NAME>RACHEL SIEGEL</NAME>. And one other question: Would you be open to an independent investigation, separate from the Fed’s probe? <NAME>CHAIR POWELL</NAME>. I welcome—it’s 100 percent certainty that there will be independent investigations and outside investigations and all that. So we welcome—when a bank fails, there are investigations. And, of course, we welcome that. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Inflation has been rather sticky, so do you need help from the fiscal side to get inflation down faster? <NAME>CHAIR POWELL</NAME>. We don’t assume that. We don’t give advice to the fiscal authorities, and we assume that—we take fiscal policy as, as it comes to our front door, stick it in our model along with a million other things. We have responsibility for price stability. The Federal Reserve has responsibility for that. And nothing’s going to change that. So—and we will get inflation down to 2 percent in time. <NAME>EDWARD LAWRENCE</NAME>. And if I can follow on that, but they’re working—the spending that’s happened is working against what you are doing, right? So it’s prolonging inflation. <NAME>CHAIR POWELL</NAME>. You have to look at, at the impulse from spending because spending was, of course, tremendously high during the pandemic, and then, as the pandemic programs rolled off, spending actually came down, so the—this sort of fiscal impulse is actually not what’s driving inflation right now. It was—it was at the beginning perhaps part of what was driving inflation, but that’s not really the story now. <NAME>MICHELLE SMITH</NAME>. Let’s go to Neil Irwin. <NAME>NEIL IRWIN</NAME>. Hi, Chair Powell. Neil Irwin with Axios. Two questions about aspects of the government’s response on Silicon Valley Bank two weekends ago. First, why is this new bank funding facility done under emergency 13(3) authority, as opposed to expansion of the discount window, changing the terms of the discount window that’s been around a long time? And, second, can you discuss the Fed’s role in the—in the FDIC guarantee of uninsured depositors and why there’s $143 billion on your balance sheets last week, supporting that deposit guarantee? <NAME>CHAIR POWELL</NAME>. Sure. So 13(3) seemed like the right—we have a little more flexibility under section 13(3). We’ve done quite a lot under the discount window as well. We needed to do a special facility that was designed a certain way, so we did it under 13(3). Really no magic to that. It’s only available in unusual and exigent circumstances, and it has to be— meet certain requirements, but it seemed to be the right place. So with the FDIC, we’re just, we’re lending to the, in effect, we’re—we’re lending to the bridge bank. So that’s where the funds came from, and it’s—it’s a loan that’s 100 percent guaranteed by the FDIC, so there’s no risk in it for us. <NAME>MICHELLE SMITH</NAME>. Okay, Chris Rugaber. <NAME>CHRIS RUGABER</NAME>. Thank you. Chris Rugaber at Associated Press. The SEB—SEP suggests one more rate hike, as does the change in the language in the statement and which suggests that you’re perhaps nearing the end of a cycle of rate hikes. Do you feel, though, that if inflation remains high, you’ll be able to resume additional hikes as needed, or have you somewhat tied your hands here with these signals about rate hikes coming to an end? Thank you. <NAME>CHAIR POWELL</NAME>. No, absolutely not. No, we, if we need to raise hike—raise rates higher, we will. I think for now though we, we—as I’ve mentioned, we see the likelihood of, of credit tightening. We know that can have, you know, an effect on the macroeconomy, on demand, on labor market, on inflation, and we’re—we’re going to be watching to see what that is. And we’ll also be watching what’s happening with inflation and in the labor market. So we’ll be watching all those things, and of course we will—we will eventually get to [a] tight enough policy to bring inflation down to 2 percent. We’ll find ourselves at that place. <NAME>MICHELLE SMITH</NAME>. Kyle. <NAME>KYLE CAMPBELL</NAME>. Hi, Chair Powell—thanks for taking the question. Kyle Campbell with American Banker. I have a couple questions about the balance sheet. First of all, I’m curious at what point the financial supports that the Fed is extending through the discount window and through its enhanced lending facility might be at odds with the objective of reducing the balance sheet. And I’m also curious what your thoughts are on the—not just the availability of reserves but the distribution of them throughout the banking system and at what point you might be concerned about it being scarce for certain banks. <NAME>CHAIR POWELL</NAME>. So—People think of QE and QT in different ways, so let me be clear about how I’m thinking about these recent developments. So the recent liquidity provision that has increased the size of our balance sheet but the intent and the effects of it are very different from what we—from when we expand our balance sheet through purchases of longer-term securities. Large-scale purchases of long-term securities are, are really meant to alter the stance of policy by pushing down—pushing up the price and down the rates, longer-term rates, which supports demand through channels we understand fairly well. The balance sheet expansion is really temporary lending to banks to meet those special liquidity demands created by the recent tensions; it’s not intended to directly alter the stance of monetary policy. We do believe that it’s working. It’s having its intended effect of bolstering confidence in the banking system and thereby forestalling what might otherwise have been an abrupt and outsized tightening in financial conditions. So that’s working. In terms of the distribution of reserves, we, we don’t see ourselves as, as running into reserve shortages. We, we think that our program of allowing our balance sheet to, to run off predictably, predicatbly and passively is working. And of course we’re, we’re always prepared to, to change that if that changes. But we don’t see any evidence that that’s changed. <NAME>MICHELLE SMITH</NAME>. Catarina. <NAME>CATARINA SARAIVA</NAME>. Hi, Chair. Catarina Saraiva with Bloomberg News. The minutes of the January–February meeting, the last meeting, indicate that you discussed the possibility of runs on nonbank financial institutions and the impact of large unrealized losses on bank portfolios. Can you talk a little bit more about that discussion—kind of what was talked about in light of that, and then why didn’t the Fed, you know, do anything about that at that point to ultimately prevent, you know, what happened this month? <NAME>CHAIR POWELL</NAME>. I mean, to be honest, I don’t—I don’t recall the specifics of that. It’s been quite an interesting seven weeks. But, but I will tell you, though, that we have—there have been presentations about, about interest rate risk. I mean, it’s been in all the newspapers. It’s not a surprise that there are institutions that have—that have had unhedged long positions in long- duration securities that have lost value as, as longer-term rates have gone up due to our rate increases. So that’s, that’s not a surprise. I, I think, as you know, as is now in the public record, the supervisory team was apparently engaged, very much engaged with the bank repeatedly, and was escalating but, you know, nonetheless, what happened happened. And so that’s really the purpose of—one way to think about the review that Vice Chair Barr is conducting is to try to understand how that happened and try to understand how we can do better and what policies we need to change. I mean, one thing is the speed of the—I’ll come back to that, the speed of the run, it’s very different from what we’ve seen in the past, and it does kind of suggest that there’s a need for possible, you know, regulatory and supervisory changes just because supervision and regulation need to keep up with what’s, what’s happening in the world. <NAME>CATARINA SARAIVA</NAME>. Can you confirm whether or not the Board knew about these escalations by the examiners in San Francisco? <NAME>CHAIR POWELL</NAME>. I will have to come back to you on that. Yeah, I don’t know. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Hi. Simon Rabinovitch with the Economist. Thank you very much. Chair Powell, you stated twice today that all depositors’ savings in the banking system are safe. Are you saying that de facto deposit insurance covers all savings? Shouldn’t Congress have a say in that? and, just by way of example, if a bank with less than $1 billion in assets failed, are you promising to bail out all of its depositors? Thanks. <NAME>CHAIR POWELL</NAME>. Well, I’m not saying anything more than I’m saying. So—but what I’m saying is you’ve seen that we have the tools to protect depositors when there’s a threat of serious harm to the economy or to—or to the financial system, and we’re prepared to use those tools. And I think depositors should assume that their—that their deposits are safe. <NAME>MICHELLE SMITH</NAME>. Let’s go to Greg Robb. <NAME>GREG ROBB</NAME>. Thank you, Chair Powell. Greg Robb from MarketWatch. I was wondering if you could give us a little bit more color. You gave just a little bit of color. You said during the first week of the Silicon Valley weekend—you said the question you guys asked was “How did this happen?” when you saw Silicon Valley Bank. So I was wondering if you could go to the Credit Suisse merger. I mean, wasn’t that the big gorilla in the room? Aren’t— didn’t you breathe a sigh of relief when that merger happened? Thanks. <NAME>CHAIR POWELL</NAME>. Sure. So, you know, we—that was really the Swiss government that we of course were, were following it over the course of the weekend, and we were engaged with their authorities in the way that you would expect, all the ways that you would expect. It seems to have been a positive outcome in the sense that the transaction was agreed to, and it has been— the markets have accepted it, and it seems to have gone well, and I think there was a concern that it might not go well. So coming into the middle of this week, yes, I would say that that is going well so far. <NAME>MICHELLE SMITH</NAME>. Nicole. <NAME>NICOLE GOODKIND</NAME>. Hi. Thank you, Chair Powell. Nicole Goodkind with CNN Business. In the Summary of Economic Projections, the FOMC sees the unemployment rate increasing to 4.5 percent this year. I’m wondering how you anticipate preventing this from snowballing while using the admittedly blunt tools at your disposal. <NAME>CHAIR POWELL</NAME>. So that’s just—that’s an estimate of what will happen as demand slows and as conditions soften in the labor market and it’s just—it’s a highly uncertain estimate. And, I mean, I was really—we have to bring inflation down to 2 percent. The costs of bringing it down—there are real costs to bringing it down to 2 percent, but the costs of failing are much higher. And if you read your history, as I’m sure you have, you can see that if the central bank doesn’t get inflation back in place, get inflation—make sure that inflation expectations remain anchored, you can have a long series of years where inflation is high and volatile, and it’s hard to invest capital, it’s hard for an economy to perform well. And we’re looking to avoid that and, you know, to get back to where we need to be—back to where we were for a quarter century, and get there as quickly as we can. <NAME>NICOLE GOODKIND</NAME>. But I guess the question is, historically, it’s hard to— historically, it’s been hard to contain unemployment and I, I—the question is, do you worry about some sort of snowball effect, and how do you factor that into your projections and your thoughts? <NAME>CHAIR POWELL</NAME>. Well, it depends on whether you—so recessions tend to be nonlinear, and so they’re very hard to model. You know, the models all work in a kind of linear way—if you have more of this, you get more of that. But when a recession happens, the reactions tend to be nonlinear and that’s what—so we don’t know whether that’ll happen this time. We don’t know—if so, we don’t know how significant it will be, and so, you know, we’re very focused on getting inflation down because we know in the longer run that that is the thing that will most benefit the people we serve. That’s how we can have a long—you know, we’ve had very strong labor markets through these long expansions that we’ve had. Four of the five longest, or three of the four longest expansions in U.S. history have been really since the high-inflation period. And the reason was inflation wasn’t forcing the central bank to come in and stop an incipient or, or, you know, an expansion. You can have very, very long expansions without high inflation, and we had several of those, and they’re very good for people. You see late in an expansion—you see low unemployment, you see the benefits of wages going to people at the lower end of the wage spectrum. It’s just a place that we should try to get back to. <NAME>MICHELLE SMITH</NAME>. Jean. <NAME>JEAN YUNG</NAME>. Hi, Chair Powell. Jean Young with Market News. I just wanted to ask, with all the events of the past two weeks, do you still see a possibility of a soft landing for the U.S. economy? <NAME>CHAIR POWELL</NAME>. You know it’s, it’s too early to say, really, whether these events have had much of an effect. It’s hard for me to see how they would have helped the possibility—but I guess I would just say, it’s too early to say whether there really have been changes in that. You know, the question will be how long this period is sustained. The longer it’s sustained, then the greater will be the likely declines in—or tightening in credit standards, credit availability, so we’ll just have to see. I do still think, though, that there’s a—there’s a pathway to that. I think that pathway still exists and, you know, we’re certainly trying to find it. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. Just wondering: How many financial institutions have been issued matters requiring attention or matters requiring immediate attention citations at this point? <NAME>CHAIR POWELL</NAME>. How many? I don’t know. But those are serious—those are serious regulatory, in particular immediate attention, and that’s—and I guess there were six of them. So. <NAME>NANCY MARSHALL</NAME>-GENZER. And, and getting to the seriousness of it, how are you going to ensure that banks comply with these citations, take them seriously—how will you enforce them? <NAME>CHAIR POWELL</NAME>. That is a great question and is right in the heart of what the review will be doing under Vice Chair Barr’s leadership. So that’s, I think that’s where—that’s what you think about. What can we do to make sure that—but, again, that’s not for me to answer today. <NAME>NANCY MARSHALL</NAME>-GENZER. Do you have specific thoughts on that? <NAME>CHAIR POWELL</NAME>. Well I, I—see, if I did, I wouldn’t share them because I, I really, you know, this review is going on, and, you know, I want nothing other than us to find out what happened and why, figure out what we can do to do better, and then implement those changes. That’s all I want. It’s—For me to be giving you my half-formed, or partially informed, thoughts, it, you know, just isn’t appropriate. There’s a real serious review going on with, with people from all over the Federal Reserve System who are not connected to this, you know, to this work, not connected to this bank, and under, again, Vice Chair Barr’s leadership, and I’m confident that it will produce a satisfactory result. <NAME>MICHELLE SMITH</NAME>. Okay, we’ll go to Jennifer for the last question. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. Curious—how do you view financial conditions right now? If credit becomes expensive enough, choking off growth, as you said you’re watching for, would that situation warrant a rate cut? What situation would warrant a rate cut? And have the bank failures prompted any discussion around changing the implementation of the balance sheet runoff? Thank you. <NAME>CHAIR POWELL</NAME>. So we haven’t really talked about changing the balance sheet implementation—that’s not something we’ve discussed yet. As I mentioned, we’re always willing to change that if we conclude that it’s appropriate, but we’re really not seeing any signs there. Sorry, then the question before that was, just give me a— <NAME>JENNIFER SCHONBERGER</NAME>. Curious how you view financial conditions now and, if credit were to tighten enough, if that would prompt a rate cut. <NAME>CHAIR POWELL</NAME>. So financial conditions seem to have tightened—and probably by more than the traditional indexes say, because traditional indexes are focused a lot on [interest] rates and [prices of] equities, and they don’t necessarily capture lending conditions. So we think that, though. So there are other measures which, if they’re focused on, you know—bank lending conditions and things like that—they show some more tightening. The question for us, though, is, how significant will that be and how, you know—what will be the extent of it and what will be the duration of it? And then—and then, you know, once you have—once you know that, there’s a fair amount of research about how that, with broad uncertainty bands—how that works its way into the economy [and] over what period of time. And so, you know, we’ll be looking to see the first part of that—like how serious is this, and does it look like it’s going to be sustained, and if it is, you know, it could easily have a significant macroeconomic effect, and we would factor that into our policy decisions. I mentioned with rate cuts, rate cuts are not in our base case, and, you know, so that’s all I have to say. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. Before discussing today’s meeting, let me comment briefly on recent developments in the banking sector. Conditions in that sector have broadly improved since early March, and the U.S banking system is sound and resilient. We will continue to monitor conditions in the sector. We are committed to learning the right lessons from this episode and will work to prevent events like these from happening again. As a first step in that process, last week we released Vice Chair for Supervision Barr’s Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank. The review’s findings underscore the need to address our rules and supervisory practices to make for a stronger and more resilient banking system, and I am confident that we will do so. From the perspective of monetary policy, our focus remains squarely on our dual mandate to promote maximum employment and stable prices for the American people. My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. Today, the FOMC raised its policy interest rate by ¼ percentage point. Since early last year, we have raised interest rates by a total of 5 percentage points in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. We are also continuing to reduce our securities holdings. Looking ahead, we will take a data-dependent approach in determining the extent to which additional policy firming may be appropriate. I will have more to say about today’s monetary policy actions after briefly reviewing economic developments. The U.S. economy slowed significantly last year, with real GDP rising at a below-trend pace of 0.9 percent. The pace of economic growth in the first quarter of this year continued to be modest, at 1.1 percent, despite a pickup in consumer spending. Activity in the housing sector remains weak, largely reflecting higher mortgage, mortgage rates. Higher interest rates and slower output growth also appear to be weighing on business fixed investment. The labor market remains very tight. Over the first three months of the year, job gains averaged 345,000 jobs per month. The unemployment rate remained very low in March, at 3.5 percent. Even so, there are some signs that supply and demand in the labor market are coming back 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 sown— shown some signs of easing, and job vacancies have declined so far this year. But overall, labor demand still substantially exceeds the supply of available workers. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in March, total PCE prices rose 4.2 percent; excluding the volatile food and energy categories, core PCE prices rose 4.6 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 2 percent has a long way to go. 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, 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 highly attentive to the risks that high inflation pose—poses to both sides of our mandate, and we are strongly committed to returning inflation to our 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by ¼ percentage point, bringing the target range to 5 to 5¼ percent. And we’re continuing to [carry out] the process of significantly reducing our securities holdings. With today’s action, we have raised interest rates by 5 percentage points in a little more than a year. We are seeing the effects of our policy tightening on demand in the most interest rate–sensitive sectors of the economy, particularly housing and investment. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. In addition, the economy is likely to face further headwinds from tighter credit conditions. Credit conditions had already been tightening over the past year or so in response to our policy actions and a softer economic outlook. But the strains that emerged in the banking sector in early March appear to be resulting in even tighter credit conditions for households and businesses. In turn, these tighter credit conditions are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. In light of these uncertain headwinds, along with the monetary policy restraint we have put in place, our future policy actions will depend on how events unfold. In determining the extent to which additional policy firming may be appropriate to return inflation to 2 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. We, we will make that determination meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation. And we are prepared to do more if greater monetary policy restraint is warranted. We remain committed to bringing inflation back down to our 2 percent goal and to keep 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 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. <NAME>MICHELLE SMITH</NAME>. Thanks. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi. Jeanna Smialek, New York Times. Thanks for taking our questions. I wonder if you could tell us whether we should read the statement today as a suggestion that the Committee is prepared to pause interest rate increases in June. And I also wonder if the Fed staff has in any way revised their forecast for a mild recession from the March minutes and, if so, what a recession like what they’re envisioning would look and feel like when it comes to, for example, the unemployment rate. <NAME>CHAIR POWELL</NAME>. So, taking your question—of course, today our decision was to raise the federal funds rate by 25 basis points. A, a decision on a pause was not made today. You will have noticed that in the—in the statement from March, we had a sentence that said the Committee anticipates that some additional policy firming may be appropriate. That sentence is, is not in, in the statement anymore. We took that out, and instead we’re saying that, in determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account certain factors. So we—that’s a— that’s a meaningful change that we’re no longer saying that we anticipate. And so we’ll be driven by incoming data meeting by meeting. And, you know, we’ll approach that question at the June meeting. So the—the staff’s forecast is—so let me say—start by saying that that’s not my own most likely case, which is really that, that the economy will continue to grow at, at a modest rate this year. And I think that’s—so different people on the Committee have different forecasts. That’s, that’s my own assessment of the most likely path. [The] staff produces its own forecast, and it’s independent of the forecasts of, of the participants, which include the Governors and the Reserve Bank presidents, of course. And we think this is a healthy thing— that the, the staff is writing down what they really think. They’re not especially influenced by what the Governors think, and vice versa. The Governors are not taking what the staff says and just writing that down. So it’s actually good that the, the staff and individual participants can have different perspectives. So, broadly, the forecast was for a mild recession, and by that I would characterize as one in which the rise in unemployment is smaller than is—has been typical in modern-era recessions. I wouldn’t want to characterize the staff’s forecast for this meeting. We’ll, we’ll leave that to the minutes—but broadly, broadly similar to that. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Thank you, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. I’m wondering if you can talk about the account of possible effects of a debt-limit standoff. You’ve said repeatedly that the ceiling must be raised, but do you see any economics effects of even getting close to a default? And what type of situation would that look like? <NAME>CHAIR POWELL</NAME>. So I wouldn’t want to speculate specifically, but I will say this: These are fiscal policy matters, for starters, and they’re, they’re for Congress and the Administration—for the elected parts of the government to deal with. And they���re really consigned to them. From our standpoint, I would just say this: It’s essential that the debt ceiling be raised in a timely way, so that the U.S. government can pay all of its bills when they’re due. A failure to do that would be unprecedented. We’d be in uncharted territory, and the—and the consequences to the U.S. economy would be highly uncertain and could, could be quite a[d]verse. So I’ll just leave it there. We, we don’t give advice to either side. We just would point out that it—that it’s very important that this be done. And the, the other point I’ll make about that, though, is that no one should assume that the Fed can protect the economy from the potential, you know, short- and long-term effects of a failure to pay our bills on time. We, we— it’s, it would be so uncertain that it’s just as important that, that this—we never get to a place where we’re actually talking about or even having a situation where the U.S. government’s not paying its bills. <NAME>RACHEL SIEGEL</NAME>. And just a follow-up. Was discussion around the uncertainty of a possible standoff—did that affect today’s monetary policy decision at all? <NAME>CHAIR POWELL</NAME>. I wouldn’t say that it did. It was—of course, it’s something that came up. We talk a lot about risks to the—to the outlook, and that will—that come up. A number of people did raise that as a risk to the outlook. I wouldn’t say that it was important in today’s monetary policy decision. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, can you—oh, thank you. Steve Liesman, CNBC. Can you tell us what the Federal Reserve Board did in the wake of that February presentation where you were informed that Silicon Valley Bank and other banks were experiencing interest rate risks? And can you tell me what supervisory actions you’ve done in the wake of the recent bank failures to make sure that banks are currently appropriately managing interest rate risk? And kind of part 3, but it’s all the same question here—do, do you still think this separation principle that monetary policy and supervision can be handled with different tools? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So the February 14 presentation—I didn’t remember it very well. But now, of course, I’ve gone back and looked at it very carefully. I did remember it. And what it was was a general presentation. It was an informational briefing of the whole Board— the entire Board. I think all members were there. And it was about interest rate risk in the banks and, and lots of data. And there was one page on Silicon Valley Bank, which talked about, you know, the amount of losses they—or mark-to-market losses they had in their portfolio. There was nothing in it about—that I recall, anyway, about, about the risk of a bank run. So it was—I think the takeaway was, they were going away to do a—an assessment, a vertical—sorry, horizontal assessment of, of banks. It wasn’t—it, it wasn’t presented as an urgent or alarming situation. It was presented as a—as an informational, nondecisional kind of a thing. And I thought it was a good presentation and, and, as I said, did remember it. In terms of what we’re doing—of course, I think banks themselves are, are—many, many banks are now, are attending to liquidity and taking opportunity now, really, since, since the events of, of early March, to build liquidity. And you asked about the separation principle. I— you know, like so many things, it, it’s very useful. But, you know, ultimately, it has its limits. I mean, I, I think in this particular case, we have found that the monetary policy tools and the financial stability tools are not in conflict. They’re both—they’re working well together. We’ve used our, our financial stability tools to support banks through our lending facilities. And, at the same time, we’ve been able to use our monetary policy tools to foster maximum employment and price stability. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, I’m sorry. I don’t mean to be argumentative, but the, the staff report said, “SVB . . . has significant interest rate risk.” It said, “Interest rate risk measurement[s] . . . failed” at SVB. And it said, “Banks with large unrealized losses face significant safety and soundness risks.” Why was that not alarming? <NAME>CHAIR POWELL</NAME>. Well, I mean, I didn’t say it wasn’t alarming. It was—they’re pointing out something that they’re working on and that they’re on the case—that, that, you know, that—I’m not sure whether they mentioned—I think they did, actually. They mentioned that they had taken regulatory action matter—or supervisory action in the form of matters requiring attention. So I think that was also in the presentation. I think it was to say: Yes, this is a bank, and there are many other banks that are experiencing this—these things, and we’re on the case. <NAME>MICHELLE SMITH</NAME>. Let’s go to Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Chair Powell. I wanted to ask���obviously, with the recent bank turmoil, we’ve seen multiple banks buy other banks. And I was just curious whether you think that further consolidation in the banking sector would increase or decrease financial stability and whether you have any concerns about the biggest bank in the U.S. getting even larger. <NAME>CHAIR POWELL</NAME>. So I, you know, we certainly don’t—and I don’t have an agenda to further consolidate banks. There’s been—consolidation has been a factor in the U.S. banking industry really since interstate banking and before that even—it goes back more than 30 years. You—when I was in the government a while back, I think there were 14,000 banks. Now there are 4,000 and change. So that’s, that’s going on. I personally have long felt that having small-, medium-, and large-size banks is a, a great part of our banking system. You know, the community banks serve particular customers very well; regional banks serve very important purposes, and the various kinds of G-SIBs do as well. So I think it’s healthy to have a, you know, an arrange—a range of different kinds of banks doing different things. I think that’s a positive thing. Is it a financial—so I would just say, in terms of J.P. Morgan buying First Republic, the FDIC really runs the process of closing and selling a closed bank completely. That, that is their role, so I really don’t have a comment on, on that process. As you know, there’s an exception to the deposit cap for a failing bank. So it was legitimate. And I think the FDIC, I believe, is bound by law to take the bid that is the least-cost bid. So I would assume that’s what they did. <NAME>VICTORIA GUIDA</NAME>. So do you have any concerns about the fact that they’re, they’re getting larger in general? <NAME>CHAIR POWELL</NAME>. So I, I think it’s probably good policy that we, we don’t want the largest banks doing big acquisitions. That is the policy. And—but this is—this is an exception for a failing bank. And I, I think it’s actually a good outcome for the banking system. It also would have—would have been a good—a good outcome for the banking system had one of the regional banks bought, bought this company. And that could have been the outcome. But, ultimately, we have to follow the law in our agencies, and the law is, it goes to the, the least-cost bid. <NAME>MICHELLE SMITH</NAME>. Now to Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. At the March meeting, you mentioned that tightening of credit conditions from the recent bank stress could be equal to one or more rate increases. So, given developments since then, how has your estimate changed? <NAME>CHAIR POWELL</NAME>. Yeah. I think—I think I follow that up by saying, it’s, it’s quite impossible to have a precise estimate of the words to that effect. But, in principle, that’s the idea. You know, when we—we’ve been raising interest rates, and that raises the price of credit, and that, in a sense, restricts credit in the economy, working through the price mechanism. And, you know, when banks raise their credit standards, that can also make credit tighter in a kind of broadly similar way. It isn’t—it isn’t possible to make a kind of clean translation between one and the other, although firms are trying that and, you know, we’re trying it. But, ultimately, we have to be—we have to be honest and humble about our ability to make a precise assessment. So it does complicate the task of achieving, you know, a sufficiently restrictive stance. But I think, conceptually, though, we think that, you know, interest rates—in principle, we won’t have to raise the rates quite as high as we would have had this not happened. The extent of that is so hard to predict because we don’t know how persistent these, these effects will be. We don’t know how large they’ll be and how long they’ll take to be transmitted. But that’s, that’s what we’ll be watching carefully to find out. <NAME>COLBY SMITH</NAME>. Just to quickly follow up—what does it suggest about the scope for the Committee to pause rate increases perhaps as early as next month, even if the data remains strong then, if, if it’s having some kind of substitute effect? <NAME>CHAIR POWELL</NAME>. It’s that—this is just something that we have to factor in as we—as we want to find ourselves. So I guess I would say it this way: The assessment of, of the extent to which additional policy firming may be appropriate is going to be an ongoing one, meeting by meeting, and we’re going to be looking at the factors that I mentioned that—they’re listed in, in the statement, the obvious factors. That’s, that’s the way we’re going to be thinking about it. And that’s really all we can do. As I say, it does complicate—we, we have, you know, a broad understanding of monetary policy. Credit tightening is a different thing. There’s a lot of literature on that. But translating it into, into rate hikes is uncertain, let’s say—it adds even further uncertainty. Nonetheless, we’ll be able to see what’s happening with credit conditions— what’s happening with lending. We get—there’s a lot of data on that. And, you know, we’ll, we’ll factor that into our decisionmaking. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. Thank you. So, noting that the statement dropped the reference to “sufficiently” restricted—“restrictive,” I was wondering, given your baseline outlook, whether you feel this current rate of 5 to 5¼ percent is, in fact, sufficiently restrictive. <NAME>CHAIR POWELL</NAME>. That’s going to be an ongoing assessment. We’re going to need data to accumulate on that—not an assessment that we’ve made, as—that, that would mean we think we’ve reached that point. And I just think it’s, it’s not possible to say that with confidence now. But, nonetheless, you, you will know that the Summary of Economic Projections from the March meeting showed that in—at that point in time, that the median participant thought that this was— this was the appropriate level of the—of the ultimate high level of rates. We don’t know that. We’ll revisit that at the June meeting. And that’s—you know, we’re just going to have to— before we really declare that, I think we’re going to have to see data accumulating and, and, you know, make that—as I mentioned, it’s an ongoing assessment. <NAME>HOWARD SCHNEIDER</NAME>. I have a follow-up on credit. Could you give us a sense of what the SLOOS survey indicated? It was already, I think, 40, 45 percent of banks were tightening credit as of the, the last survey. What did this one show, and how did that weigh into your deliberations? <NAME>CHAIR POWELL</NAME>. So we’re going to release the results of this SLOOS on May 8, in line with our usual time frame. And I would just say that the SLOOS is broadly consistent, when you see it, with how we and others have been thinking about the situation and what we’re seeing from other sources. You will have seen the Beige Book and listened to the various earnings calls that indicate that midsize banks have—some of them had been tightening their lending standards. Banking data will show that lending has continued to grow, but the pace has been slowing really since the second half of last year. <NAME>MICHELLE SMITH</NAME>. Let’s go to Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, Wall Street Journal. Chair Powell, the argument around the end of last year and the beginning of this year to slow down the pace of increases was to give yourself time to study the effects of those moves. After the bank failures in March, as you’ve discussed, the Fed staff projected a recession starting later this year. So my question is why it was necessary to raise interest rates today. Or, put, put differently: If the whole point of slowing down the pace was to see the effects of your moves, and now you’ve, for the last two meetings, been seeing the effects of those moves, why did the Committee feel it was necessary to keep moving? <NAME>CHAIR POWELL</NAME>. Well, we—the reason is that we—again, with our monetary policy we’re try—trying to reach and then—and then stay at a, for an extended period, a level of policy—a policy stance that’s sufficiently restrictive to bring inflation down to 2 percent over time. And, you know, that’s what we’re trying to do with our—with our tool. I think slowing down was the right move. I, I think it’s enabled us to see more data, and it will continue to do so. So I, I—you know, we really—you know, we have to balance. We always have to balance the risk of not doing enough and, and not getting inflation under control against the risk of maybe slowing down economic activity too much. And we thought that this rate hike, along with the meaningful change in, in our policy statement, was the right way to balance that. <NAME>NICK TIMIRAOS</NAME>. And just to follow up, you know, what you said in response to Howard’s question—you’ll need data to accumulate to determine if this is a sufficiently restrictive stance. Does that data need to accumulate, or could it accumulate over a longer period than a six-week intermeeting cycle? <NAME>CHAIR POWELL</NAME>. Yeah. I mean, as I mentioned, I would just say that this assessment will be an ongoing one. You—you know, you can’t—with, with economic data, you, you can’t—you’ve, you’ve seen—take inflation for a minute. Look, look back. We’ve seen inflation come down—move back up two or three times since March of 2021. We’ve seen inflation have a few months of coming down and then come right back up. So I think you’re going to want to see that—you know, that a few months of data will, will persuade you that you’ve—that you’ve got this right, kind of thing. And, you know, we, we have the luxury: We’ve raised 500 basis points. I think that policy is tight. I think real rates are probably—that you can calculate them many different ways. But one way is to look at the nominal rate and then subtract a, a reasonable estimate of, of, let’s say, one-year inflation, which might be 3 percent. So you’ve got 2 percent real rates. That’s meaningfully above what most people would—many people, anyway, would, would assess as, you know, the neutral rate. So policy is tight. And you see that in interest— interest-sensitive activities. And you also begin to see it more and more in, in other activities. And if you—if you put the—you put the credit tightening on top of that and the QT that’s, that’s ongoing, I think, I think you feel like, you know, we’re, we may not be far off—we’re possibly even at—that level. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you very much, Chair Powell. Edward Lawrence with Fox Business. So if the Federal Reserve gets down to the 3 percent inflation, as the projections show, at the end of this year or close to it, would it be okay for you for a prolonged period of 3 percent inflation and hoping for some outside event to move down to 2 percent target? <NAME>CHAIR POWELL</NAME>. Look—I think we’re always going to have 2 percent as our, our target. We’re always going to be focusing on getting there. <NAME>EDWARD LAWRENCE</NAME>. You would be okay with a prolonged 3 percent? <NAME>CHAIR POWELL</NAME>. You know, it’s—let me just say, that’s not what we’re looking for. We’re looking for inflation going down to 2 percent over time. I mean, we—that’s, that’s not a question that’s in front of us, and it would depend on so many other things. But, ultimately, we’re not looking to get to 3 percent and then drop our tools. We have a, a goal of getting to 2 percent. We think it’s going to take some time. We don’t think it’ll be a smooth process. And, you know, I think we’re going to—we’re going to need to stay at this for a while. <NAME>EDWARD LAWRENCE</NAME>. How does the other side of the mandate—the jobs side—once you get to 3 percent, going from 3 to 2, how does the other side of the mandate balance? <NAME>CHAIR POWELL</NAME>. I think they, they—you know, they, they will both matter equally at that point. Right now, you have a labor market that’s still extraordinarily tight. You still got 1.6 job openings, even with the lower job openings number, for every unemployed person. We do see some evidence of softening in labor market conditions. But, overall, you’re near a 50-year low in unemployment. Wages—you all will have seen that the wage number from late last week, and it’s—whenever it was. And, you know, it’s, it’s a couple of percentage points above what would be—what would be consistent with 2 percent inflation over time. So we do see some softening; we see new labor supply coming in. These are very positive developments. But the labor market is very, very strong, whereas inflation is, you know, running high—well above our—well above our goal. And right now, we need to be focusing on bringing inflation down. Fortunately, we’ve been able to do that so far without unemployment going up. <NAME>MICHELLE SMITH</NAME>. Matt. <NAME>MATTHEW BOESLER</NAME>. Hi, Chair Powell. Matthew Boesler with Bloomberg News. So, many analysts noted at the time of the March FOMC meeting that at least half of Fed officials’ projections did imply or seemed to imply that a recession was in their baseline forecast as well, given the strong first-quarter GDP tracking estimates. And so I’m just wondering if you could kind of elaborate on, you know, why you’re optimistic that a recession can be avoided, given that that’s the Fed staff’s forecast—possibly also the broader Committee’s forecast as well—and, and also, of course, most private-sector forecasters’. <NAME>CHAIR POWELL</NAME>. Yeah. I don’t think—you know, I know what’s printed in the Summary of Economic Projections and all that. I don’t think you can deduce exactly what you said about what participants think, because you don’t know what they were thinking for first- quarter GDP at that point. They could have been thinking about a fairly low number. Anyway, in any case, I’ll just say, I, I continue to think that it’s possible that this time is really different. And the reason is, there’s just so much excess demand, really, in the labor market. It’s, it’s interesting, as, you know, we’ve raised rates by 5 percentage points in 14 months, and the unemployment rate is 3½ percent, pretty much where it was—even lower than where it was when we started. So job openings are still very, very high. We see—by surveys and much, much [other] evidence—that, that conditions are cooling gradually. But it’s—it really is different. You know, it wasn’t supposed to be possible for job openings to decline by as much of the—as they’ve declined without unemployment going up. Well, that’s what we’ve seen. So we—there are no promises in this. But it just seems that, to me, that it’s possible that we can continue to have a cooling in the labor market without having the big increases in unemployment that have gone with many, you know, prior episodes. Now, that would be against history. I, I fully appreciate that. That would be against the, the pattern. But I do think that it—that this, that the situation in the labor market, with so much excess demand, yet, you know, wages are actually—wages have been moving down. Wage increases have been moving down, and that’s a good sign—down to a more sustainable level. So I think that—I think it’s still possible. I—you know, I think, you know, the, the case of, of avoiding a recession is, in my view, more likely than that of having, having a recession. But it’s not—it’s not that the case of having a recession is—I don’t rule that out, either. It’s, it’s possible that we will have what I hope would be a mild recession. <NAME>MATTHEW BOESLER</NAME>. The Committee also noted in March that wage growth was still well above levels that would be consistent with 2 percent inflation. Do you see that as well? And could you kind of explain, you know, how you come to that judgment? <NAME>CHAIR POWELL</NAME>. Sure. So we look at a range of wage, wage measures. And then that’s in nominal. And then—so you assume wages should be equal to productivity increases plus inflation. And so you can—you can look at, you know, the employment compensation index, average hourly earnings, the Atlanta wage tracker, compensation per hour—basically, those four and many others. And you can—you can look at, at what the—what they would have to run at over a long period of time for that to be consistent with 2 percent inflation. They can deviate. You know, corporate margins can go up and down. And there is a feature of long expansions where they do go down—where labor gets a bigger share toward later, later in a recession—sorry, later in an expansion. So, yeah. The, the—you know, and we calculate those, and you have to take the precision with a degree of—a degree of salt. But I would say that what they will show is that, you know, if, if the—if wages are running at 5 percent, 3 percent is closer to where they need to be. Wage increases and closer to 3 percent, roughly, is what it would take to get—to be consistent with inflation over a longer period of time. I—by the way, I don’t want to—I do not think that wages are the principal driver of inflation. You’re asking me a very specific question. I think there are many things. I think wages and prices tend to move together. And it’s very hard to say what’s causing what. But, you know, I’ve never said that, you know, that—that wages are really the principal driver, because I don’t think that’s really right. <NAME>CHRIS RUGABER</NAME>. Great. Chris Rugaber at Associated Press. Well, you mentioned profit margins. Those have expanded—did expand sharply during this inflationary period. And while there are some signs that they are starting to decline, many economists note they haven’t fallen as much as might be expected, given that we’re seeing at least some pullback among consumer spending. So, speaking of causes of inflation, do you see expanded profit margins as a driver of higher prices? And if so, would you expect them to narrow soon and, and contribute to reduced inflation in the coming months? <NAME>CHAIR POWELL</NAME>. So higher profits and higher margins are what happens when you have an imbalance between supply and demand: too much demand, not enough supply. And we’ve been in a situation in many parts of the economy where, where supply has been fixed or, or not flexible enough. And so, you know, the way the market clears is through higher prices. So to get, I, I think—as goods pipelines have, have gotten, you know, back to normal so that we don’t have the long waits and the shortages and that kind of thing—I think you will see inflation come down. And you’ll see—you’ll see corporate margins coming down as a result of return of full competition, where there’s enough supply to meet demand. And then it’s—then it’s, then you’re really back to full competition. That’s—that would be the dynamic I would expect. <NAME>MICHELLE SMITH</NAME>. Michael. <NAME>MICHAEL MCKEE</NAME>. Michael McKee for Bloomberg Radio and Television. Can you tell us something about what your policy reaction function is—your policy framework is going forward? When you look at the economy at the next meeting, are you looking at incoming data, which is, by definition, backward looking? Are you going to be forecasting what you think is going to happen? Are you ruling out the rate cuts that the market has priced in? <NAME>CHAIR POWELL</NAME>. I didn’t catch the last part. Rolling? <NAME>MICHAEL MCKEE</NAME>. Markets have priced in rate cuts by the end of the year. Do you rule that out? <NAME>CHAIR POWELL</NAME>. Oh, yes. Sorry, sorry, sorry. Okay, I got it. So, what are we looking at? I mean, we look at a combination of data and, and forecasts. Of course, the whole idea is to—is to create a good forecast based on what you see in the data. So we’re always, always looking at both. You know, and it will—of course, it’ll be the obvious things. It���ll be readings on inflation. It’ll be readings on wages, on economic growth, on the labor market, and all of those many things. I think a particular focus for us going—now, over the past six, seven weeks now and going forward is going to be, what’s happening with credit tightening? Are small and medium-sized banks tightening credit standards, and, and is that having an effect on, on loans, on lending? And, you know, so we can begin to assess how that fits in with monetary policy. That’ll, that’ll be an important thing. I just—you know, we’ll be looking at everything. It’s— again, I would just point out, we’ve raised rates by 5 percentage points. We are shrinking the balance sheet. And now we have credit conditions tightening—not just in the normal way, but perhaps a little bit more, due to what’s happened. And we have to factor all of that in and, and make our assessment of—you know, of whether our policy stance is sufficiently restrictive. And we have to do that in a world where policy works with long and variable lags. So this is challenging. But, you know, we, we will make our best assessment, and that’s what we think. <NAME>MICHAEL MCKEE</NAME>. What about the idea of rate cuts? <NAME>CHAIR POWELL</NAME>. Yeah. So we on the Committee have a—have a view that inflation is going to come down—not so quickly, but it’ll take some time. And in that world, if that forecast is broadly right, it would not be appropriate and—to cut rates, and we won’t cut rates. If you have a different forecast and, you know, markets—or have been, from time to time, pricing in, you know, quite rapid reductions in inflation, you know, we’d, we’d factor that in. But that’s not our forecast. And, of course, the history of the last two years has been very much that inflation moves down. Particularly now, if you look at nonhousing services, it really, really hasn’t moved much. And it’s quite stable. And, you know, so we think we’ll have to—demand will have to weaken a little bit, and labor market conditions, conditions may have to soften a bit more to begin to see progress there. And, again, in that world, it wouldn’t be—it wouldn’t be appropriate for us to cut rates. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. Courtenay Brown from Axios. I’m curious how you view the role of the overnight reverse repo facility in the context of the current banking stress. Do you think it’s contributing to the stress by making it more attractive for money market funds to compete with banks for deposits? And did the Committee discuss any changes to the structure of the facility? Or do you see that being put on the table in the future? Thanks. <NAME>CHAIR POWELL</NAME>. Sure. So we looked at that very carefully, as you would imagine. And, you know, the—it’s, it’s really not contributing, we don’t think, now. It hasn’t actually been growing. You know, it moved up—moved down and then moved back up to where it was. What happened in the—when, when there were the big deposit flows, which, by the way, have really stabilized now—what happened was, institutional investors took their uninsured deposits and put them in government money market funds, which bought paper from the Federal Home Loan Banks and things like that. Over the course of, of maybe the last year, retail investors had been gradual—as they do in every tightening cycle, they’ve been gradually moving their deposits into higher-yielding places such as CDs and, and other things, including money market funds. So that’s a gradual process that is quite natural and happens during a, a tightening cycle. What was unusual, really, was the institutional investors moving their uninsured deposits and spreading them around and things like that. But it doesn’t seem to have had any—any effect overall on the overnight repo facility. That is really there to, to help us keep rates where they’re supposed to be, and it’s, it’s serving that purpose very well. <NAME>MICHELLE SMITH</NAME>. Sarah. <NAME>SARAH EWALL</NAME>-WICE. Sarah Ewall-Wice, CBS News. I want to go back to the debt ceiling for a moment. I know you talked about that in terms of fiscal policy, but can you just speak towards what the impact of a default would mean for Americans across the country, the markets, and borrowing? <NAME>CHAIR POWELL</NAME>. Yeah. I would just say, it’s —I, I don’t really think we should be— we shouldn’t even be talking about a world in which the U.S. doesn’t pay its bills. It just—it just shouldn’t be a thing. And, and again, I would just say, we don’t—no one should assume that the Fed can do—can really protect the economy and the financial system and our reputation globally from, from the damage that such, such an event might inflict. <NAME>MICHELLE SMITH</NAME>. Scott. <NAME>SCOTT HORSLEY</NAME>. Thanks, Mr. Chairman. Scott Horsley for NPR. In his report last week, Vice Chair Barr identified a couple of the factors that he thought contributed to the regulatory—or the supervisory lapses at Silicon Valley Bank: a policy change in 2019 to exempt all but the biggest banks from strict scrutiny and also what he called a sort of cultural shift towards less aggressive oversight. You were here in 2019. Do you share that view, and what would it take to get the, the stronger oversight that you and he said in your release would be necessary? <NAME>CHAIR POWELL</NAME>. So I, I didn’t—I didn’t take part in creating the report or doing the work, but I do—I have read it, of course. And I find it persuasive. I mean, I would say it this way: A, a very large—a large bank, not a very large bank—a large bank failed quite suddenly and unexpectedly in a way that threatened to spread contagion into the financial system. I think the only thing that, that I’m really focused on is to understand what went wrong, what happened, and, and identify what we need to do to address that. Some of that is—may, it may just have been technology evolving. You know, we have to keep up with all that. But some of it may be our policies, and—supervisory and regulatory, whatever. What our job is now is, identify those things and implement them. And that’s kind of the only thing I care about is—and I think—I feel like I am accountable for doing everything I can to make sure that that happens. <NAME>MICHELLE SMITH</NAME>. Let’s go to Evan. <NAME>EVAN RYSER</NAME>. Thank you. Evan Ryser with MNI Market News. Chair Powell, are we in the early stage or nearing the end stage of the banking turmoil among regional banks? And, secondly, do you still have a bias to tighten rates? Is that what the statement is saying? <NAME>CHAIR POWELL</NAME>. So I guess I would—I guess I would say it this way. There were three large banks, really, from the very beginning that were at the heart of the stress that we— that we saw in early March, the severe period of stress. Those have now all been resolved, and all the depositors have been protected. I think that the resolution and sale of, of First Republic kind of draws a line under that period of—is an important step toward drawing a line under that period of, of severe stress. Okay. I also think we are very focused on what’s happening with credit availability, particularly, you know, with what you saw in the—in the Beige Book, and you will see in the SLOOS, is, is small and medium—medium-sized, small and medium-sized banks who are feeling that they need to tighten credit standards—build liquidity. What’s going to be the macroeconomic effect of that? More broadly, we, we will continue to very carefully monitor what’s going on in the banking system, and we’ll factor that assessment into our decisions in an important way, going forward. <NAME>MICHELLE SMITH</NAME>. Okay. Greg. <NAME>GREG ROBB</NAME>. Thank you, Fed Chairman. Greg Robb from MarketWatch. I just wondered if you’ve done any reflection on, on your own actions during this crisis and leading up to it over the last—since you’ve been Fed Chairman, I think I’ve heard you say a couple of times that you deferred to the Vice Chair for Supervision. Do you think that was the right way to go about this? And, yeah, comments on that. Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So let me say, first of all, I’ve been Chair of the Board for five-plus years now, and I fully recognize that we made mistakes. I think we’ve learned some new things as well, and we need to do better. And, as I mentioned, I thought the report was unflinching and appropriately so. I welcome it. And I agree with and will support those recommendations. And I do feel that I’m personally accountable to do what I can to foster measures that will address the problems. So, on, on the Vice Chair for Supervision, you know, the place to start is, is the statutory role, which is quite unusual. The Vice Chair, it says, shall deploy policy recommendations—“develop policy recommendations for the Board regarding supervision and regulation of depository institution . . . companies . . . , and shall oversee the supervision and regulation of such firms.” So this is Congress establishing a four-year term for someone else on the Board—not, not the Chair—as Vice Chair for Supervision who really gets to set the agenda for supervision and regulation for the Board of Governors. Congress wanted that person to be—to have political accountability for developing that agenda. So the way it works—the way it has worked in practice for me is, I’ve had a good working relationship. I give my, my counsel, my input privately, and that’s—I offer that. And I have good conversations, and I try to contribute constructively. I respect the authority that Congress has deferred on that person, including working with, with Vice Chair Barr and, and his predecessor. And I think that’s the way it’s supposed to work, and that’s appropriate. I, I believe that’s what the law requires. And, you know—but, but it isn’t—I wouldn’t say it’s a matter of complete deference. It’s more, I have a—I have a role in, in presenting my views and discussing—having an intelligent discussion about what’s going on and why. And, you know, that’s, that’s my input. But, ultimately, that person does get to set the agenda and gets to take things to the Board of Governors and really, in supervision, has sole authority over supervision. <NAME>GREG ROBB</NAME>. Just wondered if you have any regrets? Or was there anything that, you know—decisions that maybe you regret now in light of what’s happened? <NAME>CHAIR POWELL</NAME>. I’ve had a few, sure. I mean, you know, who doesn’t look back and think that you could have done things differently? But, honestly, you don’t—you don’t get to do that. Again, my focus is on what—control the controllable. As one of my great mentors used to always say, “Control the controllable.” What we control now is, make a fair assessment, learn the right lessons, figure out what the fixes are, and implement them. And, and I think that, that Vice Chair Barr’s report is an excellent first step in that, but we’ve got to follow through. <NAME>MEGAN CASSELLA</NAME>. Hi, there. Megan Cassella with Barron’s. Did the possibility of pausing at this meeting come up at all, and how seriously was that considered? I’m curious if you can give us any color as to whether there were any initial concerns about raising rates again or what those discussions entailed. <NAME>CHAIR POWELL</NAME>. So support for the 25 basis point rate increase was very strong across the board. I would say there are a number of people—and, you know, you’ll see this in the minutes. I don’t want to try to do the head count in real time. But people did talk about pausing, but not so much at this meeting, you know, that we’re—I mean, there’s a sense that we’re, we’re—that, you know, we’re much closer to the end of this than to the beginning, that—you know, as I mentioned, if you—if you add up all the tightening that’s going on through various channels, it’s—we, we feel like we—you know, we’re getting close or, or maybe even there. But that, again, that’s going to be an ongoing assessment. And, and we’re going to be looking at those factors that we listed and—to determine whether there’s, there’s more to do. <NAME>MEGAN CASSELLA</NAME>. I’m curious, too, how to interpret that and, and the changes to the statement. Is the bar higher now to raise rates at the next meeting, or would a strong jobs report or inflation print be enough to push the Fed to tighten again? <NAME>CHAIR POWELL</NAME>. I don’t want to—I couldn’t—I couldn’t really say. I just think we’re—I think we—look, I think we’ve moved a long way fairly quickly. And I think we can afford to look at the data and, and make a careful assessment. <NAME>MICHELLE SMITH</NAME>. And we’ll go to Nancy for the last question. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. You mentioned a few times about the lessons you’ve learned from the banking crisis—that you would learn the right lessons. What are those lessons? <NAME>CHAIR POWELL</NAME>. Well, I just would start with something that’s changed, really, which is this—the run on Silicon Valley Bank was out of keeping with the speed of runs through history. And that now needs to be reflected in some—in some way in regulation and in supervision. It—we know—now that we know it’s possible, I think we didn’t—no one thought that was possible. No one—I’m not aware of anybody thinking that this could happen so—quite so quickly. So I think that, you know, that will play through. I, I, you know—it will be up to Vice Chair Barr to really take the lead in designing the ways to address that. But I think—I think that’s one thing. I, I guess I would just say that. Then, you know—that we’re going to— obviously, we’re going to revisit [this]. It’s pretty clear we need—to me, anyways—clear that we need to strengthen both supervision and regulations for banks of this size. And I’m, I’m thinking that we’re on the—on track to do that as well. <NAME>NANCY MARSHALL</NAME>-GENZER. Can you be any more specific on stress testing or looking at banks that have specific concentrations in certain parts of the economy? <NAME>CHAIR POWELL</NAME>. Yeah. That’s—see, that’s, that’s what Vice Chair Barr’s role really is, and he’ll take the lead on that. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people. We understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 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 5 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 2 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 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 SEP 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 2 percent goal. Over the 12 months ending in April, total PCE proces—prices rose 4.4 percent; excluding the volatile food and energy categories, core PCE prices rose 4.7 percent. In May, the 12-month change in the consumer price index came in at 4 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 2 percent has a long way to go. The median projection in the SEP 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 food and energy prices, is projected to run higher than total inflation, and the median projection has been revised in the SEP 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’re strongly committed to returning inflation to our 2 percent objective. As I noted earlier, since early last year, we’ve raised our policy rate by 5 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 5 to 5¼ 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 2 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 SEP, 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 ½ 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 bringing inflation—bringing inflation back down to our 2 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. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. 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’ve felt the drag of the past Fed actions, have started to recover in some regions, and financial conditions, you know, most recently were easing. <NAME>CHAIR POWELL</NAME>. 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—that of the speed of tightening, the level to which rates would need to go, and then a 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 to 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 2 percent over time—so that the pace of the increases and the ultimate level of increases are separate variables, given how far 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 going forward, including what would happen at the next meeting, including—we did not decide or really discuss anything about going to an every-other-meeting kind of an approach or, or really any other approach. We really were focused on what to do at this meeting. <NAME>COLBY SMITH</NAME>. So there was no kind of initial debate about the possibility of July— any sense of the initial support at this stage for that move? <NAME>CHAIR POWELL</NAME>. So again, we didn’t—we didn’t make a decision about July. I mean, of course, it, it came up in the—in the meeting from time to time. But really, the focus was, was on what to do today. I would say about, about July two things: (1) [the] decision hasn’t been made, (2) I do expect that it will be a “live” meeting. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Thanks. Howard Schneider with Reuters. I was just wondering if you could help us understand the, the narrative here because it feels like there’s been a level shift in the—in the dots, stronger GDP, less of a hit to unemployment, slower progress on inflation. And I’m wondering in, in this sort of—where’s the disinflation coming from? <NAME>CHAIR POWELL</NAME>. Sure. <NAME>HOWARD SCHNEIDER</NAME>. The labor market’s going to be stronger it looks like—it’s not coming from there. Demand’s 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. <NAME>CHAIR POWELL</NAME>. So you’re, you’re right that the data came in, I would say, consistent with, but on the high side of, expectations. And if you go back to the old—the former SEP—the last SEP in March, you will see that [compared with March, projected real GDP] 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, all three of those kind of point in the same direction—which is, you know, that perhaps more [monetary policy] 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 [percent] is pretty consistent, if you think about it, where the [expected] 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’s the—where’s the disinflation going to come from? And I, 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 I think you go back to the—to the three-part framework for [analyzing] core PCE inflation—which is, we think, as good an indicator as you can have for where inflation is going forward. You start with goods. With goods, we need to see continued healing in 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 should enable goods prices to continue—goods, goods inflation 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 in 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 forecast that people are making right now about inflation coming down this year will, will contain a big dose of—this year and next year—will contain a, a good amount of, of disinflation [coming] from that source. And, and that’s, again, probably going to come slower than we would [previously have expected it to come into] effect. That leaves, you know, the big sector, which is a little more than half, pardon me, of the—of core PCE inflation that’s not 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 [that,] in a number of the parts of that sector, the largest cost would be wage cost. 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 has been some loosening 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 [real GDP] growth meaningfully below trend. It would be a labor market that’s loosening. It would be goods pipelines getting healthier and healthier and that kind of thing. 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. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, what’s the value in, in pausing and signaling future hikes versus 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. Sixteen 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? <NAME>CHAIR POWELL</NAME>. 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—and I think if you look at the SEP, that is our estimate—our individual—it’s, it’s really a cumulation 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 SEP, we’re not so far away from the destination, in most people’s accounting—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 the Committee thought overall that it was appropriate to moderate the pace, if only slightly. Then there are 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, you know—we haven’t really—we don’t know the full extent of, of the consequences of the banking turmoil that we’ve seen. We, 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, it’s just the idea that we’re trying to get this right. And this is—if you think of the two things as separate variables, then I think—I think that the skip—I shouldn’t call it a skip—the, the decision makes sense. <NAME>NICK TIMIRAOS</NAME>. I know you said July is live. With only one June employment—with only the June employment and the CPI report for June 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, a longer pause? <NAME>CHAIR POWELL</NAME>. Well, I think you’re adding that to the, the data that we’ve seen since the last meeting, too. You know, we—since we chose to maintain rates at this meeting, it’ll really be a three-month period of data that we can look at. And I think that’s a full quarter, and I think you can—you can draw more conclusions from that than you can 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. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Thanks for taking our questions. Jeanna Smialek, New York Times. You obviously, in your forecasts, marked up the sort of path for growth, marked down the path for unemployment, and marked up the path for inflation pretty notably. I wonder, you know, since March, what has changed to make you think that the economy’s 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 percent terminal by the end of this, this cycle? <NAME>CHAIR POWELL</NAME>. 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 it’s, it’s just remarkable. And that’s really, if you think about it—that’s what’s driving it. It’s job creation. It’s, it’s 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. And so it’s, it’s really the, the data. 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. It’s based on 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 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 intermeeting 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. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, thanks for taking my question. 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 5.6? Is it 6? Where is sufficiently restrictive? Thank you. <NAME>CHAIR POWELL</NAME>. You know, I, I would say again that I think that, over time, the balance of risks, as we move from very, you know—from interest rates that are effectively zero now to 5 percentage points with, with an SEP calling for additional hikes—I think we’ve moved much closer to our destination, which is that sufficiently restrictive rate, and I think that means by—almost by definition that the—that 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. And if you look at the—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 [inflation] 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 I, I think it’s—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 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. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair 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? <NAME>CHAIR POWELL</NAME>. Yeah. So it’s a—it’s a challenging thing in, in economics. It’s, it’s sort of standard thinking that monetary policy affects economic activity with long and variable lags. Of course, these days, financial conditions begin to tighten well in advance of actual rate hikes. So if you—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 [interest rate], which is a pretty good estimate of where [monetary] 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 interest-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, 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 ultimate—I can’t point to—that 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 level where we need to go. <NAME>RACHEL SIEGEL</NAME>. I was curious if you could give us an update on what you’re seeing on credit tightening since the bank incidents for March and how you’re teasing that out apart from these lag effects. <NAME>CHAIR POWELL</NAME>. So it’s, it’s too early still to, to try to assess the full extent of what that might mean. And, you know, that’s something we’re going to be watching, of course. And, you know, if we were to see what, 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—in, in making rate decisions. So that’s, that’s how we think about it. <NAME>MICHELLE SMITH</NAME>. Let’s go to Chris. <NAME>CHRIS RUGABER</NAME>. Thanks. Chris Rugaber at Associated Press. You mentioned that many of the trends are in place that you want to see—core services ex. 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 signal additional rate hikes? Aren’t things headed in the direction you need? Why not simply give it even more time? Or—it’s surprising to see so much hawkishness in the dots, given what we’re seeing recently. <NAME>CHAIR POWELL</NAME>. Yeah. So, you know, we’ve—remember, we’ve—we’re 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, you know, traditional—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 4½ 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 2 percent over time. We, we don’t want to do—we, we want to do that with the minimum damage we can to the economy, of course. But we have to get inflation down to 2 percent, and we will. And we just don’t see that yet. So, hence, you see today’s policy decision: both, both to write down further rate hikes by the end of this year but also to, you know, to take—to, to moderate somewhat the pace with which we’re moving. <NAME>CHRIS RUGABER</NAME>. 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 a 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. <NAME>CHAIR POWELL</NAME>. Right. So I’m, I’m not going to comment on any particular paper, but I, 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—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. So that was the, the origin, and it wasn’t really particularly about the labor market or wages. But as you—as you moved 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 nonhousing services sector, to getting wage inflation back to a level that is sustainable, that is consistent with 2 percent inflation. We actually have seen wages broadly move down but just at a quite gradual pace. So— and that’s, you know, that’s a little bit of the finding of the Bernanke paper with Blanchard of a few weeks ago, which is very consistent with, with what I, I would think. <NAME>MICHELLE SMITH</NAME>. Let’s go to Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. You said in the past that you don’t like to surprise markets. It’s kind of been the Fed’s view markets 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, we’d 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 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? <NAME>CHAIR POWELL</NAME>. So I, I don’t want to deal with, with hypotheticals about different ways data might move. And 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 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. <NAME>MICHAEL MCKEE</NAME>. 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? <NAME>CHAIR POWELL</NAME>. You know, I, I think if you look at—if, if you just look at—I’ll just point you to the forecast. So inflation is running—core PCE inflation is running at about 4½, a little higher than 4½ percent. And the, the median FOMC participant thinks it will 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 a pretty significant decline for half a year. So that’s, that’s the forecast. You know, we’ll—we do try to be transparent in our reaction function. We’re, we’re committed to getting inflation down. And that’s the number-one thing. So that’s how I think about it. <NAME>MICHELLE SMITH</NAME>. Let’s go to Victoria. <NAME>VICTORIA GUIDA</NAME>. Victoria Guida with Politico. Could you talk about the balance sheet and how you’re thinking about it? What, what are you looking for to judge whether we’re approaching reserve scarcity? And is Treasury issuance going to affect that? Also, are you considering lowering the RRP rate in order to take some pressure off banks? <NAME>CHAIR POWELL</NAME>. 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—of course, we’ve been very focused on that for a couple of months, as everyone has. [The] Treasury has laid out its borrowing plans publicly. I think we all saw—I saw the Secretary’s comments yesterday to the effect that [the] 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, the TGA. The adjustment process is very likely to involve both a 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 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. So that’s, that’s—that’s the—that’s the Treasury part of the answer. We will, of course, continue to monitor 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? <NAME>VICTORIA GUIDA</NAME>. Yeah—are you considering lowering the RRP rate to help take some pressure off banks? <NAME>CHAIR POWELL</NAME>. So we, we have a number of—I would say the [ON] RRP [facility] doesn’t look like it’s, it’s pulling money out of—out of the banking system. It’s actually been shrinking here lately. So I don’t think—that’s not something, something 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. <NAME>MICHELLE SMITH</NAME>. Jonnelle. <NAME>JONNELLE MARTE</NAME>. Jonnelle 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 forecasts, and how does it factor into monetary policy? <NAME>CHAIR POWELL</NAME>. 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. You know, we’re watching that situation carefully. I do think we—we will see rents, rents and, and house prices filtering into, into housing services inflation. And I, I don’t see them coming up quickly. I, I do see them kind of—kind of wandering around at a relatively low level now, and that’s appropriate. <NAME>JONNELLE MARTE</NAME>. Do you think you’ll have to target that with further rate increases? <NAME>CHAIR POWELL</NAME>. 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 the individual participants sit in their offices all over the country, and they write down their forecast and—including their most likely forecasts—including their rate forecast. And then they send it in on Friday afternoon, and we cumulate 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 itself going to be driving the rates picture, but it’s part of it. <NAME>MICHELLE SMITH</NAME>. Let’s go to Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you for taking the question, Mr. Chairman. Edward Lawrence with Fox Business. So I want to go back to comments you made about, in the past, about unsustainable fiscal path. The CBO projects the federal deficit to be $2.8 trillion 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—assuming monetary policy cannot handle alone the inflation or keep that inflation in check with the higher-level spending. <NAME>CHAIR POWELL</NAME>. I don’t do that. That’s really not my job. We—we hope and expect that other policymakers will respect our independence on, on monetary policy. And we don’t see ourselves as, as, you know, the judges of appropriate fiscal policy. I will say, and many of my predecessors have said, that we’re on an unsustainable fiscal path and, and that needs to be addressed over time. But I think trying to get into, into that with lawmakers would be—would be kind of inappropriate, given our independence and our need to stick to our knitting. <NAME>EDWARD LAWRENCE</NAME>. Is there any conversation then about the Federal Reserve financing some of that debt that we’re seeing coming down the pike? <NAME>CHAIR POWELL</NAME>. No. Under no circumstances. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. Thanks for taking our questions, Chair Powell. So looking at the SEP, it looks like GDP for this year was raised significantly—your forecast for GDP this year. 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—at least as it relates to what you were expecting in, in March? <NAME>CHAIR POWELL</NAME>. 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 getting inflation back down to 2 percent without having to see the kind of sharp downturn and, 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 is—that, that gradually cools could, 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 SEP, the Committee is completely unified in the need to get inflation down to 2 percent and will do whatever it takes to get it down to 2 percent over time. That is our plan. And, 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. <NAME>COURTENAY BROWN</NAME>. 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 SEP, 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? <NAME>CHAIR POWELL</NAME>. Sure. So, you know, if you look two and three years out with, 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, 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 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’re, we’re probably going to—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 of years out. I think, as, as anyone can see, not a single person on the Committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate, if you think about it. Inflation has not really moved down. It has—it has not so far reacted much to our—to our existing rate hikes. And so we’re going have to keep at it. <NAME>MICHELLE SMITH</NAME>. Julie. <NAME>JULIE CHABANAS</NAME>. I’m sorry. Thank you. Hi, Chair Powell. Julie Chabanas, AFP News Agency. The May job report showed a rebound in May in the Black workers’ unemployment. Is it consistent with the Fed’s maximum-employment mandate? Are you worried about that—about this rebound? <NAME>CHAIR POWELL</NAME>. So we are, of course, worried about—there are—there are long- standing 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. And so we do watch that. But remember, 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 higher—three- tenths higher than it was measured to be at the last—a month ago. But, still, it’s extraordinarily low. And so it’s a very, very tight labor market. <NAME>MICHELLE SMITH</NAME>. Megan. <NAME>MEGAN CASSELLA</NAME>. Thank you. I want to follow up first a little bit just on the rent question on housing. We heard Governor Waller talk about how—I’ll back up. We haven’t quite seen the slowdown in rents 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 bit of relief than we thought. Can you talk about how you’re thinking about that and how that played into today’s outcome? <NAME>CHAIR POWELL</NAME>. I wouldn’t say—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 want—we want the, you know, we want inflation to come down. And rental 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—it’s 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 on 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 SEP with—where it is. <NAME>MEGAN CASSELLA</NAME>. Could you also talk briefly about your outlook for wages and, given the recent slowdown in core services excluding housing, how far you think wages might need to fall in order to get inflation back in line? <NAME>CHAIR POWELL</NAME>. So wages will continue to increase. So we, 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 2 percent inflation over time. And so I, I think we’ve seen some progress—all, all of the major measures of wages have, have moved down from extremely elevated—not extremely elevated—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. Of 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 2 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. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thank you so much, Chair Powell. Greg Robb from MarketWatch. I just wondered if the Committee has talked at all about the labor market and, and—there, there’s strikes now in Hollywood and now the United Autoworkers are talking about a possible strike. I mean, aren’t workers—they have—we have some—workers have power now and are going to be seeking higher wages. Does that come up in your discussions? Thanks. <NAME>CHAIR POWELL</NAME>. So the topic of wages in the labor market and 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, you know, we—there, 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 2 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. <NAME>MICHELLE SMITH</NAME>. Let’s go to Mark for the last question. <NAME>MARK HAMRICK</NAME>. 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 nonbank financials? And could you further elevate those risks with higher still rates, possibly for longer? <NAME>CHAIR POWELL</NAME>. So I’m trying to think where to start. I’ll start with commercial real estate. We—of course, we’re watching that situation very carefully. There’s a substantial amount of commercial real estate in the banking system. A, a large part of it is in smaller banks. It’s well distributed—to the extent it’s well distributedthen, then the system could, could take losses. We do expect that there will be losses, but they’ll be—they’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. You know, it feels like—it feels like something that will be around for some time, as opposed to, you know, something that will suddenly hit and, and, you know, work its way into systemic risk. In terms of nonbank financials—financial sector—there’s been a ton of work. And, you know, clearly in the—in the pandemic, it really was—it was the nonbank financial sector where, where issues really arose. And, you know, there’s a lot of work going on in—with the Administration, in particular, leading that to try to address issues in the Treasury market and, and in all kinds of areas in the nonbank financial market. And—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. You know, in terms of 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 that may go wrong, and that would include the banks. It might be hard for me to identify something 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 unfold—as we see what’s happening with credit conditions and, and also all the individual banks that are out there, you know, we’ll be able to take, to the extent it’s appropriate, we can take, if they’re macroeconomic implications, we can take that into account in our rate setting. And so I guess that’s what I would say. <NAME>MARK HAMRICK</NAME>. Can I just follow up on the last part of that? Do you—do you risk further exacerbating those issues if you get up to another 50 basis points? <NAME>CHAIR POWELL</NAME>. So that’s—and, 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 tightening of conditions that, that you could be referring to, then we can factor that—because really, we’re—we use our—our rate tool is, is, you know, is—it really has macroeconomic purposes. So we’ll, 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.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people. We understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 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. Today we took another step by raising our policy interest rate ¼ percentage point, and we are continuing 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. Looking ahead, we will continue to take a data-dependent approach in determining the extent of additional policy firming that may be appropriate. I’ll have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a moderate pace. Growth in consumer spending appears to have slowed from earlier in the year. Although activity in the housing sector has picked up somewhat, it remains well below levels of a year ago, largely reflecting higher mortgage rates. And higher interest rates and slower output growth also appear to be weighing on business fixed investment. The labor market remains very tight. Over the past three months, job gains averaged 244,000 jobs per month, a pace below that seen earlier in the year but still a strong pace. The unemployment rate remains low at 3.6 percent. There are some continuing signs that supply and demand in the labor market are coming into better balance. The labor force participation rate has moved up since last year, particularly for individuals aged 25 to 54 years. Nominal wage growth has shown some signs of easing, and job vacancies have declined so far this year. While the jobs-to-workers gap has narrowed, labor demand still substantially exceeds the supply of available workers. Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in May, total PCE prices rose 3.8 percent; excluding the volatile food and energy categories, core PCE prices rose 4.6 percent. In June, the 12-month change in the consumer price index, or CPI, came in at 3.0 percent, and the change in the core, core CPI, was 4.8 percent. Inflation has moderated somewhat since the middle of last year. Nonetheless, the process of getting inflation back down to 2 percent has a long way to go. 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 stable prices for the American people. My colleagues and I are acutely aware that high inflation imposes significant—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’re 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 2 percent objective. At today’s meeting, the Committee raised the target range for the federal funds rate by ¼ percentage point, bringing the target range to 5¼ to 5½ percent. We are also continuing the process of significantly reducing our securities holdings. With today’s action, we’ve raised our policy rate by 5¼ percentage points since early last year. We have been seeing the effects of our policy tightening on demand in the most interest rate–sensitive sectors of the economy, particularly housing and investment. It will take time, however, for the full effects of our ongoing monetary restraint to be realized, especially on inflation. In addition, the economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 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. We will continue to make our decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks. We remain committed to bringing inflation back to our 2 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 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, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, thank you. You have, I think a couple of times in your opening remarks, talked about this language “in determining the extent of additional policy firming that may be appropriate.” Should we take that to mean that additional hikes are likely on the way? And should we also believe that all future meetings—say, September and November— are live, or are you in an every-other-meeting mode? Thank you. <NAME>CHAIR POWELL</NAME>. So we haven’t made a decision to go to every other meeting. It’s not something we’ve looked at. We’re going to be going meeting by meeting, and as we go into each meeting, we’re going to be asking ourselves the same questions. So we haven’t made any decisions about, about any future meetings, including the pace at which we’d consider hiking. But we’re going to be assessing the need for further tightening that may be appropriate—you read the language—“to return inflation to 2 percent over time.” I would say that the intermeeting data came in broadly in line with expectations: Economic activity remained resilient, job creation remains strong while cooling a bit, and the June CPI report actually came in a bit better than expectations for a change. And the June CPI report, of course, was welcomed, but it’s only one report, one month’s data. We hope that inflation will follow a lower path, as was—that will be consistent with the CPI reading, but we don’t know that, and we’re just going to need to see more data. So, what are we going to be looking at? Really, it will be the broader, the whole broader picture, and starting with—we’re looking for moderate growth, right? We’re looking for supply and demand through the economy coming into better balance, including, in particular, in the labor market. We’ll be looking at inflation. We’ll be asking ourselves, does this whole collection of data, do we assess it as suggesting that we need to raise rates further? And if we make that conclusion, then we will go ahead and raise rates. So that’s how we’re thinking about the next meeting and, you know, how we’re thinking about meetings going forward potentially, but, you know, we’re now mainly thinking about the next meeting. I will also say, since we’re talking about it, between now and the September meeting, we get two more job reports, two more CPI reports. I think we have an ECI report coming later this week—which is [an] employment compensation index—and lots of data on economic activity. All of that information is going to inform our decision as we go into that meeting. I would say it is certainly possible that we would raise funds again at the September meeting if the data warrant it, and I would also say it’s possible that we would choose to hold steady at that meeting. We’re going to be making careful assessments, as I said, meeting by meeting, and I’ll close by saying we’ve raised the federal funds rate now by 525 basis points since March 2022. Monetary policy, we believe, is restrictive and is putting downward pressure on economic activity and inflation. <NAME>STEVE LIESMAN</NAME>. If I could just briefly follow up on something you said there: You said the data in the intermeeting period, it probably came in in line with expectations. Does that mean there’s unlikely to have been a change in the overwhelming outlook of the Committee that two more hikes are necessary? <NAME>CHAIR POWELL</NAME>. I’m just going to go back to what I said. We, we—you know, that’s the question. We have eight weeks now until the September meeting, and all that data that I recited, we’re going to be looking at all that and making that assessment then. And it really—we did have the one good reading, and, of course, we welcome that. But it’s just one reading, as everybody knows. And, and, you know, we’ve seen—we’ve seen this before in the data. Many forecasts call for, for rates—for, for inflation to remain low, but we just don’t know that until we see the data. So we’ll be focusing on that. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Thank you. Thanks for taking our questions, Chair Powell. Obviously, you updated the language around growth in the statement today. You know, we’ve seen the Barbie movie numbers. We’ve seen everyone going to Taylor Swift concerts this summer. It seems like the American consumers are in pretty good shape, and it does seem like growth is sort of picking back up a little bit or at least doing well. And I wonder, from your perspective, if that continues, if we see growth not just stabilizing but doing, you know, performing well this summer, is that a problem because it’s inflationary, or is it good news because it suggests that a soft landing is more likely? Just how are you thinking about that sort of trajectory? <NAME>CHAIR POWELL</NAME>. Yeah. So I would say it this way: The overall resilience of the economy, the fact that, that we’ve been able to achieve disinflation so far without any meaningful negative impact on the labor market, the strength of the economy—overall, that’s a good thing. It’s good to see that, of course. It’s also—you see consumer, consumer confidence coming up and things like that. That will support activity going forward. But you’re, you’re right, though. At the margin, stronger growth could lead, over time, to higher inflation, and that would require an appropriate response for monetary policy. So we’ll be watching that carefully and seeing how it evolves over time. <NAME>MICHELE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks, Chair Powell. Neil Irwin from Axios. So, as you referenced earlier, in the intermeeting period, soft CPI, jobs reports still strong but moderating, JOLTS look good. So if you’re data dependent, why not pause again? Why not stay on hold? Why not take another meeting off when the data was at least cutting in the direction you want to see? <NAME>CHAIR POWELL</NAME>. So if you go back to what we’re trying to do here, we’re trying to achieve a stance of policy that’s sufficiently restrictive to bring inflation down to 2 percent. At the last meeting, we wrote down our individual estimates of that would take—of what that would take, and the median of that was, was an additional two rate hikes. So I would say, we looked at the interim intermeeting data and, as I mentioned, broadly consistent, not perfectly consistent, but broadly consistent with expectations. And, as a result, we went ahead and, and took another step. And that’s, you know, a labor market that continues to be strong but, but gradually slowing. I mentioned that the inflation report was actually a little better than expected, but, you know, we’re, we’re going to be careful about taking too much signal from, from a single reading. And, you know, growth came in stronger than expected. So that’s how we look at it, and, and so we did take that step today. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, markets widely believe the median FOMC participant’s inflation forecast from June for the fourth quarter of this year will be too high, given autos and shelter, and that by September, that may warrant a downward revision in the inflation forecast of 20 to 30 basis points. Would that type of inflation progress be enough to hold rates steady from here, or do you need to see below-trend growth and decelerating labor income growth to be convinced that you’ve done enough? <NAME>CHAIR POWELL</NAME>. So it’s hard to pick the pieces apart and say, you know, how much of this and how much of that. You know, we’ll be looking at everything. And, you know, we’ll, of course, we’ll be looking to see whether the signal from June’s CPI is replicated or, or the opposite of replicated or whether it’s somewhere in the middle. We’ll be looking at the growth data. We’ll be looking at the labor market data very closely, of course, and making an overall judgment about that. It’s the totality of the data, I think, but with a particular focus on, on making progress on inflation. <NAME>NICK TIMIRAOS</NAME>. If I could follow up: Last month you said there were benefits to moderating the pace of increases because it would give you more information to make decisions. Would another CPI report like the one we just had in June allow you to at least maintain that slower pace and defer until the fall any decision on whether you need that second rate hike? <NAME>CHAIR POWELL</NAME>. So I’m just going to tell you again what we’re going to do. In September, we’re going to look at, at two additional job reports, two additional CPI reports, lots of activity data, and that’s what we’re going to look at, and we’re going to make that decision then. And that decision could, could mean another hike in, in September, or it could mean that we decide to maintain at that level. And, again, the question we’re going to be asking ourselves is, is the overall signal one that we need to do more, that we need to tighten further? And if we get that signal, whenever we get it, then—and that’s the collective judgment of the Committee— then we will move ahead. If we don’t, you know, then, then we’ll have the option of maintaining policy at that level, but it’s, it’s, you know, it’s really dependent so much on the data, and we just don’t have it yet. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi. Chris Rugaber at Associated Press. So consumer confidence in the economy is rising, likely in large part because of, of the declines in headline inflation. You also see wages are also rising faster than prices now after trailing them for a long time. How much are Americans truly harmed by inflation at its current level, headline level of 3 percent? And with that in mind, when do you put some weight back on the employment side of the dual mandate? <NAME>CHAIR POWELL</NAME>. So I guess I’d say it this way: First, it is—it is a good thing that headline inflation has come down so much, because that’s really what the public experiences. And, and I would say that having headline inflation move down that much almost creates a—it will strengthen the broad sense that, that the public has that inflation is coming down, which will in turn, we hope, help inflation continue to move down. So you are really—sorry, your question was? <NAME>CHRISTOPHER RUGABER</NAME>. Well, I mean, you’ve talked for many press conferences now about the harm created by inflation, how hard it is for people. So how much of that are we still seeing with inflation now down at 3 [percent]? <NAME>CHAIR POWELL</NAME>. So I guess I would put it this way. We, we—I’d say it this way: It’s really a question of, how do you balance the two risks, the risk of doing too much or doing too little? And, you know, I would say that, you know, we’re coming to a place where, where there really are risks on both sides. It’s hard to say exactly whether, whether they’re in balance or not, but as our—as our stance has become more restrictive and inflation moderates, we do increasingly face that risk. But, you know, we, we need to see that inflation is durably down that far, you know. As you know, we think, and most economists think, that core inflation is actually a better signal of, of where headline inflation is going, because headline inflation is affected greatly by volatile energy and food prices. So we would want core inflation to be coming down, because that’s what we think—that’s—core is signaling where headline is going to go in the future. And core inflation is still pretty elevated, you know? There’s reason to think it can come down now, but it’s, it’s still quite elevated, and so we think we need to stay on task, and we think we’re going to need to hold, certainly, hold policy at a restrictive level for some time. And we need to be prepared to raise further if that—if we think that’s appropriate. <NAME>CHRISTOPHER RUGABER</NAME>. Well, and then if inflation were to—just a quick follow[up]: If it stays at 3 or drops even a little bit more, I mean, how much of an increase in unemployment do you think is acceptable to get that last bit of inflation? People are talking about the potential difficulty of the last, so-called last mile of inflation. So—but how much? Again, how much unemployment do you think is justified to get down that last one— <NAME>CHAIR POWELL</NAME>. So it is—it is a very positive thing that, actually, the unemployment rate is the same as it was when we lifted off in March of ’22, at 3.6 percent. So that’s a real blessing in that we’ve been able to achieve some disinflation, and we don’t seek to it. It’s not that we’re aiming to, to raise unemployment, but I would just say, the historical record—we have to be honest about the historical record, which does suggest that when central banks go in and slow the economy to bring down inflation, the result tends to be some softening in labor market conditions. And so that is still the, the likely outcome here. And, you know, we hope that that’s as little as possible, but we have to be honest that that is—that is the likely outcome. The worst outcome for everyone, of course, would be not to deal with inflation now, not get it done. Whatever the short-term social costs of getting inflation under control, the longer- term social costs of failing to do so are greater, and the historical record is very, very clear on that. If you go through a period where inflation expectations are not anchored, inflation is volatile, it interferes with people’s lives and with economic activity, and, you know, that’s the— that’s the thing we, we really need to avoid and will avoid. <NAME>MICHELLE SMITH</NAME>. Let’s go to Michael McKee. <NAME>MICHAEL MCKEE</NAME>. At this point, you say the policy is restrictive, but all year long we have seen growth surprise to the upside, unemployment to the downside, and inflation, lately, to the downside. So I’m wondering, by definition, should you be restrictive enough right now under these conditions? Do you think you might need to do more, because I’m curious about what you see as inflation dynamics now? Is the economy still moving in a direction where it creates more inflation? People talk about base effects and higher energy costs, and now we have some large labor settlements. Or is the economy disinflating, and you’re just, you’re able to go back to the old Fed policy of opportunistic disinflation? <NAME>CHAIR POWELL</NAME>. So I’ll just say again, the broader picture of what we want to see is, we want to see easing of supply constraints and normalization of pandemic-related distortions to demand and supply. We want to see economic growth running at moderate or modest levels to help ease inflationary pressures. We want to see continued restoration of supply and demand balance, particularly in the labor market. And all of that should lead to declining inflationary pressures. Now what we see is, we see those pieces of the puzzle coming together. And we’re seeing evidence of those things now, but I would—I would say that what, what our eyes are telling us is that policy has not been restrictive long, restrictive enough for long enough to have its full desired effects. So we intend, again, to keep policy restrictive until we’re confident that inflation is coming down sustainably to our 2 percent target, and we’re prepared to further tighten if that is appropriate. And we think the process, you know, still probably has a, a long way to go. <NAME>MICHAEL MCKEE</NAME>. Well, do you think under current conditions you are restrictive enough unless something changes? <NAME>CHAIR POWELL</NAME>. Well, I think—we think, you know, today’s rate hike was appropriate, and I think we’re going to be looking at the incoming data to inform our decision at the next meeting about, is the incoming data telling us that we need to do more? And if it does tell us that—collectively, if that’s our view—then we will do more. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. If September is, in fact, a live meeting, how does that square with the need for a more gradual tightening pace that you spoke of last month in explaining the rationale for holding the funds rate steady at the June meeting? <NAME>CHAIR POWELL</NAME>. So a more gradual pace doesn’t go immediately to [moving] every other meeting. It could be two out of three meetings, right? It could be—it just means if you’re slowing down, the point really was to slow down the decision cycle as, as we get closer and closer to, we think, our destination. And I wouldn’t want to go automatically to [moving] every other meeting, because I just don’t think that’s—we don’t—I think it’s not an environment where we want to provide a lot of forward guidance. There’s a lot of uncertainty out there. We just want to keep moving at what we think is the right pace, and I do think it makes all the sense in the world to slow down as we now make these finely judged decisions, and so that’s what we did. And so I, I think it’s possible. I mentioned it before. It’s possible that we would move at consecutive meetings—we’re not taking that off the table—or we might not. It’s really going to depend on what the data tell us. That’s the best we can do. <NAME>COLBY SMITH</NAME>. So we shouldn’t assume that every other meeting is the lowest tightening frequency, let’s say? It could be, you know, longer intervals in between as well? <NAME>CHAIR POWELL</NAME>. I think we’re—look, I think we’re going to—we’re going to make a decision about the next meeting, and then we’re going to make a decision about the one after that. And I think it’ll sort itself out. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Thanks. Howard Schneider with Reuters. So, among your colleagues, there have been people who’ve said they feel that very little transmission has taken place so far from monetary policy into the economy, and there are those who feel, they say, it’s happened very fast this time, and it’s kind of up to date. Where are you on that continuum? <NAME>CHAIR POWELL</NAME>. So there’s a long-running debate about the lags between changes in financial conditions and the response to those changes from economic activity and inflation, right? So we know that in the modern era, financial conditions move in anticipation of our decisions, and that has clearly been the case in this cycle. So, in a sense, the clock starts earlier than it—than it used to. But that doesn’t necessarily change the process from that point on, and it’s not clear that it has. We also—this is—I’ll tell you what we know and then what we don’t know. We know that financial conditions affect economic activity and inflation with a lag that can be long and variable, or lags, plural, that can be long and variable—a lot of uncertainty around the length of the lags. And, by the way, that’s just one component of the broader uncertainty that we face. So I’ll tell you how I—how I think about this. First, the first thing to say is, we’re determined to bring inflation down to 2 percent over time, and we will use our tools to do that. No one should doubt that. I would look at it this way, though. The real federal funds rate is now in meaningfully positive territory. If you take the nominal federal funds rate, subtract the mainstream estimate of near-term inflation expectations, you get a real federal funds rate that is well above most estimates of the longer-term neutral rate. So I would say, monetary policy is restrictive, more so after today’s decision, meaning that it is putting downward pressure on economic activity and inflation. We’ll keep monetary policy restrictive until we think it’s not appropriate to do so. So that’s how I think about it. I mean, if I sum it up, I would say: We’ve come a long way. We are resolutely committed to returning inflation to our 2 percent goal over time. Inflation has proved, repeatedly, has proved stronger than we and other forecasts—forecasters have expected, and at some point, that may change. We have to be ready to follow the data, and given how far we’ve come, we can afford to be a little patient, as well as resolute, as we let this unfold. <NAME>HOWARD SCHNEIDER</NAME>. On the—on the credit side, I’m wondering if you saw anything in the—in the latest SLOOS data that made you think you’re getting a quantum of credit contraction beyond what you’d expect. The bank lending data really is—the growth rate’s edging down towards below, heading below zero, which is usually, you know, a recession indicator. <NAME>CHAIR POWELL</NAME>. So I guess that the SLOOS will come out early next week, and I would just say it’s broadly condition—consistent with what you would expect. You’ve got lending conditions tight and getting a little tighter. You’ve got weak demand, and, you know, it, it gives a picture of pretty tight credit conditions in the economy. I think it’s really hard to tease out whether—how much of that is from this source or that source, but I think what matters is, the overall picture is of tight and tightening lending conditions. And that’s, that’s what the SLOOS will say. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. Could you break down the reasons why inflation has fallen and what share of that credit you would give to factors that don’t stem directly from rate hikes or that might be within your control at all, like easing supply chains and a drop in energy prices over the past year? <NAME>CHAIR POWELL</NAME>. Yeah. So, interesting question. So let me start by saying that the inflation surge that we saw in the pandemic resulted from a collision of elevated demand and, and constrained supply, both of which followed from the unprecedented features of the pandemic and the response from fiscal and monetary policy. And we’ve always expected that the disinflationary process would stem from, both from the normalization of those broad pandemic- related supply and demand conditions and from restrictive, restrictive monetary policy, which would help return the balance between supply and demand by restraining demand. And we think that’s broadly what we’re—what we’re seeing. So to go, break it down a little further: Of course, headline inflation has come down sharply from elevated levels as energy and food prices have come down, mostly due to [a] reversal of the effects [on those prices that resulted] from the war in Ukraine. And that’s, that’s a good thing, and the public experiences that, as I mentioned earlier. For core inflation, I’d say there also—there has been a role for, for most—for, for both factors, both that I mentioned. Clearly, for goods, normalization of supply conditions is playing an important role, as is the reversal, the beginning of the reversal, of spending—back into services and away from goods. And take autos as an example. The combination of an increase in sales and inventories, while, while vehicle inflation has decelerated, points to a substantial role for supply, but there’s also a role for demand, as, you know, the loans and things like that are more expensive. So they’re both working there. Housing services inflation now starts to move down. Clearly, higher rates have, have slowed the housing market. You know, I would say, monetary policy is working about as we expect, and we think—we think it’ll play an important role going forward, in particular in nonhousing services, where, really, we think that’s, that’s where the labor market will come in as a very, very important factor. So we think both of those—both of those sources of disinflation are playing an important role. <NAME>RACHEL SIEGEL</NAME>. I see. And just to follow up, do you think that of those two sources, that core will rely more heavily on seeing an impact from rate hikes, or is there a more even split there, too? <NAME>CHAIR POWELL</NAME>. I think monetary policy is going to be important going forward because we, we’re sort of reaping now the benefits of the—of the reversal of some of the very specific pandemic things. We’re seeing that with goods, in particular, with supply chains and shortages moving, and we’re seeing—so I think going forward, monetary policy will be important, particularly in that, in the sector, in the nonhousing services sector. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Chair Powell. First, let me compliment your tie, the choice of tie. It’s a good color. So thanks for taking our questions. So the Beige Book, it said, “Input cost pressures remained elevated for services firms but eased notably” for manufacturing sectors. Is that an indication that there’s a, a wage inflation pressure? And how do you target pressure on the wage inflation without pushing the economy into a recession? <NAME>CHAIR POWELL</NAME>. So I think that, as it relates to goods, it’s really an indication that supply chains and, and shortages are easing. And so, what was the first part of it? <NAME>EDWARD LAWRENCE</NAME>. So, wage inflation. Like, how do you—how do you target wage inflation without pushing an economy into a recession? <NAME>CHAIR POWELL</NAME>. I don’t—I don’t think we’re targeting wage inflation. I think what we’re—what we’re looking for is a broad cooling in labor market conditions. And that’s what we’re seeing. So wages have actually been gradually moving down. They’re still at levels what would—that would be consistent over a long period of time with 2 percent inflation. Nonetheless, we’re making progress there. And by so many indicators, labor market demand is cooling. You can—you can look at surveys by workers and businesses who see that. You can look at the quits rate normalizing. You can look at job openings coming down. You can look at just job creation in the, the establishment survey has, you know—it’s still at a high level, but it was at, really, an extraordinarily high level for most of the last two years. So you see cooling, particularly in private sector, in the last, you know, in the last report. So I think we see that, and it’s happening at a gradual pace. So that’s actually not a bad thing, in a sense, because if, if what we see is a labor market, very strong demand for labor, which is really the engine of the economy—people are getting hired, many people going back to work, getting wages, spending money—and that’s really what’s driving the economy but that it’s gradually slowing, it’s gradually cooling, that’s a good prescription for getting where we want to get. <NAME>EDWARD LAWRENCE</NAME>. But still we see a push to raise minimum wage. We’re seeing a lot of unions go on strike or threaten strike, and the common thing is, they come out with agreements like big pay increases, like UPS, and we have the autoworkers coming up. Are you concerned then about a trend of series of big unions, these contracts, pushing wage inflation then? <NAME>CHAIR POWELL</NAME>. Not for us to comment on, on contract negotiations. Not our job, not our role. You know, we, we monitor these things, and we’ll keep an eye on them, but, really, that’s something that’s, that’s handled at that level and not— <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to ask about the SEP, which suggests that you would cut rates as overall and core PCE get to around or under 3 percent. And so I’m wondering, is the level of inflation what’s sort of important there as you think about getting to 2 percent and when you might start cutting rates, or is the speed at which inflation is falling also important? <NAME>CHAIR POWELL</NAME>. I think you’d take both into account. I think you’d take everything into account when you start cutting rates. It would—it would depend on the whole, on a wide range of things. And when, when people are writing down rate cuts next year, you know, it just is a sense that inflation is coming down, and we’re comfortable that it’s coming down, and it’s time to start cutting rates. I think—but I mean, there’s a lot of uncertainty between what happens, you know, in the next meeting cycle, let alone the next year, let alone the year after that. So it’s, it’s hard to say exactly what happens there, what’s motivating people. <NAME>VICTORIA GUIDA</NAME>. So if it’s sort of—sort of stubbornly in maybe the high 2s, you wouldn’t necessarily cut rates? <NAME>CHAIR POWELL</NAME>. I’m not going—I’m not saying that at all. I’m not giving you any numerical guidance around that. I’m saying we would—we’d be comfortable cutting rates when we’re comfortable cutting rates, and that won’t be this year, I don’t think. It would be—you know, many people wrote down rate cuts for next year. I think the median was several for next year. And that’s just going to be a judgment that we have to make then, a full year from now, and it’ll be about how confident we are that inflation is, in fact, coming down to our 2 percent goal. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE MATTHEWS</NAME>. A good part of Wall Street has become more confident that the Fed is going to be able to engineer a soft landing, and they’ve reduced their forecast for a recession. And I’m wondering if the staff has changed its view on the likelihood of a recession being likely and if you personally have changed your view in terms of becoming more confident that you can achieve a soft landing. <NAME>CHAIR POWELL</NAME>. So it’s, it has been my view consistently that we do have a shot, and my base case is that we will be able to achieve inflation moving back down to our target without the kind of really significant downturn that results in high levels of job losses that we’ve seen in some past—in some past instances, many past instances of tightening that look like ours. That’s been my view. That’s, that’s still my view. And I think, you know, that that’s sort of consistent with, with what I see today. So—but it’s a long way from assured, and, and, you know, we have a lot left to go to see that happen. So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession. I just want to note that it’s—that our staff produces its own forecast, which is independent of the forecasts that we as FOMC participants produce. Having an independent staff forecast as well as the individual participant forecasts is really a strength of our—of our process. There’s just a lot of, I think, constructive diversity of opinion that, that helps us make— informs our deliberations—helps us make, I hope, better decisions. <NAME>STEVE MATTHEWS</NAME>. And is the reason for optimism that inflation has come down and you still have a strong labor market? I mean, does that add to the optimism? <NAME>CHAIR POWELL</NAME>. I wouldn’t use the term “optimism” about this yet. I would—I would say, though, that there’s a pathway, and, yes, that’s, that’s a good way to think about it. We’ve, we’ve seen so far the beginnings of disinflation without any real costs in the labor market. And that’s, that’s a really good thing. I would just also say the historical record suggests that there’s very likely to be some softening in labor market conditions. And consistent with having a soft landing, you would—you would have some softening in labor market conditions, and that’s still likely as we—as we go forward with this process. But it’s a good thing to date that we haven’t— we haven’t really seen that. We’ve seen softening through other—not through unemployment, not through higher unemployment. We’ve seen softening through, you know, job openings coming down part of the way back to more normal levels; the quits rate, so people are not quitting as much; we’ve seen participation—people coming in, and so labor supply has, has improved, which has lowered the temperature in the labor market, which was quite overheated, you know, going back a year or so. So we’re seeing that kind of cooling, and that’s, that’s very healthy, and, you know, we hope it continues. <NAME>MICHELLE SMITH</NAME>. Jeff. <NAME>JEFF COX</NAME>. Thank you, Mr. Chairman. Jeff Cox from CNBC.com. You and other Fed officials in the past have suggested that you don’t need to keep hiking until inflation hits 2 percent, that—as long as you see continued progress. So I’m wondering, how close do you need to get with the inflation numbers coming down? How many months of data do you need to see that will—that will give you sufficient confidence, and how, how far does this fight need to go before you’re willing to kind of declare victory on it? <NAME>CHAIR POWELL</NAME>. So the idea that we would keep hiking until inflation gets to 2 percent—it would be a prescription [for a policy] of going way past the target. That’s, that’s clearly not the appropriate way to think about it. So, and in fact, if you look at our forecast, we, we—the median participant—and, again, these are forecasting out years, so take them with a grain of salt. But people are cutting rates next year because, because, you know, the federal funds rate is at a restrictive level now. So if we see inflation coming down credibly, sustainably, then we don’t need to be at a restrictive level anymore. We can, you know, we can move back to a—to a neutral level and then below a neutral level at a certain point. I think we would, you know, we would—we, of course, would be very careful about that. We’d really want to be sure that inflation is coming down in a sustainable level. And it’s hard to make—I’m not going to try to make a numerical assessment of when and where that would be. But that’s the way I would think about it, is you’d start—you’d stop raising long before you got to 2 percent inflation, and you’d start cutting before you got to 2 percent inflation, too, because we don’t see ourselves getting to 2 percent inflation until—you know, all the way back to 2—until 2025 or so. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. It’s been over four months since a handful of regional banks, including Silicon Valley Bank, failed. When you look at credit conditions now, given Banc of California’s acquisition of PacWest, does this acquisition suggest the full impact has not been felt, or are you comfortable saying that we’ve seen most of the ripple effects that may have occurred at this point? And how does this play into your outlook for policy? <NAME>CHAIR POWELL</NAME>. So I don’t want to comment on any particular merger proposal, but I will say, things have settled down for sure out there. Deposit flows have stabilized. Capital and liquidity remain strong. Aggregate bank lending was stable quarter over quarter and is up significantly year over year. Banking-sector profits generally are coming in strong this quarter. And, overall, the banking system remains strong and resilient. Of course, we’re still watching, you know, the situation carefully and monitoring, you know, monitoring conditions in, in the banking sector. In terms of the, the actual effect on—if you think of a particular set of banks that were, were affected because of their size and business model and things like that, that were more affected by the turmoil in March than others, it’s very hard, as I mentioned; it’s very hard to sort of tease out the effects on this very large economy of ours from them tightening. They may be tightening a little bit more, probably are, than other banks. The SLOOS has been telling us for more than a year that banking conditions are tightening. That process is ongoing, and that will restrain economic growth. So I think—I think we have to take a step back from “I can’t separate those anymore.” I think—I think, basically, we’re just looking at the overall picture, which is one of tightening credit conditions. And that’s, that’s going to restrain economic activity. It is restraining economic activity. So that’s how I would look at it. <NAME>JENNIFER SCHONBERGER</NAME>. And how is that informing your outlook for setting policy? <NAME>CHAIR POWELL</NAME>. So I think we—that goes—that’s—an expected result of tightening interest rate policy is that—is that bank credit conditions—bank lending conditions would tighten as well. And so the question is, is it more effective this time because of what happened in May? I just don’t think we know that. I think we’re looking at the current data in GDP, and we’re seeing strong spending. We’re seeing a strong economy, and it’s made us confident that we can go ahead and raise interest rates now for the third time since the March events. And I—it seems like the economy is weathering this well, but, of course, we’re watching it carefully and, and expect to continue to do that. <NAME>MICHELLE SMITH</NAME>. Megan. <NAME>MEGAN CASSELLA</NAME>. Hi, Chair Powell. Thanks for taking our questions. Megan Cassella with Barron’s. I wondered on wages if you were at all concerned about any inflationary impact of wages now outpacing inflation, which is likely contributing to the boost in consumer sentiment and the continued strength of the consumer that we’ve been seeing. <NAME>CHAIR POWELL</NAME>. Well, [growth in nominal] wages in excess of inflation means [that increases in] real wages are positive. Again, that’s a great thing. Of course, we want that. We want people to have [gains in] real wages. But we want wages to be going up at a level that’s consistent with, with 2 percent inflation over time. As I mentioned, [increases in] nominal wages have been coming down gradually, and that’s what we want to see. We expect to see more of that. That’s just more of what’s consistent over a longer period of time. We don’t really think that, that wages were an important cause of inflation in the first year or so of the outbreak. But I would say that wages are probably an important issue going forward. Labor market conditions broadly are going to be an important part of, of getting inflation back down, and that’s why we think we need some further softening in labor market conditions. <NAME>MEGAN CASSELLA</NAME>. This goes sort of to the balance of risks question, but you mentioned at the start how you’re keeping an eye on consumer activity and whether there might be some sort of a rebound there, and I’m curious what the Fed’s explanation would be to families if further interest rate hikes start to hit the labor market—start to, you know, drive that sentiment back down. What’s the message there of, of why you continue to keep rates elevated or to raise them? <NAME>CHAIR POWELL</NAME>. Well, you know, we have a job assigned to us by Congress to get inflation under control. And we think the, the single most important thing we can do to benefit those very families, especially families at the lower end of the income spectrum, is to get inflation sustainably under control and restore price stability. We think that is the most important thing we can do now, and we’re determined to do that. And I would just point out that the people who are the most hurt by inflation right away are people who are on a low fixed income, who, you know, when you’re talking about travel or, you know, transportation costs, heating costs, clothing, food, things like that, those—if you’re just making it through each month on your paycheck and prices go up, you’re in trouble right away. Even middle-class people have some resources and can absorb inflation. People, people on the lower end of the income spectrum have a harder time doing that. So we need—we need to get this done. And, you know, the record is clear that if we—if we take too long or if, if we don’t succeed, that the pain will only be greater. So that’s, that’s how I would explain what we’re doing. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Thank you, Chair Powell. Simon Rabinovitch with the Economist. You had said last month that this meeting this week was going to be a live one. In the event, the market had assigned a, you know, a roughly 99 percent probability to the rate move that you announced today. The decision was, of course, unanimous, and the statement was basically unchanged from last month. So may I ask, you know, to what extent was the meeting actually a live one? Was there ever any doubt over the past two days about what the decision was, was actually going to be? <NAME>CHAIR POWELL</NAME>. Well, I mean, you could—“Was there doubt?” Look, I would say there’s a range of views on the Committee, and when you see the minutes in three weeks, you’ll see that. There’s a range of views about what we should do at this meeting and what we should do at the next meeting, and it’s a—it’s a process that we go through. Many times when we go into a meeting, the decision is not, you know, fundamentally in doubt. Nonetheless, we have the meeting, and some—some—some meetings are, you know, less uncertain than others, and I’ll just leave it at that. <NAME>MICHELLE SMITH</NAME>. Let’s go to Evan. <NAME>EVAN RYSER</NAME>. Evan Ryser, Market News International. Thank you, Chair Powell. Financial conditions have been loosening at a fairly steady clip in recent weeks—the dollar, the stock market, et cetera. What does that mean for the Fed and being sure that inflation will come down to target? <NAME>CHAIR POWELL</NAME>. So we monitor, of course, financial conditions, broad financial conditions. You’re right. It’s the dollar and equities, but—and, you know, we’re, of course, very focused on rates and our own policy. You know, we will—we’re going to use our policy tools to—working through financial conditions—to get inflation under control The implication is, you know, we will do what it takes to get inflation down, and in principle, that, that could mean that if financial conditions get looser, we have to do more. But what tends to happen, though, is, financial conditions get in and out of alignment with what we’re doing, and, and, ultimately, over time, we get where we need to go. <NAME>EVAN RYSER</NAME>. If I could also ask about the SEP from June that showed rate cuts—do you expect the Fed to cut nominal rates next year while also continuing QT? <NAME>CHAIR POWELL</NAME>. So that, that could happen. The question is, you know, is that consistent with, with—so if you think about both of them as normalization, imagine it’s a world where things are okay, and it’s time to bring rates down from what are restrictive levels to more normal levels. Normalization, in the case of, of the balance sheet, would be to reduce QT or to continue it, depending on where you are in the cycle. So they are two independent things. And, you know, really, the active tool of monetary policy is rates. But you can imagine circumstances in which it would be appropriate to have them working in what might be seen to be just different ways. But that wouldn’t be the case. <NAME>MICHELLE SMITH</NAME>. Let’s go to Kyle. <NAME>KYLE CAMPBELL</NAME>. Thanks, Chair Powell. Kyle Campbell with American Banker. I have a question about the discount window. I’m wondering if, since the bank failures of the spring, if you’ve seen signs that banks have taken more steps to be proactive in assuring that they’re ready to use that facility if they need to and if you have any sort of thoughts on whether policies might be appropriate for making sure that banks sort of test regularly to, to show that they are prepared to use it. Thanks. <NAME>CHAIR POWELL</NAME>. So that’s a very important thing. Yes. And yes to both sides of that. You know, yes, banks are now working to see that they are ready to use the discount window, and we are strongly encouraging them to do that—banks broadly. We did find, as you know, during the events of March and that, you know, that it’s a little clunkier. It can be a little clunkier and not as quick as it needs to be sometimes. So why not be in a situation where, where you’re just much more ready in case you—in case you need to access the discount window? <NAME>MICHELLE SMITH</NAME>. Let’s go to Mark Hamrick. <NAME>MARK HAMRICK</NAME>. Mr. Chairman, Mark Hamrick with Bankrate. You’ve talked in the past about getting the housing market back into better balance—excuse me—and also that the market might have bottomed. Where do you see that situation in balance, or lack thereof, right now, particularly with the restrained, constrained inventory of existing homes that might otherwise be coming onto market at a time when existing homeowners are reluctant to move and, of course, also all of that happening with the 30-year fixed-rate mortgage still around 7 percent on the heels of Fed tightening and with what you’re talking about tightening industry lending standards? Are we getting closer to balance or farther away? What’s your sense? <NAME>CHAIR POWELL</NAME>. I think we’ve got a ways to go to get back to balance, really, for the reasons that you talked about. With existing homes, you know, there are many people who have low-rate mortgages, and whereas they might want to sell in a normal situation, they’re not going to because they have such, so much, value in their mortgage, whch means that supply of existing homes is really, really tight, which is keeping prices up. On the other hand, there’s, you know, there’s a lot of supply coming on line now, and, and there are people coming in. A lot of the buyers are, are, you know, first-time buyers coming in, buying at, you know, with these, you know, with these relatively elevated mortgage rates. But I think this will take some time to work through. Hopefully, more supply comes on line, and, you know, we, we work through it. We’re still living through the, you know, the aftermath of the—of the pandemic. <NAME>MICHELLE SMITH</NAME>. We’ll go to Nancy for the last question. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. Russia has pulled out of an agreement allowing shipments of grains, safe passage through the Black Sea, and alternative routes at this point could be closed off. Just wondering, how could that contribute to higher food prices and inflation generally, and how closely are you watching that? <NAME>CHAIR POWELL</NAME>. We are watching it, of course, very closely. And you’re right. The withdrawal from the Black Sea Grain Initiative does raise concerns about global food security, particularly for poorer countries that import a large share of their food. Grain prices did go up on this news, but they remain well below their peaks of last spring. And the moves that we’ve seen so far, I would say, are not expected to make a significant contribution to U.S. inflation. Of course, we will be watching that situation carefully. <NAME>NANCY MARSHALL</NAME>-GENZER. So you don’t think it would have a big effect on Fed policy at this point? <NAME>CHAIR POWELL</NAME>. Doesn’t. You wouldn’t say so looking at what we—what we know now. <NAME>MICHELLE SMITH</NAME>. Thank you. <NAME>CHAIR POWELL</NAME>. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon, everyone. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people. We understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not 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’ve raised our policy interest rate by 5¼ percentage points and have 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. Today, we decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. Looking ahead, we’re in a position to proceed carefully in determining the extent of additional policy firming that may be appropriate. Our decisions will be based on our ongoing assessments of the incoming data and the evolving outlook and risks. I will have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a solid pace, and, so far this year, growth in real GDP has come in above expectations. Recent readings on consumer spending have been particularly robust. Activity in the housing sector has picked up somewhat, though it remains well below levels of a year ago, largely reflecting higher mortgage rates. Higher interest rates also appear to be weighing on business fixed investment. In our Summary of Economic Projections, or SEP, Committee participants revised up their assessments of real GDP growth, with the median for this year now at 2.1 percent. Participants expect growth to cool, with the median projection falling to 1.5 percent next year. The labor market remains tight, but supply and demand conditions continue to come into better balance. Over the past three months, payroll job gains averaged 150,000 jobs per month, a strong pace that is nevertheless well below that seen earlier in the year. The unemployment rate ticked up in August but remains low at 3.8 percent. The labor force participation rate has moved up since late last year, particularly for individuals aged 25 to 54 years. Nominal wage growth has shown some signs of easing, and job vacancies have declined so far this year. Although the jobs-to-workers gap has narrowed, labor demand still exceeds the supply of available workers. FOMC participants expect the rebalancing in the labor market to continue, easing upward pressures on inflation. The median unemployment rate projection in the SEP rises from 3.8 percent at the end of this year to 4.1 percent over the next two years. Inflation remains well above our longer-run goal of 2 percent. Based on the consumer price index, or CPI, and other data, we estimate that total PCE prices rose 3.4 percent over the 12 months ending in August and that, excluding the volatile food and energy categories, core PCE prices rose 3.9 percent. Inflation has moderated somewhat since the middle of last year, and 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. Nevertheless, the progress—process of getting inflation sustainably down to 2 percent has a long way to go. The median projection in the SEP for total PCE inflation is 3.3 percent this year, falls to 2.5 percent next year, and reaches 2 percent in 2026. The Fed’s monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the American people. My colleagues and I are acutely aware that high inflation imposes significant hardship, as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing, and transportation. We are highly attentive to the risks that high inflation poses to both sides of our mandate, and we’re strongly committed to returning inflation to our 2 percent objective. As I noted earlier, since early last year, we have raised our policy rate by 5¼ percentage points. We see the current stance of monetary policy as restrictive, putting downward pressure on economic activity, hiring, and inflation. In addition, the economy is facing headwinds from tighter credit conditions for households and businesses. In light of how far we have come in tightening policy, 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. We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to our 2 percent goal over time. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely—sorry—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, 5.1 percent at the end of 2024, and 3.9 percent at the end of 2025. Compared with our June Summary of Economic Projections, the median projection is unrevised for the end of this year but has moved up by ½ percentage point at the end of the next two years. These projections, of course, are not a Committee decision or plan; if the economy does not evolve as projected, the path of 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 the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks. Given how far we have come, we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks. Real interest rates now are well above mainstream estimates of the neutral policy rate, but we are mindful of the inherent uncertainties in precisely gauging the stance of policy. We’re prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our objective. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 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. We remain committed to bringing inflation back down to our 2 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 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, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. What makes the Committee inclined to think that the fed funds rate at this level is not yet sufficiently restrictive, especially when officials are forecasting a slightly more benign inflation outlook for this year? There’s noted uncertainty about policy lags. Headwinds have emerged from the looming government shutdown, the end of federal childcare funding, resumption of student debt payments—things of that nature. <NAME>CHAIR POWELL</NAME>. So I guess I would characterize the, the situation a little bit differently. So we decided to maintain the target range for the federal funds rate where it is—at 5¼ to 5½ percent—while continuing to reduce our securities holdings. And we say we’re committed to achieving and sustaining a stance of monetary policy that’s sufficiently restrictive to bring down inflation to 2 percent over time—we said that. But the fact that we decided to maintain the policy rate at this meeting doesn’t mean that we’ve decided that we have or have not at this time reached that—that stance of monetary policy that we’re seeking. If you looked at the SEP, as you—as you obviously will have done, you will see that a majority of participants believe that it is more likely than not that we will—that it will be appropriate for us to raise rates one more time in the two remaining meetings this year. Others believe that we have already reached that. So it’s, it’s something where we’re—by, by—we’re not making a decision by, by deciding to—about that question by deciding to just maintain the rate and await further data. <NAME>COLBY SMITH</NAME>. So, right now, it’s still an open question about “sufficiently restrictive”—you’re not saying today that we’ve reached this level? <NAME>CHAIR POWELL</NAME>. We’re not saying—yeah, no, no—clearly, we’re just—what we decided to do is maintain a policy rate and await further data. We want to see convincing evidence, really, that we have reached the appropriate level, and then, you know, we’re— we’ve—we’ve seen progress, and, and we welcome that. But, you know, we need to see more progress before we’ll be willing to—to reach that conclusion. <NAME>COLBY SMITH</NAME>. And just on the 2024 projections—what’s behind that shallower path for interest rate cuts and the need for real rates to be 50 basis points higher? <NAME>CHAIR POWELL</NAME>. Right. So I would say it this way: First of all, interest rates—real interest rates are, are positive now. They’re meaningfully positive, and that’s a good thing. We need policy to be restrictive so that we can get inflation down to target. Okay. And we need— we’re going to need that to remain to be the case for some time. So I think, you know— remember that the—of course, the SEP is not a plan that is negotiated or discussed, really, as a plan. It’s a cumulation, really, and what you see are the medians. It’s a cumulation of individual forecasts from 19 people, and then what you’re seeing are the medians. So I wouldn’t want to, you know, bestow upon it the idea that, that it’s really a plan. But what it reflects, though, is that economic activity’s been stronger than we expected—stronger than I think everyone expected. And, and so what you’re—what you’re seeing is, this is what people believe, as of now, will be appropriate to achieve what we’re looking to achieve, which is progress toward our—toward our inflation goal, as you see in the SEP. <NAME>MICHELLE SMITH</NAME>. Thanks. Let’s go to Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. How would you characterize the debate around another hike or holding steady? Is it discussion around lag times, fear of too much slowing, too little slowing? Could you walk us through what this disagreement was about at the meeting? <NAME>CHAIR POWELL</NAME>. Yeah. So the proposal at the meeting was to—was to maintain our current policy stance, and, and I think there was obviously unanimous support for that. But this, of course, is an SEP meeting, and so people write down what they think. And you’ve got—you have some—you saw, I think—seven wrote down no hike at this—at this meeting—or between now and the end of the year. And I think 12 wrote down another single hike in one of the next two meetings that we have between the end of the year. So it wasn’t like we were arguing over that—people just stating their positions—and, really, what, what people are saying is, “Let’s see how the data come in.” You know, we, we want to see—you know what we want to see. We want to see that, that this, this—these good inflation readings that we’ve been seeing for the last three months—we want to see that it’s more than just three months, right? We want to see, you know—the, the labor market report that we received, the last one that we received, was a good example of what we do—of what we do want to see. It was a combination of, of, you know, of—across a broad range of indicators, continuing rebalancing of the labor market. So those are the two things—so those are our two mandate variables, and, and that’s, that’s the progress that we want to see. But I think people—they want to be convinced, you know—they want to be careful to—not to jump to a conclusion, really, one way or the other—but just be convinced that the data, you know, support that conclusion. And that’s why, given how far we’ve come and how quickly we’ve come, we’re actually in a position to be able to proceed carefully as we assess the incoming data and the evolving outlooks and risks and make these decisions meeting by meeting. <NAME>RACHEL SIEGEL</NAME>. I see. And, in your view, what would—I know nothing has been decided yet—but what would one more hike at the end of the year do to the economy or to inflation? And on the other side, what would no hike do, if you could sort of game that out for us? <NAME>CHAIR POWELL</NAME>. So, you know, you, you can make the argument that one hike one way or the other won’t matter. But, for us, we’re, we’re trying—obviously, as a group, it’s a pretty tight cluster of, of where we think that, that policy stance might be, but we’re always going to be learning from data. You know, we’ve learned all through the course of the last year that, actually, we needed to go further than we had thought. If you go back a year—and what we thought, what we wrote down—it’s actually gotten higher and higher. So we, we don’t really know until—and that’s why, again, we—we’re in a position to proceed carefully at this point. A year ago, we proceeded pretty quickly to get rates up. Now—now we’re fairly close, we think, to where we need to get. It’s, it’s just a question of reaching the right stance. I wouldn’t attribute huge importance to one hike in, in macroeconomic terms. Nonetheless, you know, we need—we need to get to a place where we’re confident that we have a stance that will bring inflation down to 2 percent over time. That’s what we need to get to, and we’ve been—you know, we’ve been moving toward it. As we’ve gotten closer to it, we’ve slowed the pace at which we’ve moved. I think that was appropriate. And now that we’re getting closer, we, we— again, we have the ability to proceed carefully. <NAME>MICHELLE SMITH</NAME>. Thanks. Let’s go to Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Mr. Chairman, I want to return to Colby’s question here. What is it saying about the Committee’s view of the inflation dynamic in the economy that you achieve the same forecast inflation rate for next year but need another half a point of the funds rate on it? Does it tell you that—does it tell us that the Committee believes inflation to be more persistent—requires more medicine, effectively? And I guess a related question is, if you’re going to project a funds rate above the longer-run rate for four years in a row, at what point do we start to think, “Hey, maybe the longer rate or the neutral rate is actually higher”? Thank you. <NAME>CHAIR POWELL</NAME>. So I, I guess I would point more to—rather than pointing to a sense of inflation having become more persistent, I wouldn’t think—that’s not—we’ve, we’ve seen inflation be more persistent over the course of the past year, but I wouldn’t say that’s something that’s appeared in the recent data. It’s more about stronger economic activity, I would say. So if, if I had to attribute one thing—again, we’re, we’re picking medians here and trying to attribute one explanation. But I think, broadly, stronger economic activity means, means rates— we have to do more with rates, and that’s what—that’s what that meaning is, is telling you. In terms of, of what the neutral rate can be—you know, we—we know it by its works. We only know it by its works, really. We can’t—we can’t—you know, the, the models and, and—that we use, you—ultimately, you only know when you get there and by, by the way the economy reacts. And, again, that’s another reason why we’re—why we’re moving carefully now, because, you know, there are lags here. So it, it may—it may, of course, be that the—that the neutral rate has risen. You do see people—you don’t see the median moving—but you do see people raising their estimates of, of the neutral rate, and it’s certainly plausible that the neutral rate is higher than, than the longer-run rate. Remember—what we write down in the SEP is the longer-run rate. It is certainly possible that, you know, that the—that the neutral rate at this moment is higher than that, and that—that’s part of the explanation for why the economy has been more resilient than, than expected. <NAME>MICHELLE SMITH</NAME>. Let’s go to Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. Thank you. So you’ve said several times that the economy needed a period of below-trend growth to get inflation consistently back to 2 percent. You kind of get that in 2024 a little bit—1.5 percent is just a touch below what’s the estimate of potential. So the fact that you’re getting so much done at so much less cost, does that represent a change in how you think inflation works, a change in how you think the economy works, a change in the mix of supply healing versus demand destruction that’s necessary to achieve this? <NAME>CHAIR POWELL</NAME>. Yes, of course. It is a—it is a good thing that we, we’ve seen now meaningful rebalancing in the labor market without an increase in unemployment, and that’s, that’s because we’re seeing that rebalancing in other places—in, for example, job openings and in the jobs–worker gap. You’re also seeing supply-side things—so, so that’s happening. I would say, though, we still—I still think, and I think, broadly, people still think, that there will have to be some softening in the labor market that can come through more supply, as we’ve seen as well. Also, remember, the natural rate, we think, is, is coming down, which is a supply-side thing, so that the, the gap between any given unemployment rate that’s lower than that and the natural rate comes down. That’s a way for supply—that’s a way for the labor market to achieve a better balance. So all of those things are happening. You’re right—in, in the median forecast, we don’t see a big increase in unemployment. We do see an increase, and—but that’s—that really is just “playing forward” the trends that we’ve been seeing. That is not guaranteed. There, there may come a time when unemployment goes up more than that, but that’s, that’s really what we’ve been seeing is, progress without higher unemployment for now. <NAME>HOWARD SCHNEIDER</NAME>. So just to, to boil that down for a second—you know, we’ve gone from a very narrow path to a—to a soft landing to something different. Would you call the soft landing now a baseline expectation? <NAME>CHAIR POWELL</NAME>. No, no—I would not do that. I, I would just say—what, what would I say about that? I’ve always thought that the soft landing was, was a plausible outcome—that there was a path, really, to, to a soft landing. I’ve thought that, and I’ve said that since we lifted off. It’s also possible that, that the path has narrowed, and it’s widened, apparently. Ultimately, it—this may be decided by factors that are outside our control at the end of the day. But I do think it’s—I do think it’s possible. And, you know—I also think, you know, this is why we’re in a position to, to move carefully again. That—we, we will restore price stability. We, we know that we have to do that, and we know the public depends on us doing that, and we know that we have to do it so that we can achieve the kind of labor market that we all want to achieve, which is an extended period—sustained period of strong labor market conditions that benefit all. We know that. The fact that we’ve come this far lets us really proceed carefully, as I keep saying. So I think, you know, that’s, that’s the end we’re trying to achieve. I wouldn’t want to handicap the likelihood of it, though. It’s not up to me to do that. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, both you and Vice Chair Williams have indicated that “sufficiently restrictive” will be judged on a real rather than nominal basis, implying some scope for nominal rate cuts next year—provided further compelling evidence that price pressures will continue to subside. Is the FOMC focused on targeting a real level of policy restriction? And can you explain what would constitute enough evidence that will allow the FOMC to normalize the nominal stance of policy while keeping real policy settings sufficiently restrictive? <NAME>CHAIR POWELL</NAME>. I mean, yes—we, we understand that it’s a real rate that will matter and that needs to be sufficiently restrictive. And, again, I would say, you know—you know “sufficiently restrictive” only when you see it. You—it’s not something you can arrive at with confidence in a model or, or in various estimates, you know. And so what are we seeing? We’re, we’re seeing, you know, through a combination of the, you know, the unwinding of the pandemic-related demand and supply distortions and monetary policy’s work in suppressing demand or, or, you know, alleviating very high demand—the combination of those two things is actually working. You’re seeing, you know, inflation coming down. It’s principally now in goods—also in housing services. You begin to see effects of it in nonhousing services as well. So I think—we think that that is working. And I, I think, you know—as we’ve said, we, we want to reach that—we want to reach something that we’re confident gets us to that level. And I think confidence comes from seeing, you know, enough data that you feel like, “Yes, okay, this feels like it—we can—we can, for now, decide that this is the right level and just agree to stay here.” We’re not permanently deciding not to go higher, but, but we would—let’s say, if we get to that level—and then the question is, how long do you stay at that level? And that’s a whole other set of questions. For now, the question is trying to find that level where we think we can stay there. And we haven’t—we haven’t gotten to a point of confidence about that yet. That’s, that’s what we’re—that’s, that’s the stage we’re at, though. <NAME>NICK TIMIRAOS</NAME>. But it looks like there was—because there was an across-the-board drop in the core PCE projection—core PCE inflation projection for this year, and even then it seems possible that core PCE inflation could come in even lower than the median at 3.7 percent. Would you see a case to raise rates still if it turned out that you were going to achieve the same real rate this year because the decline in inflation proceeds somewhat better than you—than you currently anticipate? <NAME>CHAIR POWELL</NAME>. The decision that we make at, you know, at each meeting and, certainly, at the—at the last two meetings this year—it’s going to depend on the totality of all the data: so, the inflation data, the labor market data, the growth data, the, the balance of risks, and the other events that are happening out there. We’ll make—we take all of that into account, so I can’t really answer a hypothetical about one piece of that. It’ll—it’ll be trying to reach a judgment over whether we should move forward with another rate hike overall and whether that would increase our confidence that, that, yes, this is an appropriate move, and it will help, help us be more confident that we’ve gotten to the level that we need to get to. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Thanks, Chair Powell. Following up on Nick’s question, actually—John Williams, the New York Fed president, obviously, has said things to the effect of, “Next year, as we see inflation kind of”—again, to Nick’s point—“as, as we see inflation coming down, we’re going to need to reduce interest rates to make sure that we’re not squeezing the economy harder and harder over time.” And I wonder if that’s basically the logic that you apply—you know, is that how you think about it? And then I also wonder—in the last press conference, you said something to the effect of, you know, “It’s a full year out—those discussions,” and people interpreted that to mean that you didn’t see a possibility of a rate cut in the first half of next year. And I wonder if that was what you meant by that or whether, you know—how you’re thinking about that timing. <NAME>CHAIR POWELL</NAME>. No. When—so when I answer these questions about hypotheticals about, about cutting, I’m never intending to send a signal about timing; I’m just answering them as, as the question is expressed. So, so please—I, I wouldn’t want to be taken that way. Sorry— the first question was, is that how? Yeah, so we’re—as we go into next year, that’s the question we’ll be asking is—you know, taking into account lags and, and everything else we know about the economy and everything we know about monetary policy, the, the time will come at some point, and I’m not saying when, that it’s—that it’s appropriate to cut. Part of that may be that real rates are rising because inflation is coming down. Part of it just may be that—it’ll be all the factors that we see in the economy. And, you know, that time will certainly come at some point. And you—what you see is us writing down, you know, a year ahead, estimates of what that might be. And, you know, there’s—you know, there’s so much uncertainty around that. In, in— when we—in the moment, we’ll do what we think makes sense. No one will look back at this and say, “Hey, we made a plan.” It’s not like that at all. It’s—this is—these are estimates made a year in advance that are highly uncertain, and that’s how it is. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks so much, Chair Powell. Neil Irwin with Axios. I wonder—how do you think about the question of whether the strong GDP growth we’ve been seeing is driven by excess demand versus supply-side factors, productivity, labor force growth? And, relatedly, if GDP keeps coming in “hot,” even in the absence of inflation resurgence, would that on its own be a reason to consider more tightening? <NAME>CHAIR POWELL</NAME>. So on, on your first question—I mean, we’re looking at GDP very, very carefully to try to understand really what’s the direction of it—what’s, what’s driving it. And it’s, it’s a lot of consumer spending, you know. It’s been—the consumer’s been very robust in its—in spending. So that is, you know, that’s how we’re looking at it. Sorry, your second question was— <NAME>NEIL IRWIN</NAME>. Does GDP stays “hot,” but without inflation? <NAME>CHAIR POWELL</NAME>. So I, I think the question will be—GDP is not our mandate, right? Maximum employment and price stability are the mandates. The question will be, is, is the level—is GDP—is the—is the heat that we see in GDP—is it really a threat to our ability to get back to 2 percent inflation? That’s going to be the question. It’s not—it’s not a question about GDP on its own. It’s, you—you know, you’re expecting to see the—this improvement, you know—continued rebalancing in the labor market and inflation moving back down to 2 percent in a sustainable way. We have to have confidence in that, and, you know, we’d be—we’d be looking at GDP just, just to the extent that it threatens one or both of those. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guido with Politico. There are multiple external factors that are playing out right now. We see rising oil prices. We see auto workers striking. There’s the looming, very real possibility of a government shutdown. And I was just wondering, for each of those things, could you talk about how you’re thinking about how that might affect the course for the Fed and the economy? <NAME>CHAIR POWELL</NAME>. So there is a—there is a long list, and you hit some of them. But it— you know, it’s, it’s the strike, it’s government shutdown, resumption of student loan payments, higher long-term rates, oil price shock. You know, you could—there are a lot of things that you can—you can look at. And, you know—so, what we try to do is assess all of them and, and handicap all of them. And, ultimately, though, there’s so much uncertainty around, around these things. I mean, to, to start with the strike—first of all, we absolutely don’t comment on the strike, as we have no view on the strike one way or the other. But we, we do have to make an assessment of its economic effects to do our jobs. So, you know, the, the thing about it is—so uncertain. It will depend. The economic effects—it could affect—you’ve looked—we’ve looked back at history—it could affect economic output, hiring, and inflation. But that’s really going to depend on how broad it is and how long it’s sustained for. And we—and then it also depends on how quickly production can make up for, for lost production. So none of those things are known right now. It’s very, very hard to know. So you just have to leave that uncertain. And, and we’ll be learning, I think, over the course of the next intermeeting period, much more about that. And the same is true for the others. We, we—I don’t know if you mentioned shutdown; I think of all of these as being on the list. We don’t comment on that. It hasn’t traditionally had much of a macroeconomic effect. You know, energy prices being higher—that’s—that is a significant thing. We—energy prices being up can affect spending. It can affect the consumer over time. A sustained period of higher—of higher energy prices can affect consumer expectations about inflation. We tend to look through short-term volatility and look at—look at core inflation. But so the question is, how long are, are higher prices sustained? We have to—we have to take those macroeconomic effects into account as well. Those are—those are some of them. I’m not sure if I hit them all. But—I mean, ultimately, you know, you’re, you’re coming into this with an economy that appears to have significant momentum. And that’s, that’s what we start with. And we—but we do have this collection of risks that you mentioned. <NAME>MICHELLE SMITH</NAME>. Craig. <NAME>CRAIG TORRES</NAME>. Craig Torres from Bloomberg News. I was a little surprised, Chair Powell, to hear you say that a soft landing is not a primary objective. This economy’s seeing added supply in a way that could create long-term inflation stability. We have prime-age labor force participation moving up where people can add skills. Workers want to work. We have a boom in manufacturing construction. We’ve had a decent spate of homebuilding. And since inflation’s coming down with strong GDP growth, we may have higher productivity. All are which—good for the Fed’s longer-run target of low inflation. And if we lose that in a recession, aren’t we opting for the awful hysteresis that we had in 2010? So are you taking this into account as you pursue policy? Thank you. <NAME>CHAIR POWELL</NAME>. To begin: A soft landing is a primary objective, and I did not say otherwise. I mean, that’s, that’s what we’ve been trying to achieve for all this time. The, the real point, though, is—the, the worst thing we can do is to fail to restore price stability, because the record is clear on that: If you, you don’t restore price stability, inflation comes back, and you go through—you can have a long period where the economy’s just very uncertain, and it will affect growth; it will affect all kinds of things. It can be a miserable period to have inflation constantly coming back and the Fed coming in and having to tighten again and again. So the best thing we can do for everyone, we believe, is to restore price stability. I think now, today, we actually—you know, we, we have the ability to be careful at this point and move carefully, and that’s what we’re planning to do. So we fully appreciate that—you know, the benefits of being able to continue what we see already, which is rebalancing in the labor market and inflation coming down without seeing, you know, an important, large increase in unemployment, which has been typical of other tightening cycles. So— <NAME>MICHELLE SMITH</NAME>. Let’s go to Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi. Thank you. Chris Rugaber at Associated Press. When you look at the disinflation that has taken place so far, do you see it mostly as a result of what some economists are calling “the low-hanging fruit”—such as the unwinding of supply chain snarls and other pandemic disruptions—or is it more a broad disinflationary trend that involves most goods and services across the economy? Thank you. <NAME>CHAIR POWELL</NAME>. So if I—if I understood your question, it’s—I would say it this way: I think we knew from the time—from before when we lifted off, but certainly by the time we lift—we knew that bringing inflation back down was going to take, as I call it, the unwinding of these distortions to both supply and demand that happened because of the pandemic and the response. So that unwinding was going to be important. In addition, monetary policy was going to help. It was going to help supply side heal by, by cooling demand off and, just in general, better aligning supply with demand. So those two forces were always going to be important. I think it’s very hard to pull them apart. They work together. I, I do think both of them are at work now, and I think they’re at work in a way that shows you the progress that we—that we are seeing. <NAME>MICHELLE SMITH</NAME>. Let’s go to Mike. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Television and Radio. In June, you forecast a 5.6 percent year-end median fed funds rate, and since then, you’ve more than doubled your growth forecast. You lowered your unemployment forecast significantly. So, what would justify that last move, because the median forecast is for lower inflation? And given all the known unknowns that you face, how much confidence do you have, can investors have, or the American people have in your forecasts? <NAME>CHAIR POWELL</NAME>. Well, forecasts are highly uncertain. Forecasting is very difficult. Forecasters are a humble lot with much to be humble about. But to get to, to your question, though—what’s happened is, growth has come in stronger, right? Stronger than expected—and that’s required higher rates. Unemployment, you know—you also see that the, the ultimate unemployment rate is not as high, but that—that’s really because of what we’ve been seeing in the labor market. We’ve seen more and more progress in the labor market without seeing significantly higher unemployment. So we’re, we’re continuing that trend. In terms of inflation, you, you are seeing—the last three readings are, are very good readings. It’s only three readings, you know. We—we’re well aware that we need to see more than three readings. But if you look at June, July, and August, you’re looking at, you know, really significant declines in core inflation, largely in the goods sector—also to some extent in housing services and just a little in nonhousing services. Those are the three buckets. Headline inflation, of course, has come way down, largely due to lower energy prices, some of which is now reversing. So I think—people should know that, that economic forecasting is very difficult, and these are highly uncertain forecasts. But these are—these are our forecasts. You know, they’re, they’re—we have very high-quality people working on these forecasts, and I think they stand up well against other forecasters. But just the nature of the business is, the economy is very difficult to forecast. <NAME>MICHAEL MCKEE</NAME>. Given the—given the forecast that you have, what justified not moving today, and what could justify moving in the future if you think inflation is coming down? In other words, why did you leave that extra dot in? <NAME>CHAIR POWELL</NAME>. Well, I, I think we have come very far very fast in, in the, the rate increases that we’ve made. And I think it was important at the beginning that we move quickly, and we did. And, and I think as we get closer to the rate that we think—the stance of monetary policy that we think is appropriate to bring inflation down to 2 percent over time, you know, the risks become more two sided, and the risk of overtightening and the risk of, of undertightening becomes more equal. And I think the, the natural, commonsense thing to do is, as you approach that, you move a little more slowly as you get closer to it. And that, that’s what we’re doing. So we’re, we’re taking advantage of the fact that we have moved quickly to move a little more carefully now as we—as we sort of find our way to, to the right level of restriction that we need to get inflation back down to 2 percent. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. With your focus on year-over-year PCE, isn’t it true that base effects are huge and that by the time you meet in November, that it’s more likely that you’ll have a low PCE number that would make you feel more comfortable? And, secondly, how would the lack of key indicators—like CPI, the jobs report—impact your approach in upcoming meetings if we were to have a government shutdown? Thank you. <NAME>CHAIR POWELL</NAME>. Sorry—yeah, I missed the first question. What was—missed what factors? <NAME>JENNIFER SCHONBERGER</NAME>. The base factors. <NAME>CHAIR POWELL</NAME>. Base factors. Ah. Okay. So on that, we’re, you know, we’re looking at just monthly, right? You can look at just monthly readings and see what the increase was from the prior month. So you’re right—when you go back 3, 6, and 12 months, you get base factors. But we can—we can adjust for that. In terms of not getting data—you know, again, we don’t—we don’t comment on government shutdowns. It—it’s possible—if, if there is a government shutdown and it lasts through the, the next meeting, then it’s possible we wouldn’t— we wouldn’t be getting some of the data that we would ordinarily get, and we—you know, we would just have to deal with that. And I don’t know. It’s hard for me to say in advance how that would affect that meeting. It would depend on all kinds of factors that I don’t know about now. But it’s certainly a reality that, that that’s a possibility. <NAME>JENNIFER SCHONBERGER</NAME>. Would you feel more comfortable on the base effects that—as those kind of fall out of the equation for the next couple of readings by November, would you feel more comfortable at that point? <NAME>CHAIR POWELL</NAME>. You know, yes. I mean, if you’re looking—if—we, we can tell how much inflation has gone up in a given month, right? And, you know, that’s what we’re looking at. And month by month, what’s the reading? And, you know, I think—I think what we’re really looking at is, there’s a tendency to look at, you know, shorter and shorter maturities, but they’re incredibly volatile, and they can be misleading. That’s why we look at 12-month [rates]. But I think, in this situation—where it looks like we’ve had a bit of a turn in inflation starting in June—we’re also looking at six months, and even three months, but really six months’ inflation. So you’re looking at it over that period and over longer periods. That—that’s the right way to go. And we don’t—we don’t need to be in a hurry to—in, in getting to a conclusion about what to do. We can let the data evolve. So— <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thanks for the question, Chair Powell. Edward Lawrence with Fox Business. So I want to focus back in on oil prices. We’re seeing oil prices, as you mentioned, move up, and that’s pushing the price of gas. So how does that factor into your decision to raise rates or not—because in the last two inflation reports, PCE and CPI, we’ve seen, the overall inflation has actually risen? <NAME>CHAIR POWELL</NAME>. Right. So, you know, energy prices are very important for the consumer. This, this can affect consumer spending. It certainly can affect consumer sentiment. I mean, gas prices are one of the big things that, that affects consumer sentiment. It, it really comes down to how persistent—how sustained these energy prices are. The reason why we look at core inflation, which excludes food and energy, is that energy goes up and down like that. And it doesn’t—energy, energy prices mostly, mostly don’t contain much of a signal about how tight the economy is, and hence don’t tell you much about where inflation’s really going. However, we’re well aware, though, that, that, you know, if energy prices increase and stay high, that’ll have an effect on spending. And, and it may have an effect on, on consumer expectations of inflation—things like that. That’s just things we have to monitor. <NAME>EDWARD LAWRENCE</NAME>. On the consumer—they’re putting more and more of this on their credit card. The consumer is seeing, you know, record credit spending. How long do you think the consumer can manage that debt at higher interest rates now? And are you concerned about a, a debt bubble related to that? <NAME>CHAIR POWELL</NAME>. So, to, to finish my prior thought, I was saying that’s why we tend to look through energy moves that we—that we can see as, as short-term volatility. You know, turning to consumer credit, you know—of course, we watch that carefully. Consumer distress— measures of distress among consumers were at historic lows quite recently, you know, after— during and after the, the pandemic. They’re now moving back up to normal. We’re, we’re watching that carefully. But, at this point, these, these readings are not at troublingly high levels. They’re, they’re just kind of moving back up to what was the typical [level] in the pre-pandemic era. <NAME>MICHELLE SMITH</NAME>. Jean. <NAME>JEAN YUNG</NAME>. Hi. Jean Yung with MNI Market News. Yields along the Treasury curve have risen to their highest in years. What is the Fed’s view about what’s been driving that increase in recent weeks, and how much of it can be attributed to macro explanations—and how much to technical factors? <NAME>CHAIR POWELL</NAME>. So you’re right. You know, rates have moved up significantly. I think it’s always hard to say precisely, but it’s—most, most people do a common decomposition of the increase, and they’ll, they’ll—the view will be, it’s not—it’s not mostly about inflation expectations. It’s mostly about other things, you know—either term premium or real yields— and it’s, it’s hard to be precise about this. Of course, everyone’s got models that’ll give you a very precise answer, but they give you different answers. So—but, essentially, they’re, they’re moving up because—it’s not because of inflation. It’s because probably—it’ll probably have something to do with stronger growth, I would say—more, more supply of Treasuries. You know, the common explanations that you hear in the markets kind of make sense. <NAME>MICHELLE SMITH</NAME>. Kyle. <NAME>KYLE CAMPBELL</NAME>. Kyle Campbell, American Banker. Thank you for taking the questions—just two on, on housing. You’ve said slower shelter cost growth is in the pipeline and will reflect in inflation readings as new leases are signed, but there’s also some questions out there about the way housing costs are measured, particularly the use of rental equivalents, which are estimates from homeowners about what their homes would rent for if they were in the rental market. So my question is, how much of the effort to tame inflation, both as it’s measured and felt by the broader public, hinges on housing supply? And then as far as a constrained housing supply being sort of exacerbated by this sort of lock-in effect of mortgages being higher now than they were at their recent historic lows, how is that going to impact future thinking about taking interest rates to that lower bound in the future? <NAME>CHAIR POWELL</NAME>. So on the supply point—of course, supply is very important over time in, in setting house prices and, and, for that matter, rents. And so—and supply is kind of structurally constrained. But in terms of, of where inflation’s going in the near term, though, as, as you obviously know, a lot of it is, is leases that are running off and then being re-signed or re- leased at a level that’s, that’s not as—it won’t be that much higher. A year ago, it would have been much higher than it was a year before; now it may be below or at the same level. So as those leases are rolling over, we’re, we’re seeing what we expect, which is measured housing services inflation coming down. Your second question was the lock-ins. How much is that affecting things, really? <NAME>KYLE CAMPBELL</NAME>. Is that going to affect your decisions to potentially bring rates down to their lower bound in the future, sort of creating that sort of bubble of buying and then a lock-in that sort of stagnates the housing market? <NAME>CHAIR POWELL</NAME>. I, I think we look at the—I would look at the lock-in, the, the idea being that people are in, in very low mortgage—very low-rate mortgages, and if—even if they want to move now, they—it would be hard because the new mortgage would be so expensive. And that’s explaining some of the—that’s one of the explanations for what’s happening broadly in the labor market. Would that play a role in, in our future decisions—in a—in a future tight— in a future loosening cycle about whether we would cut rates? No, I, I don’t think it would. I mean, I don’t think that’s—I, I think we’d be looking at, what, you know, fundamentally, what, what rates does the economy need? And, and, you know, in, in an emergency like the pandemic or during the Global Financial Crisis, you, you know, the, the—you have to cut rates to the point that—you have to do, do what you can to support the economy. So I wouldn’t—I wouldn’t think that that would be a reason for us not to do that. It’s not something we’re thinking about at all right now. But, down the road, I wouldn’t think so. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi. Nancy Marshall-Genzer with Marketplace. Chair Powell, you’ve mentioned several things that would possibly weigh on consumer confidence, maybe cut back consumer spending—possible government shutdown, high gas prices. At this point, would the Fed welcome a decrease in consumer spending? Would that help you get inflation closer to your 2 percent target? <NAME>CHAIR POWELL</NAME>. I, I wouldn’t say it that way. We’re not looking for a decrease in consumer spending. It’s, it’s a good thing that the economy’s strong. It’s a good thing that the economy has been able to hold up under, under the tightening that we’ve done. It’s a good thing that the labor market’s strong. The, the only concern—it, it just means this: If the economy comes in stronger than expected, that just means we’ll have to do more in terms of monetary policy to get back to 2 percent—because we will get back to 2 percent. Does that answer your question? <NAME>NANCY MARSHALL</NAME>-GENZER. Yeah. And I guess, on the other hand, would you worry that that could contribute to an economic slowdown or even a recession? <NAME>CHAIR POWELL</NAME>. Well, that’s always a concern. I mean, concern number one is, is restoring price stability, because in the long run, that’s, that’s something we have to do so that we can have the kind of economy we really want, which is one with sustained period of tight labor market conditions that benefit all, as I—as I’ve said a couple times. So that, that said—of course, you know—we, we also now, given how far we’ve come with our rate hikes and how quickly we’ve come here, we do have the ability to be careful as we move forward because of that consideration. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Thank you, Chair Powell. Simon Rabinovitch with the Economist. One of the factors in the economic resilience to date appears to be a lesser degree of rate sensitivity than in the past. Obviously, we’ve talked about households with long fixed-rate mortgages—also companies that refinanced before last year. What is your thinking about the efficacy of rates and how that’s changed? And then, related to that, how do you think about the distributional consequences in the sense that if you’re a relatively wealthy household with a long fixed-rate mortgage, the past year has not been all that tough with rates going up, whereas if you’re relying on your credit card for supporting your consumption, in fact, times are getting a lot tougher a lot more quickly? Thanks. <NAME>CHAIR POWELL</NAME>. So, what—I guess it’s fair—it’s fair to say that the economy has been stronger than many expected, given, given what’s been happening with, with interest rates. Why is that? Many candidate explanations—possibly—a number of them make sense. One, one is just that household balance sheets and business balance sheets have been stronger than we had understood, and so that, that spending has held up—and that kind of thing. We’re not sure about that. The savings rate for consumers has come down a lot. The question is whether that’s sustainable. That could—it could just mean that the—that the date of effect is, is later. It could also be that for other reasons, the neutral rate of interest is, is higher for—for various reasons. We don’t know that. It could also just be that policy hasn’t been restrictive enough for long enough. And it’s—there are many candidate explanations. We have to, in, in all this uncertainty, make policy, and I, you know, I feel like what we have right now is what’s still a very strong labor market—but that’s coming back into balance. We were making progress on inflation. Growth is strong. But I think by many forecasts—many, many, many forecasts call for growth to, to moderate over the course of the next year. So that’s where we are, and, you know, we have to—we have to deal with what comes. On your second question, which was— sorry, your second question was distributional, but can you—can you be a little clearer about that? <NAME>SIMON RABINOVITCH</NAME>. Yeah. My point there was that if you’re somebody who has a long fixed-rate mortgage, you’ve been able to endure the higher rates relatively easily. If you’re somebody who’s living month to month off of your credit card, current financing rates are, are punitive. <NAME>CHAIR POWELL</NAME>. Yes. And so the point I would make there is that we’re trying to get inflation back down. The people who are most hurt by inflation are the people who are on a fixed income. If you’re a person who spends all of your income, you don’t really have any meaningful savings. You spend all your income on the basics of life—clothing, food, transportation, heating—the basics—and prices go up by 5, 6, 7 percent, you’re in trouble right away, whereas even, even middle-class people have some savings and some ability to absorb that. So it is for those people as much as for anybody that we need to restore price stability, and, and we, we want to do it as quickly as possible. Obviously, we—we’d like to do that. We’d like the current trend to continue, which is that we’re making progress without seeing the kind of increase in unemployment that we’ve seen past—in past things. But you’re right, though. When we raise rates, people who are, you know, living on credit cards and, and borrowing are going to feel that more. They are. And, of course, people with, with lots of savings also have a—have a much lower marginal propensity to consume, and so they’re not going to—it’s not going to affect them as much. <NAME>MICHELLE SMITH</NAME>. Let’s go to Greg Robb for the last question. <NAME>GREG ROBB</NAME>. Thank you, Chair Powell. Greg Robb from MarketWatch. In the Beige Book recently, you can tell that the Fed has been surveying nonprofits and community groups about the economic health of low-income Americans—moderate-income Americans. I have two questions about this. Are you going to use that data to maybe come up with sort of like a quarterly survey of those groups—like the senior loan officer survey? And from your—and also the second question is, from your recent look—readings of these surveys, how are low and moderate Americans doing? Is there this thing where, like, the GDP is strong because of wealthy Americans kind of driving things? I just want to get your sense of the health of that sector. Thank you. <NAME>CHAIR POWELL</NAME>. So I, I don’t know about the quarterly survey. That’s an idea we can—we can take away and think about. In terms of how low and moderate Americans—you know, they’re clearly—were suffering from, from high inflation. I think during the pandemic, the, the government transfers that happened were very meaningful. And, you know, if you know the—the surveys that we take showed that—showed that low- and moderate-income people were actually in very, very strong financial condition. I think now it’s a very “hot” labor market, and you’re seeing high [growth in] nominal wages, and you’re starting to see [that growth rates of] real wages are now positive by most—by most measures. So I, I think, overall, households are in good shape. Surveys are a different thing. So surveys are showing dissatisfaction, and I think a lot of that is just, people hate inflation—hate it. And that, that causes people to say, “The economy’s terrible.” But, at the same time, they’re spending money. Their behavior is, is not exactly what you would expect from the surveys. That’s kind of a, a guess at what the answer might be. But I, I think there’s a lot of good things happening on household balance sheets—and, certainly, in the labor market and with wages. The biggest wage increases having gone to relatively low- wage jobs—and now [with] inflation coming down—you’re seeing [increases in] real wages, which is a good thing. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon, everyone. Welcome. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people. We understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not 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 5¼ percentage points and have continued to reduce our securities holdings at a brisk pace. The stance of policy is restrictive—meaning that tight policy is putting downward pressure on economic activity and inflation—and the full effects of our tightening have yet to be felt. Today, we decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. Given how far we have come, along with the uncertainties and risks we face, the Committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks. I’ll have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a strong pace and well above earlier expectations. In the third quarter, real GDP is estimated to have risen at an outsized annual rate of 4.9 percent, boosted by a surge in consumer spending. After picking up somewhat over the summer, activity in the housing sector has flattened out and remains well below levels of a year ago, largely reflecting higher mortgage rates. Higher interest rates also appear to be weighing on business fixed investment. The labor market remains tight, but supply and demand conditions continue to come into better balance. Over the past three months, payroll job gains averaged 266,000 jobs per month, a strong pace that is nevertheless below that seen earlier in the year. The unemployment rate remains low at 3.8 percent. Strong job creation has been accompanied by an increase in the supply of workers. The labor force participation rate has moved up since late last year, particularly for individuals aged 25 to 54 years, and immigration has rebounded to pre-pandemic levels. Nominal wage growth has shown some signs of easing, and job vacancies have declined so far this year. Although the jobs-to-workers gap has narrowed, labor demand still exceeds the supply of available workers. Inflation remains well above our longer-run goal of 2 percent. Total PCE prices rose 3.4 percent over the 12 months ending in September. Excluding the volatile food and energy categories, core PCE prices rose 3.7 percent. Inflation has moderated since the middle of last year, and readings over the summer were quite favorable. But a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. The process of getting inflation sustainably down to 2 percent has a long way to go. Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecastters, 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 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 2 percent objective. As I noted earlier, since early last year, we have raised our policy rate by 5¼ percentage points, and we have decreased our securities holdings by more than $1 trillion. Our restrictive stance of monetary policy is putting downward pressure on economic activity and inflation. 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. We are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation sustainably down to 2 percent over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective. We are attentive to recent data showing the resilience of economic growth and demand for labor. Evidence of growth persistently above potential, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy. Financial conditions have tightened significantly in recent months, driven by higher longer-term bond yields, among other factors. Because persistent changes in financial conditions can have implications for the path of monetary policy, we monitor financial developments closely. In light of the uncertainties and risks, and how far we have come, the Committee is proceeding carefully. We will continue to make our decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation as well as the balance of risks. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 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. We remain committed to bringing inflation back down to our 2 percent goal and to keeping longer-term inflation expectations well anchored. Reducing inflation is likely to require a period of below-potential 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 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, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Let’s go to Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. Thank you, Chair Powell, for doing this. To what—you referenced the rise in long-term bond yields—to what degree did that supplant action by the Fed at this meeting? <NAME>CHAIR POWELL</NAME>. Thanks for your question. So, I’ll talk about bond yields, but I want to take a second and just sort of set the broader context in which we’re looking at that. So, if you—if you look at the situation—let’s look at the economy first. Inflation has been coming down, but it’s still running well above our 2 percent target. The labor market has been rebalancing, but it’s still very tight by many measures. GDP growth has been strong, although many forecasters are forecasting, and they have been forecasting, that it will slow. As for the Committee, we are committed to achieving a stance of monetary policy that’s sufficiently restrictive to bring inflation down to 2 percent over time, and we’re not confident yet that we have achieved such a stance. So that is the broader context into which this, this strong economy and all the things I said—that’s the context in which we’re looking at this question of rates. So, obviously we’re monitoring, we’re attentive to the increase in longer-term yields and—which have contributed to a tightening of broader financial conditions since the summer. As I mentioned, persistent changes in broader financial conditions can have implications for the path of monetary policy. In this case, the tighter financial conditions we’re seeing—[coming] from higher long-term rates, but also from other sources, like the stronger dollar and lower equity prices—could matter for future rate decisions, as long as two conditions are satisfied. The first is that the tighter conditions would need to be persistent. And that is something that remains to be seen. But that’s critical. Things are fluctuating back and forth—that’s not what we’re looking for. With financial conditions, we’re looking for persistent changes that are material. The second thing is that, that the longer-term rates that have moved up—they can’t simply be a reflection of, of expected policy moves from us that we would then—that if we didn’t follow through on them, then the rates would come back down. So, and I would say on that, it does not appear that an expectation of higher near-term policy rates is causing the increase in longer-term rates. So, in the meantime, though, perhaps the most important thing is that these higher Treasury yields are showing through to higher borrowing costs for households and businesses and those higher costs are going to weigh on economic activity to the extent this tightening persists and the mind’s eye goes to the 8 percent—near 8 percent mortgage rate, which could have pretty significant effect on housing. So that’s how I would answer your question. <NAME>HOWARD SCHNEIDER</NAME>. Just as a quick follow-on, to be clear on this: In your opening statement just now, you seemed to imply that you are not yet confident that financial conditions are restrictive enough to finish the fight. Is that true? <NAME>CHAIR POWELL</NAME>. Yes. That’s exactly right. You know, to say it a different way: We haven’t made any decisions about, about future meetings. We have not made a determination, and we’re not—I will say that we’re not confident at this time that we’ve reached such a stance. We’re not confident that we haven’t; we’re not confident that we have. And that’s—that is—the way we’re going to be going into these future meetings is to be, you know, just determining the extent of any additional further policy tightening that may be appropriate to return inflation to 2 percent over time. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Thank you so much for taking our questions. I wonder, you know, if you don’t raise interest rates in December, would the presumption be at that point that we should expect that rates are at their peak, or is there a possibility of restarting rate increases next year? And are there any costs to taking a more extended pause? <NAME>CHAIR POWELL</NAME>. So, let me start by saying we haven’t made a decision about September. You’re asking a hypothetical there. But we’re going into December meeting—we’ll get, as you know, two more inflation ratings, two more labor market readings, some data on, on economic activity, and so we’ll be taking—and also the broader situation, the broader financial condition situation and broader world situation. We’ll be looking at all those things as we make a decision in December. We haven’t made that decision. I would say, though, that, that the idea that if you—the idea that would—difficult to raise again after stopping for a meeting or two, it’s just not right. I mean, the Committee will always do what it thinks is appropriate at the time. And, again, we haven’t made any decisions about— at all about December. We didn’t even—we didn’t talk about making a decision in December today. Really, it was a decision for this meeting and understanding broader things. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, did the Fed staff put a recession back into the baseline forecast in the materials for today’s meeting? And how much does this tightening and financial conditions substitute for rate hikes if the tightening is persistent? You had said it was worth maybe a ¼ point when we had the bank failures in the spring. What is it here on something that’s presumably more straightforward and more familiar to simulate? <NAME>CHAIR POWELL</NAME>. So I guess I don’t want to answer your question about the—about the recession. But the answer is “no.” I think I have to answer it, since we did publicly say in the minutes—you’ll know anyway in the [next] minutes—the staff did not put a recession back in. I mean, it would be hard to see how you would do that if you look at the—look at the activity we’ve seen recently, which is not really indicative of a recession in the near term. In terms of how to think about translation into rate hikes, I think it’s just too early to be doing that, and the main reason is we just don’t know how persistent this will be. You can see how volatile it is. Different kinds of news will affect the level of rates, and I think any kind of an estimate that was precise would hang out there and have a great chance of looking wrong very quickly. So I think what we can say is that financial conditions have clearly tightened, and you can see that in the rates that, that consumers and households and businesses are paying now. And over time, that will have an effect. We just don’t know how persistent it’s going to be, and it’s tough to try to translate that in a way that I’d be comfortable communicating into how many rate hikes that is. <NAME>NICK TIMIRAOS</NAME>. I’d like to follow up and ask what makes you confident—what makes you confident in the tighter financial conditions will slow above-trend growth when 500 basis points of rate hikes, QT, and a minor banking crisis have not thus far? <NAME>CHAIR POWELL</NAME>. Well, I just—that’s, you know, the way our policy works is—and sometimes it works with lags, of course, which can be long and variable, but ultimately, if you raise interest rates, you do see those effects. And you see those effects in the economy now. You see what’s happening in the housing market. You’re seeing that now. You’ll see, if you look at surveys of people, it’s not a good time they think to buy durable goods of various kinds because rates are so high now. I mention again, we’re getting reports from housing that the effects of this—of this could be quite significant. But you’re right. This has been a resilient economy. And it’s, I think, been surprising in its resilience. And there are a number of possible reasons why that may be. Our job is to—is to achieve maximum employment and price stability, and so we take the economy as it comes. It has been resilient, so we just—we take it as it is. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMTH</NAME>. Thank you. Colby Smith with the Financial Times. In terms of the thresholds that you’ve laid out of what could warrant further tightening, the additional evidence of persistently above-trend growth, or some kind of reversal in the recent easing of labor market tightness—that seems to suggest something more powerful than just one more ¼ point rate hike would be necessary. And I’m just curious if that’s how the Committee sees it. <NAME>CHAIR POWELL</NAME>. So we’ve identified those factors. Those were not meant to be the only factors or a specific test that we’re going to be applying with some metrics behind it. Really, we’re going to be looking at the broader picture. You know, what’s happening with our progress toward the 2 percent inflation goal? Is the labor market continuing to, broadly, cool off and achieve a better balance? We’ll be looking at that. You know, growth—we look at growth insofar as it has implications for our two mandate goals. We look at that, and we look at broader financial conditions. So we’ll be looking at all of those things as we reach a judgment, you know, whether we need to further tighten policy. And, if we do reach that judgment, then we will further tighten policy. <NAME>COLBY SMITH</NAME>. Okay. And just in terms of the tightening of financial conditions, if that is having some kind of offsetting effect in terms of the need to potentially again raise rates, what then is the potential impact on the trajectory of rate cuts? Could we see those maybe pulled forward or have to see more than what the September SEP indicated? <NAME>CHAIR POWELL</NAME>. So it’s, it’s—the fact is the Committee is not thinking about rate cuts right now at all. We’re not talking about rate cuts. We’re still very focused on the first question, which is, have we achieved a stance of monetary policy that’s sufficiently restrictive to bring inflation down to 2 percent over time sustainably? That is the question we’re focusing on. The next question, as you know, will be, for how long will we remain restrictive? Will policy remain restrictive? And what we’ve said there is that we’ll keep policy restrictive until we’re confident that inflation is on a sustainable path down to 2 percent. That’ll be the next question, but honestly, right now we’re really tightly focused on the first question. The question of rate cuts just doesn’t come up because I think the first—it’s so important to get that first question, you know, as close to right as you can. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Mr. Chairman, I guess I had assumed that there was a tightening bias in the Committee. You say in the statement you’re looking to assess the appropriate stance of monetary policy, the extent to which you may need to hike additionally. You didn’t say earlier that you were sufficiently restrictive. There were forecasts for two rate hikes among most members of the Committee. But then you just said that, you know, we don’t—we haven’t made a determination. Would you say the bias right now is neutral, that there is no disposition to hike again and that the Committee largely has moved off of this forecast for two hikes? Sorry, one additional— <NAME>CHAIR POWELL</NAME>. No. I wouldn’t say that at all. I would say—I mean, the language, looking at it here, “In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time.” That’s the question we’re asking. <NAME>STEVE LIESMAN</NAME>. So is it right to think of that as a hiking bias is still in the Committee here? <NAME>CHAIR POWELL</NAME>. We haven’t used that term, but it’s fair to say that’s the question we’re asking is, should we hike more? It’s not—it’s not, you know—that is the question, and you’re right that, in September, we wrote down one additional rate hike. But, you know—and we’ll [each] write down another forecast, as you know, in December. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRIS RUGABER</NAME>. Thank you, Chris Rugaber, at Associated Press. Well, since the last meeting, the auto workers’ strike has finished, oil prices have leveled off, and yet, on the other hand, you have the outbreak of war between Israel and Hamas. How do you see all those factors, taken together, affecting the economy going forward? How are you thinking about those? <NAME>CHAIR POWELL</NAME>. So, there are significant issues out there, as you point out. Global geopolitical tensions are certainly elevated. And that goes for the war in Ukraine; it goes for the war between Israel and Hamas. We’re monitoring that. Our job is to monitor those things for their economic implications. So, the UAW strike, as you point out is—appears to be coming to an end. Oil prices have flattened out; they haven’t gone down. I guess they’ve gone down a little bit from their earlier peak. Another one is the possibility of government shutdown; we don’t know about that one. So there’s plenty of risk out there. But I would go back to—the bigger picture from our standpoint is, we’ve got a very strong economy, strong labor market, making progress on the labor market, making progress on inflation. And we’re very focused on getting confident that we have achieved a stance of monetary policy that is sufficiently restrictive. That’s really our focus. <NAME>CHRIS RUGABER</NAME>. Great. And just one quick thing: You, last month, had gone to York, Pennsylvania, where you talked to a lot of—or, yeah, last month, where you talked to a lot of small business owners. Just curious, what sentiments did you hear from them or what did you pick up on and what would you—was there anything that surprised you the most in terms of what they talked about? <NAME>CHAIR POWELL</NAME>. I wouldn’t say I was terribly surprised. I was very impressed by York as a town with a real strategy. And I would say it’s very impressive what the people there have put together in the face of, you know, some difficult longer-run trends about offshoring of manufacturing and that kind of thing. They’ve done a great job as a city, I think. You know, what you hear—and it’s consistent there—which is people are really suffering under high inflation. You were there. We talked to some people who, you know, were feeling that in their businesses and other people who were feeling it in their home lives as well. You know, it’s painful for people—particularly people who don’t have a lot of extra financial resources who are spending most of their incoming, you know, income on the essentials of life. So we know that. That wasn’t new. But that did come through very clearly in, in the conversations we had in York, and, you know, I walked away from that even—you know, I mean, just thinking that we really—the best thing we can do for the U.S. is to restore price stability—fully restore price stability and not fail in that task and do it as quickly as possible, but also with the least damage we can. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. You’ve spoken before about the pain that would likely be coming for the economy in order to get inflation down. But since the economy has not responded to rate hikes in ways that would normally be expected, have you changed your views on that at all—on how necessary or inevitable that kind of pain would be, say, for the labor market or overall growth? <NAME>CHAIR POWELL</NAME>. Well, I think everyone has been very gratified to see that we’ve been able to achieve, you know, pretty significant progress on inflation without seeing the kind of increase in unemployment that has been very typical of rate hiking cycles like this one. So that’s, that’s a historically unusual and very welcome result. And the same is true of growth. You know, we’ve been saying that we need to see below-potential growth. And growth has been strong, but yet we’re still seeing this. I think I still believe, and my colleagues for the most part I think still believe, that is likely to be true. It is still likely to be true—not a certainty—but likely that we will need to see some slower growth and some softening in the labor market—in labor market conditions to get, you know, to fully restore price stability. So—but it’s only a good thing that we haven’t seen it, and I think we know why. You know, since, since we lifted off, we, we have understood that there are really two processes at work here. One of them—one of which is the unwinding of the distortions to both supply and demand [that arose] from the pandemic and the response to the pandemic. And the other is, is, you know, restrictive monetary policy, which is moderating demand and giving the supply side time to recover—time and space to recover. So you see those two forces now working together to bring down inflation. But it’s that first one can bring down inflation without the need for higher unemployment or slower growth, it’s just—it’s supply—you know, supply-side improvements like shortages and bottlenecks and that kind of thing going away. It’s getting, you know, a significant increase in the size of the labor market now, both from labor force participation and from immigration. That’s a big supply-side, you know, gain that is really helping the economy, and it’s part of why—part of why GDP is so high is because we’re getting that supply. So, we welcome that. But I think those things will run their course, and we’re probably still going to be left—we think, and I think—we’ll still be left with some ground to cover to get back to full price stability. And that’s where monetary policy and what we do with demand is still going to be important. <NAME>RACHEL SIEGEL</NAME>. Against that backdrop, if you’ve gotten any clarity on lags—if you have an economy that’s been so resilient to high rate increases, does that suggest to you that there isn’t necessarily this huge wave of tightening that's still coming through the pipeline and that it may have already come into effect? <NAME>CHAIR POWELL</NAME>. You know, I continue to think it’s very hard to say. So it’s been one year at this meeting—one year ago, this was the fourth of our 75 basis points hikes. So that’s a full year since then. I think we are seeing the effects of, of all the hiking we did last year and this year—we’re seeing it. It’s very hard to know exactly what that might be. But you can, for example—an example where you wouldn’t have felt this yet is, is debt that had been termed out. But it’s going to come due and have to get rolled over next year or the year after. So—and there are little things like that where the effects have just taken time to get into the economy. So I don’t—I think we have to make monetary policy under great uncertainty about how long the lags are. I think trying to make a clear—get a clear answer and say, “I’m just going to assume this is really not a good way to do it.” And this is one of the reasons why we have slowed the process down this year, was to give monetary policy time to get into the economy. And it takes time. We know that, and you can’t rush it. So, doing—slowing down is giving us, I think, a better sense of, of how much more we need to do, if we need to do more. <NAME>MICHELLE SMITH</NAME>. Michael. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Television and Radio. I’m trying to connect the dots here. One quick clarification I wanted to ask about Rachel’s question is, you said you need slower growth. You had always said before a period of lower-than-trend growth. Has that changed? And, two, it sounds to me like you’re basically saying here that kind of the dot plot’s out the window, that every meeting is live with the possibility of a rate increase for right now—doesn’t matter about the turn of the year—and that there’s not an objective way to determine whether or not you’ve got enough tightening in the system. It’s just going to be a subjective judgment, meeting by meeting. <NAME>CHAIR POWELL</NAME>. Well so, let’s talk about the dot plot first. So the dot plot is a picture in time of what the people in the Committee think is likely to be appropriate monetary policy in light of their own personal economic forecast. In principle, when things change, it’s not—that’s not, like, planned that anybody’s agreed to or that we will do. That’s a forecast that would change, for example—I mean, many things could change that would cause people to say, “I wouldn’t write down that dot six weeks later.” Think of the number of things that could change your mind on that. So I think the efficacy of the dot plot probably decays over the three-month period between that meeting and the next meeting. But, nonetheless, it’s out there. We don’t— we do personally update our forecast, but we don’t formally update the dot plot. So, you know, I think we try to be as transparent as we can about the way we’re thinking about these things. We’re laying out there our thinking, and, you know, as we approach the meeting, we’ll all be— my colleagues and I will be talking about how we’re processing that data. In terms of—so we’re not really changing the way—in terms of growth, what I said was “below potential.” So what you have here recently is growth that is—that is temporarily— potential growth is elevated for a year or two right now over its trend level. So the right way to think about it is, what’s potential growth this year? People think trend growth over a long period of time is a little bit less than 2 percent, or I would say just around 2 percent. But what we’ve had is, with the—with the, you know, improvement in the size of the labor force, as I mentioned, through both participation and immigration, and with the, the, you know, the better functioning in the labor market and with the—with the, you know, the unwinding of the supply chain and shortages and those kinds of things, you’re seeing actually elevated potential growth. There’s catch-up growth that can happen in potential. And that means that if you’re growing—you could be growing at 2 percent this year and still be growing below the increase in the potential output of the economy. I hope that’s clear. That’s really what’s going on. That’s why I would say it as below potential. <NAME>MICHAEL MCKEE</NAME>. But if you could clarify what I asked about the meeting by meeting, are we essentially now supposed to assume that it’s a meeting by meeting, live meeting with a chance of a rate increase that will be decided on subjective criteria rather than objective at each meeting? <NAME>CHAIR POWELL</NAME>. I mean, I don’t know that I want to just accept anybody’s characterization, but I’ll tell you how we’re doing this. So, we’re going meeting by meeting. We’re asking ourselves whether we’ve achieved a stance of policy that is sufficiently restrictive to bring inflation down to 2 percent over time. That’s the question we’re asking. We’re looking at the full range of economic data, including financial conditions and all of those things that we look at, and then we’re, we’re—you know, we’ve, we’ve come very far with this rate hiking cycle, very far. And you saw the spread at the September meeting of—you know, it’s a relatively small spread of—people think one or two additional hikes. So you’re close to the—to the end of the cycle. That’s—that was an impression as of, I believe, as of September. It’s not a promise or a plan of the future. And so we’re going into these meetings one by one. We’re looking at the data. As I mentioned, we’re also—we’re being careful. We’re proceeding carefully because we can proceed carefully at this time. Monetary policy is restrictive. We see its effects, particularly in interest-sensitive spending and other channels. So that’s how I think about it. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks. Hi, Chair Powell. Neil Irwin with Axios. In light of the run-up in long-term yields we’ve seen the last several weeks, have you given any consideration to the pace of your asset runoff program? And if there were judgment that higher—that the higher- term premium was endangering the dual-mandate goals, would that be reason to think about slowing or suspending QT or should we think of that as a more technical question around reserves? <NAME>CHAIR POWELL</NAME>. So the Committee is not considering changing the pace of balance sheet runoff. It’s not something we’re talking about or considering, and I know there are many candidate explanations for why rates have been going up. And QT is certainly on that list. It may be playing a relatively small effect, although I would say at $3.3 trillion in reserves, it’s not—I think—I think it’s hard to make a case that reserves are even close to scarce at this point. So that’s not something that we’re—that we’re looking at right now. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to ask about the Basel III Endgame capital proposal. You’ve gotten a lot of “pushback” from people on different aspects of the proposal, and you yourself expressed some reservations. And I’m just curious: Could you accept finalizing that proposal without significant changes? <NAME>CHAIR POWELL</NAME>. So, that proposal is out for comment. And we expect a lot of comment. We won’t get those comments until the end of, well, into next year. You know, we’ve extended the deadline. And we’ll take them seriously. We’ll read them. I’ll say what, what I do expect is that we will—we will come to a—we’re a consensus-driven organization. We’ll come to a package that has broad support on the Board. <NAME>VICTORIA GUIDA</NAME>. So is broad support mean more support than the proposal had? <NAME>CHAIR POWELL</NAME>. It means broad support. <NAME>MICHELLE SMITH</NAME>. Jonnelle. <NAME>JONNELLE MARTE</NAME>. Jonnelle Marte with Bloomberg. So, in addition to persistence, when you look at long-term Treasury yields, what else are you watching to evaluate how those tighter financial conditions are hitting the economy and if it will lessen the need for further tightening? Also, do you think that those higher yields could affect banking stress? <NAME>CHAIR POWELL</NAME>. So what do we look at? We look at a very wide range of financial conditions and, in fact, as you’ll know, different organizations publish different financial conditions’ indexes, which can have, you know, 7 or 8 variables, or they can have 100 variables, so there’s a very rich environment. And we tend to look at a few of them. I’m not going to give you the names, but, you know, they’re a few of the common ones that people look at. And so they’re looking at things like the level of the dollar, the level of equity prices, the level of rates, the credit spreads. Sometimes they’re pulling in credit availability and things like that, so it isn’t any one thing. We would never look at, for example, long-term Treasury rates in isolation, nor would we ignore them. But we would look at them as part of a broader picture, and they do play a role, of course, in many of the major standard financial condition indexes. Your second question was? <NAME>JONNELLE MARTE</NAME>. On the banking stress. <NAME>CHAIR POWELL</NAME>. Banking stress—so it’s something we’re watching. As you know, we, we did have—there were issues with interest rate risk and also funding uninsured deposits in the March—the things we went through in March and thereafter. And so we’ve been working a lot with financial institutions to make sure that they have good funding plans and good—and that they have a plan for how to deal with the kind of portfolio, unrealized, losses that they have. And we do think the banking system is quite resilient. We had, you know, a handful of bank failures but—so that’s, that’s what we’re out there doing. And we don’t have any reason to think that this—that these rate hikes are materially changing that picture, which is one of a strong banking system and one where there’s a strong focus by banks and by supervisors on liquidity, on funding, and those sorts of things. <NAME>MICHELLE SMITH</NAME>. Scott. <NAME>SCOTT HORSLEY</NAME>. Thanks, Mr. Chairman. Scott Horsley from NPR. Last week you and your colleagues put forward a proposal to lower the cap on debit card swipe fees for comment. Could you just talk a little bit about the considerations there—what it would mean for merchants, for banks, for consumers, and also just what you all are seeing in terms of the use of both debit and credit cards in the—in the payment system? <NAME>CHAIR POWELL</NAME>. You know, so you’re right. We put a proposal out for comment, is what we did. And, you know, this is a job that Congress assigned us, as you, of course, know, in Dodd-Frank, and all we can really do is faithfully implement the statute. That’s, that’s all we’re trying to do. What else can we really do? It’s a 90-day comment period, and we typically don’t comment on these things once they’re out for—out for comment. And we do hope that stakeholders—and we know that they will use this opportunity to express their views. They haven’t been shy about that. So that’s, that’s critical and that’s, that’s what I can say about that now. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you. Thanks, Chair. Edward Lawrence with Fox Business. So for the last three months, the year-over-year PCE inflation was at 3.4 percent, core well over 3 percent. You’ve said in the past, 2 percent remains the Federal Reserve target, but with no rate increase today, how long would you be okay then with a 3 percent or 3 percent plus overall inflation? <NAME>CHAIR POWELL</NAME>. You know, the, the progress is probably going to come in lumps and be bumpy, but we’re making progress. You know, I think the core PCE [inflation rate] came down by almost 60 basis points in the third quarter. So the best thing I could point you to would be the September SEP where, you know, the expectation was that, that inflation by the end of next year, on a 12-month trailing basis, would be well into the 2s and the year after that, further into the 2s. So that’s, that’s—if you look historically, that’s, that’s sort of consistent with the way inflation comes down. It does take some time, and as you get—you know, as you get further and further from those highs, it may actually take longer time. But the good news is, you know, we’re making progress and monetary policy is restrictive. And we feel like we’re on a path to make more progress, and it’s essential that we do. <NAME>EDWARD LAWRENCE</NAME>. But you’ve said in the past that doing too little on interest rates could take years to fix, but the cost of doing too much could be easily fixed. How robust was the debate about this pause on the doing-too-little side? <NAME>CHAIR POWELL</NAME>. That’s always the question we’re asking ourselves. And we know that, if we fail to restore price stability, the risk is that expectations of higher inflation get entrenched in the economy, and we know that that’s really bad for people. Inflation will be both more—both higher and more volatile. That’s a—that’s a prescription for misery, and, and so we’re really committed to not letting that happen. You know, for the first year or so of our tightening cycle, the risk was all on the side of not doing enough. We’re, you know, we’re— we’ve come far enough that, that the risks, you know, have gotten more two sided. You can’t identify that with a lot of precision, but it does feel like the, the risks are more two sided now. And—but we’re committed to getting inflation back down to our target over time, and we will. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Hi, Simon Rabinovitch with the Economist. Quick follow-up to the question about banking stresses—you talked about how the banking system is resilient. Of course, part of the resilience the past year stems from the Bank Term Funding Program that you launched in March. Given that bond prices have not recovered, that unrealized losses are probably mounting, how likely is it that you might have to extend that program in March next year? <NAME>CHAIR POWELL</NAME>. Good question. We haven’t really—we haven’t really been thinking about that yet. We—you know, it’s November 1, and that’s a decision we’ll be making in the first quarter of next year. <NAME>SIMON RABINOVITCH</NAME>. Okay. Sorry. Quick second question about inflation expectations—the U. Michigan sentiment survey showed a big jump in one-year-ahead inflation expectations last month from 3.2 to 4.2. Last year you said that particular survey was a really decisive factor in one of your rate hike decisions. If it stays elevated next time around, how big of an input will that be into your December thinking? <NAME>CHAIR POWELL</NAME>. Yeah. We look at a range of, of things. I think the, the, the, you know, the UM thing got blown out of proportion a little bit. It was actually a preliminary estimate that got revised away. And I said it was preliminary in it, but that didn’t get picked up. So we look at many, many things. So really, look across the broad array of surveys and also market-based estimates, and, you know, we do that really carefully at every meeting and between meetings. And, you know, there’s—it’s just clear that inflation expectations are in a good place. The public does believe that inflation will get back down to 2 percent over time,. And it will— they’re right. So—and there’s no real crack in that—in that armor. You can always find one reading that is a little bit out of whack, but, honestly, the bulk of them are just very clear that the public believes that inflation will come down. And that’s, of course—we believe that’s critical in winning the battle. <NAME>MICHELLE SMITH</NAME>. Megan. <NAME>MEGAN CASSELLA</NAME>. Hi, Chair Powell. Megan Cassella with Barron’s. Thanks for taking our questions. I wanted to see if you could talk about the neutral rate. You mentioned today that you’re still debating whether rates are sufficiently restrictive, and you’ve recently said that evidence is suggesting policy is not too tight right now. So I was curious if you could elaborate on that at all and whether that means the neutral rate, in your view, has risen. <NAME>CHAIR POWELL</NAME>. Yeah. So first thing to say is that it’s very important. It’s a very important variable in, in the way we think about monetary policy, but you can’t identify it with any precision in real time. And we know that. So you have to just take that—you have to take your estimate of it with a grain of salt. What we know now is, you know, within a range of estimates of the neutral rate policy, is restrictive, and it’s therefore putting downward pressure on economic activity, hiring, and inflation. So we do—we do talk about this. There’s not any debate or attempt to, you know, to sort of agree as a group on what—whether r* has moved or not. Some people think it has, some people haven’t said—that don’t think it has. Ultimately, it’s unknowable, and so really again, what we’re focused on is, you know, looking at the data and giving ourselves a little more time now to look carefully at the data by being careful in our moves. Does it—does it feel like monetary policy is restrictive enough to bring inflation down to 2 percent over time? That’s the question we’re asking ourselves. I think, you know, years from now economists will be revising their estimates of r* as it existed on November 1, 2023. You can’t—we can’t really wait for that in making policy. We have to look—we have to have those models and look at them and think about them, and, ultimately, we’ve got to look at the effects that policy is having, accounting for the lags, which makes it difficult. <NAME>MEGAN CASSELLA</NAME>. If I could follow up on a wages point. Earlier you talked about the inflation outlook, but I’m curious if you have any concerns whether wage inflation at its current level could be—could risk pushing up overall inflation or re-acceleration? <NAME>CHAIR POWELL</NAME>. So, if you look at the—look at the broad range of wages, they have— wage increases have really come down significantly over the course of the last 18 months to a level where they’re substantially closer to that level that would be consistent with 2 percent inflation over time, making standard assumptions about productivity over time. So it’s much closer than it was. And that’s true of the ECI, which is the one that’s—the one that we got this week. It’s true of average hourly earnings and compensation per hour, too. So—and all of them are kind of saying that, which is great. And you have to look at a group of them because any one of them can be idiosyncratic from—in any given reading. So that’s what you see. And so what you saw with the ECI reading was, if you look back a couple—it comes out four times a year—if you look back a couple of quarters, you’ll see it was much higher, then it came down substantially in June. And then the September reading was more or less at the same level as the June reading. So, in a way, it’s just validating that decline, and it was very close to our expectations internally, too. So I think we feel good about that. Also I would say it isn’t—in my thinking, it’s not the case that, that wages have been the principal driver of inflation so far, although I think it’s all—I do think it’s fair to say that, as we go forward, as monetary policy becomes more important relative to the supply-side issues I’ve talked about in the unwinding of the pandemic effects, it may be that the labor market becomes more important over time, too. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi. Nancy Marshall-Genzer with Marketplace. Chair Powell, are you now as concerned about overshooting and raising interest rates too much as you are about getting inflation down to the 2 percent target? <NAME>CHAIR POWELL</NAME>. So, as I mentioned, I think for much of the last year and a half, the concern was not doing too, too—not doing enough. It was not getting rates high enough in time to avoid having inflation expectations—higher inflation expectations become entrenched. So that was the concern. I think we’ve reached, you know, now more than 18 months into this. You can see by the fact that we have slowed down, although we’re still—we’re still—we’re still trying to gain confidence in what the appropriate stance is. But you can see that. We think, and I think, that the risks are getting more balanced. I’ll just say that they’re getting more balanced. The risk of doing too much versus the risk of doing too little are getting—are getting more— closer to balance, because policy is I think clearly restrictive at 5¼ to 5½ percent. That range, if you take off a mainstream estimate of the expected inflation, take one year inflation, you’re going to see that. You’re going to see a real policy rate that is well above mainstream estimates of a neutral policy rate. Now that’s arithmetic. It doesn’t really—the proof is really in how the economy reacts, but I would say that we’re in a place where those risks are getting closer to being in balance. <NAME>NANCY MARSHALL</NAME>-GENZER. Okay. And you said the proof is how the economy reacts. What are you looking at to be sure you’re not overshooting? <NAME>CHAIR POWELL</NAME>. Well, I think what we’re looking at is are we still—is inflation still broadly cooling? Do we—is it sort of validating the path we saw over the summer, where inflation was clearly cooling and coming down. Now we’ve seen periods like that before, and they’ve just—there hasn’t been follow-through. The data have bounced back. So what are we seeing? Are we seeing—is inflation still coming down? So that’s the first thing. The second thing is, in the labor market, what we’ve seen is a very positive rebalancing of supply and demand, partly through just much more supply coming online. And with labor demand still clearly remaining very strong—when you have the kind of job growth we’ve had over the last quarter, it’s still very strong demand. So—and you see wage increases coming down as we discussed but coming down in a kind of gradual way. I think that’s—we want to see that, that whole set of processes continue. <NAME>MICHELLE SMITH</NAME>. Bryan. <NAME>BRYAN MENA</NAME>. Bryan Mena, CNN. Do you think that there has been any structural change in either consumption or in the job market that’s pushing at consumption? You obviously saw the third-quarter GDP figures, which were strong, and some economists expect everyone’s spending to have fizzled out by now. So I’m kind of wondering if there’s been any structural change in consumption. <NAME>CHAIR POWELL</NAME>. I wouldn’t say there’s been a structural change in consumption. I would say it’s certainly been strong. And so a couple of things. We may have underestimated the balance sheet strength of households and small businesses, and that may be part of it. There may be—you know, we’ve been, like everyone else, trying to estimate the number—the amount of savings that households have from the pandemic when they couldn’t spend on services really at all, or in-person services. And, you know, there can still be more of that than we think, although at a certain point we have to—we’re going to be getting back to pre-pandemic levels of savings. We may not be there yet. So things are—clearly, people are still spending. The dynamic has been really strong job creation with now wages that are—that are higher than inflation, in the aggregate anyway, and that raises real disposable income, and that raises spending, which continues to drive more hiring. And so you’ve had a really—that whole—that whole dynamic has been, and also at the same time, the pandemic effects are wearing off, so that goods availability, automobile availability is better—or was better, I think it still is. And, from a business standpoint, there are more people to hire. And it is more labor supply. So the whole thing has led to more growth, more spending, and that kind of thing. And it’s been—you know, it’s been good, and the thing is, we’ve been achieving progress on inflation in the middle of this. So, it’s been a dynamic. The question is, how long can that continue? And, you know, I just think this—the existence of this second set of factors at this time, which is the unwinding of the pandemic effects, that’s what makes this cycle unique, I think, and, you know, we’re still learning. That took longer for that process to begin than we thought, and we’re still learning about how it plays out. That’s all we can do. <NAME>MICHELLE SMITH</NAME>. Let’s go to Daniel for the last question. <NAME>DANIEL AVIS</NAME>. Thank you, Chair Powell. I’m Daniel Avis from Agence France-Presse. Just a quick question following up on an earlier one with regards to the Israel–Hamas conflict. The Fed’s Financial Stability Report said the Israel–Hamas conflict and the conflict in Ukraine “pose important risks to global economic activity, including the possibility of sustained disruptions to regional trade and food, energy, and other commodities.” You’ve had organizations at the World Bank warning of a possible surge in oil prices if the war spreads to other countries in the region. I’m just wondering how the Fed is monitoring these developments in the Middle East—you mentioned they are—and just what the potential economic impact could be if the conflict does spread to other countries in the region. Thank you. <NAME>CHAIR POWELL</NAME>. I wouldn’t want to speculate too much, but I’ll just say so—you know, really the question there is, does the war spread more widely and does it start to do things like affect oil prices in particular, since this is the Middle East we’re talking about. The price of oil has really not reacted very much so far to this. As the—you know, as the Fed—as the Federal Open Market Committee, our job is really to talk about [and] to understand the economy and economic effects. And it isn’t clear, at this point, that the conflict in the Middle East is going to—is on track to have significant economic effects. That doesn’t mean it isn’t incredibly important and something for people to, you know, to take really important notice of, but it may or may not turn out to be something that matters for the Federal Open Market Committee as an economic body. But—so what the Financial Stability Report does is it “calls out” risks. And that’s what it’s doing—[it] is calling out a risk of that. And the war in Ukraine, the same. The war in Ukraine did have, immediately, very significant macroeconomic implications because of the connection to commodities. So, thank you. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people. As we approach the end of the year, it’s natural to look back on the progress that has been made toward our dual-mandate objectives. Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news. But inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain. As we look ahead to next year, I want to assure the American people that we’re fully committed to returning inflation to our 2 percent goal. Restoring price stability is essential to 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’ve raised our policy interest rate by 5¼ percentage points and have continued to reduce our securities holdings at a brisk pace. Our actions have moved our policy rate well into restrictive territory, meaning that tight policy is putting downward pressure on economic activity and inflation, and the full effects of our tightening likely have not yet been felt. Today, we decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. Given how far we have come, along with the uncertainties and risks that we face, the Committee is proceeding carefully. We will make decisions about the extent of any additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks. I will have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that growth of economic activity has slowed substantially from the outsized pace seen in the third quarter. Even so, GDP is on track to expand around 2½ percent for the year as a whole, bolstered by strong consumer demand as well as improving supply conditions. After picking somewhat over the—up somewhat over the summer, activity in the housing sector has flattened out and remains well below the levels of a year ago, largely reflecting higher mortgage rates. Higher interest rates also appear to be weighing on business fixed investment. In our Summary of Economic Projections (SEP), Committee participants revised up their assessments of GDP growth this year but expect growth to cool, with the median projection falling to 1.4 percent next year. The labor market remains tight, but supply and demand conditions continue to come into better balance. Over the past three months, payroll job gains averaged 204,000 jobs per month, a strong pace that is nevertheless below that seen earlier in the year. The unemployment rate remains low at 3.7 percent. Strong job creation has been accompanied by an increase in the supply of workers. The labor force participation rate has moved up since last year, particularly for individuals aged 25 to 54 years, and immigration has returned to pre-pandemic levels. Nominal wage growth appears to be easing, and job vacancies have declined. Although the jobs-to-workers gap has narrowed, labor demand still exceeds the supply of available workers. FOMC participants expect the rebalancing in the labor market to continue, easing upward pressures on inflation. The median unemployment rate projection in the SEP rises somewhat from 3.8 percent at the end of this year to 4.1 percent at the end of next year. Inflation has eased over the past year but remains above our longer-run goal of 2 percent. Based on the consumer price index and other data, we estimate that total PCE prices rose 2.6 percent over the 12 months ending in November and that, excluding the volatile food and energy categories, core PCE prices rose 3.1 percent. The lower inflation readings over the past several months are welcome, but we will need to see further evidence to build confidence that inflation is moving down sustainably toward our goal. 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. As is evident from the SEP, we anticipate that the process of getting inflation all the way to 2 percent will take some time. The median projection in the SEP is 2.8 percent this year, falls to 2.4 percent next year, and reaches 2 percent in 2026. The Fed’s monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the American people. My colleagues and I are acutely aware that high inflation imposes significant hardship, as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing, and transportation. We are highly, 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 2 percent objective. As I noted earlier, since early last year, we have raised our policy rate by 5¼ percentage points, and we have decreased our securities holdings by more than $1 trillion. Our restrictive stance of monetary policy is putting downward pressure on economic activity and inflation. 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. While we believe that our policy rate is likely at or near its peak for this tightening cycle, the economy has surprised forecasters in many ways since the pandemic, and ongoing progress—sorry—ongoing progress toward our 2 percent inflation objective is not assured. We are prepared to tighten policy further if appropriate. We’re committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation sustainably down to 2 percent over time and to keeping policy restrictive until we’re confident that inflation is on a path to that objective. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward. While participants do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table. If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 percent at the end of 2024, 3.6 percent at the end of 2025, and 2.9 percent at the end of 2026, still above the median longer-term rate. These projections are not a Committee decision or plan; if the economy does not evolve as projected, the path of policy will adjust as appropriate to foster our maximum-employment and price-stability goals. In light of the uncertainties and risks, and how far we have come, the Committee is proceeding carefully. We will continue to make our decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks. In determining the extent of any additional policy firming that may be appropriate to return inflation to 2 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. 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. <NAME>MICHELLE SMITH</NAME>. Let’s go to Chris Rugaber. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. Chris Rugaber at Associated Press. I wanted to ask, how should we interpret the addition of the word “any” before “additional . . . firming” in the statement? I mean, does that mean that you’re pretty much done with rate hikes and the Committee has shifted away from a tightening bias and toward a more neutral stance? Thank you. <NAME>CHAIR POWELL</NAME>. So—specifically on “any”: We do say that “in determining the extent of any additional policy firming that may be appropriate,” so “any additional policy firming”—that sentence. So we added the word “any” as an acknowledgement that we believe that we are likely at or near the, the peak rate for this cycle. Participants didn’t write down additional hikes that we believe are likely, so that’s what we wrote down. But participants also didn’t want to take the possibility of further hikes off the table. So that’s really what we were thinking. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Happy holidays, Mr. Chairman. Fed Governor Chris Waller said that if inflation continues to fall, then the Fed in the next several months could be cutting interest rates. I wonder if you could comment on whether you agree with Fed Governor Waller on that, that the Fed would become more restrictive if it didn’t cut rates if inflation fell. Thank you, sir. <NAME>CHAIR POWELL</NAME>. So, of course, I don’t comment on, on any other officials, even those who work at the Fed. But I’ll—but I’ll try to answer your question more broadly. So the way— the way we’re looking at it is, is really this. When we started out, right, we said the first question is, how fast to move, and we moved very fast. The second question is, you know, really, how high to raise the policy rate? And that’s really the question that we’re still on here. We’re, we’re very focused on that, as I—as I mentioned. People generally think that we’re at or near that and, and think it’s not likely that we will hike, although they don’t take that possibility off the table. So that’s—when you get to that question, and that’s your answer, there’s a natural—naturally, it begins to be the next question, which is when it will become appropriate to begin dialing back the amount of policy restraint that’s in place. So that’s really the next question, and that’s what people are thinking about and, and talking about. And I would just say this. We are seeing, you know, strong growth that is—that appears to be moderating; we’re seeing a labor market that is coming back into balance by so many measures; and we’re seeing inflation making real progress. These are the things we’ve been wanting to see. We can’t know. We still have a ways to go. No one is declaring victory. That would be premature. And we can’t be guaranteed of this progress [continuing]. So we’re, we’re moving carefully in making that assessment of whether we need to do more or not. And that’s, that’s really the question that we’re on. But, of course, the other question, the question of when will it become appropriate to begin dialing back the amount of policy restraint in place, that, that begins to come into view and is clearly a discussion—topic of discussion out in the world and also a discussion for us at our meeting today. <NAME>STEVE LIESMAN</NAME>. Can you give some color as to the nature of that discussion today? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So it, it comes up in this way today. Everybody wrote down an SEP forecast. So many people mentioned what their—what their rate forecast was. And there was no back-and-forth, no attempt to sort of reach agreement like, “This is what I wrote down; this is what I think,” that kind of thing, and a preliminary kind of a discussion like that. Not everybody did that, but many people did. And then, and I would say, there’s a general expectation that this will be—this will be a topic for us, looking ahead. That, that’s really what happened in today’s meeting. I can’t do the head count for you in real time. But that’s generally what happened today. <NAME>STEVE LIESMAN</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Let’s go to Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. At this point, can you confidently say that the economy has avoided a recession and isn’t heading for one now? And if the answer is “no,” I’m curious about what you’d still be looking for. Thanks. <NAME>CHAIR POWELL</NAME>. I think you can say that there’s little basis for thinking that the economy is in a recession now. I would say that. I think there’s, there’s always a probability that, that there will be a recession in the next year, and it’s a meaningful probability no matter what the economy is doing. So it’s always a real possibility. The question is, is it—so it’s a possibility here. I have always felt, since the beginning, that there was a possibility, because of the unusual situation, that the economy could cool off in a way that enabled inflation to come down without the kind of large job losses that have often been associated with high inflation and tightening cycles. So far, that’s what we’re seeing. That’s what many forecasters, on and off the Committee, are seeing. This result is not guaranteed. It is—it is far too early to declare victory. And there are certainly risks. It’s certainly possible that, that the economy will behave in an unexpected way. It has done that repeatedly through the post—in the post-pandemic period. Nonetheless, where we are is, is we see the things that I—that I mentioned. <NAME>RACHEL SIEGEL</NAME>. I’m curious, if you’re looking back on the past year, you talked about “navigating by the stars under cloudy skies.” Can you talk about some of the ways in which the economy surprised you most this year, where you thought it would behave in one way and had to pivot to respond? Thanks. <NAME>CHAIR POWELL</NAME>. So I think forecasters generally, if you go back a year, were very broadly forecasting a recession for this year, for 2023. And not only did that not happen—that includes Fed forecasters and really, essentially, all forecasters; a very high proportion of forecasters predicted very weak growth or a recession—not only did that not happen, we actually had a very strong year, and that was a combination of, of strong demand but also of real gains on the supply side. So this was the year when labor force participation picked up, where immigration picked up, where the distortions to supply and demand from the pandemic—you know, the shortages and the bottlenecks—really began to unwind. So we had significant supply-side gains with strong demand, and we got what looks like a 2½ percent-plus, or a little more than that, growth year at a time when potential growth this year might even have been higher than that, just because of the healing on the supply side. So that was a surprise to just about everybody. I think the inflation forecast is roughly, roughly what people wrote down a year ago, but in a very different setting. And I would say the labor market, because of the stronger growth, has also been significantly better. If you look back at the SEP from a year ago, there was a significant increase in, in unemployment. It didn’t really happen. We’re still at 3.7 percent. So we’ve seen, you know, strong growth, still a tight labor market but one that’s coming back into balance with the—with support from the supply side, a greater supply of labor. It’s a—you know, that’s, that’s what we see, and I think that combination was, was not anticipated broadly. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Thanks. Howard Schneider with Reuters, and thanks for taking the questions. I, I wonder if you could give a little more color or detail on what—on what motivates the lower rates next year, whether it’s a coincidence, for example, that the spread between PCE inflation, core inflation, and the federal funds rate stays constant over the year. Are you simply calibrating against the fall in prices, in the price level that you’re expecting, in the rate of inflation that you’re expecting as opposed to supporting the economy? <NAME>CHAIR POWELL</NAME>. Nothing quite that mechanical is happening. The SEP really is, is a bottoms-up—built from the bottom up, right? So I think people are looking at what’s happening in the economy. And I think if you look at the big difference from September in the SEP, [it is that] the expectations for inflation this year, both headline and core, have come down, you know, really significantly in three months. That’s a big piece of, of this. At the same time, [real GDP] growth has turned out to be very strong in the third quarter. [Now it] is slowing, we believe, as, as appropriate. And we’ve got—we’ve had several labor market reports, which suggest, again, significant progress toward greater balance across a very—a broad range of indicators. You’re seeing so many of the indicators coming back to normal, not all of them. But so I think that people look at that, and they write down their—basically, each individual writes down a forecast and a rate forecast that goes with that forecast. We tabulate them and, and publish it. And so it’s not—it isn’t—you ask about real rates, I take it? <NAME>HOWARD SCHNEIDER</NAME>. Yes. <NAME>CHAIR POWELL</NAME>. You know, that’s—that is—that is something that we’re very conscious of, and aware of, and monitor, and it’s certainly a big part of—it’s a part of how we think about things. But, really, it’s broader financial conditions that matter. And, as you well know, it’s so hard to know exactly, you know, what the—what the real rate is or exactly how tight policy is at any given time. So you couldn’t follow that like it was a rule and think that you would get the right answer all the time, but it’s certainly something that we’re focused on. And, indeed, if you look at the projections, I think the expectation would be that the real rate is declining as we—as we move forward. <NAME>HOWARD SCHNEIDER</NAME>. It sounds like the discussion—if I could follow up—has, has already kind of begun. I’m wondering, just related to, to Steve’s question, how the—how the tactics of this play out given the slowing of inflation and the fact that the deeper you get into 2024, the closer you get to a presidential election. Do you want to front-load this, in other words? <NAME>CHAIR POWELL</NAME>. Yeah. No, we—we’re—we don’t think about political events. We don’t think about politics. We think about what’s the right thing to do for the economy. The minute we start thinking about those things—you know, we just can’t do that. We have to think, what’s the right thing? We’ll do the things that we think are right for the economy at the time we—when we think is the right time. That’s what we’ll always do. So I mentioned we’re moving carefully. One of the things we’re moving carefully about is that decision over—that assessment, really—over whether, whether we’ve done enough, really. And you see that people are not writing down rate hikes. That’s, that’s us thinking that we have done enough but not, not feeling that really strongly, confidently and not wanting to take the possibility of a rate hike off the table. Nonetheless, it’s not the base case anymore, obviously, as it was, you know, 60, 90 days ago. So that’s, that’s how we’re—that’s how we’re approaching things. And, and, you know, as I mentioned, we wrote down this SEP, and it talks about—people have individual assessments of when it will be appropriate to, you know, to start to dial back on, on the tight policy we have in place, and that’s a discussion we’ll be having going forward. But that’s another assessment that we’re going to make very carefully, so as time goes forward. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, you’ve argued over the last year that policy tightening started before you actually lifted off because the market anticipated your moves and tightened on your behalf. The market is now easing policy on your behalf by anticipating a funds rate by next September that’s a full point below the current level, with cuts beginning around March. Is this something that you are broadly comfortable with? <NAME>CHAIR POWELL</NAME>. So this last year has been remarkable for the, the sort of seesaw thing, the back-and-forth we’ve had over the course of the year of markets moving away and moving back and that kind of thing. So, and what I would just say is that we, we focus on what we have to do and how we need to use our tools to achieve our goals, and that’s what we really focus on. And people are going to have different forecasts about the economy, and they’re going to—those are going to show up in market conditions, or they won’t, you know. But in any case, we have to do what we think is right. And, you know, in the long run, it’s important that financial conditions become aligned or are aligned with what we’re trying to accomplish, and, in the long run, they will be, of course, because we will do what it takes to get to our goals. And, ultimately, that will mean that financial conditions will, will come along. But in the meantime, there can be back-and-forth, and, you know, I’m just focused on what’s the right thing for us to do. And my colleagues are focused on that, too. <NAME>NICK TIMIRAOS</NAME>. The markets seem to think inflation is coming down credibly. Do you believe we’re at the point where inflation is coming down credibly? <NAME>CHAIR POWELL</NAME>. Listen, I welcome the progress. I think it’s, it’s really good to see the progress that we’re making. I think if you look at the 12-month—look at the 6-month measures, you see very low numbers. If you look at 12-month measures, you’re still well above 2 percent. You’re actually above 3 percent on core, through November, PCE [inflation]. That isn’t to say— I’m not, you know, calling into question the progress. It’s great. We just need to see more. We need to see, you know, continued further, further progress toward getting back to 2 percent. That’s, that’s what we need to see. So, you know, our—it’s our job to restore price stability. And that—it’s one of our two jobs, along with maximum employment, and they’re equal. So we’re very focused on, on, you know, doing that. As I mentioned, we’re moving carefully at this point. We’re pleased with the progress, but, but we see the need for further progress, and I think—I think it’s fair to say there is a lot of uncertainty about going forward. We’ve seen the economy move in surprising directions, so we’re just going to need to see more further progress. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek, New York Times. Thanks for taking our questions. In the SEP from today, [real GDP] growth is notably below potential in 2024. If growth were to surprise us again in the way that it has for years now by being stronger than expected next year, would it still be possible to cut rates? Or, put another way, is below-trend growth necessary to cut rates, or would continued progress on inflation alone be sufficient? <NAME>CHAIR POWELL</NAME>. So we’ll, we’ll look at the totality of the data. Growth is one thing, so is inflation, so is labor market data. So we’d, we’d look at the totality. As we—as we make decisions about policy changes going forward, we’re going to be looking at all those things and, particularly, about the—as they affect the outlook. So it’s ultimately all about the outlook and the balance of risks as well. So that’s what—that’s what we’d be looking for. If we have stronger growth, you know, that’ll be good for people. That’ll be good for the labor market. It might actually mean that it takes a little longer to get inflation down to 2 percent. We will get it down to 2 percent, but, you know, if we see stronger growth, we’ll—we will set policy according to what we actually see. And, and so that’s how I would answer. <NAME>JEANNA SMIALEK</NAME>. I guess the—I guess the question I’m asking, if you don’t mind a quick follow-up, I guess the question I’m asking is, is above-trend growth itself a problem? <NAME>CHAIR POWELL</NAME>. It’s only a problem inso—it’s not itself a problem. It’s only a problem insofar as it makes it more difficult for us to achieve our goals. And, you know, if you have—if you have growth that’s robust, what that will mean is probably it will keep the labor market very strong. It probably will, will place some upward pressure on inflation. That could mean that it takes longer to get to 2 percent inflation. That could mean we need to keep rates higher for longer. It could even mean, ultimately, that we would need to hike again. It just is— it’s the way, the way our policy works. <NAME>MICHELLE SMITH</NAME>. Let’s go to Neil. <NAME>NEIL IRWIN</NAME>. Hi, Chair Powell. Neil Irwin with Axios. How do you interpret the state of the labor market right now? And, in particular, you’ve referred even today to evidence that it’s coming into better balance. What would you need to see to conclude that it has reached that balance? <NAME>CHAIR POWELL</NAME>. So on, on the better-balance side, there are just a lot of things. It’s— you see—you see job growth still strong but moving back down to more sustainable levels, given population growth and labor force participation. The things that are not quite—but let me go on with that list. You know, claims are low. If you look at surveys of businesses, they’re, they’re— sort of the era of this frantic labor shortage, [those kinds of worker shortages] are behind us, and they’re seeing a shortage of labor as being significantly alleviated. If you look at shortages of workers, whereas they thought job, job availability was the highest that it’d ever been or close to it, that’s now down to more normal levels by so many measures—participation, unemployment—so many measures: the unemployment—job openings, quits, all of those things. So wages are still running a bit above what would be consistent with 2 percent inflation over a long period of time. They’ve been gradually cooling off. But if wages are running around 4 percent, that’s still a bit above, I would say. And I guess there, there are just a couple of other—the unemployment rate is very, very low. And these are—but, but I would just say, overall, the development of the labor market has been very positive. It’s been a good time for workers to find jobs and get solid wage increases. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Claire Jones, Financial Times. You know, I’d say the mood among economists at the moment seems to be one of cautious optimism, which is somewhat corroborated by your forecast by the sense that we are going to have a soft landing. Yet when we—when we hear from the general public, there’s a lot of discord about economic conditions. What do you think explains this disconnect, and does it matter for policymakers? <NAME>CHAIR POWELL</NAME>. It may be. A common theme is that, while inflation is coming down, and that’s very good news, the price level is not coming down. Prices of some, some goods and services are coming down. But overall, in the aggregate, the price level is not. So people are still living with high prices, and that’s, that’s not—that is something that people don’t like. And, you know, so what will happen with that is, wages are now—[changes in] real wages are now positive. So [nominal] wages are now moving up more than inflation, as inflation comes down. And so that might help improve the mood of people. But we do see those—we see those public opinion surveys. The thing that we can do is to do our jobs, which is to use our tools to foster price stability, which has such great benefits over such long periods of time, and which is the thing that really enables us to work for and achieve an extended period of high employment, which is so beneficial for, you know, families and, and companies around the country. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to ask, you know, on, on the flip side of if things start to deteriorate rapidly, if we do fall into a recession, if we do start to see unemployment rise, at sort of the levels of inflation that we’re seeing now, how would you all think about that in terms of rate cuts? Would that be a sign that you’ve, you’ve done your job demand-wise? <NAME>CHAIR POWELL</NAME>. Sorry—if? <NAME>VICTORIA GUIDA</NAME>. If, if the economy starts to—looks like it’s starting to fall into a recession; if, if the jobless rate starts to rise. <NAME>CHAIR POWELL</NAME>. That’s not something we’re hoping to see. Obviously, we’re hoping to, to see something very different—which is a continuation of what we have seen, which is the labor market coming into better balance without a significant increase in unemployment, inflation coming down without a significant increase in unemployment, and growth moderating without a significant increase in unemployment. That’s what we’re, we’re trying very much to achieve and not something that we’re looking to see. <NAME>VICTORIA GUIDA</NAME>. But, but would you take that as a signal that you should cut rates? <NAME>CHAIR POWELL</NAME>. You know, obviously, what we’ll do is we’ll look at the totality of the data, as I’ve mentioned a couple times, and, certainly, the labor data would be important in that. And, you know, if you—if you can describe a situation like that where if, if there were the beginning of a recession or something like that, then, yes, that would certainly weigh heavily on that decision. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Television and Radio. Mr. Chairman, you were, by your own admission, behind the curve in starting to raise rates to fight inflation, and you said earlier, again, “the full effects of our tightening (cycle) have not yet been felt.” How will you decide when to cut rates, and how will you ensure you’re not behind the curve there? <NAME>CHAIR POWELL</NAME>. So we’re, we’re aware of the risk that we would hang on too long. You know, we know that that’s a risk, and we’re very focused on not making that mistake. And we do regard the two—you know, we’ve come back into a better balance between the risk of overdoing it and the risk of underdoing it. Not only that, we were able to focus hard on the—on the price-stability mandate. And we’re getting back to the point where—which is what you do when you’re very far from, from one of them, one of the two mandates—you’re getting now back to the point where both mandates are important, and they’re, they’re more in balance, too. So I think we’ll be—we’ll be very much keeping that in mind, as we make policy going forward. And the things we’ll be looking at, I’ve already described. You know, we’re, we’re obviously looking hard at what’s happening with demand, and what we see? We see the same thing other people see, which is a strong economy, which really put up quite a performance in 2023. We see good evidence and good reason to believe that growth will come in lower next year. And you see what the forecasts are. I think the median growth—median participant wrote down 1.4 percent growth, but, you know, we’ll have to see. It’s very hard to predict. We’ll also be looking to see progress on inflation and, you know, the labor market remaining strong but, but ideally, without seeing the kind of large increase in unemployment that happens sometimes. <NAME>MICHAEL MCKEE</NAME>. If I could follow up: When you begin the cutting cycle, will it be essentially run the same way you do it now with raising rates, where you basically do trial and error, cut and see what happens, or will you tie it to some particular measure of progress? <NAME>CHAIR POWELL</NAME>. We haven’t typically tried to articulate, with one exception, really specific target levels, which was if you—some of you will remember the thresholds that we used in, I guess, 2013. I don’t—the answer is, these are things that we haven’t, you know, really worked out yet. We’re sort of just at the beginning of, of that discussion. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman. Edward Lawrence of Fox Business. So if the Fed cuts rates as the dot plot is, is showing, about 75 basis points, does that signal that there’s a belief of weakness next year in the economy? <NAME>CHAIR POWELL</NAME>. It wouldn’t, if that were to—first of all, let me just say, that isn’t a plan. That’s, that’s just cumulating what people wrote down. So that’s not something—you know this, but allow me to say it again: We don’t debate or discuss what the right, you know, whose SEP is right. We just say what they are, and we tabulate them and publish them. So and it’s, you know, it’s important for people to know that. But it wouldn’t need to be a sign of—it could just be a sign that the economy is normalizing, and it doesn’t need the tight policy. It depends on—the economy can evolve in many different ways, right? So but, but it could be more of what I just described. <NAME>EDWARD LAWRENCE</NAME>. And you focused on core inflation, we’ve heard from—in other meetings. How sticky is core inflation right now? <NAME>CHAIR POWELL</NAME>. Well, that’s what we’re finding out, and we’ve, you know, we’ve seen real progress in, in core inflation. It has been sticky, and famously, the service sector is thought to be stickier, but we’ve actually seen reasonable progress in nonhousing services, which was the area where, where you would expect to see less progress. We are seeing some progress there, though. And, in fact, all three of the categories of core [prices] are now contributing: goods, housing services, nonhousing services. They’re all contributing in different—at different levels, you know, meeting by meeting—or, rather, report by report. So, yeah. <NAME>MICHELLE SMITH</NAME>. Okay. Let’s go to Catarina. <NAME>CATARINA SARAIVA</NAME>. Catarina Saraiva of Bloomberg News. Thanks for taking our questions. I just wanted to ask a little bit about, you know, we had some pretty positive data this, you know, this morning and yesterday. I’m assuming those were not incorporated into the forecast we see today, but I just wanted to ask, you know, how that kind of adds to your thinking, you know, on the inflation outlook. <NAME>CHAIR POWELL</NAME>. Right. So we got—we got CPI the morning of the first day, and we got PPI the next day, which informs the, you know, the translation into PCE [inflation]. So it’s very late in the game, you know, to—but nonetheless, participants are allowed to, encouraged to update their SEP forecast until probably midmorning today. After that, so staff has to—has to cumulate all of that and create the documents that you see. So until about midmorning, a little, maybe late morning, it’s okay to update, and I believe some people did update their forecast based on what we saw today. <NAME>CATARINA SARAIVA</NAME>. Okay. And do you see—I mean, how are you, when you think about, you know, starting to think about the rate cuts next year or whenever they come, how do you, you know, how do you think about the economy we’re in now kind of post-pandemic? Do you think that there’s been significant structural shifts, and is that going to change how you look at a rate cut path? <NAME>CHAIR POWELL</NAME>. The question of whether there have been fundamental structural shifts is, is really hard to know the answer and a very interesting one right now. The one that would affect—the one that comes to mind, though, is just the question of where the neutral rate of interest is. And so, for example, if it’s risen, and I’m not saying that it has, but if it were to have risen, that would mean that, that interest rates would need to be a little bit higher to convey the same level of restriction. The thing is, we’re not really going to know that. You know, people will be writing papers about that 10 years from now and still fighting about it. So it’s just that it’s going to be uncertain. So we’re going to be making policy in this, you know, difficult, uncertain, really unprecedented environment. Some—someone once said that you know the—you know the natural rate of interest by its works, and that’s really right, but that’s very difficult because policy operates with a lag. So that’s one of the reasons why we slowed down this year. We started slowing down at this meeting last year, reducing the pace at which we were adding restriction. And, over the course of this year, we really slowed down a lot to give those lags time to work. In terms of demand, has demand shifted more away from services into goods? There’s— you can make a case for that, that the shift back into services has not been complete, and it doesn’t look like it’s ongoing, but I don’t know if that’s right. Maybe people just bought so much stuff that they temporarily don’t want any more stuff. They haven’t got anyplace to put it. [Laughter] <NAME>MICHELLE SMITH</NAME>. Let’s go to Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. You said back in July that you needed to start cutting rates before getting to 2 percent inflation. As you mentioned, PCE inflation is now running at 3½ on core. On a six- month annual basis, core PCE is running at 2½ percent, though when you look at supercore and shelter, they are, of course, stickier. So when looking in the different components of the data, how much closer do you have to get to 2 percent before you consider cutting rates? <NAME>CHAIR POWELL</NAME>. I mean, the reason you wouldn’t wait to get to 2 percent to cut rates is that policy would be, it would be too late. I mean, you’d want to be reducing restriction on the economy well before 2 percent because—or before you get to 2 percent so you don’t overshoot, if we think, think of restrictive policy as weighing on economic activity. You know, it takes—it takes a while for policy to get into the economy, affect economic activity, and affect inflation. So I can’t give you a precise answer. But if you look at what’s in the—in the SEP, and, you know, I think you’ll see a reasonable estimate of the time lags and things like that that it would take. <NAME>JENNIFER SCHONBERGER</NAME>. Do think below 3 percent would be reasonable? <NAME>CHAIR POWELL</NAME>. I wouldn’t want to—I wouldn’t want to identify any one precise point, because I would be able to look back then and probably find out that it turned out not to be right. But we’ll be looking at it and, and looking at the broad collection of factors. <NAME>MICHELLE SMITH</NAME>. Let’s go to Jean Yung. <NAME>JEAN YUNG</NAME>. Hi, Chair Powell. Jean Yung with Market News. I wanted to go back to the stickiness-of-inflation question. Over the past couple of years, a lot of central bankers have talked about the more difficult last mile of getting inflation back down to 2 percent, yet it’s also been surprising how fast inflation has come down this year. I’m curious, do you think something has changed in our understanding of inflation, or do you subscribe to this notion still? Or is it something different about the U.S. economy? Thank you. <NAME>CHAIR POWELL</NAME>. I think—I think this. You know, we felt since the beginning that it would be a combination of two factors. The first factor is just the unwinding of, of what happened in the pandemic: the distortions of supply and demand. And the second thing would be our policy, which was weighing on aggregate demand and actually making it easier for the supply side to recover because of lower demand. We thought those two things were going to be necessary. Sorry, say your—say the last part of your question again. <NAME>JEAN YUNG</NAME>. If there was something different about the U.S. economy. <NAME>CHAIR POWELL</NAME>. Yeah. So it’s not that—it may or may not be about “different,” the U.S. economy being different. I think that this inflation was not the classic demand overload, pot-boiling-over, kind of inflation that we [typically] think about. It was a combination of very strong demand, without question, and unusual supply-side restrictions, both on the goods side but also on the labor side, because we had a—we had a participation shock. So this is just very unusual. And, you know, we had the view—my colleagues and I broadly had the view—that we could get a lot of—you know, you had essentially a vertical supply curve, because you ran into the limits of, of capacity at very low levels, because there weren’t workers and because people couldn’t—the supply chains were all broken. So we, we had the view that you could come straight down that vertical supply curve to the extent demand [was] lowered, reduced. And, you know, something like that has happened. It happened so far. The question is, you know, once, once that part of it runs out—and we think it has a ways to run; we definitely think that the sort of supply chain and shortages side has some, some ways to run—does labor force participation have much more to run? It might. Immigration could help, but it may be that, at some point—at some point, you will run out of supply-side help, and then it gets down to demand, and it gets harder. That’s, that’s very possible. But to say with certainty that the last mile is going to be different, I’d be reluctant to, you know, to suggest that we have any certainty around that. We just don’t know. I mean, inflation keeps coming down. The labor market keeps getting back into balance. And it’s so far, so good—although we kind of assume that it will get harder from here. But so far, it hasn’t. <NAME>MICHELLE SMITH</NAME>. Okay. We’ll go to Megan for the last question. <NAME>MEGAN CASSELLA</NAME>. Hi, Chair Powell. Thanks for taking our questions. Megan Cassella with Barron’s. I want to ask about the balance sheet given the Fed’s focus now on proceeding carefully and considering rate cuts. And can you talk us through what the latest thinking is, and has there been any consideration of altering the pace of quantitative tightening at all? <NAME>CHAIR POWELL</NAME>. We’re, we’re not talking about altering the pace of QT right now, just to get that out of the way. So the balance sheet seems to be working pretty much as expected. What we’ve been seeing is, you know, that we’re allowing runoff each month. That’s adding up. I think we’re down—we’re close to 1.2 trillion [dollars]. That’s showing up. The reverse repo facility [take- up] has been coming down quickly, and reserves have been either moving up or—as a result—or holding steady. At a certain point, you know, there won’t be any more to come out of, or there’ll be a level where [take-up at] the reverse repo facility levels out. And, at that point, reserves will start to come down. You know, we still have—you know that we intend to reduce our securities holdings until we judge that the quantity of reserve balances has reached a level somewhat above that consistent with ample reserves, and we also intend to slow and then stop the decline in size of the balance sheet when reserve balances are somewhat above the level judged to be consistent with ample reserves. We’re not at those levels, you know, with, with reserves close to 3.5 trillion [dollars]. We’re not—we don’t think we’re at those [levels judged consistent with ample] reserves. There isn’t a lot of evidence of that. We’re watching it carefully. And, you know, so far—so far, it’s working pretty much as expected, we think. <NAME>MEGAN CASSELLA</NAME>. Do you anticipate adjusting that thinking at all by the time you’re, you’re considering or moving forward with rate cuts? Is that time to rethink, or are you still going to follow that thinking? <NAME>CHAIR POWELL</NAME>. So I think they’re, they’re on independent tracks. You’re asking, though, the question, I guess you’re implying the question of can you continue with QT at such time—QT, which is a tightening action—at such time as policy is still tight? And the answer is, it depends on the reason. You know, if you’re—if you’re—if you’re cutting rates because you’re going back to normal, that’s one thing, [and distinct from] if you’re cutting them because the economy is really weak. So you can imagine, you’d have to know what the reason is to know whether it would be appropriate to do those two things at the same time. <NAME>MICHELLE SMITH</NAME>. Thank you. <NAME>CHAIR POWELL</NAME>. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. 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 good progress toward our dual-mandate objectives. Inflation has eased from its highs without a significant increase in unemployment. That’s very good news. But inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain. I want to assure the American people that we’re fully committed to returning inflation to our 2 percent goal. Restoring price stability is essential to achieve a sustained period of strong labor market conditions that benefit all. Today, the FOMC decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. Over the past two years, we’ve significantly tightened the stance of monetary policy. Our strong actions have moved our policy rate well into restrictive territory, and we’ve been seeing the effects on economic activity and inflation. As labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals are moving into better balance. I will have more to say about monetary policy— about monetary policy, after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a solid pace. GDP growth in the fourth quarter of last year came in at 3.3 percent. For 2023 as a whole, GDP expanded at 3.1 percent, bolstered by strong consumer demand as well as improving supply conditions. Activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates. High interest rates also appear to have been weighing on business fixed investment. The labor market remains tight, but supply and demand conditions continue to come into better balance. Over the past three months, payroll job gains averaged 165,000 jobs per month, a pace that is well below that seen a year ago but still strong. The unemployment rate remains low at 3.7 percent. Strong job creation has been accompanied by an increase in the supply of workers. The labor force participation rate has moved up, on balance, over the past year, particularly for individuals aged 25 to 54 years, and immigration has returned to pre-pandemic levels. Nominal wage growth has been easing, and job vacancies have declined. Although the jobs-to-workers gap has narrowed, labor demand still exceeds the supply of available workers. Inflation has eased notably over the past year but remains above our longer-run goal of 2 percent. Total PCE prices rose 2.6 percent over the 12 months ending in December; excluding the volatile food and energy categories, core PCE prices rose 2.9 percent. The lower inflation readings over the second half of last year are welcome. But we will need to see continuing evidence to build confidence that inflation is moving down sustainably toward our goal. 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’re highly attentive to the risks that high inflation poses to both sides of our mandate, and we’re strongly committed to returning inflation to our 2 percent objective. Over the past two years, we have raised our policy rate by 5¼ percentage points, and we’ve decreased our securities holdings by more than $1.3 trillion. Our restrictive stance of monetary policy is putting downward pressure on economic activity and inflation. 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. We believe that our policy rate is likely at its peak for this tightening cycle and that, if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economy has surprised forecasters in many ways since the pandemic, and ongoing progress toward our 2 percent inflation objective is not assured. The economic outlook is uncertain, and we remain highly attentive to inflation risks. We’re prepared to maintain the current target range for the federal funds rate for longer if appropriate. As labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals are moving into better balance. We know that reducing policy restraint too soon or too much could result in a reversal of the progress we’ve seen on inflation and ultimately require even tighter policy to get inflation back to 2 percent. 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 the incoming data, the evolving outlook, and the balance of risks. The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. We will continue to make our decisions meeting by meeting. We remain committed to bringing inflation back down to our 2 percent goal and to keeping longer-run—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 our questions. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek from the New York Times. Thanks for taking our questions. Obviously, in the statement and just in your remarks there, you note that you don’t want to cut interest rates without greater confidence that inflation is coming—coming down fully. I wonder—what do you need to see at this point to gain that confidence? And as you make those decisions, how are you weighing recent strong growth in consumer spending data against the sort of solid inflation progress you’ve been seeing? <NAME>CHAIR POWELL</NAME>. Sorry—say that last part again. <NAME>JEANNA SMIALEK</NAME>. How are—how are you weighing the growth data and consumption data, which have been surprisingly strong, against inflation data? <NAME>CHAIR POWELL</NAME>. Okay. So, what are we looking for to get greater confidence? Let me say that we have confidence. We’re—we’re looking for greater confidence that inflation is moving sustainably down to 2 percent. Implicitly, we do have confidence, and it has been increasing, but we want to get greater confidence. What do we want to see? We want to see more good data. It’s not that we’re looking for better data. It’s—we’re looking at continuation of the good data that we’ve been seeing, and a good example is inflation. So we have six months of good inflation data. The question really is, that six months of good inflation data—is it sending us a true signal that we are, in fact, on a path—a sustainable path down to 2 percent inflation? That’s the question. And the answer will come from some more data that’s also good data. It doesn’t—it’s not that the six-month data isn’t—isn’t low enough. It is. It’s just a question of, can we take that with confidence that we’re moving sustainably down to 2 percent? That’s really what we’re thinking about. In terms of, of growth, we’ve had strong growth. I mean, if you take a step back, we’ve had strong growth—very strong growth [in real GDP] last year—going right into the fourth quarter. And yet we’ve had a very strong labor market, and we’ve had inflation coming down. So I think—whereas a year ago, we, we were thinking that we needed to see some softening in economic activity—that hasn’t been the case. So I think we, we look at—we look at stronger growth. We don’t look at it as a problem. I think, at this point, we want to see strong growth. We want to see a strong labor market. We’re not looking for a weaker labor market. We’re looking for inflation to continue to come down, as it has been coming down for the last six months. <NAME>JEANNA SMIALEK</NAME>. And I’m sorry. If I could just follow up very quickly, the—when, when you say that you want to make sure that it’s a true signal, is there anything that you’re seeing in the data that makes you doubt that it’s a true signal at this stage? <NAME>CHAIR POWELL</NAME>. No, I think it’s—I, I would say it, it seems—it seems to be the likely case that, that we will achieve that confidence, but we have to achieve it, and we haven’t yet. And so—I mean, it’s a good story. We have six months of good inflation [readings]. But you can—and you know this—you can look behind those numbers, and you can see that a lot of it’s been coming from goods inflation, for example, and goods inflation running significantly negative. It’s a reasonable assumption that, over time, goods inflation will flatten out—probably approximate zero. That would mean the services sectors would have to contribute more. So, in other words, what we care about is the aggregate number—not so much the composition. But we, we just need to see more. That’s where we are, as a Committee. We need to see more evidence that sort of confirms what we think we’re seeing and that tells us that we are on—gives us confidence that we’re on, on a path to—a sustainable path down to 2 percent inflation. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, it seems to me you raised rates rapidly over the last two years for two reasons. One was the risk of a wage– price spiral. Two, there were risks of inflation expectations becoming unanchored. This morning’s ECI report for the fourth quarter shows private-sector payroll growth running at a sub–4 percent pace. Inflation expectations are very close to where they were before the inflation emergency of the last three years. And, given that you appear to have substantially cut off these two tail risks and that you’ve judged here today current policy as well into restrictive territory, what good reason is there to keep policy rates above 5 percent? Are you really going to learn more waiting six weeks versus three months from now that you have avoided those two risks? <NAME>CHAIR POWELL</NAME>. So, as you know, almost every participant on the Committee does believe that it will be appropriate to reduce rates and for, for—partly for the reasons that you say. You know, we, we feel like inflation is coming down. Growth has been strong. The labor market is strong. We’re—what we’re trying to do is identify a place where we’re really confident about inflation getting back down to 2 percent so that we can then begin the process of dialing back the restrictive level. So, overall, I think—I think people do believe—and, as you know, the median participant wrote down three rate cuts this year. But I think to get to that place where we feel comfortable starting the process, we need some confirmation that inflation is, in fact, coming down sustainably to 2 percent. <NAME>NICK TIMIRAOS</NAME>. If I could ask differently: If, if you hold rates high as inflation moderates, as it—as it has been, target rates will exceed the prescriptions of the Taylor rule or its variants. What would be the reasoning for holding rates higher than the levels recommended by those rules in the current instance? <NAME>CHAIR POWELL</NAME>. Well, I—look, I think, as you know, we consult the range of Taylor rules and, and non-Taylor kind of rules. We consult them regularly. They’re in our, our Tealbook, and, and they’re in all the materials that we look at. But, you know, I don’t think we’ve ever been at a—at a place where we were—where we were setting policy by them. And there—depending on the rule, it will tell you different things. There are many different formulations. Another way to think about it is, implicitly, is—so, in theory, of course, real rates go up if—holding all else equal—as inflation comes down. But that doesn’t mean we can mechanically adjust policy as real rates—sorry—as inflation comes down. It doesn’t mean that at all, because, for one thing, we, we don’t know—we, we look at more than just the fed funds rate. We look at—broadly—financial conditions. But, in addition, we don’t know with great confidence where the neutral rate of interest is at any given time. But that also doesn’t mean that we wait around for—to see, you know, the economy turn down, because that would be too late. So we’re really in a risk-management mode: of managing the risk—as I mentioned in my opening remarks—managing the risk that we move too soon and move too late. And I think to move, which is—which is where almost everyone on the Committee is—is in favor of, of moving rates down this year—but the timing of that is going to be linked to our gaining confidence that inflation is on a sustainable path down to 2 percent. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Hi. Thanks, Chair Powell. I’d like you to, to key in on the use of the word in, in the statement that inflation still “remains elevated.” You’ve pledged to cut rates before inflation reached 2 percent. So that implies that there’s some sort of intermediate step here on, on inflation and that a, a cut would be consequent with a change in the statement language that inflation “remains elevated.” What’s the step-down from there? <NAME>CHAIR POWELL</NAME>. Yeah, I, I don’t know that we’ve worked out the particulars— statement language and that kind of thing. I would just say, if you look at—you know, look at where, where 12-month inflation is, and it’s, you know, it’s still well above—core is 2.9 percent, for example—12-month—which is way down from where it was. Very, very positive development—very fast decline—and, and, you know, the, the case is likely that it will continue to come down. So, so that’s where—that’s where it is. But we’re, you know, we’re wanting to see, you know, more data. <NAME>HOWARD SCHNEIDER</NAME>. So, if I—if I could follow up on that, the statement allows that you want greater confidence on inflation falling before you cut, but it doesn’t mention the other side of the mandate—a slide in employment. Would a slide in employment also bring you to the point of, of cutting rates? <NAME>CHAIR POWELL</NAME>. Yes. So let me say that we’re not looking for that. That’s not something we’re looking for. But, yes, if you think about, you know—in, in the base case, the economy is performing well—the labor market remains strong. If we saw an unexpected weakening in, in—certainly in the labor market, that would certainly weigh on cutting sooner. Absolutely. And if we saw inflation being stickier or higher or those sorts of things—would argue for moving later. In the base case, though, where, where the economy is healthy and we have, you know, we have ongoing growth—solid growth—we have a strong labor market—we have inflation coming down—that’s what people are writing their SEP [submissions] around. And in that case, what we’re saying is, based on that, we think we can and should take advantage of that and, and be careful as we approach that question of when to begin to dial back restriction. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Claire Jones, Financial Times. Just to circle back to the “greater confidence” aspect of the statement, there’s been a lot of unanimity in recent meetings. I’m just wondering, going forward, when it comes to all needing greater confidence, is there unanimity or, at least, consensus among FOMC members about what the threshold for that greater confidence is? And if not, could you maybe tell us a little bit about the discussion today on, you know, what the variations between FOMC members was on what constitutes enough confidence to cut rates and also if there was any variation on how quickly that “greater confidence” threshold could be reached? Thank you. <NAME>CHAIR POWELL</NAME>. So we’re not—we’re not really at that stage. You know, we’re— we’re—there was no proposal to cut rates. Some people did, you know, talk about their view of the rate path. I would point you to the [December 2023] SEP as, as, you know, as good evidence of where people are, although it is—it is [now] one [FOMC meeting] cycle later. So, you know, we’re not—we’re not at a place of, of really working out those kinds of details, because we weren’t actively considering, you know, a—moving, moving the federal funds rate down. I will say, there is a—there is a wide disparity—a healthy disparity—of views, and you see that in public, public statements, in the minutes, and the transcripts when they’re released every five years. So we do have a healthy set of differences, and I think that’s actually essential for making good policy. We’re also able to reach agreement, generally, because we listen to each other— we, we compromise. And even though not everybody loves what we do, they’re able to—for the most part—able to join in. To me, that’s a well-functioning public institution. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. So, over the past few years, there have been all these real-time indicators that helped us gain a sharper understanding of where the economy was, like OpenTable data or office attendance. You’ve talked about vacancies in the past. And I’m wondering, at the start of this year, what might be on that dashboard for you that’s giving you the clearest picture of the economy—including on rents—if you could touch on that. <NAME>CHAIR POWELL</NAME>. Including? <NAME>RACHEL SIEGEL</NAME>. Rent. Rent costs. <NAME>CHAIR POWELL</NAME>. Yeah. Well, so we’re not—you know, it’s not the pandemic, so we can actually rely on more, more traditional forms. People are working. They’re getting wages, and, and the economy has largely reopened and is broadly normalizing, as you see. So I wouldn’t say we’re looking at that, that sort of more innovative data as much. You know, you point to rents. So, of course, we follow the, the components of inflation very carefully. Which would be: Goods inflation—I talked about that a little bit; you mentioned housing inflation. So the question is, when will these lower market rents find their way into measured rents, as measured, measured in PCE inflation? And we think that’s coming, and we know it’s coming. It’s just a question of when and, and how big it’ll be. So—but that’s in, in everyone’s forecast, I would say. So that will—that will help. But at the same time, we think goods inflation will probably—it’s been giving a lot of disinflation to the effort—and probably that declines over time, but it may well have some, some more time to run. You know, these—the supply chains are not perfectly back to where they were. In addition, it takes time for the, the healing process to get into prices. So there may be still a tailwind. We’ll find out with, with that. So we look at the things that relate to our mandate very carefully, and—as you would imagine. <NAME>RACHEL SIEGEL</NAME>. I guess, just as a quick follow-up—do you feel comfortable at this point saying the economy has reached a soft landing, or is that part of looking for more confidence? <NAME>CHAIR POWELL</NAME>. No, I wouldn’t—I wouldn’t say we’ve achieved that. And I, I think we have—we have a ways to go. Inflation is still—you know, core inflation is still well above target on a 12-month basis. Twelve months is our, our target, certainly. I’m encouraged, and we’re encouraged by the progress. But, you know, we’re, we’re not—we’re not declaring victory at all at this point. We think we have a ways to go. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Thank you, Mr. Chairman. You’ve said that you would know the neutral rate by its works. So I’m wondering what you could tell me—how do you believe the neutral rate is working or telling you right now that growth is stronger? In other words, how much is the economy really being restrained right now by the current funds rate? And how much restraint does it really need, additionally, if inflation is still coming down? <NAME>CHAIR POWELL</NAME>. So it’s—I think you, you do see in the interest-sensitive parts of the economy—you do see, for example, housing. You see the effects. You do. Your, your second question, though, really, I think, is important, and that is, a lot of this has come through—a lot of the disinflationary process has come through the healing of supply chains and also of the labor market. So you’ve seen the—you know, that other set of factors is really different from other cycles and has brought that working with tighter, tighter policy, which has enabled the supply side to recover—I think is that, that mixture has been behind what has enabled this. So, no—we really do think that we’re having an effect broadly across the economy. I would point to the interest-sensitive parts of the economy as well as spending, generally. But it’s a—it’s a joint story. It’s a complicated story. <NAME>STEVE LIESMAN</NAME>. But, but how much restraint are you actually imparting to the economy, would you say, relative to the neutral rate? <NAME>CHAIR POWELL</NAME>. It’s—so I think it’s, it’s—of course, you know that it’s not something you can identify with any precision. But if you—a standard approach would be to take the nominal rate—5.3 percent, let’s say—and subtract sort of a, a forward measure of inflation. If you do that—and there are many, many ways to calculate the neutral rate—but that’s one I like to do. And, you know, you’re going to get to something that is materially above mainstream estimates of neutrality—of the neutral rate—you will. And—but at the same time, you look at the economy, and you say, “This is an economy that grew 3.1 percent last year.” And, and you say, “What does that tell you about the neutral rate?” What’s happening, though, is, the supply side has been recovering in the middle of this. So that, that won’t go on forever. So a lot of the growth we’re seeing is not—is—it isn’t just a tug of war between, between interest rates and demand. You’re getting, you know, more activity because of the—of labor market healing and supply chains healing. So I think the question is, when that peters out, I think the, the, you know, the, the restriction will show up probably more, more sharply. <NAME>MICHELLE SMITH</NAME>. Rich. <NAME>RICH MILLER</NAME>. Thank you—sorry. Thanks for taking the question, Mr. Chairman. You mentioned earlier we’re not seeking a weaker labor market, I think you, you said. Can you talk a little bit more about that? Do you—do you think the labor market now is back to quote, unquote, “normal” and that the—we can achieve the inflation target without wage gains coming back down to what they were pre-pandemic? Even with today’s ECI levels, they were still above those pre-pandemic levels. <NAME>CHAIR POWELL</NAME>. I, I think the labor market by many measures is at or nearing normal—but not totally back to normal. And you pointed to one or more of them. So I think, you know, job openings are not quite back to where they were. Wages—wage increases, rather, are not quite back to where they—to where they would need to be in the longer run. I, I would look at it this way, though. The, the economy is broadly normalizing, and so is the labor market. And that process will probably take some time. So wage setting is something that happens—it’s, it’s—you know, probably will take a couple of years to get all the way back. And that’s okay. That’s okay. But we do see—you saw today’s ECI reading—you know, the evidence is that, that wage increases are still at a healthy level—very healthy level—but they’re gradually moving back to levels that would be more associated—given, given assumptions about productivity, are more typically associated with 2 percent inflation. It’s, it’s an ongoing process—a healthy one— and, and, you know, I think we’re, we’re moving in the right direction. <NAME>RICH MILLER</NAME>. So that process can continue without a weakening of the labor market, basically, you’re saying? <NAME>CHAIR POWELL</NAME>. I think the, the labor market is—it—I don’t know if I’d—it’s rebalancing. Clearly, that the—there was a fairly severe imbalance between demand for workers and supply at the beginning of the pandemic. So we lost several million workers at the beginning of the pandemic from people dropping out of the labor force. And then when the economy reopened—you remember 2021—you had a severe labor shortage, and it was just—it was everywhere—panic on the part of businesses—couldn’t, couldn’t find people. So, what’s happened is—we expected labor—the labor supply—labor market to come back quickly, and it didn’t. And 2022 was a disappointing year, and, you know, we were kind of thinking, “Well, maybe we won’t get it back.” And then 2023, we did, as you know—so labor force participation came back strongly in ’23, and so did immigration. Immigration came to a halt during the pandemic. So—and so those two forces have significantly lowered the temperature in the labor market to what is still a very strong labor market. It’s still a good labor market for wages and for finding a job, but it’s getting back into balance, and that’s what we want to see. And, you know, one great way to look at that is what’s happening with, with wage increases. And you see it now across the, the major things that we—that we track. It isn’t every quarter, but, overall, there’s a clear trend—still at high levels, but back down to where—what would be consistent with, with where we were before the pandemic and with 2 percent inflation. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi, Chris Rugaber at Associated Press. Thank you. I wanted to follow up on Rich’s question. It sounded like you suggested that you’re not worried about faster growth so much—so wanted to see if you’re seeing anything that suggests that inflation could reaccelerate from here. And it sounds like you’re saying you’re not worried that solid growth from here on out poses any risk to inflation. Thank you. <NAME>CHAIR POWELL</NAME>. No, I think that that is a risk—the risk that inflation would, would reaccelerate. I think the, the greater risk is that it would—that it would stabilize at a level meaningfully above 2 percent. That’s, that’s, to me, more likely. Of course, if—if inflation were to surprise by moving back up, that would—we would have to respond to that, and that would— that would be a surprise at this point. But I have to tell you, that’s why we keep our options open here and why we’re not, you know, rushing. So I, I think both of those are risks, but I think the more likely risk is the one that I mentioned, which is, you’ve had six good months—very good months—but what, what’s really going to “shake out” here? You know, where—what will— when we look back, what will we see? Will, will inflation have dipped and then come back up? Are the last six months flattered by factors that are—that are one-off factors that won’t repeat themselves? We don’t think so. We don’t—you know, that’s not what we think, but that’s the question we are asking. We have to ask [that], and we want to get comfort on that. <NAME>CHRISTOPHER RUGABER</NAME>. And just one quick follow-up—Governor Waller had mentioned the revisions that are coming on February 9th for the CPI data. Is that something you’re watching as well? And if, if we see those revisions fairly minor, is that going to give you more confidence where things are going? <NAME>CHAIR POWELL</NAME>. We’ll just have to see. Yeah. We’ll—we look at those. Last year was a—was a, a surprise. <NAME>MICHELLE SMITH</NAME>. Mike. <NAME>MICHAEL MCKEE</NAME>. Michael McKee, Bloomberg Radio and Television. If you don’t want to use the term “soft landing,” would you say, at least, that, from your point of view now, the other scenario of a hard landing caused by the Fed is off the table or the risks have diminished very much? And you mentioned below–2 percent inflation for—on a three-month basis, core PCE has been running at 1½ percent. And there are those on Wall Street who think that if you maintain the level of restriction you have right now, you could end up with inflation running below your target. How do you see that? <NAME>CHAIR POWELL</NAME>. So, how to—your first question—how to describe where we are? So I guess I would just say this—executive summary would be that growth is solid to strong over the course of last year. The labor market—3.7 percent unemployment indicates that the labor market is strong. We’ve had just about two years now of, of unemployment under 4 percent. That hasn’t happened in 50 years. So it’s a good labor market. And we’ve seen inflation come down. We’ve talked about that. So we’ve got six months of good inflation data and an expectation that there’s more to come. So this is a—this is a good situation. Let’s be honest. This is a—this is a good economy. But what’s the outlook? That’s looking in the rearview—the outlook—we do expect growth to moderate. Of course, we have expected it for some time, and it hasn’t happened, but we do expect that it will moderate as supply chain and labor market normalization runs its course. The labor market is rebalancing, as, as I mentioned. Job creation has slowed. The base of job growth has narrowed. And, of course, 12-month inflation is, is above target and getting, you know, getting down closer to target. It’s not guaranteed, but we do seem to be getting on track for that. So those are the risks and, and questions we have to answer. But, overall, this is a pretty good picture. It, it is a good picture. Your second question was—sorry. <NAME>MICHAEL MCKEE</NAME>. Could you get inflation that is below target—end up with inflation below target, and you have to do something about that? <NAME>CHAIR POWELL</NAME>. So we—the thing is, we’re not looking for inflation to tap the 2 percent base once. We’re looking for it to settle out over time at 2 percent. And the same thing is true if we have a month or two of lower—and we have that now—of, of inflation that’s annualized at a—at a lower level—that wouldn’t be good. We’re not—you know, we’re not looking to have inflation anchor below 2 percent. We’re looking to have it anchor at 2 percent. So if we do face those circumstances, then we’ll have to deal with that. I think—I think as of now, you know, the, the question, which—we want to take advantage of this situation and finish the job on inflation while keeping the labor market strong. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Edward Lawrence from Fox Business. Thank you, Mr. Chairman, for taking this. So, as I’ve—as I’ve heard from some District Fed presidents, is it, in your view, a little premature to think that rate cuts are right around the corner? And then when we do see that first rate cut, is that—should we interpret that as the beginning of a rate-cut cycle, or is it a one-off? <NAME>CHAIR POWELL</NAME>. So I’ll point you to that language on your first question. We, we included that language in the statement to signal clearly that—with strong growth, strong labor market, inflation coming down—the Committee intends to move carefully as we consider when to begin to dial back the restrictive stance that we have in place. So if you take that to the current context—current context, we’re going to be data dependent. We’re going to be looking at this meeting by meeting. Based on the meeting today, I would tell you that I don’t think it’s likely that the Committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s, that’s to be seen. So I wouldn’t call—you know, when you say—when you ask me about “in the near term,” I’m hearing that as March. I would say I don’t think that’s—that’s, that’s probably not the most likely case or what we would call the base case. And your second question is— <NAME>EDWARD LAWRENCE</NAME>. On, on the—is this the start of a—when we see a cut, is it the start of a cutting cycle, or is it—could it just be a one-off? <NAME>CHAIR POWELL</NAME>. You know, that’s going to depend on the data. The whole thing is, this is going to depend on the data. We’re going to be looking at the economic data as it affects the outlook and the balance of risks. And we’re going to make our decisions based on that. And it could wind up—you know, we’ll, we’ll have another SEP at the March meeting, and, and people will write down what they think. But, in the end, it’s really going to depend on how the economy evolves. We talked about, there are risks that would cause us to go slower—for example, stronger inflation—more, more persistent inflation. There are risks that would cause us to—if they happen—that would cause us to go faster or—and sooner. And that would be a weakening in the labor market or, for that matter, very, very persuasive lower inflation. Those are the kinds of things. So we’re just—we’re just going to be reacting to the data. That’s the— that’s really the only way we can do this. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. Could you talk a little bit more about productivity growth? You know, you’ve mentioned multiple times about, you know, the level of wage growth that’s consistent with 2 percent inflation. We’ve obviously seen, you know—you were talking about ECI this morning, in which it’s cooled a little bit but still sort of above what you wanted to see. Growth has been very strong. How much of those numbers do you attribute to productivity? And do you see that productivity as sort of just temporary because of the factors—the labor and supply chain factors you were talking about—or do you think that productivity growth will, will fade over time? <NAME>CHAIR POWELL</NAME>. So this is a really interesting question. And I think—my, my own view is—I think if you look, look back to the pandemic, you, you saw a spike in productivity as workers were laid off, and, and activity didn’t decline as fast. And then you saw a deep trough of productivity. And then, over the last—you saw high productivity last year, in ’23. I think we’re, we’re basically in the throes of getting through the pandemic economy. And the question will be, what, what is it that has changed the—you know, the productivity tends to be based on, you know, fundamental aspects of our economy. Is there—is there a case—will it be the case that we come out of this more productive on a sustained basis? And I don’t know. I don’t know. What would it take? It would take—you know, people talk about AI, but I would—my guess is that we may shake out and be back where we were, because I don’t—I’m not sure I see—work from home doesn’t seem like it’s a big productivity increase. Or AI, artificial intelligence— generative it may be, but probably not in the short run—probably, maybe in the longer run. So I’m not—I’m not seeing why it would, but, you know, right—you know, right now I would say that productivity is kind of what falls out of the, the broader forces that are driving people in and out of the labor force and, and activity returning and supply chains getting fixed. <NAME>VICTORIA GUIDA</NAME>. Right. So would that be behind why we’ve seen such strong growth, but we’ve also seen inflation fall—that maybe there’s just a higher level of productivity? <NAME>CHAIR POWELL</NAME>. That’s one way to look at it. Yeah. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. I want to ask a little bit more about housing. I’m wondering—how closely are you watching rent and housing prices as you evaluate whether and when to cut rates? And it seems like housing prices are not coming down as quickly as you expected. <NAME>CHAIR POWELL</NAME>. So when we think about, you know—our, our statutory goals are maximum employment and price stability, and that’s what we’re targeting. We’re not targeting housing price inflation, the cost of housing, or any of those things. Those are very important things for people’s lives. But they’re not—you know, those are not the things we’re targeting. We’re also well aware that when we cut rates at the beginning of the pandemic, for example, the housing, housing industry was helped more than any other industry. And when we raise rates, the housing industry can be hurt, because it’s a very interest-sensitive sector. On top of that, we have longer-run problems with the availability of housing. You know, we have a, a built-up set of cities, and, and, you know, people are moving further and further out. So there’s—there hasn’t been enough housing built. And these are not—these are not things that we have any tools to address. But, you know, where it comes into play very specifically in our work is inflation, which is a combination. It’s, it’s really rental inflation. You’re taking owners’ equivalent rent and then actual rent paid by tenants. And you’re, you’re running that through the CPI calculation. Or the PCE [inflation] calculation—the one we look at. And what that’s telling you is that market rents are increasing at a much lower rate or even being flat and that that will show up in inflation over time. It has to as long as that remains the case. <NAME>NANCY MARSHALL</NAME>-GENZER. And just real quick—what is your response to the letter that was sent to you by some members of Congress asking the Fed to lower interest rates to make housing more affordable? <NAME>CHAIR POWELL</NAME>. My response is what I started with, which is that our, our job—the job Congress has given us is price stability and maximum employment. Price stability is absolutely essential for people’s lives, most importantly for—well, not most importantly—most, mostly for people at the lower end of the income spectrum who are living at the edges—at the margins. And so someone—for someone like that, high inflation in the—in the necessities of life—right away, you’re in trouble, whereas even middle-class people have some, you know, some scope to absorb higher costs. So we have to get—it’s our job. It’s what society has asked us to do, is to get inflation down, and the tools that we use to do it are interest rates. So that’s how we think about that. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. Courtenay Brown from Axios. Can you give us some insight into whether the Committee discussed the possibility of slowing balance sheet runoff in the months ahead? <NAME>CHAIR POWELL</NAME>. Yes. So I would start by saying that balance sheet runoff so far has gone very well. And as the process has continued, you know, we’re getting to that time where questions are beginning to come into greater focus about the pace of runoff and all that. So at this meeting, we did have some discussion of the balance sheet, and we’re planning to begin in- depth discussions of balance sheet issues at our next meeting in March. So those, those questions are all coming into scope now, and we’re focusing on them. But we’re, we’re at the beginning of that process, I would say. <NAME>COURTENAY BROWN</NAME>. Quick follow-up—is it the case that the Fed would decide to lower rates and make adjustments to the balance sheet runoff in tandem? <NAME>CHAIR POWELL</NAME>. Yes, we do—we see those as independent tools. And so they don’t—for example, if you’re—if you’re normalizing policy, you might be reducing rates but continuing to run off the balance sheet. In both cases, that’s normalization, but from a strict monetary policy standpoint, you could say we’re loosening along with tightening. So that, that could happen. It’s not something we’re planning or thinking about, but right now, we’re thinking about getting to a place where—we’re going to see the balance sheet runoff to continue. We’re watching it carefully, and, as I said, we’ll—we’ll be looking into that as a Committee starting in March. <NAME>COURTENAY BROWN</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Simon Rabinovitch with the Economist. Thank you, Chair Powell. You’ve mentioned six good months of inflation data, but that not being enough to build up confidence. Based on your previous response that your base case is you probably wouldn’t start easing yet in March, the implication is that eight good months might not be enough, either. Roughly how many months do you think you might need of, of good inflation data to be—to be confident? <NAME>CHAIR POWELL</NAME>. I’m, I’m not in a position to put a number on it. I’m just going to say—and it’s not that we don’t have any confidence. We, we have growing confidence, but not to the point where we—where we feel like—it’s a highly consequential decision to start the process of, of dialing back on restriction. And we want to get that right, and we feel like the strong economy, strong labor market, inflation coming down—it gives us the ability to do that. We think that’s the best way we can serve the public, because, ultimately, we, we’ve made a lot of progress on inflation. We just want to make sure that we do get the job done in a sustainable way. That’s how we’re thinking about it. In terms of when that’ll be, you know, that, that’ll all come out of our communications, and, you know, we won’t—we won’t keep that a secret. <NAME>MICHELLE SMITH</NAME>. Evan. <NAME>EVAN RYSER</NAME>. Hi, Chair Powell. Evan Ryser with MNI Market News. Can you explain a little bit more on what you’re considering when tapering QT? Do you need to see the overnight reverse repo facility all the way down to zero, or is it something that you can start with a couple hundred billion dollars there? <NAME>CHAIR POWELL</NAME>. Not a decision that we’ve made, but I, I wouldn’t think we’d, we’d be—we wouldn’t be taking a position that it’s got to go to zero. I mean, if it—if it were to stabilize at a different level—but that’s, that’s not a decision that we’ve made. That’s, that’s what we’ll be talking about at the March meeting. A whole range of issues will be briefed up, and the Committee will get into—get into all of the issues that will be arising over the course of the next, let’s say, year or so. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thanks. Greg Robb from MarketWatch. Chair Powell, I want to change gears a little bit. In the presidential primary campaign that’s been going on for the last nine months or so, your name has come up often, and many Republican candidates had said that they probably wouldn’t want to give you a third term. So I wanted to give you a chance to talk about that. Do you want another term—you’ve had—on the Fed? What, what’s your stance on that? <NAME>CHAIR POWELL</NAME>. I don’t have a stance on that. It’s not something I’m focused on. [We’re] focused on doing our jobs. We have—this year is going to be a highly consequential year for, for the Fed and for monetary policy. And we’re, all of us, very buckled down, focused on doing our jobs. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. As you mentioned, core PCE [inflation] has been running at 1.9 percent over the past six months. And you guys are actually expecting core inflation higher this year, at 2.4 percent, compared to that six-month measure. Given that forecast and that the median is for three rate cuts this year, what happens if inflation stays where it’s been over the last six months for the next six months? <NAME>CHAIR POWELL</NAME>. So I—you know, we’re going to do—we’ll update our, our inflation forecasts at the next meeting. You referred to the December meeting. That’s, that’s, you know, three months old [by March], so it might be lower now, given the data we’ve gotten. So, look, as I mentioned, we’re going to be reacting to the data. If, if we get—if we get very strong inflation data and it, it kicks back up, then it’ll—then we’ll go slower or later or both. If we got really good inflation data soon, that would matter for both the—that, that would tell us that, that we could go sooner and perhaps go faster. So we’re just going to be—but, of course, we’ll weigh that with all the other factors. We’re setting policy based on the totality of, of the data. <NAME>JENNIFER SCHONBERGER</NAME>. But just to follow—if inflation stays where it is currently, that would probably mean that the real interest rate becomes more restrictive. Would that mean you’d have to trim more, perhaps, than you already have factored in? <NAME>CHAIR POWELL</NAME>. Well, I think if we—if we came to the view that, that inflation were—that the six-month inflation numbers, which are very close to 2 [percent], were, in “PCE world”—if we came to—if that’s—if we thought that is really where we’re going to be, then, yes, our policy would be in a different place. It would. But, you know, that’s the whole point is, we’re trying to get comfortable and gain confidence that that is where—that inflation is on a sustainable path down to 2 percent or toward 2 percent. <NAME>MICHELLE SMITH</NAME>. Daniel. <NAME>DANIEL AVIS</NAME>. Hi, Chair Powell. Daniel Avis, Agence France-Presse. I just wondered if I could get your comment on the recent consumer confidence data. It seems to suggest that consumers are sort of moving towards a much more optimistic view of the economy. I just wonder—is it fair to say that they’re moving towards where the Fed appears to have been in recent months? And, you know, do you think that inflation and falling inflation perhaps has played a role in that? And what challenges do you see, going forward? Thank you. <NAME>CHAIR POWELL</NAME>. Yeah, so it’s been—it’s been interesting that confidence surveys have been weak, at a time when unemployment has been low—very low, historically low—for a couple of years. And—but, nonetheless, that’s been the case. And we’ve asked ourselves why that is. And, you know, one obvious answer—we don’t pretend to have perfect wisdom on this—is—but one obvious answer is that the price level is high. So prices went up much more than 2 percent for year—per year for a couple of years. And people are going to the store, and they’re paying much more for the basics of life than they were two years ago—three years ago. And they’re not happy about it. And it’s fine that inflation is coming down, but the price—the prices they’re paying are still high. So that, that is what—that, that has to be some part of why people are unhappy. And they’re, they’re right to be unhappy. You know, this is why we need to keep price stability. It’s why we need to do our jobs—so that people don’t have to deal with things like this. In terms of [surveys]—you’re right. In, in recent, recent surveys, a couple of—you’ve seen a couple of significant increases in, in consumer confidence or, or happiness with the economy. I guess that’s a good thing. That can—that can support spending—can support economic activity. There’s some evidence of that. But it is—it is a fact that we have seen, you know, a meaningful increase. I think levels of confidence are still maybe not as high as they’ve been at various times. But it’s—they certainly have come up. <NAME>MICHELLE SMITH</NAME>. Bryan. <NAME>BRYAN MENA</NAME>. Thank you for taking our questions. Bryan Mena, CNN Business. Committee members have said they’d like to meet with business leaders and stakeholders in person to learn more about the economy in real time, given that some data is subject to large revisions, the issue of seasonal adjustments being thrown off balance, and many readings of the economy being quarterly. So did any members say they’ve learned anything not reflected in the data? Or have you yourself learned anything through anecdotal evidence that hasn’t been captured in the data yet? <NAME>CHAIR POWELL</NAME>. Well, yes. I’m, I’m a big believer that—yes. So we, we do meet with outside groups who come from all different parts of the economy. And I always feel like you—I mean, I spent most of my life in the private sector looking at companies—individual companies—individual management teams—and then building out from that. And so, starting with GDP data is—and working into what’s actually affecting people’s lives is—is challenging. It’s very hard. So I, I really like anecdotal data. In addition, as you know, the 12 Reserve Banks have really the best network of anyone. In all their Districts, they’re talking to, you know, not just the business community, but the educational, medical, all, all—you know, nonprofit community. They have arms into all of that. And so when they come back—that’s what goes into the Beige Book. But they come back, and what each Reserve Bank president does is, during the outlook go-around, they’ll say, “In my District . . .” And they’ll talk about 100 conversations they—not—they won’t talk—they, they will give you input, based on 100 conversations that they’ve had with people of all different walks. And it’s—I personally find it very helpful in understanding what’s going on. And also, I think you hear things before they show up in the data sometimes. <NAME>BRYAN MENA</NAME>. Did any of them—did any of them notice slowing economy based on what they’ve heard from, like, their District? <NAME>CHAIR POWELL</NAME>. Yes. I mean, if you—if you look back at the last—not this Beige Book, but the one before, it was more—there was a lot of “slower activity.” I think that, that what you’re hearing now is, is, things are picking up a bit. You’re hearing—not, not in every District and not every, every person that we talk to, but you’re—overall, it feels like you’re hearing things picking up at the margin. So that’s what comes through. <NAME>MICHELLE SMITH</NAME>. Let’s go to Jeff Cox for the last question. <NAME>JEFF COX</NAME>. Thank you, sir. Jeff Cox from CNBC.com. Just kind of looking to put it all together: You talked about basically the, the economy looking strong with 3.3 percent annualized growth in the fourth quarter. Does the strength of the economy speak more loudly to you now than any inflation threat might? That, you know—you’re in a position, in other words, to keep rates elevated as long as the economy stays strong, and you’re more—you’re more tilted towards that. And also, perhaps, are you worried at all that the economy is maybe a little too strong right now and that inflation could come back at some point? <NAME>CHAIR POWELL</NAME>. I’m not so worried about that. You know, it’s—again, we’ve had inflation come down without a slow economy and without, you know, important increases in, in unemployment, and there’s no reason why we should want to get in the way of that process, if it’s going to continue. So I, I am—you know, I think—I think declining inflation—continued declines in inflation are, are really the main thing we’re looking at. Of course, we want the labor market to remain strong, too. We don’t have a growth mandate. We’ve got a, a maximum-employment mandate and a, a price-stability mandate, and those are the two things we look at. Growth only matters to the extent it influences our achievement of those two—of those two mandates. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people. The economy has made considerable progress toward our dual-mandate objectives. Inflation has eased substantially while the labor market has remained strong, and that is very good news. But inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is 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. Our restrictive stance of monetary policy has been putting downward pressure on economic activity and inflation. As labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals are moving into better balance. I will have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a solid pace. GDP growth in the fourth quarter of last year came in at 3.2 percent. For 2023 as a whole, GDP expanded 3.1 percent, bolstered by strong consumer demand as well as improving supply conditions. Activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates. High interest rates also appear to have weighed on business fixed investment. In our Summary of Economic Projections, Committee participants generally expect GDP growth to slow from last year’s pace, with a median projection of 2.1 percent this year and 2 percent over the next two years. Participants generally revised up their growth projections since December, reflecting the strength of incoming data, including data on labor supply. The labor market remains relatively tight, but supply and demand conditions continue to come into better balance. Over the past three months, payroll job gains averaged 265,000 jobs per month. The unemployment rate has edged up but remains low at 3.9 percent. Strong job creation has been accompanied by an increase in the supply of workers, reflecting increases in participation among individuals aged 25 to 54 years and a continued strong pace of immigration. Nominal wage growth has been easing, and job vacancies have declined. Although the jobs-to- workers gap has narrowed, labor demand still exceeds the supply of available workers. FOMC participants expect the rebalancing in the labor market to continue, easing upward pressure on inflation. The median unemployment rate projection in the SEP is 4.0 percent at the end of this year and 4.1 percent at the end of next year. Inflation has eased notably over the past year but remains above our longer-run goal of 2 percent. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.5 percent over the 12 months ending in February and that, excluding the volatile food and energy categories, core PCE prices rose 2.8 percent. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters as well as from measures from financial markets. The median projection in the SEP for total PCE inflation falls to 2.4 percent this year, 2.2 percent next year, and 2 percent in 2026. The Fed’s monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the American people. My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing, and transportation. We are strongly committed to returning 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. As labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals are coming into better balance. We believe that our policy rate is likely at its peak for this tightening cycle and that, if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. The economic outlook is uncertain, however, and we remain highly attentive to inflation risks. We are prepared to maintain the current target range for the federal funds rate for longer, if appropriate. We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2 percent. 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. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably down toward 2 percent. Of course, we’re committed to both sides of our dual mandate, and an unexpected weakening in the labor market could also warrant a policy response. We will continue to make our decisions meeting by meeting. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward. If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 percent at the end of this year, 3.9 percent at the end of 2025, and 3.1 percent at the end of 2026, still above the medium— median longer-term funds rate. These projections are not a Committee decision or plan; if the economy does not evolve as projected, the path for policy will adjust as appropriate to foster our maximum-employment and price-stability goals. Turning to our balance sheet, our securities holdings have declined by nearly $1.5 trillion since the Committee began reducing our portfolio. At this meeting, we discussed issues related to slowing the pace of decline in our securities holdings. While we did not make any decisions today on this, the general sense of the Committee is that it will be appropriate to slow the pace of runoff fairly soon, consistent with the plans we previously issued. The decision to slow the pace of runoff does not mean that our balance sheet will ultimately shrink by less than it would otherwise but rather allows us to approach that ultimate level more gradually. In particular, slowing the pace of runoff will help ensure a smooth transition, reducing the possibility that money markets experience stress and thereby facilitating the ongoing decline in our securities holdings consistent with reaching the appropriate level of ample reserves. We remain committed to bringing inflation back down to our 2 percent goal and to keeping our longer-term inflation expectations well anchored. Restoring price stability is essential to set the stage for achieving maximum employment and price stability over the long term. To conclude: We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We, at the Fed, will do everything we can to achieve our maximum-employment and price-stability goals. Thank you. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Mr. Chairman, the projections show somewhat higher core inflation. They also show somewhat stronger growth. What should we infer from this notion that, on average, rates were kept the same this year, but inflation is higher and growth is higher. Does it mean more tolerance for higher inflation and less of a willingness to slow the economy to achieve that target? <NAME>CHAIR POWELL</NAME>. Well, it doesn’t—no, it doesn’t mean that. What it means is that, you know, we’ve seen incoming—as I pointed out in my opening remarks, we did mark up our growth forecast and so have many other forecasters, so the economy is performing, performing well. And the inflation data came in a little bit higher is a separate matter, and I think that caused people to write up their inflation. But nonetheless, we continue to make good progress on bringing inflation down. And so— <NAME>STEVE LIESMAN</NAME>. When you—just to follow up: When you say that you’re willing to either maintain the rate for longer, is—what is the tolerance of the Federal Reserve for inflation coming in above its 2 percent target? <NAME>CHAIR POWELL</NAME>. We’re strongly committed to bringing inflation down to 2 percent over time. That is—that is our goal, and we will achieve that goal. Markets believe we will achieve that goal. And they should believe that, because that’s what—that’s what will happen over time. But we stress “over time.” And so I think we’re, we’re making projections that do show that happening. And we’re committed to that outcome, and we will bring it about. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. You and others have been saying that relief on housing inflation is coming, but it still hasn’t shown up meaningfully in the CPI or the PCE. Does that challenge your assumption about when the shift will finally break through, since it hasn’t at that point? <NAME>CHAIR POWELL</NAME>. So I think there’s some confidence that the market rents—lower market rent increases that we’re seeing will show up in measures of housing services inflation over time. There’s a little bit of uncertainty about when that will happen, but there’s real confidence that they will show up eventually over time. But, again, uncertainty about the exact timing of that. <NAME>RACHEL SIEGEL</NAME>. Okay. And will you be able to get overall inflation down to target if housing doesn’t break through quickly, and does that affect the timing for eventual cuts this year? <NAME>CHAIR POWELL</NAME>. We will get aggregate inflation down to 2 percent over time. We will. And, and I would assume that we’ll continue to see is—we’ll see goods prices coming into a new equilibrium where they’re going down perhaps not as quickly as they had been earlier this year, where housing services inflation will come back down as, as current market rents are suggesting will happen and where nonhousing services will move back down. Some combination of those three things—and it may be different from the combination we had before the pandemic—will be achieved and will bring inflation back down to 2 percent sustainably. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, during your congressional testimony this month, you said that your test for making the first change to interest rates does not require you to be terribly comfortable that inflation is at 2 percent because interest rates are well above neutral. At the same time, you said here after the last meeting that the first cut is highly consequential. Can you reconcile these views for me? If rates are well above neutral, why would the first cut be highly consequential? Is that because you anticipate one cut would be followed by one or two more along the lines of the recalibration you made in 2019, which itself was modeled on the mid-cycle adjustment of 1995? <NAME>CHAIR POWELL</NAME>. It’s more—I would put it more in the context of what I said in our— in my opening remarks that the risks are really two-sided here. We—we’re in a situation where, you know, if we ease—if we ease too much or too soon, we could see inflation come back, and if we ease too late, we could do unnecessary harm to employment and people’s working lives. And so, you know, we do see the risks as two-sided, so it is consequential. We want to be careful. And, fortunately, with the economy growing, with the labor market strong, and with inflation coming down, we can approach that question carefully and let the data speak on that. That’s really what I was thinking. <NAME>NICK TIMIRAOS</NAME>. How much of that inflation that we’ve seen so far this year do you chalk up to one-off calendar adjustment effects following a period of high inflation versus some change in the trend we saw in the second half of last year? <NAME>CHAIR POWELL</NAME>. I want to start by being—saying I always try to be careful about dismissing data that we don’t like. So you need to check yourself on that, and I’ll do that. But— so I would say the January number, which was very high—the January CPI and PCE numbers were quite high. There’s reason to think that there could be seasonal effects there. But, nonetheless, we don’t want to be completely dismissive of it. The February number was high, higher than expectations, but we have it at currently well below 30 basis points core PCE, which is not terribly high. So it’s not like the January number. But I take the two of them together, and I think they haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2 percent. I don’t think that story has changed. I also don’t think that those readings added to anyone’s confidence that we’re moving closer to, to that point. But, you know, we didn’t—the last thing I’ll say is we didn’t excessively celebrate the good inflation readings we got in the last seven months of last year. We didn’t take too much signal out of that. What you heard us saying was that we needed to see more that we could, you know—we wanted to be careful about that decision, and we’re not going to overreact, as well, to these two months of data, nor are we going to ignore them. <NAME>MICHELLE SMITH</NAME>. Ann. <NAME>ANN SAPHIR</NAME>. Hi, yes, Chair Powell. Could you speak a little bit more about the timing? Is there enough data between now and, say, May to be able to get the kind of confidence that you say you still need? Or, by June, is there enough data for you? Just give us a sense of your thinking there. Thank you. <NAME>CHAIR POWELL</NAME>. Yeah. So we make decisions meeting by meeting. And we didn’t make any decisions about future meetings today. Those are going to depend on our ongoing assessment of the incoming data, the evolving outlook, and the balance of risks. So I really don’t have anything for you on any specific meeting, looking forward. <NAME>ANN SAPHIR</NAME>. I mean just a question of—I mean, is there even enough data for you to be able to— <NAME>CHAIR POWELL</NAME>. We’ll take—you know, things can happen during an intermeeting period, if you look back—unexpected things. So I don’t want to—I wouldn’t want to dismiss anything. So I just would say that the Committee wants to see more data that gives us higher confidence that inflation is moving down sustainably toward 2 percent. I also mentioned—and we don’t see this in the data right now, but if there were a significant weakening in the data, particularly in the labor market, that could also be a reason for us to begin the process of reducing rates. Again, I don’t—there’s nothing in the data pointing at that, but those are the things that we’ll be looking at, at coming meetings and—without trying to refer to any specific meeting. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi, Chris Rugaber, the Associated Press. Thank you. In the projections, there is an increase in the neutral rate, as you know, and higher rates—¼ point higher rates projected in 2025, 2026. Can you speak about why, [what] might be behind that? Is there a real sense here that the economy has perhaps changed in some way that higher rates will be needed in the future? Thank you. <NAME>CHAIR POWELL</NAME>. So you’re right. They’re pretty modest changes, but you’re right. There was an uptick in the longer-run rate, and also there’s a 25 basis point increase in ’25 and ’26. In terms of, are rates going to be higher in the longer run, if that’s really your question, I don’t think we know that. I think it’s, it’s—we think that rates were generally low during the pre-pandemic post–Global Financial Crisis era for reasons that are mostly, you know, important, slow-moving, large things like demographics and productivity and that sort of thing—things that don’t move quickly. But I don’t think we know. I mean, my instinct would be that rates will not go back down to the very low levels that we saw, where, all around the world, there were long- run [real interest] rates that were at or below zero in some cases. I don’t see rates going back down to that level. But I think there’s tremendous uncertainty around that. <NAME>CHRIS RUGABER</NAME>. Great, and just a quick follow[-up]. On the projections, you also have 2.6 percent core inflation for the end of this year. It’s already at—or you mentioned it being 2.8 in February. I mean, that doesn’t sound like much disinflation at all. So are you really, are you still confident or—at the last press conference, you sounded pretty optimistic [that] you would get more confidence at the end of this year. Is it right to say that this suggests you’re not seeing a lot of disinflation this year compared to what we’ve seen 2023 and so forth? <NAME>CHAIR POWELL</NAME>. I think that that higher year-end number reflects the data we’ve seen so far this year because you’re now—you’re now in this year. So I think that—sorry, say your last part of your question again. <NAME>CHRIS RUGABER</NAME>. Are you still optimistic that you’ll get the confidence you need this year? <NAME>CHAIR POWELL</NAME>. I, you know, I think, if you look at the SEP, what it says is that it is still likely in most people’s view that we will achieve that confidence and that there will be rate cuts. But that’s really going to depend on the incoming data. It is. The other thing is, in the second half of the year, you have some pretty low readings, so it might be harder to make progress as you move that 12-month window forward. Nonetheless, we’re looking for data that confirm the kind of low readings that we had last year and give us a higher degree of confidence that what we saw was really inflation moving sustainably down to 2 percent—toward 2 percent. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek, the New York Times. Thank you for taking our questions. Per your comment to Ann that a weakening in the labor market would be a reason to potentially cut rates or at least a consideration in making a rate cut, would continued strength in the labor market be a reason to hold off on rate cuts? And just in general, if labor supply continued to rebound in 2024, the way it did in 2023, what would stronger hiring and possibly stronger growth mean for the path forward on policy? <NAME>CHAIR POWELL</NAME>. Yeah. So, so, if what we’re getting is a lot of supply and a lot of demand, and that supply is actually feeding demand because workers are getting paid and they’re spending and that’s, you know—what you would have is potentially kind of what you had last year, which is a bigger economy where inflationary pressures are not increasing. In fact, they were decreasing. So you can have that if you have a continued supply-side activity that we had last year with—both with supply chains and also with, with growth in the size of the labor force. <NAME>JEANNA SMIALEK</NAME>. But—so strong hiring in and of itself would not be a reason to hold off on rate cuts? <NAME>CHAIR POWELL</NAME>. No, not all by itself. No. I mean, we saw—you saw last year very strong hiring and inflation coming down quickly. We now have a better sense that a big part of that was supply-side healing, particularly with, with growth in the labor force. So, in and of itself, strong job growth is not a reason, you know, for us to be concerned about inflation. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Hi, Chair Powell. Neil Irwin with Axios. How do you assess the state of financial conditions right now, and particularly—in particular, do you view the kind of easing in financial conditions since the fall as consistent and compatible with what you’re trying to achieve on the inflation mandate? <NAME>CHAIR POWELL</NAME>. So we think—there are many different financial conditions indicators, and you can kind of, you know, see different answers to that question. But, ultimately, we do think that financial conditions are weighing on economic activity, and we think you see that in—a great place to see it is in the labor market, where you’ve seen demand cooling off a little bit from the extremely high levels. And there I would point to job openings, quits, surveys, the hiring rate. Things like that are really demand. There are also supply-side things happening, but I think those are demand-side things happening. You know, we saw—that’s been a question for a while. We did see progress on inflation last year—significant progress, despite financial conditions sometimes being tighter, sometimes looser. <NAME>MICHELLE SMITH</NAME>. Mike. <NAME>MICHAEL MCKEE</NAME>. Michael McKee with Bloomberg Radio and Television. Can you give us more color on how the Committee is thinking about inflation dynamics now? What we’ve seen at the beginning of the year, are they more one-off increases that will fade, or is there more of a secular turn with goods prices rising again and service prices staying sticky? And also housing prices have been sort of the Godot of this cycle, in that you keep expecting them to go down, and they don’t. How does the Committee see this playing out forward, since you’ve raised your inflation forecast? <NAME>CHAIR POWELL</NAME>. So I see the Committee looking at the two months of data and asking the same question you’re asking and saying we’re just going to have to see what the data show. As I mentioned, you can look at January, which is a very high reading and you can—and I think many people did see the possibility of seasonal adjustment problems there. But, again, you don’t want to—you’ve got to be careful about dismissing the parts of the data that you don’t like. So then February wasn’t, wasn’t as high, but it was higher. So the question is, what are we going to see? You know, we tend to see a little bit stronger—this is in the data—a little bit stronger inflation in the first half of the year, a little bit less strong later in the year. We’re going to— we’re going to let the data show. I don’t think we really know whether this is a bump on the road or something more. We’ll have to find out. In the meantime, the economy is strong, the labor market is strong, inflation has come way down, and that gives us the ability to approach this question carefully and feel more confident that inflation is moving down sustainably at 2 percent when we take that step to begin dialing back our restrictive policy. <NAME>MICHAEL MCKEE</NAME>. Well, you’ve talked about the desire to have confidence that inflation is continually moving down. Have the recent numbers we’ve gotten for inflation data dented that confidence at all? <NAME>CHAIR POWELL</NAME>. It certainly hasn’t improved our confidence—it hasn’t raised anyone’s confidence. But I would say that the story is really essentially the same and that is of inflation coming down gradually toward 2 percent on a sometimes-bumpy path, as I mentioned. I think that’s what you still see. We’ve got nine months of 2½ percent inflation now, and we’ve had two months of kind of bumpy inflation. We were saying that we’ll—it’s going to be a bumpy ride. We consistently said that. Now here are some bumps, and the question is, are they more than bumps? And we just don’t—we can’t know that. That’s why we are approaching this question carefully. It is very important for everyone that we serve that we do get inflation sustainably down. And I think the historical record, it’s—every situation is different, but the historical record is that you need to approach that question carefully and try to get it right the first time and not have to come back and raise rates again perhaps if you cut inappropriately— prematurely. <NAME>MICHELLE SMITH</NAME>. Go to Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman. Edward Lawrence with FOX Business. I wanted to ask you, you received a letter from—well, the Federal Reserve is an independent body, understanding Congress has oversight over that. You received a letter from Senators Elizabeth Warren and Sheldon Whitehouse that said—calling on you to lower interest rates—to cut interest rates because this has “the potential that it may remain too high for too long, has halted advances in deploying renewable energy technologies and delayed significant climate and economic benefits from these projects.” So has higher interest rates caused that? <NAME>CHAIR POWELL</NAME>. Have they—well, first of all, I respect our—you know, in our system of government, it is Congress that has oversight responsibility over the Fed. We place a tremendous amount of importance on our engagements with Congress and always treat them with great respect. In this case, I would say, those are, you know—our mandate is for maximum employment and price stability and the other things that we do, and that’s what we’re trying to accomplish. We’re trying to do that in a way that sustains the strong growth we’re seeing, the strong labor market we’re seeing, but allows us to make further progress with inflation. That’s how we can best serve the public and leave the other issues, which in many cases are incredibly important, such as those you mentioned, leave those to the people who have responsibility for those. <NAME>EDWARD LAWRENCE</NAME>. There was another letter from two dozen lawmakers saying that the higher rates are squeezing the working people. How do these letters affect what you guys are doing, policy-wise? <NAME>CHAIR POWELL</NAME>. We receive these letters with respect, and we write careful responses and address concerns. We listen, again, because we’re talking to the people who, in our system of government, have oversight over our activity. So that’s—but at the end of the day, we take that on board, but we have to make our judgments, and we have to “stick to our knitting”— which is maximum employment, price stability, supervise and regulate the banks, work on the payment system: the things that we do. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Thank you. Claire Jones, Financial Times. Thanks a lot for the opportunity to ask a question. As Chair of the FOMC, would you want to see unanimity on the Committee or something close to it, meaning no more than one dissent, before you begin cutting rates? Thank you. <NAME>CHAIR POWELL</NAME>. We’re a very consensus-oriented organization, and we do try to achieve consensus and, ideally, unanimity. People do dissent. It’s something that happens. Life goes on, and it’s not a problem. We’ve always had dissents. But—and so I—you know, you respect thoughtful dissents very much. It’s like, you may not agree with some arguments, but you really want to understand them. So you may read a book that takes a position that you have long opposed, just to understand [the position of] that book. So I treat dissents with real respect as well. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Simon Rabinovitch with the Economist. Can you hear me? <NAME>CHAIR POWELL</NAME>. Yes. <NAME>SIMON RABINOVITCH</NAME>. Okay. Great. Obviously, inflation is some ways away from target. Unemployment, though, if you look at the projection for the full year of 4.0 percent, in February, we were already at 3.9 percent, so quite close to the median projection. Are you concerned at all that—notwithstanding the very strong jobs growth—that in fact there may be some cracks appearing in the employment market? You talked about a significant deterioration in the labor market being a condition for easing rates. What would constitute that in your books? Thank you. <NAME>CHAIR POWELL</NAME>. So we, of course, monitor—it’s one of our two goal variables. We all monitor the labor market very, very carefully. And I don’t see those cracks today. And I, you know—we follow all the possible stories that are out there about, about there being cracks, but the overall picture really is a strong labor market. The extreme imbalances that we saw in the early parts of the pandemic recovery have mostly been resolved. You’re seeing high job growth. You’re seeing big increases in supply. You’re seeing strong wage growth, but wage growth is gradually moderating down to more sustainable levels. In many, many respects, the things are returning more to their state in 2019, which we can think of as normal for this purpose. That’s job openings and quits. And surveys of workers and businesses are always interesting on this: You know, how tight is the—how easy is it to find a job? How hard is it—how easy it is to find a worker? Those have both—those surveys have both come down. So the labor market is—it’s in good shape. You know, you do see things like the low— the low hiring rate, and people have made the argument that if, if layoffs were to increase, that would—that would mean that the net would be fairly quick increases in unemployment. So that’s something we’re watching, but we’re not seeing it. Of course, initial claims are very, very low and, if anything, have tracked down a little bit. So—watching it carefully. Don’t see it. And when I say something—I, I use the term “unexpected” weakening of the labor market. So, you know, we do expect the unemployment rate to—the forecast is that it would move up, I think, closer to what we see as the longer-run sustainable level. That’s just—that’s just people’s forecast, individual forecasts. But we’re talking about something that’s unexpected. That’s where I’ll leave it, though. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE MATTHEWS</NAME>. Steve Matthews with Bloomberg. You mentioned at the beginning of the press conference that the Committee thought it might be appropriate to slow the pace of asset runoff fairly soon. I’m wondering is—when you say fairly soon, does that mean that the Committee would meet about this again in May and a decision could be reached that soon? And I was wondering if you could also just describe the scope of what the Committee is discussing here. You’re at $95 billion of caps right now. Would that be cut about in half or something in that nature? Thank you. <NAME>CHAIR POWELL</NAME>. So that is what we’re discussing essentially is—and we’re not discussing all the other many other balance sheet issues. We will discuss those in due course. But what we’re really looking at is slowing the pace of runoff. There isn't much runoff among MBS—in MBS right now, but there is in Treasuries. And we’re talking about going to a lower pace. I don’t want to give you a specific number because we haven’t made a—haven’t had an agreement or decision, but that’s the idea. And that’s what we’re looking at. In terms of the timing, I said fairly soon. I wouldn’t want to try to be more specific than that, but you get the idea. The idea is—and this is in our longer-run plans—that we may actually be able to get to a lower level, because we would avoid the kind of frictions that can happen. Liquidity is not evenly distributed in a system. And there can be times when, in the aggregate, reserves are ample or even abundant, but not in every part. And those parts where they’re not ample, there can be stress, and that can cause you to prematurely stop the process to avoid the stress. And then it would be very hard to restart, we think. So something like that happened in ’19 perhaps. So that’s what we’re doing. We’re looking at what would be a good time and what would be a good structure, and “fairly soon” is words that we use to mean fairly soon. <NAME>STEVE MATTHEWS</NAME>. And will there be a discussion about returning to an all- Treasuries balance sheet at some point? <NAME>CHAIR POWELL</NAME>. So that—our, our longer-run goal is to return to a balance sheet that is mostly Treasuries. I do expect that, once we’re through this, we’ll come back to the other issues about the composition and the maturity and revisit those issues, but it’s, you know, not urgent right now. We want to get this, this decision made first and then we can, when the time is right, come back to the other issues. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Victoria Guida with Politico. Also on the balance sheet, you know, can you talk a little bit about how the outlook for the banking sector might impact your balance sheet plans? Do you worry that, as deposits start to shrink, that we could see more turbulence? <NAME>CHAIR POWELL</NAME>. You know, we’ll be watching carefully. But one of the reasons we’re slowing down—we will soon enough, fairly soon I should say, slow down—is that we want to avoid any, any kind of that turbulence. I wasn’t thinking particularly about the banking- sector turbulence, but we—and we had some indicators the last time. This is our second time in doing this, and I think we’re going to be paying a lot of attention to the things that started to happen and that foreshadowed what eventually happened at the end of that tightening cycle where we wound up in a short[-of-]reserves situation. And we don’t want to do that again. And I think now we have a better sense of what are the indicators. It isn’t—it wasn’t so much in the banking system as it was around, for example, where federal funds are trading relative to the administered rates and where secured rates are relative to the administered rates. Those sorts of things. We will always be watching the banking system for similar signs, though. <NAME>VICTORIA GUIDA</NAME>. Well, is it also because you’re not sure exactly how the reserve supply will react once the overnight reverse repo facility drops near—at zero? <NAME>CHAIR POWELL</NAME>. Well, I think we broadly think that, once [take-up at] the overnight [reverse] repo [facility] stabilizes, either at zero or close to zero, that, as the balance sheet shrinks, we should expect that reserves will decline pretty close to dollar-for-dollar with that. That’s what we think. <NAME>MICHELLE SMITH</NAME>. Let’s go to Jean. <NAME>JEAN YUNG</NAME>. Hi Chair Powell. Jean Yung with MNI Market News. I wanted to ask also about the balance sheet. Will you—you said that starting the taper sooner could get you to a smaller balance sheet size. Does that mean you don’t have to make a decision on when to end QT at this point? And will you be setting up the process for deciding that sooner, or will you wait until we’re close to the end? <NAME>CHAIR POWELL</NAME>. So it’s sort of ironic that, by going slower, you can get farther. But that’s the idea. The idea is that, with a smoother transition, you won’t—you’ll run much less risk of kind of liquidity problems, which can grow into shocks, and which can cause you to stop the process prematurely. So that’s—in terms of how it ends, we’re going to be monitoring carefully money market conditions and asking ourselves whether they—what they’re telling us about reserves. Are they—right now, we would characterize them as “abundant,” and what we’re aiming for is “ample” and, you know, which is a little bit less than abundant. So there isn’t a— you know, there’s not a dollar amount or a percent of GDP or anything like that where we think we have a really pretty clear understanding of that. We’re going to be looking at what these— what’s happening in money markets, in particular—a bunch of different indicators, including the ones I mentioned, to tell us when we’re getting close. Then, though, you reach a point ultimately where you stop allowing the balance sheet to run off and you—but then, from that point, there’s another period in which nonreserves—nonreserve liabilities grow organically, like currency, and that also shrinks the reserves at a very slow pace. So you have a, you know, a slower pace of runoff, which we’ll have fairly soon. Then you have another time where you effectively hold the balance sheet constant and allow nonreserve liabilities to expand. And then that ultimately brings you, ideally, in for—brings it into a nice, easy landing at a level that is above—you know, above what we think the lowest possible ample number would be. We’re not trying for that. We want to have a cushion, a buffer, because we know that demand for reserves can be very volatile. And we don’t want to, again, find ourselves in a situation where there aren’t reserves, and we have to turn around and buy assets and put reserves back in the banking system the way we did in 2019 and ’20. <NAME>MICHELLE SMITH</NAME>: Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Nancy Marshall-Genzer with Marketplace. Chair Powell, you said you’re waiting to become more confident that inflation’s getting to your 2 percent goal before you cut rates. Can you just sum up more specifically what data you’re looking at that would give you that confidence? <NAME>CHAIR POWELL</NAME>. Sure. So we’re—most importantly, we’re looking at the incoming inflation data and the contents of it and what they’re telling us, so that’ll be—and also the various components—so obviously that’s what we want. We want more confidence that inflation is coming down sustainably toward 2 percent. And, I mean, of course we’ll also be looking at all the other things that are happening in the economy. We’ll look at the totality of the data, including everything essentially as we make that assessment. But the most important thing will be the inflation data coming in. <NAME>NANCY MARSHALL</NAME>-GENZER. Well, are there things that you would give more weight to, like wages? <NAME>CHAIR POWELL</NAME>. Wages is one thing. We don’t—our target is not wages. It’s really inflation. But we would look to the fact that wages are still coming in very strong. But, but they’ve been—wage increases, that’s to say—wage increases have been quite strong, but they’re, they’re gradually coming down to levels that are more sustainable over time. And that’s what we want. We don’t think that—the inflation was not originally caused—we think, I don’t think, by mostly by wages. That wasn’t really the story. But we do think that, to get inflation back down to 2 percent sustainably, we’d like to see, you know, continuing gradual movement of wage increases at still high levels but back down to levels that are more sustainable over time. <NAME>MICHELLE SMITH</NAME>. Let’s go to Greg. <NAME>GREG ROBB</NAME>. Thank you. Greg Robb from MarketWatch. Chair Powell, could you say at this meeting whether there were more officials who wanted to be careful and go slower than— about rates—than there were at the last meeting? Was there—was there that sense of maybe it’s smart to wait? Thanks. <NAME>CHAIR POWELL</NAME>. I guess I’d put it this way: The—if you look at the incoming inflation data that we’ve had for January and February, I think very broadly that suggests that we were right to wait until we’re more confident. So I think, I think—I didn’t hear anyone dismissing it as not information that we should look at or anything like that. So I think, generally speaking, it does go in the direction of saying, yes, it’s appropriate for us to be careful as we approach this question. <NAME>MICHELLE SMITH</NAME>. Brendan. <NAME>BRENDAN PEDERSEN</NAME>. Thanks Chair Powell. Brendan Pedersen with Punchbowl News. I wanted to ask you about central bank digital currency stuff. We’ve been hearing a lot from Republicans in Congress about what the Fed is or isn’t doing in a digital dollar, but I know you have said to Congress that you’re going to wait for approval before the Fed does anything— launches anything. But folks like House Majority Whip Tom Emmer have said that the Fed is either actively researching or hiring personnel to study the implications of the CBDC. Can you give us any clarity on what the Fed is doing right now on a digital dollar? <NAME>CHAIR POWELL</NAME>. Sure. So I think we’ve been pretty transparent on this, but I will— I’ll try harder. So we are not getting ready to—we haven’t proposed—we haven’t come to a conclusion that we should propose, or anything like that, that Congress consider legislation to authorize a digital dollar. And it would take legislation by Congress signed by the President to give us the ability to do what we think of as a CBDC, which is really a retail CBDC with the public. So we’re just a long, long way from that. What we are doing, and I think what every major central bank is doing, is we’re trying to stay in the frontiers of what’s going on in digital finance, and it has many, many different areas. It has applications in wholesale finance, in the payment system, and so we need—to serve the public—these issues have become very front burner in the last five or six years—we need to be knowledgeable about all that. So we actually do have people trying to understand things that are—but it’s wrong to say that we’re working on a CBDC and that we’ve secretly got a lab here where we’ve got one, and we’re just going to spring it on Congress at the right moment. We don’t. I haven’t at all, in my own mind, made a decision that I think this is something the U.S. should be doing. I just think it’s something we need to be—we need to understand. We do have people who are keeping up with that, as part of the broader payments landscape. That’s, that’s how I would characterize it. <NAME>MICHELLE SMITH</NAME>. Mark. <NAME>MARK HAMRICK</NAME>. Thank you. It’s Mark Hamrick with Bankrate. Mr. Chairman, April 27 will mark the 13th anniversary since a Fed Chairman began holding regular news conferences. How important is that higher transparency been in your view, both for the proper functioning of the central bank and also in accomplishing your mission? And is there more that you and your colleagues can do on the transparency front? And what might that look like? <NAME>CHAIR POWELL</NAME>. I generally think—I mean, this movement actually started 30 years ago—30 years ago, when some academics posited that a more transparent central bank, if the public understands your reaction function, the markets will do your work for you. They’ll react to the data. And so it all happens that way and so there’s been a march toward greater and greater transparency. And that—certainly Chairman Bernanke advanced that, Chairman Greenspan did, Chair Yellen did, and I. You know, so we went from four press conferences a year to eight, so now every meeting really is “live” now. I think that’s a good innovation. I wouldn’t want to turn it back. We also have done a bunch of other things. You know, we have an annual supervision report, Financial Stability Report. I mean, there’s a long list of things that we’ve done. I think you—I mean, nothing comes to mind as really desperately in need of doing at this moment. We’re very transparent. We have no shortage of FOMC participants speaking to the public through the media. And so that channel is full, I would say. So I think it’s generally broadly helped and made things better. But not every day and in every way. <NAME>MARK HAMRICK</NAME>. Well, to follow up: Has there ever been a day where you wanted to put that genie back in the bottle somewhat? <NAME>CHAIR POWELL</NAME>. Of course not. [Laughter] <NAME>MICHELLE SMITH</NAME>. Let’s go to Jennifer, for the last question. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. Not to harp too much more on confidence and inflation, but you did say earlier in this press conference that the recent inflation data hasn’t raised anyone’s confidence. But when you testified before the Senate a couple weeks ago, you told lawmakers that you are “not far from receiving the confidence needed on inflation to begin cutting rates.” So are you still of that belief or not? What are we to take by those words, “not far?” <NAME>CHAIR POWELL</NAME>. So let me say my main message at that—in those two days of hearings was really that the Committee needs to see more evidence to build our confidence that inflation is moving down sustainably toward our 2 percent goal, and we don’t expect that it will be appropriate to begin to reduce rates until we’re more confident that that is the case. I said that any number of times, so those were kind of the main part of the message. We repeated that today in our statement. I also—to the language you mentioned, I, I really pointed out that we had made significant progress over the past year, and what we’re looking for now is confirmation that that progress will continue. We had a series of inflation readings over the second half of last year that were really much lower. We didn’t overreact, as I mentioned. But that’s what I had in mind. <NAME>JENNIFER SCHONBERGER</NAME>. But given that you said that PCE for February, 2.8 percent the estimate, and that we have been seeing PCE—core PCE coming down by a tenth of a percent every month, I mean, wouldn’t you be at about 2.4 percent this summer, June, July, to a point where you could cut then? <NAME>CHAIR POWELL</NAME>. Well, we’ll just have to see how the data come in. We would, of course, love to get great inflation data. We got really good inflation data on the second—in the second part of last year. Again, we didn’t overreact to it. We said we needed to see more, and we said it would be bumpy. And now we have January and February, which I’ve talked about a couple of times. So, you know, we’re looking for more good data, and we would certainly welcome it. Thank you.

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+<NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>HOWARD SCHNEIDER</NAME>. Sufficiently restrictive, I guess. <NAME>CHAIR POWELL</NAME>. 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. <NAME>HOWARD SCHNEIDER</NAME>. 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— <NAME>CHAIR POWELL</NAME>. Expectations are not anchored? <NAME>HOWARD SCHNEIDER</NAME>. Are anchored. <NAME>CHAIR POWELL</NAME>. Are anchored. <NAME>HOWARD SCHNEIDER</NAME>. Stable, roughly. Would you disrupt that for the last half point on PCE? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>JEANNA SMIALEK</NAME>. Would that be—would that be a reacceleration in inflation? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>CHRISTOPHER RUGABER</NAME>. 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. <NAME>CHAIR POWELL</NAME>. 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. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>NICK TIMIRAOS</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>RACHEL SIEGEL</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>STEVE LIESMAN</NAME>. 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. <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Craig. <NAME>CRAIG TORRES</NAME>. 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. <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. 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. <NAME>CHAIR POWELL</NAME>. 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] <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHAEL MCKEE</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>EDWARD LAWRENCE</NAME>. Was there discussion about a rate hike at all? <NAME>CHAIR POWELL</NAME>. 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. <NAME>EDWARD LAWRENCE</NAME>. I wanted to follow [up] on the 3 percent. Is there a time frame of persistent inflation that would trigger a rate hike? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>VICTORIA GUIDA</NAME>. And then, is there a significant difference between, you know, whether you start in, say, September versus December? <NAME>CHAIR POWELL</NAME>. There’s— <NAME>VICTORIA GUIDA</NAME>. An economic difference. <NAME>CHAIR POWELL</NAME>. —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. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Scott. Nancy. I’m sorry. <NAME>NANCY MARSHALL</NAME>-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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>NANCY MARSHALL</NAME>-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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>COURTENAY BROWN</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Nick Jasinski. <NAME>NICHOLAS JASINSKI</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>JENNIFER SCHONBERGER</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Kyle. <NAME>KYLE CAMPBELL</NAME>. 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? <NAME>CHAIR POWELL</NAME>. 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. <NAME>KYLE CAMPBELL</NAME>. 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. <NAME>CHAIR POWELL</NAME>. 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. <NAME>MICHELLE SMITH</NAME>. Let’s go to Mark for the last question. <NAME>MARK HAMRICK</NAME>. 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. <NAME>CHAIR POWELL</NAME>. 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.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. Our economy has made considerable progress toward both goals over the past two years. The labor market has come into better balance, with continued strong job gains and a low unemployment rate. Inflation has eased substantially from a peak of 7 percent to 2.7 percent but is still too high. We are strongly committed to returning inflation to our 2 percent goal in support of a strong economy that benefits everyone. Today, the FOMC decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures. 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 1.3 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—grew at 2.8 percent in the first quarter, nearly as strong as the second half of 2023. Growth of consumer spending has slowed from last year’s robust pace but remains solid. And investment in equipment and intangibles has picked up from its anemic pace last year. Improving supply conditions have supported resilient demand and the strong performance of the U.S. economy over the past year. In our Summary of Economic Projections, Committee participants generally expect GDP growth to slow from last year’s pace, with a median projection of 2.1 percent this year and 2.0 percent over the next two years. In the labor market, supply and demand conditions have come into better balance. Payroll job gains averaged 218,000 jobs per month in April and May, a pace that is still strong but a bit below that seen in the first quarter. The unemployment rate ticked up but remains low at 4 percent. Strong job creation over the past couple of years 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. Overall, a broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic—relatively tight but not overheated. FOMC participants expect labor market strength to continue. The median unemployment rate projection in the SEP is 4.0 percent at the end of this year and 4.2 percent at the end of next year. Inflation has eased notably over the past two years but remains above our longer-run goal of 2 percent. Total PCE prices rose 2.7 percent over the 12 months ending in April; excluding the volatile food and energy categories, core PCE prices rose 2.8 percent. The consumer price index—which came out this morning and tends to run higher than the PCE, PCE price index— rose 3.3 percent over the 12 months ending in May, and the core CPI rose 3.4 percent. The inflation data received earlier this year were higher than expected, though more recent monthly readings have eased somewhat. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households and businesses and forecasters, as well as measures from financial markets. The median projection in the SEP for total PCE inflation is 2.6 percent this year, 2.3 percent next year, and 2.0 percent in 2026. 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. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. In support of these goals, 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 reducing our securities holdings. As labor market tightness has eased and inflation has declined over the past year, 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 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. The most recent inflation readings have been more favorable than earlier in the year, however, and there has been modest further progress toward our inflation objective. We will need to see more good data to bolster our confidence that inflation is moving sustainably toward 2 percent. We know that reducing policy restraint too soon or too much could result in a reversal of the progress that 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. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely scenario going forward. If the economy evolves as expected, the median participant projects that the appropriate level of the federal funds rate will be 5.1 percent at the end of this year, 4.1 percent at the end of 2025, and 3.1 percent at the end of 2026. But these projections are not a Committee plan or any kind of a decision. As the economy evolves, assessments of the appropriate policy, policy path will adjust in order to best promote our maximum-employment and price-stability goals. If the economy remains solid and inflation persists, we’re prepared to maintain the current target range for the federal funds rate as long as appropriate. If the labor market were to weaken unexpectedly or if inflation were to fall more quickly than anticipated, we’re prepared to respond. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. We’ll continue to make our decisions meeting by meeting, based on the totality of the data and its implications for the outlook and the balance of risks. The Fed has been assigned two goals for monetary policy—maximum employment and stable prices. 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 achieving maximum employment and stable prices over the long run. Our success in delivering on these goals matters to all Americans. 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, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Thank you, Mr. Chairman. Steve Liesman, CNBC. Just wondering if you could walk me through the Committee’s average inflation forecast—core PCE is now forecast to be 2.8 percent by the year-end. It’s already 2.75, and after today’s number, there were several forecasts on the street that it would be 2.6 at the end of this month. Does that tell you that the average official expects no further progress in inflation and, in fact, that it’s going to get worse? And if you have this wrong, doesn’t it mean that you sort of—you, you could have wrong the outlook for rates there? <NAME>CHAIR POWELL</NAME>. Yeah. So what’s going on there is that we had very low readings in the second half of last year—June through December, really. And we’re now lapping those. So as you go through the 12-month window, a very low reading drops out, and a new reading comes in. The new reading gets added to the 12-month window. So it’s just a, a slight element of conservativism that we’re, we’re assuming a certain level of—of, you know, incoming monthly PCE and core PCE numbers. We’re assuming, you know, good, but not great, numbers. And if you put that on top of where we are now, you get a very slight increase in the 12-month—in the 12-month, you know, reading. Now, do we have high confidence that that’s right? No. It’s just the kind of conservative way for forecasting things. If we were to get more readings like today’s reading, then, of course, that wouldn’t be the case. So it’s just a forecasting device. I think, I think—let me say that we welcome today’s reading and then hope for more like that. <NAME>STEVE LIESMAN</NAME>. But if it comes in—just to follow up—if it comes in the way you forecast it, it would seem strange for you to be cutting rates at all in context of a rising core PCE. Thank you. <NAME>CHAIR POWELL</NAME>. Yeah—no. I mean, I think we’ve, we’ve—what we said is that we don’t think it’ll be appropriate to, to reduce rates and begin to loosen policy until we have more confidence that inflation is moving back down to 2 percent on a—on a sustainable basis. And that’s the—that’s the test we’ve applied. I don’t know that—I think if we—I don’t know that this rules that in or out. I mean, really, it’s, it’s a forecast—a fairly conservative forecast month by month that would lead to slightly higher, you know, 12-months rates by the end of the year. If we get, you know, good—better readings than that, then you will see that come down or, or remain the same. If you’re at 2.6, 2.7 [percent], you know, that’s, that’s a really good place to be. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, if I look at the, the rate projections, I see 15 of the 19 that are anticipating either one or two cut—two cuts this year—fairly evenly split between the two. And so I wonder if you could explain a little more the nuances or the differences there. Would two or three more inflation readings like the one that we saw this morning make a September interest rate cut possible? <NAME>CHAIR POWELL</NAME>. So as far as the SEP part of that is concerned—as you know, I talk to—I talk to all of the other participants on the FOMC every cycle, and we talk about their Summary of Economic Projections and, and the dot plot—and, you know, their dot plot and everything. And what you—what I hear and see is that people are looking at, at, you know, a range of plausible outcomes. And in many cases, they’re—they’re thinking, “I don’t really”— you know, “I can’t really distinguish between two of these. They’re so close for me.” These are very close calls, but we ask them to write down the most likely one—so they do. And as, I think, you’ve, you’ve—as you’ve said, there’s 15 of the 19 are, are kind of clustered around one or two. So I think I would look at, at all—I’d look at all of them as plausible, but I’d look at—so I think that does tell you kind of what the Committee thinks. But what everyone agrees on is, it’s going to be data dependent. No one—no one brings to this or takes away from it that is on the Committee a really strong commitment to a particular rate path. It’s actually just their forecast and their—it’s a combination of their forecast and their own reaction function. But, again, everyone would say that this is very data dependent, and I don’t hold it with high confidence. And I think if you’re looking for—and, and don’t really think that they’re—they’re not trying to send a strong signal that “this is what I think is the right thing.” It’s just what they think at a given moment in time, subject to data. In terms of, you know, future meetings, we haven’t, you know—we don’t—we don’t try to—we don’t make decisions about future meetings until we get there. I think in terms of what we need to see, I mentioned it earlier—we, we want to—we want to gain further confidence. Certainly, more good inflation readings will help with that. I’m not going to be specific about how many because, you know, really, it’s going to be not just the inflation rating—readings—it’s going to be the totality of the data: what’s happening in the labor market, what’s happening with the balance of risks, what’s happening with the forecast, what’s happening with growth. You look at all of that, and you ask, “Are we confident? Have we reached an appropriate level of confidence that inflation is moving down sustainably to 2 percent, or, alternatively, do we see really unexpected signs of weakness in the labor market that would call for a response?”—which is—which is another thing that could, could happen. But, again, we don’t see that. And I—we do see today’s—we see today’s report as, as progress and as, you know, building confidence. But we, we don’t see ourselves as having the confidence that would warrant—you know, that would warrant beginning to, to loosen policy at this time. <NAME>NICK TIMIRAOS</NAME>. And if I could quickly follow up—did, did you or any of your colleagues change your interest rate projections after 8:30 or whenever you got the inflation numbers today? <NAME>CHAIR POWELL</NAME>. So we—this happens too often, but it, it does happen. It just is, you know—data came—I think it happened a couple of meetings ago—a few meetings ago. So when that happens—when there’s an important data print during the meeting, first day or second day— what we do is, we, we make sure people remember that they have the ability to update. We tell them how to do that. And, and some people do; some people don’t. Most, most people don’t. But I’m not going to get into the specifics, but you have the ability to do that. So that, you know—what’s in the SEP actually does reflect the data that we got today to the extent you can, you know, reflect it in one day. I think we’ll, you know—you will see PPI tomorrow. We’ll know more about the PCE [inflation] reading as the month goes on. But the initial CPI reading and its, you know, kind of first-level translation to, to PCE [inflation] we did have this morning. We were briefed about it, and people were able to consider whether they should make changes. And, as I said, you know, some people generally do, but most people generally don’t. <NAME>MICHELLE SMITH</NAME>. Jonnelle. <NAME>JONNELLE MARTE</NAME>. Hi, Chair Powell. Jonnelle Marte from Bloomberg. As you noted, the labor market is now in many ways back to where it was before the pandemic. I wondered if you could comment on how officials are viewing that. So do you think that there still needs to be more cooling in the labor market to bring inflation all the way down to 2 percent, or is there any sense that maybe the labor market is more vulnerable now to higher rates now that many of those imbalances have eased? <NAME>CHAIR POWELL</NAME>. Sure. So by, by so many measures, the labor market was, was kind of overheated two years ago. And we’ve seen it gradually move back into much better balance between supply and demand. So, what have we seen? We’ve seen labor force supply come up quite a bit through immigration and through recovering participation. That’s ongoing, mostly now through the immigration channel. But still, we’ve had some increases in prime-age labor force. In terms of on the demand side, you know, we’ve seen—well, we’ve seen quits moving down. We’ve seen job openings moving down. We’ve seen wage increases moving from very, very high levels a couple of years ago back down to more sustainable levels. We have seen unemployment creep up now sixth-tenths over the course of, of a year or so very, very gradually. So you put all that together—what you have is still-low unemployment, still 4 percent unemployment—historically low. But it’s moved up a little bit—it’s softened a bit—and, and, you know, that’s an important statistic. But, but more than that, you’ve got strong job creation. You, you have payroll jobs still coming in strong, even though, you know, there’s an argument that they may be a bit overstated but still they’re, they’re still—they’re strong. So that’s what we see. We, we watch the labor market, of course, and the economy as a whole—but the labor market very carefully—and that’s what we see. We see gradual cooling—gradual moving toward better balance. We’re monitoring it carefully for signs of, of something more than that, but we really don’t see that. <NAME>JONNELLE MARTE</NAME>. As a quick follow-up—the surveys that make up the jobs report are, are showing different tales. There’s been some divergence, especially, we saw, in the last report that we got on Friday. So how do you interpret that, and, and how does it change your view on the labor market? <NAME>CHAIR POWELL</NAME>. So sometimes it’s—you can’t reconcile the differences. You just have to, have to—have to look at it and, and try to understand. And that’s why it always makes sense to look at a series, you know, in 6—in 3, 6, and 12 months of things rather than just one report. But you’re right to point to the last report, where it was your—job losses in the household survey—job gains, big job gains in the establishment survey. So, I mean, we’re left with ambiguous results, and we have to deal with that uncertainty around data. Nonetheless, the overall picture is one of a strong and gradually cooling—gradually rebalancing labor market. Job openings, while they’ve come way down, are still, you know, greater than the number of unemployed people. The jobs–workers gap is still a significantly positive number—greater than it was before the pandemic. So, overall, we’re looking at what is still a very strong labor market but not the superheated labor market of two years ago or even one year ago. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks, Chair Powell. Neil Irwin, with Axios. Back on the rates path: The SEP showed quite a large shift of rate cut expectations relative to March—that’s a period in which the economic data flow hasn’t been that dramatic a shift. How, how—can you provide some color on what changed in the attitudes on the Committee over the last three months to, to see a much shallower path of rate cuts this year? <NAME>CHAIR POWELL</NAME>. Yeah. The big thing that changed was the inflation forecast. So the inflation forecast moved up several tenths for the end of the year. And, and, as I mentioned earlier, in the, you know—what, what did we take away from this? We had really, really good inflation data in the second half of last year, then kind of a pause in progress in the first quarter. And what we took away from that was that it’s probably going to take longer to get the confidence that we need to begin to loosen policy. So the sense of that is that rate cuts that might take place in—might’ve taken place this year—take place next year, you know? We, we—there are—there are fewer rate cuts in the median this year, but there’s one more next year. So, so you really—if you look at year-end 2025 and ’26, you’re, you’re almost exactly where you would have been, just it—just it’s moved later because of that progress. Now, you get another—you get data—different data today. So we’ll have to see where the data light the way. You know, we’re, we’re—the economy has, you know, repeatedly surprised forecasters in both directions, and today was certainly a better inflation report than almost anybody expected. And we’ll just have to see what, what—what the incoming data flow brings and, and how that affects the outlook and the balance of risks. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek, New York Times. Thanks for taking our questions. In the Summary of Economic Projections, the long-run interest rate forecast moved up a bit. I wonder if we should read that as a sign that you think that policy is not sort of as restrictive as we’ve previously expected. You know, how should we interpret what that means about how the Committee views its current policy setting? <NAME>CHAIR POWELL</NAME>. So two things about that—one, one is this—you’re right, it did move up. But, but I want to remember to point out that the long-run neutral rate of interest is, is a long-run concept. It, it really is a theoretical concept—can’t be directly observed. And what it is is the, the interest rate that would hold the economy at equilibrium—maximum employment and price stability—potentially, potentially years in the future where there are no shocks. So it’s— it’s a little bit—it’s not something we observe today. Today we’ve got a very specific economy with all kinds of shocks we’re still getting over from the pandemic. So it’s—I, I don’t think that the, the concept of r-star—it’s a very important concept in economics and in what we do. But, honestly, it doesn’t really get you where you need to be to think about what appropriate policy is in the near term. But I, I—back to your original question, people have been gradually writing it up because I just think people are coming to the view that rates aren’t—are less likely to go down to their, their pre-pandemic levels, which were, you know, very low by recent history measures. Now, we, we can’t really know that. That’s, that’s an interesting dispute and discussion to have now, but, ultimately, we think that things like the neutral rate are driven by longer-run, slow-moving forces. And, you know, there’s a really good question about whether, whether those really have changed or whether, instead, rates and the economy are experiencing a, a series of persistent but, ultimately, temporary shocks. That’s been the debate, and we can’t know. But in the meantime, we’re making policy with the economy that we have—with the distortions that we have. And I, I also—to your other point, I, I think it is—it is the case that as time has gone by, the question of “How restrictive is policy?” has become one that everyone’s asking, and we’re asking it, too. And, you know, my answer has been that policy is restrictive. The question of whether it’s sufficiently restrictive is going to be one we, we know over time. But I think for the reasons I’ve talked about at the last press conference and, and other places, I think the evidence is pretty clear that policy is restrictive and is having, you know, the effects that we would hope for. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Thanks, Chair Powell. Howard Schneider, with Reuters. Just to—just to carry that a little further, should we read this as a conclusion that the combination of tipping to one cut this year and acknowledging further progress on inflation as kind of a mark to market on the level of restrictiveness that you need—that you, in fact, have concluded that you weren’t quite there yet? <NAME>CHAIR POWELL</NAME>. I’d be reluctant to try to draw that conclusion. I, I think this is about, you know, looking at the incoming data and asking, “How much progress are we making on inflation, and how is the rest of the economy doing? Is the labor market still strong?” That’s what we’re thinking about. You know, you can—you can translate it into the—into the language you’re talking about, but, to me, the focus is more on, we have a goal, which is price stability, and another goal, which is maximum employment. How are we doing there? We think we’ve got a good, strong labor market still. We think we’ve been making progress toward the price- stability goal. And then for a while, there was a pause. And we look at today’s thing, and we think, “Well, that’s a good reading, and we hope we get more like that.” And, you know, in the meantime, we’re asking, “Is our policy stance about right?” And I think we think, “Yes, it’s about right.” We’re prepared to adjust that as appropriate, but we think—we think we’re getting the things that we would want to get, broadly speaking. And that’s why we’ve been at this policy rate now for almost a year. <NAME>HOWARD SCHNEIDER</NAME>. So, so just to follow up on that—I think one, one curious thing here is, you’ve got now this restrictive policy in place and virtually no change in any of the major things for all of this year. You’ve got growth that stays above long-run potential throughout the forecast period, unemployment that never goes above the long-run estimate— right?—of 4.2. So this isn’t a story of slack improving inflation. So where’s the improvement in inflation coming from that it’s going to pick up pace so much in 2025? <NAME>CHAIR POWELL</NAME>. Well, you know, it’s been coming—where’s it been coming from— let’s start with that. You know, clearly a lot of what—some of what we’ve been getting is just the reversal of the—the unwinding of the pandemic-related distortions to both supply and demand. And that is, you know—that is complemented by and amplified—supported by restrictive monetary policy. So those two things have been working together. We’ve also had a very positive supply shock on the labor side. And, and, also, you get—you get a positive supply shock when the—when the supply conditions unwind and return to normal. So you’ve had, you know, above-trend potential growth and, and high growth. And yet you’ve had the benefit of, of inflation coming down, you know, really fast, actually, last year, and you will see what the rest of this year brinks—brings. So these dynamics can continue as long as they continue. I mean, ultimately, the question is, ultimately, are you down to demand? And, and we don’t know that, though. I mean, look at today’s report. You know, if we see more like that—you know, we don’t—we can’t know what the future holds. But in the meantime, we’ve made pretty good progress on inflation with our current stance. <NAME>MICHELLE SMITH</NAME>. Mike. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. The base case of the Committee seems to be that there is going to be at least one rate cut this year, but your growth forecast doesn’t see any slowdown in the rest of the year, nor does the unemployment forecast see any significant weakening of the labor market. And your inflation forecasts basically average out to no change. So if, at the end of the year, there is no change from conditions now, why would you anticipate cutting rates? What, what would be the point for a rate cut? <NAME>CHAIR POWELL</NAME>. Well, we think—we think policy is restrictive. And we think, ultimately, that if you—if you just set policy at a restrictive level, eventually you will see real weakening in the economy. So that’s always been the thought is that, you know, since we raise rates this far, we’ve, we’ve always been pointing to cuts at a certain point. Not to eliminate the possibility of hikes, but, you know, no one has that as their base case, so—no one on the Committee does. But so that’s, that’s—you know, that’s how we think about it. And that’s what we’ve been getting. That’s what we’ve been getting is good progress on inflation, with growth at a—at a, a good level and with a strong labor market. Now, ultimately, we think rates will have to come down to continue to support that. But, so far, they haven’t had to. And, you know, that’s why we’re watching so carefully for signs of weakness. We don’t really see that. We kind of see what we wanted to see, which was gradual cooling in demand—gradual rebalancing in the labor market while we’re continuing to make progress on inflation. So we’re getting—we’re getting good results here. <NAME>MICHAEL MCKEE</NAME>. But, to follow up: Is there any kind of concern for the housing industry or financial stability—banks—in leaving rates where they are for too long at this point? <NAME>CHAIR POWELL</NAME>. On housing—you know, the housing situation is a complicated one. And you can see that’s a place where rates are really having, having a significant effect. I mean, ultimately, the best thing we can do for the housing market is to bring inflation down so that we can bring rates down so that the housing market can continue to normalize. There will still be a national housing shortage, as there was before the pandemic. There will still be one, but the distortions that we see now with lock-ins and things like that—you know, low mortgages—in terms of banks, the banking system has been, you know, solid, strong, well capitalized. Lending—you know, we’ve seen good performance by the banks. We had the turmoil earlier last year, but, you know, banks have been focusing on bringing up their liquidity, bringing up their capital, and having a risk—risk-management plans in place. So the banking system, you know, seems to be—seems to be in good shape. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Thanks. Chris Rugaber at Associated Press. I was wondering if we can read—on inflation, if you can tell us a little more about where you see inflationary pressure in the economy. You mentioned labor markets coming into better balance, and inflation expectations appear to be well anchored. You’re seeing, you know, anecdotal stories of, the large chains like Walmart and Target are announcing price cuts—McDonald’s announcing a $5 meal deal. So people may still be unhappy about prices at the grocery store, but it doesn’t seem like there’s a lot of inflationary pressure left in this economy—and wonder if you could tell us more about that. <NAME>CHAIR POWELL</NAME>. So I, I think it’s true that housing—that inflationary pressures have come down. But we still have—we’re still getting high inflation readings. So, you know—and I think you can see it in, in various places in—you know, in some parts of, of nonhousing services. You see elevated inflation still—and that’s probably to do with—it could be to do with wages. Goods prices have kind of fluctuated. There’s been a surprising increase in, in import prices on goods, which is kind of hard to understand. And, you know, may, may—we’ve taken some signal from that, but, you know—and, and, of course, housing services. You’re seeing—you’re continuing to see high readings there to some extent. That’s, that’s, you know, catch-up inflation from earlier pressures. But, I mean, overall, you’re right. Inflationary pressures have come down. As I mentioned, the labor market has come into better balance. Wages are still running, you know, I would say, above a, a sustainable path, which would be that of trend inflation and trend productivity. You’re still seeing wage increases moving above that. We, we haven’t thought of wages as being the principal, you know, cause of inflation. But at the same time, getting back to 2 percent inflation is likely to require a return to a more sustainable level, which is somewhat below the current level of increases in the aggregate. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. There’s obviously a lot of focus on how many cuts could be expected this year. But can you give us a sense of what one cut by the end of the year would actually do to the economy—what you think would be a meaningful difference if there was a cut by the end of the year or even two? <NAME>CHAIR POWELL</NAME>. I think if, you know—if you look back in 5 or 10 years and, and try to pull out the significance to the U.S. economy of one 25 basis point rate cut, you’d, you’d have quite a job on your hands. So that’s not how we look at it—you know, really, the whole rate path matters. And I, I do continue to think that when—you know, when we do start to loosen policy, that will show up in a significant loosening in financial market conditions. And the market will price in what it prices in. I don’t—I have no way of saying—we’re, we’re not at that stage, so I don’t know what we’ll be thinking about at that time. But it’s a consequential decision for the economy. And, you know, you want to—you want to get it right. And, fortunately, we have a strong economy, and we, we have the ability to, you know, approach this question carefully. And we will approach it carefully while we’re very much keeping an eye on, you know, downside economic risks, should they—should they emerge. <NAME>RACHEL SIEGEL</NAME>. And you’ve been talking about this clear sense that it’s just going to take longer to have the confidence that’s needed for rate cuts. Is there something about what happened in the first couple of months of the year that you’re seeing differently now with more time or hindsight? Do you still characterize it as expected bumpiness or something more lasting that is affecting your policy for the rest of the year? <NAME>CHAIR POWELL</NAME>. You know, we always want to avoid the tendency to dismiss the parts of inflation that we—that we don’t like and just make it go away. So—but we had a quarter where inflation was running higher, and, yes, I could stand here and say, “It’s stuff we shouldn’t have taken signal from.” But it is what it is. You know, you, you have to—you know, low inflation is low inflation. High—so if you have a quarter where it’s higher—we tried not to take signal from the first couple of months, but we got a third month, and we said, “Okay, the signal we’re taking is that, you know, we think it’s going to take longer to get confidence that inflation is moving sustainably down to 2 percent.” That’s, that’s what we said. I think that was the right thing to do. I still think that’s the right thing to do. Now we have today’s inflation reading, which is very different—very much more positive. We’re going to have to see what the trend is—what’s, what’s going to be the data going forward. We’re looking for something that gives us confidence that inflation is, is moving sustainably down to 2 percent. And readings like today’s, you know—that’s a step in the right direction. But, you know, one reading is—isn’t—it just—it’s only one reading. You don’t want to—you don’t want to be too motivated by any single data point. <NAME>MICHELLE SMITH</NAME>. Jo Ling. <NAME>JO LING KENT</NAME>. Hi, Chair Powell. Thank you for taking our questions. I’m Jo Ling Kent, with CBS News. What’s your message to Americans who are seeing encouraging economic data but don’t feel good about this economy? <NAME>CHAIR POWELL</NAME>. I, you know—I, I don’t think anyone knows—has a definitive answer why people are, are not as happy about the economy as they might be. And we don’t tell people how they should think or feel about the economy. That’s not our job. We—you know, people experience what they experience. All I can tell you is what the—what the data show, which is, we’ve got an economy that’s growing at a solid pace. We’ve got a very strong labor market with unemployment at 4 percent. It’s been a long time since we’ve had, you know, a long stretch of time with unemployment at or below 4 percent—very long time. We had a period of high inflation. We—inflation has come down really significantly, and we’re doing everything we can to—you know, to bring that inflationary episode fully to a halt and fully restore price stability. We’re confident that we’ll get there. And in the meantime, you know, it’s going to be painful for, for people, but the ultimate pain would be a, a period of long, high—a long period of high inflation. It is people who—lower-income people—people who are at the margins of the economy who, who have the worst experience—who experience the most pain from inflation. So, you know, it’s for those people—for all Americans, but particularly for those people—that we’re doing everything we can to bring inflation back down under control. <NAME>JO LING KENT</NAME>. As just a quick follow-up here—you’ve indicated one interest rate cut sometime this year. And I know you don’t have a crystal ball up there, but a lot of people are watching and see, you know, borrowing money remains very expensive. For everybody who’s out there waiting on a rate cut, about when can consumers expect some relief? <NAME>CHAIR POWELL</NAME>. Well, you know, I, I don’t have a precise date for you. But what we said is that we, we want to make sure that we’re confident that inflation is actually moving back down to 2 percent. And when we are, then we can look at loosening policy. So having that kind of confidence that inflation will be at 2 percent just—it just pays benefits to the whole economy, to all Americans, for a long period of time. We had that period for a very long time. We very much want to get back to a place where people can, can not think about inflation—it’s just not a concern in the everyday economic decisions that they make. We were there for a long time, and our goal is to get back to that place. And we’ve made good progress, and we’re just—we’re in the phase now of just, you know, sticking with it until we get it done. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Claire Jones, Financial Times. I’m just drawing on the change in the statement on there being “modest further progress” on inflation. You know, halfway, you know, through the year and after today’s CPI release, you know, what have you and other Committee members found that has been particularly encouraging to you? And just in terms of the conservatism, how much of that is about stickiness and shelter inflation in particular? Thank you. <NAME>CHAIR POWELL</NAME>. So, encouraging has been that growth—you know, the growth, clearly, that we had last year, particularly the second half of last year, and we continue to see still-strong growth—solid growth this year. That’s been very encouraging. If you go back a year, there was a real concern about, you know, very much slowing growth and, and a recession—many forecasters had that. And that’s not what happened. Instead, we—the U.S. is, anyway, and it’s in—it’s in sharp distinction with many other advanced economies around the world. So that’s been encouraging. I would say that the, the—today’s inflation report is encouraging, but it comes after, you know, several reports that were not so encouraging. You asked about—your second question was really about shelter inflation. So I think if you go back a couple of years—we, we know that there were renters, and then there are, you know, people who own their houses. And we have OER, which is owners’ equivalent rent. And so when market-based rents go up sharply, as they did at the beginning of the—of the—when the economy reopened, they really went up sharply. Those play into rollover rents much more slowly for existing tenants than they do for new tenants. And, and so what we—so we, we’ve found now that there are big lags. So there’s sort of a—there’s a bulge of high past increases in, in market rents. It has to get worked off, and that may take, you know, several years. Nonetheless, as long as market rents remain—are going at—up at relatively low levels—and they still are—you know, this, this is just going to happen. It just is going to happen more slowly than we thought. You know, we, we also do sort of this thing where we impute a rental value to, to owned homes. And that’s—you know, many countries around the world do that. Some do it differently than us. It’s something that the—you know, that the, the price experts have regularly looked at. It is not something that we’re the only country that does, and it’s not something we’re looking at changing or would look at changing, you know, anytime soon. But it—it’s true. It’s one of the very hardest things in, in inflation and in prices is how to think about, you know, the services that someone is getting by living in a home that they could rent, but they’re actually living in it. And some countries—you should just ignore that. But that’s not our—that’s not how we do inflation here. We, we do it the way we do it, and we’ve been very transparent about it. And, you know, it’s true that we’re—we’re seeing delays in, in realizing what—what’s happening economically. But we understand that—you know, we understand that very well. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Edward Lawrence, with Fox Business. Thank you for taking the question, Chair Powell. So I want to go back to jobs and the consumer. The last jobs report showed that over the past year, 634,000 more people took multiple jobs. That’s up 8.2 percent. And since January of 2021, we’ve seen prices rise 19 percent. So people are using their credit cards to pay for their lifestyle. What pressure points will signal to you that the slowing economy could maybe break companies in terms of hiring or break the consumer in terms of spending? <NAME>CHAIR POWELL</NAME>. So, you know, we monitor all the things you mentioned and more. You know, what we’re seeing is, basically, spending was going up faster than disposable income during big parts of next year, so—last year, rather—and so what that—you’d expect to see is people spending more on their credit cards. That—that has been happening. Credit card balances have been going up. Credit card defaults have been going up. They’re not at high levels. Remember that after the pandemic, people were cooped up. They couldn’t spend money. They couldn’t go out to spend money; they could spend money from home. But households were in very, very strong—historically strong—financial shape. They’ve now worked off a lot of that. So we’re, we’re watching that carefully. And, you know, what do we see? That’s what we see. We, we see the same data that everybody else sees, but you’ve still got a household sector that’s in—that’s in pretty good shape. You know—but, nonetheless, it’s not in the kind of shape it was in a year or two ago. And we’re, you know—we’re carefully watching that. <NAME>EDWARD LAWRENCE</NAME>. So how close then are we to that point where the consumer can’t continue to spend as it’s spending or companies can’t hire like they’re hiring? <NAME>CHAIR POWELL</NAME>. So consumer spending is still growing. It’s not growing at the pace it was growing at a year or so ago, but, but it’s still—it’s still growing solidly. And, by the way, other parts of the economy are picking up. Spending on equipment and intangibles is—has picked up quite a bit, you know, in the wake of all the construction that we saw of new tech— you know, tech plants. So, overall, the economy is exhibiting solid growth, and, you know— something around 2 percent—which is—which is, you know, good—a good pace of growth for the U.S. economy. But, no, you’re, you’re right, though. We, we do see the same thing other people see, which is, you know, increasing financial pressures on, you know, more lower-income people. And, and, you know, the best thing we can do is, is to foster a very strong jobs economy, which we think we have done—ultimately to get inflation under control, because those people experience inflation, you know, very directly—very painfully. And, and, you know, once, once we get inflation under control, rates can come down—which, which will also improve things. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. You’ve mentioned that unexpected weakening in the labor market would, would bring rate cuts sooner. And I was just wondering—can you talk a little bit about what that would look like? Is it more of, like, a quicker pace of people losing jobs? Is it more the level of the unemployment rate if it were to start to go above 4.2 or something like that? How are you thinking about what you’re looking for to see the job market unexpectedly weaken? <NAME>CHAIR POWELL</NAME>. You know—you know, when I say “unexpectedly,” the first thing is more than, kind of, is in our forecast or in common forecasts—so, something more than that. But we’ll be looking at everything. You know, we’ll—the, the labor market, you know, has the ability—has, has the tendency sometimes to, to weaken quickly. So waiting for that to happen is, is not what we’re doing. You know, we’re watching very carefully; we’re looking at the balance of risks. I always point out the balance of risks, so—and, and also the fact that we look at, at all of it—the whole situation. So, you know, a decision to begin to—you know, to loosen policy could have several reasons associated with it at a given time. But I, you know, I would just— you know, we monitor all the—all the labor market data. And if we saw troubling—weakening more than—more than expected, then that would be something we’d consider responding to. But we’d look at the—we look at the broader context of what’s going on, too. <NAME>VICTORIA GUIDA</NAME>. So something like negative payroll numbers would be— <NAME>CHAIR POWELL</NAME>. I’m not going to—yeah, I mean, I, I can think of things that would— many things would make it on that list, but I don’t think I’ll, I’ll utter them here. <NAME>SIMON RABINOVITCH</NAME>. Thank you, Chair Powell. Simon Rabinovitch with the Economist. May I ask—you mentioned, with the slightly higher PCE [inflation] readings earlier this year, that it wasn’t one or two months but three months that tipped you to be a bit more cautious in the rate outlook. Should we take from that that—you know, it looks like May will be quite good for PCE [inflation], as it was for CPI—does that imply that kind of two more good months would reinstill the confidence that rate cuts could be coming sooner than you currently project? <NAME>CHAIR POWELL</NAME>. You know, I, I don’t actually have that kind of mechanical thing in, in my thinking. I, I get that, you know—as many good ones as we had bad ones—but it’s not like that. It’s the whole. It’s going to be the totality of the data—[including] labor market data, the growth data. In terms of inflation, you know, you’d, you’d want to see real progress that builds your confidence that we’re—that we are on a path down to 2 percent. And I, I don’t want to try to give you specific numbers of things, because that points to dates, and I, I just don’t think—we’re not at a point of being able to do that. <NAME>MICHELLE SMITH</NAME>. Kosuke. <NAME>KOSUKE TAKAMI</NAME>. Thank you for doing this. I, I am Kosuke Takami, with Nikkei. I would like to know about the impact of a stronger dollar on U.S. economic growth and prices. And I have no doubt that markets should determine the exchange rate, but in—Japan and some emerging markets are suffering from the strong dollar. So I want to know if it is having a positive impact on U.S. economy in total? Thank you. <NAME>CHAIR POWELL</NAME>. So we don’t—actually, it’s our—it’s our finance ministry, the Treasury Department, that has a responsibility for thinking about and, and, if it sees fit, doing things about the level of the dollar. So for us, it’s just another financial variable. And you’re right—the dollar has been—has exhibited, exhibited some strength over the course of the last year or so because the U.S. economy is very strong. We don’t think of it as benefiting or hurting the U.S. We don’t—again, we don’t manage the level of the dollar. That’s, that’s not our— that’s not our job. It’s not. You know—and for, for our economy, what, you know, we’re trying to foster is maximum employment and price stability. And we feel like we’ve made good progress on, on both of those goals over the course of the past year. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger, with Yahoo Finance. You said you would cut rates before inflation falls to 2 percent. You’re forecasting inflation to end the year at 2.8 percent on core PCE. We’re at 2.8 percent, of course, on core PCE. Right now, you said the inflation forecast is conservative and that if you got to 2.6 to 2.7 [percent] on PCE [inflation], that would be a good place to be. You also indicated the job market has mostly normalized. So why not cut rates this summer just once—you’re well above neutral—to try to preserve the soft landing rather than risking waiting too long in the quest for confidence for inflation? <NAME>CHAIR POWELL</NAME>. You know—so we are—we’re well aware of the two-sided risks here, let me just say. We, we understand that if we wait too long, that could come at the cost of economic activity, of employment, of the expansion. We understand that if we move too, too quickly, we could end up undoing a lot of the good that we’ve done and have to then start over, and it could be very disruptive. So we’re, we’re extremely aware of both of those risks and, and just basically trying to manage them. And what we said is that we’ll—that we’re—we don’t think it’ll be appropriate to, to begin to loosen policy until we’re more confident that inflation is moving down to 2 percent over time on a sustainable basis. That’s—that’s kind of been our test. Or there’s another test, which is, you know, an unexpected deterioration in labor market conditions. So I think that’s, that’s the right way for us to think about it. That’s our—that’s our dual mandate there. And, you know, we, we have a strong economy. We’ve got growth—all forecasts are very commonly around 2 percent. That’s a—that’s a strong growth rate for our economy. The labor market continues to print jobs at a pretty high rate. Unemployment is still low. So we have the ability now to approach this question carefully, and that��s, that’s what we’re doing. <NAME>JENNIFER SCHONBERGER</NAME>. And just to follow, Chair Powell—do you need to be ahead of a weakening in the labor market? Otherwise, is it too late, given that the labor market is a lagging indicator—right?—when you look at the monthly jobs data? <NAME>CHAIR POWELL</NAME>. Yeah, we, we completely understand that that’s the risk. And that’s, that’s not what we’re—that’s not our plan is to wait for things to break and then try to fix them. We’re, we’re trying to balance these two goals in a way that is consistent with our framework, and we think we’re doing that. <NAME>MICHELLE SMITH</NAME>. Evan. <NAME>EVAN RYSER</NAME>. Thank you, Chair Powell. Evan Ryser with Market News International. You have mentioned before the framework review process will start in the latter half of the year. At this point, do you have any specific time frame for the start of that? Who will lead it? Will you be—will it be you or a member—a Committee group of your—of your peers? What will be the parameters? Do you anticipate the review will consider changes in communications going forward? <NAME>CHAIR POWELL</NAME>. So we—what, what we’ve been thinking is that we would announce and commence the review later or late in the year. In the meantime, as that time approaches, we will be devoting a lot of careful thought and planning to the contours of it. Within scope would certainly be communications generally. I—I’m not going to say that we’ll look at this or that particular thing. And all the other details, you know—we’re just—we don’t want to get prematurely into a conversation until it’s really time to have it. And so, you know, I’m going to leave pretty much everything else to, to later in the year. <NAME>MICHELLE SMITH</NAME>. Go to Nancy, for the last question. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer, with Marketplace. Just one more question on housing—can you still cut rates with shelter prices high, or will you wait until they start to moderate a bit? <NAME>CHAIR POWELL</NAME>. I wouldn’t—there isn’t any one thing—one variable, like housing prices moderating, that would really decide or decide against what we’re doing. We’ve got an overall test, which is greater confidence that inflation is moving down to 2 percent on a sustainable basis. That’s our overall test. Or, alternatively, we see unexpected weakening in the labor market. So those are—those are two different tests. I would say, you know, we’re not— we’re not looking at any one price in any one sector and saying, “That’s the one.” We don’t target housing prices, for example. And we don’t target wages. We, we target aggregate prices and overall employment, so— <NAME>NANCY MARSHALL</NAME>-GENZER. But if housing prices remain sticky, could that slow down the pace of rate cuts? <NAME>CHAIR POWELL</NAME>. I think you’d look at the over—we’d be looking at the aggregate numbers and, and asking ourselves, “What’s going on here with inflation in the—at the aggregate level?” And, you know—and, of course, if, if—any price that contributed to ongoing inflation would, would matter. Any price that contributed to ongoing disinflation would matter, too, but I wouldn’t single out housing as having a, a special role there. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. Our economy has made considerable progress toward both goals over the past two years. The labor market has come into better balance, and the unemployment rate remains low. Inflation has eased substantially from a peak of 7 percent to 2.5 percent. We are strongly committed to returning inflation to our 2 percent goal in support of a strong economy that benefits everyone. Today, the FOMC decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures. We are attentive to risks on both sides of our dual mandate, and I will 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. GDP growth moderated to 2.1 percent in the first half of the year, down from 3.1 percent last year. Private domestic final purchases, or PDFP—which excludes inventory investment, government spending, and net exports and usually sends a clearer signal of underlying demand— grew at a 2.6 percent pace over that same period, the first half. Growth of consumer spending has slowed from last year’s robust pace but remains solid. Investment in equipment and intangibles has picked up from its anemic pace last year. In the housing sector, investment stalled in the second quarter after a strong rise in the first. Improving supply conditions have supported resilient demand and the strong performance of the U.S. economy over the past year. In the labor market, supply and demand conditions have come into better balance. Payroll job gains averaged 177,000 jobs per month in the second quarter—a solid pace, but below that seen in the first quarter. The unemployment rate has moved up but remains low at 4.1 percent. Strong job creation over the past couple of years has been accompanied by an increase in the supply of workers, reflecting increases in participation among individuals aged 25 to 54 years and a strong pace of immigration. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic—strong, but not overheated. Inflation has eased notably over the past two years but remains somewhat above our longer-run goal of 2 percent. Total PCE prices rose 2.5 percent over the 12 months ending in June; excluding the volatile food and energy categories, core PCE prices rose 2.6 percent. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households and businesses and forecasters, as well as measures from financial markets. 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. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. In support of these goals, 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 reducing our securities holdings. As the labor market has cooled and inflation has declined, the risks to achieving our employment and inflation goals continue to move into better balance. Indeed, we’re attentive to the risks to both sides of our dual mandate. We’ve stated that we do not expect 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. The second quarter’s inflation readings have added to our confidence, and more good data would further strengthen that confidence. We will continue to make our decisions meeting by meeting. We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have 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. As the economy evolves, monetary policy will adjust in order to best promote our maximum-employment and price-stability goals. If the economy remains solid and inflation persists, we can maintain the current target range for the federal funds rate as long as appropriate. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. The Fed has been assigned two goals for monetary policy—maximum employment and stable prices. 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 achieving maximum employment and stable prices over the longer run. Our success in delivering on these goals matters to all Americans. 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. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek from the New York Times. Thanks for taking our questions. Markets pretty much entirely expect a rate cut in September at this stage. I wonder if you think that’s a reasonable expectation, and, if so, why not just make the move today? <NAME>CHAIR POWELL</NAME>. Thank you. So on September, let me say this. We, we have made no decisions about future meetings, and that includes the September meeting. The broad sense of the Committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. In that, we will be data dependent but not data point dependent, so it will not be a question of responding specifically to one or two data releases. The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September. So you asked, why not today? And I would just say, again, that the broad sense of the Committee is that we’re getting closer to the point at which it will be appropriate to reduce our policy rate but that we’re not quite at that point yet. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. So just to, to follow up on that a bit, if inflation behaves as you expect between now and September, would you regard a cut in September as sort of the baseline scenario right now? <NAME>CHAIR POWELL</NAME>. So I guess I would—I would think about it this way. I’ll give an example of, of cases in which it would be appropriate to cut and maybe that it wouldn’t be appropriate to cut. So if we were to see, for example, inflation moving down quickly or more or less in line with expectations, growth remains, let’s say, reasonably strong, and the labor market remains, you know, consistent with its current condition, then I would think that a, a rate cut could be on the table at the September meeting. If, if inflation were to prove, you know, sticky and we were to see higher readings from inflation, disappointing readings, we would weigh that along with the other things. You know, I think it’s going to be not just any one thing. It’s going to be the inflation data, it’s going to be the employment data, it’s going to be the balance of risks as we see it—it’s going to be the totality of all of that that would help us make this decision. <NAME>HOWARD SCHNEIDER</NAME>. And just to follow up on that—specifically, in what ways right now, given all you’ve seen over the last few months, in particular on shelter, on services, et cetera, in what ways are you not confident right now that inflation is on the way back to 2 percent? <NAME>CHAIR POWELL</NAME>. I, I think it’s just a question of seeing more good data. We have seen—the last couple of readings have, have certainly added to confidence. And we’ve seen progress across all three categories of core PCE inflation—that’s goods, nonhousing services, and housing services. So it’s really just—you know, we had a quarter of poor inflation data at the beginning of the year. Then we saw some more good inflation data; we had seven months at the end of last year. You know, we just want to see more and, and gain confidence. And, as I said, we have—we did gain confidence, and more good data would cause us to, to gain more confidence. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. The March SEP pointed to three cuts in 2024, with core inflation at 2.6 percent and the unemployment rate at 4 percent. Since we’re now at that level in terms of inflation and already beyond what was projected for the labor market, I’m just wondering if that rate path is back to being the best guidepost for policy rather than, let’s say, the shallower one laid out in that June SEP. <NAME>CHAIR POWELL</NAME>. You know, so I would just say, really, the path ahead is going to depend on the way the economy evolves. And I can’t really give you any, any better forward guidance on it than that. We didn’t, of course, do an SEP at this meeting. We will do another one at the September meeting. I would just say, I can—I can imagine a scenario in which there would be everywhere from zero cuts to several cuts, depending on the way the economy evolves, and I wouldn’t want to lay out a baseline path for you there today. I’ve said what I—what I can say about September and about today, though. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, you’ve said before that you wouldn’t wait until inflation got to 2 percent to cut rates because of how inflation has lagged. Does that apply for the labor market, too? If the labor market is back in equilibrium, why is restrictive policy and, potentially, very restrictive policy, given the high real funds rate, warranted right now? <NAME>CHAIR POWELL</NAME>. So this is the very reason that we’re thinking about—that we’ve said in our—in our statement that we’re going back to looking at both mandates and that we think the risks are coming back into balance. We think what the data broadly show in the labor market is an ongoing, gradual normalization of labor market conditions. And that’s what we want to see. You know, we’ve seen that over a period of a couple of years and a move, really, from overheated conditions to more normal conditions. We are watching the labor market conditions quite closely, and that’s what we’re seeing. If we—if we start to see something that looks to be more than that, then we’re well positioned to respond. That’s, that’s part of what we’re thinking. <NAME>NICK TIMIRAOS</NAME>. And when you talk about seeing something that’s more than whatever softness or slowdown you expect, in the past you’ve said that stronger growth wouldn’t, wouldn’t override better news on inflation. I wonder how that cuts the other way. If you’re seeing more softness in the labor market than what you would expect, does that change the calculus on what you’re looking for out of the inflation numbers to recalibrate policy? <NAME>CHAIR POWELL</NAME>. So we have, we have—growth isn’t one of our three. We have two mandates, as you know. The labor market, maximum employment is one, and stable prices is another. So we weigh—we weigh those two things equally under the law. When we were far away from our inflation mandate, we had to focus on that. Now we’re back, back to a closer to even focus, so we’ll be looking at labor market conditions and asking whether we’re getting what we’re seeing. And, as I said, we’re prepared to respond if we see that it’s—that it’s not what we wanted to see, which was, you know, a gradual normalization of conditions—if we see more than that. And it wouldn’t be any one statistic, although, of course, the unemployment rate is generally thought to be, you know, a single—a good single statistic. But we’d be looking at wages, we’d be looking at participation, we’d be looking at all the things—surveys, quits, hires, all of those things—to determine the overall status of the labor market. But we’re looking at it now. I would say, again, I think you’re back to conditions that are close to 2019 conditions, and that was not an inflationary economy—broadly similar labor markets then. I think inflation was actually—core inflation was actually running below 2 percent. So we don’t think—I don’t now think of the labor market in its current state as a likely source of significant inflationary pressures. So I would—I would not like to see a material further cooling in the labor market, and that’s part of what’s behind our thinking. The other part, of course, is that we have made real progress on inflation. And we’re—we’ve got growing confidence there that we are not quite there yet, but we’re more confident that we’re on a—that we’re on a sustainable path down to 2 percent. So those two things are working together, and we’re factoring those both into our policy. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Chris Rugaber at Associated Press. You mentioned not wanting to see any further cooling in the job market. Why not? Or would you consider preemptive cuts to prevent if you saw risks of an unexpected cooling? Is that something you would cut ahead of time for? <NAME>CHAIR POWELL</NAME>. So I wouldn’t say I wouldn’t want to see any other cooling. It would be more of a material difference. If we—if we’d be looking at this and if we see something that looks like a more significant downturn, that would be something that we would—we would have the intention of responding to. So, in terms of—I don’t think of it that way. I think of it as, you know, we’re actually in a good place here. We’re balancing these two risks of, you know, go too soon, and you undermine progress on inflation; wait too long or don’t go fast enough, and, and you put at risk the recovery. And so we have to balance those two things. That’s the nature of having two mandates, and I think we—this is how we balance them. It’s a rough balance, but it does feel like, again, the labor market feels like it’s in a place where it’s just a process of ongoing normalization; 4.1 percent unemployment is still historically low. And, you know, we’ll just have to see what the data show us. <NAME>CHRISTOPHER RUGABER</NAME>. And, just to follow up quickly: [I] wanted to see what you thought of the recent JOLTS report, which did show hiring, gross hiring, has come down even below 2019 levels. Layoffs remain low. So it painted a picture of a very static labor market. Is that sustainable in your view or something that is worrying? Thank you. <NAME>CHAIR POWELL</NAME>. So I think all of the data points continue to point to kind of the direction we would want to see. So that was taken as, you know, there was a decline in job openings. That was good. Today’s ECI reading was a little softer than expected, so that’s, that’s a good reading. It shows that wage increases are still at a strong level but that that level continues to come down to more sustainable levels over time. That’s exactly the pattern that we want to be seeing. So I think the data—the data we’ve been seeing in the labor market are broadly consistent with that normalization process. Again, we’re closely monitoring to see whether it starts to show signs that it’s more than that. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Mr. Chairman, back in March, you talked about cutting rates as a process, and, in June, you talked about the idea that, well, one rate cut wouldn’t do anything. So I wonder if you can sort of—following up on Colby’s question—talk about, are you weighing the economy right now in terms of its ability to withstand multiple rate cuts? Talk us through the process that you think—or is it just one rate cut? Or are you in the process now of thinking that rates need to be normalized here? Thank you. <NAME>CHAIR POWELL</NAME>. Yeah, I can’t really say that, honestly. You know, we’re—we— we’ve seen significant movement in the labor market, and, you know, we’re very mindful of this question of, is it just normalization or is it more? We think it’s just normalization, but we want to be in a position to, to support the labor market. At the same time, we’re seeing progress on inflation. So, you know, we actually got to this—we raised rates a year ago at the July meeting. And if you look at the situation in the economy a year ago, unemployment—sorry, inflation was over 4 percent. It was a completely different economy. Now we’ve made a lot of progress, and the labor market—I think unemployment was in the 3s, mid-3s, so it’s a different economy. And I think it’s time, it’s coming to be time, to adjust that so that we support this continued process. The thing we’re trying to do is—you know that we have, we’ve had this really significant decline in inflation, and unemployment has remained low. And this is a really unusual and historically, historically unusual and such a welcome outcome for the people we serve. What we’re thinking about all the time is, how do we keep this going? And this is—this is part of that. We think we don’t need to be 100 percent focused on inflation because of the progress we’ve made: 12-month headline at 2½ [percent], core at 2.6. You know, it’s way down from where it was. The job is not done on inflation, but, nonetheless, we can afford to begin to dial back the restriction in our policy rate. And I think we’re just—it’s part of a process. In terms of what that looks like, I mean, I think most rate—you would think, in a base case, that policy rates would move down from here, but I don’t want to try to give specific forward guidance about when that might be, the pace at which it might happen, because I think that’s really going to depend on the economy, and that’s highly uncertain. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. On inflation, do the past few months of good reports look like what we saw last year, where you really had a lot of momentum, with a few bumps in between? Would you characterize that kind of momentum as back on track at this point in the year? <NAME>CHAIR POWELL</NAME>. Actually, what we’re seeing now is a little better than what we saw last year. Last year, as we pointed out late in the year, a whole lot of the progress we saw last year was from goods prices, which were going down at an unsustainable rate, disinflating at an unsustainable rate. This is a broader disinflation. This has goods prices coming down, but it’s also—we’re also now seeing progress in the other two big categories: nonhousing services and housing services. So, you know, the thing is, we’ve only—you’ve got one quarter of that. We had seven months of low inflation; you got one quarter of this. I would say the quality of this is, is higher, and it’s good, but so far, it’s only a quarter. So I think, you know, we need to see more to know that we’re—to have more confidence that we’re on, on a good path down to 2 percent. But as I mentioned, our confidence is growing because we’ve been getting good data. And things like the ECI report and, frankly, the softening in the labor market conditions, you know, give you more confidence that the economy’s not overheating. It doesn’t look like an overheating economy, and it looks like an economy that’s normalizing. <NAME>RACHEL SIEGEL</NAME>. And if we’re to think about the first couple months of the year, is there any sense now that they were these blips that could have actually allowed for earlier rate cuts as were some of the projections going into 2024? <NAME>CHAIR POWELL</NAME>. So the thing about—if what it is is seasonality, and it could just be— it’s very, very hard to, you know, to do appropriate seasonal adjustments. If that’s what it is, then that actually implies that, that other months were underreporting too low inflation. If you smoothed it out, it’s a zero-sum game. And that’s why we look at 12 months. We look at 12 months because that takes all of that out, all those effects out. Twelve-month now is 2½ percent headline, 2.6 percent core. This is so much better than where we were even a year ago. It’s a lot better. Now, the job is not done. I want to stress that, and we’re committed to getting the job—inflation sustainably under 2 percent, but we need to take note of that progress, and we need to weigh the risks to the labor market and the risks to our inflation target now more equally than we did a year ago. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. I’d like to ask you about the balance of risks as the American people see it. At this point, is the risk greater to leave interest rates where they are, given the damage that higher interest rates do to the economy in slowing demand and raising prices? Or is it more important for the American people that you keep rates where they are to bring inflation down? <NAME>CHAIR POWELL</NAME>. I, I—you know, I think that we’ve been given an assignment by Congress. This is how we serve the American people is by achieving maximum employment and price stability, right? And so in our, you know, quasi-constitutional document, the Statement on Longer-Run Goals and Monetary Policy Strategy, we look at the two goals, and if one of them is farther away than the other—the two variables, inflation and employment—if one is farther away from its goal than the other, then you, you concentrate on the one that’s farther away. And you take account of the time to reach the goal. So, for the last couple of years, the best service we could do to the American people was to focus on inflation. But as inflation has come down—and I think the upside risks to inflation have decreased as the labor market has cooled off, and now the labor market has softened—you know, probably the inflation, inflation’s probably a little farther from its target than is employment, but I think the downside risks to, to the employment mandate are, are real now. So we have to weigh all that, and if you think about where that takes us is we have a restrictive policy rate. It’s clearly restrictive. It’s been the rate we’ve had in place for a full year. And the time is coming—as other central banks around the world are facing the same question—the time is coming at which it will begin to be appropriate to dial back that level of restrictions, restriction so that we may address both mandates. <NAME>MICHAEL MCKEE</NAME>. Well, you have event risk basically, with the jobs report on Friday and another one before you meet again. Are you certain that you won’t fall behind the curve and lead to unnecessary unemployment if you wait until September? <NAME>CHAIR POWELL</NAME>. “Certainty” is not a word that we have in our—in our business. So, you know, we get—we get a lot of data between now and September, and it isn’t going to be one data read or even two. It’s going to be the totality of the data, all of the data, and not just—and then how is that affecting the outlook? And how is it affecting the balance of risks? That’s going to be the assessment that we do. Of course, we’ll, we’ll all look carefully at the employment report, but so much other data coming in and so much happening between now and the September meeting, and we’ll, you know, we’ll make a judgment. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman. Edward Lawrence of Fox Business. I do want to dig deeper on what Michael and, and what Nick were asking. There’s a, a shift in the statement to balance between the focus between inflation and jobs. Looking at the job sides, we’ve seen wage data show sort of an abrupt slowing. We’ve—we’re hearing on earnings calls from companies like Intel abrupt layoffs. In the jobs report from the BLS, government jobs has been a leading creator. Could the government jobs—as a sector—hiring mask underlying weakness in the jobs report? <NAME>CHAIR POWELL</NAME>. Well, you know, we’ll look at everything. We’ve seen some, some tendency to have a narrowing base of job creation in some months going back, but then we’ve had some months where, where job creation was broader. And also, you know, the headline number of jobs has come down, so—but you look at the whole thing. And I think you do look at private demand extra carefully, to your point about, about government. So we’ll just be looking at, at all those things. <NAME>EDWARD LAWRENCE</NAME>. Just as a follow then—so could the Fed then be behind the curve? Because you said some of the reports—in the last meeting, you said the reports could be noisy or overstated. Was there a discussion of, of—what kind of discussion was there for a cut today, and could the Fed be “behind the curve”? <NAME>CHAIR POWELL</NAME>. Yeah, so look, the objective is to balance the two risks, right? It’s the risk of going too soon and the risk of going too late. We’ve been—you know, we, we had seven months of good inflation data at the end of last year. We said we wanted to see more. We said—we pointed out that too much of this was coming from goods, and, sure enough, the first quarter wasn’t, wasn’t great—inflation data. And now we’ve got another quarter—a quarter that is good. And, you know, we’re balancing the risk of going too soon against the risk of going too late. That’s what we’re doing. There’s no guarantee in this. It’s a very difficult judgment call, but this is—this is how we’re making it. So—but in terms of today, your question about today, we did have a—you know, we had a nice conversation about, about this issue today. The overall sense of the Committee, as I mentioned, is that we’re getting closer to the point at which it will be appropriate to begin to dial back restriction, but we’re not quite at that point yet. We want to see more good data. The decision was unanimous—all 19 participants supported it. But there was a real discussion back and forth of what the case would be for, for moving at this meeting. A strong majority supported moving—not moving at this meeting. That was the strong sense of the Committee. But it’s a conversation that we had today, certainly. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. Courtenay Brown from Axios. Thank you for taking our questions. When the Fed was raising rates, there was a lot of conversation about long and variable lags. I wonder if that applies on the way down, too. How are you and the Committee thinking about that? <NAME>CHAIR POWELL</NAME>. Yes, it does. And I think the lags have kind of showed up here in the last six months, by the way. You, you really do now see the restriction, whereas, I mean, even a few months ago, people were questioning how restrictive policy was. Look at the labor market now—you can see. And look at inflation—sorry—rate-sensitive, interest-sensitive spending. You really do see now that policy is restrictive. I wouldn’t say it’s extremely restrictive, but it’s certainly effectively restrictive. Yes, there—the lag should, should be on the way down. It should take some time to get into—to get into the full economy, affect financial conditions. And that affects economic activity, hiring and that kind of thing, and, ultimately, inflation. It doesn’t—it’s not instantaneous, although it’s faster than it used to be because markets move now in anticipation of our moves. <NAME>COURTENAY BROWN</NAME>. So are you worried then that if monetary policy acts with long and variable lags, even when you’re lowering interest rates, it might be too late for the Fed to help stave off any kind of slowdown in the labor market or broader economy? <NAME>CHAIR POWELL</NAME>. We have to worry about that. I mean, we—just to make it clear, you know, it’s a very difficult, challenging judgment, and we don’t want to go too soon, and we don’t want to go too late. But that’s—this is how we made that judgment. I feel good about where we are. We’re certainly very well positioned to respond to weakness with the policy rate at 5.3 percent. We certainly have a lot of room to respond if we were to see weakness. That’s not what we’re seeing, though. What we’re seeing—look at the—look at the first-half growth numbers. Look at PDFP at 2.6 percent for the first half. It’s not signaling a weak economy. It’s also not signaling an overheating economy. Labor market—admittedly, the unemployment rate has moved up seven-tenths, and we’re seeing—we’re seeing normalization there, but wage, wage increases are still at a high level. Unemployment is still at a low level. Layoffs are very low. Initial claims have moved up, but they’re pretty stable, and they’re historically not high at all. So the total scope of the data suggests a normalizing labor market, and, again, we are carefully watching to see that that continues to be the case. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. On the labor market, I was wondering, how worried are you all about unemployment rising to the point where it triggers the Sahm rule, and would that potentially affect how quickly you cut rates? <NAME>CHAIR POWELL</NAME>. We—so I would just say, the question really is, is one of, are we worried about a sharper downturn in the labor market? So, and the answer is, we’re watching really carefully for that. We’re, we’re aware of that rule, which is really a, you know, a—I would call it a statistical, statistical thing that has happened through history. A “statistical regularity” is what I’d call it. It’s not like an economic rule where it’s telling you something must happen. So, again, what do we see? What are our eyes telling us? We look at—we look at all the things we’re seeing, and what it looks like is a normalizing labor market—again, job creation at a pretty decent level, wages moving up at a strong level but coming down gradually. Job vacancies have come down, but they’re still high by historical standards. So, again, I’ve been through some of the data already, but what we think we’re seeing is, is a normalizing labor market, and we’re watching carefully to see if it—if it turns out to be more. If it starts to show signs that it’s more than that, then we’re well positioned to respond. <NAME>VICTORIA GUIDA</NAME>. Is there reason to think that the labor market might behave differently this time than it has historically? <NAME>CHAIR POWELL</NAME>. I think, you know, history doesn’t repeat itself; it rhymes. That statement is very true about the economy. You never assume it’s going to be just the same. An example would be, is there a trend increase in the level of vacancies? There are many, many examples, so it’s never exactly the same. Also, let’s remember that this pandemic era has been one in which so many, you know, apparent rules have been flouted, like the inverted yield curve for starters. So, many, many received—pieces of received wisdom just haven’t worked, and it’s because this situation really is unusual or unique in that so much of this inflation came from the shutdown of the economy and the resulting supply problems in the face of, admittedly, very strong demand. So the whole—the whole situation is not the same as many of the other prior inflation or downturns that we’ve seen or business cycles that we’ve seen. So we’re having to learn. We’re having to, to be very careful about the judgments that we make, I would say. So we don’t assume that these regularities will, will just repeat themselves automatically. <NAME>MICHELLE SMITH</NAME>. Amara. <NAME>AMARA OMEOKWE</NAME>. Thank you, Chair Powell. Amara Omeokwe with Bloomberg. There seems to be quite a difference between what the anecdotal data are telling us, such as the very recent downbeat Beige Book, and the hard data. Do you take those anecdotes seriously— that is, that the economy and labor market are cooling much more rapidly than what’s shown in the data? <NAME>CHAIR POWELL</NAME>. So I do take that seriously, and the Beige Book is great. What’s even greater is hearing the Reserve Bank presidents come in and talk about their conversations with, with businesses and business leaders and workers and people in the nonprofit sector in their Districts. But I’ll tell you, it’s a pretty—the picture is, is not one of a slowing or, you know, a really bad economy. It’s one of there are spots of weakness, and there are regions where growth is stronger than other regions, but, overall, it’s—again, look at the aggregate data. The aggregate data is—particularly PDFP, private domestic final purchases—is 2.6 percent, and that’s a good indicator of private—of private demand. So we listen to all of that, and it does, does—I think it’s important to listen to anecdotal data and not just look at the aggregate data. Especially, you know, it’s very hard—GDP data can be volatile quarter to quarter. So it’s just hard to measure economic activity. There are a lot of—it’s just difficult to do. So I look at both, but I wouldn’t say that the—that the anecdotal data is uniformly downbeat. It’s more mixed. <NAME>MICHELLE SMITH</NAME>. Jo Ling. <NAME>JO LING KENT</NAME>. Thank you. Jo Ling Kent with CBS News. Chair Powell, thanks for taking our questions today. You have consistently said that the Fed does not consider politics in making decisions. With a possible September rate cut on the table, it would be less than two months before the election, and former President Trump reportedly said that cutting rates so close to the election is something the central bank knows “they shouldn’t be doing.” What’s your response, and do you believe it’s possible to really remain apolitical with a September rate cut? <NAME>CHAIR POWELL</NAME>. I absolutely do, and I think it’s—first of all, we haven’t made any decisions. I would say it this way: haven’t made any decision about any future meeting. I don’t know what the data will reveal or how that will affect the appropriate path of our policy. I really don’t know. I do know how we will make that assessment. That’s what I do know. So if you take a step back, the current situation, again, is inflation has come down much closer to our goal, and that’s happened while unemployment has remained low. We’re, we’re very tightly focused on using our tools to try to foster that state of affairs continuing. That’s at each of our meetings and all of our decisions, our focus is strictly on that and really on nothing else—doing our part, whatever that part may be. You know, we’re using our best thinking. We’re doing our best to understand the economy. We, we follow academics. We follow the many commentators who bless us with their commentary [laughter], but we don’t change anything in our approach to address other factors, like the political calendar. Congress has, we believe, ordered us to conduct our business in a nonpolitical way at all times, not just some of the time. I’ll say this, too: We never use our tools to support or oppose a political party, a politician, or any political outcome. The bottom line is, if we do our very best to do our part and we stick to our part, that will benefit all Americans. If we get it right, the economy will be stronger. We’ll have price stability. People will find jobs. Wages will rise in real terms. Everyone will benefit. So that’s what we believe, and that’s how we will always act. This is my fourth presidential election at the Fed. I can tell you this is how we think about it. This is what we do. So anything that we do before, during, or after the election will be based on the data, the outlook, and the balance of risks and not on anything else. <NAME>JO LING KENT</NAME>. Just a quick follow-up—do your economic forecasts and models take into account the two very different economic plans of these two presidential candidates, Harris and Trump, and, if so, how? <NAME>CHAIR POWELL</NAME>. No. We do not do that. We absolutely do not do that. We don’t— we don’t know who’s going to win. We don’t know what they’re going to do. We don’t act as though we know, and we just can’t do that, you know? We basically—we have our forecast. We’re not—we can run simulations of different potential policies, but we would never try to make policy decisions based on the outcome of an election that hasn’t happened yet. We would just—that would just be a line we would never cross. You know, we’re a nonpolitical agency. We don’t want to be involved in any—in politics in any way, so we wouldn’t do that. <NAME>MICHELLE SMITH</NAME>. Nicholas. <NAME>NICHOLAS JASINSKI</NAME>. Thank you, Chair Powell. Nicholas Jasinski from Barron’s Magazine. There hasn’t been a dissenting vote on an interest rate decision in some time. If the data do evolve as you expect, if you do have more confidence by the September meeting, do you get the sense that there will be a unanimous vote on an interest rate move in September? Basically, are there meaningful differences in Committee members’ assessments of how much more confidence is needed? <NAME>CHAIR POWELL</NAME>. So there’s—there are always meaningful differences. There are. And, you know, we talk a lot before, during, and after the meeting. We do have a very robust discussion of these things. You’re right that in, in most cases, people, if they feel heard and they feel that they’ve—that their position has been given serious consideration, for most people, most of the time, that’s going to be enough. There are dissents. That’s fine. You know, no one has a veto. No single person has a veto, so it just is a question of, who will vote for and against? We’ve had—we’ve had, you know, dissents. We haven’t had so many during the pandemic era, and it just may be that we, we felt more united because we felt under a lot of pressure to get things right, but before the pandemic, we had plenty of dissents. And dissents happen. It’s part of the process. There’s nothing wrong with dissents, and if it happens, it happens. <NAME>MICHELLE SMITH</NAME>. Jean. <NAME>JEAN YUNG</NAME>. Hello. Jean Yung with MNI Market News. Is a 50 basis point cut as a first cut at all likely or even on the table? Thank you. <NAME>CHAIR POWELL</NAME>. You know, I don’t want to say—I don’t want to be really specific about what we’re going to do, but that’s, that’s not something we’re thinking about right now. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>CHAIR POWELL</NAME>. Of course, we haven’t made any decisions at all as of today. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. Not to get into the minutes, but you said there was a real discussion today for moving at this meeting. I’m curious if you could provide some more color on the nature of the discussion today at the meeting about a possible rate cut as early as September. <NAME>CHAIR POWELL</NAME>. Well, so, you know, the way the meeting is set up, the first day there’s a discussion of financial stability because it’s every other meeting we have that, and then we have an opportunity to comment on that. Then we have an economic go-round. And then, this morning, we have the monetary policy go-round. And I think in people’s economic or in their monetary policy go-round, people express their views about this, and, you know, there’s a range of views. People—as you will know from the speeches that they give—people have different ways of thinking about the economy. And so, in the minutes, we’ll lay this out in a much—in a much better way than I can do off the cuff, but there’s a range of perspectives. And, you know—but I do think that we are, we’re a consensus-driven organization. People come together. This was a unanimous—a unanimous decision. And, at the end, everyone, everyone supported the outcome—not just the voters, but everyone. So I would also say, some people examined the possibility, you know, the case for moving at this meeting, but, overwhelmingly, the sense of the Committee was not at this meeting but as soon as the next meeting, depending on how the data come in. <NAME>JENNIFER SCHONBERGER</NAME>. But there is a growing sense of confidence that you could move at the next meeting— <NAME>CHAIR POWELL</NAME>. Yes. <NAME>JENNIFER SCHONBERGER</NAME>. —assuming inflation comes? <NAME>CHAIR POWELL</NAME>. Well, assuming that the totality of the data supports such an outcome. No question. That’s, that is the case, as I mentioned. We think that the time is, is— it’s approaching, and if we do get the data that we—that we hope we get, then a reduction in our policy rate could be on the table at the September meeting. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. Former New York president Bill Dudley wrote an op-ed in Bloomberg earlier this month, which you probably saw, in which he said, “It might already be too late to fend off a recession by cutting rates, dawdling now unnecessarily increases the risk.” Is he wrong? <NAME>CHAIR POWELL</NAME>. So this is the judgment that we have to make, and we’re, we’re well aware of the judgment. We’re—as I’ve said, we have to weigh the risk of going too soon against the risk of going too late. If we go too soon, we can—we had a lot of advice, you know, to go ahead and cut after the seven good months of last year. We didn’t. We said we needed to see more. Then we saw some higher inflation. We’ve seen one quarter of good inflation, and we’ve seen the labor market move quite a bit. And, as I mentioned, I don’t think it needs to cool off anymore for us to get the inflation results that are related to the labor market—not all inflation is, of course. So I think it’s a difficult judgment to make, and what you see is the judgment of the Committee is that that time is drawing near. That time could be in September if, if the data support that. <NAME>NANCY MARSHALL</NAME>-GENZER. And have the chances of a hard landing increased? <NAME>CHAIR POWELL</NAME>. So I, I don’t know whether they’ve increased. I think they’re low. I think this is—you don’t see any reason to think that this economy is either overheating or sharply weakening. That’s just not in the data right now. What’s in the data right now is an economy that’s growing at a—at a solid pace, a labor market that has cooled off, but, nonetheless, inflation—sorry, unemployment is low. The data overall show a strong labor market. And so that’s, that’s really what you see. It’s not—it’s neither an overheating economy, nor is it a sharply weakening economy. It’s, it’s kind of what you would want to see, but, of course, the job is never done. You know, we’re, we’re watching to see, you know, which way the economy heads. And I think we’re—if we are to respond to weakness, we’re certainly, you know, well equipped to do that. But that’s not what we’re seeing. What we’re seeing is strong economic activity and, you know, a good labor market and inflation coming down. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thank you so much. In the—in the minutes of the June meeting that came out a few weeks ago, there was a discussion about communications, and some Fed officials said maybe the Fed wasn’t as clear enough about its reaction function. And, and when I talked to the commentators who bless you with their comments [laughter], they say that they really don’t have a sense of what is going to judge, maybe not the first cut, but the pace of the cuts going forward. They don’t have a good sense of that. Is there anything you can say, like how will we judge that? <NAME>CHAIR POWELL</NAME>. Yeah, I mean, I think the reality is that, that forecasters—and this isn’t just the Fed by any means—forecasters have been continually surprised by, for example, the strength of the economy last year. So I think we had to be pretty humble about, about giving forward guidance about this, that, and the other thing. We need to be pretty careful about that. And, you know, when you’re saying you’re going to be data driven, of course, it’s always what the data—how they affect the outlook and the balance of risks, but it’s—nobody has great vision deep into the future. In terms of a reaction function, that’s a—that’s a long-time discussion that people have had forever. I think people have understood for a long time, actually, that we were very focused on bringing down inflation. Nobody was really confused about that. The data have, you know— again, we’ve seen significant improvement in inflation just for the last quarter. Markets move around on that—on the data, really. Not so much—it’s not really what we’re going to do. It’s more just that the data keep coming in, and markets are very, very responsive to that data right now. <NAME>MICHELLE SMITH</NAME>. Go to Jeff for the last question. <NAME>JEFF COX</NAME>. Thank you, Mr. Chairman. I’m going to change gears on you just a little bit from all of the rate talk and whatnot. With FedNow being in the books for a little over a year, there hasn’t been a whole lot of talk about central bank digital currency and wondering if you could give us an update on where things are with that. Is that considered a dead issue now? Is it still something that’s being discussed within the Committee, and what, what’s happening with that? <NAME>CHAIR POWELL</NAME>. It’s not something that comes up at all with the—in the FOMC. So, more broadly, digital finance is an area that’s having—that has really significant implications for payments generally, instant payments. And, you know, it’s something that’s going to really change the way—it’s going to make more efficient and, hopefully, safer and all those things— the way payments are made around the world. And so we have people who are researching that and trying to keep up to speed, because we play an important role in the payments sector, both as a convener and as an operator, too. In terms of a CBDC, there’s really nothing new going on. There’s not much going on at all. We’re not—we don’t have the authority to issue a CB—a retail CBDC that’s available to the public. We’re not seeking that authority. So what we’re doing is keeping up with—keeping up with developments there. Pretty much every major central bank in the world is at least doing, doing that. Some of them are actually seriously looking at implementing a CBDC. We’re really not. We’re really just evaluating, you know, the story and what’s happening out there. So I think it’s work that we need to be doing, which could be very beneficial down the road, but we don’t have—on a CBDC, we don’t have any plan to. We would need to go to Congress, and we have no plan to do that. We’re not—no one here has decided that we think it’s a good idea yet. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. Our economy is strong overall and has made significant progress toward our goals over the past two years. The labor market has cooled from its formerly overheated state. Inflation has eased substantially from a peak of 7 percent to an estimated 2.2 percent as of August. We’re committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2 percent goal. Today, the Federal Open Market Committee decided to reduce the degree of policy restraint by lowering our policy interest rate by ½ percentage point. This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate growth and inflation moving sustainably down to 2 percent. We also decided to continue to reduce our securities holdings. I will 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. GDP rose at an annual rate of 2.2 percent in the first half of the year, and available data point to a roughly similar pace of growth this quarter. Growth of consumer spending has remained resilient, and investment in equipment and intangibles has picked up from its anemic pace last year. In the housing sector, investment fell back in the second quarter after rising strongly in the first. Improving supply conditions have supported resilient demand and the strong performance of the U.S. economy over the past year. In our Summary of Economic Projections, Committee participants generally expect GDP growth to remain solid, with a median projection of 2 percent over the next few years. In the labor market, conditions have continued to cool. Payroll job gains averaged 116,000 per month over the past three months, a notable step-down from the pace seen earlier in the year. The unemployment rate has moved up but remains low at 4.2 percent. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market are now less tight than just before the pandemic in 2019. The labor market is not a source of elevated inflationary pressures. The median projection for the unemployment rate in the SEP is 4.4 percent at the end of this year, four-tenths higher than projected in June. Inflation has eased notably over the past two years but remains above our longer-run goal of 2 percent. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.2 percent over the 12 months ending in August and that, excluding the volatile food and energy categories, core PCE prices rose 2.7 percent. 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 median projection in the SEP for total PCE inflation is 2.3 percent this year and 2.1 percent next year, somewhat lower than projected in June. Thereafter, the median projection is 2 percent. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. For much of the past three years, inflation ran well above our 2 percent goal, and labor market conditions were extremely tight. Our primary focus had been on bringing down inflation, and appropriately so. We 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. Our restrictive monetary policy has helped restore the balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remain well anchored. Our patient approach over the past year has paid dividends: Inflation is now much closer to our objective, and we have gained greater confidence that inflation is moving sustainably toward 2 percent. As inflation has declined and the labor market has cooled, the upside risks to inflation have diminished, and the downside risks to employment have increased. We now see the risks to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risks to both sides of our dual mandate. In light of the progress on inflation and the balance of risks, at today’s meeting, the Committee decided to lower the target range for the federal funds rate by ½ percentage point to 4¾ percent to 5 percent. This recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we begin the process of moving toward a more neutral stance. We are not on any preset course. We will continue to make our decisions meeting by meeting. We know that reducing policy restraint too quickly could hinder progress on inflation. At the same time, reducing restraint too slowly could unduly weaken economic activity and employment. In considering additional 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. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely scenario going forward. If the economy evolves as expected, the median participant projects that the appropriate level of the federal funds rate will be 4.4 percent at the end of this year and 3.4 percent at the end of 2025. These median projections are lower than in June, consistent with the projections for lower inflation and higher unemployment, as well as the changed balance of risks. These projections, however, are not a Committee plan or decision. As the economy evolves, monetary policy will adjust in order to best promote our maximum-employment and price-stability goals. If the economy remains solid and inflation persists, we can dial back policy restraint more slowly. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. The Fed has been assigned two goals for monetary policy—maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation back down to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. 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. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Thank you, Mr. Chairman, for taking our questions. In July, you said you weren’t necessarily thinking about a 50. You didn’t want to be specific, but you said you weren’t thinking about a 50. The inflation data last week came out a little firmer than expected. Retail was strong, third-quarter GDP running 3 percent. So what changed that made the Committee go 50, and how do you respond to the concerns that perhaps it shows the Fed is more concerned about the labor market? And I guess, should we expect more 50s in the months ahead? And based on what should we make that call? Thank you. <NAME>CHAIR POWELL</NAME>. So, okay, a lot of questions in there. [Laughter] Let me jump in. So, since the last meeting—okay, the last meeting we have had a lot of data come in. We’ve had the two employment reports, July and August. We’ve also had two inflation reports, including one that came in during blackout. We had the QCEW report, which suggests that maybe—that not maybe, but suggests that the payroll report numbers that we’re getting may be artificially high and will be revised down. You know that. We’ve also seen anecdotal data, like [the data collected in] the Beige Book. So we took all of those, and we went into blackout. And we thought about what to do, and we concluded that this was the right thing for the economy, for the people that we serve, and that’s, that’s how we made our decision. So that’s one question. What was the second and third? <NAME>STEVE LIESMAN</NAME>. How do we make the—sorry, thank you, sir. How do we figure out in the months ahead, is there another 25 or 50 coming in based on what should we make that call? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So a couple things. A good place to start is the—is the SEP, but let me start with what I said, which was that we’re going to be making decisions meeting by meeting based on the incoming data, the evolving outlook, the balance of risks. If you look at the SEP, you’ll, you’ll see that it’s, it’s a process of recalibrating our policy stance away from where we had it a year ago, when inflation was high and unemployment low, to a place that’s more appropriate given where we are now and where we expect to be. And that process will take place over time. There’s nothing in the—in the SEP that suggests the Committee is in a rush to get this done. This, this process evolves over time. Of course, that’s a projection. That’s a baseline projection. We know, as I mentioned in my remarks, that the actual things that we do will depend on the way the economy evolves. We can go quicker if that’s appropriate. We can go slower if that’s appropriate. We can pause if that’s appropriate. But that’s, that’s what we are contemplating. Again, I would point you to the SEP as just an assessment of where—what the Committee is thinking today—what the individual members, rather, of the Committee are thinking today, assuming that their particular forecasts take—you know, are realized. <NAME>MICHELLE SMITH</NAME>. Let’s go to Chris. <NAME>CHRIS RUGABER</NAME>. Hi. Chris Rugaber at Associated Press. Thank you. The projections show that the Fed—Fed officials expect the fed funds rate to still be above their estimate of long-run neutral by the end of next year. So does that suggest that you see rates as restrictive for that entire period? Does that threaten the weakening of the job market that you said you’d like to avoid? Or does it suggest that maybe people see the short-run neutral as a little bit higher? Thank you. <NAME>CHAIR POWELL</NAME>. I think it would—the way I would really characterize it is this: I think people write down their estimate, individuals do. I think every single person on the Committee, if you asked them, what’s your level of certainty around that, they would say there’s a wide range where that could fall. So I think we don’t know. There are model-based approaches and empirically based approaches that estimate what the neutral rate will be at any given time. But, realistically, we know it by its works. So that leaves us in a place where we’ll be—where we expect, in the base case, to be continuing to remove restriction, and we’ll be looking at the way the economy reacts to that. And that’ll be guiding us in our thinking about the question that we’re asking at every meeting, which is, is our policy stance the appropriate one? We know—if you go back, we know that the policy stance we adopted in July of 2023 came at a time when unemployment was 3½ percent and inflation was 4.2 percent. Today, unemployment is up to 4.2 percent; inflation’s down to a few tenths above 2. So we know that it is time to recalibrate our policy to something that is more appropriate given the progress on inflation and on employment moving to a more sustainable level. So the balance of risks are now even. And this is the beginning of that process I mentioned, the direction of which is toward a sense of neutral, and we’ll move as fast or as slow as we think is appropriate in real time. What you have is our individual—accumulation of individual estimates of what that will be in the base case. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. How close was this in terms of the decision? You do have the first dissent by a Governor since 2005, I think. Was the weight clearly in favor of a 50, or was this a very close decision? <NAME>CHAIR POWELL</NAME>. I think we had a good—a good discussion. You know, if you go back, I talked about this at Jackson Hole, but I didn’t address the question of the size of the cut and left it open, and I think we left it open going into blackout. And so there was a lot of discussion back and forth, good diversity of—excellent discussion today. I think there was also broad support for the decision that the Committee voted on. So I would add, though, look at the SEP. All 19 of the participants wrote down multiple cuts this year. All 19. That’s a big change from June, right? Seven of the—seven of them wrote down three or more and—sorry, 17 of the 19 wrote down three or more cuts, and 10 of the 19 wrote down four or more cuts. So, you know, there is a dissent, and there’s a range of views, but there’s actually a lot of common ground as well. <NAME>HOWARD SCHNEIDER</NAME>. Follow-up to that. Now that this is in the books, can you give us some guidance as sort of a follow-up to Steve on the pacing here? Would you expect this to be running every other meeting once we get into next year? <NAME>CHAIR POWELL</NAME>. We’re going to take it meeting by meeting, as I mentioned. There’s no sense that the Committee feels it’s in a rush to do this. We made a good, strong start to this, and that’s really, frankly, a sign of our confidence—confidence that inflation is, is coming down toward 2 percent on a sustainable basis. That gives us the ability. We can, you know, make a good, strong start. But—and I’m very pleased that we did. To me, the logic of this, both from an economic standpoint and also from a risk-management standpoint, was clear. But I think we’re going to go carefully, meeting by meeting, and make our decisions as we go. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Hi, Chair Powell. Jeanna Smialek, New York Times. Thanks for taking our questions. You and your colleagues in your economic projections today see the unemployment rate climbing to 4.4 percent and staying there. Obviously, historically, when the unemployment rate climbs that much over a relatively short period of time, it doesn’t typically just stop—it continues increasing. And so I wonder if you can walk us through why you see the labor market stabilizing, sort of what’s the mechanism there? And what do you see as the risks? <NAME>CHAIR POWELL</NAME>. So, again, the labor market is actually in solid condition, and our intention with our policy move today is to keep it there. You can say that about the whole economy. The U.S. economy is in good shape. It’s growing at a solid pace, inflation is coming down, the labor market is in a strong pace, we want to keep it there. That’s, that’s what we’re doing. <NAME>MICHELLE SMITH</NAME>. Sorry—Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, does today’s action constitute a catch-up in action given recent substantial revisions to the employment data, or is this larger-than-typical rate cut a function of the elevated nominal level of the policy rate such that an accelerated cadence could be expected to continue? <NAME>CHAIR POWELL</NAME>. Okay, multiple questions in there. So I would say we don’t think we’re behind. We do not think—we think this is timely, but I think you can take this as a sign of our commitment not to get behind. So it’s, it’s a strong move. Sorry, your other question was? <NAME>NICK TIMIRAOS</NAME>. It was, is this about what happened in the employment data between this meeting and the last meeting? Or is this about the level of the funds rate—the high nominal level of funds rate relative to what might be expected if you’re trying to maintain equilibrium? <NAME>CHAIR POWELL</NAME>. So I think it’s about—we come into this with a policy position that was put in place, as you know, I mentioned, in July of 2023, which was a time of high inflation and very low unemployment. We’ve been very patient about, about reducing the policy rate. We’ve waited. Other central banks around the world have cut, many of them several times. We’ve waited, and I think that that patience has really paid dividends in the form of our confidence that inflation is moving sustainably under 2 percent. So I think that is what enables us to take this, this strong move today. I do not think that anyone should look at this and say, “Oh, this is the new pace.” You know, you have to think about it in terms of the base case. Of course, what happens will happen. So, so, in the base case, what you see is—look at the SEP, you see cuts moving along. The sense of this is we’re recalibrating policy down over time to a more neutral level. And we’re moving at the pace that we think is appropriate given developments in the economy and the base case. The economy can develop in a way that would cause us to go faster or slower, but that’s what the base case is. <NAME>NICK TIMIRAOS</NAME>. And, if I could follow up on the balance sheet, in 2019, when you did the mid-cycle adjustment, you ceased the balance sheet runoff. With a larger cut today, is there any—should there be any signal inferred about how the Committee would approach “end state” on the balance sheet policy? <NAME>CHAIR POWELL</NAME>. So, in the current situation, reserves have really been stable. They haven’t come down. So reserves are still abundant and expected to remain so for some time. As you know, the shrinkage in our balance sheet has really come out of the overnight RRP [facility]. So I think what that tells you is, we’re not thinking about, about stopping runoff because of this at all. We know that these two things can happen side by side. In a sense, they’re both a form of normalization, and so, for a time, you can have the balance sheet shrinking but also be cutting rates. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. Just following up on Jeanna’s question on rising unemployment. Is it your view that this is just a function of a normalizing labor market amid improved supply, or is there anything to suggest that something more concerning perhaps is taking place here, given that other metrics of labor demand have softened too? And I guess, in direct follow-up to Jeanna, do you not—why should we not expect a further deterioration in labor market conditions if policy is still restrictive? <NAME>CHAIR POWELL</NAME>. So I think what we’re seeing is, clearly labor market conditions have cooled off by any measure, as I talked about in Jackson Hole, and—but they’re still at a level— the level of those conditions is actually pretty close to what I would call maximum employment. So you’re close to mandate, maybe at mandate, on that. So what’s driving it? Clearly, clearly payroll job creation has moved down over the last few months, and this bears watching. Many— By many other measures, the labor market has returned to or below 2019 levels, which was a very good, strong labor market, but this is more sort of 2018, ’17. So the labor market bears close—bears close watching, and we’ll be giving it that. But ultimately, we think—we believe, with an appropriate recalibration of our policy, that we can continue to see the economy growing, and that will support the labor market. In the meantime, if you look at the growth in economic activity data, retail sales data that we just got, second-quarter GDP—all of this indicates an economy that is still growing at a solid pace. So that should also support the labor market over time. So—but again, we’re—it bears watching. And we’re watching. <NAME>COLBY SMITH</NAME>. And just on the point about starting to see rising layoffs, if that were to happen, wouldn’t the Committee already be too late in terms of avoiding a recession? <NAME>CHAIR POWELL</NAME>. So we’re—that’s—you know, our plan, of course, has been to begin to recalibrate and we’re—as you know, we’re not seeing rising claims, we’re not seeing rising layoffs, we’re not seeing that, and we’re not hearing that from companies that that’s something that’s getting ready to happen. So we’re not waiting for that, because, you know, there is—there is thinking that the time to support the labor market is when—is when it’s strong and not when we begin to see the layoffs. There’s some lore on that. So that’s the situation we’re in. We have, in fact, begun the cutting cycle now, and we’ll be watching—and that’ll be one of the factors that we consider. Of course, we’re going to look at the totality of the data as we make these decisions meeting by meeting. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee with Bloomberg TV and Radio. To follow up on that, what would constitute for you and the Committee a deterioration in the labor market? You’re pricing in, basically by the end of next year, 200 basis points of cuts just to maintain a higher unemployment rate. Would you be moving to a more preemptive monetary policy style— rather than, as you did with inflation, waiting until the data gave you a signal? <NAME>CHAIR POWELL</NAME>. We’re going to be watching all of the data, right? So if—as I mentioned in my remarks, if the labor market were to slow unexpectedly, then we have the ability to react to that by, by cutting faster. We’re also going to be looking at our other mandate, though. We are more—we have greater confidence now that inflation is moving down to 2 percent, but, at the same time, our plan is that we will be at 2 percent, you know, over time. So—and policy, we think, is still restrictive, so that should still be happening. <NAME>MICHAEL MCKEE</NAME>. I’m just curious as to how sensitive you’ll be to the labor market, since you forecast we are going to see higher unemployment and it is going to take a significant amount of monetary easing to just maintain it. <NAME>CHAIR POWELL</NAME>. So, you know, what I would say is, we don’t think we need to see further loosening in labor market conditions to get inflation down to 2 percent. But we have a dual mandate, and I think you can take this whole action as—take a step back, what have we been trying to achieve? We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with disinflation. That’s what we’re trying to do. And I think you can take today’s action as a sign of our strong commitment to achieve that goal. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. You’re describing this view that you don’t think you’re behind when it comes to the job market. Can you walk us through the specific data points that you found to be most helpful in the discussions at this meeting? You’ve mentioned a couple, but would you be able to walk us through what that dashboard told you, as far as what you know about the job market now? <NAME>CHAIR POWELL</NAME>. Sure. So we’ll start with unemployment, which is the single most important one probably. You’re at 4.2 percent. That’s, you know—I know it’s higher than we were used to seeing, numbers in the mid- and even below mid-3s last year, but, if you look back over the sweep of the years, that’s, that’s a low. That’s a very healthy unemployment rate. And anything in the low 4s is, is a really—is a good labor market. So that’s one thing. Participation is at high levels. It’s, you know—we’ve had—we’re right—adjusted for demographics for aging, participation’s at pretty high levels. That’s a good thing. Wages are still a bit above what would be their—wage increases, rather, are still just a bit above where they would be over the very longer term to be consistent with 2 percent inflation, but they’re very much coming down to what that sustainable level is. So we feel good about that. Vacancies over—per unemployed is back to what is still a very strong level. It’s not as high as it was. That number reached two to one, two vacancies for every unemployed person. As measured, it’s now below—it’s around one. But that’s still—that’s still a very good number, I would say. You know, quits have come back down to normal levels. I mean, I could go on and on. There are many, many employment indicators. What do they say? They say this is still a solid labor market. The question isn’t the level; the question is that there has been change, particularly over the last few months, and, you know, so what we say is, as the risks, the upside risks, to inflation have really come down, the downside risks to employment have increased. And, and because we have been patient and held our fire on cutting while, while inflation has come down, I think we’re now in a very good position to manage the risks to both of our goals. <NAME>RACHEL SIEGEL</NAME>. And what do you expect to learn between now and November that will help inform the scale of the cut at the next meeting? <NAME>CHAIR POWELL</NAME>. You know, more data, the usual. Don’t look for anything else. We’ll see another labor report. We’ll see another jobs report. I think we get a—we might, actually— we get two—we get a second jobs report on the day of the meeting, I think, or no, no, on the Friday before the meeting. So—and inflation data. We’ll get all this data. We’ll be watching. You know, it’s always a question of, look at the incoming data and ask what are the implications of that data for the evolving outlook and the balance of risks and then go through our process and think, what’s the right thing to do? Is policy where we want it to be to foster the achievement of our goals over time? So that’s what it is, and that’s what we’ll be doing. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks. Hi, Chair Powell. Neil Irwin with Axios. We’ve only been running a little above 100,000 jobs a month on payroll the last three months. Do you view that level of job creation as worrying or alarming, or would you be—would you be content if we were to kind of stick at that level? And relatedly, you know, one of the welcome trends of the last couple of years has been labor markets seen coming out through job openings falling, rather than job losses. Do you think that trend has further to run, or do you see risk that further labor market cooling will have to come through job losses? <NAME>CHAIR POWELL</NAME>. So, on the job creation, it depends on—it depends on the inflows, right? So, if you’re having millions of people come into the labor force then, and you’re creating 100,000 jobs, you’re going to see unemployment go up. So it really depends on what’s the trend underlying the volatility of people coming into the country. We understand there’s been quite an influx across the borders, and that has actually been one of the things that’s, that’s, that’s allowed the unemployment rate to rise. And the other thing is just the slower hiring rate, which is something we also watch carefully. So it does depend on what’s happening on the supply side. On the Beveridge curve question, yes, so we all felt, on the Committee, not all, but I think everyone on the Committee felt that job openings were so elevated that they could fall a long way before you hit the part of the curve where job openings turned into higher unemployment, job loss. And yes, I mean, I think we are—it’s hard to know that—you can’t know these things with great precision, but certainly it appears that we’re very close to that point, if not at it, so that further declines in job openings will translate more directly into unemployment. But it’s been— it’s been a great ride down. I mean, we’ve seen a lot of, of tightness come out of the labor market in that form without it resulting in lower employment. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thanks, Chair Powell. Edward Lawrence with Fox Business. So we’ve heard some speculation that you may be going with the federal funds rate to 3½, maybe under 4 percent. There’s basically an entire generation that has experienced zero or near- zero federal funds rate, and some think we’re heading in that direction again. What’s the likelihood that cheap money is now the norm? <NAME>CHAIR POWELL</NAME>. So this is a question—and you mean after we get through all of this? It’s just—great question that we just, we can only speculate about. Intuitively, most—many, many people anyway, would say we’re probably not going back to that era where there were trillions of dollars of sovereign bonds trading at negative rates—long-term bonds trading at negative rates. And it looked like the neutral rate was—might even be negative, so—and it was—people were issuing debt at negative rates. It seems that’s so far away now. My own sense is that we’re not going back to that. But, you know, honestly, we’re going to find out. But, you know, it feels—it feels to me that the neutral rate is probably significantly higher than it was back then. How high is it? I don’t—I just don’t think we know. It’s—again, we only know it by its works. <NAME>EDWARD LAWRENCE</NAME>. And one more, how do you respond to the criticism that will likely come that a deeper rate cut now, before the election, has some political motivations? <NAME>CHAIR POWELL</NAME>. Yeah, so, you know, this is my fourth presidential election at the Fed, and, you know, it’s always the same. We’re always—we’re always going into this meeting, in particular, and asking, what’s the right thing to do for the people we serve? And we do that, and we make a decision as a group, and then we announce it. And it’s—that’s always what it is. It’s never about anything else. Nothing else is discussed, and I would also point out that the things that we do really affect economic conditions for the most part with a lag. So, nonetheless, this is what we do. Our job is to support the economy on behalf of the American people. And, if we get it right, this will benefit the American people significantly. So this really concentrates the mind, and, you know, it’s something we all take very, very seriously. We don’t put up any other filters. I think if you start doing that, I don’t know where you stop. And so we just don’t do that. <NAME>MICHELLE SMITH</NAME>. Jo Ling. <NAME>JO LING KENT</NAME>. Thank you, Chair Powell. I’m Jo Ling Kent with CBS News. My first question is, very simply, what message are you trying to send American consumers, the American people, with this unusually large rate cut? <NAME>CHAIR POWELL</NAME>. I would just say that, you know, the U.S. economy is in a good place, and, and our decision today is designed to keep it there. More specifically, the economy is growing at a solid pace, inflation is coming down closer to our 2 percent objective over time, and the labor market is still in solid shape. So our intention is really to maintain the strength that we currently see in the U.S. economy. And we’ll do that by returning rates from their high level, which has really been—the purpose of which has been to get inflation under control. We’re, we’re going to move those down over time to a more normal level over time. <NAME>JO LING KENT</NAME>. Just have a follow-up to that. Listening to you talk about inflation moving meaningfully down to 2 percent, is the Federal Reserve effectively declaring a decisive victory over inflation and rising prices? <NAME>CHAIR POWELL</NAME>. No, we’re not. So inflation, you know—what we say is we want inflation—the goal is to have inflation move down to 2 percent on a sustainable basis. And, you know, we’re not really—we’re close, but we’re not really at 2 percent. And I think we’re going to want to see it be, you know, around 2 percent and close to 2 percent for some time, but we’re certainly not doing—we’re not saying “mission accomplished” or anything like that. But I have to say, though, we’re encouraged by the progress that we have made. <NAME>MICHELLE SMITH</NAME>. Catarina. <NAME>CATARINA SARAIVA</NAME>. Hi. Catarina Saraiva with Bloomberg News. I just would love to know kind of how the Committee is thinking about the persistence we’ve seen in housing inflation. You know, do you think you can return to 2 percent with housing inflation where it is? Yeah. <NAME>CHAIR POWELL</NAME>. So housing inflation is the—is the one piece that is kind of dragging a bit, if I can say. We know that market rents are doing what we would want them to do, which is to be moving up at relatively low levels, but they’re not rolling over—the leases that are rolling over are not coming down as much and OER is coming in high. So, you know, it’s been slower than we expected. I think we now understand that it’s going to take some time for those lower market rents to get into this. But, you know, the direction of travel is clear, and as long as market rents remain, you know, relatively low inflation, over time that will show up, just the time it’s taking now, several years rather than just one or two cycles of annual lease renewals. So that’s—I think we understand that now, but I don’t think the outcome is in doubt again. As long as market rents remain under control, the outcome is not as in doubt. So I would say it’s—the rest of the portfolio—or of the elements that go into core PCE inflation have behaved pretty well. You know, they’re all—they all have some volatility. We will get down to 2 percent inflation, I believe, and I believe that, ultimately, we’ll get what we need to get out of the housing services piece, too. <NAME>CATARINA SARAIVA</NAME>. Some of your colleagues have expressed concern that, with starting to cut rates, you could re-ignite demand in housing and see prices go up even more. What’s the likelihood of that, and how would you react to that? <NAME>CHAIR POWELL</NAME>. The housing market, it’s hard to—it’s a game that—the housing market is in part frozen because of lock-in with low rates. People don’t want to sell their homes. So, because they have a very low mortgage, it would be quite expensive to refinance. As rates come down, people will start to move more, and that’s probably beginning to happen already. But remember, when that happens, you’ve got a seller, but you’ve also got a new buyer in many cases. So it’s not, you know, obvious how much additional demand that would make. I mean, the real issue with housing is that we have had, and are on track to continue to have, not enough housing. And so it’s going to be challenging. It’s hard to find—to zone lots that are in places where people want to live. It’s—all of the aspects of housing are more and more difficult, and, you know, where are we going to get the supply? And this is not something that the Fed can, can really fix. But I think, as we normalize rates, you’ll see the housing market normalize. And, I mean, ultimately by getting inflation broadly down and getting those rates normalized and getting the housing cycle normalized, that’s the best thing we can do for house holders. And then the supply question will have to be dealt with by the market and also by government. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. Just following up on some of the labor market talk earlier, you know, monetary policy operates with long and variable lags, and I’m wondering how much you see being able to keep the unemployment rate from raising too much comes from the fact that you’re starting to act now and that’s going to give people more room to run versus just the labor market is strong. And then, also, if I could, following up on Nick’s question, do you see today’s 50 basis point move as partially a response to the fact that you didn’t cut in July and that sort of gets you to the same place? <NAME>CHAIR POWELL</NAME>. So you’re right about lags, but I would just point to the overall economy. You have an economy that is growing at a solid pace. If you look at forecasters or talk to companies, they’ll say that they think 2025 should be a good year, too. So there’s no sense—the U.S. economy is basically fine if you talk to market participants, I mean, you know, business people who are actually out there doing business. So I think, you know, I think our move is timely. I do. And, as I said, you can—you can see our, our 50 basis point move as a commitment to make sure that we don’t fall behind. So you’re really asking about—your second question, you’re asking about July. And I guess if you ask if we’d gotten the July report before the meeting, would we have cut? We might well have. We didn’t make that decision, but we might well have. I think that’s not—you know, that doesn’t really answer the question that we ask ourselves, which is, let’s look, you know—at this meeting we’re looking back to the July employment report, the August employment report, the two CPI reports, one of which came, of course, during blackout, and all of the other things that I mentioned. We’re looking at all of those things, and we’re asking ourselves, what’s the right—what’s the policy stance we need to move to? We knew—it’s clear that we—clearly, literally, everyone on the Committee agreed that it’s time to move. It’s just how big—how fast do you go, and what do you think about the paths forward. So this decision we made today had broad support on the Committee, and I’ve discussed the path ahead. <NAME>MICHELLE SMITH</NAME>. Elizabeth. <NAME>ELIZABETH SCHULZE</NAME>. Thank you, Chair Powell. Elizabeth Schulze with ABC News. Mortgage rates have already been dropping in anticipation of this announcement. How much more should borrowers expect those rates to drop over the next year? <NAME>CHAIR POWELL</NAME>. Very hard for me to say. That’s—from our standpoint, I can’t really speak to mortgage rates. I will say that’ll depend on how the economy evolves. Our intention, though, is—we think that our policy was appropriately restrictive. We think that it’s time to begin the process of recalibrating it to a level that’s more neutral, rather than restrictive. We expect that process to take some time, as you can see in the projections that we released today. And as—if things work out according to that forecast, other rates in the economy will come down as well. However, the rate at which those things happen will really depend on how the economy performs. We can’t see—we can’t look a year ahead and know what the economy is to be doing—going to be doing. <NAME>ELIZABETH SCHULZE</NAME>. What’s your message to households who are frustrated that home prices have still stayed so high as rates have been high? What do you say to those households? <NAME>CHAIR POWELL</NAME>. Well, what I can say to the public is that we had the highest—we had a burst of inflation. Many other countries around the world had a similar burst of inflation, and, when that happens, part of the answer is that we raise interest rates in order to cool the economy off in order to reduce inflationary pressures. It’s not something that people experience as pleasant, but, at the end, what you get is low inflation restored, price stability restored. And a good definition of price stability is that people in their daily decisions, they’re not thinking about inflation anymore. That’s where everyone wants to be, is back to what’s inflation, you know? Just keep it low, keep it stable. We’re restoring that. So what we’re going through now really restores—it will benefit people over a long period of time. Price stability benefits everybody over a long period of time, just by virtue of the fact that they don’t have to deal with inflation. So that’s what’s been going on, and I think we’ve made real progress. I completely—we don’t tell people how to think about the economy, of course. And, of course, people are [still] experiencing high prices, as opposed to high inflation. And we understand that’s painful. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Hi, Chair Powell. Greg Robb from Marketwatch.com. I was wondering if you could go through—you said just at the beginning that, coming into the blackout, there was like an open thought of 25 or 50—you know, the Fed could move either 25 or 50. I would sort of argue that when we had those two last speeches by Governor Waller and New York Fed President John Williams, that they were sort of saying that maybe a gradual approach was going to win the day. I mean, I sort of want to ask a seven-part question about this. But, I mean, could you talk— would you have cut rates by 50 basis points if the market had been pricing in, like, low odds of a 50 point move like they were last Wednesday, you know, after the CPI number came out? It was a really small probability of a 50 point cut. Does that play in your consideration at all? Just talk a little bit about that. Thank you. <NAME>CHAIR POWELL</NAME>. We’re always going to try to do what we think is the right thing for the economy at that time. That’s what we’ll do. And that’s what we did today. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Thank you, Chair Powell. Simon Rabinovitch with the Economist. You’ve mentioned how closely you’re watching the labor market, but you also noted that payroll numbers have been a little bit less reliable lately because of the big downward revisions. Does that put your focus overwhelmingly on the unemployment rate? And given the SEP projection of 4.4 [percent] basically being the peak in the cycle, would going above that be the kind of thing that would trigger another 50 basis point cut? <NAME>CHAIR POWELL</NAME>. So we will continue to look at that broad array of labor market data, including the payroll numbers. We’re not discarding those. I mean, we’ll certainly look at those, but we will mentally tend to adjust them based on the QCEW adjustment, which you referred to. There isn’t a bright line. You know, it will be—the unemployment rate’s very important, of course, but there isn’t a single statistic or single bright line over which that thing that might move that would dictate one thing or another. We’ll look at—each meeting, we’ll look at all the data on inflation, economic activity, and the labor market, and we’ll make decisions about, is our policy stance where it needs to be to foster over the medium term our mandate goals? So I can’t—I can’t say we have a bright line in mind. <NAME>MICHELLE SMITH</NAME>. Matt Egan. <NAME>MATT EGAN</NAME>. Thanks, Chair Powell. Matt Egan from CNN. I know that you discussed earlier how the Fed does whatever the right thing is and nothing else factors in. But, in general, can you talk about whether or not you believe a sitting U.S. president should have a say in Fed decisions on interest rates? Because that’s something that former President Trump, who obviously appointed you, has previously suggested. And I know the Fed is designed to be independent, but why? Can you tell the public why you view that as so important? <NAME>CHAIR POWELL</NAME>. Sure. So countries that are—democracies around the world, countries that are sort of like the United States, all have what are called independent central banks. And the reason is that people have found over time that insulating the central bank from direct control by political authorities avoids making monetary policy in a way that favors maybe people who are in office as opposed to people who are not in office. So that’s the idea, is that— you know, I think the data are clear that countries that have independent central banks, they get lower inflation. And so we’re, we’re not—we do our work to serve all Americans. We’re not serving any politician, any political figure, any cause, any issue, nothing. It’s just maximum employment and price stability on behalf of all Americans. And that’s how the other central banks are set up, too. It’s a good institutional arrangement, which has been good for the public and I hope—and I hope and strongly believe that it will continue. <NAME>MICHELLE SMITH</NAME>. Kyle. <NAME>KYLE CAMPBELL</NAME>. Kyle Campbell for American Banker. Thanks for taking the questions, Chair Powell. A couple regulatory developments in the past week that I want to ask you about. First, last week Vice Chair for Supervision Michael Barr outlined his views for the changes to the Basel III endgame. I’m wondering if you are in alignment with him on what those changes should be, if those have support on the Board in the broad way that you’re looking for, and if you think the other agencies are also fully onboard with that approach. And then yesterday, other banking regulators— <NAME>CHAIR POWELL</NAME>. You know what, hold the second question. <NAME>KYLE CAMPBELL</NAME>. Okay. Sure. <NAME>CHAIR POWELL</NAME>. We’ll give you the second question. So the answer to your question is that, yes, those, those changes were negotiated between the agencies with my support and with my involvement, with the idea that we were going to re-propose, re-propose the changes that Vice Chair Barr talked about and then take comment on them. So, yes, that is—that’s happening with my support. <NAME>KYLE CAMPBELL</NAME>. Is there a date for that— <NAME>CHAIR POWELL</NAME>. That’s not a final proposal, though, you understand. We’re putting them out for comment. We’re going to take comment and make appropriate changes. We don’t have a—we don’t have a calendar date for that, and, as for the other agencies, you know, the idea is that we’re all moving together, we’re not moving separately, so that—I don’t know exactly where that is. But the idea is that we will move as a group to put this, again, out for comment, and then, you know, it’ll—the comments will come back 60 days later, and we’ll dive into them, and we’ll try to bring this to a conclusion sometime in the first half of next year. <NAME>KYLE CAMPBELL</NAME>. Right. And then, yesterday. there were merger reform finalizations from the other bank regulators. What does the Fed have to do to align itself on a merger? <NAME>CHAIR POWELL</NAME>. You know, I would—I would bounce that question to Vice Chair Barr. It’s a good question, but I don’t have that today. Thanks. <NAME>MICHELLE SMITH</NAME>. Jennifer, for the last question. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. You said earlier that the decision today reflects with appropriate recalibration strength in the labor market that could be maintained in the context of moderate growth, even though the policy statement says you view the risks to inflation and job growth as roughly balanced. Given what you’ve said, though, today, I’m curious, are you more worried about the job market and growth than inflation? Are they not roughly balanced? <NAME>CHAIR POWELL</NAME>. No, I think—I think, and we think, they are now roughly balanced. So if you go back for a long time, the risks were on inflation. We had a historically tight labor market, historically tight. There was a severe labor shortage, so very hot labor market. And we had inflation way above target. So, you know, that said to us, concentrate on inflation, concentrate on inflation. And we did for a while, and we kept at that, that the stance that we put in place 14 months ago was a stance that was focused on bringing down inflation. Part of bringing down inflation, though, is cooling off the economy and a little bit cooling off the labor market. You now have a cooler labor market, in part because of our activity. So what that tells you is, it’s time to change our stance. So we did that. The sense of the change in the stance is that we’re recalibrating our policy over time to a stance that will be more neutral. And today was—I think we made a good strong start on that. I think it was the right decision, and I think it should send a signal that we, you know, that we’re committed to coming up with a good outcome here. <NAME>JENNIFER SCHONBERGER</NAME>. Is the economy more vulnerable to a shock now that could tip it into recession? <NAME>CHAIR POWELL</NAME>. I don’t think so. I don’t—there’s—as I look—well, let me look at it this way: I don’t see anything in the economy right now that suggests that the likelihood of a recession—sorry, of a downturn is elevated, okay? I don’t see that. You see—you see growth at a solid rate, you see inflation coming down, and you see a labor market that’s, that’s still at very solid levels. So, so I don’t really see that, no. Thank you. <NAME>MICHELLE SMITH</NAME>. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. The economy is strong overall and has made significant progress toward our goals over the past two years. The labor market has cooled from its formerly overheated state and remains solid. Inflation has eased substantially from a peak of 7 percent to 2.1 percent as of September. We are committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2 percent goal. Today, the FOMC decided to take another step in reducing the degree of policy restraint by lowering our policy interest rate by ¼ percentage point. We continue to be confident that, with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2 percent. We also decided to continue to reduce our securities holdings. 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. GDP rose at an annual rate of 2.8 percent in the third quarter, about the same pace as in the second quarter. Growth of consumer spending has remained resilient, and investment in equipment and intangibles has strengthened. In contrast, activity in the housing sector has been weak. Overall, improving supply conditions have supported the strong performance of the U.S. economy over the past year. In the labor market, conditions remain solid. Payroll job gains have slowed from earlier in the year, averaging 104,000 per month over the past three months. This figure would have been somewhat higher were it not for the effects of labor strikes and hurricanes on employment in October. Regarding the hurricanes, let me extend our sympathies to all the families, businesses, and communities who have been harm—harmed by these devastating storms. The unemployment rate is notably higher than it was a year ago but has edged down over the past three months and remains low at 4.1 percent in October. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market are now less tight than just before the pandemic in 2019. The labor market is not a source of significant inflationary pressures. Inflation has eased significantly over the past two years. Total PCE prices rose 2.1 percent over the 12 months ending in September; excluding the volatile food and energy categories, core PCE prices rose 2.7 percent. Overall, inflation has moved much closer to our 2 percent longer-run goal, but core inflation remains somewhat elevated. 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. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. We see the risks to achieving our employment and inflation goals as being roughly in balance, and we’re attentive to the risks to both sides of our mandate. At today’s meeting, the Committee decided to lower the target range for the federal funds rate by ¼ percentage point, to 4½ percent to 4¾ percent. This further recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we move toward a more neutral stance over time. We know that reducing policy strain—restraint too quickly could hinder progress on inflation. At the same time, reducing policy restraint too slowly could unduly weaken economic activity and employment. In considering additional 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. We are not on any preset course. We will continue to make our decisions meeting by meeting. As the economy evolves, monetary policy will adjust in order to best promote our maximum-employment and price-stability goals. If the economy remains strong and inflation is not sustainably moving toward 2 percent, we can dial back policy restraint more slowly. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can move more quickly. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. The Fed has been assigned two goals for monetary policy—maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. We understand that our affect—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 our discussion. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Given the expectation that the election outcome will produce policies that would meaningfully impact the U.S. economy next year, how is the Committee taking these proposals into account for upcoming decisions, including potentially the next one in December? And, and can you give us any more sense of how proactive or reactive the Fed is prepared to be to changes in economic policies with the next Administration? <NAME>CHAIR POWELL</NAME>. Sure. So let me say that in the near term, the election will have no effects on our policy decisions. As you know, many, many things affect the economy, and anyone who writes down forecasts in their job will tell you that the economy is quite difficult to forecast, looking out past the very near term. Here, we don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy would be—specifically, whether and to what extent those policies would matter for the achievement of our goal variables: maximum employment and price stability. We don’t—we don’t guess, we don’t speculate, and we don’t assume. Now, just in principle, it’s possible that any Administration’s policies or, or policies put in place by Congress could have economic effects over time—over time that would matter for our pursuit of our dual-mandate goals. So, we—along with countless other factors, forecasts of those economic effects would be included in our models of the economy and would be taken into account through that channel. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Chair Powell, Nick Timiraos from the Wall Street Journal. Roughly one year ago when the 10-year Treasury was flirting with 5 percent and 30-year mortgage rates were near 8 percent, you noted how higher borrowing costs, if they were sustained, could weigh on economic activity. Given that you’ve said you believe policy is restrictive and the Fed is now dialing back that restriction, are the growth risks presented by higher U.S. Treasury yields today any different from those you identified one year ago when inflation was still meaningfully above your target? <NAME>CHAIR POWELL</NAME>. So I would just say this. We’ve watched the, the run-up in bond rates, and it’s, it’s nowhere where it was, of course, a year ago. I guess that, you know, the long- run rates are well below that level. So we’re watching that. Things have been moving around, and we’ll see where they settle. I think it’s too early to really say where they settle. Ultimately, I’m sure we’ve all read these decompositions of what, you know—and I certainly have, but it’s not really our job to provide our specific decomposition. I will say, though, that it appears that the moves are not, not principally about higher inflation expectations. They’re really about a sense of more likely to have stronger growth and perhaps less in the way of downside risks. So that’s what they’re about. You know, we do take financial conditions into account. If they—if they’re persistent and if they’re material, then we’ll certainly take them into account in our policy. But I would say we’re not at—we’re not at that stage right now. It’s just something that we’re watching. And, again, these things don’t really have mainly to do with, with Fed policy, but to do with other factors in the economy. <NAME>NICK TIMIRAOS</NAME>. If I could follow up—is the September SEP—are those rate projections still valid? Do they still seem relevant given where we are now? <NAME>CHAIR POWELL</NAME>. You know what? It’s—you get halfway through the cycle between the last set and the next set. I, I wouldn’t want to comment one way or the other. You know, people are—let’s talk about the data we’ve gotten since the last meeting. So, in the main, the economic activity data have been stronger than expected. The NIPA revision was stronger. Certainly, the September employment report was stronger; the October report, not stronger; retail sales, stronger. So, overall, though, I think you take away a sense of, of some of the downside risks to economic activity having, having been diminished, with the NIPA revisions in particular, and so, overall, feeling, feeling good about economic activity. So I think we would factor that in. At the same time, we got one inflation report, which was—it wasn’t terrible, but it was— it was a little higher than expected. So I think, really, the question is, is December. And, you know, by December we’ll have—we’ll have more data: I guess one more employment report, two more inflation reports, and lots of other data, and, you know, we’ll make a decision as we get to December. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek from the New York Times. Thanks for taking our questions, Chair Powell. When it comes to December, what will you be looking at specifically as you try to make that decision? And then, as of the Fed’s economic projections in September, you, you had written down four quarter-point interest rate cuts in 2025. Do you still think that those are likely? Is that sort of the baseline outlook at this point, or has that shifted? And if it shifted at all, can you—can you give a little bit of, of detail as to why? <NAME>CHAIR POWELL</NAME>. You know, I can’t. We don’t fill out a—we don’t fill out an SEP, and I can’t characterize one that wasn’t filled out today. So I can’t really speak for kind of exactly where the—where the Committee is. I would just say, for December, we’re going to be—again, in every meeting—we’re going to be looking at the incoming data and how that affects the outlook. As you know, we’re in the process of recalibrating from a fairly restrictive level at 5.33 percent. After today’s move, we’re down 75 basis points. And we’re, we’re asking ourselves, “Is that where we need to be?” You know that we’re, we’re trying to steer between the risk of moving too quickly and perhaps undermining our progress on inflation or moving too slowly and allowing the labor market to weaken too much. We’re trying to, to be on a middle path where we can maintain the strength in the labor market while also enabling further progress on inflation. We think that’s where we are, but that’s the question we’re going to be asking in September and, and in other meetings. And, again, I can’t really update you on the Committee’s thinking, because we don’t fill out an SEP at this meeting. <NAME>JEANNA SMIALEK</NAME>. Yes, total—totally appreciate that. I guess when it comes to your own thinking, do you think that that—a full percentage point of rate cuts in 2025—is a reasonable outlook? <NAME>CHAIR POWELL</NAME>. Again, I’m going to wait—we’re going to wait and see how things come in in December. I mean, I—it’s just—I would put it this way: We’re on a path to a more neutral stance. And, and that’s very much what we’re on. That has not changed at all since September. And, you know, we’re just going to have to see where the—where the data lead us. We have, you know, a whole six weeks of data to look at to make that decision in December. Obviously, I’m not ruling it out or in, but, but, you know, I would say—you know, I would say that, you know, again, we didn’t update the SEP, so I’m not going to characterize, you know, where the Committee would be. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Thanks. Howard Schneider with Reuters. I wondered if you could please elaborate and explain a little bit the two changes in the language of the statement here in the first paragraph when you say, “Inflation has made progress,” dropping the word “further progress,” and in the second paragraph dropping the sentence that the Committee had “gained greater confidence” that inflation was progressing towards its 2 percent goal. Is there any policy substance behind either of those changes in language? Is it—is it meant to open the door to a December pause? Is it meant to communicate anything about the stickiness of core inflation in the last three months? <NAME>CHAIR POWELL</NAME>. Not really, no. So let me tell you what we were thinking. So the test of gaining further confidence was a—was our test for the first rate cut, right? And so we, we met that test in September, and therefore we take that test out. If you leave it in, then it’s new forward guidance. It’s brand new forward guidance. “What do you mean by it? Are you—are you making—are you requiring yet further guidance?” We have to say “yes” or “no” at every meeting whether we’ve made further progress. The point is we have gained confidence that, that we’re on a sustainable path down to 2 percent. So that, I would tell you, is, is what that’s really all about. And it’s not meant to send a signal. Neither of those is meant to send a further signal. And, you know, saying “further progress” it becomes a test where we don’t want to be—we don’t think it’s a good time to be doing a lot of, of forward guidance. You know, we’re—there’s a fair amount of uncertainty in that—in what I’ve said. The path that we’re on, we do know what—where the destination is, but we don’t know the right pace, and we don’t know exactly where the destination is. So the—the—the point is to find that, to find the right pace and the right destination as we go. And I think there’s a fair amount of uncertainty about that, and, you know, you don’t want to tie yourself up with, with guidance. You want to be able to make sensible decisions as you go. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Mr. Chairman, you talked about higher rates, perhaps from an expectation of higher growth. You didn’t talk about it in terms of expectations of higher deficits. Is that something you think might be behind the recent rise in interest rates, and is that—are rising deficits a concern to you? <NAME>CHAIR POWELL</NAME>. So we don’t comment on fiscal policy, and, again, I don’t have a lot more to say on, on what’s driving bond yields. In terms of, of policy changes, though, let me give you a sense of how this, this works in the ordinary case. Let’s say Congress is considering a rewrite of the tax laws; it doesn’t matter what’s in the content. So we would follow that. At a certain point, we’d, we’d think we see the outline, so we’d start to model it. And then we’d wait, and we’d wait, and, at a certain point, the staff would brief the FOMC and say, you know, “This is—these are the likely effects.” There’s lots and lots of literature on the effects of tax policy changes on various parts of the economy. So we’d, we’d try to get smart on that. And then the law actually passes, and, you know, you’d start to put it—you’d probably run an alternative simulation before that happens, just to keep people trying to understand it. Then, then when it actually passes, it goes into the model, along with a million other things. So, you know, these—we have a very large economy. Many things are affecting it at any given time. And, you know, a law change of some kind would go in there, but—it would go in, but it would—you know, it’s a process that takes some time. Clearly, the legislative process takes a lot of time. And, of course, the real question is not the effect of that law. It’s all of the policy changes that are happening. What’s the net effect and, you know, the overall effect on the economy at any given time? So I think that’s a—that’s a process that takes a lot of time and that we go through all the time with every Administration, constantly. And I just—this will be no different. But, you know, right now, we’re—there’s nothing to—there’s nothing to model right now. It’s such an early stage. We don’t know what the policies are, and once we know what they are, we won’t—we won’t have a sense of, you know, when they’ll be implemented or, or all those sorts of things. So I think I would just say— <NAME>STEVE LIESMAN</NAME>. Mm-hmm. <NAME>CHAIR POWELL</NAME>. —we’re not doing that now, and all that will take time, and it will be very much regular order when we do do that. <NAME>STEVE LIESMAN</NAME>. If I could just follow up on Nick’s question—are the current rates something you feel like you need to lean against, in that they go against the direction of policy by being—adding restriction to the economy? Or do you just take them as a given or perhaps a signal that you should do less? <NAME>CHAIR POWELL</NAME>. I—look, I just think—the first question is, how long will they be sustained? If you remember the 5 percent 10-year, people were drawing massively important conclusions only to find, you know, three weeks later that the 10-year was 50 basis points lower. So, you know, it’s material changes and financial conditions that last, that are persistent, that really matter. And we don’t know that about these. What we’ve seen so far? You know, we’re watching it. We’re reading. You know, we’re doing the decompositions and reading others, but right now it’s not a major factor in, in how we’re thinking about things. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. Chris Rugaber at Associated Press. You mentioned the positive economic data that we’ve seen since the September meeting, including the revisions to things like savings, higher GDP growth. We saw a stock market jump yesterday. That’s renewed some of the questions about why, why do many cuts at all in this—with this backdrop? <NAME>CHAIR POWELL</NAME>. So you’re right. As I mentioned, and as you mentioned, the latest economic data have been strong, and that’s, of course, a great thing and highly welcome. But, of course, our mandate is maximum for employment and price stability, and we think that even with today’s cut, policy is still restrictive. We understand it’s not possible to say precisely how restrictive, but we feel that it is still restrictive. And if you look at our goal variables, the labor market has cooled a great deal from its overheated state of two years ago and is now essentially in balance. It is continuing to cool, albeit at a—at a modest rate, and we don’t need further cooling, we don’t think, to achieve our inflation mandate. So that’s the labor market. Inflation has moved down a great deal from its higher—its highs of two years ago, and we judged, as I mentioned, that it’s on a sustainable path back to 2 percent. So the job’s not done on inflation. But if you look at those two things, we judged in September that it was appropriate to begin to recalibrate our policy stance to reflect this progress, and today’s decision is really another step in that process. Overall, as I mentioned, we believe that with an appropriate recalibration of our policy stance, we can maintain strength in the labor market even as our policy stance enables further progress toward our inflation goal. <NAME>CHRISTOPHER RUGABER</NAME>. Great. And just to follow up, could you—what might cause you to pause rate cuts in December? What kind of economic data would lead you to that path? Thank you. <NAME>CHAIR POWELL</NAME>. So we haven’t, you know, made any decision like that at all. But we’re—so we’re in the process, as I mentioned, of moving policy down—our stance down over time to a more neutral level. And, as a general matter, as we move ahead, we are prepared to adjust our assessments of the appropriate pace and destination as the outlook evolves. So, for example, if we were to see the labor market deteriorating, we’d be prepared to move more quickly. Alternatively, as we approach levels that are plausibly neutral or close to neutral, it may turn out to be appropriate to slow the pace at which we’re dialing back restriction. Again, haven’t made any decisions about that, but that’s certainly a possibility. If you— you can think of it as similar to what we do with asset purchase—with asset runoff with QT. So we reach a point where we slow the pace, much like an airplane reaching the airport slows down. And so, you know, it—we’re thinking about it that way, but it’s, it’s something that we’re just beginning to think about. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thanks, Chair Powell. So with, with this noise in the jobs reports that we’ve seen and you look at the Fed’s favorite inflation, PCE inflation, overall it’s 2.1 percent—very close to the Fed’s target—but core inflation is 2.7 percent, and it’s been that way since July. So why doesn’t this data give fuel to a rate pause for this meeting? <NAME>CHAIR POWELL</NAME>. Well, so I think if you look at the 3- and 6-month—you’re quoting the 12-month. <NAME>EDWARD LAWRENCE</NAME>. Yes. <NAME>CHAIR POWELL</NAME>. So we look at all of them, right? <NAME>EDWARD LAWRENCE</NAME>. Yes. <NAME>CHAIR POWELL</NAME>. But if you look at three- and six-month core PCE, you’ll see they’re around 2.3 percent. So we look at all of them. And we look at—we also—we look at 12 as well. But what it’s telling us is that we really have made significant progress. And we expect there to be bumps. For example, you know, the, the last three months of last year, the core PCE readings were very, very low—probably unsustainably low. So that’s why you see—that’s why forecasts generally see a couple of upticks toward the end of the year. On the other hand, the January reading certainly looks like an example of residual seasonality, so that we saw last year. So when that falls out of the 12-month calculation in February, we should see it staying down. So there will literally be a bump up and then down. We understand that. Overall, you see the progress on inflation, and you also look at the economy, and you say, “What’s—what is the inflation story now? Where is it coming from?” So I point to a couple of things. One is the nonhousing services and goods, which together make up 80 percent of that— of the core PCE index, are back to the levels they were at the last time we had sustained 2 percent inflation, which happens to be in the early 2000s for a period of five, six, seven years. So they’re back at that level. What’s not is housing services. So let’s talk about housing services. Housing services is higher. What’s going on there is, you know, market rents, newly signed leases, are experiencing very low inflation. And what’s happening is older, you know, leases that are turning over are taking several years to catch up to where market, market leases are—market rent leases are. So that’s just a catch-up problem. It’s not really reflecting current inflationary pressures; it’s reflecting past inflationary pressures. So that’s, that’s one thing. The other thing is, I’d say look at the labor market—not a source of inflationary pressures. Where is it coming from? It’s not a very tight economy. What is the story about inflation? You see that catch-up inflation also in insurance and in several other areas. So you’re seeing—we’re not, not declaring victory, obviously, but we feel like the story is very consistent with inflation continuing to come down on a bumpy path over the next couple of years and settling around 2 percent. That story is intact, and it won’t be one or two really good data months, or bad data months aren’t going to really change the pattern at this point, now that we’re this far into the process. <NAME>EDWARD LAWRENCE</NAME>. So you’re quickly trying to get to that neutral rate that you see, or do you foresee that you have some time to get there? <NAME>CHAIR POWELL</NAME>. Nothing in the economic data suggests that the Committee has any need to be in a hurry to get there. We are seeing strong economic activity. We are seeing ongoing strength in the labor market; we’re watching that carefully, but we do see maintaining strength there. And so we think that the right way—the right way to find neutral, if you will, is carefully, patiently. Again, that’s not meant to have a specific meaning other than we—to the extent—to the extent the economy remains strong, we have the ability to, to take advantage of that as we try to navigate that middle path between the two risks. <NAME>MICHELLE SMITH</NAME>. Craig. <NAME>CRAIG TORRES</NAME>. Hi, Chair Powell. Craig Torres from Bloomberg. Two questions today. Did you learn anything about what Americans think about the economy from the election results? First question. Second question—I want to talk about some labor market indicators, and I do so with great respect for your attentiveness to the maximum-employment side of the mandate, Chair Powell. So the unemployment rate has been at 4 percent or higher for six months. One of the broadest measures of unemployment is up about a half a point from a year ago. Compensation gains are sliding back. The quits rate, a signal of labor market dynamism, has been heading down to that bad neighborhood of the 20-teens. So you have put a marker at Jackson Hole saying any “further cooling” is unwelcome. It is cooling, generally, a little bit further. So at what point do we reach what you would describe as a shortfall from maximum employment? Thank you. <NAME>CHAIR POWELL</NAME>. Sure. So on your first question, I’m not going to talk about anything that relates directly or indirectly to the election. On the second one, you’re—you know, this is the great question, and it’s the one we think about all the time. So I’ll just say a couple things. You know, there’s nothing really surprising here. What we know is that the unemployment rate is low. We also know that it’s come down significantly—sorry, moved up significantly from a year or so ago. So we’ve seen a big change upward in unemployment. Sometimes that has meant bad things. So far, it doesn’t appear to be. It appears that the—I wouldn’t say that the labor market has fully stabilized, because I do think it’s continuing to very gradually cool, but it seems to be in a good place. And our policy, of course, is designed to keep it in that good place, to maintain the strength in the labor market, while also enabling further progress on inflation. You know, you mentioned a bunch of, of indicators, and you’re right. You know, the, the openings to unemployment rate is back to a normal level. I would—I would characterize it more broadly as “normalizing.” You mentioned wages. Wages are still running just a bit above where they would need to be to be consistent with 2 percent inflation, unless productivity is going to remain at this high level. If we see the—if we see productivity, you know, more sustainably at these high levels, then that would sustain higher wage gains. So I would say—in fact, you can say it the other way, that, that wage increases are now consistent with 2 percent inflation given current productivity readings. But, of course, you know, the lore on productivity readings is whenever you see high readings, you should assume they’re going to revert pretty quickly to the longer-term trend. That has always been the case for 50 years. But, you know, it may be that—we’re now five years. If you look at the NIPA revisions that came out a month ago, we’re five years into, into a nice set of productivity readings, which are sustained and very healthy. But, overall, it’s a good labor market. We could talk about 20 different data series. We’ll be looking at all of them, of course. But, you know, we don’t want the labor market to, to soften much from here. We don’t think we need that to happen to get inflation back to 2 percent. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. Some of the President-elect’s advisers have suggested that you should resign. If he asked you to leave, would you go? <NAME>CHAIR POWELL</NAME>. No. <NAME>VICTORIA GUIDA</NAME>. Can you follow up on is—do you think that legally that you’re not required to leave? <NAME>CHAIR POWELL</NAME>. No. <NAME>MICHELLE SMITH</NAME>. Mike. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. You talk a lot about what the data are telling you and how you are dependent on the data. But in terms of forward-looking assessments of the economy, what are you hearing from CEOs or other officials around the country? What did you hear today from the regional Bank presidents about what companies and consumers think about where the economy is going from here, rather than looking backwards? And does that match up with what your forecasts have been and what you think the appropriate policy path should be? <NAME>CHAIR POWELL</NAME>. So it’s hard to characterize a, you know, really interesting set of discussions we had, and, of course, you’ll see them in the minutes in three weeks. But I would say this. I think, you know, the comments from our Reserve Bank colleagues and from the CEOs that they talk to are pretty constructive on the economy right now—pretty constructive, feeling that the labor market is, is, you know, back to normal to the point where it’s no longer that much of a discussion topic in their world, whereas two years ago, it was all they were talking about. So they feel like the labor market’s in balance. People feel good about where the economy is. Demand is obviously pretty strong. And, you know, you’re seeing, what, 2.8 percent growth in the third quarter estimated. Maybe the year is 2½. This is—this is—you know, this is a strong economy. It’s actually remarkable how well the U.S. economy has been performing with, you know, strong growth, a strong labor market, inflation coming down. We’re, you know, really performing better than any of our global peers. And I think that is reflected in what you hear from—what I hear people hear from CEOs. I don’t get to talk to a lot of CEOs in my job, but I hear what others summarize from those. And, of course, I hear the Reserve Bank presidents do a lot of that, and it’s pretty constructive overall. Now, that’s not to say—there are areas of caution and things like that but, ultimately, overall pretty positive. <NAME>MICHAEL MCKEE</NAME>. To follow up on the areas of caution, if there were black clouds on the horizon that you identified as something you’re watching, what would they be? <NAME>CHAIR POWELL</NAME>. I think it’s—you know, it’s things like—clearly, geopolitical risks around the world are elevated, and just as clearly, they’ve had relatively little effect on the U.S. economy. Now, that can change through the price of oil or otherwise, but people talk about those as, you know, something that’s on the horizon all the time. But, you know, ultimately, if you look at the U.S. economy, its, its performance has been very good. And that’s, that’s what we hear from businesspeople, an expectation that that will continue. If anything, people feel next year—I’ve heard this from several people—that next year could even be stronger than this year. <NAME>MICHELLE SMITH</NAME>. Andrew. <NAME>ANDREW ACKERMAN</NAME>. Hi. It’s Andrew Ackerman with the Washington Post. I just wanted to follow up on the discussion earlier on fiscal policy. Your predecessors Greenspan and Volcker spoke up loudly when they thought large budget deficits endangered financial— economic or financial stability. Will you do that, too? And, right now, we’re in a period of full employment. We have large budget deficits and debt at historic, historic highs that are—and rising. Is that something you’d speak out against? <NAME>CHAIR POWELL</NAME>. So, you know, I have said many times no more, no less than what the predecessors you mentioned have said. And what that is is that the U.S. fiscal—federal government’s fiscal path—fiscal policy is on an unsustainable path. The level of our debt relative to the economy is not unsustainable. The path is unsustainable. And we see that. And, you know, you’ve got a very large deficit at—you’re at full employment, and that’s expected to continue. So it’s important that we—you know, that that be dealt with. It is ultimately a threat to the economy. Now, I can say that. I don’t have oversight. We don’t have oversight over fiscal policy. I’ve said it on many occasions—just said it again. <NAME>ANDREW ACKERMAN</NAME>. Okay. Thank you. I guess the only other question is—to follow up on Victoria’s question—do you believe the President has the power to fire or demote you, and has the Fed determined the legality of a President demoting at will any of the other Governors with leadership positions? <NAME>CHAIR POWELL</NAME>. Not permitted under the law. <NAME>ANDREW ACKERMAN</NAME>. Not what? <NAME>CHAIR POWELL</NAME>. Not permitted under the law. <NAME>ANDREW ACKERMAN</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. Hi, Chair Powell. Courtenay Brown from Axios. In response to Howard’s question, you said it wasn’t an ideal time to give forward guidance because of the economic uncertainties. Can you lay out what some of those uncertainties are and whether or not it includes some of the proposals that the President-elect has put out on the campaign trail— tariffs, for instance? <NAME>CHAIR POWELL</NAME>. No. I was not referring to, to the new Administration’s policies at all, nor will I today. So I—what I’m just saying is, as we look ahead, we know—and I mentioned this in my statement—that the risks are two sided. I guess I should start by saying that we think that the economy and we think our policy are both in a very good place, a very good place. And—but as you look forward, you say, “What are the risks?” And one risk is that we would move too quickly and find ourselves having moved too quickly, and inflation comes back, and we—and we lost our chance to get inflation back to 2 percent. So we have to avoid that risk. And that, that—to avoid that risk, that means you want to move carefully. The other risk is that we move too slowly and that we allow the labor market to weaken too much and do unnecessary damage to the labor market and to people’s working lives. That, that says, “Don’t get behind the curve.” So these are two—these two things are the two risks that we have to manage. And so we’re, we’re in the middle there. We try to be in the middle and deal with both of the—manage both of those. Again, the idea is to maintain support, the strength that we have in the labor market and in the economy, but also with somewhat less restrictive but still restrictive policy, enable further progress toward our 2 percent inflation goal. And so there’s—you know, there— this is the thing: Meeting by meeting, we’re going to be making our assessment of what the right path is. You know, it’s not as important—the precise timing of these things is not as important as the overall arc of them, and the arc of them is to move from where we are now to a sense of neutral, a more neutral policy. We don’t know exactly where that is; we only know it by its works. We’re pretty sure it’s below where we are now. But as we move further, there will be more uncertainty about where that is. And we’re going to move carefully as, as this goes on so that, you know, we can increase the chances that we will get it right. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Thank you, Chair Powell. Simon Rabinovitch with the Economist. I know you don’t want to share your decomposition of bond yields, but if you look at the breakevens, it, it is clear that longer-term inflation expectations do seem to have risen up at about 2.5 percent, for example, on the five-year. That’s up half a point from when you cut in September. Do you have any concern at all that longer-term inflation expectations are deanchoring or, put another way, are anchoring at a slightly higher level? Thanks. <NAME>CHAIR POWELL</NAME>. So we, we would be concerned if we saw—if we thought we saw longer-term inflation expectations anchoring at a higher level. That’s not what we’re seeing. We’re still seeing between surveys and market readings broadly consistent with—you know, I, I looked at the five-year, five-year earlier today, and it’s probably moved, but it’s just not—it’s just—it’s kind of right where it’s been, and also it’s pretty close to consistent with 2 percent PCE inflation. So that’s one that’s been a traditional one that we look at a lot. But, overall, expectations seem to be—and really have throughout this—in a place that’s consistent with 2 percent inflation. But you’re right to say we watch that very carefully, and we will not allow inflation expectations to drift upward. But that’s, that’s really why we reacted so sharply back in 2022 was, was to avoid that. <NAME>MICHELLE SMITH</NAME>. Kelly. KELLY O’GRADY. Hi, Chair Powell. Kelly O’Grady, CBS News. We just talked about what you’ve heard from business leaders on the economy, but many average Americans are still not feeling the strength of the economy in their wallets. So what’s your message to them on when they might expect relief? <NAME>CHAIR POWELL</NAME>. So you’re right that, you know, we say that the economy is performing well, and it is, but we also know that people are still feeling the effects of high prices, for example. And we went through—the world went through a global inflation shock, and inflation went up everywhere. And, you know, it, it stays with you because the price level doesn’t come back down. So what that takes is it takes some years of real wage gains for people to feel better. And that’s what we’re—that’s what we’re trying to create. And I think we’re well on the road to creating that. Inflation has come way down. The economy is still strong here. Wages are moving up but, but at a sustainable level. So it’s just—I think—I think what needs to happen is happening and, for the most part, has happened. But it’ll be some time before people, you know, regain their confidence and feel that. And, you know, we don’t tell people how to—how to feel about the economy. We respect—completely respect—what they’re feeling. Those feelings are true; they’re accurate. We don’t question them. We—you know, we respect them. KELLY O’GRADY. And just a quick follow-up—President-elect Trump has been critical of your performance. Any concern about his influence on the Fed’s independence? <NAME>CHAIR POWELL</NAME>. I’m not going—I’m not going to get into the—any of the political things here today, but thank you. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. What is your plan if we start to see stagflation? <NAME>CHAIR POWELL</NAME>. So that’s a—you know, the whole plan is not to have stagflation, so we don’t have to deal with it. So that’s our—that is actually our plan. [Laughter] You know, it’s, of course, a very difficult thing because you’re—you know, you’re—anything you do with interest rates will, will hurt one side or the other, either the inflation mandate or the—or the employment mandate. I would just say that, you know, we’ve, we’ve been able to see inflation come down a whole lot, you know, much closer to our goal without the kind of sharp increase in unemployment that has often accompanied programs of disinflation. So knock on wood, we’ve gotten this far without seeing a real weakening in, in the labor market. And we believe we can complete the inflation task while also keeping the labor market strong, and that, of course, is exactly what we’re trying to do. <NAME>NANCY MARSHALL</NAME>-GENZER. Can you rule out an interest rate hike next year? <NAME>CHAIR POWELL</NAME>. I—no. I wouldn’t rule anything out or in that far away. But that’s certainly not, not our plan. I mean, our baseline expectation is that we’ll continue to move gradually down towards neutral, that the economy will continue to grow at a healthy clip, and that the labor market will remain strong. If you look at our—look at our—that will not change from the September SEP. You know, that is our baseline forecast. And, short of some exogenous event, it will—that will continue to be our forecast for the foreseeable future. So— but, ultimately, you know, it’s—we’re not in a—we’re not in a world where we can afford to rule, rule things out a full year in advance. It’s—there’s just too much uncertainty in what we do. <NAME>MICHELLE SMITH</NAME>. Let’s go to Jean for the last question. <NAME>JEAN YUNG</NAME>. Hi, Chair Powell. Jean Yung with MNI Market News. I wanted to go back to a comment that you had made about Americans being quite unhappy about the cumulative price level rises over the past few years, even though now inflation is back on a path to 2 percent. Would it be appropriate for the Fed to undershoot for a while on its inflation goal under the average inflation-targeting regime so people have a chance to catch up? <NAME>CHAIR POWELL</NAME>. No. That’s, that’s not the way our framework works. We’re aiming for inflation at, at 2 percent. We’re—we do not have—we do not think it would be appropriate to deliberately undershoot. And, you know, part of the problem there is that low inflation can be a problem, too, in a way. But that’s not part of our framework, and it’s not something we’re going to be—going to be looking at in our framework review. Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. The economy is strong overall and has made significant progress toward our, our goals over the past two years. The labor market has cooled from its formerly overheated state and remains solid. Inflation has moved much closer to our 2 percent longer-run goal. We’re committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2 percent goal. To that end, today, the Federal Open Market Committee decided to take another step in reducing the degree of policy restraint by lowering our policy interest rate by ¼ percentage point. We also decided to continue to reduce our securities holdings. 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—at a solid pace. GDP rose at an annual rate of 2.8 percent in the third quarter, about the same pace as in the second quarter. Growth of consumer spending has remained resilient, and investment in equipment and intangibles has strengthened. In contrast, activity in the housing sector has been weak. Overall, improving supply conditions have supported the strong performance of the U.S. economy over the past year. In our Summary of Economic Projections, Committee participants generally expect GDP growth to remain solid, with a median projection of about 2 percent over the next few years. In the labor market, conditions remain solid. Payroll job gains have slowed from earlier in the year, averaging 173,000 per month over the past three months. The unemployment rate is higher than it was a year ago, but, at 4.2 percent in November, it has remained low. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market are now less tight than in 2019. The labor market is not a source of significant inflationary pressures. The median projection for the unemployment rate in the SEP is 4.2 percent at the end of this year and 4.3 percent over the next few years. Inflation has eased significantly over the past two years but remains somewhat elevated relative to our 2 percent longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.5 percent over the 12 months ending in November, and that, excluding the volatile food and energy categories, core PCE prices rose 2.8 percent. 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 median projection in the SEP for total PCE inflation is 2.4 percent this year and 2.5 percent next year, somewhat higher than projected in September. Thereafter, the median projection falls to our 2 percent objective. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. We see the risks to achieving our employment and inflation goals as being roughly in balance, and we are attentive to the risks on both sides of our mandate. At today’s meeting, the Committee decided to lower the target range for the federal funds rate by ¼ percentage point, to 4¼-4½ percent. We’ve been moving policy toward a more neutral setting in order to maintain the strength of the economy and the labor market while establishing further progress in—sorry, enabling further progress on—inflation. With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive. We can therefore be more cautious as we consider further adjustments to our policy rate. We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook, and the balance of risks. We’re not on any preset course. In our Summary of Economic Projections, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely scenario going forward. The median participant projects that the appropriate level of the federal funds rate will be 3.9 percent at the end of next year and 3.4 percent at the end of 2026. These median projections are somewhat higher than in September, consistent with the firmer inflation projection. These projections, however, are not a Committee plan or decision. As the economy evolves, monetary policy will adjust in order to best promote our maximum-employment and price-stability goals. If the economy remains strong and inflation does not continue to move sustainably toward 2 percent, we can dial back policy restraint more slowly. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy more quickly. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. On a technical note: We lowered the offering rate on our overnight reverse repo facility to align it with the bottom of the target range for the federal funds rate—its typical configuration. Technical adjustments of this kind have no bearing on the stance of monetary policy. The Fed has been assigned two goals for monetary policy: maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. 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, and I look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Jeanna. <NAME>JEANNA SMIALEK</NAME>. Jeanna Smialek with the New York Times. Thank you for taking our questions. I, I wonder if you could talk a little bit about why officials think it’s appropriate to cut rates at all in 2025 if inflation is expected to remain firm throughout the year. And what would you expect, at this point, the timing might look like? Would a January cut potentially be possible, or does a pause next month seem more likely? <NAME>CHAIR POWELL</NAME>. Well, so let, let me start by saying why we—why we cut today and then—and then move to 2025. So I would say today was a—was a closer call, but we decided it was the right call because we thought it was the best decision to foster achievement of both of our goals, maximum employment and price stability. We see the risks as two-sided: moving too slowly and needlessly undermine economic activity and the labor market, or move too quickly and needlessly undermine our progress on inflation. So we’re trying to steer between those two risks, and, on balance, we decided to go ahead with a further cut. And I, I’ll give you some details on why. Downside risks to the labor market do appear to have diminished, but the labor market is now looser than pre-pandemic, and it’s clearly still cooling further, so far in, in a gradual and orderly way. We don’t think we need further cooling in the labor market to get inflation down to 2 percent. Job creation is now well below the level or certainly below the level that would hold unemployment constant, the job-finding rate is low and declining, and other measures—such as surveys of workers and businesses, quits, things like that—broadly show a, a much cooler labor market than there was, than we had in 2019. It’s still quite gradually cooling. So we, we keep an eye on that. Inflation, we see that story as still broadly on track, and, and I’ll tell you why. We, we’ve made a great deal of progress. Twelve-month core inflation, as I mentioned, through November is estimated at 2.8 percent, down from a high of 5.6 percent. Twelve—but 12-month inflation has actually been moving sideways, as we are “lapping” very low readings of late last year. Housing services inflation actually is steadily coming down now, albeit at a slower pace than we might like, but it has now come down substantially and it is making progress, slower than hoped. And we, we’ve had recent high readings from nonmarket services and some bumpiness for goods. So I’ll just say, we, we—so remember that we couple this decision today with the “extent and timing” language in the postmeeting statement that signals that we are at or near a point at which it will be appropriate to slow the pace of further adjustments. You ask about 2025. I, I think that the lower—the slower pace of cuts for next year really reflects both the higher inflation readings we’ve had this year and the expectation that inflation will be higher. You saw in the SEP that risks and, and uncertainty around inflation we see as higher. Nonetheless, we, we see ourselves as, as still on track to continue to cut. I think the actual cuts that we make next year will not be because of anything we wrote down today. We’re, we’re going to react to data. That’s just the general sense of what the Committee thinks is likely to be appropriate. <NAME>JEANNA SMIALEK</NAME>. Sorry, just one, one quick follow-up: Why, I guess, would you make those cuts? Like, what would—what would be the trigger to cut? <NAME>CHAIR POWELL</NAME>. So we’re—to, to cut further after this point, I, I would say it this way: We’ve reduced our policy rate now by 100 basis points. We’re significantly closer to neutral. At 4.3 percent and “change,” we believe policy is still meaningfully restrictive. But as for additional cuts, we’re going to be looking for further progress on inflation as well as continued strength in the labor market. And as long as the economy and the labor market are solid, we can be cautious about—as we consider further cuts. And all of that is reflected—to your question—in the December SEP, which shows a median forecast of down [to] two cuts next year, compared to four in September. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters, and thanks for the opportunity to ask you a question. So this does seem similar to the dynamic in 2016 during the last transition to a Trump Administration, where the Committee saw slightly tighter policy in part in expected anticipation of the fiscal policy stance that was seen evolving over the year. Some of it was a data mark-to-market exercise, and some of it was anticipation of fiscal. What’s the split on this one? How much of this was accounting for inflation data that was coming in, and how much of it is expecting that there will be inflationary fiscal policy next year? <NAME>CHAIR POWELL</NAME>. I, I’d say—I’d, I’d point to five or six things, and, and I’d start—let me start by saying that we think the economy’s in a really good place, and we think policy’s in a really good place. Let’s remember that the economy’s growing 2½ percent this year, that inflation has come down by 50 percent to, to—from 5.6 percent to 2.6 percent. Headline inflation is 2.5 percent on a 12-month basis. We’re actually in a really good starting place here. But since, you know—so, so what’s really driving the, the slower rate-cut path? First thing is growth is stronger, right? We, the economy grew faster in the second half of 2024, so far, than we had expected and is expected to be above what our expectations in September next year as well. Unemployment is lower, and, you know, in the SEP, you’ll see that participants think that the—that the downside risks are less and uncertainty is less. And so that’s, that’s more strength, right? Inflation is higher, as we talked about. Inflation’s higher this year. It’s also higher in the forecast next year. I’d also point out that we’re, we’re closer to the neutral rate, which is another reason to be cautious about, about further moves. And—but then getting to your—to your point, there’s also, there’s uncertainty—uncertainty around inflation, I pointed out, is actually higher. It’s also—it’s also, in the case of some people, some people—the way I’d say it is this: Some people did take a very preliminary step and start to incorporate highly conditional estimates of economic effects of policies into their forecast at this meeting and said so in the meeting. Some people said they didn’t do so, and some people didn’t, didn’t say whether they did or not. So we have people making a bunch of different approaches to that. But some did identify policy uncertainty as one of the reasons for their, their writing down more uncertainty around inflation. And, you know, the point of that uncertainty is, it’s kind of commonsense thinking that when the path is uncertain you go a little bit slower. It’s not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down. And so that may have affected some of the people. But as, as I said, there’s a range of—range of approaches on the Committee. <NAME>HOWARD SCHNEIDER</NAME>. If I could follow up on that: You mentioned the risk and uncertainty indexes toward the back of the document. The upside risk to inflation jumped quite substantially. The only thing, really, that’s happened—you, you mentioned that the disinflationary story remains intact, yet the risk weighting has jumped to the upside. The only real thing that’s happened is November 5th, in the meantime. Is it fair to say that that’s what’s driving the higher sense of upside risk on inflation? <NAME>CHAIR POWELL</NAME>. Actually, that’s not the only thing that’s happened. What’s happened is that our forecast for inflation for this year, I think, are five-tenths higher than they were in September. So, you’ve got—you had two months of higher inflation, September and October. As I mentioned, November is, is back on track. But, you know, once again we’ve, you know, we’ve had a year-end projection for inflation and it’s kind of fallen apart as we’ve approached the end of the year. So that is certainly a large factor in people’s thinking. I can tell you that might be the single biggest factor is inflation has once again underperformed relative to expectations. It’s still, you know, going to be between 2½ and 3 [percent]. It’s way below where it was. But, you know, we really want to see progress on inflation, to, to, you know, as I mentioned, as we think about further cuts, we’re going to be looking for progress on inflation. We have been moving sideways on 12-month inflation as the 12-month window moves. That’s in part because inflation was very, very low measured in, in the 4th quarter of 2023. Nonetheless, as we go forward, we’re going to want to be seeing further progress on bringing inflation down and keeping a solid labor market. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRIS RUGABER</NAME>. Thank you. Chris Rugaber at Associated Press. Thanks for taking the question. In September 2018, the Fed staff in the Tealbook discussed a policy of “looking through” any new tariffs as long as they were one-time increases and inflation expectations remained anchored. Could you comment on if that analysis remains effective and any other thinking on tariffs generally that you can share? <NAME>CHAIR POWELL</NAME>. So I do think that the 2018, the September 2018 Tealbook alternative simulations are a good place to start. I happened to have brought them here with me today. I’m sure you have them too. They’re, they’re a good starting point, and, and I would just say, you know, it’s six-years-old analysis. But nonetheless, this is still, I think, I think the right, the right questions to ask. And, you know, there, there were two simulations: one was—one was “seeing through,” one was not. And I point you to, you’ll— there’s some language in the—in the “see- through” paragraph. It says, you know, it considers situations in which it might be appropriate to “see through” inflation and then, and then names some conditions that in, in which it might not be. In any case, this is not a question that’s in front of us right now. We, we won’t face that question—we don’t know when we’ll face that question. What the Committee’s doing now is, is discussing pathways and understanding, again, the ways in which tariff-driven inflation can affect—tariffs can affect inflation and the economy, and, and how to think about that. So, we’re, we’re—we’ve done a bit of, good bit of work, all of us have, each of us has, and, you know, it puts us in position, when we finally do see what the, what the actual policies are, to be, to make, you know, a more, more careful, thoughtful assessment of what might be the appropriate policy response. <NAME>CHRIS RUGABER</NAME>. Great, and just a quick follow[-up]. Do you, given the recent bout of inflation that we’ve been through, with consumers seeing how, you know, prices can rise and businesses being—seeing that they can raise prices, at least for some time, does that make it a little bit riskier to look through tariffs? I mean, are—do you feel that you have to respond more quickly to inflation threats, given what we’ve seen the past few years? <NAME>CHAIR POWELL</NAME>. So the, the main thing is—and this is also a point in these alternative simulations—is that there’re just many, many factors that go into what, what—how much tariffs will, will even go into consumer inflation. How persistent will that be? And, you know, so, we just—we just don’t know, really, very much at all about the actual policies, so it’s very premature to try to make any kind of conclusion. We don’t know what’ll be tariffed, from what countries, for how long, and what size. We don’t know whether there’ll be, you know, retaliatory tariffs. We don’t know what the, you know, the transmission of any of that will be into consumer prices. To your—to your point as well, I don’t—I wouldn’t say that we know whether the last episode is or is not a good model for what happened. You pointed out we’ve just been through a period of high inflation. We’ve just gotten through that period. That’s a difference. It was also quite a bit of diversion of trade away from China to other countries, since that, that may—that may have affects. I don’t know. I just think we, we need to take our time, not rush, and make a very careful assessment, but only when we’ve actually seen what the policies are and how they’re implemented. And, you know, we’re just—we’re just not at that stage. We’re at the stage of doing what other forecasters are doing—which is kind of thinking about these questions, but not, not trying to get to definitive answers for some time. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, to make sure I understand, participants today revised up their core PCE inflation projection for ’25 so that the central tendency runs from 2½ to 2.7 percent, and, as Howard noted earlier, most of the Committee sees the risks to those projections to the upside. So if inflation only declines next year from 2.8 to 2.5 to 2.7, what would compel the Committee to be cutting in that situation? <NAME>CHAIR POWELL</NAME>. Let me—let me find these numbers. So we have—we have inflation coming down, core inflation coming down to 2½ [percent] next year. That’s, that’d be—that’d be significant progress. You see a slower path. I think that does take on board that we want to see real progress. But we, we, you know, we’d be seeing meaningful progress to get inflation down to that level. That wouldn’t be all the way to 2 percent, but that would be, it would be, you know, better than this year. This year, [it] will be 2.8 or 2.9. That would be meaningful. We, we also have to think about the, the, you know, the labor market. And while we, we have the labor market forecast as being in good shape, we are also mindful that it is still out there very gradually cooling, so far in an orderly, gradual way. But it’s also something we need to keep our eye on. <NAME>NICK TIMIRAOS</NAME>. I, I guess, if I could follow up: If somebody looked at these projections and also the insertion of the “extent and timing” language in the statement, which has been used at times in the past when the Committee thinks maybe it’s going to be on hold for a while, and they said, “Gee, this looks like it could be the last rate cut for some time,” would they be mistaken to, to infer that? <NAME>CHAIR POWELL</NAME>. So that’s, that’s not the—that’s not any decision that we’ve made at all. Let me explain “extent and timing.” So the, the sense of that wording is to make clear that if the economy does evolve about as anticipated, we’re at a point at which it would be appropriate to slow the pace of rate cuts. So “extent,” that just relates to how, how much further we can reduce our policy rate consistent with getting to a neutral stance. Clearly, that distance has shrunk by 100 basis points. So it’s significantly smaller. So that’s, that’s the “extent” question. And, again, we’re going to be looking for further progress on inflation, as well as a strong labor market, to make those cuts. “Timing” just suggests, again, that we’re at a place where we, we, assuming the economy develops as expected, we’re at or near a level that will make it appropriate to slow the pace of adjustments. So that, that’s what we mean by that. We’re not trying to make decisions about the longer run. You know, we are, we’re trying to make sensible policy as we go. And, you know, I just would emphasize the uncertainty, which is, it’s just—it’s just a function of the fact that, that we expect significant policy changes. There’s nothing really unusual about that. I think we need to, we need to see what they are and see what the effects they will have. We’ll, we’ll have a much clearer picture, I think, you know, when that happens. <NAME>MICHELLE SMITH</NAME>. Mike. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. Even though you’ve cut rates by 100 basis points this year, we haven’t seen much change in mortgages, auto loan rates, or credit card rates. You say you’re significantly restrictive. Are you running a risk that the markets are fighting against you and the economy could be more at risk of a slowdown than you anticipate? <NAME>CHAIR POWELL</NAME>. So the, the risks that you—sorry, the rates that you talked about are, are really longer-run rates, and they’re affected, they are affected to some extent by Fed policy, but they’re also affected by many other things. And longer rates have actually gone up quite a bit since September, as, as you well know, and those are the things that drive, for example, mortgage rates more than short-term rates do. So we look at that, but we look at all financial conditions, and then we look at what’s happening in the economy. So what we see happening in the economy, again, is, you know, most forecasters have been calling for a slowdown in growth for a very long time, and it keeps not happening. So we have—we’re now well into another year of growth. It looks like it might be 2½ percent. Third and—second and third quarters were right about at the same level. So the U.S. economy is just performing very, very well. Substantially better than our global peer group. And I, I—there’s no reason to think a downturn is, is any more likely than it—than it usually is. So, the outlook is pretty bright for our economy. We have to stay on task, though, and continue to have restrictive policies so that we can get inflation down to 2 percent. We’re also going to be looking out for the labor market. We want to keep the labor market pretty close to where it is. We’re pretty close to estimates of the, the natural rate of unemployment. Job creation is, is a little below the, the level that would keep it there but, nonetheless, close. And so that’s what our policy’s trying to achieve. <NAME>MICHAEL MCKEE</NAME>. If I could follow up by asking about—your formulation for beginning rate cuts included the phrase “we need to have confidence that inflation is moving down towards our target.” Given the fact that you’ve raised your forecast for next year, do you have confidence or are you uncertain about the path of inflation going forward? <NAME>CHAIR POWELL</NAME>. So confidence was our test for raising rates, and, you know, we’ve made—look, look at the broader suite: We’ve made just a great deal of progress. We’re, you know, we’re well into the 2’s in, in core inflation and around 2½ [percent]—or even lower than that, we have been—for headline inflation. So I, I would say I’m confident that inflation has come down a great deal, and I, I’m confident in the story about why it’s come down and why that portends well. And I’ll—and I’ll tell you why. You, again, you do see with housing services inflation, which is one that we’ve really worried, worried about, it really has come down now quite steadily, at a slower pace than we thought, you know, two years ago, but it’s nonetheless steadily coming down as, as market rents, you know, market rents start to equilibrate better with, you know, new leases that turn over. Not, not new tenants, but new leases. Market rents is new leases. So that, that’s happening; that process is ongoing pretty much as we expect. Goods inflation, which is another big piece of it, has returned right to the range where it was before the pandemic. Just for some months this year it kind of moved up in a bumpy way because of used cars and things like that. But we think, overall, that should generally be in the range it was in. Then that leaves nonhousing services, and market-based nonhousing services are in, in good shape. It’s nonmarket services, and those are—those are services that are imputed rather than measured directly, and they, they don’t, we, we think they don’t really tell us much about the, you know, about tightness in the economy. They don’t really reflect that. I mean, a good example is financial services, which is really done off of asset prices, and that just—so that, that’s how that inflation works. So the overall picture, the story of why inflation should be coming down, is still intact. In particular, the labor market—look at the labor market. It’s, it is cooler by so many measures now—modestly cooler than it was in 2019, a year when inflation was well under 2 percent. So it’s not a source of inflationary pressures. Not to say there aren’t regional and, and, you know, particular professions where labor is tight. But, overall, you’re not getting inflationary impulses of any significance from the labor market. So what’s the story? The story is still just, we’re unwinding from these large shocks that the economy got in 2021 and ’22 in, for example, housing services, and now also in, in insurance, in particular, where costs went up, and those are now being reflected later in housing insurance. It’s real inflation, but it doesn’t portend persistently high inflation. So we and most other forecasters still feel that we’re on track to, you know, to get down to 2 percent. It might take another year or two from here, but I, I’m confident that that’s the path we’re on. And, you know, our policy will do everything it can to assure that that is the case. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the Financial Times. So the unemployment rate as of November, while still very low, is within spitting distance of the level that generated a lot of concern about the labor market over the summer in the lead-up to the 50 basis point cut in September. Hiring has also narrowed to just a handful of sectors. But now the Committee appears comfortable skipping cuts at upcoming meetings. So what has changed about the Committee’s assessment of the risks confronting the labor market? Is there just less concern now on that front, or is it just about there being more upside risk to inflation that now needs to be accounted for? <NAME>CHAIR POWELL</NAME>. The, the unemployment rate has now—is now the same as it was in July: 4.2 percent. It’s moved up and down, but it’s now the same as July. And job creation is, is lower than it has been, but it’s been—it’s been steady—it’s not—it’s not declining. It’s been steady at a level which, as I pointed out a couple times, is actually below the level that would hold the unemployment rate constant, but it’s not so far below. So, you might—you might—if, if we have the, the breakeven level right, and if jobs continue—job creation continues at that level in the establishment survey, then you would get a tenth maybe every other month kind of thing. So gradually declining. But we don’t have that kind of precision in this. So, but you’re right, though, and I, I read out some of the reasons. We, we do think the labor market is still cooling by many measures, and we’re watching that closely. It’s, it’s not cooling in a—in a quick or in a way that really raises concerns. I think, you know, you pointed out participants in the FOMC really thought that the risks and uncertainty had improved relative to the labor market. And it’s because of, because things have just gotten a little bit better, it doesn’t—the unemployment rate flat and things like that. Nonetheless, you know, we’re watching it closely. <NAME>COLBY SMITH</NAME>. If, if the idea, though, is that no additional kind of softening in the labor market is welcome here, what’s to prevent that from happening if rates are still restrictive? <NAME>CHAIR POWELL</NAME>. So I—what I said is, we don’t think we need further softening to get to 2 percent inflation. That’s what I’m saying, not that it’s not welcome. We don’t need it, we don’t think. If, if you had a situation where inflation’s moving around by a tenth every few months, that’s, you know, we’d have to weigh that against the fact that inflation has in recent months been moving sideways in the 12-month window. And so we’ve got to weigh them both, at this point. You know, for a while there we were only really focused mainly, mainly focused on, on inflation. We’ve now gotten to a place where, where the risks of the two are what we think are broadly, roughly in balance. And so that’s how we think about it. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, I, I did not hear you use the word “recalibration” today. And I’m just wondering if the recalibration phase is over and what you might call this new phase and whether the criteria for changing rates is somehow different and higher than it was before. Thanks. <NAME>CHAIR POWELL</NAME>. We’re not—we’re not renaming the phase—yet. But we may get around to that. But, no, I, I would say we, we are, though, in, in a new phase in the process, as I said. So, and that’s just because we’ve reduced—we’ve reduced our policy rate by 100 basis points. We’re significantly closer to neutral. We still think where we are is meaningfully, meaningfully restrictive, and I think from this point forward, you know, it’s appropriate to move cautiously and look for progress on inflation. We’ve, you know, we’ve done a lot to support economic activity by cutting 100 basis points, and that’s a good thing. I, I think it would—I support the decision, and, and I think it was the right decision to make. I think from now we are in a place where the risks really are in balance, and we need to see progress on inflation. And that’s, that’s how we’re thinking about it. So it is kind of a new thing. We moved pretty quickly to get to here, and I think going forward, obviously, we’re going to be moving slower, which is consistent with, with the SEP. <NAME>STEVE LIESMAN</NAME>. Wonder if I could follow up and ask you how much you or the Committee are looking through some of the high numbers we’ve had in the recent inflation numbers. For example, cars being up maybe because of the hurricanes, eggs because of the avian flu, that, that kind of stuff. And, and then looking forward, perhaps, to housing inflation coming down, as it did in the recent report. <NAME>CHAIR POWELL</NAME>. So we, yeah, we always try to be careful about not throwing out the numbers we don’t like, you know? It’s just a, an occupational hazard is, is to [say], “Look, those high months are wrong.” What about the low months? You know, we’ve got, we have a very low month, potentially, in November. You know, it’s estimated by many to be in the mid-teens for core PCE. So that could be idiosyncratically low. We try to look—we try to look at not just a couple or three months. We shouldn’t have—our, our position shouldn’t change based on two or three months of good or bad data. We have a long string now of inflation coming down gradually over time. As I mentioned, 12-month, I think it’s 12-month headline’s 2½; 12-month core is 2.8. That’s way better than we were. We still have some work to do, though, is how we’re looking at it. And we need policy to remain restrictive to, to get—to get that work done, we think. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks Chair, Chair Powell. Neil Irwin from Axios. Financial markets have been very buoyant, really all year. Is the Committee comfortable with where financial conditions are, or do you see a risk that looseness in financial conditions could undermine progress on your inflation target? <NAME>CHAIR POWELL</NAME>. So we, we do look carefully at financial conditions, of course; that’s part of what we do. But, you know, we, we really look carefully at is the performance of our— of our goal variables and, and how are we affecting the economy. So what we’ve seen over the course of—just take the last year. We, we’ve seen inflation—well, over the last couple of years—come down a lot. We’ve seen the labor market cool off quite a bit. That suggests that our policy is restrictive. We’ve, we can also look more directly at, at the parts of the economy that are affected by—that, that are interest sensitive, like particularly housing. Housing activity is, is very low, and that’s partly, significantly because of our policy. So we think our policy is working. It’s transmitting, and it’s having the effects on our goal variables that we would want. You know, a lot of things move financial conditions around, as you know, and we don’t really control those. But I’d say we, we see the effects we’re hoping to see on, on the goal variables and, and the places where we’d expect to see it. <NAME>NEIL IRWIN</NAME>. So, if I may, speaking of assets that have—that have been buoyant, do you see any value or benefit in the U.S. government building a reserve of Bitcoin? <NAME>CHAIR POWELL</NAME>. So, you know, we, we’re not allowed to own Bitcoin. The Federal Reserve Act says what we can own, and we’re, we’re not looking for a, a law change. That’s the kind of thing for Congress to consider, but we are not looking for a law change at the Fed. <NAME>MICHELLE SMITH</NAME>. Andrew. <NAME>ANDREW ACKERMAN</NAME>. Hey, happy holidays, Mr. Chairman. Thanks for taking our questions. I was wondering if you are satisfied with the way 2024 is ending, if you’re confident that we’ve avoided the recession that forecasters were predicting as inevitable a couple years ago. <NAME>CHAIR POWELL</NAME>. I think it’s pretty clear we’ve avoided a recession. I think growth this year has, has been solid, it really has. PDFP, private domestic final purchases, which, which we think is the best indicator of private demand, is looking to come in around 3 percent [real growth] this year. This is a really good number. Again, the U.S. economy has just been remarkable. And it’s—when we, in these international meetings that I attend, this has been the story, is that how well the U.S. is doing. And if you look around the world, there’s just a lot of slow growth and continued struggles with inflation. So I feel—I feel very good about where the economy is and the performance of the economy, and we want to keep that going. <NAME>ANDREW ACKERMAN</NAME>. The other thing I just wanted to ask about was the—you, you guys have noted that the unemployment rate is, is still low. However, employment rates have fallen rather quickly. The prime-age employment rate has fell by about half a point—half a percent, rather—recently. The question, I guess, is, do you think there’s maybe more downside momentum in the labor market than the unemployment rate alone is signaling? <NAME>CHAIR POWELL</NAME>. I don’t think so, no. I think, overall, if you look at it, prime-age participation is still very high. What, what’s going on in the labor market is that the hiring rate is low. So if you—if you have a job, you’re doing very well, and layoffs are very low, right? So people are not losing their jobs in large numbers, unusually large numbers. If you are looking for a job, though, the hiring rate is low, and that’s a signal of, of lower demand, and it has come down. So we look for signs like that, and that, that’s clearly a sign of softening, further softening. I didn’t mention it earlier, but I, I think you can see a, an ongoing gradual softening in the labor market. Again, not something we need to see to get 2 percent inflation. And, you know, that’s part of the reason that explains why we moved ahead today with, with our, with the action, with, with an additional cut. So, but you take a step back, the level of unemployment is very low—again, participation is high. Wages are at a healthy and, and ever more sustainable level—wage growth. And so the labor market—this is a good, a good labor market, and, you know, we want to keep it that way. <NAME>MICHELLE SMITH</NAME>. Amara. <NAME>AMARA OMEOKWE</NAME>. Thank you. Amara Omeokwe from Bloomberg News. I just want to put a finer point on the labor market. Can you keep the labor market this way, in the strong position that you have described, without further cuts? In other words, do you still view the labor market as needing support to protect against a further cooling? <NAME>CHAIR POWELL</NAME>. You know, we, we can’t know that with any tremendous certainty. I, I will say that we think that, that our policy balances the risks—we think the risks are roughly in balance as between the two mandates, and we think the labor market is, is in solid shape. And when I say it’s softening or cooling, it’s very gradual process. You know, job creations are, are meaningfully positive; wages are, you know, if anything, a little, still a bit above what would be sustainable if productivity were to revert to its longer-run trend. If you, if you take into account the high productivity readings we’ve had, then wages are already at a sustainable level relative to 2 percent inflation. So, again, I, I don’t want to overstate the downside in the labor market, because the downsides clearly appear to have diminished. Nonetheless, it’s, it’s one of our mandate goals, and, you know, we pay close attention to it, and it’s, it’s worth noting that it is still gradually cooling—gradually and in an orderly way. And, and, you know, that’s, that’s how I would characterize it, and that’s why we’re paying careful attention. <NAME>MICHELLE SMITH</NAME>. Elizabeth. <NAME>ELIZABETH SCHULZE</NAME>. Thanks so much, Chair Powell. Elizabeth Schulze from ABC News. As you’ve noted, the Fed is now forecasting higher inflation next year. High prices are still a burden for so many households right now. Why do you think it is that inflation is proving to be more stubborn than you’d expected? <NAME>CHAIR POWELL</NAME>. You know, it, it breaks down into a long answer, if you want, but it just has been a little bit more stubborn. I think if you go back two or three years, many people were saying that to get this far down we would’ve had to have a, had a deep recession and, you know, high unemployment by now. Well, that has not been the case, so, you know, the, the path down has actually been much better than many predicted. We, we’ve managed to, to have the unemployment rate remain essentially at its longer-run natural rate, while inflation has come down from—you know, core PCE inflation has come down from 5.6 percent to 2.8 percent on a 12-month basis. So that’s, that’s a pretty good outcome. Why hasn’t it come down [more]? One reason is that, that—just a technical issue around the way we calculate housing services, and that, that process has been slower than—market rents have, are showing up more slowly in that measure than we might have thought three, two, two years ago. So that’s part of it. I think there are other, other parts of the story, but, you know, the, the—what, what I think people are feeling right now is the effect of high prices, not high inflation. So we, we understand very well that prices went up by a great deal, and people really feel that. And it’s prices of food and transportation and heating your home and things like that. So there’s tremendous pain in, in that burst of inflation that was very global. This was everywhere in all the advanced economies at the same time. So now we have—inflation itself is way down, but people are still feeling high prices, and that is—that is really what people are feeling. The best we can do for them—and that’s who we work for—is to get inflation back down to its target and keep it there so that people are earning, you know, big, real wage increases so that their, their wages are going up, their, their compensation is going up faster than inflation year upon year upon year. And that’s what will restore people’s good feeling about the economy. That’s what it will take, and that’s what we’re aiming for. <NAME>ELIZABETH SCHULZE</NAME>. And as we look ahead to next year, what do you see as the biggest challenge to the economy under the next Administration? <NAME>CHAIR POWELL</NAME>. I feel—I feel very good about where the economy is, and, honestly, I’m very optimistic about, about the economy, and it’s—we’re, we’re in a really good place; our policy’s in a really good place. I, I expect another good year next year. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thanks, Chair Powell, for doing the questions. Edward Lawrence from Fox Business. So you say that we’re closer to the neutral rate. What percent do you see, and the Committee believes—where is that neutral rate? <NAME>CHAIR POWELL</NAME>. So I’ll say a couple things. First of all, when we, when we write— the thing we write down in the Summary of Economic Projections is the longer-run neutral rate, which is the neutral rate at a time when supply and demand are in balance, the full economy’s in balance, and no shocks are hitting the economy. That is not where we are right now. So when we’re making monetary policy at the Fed, that’s not the question we’re asking. So you can’t do a straight read between those longer-run numbers that we write down and what we think the appropriate policy should be. So, basically, at any given time, various shocks are hitting the economy. And so what we’re doing in, in real time is we’re looking at our policy stance, and we’re looking at the way it’s hitting the economy, and, particularly, we look at the effects it’s having as we try to move the economy toward maximum employment and price stability. And the answer can be that there are things that affect the economy that are—that are lasting but not permanent. And the, the ones that are permanent are the ones that would be in r*. The ones that are, could be lasting, but, but nonetheless go away over time, they could actually affect what, what’s sort of technically the appropriate neutral stance in near term. So we’re looking at that, and, you know, we don’t—we don’t know exactly where it is, but as I like to say, we know it by its works, and I think what, what we know for sure is that we’re 100 basis points closer to it right now. There are many estimates of where that might be, and we know we’re a lot closer to it, and I think we’re in a good place. But I think from here it’s a new phase, and we’re going to be, you know, cautious about, about further cuts. <NAME>EDWARD LAWRENCE</NAME>. But, but I think that the markets are looking for, for a little more clarity. I mean, I’ve heard estimates from 2.9 percent to 4 percent. You know, I, I think the markets would like to see a little more clarity about a year out, 18 months out, as to where that, that goalpost, for lack of a better term, is, because at the moment, it looks big. <NAME>CHAIR POWELL</NAME>. Yeah, I mean, honestly, we—you know, there are countless models of what—of what a neutral rate might be at any given time. There, there are empirical models, there are theoretical models, there are things that combine them, and they have as many different answers as you’d like. So there is no real certainty. And, I mean, it’s, it’s actually a good thing to know that we don’t know exactly where it is, so you’re not—you’re not tempted to think, “Oh, I think this model or this estimate is right.” You, you just have to be open to, you know, the empirical data that are coming in and also how it’s affecting the outlook. And it’s not made any easier by the fact that, you know, that our policy works with long and variable lags. Nonetheless, that is the job we have, and so we’re, we’re— I think we need— it’s appropriate for us—for us now to proceed cautiously, now that we’re 100 basis points closer to, to neutral, and we’ll do so. Meanwhile, the economy seems to be in, in good shape, and these cuts will certainly help to support economic activity and the labor market while we can still make progress on inflation, because policy is still meaningfully restrictive. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi, Victoria Guida with Politico. I just wanted to make sure I understood what you were saying at the beginning about inflation. Are you saying that progress on core PCE counts as progress on inflation even if headline inflation ticks up? And then also, since that’s what’s projected in the SEP, I was wondering, what accounts for that? Why, why do you all see core PCE going down and, potentially, headline inflation ticking up? <NAME>CHAIR POWELL</NAME>. So, and as, as I imagine you know, the, you know, the goal overall is headline inflation, because that’s what people experience. People don’t experience core inflation; they experience inflation, and that includes food and energy costs. So that’s the overall goal. But, as we know, headline inflation contains energy and food, and those prices can fluctuate for reasons that are not related to tightness in the economy and therefore are not really good predictors of future inflation. So it turns out that core inflation is, is a better predictor of overall inflation than overall inflation is. So we look at core inflation because it’s a better measure of what future inflation is like to be, likely to be, because it’s a better measure of, of what inflation pressures exist. So that’s, that’s—it’s complicated, but ultimately, we, you know, our goal is headline, not core. So your question was, your second question was what? <NAME>VICTORIA GUIDA</NAME>. Why do you all see core going down but headline potentially ticking up? <NAME>CHAIR POWELL</NAME>. So headline can be affected—you’re talking about next year. <NAME>VICTORIA GUIDA</NAME>. Mm-hmm. <NAME>CHAIR POWELL</NAME>. Yeah, so headline can, again, it can be affected by energy prices and food prices. So that, there, there will be things in, in the headline forecasts that are to do with forecasts of energy prices, whereas core will be—if, if you look at core going out a full year, then it’ll be much more driven by things like tightness in the economy. So it—that, that’s why the two can go in different directions. Headline has been lower, as you know, most of this year, but that’s because energy prices have been coming down, which is a great thing for people. But energy prices will come down, and then they will go up, and it won’t really be telling us anything about how tight the economy is and how, how future inflation will perform. <NAME>VICTORIA GUIDA</NAME>. Do geopolitical risks factor in at all to how you’re thinking about energy prices? <NAME>CHAIR POWELL</NAME>. So we, we monitor geopolitical risks really quickly, but, you know, but—really carefully, rather. But, you know, I would say so far those risks haven’t really— nothing has come out of those risks that really, has really been important for the United States economy. The single thing that you would look to is the price of oil, given that we’re talking about the Middle East and Ukraine, and, you know, and—but that, that is a good summary statistic for the kind of thing that could go wrong in, in, with global turmoil. But the price of oil’s been coming down, and, for, because of supply conditions, global supply conditions. So we don’t—the U.S. is not feeling, really, the effects of geopolitical turmoil, but we are at, certainly, at a time of elevated geopolitical turmoil. And it remains, you know, a risk. <NAME>MICHELLE SMITH</NAME>. Kelly. KELLY O’GRADY. Thanks, Chair Powell. Kelly O’Grady from CBS News. I want to go back to something that you said a minute ago, that wage growth is outpacing inflation now. It wasn’t the case for some time, of course. It’s partly why Americans haven’t felt much relief in their wallets from prices yet. But with inflation ticking up, how worried are you the progress in closing that gap could go away? <NAME>CHAIR POWELL</NAME>. Yeah, so inflation—again, we don’t overreact to a couple of months of higher readings or a couple months of lower readings. And we, what we had was—we had four months of really nice readings, and then September and October were higher, but then November is much lower. So I don’t really think the public is experiencing that as a surprising upside risk to inflation. I, I think inflation is much lower. What the public is feeling, and they’re right about it, is that prices are, are just—the price level went up, because of the past inflation. It is going to take some time to, for real wages to recover, over a period of years in which your, your real compensation is growing. And, in other words, your compensation’s growing meaningfully faster than inflation. That’s exactly the kind of economy we have now, and we just want to hold onto it. That, that process will probably take some years, but that’s, that’s what’s going on right now. And I don’t think that, you know, a, a couple of months of higher inflation really signal that, anything of the nature you’re suggesting. KELLY O’GRADY. And just one follow-up: Let’s look more long-term. You previously predicted hitting the 2 percent inflation target in 2026. It’s now been pushed out to 2027. You said you’re focused on enabling further progress on inflation. That’s not necessarily progress in the right direction. Are you confident that target isn’t going to move further out? <NAME>CHAIR POWELL</NAME>. We’re talking about—when you’re projecting the economy, you know, three years out, two years out, you’re talking about high uncertainty. Very high uncertainty. You know, we, we really—at that point it, it’s not, it’s not possible to confidently predict where the economy is going to be in three years. So what we’re doing is we’re looking at what’s happening now. And we’re kind of projecting that the same kinds of things are happening—so we, we keep a strong labor market, housing services inflation comes down, goods and services—goods inflation settles down, and, you know, nonmarket services return to their, their prior level. All of those things should happen over time, and, and, you know, those pieces come together. There’s every reason to think that they will. The timing of it is highly uncertain. You know, but you’re not wrong, though, that, you know, we’ve, the— it’s been a bit frustrating because the—while we’ve made progress, it has been slower than we had hoped. Nonetheless, we’re still on track. And, you know, I think if you’d—if two, two years ago, you’d said, “we were [going to be] at 4.2 percent unemployment and 2.8 percent inflation,” people would be, would say, “I’ll take that.” I mean, that, that’s a pretty good interim place to be. Job’s not done, but, but I think we’re, we’re feeling good about where we are and where we’re headed. <NAME>MICHELLE SMITH</NAME>. Go to Nancy for the last question. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer from Marketplace. You said a couple times, inflation has been moving sideways. You know, it appears to be settling in around, excuse me, 2½ percent. Do you think the Fed is just going to have to settle for that and accept that you’re not going to get to your 2 percent target? <NAME>CHAIR POWELL</NAME>. No, we’re not going to settle for that. I think we’re, we’re, you know, we certainly have every intention and expectations that we’ll get inflation back sustainably to 2 percent. That is—and I am confident we will achieve that. It has taken longer, but it’s, you have to be—you know, we are making progress. We have made a great deal of progress. And we’ll continue to do so and get back to 2 percent inflation. That’s what we owe the public. And, and, you know, we’re committed to achieving it. <NAME>NANCY MARSHALL</NAME>-GENZER. In that case, can you rule out a rate hike next year? <NAME>CHAIR POWELL</NAME>. You don’t rule things completely in or out in this—in this world. That doesn’t appear to be a likely outcome. I think we’re at 4.3 percent. That’s, that’s meaningfully restrictive, and I, I think it’s a well-calibrated rate for us to continue to make progress on inflation while, while keeping a, a strong labor market. So—Thank you very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. The economy is strong—is strong overall and has made significant progress toward our goals over the past two years. Labor market conditions have cooled from their formerly overheated state and remain solid. Inflation has moved much closer to our 2 percent longer-run goal, though it remains somewhat elevated. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. 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. For 2024 as a whole, GDP looks to have risen above 2 percent, bolstered by resilient consumer spending. Investment in equipment and intangibles appears to have slowed in the fourth quarter but was strong for the year overall. Following weakness in the middle of last year, activity in the housing sector seems to have stabilized. In the labor market, conditions remain solid. Payroll job gains averaged 170,000 per month over the past three months. Following earlier increases, the unemployment rate has stabilized since the middle of last year and, at 4.1 percent in December, remains low. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance. The labor market is not a source of significant inflationary pressures. Inflation has eased significantly over the past two years but remains somewhat elevated relative to our 2 percent longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.6 percent over the 12 months ending in December and that, excluding the volatile food and energy categories, core PCE prices rose 2.8 percent. 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. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. We see the risks to achieving our employment and inflation goals as being roughly in balance, and we are attentive to the risks on both sides of our mandate. Over the course of our three previous meetings, we lowered our policy rate by a full percentage point from its peak. That recalibration of our policy stance was appropriate in light of the progress on inflation and the rebalancing in the labor market. With our policy stance significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. At today’s meeting, the Committee decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent. We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook, and the balance of risks. We’re not on any preset course. As the economy evolves, we will adjust our policy stance in a manner that best promotes our maximum-employment and price-stability goals. If the economy remains—economy remains strong and inflation does not continue to move sustainably toward 2 percent, we can maintain policy restraint for longer. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. As we previously announced, our five-year review, review of our monetary policy framework is taking place this year. At this meeting, the Committee began its discussions by reviewing the context and outcomes of our previous review that concluded in 2020 as well as the experiences of other central banks in conducting reviews. Our review will again include outreach and public events involving a wide range of parties, including Fed Listens events around the country and a research conference in May. Throughout this process, we will be open to new ideas and critical feedback, and we will take on board lessons of the last five years in determining our findings. We intend to wrap up the review by late summer. I would note that the Committee’s 2 percent longer-run inflation goal will, will be retained and will not be a focus of the review. The Fed has been assigned two goals for monetary policy: maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-run inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. 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. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Mr. Chairman, Steve Liesman from CNBC. Mr. Chairman, all right, at an event in Davos—or from, to Davos, anyway—the President said he’ll demand that interest rates drop immediately. So I guess I have a three-part question. Has the President done this to you? Has he made that demand? Secondly, what is your response to that? And, third, what effect, if anything—if any, does a President making these kind of remarks have on policy? Thank you. <NAME>CHAIR POWELL</NAME>. Three questions. I’m seeing, seeing it really as one question, though. So, I, I’m not going to have—I’m not going to have any, any response or comment whatsoever on, on what the President’s said. It’s not appropriate for me to do so. The public should be confident that we will continue to do our work as we always have—focusing on using our tools to achieve our goals, and really keeping our heads down and doing our work. And that’s how we best serve the public. <NAME>STEVE LIESMAN</NAME>. Could you just comment on whether he’s physically communicated his demand to you? <NAME>CHAIR POWELL</NAME>. I’ve had no contact. <NAME>STEVE LIESMAN</NAME>. Thank you. <NAME>CHAIR POWELL</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, you and several of your colleagues said around the time of the last meeting that your policy stance was “meaningfully restrictive.” Given economic and financial market developments since then, how has your confidence changed in an assessment that says interest rates are meaningfully restrictive? <NAME>CHAIR POWELL</NAME>. I don’t think that my assessment really has changed. I mean, a couple of things have happened. We’ve gotten more strong data, but we’ve also seen rates move up at the long end, which could represent a tightening in financial conditions. I think if we look back over the past year or so, we can see that policy is restrictive. If you look at the effect of high rates on interest-sensitive spending—for example, in housing—and if you look at the achievement of our goal variables, we’re seeing the economy move toward 2 percent inflation and, and has moved largely to maximum employment, so. Though we literally look at the—at the—at movement toward the goal variables to make that assessment. Now, policy is meaningfully less restrictive than it was before we began to cut. It’s 100 basis points less restrictive. And for that reason, you know, we’re going to be focusing on seeing real progress on inflation or, alternatively, some weakness in the labor market before we—before we consider making adjustments. <NAME>NICK TIMIRAOS</NAME>. If I could follow up. Does the economy here warrant meaningfully restrictive interest rates, and would you judge interest rates to still be meaningfully restrictive if you were to lower them by another ¼ point? <NAME>CHAIR POWELL</NAME>. So, I, I think our policy stance is very well calibrated, as I mentioned, to balance the achievement of our two—of our two goals. We, we want to—policy to be restrictive enough to continue to foster further, further progress for our 2 percent inflation goal. At the same time, we don’t need to see further weakening in the labor market to achieve that goal, and that’s kind of what we’ve been getting. The labor market has really been broadly stable; the unemployment rate has been broadly stable now for six months. Conditions seem to be broadly in balance. And I would say, look at the last couple of inflation readings and you see we don’t—we don’t overreact to two good readings or two bad readings. But, nonetheless, the last couple of readings have suggested, you know, more positive readings. So I, I think we’re—I think policy’s well, well positioned. <NAME>MICHELLE SMITH</NAME>. Colby, from the New York Times. <NAME>COLBY SMITH</NAME>. Colby Smith, with the New York Times. Chair Powell, how should we interpret the removal of the line from the statement that inflation has made progress towards the 2 percent goal? Is that no longer the case? <NAME>CHAIR POWELL</NAME>. No, so let me look—if you just look at the first paragraph, we did a little bit of language cleanup there. We took out a reference to “since earlier in the year” as it related to the labor market, and we just chose to, to shorten that sentence. Again, I, I mean, if you look at the sort of intermeeting data was good, and, and there was—there was another inflation reading, I guess, just before the December meeting. So, we’ve got two, two good readings in a row that are consistent with 2 percent inflation. Again, we’re not going to overinterpret two good or two bad readings, but this was not meant to send a signal other than this: You know, you, you can take away from all of this that we remain committed to achieving our 2 percent inflation goal sustainably. <NAME>COLBY SMITH</NAME>. And just to follow up: We’ve seen inflation expectations across a number of measures rise sharply—which has, in part, been linked to tariff concerns. But there’s also been this encouraging data that you mentioned in terms of CPI and rent indices. So how would you characterize concerns about upside risks to inflation across the Committee, especially those tied to policies related to the Trump Administration? <NAME>CHAIR POWELL</NAME>. Well I, I’d say you, you see expectations moving up a little bit, at the short end—but not at the longer run, which [is] where it really matters. And those could be related to—could be related to what you mentioned, some of the new policies. I think where the Committee is very much in the mode of waiting to see what policies are enacted. We, and we, we don’t know what will happen with, with tariffs, with immigration, with fiscal policy, and with regulatory policy. We’re only just beginning to see—actually, are not really beginning to see much, and I think we need to—we need to let those policies be articulated before we can even begin to make a, a plausible assessment of what their implications for the economy will be. So we’re going to be watching carefully and, and, as we always do. This is no different than any other set of policy changes at the beginning of a—of an Administration. We’ll patiently watch and understand and, and, you know, kind of not be in a hurry to, to get to a place of understanding what our policy response should be until we see how it plays out. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Television and Radio. You and your colleagues normally condition future policy moves with the phrase, “if the economy develops as we anticipate.” Is it fair to say that since there’s a lot unknown about what this Administration’s fiscal policies are actually going to be that you don’t have a medium- to long- term economic forecast that you can have confidence in? Or, if that’s not true, can you lay out what you think is going to happen in the economy, how you see it developing? <NAME>CHAIR POWELL</NAME>. Well, at all times—at all times, forecasts are conditional, at a minimum, on just a set of expectations, and, and they’re highly uncertain in both directions. We, we know that economic forecasting is, is really difficult, beyond just a month or two out. So in the current situation, there’s probably some elevated uncertainty because of, of, you know, significant policy shifts in those four areas that I mentioned: tariffs, tariffs, immigration, fiscal policy, and, and regulatory policy. So there’s probably some additional uncertainty, but that should be passing; we should go through that. And then we’ll be back to the regular amount of uncertain. You know, what, what forecasters are doing—not just us, but everybody’s doing—is they’ve got sort of just a set of assumptions about what might happen, but they’re really kind of in the nature of a placeholder, and—meaning, you know, plausible, could be, but honestly you wouldn’t stand behind it because you just don’t know, and so you’re just—you’re just on hold, waiting to see what comes down. You know, it’s, it’s a very large economy, and policies affect it at the margin, but we’ll, you know, we’re going to wait and see. <NAME>MICHAEL MCKEE</NAME>. If I could follow up. The idea that you feel the—that policy is restrictive suggests that the Fed, in general, wants to continue to lower interest rates. So when you look at the data that you are dependent on, are you looking for data that tell you that you can cut or data that will tell you [that] you should hold? <NAME>CHAIR POWELL</NAME>. You know, we’re—we’re looking—it’s more the other—the way— the way it works is, we are looking at the data to guide us in what we should do. And, you know, that, that’s what we do. And right now, we feel like we’re in a very good place. Policy’s well positioned. The economy’s in, in quite a good place, actually, as well. And what, what we do expect is to see further progress on inflation, and, you know, as I mentioned, as we see that—or if we were to see weakening in the labor market that could foster—we could then be in a position of, of making further adjustments. But, right now, we, we don’t see that, and we see things as in a really good place for policy and for the economy, and so we feel like we don’t need to be in a hurry to, to make any adjustments. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. Thank you very much. In 2021, at a central bank conference, you said, quote, “Throughout my career in both public and private sectors, I’ve seen that the best and most successful organizations are often the ones that have a strong and persistent commitment to diversity and inclusion. These organizations consistently attract the best talent by investing in and retaining a world-class workforce.” Question, first question is, do you still believe that? And if so, how do you intend to put that belief into practice while remaining consistent with the recent executive order prohibiting diversity and inclusion efforts? <NAME>CHAIR POWELL</NAME>. So let me say, “yes,” in answer to your first question. But, to the second question, I want to say this: We are, like others, we’re reviewing the orders and the associated details as they are made available. And as has been our practice over many Administrations, we are working to align our policies with the executive orders as appropriate and consistent with applicable law. And I want to add that I’m not going to have anything more specific for you today on this whole set of issues. <NAME>HOWARD SCHNEIDER</NAME>. Well, if I could just follow up quickly on that. I’m wondering how you’re getting that to be consistent with the Dodd-Frank law’s stipulations about maintaining an Office of Minority and Women Inclusion. <NAME>CHAIR POWELL</NAME>. So I did—I did mention “consistent with applicable law,” right? <NAME>HOWARD SCHNEIDER</NAME>. Which is governing. <NAME>MICHELLE SMITH</NAME>. Elizabeth. <NAME>ELIZABETH SCHULZE</NAME>. Thanks so much. Elizabeth Schulze with ABC News. Just to follow up on Steve’s question, what reassurance can you give the American public that the Fed will continue to operate independent of politics under this Administration? <NAME>CHAIR POWELL</NAME>. You know, I’ve—as I’ve said countless times over the years, this is—this is who we are; this is what we do. We study the data, we, we analyze how it will affect the outlook and the balance of risks, and we use our tools to try to give it our best understanding, our best thinking, try to achieve our goals. That’s what we do; that’s always what we do. Don’t look for us to do anything else. And that’s—you know, lots of research shows that’s the—that’s the best way for a central bank to operate. That’ll give us the best possible chance to achieve these goals for the benefit of the American people. That’s always what we’re going to do. And people should have confidence in that, as I—as I said a few minutes ago. <NAME>ELIZABETH SCHULZE</NAME>. You’ve said that the Fed is in wait-and-see mode, based on the policies that come out of this Administration. Has the Fed started to model what policies like mass deportations, changes in immigration policy, specifically, would look like for the workforce and for inflation? <NAME>CHAIR POWELL</NAME>. So one of the things our, our staff does is they, they look at a range of possible outcomes, and, and they, they tend to go from really good to really bad, and, you know, it’s, it’s one of the best things that they do. And in each Tealbook—you can look at the five-year-old Tealbooks and see their alternative simulations. So that’s what they do. They, it’ll be a baseline, and then they’ll show six or seven alternative scenarios, including really good ones and, and not-so-good ones. And what those do is they spark, you know, the, the policymakers to sort of think and understand about the, you know, the, the uncertainties that surround this. So, yes, we, we—staff does that, and we, we’re all well aware that there are—that the range of possibilities is always broad, and—not just now, but always. And you have to—it’s hard to be open to just how, how broad the possibilities are for an economy. You know, no one saw the pandemic coming, and it was—you know, it changed everything. So things happen, and—but yes, we do—we do do that. But it’s, it’s one thing to do that to make assessments about what might happen and begin to think about what you might do in that case, but you don’t act until you—until you see much more than we see now. <NAME>MICHELLE SMITH</NAME>. Catarina. <NAME>CATARINA SARAIVA</NAME>. Catarina Saraiva, Bloomberg News. You know, last month you talked about a future rate cut as being pretty, you know, significantly predicated on more progress in inflation. With the characterization of the labor market in the statement today, would you say that that’s even more so the case now? <NAME>CHAIR POWELL</NAME>. I’d say it’s the same. You know, we, we want to see, you know, further progress on inflation. And, you know, the story’s there. It’s, it’s—we’re just going to have to see the data. At the end of the day, it, it comes down to 12-month inflation, because that takes out the seasonality issues that may exist. And, you know, we’re, we’re just going to need to see that. We think that—we think we see the pathway for that to happen. One, one example—a key example—is that you now do see owner’s equivalent rent and, you know, housing services—the way it’s calculated for PCE [prices], you see that coming down pretty steadily now, and that’s the—that’s the place where the, most of the remaining gap is. In addition, a big part of the overrun, as you will know, was [coming] from nonmarket services [prices], which don’t tend to send much signal [about future inflation]. So you can look through all that and, and think, “Okay, that then we seem to be set up for further progress.” But being seem to set up for it is one thing; having it is another. So we, we’re going to want to see further, further progress on inflation. Remember, we’re not, you know, we’re, we’re under—2 percent, but our goal is 2 percent, and we do mean to get back sustainably to 2 percent. <NAME>CATARINA SARAIVA</NAME>. And, and in terms of the labor market, I mean, how—is that broadly—you know, you said a broad set of indicators show that it’s in pretty solid place. Was there broad agreement on that? There’s been a few underlying indicators that are showing perhaps some weakness: a low hiring rate, you know, workers reporting that it’s increasingly difficult to find a job. Is that of concern to the Committee? <NAME>CHAIR POWELL</NAME>. So you’re right. I mean, we look at, of course, a very broad range. And, so, it starts with unemployment—sorry, with, yeah, with the unemployment rate, employment participation, wages, job quits—are people quitting?—that kind of thing. The ratio of vacancies to unemployed. We look at all those things, and you, you put your finger, though, on—it’s a low—it’s a low-hiring environment. So if you have a job, it’s all—it’s all good, but if you—if you have to find a job, the job-finding rate—the hiring rates have come down. And that’s, that’s more typical of a—let’s say—let’s say that the unemployment—that the—that the labor market is at a sustainable level. It’s not overheated anymore. We don’t think we need it to cool off anymore. We do watch it extremely carefully. It’s one of our two goal variables. But, yeah, I, I’d say we watch those things quite carefully. But nonetheless, overall, look at the aggregate data in the labor market. It does seem to—the labor market does seem, seem to be pretty stable and broadly in balance. When you’ve got a, an unemployment rate that is—that has been pretty stable now for, for a, a full half a year. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you. Thank you, Mr. Chairman. Edward Lawrence with Fox Business. On employment, now, you said there’s a broad range of possibilities, but last September you said, quote, “We understand that there’s been quite an influx across the borders, and that has actually been one of things that’s allowed unemployment rate to rise.” Now that the flow over the border has slowed and we’re seeing deportations, how do you expect the unemployment rate to react? <NAME>CHAIR POWELL</NAME>. You know, so what’s happening is that the, the flows across the border have decreased very significantly, and there’s every reason to expect that to continue. And so—but job creation has come down a bit, too, so, you know, if those two things come down together, that, that sort of can be a reason for the unemployment rate to stabilize. In other words, a breakeven rate—as, as population growth slows, the breakeven rate that you need in new jobs to make—to, to make jobs for, for workers declines as well. So that seems to be something about what’s happening. You, you do see a very—a very flat unemployment rate at a time when you’ve seen significant declines [in job growth]. <NAME>EDWARD LAWRENCE</NAME>. I want to ask you about Fed employment. I know that tax money is not used here, but Elon Musk alleges that the Fed is, quote, “absurdly overstaffed.” We’ve seen the Executive Branch push to reduce the federal workforce. I just want to get your reaction. <NAME>CHAIR POWELL</NAME>. You know, we, we run a very careful budget process where we’re fully aware that what, that, you know, we owe the—we owe that to the public, and we believe we do that. I, I’ve got no further comment than that, thanks. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRIS RUGABER</NAME>. Chris Rugaber at Associated Press. President Trump has said he will lower inflation by reducing gas and energy costs. Do you see such costs as a particular driver of inflation, and would lowering them have a dramatic effect? <NAME>CHAIR POWELL</NAME>. Chris, I’m not going to—I’m not going to react or discuss anything that, that any elected politician might say. So I’ll give you a mulligan. <NAME>CHRIS RUGABER</NAME>. Okay, oh, thank you. Well, nearly two weeks ago the Fed said it was withdrawing from the Network for Greening the Financial System even as, you know, even as we have significant wildfires in Los Angeles doing billions of dollars in damage. And, of course, the NGFS, as you know, is a group to talk about how the financial system could address climate change. Many commentators did see the timing as political. Why did you leave that organization? Can you explain that decision? <NAME>CHAIR POWELL</NAME>. Sure, I’d be glad to. So we considered this, you know, really at length, and we did decide to withdraw from the NGFS. And, really, the reason is that the, the work that the NGFS does has broadened very significantly. Think about nature-related risks and biodiversity and things like that. In addition, the, the work of the NGFS is, is, in, in significant part intended to—and this is a quote—“mobilize mainstream finance to support the transition toward a sustainable economy.” So we joined to get the benefit of understanding what other central banks were doing and, and seeing research and things like that. I think this is just way beyond any plausible mandate that you could attribute to the Fed, and so we have a quite narrow role, as I’ve—as I’ve said many times, and I think that, that the activities of the NGFS are not a good fit for the Fed, given our current mandate and authority. So, you know, and I just think it was time to acknowledge that. You know, the, the process—this process dates back—thinking about it dates back a couple of years. I made the decision to bring this to the Board, you know, some months ago. It just—it just—the process just took time to get here, and, and this is when— this is when we, we got in and voted on it, so. And I’m aware of how it can look, but it was really not driven by politics; it was driven by kind of the disconnect between the work of the NGFS and our mandate. Other central banks have different mandates and belong to the NGFS. We have no, no criticism of them. But it just isn’t—it’s not right for the Fed. <NAME>MICHELLE SMITH</NAME>. Andrew. <NAME>ANDREW ACKERMAN</NAME>. Thanks. Andrew Ackerman with the Washington Post. I’m wondering if you could talk more about what further progress would look like for consumers. <NAME>CHAIR POWELL</NAME>. Well, 2 percent—inflation down to—inflation down to 2 percent sustainably is what, what we’re trying to achieve. You know, we’re, we’re somewhat above that, as you know, and, you know, we, we want to see, you know, serial readings that suggest that we’re making further progress on inflation. That’s what we want to see. And consumers will, will pick that up, of course, in the things that they buy at the grocery store or at the store. <NAME>ANDREW ACKERMAN</NAME>. The other thing I wanted to ask was just how far away you think you are from neutral. <NAME>CHAIR POWELL</NAME>. Yeah, you can’t know with any precision, of course. As I like to say, that you know that—you know the neutral rate by its works. So I think, you know, at 4.3 percent we’re, we’re above pretty much everyone on the Committee’s estimates of the longer-run neutral. I think our eyes are telling us that our policy is having the effects on the economy. That’s really the question we ask. You know, you can consult models, empirical models, theoretical models. You really have to just look out the window and see how your—how your policy rate is affecting the economy. And I think we see that it’s having meaningful effects in bringing inflation under control. It has helped bring the labor market into balance as well. So that’s what we think. I, I would say we’re meaningfully above it. I, I am—I, I have no illusion that, that anyone knows precisely how much that is. And, but it, you know—not knowing that, and having cut 100 basis points, means that it’s appropriate that we—that we not be in a hurry to make further adjustments. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Victoria Guida with Politico. So, as a general matter, when it comes to executive orders and OMB memos, do those always apply to the Fed, sometimes, never, or do you just often voluntarily comply? What is—what is the legality there? <NAME>CHAIR POWELL</NAME>. So it’s been—it’s been our practice, as I mentioned, to work to align our policies to those that are mentioned in, in the executive orders. And that’s—I’m just going to leave it at that. As I mentioned, I’m not going to—I’m not going to go any deeper than that or, or get into any deeper into this set of issues today. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Claire Jones from the Financial Times. Two questions, if I may, on tariffs. Well, first of all, we’ve seen global trade wars before, notably in 2019 last time around. But then we were then in a very different place on both inflation and growth. If we see tariffs of the same sort of magnitude that we got then—which I know is a big if—what do you think might be different this time around? And, secondly, Tiff Macklem said there was no doubt that the threat of tariffs was a big driver of the cut by the Bank of Canada today. What sort of information would the Fed need to see on tariffs before it was willing to take such a preemptive move? Thank you. <NAME>CHAIR POWELL</NAME>. Sorry, make a—? <NAME>CLAIRE JONES</NAME>. To—what sort of information would you need to see on tariffs? Would you need to see a strategy, actual implementation, actual movement of inflation expectations, before you’re actually willing to change the path of monetary policy on the basis of it? <NAME>CHAIR POWELL</NAME>. So we just—so first of all, thing, things are a little different now. We’ve just come through a high-inflation period, and you can argue that both ways. You can— you can say that companies have figured out that they do like to raise prices, but, but we also hear a lot from companies these days that consumers have really had it with price increases, and so I don’t know how that shakes out. Nonetheless, you’re coming through a situation where we’re not quite back to 2 percent, and that, that’s just different. In addition, you know, the trade—the kind of footprint of trade is, has changed a, a lot, as trade is now spread around the, you know—it’s not as concentrated in China as it was. There was a lot more manufacturing. It moved to Mexico and other places. So, so there were differences, and I just think the, the range of possibilities is, is very, very wide. We just don’t know, and I, I don’t want to start speculating, as tempting as it is, because we really don’t know. And we didn’t know, by the way, in, I guess, 2018. Yeah, we didn’t really know. And it, you know, the—again, the range of possibilities, very, very wide. We don’t know what’s going to be tariff. We don’t know for how long or how much, what countries. We don’t know about retaliation. We don’t know how it’s going to transmit through the economy to consumers. That’s, that really does remain to be seen. You know, there are lots of places where that—where that—where that price increase from the tariff can show up between the manufacturer and a consumer. Just so many variables. So we’re just going to have to wait and see. And, you know, the best we can do is what we’ve done, which is study up on this and, you know, look at historical experience, read the literature, and think about the factors that might matter, and then we’ll just have to see—have to see how it—how it goes. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. Thank you. Courtenay Brown from Axios. Two unrelated questions. The first is whether or not there was any discussion about QT and the timeline for ending QT at this meeting. And then the second question is just—I wonder if the AI-prompted selloff in the stock market this week signaled anything to you about the state of financial conditions. <NAME>CHAIR POWELL</NAME>. So, on QT, on—let’s, let’s talk about runoff. So the most recent data do suggest that reserves are still abundant. Reserves remain roughly as high as they were when runoff began. And the federal funds rate has been very steady within the target range. We track a, a bunch of metrics, and they do tend to point to, to reserves being abundant. We do intend to reduce the size of our balance sheet to a level that’s consistent with implementing monetary policy efficiently and effectively in our ample-reserves regime. We’re closely monitoring a, a range of indicators to assess conditions, and that should provide signals whether reserves are approaching a level that could be judged as, quote, “somewhat above ample.” I, I don’t have anything to say to you about particular dates; it’s just that’s the process, and what we see is, is that, that rates do appear to be abundant. As always, we stand ready to take appropriate action to support the smooth transition of monetary policy, including to adjust the details of our approach for reducing the size of the balance sheet in light of economic and financial developments. On, on AI, it’s a big event in, in the stock market and in particular parts of the stock market. I mean, what, what really matters for us is macro developments, and that means substantial changes in financial conditions that are persistent for a period of time. So I wouldn’t put that label on, on these events, although of course we’re all watching it with interest. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Simon Rabinovitch with the Economist, thank you. You mentioned in your remarks that activity in the housing sector seems to have stabilized. At the same time, since your first rate cut in September, long-term mortgage rates have gone up by a full percentage point, back above 7 percent. I’m wondering, kind of looking forward, do you think—are you confident that activity will remain stable, given how elevated mortgage rates are? How does it fit into your broader thinking about the economy? <NAME>CHAIR POWELL</NAME>. So, as you know, as we’ve reduced our, our policy rate 100 basis points, longer rates have gone up. Not because of expectations—not principally because of expectations about our policy or about inflation; it’s more a term premium story. So, and, you know, it’s long rates that matter for, for housing. So I, I don’t think—I think these higher rates are going to—they’re, they’re probably hold back housing activities to some extent, if they’re persistent. We’ll have to see how long they persist. So, you know, we, we are—we control an overnight rate. Generally, it, it propagates through the whole family of asset prices, including interest rates. But in this particular case, it’s all happened at a time when, for reasons unrelated to our policy, longer rates have moved up. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. You said you want to see further progress on inflation. Given that households appear to be unhappy with the elevated level of prices, do you believe the Committee should wait until inflation has fallen back to target to cut rates again? <NAME>CHAIR POWELL</NAME>. No, I wouldn’t say that. We, we’ve never said we need to be all the way at target to reduce rates. At, at any time, what we’re doing is we’re looking at the economy and asking whether our policy stance is the right one to achieve maximum employment and price stability. So I, I think if—we would want to see further progress, but we think our—we think our—as I mentioned, we think that our policy stance is restrictive. Meaningfully restrictive. Not highly restrictive, but meaningfully restrictive. And so I would think we need to see further progress. I wouldn’t say all the way back down to 2 percent on a sustainable basis, although we’d love to see that, of course, and we will. <NAME>JENNIFER SCHONBERGER</NAME>. And a separate question for you, on tariffs. Curious whether the threat of tariffs and not knowing whether they could stick or not creates uncertainty for business here in the United States and could cause them to pull back, ultimately weighing on growth. Does the threat of tariffs cause you to ponder your growth forecast? <NAME>CHAIR POWELL</NAME>. You know, we—I want to avoid commenting, even indirectly, on the conduct of tariffs. You know, it’s not our job, and it’s not our job to comment on the moves that people make. So I, I wouldn’t want to criticize anything that’s happening or really comment on it one way or another—praise it, for that matter. It’s just not our job. I do think that—you know, we found in, in 2018, [when] there was a lot of work done on trade policy uncertainty, trade policy uncertainty, if it’s large and persistent, can start to matter for businesses making investment decisions and things like that. That’s not something I’m observing today. It’s very early days for this. But that did—I think that did matter in 2018–19. And, and it’s one, you know, one of many things we’ll be watching. <NAME>MICHELLE SMITH</NAME>. Matt Egan. <NAME>MATT EGAN</NAME>. Thank you, Chair Powell. Matt Egan from CNN. Following up on Courtenay’s question from earlier about the stock market, how concerned are you, if at all, about potential asset bubble brewing in financial markets? How do relatively high market valuations factor into considerations about potentially lowering interest rates further? Is that something that’s in the back of your mind? <NAME>CHAIR POWELL</NAME>. So we, we look—we look at, from a financial stability perspective, at asset prices generally, along with things like leverage in the household sector, leverage in the banking system, funding risk for banks, and things like that. But it’s just one of the four things, asset prices are. And, yeah, I, I’d say they’re elevated by, by many metrics right now. A good part of that, of course, is this thing around tech and AI, but we, we look at that. But, you know, we also—we look at how resilient the households and, and businesses and the financial sector are to those things. So we look at that mainly from our financial stability perspective, and we think that there’s a lot of resilience out there. Banks have high capital, and households are actually, overall—not all households, but in, in the aggregate, households are in pretty good shape financially these days. So that’s how we think about that. I, you know, we, we also—we look at overall financial conditions, and you’ve got—you can’t just take—you can’t just take equity prices. You’ve got to look at rates, too, and that, you know, that represents a, a tightening in conditions, with higher rates. So, overall, financial conditions are probably still somewhat accommodative, but it’s a mixed bag. <NAME>MICHELLE SMITH</NAME>. Richard. <NAME>RICHARD ESCOBEDO</NAME>. Hi, Chair Powell. I’m Richard Escobedo with CBS News. One question for you. This month’s statement notes that unemployment has stabilized at a low rate and that the labor market is solid. You walked through some of what’s driving this, but I wonder what risks you see that might challenge your assessment. <NAME>CHAIR POWELL</NAME>. Well, the things we watch, we discussed earlier. One, one is, is that there’s a low hiring rate. And so that if, if there were to be a spike in layoffs, if companies were to start to reduce headcount, you would see unemployment go up pretty quickly, because the hiring rate is quite low. So that, that’s one thing we look at. I think it’s also—it’s worth pointing out that for lower-income households, they are— they’re under significant pressure. And in the aggregate, the numbers are good, but we know that people at the lower end of the income spectrum are, are struggling with, with costs. And, really, it’s, it’s high inflation for the basics of life. It’s not so much the inflation now; it’s the price level, because inflation has raised prices. Inflation is now closer—much closer to target, but people are really feeling that. But, you know, overall, this is a good labor market. Here you’re at 4.1 percent unemployment. That’s, that’s just a really good level, and you’ve been solidly there now for six, seven months. And job creation is pretty close to a level that will hold the unemployment rate there, given, given that, you know, there’ll be much slower population growth. <NAME>RICHARD ESCOBEDO</NAME>. One more question. Some of the uncertainty around immigration policy. Is—in your assessment, is that making it harder for businesses and the Fed to plan going forward? <NAME>CHAIR POWELL</NAME>. You know, we hear anecdotal reports, but I, I don’t see—there’s nothing in the data yet on that. But you do—you hear—you hear that kind of thing about construction, for example. And, and, you know, businesses that are dependent on immigrant labor are, are saying that it’s, it’s suddenly gotten harder to, to get people. But I, again—I know—you don’t see that in the aggregate data yet, but yes, you, you hear it anecdotally. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICHOLAS JASINSKI</NAME>. Thank you, Chair Powell. Nicholas Jasinski from Barron’s. The uncertainty is certainly a theme today, and I’m wondering, are there any periods from your career, or as it relates to markets, the economy, what’s going on here in Washington and beyond, or from lessons from history, that may provide some guidance for a central banker operating in uncertain times like today? <NAME>CHAIR POWELL</NAME>. I guess I’d say this: Uncertainty is, is with us all the time. It’s, it is human nature, apparently, to underestimate the—how fat the tails are, in a way, that, you know, the, the possibility—we think of things in a normal distribution, and in the economy it’s not a normal distribution. The tails are very fat, meaning things can happen way out of your expectations. It’s never not that way. I wouldn’t—you know, if you—if you think about it— think about the first few months of the pandemic. That was uncertainty. Are we going to be able to reopen the economy? If so, when? How much of it? How long will it take? You know, that was uncertainty. What we have now is a good labor market. We have the economy growing at, you know, 2 to 2½ percent. Inflation’s come down to, to now the, you know—the headline inflation number was 2.6 [percent], and that’s what the public experiences. We look at—we look at core because it’s a better indicator of future inflation. So, yes, the price level went up a lot for inflation, and people are feeling that, and, and they’re not wrong. But I—so the kind of uncertainty we have is just a, a usual level of uncertainty about the economy. But then policies—which are, you know, not for us to criticize or, or praise, really—those are—those are policies which people are, have been elected to implement. They’re implementing them with a view to, to making a better economy. And so I, I don’t think—I wouldn’t call this out as, as a— as one of those times. I wouldn’t compare it to the Global Financial Crisis or anything like that, given that we have actually a very good economy right now. <NAME>MICHELLE SMITH</NAME>. Evan. <NAME>EVAN RYSER</NAME>. Evan Ryser with Market News International. Chair Powell, is a March cut still on the table? And then, additionally, are you looking to see better-than-expected data on inflation to cut, or are you looking for inflation data that roughly aligns with current forecasts? <NAME>CHAIR POWELL</NAME>. So, as, as I mentioned, the economy’s strong, the labor market’s solid, downside risks to the labor market appear to have abated, and we think disinflation continues on a slow and sometimes bumpy path. That tells me and the other members of the Committee—the broad sense of the Committee, actually, is that we don’t need to be in a hurry to adjust our policy stance. Your second question was? <NAME>EVAN RYSER</NAME>. Whether or not you need to see better-than-expected inflation data or just inflation data that roughly aligns with your current forecasts. <NAME>CHAIR POWELL</NAME>. You know, it’s one of those things we’ll know it when we see it. But more, more the—the expectation is that we will make continued progress, and, you know, that’s what we want. We, we’ll know it when we see it. When we—it, it’s going to have to be something that isn’t just idiosyncratic. You’re going to want to see, you know, continued progress with housing services inflation; you’re going to want to see inflation behaving in a way that builds confidence that we are really making progress. That’s what it’s going to be. And, I mean, is, is that better than our expectations? If we expect to see that, it’s just a question of when. <NAME>MICHELLE SMITH</NAME>. Scott. <NAME>SCOTT HORSLEY</NAME>. Hi, Chair Powell. Scott Horsley from NPR. In your five-year review, you said the, the 2 percent inflation target won’t be on the table. Can you talk a little about why? Is that because you think that’s the right target, or is it because you don’t want to move the goalpost midgame, or what’s, what’s behind that? <NAME>CHAIR POWELL</NAME>. I think to—I think that goal has served us well over a long period of time. It’s also the sort of global standard. I think that if, if a central bank wanted to look at changing that, you wouldn’t do it at a time when you’re not meeting it anyway. I would not look at changing it anyway, but I certainly wouldn’t look at, at it at a time when you’re not—when you’re not meeting it. I mean, there’s just no interest at all in changing it, if, if I’m being at all unclear. We’re not—we’re not going to change the inflation goal any time soon. <NAME>SCOTT HORSLEY</NAME>. And, and five years ago, if I can paraphrase what you all decided, it was you’re going to not raise interest rates preemptively to, to head off inflation until you see sort of the whites of the eyes of inflation, because the solid labor market was so beneficial. Have the last few years changed your thinking about that? <NAME>CHAIR POWELL</NAME>. So what we really said was that we wouldn’t—we wouldn’t look at a—at a strong labor market and raise rates unless we saw some evidence of inflation. So the thought was that we’d seen really low levels of inflation—sorry, of unemployment—with no sign of inflation. So why would you preemptively want to—want to put people out of work in the absence of, of any kind of—any evidence that suggested that, that this was not a sustainable level? It was a way of, of acknowledging how much humility we have about, about the starred variables, especially u*, the natural rate of unemployment. So, that was a—that, that was an insight. We’ll, we’ll discuss that again. That’ll be one of the many things that we discuss. But I don’t think that insight is wrong. We didn’t—you know, we, we—what we said was that, you know, in—at times when inflation persistently undershot 2 percent, we, we would likely allow inflation to run moderately above 2 percent for some time. That’s what we said. That was— turned out not to be relevant to what actually happened. There was nothing moderate about the overshoot. It was—it was an exogenous event. It was the pandemic, and it happened, and, you know, our framework permitted us to act quite vigorously, and we did once we decided that that’s what we should do. Our framework had really nothing to do with the decision to—we, we looked at the inflation as, as transitory, and—right up to the point where the data turned against that, and when the data turned against that in late ’21, we changed our, our view, and we raised rates a lot, and here we are at 4.1 percent unemployment and inflation way down. But the framework was, was more irrelevant than anything else. The, the, that part of it—that part of it was irrelevant. The rest of the framework worked just fine as, as we used it, as it supported what we did to bring inflation down. <NAME>MICHELLE SMITH</NAME>. Go to Mark for the last question. <NAME>MARK HAMRICK</NAME>. Hello, Chairman Powell. Mark Hamrick with Bankrate. As you know, in the annual report from the Financial Stability Oversight Council, among the risks outlined is cryptocurrency. Could you talk about those risks now? And regarding individuals and households, perhaps distinct from the concern about the financial system, do you worry that speculation in this unregulated asset class could hurt their financial well-being, or do you think it has a place in a household’s portfolio? <NAME>CHAIR POWELL</NAME>. You know, so our, our role with Bitcoin, really, is to look at—with crypto, really, is to look at the banks, and, and, you know, we, we think it’s—you know, banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks and its safe, safe and soundness. Many of our—a good number of our banks that we regulate and supervise do that. You know, the threshold has been a little higher for banks engaging in crypto activities, and that’s because they’re so new, and, you know, we don’t want to make the mistake you’re—if you—if you’re making a choice to conduct that activity inside a bank which is inside the federal safety net, with deposit insurance, then you want to be pretty sure that, that it’s a safe and sound activity. So, you know, we’re, we’re not against innovation, and we certainly don’t want to, to take actions that would cause banks to, you know, to terminate customers who are perfectly legal just because of, of excess risk aversion maybe related to regulation and supervision, so. <NAME>MARK HAMRICK</NAME>. And with respect to households and their inclusion in that asset class? <NAME>CHAIR POWELL</NAME>. I, you know, that’s, that’s kind of a—it’s not really our, our bailiwick. You want people to be knowledgeable about the financial engagements that they have, and that’s why we have, you know, the securities law, laws that we have. It’s why, you know, if you read a mutual fund prospectus or individual stock prospectus, you, you want households to have the chance to understand the risk that they’re taking. And, you know, I, I do think it would be helpful if there were a greater regulatory apparatus around crypto, and I think that, that’s something Congress was working on quite a lot. We’ve actually spent a lot of time, you know, with members of Congress working together with them on, on various things, and I, I think that would be a very constructive thing for, for Congress to do. Thank you.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. The economy is strong overall and has made significant progress toward our goals over the past two years. Labor market conditions are solid, and inflation has moved closer to our 2 percent longer-run goal, though it remains somewhat elevated. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. We also made the technical decision to slow the pace of decline in the size of our balance sheet. I’ll have more to say about these decisions after briefly reviewing economic developments. Economic activity continued to expand at a solid pace in the fourth quarter of last year, with GDP rising at 2.3 percent. Recent indications, however, point to a moderation in consumer spending following the rapid growth seen over the second half of 2024. Surveys of households and businesses point to heightened uncertainty about the economic outlook. It remains to be seen how these developments might affect future spending and investment. In our Summary of Economic Projections, the median participant projects GDP to rise 1.7 percent this year, somewhat lower than projected in December, and to rise a bit below 2 percent over the next two years. In the labor market, conditions remain solid. Payroll job gains averaged 200,000 per month over the past three months. The unemployment rate, at 4.1 percent, remains low and has held in a narrow range for the past year. The jobs-to-workers gap has held steady for several months. Wages are growing faster than inflation and at a more sustainable pace than earlier in the pandemic recovery. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance. The labor market is not a source of significant inflationary pressures. The median projection for the unemployment rate in the SEP is 4.4 percent at the end of this year and 4.3 percent over the next two years. Inflation has eased significantly over the past two years but remains somewhat elevated relative to our 2 percent longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.5 percent over the 12 months ending in February and that, excluding the volatile food and energy categories, core PCE prices rose 2.8 percent. Some near-term measures of inflation expectations have recently moved up. We see this in both market- and survey-based measures, and survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2 percent inflation goal. The median projection in the SEP for total PCE inflation is 2.7 percent this year and 2.2 percent next year, a little higher than projected in December. In 2027, the median projection is at our 2 percent objective. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today’s meeting, the Committee decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent. Looking ahead, the new Administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy. While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their effects on the economic outlook is high. As we parse the incoming information, we’re focused on separating the signal from the noise as the outlook evolves. As we say in our statement, in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook, and the balance of risks. We do not need to be in a hurry to adjust our policy stance, and we are well positioned to wait for greater clarity. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely scenario going forward—an admittedly challenging exercise at this time in light of considerable uncertainty. The median participant projects that the appropriate level of the federal funds rate will be 3.9 percent at the end of this year and 3.4 percent at the end of next year, unchanged from December. While these individual forecasts are always subject to uncertainty, as I noted, uncertainty today is unusually elevated. And, of course, these projections are not a Committee plan or a decision. Policy is not on a preset course. As the economy evolves, we will adjust our policy stance in a manner that best promotes our maximum-employment and price-stability goals. If the economy remains strong and inflation does not continue to move sustainably toward 2 percent, we can maintain policy restraint for longer. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly. Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. At today’s meeting, we also decided to slow the pace of decline in our balance sheet. Since we began balance sheet runoff, our securities holdings have declined by more than $2 trillion. While market indicators continue to suggest that the quantity of reserves remains abundant, we have seen some signs of increased tightness in money markets. Beginning in April, the monthly cap on Treasury redemptions will be lowered from $25 billion to $5 billion. Consistent with the Committee’s intention to hold primarily Treasury securities in the longer run, we are leaving the cap on agency securities unchanged. This action has no implications for our intended stance of monetary policy and should not affect the size of our balance sheet over the medium term. The Committee also continued its discussions as part of our five-year review of our monetary policy framework. At this meeting, we focused on labor market dynamics and our maximum-employment goal. As we have indicated, our review will include outreach and public events involving a wide range of parties, including Fed Listens events around the country and a research conference in May. Throughout this process, we will be open to new ideas and critical feedback, and we will take on board lessons of the last five years in determining our findings. We intend to wrap up the review by late summer. The Fed has been assigned two goals for monetary policy: maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. 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 will look forward to your questions. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Howard Schneider with Reuters. Thanks for your time. So two things on sort of the real side here, one inflation and then—and then GDP. How much of the higher inflation forecast for this year is due to tariffs, and since the policy path remains the same, are you effectively reading this as a one-time price-level shock? <NAME>CHAIR POWELL</NAME>. Okay, so how much of it is, is tariffs? So let me say that it is going to be very difficult to have a precise assessment of how much of inflation is coming from tariffs and from, from other—and that’s already the case. You may have seen that goods inflation moved up pretty significantly in the first two months of the year. Trying to track that back to actual tariff increases, given what was tariffed and what was not—very, very challenging. So some of it—the, the answer is clearly some of it—a good part of it is, is coming from tariffs. But we’ll be—we’ll be working, and so will other forecasters, to try to find the best possible way to separate nontariff inflation from tariff inflation. In terms of the, the—your, your sort of looking-through question, too soon to say about that. As, as I’ve mentioned, it, it can be the case that it’s appropriate sometimes to look through inflation if it’s going to go away quickly without action by, by us, if it’s transitory. And that can be the case in the case of, of tariff inflation. I think that would depend on the, the tariff inflation moving through fairly quickly and would depend critically, as well, on inflation expectations being well anchored—longer-term inflation expectations being well anchored. <NAME>HOWARD SCHNEIDER</NAME>. Well, I, I guess I’m looking at the obvious here—the fact that the policy path doesn’t change at all and inflation is unchanged in the outyears also. Doesn’t that imply you all have basically decided that there is no signal here and that it’s just going to—we’re back to “transitory” again? <NAME>CHAIR POWELL</NAME>. So I think—I think that’s kind of the base case, but, as I said, it’s— we really can’t know that. We’re going to have to see how things actually, actually work out. And the fact that there wasn’t much change—I think that’s, that’s partly because, you know, you see—you see weaker growth but higher inflation. They kind of offset. And also, frankly, a little bit of inertia when it—when it comes to changing something in this highly uncertain environment. You know, you’re—you, you know, I think there is a level of inertia where you just say, “Maybe I’ll stay where I am.” <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the New York Times. You just described inflation expectations as well anchored, but has your confidence in that assessment changed at all, given the increase in certain measures and the high degree of uncertainty expressed by businesses, households, and forecasters? <NAME>CHAIR POWELL</NAME>. So our inflation expectations—of course, we do monitor inflation expectations very, very carefully—basically, every source we can find, and, you know—short- term, long-term, households, businesses, forecasters, market-based. And I think the picture, broadly, is this: You do see increases widely in short-term inflation expectations. And people who fill out surveys and answer, you know, questionnaires are pointing to tariffs about that. If you look—in the survey world, if you look a little further out, you, you really—you really don’t see much in the way of an increased longer-term inflation—inflation expectations are mostly well anchored, if you look at the [series maintained by the Federal Reserve Bank of] New York, for example. Then you have market based, and it’s the same pattern. You know, people and markets are pricing in and, and breakevens, some higher inflation over the next year must be related to tariffs. We know from the surveys. But if you look out five years or five-year, five- year forward, you’ll see that breakevens have—are either flat or, actually, slightly down in the case of a longer-term one. So we look at that, and we will be watching all of it very, very carefully. We do not take anything for granted. That’s at the very heart of our framework: anchored inflation expectations. But what—that’s what you see right now. <NAME>COLBY SMITH</NAME>. And, and how much weight do you put on the deterioration in consumer confidence surveys? You said recently that this is perhaps not the best indication of future spending. But I’m curious, you know, what you think is behind this deterioration and, and to what extent it could be a leading indicator for hard data. <NAME>CHAIR POWELL</NAME>. So let’s start with the hard data. You know, we, we do see pretty solid hard data still. So growth looks like it’s maybe moderating a bit, consumer spending moderating a bit, but still at a solid pace. Unemployment’s 4.1 percent. Job creation, most recently, has been at a healthy level. Inflation has started to move up now, we think partly in response to tariffs, and there may be a delay in further progress over the course of this year. So that’s the hard data. Overall, it’s a solid picture. The, the survey data, [in the case of] both household and businesses, show significant rise in uncertainty and significant concerns about downside risks. So how do we think about that? And that’s—that is the question. As I mentioned the other day, as you pointed out, the relationship between survey data and actual economic activity hasn’t been very tight. There have been plenty of times where people are saying very down—downbeat things about the economy and then going out and buying a new car. But we don’t know that that will be the case here. We will be watching very carefully for signs of weakness in the real data. Of course we will. But I, I—you know, given where we are, we think our policy’s in a good place to react to, to what comes. And we think that the right thing to do is, is to wait here for, you know, for greater clarity about, about what, what the economy’s doing. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, Chair Greenspan once defined price stability as, as an environment in which inflation is so low and stable over time that it doesn’t materially enter into the decisions of households and firms. Can you say that today we have that price stability—that households and businesses are ignoring price growth, or do you see, by an advanced psychology, big changes in inventories and surveys that show consumers, at least in the short run, expect higher inflation? <NAME>CHAIR POWELL</NAME>. So I, I do like that definition a lot. In fact, I used it at the recent conference where I spoke. So I think a world where, where people can make their daily economic decisions, and businesses, and they’re not having to think about the possibility of significantly high inflation—we know inflation will bounce around. That’s, that is price stability. You know, I think we were getting closer and closer to that. I wouldn’t say we were at that. Inflation was running around 2½ percent for some time. I do think with the arrival of, of the tariff inflation, further progress may be delayed, if the SEP doesn’t really show further downward progress on inflation this year. And that, that’s really due to the tariffs coming in. So, delayed, but if you look at our forecast, we do see ourselves getting back into the low 2s in ’26 and then down to 2 [percent] by ’27—of course, highly uncertain. So I see progress having, having been made toward that, and then progress in the future. I think that progress is probably delayed for the time being. <NAME>NICK TIMIRAOS</NAME>. If that’s the case, why are there cuts in the SEP for 2025? <NAME>CHAIR POWELL</NAME>. So, again, people wrote down two cuts the last time, and they look at—they look at the—you know, the—and they wrote down, you know, meaningful decline in growth out from 2.1 to 1.7 in 2025, a tick up in the unemployment rate, so not much there, but core inflation up by three-tenths. And so those two kind of—those kind of balance each other out. So people—not everybody, but, on balance, people wrote down similar numbers. The changes aren’t that big. The other—the other factor, though, as I mentioned, is just really high uncertainty. What would you write down? I mean, it’s just—it’s really hard to know how this is going to work out. And, again, we think our policy’s in a good place. We think it’s a good place where we can move in the direction that—where we need to. But in the meantime, we, we—it’s, it’s really appropriate to wait for further clarity, and, of course, you know, the costs of doing that, given that the economy is still solid, are very low. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman. Edward Lawrence with Fox Business. So with near 4 percent unemployment rate, that should be low enough to bring people in from the sidelines in terms of hiring. But we’re seeing the hiring rates have been stuck at 2023, 2024 levels. So, what’s going on there? <NAME>CHAIR POWELL</NAME>. Yeah, so that’s a feature of the—has been for some time, a feature of this labor market. You have pretty high participation, accounting for aging. You’ve got wages that are consistent with 2 percent inflation, assuming that we’re going to keep getting, you know, relatively high productivity. We’ve got unemployment, you know, pretty close to its natural level. But job—the hiring rate is quite low, but so is the layoff rate. So the, the—you look at initial claims or layoffs. So you’re not seeing people losing their jobs, but you’re seeing that people who don’t have a job having to wait longer and longer. And, you know, the question is, which way does that break? If we were to see a meaningful increase in layoffs, then that would probably translate fairly quickly into unemployment, because people are—you know, it’s, it’s not a—it’s not a big hiring market. We’ve been watching that, and it’s just not in the data. It hasn’t happened. What we’ve had is, is a low-firing, low-hiring situation, and it seems to be in balance now for, you know, for the last six, seven, eight months. That’s where we are. There’s healthy levels of job creation, too. So, overall, it’s a labor market that’s in balance, and, you know, we, we watch it very carefully. <NAME>EDWARD LAWRENCE</NAME>. So then, have we seen the Administration—the new Administration’s policies in the economic numbers yet? And when do you anticipate that happening? <NAME>CHAIR POWELL</NAME>. In labor? Or in, in other—? <NAME>EDWARD LAWRENCE</NAME>. In labor and inflation, just across the economy. Have we started to see the new policies take effect in the numbers? <NAME>CHAIR POWELL</NAME>. I, you know, only in a—kind of an early way. I mean, it’s only been a few months, right? You know, for example, the, the layoffs that are happening here are, you know, they’re certainly meaningful to the people involved, and they may be meaningful to a particular neighborhood or region or area, but at the national level, they’re not—they’re not significant yet. But we don’t know. We don’t know what—where that—how far that will go. We’ll, we’ll find out much more. I mentioned that—you, you saw it—we’ve had two, two very strong goods inflation readings in the last two months, which is very unexpected, and, I think, hard to trace it to specific tariffs. But it must have—it must have something to do with—it’s either noise and it’ll come back, and that—that’s very possible, too. But if it is persistent, then it must be to do with, you know, people buying ahead of tariffs, or raising prices ahead of tariffs, and things like that. That—those kinds of things happen, and they’re very, very hard to capture because so much of it is indirect. A great example is there—washing machines were tariffed in the last, last round of tariffs, and prices went up, but prices also went up on, on dryers, which were not tariffed. So the manufacturers just, you know, they just kind of followed the crowd and, and raised it. So things happen very indirectly, and so there’ll be a lot of work done in the coming months to, to try to trace all that through. But, ultimately, though, it’s too soon to be seeing significant effects in economic data. <NAME>MICHELLE SMITH</NAME>. Craig. <NAME>CRAIG TORRES</NAME>. Craig Torres from Bloomberg News. Thanks, Chair Powell. You said transitory price increases from tariffs are the base case—transitory is the base case. Wasn’t it the base case last time? And didn��t the FOMC forecast lower inflation ahead last time? And wasn’t the lesson that it quickly got into services, haircuts, daycare, everything else? And so I’m just wondering why the nine aren’t taking that on board and are cutting twice this year. <NAME>CHAIR POWELL</NAME>. When you say “last time,” are you talking about the last— <NAME>CRAIG TORRES</NAME>. Pandemic, yes—during the pandemic. <NAME>CHAIR POWELL</NAME>. You could have been talking about the last time there were tariffs. <NAME>CRAIG TORRES</NAME>. Okay. <NAME>CHAIR POWELL</NAME>. In which case, the inflation was, was transitory. <NAME>CRAIG TORRES</NAME>. Yeah. <NAME>CHAIR POWELL</NAME>. Yeah. No—of course, we’re well aware of that. And, you know, it’s, it’s still the truth, if, if there’s an inflationary impulse that’s going to go away on its own, it’s not the right policy to, to tighten policy, because by the time you have your effect, you’re—you know, you’re—an effect that by—by design, you are lowering economic activity and employment. And if that’s not necessary, you don’t want to do it. In real time, as we know, it’s hard to make that judgment. So—and, and we’re well aware, you know, of what happened, obviously, with, with the pandemic inflation. But, I mean, we have to look at this as a—as a different situation. There’s, there are differences and similarities. I mean, it’s a different time. You know, we haven’t had real price stability fully reestablished yet, and we have to keep that in mind. And, you know, we also have—we hear that people are very reluctant to take on—to, you know, to, to allow prices to go up. At the same time, we hear that businesses are intending to pass many of these prices through. So it’s hard to say how this is going to work out. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve, Steve Liesman, CNBC. Thanks for taking my question, Mr. Chairman. The Bank of Canada in its last policy statement said, “Monetary policy cannot offset the impacts of a trade war. What it can and must do is ensure that higher prices do not lead to ongoing inflation.” I wonder if that kind of reflects your own sense of prioritization, faced with higher prices and weaker growth—that the idea is, you have to take care of inflation. <NAME>CHAIR POWELL</NAME>. You know—so we, we have two goals, right? We have maximum employment and price stability, and we have to balance those. And, you know, there can be situations in which they are in tension, right? And we have, actually have a provision in our—in our consensus statement that says what we should do in that case. That’s a very challenging, you know, situation for, for any central bank, and certainly for us. And so, what we say that we’ll do is, we’ll, we’ll look how far each of those two goals is—each of those two measures is from its goal, and then we’ll ask how long we think it might take to get back to the goal for each of them, and we’ll make a judgment, because our, you know, our tools work in one direction. We’re either tightening or loosening. So it’s a very challenging situation. Let me say, we don’t have that situation right now. That’s not what the—that’s not where the economy is at all. It’s also not where the forecast is. I don’t know any mainstream forecast that really shows significant problems like that, so— <NAME>STEVE LIESMAN</NAME>. Well, just to follow up, yesterday the UCLA Anderson Forecast said there’s—a high probability of a recession. Where, where do you stand on whether or not the slowdown you’re seeing creates a higher probability or concern that you may have on recession? Thank you. <NAME>CHAIR POWELL</NAME>. You know, there’s always an unconditional probability—possibility of, of a recession. It might be broadly in the range of one in four at any time, if you look back through, through the years. It—there could be, within 12 months, a one in four chance of a recession. So the question is, is whether that—whether this current situation, those possibilities are elevated. I will say this: We don’t—we don’t make such a forecast. If you look at outside forecasts, forecasters have, have generally raised—a number of them have raised their possibility of a—of a recession somewhat, but still at relatively moderate levels—you know, still in the region of, of the traditional, because they were extremely low. If you go back two months, people were saying that the, the likelihood of a recession was extremely low. So, has moved up, but it’s not high. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi. Thank you. Chris Rugaber at Associated Press. As you know, I guess, last night the—President Trump fired two members of the Federal Trade Commission, an independent agency, and this could cause the kind of legal fight about the Administration’s power to fire independent people. If those firings stand, is that a threat to the Fed’s independence? Could he do the same thing to the Fed Board? <NAME>CHAIR POWELL</NAME>. So I think I, I did answer that question in this very room some time ago, and I, I [have] no desire to change that answer and have nothing new for you on that today. <NAME>CHRISTOPHER RUGABER</NAME>. Well, I just—okay, well, maybe I’ll have another mulligan. [Laughter] As you know, I, I wanted to go back to the consumer sentiment, particularly the inflation expectations in the University of Michigan survey. In the summer of 2022, you cited the rise in the long-term inflation expectations in that index as the reason that you went big with a three-quarter-point hike. So I know you’ve—I mean, you’ve talked about all the different measures now, but you seem to not be placing the same weight on that. And so I’m just wondering, are you dismissing that, what we saw last week from the University of Michigan, or does that carry the same weight as it did in the past? <NAME>CHAIR POWELL</NAME>. So I, I mentioned it back then, but in no way did I place a huge weight on it. I think it, it—that was an ex post story, but it wasn’t the case. That was a preliminary reading, and so is this. And it’s also—this is—that, that Michigan, the one you’re referring to, the longer-term thing—you know, we look at it, and we don’t dismiss data that we don’t like. We, we force ourselves to look at it. But it is an outlier compared to market-based and compared to other survey-based assessments of longer-run inflation expectations, so we’ve got to keep that in mind. And I, I—again, I, I would just say, we look at—we look at all of them. And that one—that one’s kind of an outlier, but, you know, nonetheless, we, we take notice of it. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Michael. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. There is a worry on Wall Street that when you say you want to study the net effect of the fiscal policies, we may see on the economy that you would end up waiting too long and be “behind the curve” in responding to any downturn. How can you reassure people that you can spot a problem early enough, unless you decide to be preemptive? <NAME>CHAIR POWELL</NAME>. Yeah, look, we’re, we’re aware of the—we’re well aware of how things are going to evolve and the time frames and all that, and, you know, we will—we will use our tools to foster achievement of our goals to the—to the best we can. And, of course, we’re going to try to be timely with that. For right now, the hard data are pretty solid. We, we are obviously aware of the soft sentiment data and high uncertainty, and we’re watching that carefully. And we think it’s a, a good time for us to wait for further clarity before we consider adjusting our, our policy stance. <NAME>MICHAEL MCKEE</NAME>. Do you think it’s going to be hard to get clarity in a “government by tweet”? I mean, do you have a, a feeling that at some point you actually will have a forecast you can trust? <NAME>CHAIR POWELL</NAME>. Yes, I think we will. I just—it’s hard to say when that will be. You know, we’re—these decisions are going to be made, and they’re going to be implemented, and then we’ll know. At that point, we’ll know what the decisions are, and we’ll have to make assessments then about their, their implications for the economy. Those things will happen. A lot of them will happen over the course of, you know, in coming months, certainly over the course of this year, and we’ll be adapting as we go. <NAME>MICHELLE SMITH</NAME>. Rachel. <NAME>RACHEL SIEGEL</NAME>. Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. At the beginning, you were talking about separating the signal from the noise, and tariff inflation from nontariff inflation. Can you “walk us through” what that looked like over the last couple of months—if there were specifics, from the January meeting to now, that helped you make those distinctions? <NAME>CHAIR POWELL</NAME>. So when we say “separating the signal from the noise,” that’s just a way of saying that things are highly uncertain and that, you know, you’re reading about developments—the news is full of developments of tariffs being put on and taken off and things like that. That’s—some of that is noise in the sense that it’s, it’s not really telling you anything. You’re trying to extract a signal from that, and the signal is what’s going to be the effect on economic activity, on inflation, on employment, and all those things. So, so that’s really when we say “signal and noise.” Sorry, the second thing was—? <NAME>RACHEL SIEGEL</NAME>. Or, similarly for tariff inflation, nontariff inflation, ways that you’re making the distinction. <NAME>CHAIR POWELL</NAME>. That’s, that’s sort of a, a special case of that—of, you know, with the idea being—and I think—do think that the first two months of this year are a great example. You’ve got high readings for goods inflation after a string of readings that averaged close to zero, and you have to ask—it’s coming during tariffs, but, you know, you—it’s very hard to, actually, scientifically go back and match up those increases and say, “Yes, I can prove that that’s from tariffs.” But it kind of has to be, to some extent. Plus, noise. There can be idiosyncratic readings in various categories, which will shortly reverse, and that, that happens, too, and that could be a big piece of it. You know, I think we’ll know. In a couple of months, we’ll know whether those were—you know, where that really was from. But it’s a—that’s another case where I think it’s going to be very, very challenging to unpack the inflation that we see over the course of this year and be able to say with confidence how much of that came from inflation and how much of it—sorry, from tariffs—and how much of it didn’t. But that’s what we’ll be doing. We’ll be doing that, and so will everybody else, and we’ll all be trying very hard to, to make that assessment. And, you know, I, I’m sure we will make a lot of progress on that. And we already have. But it, it’s going to be a challenge. <NAME>RACHEL SIEGEL</NAME>. Do you have a sense yet as to what, in your mind, what makes something cross from noise to a signal—what that threshold would look like? <NAME>CHAIR POWELL</NAME>. You know, it would depend on what we’re talking about. I mean, obviously, you’re looking for direct evidence that, that particular pieces of, of inflation are, are— or are clearly not—caused by tariffs. For example, something that was, you know, in the service sector that was far away from anything that’s tariffed. You, you might think, okay, well that is— like, frankly, housing services inflation—which, which, by the way, has been behaving well. You know—which, for, for some time, was kind of our problem. Now it’s been—it’s slow, but it’s definitely, you know, moving down in a—in a very good way. It’s more now with goods and, to some extent, with, with nonhousing services inflation. <NAME>MICHELLE SMITH</NAME>. Kelly. KELLY O’GRADY. Thanks for taking our questions, Chair Powell. Kelly O’Grady, CBS News. So consumer sentiment has dipped dramatically, but you say the economy and the hard data is still solid. What is your message to consumers that clearly disagree and don’t feel that strength? Because the hard data they’re looking at is their grocery bill. <NAME>CHAIR POWELL</NAME>. Okay, so a couple things. The grocery bill is about, about past inflation, really. There was inflation in ’21, ’22, and ’23, and prices went up. The current level—it’s not the change in prices. It’s, they’re unhappy—and, and they’re not wrong to be unhappy—that prices went up quite a bit, and they’re paying a lot for those things. So that’s—I think that is the fundamental fact and has been for a long time—a couple years—why people are unhappy with the—with the economy. It’s not that the economy’s not growing. It’s not that inflation’s really high. It’s not that unemployment is high. It’s none of those things. We have, you know, 4.1 percent unemployment. We’ve got 2 percent growth, and, you know, it’s, it’s a pretty good economy. But people are unhappy because of the price level. And, and I do—we completely understand and accept that. KELLY O’GRADY. And just to follow up: Why are you still projecting two rate cuts this year if your own projections show inflation higher for longer? Does that mean you see a slowdown in economic growth as a real threat? <NAME>CHAIR POWELL</NAME>. So I, I think if you—yeah, I mean, remember, we came into this with—at the December meeting, and the median was two cuts, the median was. And so you come in, and you see, broadly speaking, weaker growth but higher inflation. And they kind of balance each other out, so you think—and, and unemployment is really, really only, only a one- tenth change. So it’s—there’s just not a big change in the forecast. There really isn’t. Modest, you know, meaningfully higher growth and meaningfully higher inflation, which call for different responses, right? So they cancel each other out, and people just said, “Okay, I’m going to stay here.” But the second factor is, it’s so highly uncertain. Is just—you know, we’re sitting here thinking—and we, we obviously are in, in touch with businesses and households all over the country. We have an extraordinary network of contacts that come in through the Reserve Banks and put it in the Beige Book—and also through contacts at the Board. And we get all that, and we, we do understand that sentiment has fallen off pretty sharply, but economic activity has not yet. And so we’re watching carefully. So I would tell people that the economy seems to be— seems to be healthy. We understand that, that sentiment is, is quite negative at this time, and that probably has to do with, you know, turmoil at the beginning of an Administration. It’s making, you know, big changes in, in areas of policy, and that’s probably part of it. I do think the underlying unhappiness people have about the economy, though, is more—is more about the price level. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to ask, first of all, if you could clarify. You were talking about how tariffs were a good part of the uptick in the inflation forecasts, and I was just wondering what that specifically refers to. Is that the tariffs that have already been put in place? Is that anticipating some of the tariffs that might be coming on April 2? And then also, if you wouldn’t mind talking a little more about the balance sheet decision and what drove that. Did that have anything to do with expectations of how the debt ceiling—raising the debt ceiling might affect the reserve supply? <NAME>CHAIR POWELL</NAME>. Yeah, so, in the SEP, you’ll see that there’s not further progress on core inflation this year. We’re kind of side flatlining, going sideways. We don’t ask people to say—to write down how much of this is from tariffs and how much of it is not. But some of it is from tariffs. We know that tariffs are coming, and we know that they’re probably already—all, all forecasters have tariff inflation affecting core PCE inflation [and] core CPI inflation this year, without exception. I’m not aware of an exception. So it’s in there. I can’t tell you how much of that it is. In terms of the balance sheet—so, yeah, we—I think—I guess the way I’d say it is, you know, it was the flows in and out of the, the TGA that got us thinking about it, but as we, you know, as we thought about it, we really came to the view that this was a good time to, to make the move that we made. And, broadly, Committee came around—came around to the view that we, we would do the same thing we’d already done, which is, once we—I guess in June, we— was it June? Whenever it was, we, we lowered the pace of QT, and we’re just going to do that again. We’re going to cut it roughly in half. And the sense of that is, if you’re cutting the pace of QT roughly in half, then the runway is probably doubled, okay? So it’s going—it’s going to be slower for longer. And people really liked that. People thought, “That’s, that’s a good idea.” You know, it’s like a plane. You can think of it like a plane coming in for a landing. As we get closer and we—by the way, we still think that reserves are abundant, although you begin to see some of the—some of the things we look at begin to react a little bit, but we still think that they’re abundant. And, of course, now, the TGA is emptying out, so reserves are, are higher now, so you can’t really see the underlying signal. So we came around to the view, and, and it had a lot of appeal, and so we did it. It really—it has no implications at all for monetary policy. It has no implications at all for the ultimate size of the balance sheet. It isn’t sending a signal in any hidden way that you can try to tease out. It’s just not there. We’re, we’re basically—it’s very consistent with our plans and our practices that we’ve published and that we’ve followed since we began this—what is a very successful, you know, rundown of the balance sheet. Again, [this is] the second time that we’ve slowed the pace. And we’ve said that we would stop when we were somewhat above the level [of reserves] we judge as ample. And, clearly, we’re not at that level yet, but we’re going to be approaching it more slowly. It’s a commonsense kind of a— kind of a thing, and it had—it had pretty broad appeal, I will say. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Claire Jones, Financial Times. You said in January, Chair Powell, that inflation expectations remained well anchored. Would you still say they remain well anchored today? And just to reiterate the question others have asked, if they’re not so well anchored, why hasn’t there been a more radical shift to the policy path today? Thank you. <NAME>CHAIR POWELL</NAME>. So when we—when we talk about inflation expectations being well anchored, we’re talking about longer-run inflation expectations. And they really haven’t moved much, I mean, if at all. There, there’s one reading that everyone’s focusing on that’s higher, but the other survey readings and the market-based readings all show relatively, you know, well- anchored inflation expectations. You would expect that expectations of inflation over the course of a year would move around, because conditions change, and in this case, we have tariffs coming in. We don’t know how big, what’s—there’s so many things we don’t know, but we kind of know there are going to be tariffs, and they tend to bring growth down. They tend to bring inflation up at the—in the first instance. So, so I would say, you, you know, I’m not dismissing what we’re seeing in short-term inflation expectations. We, as I mentioned, follow that very carefully. But when we say expectations are well anchored, we’re really looking at, you know, longer term, five year and out, and there’s really no story to tell five years and out, either in market based or, or in surveys. But we keep—we’ll watch it. I mean, we’re not, you know, we’re, we’re not going to miss any evidence that longer-term or medium-term inflation expectations are, are moving. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Hi, Chair Powell. Neil Irwin with Axios. Treasury Secretary Bessent has observed that a large share of job growth over the last couple of years has been in what he calls government or government-adjacent sectors—health care, education. Do you agree that there’s some weakness in underlying private job growth, and do you see the composition of job growth as something that has policy implications? <NAME>CHAIR POWELL</NAME>. So that, that has been the case. We talked about that over the course of the last year. There were—there were some good number of months and times when a lot of the job creation was, was concentrated in, you know, educational institutions, health care, state governments, things like that. There were also times when private-sector job growth has been moving, moving in a healthy frame—and they’re all—they’re all jobs, but—and remember, we’re, you know, we’re at very low unemployment for, you know, for, for quite a time now. So I, I think it’s a good labor market, but it’s—look, it’s something that we monitor carefully. From our standpoint, employment is employment. But I, you know—the, the elected government is entitled to have—you know, we, we don’t have policies that address different kinds of employment. But, but the elected government has a—has a different role, and they can—they, they can have those. <NAME>NEIL IRWIN</NAME>. True. Quick QT question: Does the Committee envision at some point tapering the MBS runoff, runoff as well? <NAME>CHAIR POWELL</NAME>. I think tapering it—I, I don’t know. There’s no plan to do that. You know, at a certain point, we’ll stop runoff. And we may or may not stop MBS runoff, though, because, you know, we can—we can—we, we want to stop runoff in net at some point. We haven’t made any decisions about that, but, you know, we, we want the—we want the MBS to roll off our balance sheet. We really, strongly desire that, so—but we haven’t made any decisions about that, you know. We, we will—we—I think we’d, we’d look carefully at letting that keep going, but hold the overall size of the balance sheet in, you know, constant, at some point—a point that we’re not at yet. <NAME>MICHELLE SMITH</NAME>. Simon. <NAME>SIMON RABINOVITCH</NAME>. Simon Rabinovitch with the Economist. Thank you, Chair Powell. Several times today, you’ve said that you feel you’re well positioned to wait for greater clarity. At the same time, you could point to quite a few growth risks at the moment. We’ve seen a stock market that’s gone quite wobbly, rapidly cooling housing sales, plunging confidence surveys. Today, not only did the SEP mark down the growth outlook, 17 of 19 see risks to the downside. So my question is, how confident are you that you’re well positioned? Or is that one more thing that you’re uncertain about? <NAME>CHAIR POWELL</NAME>. I’m confident that we’re well positioned in the sense that we’re, we’re well positioned to move in the direction we’ll need to move. I, I mean, I, I don’t know anyone who has a lot of confidence in their forecast. I mean, the point is, we are—we are at, you know, we’re at a place where we can cut or we—or we can hold what is a clearly a restrictive stance of policy. And that’s what I mean. I, I mean, I think we’re—that’s well positioned. Forecasting right now, it’s—you know, forecasting is always very, very hard, and in the current situation, I just think it’s—uncertainty is, you know, remarkably high. <NAME>SIMON RABINOVITCH</NAME>. And, sorry, standing here today, would you be surprised to, to pivot back towards rate cuts in May? <NAME>CHAIR POWELL</NAME>. I, like, I, I think we’re not going to be in any hurry to move. And, as I mentioned, I think we’re, we’re well positioned to wait for further clarity, and not in any hurry. <NAME>MICHELLE SMITH</NAME>. Matt Egan. <NAME>MATT EGAN</NAME>. Matt Egan with CNN. Thank you, Chair Powell. The Fed’s statement released today removed the line that previously said “the Committee judges that the risks to achieving its employment and inflation goals are roughly in balance.” Can you explain the decision to remove that line? Does it mean that you’re now more concerned about inflation or about employment? <NAME>CHAIR POWELL</NAME>. Actually, it does not mean either of those things. You know, sometimes with language they—it, it lives its, its useful life, and then we take it off, and we— and, and that was the case there. There’s really not meant to be any signal here. Over the past year, you know, conveying this sense of the balance of risks was important that they be in balance or close to being in balance. That was useful as we approach liftoff, if you remember. But we’re past that. Or, I’m sorry, no—beginning, beginning to cut. So we just—so we just took it out. I, I actually would say that the more important thing now about risks—and this is in, in pages like 10, 11, 12 of the SEP—if you look, participants widely raised their estimate of, of the risks to our—of uncertainty, but also of the risks to growth in our employment and inflation mandates. That’s, that’s a more salient point now than whether they’re—whether they’re in balance. <NAME>MATT EGAN</NAME>. Just on the, the stock market, the stock market has obviously declined significantly since the Fed last met. Are you concerned at all about some of the market volatility having a real economic impact in terms of hurting business spending or consumer spending, especially among higher-income households? <NAME>CHAIR POWELL</NAME>. So financial conditions matter to us because, you know, financial conditions are the main channel to the real economy through which our policy has its effect. So, so they’re important. But what matters from, from a Fed standpoint for the macroeconomy is material changes to overall financial conditions that are persistent, that last for a while—long enough to actually affect economic activity. So that’s what we’re looking for. I, I’m not going to opine on the appropriate level of any market—equity, debt, commodities, or anything like that. And I would just point you to the—to the bigger picture again. You know, the, the real economy, the, the hard data are still in, in reasonably good shape. It’s the soft data—it’s the surveys that are showing, you know, significant concerns, downside risks, and those kind of things. We don’t dismiss that. We’re watching it carefully, but, you know, we, we don’t want to get ahead of that. You know, we, we want to focus on the hard data. This—if it’s—if that’s going to affect the hard data, we should know it very quickly, and, and, of course, we’ll, we’ll understand that. But you don’t see that yet. <NAME>MICHELLE SMITH</NAME>. Jennifer. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. As you look to navigate higher inflation and lower growth, the Fed has talked about heeding the lessons from the 1970s. Is the Fed willing to have a recession if it means breaking the back of inflation? <NAME>CHAIR POWELL</NAME>. Well, fortunately, we’re in a situation where we have seen inflation move down from, you know, higher levels to pretty close to 2 percent, while the unemployment rate has remained very consistent with full employment, 4.1 percent. So we now have inflation coming in from an exogenous source, but the underlying inflationary picture before that was, you know, basically 2½ percent inflation, I would say, and 2 percent growth, and 4 percent unemployment. So, so that’s what—that’s what we did. That’s what, together, the economy accomplished. So I don’t see any reason to think that we’re looking at, at a replay of the ’70s or anything like that. You know, inflation—underlying inflation is, is, you know, still running in the 2s, with probably a little bit of a pickup associated with tariffs. So I, I don’t think we’re facing—I, I wouldn’t say we’re in, in a situation that’s remotely comparable to that. <NAME>JENNIFER SCHONBERGER</NAME>. And last month, the idea of a DOGE dividend was proposed, which would send $5,000 checks to every taxpayer from DOGE savings. President Trump and Elon Musk have supported this. There’s reports there could be a bill introduced on Capitol Hill. What impact might that have on household savings and spending in terms of your growth and, and outlook for inflation? <NAME>CHAIR POWELL</NAME>. You know, I—it’s not—it’s not appropriate for me to speculate on political ideas or, or fiscal policy, for that matter. So I’m going to—I’m going to pass on that one. Thank you. <NAME>MICHELLE SMITH</NAME>. Daniel. <NAME>DANIEL AVIS</NAME>. Hi, Chair Powell. Daniel Avis from Agence France-Presse. You mentioned that tariffs are already having at least some impact on inflation. I’m just wondering how you and your colleagues on the FOMC have been thinking about the possibility of retaliatory tariffs from other countries, especially with April 2 coming up. Was it something you considered during this meeting? Thanks. <NAME>CHAIR POWELL</NAME>. So, since the very beginning, we’ve had kind of a placeholder—the staff has a placeholder of—range of—really a range of possible outcomes from tariffs, and from trade policy generally. And they generally assume full retaliation in those. And so that’s, that’s kind of baked into the numbers. What happens—it will be complicated, and there will be some retaliation and some not and, and all that, but, ultimately, they’re trying to, with the placeholder, give us a broad sense of what this might look like. This—when we know—when we actually know the specifics, we’ll be able to, to have still uncertain but, you know, better-informed forecasts. So, so, yes, that���s in there. <NAME>MICHELLE SMITH</NAME>. Last question goes to Jean. <NAME>JEAN YUNG</NAME>. Hi, Chair Powell. Jean Yung with MNI Market News. Had a couple questions on the balance sheet change that you made. So the minutes had initially described your discussion on slowing QT as temporary, until the debt ceiling is resolved, but it—from what you said earlier, doesn’t sound like there’s a desire to kind of regain the pace of QT that we have at the moment after the, the debt ceiling is resolved. Is that the case? <NAME>CHAIR POWELL</NAME>. Yeah, so we, we looked at pausing, and we looked at, at slowing, and, really, people came together very strongly behind slowing, not pausing, for a variety of reasons. And so people really came to be, you know, pretty strongly in favor of, of this move. It slows down the path and probably lengthens it—you know, doubles it, effectively, by slowing it by half. That’s, that’s—people thought that’s, that’s a good place to be. It’ll, it’ll, you know, help us assure that this path is, is a smooth one as we get closer and closer to that. So that’s how that came about. <NAME>JEAN YUNG</NAME>. Well, I guess my question is more, was that meant to be a temporary measure during the debt ceiling episode, or—? <NAME>CHAIR POWELL</NAME>. You know, it was—it was actually—it was the, the TGA flows— Treasury General Account flows that got us thinking about this. But the more we thought about it, we came around to this. And, and, you know, it, it is—yes, it was provoked. The original discussion was provoked by that. But I think what we came up with, though, was broader than that and different than it. It does address that issue, but it really is also—it fits in really nicely with our principles and our plans, and the things we’ve done before, and the things we’ve said we would do. So that’s why I—you know, pretty, pretty strong support. I’d just say it’s, it’s nothing to do with monetary policy, nothing to do with the size of the balance sheet. It’s just kind of a commonsense adjustment as you get closer and closer. Let’s slow down a little bit again. And, that way, we’ll be more and more confident that we’re getting where we need to get. You can take your time getting there. You know, we’re shrinking the balance sheet every month, and we think that’s—we think it was a good play and, as I mentioned, well supported. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. Despite heightened uncertainty, the economy is still in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has come down a great deal but has been running somewhat above our 2 percent longer- run objective. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. The risks of higher unemployment and higher inflation appear to have risen, and we believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments. I will have more to say about monetary policy after briefly reviewing economic developments. [Cough] Pardon me. Following growth of 2.5 percent last year, GDP was reported to have edged down in the first quarter, reflecting swings in net exports that were likely driven by businesses bringing in imports ahead of potential tariffs. This unusual swing complicated GDP measurement last quarter. Private domestic final purchases, or PDFP—which excludes net exports, inventory investment, and government spending—grew at a solid 3 percent rate in the first quarter, the same as last year’s pace. Within PDFP, growth of consumer spending moderated while investment in equipment and intangibles rebounded from weakness in the fourth quarter. Surveys of households and businesses, however, report a sharp decline in sentiment and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns. It remains to be seen how these developments might affect future spending and investment. In the labor market, conditions have remained solid. Payroll job gains averaged 155,000 per month over the past three months. The unemployment rate, at 4.2 percent, remains low and has stayed in a narrow range for the past year. Wage growth has continued to moderate, while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment. The labor market is not a source of significant inflationary pressures. Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal. Total PCE prices rose 2.3 percent over the 12 months ending in March; excluding the volatile food and energy categories, core PCE prices rose 2.6 percent. Near-term measures of inflation expectations have moved up, as reflected in both market- and survey-based measures. Survey respondents, including consumers, businesses, and professional forecasters, point to tariffs as the driving factor. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2 percent inflation goal. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today’s meeting, the Committee decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent and to continue reducing the size of the balance sheet. The new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. The tariff increases announced so far have been significantly larger than anticipated. All of these policies are still evolving, however, and their effects on the economy remain highly uncertain. As economic conditions evolve, we’ll continue to determine the appropriate stance of monetary policy based on the incoming data, the outlook, and the balance of risks. If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariffs’ effect—tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored. Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem. As we act to meet that obligation, we’ll balance our maximum-employment and price-stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close. For the time being, we’re well positioned to wait for greater clarity before considering any adjustments to our policy stance. At this meeting, the Committee continued its discussions as part of our five-year review of our monetary policy framework. We focused on inflation dynamics and the implications for our monetary policy strategy. Our review includes outreach and public events involving a wide range of parties, including Fed Listens events around the country and a research conference next week. Throughout this process, we’re open to new ideas and critical feedback, and we will take on board lessons of the last five years in determining our findings. We intend to wrap up the review by late summer. The Fed has been assigned two goals for monetary policy—maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. 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. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Steve Liesman, CNBC. Thank you, Mr. Chair, for taking my question. A lot has happened since the last meeting. There have been tariffs put on, tariffs taken off, and meanwhile, there was a bill advancing in Congress. And I just wonder if I could press you on the last part of your statement. Are you any closer now to deciding which side of the mandate is going to need urgent care first? <NAME>CHAIR POWELL</NAME>. Well, so, as we noted in our—in our statement—postmeeting statement, we’ve judged that the risks to higher employment and higher inflation have both risen. And this, by the way, of course, is compared to March. So that’s what we can say. I don’t think we can say, you know, which way this will shake out. I think there’s a great deal of uncertainty about, for example, where tariff policies are going to, to settle out and also, when they do settle out, what will be the implications for the economy for growth and for employment. I think it’s too early to know that. So, I mean, ultimately, we think our policy rate is in—is in a good place to stay as we await further clarity on tariffs and, ultimately, their implications for the economy. <NAME>STEVE LIESMAN</NAME>. Hearing you describe what you’re looking for in terms of being able to make a decision, it sounded like that’s a long-term process before you sound like you’re going to be comfortable, or the Committee would be comfortable, to act on what the data’s telling you. <NAME>CHAIR POWELL</NAME>. I don’t think we know. You know, I think—look where we are today. We have an economy that, if you “look through,” you know, the sort of distortions in Q1 GDP, you’ve still got an economy that looks like it’s growing at a solid pace. The labor market appears to be solid. Inflation is running just a bit above 2 percent. So it’s an economy that’s been resilient and is in good shape, and our policy is sort of modestly or moderately restrictive. It’s 100 basis points less restrictive than it was last fall. And so we think that leaves us in a good place to wait and see. We don’t think we need to be in a hurry. We think we can be patient. We’re going to be watching the data. The data may move quickly or slowly, but we do think we’re in a good position, where we are, to, to let things evolve and become clearer in terms of what should be the monetary policy response. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos for the Wall Street Journal. Chair Powell, there’s naturally a lot of [inaudible] around 2021 in supply shocks. But there are some who argue that the current situation has notable differences. Energy costs are down. Housing imbalances look nothing like they did four years ago. Labor demand appears to be gradually cooling, with wage growth running below 4 percent. What do you see right now that could nourish higher inflation beyond a rise in goods prices this year? <NAME>CHAIR POWELL</NAME>. I think the underlying inflation picture is, is good. It’s what you see, which is inflation now running a bit above 2 percent. And we’ve had basically decent readings in housing services and nonhousing services, which is a big part of it. So that part, I think is, is moving along well. But there’s just so much that we don’t know. I think—and we’re in a good position to wait and see, is the thing. We don’t have to be in a hurry. The economy is—has been resilient and is doing fairly well. Our policy is well positioned. The costs of waiting to see further are fairly low, we think. So that’s what we’re doing. And, you know, we’ll, we’ll see. The Administration is entering into negotiations with many countries over tariffs. We’ll know more with each week and month that goes by where—about where tariffs are going to land—you know, land, and we’ll know what the effects will be when we start to see those things. So we think we’ll be learning. I can’t tell you how long it will take. But, for now, it does seem like it’s, it’s, it’s a fairly clear decision for us to wait and see and watch. <NAME>NICK TIMIRAOS</NAME>. So when you say that you don’t need to be in a hurry, does that mean that—could the outlook change in such a way that a change in your stance could be warranted as soon as your next meeting? <NAME>CHAIR POWELL</NAME>. You know, as I said, we’re—we are comfortable with our policy stance. We think the right—we’re in the right place to wait and see how things evolve. We don’t feel like we need to be in a hurry. We feel like it’s appropriate to be patient. And, you know, when things develop—of course, we have a record of—we can move quickly when that’s appropriate. But we think right now, the appropriate thing to do is to wait and see how things evolve. There’s so much uncertainty. If you talk to businesses or market participants or forecasters, everyone is just—is just waiting to see how developments play out, and then we’ll be able to make a better assessment of what the appropriate path for monetary policy is. So we’re not in that place, and, you know, as that develops—and I can’t really give you a time frame on that. <NAME>MICHELLE SMITH</NAME>. Jonnelle. <NAME>JONNELLE MARTE</NAME>. Jonnelle Marte with Bloomberg. So, many economists have been pricing in higher odds of a recession, and several are noting that it is more difficult for the Fed to cut rates preemptively, given the higher risks for higher inflation. So, given the outlook, do you still see a path for a soft landing, and what does that look like? <NAME>CHAIR POWELL</NAME>. Well, let me say—I mean, so let’s, let’s, let’s look back and see where we are. So, go through 2024 up to the [present] day. We’ve had—we’ve had, you know, unemployment in the low 4s for more than a year, we’ve had inflation coming down in the—now in the mid-to-low 2s, and we’ve had an economy growing at 2½ percent. So that is—that is the economy as we see it now. What looks likely, given the scope and scale of the tariffs, is that we will see the—certainly, the risks to higher inflation, higher unemployment have increased. And if that’s what we do see, if—and if the tariffs are ultimately put in place at those levels, which we don’t know, then, then we will see—we won’t see further progress toward our goals, but we might see a delay in that. I think in the—you know, in our thinking, we would get—we would never—we never do anything but keep achieving those goals. But what we would—at least for the next, let’s say, year, we would—we would not be making progress toward those goals, again, if that is—if that’s the way the tariffs shake out. The thing is, we don’t know that. There’s so much uncertainty about the scale, scope, timing, and persistence of the tariffs. So that’s that. In terms of preemption, you know, I think you can look back at the 2019 cuts as preemptive. I wouldn’t say that what we did last fall was at all preemptive. If anything, it was a little late. But 2019, we did cut three times. But the situation was, you had a weakening economy, and you had inflation at 1.6 percent. So that’s a situation where you can move preemptively. Now we have inflation running above target. It has been above target for four years. It’s not so far above target now. And we have an expectation conditional on what happens that we’ll see upward pressure on inflation. If you look at where forecasters are, they’re all forecasting an increase in inflation. So it makes it—and then we’ve also got, you know, forecasts of weakening in the economy, and some have recession forecasts. We don’t make a—we don’t make—publish a forecast about, about that. We don’t publish a forecast that assesses how likely a recession is. But, in any case, it’s not a situation where we can be preemptive, because we actually don’t know what the right response to, to the data will be until we see more data. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Colby Smith with the New York Times. How much weakness does the Committee need to see, though, in the labor market and the economy more broadly to lower interest rates again? Is it about a certain increase in the unemployment rate over a period of time, or perhaps a certain number of negative monthly job reports? I mean, how are you making that assessment? <NAME>CHAIR POWELL</NAME>. You know, so first of all, we don’t see that yet, right? We have 4.2 percent unemployment, good participation, wages behaving very well, participation, I mentioned, at a good level. So, you know, with the labor market, we would look at the totality of the—of the data. We’d look at the level of the unemployment rate. We’d look at the speed with which it’s changing. We would look at the whole huge array of labor market data to, to get a sense of whether conditions are really deteriorating or not. And, at the same time, we’d be looking at the other side of the mandate. We could be in a position of having to balance those two things, which is, of course, a very—a difficult balancing judgment that we’d have to make. <NAME>COLBY SMITH</NAME>. On that point about balancing, I mean, you’ve mentioned that the Committee would consider how far the economy is from each goal and the time it would take to kind of get back to that point. But what does that mean in practice? I mean, how much of that assessment will be rooted in a forecast, versus data dependence? <NAME>CHAIR POWELL</NAME>. It would be a combination of the two. I mean, let’s just say this is a—this would be a complicated and challenging judgment that we would have to make if—and this is—we’re not in this situation, but the situation is if the two goals are in tension. So let’s say that unemployment is moving up in an uncomfortable way and so is inflation—not the situation we’re in—hypothetically. But we would look at how far they are from the goals, how far they’re expected to be from the goals, what’s the expected time to get back to their goals. We’d look at all those things and make a difficult judgment. And that’s in our framework. It’s always been in our thinking. You know, it’s—we haven’t had—we haven’t faced that question in a very long time. And so, again, difficult, difficult judgment to make, and not one that we face today. And we may never face it. But, you know, we have to be keeping it in our thinking now. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you. Edward Lawrence with Fox Business. So we had the CPI report that came out that showed, month over month, the first increase in inflation in about three years. The jobs report—you said “solid”—that we saw. At the same time, we have those new tariffs that we’re living under. So, given this, should the Federal Reserve be cutting rates at all this year? <NAME>CHAIR POWELL</NAME>. You know, it’s going to depend. I think you have to just take a step back and realize this is—this is why we are where we are, is, you know, we are going to need to see how this evolves. There are cases in which it would be appropriate for us to cut rates this year. There are cases in which it wouldn’t, and we just don’t know. Until we know more about how this is going to settle out and what the economic implications are for employment, for—and for, for inflation, I couldn’t confidently say that I know what the appropriate path will be. <NAME>EDWARD LAWRENCE</NAME>. So, following on that, just, you know—so then how does President Trump calling on you personally as well as the Federal Reserve to make rate cuts affect your decision today and affect your job difficulty? [0:18:00] <NAME>CHAIR POWELL</NAME>. Doesn’t affect our—doing our job at all. So we—you know, we’re always going to do the same thing—which is, we’re going to use our tools to foster maximum employment and price stability for the benefit of the American people. We’re always going to consider only the economic data, the outlook, the balance of risks. And that’s it, that’s all we’re going to consider. So it really doesn’t affect either our job or the way we do it. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Hi. Howard Schneider with Reuters, and thanks for the time. I’m wondering—I mean, given the complexity about the first-quarter GDP and what lies ahead, I’m just wondering what your intuition tells you about the underlying direction of the economy right now. Many of your colleagues have said they feel growth is slowing. If so, do you have any sense of by how much, to what degree the slowdown may be? What does your gut tell you about how things are evolving out there? <NAME>CHAIR POWELL</NAME>. My gut tells me that uncertainty about the path of the economy is extremely elevated [laughter] and that the downside risks have increased. The risk is—as we pointed out in our statement, the risks—the risks of higher unemployment and higher inflation have risen, but they haven’t materialized yet. They really haven’t. They’re not, really not in the data yet, so that—and that tells me more than by intuition because I think—I think it’s obvious, actually, that the right thing for us to do is to—we’re in a good place. Our policy’s in a very good place, and the right thing to do is, is await further clarity. And I—you know, there’s— usually, things clarify, and that—the appropriate direction becomes clear. That’s what usually happens, right? Right now, it’s very hard to say what that would be. In the meantime, the economy is doing fine. Our policy isn’t—you know, it’s not highly restrictive. It’s somewhat restrictive. It’s 100 basis points less restrictive than it was in, you know, last summer. So we think it’s���we think it’s in a good place, and we think the appropriate thing is for us to wait and see and get more clarity about, about the direction of the economy. <NAME>HOWARD SCHNEIDER</NAME>. Well, let me press you on this idea of the economy being fine right now, because, reading the Beige Book very closely the last time around, there was a lot of, you know, negative stuff, negative sentiment that was in there. And I know that everybody’s looking at soft data right now. You mentioned it yourself—that the sentiment’s sour. But the Beige Book was talking about, you know, the beginnings of layoffs in some industries, prices rising in, in some places, and an awful lot of investment decisions being, being pushed to the sideline. Doesn’t that point to a slowdown? <NAME>CHAIR POWELL</NAME>. It may well. It just hasn’t shown up yet. And, and, you know, we all look at all these sentiments and read many, many individual comments just to get a better feel. And it—you know, businesses and households very broadly are concerned and, you know, postponing economic decisions of various kinds. And, yes, if that continues and nothing, nothing happens to sort of alleviate those concerns, then you would expect that to begin to show up in economic data. It wouldn’t maybe show up overnight, but it would show up over weeks and months. And that may be what happens, but it hasn’t happened yet. And also, there are things that can happen that will—that will change that narrative. I mean, they haven’t happened, but it’s possible to imagine things. But in the meantime, yes, we’re watching it extremely carefully, like everyone is, but don’t see really much evidence of it in the actual economic data yet. And by the way, consumers keep spending, credit card spending. It’s—you know, it’s still—it’s still a healthy economy, albeit one that is shrouded in some very downbeat sentiment on the part of people and businesses. <NAME>HOWARD SCHNEIDER</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Michael McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. The Fed’s been criticized recently by a former Governor for what he calls “mission creep”—you take on more problems, use more tools, and then end up building tools to deal with the fallout of those tools, which then makes it a given that you will act more aggressively in the future. Is that a fair critique, and is that something you would be looking at in your framework review? <NAME>CHAIR POWELL</NAME>. Sorry, say that critique again. <NAME>MICHAEL MCKEE</NAME>. That the Fed has been involved in mission creep—gets involved in using too many new tools to deal with problems and to go too far. Is that something that—the critique was based around the fact that you did QE and QE and QE and— <NAME>CHAIR POWELL</NAME>. Oh, okay. Sure. <NAME>MICHAEL MCKEE</NAME>. —and went beyond the narrow confines of your mandate. <NAME>CHAIR POWELL</NAME>. So—well, I mean, there are a couple—that’s not really beyond the confines of our mandate. I—look, I would say this: We—you know, we did things—essentially, we were on an emergency footing for a couple of years in the pandemic, and it’s very fair and very welcome for people to look back over what we did and say, “Hey, you could have done this better and different.” And one thing we hear a lot is, we could have explained the QE a little better. We did think we were explaining it in real time. I completely accept the, the thought that we could have explained it better. There’s a lot of thinking that we went on too long with QE. I can tell you that the reason we did was, we were—we were concerned that we didn’t want a tightening of—a sharp tightening in financial conditions at a time when we thought the economy was still vulnerable. And so we did hold on for a long time to QE. And we, of course, tapered and everything. And then we immediately went into QT, and, you know, we’ve—we’re down a couple of trillion. But I get the—that, you know, we, we certainly, with the benefit of hindsight, could have tapered earlier or faster. That’s absolutely right. But this is all very welcome. You know, it’s, it’s—you know, we knew, doing this in real time, that we weren’t going to get it perfect. And those kind of—those kind of, you know, after-action kind of looks are essential. And we’re doing the same thing in—you know, in our review, so—on some issues. <NAME>MICHAEL MCKEE</NAME>. There—the other part of that critique is that you’ve taken on topics that are outside of the mandate, such as climate change and trying to ensure that certain groups are benefited by your economic policies in terms of employment, et cetera. <NAME>CHAIR POWELL</NAME>. So, okay, on climate, you’ve heard me say over and over again that we will not be climate policymakers and that our role on climate is a very, very narrow one. And I think—I think that’s what we’ve done. We’ve done really very little on climate. You can say that was—that little bit that we’ve done was too much. But I wouldn’t want to give any impression that, that, you know, we take—that we’ve taken climate in and it’s something that we’re spending a lot of time and energy on. We’re not. We have very, very narrow things. We did one thing, one guidance for the banks, and then we did one—a one-time stress analysis, climate stress analysis, and that’s it. And, you know, we dropped out of the Network for Greening the Financial System. So we didn’t do much on climate, but—and I do think, and I’ve said this publicly several times, I think it’s, it’s a real danger for us to try to take on a mandate like that, which is very narrow application to our work. And, you know, the risk is, if you—if you go for things that are really not on your mandate, you know, then why are you independent? You know, I think that’s a very fair question. And I do think we’ve done a whole lot less on climate than some people seem to think we did. Anyway, that’s what I think. <NAME>MICHAEL MCKEE</NAME>. Should you have taken on the question of bringing unemployment rates down for specific categories? <NAME>CHAIR POWELL</NAME>. We didn’t do that. You know, we said—what we said was that we never targeted any unemployment rate for individual racial or demographic groups. What we said was that maximum employment was a broad and inclusive goal. And I think what we meant by that was, we’re going to consider the totality of the country as we look at our maximum- employment goal. Of course, we were never going to target on any individual group with that, but I think some people, you know, wanted to hear it that way. But that’s not at all what we meant. But—so that’s just not a correct reading of our—but I can see how, you know, maybe people found that confusing, and, you know, we have to take that into consideration. <NAME>MICHELLE SMITH</NAME>. Jo Ling. <NAME>JO LING KENT</NAME>. Hi, Chair Powell. Thanks for taking our questions today. I’m Jo Ling Kent with CBS News. You’ve said, “Wait and see” and “The economy is doing fine” today. But the impact of tariffs are already showing up at the ports. Businesses big and small are telling us that they feel it, and most importantly, consumers say they feel it. But the challenges are here. And there’s no waiting and seeing. For Main Street, what is the breaking point? What would have to happen to prompt a rate cut specifically? <NAME>CHAIR POWELL</NAME>. Well, you know, so we really don’t see in the data yet big economic effects. We see—we see sentiment, their concerns that higher prices may be coming, or things like that, but—so people, they’re worried now about inflation. They’re worried about, you know, a shock from the tariffs. But they really haven’t—that shock hasn’t hit yet. Okay, so, you know, we’re going to be looking at not just the sentiment data, but also the real economic data as we assess what it is we should do. And remember, we’re—there will be two effects. One of them would be weakening economy—weakening economic activity, which translates into higher unemployment, and the other would be potentially higher inflation. Again, to say it again, the timing, the scope, the scale, and the persistence of those effects are very, very uncertain. So it’s not at all clear what the appropriate response for monetary policy is at this time. And we’re— you know—and by the way, our policy’s in a good place, so we think we can wait and move when it is clear what the right thing to do is; really not at all clear what it is we should do. So people are feeling stress and concern, but unemployment hasn’t gone up. Job creation is fine. Wages are in good shape. You know, people are not—layoffs are—people are not getting laid off at high levels. You know, initial claims for unemployment are not increasing, you know, in any kind of impressive way. So the economy itself is still, you know, in solid shape. <NAME>JO LING KENT</NAME>. Just a quick follow-up: President Trump now says he does not plan to remove you as Chair. When you heard that, what did you think? <NAME>CHAIR POWELL</NAME>. I don’t have anything more for you on that. I’ve pretty much covered that issue. Thank you. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi. Thank you. Chris Rugaber, Associated Press. Well, I just wanted to follow up. Earlier, it sounded like you said it was unclear how the Fed—you know, what kind of interest rate decisions you will make later this year. So does that—you know, in March, there was guidance that two cuts might happen, you know, two cuts were penciled in for this year. Is that now—that guidance from the last press conference, has that been overtaken by events at this point? <NAME>CHAIR POWELL</NAME>. You know, we don’t do a Summary of Economic Projections at every meeting, as you know. We do it every other meeting. And so this was the meeting when we didn’t do it. And I—you know, we don’t also kind of poll people, so I really—I really wouldn’t want to try to make a specific projection for where we are relative to that. We will—in six weeks, we have the June meeting, and you’ll have another SEP. I’m not going to hazard a guess here today what—as to what it would be. Again, what I would say is that we think our policy rate is in a good place. We think it leaves us well positioned to respond in a timely way to potential developments. That’s where we are, and that—depending on the way things play out, that could include rate hikes—sorry, rate cuts. You know, it could include us holding where we are. We just are going to need to see, you know, how things play out before we make those decisions. <NAME>CHRISTOPHER RUGABER</NAME>. Great. And just to follow up on that, I mean, when you address the issue of how the Fed would handle both rising unemployment and rising inflation, how are you thinking about the fact that addressing one could exacerbate the other? So a rate cut to reduce unemployment could worsen inflation, and vice versa. How does that—how do you handle those challenges? <NAME>CHAIR POWELL</NAME>. Well, you just captured the—this is the issue with the two goals being in tension. It’s a very challenging question. Now, there can be a case in which one goal is very far—one variable’s very far from its goal, much farther than the other. And if so, you concentrate on that one. And, frankly, that was the case—well, it wasn’t a case where they were really in tension. But if you go back to 2022, it was very clear that we needed to focus on inflation. The labor market was also super tight, so it wasn’t really a tradeoff. You know, if—I think you know what our—what our framework document says. It says we’ll look at how far each goal—each variable is from its goal and also we’ll factor in the time it would take to get there. So, you know, that’s going to be a—potentially, a very difficult judgment. But the data could break in a way that it’s not. You know, I just don’t think we know that. The data could easily favor one or the other. And right now, there’s no way to—no need to make a choice and no real basis for doing so. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. I wanted to ask, Congress is currently debating spending cuts alongside expending—extending the tax cuts. And I know you’ve talked many times about how the path of the debt is unsustainable. But given that we’re also talking right now about the economy slowing, potentially even recession, I was just wondering, is there a danger that spending cuts now could slow growth a lot more? <NAME>CHAIR POWELL</NAME>. You know, we don’t give Congress fiscal advice. I—they’re going to do—we take what they do as a given, and we put it in our models and in our assessment of the economy, so I wouldn’t want to, you know, speculate on that. I mean, I think we do know that the debt is on an unsustainable level—on an unsustainable path—not on an unsustainable level, but an unsustainable path. And it’s on Congress to figure out how to get us back on a sustainable path, and, you know, it’s not up to us to give them advice. <NAME>VICTORIA GUIDA</NAME>. Well, do you think that they should take macroeconomic conditions into account as they look at this? <NAME>CHAIR POWELL</NAME>. I think they don’t need my advice and our advice on how to do fiscal policy any more than we need their advice on monetary policy. [Laughter] <NAME>MICHELLE SMITH</NAME>. Andrew. <NAME>ANDREW ACKERMAN</NAME>. Thanks, Mr. Chairman. Andrew Ackerman with the Washington Post. In your Jackson Hole comments last year, you said you would not welcome further cooling in labor market conditions. The unemployment rate then was 4.2 percent, which is what it is now. Forecasters—many forecasters now predict a higher jobless rate. How has your tolerance for weakening labor market conditions changed compared to a year ago? <NAME>CHAIR POWELL</NAME>. So it was quite a different situation. What was happening last year is that over the space of six, eight, seven months, the unemployment rate went up by almost a full percentage point, and it was click, click, click, click, click each month. And, you know, everywhere, people were talking about downside risks to the labor market. At the same time, payroll job numbers were getting softer and softer. So there was a really obvious concern about downside risk to the labor market. And so at Jackson Hole and then in September, you know, we wanted to address that forthrightly. We wanted to show that we were there for the—I mean, we had been there for inflation for a couple of years, and we wanted to show also that we’re there for the labor market. And it was important that we send that signal. Fortunately, since then, the labor market has really—and the unemployment rate have really been moving sideways at a level that is, you know, well in the range of mainstream estimates of maximum employment. So that concern has gotten a lot less. So, you know, you’re at 4.2 percent unemployment. I think we were in a very different situation. And now we have a situation where, you know, the risks to higher inflation and higher unemployment have both gone up, as we noted in our statement, and we’ve got to monitor both of those. We actually have a potential situation where there may be a tradeoff or tension between the two potentially. We don’t have it yet, and we may not have it, but that’s what we [may] have, and that’s why I think it’s a very different, different situation. <NAME>ANDREW ACKERMAN</NAME>. I, I mean, I guess I want to follow up by asking how much of a rise in the jobless rate you would—you could tolerate. <NAME>CHAIR POWELL</NAME>. I can’t give you a—you know, a—I’m not going to try to give you a specific number. I’ll just say, we’ve got—we have to now be looking at both variables and which of them is, is, you know, demanding—if one of them is demanding our focus more than the other, that would tell us what to do with policy. If they’re more or less this, you know, equally distant and equally—or not distant, then we don’t have to make that assessment. You know, the assessment is, you wait. So I’m not going to try to be really specific about what we need to see in terms of the number. But if—look, if we did see, you know, significant deterioration in the labor market, of course that’s one of our two variables, and we would look to be able to support that. You’d hope that it wasn’t also coming at a time when inflation was getting very bad. And, again, we’re speculating here. We don’t know this. We don’t know any of these things. It’s very hypothetical. We’re just going to have to wait and see how the—how it plays out. <NAME>ANDREW ACKERMAN</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Claire Jones, Financial Times. In terms of getting some clarity, we’ve got some talks at the weekend in Geneva between the U.S. and China. A lot of economists are ask—are attaching an awful lot of importance to how—what we hear from those talks. How much importance are you attaching to them in terms of judging what will happen to the U.S. economy going forward? And just in a similar vein, you know, some economists are saying it’s days, not weeks, that we have until we start to put the U.S. economy at risk of seeing a sort of pandemic here, with shortages and higher prices, if we don’t kind of soothe relations between the U.S. and China. So it would be good to have your view on that, too. <NAME>CHAIR POWELL</NAME>. So, you know, these are not talks that we’re in any way involved in, so I really can’t comment directly on them. So—but what I will say is this: You know, we had—coming out of the March meeting, we, we—the public generally had an assessment of where tariffs were going. And then April 2 happened, and it was really substantially larger than anticipated in the forecasts that I’ve seen and in our forecast. So—and now we—and now we have a different—we’re in a new phase where—it seems to be we’re entering a new phase where the Administration is entering into beginning talks with a number of our important trading partners. And that’s—that has the potential to change the picture materially or not. And so I think it’s going to be very important how that shakes out. But I—you know, we simply have to wait and see how it works out. It certainly could change the picture, and we’re mindful of not trying to make conclusive judgments about what will happen at a time when the—you know, when the facts are changing. <NAME>CLAIRE JONES</NAME>. And just on the fall in shipping volumes from China over these tensions, I mean, do you share that concern that we could start seeing goods shortages and higher prices in the coming weeks if this isn’t resolved very quickly? <NAME>CHAIR POWELL</NAME>. You know, I don’t want to get my—we’re not—we shouldn’t be involved, even verbally, in questions about the timing of these things. Yes, we’re—of course, we follow all that data. We see the shipping data. We see all that. But, ultimately, this is for the Administration to do. This is—you know, this is their mandate, not ours. And I know they’re— as you can see, they’re, again, having—beginning to have talks with many nations. And that has the potential to change the picture materially, so we’ll just have to wait and see. <NAME>MICHELLE SMITH</NAME>. Kosuke. <NAME>KOSUKE TAKAMI</NAME>. Kosuke Takami with Nikkei. Thank you for doing this. The volume of imported goods increased significantly in the first quarter. Do you think the decision could cause a delay in the impact of tariff on inflation, and does this mean that it will take a longer time to reduce uncertainty? <NAME>CHAIR POWELL</NAME>. The decision we made today? Which decision? <NAME>KOSUKE TAKAMI</NAME>. So the future decisions. So the volume of imports— <NAME>CHAIR POWELL</NAME>. Yes. <NAME>KOSUKE TAKAMI</NAME>. —imported goods has increased significantly. So the impact of the imported inflation may delay. So, what is the impact to your future decision? <NAME>CHAIR POWELL</NAME>. Okay, so, I mean, I think we—I think we think that the—you know, there was a big spike in imports—right?—very big, historically large, really, and—to beat tariffs. And now that should actually reverse so that it’s—you know, it’s the difference between—it’s exports minus imports, so—and imports were huge, and so then it conveyed a very negative contribution to U.S. GDP—annualized GDP in the first quarter, as we all know. So that could, in the second quarter, be reversed so that we have, you know, an unusually large contribution to— unusually positive. That’s very likely as imports drop sharply. You could also have—you know, very likely you’ll have restatements of the—of the first quarter. It’ll turn out that consumer spending was higher. It will turn out that inventories were higher. And so you’ll see—you’ll see those data revised up. It may actually go into the third quarter, too. And so I think it’s going— this whole process is going to, a little bit, make it harder to make a clean assessment of U.S. demand. I mentioned private domestic final purchases, which doesn’t have inventories, government, or—inventories, government. Anyway, it’s a cleaner read on private demand. But that, that, too, probably was flattered a little bit by—you know, by strong demand for imports to be tariffed. So that might overstate. It’s a really good reading, 3 percent PDFP in the first quarter. That might actually overstate. So it’s not really going to—I don’t think it’s going to affect our decisions. I will just say, though, that it’s a little confusing and it’s probably less confusing to us than it would be to the general public as we try to explain this. You know, it’s complicated, and, you know, GDP is sending a signal. PDFP is sending a signal. It’s a little bit confusing. But I think we understand what’s going, and it’s not really going to change things for us. <NAME>MICHELLE SMITH</NAME>. Courtenay. <NAME>COURTENAY BROWN</NAME>. Thank you. Courtenay Brown from Axios. I guess, you know, we talked about some of the indications of potential layoffs, price hikes, an economic slowdown all being evident in the soft data. I’m curious why the Fed needs to wait for that to translate into hard data to, you know, make any type of monetary policy decision, especially if the hard data is not as timely or might be warped by tariff-related effects. Are you worried that the soft data might be some sort of false warning? <NAME>CHAIR POWELL</NAME>. No. I mean, it’s—look, the—look at the state of the economies. The labor market is solid. Inflation is low. We can afford to be patient as things unfold. There’s no real cost to our waiting at this point. Also, the sense of it—the sense of it is, we’re not sure what the right thing will be. You know, there should be some increase in inflation. There should be some increase in unemployment. Those call for different responses. And so until we know— potentially call for different responses—and so, you know, until we know more, we have the ability to wait and see. And it seems to be a pretty clear decision. Everyone on the Committee supported waiting. And so that’s why we’re waiting. <NAME>COURTENAY BROWN</NAME>. Just a very quick follow-up: There was this sort of vibe session, if you will, where the sentiments expressed in soft data did not translate into the hard economic data. Are you—how are you thinking about that when interpreting some of the signs in the softer survey data? <NAME>CHAIR POWELL</NAME>. You know, I think, going back a number of years, the link between sentiment data and consumer spending has been weak. It’s not been a strong link at all. On the other hand, we haven’t had a move of this, you know, speed and size. So it wouldn’t be the case that we’re looking at this and just completely dismissing it. But it’s another reason to wait and see. You’re right that we had a couple of years during the pandemic where people were saying—just very downbeat surveys and going out and spending money. So that can happen, and that may happen to some degree here. We just don’t know. This is an outsized change in sentiment, though, and so none of us are looking at this and saying that we’re sure one way or the other. We’re not. <NAME>MICHELLE SMITH</NAME>. Matt. <NAME>MATT EGAN</NAME>. Thanks, Chair Powell. Matt Egan with CNN. So you mentioned earlier that you’re monitoring the shipping data. And we have seen in the shipping data that imports from China into the Port of Los Angeles have plunged. And that has raised concerns about potential shortages. What tools, if any, does the Fed have to ensure that prices and inflation expectations don’t get out of hand if tariffs do cause significant supply chain disruptions? <NAME>CHAIR POWELL</NAME>. I mean, we don’t have, you know, the kind of tools that are good at dealing with supply chain problems. We don’t have that at all. That’s a—that’s a job for the Administration and for the private sector more than anything. You know, what we can do with our interest rate tool is, we can support—be more or less supportive of demand. And that’s— that’d be a very inefficient way to try to fix supply chain problems. But, you know, we don’t see—we don’t see the inflation yet. We’re, of course, reading the same stories and watching the same data as everybody else. And, you know, right now, we see inflation, you know, kind of moving sideways at a fairly low level. <NAME>MATT EGAN</NAME>. If I could follow up on that, President Trump has indicated that he will likely name a replacement for you when your term as Chair expires next year. But your position on the Board runs through January 2028, I believe. Would you consider remaining on the Fed Board even if you’re no longer Chair? <NAME>CHAIR POWELL</NAME>. So I don’t have anything for you on that. My whole focus is on— and my colleagues’ focus is all on, you know, trying to navigate this tricky passage we’re in right now, trying to make the right decisions. You know, we want to make the best decisions for the people that we serve. That’s what we think about day and night. And this is a challenging situation, and that’s, that’s 100 percent of our focus right now. <NAME>MICHELLE SMITH</NAME>. Let’s go to Jennifer for the last question. <NAME>JENNIFER SCHONBERGER</NAME>. Thank you so much, Chair Powell. Jennifer Schonberger with Yahoo Finance. Public records of your schedule so far this year show no meetings with President Trump. Past Presidents Obama, Bush, and Clinton have all met with Fed Chairs. And you met with Trump during his first term. Why haven’t you asked for a meeting yet with the President? <NAME>CHAIR POWELL</NAME>. I’ve never asked for a meeting with any President, and I never will. It’s not—I wouldn’t do that. There’s never a reason for me to ask for a meeting. It’s always been the other way. <NAME>JENNIFER SCHONBERGER</NAME>. So would you want to meet with him if given the opportunity— <NAME>CHAIR POWELL</NAME>. I never— <NAME>JENNIFER SCHONBERGER</NAME>. —to get more information? <NAME>CHAIR POWELL</NAME>. I never—it’s never an initiative that I take. It’s always an initiative—I—you know, I don’t think it’s up to a Fed Chair to seek a meeting with the President, although maybe some have done so. I’ve never done so, and I can’t imagine myself doing that. It’s—I think it’s always—comes the other way: A President wants to meet with you. But that hasn’t happened. <NAME>JENNIFER SCHONBERGER</NAME>. And if I could just ask one question on monetary policy, when it is time to cut rates, how will you determine how far down rates will have to come to try to keep a balance on the inflation mandate as employment weakens? <NAME>CHAIR POWELL</NAME>. You know, I think once you have a direction—a clear direction, you can make a—we can make a judgment about how fast to move and that kind of thing. So it’s— really, the harder question is the timing, I think, and when will that become clear? And, fortunately, as I mentioned, we have our policy in a good place, the economy’s in a good place, and it’s really appropriate, we think, for us to be patient and wait for things to unfold as we get more clarity about what we should do. Thanks very much.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. Despite elevated uncertainty, the economy is in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has come down a great deal but has been running somewhat above our 2 percent longer- run objective. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments. I’ll have more to say about monetary policy after briefly reviewing economic developments. Following growth of 2.5 percent last year, GDP was reported to have edged down in the first quarter, reflecting swings in net exports that were driven by businesses bringing in imports ahead of potential tariffs. This unusual swing has complicated GDP measurement. Private domestic final purchases, or PDFP, as we call them—which excludes net exports, inventory investment, and government spending—grew at a solid 2.5 percent rate. Within PDFP, growth of consumer spending moderated, while investment in equipment and intangibles rebounded from weakness in the fourth quarter. Surveys of households and businesses, however, report a decline in sentiment over recent months and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns. It remains to be seen how these developments might affect future spending and investment. In our Summary of Economic Projections, the median participant projects GDP to rise 1.4 percent this year and 1.6 percent next year—somewhat slower than projected in March. In the labor market, conditions have remained solid. Payroll job gains averaged 135,000 per month over the past three months. The unemployment rate, at 4.2 percent, remains low and has stayed in a narrow range for the past year. Wage growth has continued to moderate while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment. The labor market is not a source of significant inflationary pressures. The median projection for the unemployment rate in the SEP is 4.5 percent at the end of this year and next, a bit higher than projected in March. Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.3 percent over the 12 months ending in May and that—excluding the volatile food and energy categories—core PCE prices rose 2.6 percent. Near-term measures of inflation expectations have moved up over recent months, as reflected in both market- and survey-based measures. Respondents to surveys of consumers, businesses, and professional forecasters point to tariffs as the driving factor. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2 percent inflation goal. The median projection in the SEP for total PCE inflation this year is—is 3 percent, somewhat higher than projected in March. The median inflation projection falls to 2.4 percent in 2026 and 2.1 percent in 2027. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today’s meeting, the Committee decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent and to continue reducing the size of our balance sheet. We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks. Changes to trade, immigration, fiscal, and regulatory policies continue to evolve, and their effects on the economy remain uncertain. The effects of tariffs will depend, among other things, on their ultimate level. Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity. The effects on inflation could be short lived—reflecting a one-time shift in the price level. It’s also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored. Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem. As we act to meet that obligation, we will balance our maximum-employment and price-stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal and the potentially different time horizons over which those respective gaps would be anticipated to close. For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely scenario going forward. The median projection projects—participant—median participant projects that the appropriate level of the federal funds rate will be 3.9 percent at the end of this year, the same as projected in March. The median projection declines to 3.6 percent at the end of next year and to 3.4 percent at the end of 2027, a little higher than the March projection. These individual forecasts are always subject to uncertainty, and, as I have noted, uncertainty is unusually elevated. And, of course, these projections are not a Committee plan or decision. At this meeting, the Committee continued its discussions as part of our five-year review of our monetary policy framework. We focused on issues related to assessing the risks and uncertainties that are relevant for monetary policy and the potential implications for policy strategy and communications. Our review includes outreach and public events involving a wide range of parties, including Fed Listens events around the country and a research conference that we held last month. We are open to new ideas and critical feedback, and we will take on board lessons of the last five years in determining our findings. We intend to wrap up any modifications to our Statement on Longer-Run Goals and Monetary Policy Strategy by late summer. After that, we will consider enhancements to our suite of communications tools, including the SEP. The Fed has been assigned two goals for monetary policy: maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. And 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. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the New York Times. To what extent has the more limited impact from tariffs at this stage on inflation changed your view on what the ultimate economic fallout will be from these policies and the timing of when they will materialize in the data? <NAME>CHAIR POWELL</NAME>. So we’ve had three months of, of favorable inflation readings since the high readings of January and February, and that’s, of course, highly welcome news. Part of that just is that services, core services—both housing services and nonhousing services have really been grinding down toward levels that are—that are consistent with 2 percent inflation. So that’s the good news. We’ve had goods inflation just moving up a bit, and, of course, we expect—as you—as you point out, we, we do expect to see more of that over the course of the summer. It takes some time for tariffs to work their way through the chain of distribution to the end consumer. A good example of that would be, goods being sold at retailers today may have been imported several months ago—before tariffs were imposed—so we’re beginning to see some effects. And we do expect to see more of them over coming months. We do—we do also see price increases in some of the relevant categories like personal computers and audio-visual equipment—things like that that are attributable to tariff increases. In addition, we look at surveys of businesses, and there, there are many of those. And, and, you, you do see a range of things, but, but many, many companies do expect to—to, to put all or—some or all of the effect of tariffs through to the next, next person in the—in the chain and, ultimately, to the consumer. Today—you know, the amount of these—the, the amount of the tariff effects, the size of the tariff effects, their duration, and the time it will take are all highly uncertain. So that, that is why we think the appropriate thing to do is to hold where we are as we learn more, and we think our policy stance is, is in a good place—where we’re well positioned to react to incoming developments. <NAME>COLBY SMITH</NAME>. So in terms of how we should interpret the rate cuts penciled into the SEP, is this reflecting that there’s this expectation that underlying inflation will just stay well enough contained that allows the Committee to eventually move ahead with those cuts? Or is it about, you know, responding to a deterioration in economic activity, let’s say? I mean, how should we make sense of the forecast? <NAME>CHAIR POWELL</NAME>. So if you look at the forecast, you will see that people do generally expect inflation to move up and then to come back down. But we can’t just assume that. Of course, we don’t know that, and, you know, our, our job is to make sure—one of our jobs—to make sure that a one-time increase in inflation doesn’t turn into an inflation problem. And that, again—that will depend on the size of the effects, how long it takes for them to come in, and, and, ultimately, on, on keeping inflation expectations anchored. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Hi, and thanks, Chair Powell. Howard Schneider with Reuters. If you look at the, the rate path starting in December to today and adjust it over the full time horizon you’ve got there, you’ve taken about ¼ point per year out of your projected path. And you end at a higher rate in end-2027 than you were—would have in the prior forecast. Is that a result of, of a sense that tariffs will lead to more persistent inflation? Is it a result of reassessments of where your short-term neutral rate is? Is it—why, why are you on a slower path now? <NAME>CHAIR POWELL</NAME>. So I would focus most on the—on the nearer term. As you think—as you get out to the—to the later years, it’s hard to—it’s hard for anybody to know where the economy is going. You didn’t see people moving their longer-term, you know, estimate of the neutral rate, for example, at this meeting. So—and those things are probably slow moving. So I think—I think if you look at what’s happening here since March—this is since March, right?— you see a little slower growth, just a tiny tick up, one-tenth tick up, in, in unemployment, and you see inflation moving up three-tenths. And by the way, it was—it was a similar move from the December SEP to the March. So that’s what you see. You see the, the effects of tariffs. I think we learned in April, after the March meeting, that substantially higher tariffs were likely, and then since then, the estimates of where the tariffs will be have actually moved back down, although still at an elevated level. So we’re adapting in real time, and what you see is, you know, an, an accumulation of individual assessments. <NAME>HOWARD SCHNEIDER</NAME>. Okay, but you say in the statement that risks have diminished on that front, but the July 9, you know, drop-dead date for all the, the Liberation Day tariffs is still out there and unresolved. You’ve got now an exchange of missiles between two Middle East adversaries, with a possible U.S. involvement—how can you justify saying that risks have diminished? <NAME>CHAIR POWELL</NAME>. So what we said was that uncertainty has, has—uncertainty about the economic outlook has diminished but remains elevated. Many, many surveys say that. They do. So—and, and, that’s—that’s actually a line from the Tealbook, which you can see in five years. Remember to check that. [Laughter] <NAME>HOWARD SCHNEIDER</NAME>. Maybe the world will be over by then. [Laughter] <NAME>CHAIR POWELL</NAME>. No—but if you think of that, tariff uncertainty—uncertainty really peaked in April and since then has come down. And that’s—that’s really what that’s just acknowledging. It’s diminished but still elevated—that it’s uncertainty. So I think that’s an accurate statement. <NAME>MICHELLE SMITH</NAME>. Chris Rugaber. <NAME>CHRISTOPHER RUGABER</NAME>. Thank you. Chris Rugaber at Associated Press. There is an argument out there in favor of cutting rates more immediately. Inflation has continued to cool and is back at roughly 2 percent, despite the tariffs. And I guess I also wanted to ask about, you know, cracks in the job market, with gross hiring slowing—concentrated in just a few industries. We’ve seen some housing data, including this morning, that have been pretty weak. Do you see any concerns that, you know, the economy is weakening and that is a reason to cut rates going forward? <NAME>CHAIR POWELL</NAME>. So we do—we do, of course, monitor all those things. I, I think if you look at the overall picture, you know, what you’re seeing is 4.2 percent unemployment and an economy that’s growing at a—at a rate hard to know, given the, the unusual flows in the first quarter. But it appears to be 1½, 2 percent—maybe a little better than that. Sentiment has come up off of its very low levels. It’s still—it’s still depressed. So, you know, you can—you can point to things—the housing market is a longer-run problem and also a short-run problem. I don’t think it’s indicative of—you know, basically, the situation is, we have a longer-run shortage of housing, and we also have high rates right now. I think the best thing we can do for the housing market is to restore price stability in a sustainable way and, and create a strong labor market, and that’s the best thing we can do for the housing market. You asked about the job market—again, look at labor force participation. Look at wages. Look at job creation. They’re all at healthy levels now. I, I would say you can see perhaps a very, very slow continued cooling, but nothing that’s troubling at this time. But, you know, we watch it—we watch it very, very carefully. So, overall, again, the current stance of monetary policy leaves us well positioned to respond in a timely way to economic developments, and—for now—and we’ll be watching the data carefully. <NAME>CHRISTOPHER RUGABER</NAME>. Well, just quickly on—given that, you know, there are concerns inflation will rise—but there is the alternate scenario that tariffs would create demand destruction and slow growth sufficiently and that would perhaps keep a bit of a lid on inflation. Do you see odds of that scenario, what kind of odds do you see of that scenario coming true, and how many months of cool inflation would you need to see before concluding that maybe that lower-inflation scenario is taking place? <NAME>CHAIR POWELL</NAME>. So this is very much the conversation we had today and yesterday. There, there are many, many different scenarios—many combinations of scenarios where inflation does or doesn’t prove out to be at the levels we think and where the labor market does or doesn’t soften. And I think what, what you see people doing is looking ahead at a time of very high uncertainty and writing down what they think the most likely case is. No one holds these, these rate paths with a great deal of conviction, and everyone would agree that they’re all going to be data dependent. And that—you can make a case for, for any of the rate paths, I think, that you see in, in the SEP. And, you know, we do this once a quarter. It’s—it’s a hard thing to do at this—particularly at this time. But it does reflect—you know, if you see somebody writing down, you know, a, a rate path that involves cuts, that’s them saying, “Yes, I think we will get to a place, more likely than not, where cuts will be appropriate.” And it could be—it could be a joint probability of a number of possible outcomes. Again, remember how much uncertainty we face, though. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Thank you. Mr. Chair, I wonder if you could describe for us some of those scenarios. How do you get to a place—I’m noticing that the uncertainty levels in your forecast are very high. How do you get to a place where you have the confidence in the outlook for—say, inflation and/or growth or the unemployment rate—how many months does it take, and what do you want to see in the data to get to that level of confidence to actually reduce rates off the restrictive level? <NAME>CHAIR POWELL</NAME>. So it’s—it’s—again, it’s very, very hard to say when that will happen. We know that the time will come; it come—could come quickly. It could not come quickly. As long as the economy is solid, though—as long as we’re seeing the kind of labor market that we have and reasonably decent growth and inflation moving down, we feel like the right thing to do is to be where we are, with where our policy stance is, and just learn more. And in particular, we feel like we’re going to learn a great deal more over the summer on tariffs. We do—we hadn’t expected them to show up much by now, and they haven’t, and we will see whether—the extent to which they do over, over coming months. And I think that’s going to inform our thinking, for one thing. In addition, we’ll see how the labor market progresses. So, at some point, it will become clear. I can’t tell you exactly when that will be. And, you know, meanwhile, we’ll be watching, watching the labor market very carefully for signs of weakness and strength and tariffs for signs of, of what’s going to happen there. And, of course, there are many developments ahead, you know, even in the near term—developments are expected on tariffs. So I think we, we don’t yet know with any confidence where they will settle out. We have an estimate, and it’s a pretty—I think all estimates are now pretty close together. But it’s— it’s, yeah, highly uncertain. <NAME>STEVE LIESMAN</NAME>. When you say “estimate”—estimate of the impact of tariffs on the core PCE—is that what it is? And can you share that? <NAME>CHAIR POWELL</NAME>. Yeah, what you start with is, is—what’s the effective tariff rate overall? And people are managing to that. But, you know, the, the pass-through of tariffs to consumer price inflation is a whole process that’s very uncertain. You know, as you know, there are many parties in that chain: There’s the manufacturer, the exporter, the importer, the retailer, and the consumer, and each one of those is going to be trying not to be the one to, to pay for the tariff. But together, they will all pay for it together—or maybe one party will pay it all. But that process is very hard to predict, and we haven’t been through a situation like this, and I think we have to be humble about our ability to forecast it. So that’s why we need to see some actual data to have—to make better decisions. We, we’d like to get some, some more data, and, and, again, in the meantime, we can do that because the economy remains in solid condition. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos of the Wall Street Journal. Chair Powell, I guess I’m wondering if you could explain a little more the divergence we see in the dot plot, particularly around the 2025 rate projections. I realize this is—you know, you have one group of officials that are putting down no cuts, another that are putting down more than one—and recognizing that could be difficult to summarize, but is it a matter of people having a different outlook or a different reaction function? A different commitment to defending against another inflation mistake? How, how did that play out over the last two days? <NAME>CHAIR POWELL</NAME>. So you’re right, we—and, as is often the case, we have a pretty healthy diversity of views on the Committee. We did have strong support for today’s decision and broad agreement that our policy stance does leave us in a good place. But I would point to two factors, and you mentioned them. The first is just that parties have a diversity of forecasts, and, and they do align with, with where—with where their dots are. So if you have a higher inflation forecast, you’re going to be less likely to be writing down, you know, more, more cuts. But as—remember, as we see more data, we’re going to learn more about where inflation is headed. And that means when it is time to look at, at normal—at sort of, at, you know— resuming our normalization process, the differences you may—you see should be smaller because we’ll have seen actual data. Right now, it’s just a forecast in a very foggy time. So that’s the first part—is forecast. Secondly, people can look at the same data, and they can evaluate the risks differently, as you know. And that includes, you know, the, the risk of higher inflation, the risk it’ll be more persistent, the risk that the labor market will weaken—people are going to have different assessments of that risk. So you put that in there, too. So those are the two ways that, that—the two things, I think, that drive these things. Remember, though, with—as I mentioned earlier— with uncertainty as elevated as it is, no one holds these rate paths with a lot of conviction. So that’s really where it is. It’s a function of those things, and I think as the data come in, you should see those differences diminish. <NAME>NICK TIMIRAOS</NAME>. If I could follow up—you’ve said the policy is in a good place, and that it’s modestly restrictive. Given all the uncertainty—you just talked about tariff levels, uncertainty around the pass-through—is it price increases versus margin compression?—some of the softness that Chris talked about in, in labor and housing. Why wouldn’t it be better to have rates at a more neutral setting as the economy heads into this period of very high uncertainty? <NAME>CHAIR POWELL</NAME>. So if you just look backward at the data, that, that’s what you would say, but that’s not—we have to be forward looking. And the thing that every forecaster—every outside forecaster and the Fed is saying is that we expect a meaningful amount of inflation to arrive in coming months, and we have to take that into account. So I think a backward-looking look would, would lead you to a neutral stance. But we, we can’t—we have to—we have to look at that. And because the economy is still solid, we can take the time to actually see what’s going to happen. It, it’s, you know, the—there’s a range of possibilities on how, how large the, the inflation effects and the other effects are going to be. So we’ll make smarter and better decisions if we just wait a couple of months or however long it takes to get a sense of, of really what, what is going to be the pass-through of inflation and what’re—what’s going to be the effects on spending and on hiring and all those things. <NAME>MICHELLE SMITH</NAME>. Mr. McKee. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Radio and Television. Your friend down at 1600 Pennsylvania Avenue continues to lob insults in your direction. And I’m wondering, given now that the Supreme Court has maybe carved out the Fed from some of the legal implications of that, whether this is just noise that the markets and everybody should ignore until your term is up or whether you worry that it could lead to more pressure on confidence on Wall Street—on consumers—about the outlook for the economy. <NAME>CHAIR POWELL</NAME>. Okay, from my standpoint, it’s—it’s not complicated. What everyone on the FOMC wants is a good, solid American economy with a strong labor market and, and price stability. That’s what we want. We think our policy is well positioned to—right now to, to deliver that and, and to be able to respond in a timely way as the data lead us around. The economy’s been resilient, and part of that is our stance, and, again, we think we’re—we’re in a good place on that to respond to significant economic developments. That’s what matters. That is what matters to us—pretty much, that’s all that matters to us. <NAME>MICHAEL MCKEE</NAME>. I need to ask—assuming you are not reappointed, would you stay on as Governor when your term as Chair ends? <NAME>CHAIR POWELL</NAME>. I’m—I’m not thinking about that. I’m thinking about this. <NAME>MICHELLE SMITH</NAME>. Andrew. <NAME>ANDREW ACKERMAN</NAME>. Thanks, Mr. Chairman. I guess with workplace raids increasing, picking up significantly—what kind of effect would that have on the labor market in the short term? <NAME>CHAIR POWELL</NAME>. Sorry, sorry—with what picking up? <NAME>ANDREW ACKERMAN</NAME>. Workplace raids. <NAME>CHAIR POWELL</NAME>. Ah, ah, immigration—so you’re asking immigration? <NAME>ANDREW ACKERMAN</NAME>. Yeah. <NAME>CHAIR POWELL</NAME>. Yeah, you know—I, I wouldn’t want to speculate. What—one way to get at that from an economic standpoint—we, of course, don’t comment on immigration policy. It’s not ours to make or comment on. But what you see is a—an, an unemployment rate that has been really solid and at a low level—not really increasing. It’s been in a—in a good range and well within the range of mainstream estimates of maximum employment. And that means, like, part of that is that labor demand and labor supply are kind of moving down at the same rate. Labor demand is, is softening—you see that in job creation—but it’s still kind of at a healthy level. And labor supply is, is diminishing because the, the immigration numbers that we see are, are much lower than they were. So the—those two factors, supply and demand—that’s what has kept the, the unemployment rate in a reasonably, you know, stable place. <NAME>ANDREW ACKERMAN</NAME>. Okay, thanks. The other thing I wanted to follow up on is if you could—if you could elaborate on the potential changes to the SEP that you suggested were part of the framework review, I think. <NAME>CHAIR POWELL</NAME>. So the framework review really has two tracks, right? The first track is our—is our policy framework. That, that is reflected in the consensus statement. And we, we’ve said that we would finish that and announce it by the end of the summer. So we’re well along in that process. We’ve had the meetings that we need to have, and we’re now going to be going into [cough]—pardon me—into discussions about, you know, specific changes to language. So that’s—that’s the framework part of it. The second part of it is our communications tools and practices [cough]—pardon me—and that, that part comes next, okay? That’s what we’re going to do in the meetings this fall. Actually, what we did at this meeting, though, is we, we sort of prepared the ground for that. We had a—we had a meeting where we talked at a high level about a number of ideas. The SEP is part of it—you know, other—many, many other ideas. It’s—it’s sort of— how do we think our communications can be improved? There are a number of ideas. People offered a really—it was a great conversation. Number of ideas—but we’re—we’re going to look at those with staff briefing and a lot of thought in the fall. And I would say, when it comes to changing communications, you know, I would only do—I would only support things really that only—implement things that have very broad support. And also, you want to be really careful, because I think our communications are pretty well received. They’re not broken, so more is not necessarily better—but better is better. So we’re going to be looking at ways to do—to do things that will improve the clarity of what we do for the benefit of, of the public. <NAME>ANDREW ACKERMAN</NAME>. Thanks. <NAME>MICHELLE SMITH</NAME>. Kelly. KELLY O’GRADY. Thanks, Chair Powell. Kelly O’Grady, CBS News. You’re famously known as the guy that makes decision based on data instead of speculation. You’ve said today in—the inflation data is in a good place—we don’t know how tariffs are going to impact prices going forward—that’s uncertain. But I’ve got to go back to the last time that you cut rates in December, and there was still the what-if of tariffs. So what made you feel comfortable cutting then, when inflation was higher than where it is today—and you didn’t cut today? <NAME>CHAIR POWELL</NAME>. Well, the, the forecast for inflation in December was 2½ core PCE for 2025—the forecast was 2½ percent—which is a good inflation forecast. I think what we’ve learned is that—and this was long before we had any idea of what the actual policies would be. We’ve learned the tariffs are going to be substantially larger than, than forecasters generally thought. And, you know, we, we don’t—our, our forecasts are generally not particularly different from those of other, you know, well-resourced forecasting operations. So what we learned—and particularly in April—was that substantially larger tariffs were coming and that that would mean higher inflation. That’s what happened. And so you—now you see—you saw 2½ percent forecast in December. You saw 2.8 percent in March, and you see 3.1 percent now. So it’s six-tenths higher inflation for 2025, and that’s—that’s a big part of, of the change. And that’s—that’s due to the effects of, of the tariffs that are—you know, we, we don’t know where they’re going to land, but it’s pretty apparent they’re going to land higher than outside forecasters were really guessing at the end of last year. KELLY O’GRADY. My follow-up to that—I think consumers—right?—were looking for relief on rates when it comes to mortgages—car loans. Small businesses want to take out more manageable loans. When you look at the cumulative inflation over the past five years, prices have risen over 20 percent—it’s been a rough road. So what is the tipping point, then, for the wait-and-see approach in terms of how much it’s going to help versus when it hurts the American consumer? <NAME>CHAIR POWELL</NAME>. Well, I mean, we’re trying to restore price—the best thing we can do for the—for the public that we serve is restore price stability. If we can, and we will, restore price stability, meaning 2 percent inflation on a durable, sustainable basis—that and also maximum employment—and if we, we restore those things, that’s the best thing. And that is our goal. The best thing we can do for the American people—for, for households and businesses— that is the ultimate thing that we can deliver. And they can make their decisions without having to think about inflation all the time. So, in the meantime, we have to keep rates high to keep—to get inflation all the way down. They’re not very high—let’s be honest. I would say policy is modestly or moderately—probably modestly now—restrictive. If you look at the economy, it’s not performing as though it were performing under very strict monetary policy—very restrictive monetary policy. So I would say probably modestly restrictive—and so what it will take is, is confidence that inflation is coming down. Now, I would say, without tariffs, that confidence would be building because if you—if you see what’s happening with nonhousing services and housing services, which are the other two big pieces other than goods, those are coming down really nicely now. So I think we have to learn a little more about, about tariffs. I don’t know—I don’t know what the right way for us to react will be. I think it’s hard to know with, with any confidence how we should react until we see, really, the size of the effects—then we can start to make a better judgment. So that’s what we’re doing, and I think we can—we can take the time to do that, because unemployment is 4.2 percent. Wages are moving up. Real wages are moving up at a—at a healthy clip now. And inflation is, you know—2.3 percent headline inflation over a 12-month basis. So it’s a good economy, and a solid economy with decent growth. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Chair Powell. So you’re saying that uncertainty has come down, the economy is moving at a solid pace, inflation has come down over the past three months, and this is all moving in the right direction. So are you indicating here that Americans should expect some sort of economic pain in the second half of the year? <NAME>CHAIR POWELL</NAME>. I’m not—I’m not saying that at all. You know, from our standpoint, what I can say is that the, the U.S. economy is in solid shape. Inflation has come down. The unemployment rate remains at 4.2 percent. As I mentioned, real wages are moving up. It’s a— it’s a good—job creation is at a healthy level. Unemployment, again, as I said, low—labor force participation at a good place. What we’re waiting for to reduce rates is, is to understand what will happen with, with, really, the tariff inflation. And there’s a lot of uncertainty about that. Every forecaster you can name who, you know—who is a professional, you know, forecaster with, with adequate resources and forecasts for a living is forecasting, you know, a pretty significant—everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs. And it will be someone in that chain that I mentioned: Between the manufacturer, the exporter, the importer, the retailer— ultimately, somebody putting it into a, a good of some kind or just the consumer buying it—and, you know, all through that, that chain, people will be trying not to be the ones who, who pick up the cost. But, ultimately, the cost of the tariff has to be paid. And some of it will fall on the end consumer. We know that because that’s what businesses say—that’s what the, the data say from past—so we know that’s coming. And we just want to see, see a little bit of that before we make judgments prematurely. <NAME>EDWARD LAWRENCE</NAME>. And follow-up on that—so you’ve spent years, though, talking about how, how you’re data dependent, and be a little more direct on this. You know, now you’re making decisions looking forward—doesn’t the data you’re seeing today indicate there should be a rate cut? <NAME>CHAIR POWELL</NAME>. No, I mean, you’re—monetary policy has to be forward looking. That is elementary. You’ve got to be looking—I always—we always talk about the incoming data, the evolving outlook, and the balance of risks. We say that over and over and over again, right? So it’s always forward looking. You know, if you know—at the very beginning of the pandemic, you know, we cut rates to zero immediately. Nothing had happened. We just knew that it was going to be really bad, right? So we took very aggressive forward looking—because we knew things were going to be unusually difficult. So, of course, this, this is something we, we sort of know is coming—we just don’t know the size of it. And, again, the economy seems to be in solid shape. So the labor market’s not crying out for a rate cut. Businesses, you know, were in a bit of shock after April 2. But you see business sentiment—you talk to business people now—there’s a very different feeling now that people are working their way through this. And they, they understand how they’re going to go, and it’s—it, it feels much more positive and constructive than it did three months ago, let’s say. So, again, we think that our current stance of monetary policy is in a good place. <NAME>MICHELLE SMITH</NAME>. Amara. <NAME>AMARA OMEOKWE</NAME>. Thank you. Amara Omeokwe with Bloomberg. Chair Powell, in February, you told Congress that the Fed is “overworked, maybe, not overstaffed.” Then, in a memo to—a memo to staff in May announcing a deferred resignation program at the Fed, you said you wanted to ensure that the Fed was “right-sized.” Those two statements appear to be at odds with one another. Could you explain what changed in the roughly three months between those statements that made you decide that staff levels at the Fed should decline? <NAME>CHAIR POWELL</NAME>. I don’t see them at all as, as in tension. You know, so I was asked, “Is the Fed overstaffed?” And I said, “No.” You know, and I sort of said as a pun, “Overworked, but not overstaffed.” People do work extremely hard at the Fed, and I know they work hard at Bloomberg, too. [Laughter] So—but we do. We work hard. But I would say this—so we are careful stewards of public resources, and sometimes you need to show that. So there’ve been several times in our history—modern history—where the Fed has said, “You know what? We’re going to do a buyout. We’re going to—going to show the public. We’re going to demonstrate that we are good stewards of public resources.” So we thought—and I, I thought— that this is a time when we can. You know, we’ve—we grow about—our headcount has grown at about 1 percent a year. So over the course of a couple of years, we’re going to—we’re doing a careful scrub of the Board and all of the Reserve Banks, and we’re going to find 10 percent of employees who can do something else. Where, where we can—we can streamline our operations—and we, we think we can get there in a year, in a couple of years. We think we can do that. And we think the—we think the, the—this is, this is without taking risk to carrying out our critical missions. So this is something you do very carefully—thoughtfully. And you do it, again, respecting that we have critical missions to carry out. I’ve had experience—a lot of experience—in my prior careers, you know, with headcount reductions and things like that, and this is how you do it professionally. You do it carefully—thoughtfully—with a lot of planning, and you do it over a period of time. And I, I think it’s—I think the Fed will be fine. I think no one will notice any decline in our ability to carry out our missions, and I think it’s just us wanting to demonstrate to the public that we are actually good stewards of their—of their resources. We’re—we’re effectively wiping out 10 years of headcount growth with this. So, I mean, we just—we wanted to show that, you know—that we’re good stewards. <NAME>AMARA OMEOKWE</NAME>. How is progress on reducing the headcount going so far? Are you on track to meet the goal? <NAME>CHAIR POWELL</NAME>. We’re just at the very beginning. As you know, we’re doing a buyout program. We’re going to—we’re going to hit that goal. I think many organizations find that they can—that they can do this. You don’t want to do it every year or anything, but you can do it at intervals. And you, you wind up not, you know—not interfering with your ability to perform your jobs. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Chair Powell, Claire Jones from the Financial Times. As you’re no doubt aware, the Senate Finance Committee has tabled its version of the reconciliation bill this week, and I was wondering if you could tell me a little bit about the tenor of the debate at the FOMC over the past few days on fiscal policy and the degree to which that influenced people’s projections for 2026 and beyond. Thank you. <NAME>CHAIR POWELL</NAME>. Yeah, so, you know, we don’t—we don’t sit around and debate or really discuss—we, we take fiscal policy as fully exogenous. And so we, we actually, you know, really didn’t talk about, about the bill or the contents of it. It’s still evolving. You know, when, when it gets close—closer—remember also we have a very, very large economy, and that the effects will be at the margin. And, you know, I, I expect that they’ll—they may already be in— but they will be in by the next meeting. We’ll make an estimate. But it’s not a major thing; it’s nothing that we discuss. It, it may have been mentioned a couple of times—but as something that’s coming in. But I think the outcome is—you know, we don’t know the outcome yet there—so, hard to be real specific. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Thanks, Chair Powell. Neil Irwin with Axios. There’ve been some cutbacks in economic statistics collection in the last few weeks—worries that long-running problems around funding and response rates may be getting worse. How much is this concern on your radar? How much confidence do you have that the gauges you’re watching to assess the economy are reliable right now? <NAME>CHAIR POWELL</NAME>. You know, two things—one, the data we get right now—we, we can do our jobs. I’m not concerned that we can’t do our jobs. That’s not the—that’s not the point. The point, really, is that we are starting to see, you know, layoffs. And, and important gatherers of data are saying that they’re—they’re having to cut back on the size of their surveys. That’s going to lead to more volatility in the surveys. I think we should take a step back. And, you know, from our standpoint—and I think the standpoint of businesses and governments and everyone—having really good data on the state of the economy at any given time is a huge public good. It helps. It doesn’t just help the Fed. It helps the government, it helps Congress, it helps the executive branch. More importantly, really, it helps businesses. They need to know what’s going on in the economy. The United States has been a leader for many, many years in this whole project of measuring and understanding what’s happening in, in our very large and dynamic economy. And I hate to see—I hate to see us cutting back on that because it, it is a real benefit to the general public that people in all kinds of jobs have the best possible understanding of what’s happening in the economy and, and, hence, what’s likely to happen. It’s very hard to measure what’s going on in the U.S. economy. If, if you read—there was a book called—well, it’s really remarkable how many things you need to understand to estimate U.S. GDP. Very, very difficult—and it’s so important that we get it right. I just would—I just would say it’s not a place to—I would want to keep investing in that, you know, for the good of the general public. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. So you’re conducting this monetary policy strategy framework review, but next year we’re supposed to have a new Fed Chair, and I’m wondering if that affects at all the way that you’re approaching this. How do you ensure that this framework will actually be durable? <NAME>CHAIR POWELL</NAME>. You know, the framework goes back to—the framework document goes back to 2012, and it’s—it’s the Committee’s document. It’s not like we’re going to invent a brand new way to do things. It’s—it’s been an evolving document, so it shouldn’t depend on who the Chair is at all. It should depend on what’s happening in the economy and what the Committee wants to do. So, yeah, it isn’t really tied to any particular Chair, and, you know, we used to renew it every year. Now we do it every five years. So—but I, I don’t think anybody— I’ve never heard anyone raise this issue that, you know, a new Chair might want to come in and go in a completely different direction. I really—I really don’t think that’s right. But, you know, that’s not—not going to be up to me to decide. <NAME>VICTORIA GUIDA</NAME>. Is that affecting at all that you’re—who you’re consulting with— <NAME>CHAIR POWELL</NAME>. No, not at all. Not in any way. <NAME>MICHELLE SMITH</NAME>. Matt. <NAME>MATT EGAN</NAME>. Thank you, Chair Powell. Matt Egan from CNN. Relatively low gas prices this year have helped drive down inflation in recent reports, but that trend is starting to reverse, given the crisis in the Middle East. How are you thinking about how the Israel–Iran conflict will impact the economy, especially inflation, and what lessons were learned during the 2022 period when another conflict, the Russia–Ukraine war, sent oil and gas prices skyrocketing? <NAME>CHAIR POWELL</NAME>. So, of course, we’re watching—like everybody else is—what’s going on. I really don’t have any comment on that. You know, possible that, that we’ll see higher energy prices—what’s tended to happen is, when there’s turmoil in the Middle East, you may see a spike in energy prices—but tends to come down. Those things don’t generally tend to have lasting effects on inflation, although, of course, in the 1970s, they famously did, because you had a series of very, very large shocks. But we haven’t seen anything like that—that—like that now. The U.S. economy is far less dependent on foreign oil than it was back in the 1970s. So, but— <NAME>MATT EGAN</NAME>. A quick follow-up—I’ve just got to ask you about artificial intelligence. Some technology executives have recently been warning that AI could wipe out a large chunk of entry-level jobs and significantly increase the unemployment rate. I’m wondering how concerned you are, if at all, about the threat that AI poses to employment. <NAME>CHAIR POWELL</NAME>. So this is the question. The question really is, will AI be more augmenting labor or replacing labor? And I wouldn’t—I, I—we all see those announcements, including one today. I wouldn’t overread a, a couple of data points, because, you know, AI should be creating jobs at the same time. It may be replacing—it may be doing both. Anyone who’s done any work with it—with AI—will, will have been a little bit stunned at how capable it is. And it’s just a different thing. So I think this is something that certainly has transformational potential—and probably we’re in the very early stages of it. They say what you’re seeing now compared to what you’ll see in two years is, is going to be very different and even more effective. So I think it’s really hard to know. You know, of course, there are optimists who feel like it’s going to make everybody much more, you know—much more productive. And there are those who think it’s going to replace an awful lot of jobs right across the income spectrum—you know, white collar, blue collar, and everything. So I just don’t know. We don’t—we don’t have a “house view” on that. But this is—this is going to be a very important question for some time. <NAME>MICHELLE SMITH</NAME>. Greg. <NAME>GREG ROBB</NAME>. Thank you. Greg Robb from MarketWatch. I was wondering if you could step back a little bit, Chair Powell. You know, there’s a spate of articles and a lot of op- eds now in the newspapers saying that the U.S. economy and the global economy is going through this profound change, you know, akin to the end of the Bretton Woods era in the 1970s. And don’t you owe the American people, like, some sort of, like, explanation for what we’re going through? I mean, I, I noticed earlier this month when you, you talked about Bretton Woods a little bit, and you said that Bretton Woods—the Fed staff had to, like, change how they’ve—the dollar—movements of the dollar was impacting the economy. Are we going through something like that now—that, you know—are you having to change how you do monetary policy? Is it—is it that fundamental of a change under way? Thanks. <NAME>CHAIR POWELL</NAME>. It’s—it’s certainly a time of real change—you know, from a geopolitical standpoint, from a trade standpoint, from an immigration standpoint—you see this not just here, but everywhere. So there’s—there’s quite a lot going on. It doesn’t change the way we do monetary policy in the near term. I mean, but—and it doesn’t change our objectives or what we need to do. And, you know, these, these things are not really our issues—they’re really issues for elected governments. All of those issues are really for elected governments. But there’s no question it’s a time of, of real, real change—and very hard to see where that goes. Will it be—there have been many, many things written about how it’s going to be a more inflationary time. That’s possible; it’s not guaranteed. You know, AI could cut in a very other direction. AI could make people much more productive and—and push in the other direction. I don’t know, though. So you’re right, but, honestly, our focus is, is a much more practical one, and that is, how do we keep inflation low and, and employment high in the near term? That’s really what we’re about. <NAME>MICHELLE SMITH</NAME>. Mark. Mark Hamrick. <NAME>MARK HAMRICK</NAME>. Thank you. Hello, Chairman Powell. Mark Hamrick with Bankrate. What is the view about the growing amount of slack in the job market, including the softening in payrolls, the forecast of a modest rise in the unemployment rate, and the ability of workers to demand wage hikes or not in this environment where you have inflation surging? <NAME>CHAIR POWELL</NAME>. I don’t, you don’t see—you don’t really see unemployment going up. You don’t see increased slack, really—I mean, at the margin. Remember, you’re at 4.2 percent unemployment. That, that was for many, many years—that was an extremely low level. It happens to have come up off of an even lower level. As we came out of the pandemic, we were as low as 3.4 percent. But 4.2 percent is probably at the low end of estimates of the longer-run, you know, sustainable level of natural rate of unemployment. So I wouldn’t—I guess I wouldn’t agree with that. And also, in terms of wages—you know, real wages after inflation have been moving up sort of more than was consistent with 2 percent inflation. They’re still moving up at a—at a healthy clip—and I think much more consistent with 2 percent inflation, given, given a, a reasonable assessment of, of trend productivity. So it’s a pretty good labor market. You know, you’re right that the level of job creation has come down, but so has the supply of workers—the change in the supply—the, the new supply. So you’ve seen—you’ve seen the unemployment rate remain pretty stable at 4.2. It’s been as high as 4.3, but, you know, those are—those are good numbers. So it’s a pretty good labor market. There’s—the thing is, there’s—a more concerning thing is, there’s not—there are not a lot of layoffs, but there are not a lot of, of job creation. The number—if you’re out of work, it’s—it’s hard to find a job. But very few people are being laid off at this point. So that’s—an equilibrium we watch very, very carefully, because if there were to be, you know, significant layoffs and the job-finding rate were to remain this low, you would have a lot—you would have an increase in unemployment fairly quickly. But that hasn’t happened. It really hasn’t happened. We’re—so the U.S. economy has defied all kinds of forecasts for it to, to weaken, really, over the last three years, and it’s been remarkable to see—just again and again when people think it’s going to weaken out. Eventually it will, but we don’t see signs of that now. <NAME>MICHELLE SMITH</NAME>. Go to Jean for the last question. <NAME>JEAN YUNG</NAME>. Hi, Chair Powell. Jean Yung with MNI Market News. There’s been a lot of talk about cuts. I wanted to ask you—why do you think there are no forecasts for rates to rise or, or even to stay where they are next year, given that the projection for inflation is to rise to 3 percent and there’s a lot of—there’s some skepticism over whether those price hikes will be a one-time event? <NAME>CHAIR POWELL</NAME>. So there are a number of people on the Committee who wrote down no cuts this year but some cuts next year. So, look, I think, you know, people are writing down their most likely path, right? They’re not saying there’s zero possibility of other things, really. Really, it’s—think of it as the least unlikely path in a situation like this where uncertainty is very high. I, I think—again, people write—they write down their, their rate paths, and they do not have, like, a really high conviction that this is exactly what’s going to happen over the next two years. No one feels that way about their rate path. They feel like, “What am I going to write down?” I mean, what would you write down? It’s not easy to, to be—to do that with confidence. So I would just say it that way. We don’t rule things in or out—certainly, a hike is not the base case at all. It’s not something people are writing down. But, in the meantime, we do the best we can with these forecasts, and I, I think they’re—they’re representative of, you know, of the different forecasts and different reaction functions that people on the Committee have. So thank you very much. Thanks.

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+<NAME>CHAIR POWELL</NAME>. Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. Despite elevated uncertainty, the economy is in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has been running somewhat above our 2 percent longer-run objective. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments. I will have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that growth of economic activity has moderated. GDP rose at a 1.2 percent pace in the first half of this year, down from 2.5 percent last year. Although the increase in the second quarter was stronger at 3 percent, focusing on the first half of the year helps smooth through the volatility in the quarterly figures related to the unusual swings in net exports. The moderation in growth largely reflects a slowdown in consumer spending. In contrast, business investment in equipment and intangibles picked up from last year’s pace. Activity in the housing sector remains weak. In the labor market, conditions have remained solid. Payroll job gains averaged 150,000 per month over the past three months. The unemployment rate, at 4.1 percent, remains low and has stayed in a narrow range over the past year. Wage growth has continued to moderate while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment. Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.5 percent over the 12 months ending in June and that, excluding the volatile food and energy categories, core PCE prices rose 2.7 percent. These readings are little changed from the beginning of the year, although the underlying composition of price changes has shifted: Services inflation has continued to ease, while increased tariffs are pushing up prices in some categories of goods. Near-term measures of inflation expectations have moved up, on balance, over the course of this year on news about tariffs, as reflected in both market-based and survey-based measures. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2 percent inflation goal. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today’s meeting, the Committee decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent and to continue reducing the size of our balance sheet. We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks. Changes to government policies continue to evolve, and their effects on the economy remain uncertain. Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short lived—reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed. Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem. For the time being, we are well positioned to learn more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance. We see our current policy stance as appropriate to guard against inflation risks. We are also attentive to risks on the employment side of our mandate. In coming months, we will receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate. At this meeting, the Committee continued its discussions as part of our five-year review of our monetary policy framework. We focused on potential revisions to our Statement on Longer-Run Goals and Monetary Policy Strategy and are on track to wrap up any modifications by late summer. The Fed has been assigned two goals for monetary policy—maximum employment and price—stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. 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. <NAME>MICHELLE SMITH</NAME>. Howard. <NAME>HOWARD SCHNEIDER</NAME>. Thanks. Thanks, Chair Powell. There is a lot of “lean” in the markets and, not to mention, out of the Administration, for a rate cut now in September. Is that expectation unrealistic at this point? <NAME>CHAIR POWELL</NAME>. So, as you know, today we decided to leave our policy rate where it’s been, which—where I would characterize as modestly restrictive. Inflation is running a bit above 2 percent, as I mentioned, even excluding tariff effects. The labor market’s solid— historically low unemployment. Financial conditions are accommodative, and the economy is not—the economy is not performing as though restrictive policy were holding it back inappropriately. So it seems to, to me and to almost the whole Committee that the economy is not performing as though restrictive policy is holding it back inappropriately, and modestly restrictive policy seems appropriate. All that said, there’s also downside risk to the labor market. In coming months, we’ll receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate. <NAME>HOWARD SCHNEIDER</NAME>. So just to follow up: By, by “coming months,” does that include the possibility you’ll, you’ll be getting essentially two rounds of jobs and inflation data between now and the September meeting? Is that potentially adequate to make a decision to lower rates at that point? <NAME>CHAIR POWELL</NAME>. So you’re right. We do have—this is an, an, an intermeeting period when we’ll get two full rounds of employment and inflation data before the time of the September meeting. We have made no decisions about September—we don’t do that in advance. We’ll be taking that information into consideration and all the other information we get as we make our decision at the September meeting. <NAME>MICHELLE SMITH</NAME>. Steve. <NAME>STEVE LIESMAN</NAME>. Thank you, Mr. Chairman. You took out the word—or the notion that uncertainty has diminished from this statement. Does that mean uncertainty has increased? And I’m just wondering, the Administration has struck several deals with large trading partners where it seems like we now know what the rate is going to be. Does knowing that rate add to your certainty to change policy, or do you need to wait to see the economic effects? <NAME>CHAIR POWELL</NAME>. So, essentially, the statement in the—in the—in our statement about uncertainty reflects what’s gone on since the last meeting. So, at the time of the last meeting, uncertainty had, had, had moved down a little bit, but it was more or less even this time. So we took out, you know, “had diminished” because it didn’t diminish further. So there’s not really much in that. And then your second question is—say again? <NAME>STEVE LIESMAN</NAME>. There have been several deals that have been struck, and now we seem to have an idea of what the tariff rates are going to be with some of our large trading partners. Does that not add to the kind of certainty you might need, or is it you’re waiting for the economic effects to show, show themselves? <NAME>CHAIR POWELL</NAME>. No, I think we’re still—so you’re right, it’s been a very dynamic time for these trade negotiations, and lots and lots of events in the intermeeting period, but we’re still, you know, a ways away from seeing where things settle down. We are clearly getting more and more information. And, you know, I think at this point, people’s estimates, our estimates, outside estimates of the—of the likely, you know, effective, effective level of tariffs is, is not moving around that much at this point. But at the same time, there are many, many uncertainties left to resolve. So, yes, we are learning more and more. It doesn’t feel like we’re very close to the end of that process. And that’s, that’s not for us to judge, but it does—it feels like there’s much more to come, you know, as well looking ahead. <NAME>MICHELLE SMITH</NAME>. Neil. <NAME>NEIL IRWIN</NAME>. Hi, Mr. Chairman. Neil Irwin with Axios. This morning, we got a GDP report in which final domestic private purchases decelerated—slowest pace since ’22. There was a weakness in the interest-sensitive sectors and residential investment, commercial structures. Are those not signs that monetary policy is a little too restrictive right now, given current economic conditions? <NAME>CHAIR POWELL</NAME>. So the GDP and PDFP numbers came in pretty much right where we expected them to come in. You’ve got to look at the whole picture. So, certainly, as I mentioned in my opening remarks, economic activity data, GDP, private domestic final purchases—which we think is a narrower but better signal for future, for where the economy is going—has come down to a little better than 1 percent, 1.2 percent I think, in the case of GDP for the first half, whereas it was 2½ last year. So that has certainly come down. But if you look at the labor market, what you see is, by many, many statistics, the labor market is kind of still in balance. It’s things like quits, you know, job openings, and—let alone the unemployment rate. They’re all very—by many measures, very similar to where they were a year ago. So you do not see a weakening in the labor market. You do see a slowing in job creation, but also in a slowing—a slowing in the supply of workers. So you’ve got a labor market that’s in balance, albeit partially because both demand and supply for workers has—is coming down at the same pace, and that’s why the unemployment rate has remained roughly, roughly stable, which is why I said there—we do see downside risk in the labor market. I mean, our two—our two mandate variables— right?—are inflation and maximum employment—stable prices and maximum employment, not so much growth. So the labor market looks, looks solid. Inflation is above target. And even if you—if you look through the tariff effects, we think it’s still a bit above target. And that’s why our stance is where it is. But, as I mentioned, you know, downside risks to the labor market are certainly apparent. <NAME>NEIL IRWIN</NAME>. So on labor, given the fluid labor supply situation, is there a number for this jobs report we get on Friday that would look to you like equilibrium job growth? <NAME>CHAIR POWELL</NAME>. You know, the, the main number you have to look at now is the unemployment rate, because if, if—it’s true that the, you know, demand for workers in the form of, let’s call it—say—just say, payroll jobs—that number has come down, but so has the breakeven number, kind of in tandem. So, you know, as long as the—that puts the labor market in, in balance. The fact that it’s getting into balance due to declines in both supply and demand, though, I think does—it is suggestive of downside risk. So we’re—of course, we’ll be watching that carefully. <NAME>MICHELLE SMITH</NAME>. Colby. <NAME>COLBY SMITH</NAME>. Thank you. Colby Smith with the New York Times. Two of your colleagues called for a quarter-point cut today, and I’m wondering what aspects of their argument were most compelling to you and how you are weighing their views against those on the Committee who, as of the June forecast, were in the camp of the Fed holding interest rates steady for the remainder of the year. And, and just in terms of the June SEP in particular, is that still the best representation of where the core of the Committee is? <NAME>CHAIR POWELL</NAME>. So on, on the dissents, you know, what you—what you want from everybody and also from a dissenter is a clear explanation for—of what your thinking is and what are the arguments you’re making. And that’s—we had that today. So I think, basically, this was—this was quite a good meeting all around the table where people were—you know, thought carefully about this and put their positions out there. As I mentioned, you know, the, the—sort of the majority of the Committee was of the view that inflation’s a bit above target, maximum employment is at target. That calls for modestly restrictive—in my way of thinking, a modestly restrictive stance of policy for now. But we had two dissenters who, I think—you know, you want that clear thinking and, and, and, you know, expression of your thinking, and we certainly had that today, I think all around the table. In terms of—you asked about the June SEP. You know, I wouldn’t—you’re right that that’s what it—that’s what it says, and that may—that may well—I, I couldn’t point to it six weeks later as, as expressing people’s thought—you really can’t do that. We don’t run an SEP, and I don’t like to substitute in my own estimate of what the SEP might be. We don’t have one. So I’ll just say that, you know, we, we haven’t made any decisions about September. We’ll be monitoring all the incoming data and asking ourselves whether the federal funds rate is in the right place. <NAME>COLBY SMITH</NAME>. And, just on the point about policy being only modestly restrictive, does that mean that there’s actually not much scope to reduce rates once the conditions for a cut are met, barring a significant weakening of the labor market? <NAME>CHAIR POWELL</NAME>. So let me say, my own estimate is modestly restrictive. And there are—there are a range of views of what the neutral rate is at this moment for, for our economy. And so others may say it’s more restrictive or less restrictive even. You know, we’re—we’re going to be—at some point, when we return to moving toward a more neutral stance, we’ll be making that judgment as we go. I don’t think we have a preset course. It’s not so mechanical as saying, you know, “We’ve derived with great confidence the neutral rate, and that is our destination,” because, really, we understand that no one actually knows what the neutral rate is. We know it by its works, and that will be how—the way the economy reacts over time to—you know, to slightly looser policy. <NAME>MICHELLE SMITH</NAME>. Nick. <NAME>NICK TIMIRAOS</NAME>. Nick Timiraos, the Wall Street Journal. Chair Powell, my question is about, what have you learned over the last few months about the inflation-generating and price pass-through process? And just to drill down: The June CPI report showed evidence of tariff- induced goods inflation. Now the tariff landscape is only starting to be settled with some of these more recent deals. Given the lags between when tariffs are announced and when they show up in goods prices, is two months a long enough horizon to evaluate the impact and be confident that tariffs aren’t impacting the broader inflation process? <NAME>CHAIR POWELL</NAME>. I think you have to think of this as still quite early days. And so I think what we’re seeing now is substantial amounts of tariff revenue being collected, on the order of $30 billion a month, which is, you know, substantially higher than, than before. And the evidence seems to be, mostly not paid, but paid only to a small extent, through exporters lowering their price. And companies or retailers, sort of people who are upstream—institutions that are upstream from the consumer, are paying most of this for now. Consumers are—it’s starting to show up in consumer prices. As you know, in the June report, we expect to see more of that. And we know from surveys that companies feel that they have every intention of, of, of putting this through to the consumer. But, you know, the truth is, they may not be able to in many cases. So I think it’s—we’re just going to have to watch and learn empirically how much of this and over what period of time. I think we’ve learned that the process will probably be slower than, than expected at the beginning, but we never expected it to be fast. And we think we have a long way to go to really understand exactly how we’ll be. So that’s how we’re thinking of it right now. <NAME>NICK TIMIRAOS</NAME>. So if I could follow up, is the reticence to “look through” core goods inflation being driven by the judgment that during the pandemic, expectations proved more adaptive than anyone at the Fed expected? Is it being driven by uncertainty over how restrictive policy is? <NAME>CHAIR POWELL</NAME>. You could argue we are, a bit, “looking through” goods inflation by not raising rates. You know, we haven’t reacted to, to new inflation. But, I mean, I wouldn’t—I wouldn’t insist upon that. But I don’t think—I think the base case—I said—as I said, a reasonable base case is that these are one-time—one-time price effects. Of course, in the end, there, there will not be. This will not turn out to be inflation, because we’ll make sure that it’s not. We will, through our tools, make sure that this does not move from being a one-time price increase to serious inflation. We want to do that efficiently, though, efficiently. And that means we want to do it—if you—if you move too soon, you wind up maybe not getting inflation all the way fixed, and you have to come back. That’s inefficient. If you move too late, you might do too—unnecessary damage to the labor market. So there won’t be, in the end, a big inflationary problem. What we’re trying to do is accomplish that in a way that is efficient. But in the end, there should be no doubt that we will do what we need to do to keep inflation under control. Ideally, we do it efficiently. <NAME>MICHELLE SMITH</NAME>. Michael. <NAME>MICHAEL MCKEE</NAME>. Michael McKee from Bloomberg Television and Radio. The One Big Bill, leaving aside the adjectives—do you expect it to add stimulus to the economy in 2026? And would that be an argument for remaining on hold or cutting back on the number of rate cuts you would expect for next year? <NAME>CHAIR POWELL</NAME>. So, of course, let me just—ritual disclaimer that we don’t express any judgments or anything, right, on, on fiscal legislation or other legislation, for that matter. But I would say, when you think that, you know, the biggest part of the bill was, was making permanent existing law on, on taxes, I don’t think we see it as particularly stimulative. There should be some stimulative effect, but it shouldn’t be significant over the next couple of years. <NAME>MICHAEL MCKEE</NAME>. And to follow up, what do you—well, I don’t want to put this in terms of you and the President, so let me ask it this way: Do you have concerns about the cost to the government of keeping rates elevated for longer in terms of interest rate charges? <NAME>CHAIR POWELL</NAME>. No, that’s—you know, we, we have a mandate, and that’s maximum employment and price stability. And it is—it’s not something we do, to consider the cost to the government of our rate changes. We have to be able to look at the goal variables Congress has given us—use the tools they have given us to achieve those goals. And that’s what we do. It’s—we don’t consider the fiscal needs of the federal government. No advanced-economy central bank does that. And it wouldn’t be good for—if we did do that, it would be good neither for our credibility nor for the credibility of U.S. fiscal policy. So it’s just not something we, we take into consideration. <NAME>MICHELLE SMITH</NAME>. Victoria. <NAME>VICTORIA GUIDA</NAME>. Hi. Victoria Guida with Politico. When it comes to the renovations of the Federal Reserve’s headquarters that the Administration has been looking into, do you see their interest in that issue as being directly tied to the President’s push to get you to lower interest rates? <NAME>CHAIR POWELL</NAME>. Not for me to say. I will say, we had a—we had a nice visit with the President. It was an honor to host him. It’s not something that happens very often at the Federal Reserve—to have the President come over, let alone to visit a building—but it was—it was a good visit. <NAME>VICTORIA GUIDA</NAME>. Are there any aspects of the project that they’ve raised that you see as making you reconsider any aspects of the project? <NAME>CHAIR POWELL</NAME>. So, you know, we—this project was hatched and conceived almost a decade ago now, and we went through the very long process of clearing it through historic preservation at the National Capital Planning Commission and a lot of back-and-forth there. It was very constructive. We started out to do the work, and we’re very well along on that work. And I was quite pleased to have the President say multiple times that what he really wanted to see was, was us getting this construction completed as soon as possible. That is our focus, and that’s what we’re going to do. <NAME>MICHELLE SMITH</NAME>. Andrew. <NAME>ANDREW ACKERMAN</NAME>. Thanks, Mr. Chairman. Andrew Ackerman with the Washington Post. What message do you take from the fact that inflation hit 2.1 percent last September and has bounced higher since? Why do you think financial conditions are restrictive and in neutral rates below 4 percent when inflation has stopped falling for almost a year? <NAME>CHAIR POWELL</NAME>. So inflation—when you talk about these 12-month inflation measures, you’re always battling residual seasonality. So we’ll have, for example, two months of high inflation, sometimes early in the year, and then inflation turns lower. And a lot of that may just be an artifact. So that’s why we look at the 12-month numbers. I—look, I think inflation is most of the way back to 2 percent. There are things like the catch-up inflation. So, for example, all the insurance costs that are now—they’re only now going through inflation, but they actually reflect inflationary pressures from two, three years ago. So there’s—that’s got to go through. In addition, now we have, you know, three- or four-tenths of inflation in core inflation from tariffs. So—and we, we, we can’t really separate that out. We’re not going to have a separate, you know, kind of inflation that isn’t the tariffs. We’re always going to be dealing with the whole—all of inflation. But we—the composition, as I mentioned, has really changed. And, you know, if you go back to the last couple of years, it was all about services inflation, which was being very sticky. Now services inflation is coming down nicely. Goods inflation was well behaved before, and now goods inflation is going up. So the story has really changed. That’s partially because of tariffs. It’s also partially because we had restrictive policy in place, and we—and we’ve seen that—the result of that gradually work its way through the services economy. <NAME>ANDREW ACKERMAN</NAME>. Okay. The other thing I wanted to ask is, are you comfortable that BLS can continue performing their mission effectively if they take an 8 percent reduction in head count and authorized spending, as the Administration has proposed? <NAME>CHAIR POWELL</NAME>. I’m not going to comment on the Administration’s proposal. I do think—as I’ve said, I think that we—you know, we’re, we’re getting the data that we need to do our jobs. And I think it’s really important that, that good data helps not just the Fed—it helps the government, but it also helps the private sector. You know, people in the economy—they, they use this data a lot, too. So it’s quite important for our economy and, certainly, for the Fed’s work and other government agencies’ work that we—that we continue to get better at data. That’s what we’ve been doing for 100 years. We’ve been getting better and better and better. It’s very hard to accurately capture in real time the output of a $20-plus trillion economy. And the United States has been a leader in that for 100 years, and we really need to continue that, in my view. <NAME>MICHELLE SMITH</NAME>. Edward. <NAME>EDWARD LAWRENCE</NAME>. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. How concerned are you, with, with the data that we’re showing—coming in showing no significant upward trend in inflation over the past six months, that the wait-and-see approach for inflation is actually giving companies cover to raise prices? <NAME>CHAIR POWELL</NAME>. How concerned am I that the—say that again. <NAME>EDWARD LAWRENCE</NAME>. That the wait-and-see approach is getting— <NAME>CHAIR POWELL</NAME>. The wait-and-see approach—what do you mean by that? <NAME>EDWARD LAWRENCE</NAME>. For, for cutting rates. You’re waiting to see if the tariffs will affect inflation. So it’s a wait-and-see approach so that— <NAME>CHAIR POWELL</NAME>. Well, so that—you know, that would—that’s where we’re—policy’s restrictive. When we start cutting, it’ll go toward neutral. <NAME>EDWARD LAWRENCE</NAME>. Okay. This delay, though, where you’re saying it’s a one- time—one-time price increase for tariffs, which they—which possibly could lead into bigger inflation or more inflation, is that giving companies cover, though, to raise prices? <NAME>CHAIR POWELL</NAME>. Well, what, what may be giving—it’s not our policy stance. What may be giving—some companies will certainly be taking advantage of the fact of the tariffs and all of the discussion of how they’re going to—you know, companies will raise prices when and as they can. And you—so you saw it famously in the—in the—in the first Administration of President Trump, during those tariffs. Washing machines were tariffed, but, but, but dryers weren’t. But what do you know? Price—the price of dryers went up, too, just like washing machines. So companies will often just take—they’ll cross the street in a group, if you know what I mean. That’ll happen. We don’t see a lot of that. I mean, what we see now is basically the very beginnings of whatever the effects turn out to be on goods inflation. And, you know, I’ll say again, they may be—they may be less than, than people estimate or more than people estimate. They’re not going to be zero. Consumers will pay some of this. Businesses will pay some of this. Retailers will pay some of this. But, you know, we’re just going to have to, to see it through. <NAME>EDWARD LAWRENCE</NAME>. And just a follow-up, if I could. Some additional tariffs have been in place since February, and things, you know, really haven’t broken yet with the economy. So how, how do you justify to somebody who’s looking for a house, who’s facing a 7 percent mortgage and maybe can’t afford those rates? How do you justify that? <NAME>CHAIR POWELL</NAME>. Well, so the housing—the housing is a—is a special case. Right? Our—we don’t set—we don’t set mortgage rates at the Fed, right? We set an overnight rate, and the rates that go into mortgages are longer-term rates, like Treasury rates—it might be 30-year rates, it might be shorter than that, but it’s not the overnight Fed’s rate. It’s not that we don’t have any effect. We do have an effect, but we’re not the main effect. There are other things go—though, going on in the housing sector. And one of those is just, there’s kind of a long-term housing shortage that we have. We haven’t built enough housing. This is not something the Fed can help with, but then that’ll be the case even after things normalize. So I, I think the best thing that we can do for housing is to have 2 percent inflation and maximum employment. And that’s the—that’s what we can contribute to housing. There are lots of other jobs to do for the private sector and Congress, but that’s what we’re trying to get to. And, I mean, we’ve made a lot of progress toward that. We’re in—we have a very good labor market right now. Inflation—we were very close to 2 percent. We’re seeing some goods inflation move us away but, so far, not very far away. <NAME>MICHELLE SMITH</NAME>. Chris. <NAME>CHRISTOPHER RUGABER</NAME>. Hi, Chair Powell. Thank you. Well, can you give us a little more about, what kind of economic data does the Fed need to see before you’ll be ready to cut? I mean, do you need inflation back nearly to target? Are there other things in the pricing that you look for? Do you need to see weakening in the job market? What kind of things are you looking for? <NAME>CHAIR POWELL</NAME>. I mean, ultimately, it’s—it could be any—it could be any of those things. Right? But, but, you know, if you saw that the risks to the two goals were moving into balance, if they were fully in balance, that would imply that you should move toward a more—a more neutral stance of policy. This is—this is the special situation we’re in, which is, we have two-sided risk, risk to both of our goals. When we paused, inflation was above target, and the labor market was pretty good. So, so, you know, that was a time when policy—policy was restrictive when we paused. And to be restrictive is to be—to be supporting a return to our inflation target, right? So as the two targets get back into balance, you would—you would think you’d move in, in, in a way closer to neutral and that the next—the next steps that we take are likely to be in that direction. What will it take? You know, it’ll just take—it’ll be the totality of the evidence. As I mentioned, there’s quite a lot of data coming in, which, before the next meeting, will it be dispositive of that? I—you know, it’s really hard to say. We don’t make those decisions right now. So we’ll have to see. <NAME>CHRISTOPHER RUGABER</NAME>. Well, I guess just in terms of inflation, though, for example, like, will, will you—some people would point to, if it remains only in goods and it doesn’t bleed over to services, then maybe that’s evidence that the tariff effect is going to be a temporary, one-time thing. Is that kind of thing affect your thinking, or do you just need to see the number come down—closer to 2? <NAME>CHAIR POWELL</NAME>. I think—we’ll, we’ll, we’ll look at everything. You know, it’s—as I mentioned, you know, a pretty reasonable base case is that this will be a one-time price increase. And, in the end, we’ll make sure that that’s the case. We’re just trying to do that efficiently. We’re—and “efficiently” means getting the timing right so we don’t—again, if we go—if we cut rates too soon, maybe we didn’t finish the job with inflation. There’s—history is dotted with examples of that. If you cut too late, then maybe you’re doing unnecessary damage to the labor market. So we’re trying to—we’re trying to get that timing right, and that’s effectively what we’re doing. <NAME>MICHELLE SMITH</NAME>. Claire. <NAME>CLAIRE JONES</NAME>. Claire Jones, Financial Times. Just a question on the dollar. We’ve seen it decline quite heavily this year. I was wondering if there’s been any discussion about that at the meetings and how—to what degree that might be complicating your attempts to get inflation back to target. Thanks. <NAME>CHAIR POWELL</NAME>. So this goes back to the division of labor between the Fed and the Treasury—as you, I’m sure, know—and, you know, the, the, the Treasury only speaks to the— speaks to the dollar. It’s not—it’s not something that’s been a topic of, of, you know, major discussion at all at, at—at the—at the Fed. I won’t say it doesn’t come up. The [FOMC meeting] transcripts, when they come out in a few years—they’ll probably reflect some mentions of the dollar. But it would never be a, a major focus. <NAME>CLAIRE JONES</NAME>. And just to follow on, if I may, to Andrew’s question, I think the amount of imputed data in CPI now is up to 35 percent. I mean, is there any discussion of that as well? Is there any consideration of looking at—into alternative measures, data scraping and so on, in order to just ensure you’ve got a good read on what’s happening to prices in the U.S. economy? Thank you. <NAME>CHAIR POWELL</NAME>. Yeah, we’re—so we’re monitoring the situation. We do, of course— I mean, as you know, during the pandemic, we looked at a whole lot of new kinds of data. People are looking at big data sets that you can get from all sorts of places. And we do all of that. But at the same—we really need—the government data really is the gold standard in data, and we need it to be—you know, to be good and be able to rely on it. And we’re not going to be able to substitute for that. But if—we have to make do with what we have, but I certainly hope that we get what we need. <NAME>MICHELLE SMITH</NAME>. Jay O’Brien. JAY O’BRIEN. Hi, Mr. Chairman. Jay O’Brien, ABC News. President Trump has obviously invoked your name a lot. He has personally pressured you. Are you concerned the way that conduct might impact the Fed’s independence going forward? <NAME>CHAIR POWELL</NAME>. I’ll just say that—so I, I think that having an independent central bank has been an institutional arrangement that has served the public well. And as long as it serves the public well, it should continue and be respected. If it didn’t serve the public well, then, then it wouldn’t be something that we should just automatically defend. But what it gives us and other central banks—what it gives you is the ability to make these, these very challenging decisions that—in ways that are focused on the data and the evolving outlook, the balance of risks, and all the things we talk about, and not political factors. And so governments all over the advanced-economy world have chosen to put a little bit of distance between direct political control of those decisions and the decisionmakers. So if you—if you were—if you weren’t—if you were not to have that, that would be a great temptation, of course, to, to use interest rates to affect elections, for example. And that’s something that, that we don’t want to do. So I think that’s pretty widely understood. Certainly, it is in Congress. And, I mean—I mean, I think it’s very important. I’ll just say that. <NAME>MICHELLE SMITH</NAME>. Maria Eloisa. <NAME>MARIA ELOISA CAPURRO</NAME>. Afternoon, Chair Powell. Maria Eloisa Capurro from Bloomberg News. You mentioned a slowdown in consumer spending, and I wanted to see if you could “walk us through” what was the discussion with the Committee around that. We’ve seen delinquency rates rising for upper-income households. How do you see that evolving in the next few months, and how much of a vulnerability that is for the economy going forward? <NAME>CHAIR POWELL</NAME>. Consumer spending had been very, very strong for the last couple of years and had—repeatedly, forecasters, not just us, had been forecasting it would slow down. And now maybe it finally has. So I would say, you know, if you talk to credit card companies, for example, they will tell you that the consumer is in solid shape and that spending is at a healthy level. It’s not growing rapidly, but it’s at a healthy level. And delinquencies are not, not a problem. You mentioned high-end delinquencies. I don’t know what to make of that. I read the same thing. But—so, generally—and if you look at the banks and when the banks talk about in their earnings calls, their—the performance of credit has been good. So, essentially, you, you have a consumer that’s in good shape and is spending, not at a rapid rate. But it, it, it’s true. And it was, again, right in line with what we expected, the GDP data that we got this week. So—and I think it’s still a little bit difficult to interpret, because you have these massive swings in net exports, which, which may also be affecting—you know, some of that can be affected by—can affect consumer spending as well. Look, we—it’s one of the data points that we pay most careful attention to, and there’s no question that it’s slowed. And, you know, we’re watching it closely. But we also watch the labor market and the performance of inflation. Those are our two—those are our two variables that we’re assigned to maximize. <NAME>MARIA ELOISA CAPURRO</NAME>. And just to follow up on what my colleagues were asking about the dissents: Governor Waller said that the labor market is on edge, and he was pointing to weaknesses on the private sector. I was wondering, you’ve said that the main number to look at is the unemployment number overall, but what was the discussion about the state of the private jobs market? <NAME>CHAIR POWELL</NAME>. So I’m not going to talk about any individual’s—you know, any individual’s comments. I wouldn’t do that. But, look, I think what we know is that private- sector job creation, you know, certainly in the last report—we’ll see on Friday—but had come down a bit. And, and if you—if you take the QCEW adjustment seriously, with it—it may be even low—maybe close to zero. But the unemployment rate is still—was still low. So, what that’s telling you is that, that, you know, demand for workers is slowing, but so is the supply. So that’s a—it’s in balance, oddly enough. You’ve got a very low unemployment rate, and it’s kind of been there for a year as job creation has moved down, but also we know that, you know, because of immigration policy really, the flow into our labor forces is just a great deal slower. And those two things have slowed more or less in tandem. If you look at things, like I mentioned, quits, look at wages—wages are gradually cooling—look at vacancies to unemployment, those things have been pretty stable for—they haven’t really moved a lot in a full year. So I think if you take the totality of the labor market data, you’ve got a solid labor market. But I think you have to see that there are downside risks. It’s not—you don’t see weakening in the labor market, but I think you’ve got downside risks in a world where unemployment’s being held down because both demand and supply are declining. I think that’s—it’s worth paying close attention to it, and we are. <NAME>MICHELLE SMITH</NAME>. Nancy. <NAME>NANCY MARSHALL</NAME>-GENZER. Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. One more question on the lack of unanimity in today’s decision, the two dissents. Was there talk during the meeting? I know you’re not going to talk about what—exactly what individuals said, but, in general, was there talk during the meeting of cutting rates, and what was the case against that at the meeting? <NAME>CHAIR POWELL</NAME>. Sure. So, you know, we have—we have an economic go-round, where people talk about the economy, and then the next—to—then to—that’s yesterday. And then today, we have a monetary policy go-round, all the way around the table—everyone gives their views. So the discussion around policy was—the majority view was, was still what it has been, which is that inflation is running above target, maximum employment is right at target. That means policy, policy should be a little bit restrictive, somewhat restrictive, because we want—we want inflation to, to move all the way back to its target. So that’s where people have been and still are. Two of our members felt that the time had come to cut and that they—for the reasons that they’re—they’re going to express. I won’t tell you the reasons. They—they’ll issue some kind of a—of a thing in the next day or so. So—but that’s the story. And I would say, you know, well argued, very thoughtfully argued all around the table, good arguments. And, you know, it’s a situation where—an unusual situation. The economy is in—is in, you know, good shape, but it’s an unusual situation where you have risks to both your employment mandate and your inflation. That’s the nature of a supply shock. And it’s probably not surprising that there would be differences and different perspectives on that as well as different views of where the neutral rate is, so they—different views of how tight policy is. So we have those. I will say, what you hope is that people, you know, explain their, their positions very thoughtfully and clearly. And we absolutely had that today all the way around the table. I would call it one of the better meetings I can recall from that standpoint. <NAME>NANCY MARSHALL</NAME>-GENZER. And you’ve said you’re waiting to be confident inflation is heading toward your 2 percent target before you start cutting rates. When you do get that confidence, would you be in—would you be in favor of lowering rates right away? <NAME>CHAIR POWELL</NAME>. It’s not, not quite the way I would put it. You know, I said that’s why we think policy should, should be restrictive, is because, you know, inflation is above target. When we—when we have risks to both goals—one of them is farther away from goal than the other, and that’s inflation. Maximum employment’s at goal. So you have to—that means policy should be tight because tight policy is what brings inflation down. If you came to the view that the risks to the two were more in balance, that would imply that policy shouldn’t be restrictive, it should be more neutral—more, more, you know, a neutral stance. And that would be somewhat lower than where we are now. No one knows exactly where that is. So that’s—that’s the framework I think I’d be taking. And, you know, we’ll just have to see. We’re going to be obviously looking at a lot of data in the next cycle. It is one of the cycles where we have two employment and two inflation reports, and we’ll see where that takes us. <NAME>MICHELLE SMITH</NAME>. Jeff Cox. <NAME>JEFF COX</NAME>. Thank you, Mr. Chairman, for taking the question. Jeff Cox from CNBC.com. A metric that you like to cite a lot is the final sales to private domestic purchasers. That was down to a 1.2 percent gain in the second quarter from 1.9 percent in Q1, suggesting that there’s some softening in underlying demand. Just wondering if you look at that and you combine that with some of the housing numbers that—with the weakness that you acknowledge at the top of your remarks—that the housing market is, in fact, weak. And the inflation numbers from GDP today came down 2.1 percent for headline, 2.5 percent for core. I’m wondering how much more movement you would need to see from these data points before you would be comfortable with cutting in, say, September. <NAME>CHAIR POWELL</NAME>. It’s going to be the total—hard to answer that specifically. PDFP, I think, for the first half—private domestic final purchases, or final sales, as people call it—was 1.6 on the first half. GDP, I believe, was 1.2 percent. So that’s the whole half. You mentioned the quarters. So those are slower. But, you know, GDP is bumpy quarter to quarter, half to half, and often gets revised, you know, after the fact. The labor market data, we, we still think, is— continue to think, is the best data we have on the economy. And that shows a 4.1 percent unemployment rate. It shows wages, you know, still at a healthy level, but moving ever closer to what we would regard as long-run sustainable, consistent with longer-run productivity and 2 percent inflation. So the labor market is actually still quite solid. Inflation is above target. Even ignoring tariffs, it’s a little bit above target. And tariffs—so we’re watching all of that and, again, trying to—trying to do the right thing in what is a challenging situation, because you’re being pulled in two directions and you have to decide which of those it took to go in. And, actually, at some point, if they’re—if they’re sort of equally at risk, then you really want to be at a neutral policy stance, which we’re not right now. <NAME>JEFF COX</NAME>. So it’d be safe to say that, if the data kind of stays in line with where it is right now, that you wouldn’t be comfortable with cutting in September? <NAME>CHAIR POWELL</NAME>. I’m not going to—I’m not going to say that. No. I, I, I just think we’re going to need to see the data, and it can go in many different directions—the inflation data and, and the employment data. And we’ll just—we’re going to make a judgment based on all of the data and based on that balance-of-risks analysis that I mentioned. <NAME>JEFF COX</NAME>. Thank you. <NAME>MICHELLE SMITH</NAME>. Greg Robb, for the last question. <NAME>GREG ROBB</NAME>. Thanks, Chair Powell. Greg Robb from MarketWatch. The Treasury Secretary has said recently that it would be confusing for the markets if you stayed on as a Governor after your term on the—as Chair ends. And I was wondering if you had any update for us on—a decision on that front. <NAME>CHAIR POWELL</NAME>. Sorry, I do not have any update for you. Thanks very much, everyone.