WASHINGTON (MaceNews) – The following is a transcript of Federal Reserve Chair Jerome Powell’s news conference Wednesday, following the meeting of the Federal Open Market Committee:
CHAIRMAN JEROME POWELL: Good afternoon. My colleagues and I remain squarely focus 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 objects. Inflation has eased from its highs without a significant increase in unemployment. That is very good news, but in freedom of information is still too high, ongoing progress in bringing it down is not assured and the part forward is uncertain.
I want to assure the American people that we are fully committed to returning inflation to our 2% goal. Restoring price stability is essential to achieving 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 have significantly tightened the stance on Monetary Policy and moved well into restricted territory and seeing the effects on economic activity and inflation.
As labor market tightness has eased and progress on inflation has continued, the risk to achieving our employment and inflation goals are move 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. GEP growth in the 4th quarter of last year came in at 3.3%. For 2023 as a whole, GDP expanded at 3.1%. Bolstered by strong consumer demand, as well as improving supply conditions.
Activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates. High interest rates also appear to have 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%. 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%. Total PCE prices rose 2.6% over the 12-month ending in December, excluding the volatile food and energy categories, core PCE prices rose 2.9%.
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 households, businesses and financial markets, et cetera.
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 high inflation imposes significant hardship as it’ roads 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 strongly committed to returning inflation to our 2% objective.
Other the past two years we have raised our policy rate by 5.25% and 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 as 5.25% to 5.5%, 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 begin to ring back policy rank. The policy has surprised forecasters in many ways since the pandemic and the 2% inflation progress objective is not assured and the economic outlook is uncertain and we remain attentive to inflation risks and maintained to the target range for longer as appropriate.
As labor market has eased and progress on inflation has continued, the risk to achieving our employment and inflation goals are moving into better balance.
We know that reducing policy restraint too soon or too much can result in a reversal on the progress we have seen on inflation and too late and too little can unduly weaken economic activity in 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 it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%. We will continue to make our decisions meeting by meeting.
We remain committed to bringing inflation back down to our 2% 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 of stability goals. Thank you. I look forward to our questions.
>> “New York Times.” Thank you for taking our questions. Obviously in the statement and remarks there, you note that you don’t want to cut interest rates without greater confidence that inflation is coming down fully. I wonder, what do you need to see at this point to gain that confidence? As you make those decisions, how are you weighing recent strong growth in consumer spending data against the sort of solid inflation progress you have been seeing.
>> CHAIRMAN JEROME POWELL: Can you say the last part again.
>> How are you waving the consumption and growth data which has been strong against inflation data General Assembly what are we looking toward for greater confidence. We have confidence and we are looking for confidence that inflation is moving sustainably at 2%. We have confidence that has been increasing but we want greater confidence. What do we want to see? We want to see more good data. It is not that we are looking for better data but continuation of the better data. Six months of good inflation data, but the question is, that six months of good inflation data, is it sending us a true signal that we are, in fact, on the path — sustainable path down to 2% inflation. That is question.
The answer will come from some more data that is also good data. It is not that the 6 month data isn’t low enough. It is. But it is a question of can we take that with confidence that we are moving sustainably on to 2%. That is what we are thinking about.
In terms of growth, we have had strong growth. Take a step back. We have had strong growth, very strong growth last year, going right into the 4th quarter. And yet we have had a very strong labor market, and we have had inflation coming down. So, I think, whereas a year ago we were thinking we needed to see some softening in economic activity, that hasn’t been the case.
So, I think 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 and a strong labor market. We are not looking for a weaker labor market but for inflation to continue to come down as it has been the last six months.
>> I am sorry. If I can follow-up quickly. When you say that you want to make sure it is a true signal, is there anything you are seeing in the data that makes you doubt it is a true signal at this stage?
>> CHAIRMAN JEROME POWELL: I would say it seems to be the likely case that we will achieve that confidence, but we have to achieve it, and we haven’t yet. It is a good story. We have six months of good inflation. And you know this, you can look behind those numbers and see that a lot of it has been coming from goods inflation, for example.
And goods inflation running significantly negative. It is a reasonable assumption that over time, because inflation will flatten out, probably approximate 0, that would mean the services sectors have to contribute more.
In other words, what we care about is the aggregate number, not so much the competition, but we need to see more. That is where we are at a committee. We need to see more evidence that sort of confirm what is we think we are seeing, and gives us confidence that we are on a path to — a single path down to 2% inflation.
>> Nick Tim rose of the Wall Street. Chair Powell, you raised rates rapidly over the last two years, one the risk of inflation expectations becoming unanchored. This morning’s 4th quarter report shows progress payroll growth running at 4% pace. Inflation expectations are close to where they were before the inflation emergency of the last three years and you appear to have substantially cut off these two tail risks and that you judged the current policy, as well, in the restrictive territory. What good reason is there to keep policy rates above 5%. Will you really learn more waiting six weeks versus three months from now that you have avoided those two risks?
>> CHAIRMAN JEROME POWELL: As you know, almost every participant on the Committee believes it will be appropriate to reduce rates. For probably the reasons that you say. We feel like inflation is coming down. Growth has been strong. The labor market is strong. What we are trying to do is identify a place where we are really confident about inflation getting back down to 2% so we can then begin the process of dialing back the restrictive level.
So, overall, 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 confirmation that inflation is, in fact, coming down, sustainably to 2%.
>> If I could ask differently, if you hold rates high as inflation moderates, target rates will exceed the prescriptions of the tailor roller experience. What would be the reason for holding rates higher than the levels recommended by the rules in the current instance?
>> CHAIRMAN JEROME POWELL: I think, as you know, we consult a range of tailored rules and non-tailored rules. We consult them regularly. They are in our TO book and all the materials we look at. But, you know, I don’t think we have been in a place where we were setting policy by them.
Depending on the rule, it will tell you different things. There are many different formulations.
Another way to think about it is, implicitly, so, in theory, of course, real rate goes up if holding all else equal as inflation comes down, but that doesn’t mean we can mechanically adjust policy as real rates — I am sorry, as inflation comes down. It doesn’t mean that at all.
For one thing, we look at more than the feds funds rate. We look at the financial conditions. But, NDA, we don’t know with great confidence where the neutral rate of interest is at any given time.
That doesn’t mean we wait around to see the economy turned down, because that will be too late. We are really in a Risk Management mode of managing the risk, as I mentioned in my Opening Remarks, that we move too soon and move too late.
I think to move, which is where almost everyone on the Committee is in favor of moving rates down this year, but the timing of that will be linked to our gaining confidence that inflation is on a sustainable path down to 2%.
>> Hi, thanks Chair Powell. I would like you to key in on the use of the word in the statement that inflation still remains elevated. You pledged to cut rates before inflation reached 2%. So that implies that there is some sort of intermediate step here on inflation, and that a cut would be consequent with a change in the statement language that inflation remains elevated. What is the step down from there?
>> CHAIRMAN JEROME POWELL: Yeah. I don’t know that we worked out the particular statement language and that kind of thing. I would just say, you look at the 12-month inflation is. It is still well above — core is 2.&%F0%, 12-month, which is way down from where it was, very positive development and very fast decline.
You know, the case is likely that it will continue to come down. So, that is where it is. But we are wanting to see more data.
>> If I could follow-up on the statement, the statement allows that you have greater confidence on inflation falling before you cut, but it doesn’t mention the other side of the mandate, the slide in employment. Would a slide in employment also bring to you the point of cutting rates?
>> CHAIRMAN JEROME POWELL: Yes. So, let me say we are not looking — that is not something we are looking for.
But, yes. If you think about, you know, in a base case, the economy is performing well and the labor market remains strong. If we saw an unexpected weakening in, certainly in the labor market that, would certainly certainly weigh on cutting sooner. Absolutely.
If we saw inflation being stickier, or higher, or those sorts of things, we would argue for moving later.
In the base case, though where, the economy is healthy, and we have, you know, ongoing growth, solid growth. We have a strong labor market, and we have inflation coming down that, is what people are writing their SEP around.
In that case what we are saying is, based on that, we think we can and should take advantage of that, and be careful, as we approach that question of when to begin to dial back restrictions.
>> Just to circle back to the greater confidence aspect of this statement. There has been a lot of unanimity in recent meetings. I am wondering going forward, when it comes to all needing greater confidence, the is unanimity, or at least consensus among the FOMC member whats the threshold is for the greater confidence? If not, can you maybe tell us a little about the discussion today on what the variations between FOMC members was, what constitutes end of confidence rates and the variation on how quickly the greater confidence threshold could be reached. Thank you generators so, we are not really at that stage. There was no proposal to cut rates. Some people did talk about their few of the rate path. I would point to the SEP as good evidence of where people are, although it is one cycle later.
So, we are not at a place of really working out those kinds of details, because we weren’t actively considering moving the Federal funds rate down.
I will say, there is a wide disparity, a healthy disparity of views, and you see that in public statements, in the minutes and the transcripts when they are released every five years.
So, we do have a healthy set of differences and I think that is actually essential for making good policy.
We are also able to reach agreement generally, because we listen to each other, compromise, and even though not everybody love what is we do, they are for the most part able to join in. For me that, is a well functioning institution.
>> Hi, Chair Powell. Thank you for taking our questions. Over the past few years there have been realtime indicators that helped us gain a sharper understanding of where the economy was. Open table data, office attendance, and you talked about vacancies in the past.
I am wondering at the start of this year, what might be on the Dashboard for you that is giving you the clearest picture of the economy, including on rent, if you can touch on that.
>> CHAIRMAN JEROME POWELL: Yes. It is not the pandemic, so we can actually rely on more traditional forms. People are working, they are getting wages, and the economy is largely reopened and broadly normalizing as you see.
I would not say we are looking at that sort of more innovative data as much.
You point to rent. Of course, we follow the components of inflation very carefully, which would be goods inflation. I talked about that a little bit. You mentioned housing inflation.
The question is when will these lower market rents find their way into measured rents, as measured in PCE inflation. We think that is coming. We know it is coming. It is just a question of when and how big it will be. So, that is in everyone’s forecast, I would say.
So, that will help. But at the same time we think goods inflation will probably — it has been giving a lot of disinflation to the effort and probably that declines other time, but it may well have time to run.
Supply Chains are not perfectly back to where they were. NDA, it takes time for the healing process to get into prices, so there may still be a tailwind.
We will find out with that.
We look at the things that relate to the mandate very carefully, as you would imagine.
>> 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?
>> CHAIRMAN JEROME POWELL: No, I would not say we received that. 12-month target on the core inflation. We are certainly encouraged by the progress, but we are not declaring victory at all at this point. We think we have a ways to go.
>> Thank you, Mr. Chairman. You said that you would know the neutral rate by its works.
I am wondering, what can you tell me, how do you believe the neutral rate is working. Telling you right now the 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? generators so, I think you do see housing. The second question is important, and that is a lot of this has come through — the disinflationary process has come through the healing of Supply Chains and also the labor market. That other set of factors is really different from other cycles, and that has brought — that working with tighter policy, which has enabled the supply side to recover.
I think that mixture has been behind what has enabled this. So, we really do think we are having an effect broadly across the economy. I would point to the instraw sensitive part of the economy, as well as spending, generally, but it is a complicated story.
>> But how much restraint are you imparting to the economy relative to neutral rate.
>> CHAIRMAN JEROME POWELL: Of course, you know it is not something you can identify with any precision, but a standard approach would be to take the nominal rate, 5.3%, let’s say, and subtract sort of a forward measure of inflation. If you do that, there are many, many ways to calculate that neutral rate, but that is what I like to do.
You will get to something materially above mainstream estimates of neutrality, of the neutral rate. You will. But, at the same time, you look at the economy and you say this is an economy that grew 3.1% last year. And you say, what does that tell you about the neutral rate?
What is happening though, the supply side has been recovering in the middle of this. That won’t go on forever. A lot of the growth we are seeing, it isn’t just a tug-of-war between interest rates and demand. You are getting, you know, more activity because of labor market healing, and Supply Chains healing.
So, I think the question is, when that Peters out, I think the restriction will show up more sharply.
>> Thank you for taking the question, Mr. Chairman. You mentioned earlier, we are not seeking a weaker labor market, I think you said. Can you talk a little bit more about that? Do you think the labor market is back to quote unquote normal?
That 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 are still provide pre-pandemic levels.
>> CHAIRMAN JEROME POWELL: I think the labor market is in many measures at or nearing normal, but not totally back to normal. You pointed to one or more of them. Job openings are not quite back to where they were. Wage increases, rather, are not quite back to where they would need to be in the longer run.
I look at it this way, though. The economy is broadly normalizing. So is the labor market. That process will probably take some time. Wage-setting is something that happens. It is, you know, probably will take a couple years to get all the way back. And that is okay. That is okay.
But we do see — you saw today’s ECI reading. You know, the evidence is that wage increases are still at a healthy level, very health I level, but they are gradually moving back to levels that would be more associated, given assumptions about productivity, are more typically associated 2% inflation.
It is an ongoing process, a healthy one, and I think we are moving in the right direction.
>> So that process can continue without a weakening of a labor market, basically, you are saying?
>> CHAIRMAN JEROME POWELL: I think the labor market is — it is rebalancing. Clearly there was a fairly severe imbalance between demand for workers and supply at the begin of thing pandemic. We lost several million workers at the beginning of the pandemic for people dropping out of the labor force. When the economy reopened, you remember in 2021 you had a severe labor shortage. It with us everywhere.
Panic on the part of businesses that couldn’t find people.
So, what happened, we expected the labor market to come back quickly, and it didn’t. And in 2022 was a disappointing year, and we were kind of thinking, well, maybes we won’t get it back. Then in 2023 we did, as you know. So labor force participation came back strongly in ’23, and so did immigration. Immigration came to a halt. So those two forces have significantly lowered the temperature in the labor market to what is still a very strong labor market. It is still a good labor market for wages and finding a job, but it is getting back into balance, and that is what we want to see.
You know, one great way to look at that is what is happening with wage increases. You can see it now across the major things that we track. It isn’t every quarter, but overall it is still a clear trend, still at high levels but back down to what would be consistent with where we were before the pandemic and with 2% inflation.
>> Hi. Associated Press. Thank you. I wanted to follow-up on Rich’s question. It sounded like you suggested that you are not worried about faster growth so much. I wanted to see if you are seeing anything that suggests that inflation could reaccelerate from here, and it sounds like you are saying you are not worried that solid growth from here on out poses any risk to inflation. Thank you.
>> CHAIRMAN JEROME POWELL: No. I think that is “a” risk. The risk that reinflation would accelerate. But I think the greater risk is that it would stabilize a at a level meaningfully above 2%. That is more likely, to me. Of course, if inflation were to surprise by moving back up, we would have to respond and that would be a surprise at this point, but that is why we are keeping our options open here, and why we are not rushing.
So, I think both of those are risks, but I think the more likely risk is the one I mentioned, which is, you have had six good months, very good months, but what is really going to shake out here? When we look back, what will we see? Will inflation have dipped then come back up? Are the last six months flattered by factors that won’t repeat themselves? We don’t think so. That is not what we think, but that is not the question we are asking that we have to ask, and we want to get comfort on that.
>> One quick follow-up. Governor Waller mentioned the revisions on the February 9 data.
Is the that something you are watching, as well. If we see the revisions fairly minor, will that give you more confidence where things are going?
>> CHAIRMAN JEROME POWELL: We will just have to see. We looked at those. Last year was a surprise.
>> If you don’t want to use the term soft landing, would you say that, at least, from your point of view now, the other scenario of a hard landing caused by the fed is off the table, or the risk of diminished very much?
And, you mentioned, below 2% inflation on a 3-month basis, core PCE has been running at 1.5%. There are those on Wall Street who think 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?
>> CHAIRMAN JEROME POWELL: So, your first question, how to describe where we are. I guess I would just say this. Executive Summary would be, growth is solid to strong. Over the course of last year. The labor market, 3.7% unemployment indicates that the labor market is strong. We have had just about two years now of unemployment under 4%. That hasn’t happened in 50 years, so it is a good labor market. And we have seen inflation come down. We talked about that. So, we have six months of good inflation data and expectation there is more to come.
So, this is a good situation. Let’s be honest, this is a good economy. But what is the Outlook? We expect growth to moderate. We have expected it for some time and it hasn’t happened, but we do expect it will moderate as the Supply Chain and labor market normalization runs its course.
The labor market is rebalancing, as I mentioned. Job creation has slowed. The base of job growth has narrowed, and, of course, the 12-month inflation is above target and getting down closer to target. It is not guaranteed, but we do seem to be getting on track for that.
So, those are the risks and questions we have to answer, but, overall, it is a pretty good picture. It is a good picture.
Your second question was — sorry —
>> Could you get inflation that is below target, end up with inflation below target, and you have to do something about that?
>> CHAIRMAN JEROME POWELL: The thing is, we are not looking for inflation to tap the 2% base once. We are looking for it to settle out over time, at 2%. And the same thing is true. If we have a month or two of lower — and we have that now, of inflation analyzed at a lower level, that wouldn’t be good.
We are not looking to have inflation anchor below 2%. We are looking to have it anchored at 2%. So, if we do face those circumstances, then we will have to deal with it. For now, we want to take advantage of this situation and finish the job on inflation while keeping the labor market strong.
>> Fox business. Thank you, Mr. Chairman, for taking this. As I heard from some district Fed Presidents, is it in your few a little premature to think that rate cuts are right around the corner and when we see that, should we consider that a rate cycle or is that a one-off generators so, we include in that language, in the statement, to signal clearly that, with strong growth, strong labor market, inflation coming down, the committee intent tends to move carefully as we consider when to dial back the restrictive stance that we have in place.
So, if you take that to the current context. The current context, we will be data-dependent. We will be looking at this meeting by meeting.
Based on the meeting today, I would tell you that I don’t think it is likely that the Committee will reach a level of confidence by the time of the March meeting to identify March at as the time to do that, but that is to be seen.
So, I wouldn’t call it, you know — when you ask me about in the near term, I am hearing that as March. I would say, I don’t think that is — it is probably not the most likely case, or what we would call the base case. The second question is —
>> When we see a cut, is it the start of a cutting cycle, or could it be a one-off.
>> CHAIRMAN JEROME POWELL: You know, that will depend on the data. We will be looking at the economic data as it affects the outlook and balance of risks and we will make our decisions based on that. It could wind up we will have another SEP at the March meeting, and people will write down what they think, but in the end, it really depends on how the economy evolves practice ever we talked about there are risks that would cause us to go slower, for example, stronger inflation. And there are risks that could happen that would cause us to go fearser or sooner, and that would be a weakening in the labor market or very persuasive, lower inflation. So we will just be reacting to the data. That is the only way we can really do this.
>> Hi. POLITICO. Could you talk a little more about productivity growth. You mentioned multiple times about the level of wage growth that is consistent with 2% inflation. We have obviously seen, you know, talking about ECI this morning, in which it has cooled a little bit. It is still a little above what you have wanted to see. Growth has been very strong.
How much of those numbers do you contribute to productivity, and do you see that productivity as sort of temporary because of the labor and Supply Chain factors you were talking about? Or do you think that productivity growth will fade over time?
>> CHAIRMAN JEROME POWELL: So. This is a really interesting question. My own view is, I think if you look back to the pandemic, you saw a spike in productivity as workers were laid off and activity didn’t decline as fast. Then you saw a deep trough of productivity. Then over the last — you saw high productivity last year in 2023. I think we are basically in the flows of getting through the pandemic economy. The question will be, what is it that has changed? You know, the productivity tends to be based on fundamental aspects of our economy. Is there a case — will it be the case that we come out of this more productive, on a sustained basis? I don’t know.
What would it take? People talk about AI, but I would — my guess is that we may shake out and be back where we were, because I am not sure I see work from home doesn’t seem like it is the a big productivity — work from home. AI, Artificial Intelligence generative, maybe, but not in the short run. Probably in the longer run. So, I am not seeing why it would, but right now, I would say the productivity is kind of what falls out of the broader forces that are driving people in and out of the labor force, and activity returning, and Supply Chains getting fixed.
>> Would that be behind why we have seen such strong growth, but we have also seen inflation fall, that maybe there is a higher level of productivity there? Generators that is one way to look at it. Yes.
>> Hi, Chair Powell. Marketplace again. I want to ask a little more about housing. How closely are you are watching rent and housing prices as you evaluate when to cut rent. It seems like housing prices are not coming down as quickly as you expected.
>> CHAIRMAN JEROME POWELL: So, when you think about our statutory goals, our maximum employment and price stability — and that is what we are targeting. We are not targeting housing price inflation, the cost of housing and any of those things. Those are very important for people’s lives, but those are not the things we are targeting.
We are also well aware when we cut rates at the beginning of the pandemic, for example, the housing industry was helped more than any other industry. When we raise rates the housing industry can be hurt, because it is a very intersecting sector.
On top of that we have longer-run problems with the availability of housing. We have a built upset of cities. People are moving further and further out, so there hasn’t been enough housing built. 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 of really rental inflation.
You are taking the owner’s equivalent rent and actual rent paid by tenants and running that through the CPI calculation or the CPE calculation, the one we look at. It tells you market rents are increasing at a much lower rate, or even flat, and that will show up in inflation over time. It has to, as long as that remains the case.
>> Just real quick what, is response to the letter that we sent to you by some members of Congress asking the Fed to lower interest rates to make housing more affordable.
>> CHAIRMAN JEROME POWELL: I response is what I started with. 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 — well, not most importantly, but mostly, for people at the lower end of the income spectrum, living at the edges, at the margins.
So, for someone like that, high inflation, in the necessities of life, right away you are in trouble.
Whereas even middle-class people have some scope to absorb higher costs so we have to get inflation down, and the tools we use to do it are interest rates. So, that is how we think about that.
>> Courtney brown in Axios. Can you give us insight into whether the Committee discussed the possibility of slowing Balance Sheet runoff in the months ahead?
>> CHAIRMAN JEROME POWELL: Yes, so I would start by say that Balance Sheet runoff so far has gone very well. And as the process has continued, we are 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 had some discussion of the Balance Sheet. We are planning to begin in-depth discussions of Balance Sheet issues at our next meeting in March.
So, those questions are all coming into scope now, and we are focusing on them, but we are at the beginning of that process, I would say.
>> A quick follow-up. Is it the case the Fed would decide to lower rates and make adjustments to the Balance Sheet runoff in tandem?
>> CHAIRMAN JEROME POWELL: Yes. We see those as independent tools. For example, if you are normalizing policy, you might be reducing rates, but continuing to run off the Balance Sheet. In both cases that is normalization, but from a strict monetary standpoint, you could say one is loosening and one is tightening. That could happen. It is not something we are planning or thinking about, but we are thinking of getting to a place where we will see the Balance Sheet runoff continue, we are watching it kalely, and we will look at that as the Committee is starting in March.
>> 6 months of inflation basis you say is not enough to build up your accounts. Easing yet in March, eight good months may not be enough here. Roughly how many months of good inflation data do you need to be confident?
>> CHAIRMAN JEROME POWELL: I will not put a number on it. It is not that we don’t have any confidence. We have growing confidence, but not to the point where we feel like — it is a highly consequential decision to start the process of dialing back on restrictions. We want to get that right. We feel like the strong economy, strong labor market, inflation coming down, it gives us the ability to do that.
We feel like that is the best way to serve the public. Because ultimately we made a lot of progress on inflation, but we want to ensure the job done in a sustainable way. That will come out of our communications. We won’t keep that a secret.
>> M&I market news. Can you explain a little more on what you are considering when MNI market news. Do you see the reversibility all the way down to 0?
>> CHAIRMAN JEROME POWELL: Not a decision we made. We wouldn’t be taking a decision it has to go to zero if we were to stabilize it. That is something we will talk about at the March meeting.
A whole range of issues will be briefed up, and the Committee will get into all the issues that will be arising over the course of the next, let’s say, year or so.
>> Market January watch. In the presidential campaign going on the last nine months or so, your name has come up of and many Republican candidates said they probably wouldn’t want to give you a third term. I want to give you a chance to talk about that. Do you want another term on the Fed? What is your stance on that?
>> CHAIRMAN JEROME POWELL: I don’t have a stance on that. That is not something I am focus on. I am focused on doing our jobs. This year will be a highly consequential year for the Fed and Monetary Policy, and all of us are very buckled down and focused on doing our jobs.
>> Thank you, Chair Powell. Yahoo finance. Core PCE has been running at 1.9% over the past six months and you guys are expecting core inflation higher this year at 2.4% compared to the 6-month measure. Given the forecast and the median is for three rate cuts this year, what happens if inflation stays where it has been the last six months for the next six months?
>> CHAIRMAN JEROME POWELL: We will update our inflation forecast at the next meeting. You referred to the December meeting. That is three -month-old, so it may be lower now given the data we have gotten. As I mentioned, we will be reacting to the data. If we get strong inflation data and it kicks back up, then we will go slower, later or both.
If we got really good inflation data soon, that would matter for both the — that would tell us that we could go sooner, and perhaps go faster. So, we will be — but, of course, we will weigh that with all the other factors.
We are setting policy based on the totality of the data.
>> But to follow-up. If inflation stays where it is currently, that would probably mean the real interest rate becomes more restrictive. Would that mean you would have to trim more, perhaps, than you already factored in?
>> CHAIRMAN JEROME POWELL: I think if we came to the view that the 6 month inflation numbers are very close to 2, in PCE world, if we thought that is where we really would be, then yes, our policy would be in a different place. It would. But that is the whole point. We are trying to get comfortable and gain confidence that it is — inflation is on a sustainable path down to 2%. Toward 2%.
>> Hi, Chair Powell. I wanted to get your comment on the recent data suggesting consumers are moving toward a much more optimistic view of the economy. Is it fair to say moving toward where the Fed has been in recent months and do you think forwarding inflation has plaid a role in ta, and what challenges do you see going forward?
>> CHAIRMAN JEROME POWELL: It is interesting that confidence surveys have been weak at a time where our employment has been low, historically low for a couple of years, but nonetheless, that has been the case. We ask why that is? One obvious answer — and we don’t prepped to have perfect wisdom on this — but the price level is high, the price level went up much more than 2% for a couple of years. People are going to the store and paying much more for the basics of life than they were two or three years ago, and they are not happy about it.
It is fine the inflations are coming down, but the prices they paying is still high. So, that has to be a part of why people are unhappy. That is their right to be unhappy. This is why we need to keep price stability and do our jobs, so people don’t have to deal with things like this.
In terms of — you are right. In recent surveys, you have seen a couple of significant increases in consumer confidence, or happiness with the economy. I guess that is a good thing.
That can support spending, support economic activity. There is some evidence of that. But you are right, it is a fact this we have seen a meaningful increase, and I think levels of confidence are still maybe not as high as they have been at various times, but they certainly have come up.
>> Thank you for taking our questions. Committee Members said they want to meet with leaders to learn more about economy in realtime, seasonal adjustments being thrown offbalance and many readings of the economy being quarterly. Any members say anything not reflected in the data or heard anything through anecdotal evidence that hasn’t been captured in the data yet?
>> CHAIRMAN JEROME POWELL: Well, yes, I am a big believer that yes. We do meet with outside groups who come from all different parts of the economy. I always feel like you — I mean, I spent most of my life in the Private Sector looking at individual companies and individual Management Teams, then building out from that.
So, starting with GDP data and working into what is affecting people’s lives is challenging, very hard, so, I really like anecdotal data.
The 12 Reserve Banks have the best network of anyone, in all their districts, they are talking to. Not just the business community, but the educational, medical, you know, non-profit communities.
They have arm into all of that. So, when they come back, that is what goes into the beige book. They come back, and what each Reserve Bank President does, during the outlook go around, they will say in my district — and they will talk about 100 conversations. They will give you input based on 100 conversations they have had with people of all different walks.
I personally find it very upful in understanding what is going on. Also, I think you hear things before it is showing up in the data sometimes.
>> Do any of them noticing a slowing economy based on what they have heard from their district.
>> If you look back not this beige book but the one before, there was a lot of slower activity. I think what you are hearing now, things are picking up a bit. Not in every district, and not every person that we talk to, but your overall, it feels like you are hearing things picking up at the margin. That is what many coulds through.
>> Thank you, sir. Jeff Cox from CNBC.com. Looking to put it all together. You talked about the economy looking strong, 3.3% analyzed growth in the 4th quarter. Does the strength of the economy speak more loudly to you now than any inflation threat might that, you know, you are in a position, in other words, to keep rates elevated as long as the economy stays strong, and you are more tilted toward that?
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?
>> CHAIRMAN JEROME POWELL: I am not so worried about that. We have had inflation come down without a slow economy, and without important increases in unemployment. There is no reason why we should want to get in the way of that process if it is going to continue.
So, I think declining inflation — continued declines in in … are really the main thing we are looking at. Of course, we want the labor market to remain strong, too.
We have a maximum mandate and price stability mandate. Growth only matters to the extent it influences our achievement of those two men dates.
Thank you very much. — mandates. Thank you very much.
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