WASHINGTON (MaceNews) – Federal Reserve Chair Jerome Powell Wednesday said in several different ways the Fed has to wait and see whatever effects on inflation and unemployment come from whatever the ultimate tariff rates are imposed on China and other countries – and beyond that, he said very little more.
A transcript of the post-FOMC question-and-answer session follows:
JEROME POWELL: 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% 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.
Pardon me. Following growth of 2.5% last year, GDP was reported to have edged down in the first quarter. Reflecting swings in 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% 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% 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% longer run goal. Total PCE prices rose 2.3% over the 12 months ending in March, excluding the volatile food and energy categories, core prices rose at 2.6%. Near-term measures of inflation expectations 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 next year or so, however, most measures of longer-term expectations remain consistent with our 2% 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 four and a quarter to 4 1/2% 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 has 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 will 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, there 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 effects, on how long it takes for them to pass fully into prices and ultimately on keeping longer-term inflation expectations well anchored.
Our obligation is to keep longer-term expectations and to priest 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 that in mind without price stability we could not achieve the long periods of stronger labor market conditions that benefit all Americans.
We may find ourselves in the challenging scenario in which our dual mandate goals are intentioned. If that were to occur, we could consider how far the economy is from each goal and the potentially different time honors sons over which those respective gaps would be anticipated to close. For the time being, we are 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 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 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% 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 federal do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions.
Steve Lee from CNBC. Thank you for taking my question. A lot has happened since the last meeting. There have been tariffs put on, tariffs taken off and there’s a bill advancing in congress and I 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?
JEROME POWELL: Well, so as we noted in our statement, post-meeting statement, we have judged that the risks to higher employment and higher inflation have both risen and this is 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 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.
I mean ultimately we think our policy rate is in a good place to stay as we await further clarity on tariffs and ultimately their implications for the economy.
Hearing you describe what you are 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 are going to be comfortable or the committee would be comfortable to act on what the data is telling you.
JEROME POWELL: I don’t think we know. You know, I think if you look where we are today. We have an economy that if you look through, you know, the distortions in Q1 GDP, economy growing at a solid pace, the labor market appears to be solid. Inflation is running a bit above 2%. So it’s an economy that’s been resilient and in good shape and our policy is 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 are going to be watching the data. The data may move quickly or slowly. But we do think we are in a good position where we are to let things evolve and become clearer in terms of what should be the monetary policy response.
Nick.
Nick from the “Wall Street Journal.” 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%. What do you see right now that could nourish higher inflation beyond a rise in goods prices this year?
JEROME POWELL: I think the underlying inflation picture is good. It’s what you see, which is inflation now running a bit above 2% and we have had basically decent readings in housing services and nonhousing services which is a big part of it. That part is moving along well.
But there’s just so much that we don’t know. I think — and we are in a good position to wait and see, is the thing. We don’t have to be in a hurry. The economy has been resilient. It 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 are doing. And, you know, we will see the administration is entering into negotiations with many countries over tariffs. We will know more with each week and month that goes by, about where tariffs are going to land. And we will know what the effects will be when we start to see throes things. So, we think we will be learning. I can’t tell you how long it will take, but for now, it does seem like it’s a fairly clear decision for us to wait and see and watch.
When you say 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?
JEROME POWELL: You know, as I said, we are comfortable with our policy stance. We think we are in the right place to wait and see how things evolve. We don’t feel like we need to be aye hurry. We feel it’s appropriate to be patient. And 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 waiting to see how developments play out. And then we will be able to make a better assessment of what the appropriate path four monetary policy is.
So, we are not in that place, and as that develops, and I can’t really give you ah time frame on that.
Jenelle Marte with Bloomberg. 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?
JEROME POWELL: Well, let me say, I mean, so let’s look back and see where we are. So, go through 2024 up to the day. We have had, you know, unemployment in the low fours for more than a year, we have had inflation coming down, now in the mid to low 2s. And we have had an economy growing at 2 1/2%. 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, certainly the risks to higher inflation, unemployment have increased and if that’s what we do see and if the tariffs are ultimately put in place at those levels, which we don’t know, then we will see — we won’t see further progress toward our goals. We might see a delay in that. I think in our thinking, we would never — we never do anything but keep achieving those goals. But we would at least for the next, let’s say, year, we would not be making progress toward those goals. Again, 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 preemptive. I wouldn’t say what we did last fall is 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%. So, that’s a situation where you can move preemptively. Now we have inflation running above target, above target for four years. It’s not so far above target now and we have an expectation, conditional on what happens, that we will see upward pressure on inflation. If you look at where forecasters are, they are all forecasting an increase in inflation.
So, it makes it — and we have also got forecasts of weakening in the economy and some have recession forecasts. We don’t make a, publish a forecast 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 the data will be until we see more data.
Colby Smith with the New York Times. How much weakness does the committee need to see 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?
JEROME POWELL: You know, so first of all, we don’t see that yet. We have 4.2% unemployment, good participation, wages behaving very well, participation, I mentioned, at a good level. So, with the labor market, we would look at the totality of the data. We would look at the level of the unemployment rate, we would look at the speed with which it’s changing. We would look at the whole huge array of labor market data to get a sense of whether conditions are really deteriorating or not. And at the same time, we would 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 difficult balancing judgment that we would have to make.
On that point about balancing, you have 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 this mean in practice? How much of that assessment will be rooted in a forecast versus data dependence?
JEROME POWELL: It would be a combination of the two. I mean, let’s just say, this would be a complicated and challenging judgment that we would have to make. And this is — we are not in this situation. If the two goals are in tension, let’s say unemployment is moving up in an uncomfortable way and so on inflation. Not the situation we are in hypothetically. But we would look how far they are from the goals, how far they are expected to be from the goals, what’s the expected time to get back to their goals. We would look at all those things and make a difficult judgment and that’s in our framework. It’s always been in our thinking. We haven’t faced that question in a very long time. And so, again, 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.
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 job inflation in the past three years. The job report solid. At the same time we have the new tariffs we are living under. Given this should the Federal Reserve be cutting rates at all this year?
JEROME POWELL: It’s going to depend. I think you have to just take a step back and realize, 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 and for inflation, I couldn’t confidently say that I know what the appropriate path will be.
So following up on that, 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?
JEROME POWELL: Doesn’t affect doing our job at all. So, we are always going to do the same thing, which is we are going to use our tools to foster maximum employment and price stability for the benefit of the American people. We are always going to consider only the economic data, the outlook, the balance of risks, and that’s it. That’s all we are going to consider. So it really doesn’t affect either our job or the way we do it.
Howard Snyder with Reuters. Thanks for the time. I am wondering, given the complexity about the first quarter GDP and what lies ahead, I’m 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.
JEROME POWELL: Uncertainty about the path of the economy is extremely elevated and that the downside risks have increased. The risk is as we pointed out in our statement, the risks of higher unemployment and higher inflation have risen. But they haven’t materialized yet. They really haven’t. They are really not in the data yet. So, and that tells me more than by intuition because I think it’s obvious, actually, that the right thing for us to do is we are in a good place, our policy’s in a very good place, and the right thing to do is await further clarity.
And there’s usually things clarify and the appropriate direction becomes clear. That’s what usually happens. 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 last summer so we think it’s in a good place and the appropriate thing is for us to wait and see and get more clarity about the direction of the economy.
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, … that was in there. And everybody is looking at soft data and you mentioned yourself that the sentiment is sour. Beginning of layoffs in some industries, prices rising in some places and an awful lot of investment decisions being pushed to the sideline. Doesn’t that point to a slowdown?
And by the way, consumers keep spending, credit card spending, it’s still a healthy economy. Albeit one that is shrouded in some very down deep sentiment on the part of people and businesses.
Michael McKee from Bloomberg radio and television. The Fed has been … criticized from a former governor, your … tools which makes it a given that you will act nor aggressively in the — more aggressively in the future. Is that a fair critique and that would be something you are looking at.
JEROME POWELL: Say that critique again.
The Fed 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 —
JEROME POWELL: Sure.
And went beyond the narrow confines of your mandate.
JEROME POWELL: Well, I mean, that’s not really beyond the confines of our mandate. I would say this. We did things, essentially we are 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 QE a little better. We did think we were explaining it in real time. I completely accept 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 concerned that we didn’t want a tightening, a sharp tightening and financial conditions at a time when we thought the economy was still vulnerable so we did hold onto a long time for QE and we tapered and then we immediately went into QT and we have down a couple of trillion. But I get 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, we knew doing this in real time that we weren’t going to get it perfect. And those kind of after-action kind of looks are essential. And we are doing the same thing in our review on some issues.
The other part of that critique is that you have 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.
JEROME POWELL: So, OK. So climate, if you 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 that’s what we have done. We have done really very little on climate.
You can say that little bit that we have done was too much. But I wouldn’t want to give any impression that, you know, we take — that we have taken climate in and something that we are spending a lot of time and energy on. We are not. We have very, very narrow things.
We did one thing, one guidance for the banks and then we did a one-time stress analysis, climate stress analysis and that’s it. We dropped out of the network looking at the financial system. We didn’t do much on climate. But — and I do think, and I have said this publicly several times, I think 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 the risk is, if you go for things that are really not in your mandate, then why are you independent? And I think that’s a very fair question. I do think we have done a whole lot less on climate than some people seem to think we did. Anyway, that’s —
Should you have taken on the question of bringing unemployment rates down for specific categories?
JEROME POWELL: We didn’t do that. What we said was that we never targeted any unemployment rate for individual racial or demographic group. What we said was that maximum employment was a broad and inclusive goal. And I think what we meant by that was we are going to consider the totality of the country as we look at our maximum employment goal. Of course, we were never going to target 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.
So, that’s just not a correct reading of our — I can see how — you know, maybe people found that confusing and we have to take that into consideration.
Hi, Chair Powell, thanks for taking our questions today. I’m Joe Ling Kent with CBS news. You have 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 they say feel it, that the challenges are here and there’s no waiting and seeing.
For mainstream, what is the breaking point? What would have to happen to prompt a rate cut specifically?
JEROME POWELL: Well, so we really don’t see in the data yet big economic effects. We see sentiment, there are concerns that higher prices may be coming or things like that. So, people, they are worried now about inflation. They are worried about a shock from the tariffs. But they really haven’t — that shock hasn’t hit yet. Okay.
So, we are 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, 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 by the way, our policy is in a good place, so we think we can wait and move when it is clear what the right thing to do is. Really president 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 — people are not getting laid off at high levels. Initially claims for unemployment are not increasing in any kind of impressive way. So, the economy itself is still in solid shape.
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?
JEROME POWELL: I don’t have anything more for you on that. I have pretty much covered that issue. Thank you.
Hi. Thank you. Chris, Associated Press. I just wanted to follow up. Earlier it sounded like you say it was unclear how the Fed — you know, what kind of interest rate decisions you will make later this year. In March there was guidance that two cuts might happen, 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?
JEROME POWELL: You know, we don’t do a summary of economic projections at every meeting, as you know, but we do it every other meeting so this was the meeting when we didn’t do it. And we don’t also kind of poll people. So 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 will have another SEP. I’m not going to hazard a guess here today 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 can include us holding where we are. We just are going to need to see how things play out before we make those decisions.
Great. Judge unfortunate to follow up on that, 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 can worsen inflation and vice versa. How do you handle those challenges?
JEROME POWELL: You just captured — this is the issue with the two goals being intentioned. It’s a very challenging question. Now, there can be a case in which one goal is very far, one variable is 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 intentioned. 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 trade-off.
I think you know what our framework document says. It says we will look at how far each variable is from its goal and also we will factor in the time it would take to get there. So, that’s going to be potentially a very difficult judgment. But the data could break in a way that it’s not. 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.
Victoria, hi, Victoria Guido with Politico. Congress is extending the tax cuts and I know you have talked many times about how the path of the dead is unsustainable but given that we are also talking right now about the economy slowing, potentially even recession, I was wondering, is there a danger that spending cuts now could slow growth a lot more?
JEROME POWELL: We don’t give Congress fiscal advice. They are going to do — we take what we do as a given and we put it in our models and in our assessment of the economy. So, I wouldn’t want to speculate on that. I think we do know that the debt is on unsustainable level, on an unsustainable path not 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.
Do you think that they should take macroeconomic conditions into account as they look at this?
JEROME POWELL: 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.
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%, 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?
JEROME POWELL: 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 each month, and everywhere people were talking about downside risk to the labor market.
At the same time, payroll job numbers were getting softer and softer so there was 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 want to show that we were — I mean, we had been there for inflation for a couple of years and we wanted to show also that we are 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 well in the range of mainstream estimates of maximum employment so that concern has gotten a lot less. So, you are at 4.2% unemployment. I think we were at a different situation. Now we have a situation where the risks too higher and inflation and higher unemployment have both gone up as we noted in our statement. And we have got to monitor both of those. We have may situation where there may be a tropical waveoff between the two. That’s what we have and that’s why I think it’s a different situation.
How much of a rise in the jobless rate you could tolerate?
JEROME POWELL: I can’t give you — I’m not going to try to give you a specific number. I will say, we have to now be looking at both variables. And which of them is demanding, if one of them is demanding our focus more than the other, that would tell us what to do with policy. If they are more or less 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 a number. But, 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 would hope that it wasn’t also coming at a time when inflation was getting very bad. And, again, we are speculating here. We don’t know this. We don’t know any of these things. It’s very hypothetical. We are just going to have to wait and see how it plays out.
Thanks.
Clare Jones, Financial Times. In terms of getting some clarity we have got some talks that we can in Geneva between the U.S. and China, a lot of economists are attaching a lot of importance to 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, 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 the sort of pandemic era shortages and higher prices if we don’t soothe relations between the U.S. and China. So it would be good to have your view on that, too,.
JEROME POWELL: These are not talks that we are in any way involved in. So I really can’t comment directly on them. So, but what I will say is this. We had coming out of the March meeting, 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 had seen and in our forecasts.
So, and now we have a different — we are in a new phase where it seems to be we are entering a new phase where the administration is entering into beginning talks with a number of our important trading partners and 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 we simply have to wait and see how it works out. It certainly could change the picture and we are mindful of not trying to make conclusive judgments about what will happen at a time when the facts are changing.
Just on the falling shaping volumes from China over these tensions, 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?
JEROME POWELL: You know, I don’t want to get — we shouldn’t be involved even verbally in questions about the timing of these things. Yes, of course, we follow all that data. We see the shipping data. We see all of that. But ultimately this is for the administration to do. This is — you know, this is their mandate, not ours. And I know as you can see, they are, again, having — beginning to have talks with many nations and that has the potential to change the picture materially. So, we will have to wait and see.
Thank you. 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 longer time to reduce uncertainty?
JEROME POWELL: The decision we made today? Which decision?
So the future decisions. So, the volume of the imports, imported goods increased significantly. So, the impact on the imported inflation may delay. So, what is the impact to your future decision?
JEROME POWELL: Okay. So, I mean, I think we think that — there was a big spike in imports, very good, historically large, really. And to beat tariffs and now that should actually reverse so it’s the different between exports minus imports. 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 an unusually large contribution, unusually positive. That’s very likely as imports drop sharply.
You could also have — very likely you will have restatements of the first quarter. It will turn out that consumer spending was higher, it will turn out that inventories were higher and so you will see those data revised up. It may actually go into the third quarter, too. And so I think 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 — inventories government. Anyway, it’s a cleaner read on private demand. But that, too, probably was flattered a little bit by strong demand for imports to beat tariffs. That might overstate. It’s a really good reading, 3% PDP in the first quarter. I don’t think it’s going to affect our decisions. I will 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. It’s complicated and GDP is sending a signal, PDFP is sending a signal. It’s a little bit confusing but I think we understand what’s going on and it’s not really going to change things for us.
Courtney brown from Axios. We talked about some of the occasions of potential layoffs, price hikes and economic slowdown all be evident in the soft data. I’m curious why the Fed needs to wait for that to translate into hard data to 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?
JEROME POWELL: No. Look at the state of the economy. 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 is, we are not sure what the right thing will be. There should be some increasing inflation, there should be some increasing unemployment. Those call for different responses. And so until we know — potentially call for different responses. And so 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 are waiting.
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?
JEROME POWELL: 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 speed and size. So, it wouldn’t be the case that we are looking at this and just completely dismissing it. But it’s another reason to wait and see. You are 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 is looking at that, this and saying that we are sure one way or the other. We are not.
Thanks, Chair Powell. Matt Egan with CNN. You mentioned earlier that you were monitoring the shipping data and we have seen in the shipping data the 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?
JEROME POWELL: I mean, we don’t have the kind of tools that are good at dealing with supply chain problems. We don’t have that at all. That’s a job for the administration and for the private sector more than anything.
What we can do with our interest rate tool is we can support, be more or less supportive of demand and that would be a very inefficient way to try to fix supply chain problems.
But we don’t see the inflation yet. We are, of course, reading the same stories and watching the same data as everybody else. And right now we see inflation kind of moving sideways at a fairly low level.
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 are no longer chair?
JEROME POWELL: 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 are in right now, trying to make the right decisions. 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 100% of our focus right now.
Let’s go to Jennifer for the last question.
Thank you so much, Chair Powell. Jennifer Shawn Berger with Yahoo finance. Public records of your schedule so far this year show no meetings with President Trump, past presidents Obama, Bush and Clinton med with Fed chairs and you met with trump during his first term. Why haven’t you asked for a meeting yet with the president.
JEROME POWELL: I have never asked for a meeting with any president and I never will. I wouldn’t do that. There’s never a reason for me to ask for a meeting. It’s always been the other way.
Would you want to meet with him if given the opportunity to get more information?
JEROME POWELL: It’s never an initiative that I take. It’s always an initiative — 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 have never done so. And I can’t imagine myself doing that. I think it’s always comes the other way, a president wants to meet with you but that hasn’t happened.
A question on monetary policy. When it is time to cut rates, how will you determine how far rates will have to come to try to keep a balance on the inflation mandate as employment weakens?
JEROME POWELL: You know, I think once you have a direction, a clear direction, you can make 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 is 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.