WASHINGTON (MaceNews) – Federal Reserve Chair Jerome Powell’s bottom line is that more inflation data is needed before any rate cuts regardless of the “dot plot” and regardless of the day’s encouraging Consumer Price Index report. The transcript of his post-FOMC news conference follows:
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 marketed has come into better balance, with continued strong job gains and a low unemployment rate.
Inflation has eased substantially from a peak of 7% to 2.7% but is still too high. We are strongly committed to returning inflation to our 2% 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% in the fourth quarter of last year to 1.3% in the first quarter, private domestic final purchases which excludes inventory investment, government spending and net exports and usually sends a clear signal on underlying demand grew at 2.8% 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 demands and strong performance of the U.S. economy over the peas year. In our summary of economic projections the committee participants generally expect GDP growth to slow from last year’s pace with a median projection of 2.1% this year and 2.0% 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%. 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 peas year and the jobs to workers gap has narrowed. Overall, a broad set of indicators suggest 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 S.E.P. is 4.0% at the end of this year and 4.2% at the end of next year. Inflation has eased … the past two years but remains above our longer return goal of 2 percent. Total PCE prices rose … over the 12 months ending in April, excluding the volatile food and energy categories, core PCE prices rose 2.8%. The Consumer Price Index which came out this morning which1K3 tends to run higher than the PCE price index rose 3.3% over the 12 months ending in May and core CPI rose 3.4%.
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 reflect 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% this year, 2.3% next year, and 2.0% 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 guide by our dual mandates to promote maximum — mandated to promote maximum employment and stable prices for the American people. Decided at today’s meeting to maintain target range for federal funds rate although five and a quarter to five and a half percent and continue reducing securities holdings. As labor market tightness has eased and inflation has declined over the past year, the risks to achieving unemployment and inflation goals — our employment and inflaition goals have moved toward better balance. 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%. 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’ll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%. 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 economy will carefully assess incoming — the committee will carefully assess incoming data, evolving 1KWR0U9 look 1K3 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 … the appropriate level of the federal funds rate will be 5.1% at the end of this year, 4.1% at the end of 2025 and 3.1% at the end of 2026. But these projections are not an economy plan or any kind — committee plan or … of a decision. As the committee evolves appropriate assessments of the 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 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 signed two goals for monetary policy, maximum employment and stable prices. We remain committed to bringing inflation back down to our 2% 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.
Thank you, Mr. Chairman. Steve, CNBC. Ifs — I was wondering if you could walk me through the committee’s average inflation forecast. Core PCE is now forecast to be 2.8% 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 could have wronged the outlook for rates there?
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 slight element of conservativism that we’re assuming a certain level of, you know, incoming monthly PCE and core PCE numbers. We’re assuming, you know, a 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, you know, reading. Now, do we have high confidence that that’s right? No. It’s just a 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 let me say that we welcome today’s reading and then hope for more like that.
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 — in context of a rising core PCE. Thank you.
Yeah, no, I think what we’ve said is we don’t think it would be appropriate to reduce rates and begin to loosen policy until we have more confidence that inflation is moving back down to 2% on a sustainable basis. And 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 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 datae than that, then you will see that come down — … than that, then you will see that come down or the same. If you’re at 2.6 or 2.7, that’s a really good place to be.
Nick, Wall Street Journal. Chair Powell, if I look at the rate projections, I see 15 of the 19 that are anticipating either one or two cuts this year, fairly evenly split between the two. And so I wonder if you could explain a little bit more the nuances of 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?
So as far as the NCP part of that is concerned, as you know, I talk to all of the other participants on the FOMC every cycle and we talk about their summer of economic projections in their dot plot and everything and what I hear and see is that people are looking at, you know, a range of plausible outcomes, and in many cases they’re thinking I don’t really — I can’t really distinguish between two of these. They’re so close, these are very close calls. But we ask them to write down the most likely one, so they do. And as you’ve said, there’s fifteen of the nineteen are kind of clustered around one or two, so I think I would look at all, I look at all of them as plausible, but I 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 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 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 don’t really think that — 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 although a given point in time subject to data. In terms of future meetings, we haven’t, you know, 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 want to gain further confidence. Certainly more good inflation readings will help with that. I’m going to be specific about how many because, you know, really it’s going to be not just the inflation 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 forecasts, 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 at 2%, or alternatively, do we see really unexpected signs of weakness in the labor market that would call for a response, which is another thing that could happen. But again, we don’t see that, and we do see today’s report as progress and as, you know, building confidence, but we don’t see ourselves as having the confidence that would warrant, you know, that would warrant beginning to loosen policy at this time.
And if I could quickly follow up, did you or any of your colleagues change your interest rate projections after 8:30 or whenever you got the inflation numbers today?
So this happens too often, but it does happen. Data came out, I think it happened a couple 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 make sure people remember that they have the ability to update, we tell them how to do that, and some people do, some people don’t. Most people don’t. And I’m not going to get into the specifics. But you have the ability to do that, so that what’s in the SEP actually does reflect the data that we got today, to the extent you can reflect it in one day. I think we’ll see PPI tomorrow, we’ll know more about the PCE reading as the month goes on, but the initial CPI reading and its kind of first-level translation to PCE, 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, some people generally do, but most people generally don’t.
Hi, chair Powell. I’m 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, do you think there still needs to be more cooling in the labor market to bring inflation all the way down to 2% 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?
JEROME POWELL: Sure. So by so many measures, the labor market 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 for 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, 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 6/10 over the course of a year or so, very, very gradually. So we put all that together, what you have is still low unemployment, still 4% unemployment, historically low, but it’s moved up a little bit. It’s softened a bit. And that’s an important statistic. But more than that, you’ve got strong job creation, you have payroll jobs still coming in strong, even though there’s an argument that they may be a bit overstated, but still, they’re strong. So that’s what we see. 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 something more than that, but we really don’t see that.
As a quick follow-up, the surveys that make up the jobs report are showing different tales, there’s been some divergence, especially we saw in the last report we got on Friday. How do you interpret that and how does it change your view on the labor market?
JEROME POWELL: Sometimes you can’t reconcile the differences, you just have to look at it and try to understand. That’s why it always makes sense to look at a series in three, six and twelve months of things rather than just one report but you’re right to point to the last report where there was job losses and household survey, 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, great than it was before the pandemic. So overall, we’re looking at what is still a very strong labor market but not the super-heated labor market of two years ago, or even one year ago.
Thanks, Chair Powell. Back on the rates path, the SEP showed quite large shift of rate expectations relative to March. That’s a period in which the economic data flow hasn’t been that dramatic a shift. Can you provide some color on what changed in attitudes on the committee over the last three months to see a much shallower path of rate cuts this year?
JEROME POWELL: The big thing that changed was the inflation forecast, moved up several p tenths before the end of the year, and as I mentioned earlier in the, you know, what do we take away from this? We had 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 confidence we need to begin to loosen policy. So the sense of that is that rate cuts that might take places, might have taken place this year, take place next year, you know. There are fewer rate cuts in the median this year but there’s one more next year. So really if you look at year-end 2025 and ‘2’6, you’re almost exactly where you would have been, just it’s moved later because of that progress. Now, you get different data today. So we’ll have to see where the data light the way. You know, the economy has 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 the incoming data flow brings and how that affects the outlook and the balance of risks.
Gina.
Gina, 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 restrictedtive as we previously expected, you know, how should we interpret what that means about how the committee views its current policy setting?
Two things about that. One is this. You’re right, it did move up. But I want to remember to point out that long run neutral rate of interest is a long run concept. It really is a theoretical concept, it can’t be directly observed, and what it is is the interest rate that would hold the economy at equilibrium, maximum employment and price stability, for potentially years in the future where there are no shocks, so it’s a little bit — it’s not something we observe today. Today we’ve got a very specific economy with all kind of shocks we’re still getting over from the pandemic. So it’s — I don’t think that the concept of our — very important concept in economics and 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 back to your original question, people have been gradually writing it up because I just think people are coming it the view that rates aren’t going to — are less likely to go down to their prepandemic levels, which were very low by recent history measures. Now, we can’t really know that. 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 those really have changed or whether instead rates and the economy are experiencing 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 also, to your other point, I think it is the case that as time has gone by, the question of how restrictive is policy has become one that everyone is 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 know over time. But I think for the reasons I talked about at the last press conference 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.
Thanks, Chair Powell. Howard with Reuters. To carry this further, should we read this as a conclusion that tipping to one cutd this year and acknowledging further progress on inflation as kind of a mark to marketed on the level of restrictiveness that you need that you in fact have concluded that you weren’t quite there yet 1234.
JEROME POWELL: I would be reluctant to try to draw that conclusion. I think this is about 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 can translate it into the language you’re talking about, but to me, the focus is more on we have a goal which is price stability, 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 it as appropriate, but 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 right now for almost a year.
So just to follow up on that, I think 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 is the improvement in inflation coming from that it’s going to pick up pace so much in 2025?
JEROME POWELL: Well, where has it been coming from, we’ll start with that. Clearly some of what we’ve been getting is just the reversal of the unwinding of the pandemic related distortions to both supply and demand, and that is complemented by and amplified, supported by restrictive monetary policy. Those two things have been working together. We’ve also had a very positive supply shock on the labor side and also you get a positive supply shock when the supply conditions unwind and return to normal. So you’ve had, you know, above trend potential growth and high growth and yet you’ve had the benefit of inflation coming down, you know, really fast actually last year, and you will see what the rest of this year brings. So these dynamics can continue as long as they continue. I mean, ultimately the question is ultimately are you down to demand, and we don’t know that, though. Look at today’s report. If we see more like that, you know, we can’t know what the future holds. But in the meantime, we’ve made pretty good progress on inflation with our current stance.
Michael 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 would be the point for a rate cut?
JEROME POWELL: We think policy is restrictive and we think ultimately that if you just set policy at a restrictive level, eventually you’ll see real weakening in the economy. That’s always been the thought that since we raised rates this far, 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. So 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 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 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 continue to make progress on inflation. We’re getting good results here.
Well, 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 1 12341234.
JEROME POWELL: Housing, the housing situation is a complicated one, as you can see that’s where rates are having a significant effect. Ultimately the best thing we can do for the housing market is to bring inflation down so we can bring rates down so that the housing marketed it continue to normalize. There will still be a national housing shortage as there was before the pandemic, there will still be one, but the … that we see now with — distortions that we see now with lock-ins and things like that, low mortgages. In terms of banks the banking system has been solid, strong, well capitalized, lending, we’ve seen good performance by the banks. We had the turmoil early last year, but banks have been focusing on bringing up their liquidity, bringing up their capital and having risk management plans in place. So the banking system seems to be in good shape.
Thanks. Chris, Associated Press. I was wondering on inflation if you can tell us a little bit more about where you see inflationary pressure in the economy. You mentioned labor markets coming into better balance 1K3 inflation expectations appear to be well anchored, you’re seeing anecdotal stories of the large chains like Walmart and Target announcing price cuts, McDonald’s announcing a $5 meal deal. People may still be unhappy about prices at the grocery store but doesn’t seem like there’s a loft inflationary pressure left in this economy. I wonder if you could tell us more about that.
JEROME POWELL: It’s true that inflationary pressures have come down but we’re still getting high inflation readings, so, you know, I think you can see it in various places in some parts 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 import prices on goods which is kind of hard to understand, and, you know, we’ve taken some signal from that. But, you know, and of course housing services, you’re continuing to see high readings there to some extent, that’s, you know, catch-up inflation from earlier pressures. But overall, you’re right, inflationary pressures have come down. As I mentioned, the labor market has come into better balance. Wages are still running, I would say, above a sustainable path, which would be that of trend inflation and trend productivity. You’re still seeing wage increases moving above that. We haven’t thought of wages as being the principal cause of inflation, but at the same time, getting back to 2% inflation is likely to require … a more sustainable — return to a more sustainable level, which is somewhat below the current level of increases in the aggregate.
hi, Chair Powell, Rachel from the Washington Post. Thank you for taking our questions. Obviously a lot of focus on how many cuts expected this year but could you give us a sense of what cut by the end of the year could do to the economy, one cut or even two?
If you look back can after 25 years and try to have basis of one rate cut, that’s not how we do it, but the it rate matters and I think when we continue to 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 have no way of saying — 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, 1K3, you know, you want to get it right, and fortunately we have a strong economy, 1K3 we have the ability to approach this question carefully and we will approach it carefully, while we’re very much keeping an eye on, you know, downside … risks should they emerge.
Is there something that happened in the first couple months of the year you’re seeing more differently now or with hindsight do you still characterize it as expected bumpiness or something more lasting that is affecting your policy for the rest of the year?
JEROME POWELL: You know, you always want to a … tendency to I say miss the parts of inflation — to want to avoid the tendency to dismiss the parts of inflation we don’t like. We had a quarter where inflation was running high 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 have to — low inflation is low inflation. So if you have a quarter where it’s higher, we try not to take signal from the first couple of months but we’ve 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 on 2%, 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 going to be the data going forward. We’re looking for something that gives us confidence that inflation is moving sustainably down to 2% and readings like today’s, that’s a step in the right direction, but, you know, one reading isn’t — it’s just only one reading. You don’t want to be too motivated by any single data point.
Joleen … hi, Chair Powell, thank you for taking our questions. I’m Joleen Centd with CBS news. What’s your message to Americans who are seeing encouraging economic data but don’t feel good about this economy?
JEROME POWELL: I don’t think anyone knows, has a definitive answer … people 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. People experience what they experience. All I can tell you is 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%, it’s been a long time since we’ve had, you know, a long stretch of time with unemployment at or below 4%, very long time. We had a period of high inflation, inflation has come down really significantly, and we’re doing everything we can 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 people, but the ultimate pain would be a period of long, a long period of high inflation. It is people who, lower income people, people who are at the margins of economy who have the worst experience, who experience the most pain from inflation. So it’s for those people for all Americans but particularly for those people we’re doing everything we can to bring inflation back down under control.
As 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 — crystal ball up there but a lot of people are watching and borrowing money remains very expensive. For everybody who is out there waiting on a rate cut, about when can consumers expect some relief?
JEROME POWELL: Well, you know, I don’t have a precise date for you, but what we said is that we want to make sure that we’re confident that inflation is actually moving back down to 2%. And when we are, then we can look at loosening policy.
So having that kind of confidence that inflation will be at 2%, 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 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. 1K3 we’ve made good — and we’ve made good progress and we’re in the phase now of just, you know, sticking with it until we get it done.
Claire.
Claire Jones, Financial Times. Just drawing on the change in the statement on there being modest further progress on inflation, you know, halfway through the year and after today’s CPI release, what have you and other committee members found that has been particularly encouraging to you, and just in terms of the conservativism, how much of that is about stickiness and shelter inflation in particular 1234 thank you.
JEROME POWELL: So encouraging has been that growth, you know, that 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 a recession, many forecasters had that, and that’s not what happened. Instead, the U.S., and it’s in sharp distinction with many other advanced economies around the world. So that’s been encouraging. I would say that today’s inflation report is encouraging, but it comes after 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 know that there were renters and then there are people who own their houses and we have OER, which is owners equivalent rent. So when market-based rents go up sharply, as they did at the beginning 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, so we’ve found now that there are big lags, so there’s sort of a — there’s a bulge of high past increases in market rents that has to get worked off, and that may take, you know, several years. Nonetheless, as long as market rents remain, are going up at relatively low levels, and they still are, you know, this is still just going to happen. This is going to happen more slowly than we thought. You know, we also do sort of this thing where we impute rental value to owned homes, and many countries around the world do that. Some do it differently than us. It’s something that the price experts have regularly looked at. It is not something that we’re the only country that does. 1K3 it’s not something we’re — and it’s not something we would look at changing anytime soon. But it’s true, it’s one of the very hardest things in inflation and in prices is how to think about, you know, the services that someone is getting by flifg a home that they could rent but they’re actually — living if a home that they could rent but they’re actually living in it, some countries ignore that, but that’s not how we do inflation here. We do it the way we do t we’ve been very transparent about t and it’s true we’re seeing delays in realizing what’s happening economically. But we understand that. We understand that very well.
Edward lawyer ensz with Fox Business. Thank you for taking the question. I want to go back to jobs and the consumer. The last jobs report show that over the past year 634,000 more people took multiple jobs. That’s up 8.2% and since January of 2021 we’ve seen prices rise 19%, 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?
JEROME POWELL: So 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 — last year, rather, so what you would expect to see is people spending more on their credit cards, 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 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 watching that carefully. And, you know, what do we see? That’s what we see. We see the same data that everybody else sees, but you’ve still got household sector 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 carefully watching that.
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?
JEROME POWELL: Consumer spending is still growing shes it’s not growing at the pace it was growing a year or so ago but it’s still growing solidly. By the way, other parts of the economy are mechanic picking up spending on equipment and intangibles has picked up quite a bit, you know, in the wake of all the construction that we saw of new tech plants. So overall, the economy is exhibiting solid growth and, you know, something around 2%, which is, you know, a good pace of growth for the U.S. economy. But you’re right, though, we do see the same thing other people see, which is, you know, increasing financial pressures on more lower income peoplely and, you know, the best thing we can do is to foster a very strong jobs economy, which we think we have done. Malt thely to get inflation under chrome because those experience in– under control because those people experience inflation very painfully, and once we get inflation under control, rates can come down, which will also improve things.
Victoria.
Hi. Victoria with Politico. You’ve mentioned the unexpected weakening in the labor market would bring rate cuts sooner, and I was just wondering, could 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?
JEROME POWELL: 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. The labor market, you know, has the ability, has the tendency sometimes to weaken quickly. So waiting for that to happen is not what we’re doing. We’re watching very carefully. We’re looking at the balance of risks. I always point out the balance of risks. And also the fact that we look at all of 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 we monitor all the labor market data, and if we saw troubling weakening more than expected, then that would be something we would consider responding to, but we look at the broader context of what’s going on too.
So something like negative payroll numbers would be —
JEROME POWELL: I’m not going to — I could think of many things that would make it on that list, but I don’t think I’ll utter them here.
(laughter).
Thank you, Chair Powell. Simon with The Economist. May I ask, you mentioned with the slightly higher PCE 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 it looks like May will be quite good for PC 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?
JEROME POWELL: I don’t actually have that mechanical kind of in my thinking. Git that we have good like we have bad but it’s not that, it’s going to be the totality of the data. In terms of inflation you would want to see real progress that builds your confidence that we are on a path down to 2%, 1K3 I don’t want to try to give you specific numbers of things because that points to dates, 1K3EU just don’t think, we’re not at a point of being able to do that.
Thank you. I would like to know about impact of stronger data on U.S. economy growth and prices, and I have no doubt that markets should determine to accelerate but Japan and some emerging markets are suffering from a strong dollar, so I want to know if it is having a positive impact on U.S. economy in total. Thank you.
JEROME POWELL: So we don’t — actually it’s our finance ministry, the treasury department that has a responsibility for thinking about 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 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. Again, we don’t manage the level of the dollar, that’s not our job. It’s not — you know, and for our economy, what we’re trying to foster is maximum employment and price stability, and we feel like we’ve made good progress on both of those goals over the course of the past year.
Jennifer.
Jennifer with Yahoo! Finance. You said you would cut rates before it falls to 2%. You’re forecasting inflation to end the year at 2.8% of core PCE, right now you said the inflation forecast is conservative and that if you got two six to two seven on PCE that would be a good place to be, you also indicated 9 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 and the quest for confidence for inflation?
JEROME POWELL: We’re well aware of the two sided risks here, let me just say. 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 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 extremely aware of both of those risks and just basically trying to manage them. … what we’ve said — and what we’ve said is that we don’t think it will be appropriate to begin to loosen policy until we’re more confident that inflation is moving down to 2% over time on a sustainable basis. That’s kind of been our test. Or, there’s another test, which is, you know, unexpected deterioration in labor market conditions. So I think that’s the right way for us to think about it. That’s our dual mandate there. And you know, we have a strong economy, we’ve got growth, forecasts are very commonly around 2%, that’s a strong growth rate for our economy, the labor market continues … jobs at a pretty — 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 what we’re doing.
Just to 2308 up, Chair Powell, do you need to be … just to follow up chair Powell, do you need to be ahead in a labor market otherwise is it too late given that labor market is a lagging data?
We completely understand the risks and that’s not our plan is to wait for things to break and then try to fix them. We’re trying to balance these two goals in a way that is consistent with our framework, 1K3 we think we’re doing that — and we think we’re doing that.
Evan.
Thank you, Chair Powell. Evan with market news international. You have mentioned before the framework of you process will start in the latter haft of the year. At this — latter half of the year. Do you have any specific time frame for the start of that? Who will lead it, will it be you or a committee group of your peers 1234 what will be the parameters? Do you anticipate the review will consider changes to communications going forward?
JEROME POWELL: So 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’m not going to say that we’ll look at this or that particular thing. And all the other details, you know, we don’t want to get prematurely into a conversation until it’s really time to have it. So, you know, I’m going to leave pretty much everything else to later in the year.
The last question.
Hi, Chair Powell, Nancy 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? 12K3W4R50 there isn’t any one thing 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% on a sustainable basis. That’s our overall test. Or alternatively, we see unexpected weakening in the labor market. So those are two different tests. I would say, you know, we’re not looking at any one price in 234EU one sector and saying — in 234EU one sector and saying that’s the one — in, we don’t target housing prices or don’t target wages, we target aggregate prices overall.
But if housing prices remain sticky could that slow down the pace of rate cuts?
I think we would be looking at the aggregate numbers, and asking ourselves what’s going on here with inflation at the aggregate level. And, you know, any price that contributed to ongoing inflation would matter, any price that contributed to ongoing disinflation would matter too, but I wouldn’t single out housing as having a special role there. Thank you very much.
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