And I'm just, what's the basis for saying that things have stabilized? Thank you.
So yeah, really two questions. One is so we're getting through the distortions in the data from the shutdown. However big they were in November, they're smaller in December. So we're getting to a place where they're no longer material. They're still there, but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw data coming in which suggests some signs of stabilization. I wouldn't go too far with that but some signs of stabilization. There also some signs of continued cooling and so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time. So, for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to, this is really about the press conference and the economy and what we did today, but and some ancillary, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that, that's not something I'm, there's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Thank you. Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower? And have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar really. The administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it...
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi Chair Powell, Neil Irwin with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made, you know, what we'd say about this was that after this meeting, after the three recent rate cuts, we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for and the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC, and sticking with questions you might answer. Thank you. You had previously, I believe, described the current policy rate being at the higher end of neutral. And if you look at the longer run, the SEP and the longer run rate, 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral? And what would it take to get there?
So the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in, so for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision. So is that, you had a follow up?
I get what you're saying but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So, you've moved now to, you know, 3 point, Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Thank you, Chair Powell. Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today, broad I would say including among non-voters. So that's where that was. Of course some people did want to cut and dissented but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know, we're in a position where we still have some tension between employment and inflation, but it's less than it was. I think that the upside risks to inflation and the downside risks to employment have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So basically there are many different estimates and they're all highly uncertain. But most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand. And you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot, if you were to take that out, you'd get, and you would, I mean core PCE inflation is running just a bit above 2% excluding the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
If I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it that will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates.
Are they fully in balance?
Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering, you a minute ago you said you felt expectations were consistent with your mandate. The two and the 10-year break evens have moved quite notably in the last couple of weeks I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew, apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made, you're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty, they haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with. And you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not where Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not, there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between, to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used, you know, through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't, I'm not talking about the US context, this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that, it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone, for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other, boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case in I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and I'm just, what's the basis for saying that things have stabilized? Thank you.
So yeah, really two questions. One is so we're getting through the distortions in the data from the shutdown. However big they were in November, they're smaller in December. So we're getting to a place where they're no longer material. They're still there, but it's a tweak here and there. The reason why we changed the statement, let me just pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw data coming in which suggests some signs of stabilization. I wouldn't go too far with that but some signs of stabilization. There also some signs of continued cooling and so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time. So, for those two reasons, we thought we would take that language out of the statement.
Nick.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to, this is really about the press conference and the economy and what we did today, but and some ancillary areas, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that, that's not something I'm, there's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Thank you. Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar really. The administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it...
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil Irwin with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market and the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made, you know, what we'd say about this was that after this meeting, after the three recent rate cuts, we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for and the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in, so for some people, they think it's neutral, I think. And many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision. So is that, you had a follow up?
I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100, it's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point, Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Thank you, Chair Powell. Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today, broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks to employment have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot, if you were to take that out, you'd get, and you would, I mean core PCE inflation is running just a bit above 2% excluding the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
If I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it that will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates.
Are they fully in balance?
Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering, you a minute ago you said you felt expectations were consistent with your mandate. The two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day, and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew, apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made, you're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So, we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly, a weakening labor market would be an argument for loosening, but what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So, we'll be looking at both. Clearly, a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty, they haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with. And you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not, there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the Senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between, to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used, you know, through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't, I'm not talking about the US context, this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that, it's first of all it will be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone, for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. Turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other, boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we have lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case in I guess 1985 or so.
Volcker went to a Supreme Court case famously in, I guess, 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs, which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid? And what's the basis for saying that things have stabilized? Thank you.
So yeah, really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November, they're smaller in December. So we're getting to a place where they're no longer material. They're still there, but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillary areas, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar really. The administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil Irwin with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So, it's overall a stronger forecast really, if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting, after the three recent rate cuts, we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today. Broad, I would say, including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering, you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that was the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting-by-meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Boosted by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector. Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Hi, Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113 year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously and I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized? Thank you.
So yeah really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November they're smaller in December. So we're getting to a place where they're no longer material. They're still there but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw, you know, data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to. This is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into that. That's not something I'm. There's a time and place for these questions and but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might, you know, lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week? Thank you.
So, Claire, as you probably know, we don't comment on the dollar. Really the administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying? Is it
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil.
Hi, Chair Powell. Neil with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made. You know what we'd say about this was that after this meeting after the three recent rate cuts we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC and sticking with questions you might answer. Thank you. You had previously I believe described the current policy rate being at the higher end of neutral and if you look at the longer run the SEP and the longer run rate 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral and what would it take to get there?
So, the count I did was that four of the 19 were at or above that. Maybe I missed by one, but I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So, you're right. It's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but it's in. So, for some people, they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision.
So you had a follow up. I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today broad I would say including among non-voters. So that's where that was. Of course, some people did want to cut and dissented, but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know we're in a position where we still have some tension between employment and inflation but it's less than it was. I think that the upside risks to inflation and the downside risks have probably both diminished a bit. So you know we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and you know we'll find our way forward as the data evolve.
Edward.
Thank you. Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So, basically, there are many different estimates and they're all highly uncertain, but most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and you know that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot if you were to take that out, you'd get and you would I mean core PCE inflation is running just a bit above 2% ex the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
Oh, if I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know it will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering you a minute ago you said you felt expectations were consistent with your mandate that the two and the 10-year break evens have moved quite notably in the last couple of weeks, I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Andrew.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made. You're right. We saw the labor market weakening and we acted and I think that's the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Thanks, Anna.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation? If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria.
Hi, Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time you've seen that US rates have remained pretty. They haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not what Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer-term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more you know assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth.
Thanks so much. Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used you know through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't I'm not talking about the US context this is every advanced economy democracy of any size. So it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that it's first of all it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie.
Thanks, Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past six months, year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then that the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other.
Last week on the Lisa Cook case, Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials, whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113-year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously in I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs, which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized?
So yeah, really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November, they're smaller in December. So we're getting to a place where they're no longer material. They're still there, but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw data coming in which suggests some signs of stabilization. I wouldn't go too far with that, but some signs of stabilization. There also some signs of continued cooling. And so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time. So for those two reasons, we thought we would take that language out of the statement.
Nick Timos, the Wall Street Journal. Chair Powell, you've generally avoided engaging with political controversies directly and the video statement on January 11th was a departure. What made this different and are you concerned it could draw the institution further into political debates?
So, today I'm simply going to refer you to the statement that I made on January 11. I'm not going to expand on it or repeat it. So, I'm just not going to, this is really about the press conference and the economy and what we did today, but and some ancillaries, but I'm not going to be getting into that.
Can you say whether the Fed has responded to the subpoenas?
I have nothing for you on that today.
Michael McKee from Bloomberg Radio TV. Have you made a decision on whether you would remain as a governor of the Federal Reserve? And if so, would you tell us what it is? And if not, when might we anticipate a decision?
No. And I really once again have nothing for you on that today either.
Why would you want to leave at all under the circumstances?
Again, I don't want to get into this. It's not something I'm, there's a time and place for these questions but not something I'm going to be getting into today. Thank you.
Claire Jones, Financial Times. Thanks a lot for taking my questions. In another one that might lead to a similar answer, we've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower and have you been at all concerned just by the extent of the volatility we've seen this week?
So, Claire, as you probably know, we don't comment on the dollar really. The administration, especially the Treasury Department, has the job of oversight over the currency and exchange rates and all that. We don't comment on that. It's not our role. So I have nothing for you.
But I mean, what's your view on the market movements? I mean, what do you think behind them? Is it asset managers diversifying?
Yeah, I just don't, you know, we don't talk about the dollar. We don't talk about what moves it around. It's just not appropriate for us to do so. Really the Treasury Department has that. It's their role, their bailiwick, and we stay off it. We do monetary policy and some other things, but we don't comment on the dollar. Sorry.
Neil Irwin with Axios. Obviously no SEP in this meeting, but in light of the slight firming up of the language around growth in the labor market in the statement, should we assume that the timeline for any further rate cuts is pushed back compared to what people might have thought in December?
Well, first of all, if you look at the incoming data since the last meeting, clear improvement in the outlook for growth. The data have come in and sentiment, the beige book, everything comes in suggesting that this year starts off on a solid footing for growth. Inflation performed about as expected and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So it's overall a stronger forecast really if that's your question. I'm not sure I answered your question.
But in terms of timing or pacing of any additional easing.
So we haven't made, you know, what we'd say about this was that after this meeting, after the three recent rate cuts, we're well positioned to address the risks that we face on both sides of our dual mandate and we'll continue to make our decisions meeting by meeting based on the incoming data, the implications for and the outlook and the balance of risks. Haven't made any decisions about future meetings but you know the economy is growing at a solid pace. The unemployment rate has been broadly stable and inflation remains somewhat elevated. So, we'll be looking to our goal variables and letting the data light the way for us.
Steve Liesman, CNBC, and sticking with questions you might answer. You had previously, I believe, described the current policy rate being at the higher end of neutral. And if you look at the longer run, the SEP and the longer run rate, 16 of 19 officials are actually below there on their long run. Is the Fed still in a process of bringing it down towards a middle range of neutral? And what would it take to get there?
So the count I did was that four of the 19 were at or above that. Maybe I missed by one. I thought it was four. And if you look at the dealer survey, it was 10 out of 58 were at or above. So you're right, it's the higher end of the range. What we say is it's within the range of plausible estimates. This is the higher end of that range, but so for some people they think it's neutral. I think and many of my colleagues think it's hard to look at the incoming data and say that policy is significantly restrictive at this time. It may be sort of loosely neutral or it may be somewhat restrictive. You know, it's in the eye of the beholder and of course no one knows with any precision. So you had a follow up?
I get what you're saying, but some officials have described the Fed being in a mode of bringing it down eventually over time. Are you still in that mode or is this a place to hang out?
Yeah. No, I would say if you look at the SEP from December, most people had additional normalization, but at the same time, we've done a lot of the process of normalizing. A good piece of it is done with 75 basis points and before that 100. It's 175 basis points we've cut since we began cutting in September of 2024. So, you've moved now to, you know, 3 point Fed funds is running just a little below 3.65%. So, you've moved a good way and we think we're well positioned here to watch how the economy performs, look at the data. We're not making decisions about future meetings, but we do think we're well positioned after those three cuts to let the data speak to us.
Marquee from Bloomberg News. To what extent did the committee discuss the possibility of cutting at this meeting or in March? And how are you all thinking about the conditions that would merit another rate cut? Is there broad agreement on the committee about what it would take?
So there was broad support on the committee for holding today, broad I would say including among non-voters. So that's where that was. Of course some people did want to cut and dissented but committee pretty broadly for holding today. We're not trying to articulate, you know, a test for when to next cut or whether to cut at the next meeting. You know, what we're saying is we're well positioned as we make decisions meeting by meeting, looking at the incoming data, evolving outlook and all that. And you know, we're in a position where we still have some tension between employment and inflation, but it's less than it was. I think that the upside risks to inflation and the downside risks to employment have probably both diminished a bit. So, you know, we'll be looking at that. It's about how you weigh the risks to the two goals and how big those and quantify them. And so there are different views on the committee and we'll find our way forward as the data evolve.
Edward Lawrence from Fox Business. Has the effects of tariffs already moved through the economy on prices?
A lot of it has. So basically there are many different estimates and they're all highly uncertain. But most of the overrun in goods prices is from tariffs. And that's actually good news because if it weren't from tariffs, it might mean it's from demand and that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So most of the overshoot, if you were to take that out, you'd get, and you would, I mean core PCE inflation is running just a bit above 2% excluding the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that's a healthy development. So that's what's going on. The expectation is that we will see the effects of tariffs flowing through goods prices, peaking and then starting to come down assuming there are no new major tariff increases that are begun. And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact the downside risks reemerge or the data just get worse, we'd have to look at both of those. We have a two-sided mandate.
If I could, if President Trump does pick a new Fed chairman before May, what does that look like? How would you work with that person? And what does that transition period look like?
I don't have anything for you on that. You know, that will depend on Congress's actions and things I can't speculate on.
Howard Schneider with Reuters. Thank you for taking our questions. Given the changes in the statement and all you've said so far, is it fair to describe risks to both sides of the mandate as roughly balanced right now? And is the next move necessarily down?
I'd say that the upside risks to inflation and the downside risks to employment have diminished but they still exist. So there's still some tension between the mandates. Are they fully in balance? Hard to say. Hard to say. And you know we again we think our policy is in a good place. I've just discussed reasons why we might change our policy and, you know, we'll just have to see how the data lead us.
I'm wondering, you a minute ago you said you felt expectations were consistent with your mandate. The two and the 10-year break evens have moved quite notably in the last couple of weeks I believe. Is there any concern on that front?
I recently looked at all of the both survey and market-based short-term inflation expectations have come way down. You know, they were in a good place at the beginning of last year. They spiked around Liberation Day and now they fully retraced in the last few months. So, that's very comforting. And the longer term inflation expectations have remained in places that are, you know, very consistent with 2% inflation over time. So expectations have been solid and they reflect, you know, confidence in the return to 2% inflation.
Apologies if this is a little bit repetitive, but in the past you've said that the reason you cut rates was that the risk to the labor market was greater than the risk to the inflation side. Is that still true?
You know, we haven't made, you're right. We saw the labor market weakening and we acted and I think that was the appropriate thing to do. We will always act to address what we see as the economy moving away from our goals. Risks to both of the variables are a little less. I think that the upside risk to inflation again a little bit less and the downside risk to employment a little less. I just would say that I'm not making a judgment about how, you know, one of them is more at risk than the other, just that the risks to both of them have diminished.
Okay. Thanks. BIS wrote a paper last summer which concluded that global investors were hedging their dollar exposures in ways that previously they hadn't because of policy uncertainty. Do you agree with BIS?
We really don't see much at all about that whole story. There's just not a lot of data that suggests that there's much to that.
Anna Swanson with the New York Times. Can you talk more about what you would need to see in the labor market to conclude it's time to resume easing? Do you need to see further deterioration in the labor market or would it be enough for inflation to soften?
So we'll always be looking at both things and so there could be combinations, infinite numbers of combinations that would cause us to want to move. Certainly a weakening labor market would be an argument for loosening. But what's happening with inflation if inflation were at the same time getting worse? You know, you just have a very difficult situation there. So we'll be looking at both. Clearly a weakening labor market calls for cutting. A stronger labor market says that the rates are in a good place. We'll have to be making similar judgments too on inflation though.
And if inflation does pick back up and the labor market doesn't show further signs of deterioration, is there a chance that you could raise rates rather than simply remaining on hold? What would you need to see to consider hiking?
We don't take things off the table, but it isn't anybody's base case right now, anybody's base case that the next move will be a rate hike. But, you know, ultimately we'll do what we think is the right thing. But that's not where people's expectations are right now.
Victoria Guido with Politico. I wanted to ask, you've talked in the past about concerns about the US fiscal trajectory, and we've seen in the Japanese bond market a lot of turmoil recently, in part due to concerns over their fiscal and long-term economic outlook. So, do you worry that the US could at some point find itself in a similar situation to Japan, whether for fiscal or demographic reasons?
You know, over time, you've seen that US rates have remained pretty, they haven't moved a lot really for a while, but they haven't moved a lot because of what's been happening in Japan. So it's more of an overtime thing. The US federal budget deficit is, you know, uncontroversially on an unsustainable path. The level of debt is not unsustainable. It's very much sustainable, but the path is unsustainable. And the sooner we work on it, the better. But you know right now we're running a very large deficit at essentially full employment and so the fiscal picture needs to be addressed and it's not really being addressed. So that's important. I'm not in any way connecting it to some sort of near-term market event, but ultimately it's something we'll have to deal with and that you know in the endgame that's where you wind up is in some kind of a difficult thing. But that's not where we are. It's not where Japan is either. But it's certainly not where we are right now.
Does it reduce the effect of your rate cuts that longer term rates have overall not really budged that much?
I wouldn't say that. You know, the thing is I mean technically higher longer-term rates means less accommodated financial conditions. But remember many many things move longer term rates. It's not and it's not mostly what happens on the short end. There can be effects of longer-term rates from our moving our policy around but you know it's much more, you know, assessments of the fiscal path and fiscal policies and risks and things like that that move the 10-year around. You can look back at and find periods where we've been very actively moving the policy rate and over the course of a year and over the course of that year the 10-year is exactly where it started. So, it's not, there's not a tight link between, you know, 10-year rates and the overnight rate.
Elizabeth Schulze with ABC News. Republican Senator Tom Tillis, who sits on the Senate Banking Committee, said he will block any Fed nominee, including the chair, until this investigation into you is resolved. Do you support this move by the senator, and what conversations have you had with the senator?
I've got nothing for you on that.
More broadly, what would happen to American households if the Federal Reserve loses its ability to operate independent from politics?
So really the point of independence is not to protect policy makers or anything like that. It just is that every advanced economy democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well and that is to have a separation between, to not have direct elected official control over the setting of monetary policy and the reason is that monetary policy can be used, you know, through an election cycle to affect the economy in a way that will be politically worthwhile. So this isn't, I'm not talking about the US context, this is every advanced economy democracy of any size. So, it's a good practice. It's pretty much everywhere among countries that look at all like the United States. And I think if you lose that, it's first of all, it would be hard to restore the credibility of the institution. If people lose their faith that we're making decisions, you know, only on the basis of our assessment of what's best for everyone, for the wide public rather than trying to benefit one group or another. If you lose that, it's going to be hard to retain it. And we haven't lost it. I don't believe we will. I certainly hope we won't. But it's very important. And the reason it's important is that it's enabled central banks generally not to be perfect, but to serve the public well.
You're confident it can maintain that independence at this point.
Yes. I mean, I'm strongly committed to that and so are my colleagues.
Archie Hall from The Economist. On that sort of stabilization of the labor market question. How much do you see the weakening we saw over the past 6 months to a year as a kind of data mirage around immigration and the government shutdown and so on that's now resolved or how much have we seen a kind of real underlying firming up in the state of the labor market do you think?
Well, part of it is to your point, part of it just is that labor supply, growth in labor supply has come to essentially a halt from a fairly fast clip of growth over the last couple of years driven by immigration and then the halt being driven by a very sudden stop in immigration. So many outcomes were possible with that. You know, supply came way down. It turns out that demand for labor also came down a very similar amount, maybe just a little bit more, which is why the unemployment rate has gone up. So, I don't know whether that's a coincidence or not, but that's what's happened with that part. But if you look at other, hedged by the effects of tariffs, in contrast, disinflation appears to be continuing in the services sector.
Near-term measures of inflation expectations have declined from last year's peaks as reflected in both market and survey-based measures. 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 3 and a half to 3 and 3/4%. Since last September, we've lowered our policy rate 75 basis points or 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. Once the effects of tariff increases have passed through, we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting basis. To conclude, 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 at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people. Thank you. I look forward to your questions.
Chris Rugaber at Associated Press. Thank you. I wanted to ask that you know you attended the Supreme Court hearing last week on the Lisa Cook case and Treasury Secretary Scott Bessent criticized that as political. Can you say why you attended and what you would say in response to the secretary's criticism?
So let me start with I don't respond to comments by other officials, whoever they may be. It's just not appropriate to do that. I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113-year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously in I guess 1985 or so. So, it's precedented and I thought it was an appropriate thing and I did it.
Great. And then just quickly follow on the job market. You mentioned last month that the household survey might be distorted. And you also mentioned the potential for overcounting jobs, which would suggest that we're still in a negative hiring pace. So do you see the drop in the unemployment rate as solid and what's the basis for saying that things have stabilized?
So yeah, really two questions. One is we're getting through the distortions in the data from the shutdown. However big they were in November, they're smaller in December. So we're getting to a place where they're no longer material. They're still there, but it's a tweak here and there. The reason why we changed the statement, let me pull it out, was simply it used to say that judges that downside risks to employment rose in recent months. So we saw data coming in which suggests some signs of stabilization. I wouldn't go too far with that but some signs of stabilization. There also some signs of continued cooling and so we thought that was no longer an accurate description of the data. In addition, the outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time. So, for those two reasons, we thought we would take that language out of the statement.
