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 1/2 to 3 and 3/4 percent.
From last September through December, we lowered our policy rate 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should continue to help stabilize the labor market while allowing inflation to resume its downward trend toward 2%.
But the implications of events in the Middle East for the US economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy. We will continue to monitor the risks to both sides of our mandate. 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.
In our SEP, FOMC participants wrote down their individual assessments of an appropriate path of the federal funds rate under what each participant judges to be the most likely scenario for the economy. The median participant projects that the appropriate level of the federal funds rate will be 3.4% at the end of this year and 3.1% at the end of next year, unchanged from December.
As is always the case, these individual forecasts are subject to uncertainty and they are not a committee plan or decision. Monetary policy is not on a preset course and we'll 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, and I look forward to your questions.
Thank you. Colby Smith of the New York Times. There's been some debate about whether the Fed should look through the inflation that will come from higher oil prices stemming from the Middle East conflict. Is that the right approach at this juncture? And to what extent does the fact that inflation has been above target for roughly five years now influence the committee's thinking around this?
So, first let me say we're well aware of the performance of inflation over the last few years and how a series of shocks have interrupted progress that we've made over time, and that happened most recently with tariffs and now there will be some effects on inflation coming forward. The thing that's really important that we see this year is progress on inflation through a reduction in goods inflation as the one-time effects on prices of tariffs go through the system, go through the economy. That's the main thing we're looking for going into this exercise. And we need to be seeing that to sort of understand that we actually are making progress because on net we didn't make progress. And if you look at total core inflation, it's about 3%. And some big chunk of that between a half and 3/4 is actually tariffs. So we're looking for progress on that. The question of whether we look through the energy inflation doesn't really arise until we have kind of checked that box. It of course is kind of standard learning that you look through energy shocks, but that's always been dependent on inflation expectations remaining well anchored. And I think now it's also dependent on what you mentioned which is that broader context of 5 years now of inflation above target. We have to keep all of those things in mind and the question of looking through when it does arise will be one to approach not lightly but in the context that you mentioned.
And just on the SEP, can you help us make sense of why there is still a bias to cut from most officials this year despite the upward revision to headline and core inflation and the essentially unchanged forecast for growth and unemployment? I'm just curious kind of what's the genesis behind the need, what's the need for the cut?
Yeah. So you know there are 19 people and so 19 reasons, 19 individual submissions. But if you notice, the median didn't change but there was actually some movement toward a meaningful amount of movement toward fewer cuts by people. So four or five people went from two to one cut, let's say. And each person has individual stories behind what they want to do but essentially it is that the forecast is that we will be making progress on inflation. Not as much as we had hoped but some progress on inflation. It should come as we start to see in the middle of the year progress on tariffs going through once and then tariff inflation coming down. That's what we should be seeing and the rate forecast is conditional on the performance of the economy. So if we don't see that progress then you won't see the rate cut.
Thank you. Howard Schneider with Reuters. Just to follow up a little bit and to be clear, is the higher inflation penciled in here for 2026 solely the result of the oil shock or something else?
So, that's going to be part of it. But you know, that wouldn't be most of core, right? So, the oil shock for sure shows up here. Some of that will be in core as well. But yes, there's also just the feeling that we haven't seen the progress that we had hoped for on core goods and on tariffs and on the rest of it. You know, for whatever reason people did write up their inflation forecast that will certainly be tied to events in the Middle East and the price of oil, but it's also I think a reflection of the slow progress we've seen on tariffs, which we believe we will see. It's just a question of how long it takes for them to get all the way through the economy and it just takes some time.
Right. And is the lack of change in the SEPs again just to explicate this a little bit more due to the expectation that the oil portion of this will pass through or more out of concern that there is a potential blow to consumption and growth coming in the form of wealth effects with the stock market down, in the form of gas prices diverting spending from other parts of the economy?
So I didn't get the second part of your question.
That consumers are going to be potentially diverting money to gasoline from other parts of the economy, there could be a growth shock or a redistribution of spending there that can hit consumption, wealth effects as well. I guess I'm wondering is the rate forecast not changing because you think the oil shock is going to be temporary or because you want to be sure you're positioned in case growth starts to slow?
So, and the thing I really want to emphasize is that nobody knows. You know, the economic effects could be bigger, they could be smaller, they could be much smaller or much bigger. We just don't know. So, people are writing down something that seems to make sense to them but have no conviction that if we have a long period of much higher gas prices, that's going to weigh on consumption. That'll weigh on disposable personal income and it'll weigh on consumption. But we don't know if that's going to happen. Something quite different than that, we might have much lower than expected pass through. So people write down, you know, this is one of those SEPs where a number of people mentioned if we were ever going to skip an SEP, this would be a good one because we just don't know. So I wouldn't say there's a conviction that this is going to go through quickly or not quickly. It just, you got to write something down and this is something that people wrote down and we don't debate how long, how do you do that? We wouldn't be able to debate what the length of or size of these effects would be. We just have to kind of make an individual statement and also what you've written down before, you'll be reluctant to move too far away from that just because you don't know, it's so unclear what the direction from this particular end will be. Meanwhile, the economy, the growth has been solid. And inflation, the overshoot is mainly from goods and tariffs and the labor market, the unemployment rate of course is little changed since September. You have very, very low break-even rate apparently for new jobs with little growth in either demand or supply. But the US economy is doing pretty well. It's just we don't know what the effects of this will be and really no one does.
Mr. Chair, in the past the staff has suggested that higher oil prices, they have a hit to consumption which Howard was talking about but that's somewhat offset by increases to domestic production. Wonder if you could talk about that dynamic especially to the extent that how much US production is happening right now.
So the first thing is there is, you know, the original thinking, the long-standing thinking put it that way is that you do look through energy shocks but as I mentioned that's conditioned on inflation expectations and that kind of thing. So sorry your question was?
The what the staff is saying about and has said in the past about offsets.
So that's true. You know, we're a net exporter of energy, right? So any effects on employment and economic activity and spending would be offset to some extent by the fact that our oil companies will be more profitable and they may even do more drilling. If you ask oil companies about doing more drilling though, they're going to want to see a consistent rise in oil prices from where they were before the buildup for the war. And they're going to want to believe that that's going to be persistent for a fairly long time. So they're not sitting there waiting for oil to go over $70 a barrel and then they're going to start drilling or whatever. They're going to make a reasoned, careful judgment that we're going to have higher oil prices for an extended period of time, meaningfully higher. So I wouldn't say there's much of that happening. Not much will be happening now, but some of that could happen over time if you see that. But so the net of the oil shock will still be some downward pressure on spending and employment and upward pressure on inflation of course.
And if I could just follow up on Colby's question, how much do you worry that having looked through tariff inflation and inflation running above target and looking through the oil price shock would undermine the credibility of your commitment to the 2% target?
You know, we have to do our analysis and think these things through carefully, but of course that's on everyone's mind. You know, we're well aware of the history but you don't want to overreact to that. You know, you want to make the best judgment you can based on the facts. I don't think we're going to let it color our decision more than is appropriate. It's more the thought that it's been 5 years and we've actually had, you know, we had the tariff shock, we had the pandemic and now we have an energy shock of some size and duration. We don't know what that's going to be actually. And you know, it's one of those things where it's a repeated set of things and you worry that that's the kind of thing that can cause trouble for inflation expectations and so we worry a lot about that and we are very strongly committed to doing what it takes to keep inflation expectations anchored at 2%. And you know, I think it's important that we do that. Very important.
Nick Timiraos, Wall Street Journal. Chair, you've described monetary policy as modestly restrictive. If the unemployment rate is roughly stable, inflation moving sideways in the high twos with an ongoing overshoot in services and non-housing services, not just goods, and the economy doing fairly well as you just outlined. What gives you confidence that inflation returns to target over the next couple of years?
Okay. So I would say the rate is, you can characterize it as in the high end of neutral or you can characterize it as perhaps mildly restrictive, even modestly restrictive. No one knows for sure, but it's in that range where it's somewhere around the borderline between restrictive and not. Remember that a big part of the disinflation we're looking for is just the runoff of when tariffs are put into place, of course, what they do is they raise prices to some extent, to the extent those prices are, the tariffs are paid by consumers on a one-time basis. And we're waiting for that process. It takes 8, 9, 10, 11 months, a year to go through the system. And we're waiting for the tariffs which were put in place over the course of the middle part and later last year. We're waiting for that to go through the system so that goods inflation will return closer to what it's always been. I mean it used to be for many, many years it was negative and then the year before tariffs came in it was zero and it's running at like 2% now. So goods inflation is running at 2%. So that's not coming from standard Phillips curve restrictive policy. It's coming from the runoff of a one-time thing. We also think it's important though to keep policy either mildly restrictive or close to that but not too restrictive because of the downside risk in the labor market. We are balancing these two goals in a situation where the risks to the labor market are to the downside which would call for lower rates and the risks to inflation are to the upside which would call for higher rates or not cutting anyway. So, we're in a difficult situation and we feel like our framework calls on us to balance the risks and we feel like where we are now, which is kind of on that borderline, the higher borderline of restrictive versus not restrictive. We feel like that's the right place to be.
Can I ask about core non-housing services though? Because there are some people who think that it hasn't come down very much if at all over the past year. If wage growth has come down, if the labor market has loosened, why has non-housing services inflation maybe been slower to follow?
That's a good question. It's, you know, it's frustrating. Non-housing services have basically moved sideways for a year. They're at the same level and we do expect that they will come down but you know it's a bunch of idiosyncratic things but at the same time that is one of the things we should be seeing because to your point, the labor market is clearly not a source of inflationary pressures and that should really matter for non-housing services but we're not seeing progress there. So what we expect for next year is, what we want to see for this year rather is continued progress on housing services, finally seeing that goods inflation come back down because the one-time effects of tariffs are through and then also get some help from non-housing services. That's what we'd like to see but it's a good question why we didn't see much of that last year.
Thanks. Edward Lawrence with Fox Business. So in December we saw employment numbers revised down to 7,000. January revised down. February posted a loss of 92,000. Is the employment side a far greater risk than the inflation side? Because we are seeing inflation, CPI is close to 2%. PCE has ticked down overall.
You know, I wouldn't say that that's clear at all that one is more at risk than the other. So you can point to the unemployment rate being stable and in a world where both supply and demand for workers have come down very, very sharply over the course of the past year due to immigration policy largely, a ratio is going to be a better thing to look at than job creation for example. So and the ratio is the unemployment rate and it's been stable since September. So that tells you that inflation, you know, we're at 3.0% core inflation, 2.8% headline. So we've been well above the 2%, that amount, whatever it is, 0.8 or a full percentage point above 2% for some time and that's a concern. You know we need to get back down to 2%. And we need to keep focused on that even though we do now face some new inflation from energy. So I'd be hard-pressed to say that one of them is obviously more at risk than the other.
And if I may, what happens if there's no Federal Reserve chairman confirmed on May 15th, would you stay on?
So if my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. That is what the law calls for. That's what we've done on several occasions, including involving me, and it's what we're going to do in this situation. And while I'm at it, on the question whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over with transparency and finality. And I would refer you to the statement that was in the Fed's brief that you all have seen, and I won't have anything more for you on that. On the question of whether I will then continue to serve as a governor after my term ends and after the investigation is over, I have not made that decision yet. And I will make that decision based on what I think is best for the institution and for the people we serve. Figuring you probably were going to set the dominoes off there. And I'm not going to have any more to say on those issues. By the way.
Thank you very much. Claire Jones from the Financial Times. People have drawn quite a few historical parallels with the current situation. We've seen oil price shocks in the past. Some people have said the first Gulf War and the Fed's response to that where there was a focus on the growth risks is the right parallel. To what extent would you agree with that and to what extent would you think we're in a different place today?
Thank you. You know, it's really hard to say until we see the situation, the actual situation. In some circumstances, that might be the right case. In fact, for example, if we do see the kinds of disinflationary progress that we expect to see due to tariffs that I mentioned, I think it's hard to say and it will depend to some extent on the size and duration of the effects we're seeing on prices and it will depend a lot on what we can see in inflation expectations.
And just one follow up if I may just on the BLS report that was mentioned briefly there. It doesn't seem from the projections or from the comments you've made today about the unemployment rate and focusing on that that your view on the labor market story to a large part being a supply side story has changed despite the quite negative number in February. Would that be the right take? And was there anyone else in the room who thought differently and that the February jobs report was cause for concern?
So I think you have to take the two together. You know, in a way the January report was a positive surprise and the February report was a negative surprise. If you put them together you get something in the middle. And I think you have to realize, as you do I'm sure, there was a strike and there was weather and that's about 80,000 of the negative effect total on the February report. Notwithstanding that, so what do you see if you take a step back overall? There are a number of indicators that suggest a degree of stability but the thing that I think a good number of people on the committee are concerned about is just the very, very low level of job creation. If you adjust what has been the trend job creation over the past let's say six months, if you adjust that for what we think our staff thinks is the overstatement due to overcounting, effectively there's zero net job creation in the private sector. But actually that looks like that's about what the economy needs in terms of dealing with very, very low, non-existent really growth in the labor force which of course we've never had in our history. So you've got a sort of a zero employment growth equilibrium. Now that's balance. Okay. But I would say it does have a feel of downside risk and it's not kind of a really comfortable balance. So we look at that, we see it, we get it and I mean everybody understands the arithmetic and that you can say the break-even is zero but nonetheless it's something we're watching carefully and we're concerned about but ultimately though you can argue that it's a consequence of deliberate policy which is really the changes to immigration, that's the biggest factor there and but nonetheless something we watch carefully.
Thanks, Chair Powell. The economy's experienced a series of supply shocks in the last few years. COVID, tariffs, two oil price shocks. Do you think that is bad luck or has something changed in the world that makes supply shocks more common? And does the central bank need to start taking account of the risk of supply shocks as a more common problem?
You know, we did go through a long period where the shocks were all demand shocks and so we've had a lot of practice thinking about supply shocks in the last four or five years for sure. And it's just a very different thing and a very much more difficult thing because it does immediately raise the question of tension between the two parts of our mandate. But you know, has the world changed? I mean, COVID is a one-time thing, right? This energy supply shock is a one-time thing. It's not because of some broad tendency or anything, I don't think. And the oil shock under with Ukraine was also a consequence of military action. So I don't know that the world has changed in a way that there'll be more supply shocks. But you know, people have written that paper and that speech a number of times. A number of people have tried to make the case that that is the case. And in fact, we have seen more supply shocks in the last 5 years than we've seen in many years before that. It's a fact.
Okay. You said last year that the Fed was reviewing its communication strategies including the SEP as part of its framework review. Whatever happened to that and I have like five follow-ups to that, but I guess what would you change about Fed Communications if you had the time?
What happened about that was not much. And I'll tell you why. So, we looked carefully at many aspects of the SEP and of our communications. And there just weren't any ideas that had very broad support on the committee. And you don't want to make a change to your communications unless you have the committee behind that. So, we didn't really make any changes on that. I had hoped that there were some things that I wanted to do but they just didn't attract broad support and we'd already made all the changes we made to the framework. That was a critical thing. So we didn't, I wish we had been able to do some things but we didn't. So maybe the next chair will take a look. I'm sure he will.
Michael McKee for Bloomberg Television and Radio. The minutes show in January some members of the committee wanted to include a two-sided guidance on policy. Was that discussed today? And given the rise in the inflation expectations, how much support for a two-sided policy warning would there be?
So it did come up today. The possibility that our next move might be an increase did come up at the meeting as it did at the last meeting. The vast majority of participants don't see that as their base case. And of course we don't take things off the table. But you correctly characterized what was in the minutes that several participants indicated and something very much like that conversation did happen. What was your second question though?
Oh that was just one question there but a follow-up would be there are a lot of goods besides oil that are trapped in the strait right now and a lot of supply chains getting snarled. How much concern do you have about whether if this becomes an inflation problem beyond just oil whether there's anything you can do about it or would do about it? Given the efficacies of monetary policy.
You know, you can worry about other commodities. You can worry about all of the ways that oil, oil-related commodities go into manufacturing and that kind of thing. The truth is it's completely out of our hands and we just like everybody else we have to just wait and see what happens and it'll come down to how long the current situation lasts and then what are the effects on prices and then how do consumers react and that kind of thing. Really, I wouldn't speculate in any way and there's really not a lot we can do other than kind of watch and see.
Afternoon, Chair Powell. Mariela Capuro with Bloomberg News. I wanted to ask you, you've said longer-term measures of inflation expectations reflect confidence that the Fed will get back to its 2% goal. But there are some colleagues of yours who have pointed to higher dispersion in household surveys and business as well. And that they take as a signal that inflation expectations may be less sticky than in the past. I'm wondering if there was a discussion around that at this meeting across the committee and what were the views of what is the state of inflation expectations and the risks from higher oil and gas prices.
So, at this meeting, a number of people mentioned and staff briefed on short-term expectations having moved up quite a lot for reasons we understand well, but long-term expectations, you know, you can always find one that's troubling or some aspect of one that's troubling. But ultimately right through this whole period the overwhelming majority of the things we look to including markets, including surveys of the public and also of forecasters, they've all been pretty solid on longer-term inflation expectations being right where they need to be consistent with 2%. So that continues to be the case. We didn't have a lot of conversation about that. I think everyone does agree that we'll be watching those extremely carefully as we see the effects of the price increases come through from the conflict.
And still on how the discussion went across the committee. Before coming to this meeting there were some members who were discussing the risks of a slowdown in growth at a time where inflation remains high. It really doesn't seem that most members are penciling in a slowdown in growth. But has there been any discussion of the risks of stagflation at this point?
So people actually wrote up their growth forecast by a tenth and I think that's probably to do with just growing confidence in productivity. And but so sorry and your second question was just?
If there have been any discussions about the risk of a stagflation scenario.
Yeah. So as I mentioned there is tension between the two goals, right, the upward risk for inflation and downward risk for employment. So that puts us in a different situation. You know, when we use the term stagflation, I always have to point out that that was a 1970s term at a time when unemployment was in double figures and inflation was really high and the misery index was super high. Add them together, you get the misery index. And that's not the case right now. We actually have unemployment really close to longer-run normal and we have inflation that's, you know, one percentage point above that. So calling that stagflation, I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we're in. What we have is some tension between the goals and we're trying to manage our way through it. It's a very difficult situation, but it's nothing like what they faced in the 1970s. And that's, I reserve the word stagflation for that period. Maybe that's just me.
Thanks much, Elizabeth Schulze with ABC News. President Trump says that oil prices and overall inflation will go down very rapidly as soon as the war ends. Do you agree with that?
I don't have a forecast on that.
When we're thinking about the impact on American households, as you know, they've been facing these higher prices for years. They've seen an almost $1 increase in gas. How worried are you about households, especially lower income families, being able to afford those price hikes? And should people be bracing for higher costs, including for food?
Now, we just don't know how big these effects are going to be, and I don't want to characterize them in any way. Of course, people are already seeing gas prices. Gas prices are up almost a dollar a gallon. We hope that isn't for a long period of time, and of course, people will feel that, but I don't want to speculate about what that might mean because honestly, that would sound like I have some idea of what's actually going to happen, and I don't think anybody really does. We're going to see how this works out and I just would leave it at that.
Hi, Victoria Guido with Politico. I just wanted to ask for purposes of the next meeting, how the Middle East war develops between now and then. How are you thinking about what might guide action at your next meeting? I mean, if we have oil prices above $100 a barrel the entire time until the next meeting, is that going to change your wait and see stance? Like, what would lead you all to move or are you on hold pretty indefinitely?
We'll have to wait and see. I mean, you know, we always say we're going to learn more by the next meeting and usually we do but in this case we're going to learn a lot because we're going to learn six weeks to the day till the next meeting and what happens is going to be very important for the way the economy looks and the way the outlook evolves with what happens in the Middle East. That's going to be a big factor and we'll know that then. I don't know how it's going to affect our thinking. I really don't. And you know, we did talk about alternative scenarios a little bit, but it's just I wouldn't bring that in here. It's very uncertain and I just want to remember that we don't know and we shouldn't assume it's going to be one thing or another. We're going to see.
So, is it a matter of you don't know how the situation itself is going to evolve or even if things remain as they are, the economy could still remain relatively durable in face of them?
Yeah, that's true too. No, I mean the US economy has just, you know, it's been strong through a whole bunch of challenges. I mean, if you go back to 2023 when we raised rates a lot in '22 and '23 and close to 100% of economists called for a recession, which didn't happen. In fact, 2023 was a really strong year. So, the US economy has really been just doing pretty well through a lot of significant challenges over the past few years. It's been amazing to see. And again, I don't know what's going to happen in the next intermediate cycle, and I don't know what's going to happen in the Middle East. I wouldn't want to speculate.
Hi, Chair Powell. Thanks for taking our questions. What makes you so certain that tariff related price increases will be a one-time effect? I don't think we've seen you since the Supreme Court tariff decision. And it's pretty clear that none of us know what the extent of the tariff shock will be as the administration moves to replace some of the tariffs that were overturned. So, I suppose I'm curious, what would make you question this certainty that tariffs are going to be a one-time price effect?
Well, I would not at all use the word certain about my views on that. I'm not certain. I'm uncertain. But just if you think about what it is, it's a one-time increase in the price of a good, right? And what inflation is, is ongoing increases in prices this year, next year, the year after. That's what inflation is. It's not a one-time price increase. There's a very, very big difference. The public doesn't really focus on that, but that's the difference. And tariffs should be a, you know, in theory, unless they cause people to start expecting still more tariffs the next year and still more tariffs the next year, they should be a classic one-time thing. People say the same thing traditionally about an energy price spike because traditionally prices go up and they come back down and by the time monetary policy would react, it would be over. So, I don't have tons of confidence on that. I mean, I think that the theory is probably right. But as usual the time it takes to get all the way through the economy is just very uncertain and we found that coming out of COVID that the inflation did go away and largely for the reasons we thought it would but it took two years longer than we thought. And so I think we have to be humble about knowing how long it will take for tariffs to go all the way through the economy. And so what we've been doing is our staff's been doing, it's very interesting, they started off with just an estimate because there wasn't a real history and then they've built based on the history that they're seeing of tariffs coming through into prices, they've now, they can now have an arc and for all the tariffs they can say well, so we have I think slightly more confidence that we will see tariff inflation coming down, not prices but you won't see further increases and we should start seeing that more and more in the middle parts of the year. We do expect that. Now you're also right though that the level of tariffs came down fairly meaningfully in the wake of the court decision, but the administration said they're going to get that rate right back up to where it was. So we assume that they'll do that over time. So that's how we think about it.
Hi. Thank you. Chris Rugaber at Associated Press. I wanted, you talked about the shortcomings of the SEP in this environment. I wanted to ask about or throw in an additional thing which is the fact that it's happening before a transition. Is there still some value perhaps in the public knowing what other Fed officials are thinking, the ones who will stay on for the rest of the year and beyond? And does that even handicap your successor in any way? Well, just in terms of having a whole committee expressing its views, is that something that locks them in for the rest of the year?
No, no, no. We never, the SEP is never, people are more than happy to change their SEP dots. They're no way bound by them. You know, it's your opinion at a moment in time which can change based on events, sometimes very quickly. So it never locks people in. You know, people are more than happy to be proven wrong in either direction. And so I just think we do it and this was, I mentioned this was a time when it's very hard to do it. During the pandemic, we actually took one meeting off I think but we don't like to do that just because it's hard to do. We should just keep doing it. And but I just would say for this one though, I think it's more than even more than usual good to take the forecast with a grain of salt because subject to just very high levels of uncertainty.
Hi Chair. Brian Chung with NBC News. So you mentioned at the beginning of this conversation that you're well aware of the history of inflation running above target. It seems like that might be what's underpinning the affordability problem that we're hearing a lot about on Main Street. Are there any signs to you that that's impacting the psychology of the consumer, especially given that they're a big driver of overall economic activity?
I'm not sure what that's all about but what I'll tell you what I think and what we see in surveys and that is, you know, people, there were big price increases all around the world by the way, everywhere in countries like the United States had basically the same kind of thing, was that global inflation coming out of the pandemic and everywhere people are feeling like, you know, real wages have been going up in the United States now for three years roughly but people are not feeling good about it yet. And it will take some years of positive real earning gains for people to feel good again, we think. But you're right, when you talk to people, they do feel squeezed. And there are areas where prices are still going up like insurance, various different kinds of insurance are getting more and more expensive. And that's just catching up really from inflationary pressures that take a while to get into the price. So we take it very seriously. We don't dismiss it at all. It's a very real thing from the standpoint of what people are experiencing and what it does for us is makes us even more committed if that's possible to getting inflation back to 2% on a sustained basis.
How does the Fed's independence play into the ability to address affordability?
Well, independence is what allows us to do our jobs and stable prices is half of our mandate. It's one of our two mandates. Maximum employment being the other. I mean look at every advanced economy that looks anything like the United States anywhere in the world in a market economy in a democracy and you'll see pretty much central bank independence that looks a lot like, in some cases stronger than what we have but it's critical that we have that so that we can do the things when we need to do them to preserve price stability and it's an accepted standard practice and I think has a lot of support certainly in Congress which is where our oversight is, in Congress and you see that among Democrats and Republicans in the House and the Senate.
Hi Chair Powell. Richard Escobedo, CBS News. Thanks for doing this. I have two questions. One, how high would oil prices and broader inflation have to go and for how long for the committee to consider hiking rates? And then secondly, diesel prices are rising faster than gas prices. How concerned are you that the increase in diesel might drive up food and goods prices and lead to broader inflation?
Yeah, I'm not going to give you a specific answer on the first question. You know, we're prepared to do what needs to be done, but I wouldn't want to hypothesize about what that might be. You know, in terms of diesel prices, so your question there is are we concerned about it? I mean, how concerned and whether or not it will drive up the cost of food and other goods that really rely on it to make. It's a more general concern than that. It's diesel prices because that's transportation of food and things like that. There are just lots of ways that oil and derivatives of oil get into the production and transportation of many, many things. So, and those have big effects on headline inflation, but things like that leak into core as well. And the effects may not be as big, but they're quite real and they're material. So, we are aware of that and we're watching it, but we're right at the beginning of this and we don't know how big this will be and how long it lasts. You know, it may or may not be something that really makes a big imprint on the US economy. We're just going to have to wait and see.
Thanks very much. Just to sort of stare into the future for a little bit. I was looking at the longer run bits of the SEP and noticed that the growth estimate had been revised up a good chunk from 1.8 to 2.0 and the kind of long-term Fed funds rate as well. It'd be great just to hear is that AI productivity or what's going on there exactly?
Yeah, well I think it's just productivity. You know, we actually started seeing meaningfully higher productivity some years ago, four years ago, 5 years ago. And that's not because of, you know, generative AI. It may, we'll never know for years what it's really due to, but it could be due to the kind of things that people did during the pandemic to economize and somehow become more productive because there was an incredible labor shortage. And I think economic forecasters are very skeptical of periods of high productivity because they're so rare and they're often revised away and for many years I never thought I'd see this many years of really high productivity and by the way expected to continue and we haven't really started to see the effects of generative AI and that should certainly contribute to that. So it's quite unusual and the higher productivity is the thing that allows incomes to rise over time and so it's a great thing. Was that your question?
Yeah. No I was just curious what lay behind that and just briefly on that as well to finish up you hear the argument a lot this is a sort of disinflationary story and if you believe that productivity thing that should also weigh down on inflation over time maybe then kind of pull down where rates end up. Do you kind of agree with that line of thinking or do you think that's not how you should think about whether rates?
I think you have to be cautious about that in particular if you're talking about AI, about generative AI. So remember in the short term what's happening is we're building data centers everywhere and that's actually putting pressure on all kinds of goods and services that go into building these things. So that's actually probably pushing inflation up at the margin. In addition, it probably raises the neutral rate. So in the near term, you're looking at something that would not immediately call for lower rates or that would be lowering inflation. Over time though sure, if it's expanding potential output which is what higher productivity does then it actually can be but I think it's an empirical question because it's really what is the demand, demand growing faster or slower than the supply side and I think we just don't know that answer ex-ante going in. We'll just have to wait and see. Thank you very much.
Good afternoon. My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. The US economy has been expanding at a solid pace. While job gains have remained low, the unemployment rate has been little changed in recent months and inflation remains somewhat elevated. Today, the FOMC decided to leave our policy rate unchanged. We see the current stance of monetary policy as appropriate to promote progress toward our maximum employment and 2% inflation goals. The implications of developments in the Middle East for the US economy are uncertain. We will remain attentive to risks to both sides of our dual mandate. And I'll have more to say about monetary policy after briefly reviewing economic developments.
Available indicators suggest that economic activity has been expanding at a solid pace. Consumer spending has been resilient and business fixed investment has continued to expand. In contrast, activity in the housing sector has remained weak. In our summary of economic projections, the median participant projects that real GDP will rise 2.4% this year and 2.3% next year, somewhat stronger than projected in December.
In the labor market, the unemployment rate was 4.4% in February and has changed little since late last summer. Job gains have remained low. A good part of the slowing in the pace of job growth over the past year reflects a decline in the growth of the labor force due to lower immigration and labor force participation. Though labor demand has clearly softened as well. Other indicators, including job openings, layoffs, hiring, and nominal wage growth, generally show little change in recent months. In our SEP, the median projection of the unemployment rate is 4.4% at the end of this year and edges down thereafter.
Inflation has eased significantly from its highs in mid-2022, but remains somewhat elevated relative to our 2% longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.8%
Over the 12 months ending in February, and that excluding the volatile food and energy categories, core PCE prices rose 3.0%. These elevated readings largely reflect inflation in the goods sector, which has been boosted by the effects of tariffs. Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East. Most measures of longer-term expectations remain consistent with our 2% inflation goal. The median projection in the SCP for total PCE inflation this year is 2.7% and 2.2% next year, a bit higher than projected in December. 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%. From last September through December, we lowered our policy rate 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should continue to help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. But the implications of events in the Middle East for the US economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy. We will continue to monitor the risks to both sides of our mandate. 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. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path of the federal funds rate under what each participant judges to be the most likely scenario for the economy. The median participant projects that the appropriate level of the federal funds rate will be 3.4% at the end of this year and 3.1% at the end of next year, unchanged from December. As is always the case, these individual forecasts are subject to uncertainty and they are not a committee plan or decision. Monetary policy is not on a preset course and we'll 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, and I look forward to your questions. Colby,
Thank you. Colby Smith of the New York Times. There's been some debate about whether the Fed should look through the inflation that will come from higher oil prices stemming from the Middle East conflict. Is that the right approach at this juncture? And to what extent does the fact that inflation has been above target for roughly 5 years now influence the committee's thinking around this?
So first let me say we're well aware of the performance of inflation over the last few years and how a series of shocks have interrupted progress that we've made over time, and that happened most recently with tariffs and now there will be some effects on inflation coming forward. The thing that's really important that we see this year is progress on inflation through a reduction in goods inflation as the one-time effects on prices of tariffs go through the system, go through the economy. That's the main thing we're looking for going into this exercise. And we need to be seeing that to sort of understand that we actually are making progress because on net we didn't make progress. And if you look at total core inflation, it's about 3%. And some big chunk of that between a half and 3/4 is actually tariffs. So we're looking for progress on that. The question of whether we look through the energy inflation doesn't really arise until we have kind of checked that box. It of course is kind of standard learning that you look through energy shocks, but that's always been dependent on inflation expectations remaining well anchored. And I think now it's also dependent on what you mentioned which is that broader context of 5 years now of inflation above target. We have to keep all of those things in mind and the question of looking through when it does arise will be one to approach not lightly but in the context that you mentioned.
And just on the SEP, can you help us make sense of why there is still a bias to cut from most officials this year despite the upward revision to headline and core inflation and the essentially unchanged forecast for growth and unemployment. I'm just curious kind of what's the genesis behind the need, what's the need for the cut?
Yeah. So, you know, there are 19 people and so 19 reasons, 19 individual submissions. But if you notice, the median didn't change, but there was actually some movement toward a meaningful amount of movement toward fewer cuts by people. So, four or five people went from two to one, let's say, two cuts to one cut. And each person has individual stories behind what they want to do but essentially it is that the forecast is that we will be making progress on inflation. Not as much as we had hoped but some progress on inflation. It should come as we start to see in the middle of the year progress on tariffs going through once and then tariff inflation coming down. That's we should be seeing that and the rate forecast is conditional on the performance of the economy. So if we don't see that progress then you won't see the rate cut.
Howard.
Thank you, Howard Schneider with Reuters. Just to follow up a little bit and to be clear, is the higher inflation penciled in here for 2026 solely the result of the oil shock or something else?
So that's going to be part of it. But you know, that wouldn't be most of core, right? So the oil shock for sure shows up here. Some of that will be in core as well. But yes, but no, there's also just the feeling that we haven't seen the progress that we had hoped for on core goods and on tariffs and on the rest of it. You know, we've so for whatever reason people did write up their inflation forecast that will certainly be tied to events in the Middle East and the price of oil. But it's also, I think, a reflection of the slow progress we've seen on tariffs, which we believe we will see. It's just a question of how long it takes for them to get all the way through the economy and it just takes some time.
Right. And is the lack of change in the SEPs again just to explicate this a little bit more due to the expectation that the oil portion of this will pass through or more out of concern that there is a potential blow to consumption and growth coming in the form of wealth effects with the stock market down in the form of gas prices diverting spending from other parts of the economy.
So I didn't get the second part of your question that well.
That consumers are going to be potentially diverting money to gasoline.
From other parts of the economy, there could be a growth shock or a redistribution of spending there that can hit consumption, wealth effects as well. I guess I'm wondering, is the rate forecast not changing because you think the oil shock is going to be temporary or because you want to be sure you're positioned in case growth starts to slow?
So, and the thing I really want to emphasize is that nobody knows. You know, the economic effects could be bigger, they could be smaller, they could be much smaller or much bigger. We just don't know. So, people are writing down something that seems to make sense to them but have no conviction. That's to your point if we have a long period of much higher gas prices, that's going to weigh on consumption. That'll weigh on disposable personal income and it'll weigh on consumption. But we don't know if that's going to happen. It could be something quite different than that. We might have much lower than expected pass through. So people write down, you know, this is one of those SEPs where a number of people mentioned if we were ever going to skip an SEP, this would be a good one because we just don't know. So I wouldn't say there's a conviction that this is going to go through quickly or not quickly. It just you got to write something down and this is something that people wrote down. And so and you know, we don't debate how long, how do you do that? We wouldn't be able to debate what the length of or size of these effects would be. We just have to kind of make an individual statement and also you know what you've written down before you'll be reluctant to move too far away from that just because you don't know, it's so unclear what the direction from this particular event will be. Meanwhile, the economy has, the growth has been solid. And inflation, the overshoot is mainly from goods and tariffs and you know, the labor market is, the unemployment rate of course is little changed since September. You have very, very low break-even rate apparently for new jobs with little growth in either demand or supply. But the US economy is doing pretty well. It's just we don't know what the effects of this will be and really no one does.
Steve,
Mr. Chair, in the past the staff has suggested that higher oil prices, they have a hit to consumption which Howard was talking about, but that's somewhat offset by increases to domestic production. Wonder if you could talk about that dynamic especially to the extent that how much US production is happening right now.
So the first thing is there is, you know, the original thinking, the long-standing thinking put it that way is that you do look through energy shocks but as I mentioned that's conditioned on inflation expectations and that kind of thing. So sorry your question was?
The what the staff is saying about and has said in the past about offsets.
So that's true. You know we have, we're a net exporter of energy, right? So any effects on employment and economic activity and spending would be offset to some extent by the fact that our oil companies will be more profitable and they may even do more drilling. If you ask oil companies about doing more drilling though, they're going to want to see a consistent rise in oil prices from where they were before the buildup for the war. And they're going to want to believe that that's going to be persistent for a fairly long time. So they're not sitting there waiting for oil to go over $70 a barrel and then they're going to start drilling or whatever. They're going to make a reasoned, careful judgment that we're going to have higher oil prices for an extended period of time, meaningfully higher. So I wouldn't say there's much of that happening. Not much will be happening now, but some of that could happen over time if you see that. So the net of the oil shock will still be some downward pressure on spending and employment and upward pressure on inflation of course.
And if I could just follow up on Colby's question, how much do you worry that having looked through tariff inflation and inflation running above target and looking through the oil price shock would undermine the credibility of your commitment to the 2% target?
You know, we have to do our analysis and think these things through carefully, but of course, that's on everyone's mind. You know, we're well aware of the history and but you don't want to overreact to that. You know, you want to make the best judgment you can based on the facts. We're not, I don't think we're going to let it color our decision more than is appropriate. It's more the thought that it's been 5 years and we've actually had, you know, we had the tariff shock, we had the pandemic, and now we have an energy shock of some size and duration. We don't know what that's going to be actually. And you know, it's one of those things where it's a repeated set of things and you worry that that's the kind of thing that can cause trouble for inflation expectations and so we worry a lot about that and we are very strongly committed to doing what it takes to keep inflation expectations anchored at 2%. And you know I think it's important that we do that. Very important.
Nick.
Nick Timiraos, Wall Street Journal. Chair Powell, you've described monetary policy as modestly restrictive. If the unemployment rate is roughly stable, inflation moving sideways in the high twos with an ongoing overshoot in services and non-housing services, not just goods, and the economy doing fairly well as you just outlined. What gives you confidence that inflation returns to target over the next couple of years?
Okay. So I would say the rate is, you can characterize it as in the high end of neutral or you can characterize it as perhaps mildly restrictive, even modestly restrictive. No one knows for sure, but it's in that range where it's somewhere around the borderline between restrictive and not. Remember that a big part of the disinflation we're looking for is just the runoff of when tariffs are put into place. Of course, what they do is they raise prices to some extent to the extent those prices are, the tariffs are paid by consumers on a one-time basis. And we're waiting for that process. It takes 8, 9, 10, 11 months, a year to go through the system. And we're waiting for the tariffs which were put in place over the course of the middle part and later last year. We're waiting for that to go through the system so that goods inflation will return closer to what it's always been. I mean it used to be for many, many years it was negative and then in the year before tariffs came in it was zero and it's running at like 2% now. So goods inflation is running at 2%. So that's not coming from standard Phillips curve restrictive policy. It's coming from the runoff of a one-time thing. We also think it's important though to keep policy either mildly restrictive or close to that but not too restrictive because of the weakness in the labor market, the downside risk in the labor market. We are balancing these two goals in a situation where the risks to the labor market are to the downside which would call for lower rates and the risks to inflation are to the upside which would call for higher rates or not cutting anyway. So we're in a difficult situation and we feel like our framework calls on us to balance the risks and we feel like where we are now which is kind of on that borderline, the higher borderline of restrictive versus not restrictive. We feel like that's the right place to be.
Can I ask about core non-housing services though? Because there are some people who think that it hasn't come down very much if at all over the past year. If wage growth has come down, if the labor market has loosened, why has non-housing services inflation maybe been slower to follow?
That's a good question. It's frustrating. Non-housing services have basically moved sideways for a year. They're at the same level and we do expect that they will come down but you know it's a bunch of idiosyncratic things but at the same time that is one of the things we should be seeing because to your point the labor market is clearly not a source of inflationary pressures and that should really matter for non-housing services but we're not seeing progress there so what we want to see for this year is continued progress on housing services, finally seeing that goods inflation come back down because the one-time effects of tariffs are through and then also get some help from non-housing services. That's what we'd like to see. But it's a good question why we didn't see much of that last year.
Edward,
Thanks. Edward Lawrence with Fox Business. So in December we saw employment numbers revised down to 7,000. January revised down. February posted a loss of 92,000. Is the employment side a far greater risk than the inflation side because we are seeing inflation, CPI is close to 2%, PCE has ticked down overall.
You know it's really, I wouldn't say that's clear at all that one is more at risk than the other. So you can point to the unemployment rate being stable and in a world where both supply and demand for workers have come down very, very sharply over the course of the past year due to immigration policy largely, a ratio is going to be a better thing to look at than job creation for example. So and the ratio is the unemployment rate and it's been stable since September. So that tells you that inflation, you know, we're at 3.0% core inflation, 2.8% headline. So we've been well above the 2%, that amount, whatever it is, 0.8 or a full percentage point above 2% for some time and that's a concern. You know we need to get back down to 2%. And we need to keep focused on that even though we do now face some new inflation from energy. So I'd be hard-pressed to say that one of them is obviously more at risk than the other.
And if I may, what happens if there's no Federal Reserve chairman confirmed on May 15th, would you stay on?
So if my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. That is what the law calls for. That's what we've done on several occasions, including involving me, and it's what we're going to do in this situation. And while I'm at it, on the question whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over with transparency and finality. And I would refer you to the statement that was in the Fed's brief that you will all have seen and I won't have anything more for you on that. On the question of whether I will then continue to serve as a governor after my term ends and after the investigation is over, I have not made that decision yet. And I will make that decision based on what I think is best for the institution and for the people we serve. Figuring you probably were going to set the dominoes off there. And I'm not going to have any more to say on those issues, by the way.
Thank you very much, Claire Jones from the Financial Times. People have drawn quite a few historical parallels with the current situation. We've seen oil price shocks in the past. Some people have said the first Gulf War and the Fed's response to that where there was a focus on the growth risks is the right parallel. To what extent would you agree with that and to what extent do you think we're in a different place today? Thank you.
You know, it's really hard to say until we see the situation, the actual situation. In some circumstances, that might be the right case. In fact, for example, if we do see the kinds of disinflationary progress that we expect to see due to tariffs that I mentioned, I think it's hard to say and it will depend to some extent on the size and duration of the effects we're seeing on prices and it will depend a lot on what we can see in inflation expectations.
And just one follow up if I may just on the BLS report that was mentioned briefly there. It doesn't seem from the projections or from the comments you've made today about the unemployment rate and focusing on that that your view on the labor market story to a large part being a supply side story has changed despite the quite negative number in February. Would that be the right take? And was there anyone else in the room who thought differently and that the February jobs report was cause for concern?
So I think you have to take the two together. You know, in a way the January report was a positive surprise and the February report was a negative surprise. If you put them together you get something in the middle. And I think you have to realize, as you do I'm sure, there was a strike and there was weather and that's about 80,000 of the negative effect total on the February report. Notwithstanding that, so what do you see if you take a step back overall? There are a number of indicators that suggest a degree of stability but the thing that I think a good number of people on the committee are concerned about is just the very, very low level of job creation. If you adjust what has been the trend job creation over the past, let's say 6 months, if you adjust that for what we think our staff thinks is the overstatement due to overcounting, effectively there's zero net job creation in the private sector. But actually, that looks like that's about what the economy needs in terms of dealing with very, very low, non-existent really growth in the labor force, which of course we've never had in our history. So you've got a sort of a zero employment growth equilibrium. Now that's balance. Okay. But I would say it does have a feel of downside risk and it's not kind of a really comfortable balance. So we look at that, we see it, we get it and I mean everybody understands the arithmetic and that you can say the break-even is zero but nonetheless it's something we're watching carefully and are concerned about but ultimately though you can argue that it's a consequence of deliberate policy which is really the changes to immigration is that's the biggest factor there and nonetheless something we watch carefully.
Andrew.
Thanks, Chair Powell. The economy has experienced a series of supply shocks in the last few years. COVID, tariffs, two oil price shocks. Do you think that is bad luck or has something changed in the world that makes supply shocks more common? And does the central bank need to start taking account of the risk of supply shocks as a more common problem?
You know, we did go through a long period where the shocks were all demand shocks and so we've had a lot of practice thinking about supply shocks in the last four or five years for sure. And it's just a very different thing and a very much more difficult thing because it does immediately raise the question of tension between the two parts of our mandate. But you know, has the world changed? I mean, COVID is a one-time thing, right? This energy supply shock is a one-time thing. It's not because of some broad tendency or anything, I don't think. And you know the oil shock with Ukraine was also a consequence of military action. So I don't know that the world has changed in a way that there'll be more supply shocks. But you know people have written that paper and that speech a number of times. A number of people have tried to make the case that is the case. And in fact, we have seen more supply shocks in the last 5 years than we've seen in many years before that. It's a fact.
Okay. You said last year that the Fed was reviewing its communication strategies including the SCP as part of its framework review. Whatever happened to that and I have like five follow-ups to that, but I guess what would you change about Fed communications if you had the time? Thanks.
What happened about that was not much. And I'll tell you why. So, you know, we looked carefully at many aspects of the SCP and of our communications, and there just weren't any ideas that had very broad support on the committee. And you don't want to make a change to your communications unless you have the committee behind that. So, we didn't really make any changes on that. I had hoped that there were some things that I wanted to do but they just didn't attract broad support and we'd already made all the changes we made to the framework that was a critical thing. So we didn't, I wish we had been able to do some things but we didn't. So maybe the next chair will take a look, I'm sure he will.
Mike McKee.
Michael McKee from Bloomberg Television and Radio. The minutes show in January some members of the committee wanted to include a two-sided guidance on policy. Was that discussed today? And given the rise in the inflation expectations, how much support for a two-sided policy warning would there be?
So, it did come up today. The possibility that our next move might be an increase did come up at the meeting as it did at the last meeting. The vast majority of participants don't see that as their base case. And of course we don't take things off the table. But you correctly characterized what was in the minutes that several participants indicated and something very much like that conversation did happen. What was your second question then?
Oh that was just one question there but a follow-up would be there are a lot of goods besides oil that are trapped in the strait right now and a lot of supply chains getting snarled. How much concern do you have about whether if this becomes an inflation problem beyond just oil whether there's anything you can do about it or would do about it given the efficacies of monetary policy?
You know you can worry about other commodities. You can worry about all of the ways that oil commodities, oil related commodities go into manufacturing and that kind of thing. The truth is it's completely out of our hands and we just like everybody else we have to just wait and see what happens and it'll come down to how long the current situation lasts and then what are the effects on prices and then how do consumers react and that kind of thing. Really I wouldn't speculate in any way and there's really not a lot we can do other than kind of watch and see.
Mariela.
Good afternoon Chair Powell, Mariela Capuro with Bloomberg News. I wanted to ask you, you've said longer-term measures of inflation expectations reflect confidence that the Fed will get back to its 2% goal, but there are some colleagues of yours who have pointed to higher dispersion in household surveys and business as well. And that they take as a signal that inflation expectations may be less sticky than in the past. I'm wondering if there was a discussion around that at this meeting across the committee and what were the views of what is the state of inflation expectations and the risks from higher oil and gas prices.
So, at this meeting, a number of people mentioned and staff briefed on short-term expectations having moved up quite a lot for reasons we understand well. But long-term expectations, you know, you can always find one that's troubling or some aspect of one that's troubling. Ultimately right through this whole period the overwhelming majority of the things we look to including markets, including surveys of the public and also of forecasters, they've all been pretty solid on longer term inflation expectations being right where they need to be consistent with 2%. So that continues to be the case. We didn't have a lot of conversation about that. I think everyone does agree that we'll be watching those extremely carefully as we see the effects of the price increases come through from the conflict.
And still on how the discussion went across the committee. Before coming to this meeting, there were some members who were discussing the risks of a slowdown in growth at a time where inflation remains high. It really doesn't seem that most members are penciling in a slowdown in growth. But has there been any discussion of the risks of stagflation at this point?
So people actually wrote up their growth forecast by a tenth and I think that's probably to do with just growing confidence in productivity. And but so sorry and your second question was just?
If there have been any discussions about the risk of a stagflation scenario.
Yeah. So as I mentioned there is tension between the two goals, right? The upward risk for inflation and downward risk for employment. So that puts us in a different situation. You know when we use the term stagflation I always have to point out that that was a 1970s term at a time when unemployment was in double figures and inflation was really high and the misery index was super high. Add them together you get the misery index. And that's not the case right now. We actually have unemployment really close to longer run normal and we have inflation that's one percentage point above that. So calling that stagflation, I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we're in. What we have is some tension between the goals and we're trying to manage our way through it. It's a very difficult situation, but it's nothing like what they faced in the 1970s. And I reserve the word stagflation for that period. Maybe that's just me.
Elizabeth,
Thanks much. Elizabeth Schulze with ABC News. President Trump says that oil prices and overall inflation will go down very rapidly as soon as the war ends. Do you agree with that?
I don't have a forecast on that.
When we're thinking about the impact on American households, as you know, they've been facing these higher prices for years. They've seen an almost $1 increase in gas. How worried are you about households, especially lower income families, being able to afford those price hikes? And should people be bracing for higher costs, including for food?
Now, we just don't know how big these effects are going to be, and I don't want to characterize them in any way. Of course, people are already seeing gas prices. Gas prices are up almost a dollar a gallon. We hope that isn't for a long period of time and of course people will feel that. But I don't want to speculate about what that might mean because honestly that would sound like I have some idea of what's actually going to happen and I don't think anybody really does. We're going to see how this works out and I just would leave it at that.
Victoria,
Hi, Victoria Guido with Politico. I just wanted to ask for purposes of the next meeting, how the Middle East war develops between now and then, how are you thinking about what might guide action at your next meeting? I mean, if we have oil prices above $100 a barrel the entire time until the next meeting, is that going to change your wait and see stance? Like, what would lead you all to move or are you on hold pretty indefinitely?
We'll have to wait and see. I mean you know we always say we're going to learn more by the next meeting and usually we do but in this case we're going to learn a lot because we're going to learn six weeks to the day till the next meeting and you know we're going to see what happens. It's going to be very important for the way the economy looks and the way the outlook evolves with what happens in the Middle East. That's going to be a big factor and we'll know that then. I don't know how it's going to affect our thinking. I really don't. And we did talk about alternative scenarios a little bit, but it's just I wouldn't bring that in here. It's very uncertain and I just want to remember that we don't know and we shouldn't assume it's going to be one thing or another. We're going to see.
So, is it a matter of you don't know how the situation itself is going to evolve or even if things remain as they are, the economy could still remain relatively durable in face of them?
Yeah, that's true too. No, I mean the US economy has just, you know, it's been strong through a whole bunch of challenges. I mean, if you go back to 2023 when we raised rates a lot in '22 and '23 and close to 100% of economists called for a recession, which didn't happen. In fact, 2023 was a really strong year. So, the US economy has really been just doing pretty well through a lot of significant challenges over the past few years. It's been amazing to see. And again, I don't know what's going to happen in the next intermediate cycle, and I don't know what's going to happen in the Middle East. I wouldn't want to speculate.
Hi, Chair Powell. Thanks for taking our questions. What makes you so certain that tariff related price increases will be a one-time effect? I don't think we've seen you since the Supreme Court tariff decision. And it's pretty clear that none of us know what the extent of the tariff shock will be as the administration moves to replace some of the tariffs that were overturned. So, I suppose I'm curious, what would make you question this certainty that tariffs are going to be a one-time price effect?
Well, I would not at all use the word certain about my views on that. I'm not certain. I'm uncertain. But just if you think about what it is, it's a one-time increase in the price of a good, right? And what inflation is, is ongoing increases in prices this year, next year, the year after. That's what inflation is. It's not a one-time price increase. There's a very, very big difference. The public doesn't really focus on that, but that's the difference. And tariffs should be a, you know, in theory, unless they cause people to start expecting still more tariffs the next year and still more tariffs the next year, they should be a classic one-time thing. People say the same thing traditionally about an energy price spike because traditionally prices go up and they come back down and by the time monetary policy would react, it would be over. So, I don't have tons of confidence on that. I mean, I think that the theory is probably right. But as usual the time it takes to get all the way through the economy is just very uncertain and we found that coming out of COVID that the inflation did go away and largely for the reasons we thought it would but it took two years longer than we thought. So I think we have to be humble about knowing how long it will take for tariffs to go all the way through the economy and so what we've been doing as our staff has been doing, it's very interesting, they started off with just an estimate because there wasn't a real history and then they've built based on the history that they're seeing of tariffs coming through into prices. They can now have an arc and for all the tariffs they can say well so we have slightly more confidence that we will see tariff inflation coming down, not prices but you won't see further increases and we should start seeing that more and more in the middle parts of the year we do expect that. Now you're also right though that the level of tariffs came down fairly meaningfully in the wake of the court decision, but the administration said they're going to get that rate right back up to where it was. So, and we assume that they'll do that over time. So, that's how we think about it.
Thank you, Chris.
Hi. Thank you. Chris Rugaber at Associated Press. I wanted, you talked about the shortcomings of the SCP in this environment. I wanted to ask about or throw in an additional thing which is the fact that it's happening before a transition. Is there still some value perhaps in the public knowing what other Fed officials are thinking, the ones who will stay on for the rest of the year and beyond? And does that even handicap your successor in any way?
Well, just in terms of having a whole committee expressing its views, is that something that locks them in for the rest of the year?
We never, the SCP is never, people are more than happy to change their SCP dots. They're no way bound by them. You know, it's your opinion at a moment in time, which can change based on events, sometimes very quickly. So it never locks people in. People are more than happy to be proven wrong in either direction. And so I just think we do it and this was, I mentioned this was a time when it's very hard to do it. During the pandemic, we actually took one meeting off I think but we don't like to do that just because it's hard to do. We should just keep doing it. And but I just would say for this one though, I think it's more than even more than usual good to take the forecast with a grain of salt because subject to just very high levels of uncertainty.
Brian,
Hi Chair. Brian Chung with NBC News. So you mentioned at the beginning of this conversation that you're well aware of the history of inflation running above target. It seems like that might be what's underpinning the affordability problem that we're hearing a lot about on Main Street. Are there any signs to you that that's impacting the psychology of the consumer, especially given that they're a big driver of overall economic activity?
I'm not sure what that's all about but what I'll tell you what I think and what we see in surveys is that people, there were big price increases all around the world by the way, everywhere in countries like the United States had basically the same kind of thing. It was a global inflation coming out of the pandemic and everywhere people are feeling like, you know, real wages have been going up in the United States now for 3 years roughly. But people are not feeling good about it yet and it will take some years of positive real earning gains for people to feel good again we think. But you're right, when you talk to people, they do feel squeezed and there are areas where prices are still going up like insurance, various different kinds of insurance are getting more and more expensive and that's just catching up really from inflationary pressures that take a while to get into the price. So we take it very seriously. We don't dismiss it at all. It's a very real thing from the standpoint of what people are experiencing and what it does for us is makes us even more committed if that's possible to getting inflation back to 2% on a sustained basis.
How does the Fed's independence play into the ability to address affordability?
Well, independence is what allows us to do our jobs and stable prices is half of our mandate. It's one of our two mandates. Maximum employment being the other. I mean look at every advanced economy that looks anything like the United States anywhere in the world in a market economy in a democracy and you'll see pretty much central bank independence that looks a lot like, in some cases stronger than what we have but it's critical that we have that so that we can do the things when we need to do them to preserve price stability and it's an accepted standard practice and I think has a lot of support certainly in Congress, which is where our oversight is, in Congress, and you see that among Democrats and Republicans in the House and the Senate.
Richard Escobedo.
Hi, Chair Powell. Richard Escobedo, CBS News. Thanks for doing this. Two questions. One, how high would oil prices and broader inflation have to go and for how long for the committee to consider hiking rates? And then secondly, diesel prices are rising faster than gas prices. How concerned are you that the increase in diesel might drive up food and goods prices and lead to broader inflation?
Yeah, I'm not going to give you a specific answer on the first question. You know, we're prepared to do what needs to be done, but I wouldn't want to hypothesize about what that might be. You know, in terms of diesel prices, so your question there is are we concerned about it? I mean,
How concerned and whether or not it will drive up the cost of food and other goods that really rely on it to.
It's a more general concern than that. It's diesel prices because that's transportation of food and things like that. There are just lots of ways that oil and derivatives of oil get into the production and transportation of many, many things. So, and those have big effects on headline inflation, but things like that leak into core as well. And the effects may not be as big, but they're quite real and they're material. So, we are aware of that and we're watching it, but you know, we're right at the beginning of this and you just don't know how big this will be and how long it lasts. You know, it may or may not be something that really makes a big imprint on the US economy. We're just going to have to wait and see.
Thank you, Archie. For the last question,
Thanks very much. Just to sort of stare into the future for a little bit. I was looking at the longer run bits of the SEP and noticed that the growth estimate had been revised up a good chunk from 1.8 to 2.0 and the kind of long-term Fed funds rate as well. It'd be great just to hear is that AI productivity or what's going on there exactly?
Yeah, well I think it's just productivity. You know, we actually started seeing meaningfully higher productivity some years ago, four years ago, 5 years ago. And that's not because of, you know, generative AI. It may, we won't know for years what it's really due to, but it could be due to the kind of things that people did during the pandemic to economize and somehow become more productive because there was an incredible labor shortage. And I think economic forecasters are very skeptical of periods of high productivity because they're so rare and they're often revised away and for many years I never thought I'd see this many years of really high productivity and by the way expect it to continue and we haven't really started to see the effects of generative AI and that should certainly contribute to that. So it's quite unusual and higher productivity is the thing that allows incomes to rise over time and so it's a great thing. Was that your question?
Yeah. No, I was just curious what lay behind that and just briefly on that as well to finish up you hear the argument a lot this is a sort of disinflationary story and if you believe that productivity thing that should also weigh down on inflation over time maybe then kind of pull down where rates end up. Do you kind of agree with that line of thinking or do you think that's not how you should think about whether rates?
I think you have to be cautious about that in particular if you're talking about AI, about generative AI. So remember in the short term what's happening is we're building data centers everywhere and that's actually putting pressure on all kinds of goods and services that go into building these things. So that's actually probably pushing inflation up at the margin. In addition, it probably raises the neutral rate. So in the near term, you're looking at something that would not immediately call for lower rates or that would be lowering inflation. Over time though, sure, if it's expanding potential output which is what higher productivity does then it actually can be but I think it's an empirical question because it's really what is the demand growing faster or slower than the supply side and I think we just don't know that answer ex-ante going in. We'll just have to wait and see. Thank you very much.
Good afternoon. My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum employment and stable prices for the benefit of the American people. The US economy has been expanding at a solid pace. While job gains have remained low, the unemployment rate has been little changed in recent months and inflation remains somewhat elevated. Today, the FOMC decided to leave our policy rate unchanged. We see the current stance of monetary policy as appropriate to promote progress toward our maximum employment and 2% inflation goals. The implications of developments in the Middle East for the US economy are uncertain. We will remain attentive to risks to both sides of our dual mandate. And I'll have more to say about monetary policy after briefly reviewing economic developments. Available indicators suggest that economic activity has been expanding at a solid pace. Consumer spending has been resilient and business fixed investment has continued to expand. In contrast, activity in the housing sector has remained weak. In our summary of economic projections, the median participant projects that real GDP will rise 2.4% this year and 2.3% next year, somewhat stronger than projected in December. In the labor market, the unemployment rate was 4.4% in February and has changed little since late last summer.
Job gains have remained low. A good part of the slowing in the pace of job growth over the past year reflects a decline in the growth of the labor force due to lower immigration and labor force participation, though labor demand has clearly softened as well. Other indicators, including job openings, layoffs, hiring, and nominal wage growth, generally show little change in recent months. In our SEP, the median projection of the unemployment rate is 4.4% at the end of this year and edges down thereafter. Inflation has eased significantly from its highs in mid-2022, but remains somewhat elevated relative to our 2% longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 2.8% over the 12 months ending in February and that excluding the volatile food and energy categories, core PCE prices rose 3.0%. These elevated readings largely reflect inflation in the goods sector which has been boosted by the effects of tariffs. Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East. Most measures of longer-term expectations remain consistent with our 2% inflation goal. The median projection in the SEP for total PCE inflation this year is 2.7% and 2.2% next year, a bit higher than projected in December. 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%. From last September through December, we lowered our policy rate 3/4 of a percentage point, bringing it within a range of plausible estimates of neutral. This normalization of our policy stance should continue to help stabilize the labor market while allowing inflation to resume its downward trend toward 2%. But the implications of events in the Middle East for the US economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy. We will continue to monitor the risks to both sides of our mandate. 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. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path of the federal funds rate under what each participant judges to be the most likely scenario for the economy. The median participant projects that the appropriate level of the federal funds rate will be 3.4% at the end of this year and 3.1% at the end of next year, unchanged from December. As is always the case, these individual forecasts are subject to uncertainty and they are not a committee plan or decision. Monetary policy is not on a preset course and we'll 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, and I look forward to your questions.
Thank you. Colby Smith of the New York Times. There's been some debate about whether the Fed should look through the inflation that will come from higher oil prices stemming from the Middle East conflict. Is that the right approach at this juncture? And to what extent does the fact that inflation has been above target for roughly 5 years now influence the committee's thinking around this?
So, first let me say we're well aware of the performance of inflation over the last few years and how a series of shocks have interrupted progress that we've made over time, and that happened most recently with tariffs and now there will be some effects on inflation coming forward. The thing that's really important that we see this year is progress on inflation through a reduction in goods inflation as the one-time effects on prices of tariffs go through the system, go through the economy. That's the main thing we're looking for going into this exercise. And we need to be seeing that to sort of understand that we actually are making progress because on net we didn't make progress. And if you look at total core inflation, it's about 3% and some big chunk of that between a half and 3/4 is actually tariffs. So we're looking for progress on that. The question of whether we look through the energy inflation doesn't really arise until we have kind of checked that box. It of course is kind of standard learning that you look through energy shocks, but that's always been dependent on inflation expectations remaining well anchored. And I think now it's also dependent on what you mentioned which is that broader context of 5 years now of inflation above target. We have to keep all of those things in mind and the question of looking through when it does arise will be one to approach not lightly but in the context that you mentioned.
And just on the SEP, can you help us make sense of why there is still a bias to cut from most officials this year despite the upward revision to headline and core inflation and the essentially unchanged forecast for growth and unemployment. I'm just curious kind of what's the genesis behind the need for the cut?
Yeah. So, you know, there are 19 people and so 19 reasons, 19 individual submissions. But if you notice the median didn't change, but there was actually some movement toward a meaningful amount of movement toward fewer cuts by people. So, four or five people went from two to one, let's say, two cuts to one cut. And each person has individual stories behind what they want to do but essentially it is that the forecast is that we will be making progress on inflation. Not as much as we had hoped but some progress on inflation. It should come as we start to see in the middle of the year progress on tariffs going through once and then tariff inflation coming down. That's what we should be seeing and the rate forecast is conditional on the performance of the economy. So if we don't see that progress then you won't see the rate cut.
Thank you, Howard Schneider with Reuters. Just to follow up a little bit and to be clear, is the higher inflation penciled in here for 2026 solely the result of the oil shock or something else?
So, that's going to be part of it. But, you know, that wouldn't be most of core, right? So, the oil shock for sure shows up here. Some of that will be in core as well. But yes, but no, there's also just the feeling that we haven't seen the progress that we had hoped for on core goods and on tariffs and on the rest of it. You know, we've so for whatever reason people did write up their inflation forecast that will certainly be tied to events in the Middle East and the price of oil, but it's also I think a reflection of the slow progress we've seen on tariffs, which we believe we will see. It's just a question of how long it takes for them to get all the way through the economy and it just takes some time.
Right. And is the lack of change in the SEP again just to explicate this a little bit more due to the expectation that the oil portion of this will pass through or more out of concern that there is a potential blow to consumption and growth coming in the form of wealth effects with the stock market down in the form of gas prices diverting spending from other parts of the economy?
So I didn't get the second part of your question that well.
That consumers are going to be potentially diverting money to gasoline from other parts of the economy. There could be a growth shock or a redistribution of spending there that can hit consumption, wealth effects as well. I guess I'm wondering is the rate forecast not changing because you think the oil shock is going to be temporary or because you want to be sure you're positioned in case growth starts to slow.
So, and the thing I really want to emphasize is that nobody knows. You know, the economic effects could be bigger, they could be smaller, they could be much smaller or much bigger. We just don't know. So, people are writing down something that seems to make sense to them, but have no conviction that to your point, if we have a long period of much higher gas prices, that's going to weigh on consumption. That'll weigh on disposable personal income and it'll weigh on consumption. But we don't know if that's going to happen. It could be something quite different than that. We might have much lower than expected pass through. So people write down, you know, this is one of those SEPs where a number of people mentioned if we were ever going to skip an SEP, this would be a good one because we just don't know. So I wouldn't say there's a conviction that this is going to go through quickly or not quickly. It just you got to write something down and this is something that people wrote down. And so and you know, we don't debate how long or how do you do that? We wouldn't be able to debate what the length or size of these effects would be. We just have to kind of make an individual statement and you also you know what you've written down before will be you'll be reluctant to move too far away from that just because you don't know it's so unclear what the direction from this particular event will be. Meanwhile, the economy has the growth has been solid. And inflation that the overshoot is mainly from the goods and tariffs and you know, the labor market is the unemployment rate of course is little changed since September. You have very very low break-even rate apparently for new jobs with little growth in either demand or supply. But the US economy is doing you know pretty well. It's just we don't know what the effects of this will be and really no one does.
Mr. Chair, in the past the staff has suggested that higher oil prices they have a hit to consumption which Howard was talking about but that's somewhat offset by increases to domestic production. Wonder if you could talk about that dynamic especially to the extent that how much US production is happening right now.
So the first thing is there is you know the original thinking the long-standing thinking put it that way is that you do look through energy shocks but as I mentioned that's conditioned on inflation expectations and that kind of thing. So sorry your question was?
The what the staff is saying about and has said in the past about offsets.
So that's true. You know we have we're a net exporter of energy right. So any effects on employment and economic activity and spending would be offset to some extent by the fact that our oil companies will be more profitable and they may even do more drilling. If you ask oil companies about doing more drilling though, they're going to want to see, you know, a consistent rise in oil prices from where they were before the buildup for the war. And they're going to want to believe that that's going to be persistent for a fairly long time. So they're not sitting there waiting for oil to go over $70 a barrel and then they're going to start drilling or whatever. They're going to make a reasoned careful judgment that we're going to have higher oil prices for an extended period of time, meaningfully higher. So you don't I wouldn't say there's much of that happening. Not much will be happening now, but some of that could happen over time if you see that. But so the net of the oil shock will still be some downward pressure on spending and employment and upward pressure on inflation of course.
And if I could just follow up on Colby's question, how much do you worry that having looked through tariff inflation and tariff inflation running above target and looking through the oil price shock would undermine the credibility of your commitment to the 2% target?
You know, we have to do our analysis and think these things through carefully, but of course that's on everyone's mind. You know, we're well aware of the history and but you don't want to overreact to that. You know, you want to make the best judgment you can based on the facts. We're not I don't think we're going to let it color our decision more than is appropriate. It's more the thought that it's been 5 years and we've actually had, you know, we had the tariff shock, we had the pandemic and now we have an energy shock of some size and duration. We don't know what that's going to be actually. And you know, it's one of those things where it's a repeated set of things and you worry that that's the kind of thing that can cause trouble for inflation expectations and so we worry a lot about that and we are very strongly committed to doing what it takes to keep inflation expectations anchored at 2%. And you know I think it's important that we do that. Very important.
Nick Timiraos, Wall Street Journal. Chair Powell, you've described monetary policy as modestly restrictive. If the unemployment rate is roughly stable, inflation moving sideways in the high twos with an ongoing overshoot in services and non-housing services, not just goods, and the economy doing fairly well as you just outlined. What gives you confidence that inflation returns to target over the next couple of years?
Okay. So I would say the rate is you can characterize it as in the high end of neutral or you can characterize it as perhaps mildly restrictive, even modestly restrictive. No one knows for sure, but it's in that range where it's somewhere around the borderline between restrictive and not. Remember that a big part of the disinflation we're looking for is just the runoff of when tariffs are put into place, of course, what they do is they raise prices to some extent to the extent those prices are the tariffs are paid by consumers on a one-time basis. And we're waiting for that process. It takes 8, 10, 11 months, a year to go through the system. And we're waiting for the tariffs which were put in place over the course of the middle part and later last year. We're waiting for that to go through the system so that goods inflation will return closer to what it's always been. I mean it used to be for many many years it was negative and then in the year before tariffs came in it was zero and it's running at like 2% now. So goods inflation is running at 2%. So that's not coming from standard Phillips curve restrictive policy. It's coming from the runoff of a one-time thing. We also think it's important though to keep policy either mildly restrictive or close to that but not too restrictive because of the weakness in the downside risk in the labor market. We are balancing these two goals in a situation where the risks to the labor market are to the downside which would call for lower rates and the risks to inflation are to the upside which would call for higher rates or not cutting anyway. So we're in a difficult situation and we feel like our framework calls on us to balance the risks and we feel like where we are now which is kind of on that borderline the higher borderline of restrictive versus not restrictive. We feel like that's the right place to be.
Can I ask about core non-housing services though? Because there are some people who think that it hasn't come down very much if at all over the past year. If wage growth has come down, if the labor market has loosened, why has non-housing services inflation maybe been slower to follow?
That's a good question. It's, you know, it's frustrating. Non-housing services have basically moved sideways for a year. They're at the same level and we do expect that they will come down but you know it's a bunch of idiosyncratic things but at the same time that is one of the things we should be seeing because to your point the labor market is clearly not a source of inflationary pressures and that should really matter for non-housing services but we're not seeing progress there so what we expect for next year is continued what we want to see for this year rather is continued progress on housing services finally seeing that goods inflation come back down because the one-time effects of tariffs are through and then also get some help from non-housing services. That's what we'd like to see. But it's, you know, it's a good question why we didn't see much of that last year.
Thanks. Edward Lawrence with Fox Business. So in December, we saw employment numbers revised down to 7,000. January revised down. February posted a loss of 92,000. Is the employment side a far greater risk than the inflation side because we are seeing inflation CPI is close to 2% PCE has ticked down overall.
You know it's really I wouldn't say that that's clear at all that one is more at risk than the other. So you can point to the unemployment rate being stable and you know in a world where both supply and demand for workers have come down very very sharply over the course of the past year due to immigration policy largely, a ratio is going to be a better thing to look at than job creation for example. So and the ratio is the unemployment rate and it's been stable since September. So that tells you that inflation you know we're at 3.0% core inflation 2.8% headline. So we've been well above the 2% that amount whatever it is 0.8 or a full percentage point above 2% for some time and that's a concern. You know we need to get back down to 2%. And we need to keep focused on that even though we do now face some new inflation from energy. So I'd be hard-pressed to say that one of them is obviously more at risk than the other.
And if I may, what happens if there's no Federal Reserve chairman confirmed on May 15th, would you stay on?
So if my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. That is what the law calls for. That's what we've done on several occasions, including involving me, and it's what we're going to do in this situation. And while I'm at it, on the question whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over with transparency and finality. And I would refer you to the statement that was in the Fed's brief that you will all have seen and I won't have anything more for you on that. On the question of whether I will then continue to serve as a governor after my term ends and after the investigation is over. I have not made that decision yet. And I will make that decision based on what I think is best for the institution and for the people we serve.
Figuring you probably were going to set the dominoes off there, Edward. And I'm not going to have any more to say on those issues, by the way.
Thank you very much, Claire Jones from the Financial Times. People have drawn quite a few historical parallels with the current situation. We've seen oil price shocks in the past. Some people have said the first Gulf War and the Fed's response to that where there was a focus on the growth risks is the right parallel. To what extent would you agree with that and to what extent do you think we're in a different place today?
Thank you. You know, it's really hard to say until we see the situation, the actual situation. In some circumstances, that might be the right case. In fact, for example, if we do see the kinds of disinflationary progress that we expect to see due to tariffs that I mentioned, I think it's hard to say and it will depend to some extent on the size and duration of the effects we're seeing on prices and it will depend a lot on what we can see in inflation expectations.
And just one follow up if I may just on the BLS report that was mentioned briefly there. It doesn't seem from the projections or from the comments you've made today about the unemployment rate and focusing on that that your view on the labor market story to a large part being a supply side story has changed despite the quite negative number in February. Would that be the right take? And was there anyone else in the room who thought differently and that the February jobs report was cause for concern?
So I think you have to take the two together. You know the in a way the January report was a positive surprise and the February report was a negative surprise. If you put them together you get something in the middle. And I think you have to realize as you do I'm sure there was a strike and there was weather and that's about 80,000 of the negative effect total on the February report. Notwithstanding that so what do you see if you take a step back overall there are a number of indicators that suggest a degree of stability but the thing that I think a good number of people on the committee are concerned about is just the very very low level of job creation. If you adjust what has been the trend job creation over the past let's say six months, if you adjust that for what we think our staff thinks is the overstatement due to overcounting, effectively there's zero net job creation in the private sector. But actually that looks like that's about what the economy needs in terms of dealing with very very low non-existent really growth in the labor force which of course we've never had in our history. So you've got a sort of a zero employment growth equilibrium. Now that's balance. Okay. But you know I would say it does have a feel of downside risk and it's not kind of a really comfortable balance. So you know we look at that we see it we get it and I mean everybody understands the arithmetic and that you can say the break-even is zero but nonetheless it's something we're watching carefully and so and you know are concerned about but ultimately though you can argue that it's a consequence of deliberate policy which is really the changes to immigration is that's the biggest factor there and but nonetheless something we watch carefully.
Thanks Chair Powell. The economy's experienced a series of supply shocks in the last few years. COVID, tariffs, two oil price shocks. Do you think that is bad luck or has something changed in the world that makes supply shocks more common? And does the central bank need to start taking account of the risk of supply shocks as a more common problem?
You know, we did go through a long period where the shocks were all demand shocks and so we've had a lot of practice thinking about supply shocks in the last four or five years for sure. And it's just a very different thing and a very much more difficult thing because it does immediately raise the question of tension between the two parts of our mandate. But you know, has the world changed? I mean, COVID is a one-time thing, right? This energy supply shock is a one-time thing. It's not because of some broad tendency or anything, I don't think. And you know the oil shock with Ukraine was also a consequence of military action. So I don't know that the world has changed in a way that there'll be more supply shocks. But you know there's people have written that paper and that speech a number of times. A number of people have tried to make the case that that is the case. And in fact, we have seen more supply shocks in the last 5 years than we've seen in many years before that. It's a fact.
Okay. You said last year that the Fed was reviewing its communication strategies including the SEP as part of its framework review. What ever happened to that? And I have like five follow-ups to that, but I guess what would you change about Fed communications if you had the time?
What happened about that was not much. And I'll tell you why. So, you know, we looked carefully at many aspects of the SEP and of our communications, and there just weren't any ideas that had very broad support on the committee. And you don't want to make a change to your communications unless you have the committee behind that. So, we didn't really make any changes on that. I had hoped that there were some things that I wanted to do but they just didn't attract broad support and we'd already made all the changes we made to the framework. That was a critical thing. So we didn't I wish we had been able to do some things but you know we didn't. So maybe the next chair will take a look. I'm sure he will.
Michael McKee from Bloomberg Television and Radio. The minutes show in January some members of the committee wanted to include a two-sided guidance on policy. Was that discussed today? And given the rise in the inflation expectations, how much support for a two-sided policy warning would there be?
So it did come up today. The possibility rather that our next move might be an increase did come up at the meeting as it did at the last meeting. The vast majority of participants don't see that as their base case. And of course we don't take things off the table. But you correctly characterized what was in the minutes that several participants indicated and something very much like that conversation did happen. What was your second question there?
Oh that was just one question there but a follow-up would be there are a lot of goods besides oil that are trapped in the strait right now and a lot of supply chains getting snarled. How much concern do you have about whether if this becomes an inflation problem beyond just oil whether there's anything you can do about it or would do about it given the efficacies of monetary policy?
You know you can worry about other commodities. You can worry about all of the ways that oil commodities oil related commodities go into manufacturing and that kind of thing. The truth is it's completely out of our hands and we just like everybody else we have to just wait and see what happens and it'll come down to how long the current situation lasts and then what are the effects on prices and then how do consumers react and that kind of thing. Really I wouldn't speculate in any way and there's really not a lot we can do other than kind of watch and see.
Afternoon, Chair Powell. Maria Luisa Capuro with Bloomberg News. I wanted to ask you, you've said longer-term measures of inflation expectations reflect confidence that the Fed will get back to its 2% goal. But there are some colleagues of yours who have pointed to higher dispersion in household surveys and business as well. And that they take as a signal that inflation expectations may be less sticky than in the past. I'm wondering if there was a discussion around that at this meeting across the committee and what were the views of what is the state of inflation expectations and the risks from higher oil and gas prices.
So, at this meeting, I mean, a number of people mentioned and staff briefed on short-term expectations, having moved up quite a lot for reasons we understand well, but long-term expectations, you know, you can always find one that's troubling or some aspect of one that's troubling. But ultimately right through this whole period the overwhelming majority of the things we look to including markets including surveys of the public and also of forecasters they've all been pretty solid on longer term inflation expectations being right where they need to be consistent with 2%. So that continues to be the case. We didn't have a lot of conversation about that. I think everyone does agree that we'll be watching those extremely carefully as we see the effects of the price increases come through from the conflict.
And still on how the discussion went across the committee. Before coming to this meeting there were some members who were discussing the risks of a slowdown in growth at a time where inflation remains high. It really doesn't seem that most members are penciling in a slowdown in growth, but has there been any discussion of the risks of stagflation at this point?
So people actually wrote up their growth forecast by a tenth and I think that's probably to do with just growing confidence in productivity. And but so sorry and your second question was just if there have been any discussions about the risk of a stagflation scenario. Yeah. So as I mentioned there is tension between the two goals right the upward risk for inflation and the downward risk for employment. So and that puts us in a different situation. You know when we use the term stagflation I always have to point out that that was a 1970s term at a time when unemployment was in double figures and inflation was really high and the misery index was super high. Add them together you get the misery index. And that's not the case right now. We actually have unemployment really close to longer run normal and we have inflation that's one percentage point above that. So calling that stagflation I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we're in. What we have is some tension between the goals and we're trying to manage our way through it. It's a very difficult situation, but it's nothing like what they faced in the 1970s. And that's I reserve the word stagflation for that period. Maybe that's just me.
Thanks much. Elizabeth Schulze with ABC News. President Trump says that oil prices and overall inflation will go down very rapidly as soon as the war ends. Do you agree with that?
I don't have a forecast on that. Right.
When we're thinking about the impact on American households, as you know, they've been facing these higher prices for years. They've seen an almost $1 increase in gas. How worried are you about households, especially lower income families, being able to afford those price hikes? And should people be bracing for higher costs, including for food?
Now, we just don't know how big these effects are going to be, and I don't want to characterize them in any way. Of course, people are already seeing gas prices. Gas prices are up almost a dollar a gallon. We hope that isn't for a long period of time and of course people will feel that. But I don't want to speculate about what that might mean because things change. We see the current stance of monetary policy as appropriate to promote progress toward our maximum employment and 2% inflation goals. Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook and we will remain attentive to risks to both sides of our dual mandate. I'll have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a solid pace. Consumer spending has been resilient and business fixed investment has continued to expand at a brisk pace. In contrast, activity in the housing sector has remained weak. In the labor market, the unemployment rate was 4.3% in March and has changed little in recent months. Job gains have remained low. A good part of the slowing in the pace of job growth over the past year reflects a decline in the growth of the labor force due to lower immigration and labor force participation, though labor demand has clearly softened as well. Other indicators, including job openings, layoffs, hiring, and nominal wage growth, generally show little change in recent months. Inflation has moved up recently and is elevated relative to our 2% longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 3.5% over the 12 months ending in March, boosted by the significant rise in global oil prices that has resulted from the conflict in the Middle East. Excluding the volatile food and energy categories, core PCE prices rose 3.2% over the 12 months ending in March. This relatively high rate largely reflects the effects of tariffs on prices in the goods sector. Near-term measures of inflation expectations have risen this year, likely because of the substantial rise in oil prices. 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%. The economic outlook remains highly uncertain and the conflict in the Middle East has added to this uncertainty. In the near term, higher energy prices will push up overall inflation. Beyond that, the scope and duration of potential effects on the economy remain unclear, as does the future course of the conflict itself. We will continue to monitor the risks to both sides of our dual mandate. 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. This is my last press conference as chair and I will close with a few thoughts. First, I want to congratulate Kevin Warsh on his advancement out of the Senate Banking Committee this morning. This is an important step forward and I wish him well as that process continues. The Federal Reserve exists for one fundamental purpose, to foster the economic conditions in which American families and businesses can thrive. Stable prices, a strong job market, and a financial system they can depend on. Every decision we make, whether about interest rates or regulatory and supervisory matters or other issues, is made in service of that purpose. Our decisions reflect the collective judgment of the Board of Governors and the Federal Open Market Committee. Colleagues who demonstrate analytical rigor, principled judgment, and a genuine commitment to the public interest. Our collaborative and deliberative process has long reflected a shared commitment to finding common ground in service to our mission. This institution is resilient, capable, and staffed by professionals of extraordinary talent and exceptional dedication. It has been a privilege to serve alongside so many great public servants at the Board of Governors and around the Federal Reserve system. The Fed's work is only as effective as the public's understanding of it. And you, the press, are essential to keeping the public informed about what we do and why. The people we serve benefit from your careful reporting. I welcomed the announcement last Friday by the US Attorney for the District of Columbia that she had closed the criminal investigation. She also noted, however, that she would not hesitate to restart the investigation. Over the weekend, the Department of Justice provided assurances that they will not reopen the investigation unless there's a criminal referral from the Fed's Inspector General. And absent such a referral, if they do appeal the recent court decision, they would not seek, as part of that appeal, to restart the investigation or send new subpoenas. I've said that I will not leave the board until this investigation is well and truly over with transparency and finality, and I stand by that. I'm encouraged by recent developments, and I'm watching the remaining steps in this process carefully. My decisions on these matters will continue to be guided entirely by what I believe is in the best interest of the institution and the people we serve. After my term as chair ends on May 15, I will continue to serve as a governor for a period of time to be determined. I plan to keep a low profile as a governor. There is only ever one chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in, he will be that chair. Once sworn in as board chair, his new colleagues will elect him to chair the FOMC as well. As I regularly point out from this podium, our success in delivering our goals matters for all Americans. I'm confident that the Fed will continue to do its work with objectivity, integrity, and a deep commitment to serve the American people. Thank you, and I look forward to your questions.
Thank you, Mr. Chair. Appreciate the kind words about the press. Often doesn't come from the podium in different places, but appreciate that. Can you talk about what has gone into your decision to remain on the board? What kind of criteria are you weighing and how long might you stay?
Sure. So, you know, my concern is really about the series of legal attacks on the Fed which threaten our ability to conduct monetary policy without considering political factors. And I want to note here this has nothing whatever to do with verbal criticism by elected officials. I've never suggested that such verbal criticism is a problem and neither has anyone else here. But these legal actions by the administration are unprecedented in our 113-year history and there are ongoing threats of additional such actions. I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public which is the ability to conduct monetary policy without taking into consideration political factors. It is so important for our economy, for the people that we serve, that they can depend over time on a central bank that operates that way free of political influence. It's part of the absolute foundation of this amazing economy that we have. It's just one of the many reasons why the US economy is the envy of the world. That piece of institutional architecture separates successful countries from unsuccessful countries. It is extremely important, not for the people who work at the Fed at any given time, but for the people that we serve, that the Fed remain able to conduct monetary policy in a way that doesn't get pulled into politics trying to help or hurt any particular politician or political party. It's critical for the people that we serve. In terms of when I would leave, I will leave when I think it's appropriate to do so. Was that all your questions or was that?
Well, I just have a follow-up which is what would you say to the criticism that by remaining on the board, you're actually taking a political act and denying President Trump the majority of the board which as president he would have if you left.
I don't see that at all. As I mentioned, I'm literally staying because of the actions that have been taken. I had long planned to be retiring. And the things that have happened in really in the last 3 months have I think left me no choice but to stay until I see them through at least that long. In addition, I don't see how this will interfere. My intention is not to interfere. You know, I was a governor for almost six years, and the tradition is at the Fed that governors who understand how difficult the role of chair is, and as a soon-to-be former chair, I do understand how hard it is to get consensus with 19 strong-minded people, you work with the chair. You try to be heard, but also collaborate with the chair and try to support the chair when you can. When you can't, you can't. And I think that's the attitude that people generally take. And that's the attitude that I'll take.
Chair Powell, if I could ask about the inflation outlook. In March, you described the standard practice of looking through energy shocks as conditional on inflation expectations staying anchored. Since that meeting, there has been very little progress reopening key energy trade corridors. Can you help us understand how the inflation outlook has changed in the intervening period beginning with the prospects for tariff pass-through resolving on the timeline that you had outlined in March before getting to the energy shock that is now on top?
So, you know, I would look at it this way. For a long time, we've been working on the hypothesis really that tariffs would lead to a one-time price increase and that that would go away over time. In other words, that there would be no further change. So, measured inflation wouldn't reflect that higher level going up more and more. And it's time for that to happen. You know, we really do expect that to be happening in the next two quarters. So, we'll be watching very carefully to see that what we've thought all along would happen. That's the kind of critical part of the forecast. We need to really see that. With energy, it's so hard to say. I mentioned, you know, in the textbook, you would look through an oil shock because they tend to be short-lived and they tend to revert and monetary policy works with long and variable lags. So you wouldn't necessarily react right away. I think that is all the more true given that we're several years above 2% inflation and that we're already looking through the tariff shock. So, I think we're going to be very cautious about that. But the question about looking through energy really is not in front of us right now. It hasn't even peaked yet. And I think we'd want to see the backside of that and progress on tariffs before we even thought about reducing rates.
So, if I could follow up, the statement today preserves language that has taken on some meaning as it was socialized when the committee was actively lowering rates. Why is that easing bias still ripe given how different the inflation outlook is now versus a meeting or two ago and what more would have to happen for it to get evicted?
So that was as you will recall we had a discussion about that at the last meeting and we talked about it in the press conference after the March meeting. We had the same today. We had quite a vigorous discussion about that very issue and the guidance and is it still appropriate and that kind of thing. And I would say that the number of people on the committee who either could support that language change changing to a more neutral stance so that a hike is as likely as a cut that number has increased over the intervening period and it's easy to see why. I mean it's a good question right you see inflation has moved up over the interim a bit core inflation's 3.2 now moving albeit just a little bit in the wrong direction and we know that there's headline inflation coming out of the Gulf and we don't know how much that will be. We just we're going to need to see. So, it makes all the sense in the world that people would look at that and we'd have a vigorous discussion about that. You saw that three people dissented over the language. I think all of those people agreed with the rate decision. So the majority of the committee did not want to do that and I didn't think we needed to do it at this meeting. It really was just a question of why do we need to do that now? You know, we have so much to learn. There's so much uncertainty about the path ahead. There doesn't need to be any rush to make that decision now because what happens in the next 30, 60 days even by the next meeting could really change the picture around that language. So it's a much closer thing on the committee than it was in March and that makes all the sense in the world it seems to me.
So, Claire Jones, Financial Times. Just going back to this issue of the easing bias. We've now got oil approaching $120 a barrel when it comes to the benchmark Brent crude. If it stays around those levels six weeks from now, what would be your best guess as to whether the easing bias will still be in the statement?
I wouldn't want to guess, you know, well, first of all, we're going to have new leadership in all likelihood by then and new leadership is going to have a very important role to play in that. So, I won't be standing here at this podium to answer your question. So, I don't know. As I mentioned, that's all I can really say is that we had a great discussion about that today. It's gotten to be a better question in the interim period. We had the discussion a majority are still on the page of not feeling the need to move to that level. And that's where I am. I get it though, you know, at a certain point you would move and that conceivably could come as soon as the next meeting.
Thank you. And just to follow on, the new leadership also seem rather lukewarm on press conferences and on the dot plots. What would your advice to him be on these communication tools?
So I'm not going to give him any advice through you today here. But I think communications generally is I think every incoming chair takes a look at communications and it's a very healthy thing. I mean communications it's very complex and you can always be looking at new things and if that happens feels like it's going to happen that's a completely appropriate thing.
Hi, Chair Powell with Axios. Can you tell us if you've been in touch
With incoming Chairman Borsch, to what extent is this a normal transition process versus all the things swirling around, something unusual? And what can we expect when he takes that podium in a few weeks?
I haven't seen him since seeing him at a dinner in January where I congratulated him and had a nice chat with him. Haven't seen him. I don't know what a normal process is. The last process was with Janet Yellen with whom I had worked for six years and so we were sitting down the hall from each other. So, it was a very different thing. I think this is and will be a very normal standard kind of a transition process. So, that's what I expect. I have every reason to think it will be.
Quick follow-up. Is the Supreme Court ruling on Governor Cook a factor in when you may leave as a governor?
I wasn't thinking of it as such, but no, not really. I mean, I'm thinking more of the other things I mentioned.
Hi. Thanks for taking our question. I wanted to ask a question about your tenure. During your tenure as chair, you often spoke about how disadvantaged Americans benefited from extended periods of low unemployment. And the new framework the Fed adopted in 2020, some economists say elevated the Fed's employment mandate. Are you worried that the pandemic inflation spike that followed will make future Fed chairs more reluctant to pursue a hot jobs market, and should they be?
I don't know the answer to that. What we experienced in the mid-teens was really low levels of unemployment for a long period of time and no reaction from inflation, and we all took very much notice of that. We also noticed that the biggest wage gains were going to people at the bottom end of the income spectrum. And we had many reports of, I mean it felt like a fairly stable equilibrium and a lot of benefits were flowing to people at the bottom end of the income spectrum including companies were setting up in, you know, people who were confined and training them before they got out and it was a very healthy sort of set of societal dynamics. So of course I think anybody would love to get back to that. I don't think that anything that happened to create the global pandemic inflation was in any way related to, similarly all over the world that had to do with closing, reopening, stimulus and all that. And I mean you could look at a graph of 10 big economies on the page and not know which was the US and which was Germany, France and things like that. So I don't think that that insight was in any way responsible for the high inflation that we experienced. So I mean I think it's always been a balance. You've got to be strong on both of our dual mandates and we just for example now we don't feel that the labor market is at all a source of inflation. So we don't need to be worrying about that. It's been a long time since we have had to worry about that. Well, actually during the pandemic recovery, the labor market was super overheated and tight and that's when we had to worry about it. But not now.
And just on the other issue, would you need, do you need more assurance from the Justice Department before stepping down? Is that what you're waiting for or what else?
I'm waiting for the investigation to be well and truly over with finality and transparency and I'm waiting for that and I will leave when I think it's appropriate to do so.
Michael McKee from Bloomberg Television and Radio. I'd like to ask you if you could explain a little more or characterize a little more the discussion about the two-sided view and interest rates because there were some members of the open market committee who've been suggesting that we may need to raise interest rates even absent the war because inflation was not coming down fast enough. Is there any sense that interest rates might have to go up or was this just a setup to sort of warn people that you're worried about the war impacts?
Nobody, the three dissenters and others who could have supported that and others who were voters and non-voters who preferred it, they all supported the right decision. So people are not saying we need to hike now. It's more a question of don't we kind of feel that we should be neutral and markets are, what are markets doing? People argue that this is consistent what markets are doing and again it's a very fair question but these changes, it's a form of forward guidance and you want to make them in a way that will be sustained and continue to make sense and not something you need to take back fairly quickly. So I think we just a group of us including me didn't feel like we needed to be in a hurry on that, that markets are not confused about our reaction function. We don't have a problem to solve on that. But the other side of the argument is a good argument too as I mentioned it's a perfectly good argument to be having, good discussion to be having. So and it came out the way it came out.
Well you've got three dissents in favor of two-sided warning. You've got yourself staying on the board. You've got the criticism that does come from elected officials. And you've got a lot of critics who have faulted the Fed for being too slow in 2021 with inflation. Are you worried about Fed credibility under all of this? Is that one reason that you want to stay on?
Not driving my thinking now. I mean, monetary policy is going to get made by, you know, 19 people. There's a lot of stability there. I mean if you think about it every new Fed chair has the same situation which is you've got 18 colleagues on the FOMC, 11 of them vote during any year and your job is to create consensus, is to talk to them, understand them, be inside their thinking and be able to pull them together and get consensus and move. And that's what every Fed chair has to do. I think Kevin Warsh is actually quite well. He has the capabilities, skills to be very good at that, I would think. So, I think I'm not so worried about that process. I think that'll work itself out.
Thank you, Chair. Howard Schneider with Reuters. You mentioned that staying on as a governor, you intend to keep a low profile. I'm just wondering if you could give us a little more detail on what that looks like and how you can, what that looks like and particularly around the policy discussion, how you're able to have your intervention and not be a shadow chair and not have a kind of an outsized influence over the process.
Yeah. You know, that's just something I would never do. You know, the shadow chair thing. I don't know what the exact specifics of it will be, but I'm going back to being a governor. I respect the role of chair. I was a chair. I was a governor for six years, and I know what that's like. I had a pretty front row seat particularly with Chair Yellen to whom I was close when I worked with Chairman Bernanke for two years, but I was brand new at that time. So I got a sense of what it was and I had real sympathy for how hard it is to get that group to consensus and I always felt like I don't want to add to that unnecessarily and that means try to support the chair where the chair wants to go and if you can't, you can't. And I think that's the way it's always worked there because the chair only has one vote plus the ability to develop consensus and if people won't be, you know, they won't, if they're not flexible at all then how do you ever do that? And so that's why the chair has the authority the chair has really is to develop relationships with people and work with them and then put something forward that has consensus and I propose to be a very constructive participant in that process really out of respect for the office of the chair.
And in your view as a soon-to-be governor, how do you see the risks of oil prices bleeding into core inflation in coming weeks because that was, it seems like the commentary that was coming from particularly some of the Reserve Bank presidents, they were elevated concerns about the bleed into core and here we are with three dissents now. What do you see as the prospect of core inflation?
You know, those prospects are real. Remember though, they're real and the real thing is we're going to have to wait and see. We're going to need to see and the good news is we think our policy stance is in a very good place for us to wait and see. We're right kind of at the high end of neutral or perhaps mildly restrictive. The labor market shows more and more signs of stability whereas inflation is kind of misbehaving and so maybe a little bit of restriction or the high end of neutral is just the right place to be. So we can wait here and see how things work out before we act and we'll see how much does come through into core. You see it already in airfares of course but you may see it in many other places. We just don't know yet and it's so unknowable because how long will the strait be closed? You can develop any number of scenarios that you want but we really won't know till we know. So fortunately we're in a good place to wait and let things develop.
Thanks, Mr. Chairman. You started holding post-meeting press conferences for every meeting as opposed to the ones with just with SCPs. Can you talk about why you see that as a net positive?
So we always said when we were doing quarterly press conferences, we always said we can move at any meeting, but we only ever moved at the quarterly SCP meetings where we had the press conference. So if you think about it, during the pandemic, we were moving like a lot at every meeting and sometimes between meetings and doing that without a press conference, I think would have been quite challenging. It's become the industry norm. It's the standard. I don't know whether that has to remain that way. It's just something people have become used to and I do think it's quite helpful to, I mean I try to deliver a message on behalf of the committee rather than 18 other people going out and delivering their message and it's going to be all over the place because we do thankfully have widely disparate views.
Okay thanks. The other thing I wanted to ask about was the communications review from last year. Could you describe the debate last year? What changes were considered, what you wanted, and what prevented any action on those changes?
So, I'm not going to go into the real small specifics, but what we found very quickly was that making changes, making really large changes, for example, to the dot plot or the SCP, it didn't have, we couldn't come up with anything that had really broad support on the committee and so we just moved on. We didn't really do as much on that as we might have. And I was never the world's biggest fan of the dot plot but you can't beat something with nothing. And we've looked at a bunch of things and it's something, like I said, I think every new chair is going to look at our suite of communications and think about what would be changes. We are the only major central bank that doesn't publish a forecast and that's because we have a 19-person committee and you try to do that at the board, that's hard, at the committee, that's hard, it's hard if you do it at the staff. So it works, I think our communications are fine but looking at doing it in a different and better way is the most natural thing in the world.
Thank you. Colby Smith with the New York Times. If I could follow up on Mike's question about hikes, are we right to assume that the hawkish outcome for the Fed is still one in which the committee just extends the pause in rate cuts? And to what extent is there a growing sense within the committee that monetary policy really isn't just restrictive at all right now? The economy is holding up relatively well despite this major energy shock. The unemployment rate has ticked lower. Inflation was moving sideways even before the war and is now moving higher. So where is the committee at on that debate?
You know where we're at is we think our policy rate is in a good place. If we need to hike we will certainly signal that and we will certainly do it. If we need to cut then if it's appropriate to cut then we'll signal the opposite. I think we because we feel like we're in a good place to move in either direction. Nobody's calling for a hike right now. So it really is going to depend on how things evolve. And that's really where it is. As I mentioned, much closer question this cycle on changing the guidance but ultimately we didn't.
And as it relates to the war, at what point do you think the risk to growth will be larger than the risk to inflation as this conflict drags on?
You know, you just have to find that out empirically, with given the fact that we're a big exporter of energy and that our economy is far less energy intensive, oil intensive than it was during the 70s. The effects on the United States are really substantially less than those of Western Europe or Asia who are feeling much greater effects from these things. The effects we're feeling in the current situation currently and in sort of what's priced in which is a relatively quick outcome. If this goes on for much longer and prices go much higher, then we'll feel that much more. And of course, I'm talking about aggregate inflation numbers. We know, we're very well aware that people are experiencing higher gas prices all over the country now, and that hurts and those hikes may continue to happen and other things are going to start to reflect, airline fares I mentioned and other products and services that are dependent upon petroleum and derivatives of petroleum, people are going to start to feel that.
Thank you, Chair. Edward Lawrence with Fox Business. So I guess I'll just ask you directly on this, the markets don't see a rate cut.
Policy looking, you know, meaningfully restrictive, maybe mildly restrictive or neutral, I would say.
And I want to follow up on some of the other questions about your future a little bit. The first time we've seen four dissents now since October of 1992, are you handing off a divided Fed?
You know, the thing to remember is we have always had vigorous debates and they're excellent debates. I have to say they've been really good. And we're in an unusually difficult situation. So we've really had four supply shocks. You actually can say more than four but at a minimum we had the pandemic, we had the invasion of Ukraine, we had tariffs and now we have Iran and the oil spike. So every supply shock has the capability of driving inflation up and unemployment up and what do you do? It's a central bank has a really hard time knowing what to do. So the right thing to do is to try to balance the achievement of those two goals. And that's what our framework calls for us to do. But these are really tough difficult judgments. You've got to have a forecast for each variable. You've got to think how long it's going to take to get back to target. You got to think how restrictive or not is policy. So it's only natural that you have a range of views on the committee. People are going to see it different ways. They're going to have different risk tolerances and that kind of thing. I mean, if everybody agreed that would be surprising. And I think it's partly a function of the extraordinarily challenging set of supply shocks that we've been dealing with now for five, six years.
Thank you so much, Chair Powell. Selena Wang with ABC News. Are you confident that Kevin Warsh will stand up to political pressure from President Trump?
So, he testified very strongly to that effect in his hearing and I'll take him at his word.
And when it comes to gas, right now it's over $4 a gallon. Inflation just hit a 2-year high. Should Americans expect to be paying higher gas prices for the rest of this year? And in your view, does that take a rate cut off of the table? And secondly, by staying on as Fed governor, what message do you think you're sending to the president?
I don't know what gas prices are going to do for the rest of the year. And it will depend on how long the strait remains closed and how quickly it can be reopened and that kind of thing. But remember when gas prices go up, that's disposable income coming out of people's pockets. So they're going to spend less on other things. So there will be a hit to GDP. So it's a question whether spending goes down to offset the inflationary effects. So the answer isn't obvious ex ante whether you should move your rate over because of that, we'll have to see how it evolves.
And the message to the president by staying on?
I'll stand on what I said earlier.
Hi, Victoria Guido with Politico. During your tenure, Fed independence has come under pressure and dragging us into politics and into fiscal policy. So, we've resisted that.
Well, and maybe another way of asking it too is do you think that Fed independence is as strong now as when you became chair? And if so, why?
Look, I think it's at risk. I mean, I think these legal assaults, if you will, as I mentioned, the institution is being battered over these things. We're having to resort to the courts to enforce our legal, you know, it's not so much independence. It's really the ability to make monetary policy without political considerations. That's what we're talking about. And we've had to do that and we've been successful so far, but that's not over. None of that has concluded yet. And it's really important. It's not about people who work at the Fed or the institution. It's about the benefits of a central bank that makes decisions based on analysis and our best thinking rather than trying to help or hurt politicians. There's a bright line between central banks who do one and do the other and successful countries have, uniformly successful advanced economy countries have a really strong set of protections around their central bank just for that reason. So that's what it's all about. I am confident as I said in my remarks that the Fed will continue to make its decision based on analysis, rigorous analysis and not on political considerations. But we've had to fight for it. And I'd like to think we can get out of that era and go back to respecting what the law says and what custom has been, which is to let the Fed do our thing. We're an institution full of human beings who work super hard to get things right for the benefit of the public. We're all human. Don't expect perfection but do expect us to make decisions without political considerations and the very best analysis we can bring.
Katarina Sariva, Bloomberg News. How would you characterize what you've heard from your colleagues on your decision to stay? Do you have their support? And then have you heard concern from your colleagues about continued legal attacks from the executive branch? Is this something that others have talked to you about?
So I think that I don't want to report on what my colleagues think. They can speak for themselves. But you know, yeah, there are widespread concerns that these things may continue. That's all I'll say. And that would be a problem.
And then I just also wanted to ask about Governor Waller's speech on the reserve banks. Do you have any thoughts on centralizing some of those functions in the way he described? And are you concerned that something like that could potentially be a slippery slope to consolidate reserve bank functions even more in such a way where the central bank ultimately loses some of that important regional information?
So we try to be good stewards of the public's money and efficient and Chris in particular, Chris Waller is particularly passionate about that, of course so are the reserve presidents and it's a question of how do you accomplish it. We of course, and Chris said this in his speech, we want 12 strong independent central banks with their own staffs and their own monetary policy views and all that but there are things that are done in all 12 which could well be done at one much more efficiently and with cost savings. And so there's a back and forth going on on that, but everybody's on the same page. The other thing he touched on was the idea of removing Reserve Bank presidents from office over different views on monetary policy. And I would just agree with him so strongly that that would be the beginning of the end of the Fed's ability to make monetary policy independently if every administration could come in and do that. You're just another cabinet agency at that point. So that's not something that I would support. Chris said the same thing.
Thanks, Chair Powell. Christine Romans, NBC News. I want to ask about legacy. When the history books are written, how do you think your stewardship at the Fed will be remembered for the past eight years?
You know, I'm going to just say that's for someone else to say. I'll give you a mulligan on that.
All right. I'm going to ask you about misbehaving inflation then. You talked about those four big shocks, supply shocks over the past 5 years and inflation still misbehaving. What's your message to American families who feel like inflation has not been under control for them really since the reopening?
You know, we're committed to bring inflation back down to 2% and sustainably. That's our goal and we will stick at it until that happens. We keep getting these events keep happening which keep driving up costs and the best thing we can do is to use our tools to guide inflation back down to 2%. I think trying to get there really quickly could be very costly in terms of job loss and things like that but we try to get there over time in a way that does the least damage possible. And our commitment to that is never ending and unshakable.
How would you describe the economy outside of the misbehaving inflation? I mean, it's still awfully resilient given all of the blows.
I don't know that you can be awfully resilient. So, it's actually quite resilient, I would say, because it's a positive thing if I can have that amendment. Yeah, growth is really solid across our economy. Some of that is consumer spending is hanging in pretty well. The most recent data are good and some of it is just the apparently insatiable demand for data centers all over the United States. So a lot of business investment going into building data centers and every reason to think that continues. So you've got an economy that's growing at 2% or better. PDFP which is private domestic final purchases, which is really a better signal of momentum in the economy is actually higher than that. So that's a positive thing. If you look at the unemployment rate it's 4.3%. So that's a low rate that's pretty close to mainstream estimates of the natural rate. We've been there for a long time. So it doesn't feel like a good labor market to some who don't have jobs because quits are really low, hires are really low, and there's effectively no new net job creation. So in a sense, the labor market is in balance, but it's an unusual and uncomfortable kind of a balance where people who don't have jobs will have a hard time breaking in unless somebody quits their job. So that's pretty good. Inflation is the thing we need to work on, and it's partly tariffs, which we think that inflation should subside over the course of this year because it's kind of a one-time increase. It shouldn't be repeated, and that should start happening pretty soon. The energy inflation that we're getting should go through fairly quickly. And we'll just have to see how that works out. In the meantime, we think our policy stance is in a good place for us to hold and wait developments.
Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. At the risk of beating the dead horse here, clearly three members objected to keeping that easing bias in the statement. And you said that the majority still didn't need to move to new language at this point. So does the majority of the committee still have a bias towards cuts at this point or has the bias on the committee shifted away from cuts towards holding or hikes if that was needed?
So I think that the center is moving toward a more neutral place and that's sort of what markets are saying too. I just think there's a lot of signaling going on when you change guidance like that. And so we just, I guess a majority of us didn't feel like we needed to send a signal on that right now. And but maybe it'll come to that. And the reason is because we're kind of waiting to see what happens with events in the Middle East and what are the implications of those events for the US economy. So there was just a group who feels like we don't need to be in a hurry to do that. We get it and of course we will move to a hiking bias if we want to hike and we'll move to a neutral bias before that. But there was a difference over whether to do it at this meeting, at a meeting at which all but one of us agreed that the rate decision was correct which was not to move.
And you just said moments ago that you believe Fed independence is at risk. Is it safe to say that you want to stay on as a governor to serve as a check and balance on that?
I want to stay until, I will stay until I feel it's appropriate for me to leave. And yes, that is really what is driving this. I'm not looking to be a high-profile dissident or anything like that. I'm more looking at the other aspects of this and wanting to see that things have calmed down and we're returning to a traditional model of working with the people that you have and bringing them to consensus and respecting that consensus. That's what I'm hoping to see.
Thanks, Chair Powell. Matt Egan with CNN. You've made many tough decisions in your time at the Fed and as your time as chair comes to a close and you think about your tenure and perhaps your legacy, are there any decisions that stand out as ones that you're particularly proud of? And are there any that with the benefit of hindsight you would take a mulligan on?
Yeah, it's hard, I wouldn't want to single out individual things at this point. I'll just say we all of us together have consistently tried to do what we think is best for the American people based on our tools and our objectives that Congress has given us. It's been very challenging because we've been in a situation of supply shocks really for 6 years and that's just a very different situation than for a very long time. What the Fed and other central banks were doing all the time was demand management and there was always the inflation mandate but inflation was low for 25 years. So this is a very different world and a much more challenging one where you have to balance the two objectives and by the way central banks that have an inflation mandate have to do exactly the same thing because they're balancing economic activity. So that's been challenging and we've tried to do our very best through these really challenging times and I'm really proud of the work that I've done, that my colleagues and I have done during these years.
Now to follow up on some of the discussion around Fed independence, can you explain to the public why this notion of Fed independence, which might sound kind of wonky to some, is so critical? I mean, what are the consequences if either the Supreme Court rules against Lisa Cook or the Fed in the future decides to make decisions more around the political calendar instead of the economic data?
So, every major advanced economy in the world has made the same decision the United States has made and that is that they want to take the making of monetary policy, the setting of interest rates to support the economy to achieve maximum employment and price stability. They want to take that out of the direct control of elected politicians and the reason is elected politicians are always running for election and they'll always want low rates and that will lead to inflation over time. So after literally centuries of experience with that the whole world moved to a different model and it's worked great. This is the era in which inflation was under control for 40 years. Then we had the pandemic inflation everywhere in the world and now we have inflation that had gone pretty much all the way back to target, really close to all the way back to target and now is being buffeted by the energy shock and the US buffeted by the tariff shock as well. So but what I would say to the general public is that's the backstory. Don't think about an institution being independent. Think about it this way that you want people to make monetary policy and set interest rates to benefit the general public and to try to achieve economic goals which are maximum employment and price stability and focus only on that and ignore political considerations completely, ignore them. This isn't bipartisan. This is nonpartisan. So we just work directly for the American people doing these things. We don't think, 'Oh, I want to do this because the president says it's a good idea or because there's an election coming up and I want to speed up or slow down the economy.' I mean, think about that. If that's what we were doing, we'd have no credibility. Markets would lose faith in us and our ability to control inflation and any respect would be gone. And let me say, whatever people say, the markets believe that we will produce 2% inflation. If you look at longer run expectations, markets believe that. There's no sense in which our credibility in the markets has weakened. It's just not the case. People do get it that this is our commitment and that we will achieve it and it's priced in. If you disagree with that, then you can go ahead and bet against the markets, but the markets are pricing in Fed credibility.
Thank you, Chair Powell. Richard Escobedo with CBS News. We talked a lot about gasoline prices and even you mentioned airline ticket prices, both of which are up dramatically because of the war in Iran. And so I wonder are you seeing that weigh down consumer spending in other parts of the economy? And if so, how worried are you that that will be a drag on growth?
You don't see it in spending yet. You really don't. I mean, as one of your colleagues said, the economy has been resilient. It really has. Not just this time, but it's been remarkably resilient for some years now. The US economy has just powered through shock after shock. And consumers are still spending. And that's what the banks will tell you, credit card companies will tell you, the retail sales numbers that we got most recently. People are still spending. And how long can that go on in a world where if gas prices were to go up a bunch more, that's taking otherwise spendable money out of people's pockets. But right now we don't actually see much slowdown yet from certainly none from this. But you think logically you will because people have a certain amount of money to spend if they're spending 25% more on gas or something like that then that's going to come out of other spending. But we again we don't see it yet.
One last thing, you mentioned those economies in Southeast Asia that are particularly dependent on petroleum. They make a lot of the stuff that American consumers buy. So, was there any discussion today about whether or not those costs getting passed along to consumers is a real concern and whether or not that might push up inflation?
So, all of those things are in the models that we use to calculate inflation. So, they're just parts. You can ask about anything like that and they have a place, the staff has a place where they're looking at that and pricing in what will happen with higher prices and that kind of thing. So the effects are not that big yet. We're a huge economy. The import sector is only 10% of the economy. So we're not like a European country where 50% of the GDP is in the external sector. We're also, as I mentioned, we're an oil exporter. So, we're not feeling the same kind of pain and we're not likely to feel the same kind of pain that economies in Western Europe and certainly in Asia are feeling. Anyway, thank you very much everyone. I won't see you next time.
You're also right though that the level of tariffs came down fairly meaningfully in the wake of the court decision, but the administration said they're going to get that rate right back up to where it was. So, and we assume that they'll do that over time. So, that's how we think about it.
Hi. Thank you, Chris Rugaber at Associated Press. I wanted, you talked about the shortcomings of the SCP in this environment. I wanted to ask about or throw in an additional thing which is the fact that it's happening before transition. Is there still some value perhaps in the public stance of monetary policy as appropriate to promote progress toward our maximum employment and 2% inflation goals?
Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook and we will remain attentive to risks to both sides of our dual mandate. I'll have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a solid pace. Consumer spending has been resilient and business fixed investment has continued to expand at a brisk pace. In contrast, activity in the housing sector has remained weak. In the labor market, the unemployment rate was 4.3% in March and has changed little in recent months. Job gains have remained low. A good part of the slowing in the pace of the job growth over the past year reflects a decline in the growth of the labor force due to lower immigration and labor force participation. Though labor demand has clearly softened as well. Other indicators including job openings, layoffs, hiring, and nominal wage growth generally show little change in recent months. Inflation has moved up recently and is elevated relative to our 2% longer run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 3.5% over the 12 months ending in March, boosted by the significant rise in global oil prices that has resulted from the conflict in the Middle East. Excluding the volatile food and energy categories, core PCE prices rose 3.2% over the 12 months ending in March. This relatively high rate largely reflects the effects of tariffs on prices in the goods sector. Near-term measures of inflation expectations have risen this year, likely because of the substantial rise in oil prices. 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 1/2 to 3 and 3/4%. The economic outlook remains highly uncertain and the conflict in the Middle East has added to this uncertainty. In the near term, higher energy prices will push up overall inflation. Beyond that, the scope and duration of potential effects on the economy remain unclear, as does the future course of the conflict itself. We will continue to monitor the risks to both sides of our dual mandate. 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. This is my last press conference as chair and I will close with a few thoughts. First, I want to congratulate Kevin Warsh on his advancement out of the Senate Banking Committee this morning. This is an important step forward and I wish him well as that process continues. The Federal Reserve exists for one fundamental purpose, to foster the economic conditions in which American families and businesses can thrive. Stable prices, a strong job market, and a financial system they can depend on. Every decision we make, whether about interest rates or regulatory and supervisory matters or other issues, is made in service of that purpose. Our decisions reflect the collective judgment of the Board of Governors and the Federal Open Market Committee, colleagues who demonstrate analytical rigor, principled judgment, and a genuine commitment to the public interest. Our collaborative and deliberative process has long reflected a shared commitment to finding common ground in service to our mission. This institution is resilient, capable, and staffed by professionals of extraordinary talent and exceptional dedication. It has been a privilege to serve alongside so many great public servants at the Board of Governors and around the Federal Reserve system. The Fed's work is only as effective as the public's understanding of it. And you, the press, are essential to keeping the public informed about what we do and why. The people we serve benefit from your careful reporting. I welcomed the announcement last Friday by the US Attorney for the District of Columbia that she had closed the criminal investigation. She also noted, however, that she would not hesitate to restart the investigation. Over the weekend, the Department of Justice provided assurances that they will not reopen the investigation unless there's a criminal referral from the Fed's inspector general. And absent such a referral, if they do appeal the recent court decision, they would not seek, as part of that appeal to restart the investigation or send new subpoenas. I've said that I will not leave the board until this investigation is well and truly over with transparency and finality and I stand by that. I'm encouraged by recent developments and I'm watching the remaining steps in this process carefully. My decisions on these matters will continue to be guided entirely by what I believe is in the best interest of the institution and the people we serve. After my term as chair ends on May 15, I will continue to serve as a governor for a period of time. To be determined, I plan to keep a low profile as a governor. There is only ever one chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in, he will be that chair. Once sworn in as board chair, his new colleagues will elect him to chair the FOMC as well. As I regularly point out from this podium, our success in delivering our goals matters for all Americans. I'm confident that the Fed will continue to do its work with objectivity, integrity, and a deep commitment to serve the American people. Thank you, and I look forward to your questions.
Thank you, Mr. Chair. Appreciate the kind words about the press. Doesn't come from the podium in different places but appreciate that. Can you talk about what has gone into your decision to remain on the board? What kind of criteria are you weighing and how long might you stay? Thank you.
Sure. So my concern is really about the series of legal attacks on the Fed which threaten our ability to conduct monetary policy without considering political factors. And I want to note here this has nothing whatever to do with verbal criticism by elected officials. I've never suggested that such verbal criticism is a problem and neither has anyone else here. But these legal actions by the administration are unprecedented in our 113-year history. And there are ongoing threats of additional such actions. I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political factors. It is so important for our economy, for the people that we serve, that they can depend over time on a central bank that operates that way, free of political influence. It's part of the absolute foundation of this amazing economy that we have. It's just one of the many reasons why the US economy is the envy of the world. That piece of institutional architecture separates successful countries from unsuccessful countries. It is extremely important, not for the people who work at the Fed at any given time, but for the people that we serve, that the Fed remain able to conduct monetary policy in a way that doesn't get pulled into politics trying to help or hurt any particular politician or political party. It's critical for the people that we serve. In terms of when I would leave, I will leave when I think it's appropriate to do so.
Well, I just have a follow-up which is what would you say to the criticism that by remaining on the board you're actually taking a political act and denying President Trump the majority of the board which as president he would have if you left.
I don't see that at all. As I mentioned, I'm literally staying because of the actions that have been taken. I had long planned to be retiring. And the things that have happened in really in the last three months have left me no choice but to stay until I see them through at least that long. In addition, I don't see how this will interfere. My intention is not to interfere. I was a governor for almost six years, and the tradition is at the Fed that governors who understand how difficult the role of chair is and as a soon-to-be former chair, I do understand how hard it is to get consensus with 19 strong-minded people, you work with the chair. You try to be heard, but also collaborate with the chair and try to support the chair when you can. When you can't, you can't. And I think that's the attitude that people generally have and that's the attitude that I'll take.
Chair Powell, if I could ask about the inflation outlook. In March, you described the standard practice of looking through energy shocks as conditional on inflation expectations staying anchored. Since that meeting, there has been very little progress reopening key energy trade corridors. Can you help us understand how the inflation outlook has changed in the intermitting period beginning with the prospects for tariff pass-through resolving on the timeline that you had outlined in March before getting to the energy shock that is now on top?
So, I would look at it this way. For a long time, we've been working on the hypothesis really that tariffs would lead to a one-time price increase and that that would go away over time. In other words, that there would be no further change. So, measured inflation wouldn't reflect that higher level going up more and more. And it's time for that to happen. We really do expect that to be happening in the next two quarters. So we'll be watching very carefully to see that what we've thought all along would happen. That's the kind of critical part of the forecast. We need to really see that. With energy, it's so hard to say. I mentioned in sort of the textbook you would look through an oil shock because they tend to be short-lived and they tend to revert and monetary policy works with long and variable lags. So you wouldn't necessarily react right away. I think that is all the more true given that we're several years above 2% inflation and that we're already looking through the tariff shock. So I think we're going to be very cautious about that. But the question about looking through energy really is not in front of us right now. It hasn't even peaked yet and I think we'd want to see the backside of that and progress on tariffs before we even thought about reducing rates.
So if I could follow up, the statement today preserves language that has taken on some meaning as it was socialized when the committee was actively lowering rates. Why is that easing bias still ripe given how different the inflation outlook is now versus a meeting or two ago and what more would...
So, that was, as you will recall, we had a discussion about that at the last meeting and we talked about it in the press conference after the March meeting. We had the same today. We had quite a vigorous discussion about that very issue and the guidance and is it still appropriate and that kind of thing. And I would say that the number of people on the committee who either could support that language change, changing to a more neutral stance so that a hike is as likely as a cut, that number has increased over the intervening period and it's easy to see why. I mean, it's a good question, right? You see inflation has moved up over the interim a bit, core inflation's 3.2 now, moving albeit just a little bit in the wrong direction and we know that there will be, you know, that there's headline inflation coming out of the Gulf and we don't know how much that will be. We just, we're going to need to see. So, it makes all the sense in the world that people would look at that and we'd have a vigorous discussion about that. You saw that three people dissented over the language. I think all of those people agreed with the rate decision. So, the majority of the committee did not want to do that and I didn't think we needed to do it at this meeting. It really was just a question of why do we need to do that now? You know, we have so much to learn. There's so much uncertainty about the path ahead. There doesn't need to be any rush to make that decision now because what happens in the next 30, 60 days, even by the next meeting, could really change the picture around that language. So, you know, it's a much closer thing on the committee than it was in March. You know, that makes all the sense in the world, it seems to me.
So, Claire Jones, Financial Times. Just going back to this issue of the easing bias. We've now got oil approaching $120 a barrel when it comes to the benchmark, Brent crude. If it stays around those levels six weeks from now, what would be your best guess as to whether the easing bias will still be in the statement? Thank you.
I wouldn't want to guess, you know. Well, first of all, we're going to have new leadership in all likelihood by then and new leadership is going to have a very important role to play in that. So, I won't be standing here at this podium to answer your question. So, I don't know. As I mentioned, that's all I can really say is that we had a great discussion about that today. It's gotten to be a better question in the interim period. We had the discussion, a majority are still on the page of not feeling the need to move to that level and that's where I am. I get it though, you know, at a certain point you would move and that conceivably could come as soon as the next meeting.
Thank you. Just to follow up on the new leadership, he also seemed rather lukewarm on press conferences and on the dot plots. What would your advice to him be on these communication tools?
So, I'm not going to give him any advice through you today here, but I think communications generally is, I think every incoming chair takes a look at communications and it's a very healthy thing. I mean, communications, it's very complex and you can always be looking at new things and if that happens, feels like it's going to happen, that's a completely appropriate thing.
Hi, Chair Powell with Axios. Can you tell us if you've been in touch with incoming Chairman Warsh? To what extent is this a normal transition process versus all the things swirling around, something unusual? And what can we expect when he takes that podium in a few weeks?
I haven't seen him since seeing him at a dinner in January where I congratulated him and had a nice chat with him. Haven't seen him. I don't know what a normal process is. You know, the last process was with Janet Yellen with whom I had worked for six years and so we were sitting down the hall from each other. So, it was a very different thing. I think this is and will be a very normal, standard kind of a transition process. So, that's what I expect. I have every reason to think it will be.
Quick follow up. Is the Supreme Court ruling on Governor Cook a factor in when you may leave as a governor?
I wasn't thinking of it as such, but no, not really. I mean, I'm thinking more of the other things I mentioned.
Hi. Thanks for taking our question. I wanted to ask a question about your tenure. Chris Rugaber at Associated Press. During your tenure as chair, you often spoke about how disadvantaged Americans benefited from extended periods of low unemployment. And the new framework the Fed adopted in 2020, some economists say elevated the Fed's employment mandate. Are you worried that the pandemic inflation spike that followed will make future Fed chairs more reluctant to pursue a hot jobs market and should they be?
I don't know the answer to that. I mean, what we experienced in the mid-teens was really low levels of unemployment for a long period of time and no reaction from inflation. And we all took very much took notice of that. We also noticed that the biggest wage gains were going to people at the bottom end of the income spectrum. And we had many, many reports of, I mean, it felt like a fairly stable equilibrium and a lot of benefits were flowing to people at the bottom end of the income spectrum, including companies were, you know, setting up in and, you know, people who were confined and training them before they got out and it was a very healthy sort of set of societal dynamics. So of course I think anybody would love to get back to that. I don't think that anything that happened to create the global pandemic inflation was in any way related to overweighting the employment market. I mean, it was a global shock that happened essentially very, very similarly all over the world that had to do with closing, reopening, stimulus and all that. And I mean, you could look at a graph of 10 big economies on the page and not know which was the US and which was Germany, France and things like that. So I don't think that that insight was in any way responsible for the high inflation that we experienced. So I mean, I think it's always been a balance. You've got to be strong on both of our dual mandates and we just, for example now, we don't feel that the labor market is at all a source of inflation. So we don't need to be worrying about that. It's been a long time since we have had to worry about that. Well, actually during the pandemic recovery, the labor market was super overheated and tight and that's when we had to worry about it. But not now.
Just on the other issue, would you need, do you need more assurance from the Justice Department before stepping down? Is that what you're waiting for or what else?
I'm waiting, you know, for the investigation to be well and truly over with finality and transparency and I'm waiting for that and I will leave when I think it's appropriate to do so.
Michael McKee from Bloomberg Television and Radio. I'd like to ask you if you could explain a little more or characterize a little more the discussion about the two-sided view and interest rates because there were some members of the open market committee who've been suggesting that we may need to raise interest rates even absent the war because inflation was not coming down fast enough. Is there any sense that interest rates might have to go up or was this just a setup to sort of warn people that you're worried about the war impacts?
So nobody, the three dissenters and others who could have supported that and others who were, you know, who were voters and non-voters who preferred it, they all supported the rate decision. Right? So people are not saying we need to hike now. It's more a question of, you know, don't we kind of feel that we should be neutral and markets are, markets, what are markets doing? People argue that this is consistent with what markets are doing and again, it's a very fair question but, you know, these changes, there is, you know, it's a form of forward guidance and you want to make them in a way that will be sustained and continue to make sense and not something you need to take back, you know, fairly quickly. So I think we just, a group of us including me, didn't feel like we needed to be in a hurry on that, that markets are not confused about our reaction function. We don't have a problem to solve on that. But the other side of the argument is a good argument too as I mentioned. It's a perfectly good argument to be having, good discussion to be having. So and it came out the way it came out.
Well, you've got three dissents in favor of two-sided warning. You've got yourself staying on the board. You've got the criticism that does come from elected officials. And you've got a lot of critics who have faulted the Fed for being too slow in 2021 with inflation. Are you worried about Fed credibility under all of this? Is that one reason that you want to stay on?
Not driving my thinking now. I mean, monetary policy is going to get made by, you know, 19 people. There's a lot of stability there. I mean, if you think about it, every new Fed chair has the same situation which is you've got 18 colleagues on the FOMC, 11 of them vote during any year and your job is to create consensus, is to talk to them, understand them, you know, be inside their thinking and be able to pull them together and get consensus and move. And that's what every Fed chair has to do. I think Kevin Warsh is actually quite well. He has the capabilities, skills to be very good at that, I would think. So, I think I'm not so worried about that process, you know. I think that'll work itself out.
Thank you, Chair. Howard Schneider with Reuters. You mentioned that staying on as a governor, you intend to keep a low profile. I'm just wondering if you could give us a little more detail on what that looks like and how you can, what that looks like and particularly around the policy discussion, how you're able to have your intervention and not be a shadow chair and not have a kind of an outsized influence over the process.
Yeah. You know, that's just something I would never do. You know, the shadow chair thing. I don't know what the exact specifics of it will be, but I'm going back to being a governor. I respect the role of chair. I was a chair. I was a governor for six years, and I know what that's like. I had a pretty front row seat with particularly with Chair Yellen to whom I was close when I worked with Chairman Bernanke for two years. But, you know, I was brand new at that time. So I got a sense of what it was and I had real sympathy for how hard it is to get that group to consensus and I always felt like I don't want to add to that unnecessarily and that means try to support the chair's, the direction the chair wants to go in if you can. If you can't, you can't. And I think that's the way it's always worked there because the chair only has one vote plus the ability to develop consensus and if people won't be, you know, they won't, if they're not flexible at all then how do you ever do that? And so that's why the chair has the authority the chair has really is to develop relationships with people and work with them and then put something forward that has consensus and I propose to be a very constructive participant in that process.
Really out of respect for the office of the chair. And in your view as a soon-to-be governor, how do you see the risks of oil prices bleeding into core inflation in coming weeks because that was, it seems like the commentary that was coming from particularly some of the Reserve Bank presidents, there were elevated concerns about the bleed into core and here we are with three dissents now, what do you see as the prospect of a core inflation?
You know, those prospects are real. Remember though, our, and they're real and the real thing is we're going to have to wait and see, we're going to need to see and the good news is we think our policy stance is in a very good place for us to wait and see. We're right kind of at the high end of neutral or perhaps mildly restrictive. The labor market shows more and more signs of stability whereas inflation is kind of misbehaving and so maybe a little bit of restriction or the high end of neutral is just the right place to be. So we can wait here and see how things work out before we act and we'll see how much that, you know, how much does come through into core. You see it already in airfares of course but you may see it in many other places. You know, we just don't know yet and it's so unknowable because how long will the strait be closed? You can develop any number of scenarios that you want but we really won't know till we know. So fortunately we're in a good place to wait and let things develop.
Thanks, Mr. Chairman. You started holding post-meeting press conferences for every meeting as opposed to the ones with just with SCPs. Can you talk about why you see that as a net positive?
So we always said when we were doing quarterly press conferences, we always said we can move at any meeting but we only ever moved at the quarterly SCP meetings where we had the press conference. So if you think about it, you know, during the pandemic, we were moving like a lot at every meeting and sometimes between meetings and doing that without a press conference, I think would have been quite challenging. It's become the industry norm. It's the standard. I don't know whether that has to remain that way. I mean, it's just something people have become used to and I do think it's quite helpful to, you know, I try to deliver a message on behalf of the committee rather than 18 other people going out and delivering their message and it's, you know, it's going to be all over the place because we do thankfully have widely disparate views.
Okay, thanks. The other thing I wanted to ask about was the communications review from last year. Could you describe the debate last year? What changes were considered, what you wanted, and what prevented any action on those changes.
So, I'm not going to go into the real small specifics, but what we found very quickly was that making changes, making really large changes for example to the dot plot or the SCP, it didn't have, we couldn't come up with anything that had really broad support on the committee and so we just moved on. We didn't really do as much on that as we might have. And, you know, I was never the world's biggest fan of the dot plot, but you can't beat something with nothing. And, you know, we've looked at a bunch of things and, you know, it's something like I said, I think every new chair is going to look at our suite of communications and think about what would be changes. We are the only major central bank that doesn't publish a forecast and that's because we have a 19-person committee and, you know, you try to do that at the board, that's hard, at the committee, that's hard, it's hard if you do it at the staff, so, you know, it works, I think our communications are fine but looking at doing it in a different and better way is the most natural thing in the world.
Thank you. Colby Smith with the New York Times. If I could follow up on Mike's question about hikes, are we right to assume that the hawkish outcome for the Fed is still one in which the committee just extends the pause and rate cuts? And to what extent is there a growing sense within the committee that monetary policy really isn't just restrictive at all right now? The economy is holding up relatively well despite this major energy shock. The unemployment rate has ticked lower. Inflation was moving sideways even before the war and is now moving higher. So where is the committee at on that debate?
You know, where we're at is we think our policy rate is in a good place. If we need to hike, we will certainly signal that and we will certainly do it. If we need to cut, then if it's appropriate to cut, then we'll signal the opposite. I think we, because we feel like we're in a good place to move in either direction. Nobody's calling for a hike right now. So it really is going to depend on how things evolve. And, you know, that's really where it is. As I mentioned, much closer question this cycle on changing the guidance but ultimately we didn't.
And as it relates to the war, at what point do you think the risk to growth will be larger than the risk to inflation as this conflict drags on?
You know, you just have to find that out empirically, you know, given our, the fact that we're, you know, a big exporter of energy and that our economy is far less energy intensive, oil intensive than it was during the 70s. You know, the effects on the United States are really substantially less than those of Western Europe or Asia who are feeling much greater effects from these things. Effects we're feeling in the current situation currently and in sort of what's priced in which is, you know, a relatively quick outcome. If this goes on for much longer and prices go much higher, then we'll feel that much more. And of course, I'm talking about aggregate inflation numbers. We know, we're very well aware that people are experiencing higher gas prices all over the country now, and that hurts. And these hikes may continue to happen and other things are going to start to reflect, airline fares I've mentioned and other products and services that are dependent upon petroleum and derivatives of petroleum, people are going to start to feel that.
Thank you, thank you, Chair. Edward Lawrence with Fox Business. So I guess I'll just ask you directly on this, the markets don't see a rate hike. Policy looking, you know, meaningfully restrictive, maybe mildly restrictive or neutral, I would say.
Um, and I want to follow up on some of the other questions about your future a little bit. The first time we've seen to four dissents now since October of 1992, are you handing off a divided Fed? You know, the thing to remember is we have always had vigorous debates and they're excellent debates. I have to say they've been really good. And we're in an unusually difficult situation. So we've really had four supply shocks. You actually can say more than four, but at a minimum we had the pandemic, we had the invasion of Ukraine, we had tariffs, and now we have Iran and the oil spike. So every supply shock has the capability of driving inflation up and unemployment up and what do you do? You know, the central bank has a really hard time knowing what to do. So the right thing to do is to try to balance the achievement of those two goals. And that's what our framework calls for us to do. But these are really tough, difficult judgments. You've got to have a forecast for each variable. You've got to think how long it's going to take to get back to target. You got to think how restrictive or not is policy. So it's only natural that you have a range of views on the committee. You know, people are going to see it different ways. They're going to have different risk tolerances and that kind of thing. I mean, if everybody agreed, that would be surprising. And I think it's partly a function of the extraordinarily challenging set of supply shocks that we've been dealing with now for five, six years.
Thank you so much, Chair Powell. Selena Wang with ABC News. Are you confident that Kevin Warsh will stand up to political pressure from President Trump?
So, he testified very strongly to that effect in his hearing and I'll take him at his word.
And when it comes to gas, right now it's over $4 a gallon. Inflation just hit a two-year high. Should Americans expect to be paying higher gas prices for the rest of this year? And in your view, does that take a rate cut off of the table? And secondly, by staying on as Fed governor, what message do you think you're sending to the president?
I don't know what gas prices are going to do for the rest of the year. And it will depend on how long the strait remains closed and how quickly it can be reopened and that kind of thing. But remember when gas prices go up, that's disposable income coming out of people's pockets. So they're going to spend less on other things. So there will be a hit to GDP. So it's a question whether spending goes down to offset the inflationary effects. So the answer isn't obvious ex ante whether you should move your rate over because of that. We'll have to see how it evolves.
I'll stand on what I said earlier.
Hi, Victoria with Politico. During your tenure, Fed independence has come under pressure and dragging us into politics and into fiscal policy. So, we've resisted that.
Well, and maybe another way of asking it too is do you think that Fed independence is as strong now as when you became chair? And if so, why?
Look, I think it's at risk. I mean, I think these legal assaults, if you will. As I mentioned, the institution is being battered over these things. We're having to resort to, you know, the courts to enforce our legal, you know, it's not so much independence. It's really the ability to make monetary policy without political considerations. That's what we're talking about. And we've had to do that and we've been successful so far, but that's not over. None of that has concluded yet. And it's really important. It's not about people who work at the Fed or the institution. It's about the benefits of a central bank that makes decisions based on analysis and our best thinking. Rather than, you know, trying to help or hurt politicians. There's a bright line between central banks who do one and do the other and successful countries have, uniformly successful advanced economy countries have a really strong set of protections around their central bank just for that reason. So that's what it's all about. I am confident as I said in my remarks that the Fed will continue to make its decisions based on analysis, rigorous analysis and not on political considerations. But we've had to fight for it. And I'd like to think we can get out of that era and go back to respecting what the law says and what custom has been, which is to let the Fed do our thing. We're an institution full of human beings who work super hard to get things right for the benefit of the public. We're all human. Don't expect perfection but do expect us to make decisions without political considerations and the very best analysis we can bring.
Katarina Sariva, Bloomberg News. How would you characterize what you've heard from your colleagues on your decision to stay? Do you have their support? And then have you heard concern from your colleagues about continued legal attacks from the executive branch. Is this something that others have talked to you about?
So I think that I don't want to report on what my colleagues think. They can speak for themselves but, you know, yeah, there are widespread concerns that these things may continue. That's all I'll say. And that would be a problem.
And then I just also wanted to ask about Governor Waller's speech on the reserve banks. Do you have any thoughts on centralizing some of those functions in the way he described? And are you concerned that something like that could potentially be a slippery slope to consolidate reserve bank functions even more in such a way where the central bank ultimately loses some of that important regional information?
So we try to be good stewards of the public's money and efficient and Chris in particular, Chris Waller is particularly passionate about that, of course so are the reserve, so are the presidents and, you know, it's a question of how do you accomplish it. We of course, and Chris said this in his speech, we want 12 strong independent central banks with their own staffs and their own monetary policy views and all that but, you know, there are things that are done in all 12 which could well be done at one much more efficiently and with cost savings. And so there's a back and forth going on on that, but everybody's on the same page. The other thing he touched on was the idea of removing Reserve Bank presidents from office over different views on monetary policy. And I would just agree with him so strongly that that would be the beginning of the end of the Fed's ability to make monetary policy independently if every administration could come in and do that. You're just another cabinet agency at that point. So that's not something that I would support. Chris said the same thing.
Thanks, Chair Powell. Christine Romans, NBC News. I want to ask about legacy. When the history books are written, how do you think your stewardship at the Fed will be remembered for the past eight years?
You know, I'm going to just say that's for someone else to say. I'll give you a mulligan on that.
All right. I want to ask you about misbehaving inflation then. You talked about those four big shocks, supply shocks over the past five years and inflation still misbehaving. What's your message to American families who feel like inflation has not been under control for them really since the reopening?
You know, we're committed to bring inflation back down to 2% and sustainably. That's our goal and we will stick at it until that happens. We keep getting these events keep happening which keep driving up costs and, you know, the best thing we can do is to use our tools to guide inflation back down to 2%. I think trying to get there really quickly could be very costly in terms of job loss and things like that but we try to get there over time in a way that does the least damage possible. And, you know, our commitment to that is never ending and unshakable.
How would you describe the economy outside of the misbehaving inflation? I mean, it's still awfully resilient given all of the blows.
I don't know that you can be awfully resilient. So, it's actually quite resilient, I would say, because it's a positive thing if I can have that amendment. Yeah, that, you know, growth is really solid across our economy. Some of that is consumer spending is hanging in pretty well. The most recent data are good and some of it is just the apparently insatiable demand for data centers all over the United States. So a lot of business investment going into building data centers and every reason to think that that continues. So you've got an economy that's growing at 2% or better. PDFP, which is private domestic final purchases, which is really a better signal of momentum in the economy, is actually higher than that. So that's a positive thing. If you look at the unemployment rate, it's 4.3%. So that's a low rate that's pretty close to mainstream estimates of the natural rate. We've been there for a long time. So, it doesn't feel like a good labor market to some who don't have jobs because quits are really low, hires are really low, and there's effectively no new net job creation. So, that's, in a sense, the labor market is in balance, but it's an unusual and uncomfortable kind of a balance where people who don't have jobs will have a hard time breaking in unless somebody quits their job. So, that's pretty good. You know, inflation is the thing we need to work on, and it's partly tariffs, which we think that inflation should subside over the course of this year because it's kind of a one-time increase. It shouldn't be repeated, and that should start happening pretty soon. The energy inflation that we're getting should go through fairly quickly. And we'll just have to see how that works out. In the meantime, you know, we think our policy stance is in a good place for us to hold and wait developments.
Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. At the risk of beating the dead horse here, clearly three members objected to keeping that easing bias in the statement. And you said that the majority still didn't need to move to new language at this point. So, does the majority of the committee still have a bias towards cuts at this point or has the bias on the committee shifted away from cuts towards holding or hikes if that was needed.
So I think that, you know, the center is moving toward a more neutral place and that's sort of what markets are saying too. I just think, you know, there's a lot of signaling going on when you change guidance like that and so we just, I guess the majority of us didn't feel like we needed to send a signal on that right now. And but maybe it'll come to that and the reason is because, you know, we're kind of waiting to see what happens with events in the Middle East and what are the implications of those events for the US economy. So it was just a, there's a group who feels like we don't need to be in a hurry to do that. We get it and of course we will move to a hiking bias if we want to hike and we'll move to a neutral bias before that. There was a difference over whether to do it at this meeting, at a meeting at which all but one of us agreed that the rate decision was correct which was not to move.
And you just said a moment ago that you believe Fed independence is at risk. Is it safe to say that you want to stay on as a governor to serve as a check and balance on that?
I want to stay until I feel it's appropriate for me to leave. And yes, that is really what is driving this. I'm not looking to be, you know, a high-profile dissident or anything like that. I'm more looking at the other aspects of this and wanting to see that things have calmed down and we're returning to a traditional model of working with the people that you have and bringing them to consensus and respecting that consensus. That's what I'm hoping to see.
Thanks, Chair Powell. Matt Egan, CNN. You've made many tough decisions in your time at the Fed and as your time as chair comes to a close and you think about your tenure and perhaps your legacy, are there any decisions that stand out as ones that you're particularly proud of? And are there any that with the benefit of hindsight you would take a mulligan on?
Yeah, it's hard. I wouldn't want to single out individual things at this point. You know, I'll just say, you know, we all of us together have consistently tried to do what we think is best for the American people based on our tools and our objectives that Congress has given us. It's been very challenging because we've been in a situation of supply shocks really for six years and that's just a very different situation than for a very long time what the Fed and other central banks were doing all the time was demand management and, you know, there was always the inflation mandate but inflation was low for 25 years. So this is a very different world and a much more challenging one where you have to balance the two objectives. And by the way, central banks that have an inflation mandate have to do exactly the same thing because they're balancing economic activity. So that's been challenging and we've tried to do our very best through these really challenging times and I'm really proud of the work that I've done, that my colleagues and I have done during these years.
Now, to follow up on some of the discussion around Fed independence, can you explain to the public why this notion of Fed independence, which might sound kind of wonky to some, is so critical? I mean, what are the consequences if either the Supreme Court rules against Lisa Cook or the Fed in the future decides to make decisions more around the political calendar instead of the economic data?
Every major advanced economy in the world has made the same decision the United States has made and that is that they want to take the making of monetary policy, the setting of interest rates to support the economy to achieve maximum employment and price stability, they want to take that out of the direct control of elected politicians. And the reason is elected politicians are always running for election and they'll always want low rates and that will lead to inflation over time. So after literally centuries of experience with that, the whole world moved to the different model and it's worked great. I mean, this is the era in which inflation was under control for 40 years. Then we had the pandemic inflation everywhere in the world and now we have inflation that had gone pretty much all the way back to target, really close to all the way back to target and now is being buffeted by the energy shock and the US buffeted by the tariff shock as well. So but what I would say to the general public is that's the backstory is that don't think about an institution being independent. Think about it this way that you want people to make monetary policy and set interest rates to benefit the general public and to try to achieve economic goals which are maximum employment and price stability and focus only on that and ignore political considerations completely, ignore them. This isn't bipartisan. This is nonpartisan. So we just work directly for the American people doing these things. We don't think, 'Oh, I want to do this because the president says it's a good idea or because there's an election coming up and I want to speed up or slow down the economy.' I mean, think about that. If that's what we were doing, we'd have no credibility. Markets would lose faith in us and our ability to control inflation and any respect would be gone. And let me say, whatever people say, the markets believe that we will produce 2% inflation. If you look at longer-run expectations, markets believe that. There's no sense in which our credibility in the markets has weakened. It's just not the case. People do get it that this is our commitment and that we will achieve it and it's priced in. If you disagree with that, then you can go ahead and bet against the markets, but the markets are pricing in Fed credibility.
Thank you, Chair Powell. Richard Escobedo with CBS News. We talked a lot about gasoline prices and even you mentioned airline ticket prices, both of which are up dramatically because of the war in Iran. And so I wonder are you seeing that weigh down consumer spending in other parts of the economy? And if so, how worried are you that that will be a drag on growth?
You don't see it in spending yet. You really don't. I mean, as one of your colleagues said, the economy has been resilient. Really has. Not just this time, but it's been remarkably resilient for some years now. The US economy has just powered through shock after shock. And consumers are still spending. And that's what the banks will tell you, credit card companies will tell you, the retail sales numbers that we got most recently. People are still spending. And, you know, how long can that go on in a world where if gas prices were to go up a bunch more, that's taking otherwise spendable money out of people's pockets. But right now we don't actually see much slowdown in yet from certainly none from this. But you think logically you will because people have a certain amount of money to spend if they're spending 25% more on gas or something like that then, you know, that's going to come out of other spending. But we again we don't see it yet.
One last thing, you mentioned those economies in Southeast Asia that are particularly dependent on petroleum. They make a lot of the stuff that American consumers buy. So, was there any discussion today about whether or not those costs getting passed along to consumers is a real concern and whether or not that might push up inflation?
So, all of those things are in the models that we use to calculate inflation. So, you know, they're just parts. You can ask about anything like that and they have a place, the staff has a place where they're looking at that and pricing in what will happen with higher prices and that kind of thing. So it's there, the effects are not that big yet, you know, we're a huge economy, the import sector is only 10% of the economy so we're not like a European country where 50% of the GDP is in the external sector. We're also, you know, as I mentioned, we're an oil exporter so we're not the same kind of pain and we're not likely to feel the same kind of pain that economies in Western Europe and certainly in Asia are feeling. Anyway, thank you very much everyone. I will see you next time.
The stance of monetary policy as appropriate to promote progress toward our maximum employment and 2% inflation goals. Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook and we will remain attentive to risks to both sides of our dual mandate. I'll have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has been expanding at a solid pace. Consumer spending has been resilient and business fixed investment has continued to expand at a brisk pace. In contrast, activity in the housing sector has remained weak. In the labor market, the unemployment rate was 4.3% in March and has changed little in recent months. Job gains have remained low. A good part of the slowing in the pace of the job growth over the past year reflects a decline in the growth of the labor force due to lower immigration and labor force participation. Though labor demand has clearly softened as well. Other indicators including job openings, layoffs, hiring, and nominal wage growth generally show little change in recent months. Inflation has moved up recently and is elevated relative to our 2% longer-run goal. Estimates based on the consumer price index and other data indicate that total PCE prices rose 3.5% over the 12 months ending in March, boosted by the significant rise in global oil prices that has resulted from the conflict in the Middle East. Excluding the volatile food and energy categories, core PCE prices rose 3.2% over the 12 months ending in March. This relatively high rate largely reflects the effects of tariffs on prices in the goods sector. Near-term measures of inflation expectations have risen this year, likely because of the substantial rise in oil prices. 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 1/2 to 3 and 3/4%. The economic outlook remains highly uncertain and the conflict in the Middle East has added to this uncertainty. In the near term, higher energy prices will push up overall inflation. Beyond that, the scope and duration of potential effects on the economy remain unclear, as does the future course of the conflict itself. We will continue to monitor the risks to both sides of our dual mandate. 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. This is my last press conference as chair and I will close with a few thoughts. First, I want to congratulate Kevin Warsh on his advancement out of the Senate Banking Committee this morning. This is an important step forward and I wish him well as that process continues. The Federal Reserve exists for one fundamental purpose, to foster the economic conditions in which American families and businesses can thrive. Stable prices, a strong job market, and a financial system they can depend on. Every decision we make, whether about interest rates or regulatory and supervisory matters or other issues, is made in service of that purpose. Our decisions reflect the collective judgment of the Board of Governors and the Federal Open Market Committee, colleagues who demonstrate analytical rigor, principled judgment, and a genuine commitment to the public interest. Our collaborative and deliberative process has long reflected a shared commitment to finding common ground in service to our mission. This institution is resilient, capable, and staffed by professionals of extraordinary talent and exceptional dedication. It has been a privilege to serve alongside so many great public servants at the Board of Governors and around the Federal Reserve system. The Fed's work is only as effective as the public's understanding of it. And you, the press, are essential to keeping the public informed about what we do and why. The people we serve benefit from your careful reporting. I welcomed the announcement last Friday by the US Attorney for the District of Columbia that she had closed the criminal investigation. She also noted, however, that she would not hesitate to restart the investigation. Over the weekend, the Department of Justice provided assurances that they will not reopen the investigation unless there's a criminal referral from the Fed's inspector general. And absent such a referral, if they do appeal the recent court decision, they would not seek, as part of that appeal to restart the investigation or send new subpoenas. I've said that I will not leave the board until this investigation is well and truly over with transparency and finality and I stand by that. I'm encouraged by recent developments and I'm watching the remaining steps in this process carefully. My decisions on these matters will continue to be guided entirely by what I believe is in the best interest of the institution and the people we serve. After my term as chair ends on May 15, I will continue to serve as a governor for a period of time. To be determined, I plan to keep a low profile as a governor. There is only ever one chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in, he will be that chair. Once sworn in as board chair, his new colleagues will elect him to chair the FOMC as well. As I regularly point out from this podium, our success in delivering our goals matters for all Americans. I'm confident that the Fed will continue to do its work with objectivity, integrity, and a deep commitment to serve the American people. Thank you, and I look forward to your questions.
Thank you, Mr. Chair. Appreciate the kind words about the press. Doesn't come from the podium in different places but appreciate that. Can you talk about what has gone into your decision to remain on the board? What kind of criteria are you weighing and how long might you stay? Thank you.
Sure. So, you know, my concern is really about the series of legal attacks on the Fed which threaten our ability to conduct monetary policy without considering political factors. And I want to note here this has nothing whatever to do with verbal criticism by elected officials. I've never suggested that such verbal criticism is a problem and neither has anyone else here. But these legal actions by the administration are unprecedented in our 113-year history. And there are ongoing threats of additional such actions. I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political factors. It is so important for our economy, for the people that we serve, that they can depend over time on a central bank that operates that way, free of political influence. It's part of the absolute foundation of this amazing economy that we have. It's just one of the many reasons why the US economy is the envy of the world. That piece of institutional architecture separates successful countries from unsuccessful countries. It is extremely important, not for the people who work at the Fed at any given time, but for the people that we serve, that the Fed remain able to conduct monetary policy in a way that doesn't get pulled into politics trying to help or hurt any particular politician or political party. It's critical for the people that we serve. In terms of when I would leave, I will leave when I think it's appropriate to do so. Was that all your questions or was that...
Well, I just have a follow-up which is what would you say to the criticism that by remaining on the board you're actually taking a political act and denying President Trump the majority of the board which as president he would have if you left.
I don't see that at all. As I mentioned, I'm literally staying because of the actions that have been taken. I had long planned to be retiring. And, you know, the things that have happened in really in the last three months have, I think...
Left me no choice but to stay until I see them through at least that long. In addition, I don't see how this will interfere. My intention is not to interfere. I was a governor for almost six years, and the tradition is at the Fed that governors understand how difficult the role of chair is. As a soon-to-be former chair, I do understand how hard it is to get consensus with 19 strong-minded people. You work with the chair. You try to be heard, but also collaborate with the chair and try to support the chair when you can. When you can't, you can't. And I think that's the attitude that people generally take, and that's the attitude that I'll take.
Chair Powell, if I could ask about the inflation outlook. In March, you described the standard practice of looking through energy shocks as conditional on inflation expectations staying anchored. Since that meeting, there has been very little progress reopening key energy trade corridors. Can you help us understand how the inflation outlook has changed in the intermitting period, beginning with the prospects for tariff pass-through resolving on the timeline that you had outlined in March before getting to the energy shock that is now on top?
So, I would look at it this way. For a long time, we've been working on the hypothesis that tariffs would lead to a one-time price increase and that that would go away over time. In other words, that there would be no further change. So, measured inflation wouldn't reflect that higher level going up more and more. And it's time for that to happen. We really do expect that to be happening in the next two quarters. So we'll be watching very carefully to see that what we've thought all along would happen. That's the kind of critical part of the forecast. We need to really see that. With energy, it's so hard to say. I mentioned, you know, in the textbook you would look through an oil shock because they tend to be short-lived and they tend to revert and monetary policy works with long and variable lags. So you wouldn't necessarily react right away. I think that is all the more true given that we're several years above 2% inflation and that we're already looking through the tariff shock. So I think we're going to be very cautious about that. But the question about looking through energy really is not in front of us right now. It hasn't even peaked yet and I think we'd want to see the backside of that and progress on tariffs before we even thought about reducing rates.
If I could follow up, the statement today preserves language that has taken on some meaning as it was socialized when the committee was actively lowering rates. Why is that easing bias still ripe given how different the inflation outlook is now versus a meeting or two ago and what more would have to happen for it to get evicted?
So, that was, as you will recall, we had a discussion about that at the last meeting and we talked about it in the press conference after the March meeting. We had the same today. We had quite a vigorous discussion about that very issue and the guidance and is it still appropriate and that kind of thing. And I would say that the number of people on the committee who either could support that language change to a more neutral stance so that a hike is as likely as a cut, that number has increased over the intermitting period and it's easy to see why. I mean, it's a good question, right? You see inflation has moved up over the interim a bit, core inflation's 3.2 now, moving albeit just a little bit in the wrong direction and we know that there will be headline inflation coming out of the Gulf and we don't know how much that will be. We're going to need to see. So, it makes all the sense in the world that people would look at that and we'd have a vigorous discussion about that. You saw that three people dissented over the language. I think all of those people agreed with the rate decision. So the majority of the committee did not want to do that and I didn't think we needed to do it at this meeting. It really was just a question of why do we need to do that now? We have so much to learn. There's so much uncertainty about the path ahead. There doesn't need to be any rush to make that decision now because what happens in the next 30, 60 days, even by the next meeting, could really change the picture around that language. So it was a much closer thing on the committee than it was in March. That makes all the sense in the world, it seems to me.
Claire Jones, Financial Times. Just going back to this issue of the easing bias. We've now got oil approaching $120 a barrel when it comes to the benchmark Brent crude. If it stays around those levels six weeks from now, what would be your best guess as to whether the easing bias will still be in the statement?
I wouldn't want to guess. Well, first of all, we're going to have new leadership in all likelihood by then and new leadership is going to have a very important role to play in that. So, I won't be standing here at this podium to answer your question. So, I don't know. As I mentioned, that's all I can really say is that we had a great discussion about that today. It's gotten to be a better question in the interim period. We had the discussion, a majority are still on the page of not feeling the need to move to that level. And that's where I am. I get it though. At a certain point you would move and that conceivably could come as soon as the next meeting.
Thank you. Just a follow-on. The new leadership also seem rather lukewarm on press conferences and on the dot plots. What would your advice to him be on these communication tools?
So I'm not going to give him any advice through you today here. But I think communications generally is, I think every incoming chair takes a look at communications and it's a very healthy thing. I mean, communications is very complex and you can always be looking at new things and if that happens, feels like it's going to happen, that's a completely appropriate thing.
Hi Chair Powell, Mariela Capuro with Axios. Can you tell us if you've been in touch with incoming Chairman Worsh? To what extent is this a normal transition process versus all the things swirling around, something unusual? And what can we expect when he takes that podium in a few weeks?
I haven't seen him since seeing him at a dinner in January where I congratulated him and had a nice chat with him. Haven't seen him. I don't know what a normal process is. The last process was with Janet Yellen with whom I had worked for six years and so we were sitting down the hall from each other. So, it was a very different thing. I think this is and will be a very normal standard kind of a transition process. So, that's what I expect. I have every reason to think it will be.
Quick follow up. Is the Supreme Court ruling on Governor Cook a factor in when you may leave as a governor?
I wasn't thinking of it as such, but no, not really. I mean, I'm thinking more of the other things I mentioned.
Hi. Thanks for taking our question. I wanted to ask a question about your tenure. Chris Rugaber at Associated Press. During your tenure as chair, you often spoke about how disadvantaged Americans benefited from extended periods of low unemployment. And the new framework the Fed adopted in 2020, some economists say elevated the Fed's employment mandate. Are you worried that the pandemic inflation spike that followed will make future Fed chairs more reluctant to pursue a hot jobs market and should they be?
I don't know the answer to that. I mean, what we experienced in the mid-teens was really low levels of unemployment for a long period of time and no reaction from inflation and we all very much took notice of that. We also noticed that the biggest wage gains were going to people at the bottom end of the income spectrum. And we had many reports of, I mean it felt like a fairly stable equilibrium and a lot of benefits were flowing to people at the bottom end of the income spectrum including companies were setting up in and people who were confined and training them before they got out and it was a very healthy sort of set of societal dynamics. So of course I think anybody would love to get back to that. I don't think that anything that happened to create the global pandemic inflation was in any way related to overweighting the employment market. I mean, it was a global shock that happened essentially very similarly all over the world that had to do with closing, reopening, stimulus and all that. And I mean, you could look at a graph of 10 big economies on the page and not know which was the US and which was Germany, France and things like that. So I don't think that that insight was in any way responsible for the high inflation that we experienced. So I mean I think it's always been a balance. You've got to be strong on both of our dual mandates and we just for example now we don't feel that the labor market is at all a source of inflation. So we don't need to be worrying about that. It's been a long time since we have had to worry about that. Well, actually during the pandemic recovery, the labor market was super overheated and tight and that's when we had to worry about it. But not now.
And just on the other issue, would you need, do you need more assurance from the Justice Department before stepping down? Is that what you're waiting for or what else?
