Jerome Powell LIVE: Federal Reserve Bank Interest Rate Decision | FOMC Meeting | US Market | N18G

Good afternoon. My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. Our economy has made considerable progress toward both goals over the past two years. The labor market has come into better balance and the unemployment rate remains low. Inflation has eased substantially from a peak of 7% to 2.5%. We are strongly committed to returning inflation to our 2% goal in support of a strong economy that benefits everyone. Today, the FOMC decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures. We are attentive to risks on both sides of our dual mandate, and I will have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that economic activity has continued to expand at a solid pace. GDP growth moderated to 2.1% in the first half of the year, down from 3.1% last year. Private domestic final purchases, or PDFP, which excludes inventory investment, government spending, and net exports and usually sends a clearer signal of underlying demand, grew at a 2.6% pace over that same period. The first half growth of consumer spending has slowed from last year's robust pace but remains solid. Investment in equipment and intangibles has picked up from its anemic pace last year. In the housing sector, investment stalled in the second quarter after a strong rise in the first. Improving supply conditions have supported resilient demand and the strong performance of the US economy over the past year. In the labor market, supply and demand conditions have come into better balance. Payroll job gains averaged 177,000 jobs per month in the second quarter, a solid pace but below that seen in the first quarter. The unemployment rate has moved up but remains low at 4.1%. Strong job creation over the past couple of years has been accompanied by an increase in the supply of workers, reflecting increases in participation among individuals aged 25 to 54 years and a strong pace of immigration. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic: strong but not overheated. Inflation has eased notably over the past two years but remains somewhat above our longer-run goal of 2%. Total PCE prices rose 2.5% over the 12 months ending in June. Excluding the volatile food and energy categories, core PCE prices rose 2.6%. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing, and transportation. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. In support of these goals, the committee decided at today's meeting to maintain the target range for the federal funds rate at 5.25% to 5.5% and to continue reducing our securities holdings. The labor market has cooled and inflation has declined. The risks to achieving our employment and inflation goals continue to move into better balance. Indeed, we're attentive to the risks to both sides of our dual mandate. We have stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%. The second quarter's inflation readings have added to our confidence, and more good data would further strengthen that confidence. We will continue to make our decisions meeting by meeting. We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation. At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment. In considering any adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks. As the economy evolves, monetary policy will adjust in order to best promote our maximum employment and price stability goals. If the economy remains solid and inflation persists, we can maintain the current target range for the federal funds rate as long as appropriate. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. The Fed has been assigned two goals for monetary policy: maximum employment and stable prices. We remain committed to bringing inflation back down to our 2% goal and to keeping longer-term inflation expectations well anchored. Restoring price stability is essential to achieving maximum employment and stable prices over the longer run. Our success in delivering on these goals matters to all Americans. We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions.

Thank you. On September, let me say this: we have made no decisions about future meetings, and that includes a September meeting. The broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. In that, we will be data dependent but not data point dependent. So it will not be a question of responding specifically to one or two data releases. The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September. You asked why not today. I would just say again that the broad sense of the committee is that we're getting closer to the point at which it will be appropriate to reduce our policy rate, but that we're not quite at that point yet.

I would think about it this way. I'll give an example of cases in which it would be appropriate to cut and maybe that it wouldn't be appropriate to cut. If we were to see inflation moving down quickly or more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with its current condition, then I would think that a rate cut could be on the table at the September meeting. If inflation were to prove stickier and we were to see higher readings, disappointing readings, we would weigh that along with the other things. I think it's going to be not just any one thing; it's going to be the inflation data, the employment data, the balance of risks as we see it, the totality of all of that that helps us make this decision.

I think it's just a question of seeing more good data. We have seen the last couple of readings have certainly added to confidence, and we've seen progress across all three categories of core PCE inflation: goods, non-housing services, and housing services. So it's really just that we had a quarter of poor inflation data at the beginning of the year, then we saw some more good inflation data. We had seven months at the end of last year. We just want to see more and gain confidence. As I said, we did gain confidence, and more good data would cause us to gain more confidence.

I would just say the path ahead is going to depend on the way the economy evolves, and I can't really give you any better forward guidance on it than that. We didn't do an SEP at this meeting; we will do another one at the September meeting. I would just say I can imagine a scenario in which there would be everywhere from zero cuts to several cuts, depending on the way the economy evolves, and I wouldn't want to lay out a baseline path for you there today. I've said what I can say about September and about today.

This is the very reason that we're thinking about that we've said in our statement that we're going back to looking at both mandates and that we think the risks are coming back into balance. We think what the data broadly show in the labor market is an ongoing gradual normalization of labor market conditions, and that's what we want to see. We've seen that over a period of a couple of years, a move from overheated conditions to more normal conditions. We are watching labor market conditions quite closely, and that's what we're seeing. If we start to see something that looks to be more than that, then we're well positioned to respond. That's part of what we're thinking.

Growth isn't one of our three; we have two mandates, as you know. The labor market, maximum employment, is one, and stable prices is another. So we weigh those two things equally under the law. When we were far away from our inflation mandate, we had to focus on that. Now we're back to a closer to even focus. So we'll be looking at labor market conditions and asking whether we're getting what we're seeing. As I said, we're prepared to respond if we see that it's not what we wanted to see, which was a gradual normalization of conditions. If we see more than that, and it wouldn't be any one statistic, although the unemployment rate is generally thought to be a good single statistic, we'd be looking at wages, participation, surveys, quits, hires, all of those things to determine the overall status of the labor market. But we're looking at it now. I would say again, I think you're back to conditions that are close to 2019 conditions, and that was not an inflationary economy. Broadly similar labor markets then, I think core inflation was actually running below 2%. So I don't now think of the labor market in its current state as a likely source of significant inflationary pressures. I would not like to see material further cooling in the labor market, and that's part of what's behind our thinking. The other part, of course, is that we have made real progress on inflation, and we've got growing confidence there that we are not quite there yet, but we're getting more confident that we're on a sustainable path down to 2%. So those two things are working together, and we're factoring both into our policy.

I wouldn't say I wouldn't want to see any other cooling. It would be more of a material difference. We'd be looking at this, and if we see something that looks like a more significant downturn, that would be something we would have the intention of responding to. In terms of preemptive cuts, I don't think of it that way. I think of it as we're actually in a good place here. We're balancing these two risks: go too soon and you undermine progress on inflation, wait too long or don't go fast enough and you put at risk the recovery. So we have to balance those two things. That's the nature of having two mandates, and I think this is how we balance them. It's a rough balance, but it does feel like the labor market is in a place where it's just a process of ongoing normalization.

I think all of the data points continue to point to the direction we would want to see. There was a decline in job openings, that was good. Today's ECI reading was a little softer than expected, so that's a good reading. It shows that wage increases are still at a strong level, but that level continues to come down to more sustainable levels over time. That's exactly the pattern that we want to be seeing. So I think the data we've been seeing in the labor market are broadly consistent with that normalization process. Again, we're closely monitoring to see whether it starts to show signs that it's more than that.

I can't really say that honestly. We've seen significant movement in the labor market, and we're very mindful of this question of is it just normalization or is it more? We think it's just more normalization, but we want to be in a position to support the labor market at the same time we're seeing progress on inflation. We raised rates a year ago at the July meeting, and if you look at the situation in the economy a year ago, inflation was over 4%. It was a completely different economy. Now we've made a lot of progress, and the labor market, as you know, unemployment was in the mid-3s, so it's a different economy. I think it's time, it's coming to be time to adjust that so that we support this continued process. The thing we're trying to do is that we've had this really significant decline in inflation, and unemployment has remained low. This is a really unusual and historically unusual and such a welcome outcome for the people we serve. What we're thinking about all the time is how do we keep this going. We think we don't need to be 100% focused on inflation because of the progress we've made. 12-month headline at 2.5%, core at 2.6%, it's way down from where it was. The job is not done on inflation, but nonetheless we can afford to begin to dial back the restriction in our policy rate. I think we're just part of a process in terms of what that looks like. I mean, I think most rate, you would think in a base case that policy rates would move down from here, but I don't want to try to give specific forward guidance about when that might be or the pace at which it might happen, because I think that's really going to depend on the economy and that's highly uncertain.

Actually, what we're seeing now is a little better than what we saw last year. Last year, a whole lot of the progress we saw was from goods prices which were going down at an unsustainable rate, disinflation at an unsustainable rate. This is a broader disinflation. This has goods prices coming down, but it's also now seeing progress in the other two big categories: non-housing services and housing services. So the thing is, we've only got one quarter of that. We had seven months of low inflation, you got one quarter of this. I would say the quality of this is higher and it's good, but so far it's only a quarter. So I think we need to see more to know that we're on a good path down to 2%. But as I mentioned, our confidence is growing because we've been getting good data, and things like the ECI report and frankly the softening in the labor market conditions give you more confidence that the economy is not overheating. It doesn't look like an overheating economy, and it looks like an economy that's normalizing.

The thing about if that is seasonality, and it could just be very hard to do appropriate seasonal adjustments. If that's what it is, then that actually implies that other months were underreporting too low inflation. If you smooth it out, it's a zero-sum game. That's why we look at 12 months, because that takes all those effects out. 12-month now is 2.5% headline, 2.6% core. This is so much better than where we were even a year ago. It's a lot better. Now, the job is not done, I want to stress that, and we're committed to getting inflation sustainably down to 2%. But we need to take note of that progress, and we need to weigh the risks to the labor market and the risks to our inflation target now more equally than we did a year ago.

I think that we've been given an assignment by Congress. This is how we serve the American people, by achieving maximum employment and price stability. In our statement on longer-run goals and monetary policy strategy, we look at the two goals. If one of them is farther away than the other, the two variables, inflation and employment, if one is farther away from its goal than the other, then you concentrate on the one that's farther away. For the last couple of years, the best service we could do to the American people was to focus on inflation. But as inflation has come down, and I think the upside risks to inflation have decreased, as the labor market has cooled off, and now the labor market has softened, probably inflation is a little farther from its target than is employment. But I think the downside risks to the employment mandate are real now. So we have to weigh all that. If you think about where that takes us, we have a restrictive policy rate. It's clearly restrictive. It's been the rate we've had in place for a full year, and the time is coming, as other central banks around the world are facing the same question, the time is coming at which it will begin to be appropriate to dial back that level of restriction so that we may address both mandates well.

Certainty is not a word that we have in our business. We get a lot of data between now and September, and it isn't going to be one data read or even two. It's going to be the totality of the data, all of the data, and how that is affecting the outlook and the balance of risks. That's going to be the assessment that we do. Of course, we'll all look carefully at the employment report, but so much other data coming in and so much happening between now and the September meeting, and we'll make a judgment.

We'll look at everything. We've seen some tendency to have a narrowing base of job creation in some months going back, but then we've had some months where job creation was broader. Also, the headline number of jobs has come down. You look at the whole thing, and I think you do look at private demand extra carefully to your point about government. So we'll just be looking at all those things.

The objective is to balance the two risks: the risk of going too soon and the risk of going too late. We had seven months of good inflation data at the end of last year. We said we wanted to see more. We pointed out that too much of this was coming from goods, and sure enough the first quarter wasn't great inflation. And now we've got another quarter, a quarter that is good. We're balancing the risk of going too soon against the risk of going too late. That's what we're doing. There's no guarantee in this. It's a very difficult judgment call, but this is how we're making it. In terms of today, your question about today, we did have a nice conversation about this issue today. The overall sense of the committee, as I mentioned, is that we're getting closer to the point at which it'll be appropriate to begin to dial back restriction, but we're not quite at that point yet. We want to see more good data. The decision was unanimous, all 19 participants supported it. But there was a real discussion back and forth of what the case would be for moving at this meeting. A strong majority supported not moving. That was the strong sense of the committee, but it's a conversation that we had today.

Yes, it does. I think the lags have kind of showed up here in the last six months. You really do now see the restriction, whereas even a few months ago people were questioning how restrictive policy was. Look at the labor market now, and look at rate-sensitive spending. You really do see now that policy is restrictive. I wouldn't say it's extremely restrictive, but it's certainly effectively restrictive. The lag should be on the way down. It should take some time to get into the full economy, affect financial conditions, and that affects economic activity, hiring, and ultimately inflation. It's not instantaneous, although it's faster than it used to be because markets move now in anticipation of our moves.

We have to worry about that. It's a very difficult, challenging judgment. We didn't want to go too soon, and we don't want to go too late. But this is how we've made that judgment. I feel good about where we are. We're certainly very well positioned to respond to weakness with the policy rate at 5.3%. We certainly have a lot of room to respond if we were to see weakness. That's not what we're seeing though. Look at the first half growth numbers, PDFP at 2.6% for the first half. It's not signaling a weak economy. It's also not signaling an overheating economy. The labor market, admittedly the unemployment rate has moved up 7/10, and we're seeing normalization there. But wage increases are still at a high level, unemployment is still at a low level, layoffs are very low, initial claims have moved up but they're pretty stable and historically not high at all. So the total scope of the data suggests a normalizing labor market. Again, we are carefully watching to see that that continues to be the case.

The question really is one of are we worried about a sharper downturn in the labor market. The answer is we're watching really carefully for that. We're aware of that rule, which is really a statistical regularity that has happened through history. It's not like an economic rule where it's telling you something must happen. Again, what do we see? What are our eyes telling us? We look at all the things we're seeing, and what it looks like is a normalizing labor market. Job creation at a pretty decent level, wages moving up at a strong level but coming down gradually, job vacancies have come down but they're still high by historical standards. So again, what we think we're seeing is a normalizing labor market. We're watching carefully to see if it turns out to be more. If it starts to show signs that it's more than that, then we're well positioned to respond.

History doesn't repeat itself, it rhymes. That statement is very true about the economy. You never assume it's going to be just the same. An example would be, is there a trend increase in the level of vacancies? There are many, many examples. So it's never exactly the same. Also, let's remember that this pandemic era has been one in which so many apparent rules have been flouted, like the inverted yield curve for starters. So many received pieces of wisdom just haven't worked, and it's because the situation really is unusual or unique in that so much of this inflation came from the shutdown in the economy and the resulting supply problems in the face of admittedly very strong demand. So the whole situation is not the same as many of the other prior inflation or downturns or business cycles that we've seen. So we're having to be very careful about the judgments that we make. We don't assume that these regularities will just repeat themselves automatically.

I do take that seriously. The Beige Book is great. What's even greater is hearing the Reserve Bank presidents come in and talk about their conversations with businesses, business leaders, workers, and people in the non-private sector in their districts. But I'll tell you, the picture is not one of a slowing or really bad economy. It's one of spots of weakness and regions where growth is stronger than other regions. But overall, look at the aggregate data. Aggregate data, particularly PDFP, private domestic final purchases, is 2.6%, and that's a good indicator of private demand. So we listen to all of that, and it's important to listen to anecdotal data and not just look at the aggregate data, especially because GDP data can be volatile quarter to quarter. It's just hard to measure economic activity. So I look at both, but I wouldn't say that the anecdotal data is uniformly downbeat. It's more mixed.

I absolutely do. First of all, we haven't made any decisions. I would say it this way: haven't made any decision about any future meeting. I don't know what the data will reveal or how that will affect the appropriate path of our policy. I really don't know. I do know how we will make that assessment. That's what I do know. If you take a step back, the current situation again is inflation has come down much closer to our goal, and that's happened while unemployment has remained low. We're very tightly focused on using our tools to try to foster that state of affairs continuing. That's at each of our meetings, and all of our decisions are focused strictly on that and really on nothing else. Doing our part, whatever that part may be. We're using our best thinking, we're doing our best to understand the economy. We follow academics, we follow the many commentators who bless us with their commentary. But we don't change anything in our approach to address other factors like the political calendar. Congress has, we believe, ordered us to conduct our business in a non-political way at all times, not just some of the time. I'll say this too: we never use our tools to support or oppose a political party, a politician, or any political outcome. The bottom line is if we do our very best to do our part and we stick to our part, that will benefit all Americans. If we get it right, the economy will be stronger, we'll have price stability, people will find jobs, wages will rise in real terms, everyone will benefit. So that's what we believe, and that's how we will always act. This is my fourth presidential election at the Fed. I can tell you this is how we think about it, this is what we do. So anything that we do before, during, or after the election will be based on the data, the outlook, and the balance of risks, and nothing else.

No, we do not do that. We absolutely do not do that. We don't know who's going to win. We don't know what they're going to do. We don't act as though we know, and we just can't do that. We basically have our forecast. We can run simulations of different potential policies, but we would never try to make policy decisions based on the outcome of an election that hasn't happened yet. That would just be a line we would never cross. We're a non-political agency. We don't want to be involved in politics in any way, so we wouldn't do that.

There are always meaningful differences. We talk a lot before, during, and after the meeting. We do have a very robust discussion of these things. You're right that in most cases, if people feel heard and they feel that their position has been given serious consideration, for most people most of the time that's going to be enough. There are dissents, that's fine. No one has a veto. No single person has a veto. So it just is a question of who will vote for and against. We haven't had so many during the pandemic era, and it just may be that we felt more united because we felt under a lot of pressure to get things right. But before the pandemic, we had plenty of dissents. Dissents happen, it's part of the process. There's nothing wrong with a dissent, and if it happens, it happens.

I don't want to be really specific about what we're going to do, but that's not something we're thinking about right now. Of course, I haven't made any decisions at all as of today.

The way the meeting is set up, the first there's a discussion of financial stability because it's every other meeting we have that, and then we have an opportunity to comment on that. Then we have an economic go-around, and then this morning we have the monetary policy go-around. I think in people's economic go-around and in their monetary policy go-around, people express their views about this. There's a range of views. People, as you will know from the speeches that they give, have different ways of thinking about the economy. In the minutes, we'll lay this out in a much better way than I can do off the cuff, but there's a range of perspectives. But I do think that we are a consensus-driven organization. People come together. This was a unanimous decision, and at the end everyone supported the outcome, not just the voters but everyone. I would also say some people examined the possibility, the case for moving at this meeting, but overwhelmingly the sense of the committee was not at this meeting, but as soon as the next meeting depending on how the data come in. But there is a growing sense of confidence that you could move at the next meeting assuming inflation comes well, assuming that the totality of the data support such an outcome. No question that is the case. As I mentioned, we think that the time is approaching, and if we do get the data that we hope we get, then a reduction in our policy rate could be on the table at the September meeting.

This is the judgment that we have to make, and we're well aware of the judgment. As I've said, we have to weigh the risk of going too soon against the risk of going too late. If we go too soon, we had a lot of advice to go ahead and cut after the seven good months of last year. We didn't. We said we needed to see more. Then we saw some higher inflation. We've seen one quarter of good inflation, and we've seen the labor market move quite a bit. As I mentioned, I don't think it needs to cool off anymore for us to get the inflation results that are related to the labor market. Not all inflation is, of course. So I think it's a difficult judgment to make, and what you see is the judgment of the committee is that that time is drawing near. That time could be in September if the data support that. Have the chances of a hard landing increased? I don't know whether they've increased. I think they're low. I think this is, you don't see any reason to think that this economy is either overheating or sharply weakening. That's just not in the data right now. What's in the data right now is an economy that's growing at a solid pace, a labor market that has cooled off, but nonetheless unemployment is low. The data overall show a strong labor market. So that's really what you see. It's neither an overheating economy nor is it a sharply weakening economy. It's kind of what you would want to see. But of course, the job is never done. We're watching to see which way the economy heads, and I think we're well equipped to respond to weakness if we need to. But that's not what we're seeing. What we're seeing is strong economic activity, a good labor market, and inflation coming down.

I think the reality is that forecasters, and this isn't just the Fed by any means, have been continually surprised by, for example, the strength of the economy last year. So I think we have to be pretty humble about giving forward guidance about this and that. The other thing is we need to be pretty careful about that. When you're saying you're going to be data driven, of course it's always what the data, how they affect the outlook and the balance of risks. But nobody has great vision deep into the future. In terms of reaction function, that's a long-time discussion that people have had forever. I think people have understood for a long time actually that we were very focused on bringing down inflation. Nobody was really confused about that. The data have again, you've seen significant improvement in inflation just for the last quarter. Markets move around on that data really not so much. It's not really what we're going to do. It's more just that the data keep coming in, and markets are very responsive to that data right now.

It's not something that comes up at all in the FOMC. More broadly, digital finance is an area that has really significant implications for payments generally, instant payments, and it's something that's going to really change the way, make more efficient and hopefully safer, the way payments are made around the world. We have people who are researching that and trying to keep up to speed because we play an important role in the payments sector, both as a convener and as an operator too. In terms of a CBDC, there's really nothing new going on. There's not much going on at all. We don't have the authority to issue a retail CBDC that's available to the public. We're not seeking that authority. What we're doing is keeping up with developments there. Pretty much every major central bank in the world is at least doing that. Some of them are actually seriously looking at implementing a CBDC. We're really not. We're really just evaluating the story and what's happening out there. I think it's work that we need to be doing, which could be very beneficial down the road. But on a CBDC, we don't have any plan to. We would need to go to Congress, and we have no plan to do that. No one here has decided that we think it's a good idea yet. Thank you.