FOMC Press Conference with Jerome Powell - 13th June 2018 @ 19:30 PM UK

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Thanks very much for being here. Yeah, I know that a number of you will want to talk about the details of our announcement today, and I'm happy to do that in a few minutes. But because monetary policy affects everyone, I want to start with a plain English summary of how the economy is doing, what my colleagues and I at the Federal Reserve are trying to do, and why. The main takeaway is that the economy is doing very well. Most people who want to find jobs are finding them, and unemployment and inflation are low. Interest rates have been low for some years while the economy has been recovering from the financial crisis. For the past few years, we've been gradually raising interest rates, and along the way we've tried to explain the reasoning behind our decisions. In particular, we think that gradually returning interest rates to a more normal level as the economy strengthens is the best way the Fed can help sustain an environment in which American households and businesses can thrive. Today we've taken another step in that process by raising our target range for the federal funds rate by a quarter of a percentage point. My colleagues and I meet eight times a year and take a fresh look each time at what is happening in the economy and consider whether our policy needs adjusting. We don't put our interest rate decisions on hold or on autopilot because the economy can always evolve in unexpected ways. History has shown that moving interest rates either too quickly or too slowly can lead to bad economic outcomes. We think the outcomes are likely to be better overall if we are as clear as possible about what we're likely to do and why. To that end, we try to give a sense of our expectations for how the economy will evolve and how our policy stance may change. As Chairman, I hope to foster a public conversation about what the Fed is doing to support a strong and resilient economy. One practical step in doing so is to have a press conference like this after every one of our scheduled FOMC meetings, and we're going to do that beginning in January. That will give us more opportunity to explain our actions and to answer your questions. I want to point out that having twice as many press conferences does not signal anything about the timing or pace of future interest rate changes. This change is only about improving communications. My FOMC colleagues and I will also continue to issue our economic projections on the existing quarterly schedule. Now let me go into more detail over developments in the economy, our economic projections, and our policy decision. Economic growth appears to have picked up in the current quarter, largely reflecting a bounce-back in household spending. Business investment continues to grow strongly, and the overall outlook for growth remains favorable. Several factors support this assessment: fiscal policy is boosting the economy, ongoing job gains are raising incomes and confidence, foreign economies continue to expand, and overall financial conditions remain accommodative. These observations are consistent with the projections that committee participants submitted for this meeting. The median projection for the growth of real GDP is 2.8 percent this year, 2.4 percent next year, and 2 percent in 2020. Compared with the projections made in March, this median growth path is little changed. In the labor market, job gains averaged 180 thousand per month over the past three months, well above the pace needed in the longer run to provide jobs for new entrants into the workforce. The unemployment rate declined over the past two months and stood at 3.8 percent in May, its lowest level in nearly two decades. Meanwhile, the labor force participation rate has been roughly unchanged since late 2013. That is a positive sign, given that the aging of our population is putting downward pressure on the participation rate. We expect the job market to remain strong. As you can see in our Summary of Economic Projections, the median of committee participants' projections for the unemployment rate stands at 3.6 percent in the fourth quarter of this year and runs at 3.5 percent over the next few years, a percentage point below the median estimate of its longer-run normal rate. This median path is just a bit lower than that for March. After many years of running below our 2 percent longer-run objective, inflation has recently moved close to that level. Indeed, overall consumer prices as measured by the price index for personal consumption expenditures increased 2 percent over the 12 months ending in April. The core PCE index, which excludes prices of energy and food and tends to be a better indicator of future inflation, rose 1.8 percent over the same period. As we had expected, inflation moved up as the unusually low readings from last March dropped out of the calculation. The recent inflation data have been encouraging, but after many years of inflation below our objective, we do not want to declare victory. We want to ensure that inflation remains near our symmetric 2 percent longer-run goal on a sustained basis. As we note in our Statement of Longer-Run Goals and Monetary Policy Strategy, the committee would be concerned if inflation were running persistently above or below our 2 percent objective. Of course, many factors affect inflation, some temporary and others more lasting, and at any given time inflation may be above or below 2 percent. For example, the recent rise in oil prices will likely push inflation somewhat above 2 percent in coming months, but that transitory development should have little if any consequence for inflation over the next few years. The median of participants' projections for inflation runs at 2.1 percent through 2020. Relative to the March projections, the median inflation projection is a little higher this year and next. As I mentioned, today we took another step in gradually scaling back monetary policy accommodation by raising the target range for the federal funds rate by a quarter percentage point, bringing it to 1.75 to 2 percent. We also made some changes to our policy statement, reflecting that policy normalization is proceeding broadly as we have expected. None of these changes signals a change in our policy views. For example, we removed the language stating that "the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run." Since we introduced that language a few years ago, the economy has strengthened and the committee has raised the federal funds rate from near zero to 1.75 to 2 percent. As we continue to note in our statement, we expect to make further gradual increases in that rate. As a result, if the economy evolves broadly as we anticipate, the federal funds rate will over the next year or so move well within the range of estimates of the normal long-run level. Therefore, we thought that now is an appropriate time to remove this forward guidance from our policy statement. We continue to believe that a gradual approach for increasing the federal funds rate will best promote a sustained expansion of economic activity, strong labor market conditions, and inflation near our symmetric 2 percent goal. We are aware that raising rates too slowly might raise the risk that monetary policy would need to tighten abruptly down the road in response to an unexpectedly sharp increase in inflation or financial excesses, jeopardizing the economic expansion. Conversely, if we raise interest rates too rapidly, the economy could weaken and inflation could continue to run persistently below our objective. The committee's gradual approach is reflected in participants' projections for the appropriate path for the federal funds rate. The median projection for the federal funds rate is 2.4 percent at the end of this year, 3.1 percent at the end of 2019, and 3.4 percent at the end of 2020. By 2020, the median federal funds rate is modestly above its estimated longer-run level. These projections are very similar to those made in March, although the median federal funds rate edged up this year and next. Most participants did not revise their projections. I'll conclude by mentioning two additional matters. First, our program for reducing our balance sheet, which began in October, is proceeding smoothly. Barring a material and unexpected weakening in the outlook, this program will proceed on schedule, and our balance sheet will continue to shrink. As we have said, changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy. Finally, as discussed in the minutes of our May meeting, we're making a small technical adjustment in one of our tools for implementing monetary policy. To keep the federal funds rate in the target range, we rely on the rate of interest on excess reserves, or the IOER. Up until now, we have set the IOER rate at the top of the target range for the federal funds rate. In recent months, the federal funds rate has moved up toward the IOER rate as short-term interest rates have risen more generally. So to move the federal funds rate closer to the middle of the target range, we are now setting the IOER rate five basis points below the upper end of the target range. This minor technical adjustment has no bearing on the appropriate path for the federal funds rate or financial conditions more generally. Thanks for listening, and I'll be happy to take your questions.

Sure. So since March, I wouldn't say anything has happened to really change the way I'm thinking about inflation or the way the committee's thinking about inflation. We've seen inflation move very gradually up toward our 2 percent objective. Part of that has been just idiosyncratic things dropping out from last March which were holding measured inflation down. Part of it is just that continued tightening in the labor market and the economy more broadly is pushing inflation up. So we continue to think, and the committee continues to think, that we are just about at our 2 percent goal, but as I mentioned, not ready to declare victory until we sustain that over time, which we haven't done yet. You also asked about fiscal policy. There's a range of views on the committee, and I think more broadly a range of views among economists generally. But I can say that the committee participants generally believed that the fiscal changes, which includes both the tax cuts (individual and corporate) and the spending changes, will provide meaningful support to demand, significant support to demand over the course of the next three years. The other question is what about the supply side. So it makes sense that if you lower corporate tax rates and allow faster expensing of investment, you will encourage greater investment. That should drive productivity, that should increase potential output. So that really ought to happen as well. I think the amounts and the timing of that coming in are also quite uncertain. There's also the possibility that there would be more labor supply from lower individual tax rates, again in amounts and in timing that might be more uncertain. So that's how the committee generally is thinking about fiscal policy.

So for many, many years we've been far from maximum employment and stable prices, and so the need for accommodative policy has been clear. As the economy has strengthened and as we've gradually raised interest rates, the question comes into view of how much longer will you need to be accommodative and how will you know where, at what point, policy will be neutral? Neutral meaning that interest rates are neither pushing the economy up nor trying to restrain it. So we know that we're getting closer to that neutral level. We don't have an exact sense of how that will be. So the committee is discussing very actively the questions that you raised. Really, it boils down to a question of what is appropriate policy. You asked how will we know. I think we'll be very carefully looking at incoming data on inflation, on financial readings, and on the labor market. We have to acknowledge that there are always wide uncertainty bands around the level of, for example, the natural rate of unemployment, but also what is the neutral rate of interest? What is that rate of interest that pushes neither up nor down? So I think we will be guided by incoming data on the economy and try to keep our minds open as we move forward.

Our target, our medium-term objective for inflation, is 2 percent PCE inflation. We feel that that target has served the economy well, and I'm strongly committed to it. The committee is strongly committed to it. The sort of barriers to making a material change to that would be very high, because again we think it's fundamental and we think it's worked. You asked about price level targeting and that sort of thing. There are some ideas that take cognizance of the fact that rates are lower, we're near the zero lower bound, and that could put downward pressure on inflation expectations if we're going to be down at the zero lower bound, and therefore sort of undermine the credibility of the 2 percent inflation objective. So the idea is to have kind of a makeup: if you're below target for a while, you have a time of being above target. The idea is to enhance the credibility of that 2 percent target. This is an idea that's been written about for many years. It's not something that the committee has looked at seriously. I imagine we will be having discussions about it, but not something that we have on the calendar right now.

Thanks. I ought to start by saying that Congress has assigned us very important jobs: maximum employment, stable prices. We have a role in financial stability that we share with other agencies. Congress has very specifically given authority over trade to the executive branch, so I wouldn't comment on any particular specific trade actions. I will say that we have broad contacts among business leaders around the country, and the Reserve Bank presidents in particular have that. They report in the Beige Book and then in person at the FOMC meeting, and they do come back and say that concerns about changes in trade policy are rising, I think it's fair to say. Also, you're beginning to hear reports of companies holding off on making investments and hiring people. Right now we don't see that in the numbers at all. The economy is very strong, the labor market is strong, growth is strong. We really don't see it in the numbers; it's just not there. So I would put it down as more of a risk.

First of all, that's a reasonable range. I think it's not that we're all on the same number, but there are a range of views about potential growth, and there's so much uncertainty around this. The thing about fiscal policy is you don't have thousands of incidents to... you don't have big data in a way; you have very small data. You've got only a few instances here, so you have a lot of uncertainty around what the effects will be. They could be large. We hope they're large. But I think our approach is going to be to watch and see, and hope that in fact we do get significant effects to potential growth out of the tax bill. We're just going to have to see. I think we're looking at a reasonable range of estimates, and we're putting... different participants are putting different estimates in, and we're going to be waiting and seeing.

What we've said in our Statement of Longer-Run Principles and Monetary Policy Strategy is that the committee would be concerned if inflation were to run persistently above or below 2 percent. Persistently above or below 2 percent. That's what we mean by symmetric: we're looking at it equally on either side, and it's a matter of persistent overruns. We know that inflation is going to bounce around. For example, as I mentioned, later this summer there's a good chance that headline inflation will move up above 2 percent because of oil prices. Things buffet inflation back and forth. But we acknowledge that, we understand that. And if inflation were to persistently run above or below 2 percent, then we would be using our tools to try to move inflation back in the direction of the target. What we do understand, though, is that we don't have the ability to precisely hit that target, so we expect that inflation will be above or below, and we just hope that that happens on a symmetric basis.

I think what you should see is that the economy is continuing to make progress. The economy has strengthened so much since I joined the Fed in 2012, and even over the last couple of years, the economy's in a very different place. Unemployment was 10 percent at the height of the crisis; it's 3.8 percent now and moving lower. So really, the decision you see today is another sign that the US economy is in great shape. Growth is strong, labor markets are strong, inflation is close to target. That's what you're seeing. For many years, as I mentioned, we had interest rates held low to support economic activity, and it's been clear that as we've gotten closer to our statutory goals, we should normalize policy. That's really what we've been consistently doing for some years now.

Wages have been gradually moving up. Earlier in the recovery, there are many different wage measures of course, but just to generalize, wages were running roughly around 2 percent and they've moved gradually up into between 2 and 3 percent as the labor market has become stronger and stronger. I think it's fair to say that some of us, and I certainly would have expected wages to react more to the very significant reduction in unemployment that we've had, as I mentioned from 10 percent to 3.8 percent. Part of that can be explained by low productivity, which is something we've talked about at the committee and elsewhere. But nonetheless, many would have anticipated that wages, in a world where we're hearing lots and lots about labor shortages everywhere we go, we hear about labor shortages, but where's the wage reaction? So it's a bit of a puzzle. I wouldn't say it's a mystery, but it's a bit of a puzzle. Frankly, I do think there's a lot to like about low unemployment. One of the things is you will see pretty much people who want to get jobs, not everybody, but people who want to get jobs, many of them will be able to get jobs. You will see wages go up. You'll see people at the margins of the labor force having an opportunity to get back in work. They benefit from that, society benefits from that. So there are a lot of things to really like, including higher wages as you asked. Our role, though, is also to make sure that maximum employment happens in a context of price stability and financial stability, which is why we're gradually raising rates.

You mentioned that unemployment moved down, inflation moved up by truly small amounts. If you look at the Summary of Economic Projections, things are moving by just a tick or even a semi-tick between now and March. I think we take a longer-run view. We're shooting for, we're aiming for 2 percent inflation, inflation around 2 percent. We know that it'll be above or below. We didn't overreact, I think, to inflation being under 2 percent; we won't overreact to it being over 2 percent. I think we'll always be using our tools to move inflation in the direction of the target if it moves away from the target persistently, as I mentioned. In terms of unemployment, you have to acknowledge that no one really knows with certainty what the level of the natural rate of unemployment is, the rate that is sustainable over a long period of time. We know that that rate has declined as the US population has become more educated, as it has become older. Older and more educated people have lower unemployment rates. We don't know the level with precision, so we have to be learning as we go. We've got to be looking at data and informed by what's coming in. As I mentioned at the last press conference, estimates by the members of the committee have moved down by a full percentage point since maybe 2012, as we've learned as unemployment has dropped and inflation hasn't really reacted. So I can't give you a precise number, but we will be very much informed by incoming data. This uncertainty is why we've been gradually raising rates. We're not waiting for inflation to show up; we'll go ahead and move gradually, trying to navigate between two risks. One would be moving too quickly, inflation never gets back to target if we do that. The other is moving too slowly, and then we have too much inflation or financial instability, and we have to raise quickly, and that can also have bad outcomes.

Thanks. So I would say that the important thing is that we want the federal funds rate to trade in the target range. That's the whole idea. IOER is the principal tool by which we assure that will happen. We've said in basic documents that we will adjust the use of our tools as appropriate. We don't expect to have to do this often or again, but we're not sure about that. If we have to do it again, we'll do it again. Don't expect it to happen. You ask why. Yes, we're looking carefully at that. The truth is we don't know with any precision, really no one does. You can't run experiments with one effect and not the other. I think there's a lot of probability to the idea that high bill supply leads to higher repo costs, higher money market rates generally, and the arbitrage pulls up the federal funds rate towards IOER. We don't know that that's the only effect, and we're just going to have to be watching and learning. Frankly, we don't have to know today. What we really need is to have the federal funds rate trade in the range, and that's what this minor technical adjustment accomplishes.

Your first question really is: do we think the natural rate of unemployment is lower? So I think we do believe it has moved down significantly over a long period of time. We don't think that the natural rate of unemployment is one of those variables that moves around a lot; it tends to be driven by slow-moving variables like the education level of the population, the functioning of the labor market, and things like that. So it may have moved down. Is it on a cyclical basis lower as the economy gets hotter and hotter? There's some possibility of that. But the thing is, if you look back, there have been a lot of studies done, and real-time estimates of the natural rate of unemployment have uncertainty bands which are quite wide. So we have to remember that and very much be guided by the incoming data. You asked about inflation. We look at the 2 percent inflation objective as something that central banks, the Fed, really control, and we have to be strongly committed to achieving that using our tools. I think in recent years, the dominant force has been disinflationary, pushing down on inflation, and so we've been pushing back up. Of course, all those years when we were growing up, it was the opposite: inflation was too high and central banks were constantly pushing down. It's really important that inflation not fall below 2 percent, that inflation expectations remain well anchored at 2 percent. Very important because the implications of inflation below 2 percent are that you're closer to the zero lower bound, meaning the Fed has less room to cut, meaning that we'll spend more time there and we won't be able to do the job that we're assigned to do for our citizens.

I would just emphasize a couple things. First, we're learning about the real location of the natural rate of unemployment as we go. So it's moved down by more than a full percentage point since 2012. So it's not so simple as thinking, "Boy, we've just got to go ahead and get that right up." If you look at the forecast two years from now, end of 2020, you're still seeing inflation very close to target. So there's no sense that inflation will take off or move unexpectedly quickly from these levels, even if unemployment does remain low. So it's important to know that the unemployment rate forecasts go with the inflation forecasts and go with the rate forecasts. Each person who's submitting them is submitting appropriate monetary policy that fits with that person's assessment. Their assessments generally are to support maximum employment and stable prices around 2 percent. So if we thought that inflation were going to take off, obviously we'd be showing higher rates, but that's not what we think will happen.

Yeah, it may be. We may find that out. The best estimate that we have over the longer run is that, although there's a range of views, some people are in the low fours. As I said, the uncertainty bands are not quite a full percentage point on either side, but three-quarters of a percent, that kind of thing. So it's very possible. We have to be... we can't be too attached to these unobservable variables. I think we have to be practical about the way we think about these things, and we do that by being grounded in the data and what we see happening in the real economy.

The countercyclical capital buffer gives us the ability to raise capital requirements on the largest institutions when financial stability vulnerabilities are meaningfully above normal. That's the language that we've used, and that's certainly a possibility. I wouldn't look at today's financial stability landscape and say that risks are meaningfully above normal. I would say that they're roughly at normal. Households are in good shape. They pay down their debt, incomes are rising, people have jobs. So households are not really a concern. Banks are highly capitalized, so that's not really a concern. We see some concern with asset prices in a couple of pockets, but overall, if you make it all in, I think we see generally financial vulnerabilities as moderate. Could that change over a couple of years? Yeah, they could. You also asked about marijuana businesses. This is a very difficult area because we have state law, many state laws permit the use of marijuana, and federal law still doesn't. So it puts federally chartered banks in a very difficult situation. I think it would be great if that could be clarified. It puts the supervisor in a very, very difficult position. Of course, this isn't our mandate; it has nothing to do with marijuana. So we really would just love to see it clarified.

It's actually a pretty full docket right now. You mentioned a number of the things, but I would point out we're having a public board meeting tomorrow on the single counterparty credit limit provision. We've also got quite a lot of work to promulgate rules after S. 2155, the Senator Crapo bill passed. We've got a lot of work to do under that. We've got to think about how we would reach below that $250 billion threshold to assess and supervise, regulate financial stability risk below that level. So what am I missing? There's the net stable funding ratio is out there to be done. So there's a lot of work to do. If I can just take this opportunity to say, the financial system all but failed ten years ago. We went to work for ten years to strengthen it: stronger capital, certainly liquidity, stress testing, resolution planning. We want to keep all that stuff. We want to make it even more effective and certainly more efficient. We want to tailor those regulations for institutions. We want the strongest provisions to apply to the most systemically important institutions. So we're committed to preserving and enhancing that structure, but we're finding a lot that we can do in the way of tailoring regulations for the smaller, less systemically important institutions. That's a lot of what we're working on right now.

I would say that the economy is in great shape. If you look at household surveys, confidence is high. Look at business confidence, it's high. If you survey workers about the job market, they'll say that it's a really good environment to find jobs. Survey businesses, they'll say that workers are scarce. So I think overall we have a really solid economy on our hands here. What we're doing is trying to conduct monetary policy in a way that will sustain that expansion, keep the labor markets strong, and keep inflation right at 2 percent. That's really what we're trying to do. I would say I like the results so far. We've been very, very careful not to tighten too quickly. I think we've been patient. I think that patience has borne fruit, and I think it continues to. We had a lot of encouragement to go much faster, and I'm really glad we didn't. But at this time, continuing on that gradual pace seems like the right thing. If we get a sense that the economy is reacting badly, then we'll certainly react to that.

I would just point you to the range of estimates at the committee, which I think is 2.25 to 3.5, and the median is 2.9 right in there. So that's the range of estimates of the nominal neutral rate of interest. We do understand that there's high uncertainty around that, but that's kind of... so you can think of 2.9 as being sort of a full percentage point away from where Fed funds is going to trade after today's decision. You ask, is the neutral rate moving up because of fiscal policy? Yes. I mean, there should be an effect. If you have increased deficits, that should put upward pressure on it, a few tenths, let's say. Again, though, we're estimating these things. It's one of these unobserved variables, so it's very hard. You shouldn't try to speak about it with a lot of precision or confidence, but yes, that should put upward pressure on it. How will we know? I think you have to look at inflation, you've got to look at all of the indicators in the economy, look at inflation, look at unemployment, look at what's happening in the job market. Inflation is really important. It's worth noting that the last two business cycles didn't end with high inflation; they ended with financial instability. So that's something we need to also keep our eye on.

Yes, that is something that we discuss. We look at all the language. As you know, we made a significant number of changes at this meeting. So language gets in the statement, and then the economy changes. That's what happens. Our approach to policy hasn't changed. As I mentioned earlier, for a long time the economy has needed accommodative monetary policy. As the economy has recovered, we've been gradually raising rates. We will be at a place relatively soon, again assuming we stay on this path, when interest rates will be in the zone of what FOMC participants think is roughly neutral. At that point, it would no longer be accurate for us to say that the committee thinks that policy is accommodative. We know that's coming. We kind of don't think it's here yet, but it's certainly coming. I think the market will understand that. The real message is that you're getting close to the neutral rate. It's a characterization about where policy is; it's not a statement that should upset the markets. But we'll obviously discuss it carefully in meetings and communicate about it.

Sure. As I mentioned earlier, I'm really committed to staying in our lane on things. We have very important jobs assigned to us by Congress: maximum employment, stable prices, financial stability. Trade is explicitly assigned to the executive branch by Congress and not to us. So we don't really seek to play a role in trade policy. We're not at that table. Those powers and decisions are given to others. We want to stick to what we do. As I mentioned earlier, we do hear from our business contacts, which are extensive in the United States, and we do report on that in the minutes. I've just mentioned what those are. There is concern that trade changes could be disruptive. As I also mentioned, we don't see it in the numbers yet. We really don't. We see a very strong economy across a bunch of fronts. It hasn't reached everyone, let's be clear on that, but most people who want a job can find one. We're well aware that there are pockets out there of people who have not felt the recovery yet. But broadly speaking, it's a good economy.

Let me briefly mention the yield curve. I see it as something that people are talking about a lot, including FOMC participants. There's a range of views. It's something we're going to continue to be talking about, but it's only one of many things that we talk about. I think that discussion is really about what is appropriate policy and how do we think about policy as we approach the neutral rate. How do we understand what the neutral rate is, how do we know where it is, and what are the consequences of being above or below it? That's really what people are talking about when they talk about the slope of the yield curve. We know why the yield curve is flattening: it's because we're raising the federal funds rate. It makes all the sense in the world that the short end would come up. I think the harder question is what's happening with long rates. There are many things that move long rates around. There's an embedded expectation of the path of short rates, there's the term premium which has been very low by historical standards. Arguments are made that a flatter yield curve has less of a signal embedded in it. In addition, I think what you saw most recently, that you referred to Steve, was just risk-on, risk-off. In a risk-off environment, people want to own US Treasuries, and you see Treasury prices go up, rates go down quite a lot. But ultimately, what we really care about is what's the appropriate stance of policy. There may be a signal in that long-term rate about what is the neutral rate, and I think that's why people are paying attention to the yield curve.

If you look at households, you do not see excess credit growth. You don't see high levels of credit going out. So not so much households. That really was where the problems were before the financial crisis, particularly among household borrowing, particularly around mortgages. With banks, of course, their leverage is significantly lower, or to say it differently, their capital is significantly higher. If you ask about non-financial corporates, that's really where leverage is at levels that are high relative to history. But defaults are low, interest rates are low. So it's something we're watching very carefully. But again, I don't think we see it as... there are a range of views on that, but we are watching non-financial corporates. Households are in good shape though, and that is so important because that's where we got into trouble before. It's often around property and particularly housing where you see real problems emerge. We don't really see that now, so we take some solace from that.

It doesn't play any part in my thinking, and I'll tell you why. If you raise rates too quickly, you're just increasing the likelihood of a recession, and that's exactly what you don't want to do. So the best thing you can do, I think the incentives actually run the other direction. If you're worried about going back to the lower bound, then risk management would suggest that you go a little slower in raising rates and tolerate that. That's likely to be a more sustainable strategy to get further away from the zero lower bound. I think we're far enough away now though that the risks are kind of balanced. So I think it's more just we're looking at the economy and what does it need, and how do we sustain the expansion, keep the labor markets strong, and try to keep inflation at 2 percent.

We don't have the tools to control that. If companies choose to, companies in our system are free to do what they need to do. Once they've made profits and have cash to distribute, they can distribute it to their shareholders through dividends or buybacks, they can pay their workers. We don't play a role in those decisions. The part that we focus on is maximum employment. That's our mandate. We view maximum employment as the maximum sustainable level of employment, meaning it's not so much that it will cause the economy to overheat. I think we've been committed to that. I think we take that obligation very seriously. Over time, when labor markets are strong and companies are hiring, we should see higher wages. But again, we don't really have the tools that will address the distribution of profits and that kind of thing.