Highlights
Tighter credit arising from the ongoing banking crisis is the new wild card for the economic outlook, potentially slowing growth and easing the necessity for the Federal Reserve to further tighten monetary policy. This is the thrust of not only the FOMC announcement but Jerome Powell's opening statement as well.
Powell opened his press conference saying that"serious" difficulties at a"small number of banks" have emerged in recent days and have been met, in coordination with the US Treasury and Federal Deposit Insurance Corporation, with decisive action including the establishment of a special facility to boost liquidity in the financial system. Powell stressed that"all deposits are safe".
In line with the easing need to raise rates, Powell noted that the economy slowed"significantly" last year and he downplayed this year's early uptick in consumer spending, saying it could be due to"swings" in the weather. He said housing remains"weak" due to high interest rates which are also weighing on business investment. Powell further noted that the Fed's quarterly forecasts see slow growth ahead with risks weighted to the downside.
Nevertheless, the Fed's chair said inflation, though moderating somewhat in recent months, remains"high" and that the process to getting it back to 2 percent will be"bumpy" and"has a long way to go".
In the question and answer session, where Powell was asked about the failure of Silicon Valley Bank, he deferred to Vice Chair for Supervision Michael Barr as leading the investigation on the situation. Powell specifically did not want to comment before investigations were complete. He did note that Barr would be testifying before Congress in the coming week, and that some answers might be forthcoming then. In the meantime, Powell said the Fed's investigation would be thorough and transparent, and that once the problem was understood, he would support changes to regulation and supervision to prevent similar occurrences in the future.
On the fallout from the SVB failure, Powell said a significant number of people are anticipating tightening in credit conditions. He noted the difficulty"in trying to assess something that is so recent," in the context of monetary policy. The change in the FOMC statement language reflects Fed policymakers' best assessment of the current situation. Monetary policy reflects the most recently available data which suggests that some disinflation continues, but that it remains stubborn for non-housing services prices. Although the March 22 statement guidance indicates policymakers are winding down interest rate hikes, the FOMC remains data dependent. A change in the data could mean a change in policy. The FOMC's collective forecast indicates that only one more 25 basis point rate hike is currently expected, but that could change.
Powell opened his press conference saying that"serious" difficulties at a"small number of banks" have emerged in recent days and have been met, in coordination with the US Treasury and Federal Deposit Insurance Corporation, with decisive action including the establishment of a special facility to boost liquidity in the financial system. Powell stressed that"all deposits are safe".
In line with the easing need to raise rates, Powell noted that the economy slowed"significantly" last year and he downplayed this year's early uptick in consumer spending, saying it could be due to"swings" in the weather. He said housing remains"weak" due to high interest rates which are also weighing on business investment. Powell further noted that the Fed's quarterly forecasts see slow growth ahead with risks weighted to the downside.
Nevertheless, the Fed's chair said inflation, though moderating somewhat in recent months, remains"high" and that the process to getting it back to 2 percent will be"bumpy" and"has a long way to go".
In the question and answer session, where Powell was asked about the failure of Silicon Valley Bank, he deferred to Vice Chair for Supervision Michael Barr as leading the investigation on the situation. Powell specifically did not want to comment before investigations were complete. He did note that Barr would be testifying before Congress in the coming week, and that some answers might be forthcoming then. In the meantime, Powell said the Fed's investigation would be thorough and transparent, and that once the problem was understood, he would support changes to regulation and supervision to prevent similar occurrences in the future.
On the fallout from the SVB failure, Powell said a significant number of people are anticipating tightening in credit conditions. He noted the difficulty"in trying to assess something that is so recent," in the context of monetary policy. The change in the FOMC statement language reflects Fed policymakers' best assessment of the current situation. Monetary policy reflects the most recently available data which suggests that some disinflation continues, but that it remains stubborn for non-housing services prices. Although the March 22 statement guidance indicates policymakers are winding down interest rate hikes, the FOMC remains data dependent. A change in the data could mean a change in policy. The FOMC's collective forecast indicates that only one more 25 basis point rate hike is currently expected, but that could change.
Definition
The Fed announced in 2011 that then Fed Chair Ben Bernanke would hold press briefings four times a year to explain the FOMC's latest quarterly economic projections. The purpose of the briefings is to provide additional context for the FOMC's policy decisions and to allow for questions-and-answers with the press. According to the Fed, the"introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication." The press briefing is held at 2:30 p.m. ET on the days of FOMC statements in which quarterly projections are released. Beginning in 2019, the briefing will be held after each FOMC meeting. The policy statement is released at 2:00 p.m. ET after the conclusion of every FOMC meeting regardless of whether there are forecasts or not.
Description
The Fed’s meeting statement and economic projections can move financial markets. However, the Fed’s meeting statement — which indicates any changes in monetary policy—typically is very concise and lacking in detail. However, the Fed now releases its economic forecasts four times a year. As of March 20, 2013, the forecasts are released at the same time as the FOMC statement during the months of March, June, September, and December. After each of the 8 Fed meetings, the chair holds a press conference to explain the forecasts and other policy issues. The chair’s press conference allows for the financial markets and public in general to learn more about why and how the monetary policy decision was made and to learn more about FOMC views on the direction of the economy—including real growth, inflation, unemployment, expected timing of changes in the fed funds rate, and expected levels of the fed funds rate in the near term.
