Highlights
After raising rates by another 25 basis points, the Federal Reserve appears to have shifted into pause-mode waiting for the effects of prior rate hikes to manifest themselves fully and, in the new twist, waiting to see what the effects are of ongoing troubles in the banking sector, according to Jerome Powell in his opening statement. Powell noted that credit conditions, due to Fed hikes and slowing economic growth, were"already tightening" before the insolvency of Silicon Valley Bank in March. Since March, Powell said that credit conditions are"even tighter" for both consumers and businesses and that the extent of the effects"remains uncertain".
Whether the Fed refrains from raising rates at its next meeting in June will be determined, he said, by"how events will unfold". But he stressed that the Fed is prepared to tighten monetary policy further if"greater restraint is warranted". Whether the Fed may be prepared to begin cutting rates is a step Powell didn't address in his opening statement but may well have to in questions and answers.
Much of the question and answer portion of the press briefing was devoted to the recent stresses in the banking system, and the Fed's role as supervisor and regulator. Powell noted the Board of Governors in general and Vice Chair for Supervision Michael Barr in particular are taking the risks to the banking system seriously and giving consideration to appropriate supervision and regulation to ensure the health of the banking system. Powell affirmed that there is a role for community, regional, and large banks, and that banking at all these levels plays an important role in the health of the US economy.
There were also a number of questions regarding the consequences of a failure of Congress to raise the debt limit in a timely manner. Powell said he could not comment on fiscal policy matters other than to say,"it's essential that the debt ceiling be raised in a timely way," and that failing to do so would result in a"highly uncertain" situation and"adverse" outcomes. He added,"No one should assume that the Fed can protect the economy" from the fallout of not raising the debt limit.
When asked if the FOMC was prepared to pause the current rate increase cycle, Powell said,"A decision on a pause was not made today," but that the statement had"meaningful change" in its guidance. He said future rate decisions are on a meeting-by-meeting basis. He noted that expectations of a rate cut this year are out of line with the FOMC's collective forecast which will be updated at the June 13-14 meeting.
Powell said,"Support for a rate increase was very strong", and"across the board". However, he also noted the FOMC has a"sense that we are much closer to the end of this than the beginning".
Powell thinks that the staff forecast for a recession is not his personal view. He said,"We can continue to have a cooling in the labor market," and"it is still possible to avoid a recession" this year.
Whether the Fed refrains from raising rates at its next meeting in June will be determined, he said, by"how events will unfold". But he stressed that the Fed is prepared to tighten monetary policy further if"greater restraint is warranted". Whether the Fed may be prepared to begin cutting rates is a step Powell didn't address in his opening statement but may well have to in questions and answers.
Much of the question and answer portion of the press briefing was devoted to the recent stresses in the banking system, and the Fed's role as supervisor and regulator. Powell noted the Board of Governors in general and Vice Chair for Supervision Michael Barr in particular are taking the risks to the banking system seriously and giving consideration to appropriate supervision and regulation to ensure the health of the banking system. Powell affirmed that there is a role for community, regional, and large banks, and that banking at all these levels plays an important role in the health of the US economy.
There were also a number of questions regarding the consequences of a failure of Congress to raise the debt limit in a timely manner. Powell said he could not comment on fiscal policy matters other than to say,"it's essential that the debt ceiling be raised in a timely way," and that failing to do so would result in a"highly uncertain" situation and"adverse" outcomes. He added,"No one should assume that the Fed can protect the economy" from the fallout of not raising the debt limit.
When asked if the FOMC was prepared to pause the current rate increase cycle, Powell said,"A decision on a pause was not made today," but that the statement had"meaningful change" in its guidance. He said future rate decisions are on a meeting-by-meeting basis. He noted that expectations of a rate cut this year are out of line with the FOMC's collective forecast which will be updated at the June 13-14 meeting.
Powell said,"Support for a rate increase was very strong", and"across the board". However, he also noted the FOMC has a"sense that we are much closer to the end of this than the beginning".
Powell thinks that the staff forecast for a recession is not his personal view. He said,"We can continue to have a cooling in the labor market," and"it is still possible to avoid a recession" this year.
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.
