Highlights
Saying inflation"is still too high" and further progress"not assured", Jerome Powell stressed that it"would not be appropriate" to cut its policy rate until officials have greater confidence that inflation is moving sustainably to the Federal Reserve's two percent goal. So far incoming data"haven't given us this greater confidence".
Importantly, the Fed Chair said reaching this level of confidence will take"longer than previously expected". Powell noted that PCE inflation, at 2.7 percent overall and 2.8 percent for the ex-food ex-energy core, is"higher than expected" and he further cited increases in short-term inflation expectations among consumer and business surveys.
Powell repeated and repeated that officials are"highly attentive to inflation risks" but he also said they are"prepared to respond to unexpected weakening in the labor market", a response presumably that would point to a possible rate cut should employment troubles emerge. Yet he said the labor market remains"relatively tight" with demand for workers still exceeding the supply of workers. He did note that labor supply is improving helped by a continued"strong pace" of immigration.
On balance sheet unwinding, Powell said the Fed is slowing the pace of decline in its securities holdings by roughly $40 billion per month and will focus its holdings on Treasuries. He said this will allow a gradual approach to an appropriate level of ample reserves.
Powell was clear that the change in pace in unwinding the balance sheet sometimes called quantitative tightening or QT should not be interpreted as a change in monetary policy. He said it is not intended to provide accommodation or less restriction, just to avoid market turmoil.
With a full quarter of inflation data to consider, the FOMC is taking the signal that movement back to the Fed's two percent inflation objective is sideways after the significant disinflation seen in 2023. Powell said the FOMC is avoiding overreacting to what might be a temporary pause in making progress on inflation. Data-dependent policymakers remain prepared to act as appropriate to achieve the dual mandate whether that is for less or more restrictive monetary policy. Powell continues to see the current 5.25-5.50 fed funds target range as the peak for this cycle and further rate hikes as unlikely.
Powell was asked if the presidential election year would have any impact on the timing and size of interest rate policy. Powell was firm that the FOMC makes its decisions based solely upon incoming data and economic conditions. He said,"We just don't go down that road." He reiterated that the Fed's mission is for all the American people and not to favor any political agenda.
Importantly, the Fed Chair said reaching this level of confidence will take"longer than previously expected". Powell noted that PCE inflation, at 2.7 percent overall and 2.8 percent for the ex-food ex-energy core, is"higher than expected" and he further cited increases in short-term inflation expectations among consumer and business surveys.
Powell repeated and repeated that officials are"highly attentive to inflation risks" but he also said they are"prepared to respond to unexpected weakening in the labor market", a response presumably that would point to a possible rate cut should employment troubles emerge. Yet he said the labor market remains"relatively tight" with demand for workers still exceeding the supply of workers. He did note that labor supply is improving helped by a continued"strong pace" of immigration.
On balance sheet unwinding, Powell said the Fed is slowing the pace of decline in its securities holdings by roughly $40 billion per month and will focus its holdings on Treasuries. He said this will allow a gradual approach to an appropriate level of ample reserves.
Powell was clear that the change in pace in unwinding the balance sheet sometimes called quantitative tightening or QT should not be interpreted as a change in monetary policy. He said it is not intended to provide accommodation or less restriction, just to avoid market turmoil.
With a full quarter of inflation data to consider, the FOMC is taking the signal that movement back to the Fed's two percent inflation objective is sideways after the significant disinflation seen in 2023. Powell said the FOMC is avoiding overreacting to what might be a temporary pause in making progress on inflation. Data-dependent policymakers remain prepared to act as appropriate to achieve the dual mandate whether that is for less or more restrictive monetary policy. Powell continues to see the current 5.25-5.50 fed funds target range as the peak for this cycle and further rate hikes as unlikely.
Powell was asked if the presidential election year would have any impact on the timing and size of interest rate policy. Powell was firm that the FOMC makes its decisions based solely upon incoming data and economic conditions. He said,"We just don't go down that road." He reiterated that the Fed's mission is for all the American people and not to favor any political agenda.
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.
