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US: Fed Chair Press Conference
Highlights
A"very notable change" since the June FOMC meeting is that nominal and real yields have increased"materially" across the Treasury curve, Fed Chair Kevin Warsh said following the FOMC decision to leave the policy rate unchanged.
He also highlighted the strong growth in business investment as"the most striking feature of the economy", especially AI-related investments."Capex is preparing the ground for future growth," he said."Nonetheless, the precise timing and magnitude of effects on the supply side remain hard to predict".
At its July meeting, the FOMC left the fed funds target rate range unchanged at 3.50 to 3.75 percent, as expected. The vote was 9-3 in favor of maintaining the fed funds target rate range.
Voting against the monetary policy action were Beth M. Hammack, Neel Kashkari, and Lorie K. Logan, who preferred a rate hike. The voting record was the only difference from June, when the vote was 12-0.
Although inflation remains"elevated" relative to the 2 percent target, the statement repeated that"The Committee will deliver price stability". It continued to attribute high inflation"in part" to supply shocks, including energy.
Still, when asked during the press conference why the Fed did not hike rates, Warsh said the central bank is"on the case" and offered"the assurance" that it will deliver price stability. The Fed"will not hesitate" to act on inflation, he said.
Asked which measure of inflation should be used to assess whether inflation is on target, Warsh said the current statement of strategy and purpose refers to the PCE but"who knows" what comes next in 2027. He suggested a broader set of measures than the PCE.
Warsh said FOMC discussions focused on four questions: the implications of the past high inflation on the current policy conjuncture, the different sources and effects of supply shocks on output, employment and prices. The fourth question centered on the monetary policy tools and strategies, including the accommodation provided by the balance sheet.
On reserves, the statement said"The Committee is continuing its policy of maintaining ample reserves in the banking system."
Warsh defended again the decision to drop forward guidance, noting that markets are now reacting to data and developments in real time, which is"a change for the better" as markets become a better source of information.
Acknowledging uncertainties about whether FOMC meetings would continue to be followed by a press conference, Warsh confirmed he would commit to press conferenced at least until the end of the 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.