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Federal Reserve Chair Jerome Powell talks after Fed kept interest rates steady · Elon Musk Podcast

0:01
Hey everybody. Welcome back to the Elon Musk
0:04
Podcast. This is a show where we discuss
0:07
the critical crossroads, the Shape, SpaceX, Tesla X, The
0:11
Boring Company, and Neuralink. I'm your host, Will Walden.
0:15
Good afternoon. My colleagues and I remain
0:18
squarely focused on achieving our dual mandate goals of
0:21
maximum employment and stable prices for the benefit of the
0:25
American people. Despite elevated uncertainty,
0:28
the economy is in a solid position.
0:31
The unemployment rate remains low and the labor market is at
0:34
or near maximum employment. Inflation has come down a great
0:39
deal, but has been running somewhat above our 2% longer run
0:42
objective. In support of our goals today,
0:46
the Federal Open Market Committee decided to leave our
0:49
policy interest rate unchanged. We believe that the current
0:53
stance of monetary policy leaves us well positioned to respond in
0:57
a timely way to potential economic developments.
1:01
I'll have more to say about monetary policy after briefly
1:03
reviewing economic developments. Following growth of 2.5% last
1:09
year, GDP was reported to have edged down in the first quarter,
1:14
reflecting swings in net exports that were driven by businesses
1:17
bringing in imports ahead of potential tariffs.
1:21
This unusual swing has complicated GDP measurement.
1:26
Private domestic final purchases, or PDFP as we call
1:29
them, which excludes net exports, inventory, investment
1:33
and government spending, grew at a solid 2.5% rate.
1:38
Within PDFP, growth of consumer spending moderated, while
1:42
investment in equipment and intangibles rebounded from
1:45
weakness in the fourth quarter. Surveys of households and
1:49
businesses, however, report a decline in sentiment over recent
1:52
months and elevated uncertainty about the economic outlook,
1:56
largely reflecting trade policy concerns.
2:00
It remains to be seen how these developments might affect future
2:03
spending and investment. In our summary of economic
2:07
projections, the median participant projects GDP to rise
2:11
1.4% this year and 1.6% next year, somewhat slower than
2:16
projected in March. In the labor market, conditions
2:21
have remained solid. Payroll job gains averaged
2:24
135,000 per month over the past three months.
2:28
The unemployment rate, at 4.2%, remains low and has stayed in a
2:32
narrow range for the past year. Wage growth has continued to
2:37
moderate while still outpacing inflation.
2:41
Overall, a wide set of indicators suggest that
2:44
conditions in the labor market are broadly in balance and
2:47
consistent with maximum employment.
2:50
The labor market is not a source of significant inflationary
2:54
pressures. The median projection for the
2:58
unemployment rate in the Sep is 4.5% at the end of this year and
3:02
next, a bit higher than projected in March.
3:06
Inflation has eased significantly from its highs in
3:09
mid 2022, but remains somewhat elevated relative to our 2%
3:14
longer run goal. Estimates based on the Consumer
3:17
Price Index and other data indicate that total PCE prices
3:21
rose 2.3% over the 12 months ending in May and that excluding
3:26
the volatile food and energy categories, core PCE prices rose
3:30
2.6%. Near term measures of inflation
3:35
expectations have moved up over recent months, as reflected in
3:38
both market and survey based measures.
3:41
Respondents to surveys of consumers, businesses and
3:44
professional forecasters point to tariffs as the driving
3:47
factor. Beyond the next year or so,
3:51
however, most measures of longer term expectations remain
3:54
consistent with our 2% inflation goal.
3:57
The median projection in the SCP for total PCE inflation this
4:01
year is is 3%, somewhat higher than projected in March.
4:06
The median inflation projection falls to 2.4% in 2026 and 2.1%
4:13
in 2027. Our monetary policy actions are
4:18
guided by our dual mandate to promote maximum employment and
4:21
stable prices for the American people.
4:24
At today's meeting, the Committee decided to maintain
4:26
the target range for the federal funds rate at 4:00 and 3:45 and
4:29
a half percent and to continue reducing the size of our balance
4:33
sheet. We will continue to determine
4:36
the appropriate stance of monetary policy based on the
4:38
incoming data, the evolving outlook and the balance of
4:41
risks. Changes to trade, immigration,
4:45
fiscal and regulatory policies continue to evolve, and their
4:48
effects on the economy remain uncertain.
4:52
The effects of tariffs will depend, among other things, on
4:55
their ultimate level. Expectations of that level, and
4:58
thus of the related economic effects, reached a peak in April
5:01
and have since declined. Even so, increases in tariffs
5:06
this year are likely to push up prices and weigh on economic
5:10
activity. The effects on inflation could
5:13
be short lived, reflecting A1 time shift in the price level.
5:17
It's also possible that the inflationary effects could
5:20
instead be more persistent. Avoiding that outcome will
5:23
depend on the size of the tariff effects, on how long it takes
5:26
for them to pass through fully into prices, and ultimately on
5:29
keeping longer term inflation expectations well anchored.
5:33
Our obligation is to keep longer term inflation expectations well
5:37
anchored and to prevent a one time increase in the price level
5:40
from becoming an ongoing inflation problem.
5:43
As we act to meet that obligation, we will balance our
5:46
maximum employment and price stability mandates.
5:49
Keeping in mind that without price stability we cannot
5:52
achieve the long periods of strong labor market conditions
5:55
that benefit all Americans, we may find ourselves in the
6:00
challenging scenario in which our dual mandate goals or
6:03
intention. If that were to occur, we would
6:05
consider how far the economy is from each goal and the
6:09
potentially different time horizons over which those
6:11
respective gaps would be anticipated to close.
6:16
For the time being, we are well positioned to wait to learn more
6:19
about the likely course of the economy before considering any
6:22
adjustments to our policy stats. In our SEPFOMC, participants
6:29
wrote down their individual assessments of an appropriate
6:31
path for the federal funds rate based on what each participant
6:35
judges to be the most likely scenario going forward.
6:39
The median projection projects participant.
6:42
Median participant projects that the appropriate level of the
6:44
federal funds rate will be 3.9% at the end of this year, the
6:48
same as projected in March. The median projection declines
6:52
to 3.6% at the end of next year and to 3.4% at the end of 2027,
6:58
a little higher than the March projection.
7:01
These individual forecasts are always subject to uncertainty
7:05
and as I've noted, uncertainty is unusually elevated.
7:09
And of course, these projections are not a committee plan or
7:12
decision. At this meeting, the committee
7:16
continued its discussions as part of our five year review of
7:19
our monetary policy framework. We focused on issues related to
7:23
assessing the risks and uncertainties that are relevant
7:25
for monetary policy and the potential implications for
7:28
policy strategy and communications.
7:32
Our review includes outreach and public events involving a wide
7:35
range of parties, including Fed Listens, events around the
7:38
country, and a research conference that we held last
7:40
month. We are open to new ideas and
7:43
critical feedback, and we will take on board lessons of the
7:46
last five years in determining our findings.
7:50
We intend to wrap up any modifications to our statement
7:53
on longer run goals and monetary policy strategy by late summer.
7:57
After that, we will consider enhancements to our suite of
8:00
communications tools, including the SCP. the Fed has been
8:05
assigned two goals for monetary policy, maximum employment and
8:09
stable prices. We remain committed to
8:12
supporting maximum employment, bringing inflation sustainably
8:15
to our 2% goal, and keeping longer term inflation
8:18
expectations well anchored. Our success in delivering on
8:22
these goals matters to all Americans.
8:25
We understand that our actions affect communities, families,
8:27
and businesses across the country.
8:30
Everything we do is in service to our public mission and we at
8:33
the Fed will do everything we can to achieve our maximum
8:37
employment and price stability goals.
8:39
Thank you. I look forward to your
8:40
questions, Colby. Thank you, Colby Smith with The
8:46
New York Times. To what extent has the more
8:48
limited impact from tariffs at this stage on inflation changed
8:52
your view on what the ultimate economic fallout will be from
8:55
these policies and the timing of when they will materialize in
8:59
the data? So we've had three months of of
9:06
favorable inflation reading since the high readings of
9:08
January and February and that's of course highly welcome news.
9:11
Part of that just is it's services, core services, both
9:15
housing services and non housing services have really been
9:18
grinding down toward levels that are that are consistent with 2%
9:21
inflation. So that's the good news.
9:23
We've had goods inflation just moving up a bit.
9:28
And of course we expect as you, as you point out, we, we do
9:30
expect to see more of that over the course of the summer.
9:35
It takes some time for tariffs to work their way through the
9:37
chain of distribution to the end consumer.
9:39
A good example of that would be goods being sold at retailers
9:43
today may have been imported several months ago before
9:46
tariffs were imposed. So we're beginning to see some
9:48
effects and we do expect to see more of them overcoming months.
9:52
We do, we do also see price increases in some of the
9:55
relevant categories like personal computers and audio,
9:58
visual equipment, things like that, that are attributable to
10:01
tariff increases. In addition, we look at surveys
10:04
of businesses and there, there are many of those and, and you,
10:08
you do see a range of things, but but many, many companies do
10:12
expect to, to, to put all or, or some or all of the effective
10:17
tariffs through to the next next person in the, in the chain and
10:21
ultimately to the consumer today.
10:23
You know, the amount of these, the, the amount of the tariff
10:26
effects, the size of the tariff effects, their duration in the
10:30
time it will take her all highly uncertain.
10:32
So that that is why we think the appropriate thing to do is to
10:36
hold where we are as we learn more and we think our policy
10:40
stances is in a good place where we're well positioned to react
10:42
to incoming developments. So.
10:44
In terms of how we should interpret the rate cuts pencil
10:47
penciled into the Sep, is this reflecting that there's this
10:51
expectation that underlying inflation will just stay well
10:53
enough contained that allows the committee to eventually move
10:57
ahead with those cuts? Or is it about, you know,
10:59
responding to a deterioration in economic activity, let's say?
11:03
I mean, how should we make sense of the forecast?
11:05
So if you look at the forecast, you will see that people do
11:07
generally expect inflation to move up and then to come back
11:10
down. But we can't just assume that.
11:13
Of course we don't know that. And you know, our, our job is to
11:16
make sure one of our jobs to make sure that a one time
11:19
increase in inflation doesn't turn into an inflation problem.
11:24
And that again, that will depend on the size of the effects, how
11:27
long it takes for them to come in and ultimately on, on keeping
11:30
inflation expectations anchored. Oh, hi, and thanks, Jeff Howard
11:39
Schneider with Reuters. If you look at the the rate path
11:42
starting in December to today and adjusted over the full time
11:48
horizon you've got there, you've taken about 1/4 point per year
11:51
out of your projected path and you ended a higher rate at in
11:54
2027 than you were would have in the prior 14.
11:58
Is that a result of, of, of a sense of tariffs will lead to
12:02
more persistent inflation? Is it a result of reassessments
12:05
of where your short term neutral rate?
12:07
Is it why? Why are you on a slower path
12:09
now? So I would focus most on the on
12:12
the nearer term as you think, as you get out to the to the later
12:16
years, it's hard to, it's hard for anybody to know where the
12:20
economy's been going. You didn't see people moving
12:22
their longer term, you know, estimated the neutral rate, for
12:25
example, at this meeting. So, and those things are
12:28
probably slow moving. So I think, I think if you look
12:30
at what's happening here since March, this is since March,
12:33
right? You see little slower growth,
12:35
just a tiny tick up 110th tick up in, in, in unemployment and
12:40
you see inflation moving up 3/10.
12:42
And by the way, it was, it was a similar move from the December
12:45
move Sep to the 5th March. So that's what you see.
12:48
You see the the the effects of tariffs.
12:51
I think we learned in April after the March meeting that
12:56
substantially higher tariffs were likely.
12:58
And then since then the estimates of where the tariffs
13:01
we have actually moved back down, although still in an
13:03
elevated level. So we're adapting in real time,
13:06
and what you see isn't, you know, an accumulation of
13:09
individual assessments. You say in the statement that
13:13
risks have diminished on that front, but the July 9th, you
13:17
know, drop dead date for all the the Liberation day tariffs is
13:21
still out there and unresolved. You've got now exchange of
13:25
missiles between 2 Middle East adversaries with a possible US.
13:28
Involvement. How can you justify saying that
13:30
risks have diminished? So what we said was that
13:33
uncertainty has has uncertainty about the economic outlook has
13:38
diminished, but range elevated. Many, many surveys say that they
13:41
do so. And and that's, that's actually
13:43
a line from the teal book, which you can see in five years.
13:47
Remember to check that. No, but if you think about it,
13:52
tariff, tariff uncertainty, uncertainty really peaked in
13:56
April and since then has come down.
13:58
And that's that's really what that's just acknowledging it's
14:00
diminished but still elevated and that it's uncertainty.
14:03
So I think that's an accurate statement.
14:09
Thank you, Chris Reguaber and Associated Press.
14:12
There is an argument out there in favor of cutting rates more
14:16
immediately. Inflation has continued to cool
14:20
and is back to roughly 2% despite the tariffs.
14:23
And I guess I also wanted to ask about, you know, cracks in the
14:25
job market with gross hiring slowing concentrated in just a
14:30
few industries. We've seen some housing data,
14:34
including this morning that have been pretty weak.
14:37
Do you see any concerns that you know the economy is weakening
14:41
and that is a reason to cut rates?
14:44
Going forward. So we do, we do of course
14:47
monitor all those things. I, I think if you look at the
14:49
overall picture, you know, what you're seeing is 4.2%
14:53
unemployment and an economy that's growing at a, at a rate
14:57
hard to know given the, the unusual flows in the first
15:01
quarter. But it appears to be one and a
15:03
half, 2% maybe a little better than that sentiment has come up
15:07
off of its very low levels. It's still, it's still
15:10
depressed. So, you know, you can, you can
15:13
point to things to housing market is a longer run problem
15:16
and also a short run problem. I don't think it's indicative
15:20
of, you know, basically the situations we have a longer run
15:23
shortage of housing and we also have high rates right now.
15:27
I think the best thing we can do for the housing market is to
15:31
restore price stability in a sustainable way and and create a
15:34
strong labor market. And that's the best thing we can
15:36
do for the housing market. You asked about the job market.
15:43
Again, look at look at labor force participation, look at
15:45
wages, look at job creation. They're all at healthy levels
15:49
now. I I would say you can see
15:51
perhaps a very, very slow continued cooling, but nothing
15:56
that's troubling at this time. But you know, we watch it.
15:59
We watch it very, very carefully.
16:00
So overall, again, the current stance of monetary policy leaves
16:03
us well positioned to respond in a timely way to economic
16:07
developments. And for now, and we'll be
16:10
watching the data carefully. Well, just quickly on, given
16:14
that you know there are concerns inflation will rise, but there
16:17
is the alternate scenario that tariffs would create demand
16:21
destruction and slow growth sufficiently and that would
16:24
perhaps keep a bit of a lid on inflation.
16:26
Do you see odds of that scenario?
16:29
What kind of odds do you see of that scenario coming true and
16:32
how many months of cool inflation, what do you need to
16:34
see before concluding that maybe that lower inflation scenario is
16:38
taking place so. This is very much the
16:40
conversation we had today and yesterday.
16:43
There. There are many, many different
16:44
scenarios, many combinations of scenarios where where inflation
16:48
does or doesn't prove out to be at the levels we think and where
16:51
the labor market does or doesn't soften.
16:54
And I think what would you see people doing is looking ahead at
16:58
a time of very high uncertainty and writing down what they think
17:01
the most likely case is. No one holds these these rate
17:05
paths with a great deal of conviction.
17:08
And everyone would agree that they're all going to be data
17:10
dependent and that you can make a case for if for any of the
17:14
rate pass. I think that you see in the, in
17:17
the SCP and you know, we do this once 1/4 it's, it's a hard thing
17:21
to do at this, particularly at this time, but it does reflect,
17:25
you know, if you see you somebody writing down, you know,
17:27
a rate path that involves cuts, that's them saying, yes, I think
17:30
we will get to a place more likely than not where cuts will
17:34
be appropriate. And it could be, it could be a
17:36
joint probability of a number of possible outcomes.
17:39
Again, remember how much uncertainty we face, though.
17:45
Thank you, Mr. Chair. I wonder if you could describe
17:47
for us some of those scenarios. How do you get to a place?
17:50
I'm noticing that the uncertainty levels in your.
17:52
Forecast are very high. How do you get to a place where
17:55
you have the confidence in the outlook for say inflation and or
17:59
growth or the unemployment rate? How many months does it take and
18:03
what do you want to see in the data to get to that level of
18:05
confidence? Actually reduce rates off the
18:07
restrictive level. So it's, it's again, it's very,
18:09
very hard to say when that will happen.
18:11
We know that the time will come. It come, could come quickly.
18:15
It could not come quickly. As long as the economy is solid
18:18
though, as long as we're seeing the kind of Labor market that we
18:22
have and reasonably decent growth and inflation moving
18:25
down, we feel like the right thing to do is to be where we
18:29
are with where our policy stance is and just learn more.
18:32
And in particular, we feel like we're going to learn a great
18:34
deal more over the summer on tariffs.
18:37
We do, we, we hadn't expected them to show up much by now and
18:40
they haven't. And we will see whether to the
18:43
extent to which they do or overcoming months.
18:45
And I think that's going to inform our thinking for one
18:48
thing. In addition, we'll see how the
18:49
labor market progresses. So it at some point it will
18:52
become clear. I can't tell you exactly when
18:54
that will be. And you know, meanwhile we'll be
18:56
watching, watching the labor market very carefully for signs
18:59
of weakness and strength and tariffs for signs of, of what's
19:03
going to happen there. And of course there are many
19:05
developments ahead, you know, even in the near term
19:08
developments are expected on tariffs.
19:10
So I think we we don't yet know with any confidence where they
19:12
will settle out. We have an estimate and it's a
19:15
pretty, I think all estimates are now pretty close together.
19:18
But it's, it's the highly uncertain, you say estimate,
19:22
estimate of the impact of tariffs on the core PCE.
19:25
Is that what it is? Yeah.
19:27
What you start with is, is what's the effective tariff rate
19:30
overall? And people are managing to that.
19:33
But you know, the, the pass through of tariffs to consumer
19:37
price inflation is a whole process that's very uncertain.
19:41
You know, there, as you know, there are many parties in that
19:43
chain. There's the manufacturer, the
19:45
exporter, the importer, the retailer and the consumer.
19:48
And each one of those is going to be trying not to be the one
19:51
to, to pay for the tariff, but together they will all pay for
19:54
the together. Or maybe, maybe one party will
19:56
pay it all. But that process is very hard to
19:59
predict. And we haven't been through a
20:02
situation like this. And I, I'd think we have to be
20:04
humble about our ability to forecast it.
20:06
So that's why we need to see some actual data just to have to
20:09
make better decisions. We, we'd like to get some, some
20:12
more data. And, and again, in the meantime,
20:14
we can do that because the economy remains in solid
20:16
condition, Nick. Nick Tamarosa, The Wall Street
20:25
Journal. Sure, pal.
20:27
I guess I'm wondering if you could explain a little bit more
20:29
the divergent we see in the dot plot, particularly around the
20:33
2025 rate projections. I realize this is, you know, you
20:36
have one group of officials that are putting down no cuts,
20:39
another that are putting down more than one.
20:44
And again, recognizing that could be difficult to summarize,
20:47
but is it a matter of people having a different outlook or a
20:51
different reaction function, a different commitment to
20:54
defending against another inflation mistake?
20:56
How how did the that play out over the last two days?
21:02
So you're right, we, and this is often the case, we have a pretty
21:05
healthy diversity of views on the committee.
21:08
We did have strong support for today's decision and broad
21:10
agreement that our policy stance does leave us in a good place.
21:14
But I would point to two factors and you mentioned them.
21:16
The first is just that parties have a diversity of forecasts
21:20
and and they do align with with where, with where their dots
21:23
are. So if you have a higher
21:25
inflation forecast, you're going to be less likely to be writing
21:27
down, you know, more, more cuts. But as remember, as we see more
21:33
data, we're going to learn more about where inflation is headed.
21:35
And that means when it is time to look at normal, at, you know,
21:40
resuming our normalization process, the differences you may
21:44
you see should be smaller because we'll have seen actual
21:47
data. Right now it's just a forecast
21:49
in a very foggy time. So that's the first part is
21:51
forecast. Secondly, people can look at the
21:53
same data and they can evaluate the risks differently as you
21:56
know, and that includes, you know, the the risk of higher
21:59
inflation, the risk could have been more persistent, the risk
22:01
of the labor market will weaken. People are going to have
22:03
different assessments of that risk so that you put that in
22:07
there too. So those are the two ways that
22:11
that the two things I think that drive these things.
22:14
Remember though, with, as I mentioned earlier, with with
22:17
uncertainty, as elevated it as it is, no one holds these right
22:21
paths with a lot of conviction. So that's really where it is.
22:26
It's, it's a function of those things.
22:28
And I think as the data come in, you should see those differences
22:31
diminish. If I, if I could follow you,
22:33
you've said the policy is in a good place and that it's
22:35
modestly restrictive given all the uncertainty you just talked
22:39
about tariff levels, uncertainty around the pass through.
22:41
Is that price increases versus margin compression, some of the
22:44
softness that Chris talked about in in labor and housing?
22:47
Why wouldn't it be better to have rates at a more neutral
22:50
setting as the economy heads into this period of very high
22:54
uncertainty? So if you just look backward at
22:56
the data that that's what you would say, but that's not we
23:01
have to be forward-looking. And the thing that every
23:03
forecaster, every outside forecaster and the Fed is saying
23:07
is that we expect a meaningful amount of inflation to arrive in
23:10
coming months. And we have to take that into
23:13
account. So I think a backward looking
23:15
look would, would lead you to a neutral stance.
23:17
But we, we can't, we have to, we have to look at that.
23:20
And, and because the economy is still solid, we can take the
23:24
time to actually see what's going to happen.
23:26
It's, it's, if you know, the, there's a range of possibilities
23:28
on how, how large the, the inflation effects and the other
23:32
effects are going to be. So we'll make smarter and better
23:34
decisions if we just wait a couple of months or however long
23:38
it takes to get a sense of of really what what is going to be
23:41
the pass through of inflation and what are what's going to be
23:44
the effects on spending and on hiring and all those things.
23:52
Michael McKee from Bloomberg Radio and Television, your
23:55
friend down at 1600 Pennsylvania Ave. continues to rob insults in
23:59
your direction. And I'm wondering given now that
24:02
the Supreme Court has maybe carved out the Fed from some of
24:06
the legal implications of that, whether this is just noise that
24:11
the markets and everybody should ignore until your term is up or
24:16
whether you worry that it could lead to more pressure on
24:20
confidence on Wall Street on consumers about the outlook for
24:24
the economy? OK, from my standpoint, it's,
24:29
it's not complicated what everyone on the FOMC wants.
24:32
It's a good solid American economy with strong labor market
24:36
and and price stability. That's what we want.
24:38
We think our policy is well positioned to right now to, to
24:42
deliver that and and to be able to respond in timely way as the
24:45
data lead us around the economy has been resilient and part of
24:49
that is our stance. And again, we think we're we're
24:52
in a good place on that it to respond to significant economic
24:55
developments. That's what matters.
24:57
That is what matters to us. Pretty much that's all that
25:00
matters to us. I need to ask, assuming you are
25:04
not reappointed, would you stay on as governor when you're term
25:08
as chair? And I'm not thinking about that.
25:10
I'm thinking about this. Andrew, thanks, Mr. Chairman, I
25:19
guess with workplace raids increasing picking up
25:22
significantly, what kind of effect would that have on the
25:24
labor? Market with what?
25:26
Picking up workplace raids? Immigration.
25:30
So you're asking immigration? Yeah.
25:32
You know, I I wouldn't want to speculate.
25:34
I would one way to get at that from an economic standpoint, we
25:38
of course don't comment on immigration policy.
25:40
It's not ours to make or comment on.
25:42
But what you see is a, an unemployment rate that has been
25:46
really solid and at a low below level, not really increasing.
25:50
It's been in a in a good range and well within the range of
25:53
mainstream estimates of maximum employment.
25:55
And that means like part of that is that labor demand and labor
25:58
supply are kind of moving down at the same rate.
26:02
Labor demand is, is softening. You see that in job creation,
26:05
but it's still kind of at a healthy level.
26:07
And labor supply is, is diminishing because the, the
26:11
immigration numbers that we see are, are much lower than they
26:14
were. So the, the, those two factors,
26:16
supply and demand, that's what has kept them the, the
26:19
unemployment rate in a reasonably, you know, stable
26:22
place. OK, thanks.
26:24
The other thing I wanted to follow up on is if you could you
26:27
could elaborate on the potential changes to the SCP that you
26:29
suggested were part of the framework review I think.
26:33
So the framework review really has 2 tracks, right?
26:37
The first track is our, is our policy framework that, that is
26:40
reflected in the consensus statement.
26:42
And we, we've said that we would finish that and announce it by
26:46
the end of the summer. So we're well along in that
26:49
process. We've had the meetings that we
26:51
need to have. And we're now going to be going
26:53
into, pardon me, into discussions about, you know,
26:58
specific changes to language. So that that's, that's the
27:01
framework part of it. The second part of it is our
27:04
communications tools and practices.
27:07
Pardon me. And that, that part comes next.
27:10
OK. That's what we're going to do in
27:12
the meetings this fall. Actually what we did at this
27:14
meeting, though, is we, we sort of prepared the ground for that.
27:18
We had a, we had a meeting where we talked at a high level about
27:21
a number of ideas. The SCP is part of it, you know,
27:25
other, many, many other ideas. It's, it's sort of how do we
27:28
think our communications can be improved?
27:30
There are number of ideas people offered a really, it was great
27:33
conversation, number of ideas. But we're going to look at those
27:36
with staff briefing and a lot of thought in the fall.
27:40
And I would say when it comes to changing communications, you
27:43
know you, I would only do that. I would only support things
27:46
really that have only implement things that have very broad
27:49
support. And also you want to be really
27:51
careful because I think our communications are pretty well
27:54
received. They're not broken.
27:55
So more is not necessarily better, but better is better.
27:59
So what we're going to be looking at ways to do to do
28:02
things that will improve the clarity of of what we do for the
28:04
benefit of the public. Thanks, Chair Powell Kelly
28:12
O'Grady, CBS News. You're famously known as the guy
28:15
that makes decision based on data instead of speculation.
28:19
You said today, and the inflation data is in a good
28:21
place. We don't know how tariffs are
28:23
going to impact prices going forward.
28:25
That's uncertain. But I've got to go back to the
28:27
last time that you caught rates in December and there was still
28:31
the what if of tariffs. So what made you feel
28:35
comfortable cutting then when inflation was higher than where
28:39
it is today and you didn't cut today?
28:42
Well, the. The forecast for inflation in
28:45
December was 2 1/2 core PCE. For 2025, the forecast was 2
28:52
1/2%, which is a good inflation forecast.
28:55
I think what we've learned is that in this was long before we
28:59
had any idea of what the actual policies would be.
29:02
We've learned the tariffs are going to be substantially larger
29:05
than than forecasters generally thought.
29:07
And yet we, we don't our, our forecasts are generally not
29:11
particularly different from those of other, you know, well
29:14
resourced forecasting operations.
29:16
So what we learned and particularly in April was that
29:20
very substantially larger tariffs were coming in that that
29:23
would mean higher inflation. That's what happened.
29:25
And so you now you see, you saw 2 1/2 percent forecast in
29:29
December, you saw 2.8% in March and you see 3.1% now.
29:34
So it's 6/10 higher inflation for 2025.
29:37
And that's, that's a big part of, of the change.
29:39
And that's, that's due to the effects of, of the tariffs that
29:44
are, you know, we, we don't know where they're going to land, but
29:46
it's pretty apparent they're going to land higher than
29:48
outside forecasters. We're really guessing at the end
29:52
of last year. My follow up to that, I think
29:55
consumers, right, we're looking for relief on rates when it
29:58
comes to mortgages, car loans, small businesses want to take
30:01
out more manageable loans. When you look at the cumulative
30:04
inflation over the past five years, prices have risen over
30:07
20%. It's been a rough Rd.
30:10
So what is the tipping point then for the wait and see
30:13
approach in terms of how much it's going to help versus when
30:16
it hurts the American consumer? Well, I mean, we're trying to
30:20
restore price. Best thing we can do for the,
30:22
for the public that we serve is restore price stability if we
30:26
can and we will restore price stability, meaning 2% inflation
30:29
on a durable sustainable basis that and also maximum
30:34
employment. If we we restore those things,
30:36
that's the best thing. And that, that is our goal.
30:38
The best thing we can do for the American people, for for
30:40
households and businesses, that is the ultimate thing that we
30:44
can deliver and they can make their decisions without having
30:47
to think about inflation all the time.
30:49
So in the meantime, we have to keep rates high to keep to get
30:52
inflation all the way down. They're not very high.
30:55
Let's be honest. I would say policy is modestly
30:59
or moderately, probably modestly now restrictive.
31:01
If you look at the economy, it's not performing as though it were
31:04
performing under very strict monetary policy, very
31:07
restrictive monetary policy. So I would say probably modestly
31:10
restrictive. And So what it will take is, is
31:13
confidence that inflation is coming down.
31:15
Now I would say without tariffs, that confidence would be
31:18
building because if you if you see what's happening with non
31:23
housing services and housing services, which are the other
31:25
two big pieces other than goods, those are coming down really
31:28
nicely now. So I think we have to learn a
31:31
little more about about tariffs. I don't know.
31:32
I don't know what the right way for us to react will be.
31:35
I think it's hard to know with, with any confidence how we
31:37
should react until we see really the size of, of the effects and
31:41
then we can start to make a better judgement.
31:43
So that's what we're doing. And I think we can, we can take
31:46
the time to do that because unemployment is 4.2%, wages are
31:51
moving up, real wages are moving up at a, at a healthy clip now.
31:54
And inflation is, you know, 2.3% headline inflation over a 12
31:58
month basis. So it's a good economy and a
32:01
solid economy with decent growth.
32:07
Thank you, Chair Paul. So you're saying that
32:10
uncertainty has come down, the economy is moving at a solid
32:12
pace, Inflation has come down over the past three months, and
32:16
this is all moving in the right direction.
32:18
So are you indicating here that Americans should expect some
32:21
sort of economic pain in the second-half of the year?
32:25
I'm not, I'm not saying that at all.
32:27
You know, from our standpoint, what I can say is that the US
32:30
economy is in solid shape. Inflation has come down.
32:33
Unemployment rate remains at 4.2%.
32:36
As I mentioned, real wages are moving up.
32:37
It's a, it's a good job creation is at a healthy level.
32:41
Unemployment again, as I said, low labor force participation in
32:44
a good place. So, and what we're waiting for
32:47
to reduce rates is, is to understand what will happen
32:50
with, with really the tariff inflation.
32:53
And there's a lot of uncertainty about that.
32:56
Every forecaster you can name who you know, who is a
32:59
professional, you know, forecaster with, with adequate
33:03
resources and forecast for a living is forecasting, you know,
33:06
pretty significant. Everyone that I know is
33:08
forecasting A meaningful increase in inflation in coming
33:11
months from tariffs because someone has to pay for the
33:15
tariffs. And it will be someone in that
33:17
chain that I mentioned between the manufacturer, the exporter,
33:21
the importer, the retailer, ultimately somebody putting it
33:24
into a, a good of some kind or just the consumer buying it.
33:28
You know, and all through that, that's that chain, people will
33:31
be trying not to be the ones who who pick up the cost, but
33:33
ultimately the cost of the tariff has to be paid and some
33:37
of it will fall on the end consumer.
33:39
We know that because and if that's what businesses say,
33:41
that's what the the data say from past that debt.
33:44
So we know that's coming and we just want to see see a little
33:48
bit of that before we make judgments prematurely.
33:51
And follow up on that. So you spent years there talking
33:53
about how how you're data dependent and be a little more
33:55
direct on this, you know, now you're making decisions looking
33:58
forward. Doesn't the data you're seeing
34:00
today indicate there should be a rate cut?
34:04
No, I mean you're monetary policy has to be
34:08
forward-looking. That is an elementary you've got
34:10
to be looking at. I always, I always talk about
34:12
the incoming data, the evolving outlook and the balance of risks
34:16
that we say that over and over and over again, right?
34:18
So it's always forward-looking. You know, if you know, at the
34:22
very beginning of the pandemic, you know, we cut rates to 0
34:26
immediately. Nothing had happened.
34:28
We just knew that it was going to be really bad, right?
34:30
So we, we, we took very aggressive forward-looking
34:33
because we knew things were going to be unusually difficult.
34:37
So of course, this, this is something we, we sort of know is
34:41
coming. We just don't know the size of
34:43
it. And again, the economy seems to
34:45
be in solid shape. So the labor market's not crying
34:48
out for a rate cut. Businesses, you know, we're in a
34:52
bit of shock after April too. But you see business sentiment,
34:55
you talk to business people now there's a very different feeling
34:57
now that people are working their way through this and they,
35:00
they understand how they're going to go.
35:02
And it's it, it, it feels much more positive and constructive
35:05
than it did three months ago, let's say.
35:07
So again, we think that our current stance of monetary
35:10
policy is in a good place. Thank you, Mara Mulkley with
35:18
Bloomberg Chairpal. In February, you told Congress
35:20
that the Fed is, quote, overworked, maybe not
35:23
overstaffed. Then an amendable memo to staff
35:26
in May announcing A deferred resignation program at the Fed.
35:29
You said you wanted to ensure that the Fed was quote right
35:31
sized. Those two statements appear to
35:33
be at odds with one another. Could you explain what changed
35:36
in the roughly 3 months between those statements that made you
35:39
decide that that staff levels at the Fed should decline?
35:42
I don't see them at all as, as intention, you know, So I was
35:46
asked, is the Fed overstaffed? And I said no, you know, and I
35:49
sort of said as a pun, overworked but not overstaffed.
35:52
People do work extremely hard at the Fed and they, I know they
35:55
work hard at Bloomberg too. So, but we do, we work hard and,
36:00
but I would say this, so we are careful students, stewards of
36:04
public resources. And sometimes you need to show
36:06
that. So there have been several times
36:08
in our history, modern history where the Fed has said, you know
36:11
what, we're going to do a buyout.
36:12
We're going to, we're going to show the public, we're going to
36:14
demonstrate that we are good stewards of public resources.
36:18
So we thought, and I, I thought that this is a time when we can,
36:22
you know, we've, we grow at about our head count is growing
36:25
at about 1% a year. So over the course of a couple
36:28
of years, we're going to, we're doing a careful scrub of the
36:31
board and all the reserve banks and we're going to find 10% of
36:35
employees who can do something else where, where we can, we can
36:39
streamline our operations. And we, we think we can get
36:43
there in a year or in a couple of years.
36:45
We think we can do that. And we think the, we think the,
36:48
the, you know, this is, this is without taking risk to carrying
36:53
out our Chris critical missions. So this is something you do very
36:56
carefully, thoughtfully, and you do it again, respecting that we
37:00
have critical missions to carry out.
37:02
I've had experience, a lot of experience in my prior careers,
37:06
you know, with headcount reductions and things like that.
37:10
And this is how you do it professionally.
37:12
You do, you do it carefully, thoughtfully, with a lot of
37:14
planning and you do it over a period of time.
37:17
I think it's, I think the Fed will be fine.
37:19
I think no one will notice any decline in our ability to carry
37:22
out our missions. And I think it's just us wanting
37:24
to demonstrate to the public that we are actually good
37:28
stewards of their, of their resources.
37:31
We're we're effectively wiping out 10 years of headcount growth
37:35
with this. So I mean, we just, we wanted to
37:37
show that, you know, that we're good stewards.
37:40
How is progress on reducing that?
37:42
Tail going so far, are you on track to meet the goal?
37:44
We're just at the very beginning, as you know, we're
37:46
doing a buyout program. We're we're going to, we're
37:48
going to hit that goal. I think many organizations find
37:51
that they can, that they can do this.
37:54
You don't want to do it every year or anything, but you can do
37:56
it AD intervals and you, you wind up not, you know, not you
38:00
not interfering with your ability to perform your jobs.
38:04
Claire. And Chair Powell Claire Jones
38:11
from the Financial Times. As you're no doubt aware, the
38:14
Senate Finance Committee has tabled its version of the
38:17
reconciliation bill this week. And I was wondering if you could
38:21
tell me a little bit about the tenor of the debate at the FOMC
38:25
over the past few days on fiscal policy and the degree to which
38:30
that influence people's projections for 2026 and beyond.
38:34
Thank you. Yeah.
38:35
So, you know, we don't, we don't sit around and debate or really
38:41
discuss. We, we take fiscal policy as
38:43
fully exogenous. And so people, we, we actually,
38:48
you know, really didn't talk about, about the, the bill or
38:51
the contents of it. It's still evolving.
38:55
You know, when, when it gets close, closer, it's remember
38:59
also we have a very, very large economy and at the effects will
39:02
be at the margin. And you know, I, I expect that
39:06
they'll, they may already be in, but they will be in by the next
39:09
meeting. We'll make an estimate, but it's
39:11
not a major thing. That's nothing that we discuss.
39:14
It may have been mentioned a couple of times, but as
39:17
something that's coming in, but I think the outcome is, you
39:21
know, we don't know the outcome yet.
39:22
They're so hard to be real specific, Neil.
39:30
Thanks, Shapal. Neil Irwin with Axios.
39:32
There's been some cutbacks in economic statistics collection
39:35
in the last few weeks. Worries that long running
39:37
problems around funding and response rates may be getting
39:39
worse. How much is this concern on your
39:41
radar? How much confidence do you have
39:43
that the ages you're watching to assess the economy are reliable
39:46
right now? You know, two things.
39:49
One, the data we get right now, we, we can do our jobs.
39:53
I'm not concerned that we can't do our jobs.
39:57
That's not the, that's not the point.
39:58
The, the point really is that we are starting to see, you know,
40:03
layoffs and, and, and important gatherers of data are saying
40:07
that they're, they're having to cut back on the size of their
40:10
surveys. That's going to lead to more
40:11
volatility in the surveys. I think we should take a step
40:14
back and, you know, from our standpoint, and I think the
40:17
standpoint of businesses and governments and everyone having
40:21
really good data on the state of the economy at any given time is
40:24
a huge public good. It helps, it not just doesn't
40:27
help the Fed, it helps the government.
40:28
It helps Congress, it helps the executive branch.
40:31
More importantly, really, it helps businesses.
40:32
They need to know what's going on in the economy.
40:35
The United States has been a leader for many, many years in
40:38
this whole project of measuring and understanding what's
40:42
happening in, in our, in our very, very large and dynamic
40:44
economy. And I hate to see, I hate to see
40:47
us cutting back on that because it is a real benefit to the
40:52
general public that people in all kinds of jobs have the best
40:56
possible understanding of what's happening in the economy and and
41:00
hence what's likely to happen. It's very hard to measure what's
41:03
going on in the US economy. If you read, there was a book
41:05
called, well, it's really remarkable how many things you
41:10
need to understand to estimate USGDP.
41:13
Very, very difficult. And it's so important that we
41:16
get it right. I just would, I just would say
41:18
it's not a place to, to, I would want to keep investing in that,
41:23
you know, for the good of the general public.
41:33
Hi, Victoria Guido with Politico.
41:35
So you're conducting this monetary policy strategy
41:39
framework review, but next year we're supposed to have a new Fed
41:43
chair. And I'm wondering if that
41:45
affects at all the way that you're approaching this.
41:48
How do you ensure that this? Framework will actually be
41:50
durable. You know, the framework goes
41:55
back to the framework document goes back to 2012 and it's, it's
42:00
the committee's document. It's not like we're going to
42:03
invent a brand new way to do things.
42:04
It's, it's been an evolving document.
42:06
So it shouldn't depend on who the chair is at all.
42:10
It should depend on what's happening in the economy and
42:12
what the committee wants to do. So yeah, it, it isn't really
42:15
tied to any particular chair. And you know, we used to, we
42:18
used to renew it every year. Now we do it every five years.
42:22
So, but I, I don't think anybody, I've never heard anyone
42:25
raise this issue that, you know, a new chair might want to come
42:29
in and go in a completely different direction.
42:30
I really, I really don't think that's right.
42:32
But you know, but that's not not going to be up to me to decide.
42:35
Is that affecting at all that you're?
42:37
You're consulting with not at all, not in any way.
42:47
Thank you. Chair Powell, Matt Egan from CNN
42:50
Relatively low gas prices this year have helped drive down
42:55
inflation in recent reports, but that trend is starting to
42:58
reverse. Given the crisis in the Middle
43:00
East. How are you thinking about how
43:03
the Israel Iran conflict will impact the economy, especially
43:06
inflation, And what lessons were learned during the 2022 period
43:12
when another conflict, the Russian Ukraine war, sent oil
43:15
and gas prices skyrocketing? So of course we're we're
43:18
watching like everybody else's. What's going on.
43:21
I really don't have any comment on that.
43:23
You know, possible that, that we'll see higher energy prices.
43:27
What's tended to happen is when there's turmoil in the Middle
43:31
East, you may see a spike in energy prices, but tends to come
43:34
down. Those things don't generally
43:37
tend to have lasting effects on inflation, although of course,
43:41
in the 1970s they famously did because you had a series of
43:44
very, very large shocks. But we haven't seen anything
43:48
like that that like that. Now the US economy is far less
43:51
dependent on for foreign oil than it was back in the 1970s.
43:56
So but there. A quick follow up, I'm just
44:00
going to ask you about artificial intelligence.
44:02
Some technology executives have recently been warning that AI
44:06
could wipe out a large chunk of entry level jobs and
44:10
significantly increase the unemployment rate.
44:13
I'm wondering how concerned you are, if at all, about the threat
44:16
that AI poses to employment. So if this is the question,
44:22
question really is, will AI be more augmenting labor or
44:26
replacing labor? And I wouldn't I, I, we all see
44:29
those announcements, including one today.
44:31
I wouldn't, you know, over read a couple of a couple of date
44:36
data points because you know, AI should be creating jobs at the
44:40
same time. It may be replacing maybe doing
44:42
both. Anyone who's done any work with
44:47
it, with AI will, will have been a little bit stunned and how
44:51
capable it is. And it's just a different thing.
44:54
So I think this is something that the certainly has
44:57
transformational potential and probably we're in the very early
45:00
stages of it. You know, they they say what
45:03
you're seeing now compared to what you'll see in two years is,
45:06
is going to be very different and even more effective.
45:08
So I think it's really hard to know that, you know, of course
45:11
there are optimists who feel like it's going to make
45:13
everybody much more, you know, much more productive.
45:18
And they're those who think it's going to replace an awful lot of
45:20
jobs right across the income spectrum, you know, white
45:22
collar, blue collar and everything.
45:24
So I just don't know. We don't, we don't have a house
45:27
view on that. But this is this is going to be
45:30
a very important question for some time.
45:32
Great. Thank you, Greg Wrap from
45:42
MarketWatch. I was wondering if you could
45:44
step back a little bit, Chair Powell.
45:47
You know, there's a spate of articles and a lot of op eds now
45:50
in the newspapers saying that the US economy and the global
45:54
economy is going through this profound change, you know, under
45:58
akin to the end of the Bretton Woods era in the 1970s.
46:02
And don't you owe the American people like some sort of like
46:07
explanation for what we're going through?
46:09
I mean, I, I noticed earlier this month when you, you talked
46:12
about Bretton Woods a little bit and you said that Bretton Woods,
46:15
the Fed staff had to like change how they've the dollar movements
46:19
for the dollar wasn't impacting the economy.
46:21
Are we going through something like that now that, you know,
46:25
are you having to change how you do monetary policy?
46:27
Is that, is it that fundamental a change underway?
46:30
Thanks. It's, it's certainly a time of
46:33
real change, you know, from a geopolitical standpoint, from a
46:38
trade standpoint, from an immigration standpoint, you see
46:41
this not just here, but everywhere.
46:43
So there's, there's quite a lot going on.
46:46
It doesn't change the way we do monetary policy in the near
46:48
term. I mean, but, and it doesn't
46:50
change our objectives or what we need to do.
46:52
And you know, these, these things are not really our
46:54
issues. They're really issues for
46:56
elected governments. All of those issues are really
46:58
for elected governments. But there's no question it's a
47:00
time of, of real, real change and very hard to see where that
47:06
goes. You know, will it be, there have
47:09
been many, many things written about how it's going to be more
47:11
inflationary time. That's possible.
47:13
It's not guaranteed. You know, AI could cut in the
47:16
very other direction. AI could make people much more
47:19
productive and, and, and push in the other direction.
47:22
I don't know, though. So, but you're right.
47:24
But honestly, our focus is, is a much more practical 1.
47:27
And that is how do we keep inflation low and, and
47:30
employment high in the near term?
47:32
That's that's really what we're about.
47:37
Mark. Hello, Chairman Powell, Mark
47:46
Hamrick with Bankrate what is the view about the growing
47:49
amount of slack in the job market, including the softening
47:52
in payrolls, the forecast of a modest rise in the unemployment
47:55
rate and the. Ability of workers to.
47:58
Demand wage hikes or not in this environment where you have
48:02
inflation surging. You don't see, you don't.
48:04
Really see unemployment going up.
48:06
You don't see increased slack really.
48:07
I mean, at the margin, remember you're at 4.2% unemployment that
48:11
that was for many, many years. That was a extremely low level.
48:15
It happens to have come up off of an even lower level.
48:17
As we came out of the pandemic, we were as low as 3.4%.
48:20
But 4.2% is probably at the low end of estimates of the longer
48:25
run, you know, sustainable level of natural rate of unemployment.
48:30
So I wouldn't, I guess I wouldn't agree with that.
48:33
And also in terms of wages, you know, real wages after inflation
48:38
have been moving up sort of more than was consistent with 2%
48:42
inflation. They're still moving up at a, at
48:44
a, at a, at a healthy clip. And I think much more consistent
48:48
with 2% inflation given, given a reasonable assessment of, of
48:53
trend productivity. So it's a pretty good labor
48:56
market. You know, you're right that the
48:57
level of job creation has come down, but so has the supply of
49:00
workers, the change in the supply, the, the new supply.
49:04
So you've seen, you've seen the unemployment rate remain pretty
49:06
stable at 4.2. It's been as high as 4.3.
49:10
But you know, there's a, there's a good number.
49:12
So it's pretty good labor market.
49:14
There's The thing is, there's a more concerning thing is there's
49:16
not there not a lot of laughs, but they're not a lot of job
49:20
creation. The number if you're out of
49:22
work, it's, it's hard to find a job, but they're very few people
49:26
are being laid off at this point.
49:28
So that's a, that's a, an equilibrium.
49:31
We watch very, very carefully because if there were to be, you
49:35
know, significant layoffs and the job finding rate were to
49:38
remain this low, you would have a lot, you would have an
49:40
increase in unemployment fairly quickly.
49:42
But that hasn't happened. It really hasn't happened.
49:44
We're so the US economy has defied all kinds of forecasts
49:49
for it to to weaken really over the last three years.
49:53
And it's been remarkable to see just again and again when people
49:56
think it's going to weaken out eventually it will.
49:58
But we don't see signs of that now.
50:02
Go to Gene for the last question.
50:06
Hi Chair Powell, Gene Young with M and I Market News.
50:09
There's been a lot of talk about cuts.
50:11
I wanted to ask you why do you think there are no forecasts for
50:15
rates to rise or or even to stay where they are next year given
50:19
that the projection for inflation is to rise to 3% and
50:24
there's a lot of there's some skepticism over whether those
50:29
price hikes will be a one time event.
50:32
So there are number of people on.
50:33
The committee who wrote down no cuts this year, but some cuts
50:36
next year. So I look, I think, you know,
50:40
people are writing down their most likely path, right?
50:43
They're not saying there's zero possibility of other things.
50:46
Really, really it's think of it as the least unlikely path in a
50:49
situation like this where uncertainty is very high.
50:53
I, I think again, people write, they write down their, their,
50:56
their rate paths and they do not have like a really high
51:00
conviction that this is exactly what's going to happen over the
51:02
next two years. No one feels that way about
51:03
their rate path. They feel like, what am I going
51:06
to write down? I mean, what would you write
51:07
down? It's not easy to, to, to be, to
51:10
do that with confidence. So that would just say it that
51:12
way. We don't rule things in or out.
51:15
Certainly a hike is not the base case at all.
51:18
It's not something people are writing down.
51:20
But in the meantime, we do the best we can with these
51:24
forecasts. And I, I think they're, they're
51:26
representative of, you know, of the different forecasts and
51:29
different reaction functions that people on the committee
51:31
have. So thank you very much.
51:33
Thanks. Hey, thank you so much for
51:34
listening today. I.
51:35
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51:37
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