FOMC Press Conference May 1, 2019


Transcript of Chair Powell’s
Press Conference May 1, 2019 CHAIR POWELL. Good afternoon, and welcome. At the FOMC meeting
that concluded today, we reviewed economic and
financial developments in the United States and
around the world and decided to leave our policy
interest rate unchanged. My colleagues and I have
one overarching goal: to use our monetary policy tools to sustain the economic
expansion with a strong job market and
stable prices for the benefit of the American people. Incoming data since
our last meeting in March have been broadly in
line with our expectations. Economic growth and job creation
have both been a bit stronger than we anticipated, while inflation has
been somewhat weaker. Overall, the economy
continues on a healthy path, and the Committee believes
that the current stance of policy is appropriate. The Committee also believes that solid underlying
fundamentals are supporting the economy, including accommodative
financial conditions, high employment and job
growth, rising wages, and strong consumer
and business sentiment. Job gains rebounded in March
after a weak reading in February and averaged 180,000 per
month in the first quarter, well above the pace needed to absorb new entrants
to the labor force. Although first-quarter
GDP rose more than most forecasters
had expected, growth in private consumption and business fixed
investment slowed. Recent data suggest that these
two components will bounce back, supporting our expectation
of healthy GDP growth over the rest of the year. The Committee is
strongly committed to our symmetric 2 percent
inflation objective. For much of this long expansion, inflation ran a bit below
our 2 percent objective, alongside considerable slack
in resource utilization. But last year, with the
unemployment rate at or below 4 percent,
inflation moved up. From March through December, core inflation-which
excludes volatile food and energy components-was at
or very close to 2 percent. Overall inflation
fluctuated from a few tenths above 2 percent to a few
tenths below over this period, with the moves mostly due
to changes in energy prices. As expected, overall inflation
fell at the start of this year as earlier oil price declines
worked through the system. Overall inflation for
the 12 months ended in March was 1.5 percent. Core inflation unexpectedly
fell as well, however, and as of March stood
at 1.6 percent for the previous 12 months. We suspect that some transitory
factors may be at work. Thus, our baseline view remains
that, with a strong job market and continued growth, inflation
will return to 2 percent over time and then
be roughly symmetric around our longer-term
objective. At the start of the year, a number of crosscurrents
presented risks to the outlook, including weak global
growth, particularly in China and Europe; the possibility
of a disruptive Brexit; and uncertainty around
unresolved trade negotiations. While concerns remain
in all of these areas, it appears that risks
have moderated somewhat. Global financial conditions have
eased, supported in many places around the world by
an accommodative shift in monetary policy and, in
some cases, fiscal policy. Recent data from China and
Europe show some improvement, and the prospect of a disorderly
Brexit has been pushed off for now. Further, there are reports of
progress in the trade talks between the United
States and China. The Committee views
these developments, along with the outlook
for continued growth, a strong job market, and
muted inflation pressures, as consistent with
continued patience in assessing further
adjustments in monetary policy. Over the past several
months, we have made a number of consequential decisions
about our balance sheet. In January, we decided to continue implementing
monetary policy using our current policy regime, which involves providing an
ample supply of reserves. In March, we decided to slow the
pace of balance sheet runoff, starting this month, and to cease runoff
entirely in September. These plans support our
longer-run dual-mandate objectives and also provide
clarity about the path of our asset holdings. Today we had a preliminary
discussion about the longer-run maturity
composition of the portfolio. Before the financial crisis, our portfolio was weighted
toward shorter-term debt of the federal government. In the wake of the crisis,
the Fed bought a large amount of longer-term securities
with the aim of lowering longer-term
interest rates and, thus, supporting the recovery. Because of these purchases, our portfolio is now weighted
toward longer-term securities. As part of normalization,
we will have to decide what the
maturity structure should be in the longer term. This choice raises
many complex issues and has possible implications
for the stance of policy. Today’s preliminary
discussion laid the groundwork for more complete
analysis and discussion, and we plan to return to the maturity composition
question toward the end of the year. There is no pressing need to
resolve this matter, however, and any decisions we ultimately
reach will be implemented with considerable advance notice
and in a manner that allows for smooth adjustment. As we have often emphasized, adjustments to the balance sheet
normalization process may well be needed as the
process unfolds. Finally, we made a small
technical adjustment in one of our tools for
implementing monetary policy: the interest rate on excess
reserves, or IOER rate. The change does not
reflect any shift in the intended stance
of monetary policy. We use the IOER rate to help
keep the federal funds rate in our target range. As balance sheet normalization
continues, we have expected that the effective federal
funds rate would shift up over time relative
to the IOER rate. Last year we twice
lowered the IOER rate by 5 basis points relative to
the top of the target range after the federal funds
rate moved toward the top of the range. These actions helped keep the
effective federal funds rate well within the target range. And today we made
one more such change. The target range for the federal
funds rate is our main indicator of the stance of policy,
and it remains unchanged. Thank you very much. I will be glad to
take your questions. STEVE LIESMAN. Thank you, Mr. Chair. Steve Liesman, CNBC. As the statement noted, core inflation is now running
below 2 percent-it’s been falling for three
straight months, and while you’ve been close,
it’s only been at 2 percent or above one month since 2012. Mr. Chair, I guess I wonder, is
it time to address low inflation through policy, and can you give
us some sense of your metric for when it would be time? At what level would it
require a policy response from the Committee? CHAIR POWELL. So, first, we are
strongly committed to our 2 percent inflation
objective and to achieving it on a sustained and
symmetric basis. As I mentioned, we think our
policy stance is appropriate at the moment, and we
don’t see a strong case for moving in either direction. I would point out that inflation
actually ran-including core inflation-actually
ran pretty close to 2 percent for much of 2018. As you point out, both
headline and core, though, did come in on the soft
side in the first quarter, and that was not expected
as it relates to core. So we say in our Statement
of Longer-Run Goals and Monetary Policy Strategy that the Committee
would be concerned if inflation were
running persistently above or below 2 percent. So “persistent” carries
the sense of something that’s
not transient, something that will sustain
over a period of time. And in this case, as we
look at these readings in the first quarter for core,
we do see good reasons to think that some or all of the unexpected decrease
may wind up being transient. And I’d point to things
like portfolio management, service prices, apparel
prices, and other things. In addition, the
trimmed mean measures of inflation did
not go down as much. Indeed, the Dallas trimmed
mean is at 2 percent. But to go back to your question, if we did see a
persistent-inflation running persistently below, then that is
something the Committee would be concerned about and
something that we would take into account in setting policy. SAM FLEMING. Thanks very much. Sam Fleming from
the Financial Times. Let me carry on on
the same theme. There’s obviously been a lot
of speculation in the markets about the prospects for a
rate reduction this year. Do you think markets have
effectively gotten ahead of themselves on this? And what sort of economic
conditions would you need to see to give serious consideration
of a rate cut? The discussion, for example, about the 1995 example-do
you actually need to see a looming
recession to cut rates, or could an insurance
cut be appropriate? Thanks. CHAIR POWELL. So as I mentioned, we’ve just
come through a two-day meeting, and we’ve done a
deep dive on economic and financial conditions
in the United States and around the world and
thought about our policy, and we do think our policy
stance is appropriate right now. We don’t see a strong case for
moving in either direction. So- we do, of course,
though-as a routine matter, as you well know-we look
not only at our baseline, but we also look at alternative
simulations, both better and worse, and we ask ourselves
what the appropriate policy response would be. But that’s all we do. And I would just say that we’re
comfortable-the Committee is comfortable with our
current policy stance. HOWARD SCHNEIDER. Hi. Howard Schneider
with Reuters. Shifting gears a little bit, I wondered if you could flesh
out-I know you’re describing it as a small technical adjustment, but on the IOER federal
funds spread, give us a sense of why it matters whether or not this breaches the
upper limit a little bit. Is there any feed-through
to broader credit conditions and financial conditions
that you worry about, or is it simply a
matter of the Fed showing that it can control what
it says it’s controlling? And I do have a follow-up. CHAIR POWELL. So a small, temporary
deviation outside of the range would really
carry no-wouldn’t be important, as your question suggests. But we do think it’s
important that we be able to control the federal
funds rate and generally keep
it within the range. That’s just good monetary
policy, good monetary control. So we think it’s important, and
we have the tools to do that, so we’ve used them again today. And, again, this is
just a technical fix. It really has no
implications for policy. HOWARD SCHNEIDER. But as a follow-up on
this, it is demonstrating that you can control the
market you want to control. And I guess the question is, at what point would
these steady declines in the IOER-steady widening of
this spread, if it continues, essentially become
the policy choice? CHAIR POWELL. Yes, I mean-so, generally
speaking, the federal funds rate-we
control only directly the federal funds rate in
terms of the market rate. And the transmission of
the federal funds rate into other short-term
rates-money market rates-has been very good over a
long period of time. And that’s important, because
it’s really broader financial conditions that matter, not so much precisely
the federal funds rate. So I think the Fed controlling
the federal funds rate is actually important
from that standpoint, and I don’t see us
not controlling it. So I think we’ll continue to
control it, and it will continue to transmit well into
broader financial conditions. MICHAEL MCKEE. Michael McKee with Bloomberg. I’m curious about the
financial conditions that you see out there. The minutes of the
March meeting tell us “a few” officials worried about
financial stability risks. Was there a broader
discussion at this meeting? Any consensus on whether
such risks are growing as the markets hit new highs,
and we do see some instability in short-end trading-is
it possible that rates are too
low at this point? CHAIR POWELL. We actually have a
financial stability briefing and opportunity for
comment every other meeting. So we had our quarterly
briefing today-yesterday, as a matter of fact-and had
that discussion as well. And I think there haven’t
been a lot of changes since the last meeting,
but I’ll just go through the way we
think about it. First, we’ve developed and
published our framework for assessing financial
stability vulnerabilities-put it out for comment and
welcome any feedback that we get from the public. And that enables us to focus
our assessments regularly on the same things so that
we can be held accountable and be transparent. So there are four aspects of it
that I’ll go through quickly, but I’d say that the
headline really is that while there
are some concerns around nonfinancial
corporate debt, really the finding
is that, overall, financial stability
vulnerabilities are moderate, on balance. And, in addition, I would say that the financial system
is quite resilient to shocks of various kinds with high
capital and liquidity. But the four things we look
at are, first, asset prices. And as for asset prices, some asset prices are
somewhat elevated, but I would say not
extremely so. Leverage in the financial
sector-I mentioned households are actually in good shape
from a leverage standpoint. Default rates are low. Borrowing is relatively low. Nonfinancial corporates is an
area that we’ve spotlighted and focused on for attention,
and there are concerns about that-not so much from a
financial stability standpoint, but from the standpoint that having a highly levered
corporate sector could be an amplifier for a downturn. And then the last two-the
last two things are really about the leverage in
the financial system and funding risk, and
those are both very, very low by historic
standards in the United States. So, on balance, in my view,
vulnerabilities are moderate. MICHAEL MCKEE. If I could follow up on
that-I’m just curious as to whether the level of asset
prices is a reason why you might not be interested
in cutting rates. CHAIR POWELL. So we do say that risks to
the financial system-we say in our longer-run
statement of goals and monetary policy
strategy that risks to the financial system
that could prevent us from achieving our
goals are something that we do take into
consideration. I would say that, though,
that really the tools for addressing those concerns
are better-capital liquidity, good supervision, good stress
testing, and things like that. Those are better first-order
tools to deal with these kinds of issues than monetary policy. NICK TIMIRAOS. Nick Timiraos of the
Wall Street Journal. Chair Powell, with the
benefit of hindsight, did last year’s rate increases
make it harder for the Fed to credibly affirm its 2 percent
symmetric inflation target is not, in fact, a ceiling? And, if so, would it be
appropriate to lower rates if core inflation remained
persistently closer to 1½ percent instead
of 2 percent? And, if not, do you worry
about any unwelcome tightening in real rates, given the recent
softness in core inflation? CHAIR POWELL. So, to your first question,
if you go back and think about the middle of last year,
inflation was at 2 percent and appeared to be
staying there. And the economy was quite
strong and was growing strong. The fiscal changes were
hitting the economy in a very positive way. And so I think the
expectation was that inflation would
remain up around 2 percent. The weak first quarter
performance was not expected-of core was not expected, and
I don’t think is related to anything we did, in
terms of raising rates. It appears to be
more-we don’t know this, but you never know
until-with hindsight, with perfect hindsight,
but some of it does appear to be transient or
idiosyncratic. Now, the second part
of your question? Sorry. NICK TIMIRAOS. Well, I mean, if it was an
issue, would it be appropriate to lower rates if core inflation
held closer to 1½ percent? And, if not, are you worried that there is unwanted
tightening from real rates,
being where they are? CHAIR POWELL. Yes, I mean-so, as I said
earlier, we do address this in our, sort of,
constitutional document. If inflation were to run
persistently below 2 percent or persistently above 2
percent, that would be a concern for the Committee, and
the Committee would take that into account
in making policy. I do think it’s important
that inflation run close to and sustainably -for
a sustained period of time-and symmetrically
around 2 percent. Because if it doesn’t,
you run the risk that inflation expectations
can-it has been the case, most of the misses are on the
downside-inflation expectations over time could be pulled down, and that could put downward
pressure on inflation and make it harder for us to
react to downturns and harder for us to, you know, support
the economy in difficult times. JEANNA SMIALEK. Jeanna Smialek, New York Times. So as you just mentioned, last
year when you guys were kind of getting inflation
coming in around 2 percent, you had this benefit of the
tailwind of fiscal stimulus. And you still have
that to some extent, although the tax cuts have
mostly feeded through-we’ve still got something
in the pipeline from the spending cap increases. So, I guess, how do you
think about inflation as that fiscal benefit wanes
toward the end of this year? CHAIR POWELL. Inflation, first of
all-month-to-month, quarter-to-quarter-is
going to move around. There will always be
factors hitting it. So probably the biggest single
factor driving it is the rate of underlying inflation or
the closely related idea of where inflation expectations
are anchored-the thought being, that’s where inflation
will go in the long run if it’s not been pushed
by those other factors. So we also think that
slack-the level of slack in the economy does
play some small role. It’s actually still
a measurable role. It’s nothing like
it was in the 1960s when the Phillips
curve was quite steep, so that’s also something
that plays a role. And so we take all those things
into account, and the part of it that we can control
is the slack part. And, again, we do expect that
this reading will be transient and inflation will move back up. And if it isn’t and if it runs
persistently below 2 percent for a sustained period, then
that’s something we’d take into account in setting policy. DONNA BORAK. Chairman Powell,
Donna Borak with CNN. Pivoting a little
bit-about wages, since 2010, women’s real earnings have gone
up about 3.9 percent compared to men’s, which have
risen about 2.1. Do you think the
relative increase in women’s wages is a
problem for the U.S. economy? CHAIR POWELL. You know, I think, generally, I’d have to see the
data on that. It sounds like you picked
a particular time frame. Over time, I really wonder
whether that’s the case. You know, I think men and
women should make the same for the same work, by and large. So- DONNA BORAK. Just to push a little
bit on this. But if the data shows that
women’s wages are rising higher, is there a damage
to the U.S. economy if male’s wages are declining or
not growing as fast as women’s? CHAIR POWELL. So I think we’re getting in
here to commenting on a nominee to the Fed indirectly, and that’s something
I’d rather avoid. It’s really not my role to
engage with potential nominees to the Fed, so I’m really
not going to go there. I haven’t seen this
research either, so I don’t really-really know. Thanks. VICTORIA GUIDA. Victoria Guida with Politico. I wanted to ask-early last
month, I believe it was April 2, the Fedwire® system went down. And I was just wondering
if you could talk about what happened
there, how long it lasted, whether you know what happened,
whether you’re still looking into it, and whether
it’s something that could happen again. CHAIR POWELL. Sure. So that’s right. I want to say it was April 1,
but it may have been April 2. In any case, the Fedwire®
did go down for a few hours, in the three- or
four-hour range. We were able to quickly
identify the problem: It was an internal problem,
and we were able to correct it and make changes so that that
problem and other problems like it cannot repeat
themselves. So, you know, we learn
from these instances. They’re fairly rare,
but we learn from them, and in this case
it was internal, and it’s been corrected. STEVE MATTHEWS. Steve Matthews with Bloomberg. Next month, we have the
10th anniversary of the end of the recession, and
there are some countries that have had expansions
for 15, 20, 25 years. Do you think that’s something
that’s practical for the U.S., that we could have that
kind of lengthy expansion? And for you personally, if we had a recession
during your tenure, would you consider
that a failure? CHAIR POWELL. You know, I wouldn’t
want to speculate. There’s always the example
of Australia that everyone, I think, is aware of,
where I think they’re in year 28 of their expansion. So things are possible. All I can see is that
we have an economy where the expansion
is continuing. Growth is at a healthy level. The labor market is strong. We see job creation. We see wages moving up. Inflation is low, which gives
us the ability to be patient, and we do expect it to
move up, and we want it to move up to 2 percent. So I see us on a good
path for this year. STEVE MATTHEWS. Do you see parallels with
the 1990s, when-for example, some people have
pointed out, in the U.S., the longest expansion before
this one, there was a rate cut in 1995, and rates went up,
and then they came down, and there was that
kind of management. Do you see similarities
in today’s situation? CHAIR POWELL. Similarities in the length. I mean, the situations
were quite different then. This was before inflation
really was under control, but, you know, it’s very interesting
to look at the history. I find it quite interesting
to look at different periods. But I think, in our own cycle,
we face a particular set of challenges that are really
what’s relevant for us now. MARTIN CRUTSINGER. Mr. Chairman, Marty
Crutsinger with the AP. You’ve repeatedly said
that the Fed’s going to conduct monetary
policy without regard to outside political
pressure, but it seems like the President is
intent on increasing that political pressure. Yesterday, he said you should
cut rates a full percentage point and start quantitative
easing. What do those comments do, in terms of affecting
how you pursue policy and how you convey your
decisions to the public? CHAIR POWELL. Yes, so, as you know, we are
a nonpolitical institution, and that means we don’t think about short-term
political considerations, we don’t discuss them,
and we don’t consider them in making our decisions
one way or the other. And what we’re always solving
for in our process, in our work, is to carry out our mission, which is to extend the
economic expansion, keep the labor market strong, and get inflation
around 2 percent. So to give you an idea of
what our process is like, maybe as a way of putting
all that in context-so for the past maybe 10 days, all 17 FOMC members will have
made extensive preparations: catching up on the latest
data, reading all the memos, talking to their
colleagues and their staff. As you also are I’m
sure aware, Marty, we talk to literally
thousands of businesspeople and market people and people
in the nonprofit sector and the educational sector just to get a better sense
of the economy. We put all that together, and
we come together for two days. The first day begins with an
economic briefing, which is, sort of, economic and
financial developments in the United States
and around the world. That takes up most
of the first day, and we talk about
this in great detail. We go away, we think about
that, and we come back, and the next day we talk
about monetary policy. And in this particular case, we
came to a unanimous decision, after an extensive discussion, that our monetary policy stance
is appropriate where it is. And we think our monetary policy
stance is in a good place, and we’re going to be patient
as we consider adjustments. And we also see, by the way,
the evolving-risk picture as very consistent
with that outlook. So we don’t feel like the data’s
pushing us in either direction. Of course, we’ll not
hesitate if we do feel that the data justify
moving in either direction. But that’s our process. That’s how we think
about things. We don’t think about
other factors. We don’t let them into
our decisionmaking. We don’t discuss them. PAUL KIERNAN. Paul Kiernan from
Dow Jones Newswires. Thanks for the question. In the last 23 years,
core PCE inflation has run above 2 percent only during
the period that coincided with the housing bubble. I’d like to know what you
would say to people who worry that it will prove difficult
for the Fed to lift inflation without potentially
stoking another asset bubble of some sort. Thank you. CHAIR POWELL. Yes. So you’re pointing
to, really, the fact that in recent years
inflation has moved down and down, and, really, many major central
banks have struggled to reach their inflation
goals from below. And that includes us, although
we’ve actually done-we’ve come closer, I think,
than most others. And it’s just a question,
I think, of demographic and other large and, in
some cases, global forces that are disinflationary
to some extent, and it creates significant
challenges. One, I would say, is, it means that interest rates will
be lower-will be closer to the effective lower
bound more of the time because that means
lower interest rates. And that’s one of the
reasons we’re having a review of our monetary policy
strategies, tools, and communications this year-to
think about that problem. You mentioned the connection
to financial stability of lower-for-longer rates,
and that is another challenge. As I mentioned earlier, we do consider financial
stability concerns to the extent they threaten
achievement of our goals, but we also view, and I do take
the view that macroprudential and supervisory tools,
regulatory tools, things like the stress
tests that we can do right through the cycle-those
are really the best defense against financial instability so that the financial system is
highly resilient to the kinds of financial shocks
that can happen. GREG ROBB. Thank you. Greg Robb from MarketWatch. This morning, the ISM
manufacturing index fell to have its worst reading
since October 2016. So isn’t that a dark cloud on
your outlook for strong growth for the rest of the year? I mean, how much weight does it
hold for you, and is it a sign that monetary policy
might be too tight? CHAIR POWELL. This is the ISM reading, I guess from this morning,
on manufacturing. Yes, we see that reading
as-it’s still a positive reading and consistent with
what we expect from the manufacturing
sector, which is moderate or perhaps modest growth. Manufacturing has been
weak all around the world. Services have been
growing faster. So it’s-yes, it’s something
that we are watching carefully, but we do expect a positive
contribution to growth from the manufacturing sector. EDWARD LAWRENCE. Edward Lawrence from
Fox Business. Thank you, Mr. Chairman,
for doing this. You mentioned-talked about domestic growth a
little bit with the economy. You mentioned that the progress
in the talks with China trade, progress in talks with Japanese
trade, the USMCA is moving or going to move
through Congress. Could you talk about a little
bit of the domestic growth that you’re seeing going forward
for the rest of the year? And could these trade deals turn
into tailwinds for the economy? CHAIR POWELL. Our outlook and my outlook
is for-is a positive one, is a healthy one for the
U.S. economy for growth for the rest of this year. And I would say that the
basis for that, really, is consumer spending
and business investment. So if you look at
consumer spending, you saw stronger retail sales, stronger motor vehicle
sales in March. And, as I mentioned,
the conditions, the broader economic
fundamentals, are strong in support of consumer spending-that’s
more accommodative financial conditions, high
confidence readings, high levels of employment,
wages going up. All those things are going
to support consumer spending. So that’s a significant part
of the outlook this year. And business investment
should also be positive in that sort of direction. In terms of the effect
of trade deals, I think one thing would
be that the resolution of the uncertainty around
these trade negotiations would, I would guess, be a positive
for business sentiment. We have been hearing from our
business contacts, really, a lot since the beginning
of the trade negotiations that uncertainty is a concern. If you import metals or
whatever for your product or export your product, then
it’s been a challenge for you. So that would be a positive. And, of course, most of the
gains, though, I would expect, even from a successful
trade negotiation, would come in over time. You know, I don’t think-it
wouldn’t be the kind of thing where you’d immediately
feel big effects right away, but they could be quite
important over a longer period. So that, I think-that
would be my expectation. I don’t know, though. I haven’t seen-none of us,
at least I haven’t seen, the details of what’s
been negotiated. DON LEE. Don Lee
with the L.A. Times. Getting back to inflation,
can you talk more about the transitory factors
holding down inflation, how significant they are, and why you think those
factors will pass? CHAIR POWELL. Sure. Well, I would
just mention a couple. Let me say, I don’t mean
to diminish concerns about too-low inflation, but
I think there’s good reason to think that these readings
are particularly influenced by some transitory factors. One that I would mention is
portfolio management services, which would tend to go down
when asset prices go down, with a lag. And so when asset
prices went back up, probably there’ll be
a swing around there, a positive contribution. Other ones that get mentioned
are things like apparel, and apparel prices
were very, very low. There was a change
in the methodology. And another one is airfares. There are many little things. So we don’t know until, again,
until we see, but there’s reason to think that those would be
transient and would turn around. And another way to look at it
is, there are models that look at inflation in different ways,
like-not models, but measures, like the Dallas trimmed
mean, as I mentioned. So trimmed mean-it cuts off
the big movements on the upside and the downside and looks
at just the mean movements in inflation of various
product categories and service categories, and
it didn’t go down at all. It’s at 2 percent-or it’s at, I
don’t know whether it went down or was above that, but
it’s at 2 percent now. So there’s reason to think
that these will be transient. We, of course, will be
watching very carefully to see that that is the case. I would point to the case
of cell phone services. Many of you will
remember, in March of 2017, there was a very low reading for cell phone services-mobile
phone services-and it was kind of a price war, and it
dragged down core inflation for a full year, but it
did not look like something that would be repeated. And we kind of thought so and
said so, and then, sure enough, in 2018, we had those months
of 2 percent inflation. So, again, we’ll
have to see here. We’re going to be
watching-really, I’d like to say we’re going to
be watching inflation carefully to see that these things
are transient, and I’ll end by saying we are
strongly committed to the 2 percent
inflation objective. NANCY MARSHALL-GENZER. Just following up, Chair Powell. Nancy Marshall-Genzer
with Marketplace. You were saying if
inflation does stay low and these low inflation
rates are not transient, you said a couple
times you’ll take that into account
with monetary policy. How, specifically, will
you take that into account? CHAIR POWELL. Yes, it’s hard to say, because
there’s so many other variables. Ultimately, there are
many variables to be taken into account at any given time,
but that’s part of our mandate. Stable prices is
half of our mandate, and we’ve defined
that as 2 percent. So we would be concerned, and
we’d take it into account. NANCY MARSHALL-GENZER. So a cut in interest
rates would be possible? CHAIR POWELL. I can’t really be any more
specific than what I’ve said. JEAN YUNG. Hi, Jean Yung with Market News. If the fed funds rate keeps
rising, do you see room for another IOER adjustment? And then, can you speak to
any other strategies or tools that might be useful
for keeping a ceiling on short-term interest rates? There have been other
ideas floated, like the standing repo facility and targeting a different
benchmark rate. CHAIR POWELL. If we need to, and as
needed, we will use our tools to keep the federal funds rate
somewhere in the target range. We’ll do that. Don’t expect to need to do
it again, but we don’t know. I mean, we’re-with-the
balance sheet is now-the size of it is going to be driven
by demand for liabilities, principally reserves,
as I mentioned. And we’re right at that
point where we’re starting to learn more and more
about what the real demand for reserves is over
the next few months. And so I-there is no
template for this. There’s no roadmap. We just have to do it, and that’s why we’re
moving so very gradually. It’s why we tapered the
roll-off to only $15 billion in Treasuries per month. Effective, I guess, today,
we’re cutting the roll-off rate for Treasuries in half just
because we want to take our time and move gradually here. So that’s that. In terms of other tools,
we’re actually-I’m sure at an upcoming meeting
we will be looking at the idea of a repo facility. I don’t have any presupposition
that it’s something we would do, but we’ll be taking a look at it as a possible addition
to our toolbox. Again, I wouldn’t say-it
would just be a way for us to do what we do, which is
to do a deep dive on it, think carefully about it,
look at the pros and cons, look at the different possible
ways to do it, and then go away and think about it
for a little while. And then probably come
back and make a decision. But that’s something we’ll do at an upcoming meeting,
I would imagine. HANNAH LANG. Hannah Lang, American Banker. On the regulatory side, the Fed and other bank regulators are
said to be weighing all options for retooling a proposal
to revise the Volcker rule. Can you give any indication how
close the agencies are to coming to a solution and what that
solution might look like, whether it would be starting
from scratch entirely or making changes to
the original proposal? CHAIR POWELL. You know, we put out a proposal
on Volcker some time ago, and we got a lot of comments, and we’re reviewing
them carefully. I really don’t have
a lot for you. I know they’re making
good progress. I don’t really have
a date though. And in terms of what
all it’s going to be, it’s not something I can
say with any certainty yet. BRIAN CHEUNG. Hi there. Brian Cheung
with Yahoo Finance. So given what you’ve said about
the expectations for consumption and also business fixed
investment perhaps bouncing back in the next GDP reading,
I’m wondering if you think that continued growth in economic activity
might show some sort of underlying fundamental that
could flag another overheating. For example, the median
projection in the March meeting for GDP growth for 2019 was
2.1, so I’m just kind of curious about what you see going
forward if we continue to see strong GDP numbers. CHAIR POWELL. Well, we don’t see
any evidence at all of overheating, for one thing. We see inflation below 2 percent
now-as I mentioned, pretty close to 2 percent for
most of last year. So, really, no signs
of overheating. If you look at the labor market, for a long time now there
have been anecdotal reports of labor shortages
and difficulty in finding skilled labor
and that kind of thing. Nonetheless, you have
very strong job creation, and you have wages moving up
at a rate that is appropriate, given inflation and
given productivity, but not at all signaling
any overheating at all. It’s not higher than that rate that would incorporate both
inflation and productivity. So, really not seeing signs
of overheating at the moment. HEATHER LONG. Are wages ever going to get back
above 4 percent in this cycle? Can you kind of give us a read
on-but more substantively, can you give us a read on how the Committee
views productivity growth, if it’s accelerating enough? CHAIR POWELL. Yes-in terms of wages getting
over 4 percent, wages have moved up pretty steadily over the last
five years and are now-wages and benefits are now
between 3 and 3½ percent. Just for the last couple
of years, the biggest part of the gains have come for
people at the lowest end of compensation and education, which is kind of
a welcome thing. You mentioned productivity. So productivity is really
very difficult to predict. No one has been able to
predict it successfully, so I won’t really try. But I will say this:
Productivity was very, very low in the wake of the
crisis for six or seven years. Last year, we had 1.9
percent productivity, which is much higher. I don’t know if that
level can be sustained, but we really-it’s
driven, to some extent, by technological developments
and, really, the diffusion of technology through
the economy, and it’s very hard to predict. So I think it’s positive. In fact, I’ll mention, if we’re
talking about the supply side, labor force participation. Really, there has been a
significant positive supply-side development over the last year
and a half between the uptick in labor force participation,
which goes back several years, but also productivity. And that does suggest
more room to grow. It suggests that a less
tight economy, a less, you know-may be part of the
explanation for lower inflation. Thanks very much. May 1, 2019 Chair Powell’s Press
Conference FINAL Page 1 of 20

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