The Federal Reserve announced Wednesday it will keep interest rates the same, as expected, but gave slight indications economic data should soon support a rate cut, a welcome sign for borrowers and investors rooting for rates to come down from their 23-year high.
READ MORE: https://www.forbes.com/sites/dereksaul/2024/07/31/fed-holds-interest-rates-at-23-year-high-hints-inflation-improving-with-first-rate-cut-on-the-table/
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READ MORE: https://www.forbes.com/sites/dereksaul/2024/07/31/fed-holds-interest-rates-at-23-year-high-hints-inflation-improving-with-first-rate-cut-on-the-table/
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NewsTranscript
00:00Good afternoon.
00:11My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum
00:16employment and stable prices for the benefit of the American people.
00:21Our economy has made considerable progress toward both goals over the past two years.
00:26The labor market has come into better balance, and the unemployment rate remains low.
00:32Inflation has eased substantially, from a peak of 7 percent to 2.5 percent.
00:37We are strongly committed to returning inflation to our 2 percent goal in support of a strong
00:41economy that benefits everyone.
00:44Today, the FOMC decided to leave our policy interest rate unchanged and to continue to
00:51reduce our securities holdings.
00:53We are maintaining our restrictive stance of monetary policy in order to keep demand
00:58in line with supply and reduce inflationary pressures.
01:02We are attentive to risks on both sides of our dual-mandate, and I will have more to
01:06say about monetary policy after briefly reviewing economic developments.
01:12Recent indicators suggest that economic activity has continued to expand at a solid pace.
01:18GDP growth moderated to 2.1 percent in the first half of the year, down from 3.1 percent
01:24last year.
01:26Private domestic final purchases, or PDFP, which excludes inventory investment, government
01:31spending, and net exports, and usually sends a clearer signal of underlying demand, grew
01:36at a 2.6 percent pace over that same period, the first half.
01:41Growth of consumer spending has slowed from last year's robust pace, but remains solid.
01:47Investment in equipment and intangibles has picked up from its anemic pace last year.
01:52In the housing sector, investment stalled in the second quarter after a strong rise
01:56in the first.
01:58Improving supply conditions have supported resilient demand and the strong performance
02:02of the U.S. economy over the past year.
02:06In the labor market, supply and demand conditions have come into better balance.
02:12Overall, job gains averaged 177,000 jobs per month in the second quarter, a solid pace,
02:18but below that seen in the first quarter.
02:21The unemployment rate has moved up, but remains low at 4.1 percent.
02:27Strong job creation over the past couple of years has been accompanied by an increase
02:31in the supply of workers, reflecting increases in participation among individuals aged 25
02:38to 54 years, and a strong pace of immigration.
02:43Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed.
02:48Overall, a broad set of indicators suggest that conditions in the labor market have returned
02:54to about where they stood on the eve of the pandemic, strong but not overheated.
03:01Inflation has eased notably over the past two years, but remains somewhat above our
03:05longer-run goal of 2 percent.
03:09Total PCE prices rose 2.5 percent over the 12 months ending in June.
03:14Excluding the volatile food and energy categories, core PCE prices rose 2.6 percent.
03:20Longer-term inflation expectations appear to remain well-anchored, as reflected in a
03:24broad range of surveys of households and businesses and forecasters, as well as measures from
03:30financial markets.
03:33My colleagues and I are acutely aware that high inflation imposes significant hardship
03:37as it erodes purchasing power, especially for those least able to meet the higher costs
03:42of essentials like food, housing, and transportation.
03:47Our monetary policy actions are guided by our dual mandate to promote maximum employment
03:52and stable prices for the American people.
03:55In support of these goals, the Committee decided at today's meeting to maintain the target
03:59range for the federal funds rate at 5.25 to 5.5 percent, and to continue reducing our
04:04securities holdings.
04:07As the labor market has cooled and inflation has declined, the risks to achieving our employment
04:12and inflation goals continue to move into better balance.
04:15Indeed, we are attentive to the risks to both sides of our dual mandate.
04:20We have stated that we do not expect it will be appropriate to reduce the target range
04:25for the federal funds rate until we have gained greater confidence that inflation is
04:29moving sustainably toward 2 percent.
04:33The second quarter's inflation readings have added to our confidence, and more good data
04:37would further strengthen that confidence.
04:40We will continue to make our decisions meeting by meeting.
04:42We know that reducing policy restraint too soon or too much could result in a reversal
04:47of the progress we have seen on inflation.
04:50At the same time, reducing policy restraint too late or too little could unduly weaken
04:55economic activity and employment.
04:59In considering any adjustments to the target range for the federal funds rate, the Committee
05:02will carefully assess incoming data, the evolving outlook, and the balance of risks.
05:10As the economy evolves, monetary policy will adjust in order to best promote our maximum
05:14employment and price stability goals.
05:17If the economy remains solid and inflation persists, we can maintain the current target
05:22range for the federal funds rate as long as appropriate.
05:25If the labor market were to weaken unexpectedly or inflation were to fall more quickly than
05:29anticipated, we are prepared to respond.
05:33Policy is well positioned to deal with the risks and uncertainties that we face in pursuing
05:38both sides of our dual mandate.
05:40The Fed has been assigned two goals for monetary policy-maximum employment and stable prices.
05:46We remain committed to bringing inflation back down to our 2 percent goal and to keeping
05:51longer-term inflation expectations well anchored.
05:55Restoring price stability is essential to achieving maximum employment and stable prices
06:00over the longer run.
06:02Our success in delivering on these goals matters to all Americans.
06:06We understand that our actions affect communities, families, and businesses across the country.
06:12Everything we do is in service to our public mission.
06:15We at the Fed will do everything we can to achieve our maximum employment and price stability
06:20goals.
06:22I look forward to your questions.
06:23GINA SMILEY.
06:24Gina Smiley from the New York Times.
06:25Thanks for taking our questions.
06:26Markets pretty much entirely expect a rate cut in September at this stage.
06:27I wonder if you think that's a reasonable expectation, and, if so, why not just make
06:28the move today?
06:29CHAIR POWELL.
06:31So, as I said, the Fed has been assigned two goals for monetary policy-maximum employment
06:32and stable prices over the longer run.
06:33We remain committed to delivering on these goals.
06:34Restoring price stability is essential to achieving maximum employment and stable prices
06:35over the longer run.
06:36We understand that our actions affect communities, families, and businesses across the country.
06:37I wonder if you think that's a reasonable expectation, and, if so, why not just make
06:42the move today?
06:43CHAIR POWELL.
06:45So, on September, let me say this.
06:48We have made no decisions about future meetings, and that includes the September meeting.
06:53The broad sense of the Committee is that the economy is moving closer to the point at which
06:57it will be appropriate to reduce our policy rate.
07:01In that, we will be data-dependent but not data-point-dependent, so it will not be a
07:05question of responding specifically to one or two data releases.
07:10The question will be whether the totality of the data, the evolving outlook, and the
07:15balance of risks are consistent with rising confidence on inflation and maintaining a
07:19solid labor market.
07:21If that test is met, a reduction in our policy rate could be on the table as soon as the
07:26next meeting in September.
07:28So you asked, why not today, and I would just say, again, that the broad sense of the Committee
07:34is that we're getting closer to the point at which it will be appropriate to reduce
07:37our policy rate, but that we're not quite at that point yet.
07:42HOWARD MARKEL.
07:46So just to follow up on that a bit, if inflation behaves as you expect between now and September,
07:53would you regard a cut in September as sort of the baseline scenario right now?
07:57CHAIR POWELL.
07:58So I guess I would think about it this way.
08:01I'll give an example of cases in which it would be appropriate to cut and maybe that it wouldn't
08:06be appropriate to cut.
08:07So if we were to see, for example, inflation moving down quickly or more or less in line
08:15with expectations, growth remains, let's say, reasonably strong, and the labor market remains,
08:23you know, consistent with its current condition, then I would think that a rate cut could be
08:29on the table at the September meeting.
08:31If inflation were to prove, you know, stickier and we were to see higher readings from inflation,
08:36disappointing readings, we would weigh that along with the other things.
08:40You know, I think it's going to be not just any one thing.
08:43It's going to be the inflation data.
08:45It's going to be the employment data.
08:48It's going to be the balance of risks as we see it.
08:51It's going to be the totality of all of that that help us make this decision.
08:55And just to follow up on that, specifically, in what ways right now,
08:59given all you've seen over the last few months in particular on shelter, on services, et cetera,
09:04in what ways are you not confident right now that inflation is on the way back to 2 percent?
09:09I think it's just a question of seeing more good data.
09:12We have seen-the last couple of readings have certainly added to confidence,
09:15and we've seen progress across all three categories of core PCE inflation.
09:21That's goods, non-housing services, and housing services.
09:24So it's really just-you know, we had a quarter of poor inflation data at the beginning of the year.
09:30Then we saw some more good inflation data.
09:32We had seven months at the end of last year.
09:34You know, we just want to see more and gain confidence.
09:37And, as I said, we have-we have-we did gain confidence,
09:40and more good data would cause us to gain more confidence.
09:44COLBY.
09:49Colby Smith with the Financial Times.
09:51The March SEP pointed to three cuts in 2024,
09:55with core inflation at 2.6 percent and the unemployment rate at 4 percent.
09:58Since we're now at that level in terms of inflation
10:01and already beyond what was projected for the labor market,
10:03I'm just wondering if that rate path is back to being the best guidepost for policy
10:08rather than, let's say, the shallower one laid out in the June SEP.
10:11CHAIRMAN POWELL.
10:13You know, so I would just say, really,
10:16the path ahead is going to depend on the way the economy evolves.
10:20And I can't really give you any better forward guidance on it than that.
10:25We didn't, of course, do an SEP at this meeting.
10:27We will do another one at the September meeting.
10:30I would just say I can imagine a scenario in which there would be
10:35everywhere from zero cuts to several cuts,
10:37depending on the way the economy evolves.
10:40And I wouldn't want to lay out a baseline path for you there today.
10:45I've said what I can say about September and about today, though.
10:49NICK TIMIRAOS.
10:55Nick Timiraos of the Wall Street Journal.
10:57Chair Powell, you've said before that you wouldn't wait until inflation got to 2 percent
11:01to cut rates because of how inflation is lagged.
11:04Does that apply for the labor market, too?
11:07If the labor market is back in equilibrium,
11:10why is restrictive policy and potentially very restrictive policy,
11:14given the high real funds rate, warranted right now?
11:17CHAIR POWELL.
11:18So this is the very reason that we're thinking about-you know,
11:23that we've said in our statement that we're going back to looking at both mandates
11:28and that we think the risks are coming back into balance.
11:30We think what the data broadly show in the labor market is an ongoing,
11:34gradual normalization of labor market conditions.
11:37And that's what we want to see.
11:38You know, we've seen that over a period of a couple of years,
11:40and a move, really, from overheated conditions to more normal conditions.
11:45We are watching the labor market conditions quite closely,
11:49and that's what we're seeing.
11:50If we start to see something that looks to be more than that,
11:54then we're well positioned to respond.
11:56That's part of what we're thinking.
11:58MR.
11:59MILLER.
11:59And when you talk about seeing something that's more than whatever softness
12:04or slowdown you expect, in the past, you've said that stronger growth wouldn't override
12:12better news on inflation.
12:13Better news on inflation.
12:15I wonder how that cuts the other way.
12:17If you're seeing more softness in the labor market than what you would expect,
12:21does that change the calculus on what you're looking for out of the inflation numbers
12:27to recalibrate policy?
12:29MR.
12:29MILLER.
12:29We have-growth isn't one of our three-we have two mandates, as you know.
12:34The labor market-maximum employment is one, and stable prices is another.
12:38So we weigh-you know, we weigh those two things equally under the law.
12:42When we were far away from our inflation mandate, we had to focus on that.
12:46Now we're back to a closer-to-even focus.
12:48So we'll be looking at labor market conditions and asking whether we're getting what we're
12:53seeing.
12:53And, as I said, we're prepared to respond if we see that it's not what we wanted to see,
12:58which was, you know, a gradual normalization of conditions, if we see more than that.
13:02And it wouldn't be any one statistic, although, of course, the unemployment rate is generally
13:07thought to be, you know, a single-a good single statistic.
13:10But we'd be looking at wages.
13:12We'd be looking at participation.
13:13We'd be looking at all the things-surveys, quits, hires, all of those things-to determine
13:18the overall status of the labor market.
13:20But we're looking at it now.
13:22I would say, again, I think you're back to conditions that are close to 2019 conditions,
13:28and that was not an inflationary economy.
13:31Broadly similar labor markets then.
13:33I think inflation was actually-core inflation was actually running below 2 percent.
13:37So we don't think-I don't now think of the labor market in its current state as a likely
13:42source of significant inflationary pressures.
13:46So I would not like to see material further cooling in the labor market.
13:52And that's part of what's behind our thinking.
13:54The other part, of course, is that we have made real progress on inflation.
13:58And we've got growing confidence there that we are not quite there yet, but we're getting
14:04more confident that we're on a sustainable path down to 2 percent.
14:08So those two things are working together, and we're factoring those both into our policy.
14:12Chris.
14:16Chris Ruegaber, Associated Press.
14:19You mentioned not wanting to see any further cooling in the job market.
14:24Why not-or would you consider preemptive cuts to prevent, if you saw risks of an
14:29unexpected cooling?
14:30Is that something you would cut ahead of time for?
14:33So I wouldn't say I wouldn't want to see any other cooling.
14:37It would be more of a material difference.
14:39If we-we'd be looking at this, and if we see something that looks like a more significant
14:43downturn, that would be something that we would-you know, we would have the intention
14:49of responding to.
14:52So in terms of-I don't think of it that way.
14:56I think of it as, you know, we're actually in a good place here.
14:58We're balancing these two risks of, you know, go too soon and you undermine progress
15:03on inflation, wait too long or don't go fast enough, and you put at risk the recovery.
15:11And so we have to balance those two things.
15:12That's the nature of having two mandates.
15:14And I think we-this is how we balance them.
15:17It's a rough balance, but, you know, it does feel like-again, the labor market feels like
15:22it's in a place where it's just a process of ongoing normalization, 4.1 percent
15:27unemployment is still historically low.
15:31And, you know, we'll just have to see what the data show us.
15:34And just to follow quickly, I wanted to see what you thought of the recent JOLTS report,
15:38which did show hiring-gross hiring has come down even below 2019 levels.
15:43Layoffs remain low.
15:45So it painted a picture of a very static labor market.
15:49Is that sustainable, in your view, or something that is worrying?
15:53So I think all of the data points continue to point to kind of the direction we would
15:57want to see.
15:58So that was taken as-you know, there was a decline in job openings.
16:02That was good.
16:03Today's ECI reading was a little softer than expected.
16:07So that's a good reading.
16:09It shows that wage increases are still at a strong level, but that that level continues
16:15to come down to more sustainable levels over time.
16:18That's exactly the pattern that we want to be seeing.
16:20So I think the data that we've been seeing in the labor market are broadly consistent
16:24with that normalization process.
16:27Again, we're closely monitoring to see whether it starts to show signs that it's more than
16:31that.
16:33Steve.
16:36Steve Leisman, CNBC.
16:37Mr. Chairman, back in March you talked about cutting rates as a process, and in June you
16:44talked about the idea that, well, one rate cut wouldn't do anything.
16:47So I wonder if you can sort of follow up on Colby's question.
16:52Talk about-are you weighing the economy right now in terms of its ability to withstand multiple
16:59rate cuts?
17:00Talk us through the process that you think-or is it just one rate cut, or are you in the
17:04process now thinking that rates need to be normalized here?
17:10Yeah, I can't really say that, honestly.
17:12You know, we're-we've seen, you know, significant movement in the labor market, and, you know,
17:19we're very mindful of this question of, is it just normalization or is it more?
17:23We think it's just more normalization, but we want to be in a position to support the
17:27labor market.
17:28At the same time, we're seeing progress on inflation.
17:30So, you know, we actually got to this-we raised rates a year ago at the July meeting, and
17:37if you look at the situation in the economy a year ago, unemployment-sorry, inflation
17:43was over 4 percent.
17:44It was a completely different economy.
17:46Now we've made a lot of progress, and the labor market has-I think, you know, unemployment
17:50was in the threes-mid threes.
17:52So it's a different economy.
17:53And I think it's time-it's coming to be time to adjust that so that we support this
17:59continued process.
18:01The thing we're trying to do is-you know that we have-we've had this really significant
18:07decline in inflation, and unemployment has remained low.
18:11And this is a really unusual and historically-historically unusual and such a welcome outcome for the
18:18people we serve.
18:19What we're thinking about all the time is, how do we keep this going?
18:22And this is part of that.
18:24We think we don't need to be 100 percent focused on inflation because of the progress
18:29we've made.
18:31Twelve-month headline at 2.5, core at 2.6.
18:34You know, it's way down from where it was.
18:36The job is not done on inflation, but nonetheless, we can afford to begin to dial back the restriction
18:42in our policy rate.
18:43And I think we're just as part of a process.
18:45In terms of what that looks like, I mean, I think most rate-you know, you would think
18:51in a base case that policy rates would move down from here.
18:55But I don't want to try to give specific, you know, forward guidance about when that
19:00might be because-the pace at which it might happen, because I think that's really going
19:03to depend on the economy, and that's highly uncertain.
19:06Rachel.
19:10Hi, Chair Powell.
19:11It's Rachel Siegel from The Washington Post.
19:12Thanks for taking our questions.
19:14On inflation, do the past few months of good reports look like what we saw last year, where
19:19you really had a lot of momentum with a few bumps in between?
19:22Would you characterize that kind of momentum as back on track at this point in the year?
19:26Actually, what we're seeing now is a little better than what we saw last year.
19:29Last year, as we pointed out late in the year, a whole lot of the progress we saw last year
19:34was from goods prices, which were going down at an unsustainable rate-disinflating at an
19:39unsustainable rate.
19:40This is a broader disinflation.
19:42This has goods prices coming down, but it's also-we're also now seeing progress in the
19:47other two big categories, non-housing services and housing services.
19:51So, you know, so the thing is, we've only-you've got one quarter of that.
19:55We had seven months of low inflation.
19:57You got one quarter of this.
19:58I would say the quality of this is higher, and it's good, but so far it's only a quarter.
20:04So I think, you know, we need to see more to know that we're-you know, to have more
20:09confidence that we're on a good path down to 2 percent.
20:12But, as I mentioned, our confidence is growing because we've been getting good data.
20:16And things like the ECI report and, frankly, the softening in the labor market conditions,
20:22you know, give you more confidence that the economy is not overheating.
20:25It doesn't look like an overheating economy, and it looks like an economy that's normalizing.
20:32And if we're to think about the first couple of months of the year, is there any sense
20:36now that they were these blips that could have actually allowed for earlier rate cuts,
20:40as were some of the projections going into 2024?
20:41So the thing about-if that's-if what it is is seasonality, and it could just be-it's
20:46very, very hard to, you know, to do appropriate seasonal adjustments.
20:50If that's what it is, then that actually implies that other months were under-reporting
20:56too low inflation.
20:57If you smoothed it out, it's a zero-sum game.
20:59And that's why we look at 12 months.
21:01We look at 12 months because that takes all that out, all those effects out.
21:05Twelve months now is 2.5 percent headline, 2.6 percent core.
21:09This is so much better than where we were even a year ago.
21:12It's a lot better.
21:13Now, the job is not done.
21:15I want to stress that, and we're committed to getting job inflation sustainably under
21:192 percent.
21:19But we need to take note of that progress, and we need to weigh the risks to the labor
21:23market and the risks to our inflation target now more equally than we did a year ago.
21:30Michael McKee.
21:33Michael McKee from Bloomberg Radio and Television.
21:35I'd like to ask you about the balance of risks as the American people see it.
21:39At this point, is the risk greater to leave interest rates where they are, given the damage
21:46that higher interest rates do to the economy in slowing demand and raising prices, or is
21:53it more important for the American people that you keep rates where they are to bring
21:57inflation down?
22:00I think that we've been given an assignment by Congress, this is how we serve the American
22:05people, is by achieving maximum employment and price stability, right?
22:10And so in our quasi-constitutional document, the Statement on Longer-Run Goals and Monetary
22:17Policy Strategy, we look at the two goals, and if one of them is farther away than the
22:21other-the two variables, inflation and employment, if one is farther away from its goal than
22:27the other, then you concentrate on the one that's farther away, and you take account
22:30of the time to reach the goal.
22:32So for the last couple of years, the best service we could do to the American people
22:36was to focus on inflation.
22:38But as inflation has come down, and I think the upside risks to inflation have decreased
22:43as the labor market has cooled off, and now-and labor market has softened, you know, probably
22:52the inflation-inflation is probably a little farther from its target than is the employment,
22:56but I think the downside risks to the employment mandate are real now.
23:02So we have to weigh all that, and if you think about where that takes us is we have a restrictive
23:07policy rate.
23:08It's clearly restrictive.
23:09It's been the rate we've had in place for a full year, and the time is coming, as other
23:15central banks around the world are facing the same question, the time is coming at which
23:19it will begin to be appropriate to dial back that level of restrictions-restrictions so
23:25that we may address both mandates.
23:27Well, you have event risk, basically, with the jobs report on Friday and another one
23:32before you meet again.
23:34Are you certain that you won't fall behind the curve and lead to unnecessary unemployment
23:41if you wait until September?
23:44Certainty is not a word that we have in our-in our business.
23:49So, you know, we get-we get a lot of data between now and September, and it isn't going
23:53to be one data reader or even two.
23:55It's going to be the totality of the data, all of the data, and not just-and then how
24:00is that affecting the outlook and how is it affecting the balance of risks?
24:03That's going to be the assessment that we do.
24:05Of course, we'll all look carefully at the employment report, but so much other data
24:10coming in and so much happening between now and the September meeting, and we'll-you
24:14know, we'll make a judgment.
24:17Edward.
24:19Thank you, Mr. Chairman.
24:20Edward Lawrence, Fox Business.
24:21I do want to dig deeper on what Michael and what Nick were asking.
24:25There's a shift in the statement to balance between the focus between inflation and jobs.
24:29Looking at the job sites, we've seen wage data show sort of an abrupt slowing.
24:33We've-we're hearing on earnings calls from companies like Intel abrupt layoffs.
24:38In the jobs report from the BLS, government jobs has been a leading creator.
24:42Could the government jobs as a sector hiring mask underlying weakness in the jobs report?
24:48Well, you know, we'll look at everything.
24:50We've seen some-some tendency to have a narrowing base of job creation in some months
24:57going back, but then we've had some months where-where job creation was broader.
25:02And-and also the-you know, the headline number of jobs has come down.
25:05So, you know, we would-we-but you-you look at the whole thing, and-and I think you do
25:10look at private demand extra carefully, to your point about-about government.
25:16So we'll just be looking at-at all those things.
25:18So as a follow, then, so could the Fed then be behind the curve?
25:21Because you said some of the reports-last meeting, you said the reports could be noisy
25:25or overstated.
25:27Was there a discussion of-of what kind of discussion was there for a cut today?
25:30And could the Fed be behind the curve?
25:32Yeah.
25:32So, look, the objective is to balance the two risks, right?
25:39It's the risk of going too soon and the risk of going too late.
25:43We've been-you know, we-we had seven months of good inflation data at the end of last
25:48year.
25:49We said we wanted to see more.
25:50We said-we pointed out that too much of this was coming from goods.
25:54And sure enough, the first quarter wasn't-wasn't great inflation data.
25:58Now we've got another quarter-a quarter that is good.
26:01And, you know, we're balancing the risk of going too soon against the risk of going too
26:05late.
26:05That's what we're doing.
26:06There's no guarantee in this.
26:08It's a very difficult judgment call.
26:09But this is-this is how we're making it.
26:13So-but in terms of today, your question about today, we did have a-you know, we had, you
26:22know, a nice-a nice conversation about-about this issue today.
26:26The overall sense of the committee, as I mentioned, is that we're getting closer to the point
26:30at which it'll be appropriate to begin to-to dial back restriction.
26:33But we're not quite at that point yet.
26:35We want to see more good data.
26:38The decision was unanimous.
26:39All 19 participants supported it.
26:42And-but, you know, there was a real discussion back and forth of what the case would be for-for
26:48moving at this meeting.
26:50You know, a strong majority supported moving-not moving at this meeting.
26:54That was the strong sense of the committee.
26:56But it's a conversation that we had today, certainly.
26:58COURTNEY BROWN.
27:03Courtney Brown from Axios.
27:05Thank you for taking our questions.
27:07When the Fed was raising rates, there was a lot of conversation about long and variable
27:12lags.
27:13I wonder if that applies on the way down, too.
27:16How are you and the committee thinking about that?
27:18CHAIRMAN POWELL.
27:19Yes, it does.
27:20And I think the lags have kind of showed up here in the last six months, by the way.
27:24You really do now see the restriction.
27:26Whereas, I mean, even a few months ago, people were questioning how restrictive policy was.
27:31Look at the labor market now.
27:32You can see-and look at inflation-sorry, rate-sensitive, interest-sensitive spending.
27:38You really do see now that policy is restrictive.
27:40I wouldn't say it's extremely restrictive, but it's certainly effectively restrictive.
27:45Yes, there-the lag should be on the way down.
27:48It should take some time to get into-to get into the full economy, affect financial conditions,
27:54and that affects economic activity, hiring, and that kind of thing, and ultimately inflation.
27:58It doesn't-it's not instantaneous, although it's faster than it used to be, because
28:02markets move now in anticipation of our moves.
28:05Q. So are you worried, then, that if monetary policy acts with long and variable lags,
28:10even when you're lowering interest rates, it might be too late for the Fed to help stave off
28:17any kind of slowdown in the labor market or broader economy?
28:20CHAIRMAN POWELL.
28:20We have to worry about that.
28:21I mean, we-you're-just to make it clear, you know, it's a very difficult, challenging judgment.
28:29And we don't want to go too soon.
28:31We don't-and we don't want to go too late.
28:34And-but that's-this is how we've made that judgment.
28:36I feel good about where we are.
28:38We're certainly very well positioned to respond to weakness with the policy rate at 5.3 percent.
28:44We certainly have a lot of room to respond if we were to see weakness.
28:48That's not what we're seeing, though.
28:49What we're seeing-look at the-look at the first-half growth numbers.
28:51Look at PDFP at 2.6 percent for the first half.
28:54It's not signaling a weak economy.
28:56It's also not signaling an overheating economy.
29:00The labor market-admittedly, the unemployment rate has moved up seven-tenths,
29:04and we're seeing-you know, we're seeing normalization there.
29:07But, you know, wage increases are still at a high level.
29:10Unemployment is still at a low level.
29:12Layoffs are very low.
29:14Initial claims have moved up, but they're pretty stable,
29:16and they're historically not high at all.
29:18So the total scope of the data suggests a normalizing labor market.
29:23And, again, we are carefully watching to see that that continues to be the case.
29:28VICTORIA GUIDO.
29:31Hi, Victoria Guido with Politico.
29:33On the labor market, I was wondering, how worried are you all about unemployment
29:38rising to the point where it triggers the SOM rule?
29:40And would that potentially affect how quickly you cut rates?
29:45CHAIRMAN POWELL.
29:45We-so I would just say that the question really is one of,
29:54are we worried about a sharper downturn in the labor market?
29:56So-and the answer is, we're watching really carefully for that.
29:59We're aware of that rule, which is really a-you know, a-I would call it a statistical thing
30:09that has happened through history-a statistical regularity is what I'd call it.
30:16It's not like an economic rule where it's telling you something must happen.
30:20So, again, what do we see?
30:22What are our eyes telling us?
30:23We look at-we look at all the things we're seeing.
30:27And what it looks like is a normalizing labor market.
30:30Again, job creation at a pretty decent level, wages moving up at a strong level
30:35but coming down gradually.
30:37Job vacancies have come down, but they're still high by historical standards.
30:41So, again, I've been through some of the data already,
30:44but what we think we're seeing is a normalizing labor market.
30:49And we're watching carefully to see if it's-if it turns out to be more-if it starts to show
30:53signs that it's more than that, then we're well-we're well-positioned to respond.
30:58Is there reason to think that the labor market might behave differently this time
31:00than it has historically?
31:02I-I think, you know, history doesn't repeat itself.
31:07It rhymes.
31:08I think that statement is very true about the economy.
31:10You never assume it's going to be just the same.
31:12An example would be, is there a trend increase in the level of vacancies?
31:16There are many, many examples.
31:17So it's never exactly the same.
31:19Also, let's remember that this pandemic era has been one in which so many, you know,
31:24apparent rules have been flouted, like the inverted yield curve, for starters.
31:31So many, many received-pieces of received wisdom just haven't worked.
31:35And it's because the situation really is unusual or unique in that so much of this inflation
31:41came from the shutdown in the economy and the resulting supply
31:45problems in the face of, admittedly, very strong demand.
31:48So the whole-the whole situation is not the same as many of the other prior inflation
31:56or downturns that we've seen or business cycles that we've seen.
32:00So we're having to learn-you know, we're having to, you know,
32:03to be very careful about the judgments that we make, I would say.
32:07So we don't assume that these regularities will just repeat themselves automatically.
32:11CHAIR YELLEN.
32:14Amir.
32:15AMIR MOQOUI.
32:16Thank you, Chair Powell.
32:17Amir Moqoui with Bloomberg.
32:19There seems to be quite a difference between what the anecdotal data are telling us,
32:23such as the very recent downbeat Beige Book and the hard data.
32:27Do you take those anecdotes seriously, that is, that the economy
32:31and labor market are cooling much more rapidly than what's shown in the data?
32:34CHAIR POWELL.
32:35So I do take that seriously.
32:37And the Beige Book is great.
32:39What's even greater is hearing the Reserve Bank presidents come in and talk
32:44about their conversations with businesses and business leaders and workers and people
32:50in the nonprofit sector in their districts.
32:53But I'll tell you, it's a pretty-you know, the picture is not one of a slowing or,
32:59you know, a really bad economy.
33:00It's one of-there are spots of weakness in their regions
33:03where growth is stronger than other regions.
33:05But, overall, it's-you know, again, look at the aggregate data.
33:09Aggregate data is-you know, particularly PDFP,
33:12private domestic final purchases, is 2.6 percent.
33:16And that's a good indicator of private demand.
33:20So we listen to all of that.
33:21And it does-I think it's important to listen to anecdotal data
33:26and not just look at the aggregate data, especially-you know, it's very hard.
33:29GDP data can be volatile quarter to quarter.
33:34So it's just hard to measure economic activity.
33:37There are a lot of-it's just difficult to do.
33:40So I look at both.
33:41But I wouldn't say that the-that the anecdotal data is uniformly downbeat.
33:46It's more mixed.
33:49JOLYNN KENT.
33:55Jolynn Kent with CBS News.
33:56Chair Powell, thanks for taking our questions today.
33:59You have consistently said that the Fed does not consider politics in making decisions.
34:03With a possible September rate cut on the table,
34:06it would be less than two months before the election.
34:08And former President Trump reportedly said that cutting rates so close
34:11to the election is something the central bank knows they shouldn't be doing.
34:15What's your response?
34:17And do you believe it's possible to really remain apolitical
34:20with a September rate cut?
34:23CHAIR POWELL.
34:23I absolutely do.
34:24And I think it's-first of all, we haven't made any decisions.
34:27I would say it this way.
34:28Haven't made any decision about any future meeting.
34:31I don't know what the data will reveal or how
34:33that will affect the appropriate path of our policy.
34:36I really don't know.
34:37I do know how we will make that assessment.
34:39That's what I do know.
34:40So, if you take a step back, the current situation, again,
34:43is inflation has come down much closer to our goal,
34:47and that's happened while unemployment has remained low.
34:50We're-we're very tightly focused on using our tools to try
34:54to foster that state of affairs continuing.
34:58That's-at each of our meetings and all of our decisions,
35:00our focus is strictly on that and really on nothing else,
35:03doing our part, whatever that part may be.
35:07You know, we're using our best thinking.
35:09We're doing our best to understand the economy.
35:12We follow academics.
35:14We follow the many commentators who bless us
35:17with their commentary.
35:19But we don't change anything in our approach
35:24to address other factors, like the political calendar.
35:26Congress has, we believe, ordered us
35:28to conduct our business in a nonpolitical way at all times,
35:32not just some of the time.
35:34I'll say this, too.
35:35We never use our tools to support
35:38or oppose a political party, a politician,
35:40or any political outcome.
35:42The bottom line is, if we do our very best to do our part
35:46and we stick to our part, that will benefit all Americans.
35:50If we get it right, the economy will be stronger.
35:53We'll have price stability.
35:54People will find jobs.
35:56Wages will rise in real terms.
35:59Everyone will benefit.
36:01So that's what we believe, and that's how we will always act.
36:04This is my fourth presidential election at the Fed.
36:07I can tell you this is how we think about it.
36:09This is what we do.
36:11So it's-anything that we do before, during,
36:14or after the election will be based on the data, the outlook,
36:18and the balance of risks, and not on anything else.
36:22Just a quick follow-up.
36:23Do your economic forecasts and models take
36:26to very different economic plans
36:28of these two presidential candidates, Harris and Trump?
36:32And if so, how?
36:33No. We do not do that.
36:35We absolutely do not do that.
36:37We don't-we don't know who's going to win.
36:39We don't know what they're going to do.
36:40We don't act as though we know, and we just can't do that.
36:43You know, we-basically, we have our forecast.
36:46We're not-we can run simulations of different potential policies,
36:51but we would never try to make policy decisions based
36:54on the outcome of an election that hasn't happened yet.
36:56We would just-that would just be a line we would never cross.
37:00You know, we're a non-political agency.
37:01We don't-we don't want to be involved in any-in politics
37:04in any way, so we wouldn't do that.
37:08Nicholas.
37:10Thank you, Chair Powell.
37:12Nicholas Jasinski from Barron's Magazine.
37:14There hasn't been a dissenting vote
37:17on an interest rate decision in some time.
37:19If the data do evolve, as you expect,
37:22if you do have more confidence by the September meeting,
37:24do you get the sense that there will be a unanimous vote
37:27on an interest rate move in September?
37:29Or basically, are there meaningful differences
37:31in committee members' assessments
37:34of how much more confidence is needed?
37:36So there's all-there are always meaningful differences.
37:39There are.
37:41And, you know, we talk a lot before, during, and after the meeting.
37:45We do have a very robust discussion of these things.
37:49You're right that in most cases, people, if they feel heard,
37:54and they feel that they've-that their, you know,
37:57their position has been given serious consideration.
37:59For most people, most of the time, that's going to be enough.
38:02There are dissents.
38:03That's fine.
38:05You know, no one has a veto.
38:06You know, no single person has a veto.
38:09So it just is a question of who will vote for and against.
38:12We've had-we've had, you know, dissents.
38:17We haven't had so many during the pandemic era, and it just may be
38:21that, you know, we've felt more united because we felt, you know,
38:25under a lot of pressure to get things right.
38:27But before the pandemic, we had plenty of dissents.
38:30And, you know, dissents happen.
38:33It's part of the process.
38:35There's nothing wrong with dissents.
38:37And if it happens, it happens.
38:40JEAN YOUNG.
38:44Hello, Jean Young with M&I Market News.
38:47Is a 50-basis point cut as a first cut at all likely or even on the table?
38:54You know, I don't want to say-I don't want to be really specific
38:57about what we're going to do, but that's not-that's not something we're
38:59thinking about right now.
39:01Of course, I haven't made any decisions at all as of today.
39:09Thank you, Chair Bell.
39:09Jennifer Schonberger with Yahoo Finance.
39:11Not to get into the minutes, but you said there was a real discussion today
39:14for moving at this meeting.
39:16I'm curious if you could provide some more color on the nature
39:19of the discussion today at the meeting
39:21about a possible rate cut as early as September.
39:26CHAIRMAN POWELL.
39:28Well, so, you know, the way the meeting is set up,
39:33the first day there's a discussion of financial stability
39:35because it's-every other meeting we have that.
39:37And then we have an opportunity to comment on that.
39:39Then we have an economic go-around.
39:41And then, this morning, we have the monetary policy go-around.
39:46And I think in people's economic go-around
39:49and in their monetary policy go-around,
39:51people express their views about this.
39:54And, you know, there's a range of views.
39:56People, as you will know from the speeches that they give,
39:58people have different ways of thinking about the economy.
40:00And so, in the minutes, we'll lay this out in a much better way
40:06than I can do off the cuff.
40:08But there's a range of perspectives.
40:10And, you know, but I do think that, you know, we are-you know,
40:13we're a consensus-driven organization.
40:15People come together.
40:16This was a unanimous decision.
40:18And at the end, everyone supported the outcome,
40:22not just the voters, but everyone.
40:24So, you know, I would also say some people examined the possibility,
40:29you know, the case for moving at this meeting.
40:34But overwhelmingly, the sense of the Committee was not
40:37that this meeting, but as soon as the next meeting,
40:40depending on how the data come in.
40:41But there is a growing sense of confidence that you could move
40:44at the next meeting, assuming inflation comes.
40:47Well, assuming that the totality of the data supports
40:50such an outcome.
40:51No question.
40:52That is the case.
40:53That, as I mentioned, you know, we think that the time is-it's
41:05approaching.
41:06And if we do get the data that we hope we get, then, you know,
41:11a reduction in our policy rate could be
41:13on the table at the September meeting.
41:15Nancy.
41:20Hi, Chair Powell.
41:22Nancy Marshall-Genzer with Marketplace.
41:24Former New York President Bill Dudley wrote an op-ed
41:27in Bloomberg earlier this month, which you probably saw,
41:31in which he said, quote, it might already be too late
41:34to fend off a recession by cutting rates.
41:36Doddling now unnecessarily increases the risk.
41:40Is he wrong?
41:42So this is the judgment that we have to make.
41:44And we're well aware of the judgment.
41:46We're, you know, we're-as I've said, we have to weigh the risk
41:50of going too soon against the risk of going too late.
41:54If we go too soon, we can, you know-we had a lot of advice,
41:59you know, to go ahead and cut
42:00after the seven good months of last year.
42:02We didn't.
42:03We said we needed to see more.
42:05Then we saw some higher inflation.
42:06We've seen one quarter of good inflation,
42:08and we've seen the labor market move quite a bit.
42:11And, as I mentioned, I don't think it needs to, you know,
42:15cool off any more for us to get the inflation results
42:19that are related to the labor market.
42:21Not all inflation is, of course.
42:22So I think it's a difficult judgment to make,
42:25and what you see as the judgment of the Committee is
42:28that that time is drawing near.
42:30That time could be in September if, you know,
42:35if the data support that.
42:36And have the chances of a hard landing increased?
42:42So I-I don't know whether they've increased.
42:44I think they're low.
42:45I think this is-you don't see any reason to think
42:50that this economy is either overheating
42:52or sharply weakening.
42:55That's just not in the data right now.
42:57What's in the data right now is an economy that's growing
43:00at a solid pace, a labor market that has cooled off,
43:04but nonetheless inflation-sorry, unemployment is low.
43:08You know, the data overall show a strong labor market.
43:12And, you know, so that's really what you see.
43:16It's not-it's neither an overheating economy,
43:19nor is it a sharply weakening economy.
43:22It's kind of what you would want to see.
43:24But, of course, it's-the job is never done.
43:27You know, we're watching to see, you know,
43:30which way the economy heads.
43:32And I think we're-if we are to respond to weakness,
43:35we're certainly, you know, well-equipped to do that.
43:38But that's not what we're seeing.
43:39What we're seeing is strong economic activity and, you know,
43:43a good labor market and inflation coming down.
43:46Greg.
43:51Thank you so much.
43:53In the minutes of the June meeting that came
43:56out a few weeks ago, there was a discussion about communications.
44:00And some Fed officials said maybe the Fed wasn't as clear enough
44:04about its reaction function.
44:07And when I talk to the commentators who bless you
44:10with their comments, they say that they really don't have a sense
44:14of what is going to judge-maybe not the first cut,
44:19but the pace of the cuts going forward.
44:21They don't have a good sense of that.
44:22Is there anything you can say?
44:24Like, how will we judge that?
44:26Yeah, I mean, I think the reality is that forecasters-and this isn't just
44:34the Fed by any means-forecasters have been continually surprised by,
44:38for example, the strength of the economy last year.
44:42So I think we have to be pretty humble about giving forward guidance
44:46about this, that, and the other thing.
44:48We need to be pretty careful about that.
44:49And, you know, when you're saying you're going to be data-driven,
44:52of course it's always what the data-how they affect the outlook
44:55and the balance of risks, but it's-nobody has great vision deep
45:00into the future.
45:01In terms of a reaction function, that's a long-time, you know,
45:05discussion that people have had forever.
45:08I think people have understood for a long time, actually,
45:12that we were very focused on bringing down inflation.
45:14Nobody was really confused about that.
45:17The data have, you know-again, you've seen significant improvement
45:22in inflation just for the last quarter.
45:24Markets move around on that-on the data, really, not so much-it's not really
45:28what we're going to do.
45:29It's more just that the data keep coming in,
45:31and markets are very, very responsive to that data right now.
45:35Go to Jeff for the last question.
45:40Thank you, Mr. Chairman.
45:41I'm going to change gears on you just a little bit from all
45:44of the rate talk and whatnot.
45:46With Fed now being in the books for a little over a year,
45:51there hasn't been a whole lot of talk about central bank digital currency,
45:55and wondering if you could give us an update on where things are with that.
45:59Is that considered a dead issue now?
46:01Is it still something that's being discussed within the committee
46:04and what's happening with that?
46:07It's not something that comes up at all with the-in the FOMC.
46:09So, more broadly, digital finances is an area that's having-that has really significant
46:17implications for payments generally, instant payments.
46:20And, you know, it's something that's going to really change the way-it's going
46:24to make more efficient and hopefully safer and all of those things the way payments are made
46:28around the world.
46:29And so we are-we have people who are researching that and trying to keep up to speed
46:33because we play an important role in the payments sector, both as a-you know,
46:38as a convener and as an operator, too.
46:40In terms of a CBDC, there's really nothing new going on.
46:44There's not much going on at all.
46:46We're not-we don't have the authority to issue a, you know,
46:51a retail CBDC that's available to the public.
46:53We're not seeking that authority.
46:55So what we're doing is keeping up with-keeping up with developments there.
47:01Pretty much every major central bank in the world is at least doing that.
47:05Some of them are actually seriously looking at implementing a CBDC.
47:08We're really not.
47:10We're really just evaluating, you know, the story and what's happening out there.
47:15So, you know, I think it's work that we need to be doing
47:19which could be very beneficial down the road.
47:21But we don't have-on a CBDC, we don't have any plan to-we would need to go to Congress
47:27and we have no plan to do that.
47:28We're not-no one here has decided that we think it's a good idea yet.