Press conference exchange between NICK TIMIRAOS and Fed Chair Jerome Powell:

user: Nick Timiraos of the Wall Street Journal. Chair Powell, you’ve said before that you wouldn’t wait until inflation got to 2 percent to cut rates because of how inflation has lagged. Does that apply for the labor market, too? If the labor market is back in equilibrium, why is restrictive policy and, potentially, very restrictive policy, given the high real funds rate, warranted right now?

assistant: So this is the very reason that we’re thinking about—that we’ve said in our—in our statement that we’re going back to looking at both mandates and that we think the risks are coming back into balance. We think what the data broadly show in the labor market is an ongoing, gradual normalization of labor market conditions. And that’s what we want to see. You know, we’ve seen that over a period of a couple of years and a move, really, from overheated conditions to more normal conditions. We are watching the labor market conditions quite closely, and that’s what we’re seeing. If we—if we start to see something that looks to be more than that, then we’re well positioned to respond. That’s, that’s part of what we’re thinking.

user: And when you talk about seeing something that’s more than whatever softness or slowdown you expect, in the past you’ve said that stronger growth wouldn’t, wouldn’t override better news on inflation. I wonder how that cuts the other way. If you’re seeing more softness in the labor market than what you would expect, does that change the calculus on what you’re looking for out of the inflation numbers to recalibrate policy?

assistant: So we have, we have—growth isn’t one of our three. We have two mandates, as you know. The labor market, maximum employment is one, and stable prices is another. So we weigh—we weigh those two things equally under the law. When we were far away from our inflation mandate, we had to focus on that. Now we’re back, back to a closer to even focus, so we’ll be looking at labor market conditions and asking whether we’re getting what we’re seeing. And, as I said, we’re prepared to respond if we see that it’s—that it’s not what we wanted to see, which was, you know, a gradual normalization of conditions—if we see more than that. And it wouldn’t be any one statistic, although, of course, the unemployment rate is generally thought to be, you know, a single—a good single statistic. But we’d be looking at wages, we’d be looking at participation, we’d be looking at all the things—surveys, quits, hires, all of those things—to determine the overall status of the labor market. But we’re looking at it now. I would say, again, I think you’re back to conditions that are close to 2019 conditions, and that was not an inflationary economy—broadly similar labor markets then. I think inflation was actually—core inflation was actually running below 2 percent. So we don’t think—I don’t now think of the labor market in its current state as a likely source of significant inflationary pressures. So I would—I would not like to see a material further cooling in the labor market, and that’s part of what’s behind our thinking. The other part, of course, is that we have made real progress on inflation. And we’re—we’ve got growing confidence there that we are not quite there yet, but we’re more confident that we’re on a—that we’re on a sustainable path down to 2 percent. So those two things are working together, and we’re factoring those both into our policy.