Press conference exchange between MICHAEL MCKEE and Fed Chair Jerome Powell:

user: Mr. Chairman, can you help me understand something about the, the SEP and your forecasts? The inflation that you’re talking about for this year, you say, is “transitory.” Then, by 2023, you’re back down to 2.1 percent. There’s no forecast for a rate increase for 2023. If you get to 3½ percent unemployment but inflation is only at 2 or 2.1 percent, are you willing to leave rates at zero going forward from there—or, roughly zero going forward from there? In other words, could we be in a Japan-like situation where rates just stay low because inflation does?

assistant: Well, again, I wouldn’t read too much into, into the, the March 2021 SEP dot plot. Remember what it is: It’s a compilation of individual projections by individual members. They’re all making different assessments. They, they have different forecasts, economic forecasts. Some have more optimistic ones, some less optimistic. And they’re—also remember that the SEP doesn’t actually include all the things that go into maximum employment. Right? It’s, it’s only—it only includes unemployment. So I, I would just say, we’ve set out clear guidance. The—the message from the SEP that I would like to leave with people is, we set out clear guidance. I mentioned what it was. It’s inflation up to—no, sorry, it’s, it’s labor market conditions consistent with our estimates of maximum employment—and that’s not just unemployment, it’s all the other indicators, but, overall, totaling up to maximum employment; it’s inflation at 2 percent, and not on a transient basis; and inflation on track to exceed 2 percent for—moderately for some time. Those are the criteria. We’re committed to robustly implementing that guidance. And that’s what this—that’s what this says. That’s really all it says. We’re going to wait until those requirements are met. And, again, you know, the, the state of the economy in two or three years is highly uncertain. And I wouldn’t want to focus too much on the exact timing of a potential rate increase that far into the future.

user: If I could follow up, I’m just wondering—before 2019, I would say you were focused on the problems with having interest rates too low. Now are you saying we’re willing to live with it until we reach these goals even if you get—meet your goal on maximum employment?

assistant: So what I would say is, we’re committed to giving the economy the support that it needs to return as quickly as possible to a state of maximum employment and price stability. And, you know, to the extent having rates low and support for monetary policy broadly, to the extent that raises other questions, we think it’s absolutely essential to maintain the strength and stability of the—of the broader financial system and to carefully monitor financial stability questions if that’s what you’re getting at. You know, we, we do that. We will—we monitor them very carefully. I, I would point out that, over the long expansion—the longest in U.S. history, 10 years and 8 months—rates were very low for—they were at zero for, you know, 7 years and then—and then never got above, you know, 2.4 percent, roughly. During that, we didn’t see, actually, excess buildup of debt. We didn’t see asset prices form into bubbles that would threaten the progress of the economy. We didn’t see the things you—we didn’t see a housing bubble. You know, the things that have tended to really hurt an economy and have in recent history hurt the U.S., we didn’t see them build up despite very low rates. Part of that just is that you’re in a low- rate environment, you’re in a much lower rate environment, and the connection between low rates and the financial instability issues is just not as tight as people think it is. That’s not to say we ignore it. We don’t ignore it. We, we watch it very carefully. And we don’t think—we think there is a connection. We say there is, but it’s not quite so clear. We actually monitor financial conditions very, very broadly and carefully. And we didn’t do that before the Global Financial Crisis 12 years ago. Now we do. And we’ve also, you know, put a lot of time and effort into strengthening the large financial institutions that form the core of our financial system—are much stronger, much more resilient. That’s true of the banks. I think it’s true of the CCPs. We want it to be true of, of other nonbank financial intermediation, markets, and, and institutions. So I think that’s, that’s—you know, monetary policy should be, to me, for, for achieving our macroeconomic aims. Financial regulatory policy and supervision should be for strengthening the financial system so that it is strong and robust and can withstand the kinds of things that it couldn’t, frankly—and we learned that in 2008, ’09, ’10. This time around, the regulated part of the financial system held up very well. We, we found some other areas that need strengthening, and that’s what we’re working on now.