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

user: Mike McKee from Bloomberg Television and Radio. The balance sheet—why did you decide to wait until June 1st to begin letting securities roll off and not immediately start in the middle of this month, say? And do you have another, a newer or a better, estimate for the monetary policy impact of letting the balance sheet decline? And then, finally, I’m just curious why you felt the need to address the American people at the top of your remarks? Are you concerned about Fed credibility with the American people?

assistant: So, why June 1? It was just, pick a date, you know, and that happened to be the date that we picked. It was—nothing magic about it. You know, it’s not going to have any macroeconomic significance over time. We just picked that. Sometimes we publish these calendars on the first day of the month, and that’s what we’re doing. I wouldn’t read anything into it. In terms of the effect, I mean, I would just stress how uncertain the effect is of shrinking the balance sheet. You know, we run these models—and everyone does in this field—and make estimates of what will be, how do you measure, you know, a certain quantum of balance sheet shrinkage compared to quantitative easing? And, you know, these are very uncertain. I really can’t be any clearer. There won’t be any clearer estimates. You know, people estimate that, broadly, on the path we’re on—and this will be taken, probably, too seriously—but ¼ percent, one rate increase over the course of a year at this pace. But I would just say, with very wide uncertainty bands—very wide. We don’t really know. There are other estimates that are much smaller than that, by the way. And some of you may read about that. That’s a mainstream estimate. We know that it is part of returning to more normal, more neutral financial conditions. And, you know, our strategy is to set up a plan and have it operate and really have, you know, have the interest rate be the active tool of monetary policy. In terms of speaking to the American people, so I feel like sometimes I just want to remind us, really, ’s who we work for, and that it’s inflation that people are feeling all over the country. And it’s very important that they know that we know how painful it is and that we are working hard on fixing it. I thought it was quite important to do that. And so that was really the thinking behind that.

user: Do you think the Fed has a credibility problem?

assistant: No, I don’t. And a good example of why would be—in the fourth quarter of last year, as we started talking about tapering sooner and then raising rates this year, you saw financial markets reacting, you know, very appropriately. Not to bless any particular day’s measure, but the way financial markets, the forward rate curve has tightened in response to our guidance and our actions really amplifies our policy. It’s—monetary policy is working through expectations now, to a very large extent. We’ve only done two rate increases. But if you look at financial conditions, the two-year rate is at 280 basis points now. In September, I think it was at 20 basis points. And that’s all through the economy. People are feeling those higher rates already. And so that shows that the markets think that our forward guidance is credible. And I think we want to keep it that way.