Press conference exchange between HOWARD SCHNEIDER and Fed Chair Jerome Powell:

user: Thanks, Chair Powell. Howard Schneider, with Reuters. Just to—just to carry that a little further, should we read this as a conclusion that the combination of tipping to one cut this year and acknowledging further progress on inflation as a mark to market on the level of restrictiveness that you need—that you, in fact, have concluded that you weren’t quite there yet?

assistant: I’d be reluctant to try to draw that conclusion. I, I think this is about, you know, looking at the incoming data and asking, “How much progress are we making on inflation, and how is the rest of the economy doing? Is the labor market still strong?” That’s what we’re thinking about. You know, you can—you can translate it into the—into the language you’re talking about, but, to me, the focus is more on, we have a goal, which is price stability, and another goal, which is maximum employment. How are we doing there? We think we’ve got a good, strong labor market still. We think we’ve been making progress toward the price- stability goal. And then for a while, there was a pause. And we look at today’s thing, and we think, “Well, that’s a good reading, and we hope we get more like that.” And, you know, in the meantime, we’re asking, “Is our policy stance about right?” And I think we think, “Yes, it’s about right.” We’re prepared to adjust that as appropriate, but we think—we think we’re getting the things that we would want to get, broadly speaking. And that’s why we’ve been at this policy rate now for almost a year.

user: So, so just to follow up on that—I think one, one curious thing here is, you’ve got now this restrictive policy in place and virtually no change in any of the major things for all of this year. You’ve got growth that stays above long-run potential throughout the forecast period, unemployment that never goes above the long-run estimate— right?—of 4.2. So this isn’t a story of slack improving inflation. So where’s the improvement in inflation coming from that it’s going to pick up pace so much in 2025?

assistant: Well, you know, it’s been coming—where’s it been coming from— let’s start with that. You know, clearly a lot of what—some of what we’ve been getting is just the reversal of the—the unwinding of the pandemic-related distortions to both supply and demand. And that is, you know—that is complemented by and amplified—supported by restrictive monetary policy. So those two things have been working together. We’ve also had a very positive supply shock on the labor side. And, and, also, you get—you get a positive supply shock when the—when the supply conditions unwind and return to normal. So you’ve had, you know, above-trend potential growth and, and high growth. And yet you’ve had the benefit of, of inflation coming down, you know, really fast, actually, last year, and you will see what the rest of this year brinks—brings. So these dynamics can continue as long as they continue. I mean, ultimately, the question is, ultimately, are you down to demand? And, and we don’t know that, though. I mean, look at today’s report. You know, if we see more like that—you know, we don’t—we can’t know what the future holds. But in the meantime, we’ve made pretty good progress on inflation with our current stance.