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

user: Nick Timiraos of the Wall Street Journal. Chair Powell, I guess I’m wondering if you could explain a little more the divergence we see in the dot plot, particularly around the 2025 rate projections. I realize this is—you know, you have one group of officials that are putting down no cuts, another that are putting down more than one—and recognizing that could be difficult to summarize, but is it a matter of people having a different outlook or a different reaction function? A different commitment to defending against another inflation mistake? How, how did that play out over the last two days?

assistant: So you’re right, we—and, as is often the case, we have a pretty healthy diversity of views on the Committee. We did have strong support for today’s decision and broad agreement that our policy stance does leave us in a good place. But I would point to two factors, and you mentioned them. The first is just that parties have a diversity of forecasts, and, and they do align with, with where—with where their dots are. So if you have a higher inflation forecast, you’re going to be less likely to be writing down, you know, more, more cuts. But as—remember, as we see more data, we’re going to learn more about where inflation is headed. And that means when it is time to look at, at normal—at sort of, at, you know— resuming our normalization process, the differences you may—you see should be smaller because we’ll have seen actual data. Right now, it’s just a forecast in a very foggy time. So that’s the first part—is forecast. Secondly, people can look at the same data, and they can evaluate the risks differently, as you know. And that includes, you know, the, the risk of higher inflation, the risk it’ll be more persistent, the risk that the labor market will weaken—people are going to have different assessments of that risk. So you put that in there, too. So those are the two ways that, that—the two things, I think, that drive these things. Remember, though, with—as I mentioned earlier— with uncertainty as elevated as it is, no one holds these rate paths with a lot of conviction. So that’s really where it is. It’s a function of those things, and I think as the data come in, you should see those differences diminish.

user: If I could follow up—you’ve said the policy is in a good place, and that it’s modestly restrictive. Given all the uncertainty—you just talked about tariff levels, uncertainty around the pass-through—is it price increases versus margin compression?—some of the softness that Chris talked about in, in labor and housing. Why wouldn’t it be better to have rates at a more neutral setting as the economy heads into this period of very high uncertainty?

assistant: So if you just look backward at the data, that, that’s what you would say, but that’s not—we have to be forward looking. And the thing that every forecaster—every outside forecaster and the Fed is saying is that we expect a meaningful amount of inflation to arrive in coming months, and we have to take that into account. So I think a backward-looking look would, would lead you to a neutral stance. But we, we can’t—we have to—we have to look at that. And because the economy is still solid, we can take the time to actually see what’s going to happen. It, it’s, you know, the—there’s a range of possibilities on how, how large the, the inflation effects and the other effects are going to be. So we’ll make smarter and better decisions if we just wait a couple of months or however long it takes to get a sense of, of really what, what is going to be the pass-through of inflation and what’re—what’s going to be the effects on spending and on hiring and all those things.