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

user: Nick Timiraos, the Wall Street Journal. Chair Powell, my question is about, what have you learned over the last few months about the inflation-generating and price pass-through process? And just to drill down: The June CPI report showed evidence of tariff- induced goods inflation. Now the tariff landscape is only starting to be settled with some of these more recent deals. Given the lags between when tariffs are announced and when they show up in goods prices, is two months a long enough horizon to evaluate the impact and be confident that tariffs aren’t impacting the broader inflation process?

assistant: I think you have to think of this as still quite early days. And so I think what we’re seeing now is substantial amounts of tariff revenue being collected, on the order of $30 billion a month, which is, you know, substantially higher than, than before. And the evidence seems to be, mostly not paid, but paid only to a small extent, through exporters lowering their price. And companies or retailers, people who are upstream—institutions that are upstream from the consumer, are paying most of this for now. Consumers are—it’s starting to show up in consumer prices. As you know, in the June report, we expect to see more of that. And we know from surveys that companies feel that they have every intention of, of, of putting this through to the consumer. But, you know, the truth is, they may not be able to in many cases. So I think it’s—we’re just going to have to watch and learn empirically how much of this and over what period of time. I think we’ve learned that the process will probably be slower than, than expected at the beginning, but we never expected it to be fast. And we think we have a long way to go to really understand exactly how we’ll be. So that’s how we’re thinking of it right now.

user: So if I could follow up, is the reticence to “look through” core goods inflation being driven by the judgment that during the pandemic, expectations proved more adaptive than anyone at the Fed expected? Is it being driven by uncertainty over how restrictive policy is?

assistant: You could argue we are, a bit, “looking through” goods inflation by not raising rates. You know, we haven’t reacted to, to new inflation. But, I mean, I wouldn’t—I wouldn’t insist upon that. But I don’t think—I think the base case—I said—as I said, a reasonable base case is that these are one-time—one-time price effects. Of course, in the end, there, there will not be. This will not turn out to be inflation, because we’ll make sure that it’s not. We will, through our tools, make sure that this does not move from being a one-time price increase to serious inflation. We want to do that efficiently, though, efficiently. And that means we want to do it—if you—if you move too soon, you wind up maybe not getting inflation all the way fixed, and you have to come back. That’s inefficient. If you move too late, you might do too—unnecessary damage to the labor market. So there won’t be, in the end, a big inflationary problem. What we’re trying to do is accomplish that in a way that is efficient. But in the end, there should be no doubt that we will do what we need to do to keep inflation under control. Ideally, we do it efficiently.