Press conference exchange between GREG ROBB and Fed Chair Jerome Powell:

user: Thank you, Chair Powell. Greg Robb from MarketWatch. I wonder if you can go back a little bit in time to before there was this outbreak of inflation, when the Committee put in place forward guidance on tapering asset purchases. I think it was December 2020. There’s a recent speech by Fed Governor Waller talking about that and saying that maybe that was too tight, that condition, and it put you a little bit behind—not his words but maybe, you know, were late to react to some of that inflation. So could you talk about that decision, and have you looked at it in hindsight at all? Thank you.

assistant: So, yes, we said that we wouldn’t lift off until we had basically achieved our dual-mandate goals. And the reason we did it in real time was that, the first look at the new framework that we’d rolled out, plenty of people were saying, “It’s not credible. You’ll never get inflation to 2 percent.” Some of our critics now who say inflation’s too tight—too high were the same ones who were saying, “You’ll never get to 2 percent.” Well, but anyway, that’s what happened. So we, we thought we needed to really make a strong statement with that. It wasn’t part of the framework. The December ’20 guidance was not part of our overall new framework. It was just guidance that we put in place. So I would say two things. One, I don’t think has materially changed the situation. But I have to admit, I don’t think I would do that again. I don’t think I would do that again. We—you know, ultimately, the situation evolved in a highly unexpected way for all of us. And, you know, maybe the learning is that leave a little more flexibility than that. But did it matter in the end? You know, we—if you look at—I really don’t think it did. I’m not sure it would’ve mattered if we’d been raising rates three months earlier. Does anybody think that would’ve made a big difference? I mean, lots of central banks were raising rates three months earlier, and it didn’t matter. I mean, this is a—this is a global phenomenon that’s happening now—admittedly, different in the United States, but anyway.

user: Just a lot of people talk about that time, and they talk about a taper tantrum. I know you haven’t talked about it too much but that you were worried at the time about repeating that taper tantrum that you had experienced as a Governor. So was that part of that? Where did that fit into all those decisions? Thank you.

assistant: So I think we learned—there’ve been multiple taper tantrums, right? So there was the famous one in 2013. There’s what happened at the December ’18 meeting, where, you know, markets can ignore developments around the balance sheet for years on end and then suddenly react very sharply. So we just had developed a practice of moving predictably and doing it in steps and things like that. It was just like that’s how we did it. And so we did it that way this time. We were—we were careful to, to take steps and communicate and all that thing. Yes, we were trying to avoid a tantrum because they can be quite destructive. They can tighten financial conditions and knock the economy off kilter. And, you know, when it happens, you have to—really, in both ’13 and ’18, it really had consequences for the real economy, you know, two, three, four months later. So we were trying to avoid that. That was part of it. Again, I don’t think that’s—the real issue of 2020 and ’21 was just trying to understand what was happening with the reopening economy. That, that was where the big uncertainty was. And, you know, our view was that these supply-side issues would get better: that people would go back to work, that labor force participation would come back, everyone would get vaccinated, schools would open, kids would be in school, and labor force participation would jump back up. That’s what we were—that was very broadly thought to be the case: these supply-side issues would get solved reasonably quickly. And they just haven’t. They still haven’t. So that’s really the learning, I think, is around how complicated these supply-side issues can be. We haven’t seen this before in a long, long time. And so that’s really, you know, what accounts for the pace at which we moved, and we did. When inflation changed direction, really, in October, we’ve moved quickly since then. I think people would agree. But before then, inflation was coming down month by month. And, you know, we thought we had the story—probably had the story right. But then, I think in October, you started to see a range of data that said “No. This is a much stronger economy and much higher inflation than we’ve been thinking.” And, again, we’ve pivoted, and here we are.