Press conference exchange between EDWARD LAWRENCE and Fed Chair Jerome Powell:

user: Thank you, Chair Powell. So you’re saying that uncertainty has come down, the economy is moving at a solid pace, inflation has come down over the past three months, and this is all moving in the right direction. So are you indicating here that Americans should expect some economic pain in the second half of the year?

assistant: I’m not—I’m not saying that at all. You know, from our standpoint, what I can say is that the, the U.S. economy is in solid shape. Inflation has come down. The unemployment rate remains at 4.2 percent. As I mentioned, real wages are moving up. It’s a— it’s a good—job creation is at a healthy level. Unemployment, again, as I said, low—labor force participation at a good place. What we’re waiting for to reduce rates is, is to understand what will happen with, with, really, the tariff inflation. And there’s a lot of uncertainty about that. Every forecaster you can name who, you know—who is a professional, you know, forecaster with, with adequate resources and forecasts for a living is forecasting, you know, a pretty significant—everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs. And it will be someone in that chain that I mentioned: Between the manufacturer, the exporter, the importer, the retailer— ultimately, somebody putting it into a, a good of some kind or just the consumer buying it—and, you know, all through that, that chain, people will be trying not to be the ones who, who pick up the cost. But, ultimately, the cost of the tariff has to be paid. And some of it will fall on the end consumer. We know that because that’s what businesses say—that’s what the, the data say from past—so we know that’s coming. And we just want to see, see a little bit of that before we make judgments prematurely.

user: And follow-up on that—so you’ve spent years, though, talking about how, how you’re data dependent, and be a little more direct on this. You know, now you’re making decisions looking forward—doesn’t the data you’re seeing today indicate there should be a rate cut?

assistant: No, I mean, you’re—monetary policy has to be forward looking. That is elementary. You’ve got to be looking—I always—we always talk about the incoming data, the evolving outlook, and the balance of risks. We say that over and over and over again, right? So it’s always forward looking. You know, if you know—at the very beginning of the pandemic, you know, we cut rates to zero immediately. Nothing had happened. We just knew that it was going to be really bad, right? So we took very aggressive forward looking—because we knew things were going to be unusually difficult. So, of course, this, this is something we, we know is coming—we just don’t know the size of it. And, again, the economy seems to be in solid shape. So the labor market’s not crying out for a rate cut. Businesses, you know, were in a bit of shock after April 2. But you see business sentiment—you talk to business people now—there’s a very different feeling now that people are working their way through this. And they, they understand how they’re going to go, and it’s—it, it feels much more positive and constructive than it did three months ago, let’s say. So, again, we think that our current stance of monetary policy is in a good place.