Press conference exchange between RACHEL SIEGEL and Fed Chair Jerome Powell:

user: Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. At the beginning, you were talking about separating the signal from the noise, and tariff inflation from nontariff inflation. Can you “walk us through” what that looked like over the last couple of months—if there were specifics, from the January meeting to now, that helped you make those distinctions?

assistant: So when we say “separating the signal from the noise,” that’s just a way of saying that things are highly uncertain and that, you know, you’re reading about developments—the news is full of developments of tariffs being put on and taken off and things like that. That’s—some of that is noise in the sense that it’s, it’s not really telling you anything. You’re trying to extract a signal from that, and the signal is what’s going to be the effect on economic activity, on inflation, on employment, and all those things. So, so that’s really when we say “signal and noise.” Sorry, the second thing was—?

user: Or, similarly for tariff inflation, nontariff inflation, ways that you’re making the distinction.

assistant: That’s, that’s a, a special case of that—of, you know, with the idea being—and I think—do think that the first two months of this year are a great example. You’ve got high readings for goods inflation after a string of readings that averaged close to zero, and you have to ask—it’s coming during tariffs, but, you know, you—it’s very hard to, actually, scientifically go back and match up those increases and say, “Yes, I can prove ’s from tariffs.” But it has to be, to some extent. Plus, noise. There can be idiosyncratic readings in various categories, which will shortly reverse, and that, that happens, too, and that could be a big piece of it. You know, I think we’ll know. In a couple of months, we’ll know whether those were—you know, where that really was from. But it’s a—that’s another case where I think it’s going to be very, very challenging to unpack the inflation that we see over the course of this year and be able to say with confidence how much of that came from inflation and how much of it—sorry, from tariffs—and how much of it didn’t. But that’s what we’ll be doing. We’ll be doing that, and so will everybody else, and we’ll all be trying very hard to, to make that assessment. And, you know, I, I’m sure we will make a lot of progress on that. And we already have. But it, it’s going to be a challenge.

user: Do you have a sense yet as to what, in your mind, what makes something cross from noise to a signal—what that threshold would look like?

assistant: You know, it would depend on what we’re talking about. I mean, obviously, you’re looking for direct evidence that, that particular pieces of, of inflation are, are— or are clearly not—caused by tariffs. For example, something that was, you know, in the service sector that was far away from anything that’s tariffed. You, you might think, okay, well that is— like, frankly, housing services inflation—which, which, by the way, has been behaving well. You know—which, for, for some time, was our problem. Now it’s been—it’s slow, but it’s definitely, you know, moving down in a—in a very good way. It’s more now with goods and, to some extent, with, with nonhousing services inflation.