Press conference exchange between JEANNA SMIALEK and Fed Chair Jerome Powell:

user: Jeanna Smialek with the New York Times. Thank you for taking our questions. I, I wonder if you could talk a little bit about why officials think it’s appropriate to cut rates at all in 2025 if inflation is expected to remain firm throughout the year. And what would you expect, at this point, the timing might look like? Would a January cut potentially be possible, or does a pause next month seem more likely?

assistant: Well, so let, let me start by saying why we—why we cut today and then—and then move to 2025. So I would say today was a—was a closer call, but we decided it was the right call because we thought it was the best decision to foster achievement of both of our goals, maximum employment and price stability. We see the risks as two-sided: moving too slowly and needlessly undermine economic activity and the labor market, or move too quickly and needlessly undermine our progress on inflation. So we’re trying to steer between those two risks, and, on balance, we decided to go ahead with a further cut. And I, I’ll give you some details on why. Downside risks to the labor market do appear to have diminished, but the labor market is now looser than pre-pandemic, and it’s clearly still cooling further, so far in, in a gradual and orderly way. We don’t think we need further cooling in the labor market to get inflation down to 2 percent. Job creation is now well below the level or certainly below the level that would hold unemployment constant, the job-finding rate is low and declining, and other measures—such as surveys of workers and businesses, quits, things like that—broadly show a, a much cooler labor market than there was, than we had in 2019. It’s still quite gradually cooling. So we, we keep an eye on that. Inflation, we see that story as still broadly on track, and, and I’ll tell you why. We, we’ve made a great deal of progress. Twelve-month core inflation, as I mentioned, through November is estimated at 2.8 percent, down from a high of 5.6 percent. Twelve—but 12-month inflation has actually been moving sideways, as we are “lapping” very low readings of late last year. Housing services inflation actually is steadily coming down now, albeit at a slower pace than we might like, but it has now come down substantially and it is making progress, slower than hoped. And we, we’ve had recent high readings from nonmarket services and some bumpiness for goods. So I’ll just say, we, we—so remember that we couple this decision today with the “extent and timing” language in the postmeeting statement that signals that we are at or near a point at which it will be appropriate to slow the pace of further adjustments. You ask about 2025. I, I think that the lower—the slower pace of cuts for next year really reflects both the higher inflation readings we’ve had this year and the expectation that inflation will be higher. You saw in the SEP that risks and, and uncertainty around inflation we see as higher. Nonetheless, we, we see ourselves as, as still on track to continue to cut. I think the actual cuts that we make next year will not be because of anything we wrote down today. We’re, we’re going to react to data. That’s just the general sense of what the Committee thinks is likely to be appropriate.

user: Sorry, just one, one quick follow-up: Why, I guess, would you make those cuts? Like, what would—what would be the trigger to cut?

assistant: So we’re—to, to cut further after this point, I, I would say it this way: We’ve reduced our policy rate now by 100 basis points. We’re significantly closer to neutral. At 4.3 percent and “change,” we believe policy is still meaningfully restrictive. But as for additional cuts, we’re going to be looking for further progress on inflation as well as continued strength in the labor market. And as long as the economy and the labor market are solid, we can be cautious about—as we consider further cuts. And all of that is reflected—to your question—in the December SEP, which shows a median forecast of down to two cuts next year, compared to four in September.