Press conference exchange between MICHAEL DERBY and Fed Chair Jerome Powell:

user: Thank you for taking my question. I wanted to ask you another question about inflation, and it has to do with inflation expectations. A number of different surveys and, and market indicators are showing, you know, multiyear highs in inflation expectations ratings. So I wondered, you know, if, if that was something that you saw consistent with your inflation outlook. Is that something that worries you, or do you see that as, maybe, you know, the success of the Fed’s new inflation framework, you know, making it out to the, to the broader public?

assistant: Right. Inflation expectations before the pandemic hit—and here we think of survey, market based—survey being either households or, or economists and, and market based. You look at all of those, and I would say that they were at the low end of what would have been consistent with a 2 percent inflation target, particularly our 2 percent inflation target, which calls for 2 percent average inflation. So they’re at the low end. Inflation expectations actually went down a bit at the beginning of the pandemic, and now they’ve just moved back up to levels broadly—that, that are where they were in 2018, or in some cases 2014, and, I would say, more consistent with our mandate. And we want them to be—we want them to be higher and—you know, on a persistent basis. We want inflation to run a little bit higher than it has been running for the last quarter of a century. We want it to average 2 percent, not 1.7 percent. And for that, we need to see inflation expectations that are consistent with that, really well anchored at 2 percent. We don’t really see that yet, but I would say that, that, you know, breakevens have moved up, in a way. Breakevens are based on CPI, of course, but they’re, they’re now at levels that are—that are pretty close to mandate consistent, whereas before, they were below. We monitor inflation expectations very, very carefully, as you would obviously know. So that’s where—that’s where I would say it is.

user: Just one small follow-up. Do you have any redlines on inflation readings where if, you know, you hit, like, a certain number on, say, you know, core PCE, that would be, you know, a trigger response from the Fed?

assistant: It doesn’t work that way. You know, we’re, we’re—inflation measures are always going to be a bit volatile. We expect—as I mentioned, we expect core and, and headline PCE to move up because of base effects, and—you know, I—and we expect that to go away. We, we also expect these, these bottleneck effects to come in. We don’t know how persistent they’ll be. We, we think they’ll—you know, it’s a matter of, of when they will pass through, not whether they will pass through. But we can’t be confident about the exact timing of that or the size of them. They don’t seem especially large at the moment, but, you know, we, we don’t know. I mean, you know, this is—this is all about the reopening of the economy. That’s what’s happening. We had it—we were in a deep, deep hole a year ago, and now, with a lot of help from fiscal policy, some additional help from monetary policy, and, you know, a great deal of help from vaccination, we’re seeing a strong rebound in activity. And what’s happening is, it’s, it’s—demand can be spurred with fiscal transfers and—the saved-up fiscal transfers and, and people going back to work and things like that. The supply side will take a little bit of time to adapt. New restaurants will have to be opened. The supply of various inputs into the goods part of the economy will have to be brought back up to speed. And you—you’re seeing some of that. That’ll happen over a period of time, over coming quarters. You’ll see some of the bottlenecks resolved, but the last one may not be resolved for some time.