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

user: Mr. Chairman, the critics of your patience policy argue that, given the long and variable lags with which monetary policy works, that you are likely to end up, given inflation, by having to raise rates faster and farther than you would have liked and, therefore, send the economy into recession. Given the fact that, basically, your forecast has been chasing inflation over the last year, and now you’re talking about it not coming down until the second or third quarter, why would they be wrong in thinking that?

assistant: Well, so, let me say what’s happened—and we’re very, very straightforward about it—is that inflation has come in higher than expected, and bottlenecks have been more persistent and more prevalent. We see that just like everybody else does, and we see that they’re now on track to persist well into next year. That was not expected—not expected by us, not expected by other macro forecasters. Now, let me say, you know, it’s difficult enough to just forecast the economy in normal times. When you’re talking about, you know, global supply chains in turmoil, it’s a whole different thing. And you’re talking about a pandemic that’s holding people out of the labor force for reasons that we can sample, but we don’t have a lot of experience with this. So it’s very, very difficult to forecast and not easy to set policy. So we have to set policy, though. So that’s what we’re doing. And, you know, so, to look at your question this way, I don’t think that we’re behind the curve. I actually believe that policy is well positioned to address the range of plausible outcomes, and that’s what we need to do. I do think it would be premature to raise rates today. That’s not—I don’t think that’s controversial. Certainly, I don’t know anyone arguing for that today. And the reason is that there’s still ground to cover to get to maximum employment. And we don’t want to stop that when there’s good reason to think—there’s still good reason to think, although it’s been delayed, clearly, there’s good reason to think that the economy will reopen, particularly if we do get past, you know, significant outbreaks of COVID. That’s when we’re really going to see what the characteristics of the labor market are. And, you know, I think, you know, the bottlenecks that we’re seeing in global supply chains around goods and, frankly, now at our own domestic ports, because demand is stronger than the capacity of those ports—those things are going to work themselves out. We have a flexible economy. It’ll take some time, but, you know, it took—you know, the experts managed to create a vaccine faster than, certainly, than I expected. And I think this stuff will work itself out over the course of next year. That is my baseline understanding, and that’s a very widely held one among people. But, you know, we are prepared for different eventualities, and we will use our tools to achieve price stability and maximum employment. And we’re going to let the data lead us to where we need to go. Our policy will adapt—and has already adapted—to the changing understanding of inflation and of bottlenecks and the whole supply-side story—which is also partly a demand story. So our policy will continue to adapt as is appropriate.