Press conference exchange between HOWARD SCHNEIDER and Fed Chair Jerome Powell:

user: Howard Schneider with Reuters. Thank you. So you’ve said several times that the economy needed a period of below-trend growth to get inflation consistently back to 2 percent. You get that in 2024 a little bit—1.5 percent is just a touch below what’s the estimate of potential. So the fact that you’re getting so much done at so much less cost, does that represent a change in how you think inflation works, a change in how you think the economy works, a change in the mix of supply healing versus demand destruction that’s necessary to achieve this?

assistant: Yes, of course. It is a—it is a good thing that we, we’ve seen now meaningful rebalancing in the labor market without an increase in unemployment, and that’s, that’s because we’re seeing that rebalancing in other places—in, for example, job openings and in the jobs–worker gap. You’re also seeing supply-side things—so, so that’s happening. I would say, though, we still—I still think, and I think, broadly, people still think, that there will have to be some softening in the labor market that can come through more supply, as we’ve seen as well. Also, remember, the natural rate, we think, is, is coming down, which is a supply-side thing, so that the, the gap between any given unemployment rate that’s lower than that and the natural rate comes down. That’s a way for supply—that’s a way for the labor market to achieve a better balance. So all of those things are happening. You’re right—in, in the median forecast, we don’t see a big increase in unemployment. We do see an increase, and—but that’s—that really is just “playing forward” the trends that we’ve been seeing. That is not guaranteed. There, there may come a time when unemployment goes up more than that, but that’s, that’s really what we’ve been seeing is, progress without higher unemployment for now.

user: So just to, to boil that down for a second—you know, we’ve gone from a very narrow path to a—to a soft landing to something different. Would you call the soft landing now a baseline expectation?

assistant: No, no—I would not do that. I, I would just say—what, what would I say about that? I’ve always thought that the soft landing was, was a plausible outcome—that there was a path, really, to, to a soft landing. I’ve thought that, and I’ve said that since we lifted off. It’s also possible that, that the path has narrowed, and it’s widened, apparently. Ultimately, it—this may be decided by factors that are outside our control at the end of the day. But I do think it’s—I do think it’s possible. And, you know—I also think, you know, this is why we’re in a position to, to move carefully again. That—we, we will restore price stability. We, we know that we have to do that, and we know the public depends on us doing that, and we know that we have to do it so that we can achieve the labor market that we all want to achieve, which is an extended period—sustained period of strong labor market conditions that benefit all. We know that. The fact that we’ve come this far lets us really proceed carefully, as I keep saying. So I think, you know, that’s, that’s the end we’re trying to achieve. I wouldn’t want to handicap the likelihood of it, though. It’s not up to me to do that.