Press conference exchange between DON LEE and Fed Chair Jerome Powell:

user: Hi, Chair Powell. As you know, households, households are sitting on a lot of excess savings. And I wonder if, combined with that, you have an unleashing of, you know, pent-up demand. How much do you think that would affect—that would affect inflation? And would you expect that to be transitory?

assistant: We, you know, we and everyone who’s forecasting these—what, what we’re all doing is, we are looking at the—at the amount of savings. We’re looking at—you know, we have reasonably good data on that. And we’re looking at the government transfers that’ll be made as part of the various laws. And we’re trying to make an assessment on what will be the tendency of people to spend that money, the marginal propensity to consume. And from that, you can develop an estimate of the impact on spending, on growth, on hiring, and, ultimately, on inflation. So that’s, that’s what we’re all doing. And we have, you know, we have—we can look at history, and we can make estimates, and those are all very transparent and public. And you can compare one to the other. And, of course, we’ve all—we’ve all done that. And I think we’ve made very conservative assumptions and sensible mainstream assumptions at each step of that process. And what, what it comes down to is what I said before, which is, there very likely will be a step-up in inflation as March and April of last year drop out of the 12-month window, because they were very low inflation numbers. That’s a—that’ll be a fairly significant pop in inflation. It’ll wear off quickly, though, because it—just the way the numbers are calculated. Past that, as the economy reopens, people will start spending more, and then, you know, you can only go out to dinner once per night, but a lot of people can go out to dinner. And so— and they’re not doing that now. They’re not going to restaurants, not going to theaters. That part of the economy—and travel and hotels—that part of the economy is, is really not functioning at, at full capacity, right? But as that happens, people can start to spend. It’s also—wouldn’t be surprising if—and you’re seeing this now, particularly in the goods economy—there’ll be bottlenecks. They won’t be—they won’t be able to service all of the demand maybe, maybe for a period. So those things could lead to—and we’ve, we’ve modeled that. Other people have too. We’ve—and what we see is relatively modest increases in inflation. So—but those are not permanent things. You know, what’ll, what’ll happen is—the supply side—the supply side in the United States is very dynamic. People start businesses, they, they reopen restaurants, you know, the airlines are, will be flying again, all of those things will happen. And so it’ll turn out to be a one—a one-time bulge in, in prices, but it won’t change inflation going forward, because inflation expectations are strongly anchored around 2 percent. We know that inflation dynamics do evolve over time. And there was a time when, when inflation went up, it would stay up. And, and that time is not now. That hasn’t been the case for some decades. And we think it won’t—it won’t—we won’t suddenly change to another regime. These things tend to change over time. And they tend to—tend to change when the central bank doesn’t understand that having inflation expectations anchored at 2 percent is the key to it all. The, the—having them anchored at 2 percent is what gives us the ability to push hard when the economy’s really weak. If we saw inflation expectations moving materially above 2 percent, of course, we would conduct policy in a way that would, would make sure didn’t happen. We’re committed to having inflation expectations anchored at 2 percent, not materially above or below 2 percent. So that’s—I think if you—if you look at the savings, look at all of that, model it, that’s, that’s what comes out of our assessment. There are different possibilities. I think it’s, it’s a relatively unusual—very unusual situation to have all these savings and this, this amount of fiscal support and monetary policy support. Nonetheless, that, that is our most likely case. And you know, as the—as the data come in and the economy performs, we’ll of course adjust. Our outcome-based guidance will immediately adapt, we think, to meet whatever the actual path of the economy is.