Press conference exchange between EVAN RYSER and Fed Chair Jerome Powell:

user: Evan Ryser, Market News International. Thank you, Chair Powell. I was wondering if the Fed has initiated a review of the conduct of monetary policy over the last two years or so, given the inflation, and will that be shared with the public? And then, secondly, given the illiquidity and the extraordinary volatility in financial markets, are you concerned that QT will make that worse?

assistant: Sorry, what was your question on QT?

user: Just given the illiquidity and extraordinary volatility in financial markets, whether QT will make things worse.

assistant: So, of course, we’ve been looking very carefully and hard at why inflation picked up so much more than expected last year and why it proved so persistent. We— it’s hard to overstate the extent of interest we have in that question morning, noon, and night. But you have to understand the context. For—really, the context is this: For decades before the pandemic and the reopening, you had a world where inflation was dominated by disinflationary forces such as declining population or aging demographics, let’s call it that, globalization enabled by technology, other factors, low productivity. So and that’s how all the models work is, decades and decades of data—they look at that. It’s a very flat Philips curve world, and the supply shocks tend to be transient, right? So we have now experienced an extraordinary series of shocks, if you think about it: the pandemic, the response, the reopening, inflation, followed by the war in Ukraine, followed by shutdowns in China—the war in Ukraine potentially having effects for years here. So we’re aware that a different set of forces are driving the economy—we have been, obviously, for quite a while. But this is a different—these forces are different. Inflation is behaving differently, and, in our thinking, it really is a question of very strong demand. But you couldn’t get this inflation without a change on the supply side, which is there for anybody to see, which is these blockages and shortages and people dropping out of the labor force and things like that. So that’s how we’re looking at it. And we’ve done a lot of work internally on, and thinking about, what all that means. You don’t—the thing is, you don’t know whether those forces are—to what extent are they going to be sustained? In other words, will we go back to a world where it looks a little more like the old world, or are we really going to be in a world where major supply shocks go on and on? The history is, you see these waves of supply shocks, as you did in the ’70s, and then they go away, and there’s a “new normal,” and things settle down. But, honestly, we don’t know what that’s going to be. In the meantime, we have to find price stability in this new world and maximum employment in this new world where, clearly, inflationary forces are—you’re seeing them everywhere. Again, if you look around the world at where inflation levels are, it’s absolutely extraordinary. It’s not just here. In fact, we’re in the middle of the pack, although I think we have, of course, a different inflation than other people have, partly because our economy is stronger and more highly recovered. So that’s what we’re doing. We’ve done a lot of introspection and work on that and—sorry, on QT, we’ve communicated really clearly to the markets about what we’re going to do there. Markets seem to be okay with it. We’re phasing in—Treasury security issuance is down quite a lot, quite a lot from where it’s been, so I have no reason to think—markets are forward looking, and they see this coming. I have no reason to think it will lead to illiquidity and problems. It seems to be kind of understood and accepted at this point.