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

user: Mr. Chairman, since September of 2020, you’ve been operating on a monetary policy framework that let the economy run hot to bring unemployment down. That seems to be over. But I’m wondering how you would describe your reaction function now. What is it that the Fed is trying to do other than bring inflation down? In other words, is it, we’re going to keep raising rates until it comes down to an acceptable level?

assistant: Yes. So I want to clear one thing up again. And that is that nothing in our new framework or in the changes that we made has caused us to wait longer to raise interest rates. What we said in the framework changes was—and this was really a reflection of what had happened for the preceding couple of decades, actually. What we said was, if we see, you know, low unemployment, high employment, but we don’t see inflation, then we’re not going to raise rates ’til we actually see inflation. That’s what we said, and that was the sense of it. There was no sense in which, if we got a burst of really high inflation, we would wait to raise rates. That’s simply not in the framework. In fact, quite the contrary. The framework is all about anchoring inflation expectations at 2 percent. So I do hear this, you know, that the framework—really, we can’t blame the framework. It was a sudden, unexpected burst of inflation. And then it was the reaction to it, and it was what it was. But it was not in any way caused by or related to the framework. So, come to today. You know, I think our vision on this on the Committee is very, very clear. What we see is a strong labor market. We see a labor market with a lot of momentum, great job creation. And we see the underlying economy’s strong. Balance sheets are strong. Yes, there are threats to growth from, you know, from what’s going on in Eastern Europe. And, but, nonetheless, in the base case, there’s a pretty broad expectation of strong growth. But inflation is far above our target. And, you know, the help we’ve been expecting and other forecasters have been expecting from supply-side improvement, labor force participation, bottlenecks, all those things getting better—it hasn’t come. And so we’re looking now to using our tools to restore price stability, and we’re committed to doing that. And you see that, I think, in the Summary of Economic Projections. And you see that in the decision we make, and you’ll continue to see it in the decisions we make, going forward.

user: If I could follow up by asking—I guess what you’d call it is the “Paul Volcker” question: You don’t think unemployment is going to rise significantly, but, if it does, does that temper your desire to keep raising rates?

assistant: The goal, of course, is to restore price stability while also sustaining a strong labor market. We have a dual mandate, and they’re equal. But, as I said earlier, you know, price stability is an essential goal. In fact, it’s a precondition, really, for achieving the labor market that we want, which is a strong and sustained labor market. We saw the benefits of a long expansion, a sustained labor market. It pulled people back in, and there were really no imbalances in the economy that threatened the long expansion. It, just, the pandemic arrived; it was just a completely exogenous event. So that’s how we’re thinking about it. We, of course, want to achieve, you know, price stability with a strong labor market. But we do understand also that, really, you can’t have maximum employment for any sustained period without price stability. So we need to focus on price stability particularly, because the labor market is so strong and the economy is so strong. We feel like the economy can handle tighter monetary policy.