Press conference exchange between NICK TIMIRAOS and Fed Chair Jerome Powell:

user: Nick Timiraos of the Wall Street Journal. Chair Powell, to what extent has the easing in financial conditions since November contributed to the reacceleration in growth, and do you now expect a period of sustained tighter financial conditions will be needed to resume the disinflation the economy saw last year?

assistant: So I think it’s hard to know that. I think we’ll be able to look back, you know, from down the road and look back and understand it better. You know, if you look at—let’s look at growth. Really, what we’ve seen so far this year in the first quarter is growth coming in about consistent with where it was last year. I know GDP came in lower, but you don’t see an acceleration in growth. I mean, the thought would be that financial conditions loosened in, in, December, and that caused an uptick in activity, and that caused inflation. Presumably, that’s what we’re tightening in the labor market. You don’t really see that happening. What you see is economic activity at a level that’s roughly the same as, as last year. So, you know, what’s causing this inflation? You know, we’ll, we’ll have a better sense of that over time. I don’t know that there’s an obvious connection there, though, with easing of financial conditions. In terms of tightening, you’re, you’re right. Rates are certainly higher now and have been for some time than they were before the December meeting. And they’re higher, and that’s tighter financial conditions. And, you know, that’s appropriate, given what inflation has done in the first quarter.

user: You’ve said in the past that stronger growth wouldn’t necessarily preclude rate cuts. I wonder, would continued strength in the labor market change your view about the appropriate stance of policy if it was accompanied by signs the wage growth was reaccelerating?

assistant: So I just want to be careful that we don’t target wage growth or the labor market. And remember what we saw last year: very strong growth, a really tight labor market, and a historically fast decline in inflation. So—and that’s because we know there are two forces at work here. There’s the unwinding of the pandemic-related supply-side distortions and demand-side distortions, and there’s also monetary policy, you know, restrictive monetary policy. So I wouldn’t rule out that something like that can continue. You know, I wouldn’t give up, at this point, on further things happening on the supply side either because, you know, we do see that companies still report that there are supply-side issues that they’re facing. And also, even when the supply-side issues are solved, it should take some time for that to affect economic activity and ultimately inflation. So there are still those things. So I don’t like to say that either strong—either growth or, or a strong labor market, in and of itself, would automatically create problems on inflation, because, of course, it didn’t do that last year. You ask about wages. We also don’t—we don’t target wages. We target price inflation. It is one of the inputs. The point with wages is, of course, we, like everyone else, like to see high wages, but we also want to see them not eaten up by high inflation. And that’s really what we’re trying to do, is to cool the economy and work with what’s happening on the supply side to bring—to bring the economy back to 2 percent inflation. Part of that will probably be having wage increases move down incrementally toward levels that are more sustainable.