Press conference exchange between VICTORIA GUIDA and Fed Chair Jerome Powell:

user: wanted to ask a little bit more about inflation to make sure I understand how you’re thinking about this So in the projections inflation is expected be high this year and then come back down next year and then maybe start to rise a little bit again enough for a liftoff in 2023 You know I know that’s obviously— take that with a grain of salt But that would suggest that you all could theoretically see inflation sustainably staying above 2 percent And so I guess my question is what would be causing that inflation? What would be—because it seems like you all now see a situation in which inflation would be rising in a way that isn’t caused by transitory factors in the—in the next couple of years So would that be the result of a tight labor market? Would that be because this whole situation has raised people’s inflation expectations? How are you thinking about that?

assistant: So what we’re seeing in the near term—again, our base case is that what we’re seeing in the near term is, is principally associated with, with the reopening of the economy and not with a tight labor market or tight resource constraints, really. So—but you’re right. When, when you get to—in, in the forecast, all of that, you know, supply and demand sides of the economy adapt. We have a very highly adaptive, you know, flexible economy, more so than most. And by 2023, those increases are really about, about, you know, rising resource utilization or, to put it a different way, you know, low unemployment, or high employment is a way to think about it. So that’s what that’s about. That’s about the broad inflationary pressure that results from, you know, a really strong expansion tightening up resource utilization across the whole economy and lifting, lifting up inflation. And that’s why—that’s why you would see it then, because by then, you know, in the forecast—and it’s just a forecast, they’re just individual forecasts. In people’s forecasts, that’s what’s happening.

user: So the change in the projections reflect the fact that you all are more optimistic about the economic outlook and not necessarily that you think that this will change the way people think about inflation?

assistant: Yeah, I think—there may be an element of the latter as well, because inflation expectations have continued to move up. You know, it’s all in people’s individual thinking, and you can’t—it’s hard to say. It’s not something the Committee debates in terms of, you know, what, what the outlook is for 2023. So I’m, I’m a little bit speculating, which I shouldn’t do. But it wouldn’t surprise me if there’s an element for some people in, you know, seeing the inflation performance that we’ve had and thinking that I have more confidence that we could see inflation above 2 percent, that it may not be as hard to do that as we thought, and that inflation expectations may move up to a—to a level—they were—they were really at a level that was a little below 2 percent. They might move up as a consequence of this or, or, or as a consequence of, of, of the new framework. You know, we did see inflation expectations moving up in the—in the wake of the announcement of the framework. But, you know, we don’t really know that. So, ultimately, I think it’s consistent with both those things.