Press conference exchange between CHRIS RUGABER and Fed Chair Jerome Powell:

user: Thanks. Chris Rugaber at Associated Press. You mentioned that many of the trends are in place that you want to see—core services ex. housing has come in pretty low in the past couple of months. And, as you noted, a significant portion of core inflation is now housing prices. And then we’ve had some quirks in used-car prices. So given that these trends are in place, I guess I’m asking the flip side of Nick’s question: Why signal additional rate hikes? Aren’t things headed in the direction you need? Why not simply give it even more time? Or—it’s surprising to see so much hawkishness in the dots, given what we’re seeing recently.

assistant: Yeah. So, you know, we’ve—remember, we’ve—we’re two and a half years into this—or two and a quarter years into this. And forecasters, including Fed forecasters, have consistently thought that inflation was about to turn down and, you know, traditional—you know, typically forecasted that it would and been wrong. So I think if you—I think if you look at the—at core PCE inflation overall—look at it over the last six months—you’re just not seeing a lot of progress. It’s running, and it’s running at a level, you know, over 4½ percent—far above our, our target and not really, you know, moving down. We want to see it moving down decisively. That’s all. We’re, you know, of course, we’re going to get inflation down to 2 percent over time. We, we don’t want to do—we, we want to do that with the minimum damage we can to the economy, of course. But we have to get inflation down to 2 percent, and we will. And we just don’t see that yet. So, hence, you see today’s policy decision: both, both to write down further rate hikes by the end of this year but also to, you know, to take—to, to moderate somewhat the pace with which we’re moving.

user: Quick follow-up. I mean, the last press conference you mentioned you didn’t see wages driving inflation. And, you know, there was some research from the San Francisco Fed suggesting wages aren’t necessarily a key driver. But you’ve talked about the labor market today and the need for softening. Can you give us a little more, specifically, of how you see the tight labor market driving inflation at this point? Thank you.

assistant: Right. So I’m, I’m not going to comment on any particular paper, but I, I would say that the—I think the overall picture is that at the beginning in, you know, early 2021, inflation was really becoming from very strong demand for—largely for goods. People were still at home. They had money in the bank, and they wanted to spend—they spent a lot on goods. And, of course, at the same time—and because of that high demand, to some extent, supply chains got all snarled up. So prices went way up. Inflation went way up. So that was the, the origin, and it wasn’t really particularly about the labor market or wages. But as you—as you moved into—through ’21, into ’22, and now in ’23, I think many, many analysts believe that it will be important—an important part of getting inflation down, especially in the nonhousing services sector, to getting wage inflation back to a level that is sustainable, that is consistent with 2 percent inflation. We actually have seen wages broadly move down but just at a quite gradual pace. So— and that’s, you know, that’s a little bit of the finding of the Bernanke paper with Blanchard of a few weeks ago, which is very consistent with, with what I, I would think.