Press conference exchange between COLBY SMITH and Fed Chair Jerome Powell:

user: Thank you. Colby Smith with the Financial Times. What makes the Committee inclined to think that the fed funds rate at this level is not yet sufficiently restrictive, especially when officials are forecasting a slightly more benign inflation outlook for this year? There’s noted uncertainty about policy lags. Headwinds have emerged from the looming government shutdown, the end of federal childcare funding, resumption of student debt payments—things of that nature.

assistant: So I guess I would characterize the, the situation a little bit differently. So we decided to maintain the target range for the federal funds rate where it is—at 5¼ to 5½ percent—while continuing to reduce our securities holdings. And we say we’re committed to achieving and sustaining a stance of monetary policy that’s sufficiently restrictive to bring down inflation to 2 percent over time—we said that. But the fact that we decided to maintain the policy rate at this meeting doesn’t mean that we’ve decided that we have or have not at this time reached that—that stance of monetary policy that we’re seeking. If you looked at the SEP, as you—as you obviously will have done, you will see that a majority of participants believe that it is more likely than not that we will—that it will be appropriate for us to raise rates one more time in the two remaining meetings this year. Others believe that we have already reached that. So it’s, it’s something where we’re—by, by—we’re not making a decision by, by deciding to—about that question by deciding to just maintain the rate and await further data.

user: So, right now, it’s still an open question about “sufficiently restrictive”—you’re not saying today that we’ve reached this level?

assistant: We’re not saying—yeah, no, no—clearly, we’re just—what we decided to do is maintain a policy rate and await further data. We want to see convincing evidence, really, that we have reached the appropriate level, and then, you know, we’re— we’ve—we’ve seen progress, and, and we welcome that. But, you know, we need to see more progress before we’ll be willing to—to reach that conclusion.

user: And just on the 2024 projections—what’s behind that shallower path for interest rate cuts and the need for real rates to be 50 basis points higher?

assistant: Right. So I would say it this way: First of all, interest rates—real interest rates are, are positive now. They’re meaningfully positive, and that’s a good thing. We need policy to be restrictive so that we can get inflation down to target. Okay. And we need— we’re going to need that to remain to be the case for some time. So I think, you know— remember that the—of course, the SEP is not a plan that is negotiated or discussed, really, as a plan. It’s a cumulation, really, and what you see are the medians. It’s a cumulation of individual forecasts from 19 people, and then what you’re seeing are the medians. So I wouldn’t want to, you know, bestow upon it the idea that, that it’s really a plan. But what it reflects, though, is that economic activity’s been stronger than we expected—stronger than I think everyone expected. And, and so what you’re—what you’re seeing is, this is what people believe, as of now, will be appropriate to achieve what we’re looking to achieve, which is progress toward our—toward our inflation goal, as you see in the SEP.