Press conference exchange between STEVE LIESMAN and Fed Chair Jerome Powell:

user: Steve Liesman, CNBC. Thank you for taking my question, Mr. Chairman. You have not used the phrase in a long time “monetary policy is in a good place,” which is a phrase that you used to use often. Now that the Committee is projecting 4 percent on a—or 3.8 percent next year in terms of the funds rate, which is similar to where the market is now, the futures market of 4 percent funds rate next year, do you think that’s a level that is going to be sufficiently high enough to deal with and bring down the inflation problem? And just as a follow-up, could you break that apart for me? How much of that is restrictive, and how much of that is a normal positive rate that ought to be embedded or not, in your opinion, in the funds rate? Thank you.

assistant: Sure. So the question really is, how high does the rate really need to go? And this is—the estimates on the Committee are in that range of 3½ to 4 percent. And how do you think about that? Well, you can think about the longer-run neutral rate, you can compare it to that, and we think that’s in the mid-2s. You can look, frankly, at broader financial conditions. You can look at asset prices, you can look at the effect they’re having on the economy, rates, asset prices, credit spreads—all of those things go into that. You can also look at the yield curve and ask, all along the yield curve, where is the policy rate? So for much of the yield curve now, real rates are positive. That’s not true at the short end. At the short end of the yield curve in the early years, you don’t have real—you have negative rates still. So that really is one data point—it’s one part of financial conditions. So I think—I have to look at it this way: We move the policy rate. That affects financial conditions. And that affects the economy. We have, of course, ways—rigorous ways to think about it, but, ultimately, it comes down to, do we think financial conditions are in a place where they’re having the desired effect on the economy? And that desired affect is, we’d like to see demand moderating. Demand is very hot still in the economy. We’d like to see the labor market getting better in balance between supply and demand, and that can happen as a result of developments coming both from supply and demand. Right now, there’s—demand is substantially higher than available supply, though, so we feel that there’s a role for us in moderating demand. Those are the things we can affect with our policy tools. There are many things we can’t affect, and those would be, you know, the things—the commodity price issues that we’re having around the world due to the war in Ukraine and the fallout from that, and also just all of the supply-side things that are still pushing upward on inflation. So that’s really how I think—how I think about it.

user: But does 3.8 percent, 4 percent get it done? Does it get the job done on breaking the back of inflation?

assistant: I think it’s certainly in the range of plausible numbers. I think we’ll know when we get there really. I mean, honestly, though, that would be—you would have positive real rates, I think, and inflation coming down by then. I think you’d have positive real rates across the yield curve. I think that the neutral rate is pretty low these days. So I would think it would, but what? We’re going to find that out empirically. We’re not going to be completely model driven about this. We’re going to be looking at this, keeping our eyes open, and reacting to incoming data both on financial conditions and on what’s happening in the economy.