Press conference exchange between MICHAEL MCKEE and Fed Chair Jerome Powell:

user: A question—I have a question that I was going to ask, but I need to follow up for a second on the questions about the markets and macroprudential, and that is, you have one tool you can use. Would you be discussing—have you discussed raising margin requirements under Regulation T? And, if not, why not?

assistant: No, we haven’t—we haven’t done that. I mean, remember, we’re, we’re focused on maximum employment, price stability, financial stability as I defined it—the broad financial sector. And, and that—that’s not, you know—over the years, we, we consult the fact that we have that authority. But, no, it’s not something we’re looking at right now at all.

user: All right. My follow-up question is, a lot of people in the markets think that you’re basically stuck right now, because you can’t really go lower with the zero bound, rejecting negative interest rates, and you can’t really go higher because of the threat of a taper tantrum. Is the Fed locked into a very narrow corridor now? And, if not, you did say you would signal any change in interest rates a long time ahead. But former New York Fed President Bill Dudley says there’s no way you can avoid a taper tantrum. So how do you do that?

assistant: Well, first, I—we, we think our policy stance is, is just right. We think it’s providing significant support for economic activity and hiring. We, you know, we, we adopted a new monetary policy framework of flexible average inflation targeting in August. In September, we, we implemented rate guidance that, that was consistent with and based on that new framework. In December, we did the same for asset purchases. So we now have, you know, strong guidance on, on rates and on asset purchases that’s providing very strong support for economic activity. If you look at the sectors of the economy that are interest sensitive, you will see very strong activity: housing, durable goods, automobile sales. So, you know, our, our policies are working. And we think that, that they are—we think our policy stance is, is right. That said, there’s clearly more that we can do. With asset purchases, for example, we can, you know—that’s, that’s a tool we can do more—we can strengthen our guidance, too, if we were to think were appropriate. What you see is an economy where what’s holding it back is not the lack of, of policy support from the Fed. It’s the pandemic. It’s, it’s the spread of the disease and people’s reluctance or, or inability to partake in certain kinds of economic activities, which amount to a, a meaningful part of the economy. So that’s, that’s what I would say. We certainly have things that we can do, but we think we’re—we think we’re in the right place. You know, in terms of—in terms of tapering, it’s just premature. We just created the, the guidance. We said we’d want to see substantial further progress toward our goals before we modify our, our asset purchase guidance. It’s just too early to be talking about dates, which we should be focused on, on progress. We’ll need to see actual progress. And when, when we see ourselves getting to that point, we’ll communicate clearly about it to, to the public so nobody will be surprised when the time comes. And we’ll do that well in advance of actually considering what will be a pretty gradual taper.

user: Well, if I might, you—your policies are working, and you can maybe do more. But the question is, can you stop doing it when it’s time?

assistant: Yes. So, you know, I, I was here—we had all the same questions back in—after the Global Financial Crisis. We raised interest rates. We froze the balance sheet size, and then we shrank the balance sheet size. So there’s no reason why we, we won’t be able to do that again. In fact, we learned a lot from that experience. And, you know, we, we understand—as we understood then, but even more so—we understand that the—that the way to do it is to communicate well in advance, to, to do predictable things, and to move gradually. And that’s, that’s what we’re going to do. We’re going to be very transparent. But, honestly, no—you know, the whole focus on exit is premature, if I may say. We’re focused on finishing the job we’re doing, which is to support the economy, to give the economy the support it needs. There are people out there who’ve lost their jobs. It’s essential that we get them back to work as quickly as possible, and we want to do everything we can to do that. And that is our primary focus right now. It’s, it’s, it’s too soon to be—to be worried about that. You know, when we come to exit, we have a—we have an understanding of how to do that, and we’ll do it very carefully. But in the meantime, our focus is on giving the economy the support it needs.