Press conference exchange between EDWARD LAWRENCE and Fed Chair Jerome Powell:

user: Thanks, Chair Powell, for doing the questions. Edward Lawrence from Fox Business. So you say that we’re closer to the neutral rate. What percent do you see, and the Committee believes—where is that neutral rate?

assistant: So I’ll say a couple things. First of all, when we, when we write— the thing we write down in the Summary of Economic Projections is the longer-run neutral rate, which is the neutral rate at a time when supply and demand are in balance, the full economy’s in balance, and no shocks are hitting the economy. That is not where we are right now. So when we’re making monetary policy at the Fed, that’s not the question we’re asking. So you can’t do a straight read between those longer-run numbers that we write down and what we think the appropriate policy should be. So, basically, at any given time, various shocks are hitting the economy. And so what we’re doing in, in real time is we’re looking at our policy stance, and we’re looking at the way it’s hitting the economy, and, particularly, we look at the effects it’s having as we try to move the economy toward maximum employment and price stability. And the answer can be that there are things that affect the economy that are—that are lasting but not permanent. And the, the ones that are permanent are the ones that would be in r*. The ones that are, could be lasting, but, but nonetheless go away over time, they could actually affect what, what’s technically the appropriate neutral stance in near term. So we’re looking at that, and, you know, we don’t—we don’t know exactly where it is, but as I like to say, we know it by its works, and I think what, what we know for sure is that we’re 100 basis points closer to it right now. There are many estimates of where that might be, and we know we’re a lot closer to it, and I think we’re in a good place. But I think from here it’s a new phase, and we’re going to be, you know, cautious about, about further cuts.

user: But, but I think that the markets are looking for, for a little more clarity. I mean, I’ve heard estimates from 2.9 percent to 4 percent. You know, I, I think the markets would like to see a little more clarity about a year out, 18 months out, as to where that, that goalpost, for lack of a better term, is, because at the moment, it looks big.

assistant: Yeah, I mean, honestly, we—you know, there are countless models of what—of what a neutral rate might be at any given time. There, there are empirical models, there are theoretical models, there are things that combine them, and they have as many different answers as you’d like. So there is no real certainty. And, I mean, it’s, it’s actually a good thing to know that we don’t know exactly where it is, so you’re not—you’re not tempted to think, “Oh, I think this model or this estimate is right.” You, you just have to be open to, you know, the empirical data that are coming in and also how it’s affecting the outlook. And it’s not made any easier by the fact that, you know, that our policy works with long and variable lags. Nonetheless, that is the job we have, and so we’re, we’re— I think we need— it’s appropriate for us—for us now to proceed cautiously, now that we’re 100 basis points closer to, to neutral, and we’ll do so. Meanwhile, the economy seems to be in, in good shape, and these cuts will certainly help to support economic activity and the labor market while we can still make progress on inflation, because policy is still meaningfully restrictive.