Press conference exchange between HOWARD SCHNEIDER and Fed Chair Jerome Powell:

user: Howard Schneider with Reuters. Thank you, Chair Powell, for doing this. To what—you referenced the rise in long-term bond yields—to what degree did that supplant action by the Fed at this meeting?

assistant: Thanks for your question. So, I’ll talk about bond yields, but I want to take a second and just set the broader context in which we’re looking at that. So, if you—if you look at the situation—let’s look at the economy first. Inflation has been coming down, but it’s still running well above our 2 percent target. The labor market has been rebalancing, but it’s still very tight by many measures. GDP growth has been strong, although many forecasters are forecasting, and they have been forecasting, that it will slow. As for the Committee, we are committed to achieving a stance of monetary policy that’s sufficiently restrictive to bring inflation down to 2 percent over time, and we’re not confident yet that we have achieved such a stance. So that is the broader context into which this, this strong economy and all the things I said—that’s the context in which we’re looking at this question of rates. So, obviously we’re monitoring, we’re attentive to the increase in longer-term yields and—which have contributed to a tightening of broader financial conditions since the summer. As I mentioned, persistent changes in broader financial conditions can have implications for the path of monetary policy. In this case, the tighter financial conditions we’re seeing—coming from higher long-term rates, but also from other sources, like the stronger dollar and lower equity prices—could matter for future rate decisions, as long as two conditions are satisfied. The first is that the tighter conditions would need to be persistent. And that is something that remains to be seen. But that’s critical. Things are fluctuating back and forth—that’s not what we’re looking for. With financial conditions, we’re looking for persistent changes that are material. The second thing is that, that the longer-term rates that have moved up—they can’t simply be a reflection of, of expected policy moves from us that we would then—that if we didn’t follow through on them, then the rates would come back down. So, and I would say on that, it does not appear that an expectation of higher near-term policy rates is causing the increase in longer-term rates. So, in the meantime, though, perhaps the most important thing is that these higher Treasury yields are showing through to higher borrowing costs for households and businesses and those higher costs are going to weigh on economic activity to the extent this tightening persists and the mind’s eye goes to the 8 percent—near 8 percent mortgage rate, which could have pretty significant effect on housing. So that’s how I would answer your question.

user: Just as a quick follow-on, to be clear on this: In your opening statement just now, you seemed to imply that you are not yet confident that financial conditions are restrictive enough to finish the fight. Is that true?

assistant: Yes. That’s exactly right. You know, to say it a different way: We haven’t made any decisions about, about future meetings. We have not made a determination, and we’re not—I will say that we’re not confident at this time that we’ve reached such a stance. We’re not confident that we haven’t; we’re not confident that we have. And that’s—that is—the way we’re going to be going into these future meetings is to be, you know, just determining the extent of any additional further policy tightening that may be appropriate to return inflation to 2 percent over time.