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

user: Thanks. Howard Schneider with Reuters. So, among your colleagues, there have been people who’ve said they feel that very little transmission has taken place so far from monetary policy into the economy, and there are those who feel, they say, it’s happened very fast this time, and it’s up to date. Where are you on that continuum?

assistant: So there’s a long-running debate about the lags between changes in financial conditions and the response to those changes from economic activity and inflation, right? So we know that in the modern era, financial conditions move in anticipation of our decisions, and that has clearly been the case in this cycle. So, in a sense, the clock starts earlier than it—than it used to. But that doesn’t necessarily change the process from that point on, and it’s not clear that it has. We also—this is—I’ll tell you what we know and then what we don’t know. We know that financial conditions affect economic activity and inflation with a lag that can be long and variable, or lags, plural, that can be long and variable—a lot of uncertainty around the length of the lags. And, by the way, that’s just one component of the broader uncertainty that we face. So I’ll tell you how I—how I think about this. First, the first thing to say is, we’re determined to bring inflation down to 2 percent over time, and we will use our tools to do that. No one should doubt that. I would look at it this way, though. The real federal funds rate is now in meaningfully positive territory. If you take the nominal federal funds rate, subtract the mainstream estimate of near-term inflation expectations, you get a real federal funds rate that is well above most estimates of the longer-term neutral rate. So I would say, monetary policy is restrictive, more so after today’s decision, meaning that it is putting downward pressure on economic activity and inflation. We’ll keep monetary policy restrictive until we think it’s not appropriate to do so. So that’s how I think about it. I mean, if I sum it up, I would say: We’ve come a long way. We are resolutely committed to returning inflation to our 2 percent goal over time. Inflation has proved, repeatedly, has proved stronger than we and other forecasts—forecasters have expected, and at some point, that may change. We have to be ready to follow the data, and given how far we’ve come, we can afford to be a little patient, as well as resolute, as we let this unfold.

user: On the—on the credit side, I’m wondering if you saw anything in the—in the latest SLOOS data that made you think you’re getting a quantum of credit contraction beyond what you’d expect. The bank lending data really is—the growth rate’s edging down towards below, heading below zero, which is usually, you know, a recession indicator.

assistant: So I guess that the SLOOS will come out early next week, and I would just say it’s broadly condition—consistent with what you would expect. You’ve got lending conditions tight and getting a little tighter. You’ve got weak demand, and, you know, it, it gives a picture of pretty tight credit conditions in the economy. I think it’s really hard to tease out whether—how much of that is from this source or that source, but I think what matters is, the overall picture is of tight and tightening lending conditions. And that’s, that’s what the SLOOS will say.