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

user: Thanks. Howard Schneider with Reuters, and thanks for taking the questions. I, I wonder if you could give a little more color or detail on what—on what motivates the lower rates next year, whether it’s a coincidence, for example, that the spread between PCE inflation, core inflation, and the federal funds rate stays constant over the year. Are you simply calibrating against the fall in prices, in the price level that you’re expecting, in the rate of inflation that you’re expecting as opposed to supporting the economy?

assistant: Nothing quite that mechanical is happening. The SEP really is, is a bottoms-up—built from the bottom up, right? So I think people are looking at what’s happening in the economy. And I think if you look at the big difference from September in the SEP, it is that the expectations for inflation this year, both headline and core, have come down, you know, really significantly in three months. That’s a big piece of, of this. At the same time, real GDP growth has turned out to be very strong in the third quarter. Now it is slowing, we believe, as, as appropriate. And we’ve got—we’ve had several labor market reports, which suggest, again, significant progress toward greater balance across a very—a broad range of indicators. You’re seeing so many of the indicators coming back to normal, not all of them. But so I think that people look at that, and they write down their—basically, each individual writes down a forecast and a rate forecast that goes with that forecast. We tabulate them and, and publish it. And so it’s not—it isn’t—you ask about real rates, I take it?

user: It sounds like the discussion—if I could follow up—has, has already begun. I’m wondering, just related to, to Steve’s question, how the—how the tactics of this play out given the slowing of inflation and the fact that the deeper you get into 2024, the closer you get to a presidential election. Do you want to front-load this, in other words?

assistant: Yeah. No, we—we’re—we don’t think about political events. We don’t think about politics. We think about what’s the right thing to do for the economy. The minute we start thinking about those things—you know, we just can’t do that. We have to think, what’s the right thing? We’ll do the things that we think are right for the economy at the time we—when we think is the right time. That’s what we’ll always do. So I mentioned we’re moving carefully. One of the things we’re moving carefully about is that decision over—that assessment, really—over whether, whether we’ve done enough, really. And you see that people are not writing down rate hikes. That’s, that’s us thinking that we have done enough but not, not feeling that really strongly, confidently and not wanting to take the possibility of a rate hike off the table. Nonetheless, it’s not the base case anymore, obviously, as it was, you know, 60, 90 days ago. So that’s, that’s how we’re—that’s how we’re approaching things. And, and, you know, as I mentioned, we wrote down this SEP, and it talks about—people have individual assessments of when it will be appropriate to, you know, to start to dial back on, on the tight policy we have in place, and that’s a discussion we’ll be having going forward. But that’s another assessment that we’re going to make very carefully, so as time goes forward.