Press conference exchange between MATTHEW BOESLER and Fed Chair Jerome Powell:

user: Hi, Chair Powell. Matthew Boesler with Bloomberg. So, as you just mentioned, the Committee is now projecting a ½ percentage point rise in the unemployment rate and the SEPs over the next couple of years, and it removed a line from its policy statement about thinking that the labor market can remain strong while it tightens policy. You just mentioned is still your objective, though, so I’m wondering if you could explain why that line was removed from the statement—also whether this means the FOMC is trying to induce a recession now to bring inflation down.

assistant: Not trying to induce a recession now. Let’s be clear about that. We’re trying to achieve 2 percent inflation consistent with a strong labor market. That’s what we’re trying to do. So let me talk about that sentence. Clearly, it’s our goal to bring about 2 percent inflation while keeping the labor market strong, right? And that’s what the SEP says. The SEP has inflation getting down to 2, a little above 2 percent in 2024, with unemployment at 4.1 percent. And this is a strong labor market—this is a good labor market. And, as I mentioned, there are pathways to do it. But those pathways have become much more challenging due to factors that are not under our control. Again, thinking here of the fallout from the war in Ukraine, which has brought a spike in prices of energy, food, fertilizer, industrial chemicals, and also just the supply chains more broadly, which have been larger and longer lasting than anticipated. So the sentence that we deleted said that we believe that appropriate monetary policy, effectively alone, can bring about the result of 2 percent inflation with a strong labor market. And so much of it is really not down to monetary policy. It just didn’t—the sentence isn’t—it says on its face that monetary policy alone can do this. And that’s not—that just didn’t seem appropriate, so we took the sentence out.

user: And given the new projections for the unemployment rate, could you talk a little bit about what accounts for such reduced confidence against, say, a month ago or three months ago that inflation will largely normalize on its own as these supply-side issues get worked out? Thanks.

assistant: Well, yeah, I think you’ve seen—again, we’ve been expecting progress, and we didn’t get that. We got the opposite. So I also think the situation, really—since the consequences of the Ukraine war become more and more clear, what you’re seeing is the situation getting more difficult. And you look around the world—I mean, lots of countries are—lots of countries are looking at inflation of 10 percent, and it’s largely due to commodities prices. But all over the world, you’re seeing these effects. And so—and we’re seeing them here: gas prices at all-time highs, and things like that. That’s not something we can do something about. So that is really—and, by the way, headline inflation, headline inflation is important for expectations. People—the public’s expectations, why would they be distinguishing between core inflation and headline inflation? Core inflation is something we on the Committee think about because it is a better predictor of future inflation. But headline inflation is what people experience. They don’t know what core is. Why would they? They have no reason to. So that’s—expectations are very much at risk due to high headline inflation. So it’s become—the environment has become more difficult, clearly, in the last four or five months, and hence the need for the policy actions that we took today. Hence our resolution to get rates up and, ultimately, get them to where we think they need to be in coming months.