Press conference exchange between CHRISTOPHER RUGABER and Fed Chair Jerome Powell:

user: Hi. Chris Rugaber at Associated Press. So consumer confidence in the economy is rising, likely in large part because of, of the declines in headline inflation. You also see wages are also rising faster than prices now after trailing them for a long time. How much are Americans truly harmed by inflation at its current level, headline level of 3 percent? And with that in mind, when do you put some weight back on the employment side of the dual mandate?

assistant: So I guess I’d say it this way: First, it is—it is a good thing that headline inflation has come down so much, because that’s really what the public experiences. And, and I would say that having headline inflation move down that much almost creates a—it will strengthen the broad sense that, that the public has that inflation is coming down, which will in turn, we hope, help inflation continue to move down. So you are really—sorry, your question was?

user: Well, I mean, you’ve talked for many press conferences now about the harm created by inflation, how hard it is for people. So how much of that are we still seeing with inflation now down at 3 percent?

assistant: So I guess I would put it this way. We, we—I’d say it this way: It’s really a question of, how do you balance the two risks, the risk of doing too much or doing too little? And, you know, I would say that, you know, we’re coming to a place where, where there really are risks on both sides. It’s hard to say exactly whether, whether they’re in balance or not, but as our—as our stance has become more restrictive and inflation moderates, we do increasingly face that risk. But, you know, we, we need to see that inflation is durably down that far, you know. As you know, we think, and most economists think, that core inflation is actually a better signal of, of where headline inflation is going, because headline inflation is affected greatly by volatile energy and food prices. So we would want core inflation to be coming down, because that’s what we think—that’s—core is signaling where headline is going to go in the future. And core inflation is still pretty elevated, you know? There’s reason to think it can come down now, but it’s, it’s still quite elevated, and so we think we need to stay on task, and we think we’re going to need to hold, certainly, hold policy at a restrictive level for some time. And we need to be prepared to raise further if that—if we think that’s appropriate.

user: Well, and then if inflation were to—just a quick followup: If it stays at 3 or drops even a little bit more, I mean, how much of an increase in unemployment do you think is acceptable to get that last bit of inflation? People are talking about the potential difficulty of the last, so-called last mile of inflation. So—but how much? Again, how much unemployment do you think is justified to get down that last one—

assistant: So it is—it is a very positive thing that, actually, the unemployment rate is the same as it was when we lifted off in March of ’22, at 3.6 percent. So that’s a real blessing in that we’ve been able to achieve some disinflation, and we don’t seek to it. It’s not that we’re aiming to, to raise unemployment, but I would just say, the historical record—we have to be honest about the historical record, which does suggest that when central banks go in and slow the economy to bring down inflation, the result tends to be some softening in labor market conditions. And so that is still the, the likely outcome here. And, you know, we hope ’s as little as possible, but we have to be honest is—that is the likely outcome. The worst outcome for everyone, of course, would be not to deal with inflation now, not get it done. Whatever the short-term social costs of getting inflation under control, the longer- term social costs of failing to do so are greater, and the historical record is very, very clear on that. If you go through a period where inflation expectations are not anchored, inflation is volatile, it interferes with people’s lives and with economic activity, and, you know, that’s the— that’s the thing we, we really need to avoid and will avoid.