Press conference exchange between MICHAEL MCKEE and Fed Chair Jerome Powell:

user: of course you’ll be shocked to learn that you have some critics on Wall Street And I would like to paraphrase a couple of their criticisms and get your reaction to them One is that the new policy framework is that you react to actual data and do not react to forecasts yet the actual inflation data is coming in hot and you’re relying on the forecast that it will cool down in order to make policy I wanted to get your view on how you square that Another is that you have a long runway you’ve said for tapering with announcements But if the data keep coming in faster than expected are you trapped by fear of a taper tantrum from advancing the time period in which you announce a taper? And finally you’ve said the Fed knows how to combat inflation but raising rates also slows the economy And there’s a concern that you might be sacrificing the economy if you wait too long and have to raise rates too quickly

assistant: So that’s a—that’s a few questions there. So let me say, first, I think people misinterpret the framework. I think the—there’s nothing wrong with the framework, and there’s nothing in the framework that would in any way, you know, interfere with our ability to pursue our, our goals. That’s for starters. All of our discussions and all of our thinking and planning are taking place in the context of our new framework. We’re strongly committed to it, we think it’s well suited to our goals, including in this—in this unique time. And I think if you look at the—look at the forecasts that we’ve written down, you know, our Committee is solidly behind them. The forecasts are all consistent with that. You know, your specific question, I guess, was, will we be behind the curve? And, you know, that’s, that’s not the situation we’re facing at all. The situation that we, we addressed in our—in our Statement on Longer-Run Goals and Monetary Policy Strategy was a situation in which employment was at very high levels, but inflation was low. And what we said was, we wouldn’t raise interest rates just because unemployment was low and employment was high if there was no evidence of inflation or other troubling imbalances. So that’s what we said. That is not at all the current situation. In the current situation, we have many millions of people who are unemployed, and we have inflation running well above our target. The question we face with this inflation has nothing to do with our framework. It’s a very different, very difficult version of a standard investment—sorry, a central banking question. And that is, how do you separate in inflation—how do you separate things that, that follow from broad upward price pressures from things that really are a function of, of idiosyncratic factors in a particular—due to particular things? I mean, a classic example was, to pick a narrow example, was the cellphone price war back in 2017. If you remember, there was—prices were incredibly low, and it held down core PCE by three-tenths or something for a year, and then it fell out. So this is much bigger than that. And, of course, it’s not—it’s not easy to tell in real time which is which, but that’s, that’s the question you would face under, really, any framework. And, you know, we’re trying to sort that out. I’ve tried to, to explain that today about how we think about that. And, you know, we do think that these are temporary factors, and that they’ll wane. We can’t be absolutely certain about the timing of that, and we’re prepared to use our tools as appropriate. Your second one was? Oh, you know, we will—we will taper when we feel that the economy has achieved substantial further progress. And we will communicate very carefully in advance on that. And that’s what we’re doing. That’s what we’re going to do, and, and we will follow through on that. There’s no—I mean, we will do what we can to avoid a market reaction. But, ultimately, when we achieve our macroeconomic goal, we will—we will taper as appropriate. The third thing was—what was the third thing?

user: If you raise rates to control inflation you also slow the economy And the history of the Fed is that sometimes you go too far

assistant: That’s right. And we—look, we have to balance the two—the two goals: maximum employment and price stability. Often they are—they do pull in the same direction, of course. But when we—when we raise interest rates to control inflation, there’s no question that has an effect on activity. And that’s the channel—one of the channels through which we get to inflation. We don’t think that we’re in a situation like that right now. We think that the economy is recovering from a deep hole—an unusual hole, actually, because it’s to do with, with shutting down the economy. It turns out it’s a heck of a lot easier to create demand than it is to, you know, to bring supply back up to snuff. That’s happening all over the world. There’s no reason to think process will last indefinitely. But we’re going, you know, we’re going to watch carefully to make sure that, that evolving inflation and our understanding of what’s happening is, is, is right. And in the meantime, we’ll conduct policy appropriately.