FOMC Press Conference - 2025-05-07
Central bank: fed | Type: press_conference | Date: 2025-05-07

May 7, 2025 Chair Powell’s Press Conference FINAL
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Transcript of Chair Powell’s Press Conference
May 7, 2025
CHAIR POWELL. Good afternoon. My colleagues and I remain squarely focused on
achieving our dual-mandate goals of maximum employment and stable prices for the benefit of
the American people. Despite heightened uncertainty, the economy is still in a solid position.
The unemployment rate remains low, and the labor market is at or near maximum employment.
Inflation has come down a great deal but has been running somewhat above our 2 percent longer-
run objective.
In support of our goals, today the Federal Open Market Committee decided to leave our
policy interest rate unchanged. The risks of higher unemployment and higher inflation appear to
have risen, and we believe that the current stance of monetary policy leaves us well positioned to
respond in a timely way to potential economic developments. I will have more to say about
monetary policy after briefly reviewing economic developments. [Cough] Pardon me.
Following growth of 2.5 percent last year, GDP was reported to have edged down in the
first quarter, reflecting swings in net exports that were likely driven by businesses bringing in
imports ahead of potential tariffs. This unusual swing complicated GDP measurement last
quarter. Private domestic final purchases, or PDFP—which excludes net exports, inventory
investment, and government spending—grew at a solid 3 percent rate in the first quarter, the
same as last year’s pace. Within PDFP, growth of consumer spending moderated while
investment in equipment and intangibles rebounded from weakness in the fourth quarter.
Surveys of households and businesses, however, report a sharp decline in sentiment and elevated
uncertainty about the economic outlook, largely reflecting trade policy concerns. It remains to
be seen how these developments might affect future spending and investment.
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In the labor market, conditions have remained solid. Payroll job gains averaged
155,000 per month over the past three months. The unemployment rate, at 4.2 percent, remains
low and has stayed in a narrow range for the past year. Wage growth has continued to moderate,
while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the
labor market are broadly in balance and consistent with maximum employment. The labor
market is not a source of significant inflationary pressures.
Inflation has eased significantly from its highs in mid-2022 but remains somewhat
elevated relative to our 2 percent longer-run goal. Total PCE prices rose 2.3 percent over the
12 months ending in March; excluding the volatile food and energy categories, core PCE prices
rose 2.6 percent. Near-term measures of inflation expectations have moved up, as reflected in
both market- and survey-based measures. Survey respondents, including consumers, businesses,
and professional forecasters, point to tariffs as the driving factor. Beyond the next year or so,
however, most measures of longer-term expectations remain consistent with our 2 percent
inflation goal.
Our monetary policy actions are guided by our dual mandate to promote maximum
employment and stable prices for the American people. At today’s meeting, the Committee
decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent and to
continue reducing the size of the balance sheet.
The new Administration is in the process of implementing substantial policy changes in
four distinct areas: trade, immigration, fiscal policy, and regulation. The tariff increases
announced so far have been significantly larger than anticipated. All of these policies are still
evolving, however, and their effects on the economy remain highly uncertain. As economic
conditions evolve, we’ll continue to determine the appropriate stance of monetary policy based
on the incoming data, the outlook, and the balance of risks.
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If the large increases in tariffs that have been announced are sustained, they are likely to
generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.
The effects on inflation could be short lived, reflecting a one-time shift in the price level. It is
also possible that the inflationary effects could instead be more persistent. Avoiding that
outcome will depend on the size of the tariffs’ effect—tariff effects, on how long it takes for
them to pass through fully into prices, and, ultimately, on keeping longer-term inflation
expectations well anchored.
Our obligation is to keep longer-term inflation expectations well anchored and to prevent
a one-time increase in the price level from becoming an ongoing inflation problem. As we act to
meet that obligation, we’ll balance our maximum-employment and price-stability mandates,
keeping in mind that, without price stability, we cannot achieve the long periods of strong labor
market conditions that benefit all Americans.
We may find ourselves in the challenging scenario in which our dual-mandate goals are
in tension. If that were to occur, we would consider how far the economy is from each goal, and
the potentially different time horizons over which those respective gaps would be anticipated to
close. For the time being, we’re well positioned to wait for greater clarity before considering any
adjustments to our policy stance.
At this meeting, the Committee continued its discussions as part of our five-year review
of our monetary policy framework. We focused on inflation dynamics and the implications for
our monetary policy strategy. Our review includes outreach and public events involving a wide
range of parties, including Fed Listens events around the country and a research conference next
week. Throughout this process, we’re open to new ideas and critical feedback, and we will take
on board lessons of the last five years in determining our findings. We intend to wrap up the
review by late summer.
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The Fed has been assigned two goals for monetary policy—maximum employment and
stable prices. We remain committed to supporting maximum employment, bringing inflation
sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored.
Our success in delivering on these goals matters to all Americans. We understand that our
actions affect communities, families, and businesses across the country. Everything we do is in
service to our public mission. We at the Fed will do everything we can to achieve our
maximum-employment and price-stability goals.
Thank you. I look forward to your questions.
MICHELLE SMITH. Steve.
STEVE LIESMAN. Steve Liesman, CNBC. Thank you, Mr. Chair, for taking my
question. A lot has happened since the last meeting. There have been tariffs put on, tariffs taken
off, and meanwhile, there was a bill advancing in Congress. And I just wonder if I could press
you on the last part of your statement. Are you any closer now to deciding which side of the
mandate is going to need urgent care first?
CHAIR POWELL. Well, so, as we noted in our—in our statement—postmeeting
statement, we’ve judged that the risks to higher employment and higher inflation have both risen.
And this, by the way, of course, is compared to March. So that’s what we can say. I don’t think
we can say, you know, which way this will shake out. I think there’s a great deal of uncertainty
about, for example, where tariff policies are going to, to settle out and also, when they do settle
out, what will be the implications for the economy for growth and for employment. I think it’s
too early to know that. So, I mean, ultimately, we think our policy rate is in—is in a good place
to stay as we await further clarity on tariffs and, ultimately, their implications for the economy.
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STEVE LIESMAN. Hearing you describe what you’re looking for in terms of being able
to make a decision, it sounded like that’s a long-term process before you sound like you’re going
to be comfortable, or the Committee would be comfortable, to act on what the data’s telling you.
CHAIR POWELL. I don’t think we know. You know, I think—look where we are
today. We have an economy that, if you “look through,” you know, the sort of distortions in Q1
GDP, you’ve still got an economy that looks like it’s growing at a solid pace. The labor market
appears to be solid. Inflation is running just a bit above 2 percent. So it’s an economy that’s
been resilient and is in good shape, and our policy is sort of modestly or moderately restrictive.
It’s 100 basis points less restrictive than it was last fall. And so we think that leaves us in a good
place to wait and see. We don’t think we need to be in a hurry. We think we can be patient.
We’re going to be watching the data. The data may move quickly or slowly, but we do think
we’re in a good position, where we are, to, to let things evolve and become clearer in terms of
what should be the monetary policy response.
MICHELLE SMITH. Nick.
NICK TIMIRAOS. Nick Timiraos for the Wall Street Journal. Chair Powell, there’s
naturally a lot of [inaudible] around 2021 in supply shocks. But there are some who argue that
the current situation has notable differences. Energy costs are down. Housing imbalances look
nothing like they did four years ago. Labor demand appears to be gradually cooling, with wage
growth running below 4 percent. What do you see right now that could nourish higher inflation
beyond a rise in goods prices this year?
CHAIR POWELL. I think the underlying inflation picture is, is good. It’s what you see,
which is inflation now running a bit above 2 percent. And we’ve had basically decent readings
in housing services and nonhousing services, which is a big part of it. So that part, I think is, is
moving along well.
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But there’s just so much that we don’t know. I think—and we’re in a good position to
wait and see, is the thing. We don’t have to be in a hurry. The economy is—has been resilient
and is doing fairly well. Our policy is well positioned. The costs of waiting to see further are
fairly low, we think. So that’s what we’re doing. And, you know, we’ll, we’ll see. The
Administration is entering into negotiations with many countries over tariffs. We’ll know more
with each week and month that goes by where—about where tariffs are going to land—you
know, land, and we’ll know what the effects will be when we start to see those things. So we
think we’ll be learning. I can’t tell you how long it will take. But, for now, it does seem like
it’s, it’s, it’s a fairly clear decision for us to wait and see and watch.
NICK TIMIRAOS. So when you say that you don’t need to be in a hurry, does that mean
that—could the outlook change in such a way that a change in your stance could be warranted as
soon as your next meeting?
CHAIR POWELL. You know, as I said, we’re—we are comfortable with our policy
stance. We think the right—we’re in the right place to wait and see how things evolve. We
don’t feel like we need to be in a hurry. We feel like it’s appropriate to be patient. And, you
know, when things develop—of course, we have a record of—we can move quickly when that’s
appropriate. But we think right now, the appropriate thing to do is to wait and see how things
evolve. There’s so much uncertainty. If you talk to businesses or market participants or
forecasters, everyone is just—is just waiting to see how developments play out, and then we’ll be
able to make a better assessment of what the appropriate path for monetary policy is. So we’re
not in that place, and, you know, as that develops—and I can’t really give you a time frame
MICHELLE SMITH. Jonnelle.
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JONNELLE MARTE. Jonnelle Marte with Bloomberg. So, many economists have been
pricing in higher odds of a recession, and several are noting that it is more difficult for the Fed to
cut rates preemptively, given the higher risks for higher inflation. So, given the outlook, do you
still see a path for a soft landing, and what does that look like?
CHAIR POWELL. Well, let me say—I mean, so let’s, let’s, let’s look back and see
where we are. So, go through 2024 up to the [present] day. We’ve had—we’ve had, you know,
unemployment in the low 4s for more than a year, we’ve had inflation coming down in the—now
in the mid-to-low 2s, and we’ve had an economy growing at 2½ percent. So that is—that is the
economy as we see it now. What looks likely, given the scope and scale of the tariffs, is that we
will see the—certainly, the risks to higher inflation, higher unemployment have increased. And
if that’s what we do see, if—and if the tariffs are ultimately put in place at those levels, which we
don’t know, then, then we will see—we won’t see further progress toward our goals, but we
might see a delay in that. I think in the—you know, in our thinking, we would get—we would
never—we never do anything but keep achieving those goals. But what we would—at least for
the next, let’s say, year, we would—we would not be making progress toward those goals, again,
if that is—if that’s the way the tariffs shake out. The thing is, we don’t know that. There’s so
much uncertainty about the scale, scope, timing, and persistence of the tariffs. So that’s that. In
terms of preemption, you know, I think you can look back at the 2019 cuts as preemptive. I
wouldn’t say that what we did last fall was at all preemptive. If anything, it was a little late. But
2019, we did cut three times. But the situation was, you had a weakening economy, and you had
inflation at 1.6 percent. So that’s a situation where you can move preemptively. Now we have
inflation running above target. It has been above target for four years. It’s not so far above
target now. And we have an expectation conditional on what happens that we’ll see upward
pressure on inflation. If you look at where forecasters are, they’re all forecasting an increase in
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inflation. So it makes it—and then we’ve also got, you know, forecasts of weakening in the
economy, and some have recession forecasts. We don’t make a—we don’t make—publish a
forecast about, about that. We don’t publish a forecast that assesses how likely a recession is.
But, in any case, it’s not a situation where we can be preemptive, because we actually don’t
know what the right response to, to the data will be until we see more data.
MICHELLE SMITH. Colby.
COLBY SMITH. Colby Smith with the New York Times. How much weakness does the
Committee need to see, though, in the labor market and the economy more broadly to lower
interest rates again? Is it about a certain increase in the unemployment rate over a period of
time, or perhaps a certain number of negative monthly job reports? I mean, how are you making
that assessment?
CHAIR POWELL. You know, so first of all, we don’t see that yet, right? We have
4.2 percent unemployment, good participation, wages behaving very well, participation, I
mentioned, at a good level. So, you know, with the labor market, we would look at the totality of
the—of the data. We’d look at the level of the unemployment rate. We’d look at the speed with
which it’s changing. We would look at the whole huge array of labor market data to, to get a
sense of whether conditions are really deteriorating or not. And, at the same time, we’d be
looking at the other side of the mandate. We could be in a position of having to balance those
two things, which is, of course, a very—a difficult balancing judgment that we’d have to make.
COLBY SMITH. On that point about balancing, I mean, you’ve mentioned that the
Committee would consider how far the economy is from each goal and the time it would take to
kind of get back to that point. But what does that mean in practice? I mean, how much of that
assessment will be rooted in a forecast, versus data dependence?
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CHAIR POWELL. It would be a combination of the two. I mean, let’s just say this is
a—this would be a complicated and challenging judgment that we would have to make if—and
this is—we’re not in this situation, but the situation is if the two goals are in tension. So let’s say
that unemployment is moving up in an uncomfortable way and so is inflation—not the situation
we’re in—hypothetically. But we would look at how far they are from the goals, how far they’re
expected to be from the goals, what’s the expected time to get back to their goals. We’d look at
all those things and make a difficult judgment. And that’s in our framework. It’s always been in
our thinking. You know, it’s—we haven’t had—we haven’t faced that question in a very long
time. And so, again, difficult, difficult judgment to make, and not one that we face today. And
we may never face it. But, you know, we have to be keeping it in our thinking now.
MICHELLE SMITH. Edward.
EDWARD LAWRENCE. Thank you. Edward Lawrence with Fox Business. So we had
the CPI report that came out that showed, month over month, the first increase in inflation in
about three years. The jobs report—you said “solid”—that we saw. At the same time, we have
those new tariffs that we’re living under. So, given this, should the Federal Reserve be cutting
rates at all this year?
CHAIR POWELL. You know, it’s going to depend. I think you have to just take a step
back and realize this is—this is why we are where we are, is, you know, we are going to need to
see how this evolves. There are cases in which it would be appropriate for us to cut rates this
year. There are cases in which it wouldn’t, and we just don’t know. Until we know more about
how this is going to settle out and what the economic implications are for employment, for—and
for, for inflation, I couldn’t confidently say that I know what the appropriate path will be.
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EDWARD LAWRENCE. So, following on that, just, you know—so then how does
President Trump calling on you personally as well as the Federal Reserve to make rate cuts affect
your decision today and affect your job difficulty?
CHAIR POWELL. Doesn’t affect our—doing our job at all. So we—you know, we’re
always going to do the same thing—which is, we’re going to use our tools to foster maximum
employment and price stability for the benefit of the American people. We’re always going to
consider only the economic data, the outlook, the balance of risks. And that’s it, that’s all we’re
going to consider. So it really doesn’t affect either our job or the way we do it.
MICHELLE SMITH. Howard.
HOWARD SCHNEIDER. Hi. Howard Schneider with Reuters, and thanks for the time.
I’m wondering—I mean, given the complexity about the first-quarter GDP and what lies ahead,
I’m just wondering what your intuition tells you about the underlying direction of the economy
right now. Many of your colleagues have said they feel growth is slowing. If so, do you have
any sense of by how much, to what degree the slowdown may be? What does your gut tell you
about how things are evolving out there?
CHAIR POWELL. My gut tells me that uncertainty about the path of the economy is
extremely elevated [laughter] and that the downside risks have increased. The risk is—as we
pointed out in our statement, the risks—the risks of higher unemployment and higher inflation
have risen, but they haven’t materialized yet. They really haven’t. They’re not, really not in the
data yet, so that—and that tells me more than by intuition because I think—I think it’s obvious,
actually, that the right thing for us to do is to—we’re in a good place. Our policy’s in a very
good place, and the right thing to do is, is await further clarity. And I—you know, there’s—
usually, things clarify, and that—the appropriate direction becomes clear. That’s what usually
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happens, right? Right now, it’s very hard to say what that would be. In the meantime, the
economy is doing fine. Our policy isn’t—you know, it’s not highly restrictive. It’s somewhat
restrictive. It’s 100 basis points less restrictive than it was in, you know, last summer. So we
think it’s—we think it’s in a good place, and we think the appropriate thing is for us to wait and
see and get more clarity about, about the direction of the economy.
HOWARD SCHNEIDER. Well, let me press you on this idea of the economy being fine
right now, because, reading the Beige Book very closely the last time around, there was a lot of,
you know, negative stuff, negative sentiment that was in there. And I know that everybody’s
looking at soft data right now. You mentioned it yourself—that the sentiment’s sour. But the
Beige Book was talking about, you know, the beginnings of layoffs in some industries, prices
rising in, in some places, and an awful lot of investment decisions being, being pushed to the
sideline. Doesn’t that point to a slowdown?
CHAIR POWELL. It may well. It just hasn’t shown up yet. And, and, you know, we all
look at all these sentiments and read many, many individual comments just to get a better feel.
And it—you know, businesses and households very broadly are concerned and, you know,
postponing economic decisions of various kinds. And, yes, if that continues and nothing,
nothing happens to sort of alleviate those concerns, then you would expect that to begin to show
up in economic data. It wouldn’t maybe show up overnight, but it would show up over weeks
and months. And that may be what happens, but it hasn’t happened yet. And also, there are
things that can happen that will—that will change that narrative. I mean, they haven’t happened,
but it’s possible to imagine things. But in the meantime, yes, we’re watching it extremely
carefully, like everyone is, but don’t see really much evidence of it in the actual economic data
yet. And by the way, consumers keep spending, credit card spending. It’s—you know, it’s
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still—it’s still a healthy economy, albeit one that is shrouded in some very downbeat sentiment
on the part of people and businesses.
HOWARD SCHNEIDER. Thank you.
MICHELLE SMITH. Michael McKee.
MICHAEL MCKEE. Michael McKee from Bloomberg Radio and Television. The
Fed’s been criticized recently by a former Governor for what he calls “mission creep”—you take
on more problems, use more tools, and then end up building tools to deal with the fallout of those
tools, which then makes it a given that you will act more aggressively in the future. Is that a fair
critique, and is that something you would be looking at in your framework review?
CHAIR POWELL. Sorry, say that critique again.
MICHAEL MCKEE. That the Fed has been involved in mission creep—gets involved in
using too many new tools to deal with problems and to go too far. Is that something that—the
critique was based around the fact that you did QE and QE and QE and—
CHAIR POWELL. Oh, okay. Sure.
MICHAEL MCKEE. —and went beyond the narrow confines of your mandate.
CHAIR POWELL. So—well, I mean, there are a couple—that’s not really beyond the
confines of our mandate. I—look, I would say this: We—you know, we did things—essentially,
we were on an emergency footing for a couple of years in the pandemic, and it’s very fair and
very welcome for people to look back over what we did and say, “Hey, you could have done this
better and different.” And one thing we hear a lot is, we could have explained the QE a little
better. We did think we were explaining it in real time. I completely accept the, the thought that
we could have explained it better. There’s a lot of thinking that we went on too long with QE. I
can tell you that the reason we did was, we were—we were concerned that we didn’t want a
tightening of—a sharp tightening in financial conditions at a time when we thought the economy
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was still vulnerable. And so we did hold on for a long time to QE. And we, of course, tapered
and everything. And then we immediately went into QT, and, you know, we’ve—we’re down a
couple of trillion. But I get the—that, you know, we, we certainly, with the benefit of hindsight,
could have tapered earlier or faster. That’s absolutely right. But this is all very welcome. You
know, it’s, it’s—you know, we knew, doing this in real time, that we weren’t going to get it
perfect. And those kind of—those kind of, you know, after-action kind of looks are essential.
And we’re doing the same thing in—you know, in our review, so—on some issues.
MICHAEL MCKEE. There—the other part of that critique is that you’ve taken on topics
that are outside of the mandate, such as climate change and trying to ensure that certain groups
are benefited by your economic policies in terms of employment, et cetera.
CHAIR POWELL. So, okay, on climate, you’ve heard me say over and over again that
we will not be climate policymakers and that our role on climate is a very, very narrow one. And
I think—I think that’s what we’ve done. We’ve done really very little on climate. You can say
that was—that little bit that we’ve done was too much. But I wouldn’t want to give any
impression that, that, you know, we take—that we’ve taken climate in and it’s something that
we’re spending a lot of time and energy on. We’re not. We have very, very narrow things. We
did one thing, one guidance for the banks, and then we did one—a one-time stress analysis,
climate stress analysis, and that’s it. And, you know, we dropped out of the Network for
Greening the Financial System. So we didn’t do much on climate, but—and I do think, and I’ve
said this publicly several times, I think it’s, it’s a real danger for us to try to take on a mandate
like that, which is very narrow application to our work. And, you know, the risk is, if you—if
you go for things that are really not on your mandate, you know, then why are you independent?
You know, I think that’s a very fair question. And I do think we’ve done a whole lot less on
climate than some people seem to think we did. Anyway, that’s what I think.
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MICHAEL MCKEE. Should you have taken on the question of bringing unemployment
rates down for specific categories?
CHAIR POWELL. We didn’t do that. You know, we said—what we said was that we
never targeted any unemployment rate for individual racial or demographic groups. What we
said was that maximum employment was a broad and inclusive goal. And I think what we meant
by that was, we’re going to consider the totality of the country as we look at our maximum-
employment goal. Of course, we were never going to target on any individual group with that,
but I think some people, you know, wanted to hear it that way. But that’s not at all what we
meant. But—so that’s just not a correct reading of our—but I can see how, you know, maybe
people found that confusing, and, you know, we have to take that into consideration.
MICHELLE SMITH. Jo Ling.
JO LING KENT. Hi, Chair Powell. Thanks for taking our questions today. I’m Jo Ling
Kent with CBS News. You’ve said, “Wait and see” and “The economy is doing fine” today.
But the impact of tariffs are already showing up at the ports. Businesses big and small are telling
us that they feel it, and most importantly, consumers say they feel it. But the challenges are here.
And there’s no waiting and seeing. For Main Street, what is the breaking point? What would
have to happen to prompt a rate cut specifically?
CHAIR POWELL. Well, you know, so we really don’t see in the data yet big economic
effects. We see—we see sentiment, their concerns that higher prices may be coming, or things
like that, but—so people, they’re worried now about inflation. They’re worried about, you
know, a shock from the tariffs. But they really haven’t—that shock hasn’t hit yet. Okay, so, you
know, we’re going to be looking at not just the sentiment data, but also the real economic data as
we assess what it is we should do. And remember, we’re—there will be two effects. One of
them would be weakening economy—weakening economic activity, which translates into higher
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unemployment, and the other would be potentially higher inflation. Again, to say it again, the
timing, the scope, the scale, and the persistence of those effects are very, very uncertain. So it’s
not at all clear what the appropriate response for monetary policy is at this time. And we’re—
you know—and by the way, our policy’s in a good place, so we think we can wait and move
when it is clear what the right thing to do is; really not at all clear what it is we should do. So
people are feeling stress and concern, but unemployment hasn’t gone up. Job creation is fine.
Wages are in good shape. You know, people are not—layoffs are—people are not getting laid
off at high levels. You know, initial claims for unemployment are not increasing, you know, in
any kind of impressive way. So the economy itself is still, you know, in solid shape.
JO LING KENT. Just a quick follow-up: President Trump now says he does not plan to
remove you as Chair. When you heard that, what did you think?
CHAIR POWELL. I don’t have anything more for you on that. I’ve pretty much
covered that issue. Thank you.
MICHELLE SMITH. Chris.
CHRISTOPHER RUGABER. Hi. Thank you. Chris Rugaber, Associated Press. Well, I
just wanted to follow up. Earlier, it sounded like you said it was unclear how the Fed—you
know, what kind of interest rate decisions you will make later this year. So does that—you
know, in March, there was guidance that two cuts might happen, you know, two cuts were
penciled in for this year. Is that now—that guidance from the last press conference, has that
been overtaken by events at this point?
CHAIR POWELL. You know, we don’t do a Summary of Economic Projections at
every meeting, as you know. We do it every other meeting. And so this was the meeting when
we didn’t do it. And I—you know, we don’t also kind of poll people, so I really—I really
wouldn’t want to try to make a specific projection for where we are relative to that. We will—in
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six weeks, we have the June meeting, and you’ll have another SEP. I’m not going to hazard a
guess here today what—as to what it would be. Again, what I would say is that we think our
policy rate is in a good place. We think it leaves us well positioned to respond in a timely way to
potential developments. That’s where we are, and that—depending on the way things play out,
that could include rate hikes—sorry, rate cuts. You know, it could include us holding where we
are. We just are going to need to see, you know, how things play out before we make those
decisions.
CHRISTOPHER RUGABER. Great. And just to follow up on that, I mean, when you
address the issue of how the Fed would handle both rising unemployment and rising inflation,
how are you thinking about the fact that addressing one could exacerbate the other? So a rate cut
to reduce unemployment could worsen inflation, and vice versa. How does that—how do you
handle those challenges?
CHAIR POWELL. Well, you just captured the—this is the issue with the two goals
being in tension. It’s a very challenging question. Now, there can be a case in which one goal is
very far—one variable’s very far from its goal, much farther than the other. And if so, you
concentrate on that one. And, frankly, that was the case—well, it wasn’t a case where they were
really in tension. But if you go back to 2022, it was very clear that we needed to focus on
inflation. The labor market was also super tight, so it wasn’t really a tradeoff. You know, if—I
think you know what our—what our framework document says. It says we’ll look at how far
each goal—each variable is from its goal and also we’ll factor in the time it would take to get
there. So, you know, that’s going to be a—potentially, a very difficult judgment. But the data
could break in a way that it’s not. You know, I just don’t think we know that. The data could
easily favor one or the other. And right now, there’s no way to—no need to make a choice and
no real basis for doing so.
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MICHELLE SMITH. Victoria.
VICTORIA GUIDA. Hi. Victoria Guida with Politico. I wanted to ask, Congress is
currently debating spending cuts alongside expending—extending the tax cuts. And I know
you’ve talked many times about how the path of the debt is unsustainable. But given that we’re
also talking right now about the economy slowing, potentially even recession, I was just
wondering, is there a danger that spending cuts now could slow growth a lot more?
CHAIR POWELL. You know, we don’t give Congress fiscal advice. I—they’re going
to do—we take what they do as a given, and we put it in our models and in our assessment of the
economy, so I wouldn’t want to, you know, speculate on that. I mean, I think we do know that
the debt is on an unsustainable level—on an unsustainable path—not on an unsustainable level,
but an unsustainable path. And it’s on Congress to figure out how to get us back on a sustainable
path, and, you know, it’s not up to us to give them advice.
VICTORIA GUIDA. Well, do you think that they should take macroeconomic
conditions into account as they look at this?
CHAIR POWELL. I think they don’t need my advice and our advice on how to do fiscal
policy any more than we need their advice on monetary policy. [Laughter]
MICHELLE SMITH. Andrew.
ANDREW ACKERMAN. Thanks, Mr. Chairman. Andrew Ackerman with the
Washington Post. In your Jackson Hole comments last year, you said you would not welcome
further cooling in labor market conditions. The unemployment rate then was 4.2 percent, which
is what it is now. Forecasters—many forecasters now predict a higher jobless rate. How has
your tolerance for weakening labor market conditions changed compared to a year ago?
CHAIR POWELL. So it was quite a different situation. What was happening last year is
that over the space of six, eight, seven months, the unemployment rate went up by almost a full
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percentage point, and it was click, click, click, click, click each month. And, you know,
everywhere, people were talking about downside risks to the labor market. At the same time,
payroll job numbers were getting softer and softer. So there was a really obvious concern about
downside risk to the labor market. And so at Jackson Hole and then in September, you know, we
wanted to address that forthrightly. We wanted to show that we were there for the—I mean, we
had been there for inflation for a couple of years, and we wanted to show also that we’re there
for the labor market. And it was important that we send that signal. Fortunately, since then, the
labor market has really—and the unemployment rate have really been moving sideways at a level
that is, you know, well in the range of mainstream estimates of maximum employment. So that
concern has gotten a lot less. So, you know, you’re at 4.2 percent unemployment. I think we
were in a very different situation. And now we have a situation where, you know, the risks to
higher inflation and higher unemployment have both gone up, as we noted in our statement, and
we’ve got to monitor both of those. We actually have a potential situation where there may be a
tradeoff or tension between the two potentially. We don’t have it yet, and we may not have it,
but that’s what we [may] have, and that’s why I think it’s a very different, different situation.
ANDREW ACKERMAN. I, I mean, I guess I want to follow up by asking how much of
a rise in the jobless rate you would—you could tolerate.
CHAIR POWELL. I can’t give you a—you know, a—I’m not going to try to give you a
specific number. I’ll just say, we’ve got—we have to now be looking at both variables and
which of them is, is, you know, demanding—if one of them is demanding our focus more than
the other, that would tell us what to do with policy. If they’re more or less this, you know,
equally distant and equally—or not distant, then we don’t have to make that assessment. You
know, the assessment is, you wait. So I’m not going to try to be really specific about what we
need to see in terms of the number. But if—look, if we did see, you know, significant
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deterioration in the labor market, of course that’s one of our two variables, and we would look to
be able to support that. You’d hope that it wasn’t also coming at a time when inflation was
getting very bad. And, again, we’re speculating here. We don’t know this. We don’t know any
of these things. It’s very hypothetical. We’re just going to have to wait and see how the—how it
plays out.
ANDREW ACKERMAN. Thanks.
MICHELLE SMITH. Claire.
CLAIRE JONES. Claire Jones, Financial Times. In terms of getting some clarity, we’ve
got some talks at the weekend in Geneva between the U.S. and China. A lot of economists are
ask—are attaching an awful lot of importance to how—what we hear from those talks. How
much importance are you attaching to them in terms of judging what will happen to the U.S.
economy going forward? And just in a similar vein, you know, some economists are saying it’s
days, not weeks, that we have until we start to put the U.S. economy at risk of seeing a sort of
pandemic here, with shortages and higher prices, if we don’t kind of soothe relations between the
U.S. and China. So it would be good to have your view on that, too.
CHAIR POWELL. So, you know, these are not talks that we’re in any way involved in,
so I really can’t comment directly on them. So—but what I will say is this: You know, we
had—coming out of the March meeting, we, we—the public generally had an assessment of
where tariffs were going. And then April 2 happened, and it was really substantially larger than
anticipated in the forecasts that I’ve seen and in our forecast. So—and now we—and now we
have a different—we’re in a new phase where—it seems to be we’re entering a new phase where
the Administration is entering into beginning talks with a number of our important trading
partners. And that’s—that has the potential to change the picture materially or not. And so I
think it’s going to be very important how that shakes out. But I—you know, we simply have to
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wait and see how it works out. It certainly could change the picture, and we’re mindful of not
trying to make conclusive judgments about what will happen at a time when the—you know,
when the facts are changing.
CLAIRE JONES. And just on the fall in shipping volumes from China over these
tensions, I mean, do you share that concern that we could start seeing goods shortages and higher
prices in the coming weeks if this isn’t resolved very quickly?
CHAIR POWELL. You know, I don’t want to get my—we’re not—we shouldn’t be
involved, even verbally, in questions about the timing of these things. Yes, we’re—of course,
we follow all that data. We see the shipping data. We see all that. But, ultimately, this is for the
Administration to do. This is—you know, this is their mandate, not ours. And I know they’re—
as you can see, they’re, again, having—beginning to have talks with many nations. And that has
the potential to change the picture materially, so we’ll just have to wait and see.
MICHELLE SMITH. Kosuke.
KOSUKE TAKAMI. Kosuke Takami with Nikkei. Thank you for doing this. The
volume of imported goods increased significantly in the first quarter. Do you think the decision
could cause a delay in the impact of tariff on inflation, and does this mean that it will take a
longer time to reduce uncertainty?
CHAIR POWELL. The decision we made today? Which decision?
KOSUKE TAKAMI. So the future decisions. So the volume of imports—
CHAIR POWELL. Yes.
KOSUKE TAKAMI. —imported goods has increased significantly. So the impact of the
imported inflation may delay. So, what is the impact to your future decision?
CHAIR POWELL. Okay, so, I mean, I think we—I think we think that the—you know,
there was a big spike in imports—right?—very big, historically large, really, and—to beat tariffs.
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And now that should actually reverse so that it’s—you know, it’s the difference between—it’s
exports minus imports, so—and imports were huge, and so then it conveyed a very negative
contribution to U.S. GDP—annualized GDP in the first quarter, as we all know. So that could, in
the second quarter, be reversed so that we have, you know, an unusually large contribution to—
unusually positive. That’s very likely as imports drop sharply. You could also have—you know,
very likely you’ll have restatements of the—of the first quarter. It’ll turn out that consumer
spending was higher. It will turn out that inventories were higher. And so you’ll see—you’ll see
those data revised up. It may actually go into the third quarter, too. And so I think it’s going—
this whole process is going to, a little bit, make it harder to make a clean assessment of U.S.
demand. I mentioned private domestic final purchases, which doesn’t have inventories,
government, or—inventories, government. Anyway, it’s a cleaner read on private demand. But
that, that, too, probably was flattered a little bit by—you know, by strong demand for imports to
be tariffed. So that might overstate. It’s a really good reading, 3 percent PDFP in the first
quarter. That might actually overstate. So it’s not really going to—I don’t think it’s going to
affect our decisions. I will just say, though, that it’s a little confusing and it’s probably less
confusing to us than it would be to the general public as we try to explain this. You know, it’s
complicated, and, you know, GDP is sending a signal. PDFP is sending a signal. It’s a little bit
confusing. But I think we understand what’s going, and it’s not really going to change things
MICHELLE SMITH. Courtenay.
COURTENAY BROWN. Thank you. Courtenay Brown from Axios. I guess, you
know, we talked about some of the indications of potential layoffs, price hikes, an economic
slowdown all being evident in the soft data. I’m curious why the Fed needs to wait for that to
translate into hard data to, you know, make any type of monetary policy decision, especially if
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the hard data is not as timely or might be warped by tariff-related effects. Are you worried that
the soft data might be some sort of false warning?
CHAIR POWELL. No. I mean, it’s—look, the—look at the state of the economies. The
labor market is solid. Inflation is low. We can afford to be patient as things unfold. There’s no
real cost to our waiting at this point. Also, the sense of it—the sense of it is, we’re not sure what
the right thing will be. You know, there should be some increase in inflation. There should be
some increase in unemployment. Those call for different responses. And so until we know—
potentially call for different responses—and so, you know, until we know more, we have the
ability to wait and see. And it seems to be a pretty clear decision. Everyone on the Committee
supported waiting. And so that’s why we’re waiting.
COURTENAY BROWN. Just a very quick follow-up: There was this sort of vibe
session, if you will, where the sentiments expressed in soft data did not translate into the hard
economic data. Are you—how are you thinking about that when interpreting some of the signs
in the softer survey data?
CHAIR POWELL. You know, I think, going back a number of years, the link between
sentiment data and consumer spending has been weak. It’s not been a strong link at all. On the
other hand, we haven’t had a move of this, you know, speed and size. So it wouldn’t be the case
that we’re looking at this and just completely dismissing it. But it’s another reason to wait and
see. You’re right that we had a couple of years during the pandemic where people were
saying—just very downbeat surveys and going out and spending money. So that can happen,
and that may happen to some degree here. We just don’t know. This is an outsized change in
sentiment, though, and so none of us are looking at this and saying that we’re sure one way or
the other. We’re not.
MICHELLE SMITH. Matt.
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MATT EGAN. Thanks, Chair Powell. Matt Egan with CNN. So you mentioned earlier
that you’re monitoring the shipping data. And we have seen in the shipping data that imports
from China into the Port of Los Angeles have plunged. And that has raised concerns about
potential shortages. What tools, if any, does the Fed have to ensure that prices and inflation
expectations don’t get out of hand if tariffs do cause significant supply chain disruptions?
CHAIR POWELL. I mean, we don’t have, you know, the kind of tools that are good at
dealing with supply chain problems. We don’t have that at all. That’s a—that’s a job for the
Administration and for the private sector more than anything. You know, what we can do with
our interest rate tool is, we can support—be more or less supportive of demand. And that’s—
that’d be a very inefficient way to try to fix supply chain problems. But, you know, we don’t
see—we don’t see the inflation yet. We’re, of course, reading the same stories and watching the
same data as everybody else. And, you know, right now, we see inflation, you know, kind of
moving sideways at a fairly low level.
MATT EGAN. If I could follow up on that, President Trump has indicated that he will
likely name a replacement for you when your term as Chair expires next year. But your position
on the Board runs through January 2028, I believe. Would you consider remaining on the Fed
Board even if you’re no longer Chair?
CHAIR POWELL. So I don’t have anything for you on that. My whole focus is on—
and my colleagues’ focus is all on, you know, trying to navigate this tricky passage we’re in right
now, trying to make the right decisions. You know, we want to make the best decisions for the
people that we serve. That’s what we think about day and night. And this is a challenging
situation, and that’s, that’s 100 percent of our focus right now.
MICHELLE SMITH. Let’s go to Jennifer for the last question.
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JENNIFER SCHONBERGER. Thank you so much, Chair Powell. Jennifer Schonberger
with Yahoo Finance. Public records of your schedule so far this year show no meetings with
President Trump. Past Presidents Obama, Bush, and Clinton have all met with Fed Chairs. And
you met with Trump during his first term. Why haven’t you asked for a meeting yet with the
President?
CHAIR POWELL. I’ve never asked for a meeting with any President, and I never will.
It’s not—I wouldn’t do that. There’s never a reason for me to ask for a meeting. It’s always
been the other way.
JENNIFER SCHONBERGER. So would you want to meet with him if given the
opportunity—
CHAIR POWELL. I never—
JENNIFER SCHONBERGER. —to get more information?
CHAIR POWELL. I never—it’s never an initiative that I take. It’s always an
initiative—I—you know, I don’t think it’s up to a Fed Chair to seek a meeting with the
President, although maybe some have done so. I’ve never done so, and I can’t imagine myself
doing that. It’s—I think it’s always—comes the other way: A President wants to meet with you.
But that hasn’t happened.
JENNIFER SCHONBERGER. And if I could just ask one question on monetary policy,
when it is time to cut rates, how will you determine how far down rates will have to come to try
to keep a balance on the inflation mandate as employment weakens?
CHAIR POWELL. You know, I think once you have a direction—a clear direction, you
can make a—we can make a judgment about how fast to move and that kind of thing. So it’s—
really, the harder question is the timing, I think, and when will that become clear? And,
fortunately, as I mentioned, we have our policy in a good place, the economy’s in a good place,
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and it’s really appropriate, we think, for us to be patient and wait for things to unfold as we get
more clarity about what we should do.
Thanks very much.