For release on delivery
9:30 a.m. EDT
June 22, 2022
Statement by
Jerome H. Powell
Chair
Board of Governors of the Federal Reserve System
before the
Committee on Banking, Housing, and Urban Affairs
U.S. Senate
June 22, 2022
Chairman Brown, Ranking Member Toomey, and other members of the Committee, I
appreciate the opportunity to present the Federal Reserve's semiannual Monetary Policy Report.
I will begin with one overarching message. At the Fed, we understand the hardship high
inflation is causing. We are strongly committed to bringing inflation back down, and we are
moving expeditiously to do so. We have both the tools we need and the resolve it will take to
restore price stability on behalf of American families and businesses. It is essential that we bring
inflation down if we are to have a sustained period of strong labor market conditions that benefit
all.
I will review the current economic situation before turning to monetary policy.
Current Economic Situation and Outlook
Inflation remains well above our longer-run goal of 2 percent. Over the 12 months
ending in April, total PCE (personal consumption expenditures) prices rose 6.3 percent;
excluding the volatile food and energy categories, core PCE prices rose 4.9 percent. The
available data for May suggest the core measure likely held at that pace or eased slightly last
month. Aggregate demand is strong, supply constraints have been larger and longer lasting than
anticipated, and price pressures have spread to a broad range of goods and services. The surge in
prices of crude oil and other commodities that resulted from Russia's invasion of Ukraine is
boosting prices for gasoline and fuel and is creating additional upward pressure on inflation.
And COVID-19-related lockdowns in China are likely to exacerbate ongoing supply chain
disruptions. Over the past year, inflation also increased rapidly in many foreign economies, as
discussed in a box in the June Monetary Policy Report.
Overall economic activity edged down in the first quarter, as unusually sharp swings in
inventories and net exports more than offset continued strong underlying demand. Recent
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indicators suggest that real gross domestic product growth has picked up this quarter, with
consumption spending remaining strong. In contrast, growth in business fixed investment
appears to be slowing, and activity in the housing sector looks to be softening, in part reflecting
higher mortgage rates. The tightening in financial conditions that we have seen in recent months
should continue to temper growth and help bring demand into better balance with supply.
The labor market has remained extremely tight, with the unemployment rate near a
50-year low, job vacancies at historical highs, and wage growth elevated. Over the past three
months, employment rose by an average of 408,000 jobs per month, down from the average pace
seen earlier in the year but still robust. Improvements in labor market conditions have been
widespread, including for workers at the lower end of the wage distribution as well as for
African Americans and Hispanics. A box in the June Monetary Policy Report discusses
developments in employment and earnings across all major demographic groups. Labor demand
is very strong, while labor supply remains subdued, with the labor force participation rate little
changed since January.
Monetary Policy
The Fed's monetary policy actions are guided by our mandate to promote maximum
employment and stable prices for the American people. My colleagues and I are acutely aware
that high inflation imposes significant hardship, especially on those least able to meet the higher
costs of essentials like food, housing, and transportation. We are highly attentive to the risks
high inflation poses to both sides of our mandate, and we are strongly committed to returning
inflation to our 2 percent objective.
Against the backdrop of the rapidly evolving economic environment, our policy has been
adapting, and it will continue to do so. With inflation well above our longer-run goal of 2
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percent and an extremely tight labor market, we raised the target range for the federal funds rate
at each of our past three meetings, resulting in a 1-1/2 percentage point increase in the target
range so far this year. The Committee reiterated that it anticipates that ongoing increases in the
target range will be appropriate. In May, we announced plans for reducing the size of our
balance sheet and, shortly thereafter, began the process of significantly reducing our securities
holdings. Financial conditions have been tightening since last fall and have now tightened
significantly, reflecting both policy actions that we have already taken and anticipated actions.
Over coming months, we will be looking for compelling evidence that inflation is moving
down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases
will be appropriate; the pace of those changes will continue to depend on the incoming data and
the evolving outlook for the economy. We will make our decisions meeting by meeting, and we
will continue to communicate our thinking as clearly as possible. Our overarching focus is using
our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation
expectations well anchored.
Making appropriate monetary policy in this uncertain environment requires a recognition
that the economy often evolves in unexpected ways. Inflation has obviously surprised to the
upside over the past year, and further surprises could be in store. We therefore will need to be
nimble in responding to incoming data and the evolving outlook. And we will strive to avoid
adding uncertainty in what is already an extraordinarily challenging and uncertain time. We are
highly attentive to inflation risks and determined to take the measures necessary to restore price
stability. The American economy is very strong and well positioned to handle tighter monetary
policy.
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To conclude, 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 am happy to take your questions.