Federal Reserve press conference, 2018-06-13 — Chair Jerome Powell

Question (Howard Schneider, Reuters): Howard Schneider with Reuters. 2.1 percent above target for two and a half years starts to feel like some of the alternate frameworks that have been discussed here, be it price-level targeting or trying to set expectations higher so that you hit your 2. In deciding how symmetric is too symmetric, what sort of parameters are you using on that front?
Answer: You know, the—our target for—our medium-term objective for inflation is 2 percent PCE inflation. We feel that that target has served the economy well, and I’m strongly committed to it. The Committee is strongly committed to it. The sort of barriers to making a material change to that would be—would be very high because, again, we think it’s fundamental, and we think it’s worked. You asked about price-level targeting and that sort of thing. You know, there are some ideas that sort of take cognizance of the fact that rates are lower, we’re near the zero lower bound, and that could put downward pressure on inflation expectations if we’re going to be down at the zero lower bound and, therefore, sort of undermine the credibility of the 2 percent inflation objective. So the idea is to have kind of a makeup. If you—if you’re below target for a while, you have a—you have a time of being above target. And the idea is to enhance the credibility of that 2 percent—that 2 percent target. This is an idea that’s been written about for many years. It’s not something that the Committee has looked at seriously. I imagine we will be having discussions about it, but—not something that we have on the calendar right now.

Question (Steve Liesman, CNBC): Steve Liesman, CNBC. Mr. Chairman, you said there’s a difference of opinion among economists, but looking at the longer-run GDP growth rates for the members of the Committee, there’s not a whole lot of difference. It’s 1.8 to 2, or 1.7 to 2.1, depending upon how you count it. Is that showing us that not a single member of the Committee— including yourself, Mr. Chairman—agrees with economists over at the White House that they can achieve long-run sustained growth rates above or at 3 percent or higher? Do you believe in that?
Answer: You know, first of all, that’s a—that’s a reasonable range, I think, of—it’s not that we’re all on the same number, but there are a range of views about potential growth. And there’s so much uncertainty around this. You know, we don’t—the thing about fiscal policy is, you don’t have thousands of incidents to, you know, to—you don’t have big data, in a way. You have very small data. You’ve got only a few instances here, so you have a lot of uncertainty around what the effects will be. They could be large. We hope they’re large. But I think our approach is going to be to watch and see and hope that, in fact, we do get significant effects to, you know, to potential growth out of the tax bill, and we’re just going to have to see.

Question (Jeanna Smialek, Bloomberg): If I could just follow up really quickly. Then why, I guess, would the longer-run unemployment rate not be a little bit lower and closer to that 2020 number?
Answer: Yeah, it may be. It may be. We may find that out. You know, the best estimate that we have, over the longer run, is that. Although, you know, there’s a range of views, you know. Some people are in the low 4s, and, again, I said the uncertainty bands are, you know, not quite a full percentage point on either side, but ¾ of a percent, that kind of thing, so it’s very possible. We have to be, you know—we can’t do—we can’t be too attached to these unobservable variables. You know, we—I think we have to be practical about the way we think about these things and we do that by being grounded in the data and what we see happening in the real economy.

Question (Myles Udland, Yahoo Finance): Myles Udland with Yahoo Finance. Chair Powell, you referenced a minute ago this idea of cushion, or the fact that the Fed doesn’t have as much of when rates are low and inflation is low. And I’m wondering if you or the Committee has thought about your move to raise interest rates as partly responding to the economy, but partly giving yourselves room to navigate in the inevitable future recession, whenever that was to come. And do you think that that has played any part in, you know, your outlook for policy or recent policy decisions? Or is it, you know, just a purely based on what the economy is doing?
Answer: So it doesn’t play any part in my thinking and I’ll tell you why. If you raise rates too quickly, you’re just increasing the likelihood of a recession, and that’s exactly what you don’t want to do. So the best thing you can do, I think—I think the incentives actually run in the other direction. If you’re—if you’re worried about going back to the lower bound, then risk management would suggest that you go a little slower in raising rates and tolerate—that’s likely to be a more sustainable strategy to get further away from the zero lower bound. I think we’re far enough away now, though, that the risks are kind of balanced. And so I think it’s more just—we’re just looking at the economy, and what does it need, and how do we— how do we sustain the expansion, keep the labor market strong, and try to keep inflation near 2 percent?