Federal Reserve press conference, 2019-05-01 — Chair Jerome Powell

Question (Paul Kiernan, Dow Jones Newswires): Paul Kiernan from Dow Jones Newswires. Thanks for the question. In the last 23 years, core PCE inflation has run above 2 percent only during the period that coincided with the housing bubble. I’d like to know what you would say to people who worry that it will prove difficult for the Fed to lift inflation without potentially stoking another asset bubble of some sort. Thank you.
Answer: Yes. So you’re pointing to, really, the fact that in recent years inflation has moved down and down, and, really, many major central banks have struggled to reach their inflation goals from below. And that includes us, although we’ve actually done— we’ve come closer, I think, than most others. And it’s just a question, I think, of demographic and other large and, in some cases, global forces that are disinflationary to some extent, and it creates significant challenges. One, I would say, is, it means that interest rates will be lower— will be closer to the effective lower bound more of the time because that means lower interest rates. And that’s one of the reasons we’re having a review of our monetary policy strategies, tools, and communications this year—to think about that problem. You mentioned the connection to financial stability of lower-for-longer rates, and that is another challenge. As I mentioned earlier, we do consider financial stability concerns to the extent they threaten achievement of our goals, but we also view, and I do take the view that macroprudential and supervisory tools, regulatory tools, things like the stress tests that we can do right through the cycle—those are really the best defense against financial instability so that the financial system is highly resilient to the kinds of financial shocks that can happen.

Question (Hannah Lang, American Banker): Hannah Lang, American Banker. On the regulatory side, the Fed and other bank regulators are said to be weighing all options for retooling a proposal to revise the Volcker rule. Can you give any indication how close the agencies are to coming to a solution and what that solution might look like, whether it would be starting from scratch entirely or making changes to the original proposal?
Answer: You know, we put out a proposal on Volcker some time ago, and we got a lot of comments, and we’re reviewing them carefully. I really don’t have a lot for you. I know they’re making good progress. I don’t really have a date though. And in terms of what all it’s going to be, it’s not something I can say with any certainty yet.