Federal Reserve press conference, 2025-05-07 — Chair Jerome Powell

Question (Colby Smith, New York Times): 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?
Answer: 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.

Question (Jo Ling Kent, CBS News): 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?
Answer: 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 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.

Question (Victoria Guida, Politico): Well, do you think that they should take macroeconomic conditions into account as they look at this?
Answer: 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]

Question (Andrew Ackerman, Washington Post): 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?
Answer: 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 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.

Question (Matt Egan, CNN): 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?
Answer: 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.