Federal Reserve press conference, 2020-09-16 — Chair Jerome Powell

Question (Steve Liesman, CNBC): Mr. Chairman, I wonder if you could help me understand how the projections of the Committee line up with the goals of the Committee. You’ve now altered the projections to—the statement to aim for inflation above 2 percent. But when I look at the SEP, I don’t see the Committee believing a single year in the next four years that you are ever above 2 percent. In fact, for each year, you are below it until 2023, which is the first time that you actually hit 2 percent. So do you think—are, are you confident—is this just the Committee is not confident that not only can it not hit its 2 percent goal, but that now it can’t hit its goal of being above 2 percent?
Answer: Not at all. And, you know, you don’t—you also don’t see people, by and large, lifting off or raising interest rates above zero. I guess there are 4 exceptions out of a Committee of 17 during that—during the forecast period. So we don’t reach 2 percent, but we get very close to it in the forecast. We reach 2 percent—I guess the median is 2 percent at the end of 2023. So, you know, you know what the guidance says. It says that we expect that the current setting of, of our rates will be—what we expect [is] that it will be appropriate until such time as we reach 2 percent inflation, that we feel that labor market conditions are consistent with our assessment of maximum employment, and that we’re on track to achieve inflation moderate—inflation moderately above. So that’s the test. So I don’t think there’s any conflict between those two because, you know, the, the way they’re set up, the projections don’t show the out years. You asked about confidence, and I would say that this, this very strong, very powerful guidance shows both our confidence and our determination. It shows our confidence that we can reach this goal and our determination to do so.

Question (Victoria Guida, Politico): Hi. Thanks for taking my question. I wanted to ask about a couple of things. First of all, if we don’t get a vaccine until well into next year, what does that mean for the economy? And then, somewhat related, I was wondering if you could provide any more detail about the stress scenarios that you all are going to release for the big banks and whether that is going to be another full-blown stress test, whether we’re going to publicly see those results, and what it might mean for bank payouts.
Answer: Great. So, on the first one, what’s happening is basically we’re learning to live with—right now, we're learning to live with COVID, which still spreads. And we’re learning to, to engage in economic activity. All of this recovery that we’ve seen is in a context where—you know, where people are still at risk of, of catching it, and yet we’re able to resume lots and lots of economic activities. And that involves, as I mentioned, you know—I think the more social distancing we can preserve as we go back into the workforce—wearing masks, keeping our distance, that kind of thing—the better we’ll be able to get economic activity back up close to where it was. I do think, though, there are areas of the economy that are just going to really struggle until we have an—a vaccine that’s, that’s in wide—you know, wide usage and is, is widely trusted. And those are the ones where people were getting really closely—close together. I also think testing—to the extent you have cheap and rapid testing, you can do a lot with that in the workforce. You can—you can build confidence in the workforce if you have regular—very regular testing that doesn’t cost very much and you get the results really quickly. If you do that, you’ll be able to open a lot of workforces, particularly in cities where the overall case numbers are quite low. And that will help a lot. So I think we’re, we’re going to be finding lots and lots of ways to get out towards—you know, as far as we can. There’s always going to be that—for, for some time, there’s going to be certain activities that will be—that will be hard to, to resume. So I, I think that’s the only way I can say it. And I think trying to—you know, we all—when we make a forecast, we make assessments about that, but it’s really hard to say. There is no template here. There’s no—you know, there’s no experience with this. So, frankly, for the last 60 days or so, the economy’s recovered faster than expected. And that may continue or not. We just don’t know. And I think we should do those things that we control to make sure that we can recover as quickly as possible. And the main thing, again, is wearing a mask and keeping your distance while you’re in the workforce. That’s something we can all do that will limit the spread and let people go back to work, avoid major outbreaks, and things like that. In, in terms of the stress tests, so I really don’t have any—you know, we’re getting ready quite soon to be making announcements and saying things publicly. There’s not much I can say with you—nothing, really, that I can say that’s—on that today. I don’t have anything for you.

Question (Michael McKee, Bloomberg): Well, if I could follow up, in terms of the balance sheet, are you concerned that your actions are more likely to produce asset price inflation than goods-and- services inflation? In other words, are you risking a bubble on Wall Street?
Answer: You know, so, of course we monitor financial conditions very carefully. These are—these are not new questions. These were questions that were very much in the air a decade ago and more when, when the Fed first started doing QE. And, I would say, if you look at the long experience of, you know, the 10-year, 8-month expansion, the longest in our recorded history, it included an awful lot of quantitative easing and low rates for 7 years. And, I would say, it was notable for the lack of the emergence of, of some sort of a financial bubble—a housing bubble or some kind of a bubble, the popping of which could threaten the expansion. That didn’t happen. And, frankly, it hasn’t really happened around the world since then. That doesn’t mean that it won’t happen, but—and so, of course, it’s something that we monitor carefully. After the financial crisis, we started a new—a whole division of the Fed to focus on financial stability. We look at it in every—from every perspective. The FOMC gets briefed on a quarterly basis. At the Board here, we talk about it more or less on an ongoing basis, so it is something we monitor. But I don’t know that the—that the connection between asset purchases and, and financial stability is a particularly tight one. So—but again, we won’t be—we won’t be just assuming that. We’ll be checking carefully as we go. And, by the way, the kinds of tools that we would use to address those sorts of things are not really monetary policy. It would be more tools that strengthen the financial system.

Question (Don Lee, Los Angeles Times): Chair Powell, I’d like to ask you about the labor market. As you know, in August there were about 30 million persons claiming unemployment benefits. Yet the BLS jobs report for August showed about 13½ million unemployed, only about 6 million more than before the pandemic. I wonder how you reconcile that and what you think the actual labor market conditions are.
Answer: So, I mean, I think the overall picture—take a step back from this. The overall picture is clear, and that is that the labor market has been recovering, but that it’s a long way—a long way from maximum employment. I think that’s, that’s the bottom line on it. So, within that, though—take claims in particular. The number of claims, the quantity of claims, and, frankly, the fact that PUA claims are new—the Pandemic Unemployment Assistance claims—that’s a new system that had to be set up. The actual counting of the claims is, is volatile, and, and it’s very difficult to take much signal about the particular level. So, you know, because people were setting those systems up, and when they got them set up, they counted them all at once and things like that. I think, though, what you’ve seen is that the level of—certainly the level of initial claims has declined very sharply from the very high levels of March and April and is now at a lower level—continues either to be flat or gradually decline. It’s worth noting—and that’s good—it’s worth noting that that level is maybe five times the level of what claims were. Claims were around 200,000; now they’re 900,000, in that range, weekly for, for initial claims. So that just tells you, the labor market has improved, but it’s a long, long way from maximum employment, and it will be some time getting back there. I think that’s the best way to think about it. In many parts of the economy there’s just a lot of disruption, and it’s, it’s really hard to say precisely where we are. I’ll give you another example with—you know, we say unemployment’s 8.4 percent. But if you count those who are—who are misidentified as, as employed when they’re actually unemployed and you add back some part of the participation number—so if you were—if you had a job and you were in the labor force in February and you lost it because of the pandemic, some of you are now being reported as out of the labor force. But I—you know, I would—I would more look at those people as unemployed. If you add those back, the level of unemployment’s probably 3 percent higher. On the other hand, by that metric, the, the unemployment rate would have been in the—in the 20s in, in April. So the improvement has been quite substantial under any measurement. But the level is still quite high.