Federal Reserve press conference, 2021-03-17 — Chair Jerome Powell

Question (Howard Schneider, Reuters): If, if I could follow up on that, this shift in the dots—why wouldn’t that suggest a weakening of the commitment here? An awful lot of people shifted into 2022, it seems.
Answer: I, I don’t see that at all. You know, we, we have a, a range of perspectives on the Committee. I welcome that. And, you know, we, we have—we debate things, we discuss things, and we always come together around a—around a, a solution. But, you know, the, the strong bulk of the Committee is, is not showing a rate increase during this forecast period. And, you know, as, as data improve, as the outlook improves very significantly since the December meeting, you would expect forecasts to move up. It’s probably not a surprise that some people would bring in their estimate of the appropriate time for liftoff. Nonetheless, you know, the bulk of the Committee—the, the largest part by far of the Committee is, is—doesn’t show a rate increase during this period. And, again, part of that is wanting to see actual data rather than just a forecast at this point. We do expect that we’ll begin to make faster progress on both spending—you know, labor markets and inflation as the year goes on because of the progress with the vaccines, because of the fiscal support that we’re getting. We expect that to happen. But, you know, we’ll have to see it first.

Question (Greg Robb, MarketWatch): Hi. Thanks for taking my question. I wanted to follow up a little bit. I, I understand what you’re saying about the dot plot and, and the message you’re trying to send with the dot plot. But does the same apply for the taper tantrum? You’ve said that it’s going to take “some time” to get some fundamental progress on your goals, but it seems like “some time” could now be any time.
Answer: So we’ve said “substantial further progress.” Now, if you go back, October, November—sorry, November, December, and January, progress in the labor market slowed very sharply. So you had an average of 29,000 jobs per month. If you go back and look at the, the level of job creation before that, it was very, very high—very high. So we weren’t making any progress on the labor market from November through January. February, we saw a nice—a nice pickup, a good jobs report—379,465 private sector. So that’s good. It can go so much higher, though. And, and, you know, it would be nice to see—to really make faster progress that’s different from substantial progress, we’d like to see it be, be higher than that. And I think it will be. That’s—the expectation is, you’ll see now, I think, really strong job creation return—not as high as it was in the very early days of the recovery, the reopening of the economy, but, nonetheless, very strong. Okay. So what, what I’m saying is, to achieve substantial progress from where we are, having had three months of, of very little progress, is going to take some time. And it’s—we don’t want to get into—I don’t want to get into trying to put a pin on the calendar someplace, because it’s going to be data dependent. When we see—when we see ourselves on track to make substantial further progress, we’re going to—we’re going to say so. We understand fully that that test is one that involves judgment. If you remember, during the Global Financial Crisis recovery, we said quantitative easing, number three, was—the test was a substantial improvement in the outlook for the labor market. Well, what does that mean? Well, it means a substantial improvement in the outlook for the labor market. It meant we would communicate when we thought we had that. This is just like that, in a way. What we’re saying is, substantial further progress toward our goals. We’ll tell people when we think—until we—until we say—until we give a signal, you can assume we’re not there yet. And as we approach it, well in advance—well in advance—we will give a signal that, yes, we’re on a path to, to possibly achieve that, to consider tapering. So that’s, that’s how we’re planning to handle it. It’s not different, really, from, from QE3. And I think we’ve learned—what we’ve learned from the experience of these last dozen years is to communicate very carefully, very clearly, well in advance, and then follow through with, with your communications. In this case, it’s, it’s an outcome-based set of guidance, as our rate guidance is, and it’s going to depend on the progress of the economy. That’s why it’s not appropriate to start pointing at dates yet.

Question (Don Lee, Los Angeles Times): Hi, Chair Powell. As you know, households, households are sitting on a lot of excess savings. And I wonder if, combined with that, you have an unleashing of, you know, pent-up demand. How much do you think that would affect—that would affect inflation? And would you expect that to be transitory?
Answer: We, you know, we and everyone who’s forecasting these—what, what we’re all doing is, we are looking at the—at the amount of savings. We’re looking at—you know, we have reasonably good data on that. And we’re looking at the government transfers that’ll be made as part of the various laws. And we’re trying to make an assessment on what will be the tendency of people to spend that money, the marginal propensity to consume. And from that, you can develop an estimate of the impact on spending, on growth, on hiring, and, ultimately, on inflation. So that’s, that’s what we’re all doing. And we have, you know, we have—we can look at history, and we can make estimates, and those are all very transparent and public. And you can compare one to the other. And, of course, we’ve all—we’ve all done that. And I think we’ve made very conservative assumptions and sensible mainstream assumptions at each step of that process. And what, what it comes down to is what I said before, which is, there very likely will be a step-up in inflation as March and April of last year drop out of the 12-month window, because they were very low inflation numbers. That’s a—that’ll be a fairly significant pop in inflation. It’ll wear off quickly, though, because it—just the way the numbers are calculated. Past that, as the economy reopens, people will start spending more, and then, you know, you can only go out to dinner once per night, but a lot of people can go out to dinner. And so— and they’re not doing that now. They’re not going to restaurants, not going to theaters. That part of the economy—and travel and hotels—that part of the economy is, is really not functioning at, at full capacity, right? But as that happens, people can start to spend. It’s also—wouldn’t be surprising if—and you’re seeing this now, particularly in the goods economy—there’ll be bottlenecks. They won’t be—they won’t be able to service all of the demand maybe, maybe for a period. So those things could lead to—and we’ve, we’ve modeled that. Other people have too. We’ve—and what we see is relatively modest increases in inflation. So—but those are not permanent things. You know, what’ll, what’ll happen is—the supply side—the supply side in the United States is very dynamic. People start businesses, they, they reopen restaurants, you know, the airlines are, will be flying again, all of those things will happen. And so it’ll turn out to be a one—a one-time sort of bulge in, in prices, but it won’t change inflation going forward, because inflation expectations are strongly anchored around 2 percent. We know that inflation dynamics do evolve over time. And there was a time when, when inflation went up, it would stay up. And, and that time is not now. That hasn’t been the case for some decades. And we think it won’t—it won’t—we won’t suddenly change to another regime. These things tend to change over time. And they tend to—tend to change when the central bank doesn’t understand that having inflation expectations anchored at 2 percent is the key to it all. The, the—having them anchored at 2 percent is what gives us the ability to push hard when the economy’s really weak. If we saw inflation expectations moving materially above 2 percent, of course, we would conduct policy in a way that would, would make sure that that didn’t happen. We’re committed to having inflation expectations anchored at 2 percent, not materially above or below 2 percent. So that’s—I think if you—if you look at the savings, look at all of that, model it, that’s, that’s kind of what comes out of our assessment. There are different possibilities. I think it’s, it’s a relatively unusual—very unusual situation to have all these savings and this, this amount of fiscal support and monetary policy support. Nonetheless, that, that is our most likely case. And you know, as the—as the data come in and the economy performs, we’ll of course adjust. Our outcome-based guidance will immediately adapt, we think, to meet whatever the actual path of the economy is.