Federal Reserve press conference, 2019-06-19 — Chair Jerome Powell

Question (Paul Kiernan, Dow Jones Newswires): Thank you, Chairman Powell. Paul Kiernan from Dow Jones. If the most—according to the dot plot, I mean—if the most likely case is that you will have to cut rates in the next 18 months and given some of the concerns about, you know, policy needing to react sooner and more aggressively, what would have been the downsides to cutting rates now? Why not just cut them now?
Answer: So, why not now? And, I would say, there was not much support for cutting rates now at this meeting. There was, as you see, a number of people wrote down rate cuts. But all of those, but apparently one, felt that it would be better to see more to—before moving. And I gave a couple of reasons why that is the case. First, it’s just the fact that some of these developments are so recent that we want to see whether they’ll sustain. So we felt that it would be better to get a clearer picture of things, and that we would, in fact, learn a lot about these developments in the near term. Ultimately, the question we’re going to be asking ourselves is, are these risks going to be continuing to weigh on the outlook? And we will act as needed, including promptly, if that’s appropriate, and use our tools to expand—to sustain the expansion.

Question (Michael McKee, Bloomberg): Michael McKee, Bloomberg Television and Radio. If consumer spending is solid and business investment has been slowed by uncertainty, I’d like to get your thinking on what a Fed rate cut would do? Have you modeled the additional growth and inflation you might get from a rate cut? Can you identify any sectors that would benefit from a lower cost of capital? Or is this really about the Fed being the only game in town?
Answer: Well, we have the tools we have, and we’re committed and sworn to use them to support economic activity. And they do support economic activity through a number of channels that are reasonably well understood—some more directly tied to interest rates than others. But we do generally believe that—that our interest rate policy can support demand and support business investment as well. And so we will use those tools and use them as we see as appropriate to achieve our objectives, which really are to sustain this expansion, and I would just make a note of that. The reason why we say “sustain the expansion” is, you’re seeing now, for the first time, you know, communities that are being brought into the benefits of this expansion that hadn’t been earlier. You’re 10 years deep into this, and that’s something we heard quite a lot at the conference in Chicago on the review. And I just would say, that’s why we think—it’s one of the reasons why we think it’s so important to sustain the expansion, keep it going, because we really are benefiting groups that haven’t seen, you know, this kind of prosperity in a long time.

Question (Michael McKee, Bloomberg): But given your description of the crosscurrents, do you think Fed policy can solve those problems?
Answer: So we take the—you know, we take the crosscurrents as a given, and we have our tools. You know, we don’t—we react to anything in principle that could undermine our achievement of our dual-mandate goals—maximum employment, stable prices—is worthy of our attention and can call forth a policy response. And that’s just how we look at it.

Question (Nancy Marshall-Genzer, Marketplace): Nancy Marshall-Genzer with Marketplace. Chair Powell, are you concerned that new digital currencies like Libra, which Facebook unveiled this week, could undermine the Fed and erode your power to influence the economy? And did anyone from Facebook talk with anyone at the Fed before Libra was unveiled this week?
Answer: So, on your specific question of digital currencies replacing central bank currencies, I think we’re a long way from that. And, of course, the—so I think we’re a long way from that. Digital currencies are in their infancy. So, essentially, not too concerned about, you know, the central banks no longer being able to carry out monetary policy because of cryptocurrencies or digital currencies. You know, Facebook, I believe, has made quite broad rounds in—around the world really with regulators, supervisors, and lots of people to discuss their plans, and that certainly includes us. And we’re—you know, it’s something we’re looking at. We meet with a broad range of private-sector firms all the time on financial technology, and there’s just a tremendous amount of innovation going on out there. You know, there are potential benefits here. There are also potential risks, particularly of a currency that could, you know, that could potentially have large application. So I would echo what Governor Carney said, which is that we will wind up having quite high expectations, from a sort of safety and soundness and regulatory standpoint, if they do decide to go forward with something.