Federal Reserve press conference, 2023-09-20 — Chair Jerome Powell

Question (Rachel Siegel, Washington Post): I see. And, in your view, what would—I know nothing has been decided yet—but what would one more hike at the end of the year do to the economy or to inflation? And on the other side, what would no hike do, if you could sort of game that out for us?
Answer: So, you know, you, you can make the argument that one hike one way or the other won’t matter. But, for us, we’re, we’re trying—obviously, as a group, it’s a pretty tight cluster of, of where we think that, that policy stance might be, but we’re always going to be learning from data. You know, we’ve learned all through the course of the last year that, actually, we needed to go further than we had thought. If you go back a year—and what we thought, what we wrote down—it’s actually gotten higher and higher. So we, we don’t really know until—and that’s why, again, we—we’re in a position to proceed carefully at this point. A year ago, we proceeded pretty quickly to get rates up. Now—now we’re fairly close, we think, to where we need to get. It’s, it’s just a question of reaching the right stance. I wouldn’t attribute huge importance to one hike in, in macroeconomic terms. Nonetheless, you know, we need—we need to get to a place where we’re confident that we have a stance that will bring inflation down to 2 percent over time. That’s what we need to get to, and we’ve been—you know, we’ve been moving toward it. As we’ve gotten closer to it, we’ve slowed the pace at which we’ve moved. I think that was appropriate. And now that we’re getting closer, we, we— again, we have the ability to proceed carefully.

Question (Victoria Guida, Politico): Hi. Victoria Guido with Politico. There are multiple external factors that are playing out right now. We see rising oil prices. We see auto workers striking. There’s the looming, very real possibility of a government shutdown. And I was just wondering, for each of those things, could you talk about how you’re thinking about how that might affect the course for the Fed and the economy?
Answer: So there is a—there is a long list, and you hit some of them. But it— you know, it’s, it’s the strike, it’s government shutdown, resumption of student loan payments, higher long-term rates, oil price shock. You know, you could—there are a lot of things that you can—you can look at. And, you know—so, what we try to do is assess all of them and, and handicap all of them. And, ultimately, though, there’s so much uncertainty around, around these things. I mean, to, to start with the strike—first of all, we absolutely don’t comment on the strike, as we have no view on the strike one way or the other. But we, we do have to make an assessment of its economic effects to do our jobs. So, you know, the, the thing about it is—so uncertain. It will depend. The economic effects—it could affect—you’ve looked—we’ve looked back at history—it could affect economic output, hiring, and inflation. But that’s really going to depend on how broad it is and how long it’s sustained for. And we—and then it also depends on how quickly production can make up for, for lost production. So none of those things are known right now. It’s very, very hard to know. So you just have to leave that uncertain. And, and we’ll be learning, I think, over the course of the next intermeeting period, much more about that. And the same is true for the others. We, we—I don’t know if you mentioned shutdown; I think of all of these as being on the list. We don’t comment on that. It hasn’t traditionally had much of a macroeconomic effect. You know, energy prices being higher—that’s—that is a significant thing. We—energy prices being up can affect spending. It can affect the consumer over time. A sustained period of higher—of higher energy prices can affect consumer expectations about inflation. We tend to look through short-term volatility and look at—look at core inflation. But so the question is, how long are, are higher prices sustained? We have to—we have to take those macroeconomic effects into account as well. Those are—those are some of them. I’m not sure if I hit them all. But—I mean, ultimately, you know, you’re, you’re coming into this with an economy that appears to have significant momentum. And that’s, that’s what we start with. And we—but we do have this collection of risks that you mentioned.

Question (Jennifer Schonberger, Yahoo Finance): Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. With your focus on year-over-year PCE, isn’t it true that base effects are huge and that by the time you meet in November, that it’s more likely that you’ll have a low PCE number that would make you feel more comfortable? And, secondly, how would the lack of key indicators—like CPI, the jobs report—impact your approach in upcoming meetings if we were to have a government shutdown? Thank you.
Answer: Base factors. Ah. Okay. So on that, we’re, you know, we’re looking at just monthly, right? You can look at just monthly readings and see what the increase was from the prior month. So you’re right—when you go back 3, 6, and 12 months, you get base factors. But we can—we can adjust for that. In terms of not getting data—you know, again, we don’t—we don’t comment on government shutdowns. It—it’s possible—if, if there is a government shutdown and it lasts through the, the next meeting, then it’s possible we wouldn’t— we wouldn’t be getting some of the data that we would ordinarily get, and we—you know, we would just have to deal with that. And I don’t know. It’s hard for me to say in advance how that would affect that meeting. It would depend on all kinds of factors that I don’t know about now. But it’s certainly a reality that, that that’s a possibility.

Question (Edward Lawrence, Fox Business): On the consumer—they’re putting more and more of this on their credit card. The consumer is seeing, you know, record credit spending. How long do you think the consumer can manage that debt at higher interest rates now? And are you concerned about a, a debt bubble related to that?
Answer: So, to, to finish my prior thought, I was saying that’s why we tend to look through energy moves that we—that we can see as, as short-term volatility. You know, turning to consumer credit, you know—of course, we watch that carefully. Consumer distress— measures of distress among consumers were at historic lows quite recently, you know, after— during and after the, the pandemic. They’re now moving back up to normal. We’re, we’re watching that carefully. But, at this point, these, these readings are not at troublingly high levels. They’re, they’re just kind of moving back up to what was the typical [level] in the pre-pandemic era.

Question (Jean Yung, MNI): Hi. Jean Yung with MNI Market News. Yields along the Treasury curve have risen to their highest in years. What is the Fed’s view about what’s been driving that increase in recent weeks, and how much of it can be attributed to macro explanations—and how much to technical factors?
Answer: So you’re right. You know, rates have moved up significantly. I think it’s always hard to say precisely, but it’s—most, most people do a common decomposition of the increase, and they’ll, they’ll—the view will be, it’s not—it’s not mostly about inflation expectations. It’s mostly about other things, you know—either term premium or real yields— and it’s, it’s hard to be precise about this. Of course, everyone’s got models that’ll give you a very precise answer, but they give you different answers. So—but, essentially, they’re, they’re moving up because—it’s not because of inflation. It’s because probably—it’ll probably have something to do with stronger growth, I would say—more, more supply of Treasuries. You know, the common explanations that you hear in the markets kind of make sense.