Federal Reserve press conference, 2025-10-29 — Chair Jerome Powell

Question (Jonnelle Marte, Bloomberg): Jonnelle Marte with Bloomberg. How are officials interpreting the latest CPI report? So some components came in lower than expected, but core inflation was still at 3 percent. So at this moment are—what are you learning about the drivers and, also, do you believe that the risks are greater that the Fed makes a mistake on employment or inflation?
Answer: So, okay, so the September CPI report, we didn’t get PPI after that, which is—which is important for translation into what we look at, which is PCE inflation. But we can still make a pretty good assessment of what that will be. When we get PPI, there might be some adjustments. But so directionally, it was a little softer than expected, and we always break it down into the three components. So, basically, you’ve seen goods prices increasing, and that’s really due to tariffs, and that’s due—that’s compared to a longer-run trend of very, very mild deflation in goods. So that’s moving inflation up. On the other side of that, good news— housing services inflation has been coming down and is expected to continue to come down. So if you remember, a year—a couple years ago, that’s the one that just, we kept expecting it to do that. Now it’s doing—it’s been doing that for some time, and we expect to continue that. That leaves—the biggest category is services other than housing services. And that’s kind of been moving sideways over the last few months, but a significant part of that is nonmarket services. We don’t take a lot of signal about the tightness of the economy from that. So if you add all that up, a couple of things to say. One is that inflation away from tariffs is actually not so far from our 2 percent goal. We estimate—people have different estimates of what that is, but it might be five- or six-tenths, and so if it’s 2.8, then core PCE, not including tariffs, might be 2.3 or 2.4, in that range, something like that. So that’s not so far from your goal. So that—we look at that, and the thing about tariff inflation is the base case is that it will come, and it probably will increase further. But it is that it will be a one-time increase, and we’ve been very focused for all of this year at making sure that that’s the case and thinking carefully about what are the—what are the pathways through which it could become something else, troublesome inflation. One of those would be a really tight labor market. We don’t see that. Another could be inflation expectations moving. We don’t see that. So I think—we’re watching this very carefully. I think it’s—it’s not the case that we’re just assuming that it’s going to be a one-time inflation. We understand fully that this is a risk we have to monitor and ultimately manage.

Question (Edward Lawrence, Fox Business): So on that division, then, you’re talking about going forward. So what’s more important in this division? Is it inflation risks? Is it employment risks? Or is there a deeper philosophy division among the Board?
Answer: I—look, everybody on the Committee is deeply committed to doing the right thing to achieve our goals: maximum employment and stable prices. You have differences on how to do that. And as I mentioned, some of that is different forecasts, but a lot of it is also different risk aversions to the two different variables, which is common through, through all federal reserves, they’re—people just have different risk tolerances, let’s say. So that leads you to people with disparate views. You will know that from the speeches you’ve been listening to from my colleagues. And so we’re at a place now where we have, in fact, cut two more times, and now we’re 150 basis points closer to neutral, wherever that may be, than we were a year ago. And so there’s a growing chorus now of feeling like maybe this is where we should at least wait a cycle, something like that. That’s what it is. It’s just what you think it would be. It’s—and, again, you’ve seen it in the September Summary of Economic Projections. You’ve seen this in the public remarks of FOMC participants. And now I’m telling you that’s what—that’s what you can expect in the minutes. And I’m just telling you that’s what happened in the meeting.

Question (Jennifer Schonberger, Yahoo Finance): And then, separately, many—you yourself have said that we’re in a bifurcated economy right now with high-net-worth individuals continuing to spend, with the lower income pulling back. How much of consumer spending continuing hinges on the stock market remaining strong? In some odd way, does the market help keep the economy buoyant?
Answer: So there is some—there is some relationship there, but, remember, the more wealth someone has, the lower an additional dollar of wealth matters. So your marginal propensity to consume declines quite dramatically as you reach—as you reach levels of stock market wealth. So the stock market—it would affect spending if the stock market went down, but it wouldn’t drop—it wouldn’t drop sharply unless there were quite a sharp drop in the stock market. People at the lower end of income and wealth have a much higher marginal propensity to consume an incremental dollar of income or wealth, but they don’t have the stock market wealth. So I think it’s certainly a factor supporting consumption right now, but—and you would see it if you saw material corrections in spending. But it wouldn’t be—you shouldn’t think that it’ll, dollar for dollar, stop consumption, because that wouldn’t be the case. Thanks very much.