Federal Reserve press conference, 2019-09-18 — Chair Jerome Powell

Question (Martin Crutsinger, Associated Press): Marty Crutsinger with the Associated Press. Mr. Chairman, when you cut rates in July, you characterized it as a “midcycle adjustment.” Is that still your view of what’s happening?
Answer: So, as you can see from our policy statement and from the SEP, we see a favorable economic outlook, with continued moderate growth, a strong labor market, and inflation near our 2 percent objective. And, by the way, that view is consistent with those of many other forecasters. As you can see, FOMC participants generally think that these positive economic outcomes will be achieved with modest adjustments to the federal funds rate. At the last press conference, I pointed to two episodes in, I guess, 1995 and 1998 as examples of such an approach, which was successful in both of those instances. As our statement also highlights, though, there are risks to this positive outlook due particularly to weak global growth and trade developments. And if the economy does turn down, then a more extensive sequence of rate cuts could be appropriate. We don’t see that—it’s not what we expect—but we would certainly follow that path if it became appropriate. In other words, as we say in our statement, we will continue to monitor these developments closely, and we will act as appropriate to help ensure that the expansion remains on track.

Question (Paul Kiernan, Dow Jones Newswires): Hi, Chairman Powell. Paul Kiernan from Dow Jones Newswires. You mentioned trade policy being a complex, ongoing discussion. What is your rule for stopping as far as interest rate cuts go? You referred to this as a “midcycle adjustment.” The median dot suggests no more rate cuts, but, you know, if we get continued kind of back-and- forth between the U.S. and China, trade policy uncertainty is going to remain heightened. So, you know, under what circumstances would you say, “You know what, I think we’ve cut enough, we stop now”? And, secondly, as leader of this institution, have you felt a need to take any steps to boost, like, employee morale at a time when the President is constantly criticizing the Fed? Thanks.
Answer: You know, I’d love to be able to articulate a simple, straightforward stopping rule, but it’s really just going to be when we think we’ve done enough. And, you know, our eyes are open. We’re watching the situation. We’ve cut rates twice. We’ve moved, really, through the course of this year, as I discussed, and, you know, we see ourselves as taking actions to sustain the expansion and thereby achieve our goals. And if you look at sort of the things that are happening in the economy, I think I personally see a high value in sustaining the expansion, because we really are reaching—this positive economy is reaching communities that haven’t been reached in a long time. There would be great benefit in having that last as long as possible, that’s all. So I don’t have a specific stopping rule for you, but I think we’re watching carefully, and there will come a time, I suspect, when we think we’ve done enough, but there may also come a time when the economy worsens, and we would then have to cut more aggressively. We don’t know. We’re going to be watching things carefully. The incoming data and the evolving situation and—that’s what’s going to guide our—guide us on that path. In terms of the morale of the institution, I would say it’s very high. We’re very unified. We feel like we’re doing the best job we can in serving the American people.

Question (Steven Beckner, NPR): Steve Beckner filing for NPR, freelance. The Fed and your fellow central banks have been sort of exploring the far reaches of what’s possible for monetary policy, even going so far as to make rates negative in some cases, with mixed results. Meanwhile, fiscal and regulatory, not to mention trade, policy are pursuing their own separate courses. As you and your colleagues do this monetary policy framework review, do you ever consider the limitations of monetary policy? Should you be more explicit about what monetary policy can and cannot do in this environment?
Answer: You know, we try to be clear about that, but, really, I think our job is to use our tools as best we can to achieve—you know, to do the jobs that Congress has assigned us, which is achieve maximum employment and stable prices. That’s our real job. In terms of giving the fiscal authorities—who, by the way, are the ones who created us— advice about how to do their job, you know, we keep that at a high level, I think. And, at a high level, yes, I would say, and I’ve said before, that it’s really fiscal policy that is more powerful and that has much more to do with—fiscal policy can do those things that will increase the longer-run growth rate of the United States by improving productivity and labor force participation and the skills and aptitudes of workers. All of that comes from the private sector, but also from more of the kinds of things that can be done with fiscal policy. Over the long run, we can’t really affect the growth rate of the United States. The potential growth rate of the United States is not a function of monetary policy. It’s a function of other things. So I—I try to be clear about that, and so—but, ultimately, fiscal—fiscal authorities will do what they seem—deem appropriate.