Federal Reserve press conference, 2019-03-20 — Chair Jerome Powell

Question (Heather Long, Washington Post): Heather Long from the Washington Post. On the broader economy, can you clarify how worried the FOMC is about a steep slowdown? Some of the actions today look like there is more worry. And on the balance sheet, can you clarify: Does the FOMC see the runoff as a form of monetary tightening?
Answer: So, on the outlook, our outlook is a positive one. So, as I mentioned, FOMC participants continue to see growth this year of around 2 percent, just a bit below what we saw back in—at the end of last year. And part of that is seeing that economic fundamentals—underlying economic fundamentals are still very strong. You have a strong labor market by most measures. You have rising incomes. You’ve got very low unemployment. You have confidence surveys for households and also for businesses that are at attractive levels, and you also have financial conditions that are more accommodative than they were a couple of months ago. So we see the outlook as a positive one. As far as balance sheet—the balance sheet plan, the answer to that is, you asked whether that’s related to our monetary policy, in effect, and the answer is really “no.” We are—we still— we think of the interest rate tool as the principal tool of monetary policy, and we think of ourselves as returning the balance sheet to a normal level over the course of the next six months. And we’re not really thinking of those as two different tools of monetary policy.

Question (James Puzzanghera, Los Angeles Times): Hi. Thank you, Chairman. I want to switch gears temporarily to Wells Fargo. Wells Fargo last week announced that its chief executive received a 5 percent pay raise last year, and this comes among continued settlements by the bank of various consumer abuse and reports that new consumer-unfriendly sales incentives are returning. Do you have concerns about Wells Fargo’s efforts to fix its problems, and do you expect the asset cap to remain in place beyond this year?
Answer: Wells Fargo. So what happened at Wells Fargo really was a remarkably widespread series of breakdowns, really, in their risk-management apparatus, which resulted in significant consumer abuses, let’s say. And as it’s gone on and on, it’s become clear that—I think some time ago it became clear that these are deep problems that needed to be addressed in a fundamental kind of a way. So there’s a lot of work to do on that. And we put in place, really, an unprecedented sanction in the form of an asset growth cap, and we will not lift that until Wells Fargo gets their arms around this, comes forward with plans, implements those plans, and we’re satisfied with what they’ve done. And that’s not where we are right now.

Question (Victoria Guida, Politico): Hi. Victoria Guida with Politico. On stress testing, I wanted to ask, how do you respond to criticism that the Fed’s recent move to remove the qualitative objection from CCAR makes it less transparent to the general public? And then, also, Governor Brainard dissented on that decision, and she’s dissented on some other decisions as well regulatorily recently. Does it concern you, given that the Fed has traditionally been a consensus- 1 Chair Powell intended to say that the unemployment rate is under 4 percent. based organization, if you keep having these decisions where, you know, a Board member is not onboard with them?
Answer: So you mentioned the qualitative aspect of CCAR. And U.S.—the large U.S. financial institutions have made significant progress there and are now much better at the capital planning process. And for, really, some time now, for a couple of years, we’ve talked about moving supervision of that process—moving to a supervisory approach to that rather than having a pass/fail in the stress tests. We’ve been talking about that for quite a while. And I think, given the level that the banks have moved to in capital planning, we did that. It shouldn’t be a big surprise—something we’ve been talking about doing for a couple of years. For banks that are newer to CCAR and haven’t made that kind of progress, then they’re still going to be part of—they’re still going to have a qualitative test until they can reach similar levels of achievement. In terms of having disparate views, I—look, we try—we are very much a consensus- driven organization. We try very hard to reach consensus on things. In the end, it’s very healthy to have disparate views and to state them publicly and put them on the record. It’s nothing but healthy from my standpoint. We’ll always be trying to reach consensus, and, you know, I’m committed to that.

Question (Trevor Hunnicutt, Reuters): Trevor Hunnicutt from Reuters. Just—you mentioned that you have, kind of, a positive outlook as it regards the economy but also see slower growth on the household side and the business side. Given how big of a part of the U.S. economy that is, what gives you, kind of, confidence that both the slowdown we’re seeing is temporary?
Answer: So on the household side, what we saw was a very weak reading on retail sales in December and then a bounceback in the January reading. And, you know, it was a surprise, I would say, and inconsistent with a significant amount of other data. We’re not dismissing it in any way, but I would go back to, what is it that supports consumer spending? It’s 70 percent of the economy, as you point out. It’s strong economic underlying fundamentals, so, rising wages, high levels of employment, low levels of unemployment, high levels of job creation, confidence. The household confidence surveys have moved back up to where they were last summer. So we look at those fundamentals, and we think that looks like a setting in which consumption will have support from underlying economic fundamentals. And that’s really what we’re thinking there. So, you know, we’re also patiently watching and waiting and not assuming. We’re not taking no signal from the incoming data; that’s why we called it out in our statement. So I think our eyes are open on this.