Federal Reserve press conference, 2021-11-03 — Chair Jerome Powell

Question (Jeanna Smialek, New York Times): Hi, Chair Powell. I was wondering if you could detail a little bit how you’re thinking about wages at this moment. Obviously, we’re seeing strong wage growth, particularly for people in sort of lower-income fields. I wonder if you see that as a positive thing or as a potential start to a wage–price spiral and sort of how you sort of delineate those two things.
Answer: So wages have been moving up strongly, very strongly. And, in particular, I would point to the employment compensation index reading that we got last Friday. Now, in real terms, they’ve been—they had been running a little bit below inflation, so real wages were not really increasing. I think, with the ECI reading, it becomes close to maybe not increasing, but close to back to zero in terms of the real increase. So wages moving up, of course, is how standard of living increases over the years for generation upon generation. It’s very important, and it’s generally a good thing. You know, the concern is a somewhat unusual case where, if wages were to be rising persistently and materially above inflation and productivity gains, that could put upward pressure on, or downward pressure on margins and cause companies to—or employers, really—to raise prices as a result, and you can see yourself, find yourself in what we used to call a wage–price spiral. We don’t have evidence of that yet. Productivity has been very high. The ECI reading is just one reading. Again, if you look back, we—so we’ll be watching this carefully. But I would say that, at this point, we don’t see troubling increases in wages. And we don’t expect those to emerge, but we’ll be watching carefully.

Question (Brian Cheung, Yahoo Finance): Hi, Chairman Powell. Brian Cheung, Yahoo Finance. So, just to expand on the ethics conversation, you talked about how you engage with people on Capitol Hill and in the Administration. You talked about what you’ve done already, but I’m just wondering if you can take a step back and just assess whether or not there was reputational damage as a result of that, either from the public’s view or from the financial community’s view of the Federal Reserve’s independence. And then, secondly, do you look back on the whole episode and have thoughts on your individual responsibility in preventing something like this from having happened?
Answer: You know, I think it’s too soon to say what the reputational damage is. I think, from the very beginning, my reaction was: We need to deal with this straightforwardly, transparently, and forcefully. And that’s what we’re going to do. I mean, it’s, it means everything to me that we do whatever it takes to make sure that nothing like this happens again, and I like to think we’ve made a real good start on that. If you think about it, you cannot execute a trade unless it’s precleared, and then you have to say, “Execute.” It’s not even a trade. Really, there’s no trading going on. This is for investment and, you know, getting liquidity for life’s expenses. But you then have to wait 45 days to actually execute that sale or purchase. So I think it’s a pretty good system. We’ll always be looking to make it better. So in terms of our independence, you know, look, I think we will address this, and I think we have. And I like to think it’s enough, but it’s going to, you know—we’re just beginning to implement it. We have to write the rules, which we’re doing, you know, as quickly as possible. We need more people. We’re going to have to resource this much more significantly here at the Board, and also, we’re going to need appropriate technology, because, you know, the Fed has more than—the System has more than 30,000 employees. Not all of them, far few of them, will be covered by this, but the senior officers, who will be covered by this, will, you know, will have to have technology access, and it’s going to have to work efficiently. So there’s a lot of work to do to implement. You know, again, I would just say, this system has been in place for decades. And it was in place when I took over. It was in place for the last, at least the last three or four Chairs. And, you know, it was what it was. And, you know, it proved to have weaknesses in it. And part of that was, it wasn’t uniformly enforced across the System. I’m a big believer in the value of the Federal Reserve System and the Reserve Banks. But you had 12 different ethics officers at 12 different Banks. And you had ethics people here. And, you know, compliance wasn’t, it wasn’t all exactly the same. It was a little bit different and uneven, and also, the rules were— you know, we didn’t imagine the problems that happened. And they may have actually been—I don’t know this—but they may actually have been in compliance with the specifics of our rules. They were clearly not in compliance with the part of our rules that said, don’t do anything that would create that appearance. I mean, that’s clear. This was a bad appearance. So, anyway, what can we do? We are where we are. It happened, and we just have to deal with it forthrightly and transparently and “own” it and step up to this, you know, meet this moment. I’m totally committed to doing that. And, again, if there are better ideas, I’d love to hear them, but I think we have so far made a good start.