Federal Reserve press conference, 2024-09-18 — Chair Jerome Powell

Question (Michael McKee, Bloomberg): I’m just curious as to how sensitive you’ll be to the labor market, since you forecast we are going to see higher unemployment and it is going to take a significant amount of monetary easing to just maintain it.
Answer: So, you know, what I would say is, we don’t think we need to see further loosening in labor market conditions to get inflation down to 2 percent. But we have a dual mandate, and I think you can take this whole action as—take a step back, what have we been trying to achieve? We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with disinflation. That’s what we’re trying to do. And I think you can take today’s action as a sign of our strong commitment to achieve that goal.

Question (Neil Irwin, Axios): Thanks. Hi, Chair Powell. Neil Irwin with Axios. We’ve only been running a little above 100,000 jobs a month on payroll the last three months. Do you view that level of job creation as worrying or alarming, or would you be—would you be content if we were to kind of stick at that level? And relatedly, you know, one of the welcome trends of the last couple of years has been labor markets seen coming out through job openings falling, rather than job losses. Do you think that trend has further to run, or do you see risk that further labor market cooling will have to come through job losses?
Answer: So, on the job creation, it depends on—it depends on the inflows, right? So, if you’re having millions of people come into the labor force then, and you’re creating 100,000 jobs, you’re going to see unemployment go up. So it really depends on what’s the trend underlying the volatility of people coming into the country. We understand there’s been quite an influx across the borders, and that has actually been one of the things that’s, that’s, that’s allowed the unemployment rate to rise. And the other thing is just the slower hiring rate, which is something we also watch carefully. So it does depend on what’s happening on the supply side. On the Beveridge curve question, yes, so we all felt, on the Committee, not all, but I think everyone on the Committee felt that job openings were so elevated that they could fall a long way before you hit the part of the curve where job openings turned into higher unemployment, job loss. And yes, I mean, I think we are—it’s hard to know that—you can’t know these things with great precision, but certainly it appears that we’re very close to that point, if not at it, so that further declines in job openings will translate more directly into unemployment. But it’s been— it’s been a great ride down. I mean, we’ve seen a lot of, of tightness come out of the labor market in that form without it resulting in lower employment.

Question (Edward Lawrence, Fox Business): Thanks, Chair Powell. Edward Lawrence with Fox Business. So we’ve heard some speculation that you may be going with the federal funds rate to 3½, maybe under 4 percent. There’s basically an entire generation that has experienced zero or near- zero federal funds rate, and some think we’re heading in that direction again. What’s the likelihood that cheap money is now the norm?
Answer: So this is a question—and you mean after we get through all of this? It’s just—great question that we just, we can only speculate about. Intuitively, most—many, many people anyway, would say we’re probably not going back to that era where there were trillions of dollars of sovereign bonds trading at negative rates—long-term bonds trading at negative rates. And it looked like the neutral rate was—might even be negative, so—and it was—people were issuing debt at negative rates. It seems that’s so far away now. My own sense is that we’re not going back to that. But, you know, honestly, we’re going to find out. But, you know, it feels—it feels to me that the neutral rate is probably significantly higher than it was back then. How high is it? I don’t—I just don’t think we know. It’s—again, we only know it by its works.