Federal Reserve press conference, 2025-06-18 — Chair Jerome Powell

Question (Colby Smith, New York Times): So in terms of how we should interpret the rate cuts penciled into the SEP, is this reflecting that there’s this expectation that underlying inflation will just stay well enough contained that allows the Committee to eventually move ahead with those cuts? Or is it about, you know, responding to a deterioration in economic activity, let’s say? I mean, how should we make sense of the forecast?
Answer: So if you look at the forecast, you will see that people do generally expect inflation to move up and then to come back down. But we can’t just assume that. Of course, we don’t know that, and, you know, our, our job is to make sure—one of our jobs—to make sure that a one-time increase in inflation doesn’t turn into an inflation problem. And that, again—that will depend on the size of the effects, how long it takes for them to come in, and, and, ultimately, on, on keeping inflation expectations anchored.

Question (Christopher Rugaber, Associated Press): Well, just quickly on—given that, you know, there are concerns inflation will rise—but there is the alternate scenario that tariffs would create demand destruction and slow growth sufficiently and that would perhaps keep a bit of a lid on inflation. Do you see odds of that scenario, what kind of odds do you see of that scenario coming true, and how many months of cool inflation would you need to see before concluding that maybe that lower-inflation scenario is taking place?
Answer: So this is very much the conversation we had today and yesterday. There, there are many, many different scenarios—many combinations of scenarios where inflation does or doesn’t prove out to be at the levels we think and where the labor market does or doesn’t soften. And I think what, what you see people doing is looking ahead at a time of very high uncertainty and writing down what they think the most likely case is. No one holds these, these rate paths with a great deal of conviction, and everyone would agree that they’re all going to be data dependent. And that—you can make a case for, for any of the rate paths, I think, that you see in, in the SEP. And, you know, we do this once a quarter. It’s—it’s a hard thing to do at this—particularly at this time. But it does reflect—you know, if you see somebody writing down, you know, a, a rate path that involves cuts, that’s them saying, “Yes, I think we will get to a place, more likely than not, where cuts will be appropriate.” And it could be—it could be a joint probability of a number of possible outcomes. Again, remember how much uncertainty we face, though.

Question (Edward Lawrence, Fox Business): Thank you, Chair Powell. So you’re saying that uncertainty has come down, the economy is moving at a solid pace, inflation has come down over the past three months, and this is all moving in the right direction. So are you indicating here that Americans should expect some sort of economic pain in the second half of the year?
Answer: I’m not—I’m not saying that at all. You know, from our standpoint, what I can say is that the, the U.S. economy is in solid shape. Inflation has come down. The unemployment rate remains at 4.2 percent. As I mentioned, real wages are moving up. It’s a— it’s a good—job creation is at a healthy level. Unemployment, again, as I said, low—labor force participation at a good place. What we’re waiting for to reduce rates is, is to understand what will happen with, with, really, the tariff inflation. And there’s a lot of uncertainty about that. Every forecaster you can name who, you know—who is a professional, you know, forecaster with, with adequate resources and forecasts for a living is forecasting, you know, a pretty significant—everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs. And it will be someone in that chain that I mentioned: Between the manufacturer, the exporter, the importer, the retailer— ultimately, somebody putting it into a, a good of some kind or just the consumer buying it—and, you know, all through that, that chain, people will be trying not to be the ones who, who pick up the cost. But, ultimately, the cost of the tariff has to be paid. And some of it will fall on the end consumer. We know that because that’s what businesses say—that’s what the, the data say from past—so we know that’s coming. And we just want to see, see a little bit of that before we make judgments prematurely.

Question (Amara Omeokwe, Bloomberg): Thank you. Amara Omeokwe with Bloomberg. Chair Powell, in February, you told Congress that the Fed is “overworked, maybe, not overstaffed.” Then, in a memo to—a memo to staff in May announcing a deferred resignation program at the Fed, you said you wanted to ensure that the Fed was “right-sized.” Those two statements appear to be at odds with one another. Could you explain what changed in the roughly three months between those statements that made you decide that staff levels at the Fed should decline?
Answer: I don’t see them at all as, as in tension. You know, so I was asked, “Is the Fed overstaffed?” And I said, “No.” You know, and I sort of said as a pun, “Overworked, but not overstaffed.” People do work extremely hard at the Fed, and I know they work hard at Bloomberg, too. [Laughter] So—but we do. We work hard. But I would say this—so we are careful stewards of public resources, and sometimes you need to show that. So there’ve been several times in our history—modern history—where the Fed has said, “You know what? We’re going to do a buyout. We’re going to—going to show the public. We’re going to demonstrate that we are good stewards of public resources.” So we thought—and I, I thought— that this is a time when we can. You know, we’ve—we grow about—our headcount has grown at about 1 percent a year. So over the course of a couple of years, we’re going to—we’re doing a careful scrub of the Board and all of the Reserve Banks, and we’re going to find 10 percent of employees who can do something else. Where, where we can—we can streamline our operations—and we, we think we can get there in a year, in a couple of years. We think we can do that. And we think the—we think the, the—this is, this is without taking risk to carrying out our critical missions. So this is something you do very carefully—thoughtfully. And you do it, again, respecting that we have critical missions to carry out. I’ve had experience—a lot of experience—in my prior careers, you know, with headcount reductions and things like that, and this is how you do it professionally. You do it carefully—thoughtfully—with a lot of planning, and you do it over a period of time. And I, I think it’s—I think the Fed will be fine. I think no one will notice any decline in our ability to carry out our missions, and I think it’s just us wanting to demonstrate to the public that we are actually good stewards of their—of their resources. We’re—we’re effectively wiping out 10 years of headcount growth with this. So, I mean, we just—we wanted to show that, you know—that we’re good stewards.