Federal Reserve press conference, 2025-09-17 — Chair Jerome Powell

Question (Michael McKee, Bloomberg): Michael McKee from Bloomberg Radio and Television. I’m a little confused by your explanation of the Fed cutting rates because of unemployment if you think that most of what’s happening in the employment area is related to immigration, which your rate cuts wouldn’t address. How do you see that as more important than inflation, which has remained almost a full percentage point above your target?
Answer: Well, I was—I was saying that what’s happening in the labor market has more to do with immigration than it has to do with tariffs. That was the question I was answering. So I wouldn’t say that all of what’s happening in the labor market is due to tariffs. I mean, you clearly have a slowing due to immigration. You clearly have a slowing in demand, which is now perhaps more than that in supply. And we know that because the unemployment rate has ticked up. So that’s how—that’s what I meant by that.

Question (Elizabeth Schulze, ABC News): Thanks so much. Elizabeth Schulze with ABC News. The latest inflation report shows that prices are still going up across key categories for many households, including groceries. What will the Fed do if prices pick up more?
Answer: So our expectation, and you can see this consistently through the year, has been that inflation will move up this year, but that the—basically, because of the effects on goods prices from tariffs—but that those will turn out to be a one-time price increase, as opposed to creating an inflationary process. That’s been our forecast. Pretty much every—all the individual forecasts say that. We can’t just assume that, though, right? We have to—our job is literally to make sure that that is what happens. And we will do that job. Right now, the situation we’re in is that we see inflation—we continue to expect it to move up. Maybe not as high as we would have expected it to move up a few months ago. The pass-through into—of the tariffs into inflation has been slower and smaller. The labor market has softened. So the case for there being a persistent inflation outbreak is less. And so that’s why we think it’s time for us really to acknowledge that the risks to the other mandate have grown, and that we should move in the direction of neutral. So what will we do? We’ll do what we need to do. But we have two mandates, and we try to balance them. For a long time, our framework says that when our two goals are in tension—this is quite an unusual situation. How do we decide what to do? Because our tools can’t do two things at once. What we do is we ask, which is farther from—how far is each from the goal, and how long is it expected to get to the goal? So and then that’s—we think about those things, and we see—as I mentioned, we have been—our policy had been really skewed toward inflation for a long time, really. Now we see that there’s downside risk clearly in the labor market. And so we’re moving in a direction of more neutral policy.

Question (Steve Liesman, CNBC): Steve Liesman, CNBC. Mr. Chair, in the past during rate cuts you used the word “recalibration.” And I wonder if you pointedly did not use it this time. And, in fact, when you said “policy is not on a preset course,” did you mean that as sort of the opposite of recalibration? Are we meeting to meeting, data point by data point? Are we in the process here of getting back to neutral? Thank you.
Answer: So I think we are—we’re in a meeting-by-meeting situation, and we’re going to be looking at the data. You know, let me say a word about the SEP, really, here. So we often point this out. What the SEP is, it’s an accumulation—a cumulation of the individual projections of 19 people showing what they believe at a particular moment in time to be the most likely path for the economy and, thus, the appropriate path for monetary policy as well. And as you know, we don’t—we don’t debate or try to agree on what that is; we just write them down and cumulate them. We do sometimes discuss them. And so we always say we’re not on a preset path, and we really mean that. The actual decisions we make are going to be based on the incoming data, the evolving outlook, and the balance of risks at the time the decisions are actually made. So you will have seen that we have 10 participants out of 19 who wrote down two or more cuts for the remainder of the year, and 9 who wrote down fewer than—in fact, in a good number of cases no more cuts. So rather than looking at—so rather than looking at this as certainty, I would encourage people, as always, to look at the SEP as—through the lens of probability. And so there are—there are different possible outcomes and likelihoods rather than “this one is certain, and this one isn’t happening.” So that’s what I would say.

Question (Jennifer Schonberger, Yahoo Finance): Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. If you’re cutting rates, why continue to reduce the size of your balance sheet [rather] than pause the unwinding?
Answer: Well, I think we’re—you know, we’re cutting the size of our balance sheet quite marginally now. As you know, with the balance sheet, we’re still in an abundant- reserves condition. And we’ve said that we would stop somewhat above a—somewhat above an ample-reserves level. That’s where we are. And we’re—you know, we’re getting closer to that. We’re monitoring it very carefully. We don’t think that that has, at all, significant macroeconomic effects. These are pretty small numbers moving around inside a giant economy. You know, the level of runoff is not very large. So I wouldn’t attribute macroeconomic consequences to that, at this point.