Federal Reserve press conference, 2023-09-20 — Chair Jerome Powell

Question (Jeanna Smialek, New York Times): Thanks, Chair Powell. Following up on Nick’s question, actually—John Williams, the New York Fed president, obviously, has said things to the effect of, “Next year, as we see inflation kind of”—again, to Nick’s point—“as, as we see inflation coming down, we’re going to need to reduce interest rates to make sure that we’re not squeezing the economy harder and harder over time.” And I wonder if that’s basically the logic that you apply—you know, is that how you think about it? And then I also wonder—in the last press conference, you said something to the effect of, you know, “It’s a full year out—those discussions,” and people interpreted that to mean that you didn’t see a possibility of a rate cut in the first half of next year. And I wonder if that was what you meant by that or whether, you know—how you’re thinking about that timing.
Answer: No. When—so when I answer these questions about hypotheticals about, about cutting, I’m never intending to send a signal about timing; I’m just answering them as, as the question is expressed. So, so please—I, I wouldn’t want to be taken that way. Sorry— the first question was, is that how? Yeah, so we’re—as we go into next year, that’s the question we’ll be asking is—you know, taking into account lags and, and everything else we know about the economy and everything we know about monetary policy, the, the time will come at some point, and I’m not saying when, that it’s—that it’s appropriate to cut. Part of that may be that real rates are rising because inflation is coming down. Part of it just may be that—it’ll be all the factors that we see in the economy. And, you know, that time will certainly come at some point. And you—what you see is us writing down, you know, a year ahead, estimates of what that might be. And, you know, there’s—you know, there’s so much uncertainty around that. In, in— when we—in the moment, we’ll do what we think makes sense. No one will look back at this and say, “Hey, we made a plan.” It’s not like that at all. It’s—this is—these are estimates made a year in advance that are highly uncertain, and that’s how it is.

Question (Jennifer Schonberger, Yahoo Finance): Would you feel more comfortable on the base effects that—as those kind of fall out of the equation for the next couple of readings by November, would you feel more comfortable at that point?
Answer: You know, yes. I mean, if you’re looking—if—we, we can tell how much inflation has gone up in a given month, right? And, you know, that’s what we’re looking at. And month by month, what’s the reading? And, you know, I think—I think what we’re really looking at is, there’s a tendency to look at, you know, shorter and shorter maturities, but they’re incredibly volatile, and they can be misleading. That’s why we look at 12-month [rates]. But I think, in this situation—where it looks like we’ve had a bit of a turn in inflation starting in June—we’re also looking at six months, and even three months, but really six months’ inflation. So you’re looking at it over that period and over longer periods. That—that’s the right way to go. And we don’t—we don’t need to be in a hurry to—in, in getting to a conclusion about what to do. We can let the data evolve. So—