Federal Reserve press conference, 2024-07-31 — Chair Jerome Powell

Question (Jeanna Smialek, New York Times): Jeanna Smialek from the New York Times. Thanks for taking our questions. Markets pretty much entirely expect a rate cut in September at this stage. I wonder if you think that’s a reasonable expectation, and, if so, why not just make the move today?
Answer: Thank you. So on September, let me say this. We, we have made no decisions about future meetings, and that includes the September meeting. The broad sense of the Committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. In that, we will be data dependent but not data point dependent, so it will not be a question of responding specifically to one or two data releases. The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September. So you asked, why not today? And I would just say, again, that the broad sense of the Committee is that we’re getting closer to the point at which it will be appropriate to reduce our policy rate but that we’re not quite at that point yet.

Question (Howard Schneider, Reuters): So just to, to follow up on that a bit, if inflation behaves as you expect between now and September, would you regard a cut in September as sort of the baseline scenario right now?
Answer: So I guess I would—I would think about it this way. I’ll give an example of, of cases in which it would be appropriate to cut and maybe that it wouldn’t be appropriate to cut. So if we were to see, for example, inflation moving down quickly or more or less in line with expectations, growth remains, let’s say, reasonably strong, and the labor market remains, you know, consistent with its current condition, then I would think that a, a rate cut could be on the table at the September meeting. If, if inflation were to prove, you know, sticky and we were to see higher readings from inflation, disappointing readings, we would weigh that along with the other things. You know, I think it’s going to be not just any one thing. It’s going to be the inflation data, it’s going to be the employment data, it’s going to be the balance of risks as we see it—it’s going to be the totality of all of that that would help us make this decision.

Question (Howard Schneider, Reuters): And just to follow up on that—specifically, in what ways right now, given all you’ve seen over the last few months, in particular on shelter, on services, et cetera, in what ways are you not confident right now that inflation is on the way back to 2 percent?
Answer: I, I think it’s just a question of seeing more good data. We have seen—the last couple of readings have, have certainly added to confidence. And we’ve seen progress across all three categories of core PCE inflation—that’s goods, nonhousing services, and housing services. So it’s really just—you know, we had a quarter of poor inflation data at the beginning of the year. Then we saw some more good inflation data; we had seven months at the end of last year. You know, we just want to see more and, and gain confidence. And, as I said, we have—we did gain confidence, and more good data would cause us to, to gain more confidence.

Question (Colby Smith, Financial Times): Thank you. Colby Smith with the Financial Times. The March SEP pointed to three cuts in 2024, with core inflation at 2.6 percent and the unemployment rate at 4 percent. Since we’re now at that level in terms of inflation and already beyond what was projected for the labor market, I’m just wondering if that rate path is back to being the best guidepost for policy rather than, let’s say, the shallower one laid out in that June SEP.
Answer: You know, so I would just say, really, the path ahead is going to depend on the way the economy evolves. And I can’t really give you any, any better forward guidance on it than that. We didn’t, of course, do an SEP at this meeting. We will do another one at the September meeting. I would just say, I can—I can imagine a scenario in which there would be everywhere from zero cuts to several cuts, depending on the way the economy evolves, and I wouldn’t want to lay out a baseline path for you there today. I’ve said what I—what I can say about September and about today, though.

Question (Nick Timiraos, Wall Street Journal): Nick Timiraos of the Wall Street Journal. Chair Powell, you’ve said before that you wouldn’t wait until inflation got to 2 percent to cut rates because of how inflation has lagged. Does that apply for the labor market, too? If the labor market is back in equilibrium, why is restrictive policy and, potentially, very restrictive policy, given the high real funds rate, warranted right now?
Answer: So this is the very reason that we’re thinking about—that we’ve said in our—in our statement that we’re going back to looking at both mandates and that we think the risks are coming back into balance. We think what the data broadly show in the labor market is an ongoing, gradual normalization of labor market conditions. And that’s what we want to see. You know, we’ve seen that over a period of a couple of years and a move, really, from overheated conditions to more normal conditions. We are watching the labor market conditions quite closely, and that’s what we’re seeing. If we—if we start to see something that looks to be more than that, then we’re well positioned to respond. That’s, that’s part of what we’re thinking.

Question (Christopher Rugaber, Associated Press): Chris Rugaber at Associated Press. You mentioned not wanting to see any further cooling in the job market. Why not? Or would you consider preemptive cuts to prevent if you saw risks of an unexpected cooling? Is that something you would cut ahead of time for?
Answer: So I wouldn’t say I wouldn’t want to see any other cooling. It would be more of a material difference. If we—if we’d be looking at this and if we see something that looks like a more significant downturn, that would be something that we would—we would have the intention of responding to. So, in terms of—I don’t think of it that way. I think of it as, you know, we’re actually in a good place here. We’re balancing these two risks of, you know, go too soon, and you undermine progress on inflation; wait too long or don’t go fast enough, and, and you put at risk the recovery. And so we have to balance those two things. That’s the nature of having two mandates, and I think we—this is how we balance them. It’s a rough balance, but it does feel like, again, the labor market feels like it’s in a place where it’s just a process of ongoing normalization; 4.1 percent unemployment is still historically low. And, you know, we’ll just have to see what the data show us.

Question (Christopher Rugaber, Associated Press): And, just to follow up quickly: [I] wanted to see what you thought of the recent JOLTS report, which did show hiring, gross hiring, has come down even below 2019 levels. Layoffs remain low. So it painted a picture of a very static labor market. Is that sustainable in your view or something that is worrying? Thank you.
Answer: So I think all of the data points continue to point to kind of the direction we would want to see. So that was taken as, you know, there was a decline in job openings. That was good. Today’s ECI reading was a little softer than expected, so that’s, that’s a good reading. It shows that wage increases are still at a strong level but that that level continues to come down to more sustainable levels over time. That’s exactly the pattern that we want to be seeing. So I think the data—the data we’ve been seeing in the labor market are broadly consistent with that normalization process. Again, we’re closely monitoring to see whether it starts to show signs that it’s more than that.

Question (Steve Liesman, CNBC): Steve Liesman, CNBC. Mr. Chairman, back in March, you talked about cutting rates as a process, and, in June, you talked about the idea that, well, one rate cut wouldn’t do anything. So I wonder if you can sort of—following up on Colby’s question—talk about, are you weighing the economy right now in terms of its ability to withstand multiple rate cuts? Talk us through the process that you think—or is it just one rate cut? Or are you in the process now of thinking that rates need to be normalized here? Thank you.
Answer: Yeah, I can’t really say that, honestly. You know, we’re—we— we’ve seen significant movement in the labor market, and, you know, we’re very mindful of this question of, is it just normalization or is it more? We think it’s just normalization, but we want to be in a position to, to support the labor market. At the same time, we’re seeing progress on inflation. So, you know, we actually got to this—we raised rates a year ago at the July meeting. And if you look at the situation in the economy a year ago, unemployment—sorry, inflation was over 4 percent. It was a completely different economy. Now we’ve made a lot of progress, and the labor market—I think unemployment was in the 3s, mid-3s, so it’s a different economy. And I think it’s time, it’s coming to be time, to adjust that so that we support this continued process. The thing we’re trying to do is—you know that we have, we’ve had this really significant decline in inflation, and unemployment has remained low. And this is a really unusual and historically, historically unusual and such a welcome outcome for the people we serve. What we’re thinking about all the time is, how do we keep this going? And this is—this is part of that. We think we don’t need to be 100 percent focused on inflation because of the progress we’ve made: 12-month headline at 2½ [percent], core at 2.6. You know, it’s way down from where it was. The job is not done on inflation, but, nonetheless, we can afford to begin to dial back the restriction in our policy rate. And I think we’re just—it’s part of a process. In terms of what that looks like, I mean, I think most rate—you would think, in a base case, that policy rates would move down from here, but I don’t want to try to give specific forward guidance about when that might be, the pace at which it might happen, because I think that’s really going to depend on the economy, and that’s highly uncertain.

Question (Rachel Siegel, Washington Post): And if we’re to think about the first couple months of the year, is there any sense now that they were these blips that could have actually allowed for earlier rate cuts as were some of the projections going into 2024?
Answer: So the thing about—if what it is is seasonality, and it could just be— it’s very, very hard to, you know, to do appropriate seasonal adjustments. If that’s what it is, then that actually implies that, that other months were underreporting too low inflation. If you smoothed it out, it’s a zero-sum game. And that’s why we look at 12 months. We look at 12 months because that takes all of that out, all those effects out. Twelve-month now is 2½ percent headline, 2.6 percent core. This is so much better than where we were even a year ago. It’s a lot better. Now, the job is not done. I want to stress that, and we’re committed to getting the job—inflation sustainably under 2 percent, but we need to take note of that progress, and we need to weigh the risks to the labor market and the risks to our inflation target now more equally than we did a year ago.

Question (Michael McKee, Bloomberg): Michael McKee from Bloomberg Radio and Television. I’d like to ask you about the balance of risks as the American people see it. At this point, is the risk greater to leave interest rates where they are, given the damage that higher interest rates do to the economy in slowing demand and raising prices? Or is it more important for the American people that you keep rates where they are to bring inflation down?
Answer: I, I—you know, I think that we’ve been given an assignment by Congress. This is how we serve the American people is by achieving maximum employment and price stability, right? And so in our, you know, quasi-constitutional document, the Statement on Longer-Run Goals and Monetary Policy Strategy, we look at the two goals, and if one of them is farther away than the other—the two variables, inflation and employment—if one is farther away from its goal than the other, then you, you concentrate on the one that’s farther away. And you take account of the time to reach the goal. So, for the last couple of years, the best service we could do to the American people was to focus on inflation. But as inflation has come down—and I think the upside risks to inflation have decreased as the labor market has cooled off, and now the labor market has softened—you know, probably the inflation, inflation’s probably a little farther from its target than is employment, but I think the downside risks to, to the employment mandate are, are real now. So we have to weigh all that, and if you think about where that takes us is we have a restrictive policy rate. It’s clearly restrictive. It’s been the rate we’ve had in place for a full year. And the time is coming—as other central banks around the world are facing the same question—the time is coming at which it will begin to be appropriate to dial back that level of restrictions, restriction so that we may address both mandates.

Question (Michael McKee, Bloomberg): Well, you have event risk basically, with the jobs report on Friday and another one before you meet again. Are you certain that you won’t fall behind the curve and lead to unnecessary unemployment if you wait until September?
Answer: “Certainty” is not a word that we have in our—in our business. So, you know, we get—we get a lot of data between now and September, and it isn’t going to be one data read or even two. It’s going to be the totality of the data, all of the data, and not just—and then how is that affecting the outlook? And how is it affecting the balance of risks? That’s going to be the assessment that we do. Of course, we’ll, we’ll all look carefully at the employment report, but so much other data coming in and so much happening between now and the September meeting, and we’ll, you know, we’ll make a judgment.

Question (Edward Lawrence, Fox Business): Thank you, Mr. Chairman. Edward Lawrence of Fox Business. I do want to dig deeper on what Michael and, and what Nick were asking. There’s a, a shift in the statement to balance between the focus between inflation and jobs. Looking at the job sides, we’ve seen wage data show sort of an abrupt slowing. We’ve—we’re hearing on earnings calls from companies like Intel abrupt layoffs. In the jobs report from the BLS, government jobs has been a leading creator. Could the government jobs—as a sector—hiring mask underlying weakness in the jobs report?
Answer: Well, you know, we’ll look at everything. We’ve seen some, some tendency to have a narrowing base of job creation in some months going back, but then we’ve had some months where, where job creation was broader. And also, you know, the headline number of jobs has come down, so—but you look at the whole thing. And I think you do look at private demand extra carefully, to your point about, about government. So we’ll just be looking at, at all those things.

Question (Edward Lawrence, Fox Business): Just as a follow then—so could the Fed then be behind the curve? Because you said some of the reports—in the last meeting, you said the reports could be noisy or overstated. Was there a discussion of, of—what kind of discussion was there for a cut today, and could the Fed be “behind the curve”?
Answer: Yeah, so look, the objective is to balance the two risks, right? It’s the risk of going too soon and the risk of going too late. We’ve been—you know, we, we had seven months of good inflation data at the end of last year. We said we wanted to see more. We said—we pointed out that too much of this was coming from goods, and, sure enough, the first quarter wasn’t, wasn’t great—inflation data. And now we’ve got another quarter—a quarter that is good. And, you know, we’re balancing the risk of going too soon against the risk of going too late. That’s what we’re doing. There’s no guarantee in this. It’s a very difficult judgment call, but this is—this is how we’re making it. So—but in terms of today, your question about today, we did have a—you know, we had a nice conversation about, about this issue today. The overall sense of the Committee, as I mentioned, is that we’re getting closer to the point at which it will be appropriate to begin to dial back restriction, but we’re not quite at that point yet. We want to see more good data. The decision was unanimous—all 19 participants supported it. But there was a real discussion back and forth of what the case would be for, for moving at this meeting. A strong majority supported moving—not moving at this meeting. That was the strong sense of the Committee. But it’s a conversation that we had today, certainly.

Question (Courtenay Brown, Axios): Courtenay Brown from Axios. Thank you for taking our questions. When the Fed was raising rates, there was a lot of conversation about long and variable lags. I wonder if that applies on the way down, too. How are you and the Committee thinking about that?
Answer: Yes, it does. And I think the lags have kind of showed up here in the last six months, by the way. You, you really do now see the restriction, whereas, I mean, even a few months ago, people were questioning how restrictive policy was. Look at the labor market now—you can see. And look at inflation—sorry—rate-sensitive, interest-sensitive spending. You really do see now that policy is restrictive. I wouldn’t say it’s extremely restrictive, but it’s certainly effectively restrictive. Yes, there—the lag should, should be on the way down. It should take some time to get into—to get into the full economy, affect financial conditions. And that affects economic activity, hiring and that kind of thing, and, ultimately, inflation. It doesn’t—it’s not instantaneous, although it’s faster than it used to be because markets move now in anticipation of our moves.

Question (Courtenay Brown, Axios): So are you worried then that if monetary policy acts with long and variable lags, even when you’re lowering interest rates, it might be too late for the Fed to help stave off any kind of slowdown in the labor market or broader economy?
Answer: We have to worry about that. I mean, we—just to make it clear, you know, it’s a very difficult, challenging judgment, and we don’t want to go too soon, and we don’t want to go too late. But that’s—this is how we made that judgment. I feel good about where we are. We’re certainly very well positioned to respond to weakness with the policy rate at 5.3 percent. We certainly have a lot of room to respond if we were to see weakness. That’s not what we’re seeing, though. What we’re seeing—look at the—look at the first-half growth numbers. Look at PDFP at 2.6 percent for the first half. It’s not signaling a weak economy. It’s also not signaling an overheating economy. Labor market—admittedly, the unemployment rate has moved up seven-tenths, and we’re seeing—we’re seeing normalization there, but wage, wage increases are still at a high level. Unemployment is still at a low level. Layoffs are very low. Initial claims have moved up, but they’re pretty stable, and they’re historically not high at all. So the total scope of the data suggests a normalizing labor market, and, again, we are carefully watching to see that that continues to be the case.

Question (Amara Omeokwe, Bloomberg): Thank you, Chair Powell. Amara Omeokwe with Bloomberg. There seems to be quite a difference between what the anecdotal data are telling us, such as the very recent downbeat Beige Book, and the hard data. Do you take those anecdotes seriously— that is, that the economy and labor market are cooling much more rapidly than what’s shown in the data?
Answer: So I do take that seriously, and the Beige Book is great. What’s even greater is hearing the Reserve Bank presidents come in and talk about their conversations with, with businesses and business leaders and workers and people in the nonprofit sector in their Districts. But I’ll tell you, it’s a pretty—the picture is, is not one of a slowing or, you know, a really bad economy. It’s one of there are spots of weakness, and there are regions where growth is stronger than other regions, but, overall, it’s—again, look at the aggregate data. The aggregate data is—particularly PDFP, private domestic final purchases—is 2.6 percent, and that’s a good indicator of private—of private demand. So we listen to all of that, and it does, does—I think it’s important to listen to anecdotal data and not just look at the aggregate data. Especially, you know, it’s very hard—GDP data can be volatile quarter to quarter. So it’s just hard to measure economic activity. There are a lot of—it’s just difficult to do. So I look at both, but I wouldn’t say that the—that the anecdotal data is uniformly downbeat. It’s more mixed.

Question (Jo Ling Kent, CBS News): Just a quick follow-up—do your economic forecasts and models take into account the two very different economic plans of these two presidential candidates, Harris and Trump, and, if so, how?
Answer: No. We do not do that. We absolutely do not do that. We don’t— we don’t know who’s going to win. We don’t know what they’re going to do. We don’t act as though we know, and we just can’t do that, you know? We basically—we have our forecast. We’re not—we can run simulations of different potential policies, but we would never try to make policy decisions based on the outcome of an election that hasn’t happened yet. We would just—that would just be a line we would never cross. You know, we’re a nonpolitical agency. We don’t want to be involved in any—in politics in any way, so we wouldn’t do that.

Question (Nicholas Jasinski, Barron's): Thank you, Chair Powell. Nicholas Jasinski from Barron’s Magazine. There hasn’t been a dissenting vote on an interest rate decision in some time. If the data do evolve as you expect, if you do have more confidence by the September meeting, do you get the sense that there will be a unanimous vote on an interest rate move in September? Basically, are there meaningful differences in Committee members’ assessments of how much more confidence is needed?
Answer: So there’s—there are always meaningful differences. There are. And, you know, we talk a lot before, during, and after the meeting. We do have a very robust discussion of these things. You’re right that in, in most cases, people, if they feel heard and they feel that they’ve—that their position has been given serious consideration, for most people, most of the time, that’s going to be enough. There are dissents. That’s fine. You know, no one has a veto. No single person has a veto, so it just is a question of, who will vote for and against? We’ve had—we’ve had, you know, dissents. We haven’t had so many during the pandemic era, and it just may be that we, we felt more united because we felt under a lot of pressure to get things right, but before the pandemic, we had plenty of dissents. And dissents happen. It’s part of the process. There’s nothing wrong with dissents, and if it happens, it happens.

Question (Jean Yung, MNI): Hello. Jean Yung with MNI Market News. Is a 50 basis point cut as a first cut at all likely or even on the table? Thank you.
Answer: You know, I don’t want to say—I don’t want to be really specific about what we’re going to do, but that’s, that’s not something we’re thinking about right now. Of course, we haven’t made any decisions at all as of today.

Question (Jennifer Schonberger, Yahoo Finance): Thank you, Chair Powell. Jennifer Schonberger with Yahoo Finance. Not to get into the minutes, but you said there was a real discussion today for moving at this meeting. I’m curious if you could provide some more color on the nature of the discussion today at the meeting about a possible rate cut as early as September.
Answer: Well, so, you know, the way the meeting is set up, the first day there’s a discussion of financial stability because it’s every other meeting we have that, and then we have an opportunity to comment on that. Then we have an economic go-round. And then, this morning, we have the monetary policy go-round. And I think in people’s economic or in their monetary policy go-round, people express their views about this, and, you know, there’s a range of views. People—as you will know from the speeches that they give—people have different ways of thinking about the economy. And so, in the minutes, we’ll lay this out in a much—in a much better way than I can do off the cuff, but there’s a range of perspectives. And, you know—but I do think that we are, we’re a consensus-driven organization. People come together. This was a unanimous—a unanimous decision. And, at the end, everyone, everyone supported the outcome—not just the voters, but everyone. So I would also say, some people examined the possibility, you know, the case for moving at this meeting, but, overwhelmingly, the sense of the Committee was not at this meeting but as soon as the next meeting, depending on how the data come in.

Question (Jennifer Schonberger, Yahoo Finance): But there is a growing sense of confidence that you could move at the next meeting— —assuming inflation comes?
Answer: Well, assuming that the totality of the data supports such an outcome. No question. That’s, that is the case, as I mentioned. We think that the time is, is— it’s approaching, and if we do get the data that we—that we hope we get, then a reduction in our policy rate could be on the table at the September meeting.

Question (Nancy Marshall-Genzer, Marketplace): And have the chances of a hard landing increased?
Answer: So I, I don’t know whether they’ve increased. I think they’re low. I think this is—you don’t see any reason to think that this economy is either overheating or sharply weakening. That’s just not in the data right now. What’s in the data right now is an economy that’s growing at a—at a solid pace, a labor market that has cooled off, but, nonetheless, inflation—sorry, unemployment is low. The data overall show a strong labor market. And so that’s, that’s really what you see. It’s not—it’s neither an overheating economy, nor is it a sharply weakening economy. It’s, it’s kind of what you would want to see, but, of course, the job is never done. You know, we’re, we’re watching to see, you know, which way the economy heads. And I think we’re—if we are to respond to weakness, we’re certainly, you know, well equipped to do that. But that’s not what we’re seeing. What we’re seeing is strong economic activity and, you know, a good labor market and inflation coming down.

Question (Jeff Cox, CNBC): Thank you, Mr. Chairman. I’m going to change gears on you just a little bit from all of the rate talk and whatnot. With FedNow being in the books for a little over a year, there hasn’t been a whole lot of talk about central bank digital currency and wondering if you could give us an update on where things are with that. Is that considered a dead issue now? Is it still something that’s being discussed within the Committee, and what, what’s happening with that?
Answer: It’s not something that comes up at all with the—in the FOMC. So, more broadly, digital finance is an area that’s having—that has really significant implications for payments generally, instant payments. And, you know, it’s something that’s going to really change the way—it’s going to make more efficient and, hopefully, safer and all those things— the way payments are made around the world. And so we have people who are researching that and trying to keep up to speed, because we play an important role in the payments sector, both as a convener and as an operator, too. In terms of a CBDC, there’s really nothing new going on. There’s not much going on at all. We’re not—we don’t have the authority to issue a CB—a retail CBDC that’s available to the public. We’re not seeking that authority. So what we’re doing is keeping up with—keeping up with developments there. Pretty much every major central bank in the world is at least doing, doing that. Some of them are actually seriously looking at implementing a CBDC. We’re really not. We’re really just evaluating, you know, the story and what’s happening out there. So I think it’s work that we need to be doing, which could be very beneficial down the road, but we don’t have—on a CBDC, we don’t have any plan to. We would need to go to Congress, and we have no plan to do that. We’re not—no one here has decided that we think it’s a good idea yet. Thank you.