On Thursday, November 7, 2024 FOMC Chair Jerome Powell gave his scheduled November 2024 FOMC Press Conference. (link of video and related materials)
Below are Jerome Powell’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript. These comments are excerpted from the “Transcript of Chair Powell’s Press Conference“ (preliminary)(pdf) of November 7, 2024, with the accompanying “FOMC Statement.”
Excerpts from Chair Powell’s opening comments:
Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. We see the risks to achieving our employment and inflation goals as being roughly in balance, and we are attentive to the risks to both sides of our mandate.
At today’s meeting the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point, to 4-1/2 to 4-3/4 percent. This further recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we move toward a more neutral stance over time.
Excerpts of Jerome Powell’s responses as indicated to various questions:
NICK TIMIRAOS. Chair Powell, Nick Timiraos from the Wall Street Journal. Roughly one year ago when the ten-year Treasury was flirting with five percent and three-year border trades were near eight percent, you noted how higher borrowing costs if they were sustained could weigh on economic activity. Given that you’ve said you believe policy is restrictive and the Fed is now dialing back that restriction, are the growth risks presented by higher US Treasury yields today any different from those you identified one year ago when inflation was still meaningfully above your target?
CHAIR POWELL. So I would just say this, yes we’ve watched the run-up in bond rates and it’s nowhere where it was, of course, a year ago. I guess the — you know, the long-run rates are well below that level. So we’re watching that, things have been moving around, and we’ll see where they settle. I think it’s too early to really say where they settle. Ultimately — I’m sure we’ve all read these decompositions of what, you know — and I certainly have, but it’s not really our job to provide our specific decomposition. I will say, though, that it appears that the moves are not principally about higher inflation expectations, they’re really about a sense of more likely to have stronger growth and perhaps less in the way of downside risks. So that’s what they’re about. You know, we do take financial conditions into account. If they’re persistent and if they’re material, then we’ll certainly take them into account in our policy. But I would say we’re not at that stage right now, it’s just something that we’re watching. And again, these things don’t really have mainly to do with Fed policy, but to do with other factors in the economy.
also:
STEVE LIESMAN. If I could just follow up on Nick’s question. Are the current rates something you feel like you need to lean against in that they go against the direction of policy by being — adding restriction to the economy, or do you just take them as a given or perhaps a signal that you should do less?
CHAIR POWELL. I — look, I just think — the first question is how long will they be sustained? If you remember, the five percent ten-year people were drawing massively important conclusions only to find, you know, three weeks later that the ten-year was 50 basis points lower. So, you know, it’s material changes and financial conditions that last, that are persistent that really matter. And we don’t know that about these. What we’ve seen so far, you know, we’re watching it, we’re reading — you know, we’re doing the decompositions and reading others, but right now it’s not a major factor in how we’re thinking about things.
also:
MICHAEL MCKEE. Michael McKee from Bloomberg Radio and Television. You talk a lot about what the data are telling you and how you are dependent on the data. But in terms of forward-looking assessments of the economy, what are you hearing from CEOs or other officials around the country? What did you hear today from the regional bank presidents about what companies and consumers think about where the economy is going from here, rather than looking backwards? And does that match up with what your forecasts have been and what you think the appropriate policy path should be?
CHAIR POWELL. So it’s hard to characterize a, you know, really interesting set of discussions we had and of course you’ll see them in the minutes in three weeks. But I would say this, I think, you know, the comments from our reserve bank colleagues and from the CEOs that they talk to are pretty constructive on the economy right now; pretty constructive, feeling that the labor market is, you know, back to normal to the point where it’s no longer that much of a discussion topic in their world, whereas two years ago it was all they were talking about. So they feel like the labor market is in balance. People feel good about where the economy is. Demand is obviously pretty strong. And you know, you’re seeing, what, 2.8 percent growth in the third quarter estimated, maybe the year is two and a half. This is — you know, this is a strong economy. It’s actually remarkable how well the U.S. economy has been performing with, you know, strong growth, a strong labor market, inflation coming down. We’re, you know, really performing better than any of our global peers. And I think that is reflected in what you hear from — what I hear people hear from CEOs. I don’t get to talk to a lot of CEOs in my job, but I hear what others summarize from those. And of course, I hear the reserve bank presidents do a lot of that, and it’s pretty constructive overall. Now, that’s not to say there are areas of caution and things like that, but ultimately, overall, pretty positive.
also:
SIMON RABINOVITCH. Thank you, Chair Powell, Simon Rabinovitch with The Economist. I know you don’t want to share your decomposition of bond yields, but if you look at the breakevens, it is clear that longer-term inflation expectations do seem to have risen up at about 2.5 percent, for example, on the five-year. That’s up half a point from when you cut in September. Do you have any concern at all that longer-term inflation expectations are deanchoring, or put another way, are anchoring at a slightly higher level? Thanks.
CHAIR POWELL. So we would be concerned if we saw — if we thought we saw longer-term inflation expectations anchoring at a higher level. That’s not what we’re seeing. We’re still seeing between surveys and market readings broadly consistent with — you know, I was — I looked at the five-year, five-year earlier today and it’s probably moved. But it’s just not — it’s just — it’s kind of right where it’s been, and also it’s pretty close to — consistent with two percent PCE inflation. So that’s one that’s been a traditional one that we look at a lot. But overall, expectations seem to be — and have really have throughout this in a place that’s consistent with two percent inflation. But you’re right to say we watch that very carefully, and we will not allow inflation expectations to drift upward. But that’s really why we reacted so sharply back in 2022 was to avoid that.
KELLY O’GRADY. Hi, Chair Powell, Kelly O’Grady, CBS News. We just talked about what you’ve heard from business leaders on the economy. But many average Americans are still not feeling the strength of the economy in their wallets. So what’s your message to them on when they might expect relief?
CHAIR POWELL. So you’re right that we — you know, we say that the economy is performing well, and it is, but we also know that people are still feeling the effects of high prices, for example. And we went through — the world went through a global inflation shock, and inflation went up everywhere. And you know, it stays with you because the price level doesn’t come back down. So what that takes is it takes some years of real wage gains for people to feel better. And that’s what we’re trying to create. And I think we’re well on the road to creating that. Inflation has come way down, the economy is still strong here, wages are moving up but at a sustainable level. So it’s just — I think what needs to happen is happening, and for the most part has happened. But it will be some time before people, you know, regain their confidence and feel that. And you know, we don’t tell people how to feel about the economy, we respect — completely respect what they’re feeling. Those feelings are true, they’re accurate. We don’t question them, we — you know, we respect them.
also:
JEAN YUNG. Hi, Chair Powell, Jean Yung with MNI Market News. I wanted to go back to a comment that you had made about Americans being quite unhappy about the cumulative price level rises over the past few years, even though now inflation is back on a path to two percent. Would it be appropriate for the Fed to undershoot for a while on its inflation goal under the average inflation targeting regime so people have a chance to catch up?
CHAIR POWELL. No, that’s not the way our framework works. We’re aiming for inflation at two percent. We’re — we do not have — we did not think it would be appropriate to deliberately undershoot. And you know, part of the problem there is that low inflation can be a problem, too, in a way. But that’s not part of our framework, and it’s not something we’re going to be looking at in our framework review. Thank you very much.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 5998.04 as this post is written
