Thursday, June 20, 2019

Jerome Powell’s June 19, 2019 Press Conference – Notable Aspects

On Wednesday, June 19, 2019 FOMC Chairman Jerome Powell gave his scheduled June 2019 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 Chairman Powell’s Press Conference“ (preliminary)(pdf) of June 19, 2019, with the accompanying “FOMC Statement” and “Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, June 2019.“
From Chairman Powell’s opening comments:
CHAIR POWELL.  Good afternoon, and welcome.  My colleagues and I have one overarching goal: to sustain the economic expansion, with a strong job market and stable prices, for the benefit of the American people.   
At the Federal Open Market Committee (FOMC) meeting that concluded today, we maintained our policy interest rate, but made some significant changes to our statement.  Since the beginning of the year, we have judged that our current policy stance was broadly appropriate, and that we should be patient in assessing the need for any changes.  In light of increased uncertainties and muted inflation pressures, we now emphasize that the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its 2 percent objective.
I’d like to step back and review how the changing economic and financial picture brings us to today’s decision.  So far this year, the economy has performed reasonably well, with solid fundamentals supporting continued growth and strong employment.  Inflation has been running somewhat below our objective, but we have expected it to pick up, supported by solid growth and a strong job market.  Along with this favorable picture, we have been mindful of some ongoing crosscurrents, including trade developments and concerns about global growth.  At the time of our last FOMC meeting, which ended on May 1, there was tentative evidence that these crosscurrents were moderating.  The latest data from China and Europe were encouraging, and there were reports of progress in trade negotiations with China.  Our continued patient stance seemed appropriate, and the Committee saw no strong case for adjusting our policy rate.
In the weeks since our last meeting, the crosscurrents have reemerged.  Growth indicators from around the world have disappointed on net, raising concerns about the strength of the global economy.  Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture report heightened concerns over trade developments.  These concerns may have contributed to the drop in business confidence in some recent surveys and may be starting to show through to incoming data.  Risk sentiment in financial markets has deteriorated as well. 
Against this backdrop, inflation remains muted.  
Jerome Powell’s responses as indicated to the various questions:
NICK TIMIRAOS. Nick Timiraos, Wall Street Journal.  Chair Powell, would you consider a rate cut today—specifically was it one of the options, the policy options in the Teal Book?  And is the Committee considering moving given all the uncertainty you addressed moving—changing its policy before the next meeting? 
CHAIR POWELL. So, the Committee had, you know, our usual long discussion of global and domestic economic and financial conditions and then spent this morning talking about monetary policy.  And I came to the view that I expressed to you, which is that we’re going to be monitoring the crosscurrents, and the other items that we’ve mentioned but that we’d like to see more going forward.  Particularly, we’d like to see whether these risks continue to weigh on the outlook. 
So generally, as I mentioned, many on the Committee do see a strengthened case, eight of those strengthen case for cutting rates.  Eight actually wrote down rate cuts, a number of others see that the case is strengthened.  But the Committee wanted to see more, as I mentioned. And I also mentioned that some of these developments have been quite recent advantage.  And so, we do expect that we’ll be learning a lot more on all of these issues in the near term.  And that’s our focus. 
PAUL KIERNAN. Thank you Chairman Powell, Paul Kiernan from Dow Jones.  If the most, according to the dot plot, I mean if the most likely case is that you will have to cut rates in the next 18 months, and given some of the concerns about, you know, policy, needing to react sooner and more aggressively, what would have been the downsides to cutting rates now?  Why not just cut them now? 
CHAIR POWELL. So, why not now?  And I would say that there was not much support for cutting rates now at this meeting.  There was, as you see a number of people wrote down rate cuts.  But all of those but apparently one felt that it would be better to see more to—before moving.  And I gave a couple of reasons why that is the case.  
First is just the fact that some of these developments are so recent that we want to see whether they’ll sustain.  So, we felt that it would be better to get a clearer picture of things, and then we would in fact learn a lot about these developments in the near term.  Ultimately, the question we’re going to be asking ourselves is, are these risks going to be continuing to weigh on the outlook?  And we will act as needed, including promptly if that’s appropriate and use our tools to expand—to sustain the expansion.
MICHAEL MCKEE. Michael McKee, Bloomberg Television and radio.  If consumer spending is solid and business investment has been slowed by uncertainty, I’d like to get your thinking on what a Fed rate cut would do?  Have you modeled the additional growth and inflation you might get from a rate cut?  Can you identify any sectors that would benefit from a lower cost of capital, or is this really about the Fed being the only game in town? 
CHAIR POWELL. Well, we have the tools we have and we’re committed and sworn to use them to support economic activity, and they do support economic activity through a number of channels that are reasonably well understood.  Some more directly tied to interest rates than others.  But we do generally believe that that our interest rate policy can support demand and support business investment as well.  And so, we will use those tools and use them as we see as appropriate to achieve our objective, which really are to sustain this expansion, and I would just make a note of that.  
The reason why we say sustain the expansion is, you’re seeing now for the first time, you know, communities that are being brought into the benefits of this expansion that hadn’t been earlier.  You’re 10 years deep into this and that’s something we heard quite a lot at the conference in Chicago on the review, I just would say that’s why we think—it’s one of the reasons why we think it’s so important to sustain the expansion and keep it going, because we really are benefiting groups that haven’t seen, you know, this kind of prosperity in a long time.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2944.83 as this post is written

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