Thursday, May 2, 2024

Jerome Powell’s May 1, 2024 Press Conference – Notable Aspects

On Wednesday, May 1, 2024 FOMC Chair Jerome Powell gave his scheduled May 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 Chairman Powell’s Press Conference“ (preliminary)(pdf) of May 1, 2024, with the accompanying “FOMC Statement.”

Excerpts from Chair Powell’s opening comments:

Today, the FOMC decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings, though at a slower pace.  Our restrictive stance of monetary policy has been putting downward pressure on economic activity and inflation, and the risks to achieving our employment and inflation goals have moved toward better balance over the past year.  However, in recent months inflation has shown a lack of further progress toward our 2 percent objective, and we remain highly attentive to inflation risks.  I will have more to say about monetary policy after briefly reviewing economic developments.

Recent indicators suggest that economic activity has continued to expand at a solid pace.  Although GDP growth moderated from 3.4 percent in the fourth quarter of last year to 1.6 percent in the first quarter, Private Domestic Final Purchases, which excludes inventory investment, government spending and net exports, and usually sends a clearer signal on underlying demand, was 3.1 percent in the first quarter, as strong as the second half of 2023.  Consumer spending has been robust over the past several quarters, even as high interest rates have weighed on housing and equipment investment.  Improving supply conditions have supported resilient demand and the strong performance of the U.S. economy over the past year.


Inflation has eased notably over the past year but remains above our longer-run goal of 2 percent.  Total PCE prices rose 2.7 percent over the 12 months ending in March; excluding the volatile food and energy categories, core PCE prices rose 2.8 percent.  The inflation data received so far this year have been higher than expected.  Although some measures of short-term inflation expectations have increased in recent months, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.  

Excerpts of Jerome Powell’s responses as indicated to various questions:

JEANNA SMIALEK.  Thanks for taking our question, Chair Powell. I wonder, obviously Michelle Bowman has been saying that there is a risk that rates may need to increase further, although it’s not her baseline outlook, I wonder if you see that as a risk as well, and if so, what change in conditions would merit considering raising rates at this point?

CHAIR POWELL.  So I think it’s unlikely that the next policy rate move will be a hike. I’d say it’s unlikely. You know, our policy focus is really what I just mentioned, which is how long to keep policy restrictive. You ask what would it take, I think we’d need to see persuasive evidence that our policy stance is not sufficiently restrictive to bring inflation sustainably down to 2 percent over time. That’s not what we think we’re seeing, as I mentioned, but something like that is what it would take. We’d look at the totality of the data and answer that question that would include inflation, inflation expectations, and all the other data too.

JEANNA SMIALEK.  Would that be a reacceleration in inflation? 

CHAIR POWELL.  Well, I think again, the test, what I’m saying is, if we were to come to that conclusion that policy weren’t tight enough to achieve that. So it would be the totality of all the things we’d be looking at. It could be expectations, it could be a combination of things, but if we reach that conclusion and we don’t see evidence supporting that conclusion, that’s what it would take I think for us to take that step. 


CRAIG TORRES.  Craig Torres from Bloomberg. Two questions, first simple one; given the run of data since March, has the probability in your mind of no cuts this year increased or stayed the same? That’s the first question. Second question; Chair Powell, you joined the Board in 2012, and I’m sure you remember as I do, what the jobless recovery was like, lawyers, accountants, all kinds of highly qualified people who couldn’t get jobs. And given your history there, I wonder if there’s an argument for being more patient with inflation here. We have strong productivity growth that’s helping wages grow up, go up, we have good employment, and so it seems to me there’s a lot of hysteria about inflation. I agree, nobody likes it, but is there an argument for being patient and working with the economic cycle to get it down over time? Thank you. 

CHAIR POWELL.  So on your first question, I don’t have a probability estimate for you. But all I can say is that we’ve said that we didn’t think it would be appropriate to cut until we were more confident that inflation was moving sustainably down to 2 percent, we didn’t get our confidence in that didn’t increase in the first quarter and in fact, what really happened was we came to the view that it will take longer to get that confidence. And I think there are, I think the economy has been very hard for forecasters broadly to predict its path, but there are paths to not cutting and there are paths to cutting, it’s really going to depend on the data. In terms of the employment mandate, to your point, if you go back a couple of years, our sort of framework document says that when you look at the two mandate goals, and if one of them is further away from goal than the other, then you focus on that one. You actually, it’s the time to get back there, times how far it is from the goal. And that was clearly inflation. So, our focus was very much on inflation. As, and this is what we referred to in the statement, as inflation has come down, now to below 3 percent on a 12-month basis, it’s become, we’re now focusing the other goal, the employment goal now comes back into focus. And so we are focusing on it. And that’s how we think about that. 


JENNIFER SCHONBERGER. Thank you Chair Powell, Jennifer Schonberger with Yahoo Finance. You sort of backed away from the notion that the economy would need to encounter pain for inflation to come back down. But given the sticky inflation data in the first quarter, can disinflation still happen along relatively painless path for the economy or is some softening in the labor market and the economy likely needed to bring inflation back down? 

CHAIR POWELL. So you’re right, I think we thought, and most people thought, there would have to be probably significant dislocations somewhere in the economy, perhaps the labor market, to get inflation all the way down from the very high levels it was at at the beginning of this episode. That didn’t happen, that’s a tremendous result, we’re very of course gratified and pleased that hasn’t happened. And if you look at the dynamics that enabled that, it really was this empty, that so much of the gain was from the unwinding of things that weren’t to do with monetary policy, with the unwinding of the distortions to the economy, supply problems, supply side problems and also some demand issues as well. The unwinding of those really helped inflation come down. Now, as I’ve said, I’m not giving up on that. So I think it is possible that those forces will still work to help us bring inflation down. We can’t be guaranteed that that’s true though. And so we’re trying to use our tools in a way that keeps the labor market strong and the economy strong, but also helps bring inflation back down to 2 percent sustainably. We will bring inflation down to 2 percent sustainably, we hope we can do it without significant dislocations in the labor market or elsewhere.


MARK HAMRICK. Thank you, Mark Hamrick with Bankrate. Mr. Chairman, what can you tell us about the approach that you take with your role on the sense of trying to achieve consensus, what you recently identified as a priority, while allowing for a range of views or even dissent. We don’t see many dissenting votes in the official statements, even when more spirited discussions are noted in the minutes after the fact. How do you avoid groupthink and avoid a higher risk of a policy mistake? Thank you. 

CHAIR POWELL. So I think if you listen to, and you all do, listen to my 18 colleagues on the FOMC, you’ll see that we do not lack for a diversity of voices and perspectives. We really don’t. And it’s one of the great aspects of the Federal Reserve System. We have 12 reserve banks around the country where they have their own economic staff, not the people who work here at the Board, there are different people and so each reserve bank has its own culture around monetary policy and its own approach and that kind of thing. It guarantees you a diversity of perspectives. So, I think perspectives are very diverse but, and in terms of dissents, we have dissents and a thoughtful dissent is a good thing, if someone really makes you think, that kind of thing. But all I can say from my standpoint is I try, I listen carefully to people, I try to incorporate their thinking, or do everything I can to incorporate their thinking into what we’re doing, and I think many people if they feel that’s happening, that for most people most of the time, that’ll be enough and but I’m not, I mean it’s not frowned upon or illegal or against the rules or anything like that. It just is the way things come out and I mean I think we have a very diverse group, frankly more diverse than it used to be in many dimensions, more diverse from the obvious gender and demographic ways, but also we have more people who are not PhD economists so we have people from business and law and academia, and things like that. So I think we actually do have quite a good diverse perspective. I think all of us read these stories about the lack of diversity and we look around the room and say, I don’t understand, I really don’t understand what they’re talking about. So, but I get the question though. Thank you very much.



The Special Note summarizes my overall thoughts about our economic situation

SPX at 5054.55 as this post is written

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