Thursday, June 13, 2024

Jerome Powell’s June 12, 2024 Press Conference – Notable Aspects

On Wednesday, June 12, 2024 FOMC Chair Jerome Powell gave his scheduled June 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 June 12, 2024, with the accompanying “FOMC Statement” and “Summary of Economic Projections” (pdf) dated June 12, 2024.

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.  We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures.  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 1.3 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, grew at 2.8 percent in the first quarter, nearly as strong as the second half of 2023.  Growth of consumer spending has slowed from last year’s robust pace but remains solid.  And investment in equipment and intangibles has picked up from its anemic pace last year.  Improving supply conditions have supported resilient demand and the strong performance of the U.S. economy over the past year.  In our Summary of Economic Projections, Committee participants generally expect GDP growth to slow from last year’s pace, with a median projection of 2.1 percent this year and 2.0 percent over the next two years.

also:

Inflation has eased notably over the past two years but remains above our longer-run goal of 2 percent.  Total PCE prices rose 2.7 percent over the 12 months ending in April; excluding the volatile food and energy categories, core PCE prices rose 2.8 percent.  The Consumer Price Index, which came out this morning and tends to run higher than the PCE price index, rose 3.3 percent over the 12 months ending in May, and the core CPI rose 3.4 percent.  The inflation data received earlier this year were higher than expected, though more recent monthly readings have eased somewhat.  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.  The median projection in the SEP for total PCE inflation is 2.6 percent this year, 2.3 percent next year, and 2.0 percent in 2026.

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

JONNELLE MARTE. Hi, Chair Powell. Jonnelle Marte from Bloomberg. As you noted, the labor market is now in many ways back to where it was before the pandemic. I wondered if you could comment on how officials are viewing that? So, do you think that there still needs to be more cooling in the labor market to bring inflation all the way down to 2 percent or is there any sense that maybe the labor market is more vulnerable now to higher rates now that many of those imbalances have eased? 

CHAIR POWELL. Sure, so by so many measures, the labor market was kind of overheated two years ago. And we’ve seen it gradually move back into much better balance between supply and demand. So, what have we seen? We’ve seen labor force supply come up quite a bit through immigration and through recovering participation. That’s ongoing, mostly now through the emigration channel. But still, we’ve had some increases in prime age labor force. In terms of on the demand side, you know, we’ve seen quits moving down, we’ve seen job openings moving down, we’ve seen wage increases moving from very, very high levels a couple of years ago back down to more sustainable levels. We have seen unemployment creep up now sixth-tenths over the course of a year or so very, very gradually. So, you put all that together, what you have is still low unemployment, still 4 percent unemployment, historically low. But it’s moved up a little bit, it’s softened a bit and that’s an important statistic. But more than that, you’ve got strong job creation, you have payroll jobs still coming in strong, even though there’s an argument that they may be a bit overstated but still they’re strong. So, that’s what we see. We watch the labor market, of course, and the economy as a whole, but labor market very carefully and that’s what we see. We see gradual cooling, gradual moving toward better balance. We’re monitoring it carefully for signs of something more than that, but we really don’t see that.

JONNELLE MARTE.  As a quick follow up. The surveys that make up the jobs report are showing different tales. There’s been some divergence, especially we saw in the last report that we got on Friday. So, how do you interpret that and how does it change your view on the labor market? 

CHAIR POWELL.  So, sometimes you can’t reconcile the differences, you just have to have to look at it and try to understand. And that’s why it always makes sense to look at a series, you know, in three, six, and 12 months of things rather than just one report. But you’re right to point to the last report where there was your job losses and household survey, job gains big job gains in the establishment survey. So, I mean, we’re left with ambiguous results, and we have to deal with that uncertainty around data. Nonetheless, the overall picture is one of a strong and gradually cooling, gradually rebalancing labor market. Job openings, while they’ve come way down, are still, you know, greater than the number of unemployed people. The jobs workers’ gap is still a significantly positive number greater than it was before the pandemic. So overall, we’re looking at what was still a very strong labor market, but not the superheated labor market of two years ago, or even one year ago. 

also:

MICHAEL MCKEE.  Michael McKee from Bloomberg Radio and Television. The base case of the Committee seems to be that there is going to be at least one rate cut this year, but your growth forecast doesn’t see any slowdown in the rest of the year nor does the unemployment forecast see any significant weakening of the labor market. And your inflation forecasts, basically, average out to no change. So, if at the end of the year, there is no change from conditions now, why would you anticipate cutting rates? What would be the point for a rate cut?

CHAIR POWELL.  Well, we think policy is restrictive. And we think, ultimately, that if you just set policy at a restrictive level, eventually you will see real weakening in the economy. So, that’s always been the thought is that, you know, since we raise rates this far, we’ve always been pointing to cuts at a certain point. Not to eliminate the possibility of hikes, but, you know, no one has that as their base case. So, no one on the Committee does. But so, that’s, you know, that’s how we think about it. And that’s what we’ve been getting. That’s what we’ve been getting is good progress on inflation, with growth at a good level, and with a strong labor market. Now, ultimately, we think rates will have to come down to continue to support that. But, so far, they haven’t had to. And, you know, that’s why we’re watching so carefully for signs of weakness. We don’t really see that. We kind of see what we wanted to see, which was gradual cooling and demand, gradual rebalancing in the labor market while we’re continuing to make progress on inflation. So, we’re getting good results here. 

MICHAEL MCKEE.  But the follow up, is there any kind of concern for the housing industry or financial stability banks in leaving rates where they are for too long at this point?

CHAIR POWELL.  On housing, you know, the housing situation is a complicated one. And you can see that’s a place where rates are really having a significant effect. I mean, ultimately, the best thing we can do for the housing market is to bring inflation down so that we can bring rates down, so that the housing market can continue to normalize. There will still be a national housing shortage as there was before the pandemic. There will still be one, but the distortions that we see now with lock-ins and things like that, low mortgages. In terms of banks, the banking system has been, you know, solid, strong, well capitalized, lending. You know, we’ve seen good performance by the banks. We had the turmoil earlier last year but, you know, banks have been focusing on bringing up their liquidity, bringing up their capital, and having a risk management plans in place. So, the banking system, you know, seems to be in good shape.

also:

JO LING KENT. Hi, Chair Powell. Thank you for taking our questions. I’m Jo Ling Kent with CBS News. What’s your message to Americans who are seeing encouraging economic data, but don’t feel good about this economy? 

CHAIR POWELL. You know, I don’t think anyone knows, has a definitive answer why people are not as happy about the economy as they might be. And we don’t tell people how they should think or feel about the economy. That’s not our job. We, you know, people experience what they experience. All I can tell you is what the data show, which is, we’ve got an economy that’s growing at a solid pace, we’ve got a very strong labor market with unemployment at 4 percent. It’s been a long time since we’ve had, you know, a long stretch of time with unemployment at or below 4 percent, very long time. We had a period of high inflation. Inflation has come down really significantly and we’re doing everything we can to, you know, to bring that inflationary episode fully to a halt and fully restore price stability. We’re confident that we’ll get there. And, in the meantime, you know, it’s going to be painful for people but the ultimate pain would be a period of, a long period of high inflation. It is people who, lower income people who are at the margins of the economy who have the worst experience, who experience the most pain from inflation. So, you know, it’s for those people, for all Americans, but particularly for those people that we’re doing everything we can to bring inflation back down under control. 

JO LING KENT. As just a quick follow up here, you’ve indicated one interest rate cut sometime this year. And I know you don’t have a crystal ball up there but a lot of people are watching and see, you know, borrowing money remains very expensive. For everybody who’s out there waiting on a rate cut, about when can consumers expect some relief? 

CHAIR POWELL. Well, you know, I don’t have a precise date for you. But what we said is that we want to make sure that we’re confident that inflation is actually moving back down to 2 percent. And when we are, then we can look at loosening policy. So, having that kind of confidence that inflation will be at 2 percent, it just pays benefits to the whole economy to all Americans for a long period of time. We had that period for a very long time, we very much want to get back to a place where people can not think about inflation. It’s just not a concern in the everyday economic decisions that they make. We were there for a long time and our goal is to get back to that place. And we’ve made good progress and we’re just we’re in the phase now of just, you know, sticking with it until we get it done. 

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 5421.86 as this post is written

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