On Wednesday, September 18, 2024 FOMC Chair Jerome Powell gave his scheduled September 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 September 18, 2024, with the accompanying “FOMC Statement” and “Summary of Economic Projections” (pdf) dated September 18, 2024.
Excerpts from Chair Powell’s opening comments:
As inflation has declined and the labor market has cooled, the upside risks to inflation have diminished and the downside risks to employment have increased. We now see the risks to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risks to both sides of our dual mandate.
In light of the progress on inflation and the balance of risks, at today’s meeting the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point, to 4-3/4 percent to 5 percent. This 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 begin the process of moving toward a more neutral stance. We are not on any preset course. We will continue to make our decisions meeting by meeting.
We know that reducing policy restraint too quickly could hinder progress on inflation. At the same time, reducing restraint too slowly could unduly weaken economic activity and employment. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
Excerpts of Jerome Powell’s responses as indicated to various questions:
JEANNA SMIALEK. Hi Chair Powell, Jeanna Smialek, New York Times. Thanks for taking our questions. You and your colleagues in your economic projections today see the unemployment rate climbing to 4.4 percent and staying there. Obviously, historically when the unemployment rate climbs that much over a relatively short period of time, it doesn’t typically just stop, it continues increasing. And so I wonder if you can walk us through why you see the labor market stabilizing, sort of what’s the mechanism there? And what do you see as the risks?
CHAIR POWELL. So, again, the labor market is actually in solid condition. And our intention with our policy move today is to keep it there. You can say that about the whole economy. The U.S. economy is in good shape. It’s growing at a solid pace, inflation is coming down, the labor market is in a strong pace, we want to keep it there. That’s what we’re doing.
also:
COLBY SMITH. Thank you, Colby Smith with the Financial Times. Just following up on Jeanna’s question on rising unemployment. Is it your view that this is just a function of a normalizing labor market amid improved supply, or is there anything to suggest that something more concerning perhaps is taking place here, given that other metrics of labor demand have softened too? And I guess, in direct follow up of Jeanna’s, do you not, why should we not expect a further deterioration in labor market conditions if policy is still restricted?
CHAIR POWELL. So I think what we’re seeing is clearly labor market conditions have cooled off by any measure, as I talked about in Jackson Hole, and but they’re still at a level, the level of those conditions is actually pretty close to what I would call maximum employment. So you’re close to mandate, maybe at mandate, on that. So, what’s driving it? Clearly, clearly payroll job creation has moved down over the last few months, and this bears watching. Meant by many other measures, the labor market has returned to or below 2019 levels, which was a very good strong labor market, but this is more sort of 2018, ’17. So, the labor market bears close watching and we’ll be giving it that. But ultimately, we think, we believe, with an appropriate recalibration of our policy that we can continue to see the economy growing and that will support the labor market. In the meantime, if you look at the growth in economic activity data; retail sales data that we just got, second quarter GDP, all of this indicates an economy that is still growing at a solid pace. So that should also support the labor market over time. So, but again, we’re– it bears watching and we’re watching.
COLBY SMITH. And just on the point about starting to see rising layoffs, if that were to happen, wouldn’t the Committee already be too late in terms of avoiding a recession?
CHAIR POWELL. So we’re, that’s– our plan of course has been to begin to recalibrate and as you know, we’re not seeing rising claims, we’re not seeing rising layoffs, we’re not seeing that and we’re not hearing that from companies that that’s something that’s getting ready to happen. So we’re not waiting for that, because there is– there is thinking that the time to support the labor market is when it’s strong, and not when we begin to see the layoffs. There’s some lore on that. So that’s the situation we’re in. We have, in fact, begun the cutting cycle now and we’ll be watching, and that’ll be one of the factors that we consider. Of course, we’re going to look at the totality of the data as we make these decisions meeting by meeting.
also:
EDWARD LAWRENCE. Thanks Chair Powell, Edward Lawrence of FOX Business. So we’ve heard some speculation that you may be going with the federal funds rate to 3 and 1/2, maybe under 4 percent, as basically an entire generation that has experienced zero or near zero federal funds rate, and some think we’re heading in that direction again, what’s the likelihood that cheap money is now the norm?
CHAIR POWELL. So this is a question, and you mean after we get through all of this? It’s just, great question that we just, we can only speculate about. Intuitively most, many, many people anyway, would say we’re probably not going back to that era where there were trillions of dollars of sovereign bonds trading at negative rates, long-term bonds trading at negative rates. And it looked like the neutral rate was, might even be negative, so and it was, people were issuing debt at negative rates. It seems that’s so far away now, my own sense is that we’re not going back to that. But honestly, we’re going to find out. But it feels, it feels to me, and that the neutral rate is probably significantly higher than it was back then. How high is it? I don’t, I just don’t think we know. It’s, again, we only know it by its works.
also:
JO LING KENT. Thank you, Chair Powell, I’m Jo Ling Kent with CBS News. My first question is; very simply, what message are you trying to send American consumers, the American people, with this unusually large rate cut?
CHAIR POWELL. I would just say that the U.S. economy is in a good place, and our decision today is designed to keep it there. More specifically, the economy is growing at a solid pace, inflation is coming down closer to our 2 percent objective over time, and the labor market is still in solid shape, so our intention is really to maintain the strength that we currently see in the U.S. economy. And we’ll do that by returning rates from their high level, which has really been the purpose of which has been to get inflation under control. We’re going to move those down over time to a more normal level over time.
JO LING KENT. Just have a follow-up to that, listening to you talk about inflation moving meaningfully down to 2 percent, is the Federal Reserve effectively declaring a decisive victory over inflation and rising prices?
CHAIR POWELL. No. We’re not. So, inflation, what we say is we want inflation, the goal is to have inflation move down to 2 percent on a sustainable basis. And we’re not really, we’re close, but we’re not really at 2 percent and I think we’re going to want to see it be around 2 percent and close to 2 percent for some time, but we’re certainly not doing, we’re not saying mission accomplished or anything like that. But I have to say though, we’re encouraged by the progress that we have made.
also:
JENNIFER SCHONBERGER. Thank you Chair Powell, Jennifer Schonberger with Yahoo Finance. You said earlier that the decision today reflects with appropriate recalibration strength in labor market that could be maintained in the context of moderate growth even though the policy statement says you view the risks to inflation and job growth as roughly balanced. Given what you’ve said though today, I’m curious, are you more worried about the job market and growth than inflation? Are they not roughly balanced?
CHAIR POWELL. No, I think, I think and we think they are now roughly balanced. So if you go back for a long time, the risks were on inflation, we had a historically tight labor market, historically tight. There was a severe labor shortage. So very hot labor market and we had inflation way above target. So, that said to us, concentrate on inflation, concentrate on inflation. And we did for a while and we kept at that, that the stance that we put in place 14 months ago was a stance that was focused on bringing down inflation. Part of bringing down inflation though is cooling off the economy and a little bit cooling off the labor market. You now have a cooler labor market, in part because of our activity. So, what that tells you is it’s time to change our stance. So we did that. The sense of the change in the stance is that we’re recalibrating our policy over time to a stance that will be more neutral. And today was, I think we made a good strong start on that. I think it was the right decision, and it think it should send a signal that we, that we’re committed to coming up with a good outcome here.
JENNIFER SCHONBERGER. Is the economy more vulnerable to a shock now that could tip it into recession?
CHAIR POWELL. I don’t think so. I don’t, there’s– as I look, well, let me look at it this way, I don’t see anything in the economy right now that suggests that the likelihood of a recession, sorry, of a downturn is elevated. Okay? I don’t see that. You see growth at a solid rate, you see inflation coming down, and you see a labor market that’s still at very solid levels. So, I don’t really see that, no. Thank you. Thank you.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 5718.66 as this post is written
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