On Wednesday, December 18, 2024 FOMC Chair Jerome Powell gave his scheduled December 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 December 18, 2024, with the accompanying “FOMC Statement” and “Summary of Economic Projections” (pdf) dated December 18, 2024.
Excerpts from Chair Powell’s opening comments:
Recent indicators suggest that economic activity has continued to expand at a solid pace. GDP rose at an annual rate of 2.8 percent in the third quarter, about the same pace as in the second quarter. Growth of consumer spending has remained resilient, and investment in equipment and intangibles has strengthened. In contrast, activity in the housing sector has been weak. Overall, improving supply conditions have supported 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 remain solid, with a median projection of about 2 percent over the next few years.
also:
At today’s meeting, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point, to 4-1/4 to 4-1/2 percent. We have been moving policy toward a more neutral setting in order to maintain the strength of the economy and the labor market while enabling further progress on inflation. With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive. We can therefore be more cautious as we consider further adjustments to our policy rate.
Excerpts of Jerome Powell’s responses as indicated to various questions:
MICHAEL MCKEE. Michael McKee from Bloomberg Radio and Television. Even though you’ve cut rates by 100 basis points this year, we haven’t seen much change in mortgages, auto loan rates, or credit card rates. You say you’re significantly restrictive, are you running a risk that the markets are fighting against you and the economy could be more at risk of a slowdown than you anticipate?
CHAIR POWELL. So, the risks that you — sorry, the rates that you talked about are really longer-run rates and they’re affected, they are affected to some extent by Fed policy, but they’re also affected by many other things. And longer rates have actually gone up quite a bit since September, as you well know, and those are the things that drive, for example, mortgage rates more than short-term rates do. So, we look at that, but we look at all financial conditions and then we look at what’s happening in the economy, so what we see happening in the economy, again, is most forecasters have been calling for a slowdown in growth for a very long time, and it keeps not happening. So, we have, we’re now well into another year of growth it looks like, it might be 2 and 1/2 percent. Third and — second and third quarters were right about at the same level. So, the U.S. economy is just performing very, very well. Substantially better than our global peer group. And there’s no reason to think a downturn is any more likely than it usually is. So, the outlook is pretty bright for our economy. We have to stay on task though and continue to have restrictive policies so that we can get inflation down to 2 percent. We’re also going to be looking out for the labor market, we want to keep the labor market pretty close to where it is. We’re pretty close to estimates of the natural rate of unemployment, job creation is a little below the level that would keep it there, but nonetheless, close. And so that’s what our policy’s trying to achieve.
also:
NEIL IRWIN. Thanks Chair, Chair Powell. Neil Irwin from Axios. Financial markets have been very buoyant really all year, is the Committee comfortable with where financial conditions are or do you see a risk that looseness in financial conditions could undermine progress on your inflation target?
CHAIR POWELL. So we do look carefully at financial conditions of course, that’s part of what we do, but what we really look carefully at is the performance of our goal variables and how are we affecting the economy. So what we’ve seen over the course of just take the last year, we’ve seen inflation, well, over the last couple of years, come down a lot. We’ve seen the labor market cool off quite a bit. That suggests that our policy is restrictive, we can also look more directly at the parts of the economy that are affected by, that are interest sensitive like particularly housing. Housing activity is very low, and that’s partly significantly because of our policy. So we think our policy is working, it’s transmitting and it’s having the effects on our goal variables that we would want. A lot of things move financial conditions around as you know. And we don’t really control those. But I’d say we see the effects we’re hoping to see on the goal variables and the places where we’d expect to see it.
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ANDREW ACKERMAN. Happy holidays Mr. Chairman, thanks for taking our questions. I was wondering if you are satisfied with the way 2024 is ending, if you’re confident that we’ve avoided the recession that forecasters were predicting as inevitable a couple years ago.
CHAIR POWELL. I think it’s pretty clear we’ve avoided a recession. I think growth this year has been solid, it really has. PDFP, Private Domestic Final Purchases, which we think is the best indicator private demand is looking to come in around 3 percent this year. This is a really good number. Again, the U.S. economy has just been remarkable. And it’s, when we, in these international meetings that I attend, this has been a story is how well the U.S. is doing. And if you look around the world, there’s just a lot of slow growth and continued struggle with inflation. So, I feel very good about where the economy is and the performance of the economy, and we want to keep that going.
ANDREW ACKERMAN. The other thing I just wanted to ask about was the — you guys have noted that the unemployment rate is still low. However employment rates have fallen rather quickly, the prime age employment rate fell by about half a point, half a percent rather, recently. The question I guess is, do you think there’s maybe more downside momentum in the labor market than the unemployment rate alone is signaling?
CHAIR POWELL. I don’t think so, no. I think overall if you look at prime age participation is still very high. What’s going on in the labor market is that the hiring rate is low. So, if you have a job you’re doing very well, and layoffs are very low, right? So people are not losing their jobs in large numbers, unusually large numbers. If you are looking for a job though, the hiring rate is low and that’s a signal of lower demand, and it has come down. So, we look for signs like that, and that’s clearly a sign of softening, further softening. I didn’t mention earlier, but I think you can see an ongoing gradual softening in the labor market. Again, not something we need to see to get 2 percent inflation. And that’s part of the reason that explains why we moved ahead today with our, with the action, with an additional cut. So, but you take a step back, the level of unemployment is very low. Again, participation is high, wages are at a healthy and evermore sustainable level in wage growth. And so the labor market, this is a good labor market, and we want to keep it that way.
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ELIZABETH SCHULZE. Thanks so much, Chair Powell. Elizabeth Schulze from ABC News. As you’ve noted, the Fed is now forecasting higher inflation next year. High prices are still a burden for so many households right now. Why do you think it is that inflation is proving to be more stubborn than you’d expected?
CHAIR POWELL. It breaks down into a long answer if you want, but it just has been a little bit more stubborn. I think if you go back two or three years, many people were saying that to get this far down we would have had to have a — had a deep recession and high unemployment by now. Well, that has not been the case, so the path down has actually been much better than many predicted. We’ve managed to have the unemployment rate remain essentially at its longer-run natural rate while inflation has come down from — core PCE inflation has come down from 5.6 percent to 2.8 percent on a 12-month basis. So that’s a pretty good outcome. Why hasn’t it come down? One reason is that just a technical issue around the way we calculate housing services and that process has been slower than market rents are showing up more slowly in that measure than we might have thought three — two years ago. So that’s part of it. I think there are other parts of the story, but the — what I think people are feeling right now is the effect of high prices, not high inflation. So we understand very well that prices went up by a great deal and people really feel that. And it’s prices of food and transportation, and heating your home, and things like that, so there’s tremendous pain in that burst of inflation that was very global. This was everywhere in all the advanced economies at the same time. So now we have inflation itself is way down but people are still feeling high prices and that is really what people are feeling. The best we can do for them, and that’s who we work for, is to get inflation back down to its target and keep it there so that people are earning big, real wage increases so that their wages are going up, their compensation is going up faster than inflation year upon year upon year, and that’s what will restore people’s good feeling about the economy. That’s what it will take, and that’s what we’re aiming for.
ELIZABETH SCHULZE. And as we look ahead to next year, what do you see as the biggest challenge to the economy under the next administration?
CHAIR POWELL. I feel, I feel very good about where the economy is and honestly, I’m very optimistic about the economy and it’s, we’re in a really good place, our policy’s in a really good place. I expect another good year next year.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 5867.08 as this post is written
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