On Wednesday, July 31, 2024 FOMC Chair Jerome Powell gave his scheduled July 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 July 31, 2024, with the accompanying “FOMC Statement.”
Excerpts from Chair Powell’s opening comments:
Recent indicators suggest that economic activity has continued to expand at a solid pace. GDP growth moderated to 2.1 percent in the first half of the year, down from 3.1 percent last year. Private domestic final purchases, or PDFP, which excludes inventory investment, government spending, and net exports and usually sends a clearer signal on underlying demand, grew at a 2.6 percent pace over that same period, the first half. Growth of consumer spending has slowed from last year’s robust pace but remains solid. Investment in equipment and intangibles has picked up from its anemic pace last year. In the housing sector, investment stalled in the second quarter after a strong rise in the first. Improving supply conditions have supported resilient demand and the strong performance of the U.S. economy over the past year.
In the labor market, supply and demand conditions have come into better balance. Payroll job gains averaged 177 thousand jobs per month in the second quarter, a solid pace but below that seen in the first quarter. The unemployment rate has moved up but remains low at 4.1 percent. Strong job creation over the past couple of years has been accompanied by an increase in the supply of workers, reflecting increases in participation among individuals aged 25 to 54 years and a strong pace of immigration. Nominal wage growth has eased over the past year and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic—strong but not overheated.
Inflation has eased notably over the past two years but remains somewhat above our longer-run goal of 2 percent. Total PCE prices rose 2.5 percent over the 12 months ending in June; excluding the volatile food and energy categories, core PCE prices rose 2.6 percent. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, and businesses, and forecasters, as well as measures from financial markets.
Excerpts of Jerome Powell’s responses as indicated to various questions:
RACHEL SIEGEL. Hi Chair Powell, Rachel Siegel from the Washington Post. Thanks for taking our questions. On inflation, do the past few months of good reports look like what we saw last year, where you really had a lot of momentum, with a few bumps in between. Would you characterize that kind of momentum as back on track at this point in the year?
CHAIR POWELL. Actually what we’re seeing now is a little better than what we saw last year. Last year, as we pointed out late in the year, a whole lot of the progress we saw last year was from goods prices, which were going down at an unsustainable rate, disinflating at an unsustainable rate. This is a broader disinflation, this has goods prices coming down but we’re also now seeing progress in the other two big categories; non-housing services and housing services. So the things we’ve only, you’ve got one quarter of that, we had seven months of low inflation, you got one quarter of this. I would say the quality of this is higher and it’s good, but so far it’s only a quarter. So I think we need to see more to know that we’re, to have more confidence that we’re on a good path down to 2 percent. But as I mentioned, our confidence is growing because we’ve been getting good data. And things like the ECI Report, and frankly the softening in the labor market conditions, give you more confidence that the economy’s not overheating, it doesn’t look like an overheating economy, and it looks like an economy that’s normalizing.
also:
MICHAEL MCKEE. Michael McKee from Bloomberg Radio and Television. I’d like to ask you about the balance of risks as the American people see it. At this point is the risk greater to leave interest rates where they are, given the damage that higher interest rates do to the economy in slowing demand and raising prices? Or is it more important for the American people that you keep rates where they are to bring inflation down?
CHAIR POWELL. I think that we’ve been given an assignment by Congress, this is how we serve the American people is by achieving maximum employment and price stability, right? And so in our quasi constitutional document, the Statement on Longer-Run Goals and Monetary Policy Strategy, we look at the two goals and if one of them is farther away than the other, the two variables; inflation and employment, if one is farther away from its goal than the other, you concentrate on the one that’s farther away. And you take kind of the time to reach the goal. So, for the last couple of years the best service we could do to the American people was to focus on inflation. But as inflation has come down, and I think the upside risks to inflation have decreased as the labor market has cooled off, and now and labor market has softened, probably the inflation– inflation’s probably a little farther from its target than is the employment, but I think the downside risks to the employment mandate are real now. So we have to weigh all that and if you think of where that takes us is we have a restrictive policy rate, it’s clearly restrictive, it’s been the rate we’ve had in place for a full year, and the time is coming, as other central banks around the world are facing the same question, the time is coming at which it will begin to be appropriate to dial back that level of restriction so that we may address both mandates.
MICHAEL MCKEE. Well you have event risk basically, with the jobs report on Friday and another one before you meet again. Are you certain that you won’t fall behind the curve and lead to unnecessary unemployment if you wait until September?
CHAIR POWELL. Certainty is not a word that we have in our business. So, we get a lot of data between now and September, and it isn’t going to be one data read or even two, it’s going to be the totality of the data, all of the data, and not just– and then how is that affecting the outlook and how is it affecting the balance of risks? That’s going to be the assessment that we do. Of course we’ll all look carefully at the employment report, but so much other data coming in and so much happening between now and the September meeting, and we’ll make a judgment.
also:
AMARA OMEOKWE. Thank you, Chair Powell, Amara Omeokwe with Bloomberg. There seems to be quite a difference between what the anecdotal data are telling us, such as the very recent downbeat Beige Book, and the hard data. Do you take those anecdotes seriously? That is that the economy and labor market are cooling much more rapidly than what’s shown in the data.
CHAIR POWELL. So, I do take that seriously, and the Beige Book is great. What’s even greater is hearing the Reserve Bank presidents come in and talk about their conversations with businesses, and business leaders and workers, and people in the nonprofit sector in their districts. But I’ll tell you, it’s a pretty, the picture is not one of a slowing or a really bad economy, it’s one of there are spots of weakness and there are regions where growth is stronger than other regions, but overall, it’s again, look at the aggregate data. Aggregate data is, particularly PDFP, Private Domestic Final Purchases, is 2.6 percent and that’s a good indicator of private demand. So we listen to all of that and it does, I think it’s important to listen to anecdotal data and not just look at the aggregate data. Especially it’s very hard, GDP data can be volatile quarter to quarter. So, it’s just hard to measure economic activity, there are a lot of, it’s just difficult to do. So, I look at both, but I wouldn’t say that the anecdotal data is uniformly downbeat, it’s more mixed.
_____
_____
The Special Note summarizes my overall thoughts about our economic situation
SPX at 5416.80 as this post is written
