The Federal Reserve’s interest rate policy meeting ending Wednesday afternoon did not bring the immediate rate cut(s) President Donald Trump hopes to see, as Trump’s tariffs throw a new wrench into a complicated stretch for the U.S. central bank.
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NewsTranscript
00:00CHAIRMAN POWELL.
00:05Good afternoon.
00:11My colleagues and I remain squarely focused on achieving our dual-mandate goals of maximum
00:15employment and stable prices for the benefit of the American people.
00:20The economy is strong overall and has made significant progress toward our goals over
00:25the past two years.
00:27market conditions are solid, and inflation has moved closer to our 2 percent longer-run
00:32goal, though it remains somewhat elevated.
00:35In support of our goals, today the Federal Open Market Committee decided to leave our
00:39policy interest rate unchanged.
00:42We also made the technical decision to slow the pace of decline in the size of our balance
00:46sheet.
00:47I'll have more to say about these decisions after briefly reviewing economic developments.
00:54Economic activity continued to expand at a solid pace in the fourth quarter of last
00:57year, with GDP rising at 2.3 percent.
01:02Recent indications, however, point to a moderation in consumer spending following the rapid growth
01:07seen over the second half of 2024.
01:11Surveys of households and businesses point to heightened uncertainty about the economic
01:15outlook.
01:17It remains to be seen how these developments might affect future spending and investment.
01:22In our summary of economic projections, the median participant projects GDP to rise 1.7
01:28percent this year, somewhat lower than projected in December, and to rise a bit below 2 percent
01:34over the next two years.
01:37In the labor market, conditions remain solid.
01:40Payroll job gains averaged 200,000 per month over the past three months.
01:44The unemployment rate, at 4.1 percent, remains low and has held in a narrow range for the
01:49past year.
01:52The jobs-to-workers gap has held steady for several months.
01:56Wages are growing faster than inflation and at a more sustainable pace than earlier in
02:00the pandemic recovery.
02:02Overall, a wide set of indicators suggest that conditions in the labor market are broadly
02:08in balance.
02:10The labor market is not a source of significant inflationary pressures.
02:15The median projection for the unemployment rate in the SEP is 4.4 percent at the end
02:20of this year and 4.3 percent over the next two years.
02:25Inflation has eased significantly over the past two years but remains somewhat elevated
02:29relative to our 2 percent longer-run goal.
02:33Estimates based on the Consumer Price Index and other data indicate that total PCE prices
02:37rose 2.5 percent over the 12 months ending in February and that, excluding the volatile
02:43food and energy categories, core PCE prices rose 2.8 percent.
02:50Some near-term measures of inflation expectations have recently moved up.
02:54We see this in both market and survey-based measures, and survey respondents, both consumers
02:59and businesses, are mentioning tariffs as a driving factor.
03:05Beyond the next year or so, however, most measures of longer-term expectations remain
03:09consistent with our 2 percent inflation goal.
03:12The median projection in the SEP for total PCE inflation is 2.7 percent this year and
03:182.2 percent next year, a little higher than projected in December.
03:23In 2027, the median projection is at our 2 percent objective.
03:29Our monetary policy actions are guided by our dual mandate to promote maximum employment
03:34and stable prices for the American people.
03:37At today's meeting, the Committee decided to maintain the target range for the federal
03:41funds rate at 4.25 to 4.5 percent.
03:45Looking ahead, the new administration is in the process of implementing significant
03:49policy changes in four distinct areas-trade, immigration, fiscal policy, and regulation.
03:57It is the net effect of these policy changes that will matter for the economy and for the
04:01path of monetary policy.
04:03While there have been recent developments in some of these areas, especially trade policy,
04:07uncertainty around the changes and their effects on the economic outlook is high.
04:12As we parse the incoming information, we're focused on separating the signal from the
04:16noise as the outlook evolves.
04:19As we say in our statement, in considering the extent and timing of additional adjustments
04:23to the target range for the federal funds rate, the Committee will assess incoming data,
04:28the evolving outlook, and the balance of risks.
04:32We do not need to be in a hurry to adjust our policy stance, and we are well positioned
04:36to wait for greater clarity.
04:40In our SEP, FOMC participants wrote down their individual assessments of an appropriate path
04:45for the federal funds rate based on what each participant judges to be the most likely scenario
04:50going forward, an admittedly challenging exercise at this time in light of considerable uncertainty.
04:58The median participant projects that the appropriate level of the federal funds rate will be 3.9
05:02percent at the end of this year and 3.4 percent at the end of next year, unchanged from December.
05:10While these individual forecasts are always subject to uncertainty, as I noted, uncertainty
05:14today is unusually elevated, and, of course, these projections are not a Committee plan
05:18or a decision.
05:21Policy is not on a preset course.
05:23As the economy evolves, we will adjust our policy stance in a manner that best promotes
05:27our maximum employment and price stability goals.
05:32If the economy remains strong and inflation does not continue to move sustainably toward
05:352 percent, we can maintain policy restraint for longer.
05:39If the labor market were to weaken unexpectedly or inflation were to fall more quickly than
05:43anticipated, we can ease policy accordingly.
05:47Our current policy stance is well positioned to deal with the risks and uncertainties that
05:51we face in pursuing both sides of our dual mandate.
05:56At today's meeting, we also decided to slow the pace of decline in our balance sheet.
06:01Since we began balance sheet runoff, our securities holdings have declined by more than $2 trillion.
06:07While market indicators continue to suggest that the quantity of reserves remains abundant,
06:12we have seen some signs of increased tightness in money markets.
06:16Beginning in April, the monthly cap on Treasury redemptions will be lowered from $25 billion
06:20to $5 billion.
06:23Consistent with the Committee's intention to hold primarily Treasury securities in the
06:26longer run, we are leaving the cap on agency securities unchanged.
06:31This action has no implications for our intended stance of monetary policy and should not affect
06:36the size of our balance sheet over the medium term.
06:40The Committee also continued its discussions as part of our five-year review of our monetary
06:44policy framework.
06:46At this meeting, we focused on labor market dynamics and our maximum employment goal.
06:51As we have indicated, our review will include outreach and public events involving a wide
06:55range of parties, including Fed Listens events around the country and a research conference
07:00in May.
07:02Throughout this process, we will be open to new ideas and critical feedback, and we will
07:06take on board lessons of the last five years in determining our findings.
07:10We intend to wrap up the review by late summer.
07:14The Fed has been assigned two goals for monetary policy, maximum employment and stable prices.
07:20We remain committed to supporting maximum employment, bringing inflation sustainably
07:24to our 2 percent goal, and keeping longer-term inflation expectations well anchored.
07:30Our success in delivering on these goals matters to all Americans.
07:34We understand that our actions affect communities, families, and businesses across the country.
07:39Everything we do is in service to our public mission.
07:42We at the Fed will do everything we can to achieve our maximum employment and price stability
07:46goals.
07:48I will look forward to your questions.
07:49HOWARD SCHNEIDER.
07:50Howard Schneider with Reuters.
07:51Thanks for your time.
07:52So, two things on sort of the real side here-inflation and then GDP.
08:01How much of the higher inflation forecast for this year is due to tariffs, and since
08:06the policy path remains the same, are you effectively reading this as a one-time price
08:12level shock?
08:13CHAIRMAN POWELL.
08:14Okay.
08:15So, how much of it is tariffs?
08:18So let me say that it is going to be very difficult to have a precise assessment of
08:24how much of inflation is coming from tariffs and from other-and that's already the case.
08:29You may have seen that goods inflation moved up pretty significantly in the first two months
08:34of the year.
08:35Trying to track that back to actual tariff increases, given what was tariffed and what
08:40was not, very, very challenging.
08:41So some of it-the answer is, clearly, some of it.
08:44A good part of it is coming from tariffs.
08:48But we'll be working, and so will other forecasters, to try to find the best possible way to separate
08:53non-tariff inflation from tariff inflation.
08:58In terms of the-your sort of looking-through question, too soon to say about that.
09:04As I've mentioned, it can be the case that it's appropriate sometimes to look through
09:10inflation, if it's going to go away quickly without action by us, if it's transitory.
09:16And that can be the case in the case of tariff inflation.
09:21I think that would depend on the tariff inflation moving through fairly quickly and would depend
09:27critically, as well, on inflation expectations being well anchored-longer-term inflation
09:32expectations being well anchored.
09:34Well, I guess I'm looking at the out years here, and the fact that the policy path doesn't
09:39change at all, and inflation is unchanged in the out years also, doesn't that imply
09:45you all have basically decided that there is no signal here, and that it's just going
09:50to-we're back to transitory again?
09:53So I think that's kind of the base case.
09:56But as I said, it's-we really can't know that.
09:59We're going to have to see how things actually work out.
10:01And the fact that there wasn't much change, I think that's partly because, you know, you
10:06see weaker growth but higher inflation.
10:09They kind of offset.
10:10And also, frankly, a little bit of inertia.
10:13When it comes to changing something in this highly uncertain environment, you know, you're-you
10:17know, I think there is a level of inertia where you just say, maybe I'll stay where
10:19I am.
10:20MS.
10:21DAVIS.
10:26Colby Smith with The New York Times.
10:27You just described inflation expectations as well-anchored, but has your confidence
10:30in that assessment changed at all, given the increase in certain measures and the high
10:34degree of uncertainty expressed by businesses, households, and forecasters?
10:38CHAIRMAN POWELL.
10:39So on inflation expectations, of course, we do monitor inflation expectations very, very
10:43carefully, basically every source we can find, and, you know, short-term, long-term households,
10:49businesses, forecasters, market-based.
10:52And I think the picture broadly is this.
10:54You do see increases widely in short-term inflation expectations, and people who fill
11:00out surveys and answer, you know, questionnaires are pointing to tariffs about that.
11:07If you look in the survey world, if you look a little further out, you really-you really
11:13don't see much in the way of an increase.
11:15Longer-term inflation expectations are mostly well-anchored.
11:19If you look at the New York, for example, then you have market-based, and it's the same
11:24pattern.
11:25You know, people in markets are pricing in in break-evens.
11:29Some higher inflation over the next year must be related to tariffs, we know from the surveys.
11:34But if you look out five years or the five-year-five-year forward, you'll see that break-evens have-are
11:42either flat or actually slightly down in the case of the longer-term ones.
11:44So we look at that, and we will be watching all of it very, very carefully.
11:49We do not take anything for granted.
11:51It's at the very heart of our framework, anchored inflation expectations, but that's what you
11:55see right now.
11:56And how much weight do you put on the deterioration in consumer confidence surveys?
12:02You said recently that this is perhaps not the best indication of future spending, but
12:08I'm curious, you know, what you think is behind this deterioration and to what extent it could
12:14be a leading indicator for hard data?
12:16So let's start with the hard data.
12:19You know, we do see pretty solid hard data still.
12:22So growth looks like it's maybe moderating a bit, consumer spending moderating a bit,
12:27but still at a solid pace.
12:29Unemployment's 4.1 percent.
12:31Job creation most recently has been at a healthy level.
12:35Inflation has started to move up now, we think partly in response to tariffs, and there may
12:39be a delay in further progress over the course of this year.
12:44So that's the hard data.
12:46Overall, it's a solid picture.
12:48The survey data, both household and businesses, show significant rise in uncertainty and significant
12:55concerns about downside risks.
12:56So how do we think about that?
12:58And that is the question.
13:00As I mentioned the other day, as you pointed out, the relationship between survey data
13:06and actual economic activity hasn't been very tight.
13:09There have been plenty of times where people are saying very downbeat things about the
13:13economy and then going out and buying a new car.
13:17But we don't know that that will be the case here.
13:19We will be watching very carefully for signs of weakness in the real data.
13:23Of course we will.
13:24But given where we are, we think our policy's in a good place to react to what comes, and
13:32we think that the right thing to do is to wait here for greater clarity about what the
13:37economy is doing.
13:43Nick Timoros of the Wall Street Journal.
13:45Chair Greenspan wants to find price stability as an environment in which inflation is so
13:50low and stable over time that it doesn't materially enter into the decisions of households and
13:56firms.
13:57Can you say that today, that we have that price stability, that households and businesses
14:02are ignoring price growth?
14:03Do you see buy-in-advance, psychology, big changes in inventories and surveys that show
14:10consumers, at least in the short run, expect higher inflation?
14:14So I do like that definition a lot.
14:17In fact, I used it at the recent conference where I spoke.
14:20So I think a world where people can make their daily economic decisions in businesses and
14:25they're not having to think about the possibility of significantly high inflation.
14:29We know inflation will bounce around.
14:31That is price stability.
14:32You know, I think we were getting closer and closer to that.
14:36I wouldn't say we were at that.
14:39Inflation was running around 2.5 percent for some time.
14:42I do think with the arrival of the tariff inflation, further progress may be delayed.
14:48The SEP doesn't really show further downward progress on inflation this year, and that's
14:53really due to the tariffs coming in.
14:55So delayed, but if you look at our forecasts, we do see ourselves getting back into the
15:01low 2s in 26 and then down to 2 by 27, of course, highly uncertain.
15:05So I see progress having been made toward that and then progress in the future.
15:10I think that progress is probably delayed for the time being.
15:13If that's the case, why are there cuts in the SEP for 2025?
15:18So again, people wrote down two cuts the last time, and they look at the, you know, the
15:25they wrote down, you know, meaningful decline in growth from 2.1 to 1.7 in 2025, a tick
15:33up in the unemployment rate, so not much there, but core inflation up by three-tenths.
15:38And so those two kind of balance each other out.
15:41So people, not everybody, but on balance, people wrote down similar numbers.
15:45The changes aren't that big.
15:47The other factor, though, as I mentioned, is just really high uncertainty.
15:51What would you write down?
15:52I mean, it's just it's really hard to know how this is going to work out.
15:57And again, we think our policy is in a good place.
16:00We think it's a good place where we can move in the direction where we need to.
16:04But in the meantime, it's really appropriate to wait for further clarity.
16:08And of course, you know, the costs of doing that, given that the economy is still solid,
16:13are very low.
16:14Edward.
16:15Thank you, Mr. Chairman, Edward Lawrence with Fox Business.
16:21So with near 4 percent unemployment rate, that should be low enough to bring people
16:25in from the sidelines in terms of hiring.
16:28But we're seeing the hiring rates have been stuck at 20, 23, 20, 24 levels.
16:32So what's going on there?
16:33Yeah.
16:34So that's a feature that has been for some time a feature of this labor market.
16:39You have pretty high participation accounting for aging.
16:42You've got wages that are consistent with 2 percent inflation, assuming that we're going
16:47to keep getting, you know, relatively high productivity.
16:50You've got unemployment, you know, pretty close to its natural level.
16:54But job hiring rate is quite low.
16:58But so is the layoff rate.
16:59So you look at initial claims or layoffs.
17:02So you're not seeing people losing their jobs, but you're seeing that people who don't have
17:06a job having to wait longer and longer.
17:08And you know, the question is, which way does that break?
17:10If we were to see a meaningful increase in layoffs, then that would probably translate
17:15fairly quickly into unemployment because people are you know, it's not it's not a big
17:21hiring market.
17:23We've been watching that.
17:24And it's just not in the data.
17:25It hasn't happened.
17:26What we've had is is a low firing, low hiring situation.
17:30And it seems to be in balance now for, you know, for the last six, seven, eight months.
17:34That's where we are.
17:36There's healthy levels of job creation, too.
17:39So overall, it's a labor market that's in balance.
17:41And you know, we watch it very carefully.
17:43So then have we seen the administration of the new administration's policies in the economic
17:47numbers yet?
17:48And when do you anticipate that happening in labor or in other in labor and inflation
17:53just across the economy?
17:54Have we started to see the new policies take effect in the numbers?
17:59You know, only in a kind of early way.
18:01I mean, it's only been a few months, right?
18:04You know, for example, the the layoffs that are happening here are, you know, they're
18:10certainly meaningful to the people involved, and they may be meaningful to a particular
18:13neighborhood or region or area.
18:16But at the national level, they're not they're not significant yet.
18:18But we don't know.
18:19We don't know what where that how far that will go.
18:21We'll find out much more.
18:23I mentioned that you you saw we've had two, two very strong goods inflation readings in
18:30the last two months, which is very unexpected.
18:32I think hard to trace it to specific tariffs, but it must have it must have something to
18:37do with it's either noise and it will come back.
18:41And that's very possible, too.
18:42But if it is persistent, then it must be to do with, you know, people buying ahead
18:46of tariffs or raising prices ahead of tariffs and things like that, that those kinds of
18:50things happen.
18:51And they're very, very hard to capture because so much of it is indirect.
18:55A great example is their washing machines were tariffed in the last last round of tariffs
19:01and prices went up.
19:02But prices also went up on on dryers, which were not tariffed.
19:07So the manufacturers just you know, they just kind of follow the crowd and raised it.
19:11So things happen very indirectly.
19:14And so there'll be a lot of work done in coming months to try to trace all that through.
19:18But ultimately, though, it's too soon to be seeing significant effects in economic data.
19:26Craig Torres from Bloomberg News.
19:29Thanks, Chair Powell.
19:30You said transitory price increases from tariffs are the base case transitory is the base case.
19:36Wasn't it the base case last time?
19:40Didn't the FOMC forecast lower inflation ahead last time and wasn't the lesson that it quickly
19:46got into services, haircuts, daycare, everything else?
19:50And so I'm just wondering why the nine aren't taking that on board and are cutting twice
19:56this year.
19:57When you say last time, are you talking about the pandemic?
19:59Yes.
20:00You could have been talking about the last time there were tariffs, in which case the
20:04inflation was was transitory.
20:06Yeah.
20:07No, of course, we're well aware of that.
20:08And, you know, it's it's still the truth.
20:12If if there's an inflationary impulse that's going to go away on its own, it's not the
20:18right policy to to tighten policy, because by the time you have your effect, you're you
20:24know, you're in effect by by design.
20:26You are lowering economic activity and employment.
20:29And if that's not necessary, you don't want to do it in real time.
20:33As we know, it's hard to make that judgment.
20:36So and we're well aware, you know, of what happened, obviously, with with with with the
20:42pandemic inflation.
20:44But I mean, we have to look at this as as as a different situation.
20:48There's there are differences and similarities.
20:51I mean, it's a different time.
20:52You know, we haven't had real price stability fully reestablished yet, and we have to keep
20:57that in mind.
20:58And, you know, we also have we hear that people are very reluctant to take on to, you know,
21:05to allow prices to go up at the same time.
21:07We hear that businesses are intending to pass many of these prices through.
21:10So it's hard to say how this is going to work out.
21:15Steve, Steve, Steve Leesman, CNBC, thanks for taking my question, Mr. Chairman.
21:20The Bank of Canada in its last policy statement said monetary policy cannot offset the impacts
21:25of a trade war.
21:27What it can and must do is ensure that higher prices do not lead to ongoing inflation.
21:31I wonder if that kind of reflects your own sense of prioritization faced with higher
21:36prices and weaker growth, that the idea is you have to take care of inflation.
21:42You know, so we have two goals, right?
21:44We have maximum employment and price stability, and we have to balance those.
21:47And, you know, there can be situations in which there are intention, right?
21:52And we have actually have a provision in our in our consensus statement that says what
21:56we should do in that case.
21:57So it's a very challenging, you know, situation for any central bank and certainly for us.
22:03And so what we say that we'll do is we'll look how far each of those two goals is, each
22:08of those two measures is from its goal.
22:11And then we'll ask how long we think it might take to get back to the goal for each of them.
22:16And we'll make a judgment because our, you know, our tools work in one direction.
22:19We're either tightening or loosening.
22:21So it's a very challenging situation.
22:23Let me say, we don't have that situation right now.
22:25It's not what the that's not where the economy is at all.
22:28It's also not where the forecast is.
22:30I don't know any mainstream forecasts that really show significant problems like that.
22:36So well, just to follow up yesterday, the UCLA Anderson forecast said their high probability
22:42of a recession.
22:43Where do you stand on whether or not the slowdown you're seeing creates a higher probability
22:47or concern that you may have on recession?
22:50There's always an unconditional probability possibility of a recession.
22:55It might be broadly in the range of one in four at any time.
22:59If you look back through through the years, it could be within 12 months of one in four
23:03chance of a recession.
23:04So the question is, is whether that whether this current situation, those possibilities
23:10are elevated.
23:11I will say this.
23:13We don't we don't make such a forecast.
23:14If you look at outside forecasts, forecasters have have generally raised a number of them
23:19have raised their possibility of a recession somewhat, but still at relatively moderate
23:26levels, you know, still in the region of of the traditional because they were extremely
23:29low.
23:30If you go back two months, people were saying that the likelihood of a recession was extremely
23:34low.
23:35So has moved up, but it's not high.
23:38Chris.
23:40Hi.
23:44Chris Rugeber at Associated Press.
23:46As you know, I guess last night, the President Trump fired two members of the Federal Trade
23:51Commission, an independent agency, and this could cause the kind of legal fight about
23:57the administration's power to fire independent people.
24:00If those firings stand, is that a threat to the Fed's independence?
24:04Could he do the same thing to the Fed board?
24:07So I think I did answer that question in this very room some time ago, and I have no desire
24:13to change that answer and have nothing new for you on that today.
24:17Okay.
24:18Well, I just, okay, well, maybe I'll have another mulligan.
24:21As you know, I wanted to go back to the consumer sentiment, particularly the inflation expectations
24:29in the University of Michigan survey.
24:31In the summer of 2022, you cited the rise in the long-term inflation expectations in
24:36that index as the reason that you went big with a three-quarter point hike.
24:41So I know you've, I mean, you've talked about all the different measures now, but you seem
24:44to not be placing the same weight on that, and so I'm just wondering, are you dismissing
24:49that, what we saw last week from the University of Michigan, or you just take care of the
24:53same weight as it did in the past?
24:55So I mentioned it back then, but in no way did I place a huge weight on it.
24:59I think that was an ex-post story, but it wasn't the case.
25:04That was a preliminary reading, and so is this, and it's also, this is, that Michigan,
25:09the one you're referring to, the longer-term thing, you know, we look at it,
25:12we don't dismiss data that we don't like.
25:14We force ourselves to look at it, but it is an outlier compared to market-based and compared
25:20to other survey-based assessments of longer-run inflation expectations.
25:26So we got to keep that in mind, and again, I would just say, we look at all of them,
25:32and that one's kind of an outlier, but, you know, nonetheless, we take notice of it.
25:39Mike McKee.
25:40Mike McKee from Bloomberg Radio and Television.
25:45There's a worry on Wall Street that when you say you want to study the net effect of the
25:51fiscal policies we may see on the economy, that you would end up waiting too long and
25:57be behind the curve in responding to any downturn.
26:00How can you reassure people that you can spot a problem early enough, unless you decide
26:07to be preemptive?
26:08Yeah, look, we're aware of the – we're well aware of how things are going to evolve
26:15in the timeframes and all that, and, you know, we will use our tools to foster achievement
26:19of our goals to the best we can, and, of course, we're going to try to be timely with that.
26:24For right now, the hard data are pretty solid.
26:28We are obviously aware of the soft sentiment data and high uncertainty, and we're watching
26:33that carefully, and we think it's a good time for us to wait for further clarity before
26:38we consider adjusting our policy stance.
26:41Do you think it's going to be hard to get clarity in a government-by-tweet?
26:45I mean, do you have a feeling that at some point you actually will have a forecast you
26:50can trust?
26:51Yes, I think we will.
26:52I just – it's hard to say when that will be.
26:56You know, we're – these decisions are going to be made, and they're going to be
26:59implemented, and then we'll know at that – well, we'll know what the decisions
27:02are, and we'll have to make assessments then about their – the implications for
27:05the economy.
27:06Those things will happen.
27:07A lot of them will happen over the course of, you know, in coming months, certainly
27:10over the course of this year, and we'll be adapting as we go.
27:14Rachel.
27:15Hi, Chair Powell, Rachel Siegel from The Washington Post.
27:21Thank you for taking our questions.
27:23At the beginning, you were talking about separating the signal from the noise and tariff inflation
27:27from non-tariff inflation.
27:29Can you walk us through what that looked like over the last couple of months, if there
27:32were specifics from the January meeting to now that helped you make those distinctions?
27:37So when we say separating the signal from the noise, that's just a way of saying that
27:41things are highly uncertain and that, you know, you're reading about developments.
27:45The news is full of developments of tariffs being put on and taken off and things like
27:49that.
27:50That's – some of that is noise in the sense that it's not really telling you anything.
27:54You're trying to extract a signal from that, and the signal is what's going to be the
27:59effect on economic activity, on inflation, on employment, and all those things.
28:04So that's really when we say signal and noise.
28:05Sorry, the second thing was?
28:07Or similarly for tariff inflation, non-tariff inflation, ways that you're making the distinction.
28:11That's sort of a special case of that.
28:13You know, the idea being – and I think – do think that the first two months of this year
28:18are a great example.
28:19You've got high readings for goods inflation after a string of readings that average close
28:24to zero, and you have to ask, it's coming during tariffs.
28:28But, you know, it's very hard to actually scientifically go back and match up those
28:33increases and say, yes, I can prove that that's from tariffs.
28:36But it kind of has to be to some extent.
28:38Plus noise.
28:39There can be idiosyncratic readings in various categories, which we'll shortly reverse.
28:43And that happens too, and that could be a big piece of it.
28:46You know, I think we'll know.
28:47In a couple of months, we'll know whether those were – you know, where that really
28:50was from.
28:51But that's another case where I think it's going to be very, very challenging to unpack
28:56the inflation that we see over the course of this year and be able to say with confidence
29:01how much of that came from inflation and how much of it – sorry, from tariffs and how
29:05much of it didn't.
29:07But that's what we'll be doing.
29:08We'll be doing that, and so will everybody else, and we'll all be trying very hard to
29:12make that assessment.
29:13And, you know, I'm sure we will make a lot of progress on that, and we already have.
29:17But it's going to be a challenge.
29:19Do you have a sense yet as to what, in your mind, would make something cross from noise
29:23to a signal, what that threshold would look like?
29:26You know, it would depend on what we're talking about.
29:27I mean, obviously, you're looking for direct evidence that particular pieces of inflation
29:33are or are clearly not caused by tariffs.
29:37For example, if something that was, you know, in the service sector that was far away from
29:42anything that's tariffed, you might think, okay, well, that is, like, frankly, housing
29:46services inflation, which, by the way, has been behaving well, you know, which for some
29:51time was kind of our problem.
29:54Now it's been-it's slow, but it's definitely, you know, moving down in a very good way.
30:00It's more now with goods and, to some extent, with non-housing services inflation.
30:05Kelly.
30:06Thanks for taking our questions, Chair Powell.
30:12Kelly O'Grady, CBS News.
30:14So consumer sentiment has dipped dramatically, but you say the economy and the hard data
30:19is still solid.
30:21What is your message to consumers that clearly disagree and don't feel that strength?
30:27Because the hard data they're looking at is their grocery bill.
30:29Okay.
30:30So a couple things.
30:31The grocery bill is about-about past inflation, really.
30:35There was inflation in 21, 2, and 3, and prices went up.
30:39The current level-it's not the change in prices, it's they're unhappy and they're not wrong
30:44to be unhappy that prices went up quite a bit, and they're paying a lot for those things.
30:49So that's-I think that is the fundamental fact, and has been for a long time, a couple
30:53years, why people are unhappy with the economy.
30:57It's not that the economy is not growing.
30:59It's not that inflation is really high.
31:00It's not that unemployment is high.
31:02It's none of those things.
31:03We have, you know, 4.1 percent unemployment.
31:06We've got 2 percent growth, and, you know, it's a pretty good economy.
31:10But people are unhappy because of the price level, and I do-we completely understand and
31:14accept that.
31:16And just to follow up, why are you still projecting two rate cuts this year if your own projections
31:22show inflation higher for longer?
31:24Does that mean you see a slowdown in economic growth as a real threat?
31:29So I think if you-yeah, I mean, remember, we came into this with-at the December meeting,
31:35the median was two cuts.
31:38The median was.
31:39And so you come in and you see, broadly speaking, weaker growth but higher inflation.
31:45And they kind of balance each other out.
31:46So you think-and unemployment is really-there's really only a one-tenth change.
31:51So it's-there's just not a big change in the forecast.
31:54There really isn't.
31:55Modest, you know, meaningfully higher-sorry-growth and meaningfully higher inflation, which call
32:01for different responses, right?
32:03So they cancel each other out, and people just said, OK, I'm going to stay here.
32:07But the second factor is, it's so highly uncertain, is just, you know, we're sitting here thinking-and
32:13we obviously are in touch with businesses and households all over the country.
32:18We have an extraordinary network of contacts that come in through the reserve banks and
32:23put in the Beige Book and also through contacts at the board.
32:27And we get all that.
32:28And we do understand that sentiment has fallen off pretty sharply, but economic activity
32:33has not yet.
32:34And so we're watching carefully.
32:36So I would tell people that the economy seems to be-seems to be healthy.
32:41We understand that sentiment is quite negative at this time.
32:45And that probably has to do with, you know, turmoil at the beginning of an administration
32:50that's making, you know, big changes in areas of policy.
32:55And that's probably part of it.
32:57I do think the underlying unhappiness people have about the economy, though, is more-is
33:01more about the price level.
33:03VICTORIA GUIDO.
33:06Hi, Victoria Guido with Politico.
33:10I wanted to ask, first of all, if you could clarify.
33:13You were talking about how tariffs were a good part of the uptick in the inflation forecast.
33:19And I was just wondering what that specifically refers to.
33:22Is that the tariffs that have already been put in place?
33:25Is that anticipating some of the tariffs that might be coming on April 2nd?
33:29And then also, if you wouldn't mind, talking a little more about the balance sheet decision
33:34and what drove that.
33:36Did that have anything to do with expectations of how the debt ceiling-raising the debt ceiling
33:40might affect the reserve supply?
33:41CHAIRMAN POWELL.
33:42Yes.
33:43So, in the SEP, you'll see that there's not further progress on core inflation this year.
33:48We're kind of flatlining, going sideways.
33:51We don't ask people to say-to write down how much of this is from tariffs and how much
33:55of it is not.
33:56But some of it is from tariffs.
33:57We know that tariffs are coming in.
33:58We know that they're probably already-all forecasters have tariff inflation affecting
34:04core PCE inflation, core CPI inflation this year, without exception.
34:08I'm not aware of an exception.
34:10So it's in there.
34:11I can't tell you how much of that it is.
34:13In terms of the balance sheet-so, yeah, we-I think-I guess the way I'd say it is, you know,
34:21it was the flows in and out of the TGA that got us thinking about it.
34:26But as we-you know, as we thought about it, we really came to the view that this was a
34:32good time to make the move that we made.
34:36And the Broad League Committee came around to the view that we would do the same thing
34:43we'd already done, which is, once we-I guess in June, we-was it June, whenever it was,
34:50we lowered the pace of QT.
34:53And we're just going to do that again.
34:54We're going to cut it roughly in half.
34:56And the sense of that is, if you're cutting the pace of QT roughly in half, then the runway
35:01is probably doubled, okay?
35:03So it's going to be slower for longer.
35:07And people really like that.
35:09People thought, that's a good idea.
35:10You know, it's like a plane.
35:11You can think of it like a plane coming in for a landing.
35:14As we get closer, and we-by the way, we still think that reserves are abundant, although
35:19you begin to see some of the things we look at begin to react a little bit, but we still
35:23think that they're abundant.
35:24Now, of course, now the TGA is emptying out, so reserves are higher now, so you can't really
35:29see the underlying signal.
35:31So we came around to the view, and it had a lot of appeal, and so we did it.
35:36Really, it has no implications at all for monetary policy.
35:40It has no implications at all for the ultimate size of the balance sheet.
35:44It isn't sending a signal in any hidden way that you can try to tease out.
35:49It's just not there.
35:50We're basically-it's very consistent with our plans and our practices that we've published
35:55and that we've followed since we began this-what is a very successful, you know, rundown of
36:01the balance sheet.
36:02Again, the second time that we've slowed the pace, and we've said that we would stop when
36:07we were somewhat above the level we judge as ample, and, clearly, we're not at that
36:11level yet, but we're going to be approaching it more slowly.
36:14It's a common-sense kind of a-kind of a thing, and it had-it had pretty broad appeal, I will
36:18say.
36:19Claire.
36:20I'm Claire Jones, Financial Times.
36:27You said in January, Chair Powell, that inflation expectations remained well-anchored.
36:33Would you still say they remain well-anchored today?
36:36And just to reiterate the question of the ZEVACs, if they're not so well-anchored, why
36:42hasn't there been a more radical shift to the policy path today?
36:47So when we-when we talk about inflation expectations being well-anchored, we're talking about longer-run
36:55inflation expectations, and they really haven't moved much, I mean, if at all.
37:01There's one-there's one reading that everyone's focusing on that it's higher, but the other
37:05survey readings and the market-based readings all show relatively, you know, well-anchored
37:11inflation expectations.
37:12You would expect that expectations of inflation over the course of a year would move around
37:18because conditions change, and, in this case, we have tariffs coming in.
37:21We don't know how big, what's-we-there's so many things we don't know.
37:24But we kind of know there are going to be tariffs, and they tend to bring growth down,
37:28they tend to bring inflation up at the-in the first instance.
37:31So-so I would say, you know, I'm not dismissing what we're seeing in short-term inflation
37:36expectations.
37:37We, as I mentioned, follow that very carefully.
37:40But when we say expectations are well-anchored, we're really looking at, you know, longer
37:45terms, five-year and out.
37:47And there's really no story to tell five years and out, either in market-based or-or in surveys.
37:54But we'll watch it.
37:55I mean, we're not-you know, we're not going to miss any evidence that longer-term or medium-term
38:01inflation expectations are-are moving.
38:04NEIL IRWIN.
38:05Hi, Chair Powell.
38:06Neil Irwin with Axios.
38:07Treasury Secretary Besant has observed that a large share of job growth over the last
38:08couple of years has been in what he calls government-or government-adjacent sectors,
38:09health care, education.
38:10Do you agree that there's some weakness in underlying private job growth?
38:11And do you see the composition of job growth as something that has policy implications?
38:27CHAIR POWELL.
38:28So that-that has been the case.
38:30We talked about that over the course of the last year.
38:32There were-there were-there were some good number of months and times when a lot of the
38:37job creation was-was concentrated in, you know, educational institutions, health care,
38:44state governments, things like that.
38:46There were also times when private-sector job growth has been moving in a healthy-right?
38:51I mean, they're all-they're all jobs.
38:53But-and remember, we're-you know, we're at very low unemployment for-you know, for quite
38:59a time now.
39:00So I think it's a good labor market.
39:02But it's-look, it's something that we monitor carefully.
39:04From our standpoint, employment is employment.
39:08But I-you know, the elected government is entitled to have-you know, we don't have policies
39:13that address different kinds of employment.
39:16But the elected government has a different role, and they can-they can have those.
39:19MR.
39:20THIESSEN.
39:21Here's a quick QT question.
39:22Does the Committee envision at some point tapering the MBS runoff as well?
39:26CHAIR POWELL.
39:27I think tapering it-I don't know.
39:30There's no plan to do that.
39:31You know, at a certain point, we'll stop runoff.
39:35And we may or may not stop MBS runoff, though, because, you know, we can-we want to stop
39:40runoff in net at some point.
39:42We haven't made any decisions about that.
39:44You know, we want the MBS to roll off our balance sheet.
39:50We really strongly desire that.
39:52So-but we haven't made any decisions about that.
39:54You know, we will-I think we'd look carefully at letting that keep going but hold the overall
40:00size of the balance sheet in, you know, constant-at some point, a point that we're not out yet.
40:06MS.
40:07RABINOVICH.
40:08Simon Rabinovich with The Economist.
40:11Thank you, Chair Powell.
40:12Several times today you've said that you feel you're well-positioned to wait for greater
40:16clarity.
40:17At the same time, you could point to quite a few growth risks at the moment.
40:20We've seen a stock market that's gone quite wobbly, rapidly cooling housing sales, plunge
40:26in confidence surveys.
40:28Today, not only did the SEP mark down the growth outlook, 17 of 19 see risks to the
40:33downside.
40:34So my question is, how confident are you that you're well-positioned, or is that one more
40:37thing that you're uncertain about?
40:39CHAIR POWELL.
40:40I'm confident that we're well-positioned in the sense that we're well-positioned to move
40:45in the direction we'll need to move.
40:46I mean, I don't know anyone who has a lot of confidence in their forecast.
40:50I mean, the point is, we are-we are at-you know, we're at a place where we can cut or
40:56we can hold what is clearly a restrictive stance of policy.
41:01And that's what I mean.
41:02I mean, I think we're-that's well-positioned.
41:05Forecasting right now, it's-you know, forecasting is always very, very hard.
41:09And in the current situation, I just think it's-uncertainty is, you know, remarkably
41:14high.
41:15MR.
41:16RATHKE.
41:17And, sorry, standing here today, would you be surprised to pivot back towards rate cuts
41:20in May?
41:21CHAIR POWELL.
41:22Well, look, I think we're not going to be in any hurry to move.
41:26And, as I mentioned, I think we're well-positioned to wait for further clarity, and not in any
41:33hurry.
41:34MATT HEGAN.
41:35Matt Hegan with CNN.
41:36Thank you, Chair Powell.
41:41The Fed statement released today removed the line that previously said the Committee judges
41:47that the risks to achieving its employment and inflation goals are roughly in balance.
41:52Can you explain the decision to remove that line?
41:55Does it mean that you're now more concerned about inflation or about employment?
41:59CHAIR POWELL.
42:00Actually, it does not mean either of those things.
42:03You know, sometimes with language, they-it lives its useful life, and then we take it
42:11off.
42:12And that was the case here.
42:13There's really not meant to be any signal here.
42:16Over the past year, you know, conveying a sense of the balance of risks was important,
42:21that they be in balance or close to being in balance.
42:24That was useful as we approached liftoff, if you remember.
42:27But we're past that-or, sorry, no, beginning-beginning to cut.
42:31So we just-we just took it out.
42:33I actually would say that the more important thing now about risks-and this is in the pages,
42:3910, 11, 12 of the SEP-if you look, participants widely raised their estimate of the risks
42:48to our uncertainty, but also of the risks to growth and our employment and inflation
42:54mandates.
42:55That's-that's a more salient point now than whether they're-whether they're in balance.
43:00Q. Just on the stock market, the stock market has obviously declined significantly since
43:05the Fed last met.
43:07Are you concerned at all about some of the market volatility having a real economic impact
43:13in terms of hurting business spending or consumer spending, especially among higher-income households?
43:18CHAIRMAN POWELL.
43:19So financial conditions matter to us because, you know, financial conditions are the main
43:23channel to the real economy through which our policy has its effects.
43:27So-so they're important.
43:28But what matters from-from a Fed standpoint for the macroeconomy is material changes to
43:34overall financial conditions that are persistent, that last for a while, long enough to actually
43:39affect-affect economic activity.
43:42So that's what we're looking for.
43:44I-I'm not going to opine on the appropriate level of-of any market-equity, debt, commodities
43:51or anything like that.
43:53And I would just point you to the bigger picture again.
43:56You know, the real economy, the hard data, are still in reasonably good shape.
44:00It's the soft data.
44:01It's the surveys that are showing, you know, significant concerns, downside risks, and
44:07those kind of things.
44:08We don't dismiss that.
44:09We're watching it carefully.
44:10But, you know, we-we don't want to get ahead of that.
44:12You know, we want to focus on the hard data.
44:15This-if it's-if that's going to affect the hard data, we should know it very quickly.
44:20And, of course, we'll-we'll understand that.
44:22But you don't see that yet.
44:23MS.
44:24PAGE.
44:25Jennifer.
44:26MS.
44:28PAGE.
44:29Thank you, Chair Powell.
44:30Jennifer Schonberger with Yahoo Finance.
44:32As you look to navigate higher inflation and lower growth, the Fed has talked about heeding
44:37the lessons from the 1970s.
44:39Is the Fed willing to have a recession if it means breaking the back of inflation?
44:45CHAIRMAN POWELL.
44:46Well, fortunately, we're in a situation where we have seen inflation move down from, you
44:55know, higher levels to pretty close to 2 percent, while the unemployment rate has remained
45:01very consistent with full employment-4.1 percent.
45:04So we now have inflation coming in from an exogenous source, but the underlying inflationary
45:09picture before that was, you know, basically 2.5 percent inflation, I would say, and 2
45:14percent growth and 4 percent unemployment.
45:18So that's what-that's what we did.
45:19That's what, together, the economy accomplished.
45:23So I don't see any reason to think that we're looking at a replay of the 70s or anything
45:28like that.
45:29You know, inflation-underlying inflation is, you know, still running in the 2s, with probably
45:34a little bit of a pickup associated with tariffs.
45:37So I don't think we're facing-I wouldn't say we're in a situation that's remotely comparable
45:43to that.
45:44MS.
45:45PAGE.
45:46And last month, the idea of a doge dividend was proposed, which would send $5,000 checks
45:49to every taxpayer from doge savings.
45:52President Trump and Elon Musk have supported this.
45:54There's reports there could be a bill introduced on Capitol Hill.
45:57What impact might that have on household savings and spending in terms of your growth and outlook
46:04for inflation?
46:05CHAIRMAN POWELL.
46:06You know, I-it's not-it's not appropriate for me to speculate on political ideas or
46:10fiscal policy, for that matter.
46:12So I'm going to-I'm going to pass on that one.
46:14MS.
46:15PAGE.
46:16Daniel.
46:17QUESTION.
46:18Hi, Chair Powell.
46:19Daniel Avis from Agence France-Presse.
46:21You mentioned that tariffs are already having at least some impact on inflation.
46:25I'm just wondering how you and your colleagues on the FOMC have been thinking about the possibility
46:29of retaliatory tariffs from other countries, especially with April 2nd coming up.
46:33Was it something you considered during this meeting?
46:35Thanks.
46:36CHAIRMAN POWELL.
46:37So, since the very beginning, we've had kind of a placeholder-the staff has a placeholder
46:41of range-really a range of possible outcomes from tariffs and from trade policy generally,
46:48and they generally assume full retaliation in those.
46:52And so that's-that's kind of baked into the numbers.
46:53What happens-it will be complicated, and there will be some retaliation and some not and
46:59all that.
47:00But, ultimately, they're trying to, with the placeholder, give us a broad sense of what
47:05this might look like.
47:06This-when we know-when we actually know the specifics, we'll be able to have still uncertain,
47:10but, you know, better-informed forecasts.
47:13So yes, that's in there.
47:14MS.
47:15PAGE.
47:16Last question goes to Jean.
47:17QUESTION.
47:18Hi, Chair Powell.
47:19Jean Young with M&I Market News.
47:21I had a couple questions on the balance sheet change that you made.
47:26So the Minutes had initially described your discussion on slowing QT as temporary until
47:32the debt ceiling is resolved, but from what you said earlier, it doesn't sound like there's
47:36a desire to kind of regain the pace of QT that we have at the moment after the debt
47:42ceiling is resolved.
47:43Is that the case?
47:44CHAIRMAN POWELL.
47:45Yes.
47:46So we looked at pausing it, and we looked at the balance sheet.
47:47Yes.
47:48So we looked at pausing, and we looked at slowing, and really, people came together
47:52very strongly behind slowing, not pausing, for a variety of reasons.
47:57And so people really came to be, you know, pretty strongly in favor of this move, slows
48:02down the path and probably lengthens it, you know, doubles it effectively by slowing it
48:07by half.
48:08That's-that's-that people thought that's-that's a good place to be.
48:12It'll-it'll, you know, help us assure that this path is-is a smooth one as we get closer
48:18and closer to that.
48:19So that's how that came about.
48:20MS.
48:21RAHMAN.
48:22Well, I guess my question is more, was that meant to be a temporary measure during the
48:24debt ceiling episode, or- CHAIRMAN POWELL.
48:26You know, it was-it was actually-it was the-the TGA flows, Treasury General Account flows,
48:31that got us thinking about this.
48:33But the more we thought about it, we came around to this.
48:36And-and, you know, it is-yes, it was provoked-the original discussion was provoked by that.
48:41But I think what we came up with, though, was broader than that and different than that.
48:44It does address that issue, but it really is also-it fits in really nicely with our
48:50principles and our plans and the things we've done before and the things we said we would
48:53do.
48:54So that's why, you know, pretty-pretty strong support.
48:57I'd just say it's-it's nothing to do with monetary policy, nothing to do with the size
49:01of the balance sheet.
49:02It's just kind of a common-sense adjustment as you get closer and closer.
49:07Let's slow down a little bit again, and that way we'll be more and more confident that
49:10we're getting where we need to get.
49:13You can take our time getting there.
49:14You know, we're shrinking the balance sheet every month, and we think that's-we think
49:18it was a good play, and, as I mentioned, well supported.
49:20Thanks very much.