Sweeping tariffs rolled out by the Trump administration this week are expected to raise inflation and slow economic growth, according to Federal Reserve Chairman Jerome Powell who indicated Friday that the Fed is likely to keep its benchmark interest rate unchanged.
READ MORE: https://www.forbes.com/sites/gennacontino/2025/04/04/tariffs-will-increase-inflation-jerome-powell-warns-as-trump-pressures-fed-to-cut-rates/
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READ MORE: https://www.forbes.com/sites/gennacontino/2025/04/04/tariffs-will-increase-inflation-jerome-powell-warns-as-trump-pressures-fed-to-cut-rates/
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NewsTranscript
00:00And I do want to start by thanking all of you for the work that you do,
00:03which is incredibly important, and we do appreciate that at the Fed.
00:06I'm sure that this room full of reporters does not lack for questions to ask,
00:10and before answering a few of those, I'll briefly summarize the outlook
00:14for the economy and monetary policy.
00:17At the Fed, we are squarely focused on achieving the dual mandate goals
00:21that Congress has given us, of maximum employment and stable prices.
00:26While uncertainty is high and downside risks have risen,
00:28the economy is still in a good place.
00:31The incoming data show solid growth, a labor market in balance,
00:35and inflation running much closer to, but still above, our 2 percent objective.
00:42After a couple of years of solid growth,
00:44many forecasters have anticipated somewhat slower growth this year.
00:48The initial reading for first quarter GDP will be released later this month.
00:53The limited hard data are consistent, though,
00:55with a slower but still solid growth outlook.
00:59At the same time, surveys of households
01:01and businesses report dimming expectations
01:04and higher uncertainty about the outlook.
01:07Survey respondents point to the effects
01:09of the new federal policies especially related to trade.
01:13We are closely watching this tension between the hard and the soft data.
01:18As the new policies and their likely economic effects become clearer,
01:21we will have a better sense of their implications
01:23for the economy and for monetary policy.
01:25Looking across many indicators, the labor market appears to be broadly
01:29in balance and not a significant source of inflationary pressure.
01:33This morning's jobs report showed the unemployment rate at 4.2 percent
01:37in March, still in the low range where it has held since early last year.
01:42Over the first quarter, payrolls grew by an average
01:46of 150,000 jobs per month.
01:48The combination of low layoffs, moderating job growth,
01:51and slowing labor force growth has kept the unemployment rate
01:55broadly stable.
01:58Turning to the other leg of our dual mandate,
02:00inflation has declined sharply from its pandemic highs of mid-2022.
02:05It has done so without the kind of painful rise in unemployment
02:10that has often accompanied periods of tight monetary policy
02:13that are needed to reduce inflation.
02:15More recently, progress toward our 2 percent inflation objective
02:19has slowed.
02:19Total PCE prices rose 2.5 percent over the 12 months ending in February.
02:25Core PCE prices, which exclude the volatile food
02:28and energy categories, rose 2.8 percent.
02:31Looking ahead, higher tariffs will be working their way
02:35through our economy and are likely to raise inflation in coming quarters.
02:39Reflecting this, both survey and market-based measures
02:42of near-term inflation expectations have moved up.
02:45By most measures, longer-term inflation expectations,
02:48those beyond just the next few years, remain well-anchored
02:52and consistent with our 2 percent inflation goal.
02:55We remain committed to returning inflation sustainably
02:58to our 2 percent objective.
03:02Turning to monetary policy, we face a highly uncertain outlook
03:06with elevated risks of both higher unemployment
03:09and higher inflation.
03:10The new Administration is in the process of working
03:13to reduce inflation, and we are committed to reducing inflation.
03:16The new Administration is in the process
03:18of implementing substantial policy changes in four distinct areas-trade,
03:25immigration, fiscal policy, and regulation.
03:28Our monetary policy stance is well positioned to deal with the risks
03:32and uncertainties we face as we gain a better understanding
03:36of the policy changes and their likely effects on the economy.
03:38It is not our role to comment on those policies.
03:43We are committed to working with our partners to assess the risks,
03:46observe the behavior of the economy, and set monetary policy in a way
03:50that best achieves our dual-mandate goals.
03:54We have stressed that it will be very difficult
03:56to assess the likely economic effects of higher tariffs
03:59until there is greater certainty about the details,
04:02such as what will be tariffed, at what level, and for what duration,
04:07and the extent of any retaliation from our trading partners.
04:10While uncertainty remains elevated,
04:12the effects of higher tariffs are likely to be larger than expected,
04:16and the same is likely to be true of the economic effects,
04:19which will include higher inflation and slower growth.
04:21The size and duration of these effects remains uncertain.
04:27While tariffs are highly likely to generate at least a temporary rise
04:30in inflation, it is also possible
04:33that the effects could be more persistent.
04:35Avoiding that outcome would depend
04:37on keeping longer-term inflation expectations well anchored,
04:39and to make certain that a one-time increase
04:42in the price level does not become an ongoing inflation problem.
04:47We will continue to carefully monitor the incoming data,
04:49the evolving outlook, and the balance of risks.
04:52We are well positioned to wait
04:53for greater clarity before considering any adjustments
04:56to our policy stance.
04:58It is too soon to say what will be the appropriate policy
05:01for the future.
05:03We will continue to monitor the incoming data,
05:05the evolving outlook, and the balance of risks.
05:07It is too soon to say what will be the appropriate path
05:10for monetary policy.
05:14We understand the benefits of a solid economy
05:16where workers can find jobs and inflation is low and predictable.
05:20We also understand that elevated levels of unemployment
05:22or inflation can be damaging and painful for communities,
05:26families, and businesses.
05:28That is why we at the Fed will continue
05:30to do everything we can to achieve our maximum employment
05:34and price stability goals.
05:35Thank you, and I look forward to your questions.
05:43This feels like quite a moment to be speaking with you,
05:54and I want to thank you for your time.
05:58He's got a, I want to thank you for being here,
06:02and thank you for taking the time to speak with this business,
06:04this group of business journalists.
06:07Also, I'd like to give a special thanks to Heather Wong
06:09with the Washington Post who helped make this event possible.
06:13So, for starters, sir, how's your week been?
06:18Just fine, thank you.
06:21Care to elaborate?
06:23So far, so good.
06:27Chair Powell, yes, thank you so much for being here
06:28and taking our questions.
06:31You were talking about the economy
06:32as being a very strong economy.
06:33You characterized inflation as coming down,
06:36employment as being very strong still.
06:39However, President Trump, earlier this week,
06:42when asked about the market volatility we've been seeing,
06:45said the volatility was, quote, to be expected.
06:48This is a patient that was very sick.
06:50We inherited a terrible economy.
06:53A lot of voters did and do agree
06:55with that assessment, or at least in part.
06:58I'm wondering how you would respond to that assessment
07:00and the disconnect between the story of the data
07:04and the way a lot of people are feeling about the economy.
07:07Sure, so let me just be clear at the start.
07:10I make it a practice not to respond
07:12to any elected officials' comments,
07:14so I don't want to be seen to be doing that.
07:16It's just not appropriate for me.
07:18But the situation, I think, is this,
07:22and people, when they're surveyed,
07:24they are unhappy about the economy.
07:26That seems to largely reflect the increase
07:29in the price level that happened when inflation was high,
07:322021, 22, and 23, largely.
07:35Inflation is now back down to much more normal levels.
07:38Unemployment is low, the economy has been growing,
07:41but people are still experiencing that high price level.
07:44In other words, prices don't go down.
07:46They know they're paying much more
07:47for the basic necessities of life,
07:50and they're right that they are,
07:51and they're not happy about it,
07:52and they're right not to be happy about it.
07:54So I think that accounts for the negative sentiment.
07:57We, of course, we're looking at inflation,
07:59which is the change in prices,
08:01and we're seeing that that has come down quite a bit,
08:03and that unemployment is actually low.
08:06It's sort of very close to measures of maximum employment,
08:10and the economy's growing.
08:11So all those statistics are good,
08:12but the price increases of the past few years
08:16are weighing on people's budgets.
08:21So I'm from Milwaukee, and I've been talking
08:23to business leaders, executives,
08:25and consumers in our community,
08:27in our region for the last few weeks,
08:29mostly before this week's news.
08:32Chairman, they're troubled, and they're nervous.
08:35One business owner told me,
08:37if there's a hint of a recession, we're cooked,
08:40and he asked me to share that with you.
08:43What's your response?
08:47So I guess I would say, let's start with the fact
08:50that the incoming data right through
08:52this morning's employment report,
08:54which admittedly is from roughly a month ago,
08:57the week of March 12, they took the data,
08:59and it still shows a solid economy.
09:02Unemployment's still low.
09:04I understand the uncertainty that's weighing on people.
09:08You ask about a recession.
09:11We don't actually, we don't make a probability forecast
09:14of how likely it is for there to be a recession,
09:16but many outside forecasters do,
09:18and many of them have raised the likelihood,
09:20albeit from very low levels.
09:22It's not something that anybody now is forecasting,
09:28or some people are starting to.
09:30And so I can't, there's not much more I can say about that.
09:33I realize that the uncertainty is high,
09:36and what we've learned is that the tariffs
09:39are higher than anticipated,
09:41higher than almost all forecasters predicted.
09:44We still don't know where that comes to rest, though,
09:46and we're just going to have to see that through.
09:49At a congressional hearing last year,
09:52one of the US representatives said
09:54that you were pretty boring, and you thanked him,
09:58and said that you considered that a very high compliment.
10:02And in fact, I feel like it's one of the roles
10:04of the Federal Reserve, especially since the housing crisis,
10:07to be kind of a ballast, especially in the face
10:11of the volatility of the markets,
10:12and the dramatics that we can experience with the economy.
10:16Very steady, no surprises, very reliable.
10:20In a moment like this, which also has a lot of drama
10:24and unpredictability, but it is not necessarily
10:28from an economic crisis, it's by design, it's political,
10:33how do you see your role in this moment?
10:36So I think all of the values that you touched on
10:39are in fact the values that we try to live by.
10:42We're driven by analysis and careful thought
10:45and discussion and debate, and the merits of things.
10:49We try to stay as far as we can from the political process.
10:53We don't look at political cycles or things like that.
10:55So, and I think people expect that from us.
10:58They expect us to tell the truth,
10:59and that's what we're going to do.
11:01But at the same time, we're not part of,
11:04we don't want to be part of the broader political discussion
11:06about the wisdom of policies that are not assigned to us.
11:09We're not responsible for trade policy,
11:11immigration policy, fiscal policy.
11:13So we don't comment on, those decisions are made by others,
11:17and what we do is we use our tools
11:18to try to achieve the goals that Congress assigned us,
11:21which is maximum employment and price stability.
11:24So I like to think that over time,
11:25we're a source of calm, rational analysis,
11:29and also of stability.
11:31That's really what the business that we're in
11:33is providing financial and macroeconomic stability
11:37to the public.
11:38That's really our purpose.
11:41So how can businesses and individuals and the Fed
11:46make plans for the future when so much is being dictated
11:49by the actions of a single person?
11:52And do you see yourself as the consoler-in-chief
11:56on economic matters?
11:57No, I think, take a step back.
12:00What's happening is, as I mentioned,
12:02the new administration is coming in,
12:04what's happening is, as I mentioned,
12:06the new administration is making significant policy changes
12:10in trade, immigration, fiscal policy, and regulation.
12:13And you're still just a couple of months
12:16into the administration,
12:18and that process will take place,
12:21and at a certain point,
12:22the new policies will be on the table,
12:24they will be having the effects
12:25they're going to have on the economy,
12:27and uncertainty will decline.
12:29Right now, there's a lot of uncertainty
12:31about where all that's gonna sort out,
12:34the forms it will take,
12:35and what the economic effects will be.
12:36If you fast forward a year from now,
12:38the uncertainty should be much lower.
12:40The actual effects of the policies
12:42should then be pretty manifest and clear.
12:44So I think I understand why it just is highly uncertain
12:49both what the policies will turn out to be,
12:51exactly what they'll turn out to be,
12:52and also what their effects will be in the near term.
12:55We just have to go through that process,
12:57and it is just kind of a manifestation
12:59of our election cycle,
13:00and a new administration coming in
13:02with new policies.
13:05I mean, given all of the change happening,
13:08and the fact that we are in a period
13:09where things have not settled in yet,
13:11and that the Federal Reserve and you as chair
13:15are very projection, data-driven, policy-driven,
13:18how do you handle a moment like now?
13:21I mean, can you tweak your plans and projections?
13:25Do you just kind of, do you have to reset them?
13:27So what we've had since, in the last few months,
13:32from the staff has been a placeholder,
13:34rather, they wouldn't call it a forecast
13:36because it's so uncertain, they call it a placeholder.
13:39And that's kind of how we've been thinking about it.
13:41So it's a good time to take a step back
13:43and let things clarify.
13:45That's why it's just too soon to say
13:48what the appropriate monetary policy response
13:51will be to these new policies.
13:53It is just too soon to say.
13:54We can't say with any confidence today.
13:56So that's what we're doing.
13:58We've taken a step back,
13:59and we're watching to see what the policies turn out to be
14:02and the ways in which they will affect the economy,
14:05and then we'll be able to act.
14:06Fortunately, our policy stance
14:08is in a good place for us to do that.
14:11We're probably modestly, moderately restrictive, let's say,
14:15so it's not really tight policy,
14:17but it's, which is appropriate
14:19since inflation is a bit above target.
14:21So we think we're well-positioned
14:23to address whatever may come.
14:25And in the meantime, I'd say we're waiting this to,
14:29waiting for greater clarity before we consider adjustments.
14:33Business owners in Wisconsin have told me
14:35that they can't make their plans.
14:38They want to expand.
14:39They want to build a new facility.
14:41They want to hire or do whatever the future calls for.
14:45They say, we're trying to look around the corner.
14:48We're not even sure where the corner is,
14:50and we're not even sure what's around the corner.
14:53Sounds like they're in the same position
14:54as you are a little bit.
14:56No, we hear the same thing.
14:57Of course, we have an incredible network
14:59of contacts with businesses and also universities,
15:02non-profits, all different sectors
15:04through the reserve banks
15:05and also through the Board of Governors.
15:08And that's what we hear.
15:10But again, it's a process.
15:11We're going through it,
15:12and I think we will know when we know
15:17what the policies are exactly
15:19and what their implications will be for the economy.
15:21That will all become clear,
15:22and I think that'll be a time
15:24when people can make decisions.
15:25In the meantime, though, I get it.
15:27We're hearing that a lot from people,
15:28and we are kind of in the same place,
15:30which is waiting for clarity
15:32about what our policy path should be.
15:36We'll have to see.
15:39As you're talking about placeholders right now
15:41and having something in the place
15:44when there's so much that we don't know,
15:46it does occur to me that this is not the first
15:48economic shock that you have steered
15:50the markets and the economy through.
15:52Obviously, there was COVID almost exactly five years ago.
15:56It seems similar in certain ways
15:57with a lot of uncertainty, a lot of shock,
16:01also potential disruptions to prices and to supply,
16:04which is very much in the Federal Reserve's wheelhouse.
16:09I mean, from where you sit,
16:11can Liberation Day be compared
16:13to kind of the economic effects of COVID?
16:16Are they totally different, somewhat related?
16:19I think each situation is different.
16:23You know, there was COVID.
16:25There was also then, in the response to COVID,
16:27then there was high inflation,
16:30and then there was soft landing,
16:32and then there was, and now we have new administration
16:35and changes in policies.
16:36And every situation, you know, it kind of rhymes,
16:40but it's not exactly the same thing.
16:42And so in this situation, what we face is,
16:46what I mentioned in my remarks is,
16:47you actually have risks for higher unemployment
16:50and higher inflation.
16:52And that's difficult for a central bank
16:53because our tools, which consist of interest rates,
16:57you know, either slow down or speed up the economy over time
17:02and, you know, higher unemployment would call
17:04for speeding up the economy,
17:06and higher inflation would call for slowing it down.
17:08So you can be in a situation,
17:10if we find ourselves in that situation,
17:12we look at how far each of the two variables
17:14is from its goal, and we ask ourselves,
17:16how long would it take to get back?
17:18And we weigh those things
17:19and make a decision about what to do.
17:21But there's no question, that's a different situation,
17:23very difficult situation.
17:25When we faced high inflation,
17:27it was painful for the country,
17:28painful for the people that we serve,
17:30but we knew what policy needed to be.
17:32We knew we needed to raise rates quite a bit.
17:34During the pandemic, we knew what we needed to do.
17:37It was very clear the direction that we needed to take.
17:39We needed to take with force, and we did.
17:41It's almost a situation potentially
17:43where the dual mandate is at odds with itself.
17:46The two goals are, as we say, intention, or they may be.
17:49I'd say that's not what we're seeing right now,
17:52but the effects at the margin right now
17:55would be for higher inflation
17:58and perhaps higher unemployment.
18:01But that's a marginal effect.
18:02I would say you're not in a situation
18:05like we were in the 1970s,
18:06where the two goals were really both
18:10pulling in opposite directions and required.
18:13It's just very hard for a central bank
18:15to be the answer to a situation like that.
18:17But that's not the situation
18:19that we're really in today.
18:20One of the questions from the audience that we had
18:22is if unemployment takes off and inflation takes off,
18:28which lever do you go for?
18:30Which lever do you, what do you do?
18:34So we actually have a, you know,
18:36we have a document called our consensus statement,
18:39or the longer version is Statement on Longer Run Goals
18:42and Monetary Policy Strategy.
18:44And the sixth paragraph of that actually contemplates
18:47when the two goals are in tension.
18:49And what it says is,
18:51think about how far each variable is from its goal
18:55and think about how long it would take
18:57for each to get back.
18:58So in a way, it's an equation.
19:00You're comparing two quantities,
19:02which each have two variables.
19:03And then you say, you look at that and you think,
19:06what do we need to do?
19:07And, you know, typically one doesn't,
19:09this doesn't happen very often,
19:10but if one of them is further away,
19:12then you would focus on that one.
19:14In the case of high inflation,
19:16they actually both pointed in the same direction.
19:17The labor market was overheated
19:20and inflation was very high.
19:21So both of those caused, called for,
19:23you know, for tight monetary policy.
19:25This is, this could be different,
19:26but again, we're not actually facing that today.
19:29I feel like there's another tension inherent in your job,
19:32which is that you're looking at the macro economy,
19:35at the global economy, really,
19:36and the U.S. place is in it,
19:38but also the data you're looking at is very profoundly human
19:42as Jim has been pointing out.
19:43Jobs, I think, and prices are probably
19:46the two most human pieces of data.
19:50And certainly in our day-to-day experience,
19:53probably the things that loom the largest.
19:55How do you reconcile those two things
19:58when you're looking at the data,
20:00like both the global markets
20:02and knowing that the data represents a lot of lives
20:05and jobs and egg prices and things like that?
20:09So we, I think at the Fed,
20:10we always keep a focus on the people that we serve
20:15and we know and are very conscious daily
20:20that the things that we do have a real effect
20:22on people's lives.
20:23We know that and it really does focus the mind.
20:25And I think if you talk to people at the Fed,
20:28there's a very strong commitment
20:29to serving the public as well as we possibly can.
20:32Economic events are just very, very unpredictable at times
20:36and there are shocks that you can't see coming.
20:38Nonetheless, our job is to, whatever happens,
20:41use our tools to bring the economy back to stability,
20:45back to price stability, back to maximum employment.
20:48And that's what we do.
20:48But you're right, we try to keep everybody
20:52in the room with us when we're thinking about what to do.
20:56So in response to the last round of tariffs,
20:59Harley-Davidson, which is based in Milwaukee,
21:02moved some production to Thailand.
21:04Now the company might be whipsawed again
21:07by the new tariffs.
21:08It could be really devastating for sales,
21:10for employment, for the future of that company.
21:13But a lot of companies are in that same position.
21:16And what do you say to companies like Harley-Davidson
21:19and their workers?
21:20So it just isn't, I really wanna stick to our knitting.
21:25I mean, we have this great thing called
21:27our independence of monetary policy.
21:30And that's critical for us to be able to do our job.
21:33But for us to keep that independence,
21:34we need to not succumb to the temptation
21:37to wanna be a player on issues that are not assigned to us.
21:40And trade policy is one of those.
21:42There are many, many issues that people love
21:44to try to pull us in on.
21:45Almost every issue, really.
21:47And we just need to stick to our knitting,
21:49not get pulled into those things.
21:50And so trade policy is a classic one.
21:53Energy policy is another.
21:54Climate change, immigration is not.
21:58Although all of those things have economic implications,
22:01and it gets argued that way.
22:02But if we treated those as our job,
22:06the case for our independence would disappear.
22:08So I really can't comment on,
22:11I mean, we hear the same stories, stories like that.
22:14But honestly, the policymakers who are charged with that,
22:17they're probably hearing the same stories too.
22:19And they're reaching a judgment about
22:20what's in the best interest of the country in the long run.
22:23That's what they are doing, I guess.
22:25And that's, so it's not for us to comment on that.
22:28What happens inside the Fed at a moment like right now,
22:31when there's so much change and quite a bit of uncertainty,
22:35when you're watching things unfold,
22:38what does that look like, practically speaking?
22:41What are people doing inside the building?
22:44So I'm very proud to work with the people I work with.
22:47I can tell you that in times like this,
22:49or times like the pandemic,
22:51where the global financial markets were shutting down,
22:54the global economy was shutting down,
22:55people step forward and they say, we've got this.
22:57These are career people who were here
23:00for the global financial crisis.
23:01They've got 25 years, 35 years of experience with crises.
23:06And they step forward and they,
23:08it's just incredible what they can do and how good they are.
23:11It's a great honor to work with them.
23:13So right now isn't that situation.
23:15You know, we have the situation we have.
23:17So, you know, our trade people and our inflation people
23:20and our macroeconomists are all working hard to,
23:23you know, to kind of digest the news of this week
23:27and try to filter that into the forecast that they'll make.
23:32And policymakers are doing very much the same thing.
23:35And we're reading everything we can about what's happening
23:37and lots of outside analysis too.
23:40We don't have an FOMC meeting until May 6th and 7th.
23:44So that's really a process that lasts several weeks,
23:47but we're not quite at that stage yet.
23:50But we're kind of thinking ahead to that
23:52and working through all of that.
23:55I will say though, you know,
23:57it feels like we don't need to be in a hurry.
23:59It feels like we have time to, yes, yes.
24:01It feels like we don't, no, I mean, it's like I said,
24:06you have, you have, inflation is going to be moving up
24:09and growth is going to be slowing, but it isn't really,
24:12it's to me, it's not clear at this time
24:15what the appropriate path for monetary policy will be.
24:18And we're going to need to wait and see how this plays out
24:21before we can start to make those adjustments.
24:25Question from the audience.
24:27One of our, from one of our SEBU members is,
24:31are you in contact with other central bankers
24:33in other countries at a time like this?
24:35Yes, yes, pretty frequently.
24:40Absolutely, I am.
24:40And the same was true during the other crises
24:44I've been through.
24:46Not only that though, we do meet very regularly.
24:49You know, the IMF World Bank meetings here in Washington
24:52twice a year, we go to Basel multiple times a year to meet.
24:56That's all central bankers.
24:59And there are also G20 meetings, G7 meetings
25:01where we were, the central bankers are there.
25:03So we're kind of regularly meeting and talking.
25:06And when we're not doing that,
25:07we're also texting each other and-
25:09Is there a group chat?
25:10Yeah.
25:13I'm not at liberty to say.
25:17No, there's not.
25:22And have you talked to those central bankers this week?
25:26Recently.
25:27Yeah, I didn't want to get too specific about this,
25:28but yes, I have.
25:29What's their sentiment?
25:30Can you characterize that?
25:31I'd rather, you know, again,
25:32I don't comment on what my international colleagues say,
25:36or it's not appropriate.
25:38But, you know, we're talking about events.
25:39We're talking about the implications for the economy.
25:41We're discussing what we're hearing from markets
25:45and from business people and for, you know,
25:48from the elected governments too.
25:49It's all the things you would expect us
25:51to be talking about on a regular basis.
25:54It's one of the best things about this role
25:58is that the central banks have a lot,
26:01you know, we're not, we're all non-political.
26:04So we think about things in quite similar ways.
26:07And we, they're real bonds.
26:09We, you know, we'd also,
26:11we're not lobbying each other ever on policies.
26:13There's never, that's just not a thing.
26:15Because we, you know, we do our policy here.
26:17They do their policy there.
26:19But we develop really, really good relationships
26:21and bonds with them.
26:22And it's one of the real pleasures and benefits
26:25being able to talk about this,
26:27just not only with the great people at the Fed,
26:29but also with the leaders around the world.
26:32I mean, it's interesting because it is a job
26:34of enormous responsibility and power,
26:37but it's also a job.
26:39Is it, I mean, how would you characterize
26:42the job of Fed chair?
26:44Like, how is it as a job?
26:46Honestly, that's what it is.
26:47I really feel just like another person doing that job.
26:50Really?
26:51Yeah.
26:52You just like.
26:52That's how it is.
26:53I'm doing a job.
26:54I have a job to do.
26:55I actually really like the job.
26:56I like it a lot.
26:57I enjoy it.
26:59It can be stressful at times.
27:00Nonetheless, incredibly interesting,
27:02great people to work with, really important.
27:04You know, what more could you want?
27:06But that's what it is.
27:08And, you know, I, again,
27:09I'm blessed by working with great colleagues
27:11who are really committed to getting it right.
27:14I mean, fully appreciate how important it is
27:16that we get it right
27:18and do everything we possibly can
27:20to bring the best thinking, the best analysis
27:22and debate things, you know, over and over
27:25until we feel like we're in the right place.
27:27At the same time, there is no certainty in this.
27:29You can be wrong because economy can zig
27:34when you thought it was gonna zag.
27:36So your term as Fed chair ends about a year from now.
27:41What do you think about your job security?
27:44I fully intend to serve all of my term.
27:49Excellent.
27:50I mean, as we're getting close to wrapping up,
27:52I did wanna ask something a little bit out of the box.
27:55I think because you do have a position
27:57of such great responsibility,
27:58people are very curious about you.
28:02And I think people tend to read into everything
28:05a Fed chair does, small gestures, word choice.
28:09I know we, it's part of our jobs in this room
28:12to pour over every word you choose.
28:14I did wanna ask about one thing
28:16that I've wondered about for years,
28:18which is your tie.
28:22You always seem to wear a purple tie.
28:24And every time I think I've seen you,
28:27you've worn a purple tie.
28:28And I'm wondering if there's significance to that.
28:31Well, at the beginning, the only significance
28:33was that I like purple ties.
28:35Okay.
28:36But I will say, you know,
28:38so then the next press conference,
28:40I reach for a blue tie or a red tie
28:42and I go, hmm, maybe not, you know.
28:44And so I wind up wearing purple ties.
28:46And then it becomes a thing.
28:47And now I definitely wear purple ties all the time.
28:50Okay.
28:51But I felt like you didn't,
28:52it just felt a little awkward
28:53to be wearing one that was identified.
28:55We are strictly non-political.
28:57I can't stress that enough.
28:59We are not, it's not that we're bipartisan.
29:01We are non-political.
29:02We don't do that.
29:03And so purple was a good color for that.
29:06That's all.
29:07Plus I like purple ties.
29:09Sorry to give you a purple guitar pick.
29:12I have one other Milwaukee question
29:14that I overlooked here,
29:15but in Milwaukee and other parts of the country,
29:18the housing market is out of whack.
29:21In our market alone in Southeastern Wisconsin,
29:25there's 5,000, the market's out of whack
29:28by like 5,000 houses that need to be on the market
29:30for it to have equilibrium.
29:33And this report this week said tariffs
29:35could tack on some 6,000 bucks
29:38to the cost of building a new home.
29:41How long are people gonna sit
29:42on their cheap mortgages from COVID?
29:44Thank you very much.
29:46But, and before they move on,
29:49before the market frees up.
29:50So you have several things there.
29:52The first is we just haven't built enough housing
29:56and we haven't kept up with the demand for housing.
29:58So there's an underlying shortage.
30:00Before the pandemic, there was a real housing shortage.
30:04And by the way, that's happening
30:05in many comparable democracies around the world.
30:08The second thing is, you know, lock-in, as you say,
30:11there were very, very low mortgage rates during COVID
30:14and people are kind of locked in.
30:15It would be very expensive to move.
30:16And that'll of course, wear off over time.
30:20You also mentioned, you know, the costs of materials
30:25that might be imported, you know, lumber and nails
30:27and things like that.
30:28And yeah, that had been also labor.
30:31A lot of labor from in the home building business
30:36has been traditionally immigrant labor.
30:38So yeah, the housing, the new,
30:40the sort of new build market,
30:42it may face some cost pressures as well.
30:44That's just, that may very well be the case.
30:46That's what we're hearing from home builders, for example,
30:48both on the labor side and on the material side.
30:51But even once these short-term things happen,
30:53we're still gonna have not enough houses.
30:56And so it's all, you know, I think for a long time,
30:58we're still gonna see upward pressure on housing prices,
31:02you know, maybe until population growth slows
31:05until we catch up.
31:07You mentioned that we're kind of in a period of waiting
31:10right now to see how policy ripples out through the economy.
31:13How long do you expect that to take?
31:16How long do you expect these big policy changes
31:18to show up in our day-to-day lives
31:20and prices and supplies and things like that?
31:24So for a while, we didn't know what was coming on April 2.
31:29Now we know what came on April 2.
31:31We don't know, there's a lot more to be said
31:34about how all that shakes out.
31:35But we've come through that,
31:37and I think you now know that the tariffs are larger
31:40than people were generally expecting.
31:42That much you know now at this point.
31:44And you'll know more as you start to see
31:47the effects on the economy.
31:48So, you know, as the months go by,
31:50well, it's hard to say exactly when you'll know,
31:52but clearly that learning process is ongoing.
31:56We're just seeing that these are new policies,
31:57not just the tariff policies, but the other ones as well.
32:01There'll be important fiscal legislation
32:04coming up fairly soon.
32:06And there'll be regulatory changes,
32:07significant regulatory changes.
32:09You have to really look at all of that
32:10to see what the overall effect will be.
32:12So I can't give you a date,
32:14but all of that is now kind of coming into place
32:18at sort of the speed you expect policy changes to be.
32:22And then we'll begin to see the real economic effects
32:24as the year goes on.
32:26But again, I can't give you a really specific date.
32:28Is the fiscal legislation the tax cuts?
32:33Well, yes, I mean, I know they're contemplating,
32:35and we don't comment on fiscal policy,
32:37but what I read is that they're contemplating
32:40making the Tax Cuts and Jobs Act cuts permanent
32:43and also perhaps some other things as well.
32:45We wouldn't be, we have sort of a placeholder for that too,
32:50but that's really not ours to comment on.
32:52But that's what I was talking about, yes.
32:55So I have a question from a friend in Milwaukee
33:00who said she has clients that have deals ready to go,
33:05businesses that are ready to launch from their garage
33:09to a private equity deal,
33:11and they're just stuck in their garage right now.
33:14How long do you think, what do you think the impact
33:16of the uncertainty these days
33:19will have on the private equity deals?
33:21So again, we're hearing a lot of that.
33:22People are just, they're just kind of waiting,
33:25and for clarity, waiting for clarity.
33:27And I can't tell you when that will pass,
33:30but ultimately, it will pass.
33:32We know that at a certain point,
33:36we'll know enough to know what the new,
33:38the uncertainty will decline,
33:39and we'll be able to see with real clarity
33:42what the policies are and what their effects are.
33:46But you're right, we hear the same thing from businesses
33:48and just from people that they're kind of waiting and seeing.
33:52There's a lot of waiting and seeing going on,
33:54including by us, and that just seems like
33:56the right thing to do at a time of elevated uncertainty.
34:00What economic indicators are you watching right now?
34:03Very famously, you look at the CPE
34:05and obviously the CPI and things like that,
34:09but are there any economic indicators in this moment,
34:11in these circumstances, that you are watching,
34:15focused on, interested in?
34:17So the basic two big data pools
34:20are the data around prices and around employment.
34:22And we get, in the employment area,
34:25we get just really, and that's an area
34:27where we actually get pretty good data,
34:29although the survey response rates have been lower.
34:31Nonetheless, we get a lot of different data,
34:33and it's not just unemployment, it's participation,
34:36it's by age group and things like that.
34:38It's wages, it's many, many different things.
34:41It's jobs, it's quits, all the job creation quits,
34:45openings, all those things.
34:47So that's one thing.
34:48On inflation, we do, we target PCE,
34:50Personal Consumption Expenditure Inflation, not CPI.
34:54And the two are broadly, they move together,
34:58but 25 years ago, the Fed switched to PCE.
35:03The public looks at CPI.
35:04It's kind of a little bit of a thing,
35:06but because we think it's really just a better way
35:10to capture the inflation, the cost pressures
35:12that households and businesses feel.
35:13We think it's a better measure.
35:15And that's what we look at, but they're not that different.
35:17I mean, they're just, they look at different measures.
35:19Ultimately, they're pretty close together.
35:21Those things, you know, on growth,
35:23you look at what's happening with consumer spending.
35:26The economy is overwhelmingly driven by spend,
35:29by consumer spending.
35:31So you look at how are, you know, consumer surveys,
35:34how are they feeling?
35:35How are they spending?
35:36Sometimes the surveys are very negative,
35:38but they keep spending.
35:39That happens, that's been happening really for a while.
35:42People spent right through the pandemic
35:45and they spent right through this time of higher inflation.
35:47They kept spending and forecasters kept thinking,
35:50like us, kept thinking that consumption would slow down.
35:53But that's a really critical thing.
35:55After that, business investment is a big chunk.
35:58And you look at that,
35:59and that is also susceptible to sentiment.
36:02You know, businesses, if they don't know what to do,
36:04they're not gonna do an acquisition
36:06or they're gonna hold off on building a factory or a plant
36:08or hiring people and things like that.
36:10So we look at, I mean, I could go on for a long time.
36:13We look at a lot of data and we try to make sense.
36:15We also talk to people who are in the real economy.
36:19You know, I grew up,
36:20my career was mostly in the private sector,
36:23talking to people who ran businesses.
36:26And for me, the story doesn't come together
36:28until I actually hear from people
36:30who are in the economy doing things
36:33and what they're feeling and seeing.
36:34And then it sort of fits together better.
36:37This is like via the Beige Book or just-
36:40Beige Book, thank you for mentioning the Beige Book.
36:42And if you, I hope you read it.
36:44I actually, I love the Beige Book.
36:46See, that's great.
36:47Everyone should read the Beige Book.
36:48The Beige Book comes out sort of mid FOMC cycle
36:50and it's all the 12 reserve banks
36:52and all of their incredible contacts,
36:54what they're saying about what's going on in the economy.
36:56So if you wanna know, you know,
36:57you can look at the national data,
36:59but if you wanna know what's going on in regions
37:01and at different industries, you look at the Beige Book.
37:03So it's really a critical, critical thing.
37:06And actually the reserve bank system that we have
37:08is an enormous strength of the Federal Reserve System.
37:11We have these 12 reserve banks
37:12with their own, you know, economics departments
37:16and own participants on the FOMC.
37:18So that's a great thing to look at.
37:21I'd like to ask you about another body of work
37:23that many of us know that you're familiar with
37:26and that's the Grateful Dead.
37:29So, question for you, sir.
37:31American Beauty or Terrapin Station?
37:34American Beauty.
37:35Well, it's not even close, that was too fast.
37:39Working Man's-
37:40That's my era, that's my era.
37:41Working Man's Dead?
37:43Or Europe's 72?
37:43Both, both.
37:45We're in the same era here.
37:46So that's, for me, it's late 60s to mid 70s.
37:49So you're-
37:50Touch of Grey, what do you think?
37:52It was their only hit, but it's a good song.
37:54Okay.
37:55Yeah.
37:56Finally, there's-
37:57Are we gonna do this?
37:57I feel like you're speaking another language.
37:59There's a well-known Grateful Dead bootlegger
38:04who, with, I believe, the permission of the band,
38:07Dix Picks, who's put out...
38:10So what's your recommendation of those hundreds of-
38:13I don't have any Dix Picks.
38:15Like I said, my real interest was late 60s to mid 70s.
38:20And I saw them a bunch of times,
38:21and I know every note on every song from that era.
38:23But since then, I've been busy, actually.
38:26Yeah.
38:26Well, we thank you for taking your time,
38:31taking time out of your schedule to join us here,
38:33and we appreciate your work.
38:34Thank you very much.
38:35Thanks, everybody.
38:36Thanks, Jim.
38:38Thanks, Jim.
38:57We are now adjourned until...
39:03Two o'clock, I believe.