Federal-Reserve
During the FOMC press conference, Federal Reserve Chair Jerome Powell reiterated the committee's commitment to reducing inflation to their 2% goal, highlighting the tight labor market and excessive inflation as ongoing concerns. Despite recent indicators showing slowed spending and production, especially in consumer spending and the housing sector, the labor market has remained strong, with a low unemployment rate and elevated wage growth. Powell emphasized that the Fed will continue to closely monitor both headline and core inflation before deciding if the current monetary policy is restrictive enough to combat rising prices. Additionally, Powell discussed the state of the labor market and the potential for a soft landing for the economy, but acknowledged the challenges in achieving this given the uncertainty surrounding the current economic climate. Despite concerns about the rapid monetary policy tightening and its potential impact on financial stability domestically and globally, the Fed remains committed to bringing down inflation and providing price stability.
In this section, Chair Powell discusses the Federal Open Market Committee's commitment to reducing inflation to their 2% goal, highlighting that the tight labor market and excessive inflation are still concerns for the American people. Powell notes that recent economic indicators show slowed spending and production, especially in consumer spending and the housing sector. Despite these developments, the labor market has remained strong, with a low unemployment rate and elevated wage growth. Inflation remains well above their goal of 2%, and high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation. As a result, the committee raised the federal funds rate by 0.25%, continuing the process of reducing the size of their balance sheet to restore price stability on behalf of American families and businesses.
In this section, Federal Reserve Chair Jerome Powell discussed the decision to increase interest rates by 75 basis points and stated that the Fed will continue to make decisions on interest rates meeting by meeting. The Fed's overarching focus remains on bringing demand into balance with supply to achieve the 2% inflation goal and to keep inflation expectations anchored. Powell noted that the Fed would be nimble in responding to incoming data and the evolving economic outlook. The Fed will also strive to avoid adding uncertainty in this challenging and uncertain time. Powell discussed the expected decline in headline inflation and the potential persistence in core readings. The Committee's thinking on how far interest rates will need to go has changed, and it will weigh data on economic activity and labor market conditions in decision-making. Furthermore, Powell stated that the focus remained on returning inflation to the 2% longer-run goal, and any decisions towards restrictive territory will be made meeting by meeting.
In this section, Fed Chair Jerome Powell reiterated that the Federal Reserve would be closely monitoring both headline and core inflation before deciding if the current monetary policy is restrictive enough to combat rising prices. The Committee is asking whether inflationary pressures are declining and whether the current policy stance is effective in bringing inflation back down to the Fed's 2% target. Powell stated that the Committee feels policy needs to be at least moderately restrictive, with their most current reading from the June meeting showing median federal funds rate projections between 3.25% and 3.5% by the end of this year. However, Powell highlighted that it is hard to predict what rates will be in the future due to the uncertainty surrounding the current economic climate, and the Committee will make decisions meeting by meeting rather than provide clear guidance as they had previously done.
In this section, Chair Powell discusses the possibility of weak headline inflation numbers due to decreasing oil prices, while core inflation continues to be strong. Powell emphasizes that the Fed's policy stance will be set to ensure they are confident inflation will move down to 2%. However, a sustained period of supply shocks could impact inflation expectations, leading to de-anchoring, and even though their tools do not address supply-side issues, it is something they must consider. Powell also comments on the potential for economic growth to slow down this year, leading to softening market conditions, and acknowledges that restoring price stability is crucial for a strong labor market. Finally, when asked about expectations, Powell states that the Fed is aiming to find a balance between doing too much and too little, acknowledging that events outside the Fed's control could change their approach.
In this section of the FOMC press conference, Chair Powell emphasizes the importance of restoring price stability in order to sustain a strong labor market over time. He notes the two-sided risks of doing too much or too little and stresses the importance of addressing inflation now to avoid raising costs later. When asked about the possibility of a recession, Powell points to strong performance in the labor market and does not believe that the U.S. is currently in a recession. He also discusses the new conflict-of-interest rules that have been put in place and asserts that they are the toughest rules in place at any comparable institution. Finally, Powell is asked about the decision-making process for raising rates and notes that the FOMC considers a variety of factors in making this decision.
In this section, Chair Powell discusses the upcoming Federal Open Market Committee (FOMC) meeting and the factors that will influence their decision, including activity, labor market, and inflation. Powell mentions the possibility of slowing down rate increases as they approach the neutral stance, but no decision has been made yet. Additionally, Powell addresses the growing gap between the Fed's preferred measure of inflation, the PCE index, and CPI index followed by the public and explains that they will eventually come together. Finally, Powell discusses the slowing down of demand in the second quarter as opposed to the first quarter, which was misleading, and the strong labor market that will play a significant role in the decision-making process.
In this section of the FOMC press conference, Chairman Powell discusses the current state of the labor market and the economy. Despite a marked slowing in the economy in the second quarter, Powell notes that the labor market remains strong with low unemployment rates and high wages. While there is evidence of demand moderating, there is also a great deal of money on people's balance sheets that they can spend. Powell expects the economy to do well in the second half of the year but indicates that the FOMC will closely monitor the data to make adjustments and create slack to give inflation a chance to come down. Additionally, Powell notes that labor demand may be slowing, but labor supply is not, and expects the labor market to adjust due to the huge overhang of job openings and excess demand. Finally, Powell emphasizes the need to see inflation coming down and how forecasts of a possible recession from banks and economists could make a soft landing more difficult.
In this section, Chair Powell discusses the state of the U.S. economy, stating that it does not appear to be in a recession yet, but growth is slowing across various categories. Despite this, the labor market continues to show strength, and it is likely that demand is still strong, and the economy will continue to grow this year. Regarding a soft landing, Powell acknowledges that it will not be an easy task, as there is a level of uncertainty surrounding the issue, although the labor market could potentially help in this regard due to the large amount of surplus demand. Powell also mentions that the balance sheet reduction program headed by the Fed is working fine, and the markets have thus far accepted it, with the plan broadly on track, although it may take several years to reach the minimum level of reserves needed in the system. Furthermore, while financial conditions have tightened, the Fed will continue to raise rates until they reach a level where they are confident that inflation will be moving back down to 2%.
In this section, a reporter questions Chair Powell about the Fed's decision to put in place forward guidance on tapering asset purchases in December 2020 and whether in hindsight, the decision has had any material impact on the current inflation situation. Powell admits that he would not make the same decision again, as the situation evolved in an unexpected way, leading to the current high inflation. Powell acknowledges that central banks across the world were also raising rates three months earlier with no significant impact, concluding that what is happening now is a global phenomenon. Powell also discusses the Fed's efforts to avoid a "taper tantrum" and the lessons learned around the complexity of supply-side issues. Finally, Powell is asked how the Fed would define a recession and whether a negative GDP number for Q2 2022 would qualify. Powell states that while a negative GDP number is a significant event, it is not necessarily a recession, and the Fed would need more data to make that determination.
In this section, Chair Powell clarifies that the Fed does not make a judgment on the start of a recession, and only focuses on achieving maximum employment and price stability through their tools and the data available. Powell mentions that the current state of the economy does not suggest a broad-based decline across industries that typically occurs during a recession and attributes this to the strength of the labor market. Powell also discusses the possibility of the natural rate of unemployment having moved up and the potential for it to come back down significantly. A journalist asks Powell about public concerns regarding a recession, and Powell states that while there has been a slowing in spending, he believes the strong labor market will reassure the public and that their goal is to have a soft landing for the economy.
In this section, Chair Powell addresses concerns about the rapid monetary policy tightening that has happened so far this year and how it might increase risks to financial stability domestically and globally. He notes that there are precedents for the FOMC moving quickly in the past, and that given how quickly they've moved this year, he is gratified that markets have been working and have been orderly with some expected volatility. From a financial stability standpoint, asset values have come down, households are generally in strong financial shape given the money that's on their balance sheets, and there is a well-capitalized banking system. However, this is not to say that people at the lower end of the income spectrum aren't suffering, as they are experiencing high inflation that is causing real declines in food consumption. Chair Powell acknowledges that the Fed is committed to bringing down inflation and providing price stability to the American people, even though there will be some softening in labor market conditions, which will no doubt affect households and individuals.
No videos found.
No related videos found.
No music found.