Federal-Reserve
During the FOMC press conference on June 15, 2022, Chair Powell emphasized that the Federal Reserve is committed to returning inflation to its 2% objective, and ongoing increases in the target range will be appropriate. The Committee raised the target range for the federal funds rate by 0.75 percentage points, resulting in a 1.5 percentage point increase in the target range so far this year to ensure that longer-term inflation expectations remain well-anchored at 2%. Powell stressed the need to be nimble in responding to incoming data and the evolving outlook and avoiding adding more uncertainty, as the American economy is strong and well-positioned to handle tighter monetary policy. He also acknowledged that the Fed's decision is subject to incoming data and could change as the situation evolves over the next six months, and that the Fed will remain flexible and responsive to incoming data as it continues to monitor inflation.
In this section, Chair Powell discusses the Federal Reserve's commitment to reducing inflation, which is causing hardship for American families and businesses. The Federal Open Market Committee has raised its policy interest rate by a percentage point and anticipates ongoing increases will be appropriate. The Fed is also continuing to reduce the size of its balance sheet. Despite overall economic activity edging down in the first quarter, recent indicators suggest that real GDP growth has picked up this quarter, with consumption spending remaining strong. However, growth in business fixed investment appears to be slowing, and activity in the housing sector looks to be softening, in part reflecting higher mortgage rates. The tightening in financial conditions that has been seen in recent months should continue to temper growth and help bring demand into better balance with supply.
In this section, Chair Powell highlights the Federal Reserve's strong commitment to returning inflation to its 2% objective and notes that ongoing increases in the target range will be appropriate, as the policy adapts to the rapidly evolving economic environment. The Committee raised the target range for the federal funds rate by 0.75 percentage points, resulting in a 1.5 percentage point increase in the target range so far this year, to ensure that longer-term inflation expectations remain well-anchored at 2%. Powell emphasizes the need to be nimble in responding to incoming data and the evolving outlook and avoiding adding more uncertainty. The American economy is strong and well-positioned to handle tighter monetary policy, and the Fed will take the necessary measures to restore price stability.
In this section, Fed Chair Jerome Powell explains the decision behind the recent 75 basis point rate hike and the speed at which they are moving towards more normal levels. The goal is to see a series of declining monthly inflation readings and strong action was warranted based on elevated inflation and indicators of increased inflation expectations. The speed is a factor in decision-making, along with data dependence, and the recent increase was necessary to front-load the move towards more normal levels as the federal funds rate, even after the hike, is still at 1.6 percent. Powell also clarifies that the decision is subject to incoming data and could change as the situation evolves over the next six months.
In this section, Chairman Powell is asked about the range of the policy rate projected by the Committee and if it will be sufficiently high to bring down inflation. Powell notes that the estimates of the Committee for the policy rate range from 3.5 to 4 percent and suggests that it is plausible, and they will know whether it will be effective in reducing inflation as the real rates move up and the desired effect is seen on the economy. Powell also explains that financial conditions and asset prices play a crucial role in the desired impact on the economy, and the policy's effectiveness depends on demand moderating and labor market balance, which can be affected by supply and demand developments. Powell also acknowledges the limitations of the policy tools to affect things like commodity price issues and supply-side factors.
In this section, Chair Powell of the Federal Reserve discusses the decision to raise rates by 75 basis points and the factors that influenced it in the June 15 press conference. Powell mentions that one of the factors was the "eye-catching" movement of the index of common inflation expectations at the Board, which had been pretty flat for a long time. Powell stresses that the Fed is determined to keep inflation anchored at 2%, another reason for the rate hikes, given the forty-year highs in inflation. He also addresses questions about the effectiveness of policy guidance and potential tradeoffs with higher unemployment if inflation does not moderate at an acceptable pace.
In this section, Chair Powell stated that the implementation of policy will be flexible and responsive to incoming data as the Federal Reserve continues to monitor inflation. He said that they will continue to look for convincing evidence that inflation is coming down before they declare their job is done. Powell also discussed how a higher unemployment rate would not be a negative outcome if inflation is being brought down to 2% and described the factors affecting the path towards getting there, such as external forces beyond their control. Powell explained that the FOMC's objective is to bring inflation down to 2% while the labor market remains strong but acknowledges that many factors outside of their control will play a significant role in deciding whether that is possible or not.
In this section, Federal Reserve Chair Jerome Powell discussed the connection between a strong labor market, wage growth, and price stability. Powell emphasized that the Federal Reserve does not seek to put people out of work, but acknowledged the need to establish price stability to achieve the kind of labor market where workers are getting wage increases, participation is high, and there are lots of job opportunities. Powell also explained the decision to remove a sentence from the policy statement related to the belief that appropriate monetary policy alone can bring about the result of 2 percent inflation with a strong labor market and noted that the current environment has become more difficult due to factors beyond monetary policy.
In this section, Edward Lawrence from Fox Business asked Federal Reserve Chair Powell about changes in consumer spending and whether there were any signs of a broader economic slowdown. Powell stated that overall spending is still very strong, and while there have been some instances of sales going down in retail stores, he does not see any sign of a broader economic slowdown. He also noted that while job growth has slowed, the US economy is still in a strong position and is well positioned to deal with higher interest rates. When asked about inflation, Powell clarified that the Fed is responsible for headline inflation but also looks closely at core inflation, as it is a much better predictor of future inflation and is more relevant to the Fed's tools. He also discussed the difficulty in affecting global commodity prices, which factor into headline inflation.
In this section, Chairman Powell emphasizes the Federal Reserve's role in managing demand, as opposed to inflation, which the Fed views as a lagging indicator. Powell states that the Fed will focus on the areas they can influence, such as excess demand, job openings, and wages in the service sector. He acknowledges that there is always a risk of overshooting or undershooting inflation targets, but emphasizes the importance of price stability as the bedrock of the economy. Powell recognizes that inflation has affected the general public and caused hardship, but emphasizes the Fed's determination to restore price stability and sustain public confidence in the Fed's ability to do so. Regarding measures of inflation such as the Cleveland Fed's median and trimmed mean CPIs, Powell acknowledges that inflation has spread across the economy and into the services sector. He also notes that it will take time to bring inflation back down to the Fed's 2% target.
In this section, Chair Powell expresses the belief that a "softish landing" is still possible, as the SEP projections for inflation and unemployment rate by 2024 meet the test. He notes that the events of the last few months have made it more challenging, but he still believes it is possible to meet that objective. However, Powell stresses that there is a bigger chance now that the outcome will depend on uncontrollable factors like commodity prices. Additionally, Powell emphasizes that financial conditions have tightened in the last seven months, but the current federal funds rate is still low and not a recession risk. Finally, he says that the Fed has been looking at why inflation picked up more than expected last year and how persistent it became, but in highly uncertain times, data-driven flexibility is always key.
In this section, Powell highlights the changing forces of inflation, as opposed to historic models that depict inflation as being dominated by disinflationary effects. The recent spate of supply-side shocks such as the pandemic, global geopolitical unrest, and disruptions in the labor force, meant that inflation has started behaving differently. Powell admits that the Fed is unsure whether these supply-side shocks will recede and go back to behavior observed in the past or become routine, and it is, therefore, imperative to find price stability in the new world and maximize employment in a high-inflation environment. In response to a question on mortgage rates and the outlook on the housing market, Powell highlights a changing market due to increased demand for single-family homes in the suburbs as people shift away from urban areas.
In this section, Federal Reserve Chairman Jerome Powell speaks about the US housing market, noting that the supply of unfinished homes is high while the supply of finished homes that are for sale is historically low. He mentions that this is a complicated situation and that the Fed is closely monitoring the situation. Powell advises homebuyers and young people looking to buy a home that they may need to reset their expectations and wait for the market to settle in a new place where housing and credit availability are at appropriate levels.
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