Federal-Reserve
Federal Reserve Chair Jerome Powell discussed the Fed's commitment to bringing inflation down to two percent and the measures the Fed has taken to achieve this target. He stated that financial conditions had tightened significantly over the past year and that the Fed's focus was on persistent moves rather than short-term fluctuations. Powell predicted that inflation would primarily come from the goods sector and would take longer to decrease in the service sector. Although he acknowledged that the labor market remained strong, he suggested that reducing inflation might require a sustained period of below-trend growth and some softening of labor market conditions. Finally, Powell stressed the importance of restoring strong labor market conditions while bringing inflation under control and using the Fed's tools to support maximum employment and price stability in the event of a recession.
In this section, Federal Reserve Chair Jerome Powell discusses the Fed's strong commitment to bringing inflation back down to the two percent goal, stating that price stability is the responsibility of the Federal Reserve and serves as the bedrock of the economy. The Federal Reserve raised its policy interest rate by half a percentage point and anticipates ongoing increases to attain a monetary policy restrictive enough to return inflation to two percent over time. The US economy has slowed significantly from the previous year, with growth in consumer spending and activity in the housing sector weakened, while higher mortgage rates, interest rates, and slower output growth have weighed on business fixed investment. The labor market remains tight with the unemployment rate at a 50-year low, job vacancies remaining high, and wage growth elevated. Although inflation remains above the two percent goal, longer-term inflation expectations remain well-anchored.
In this section, the Chair of the Federal Reserve, Jerome Powell, discussed the decision to raise the federal funds rate by half a percentage point bringing the target range to 4.25% to 4.5%. Powell stated that the Fed's goal is to return inflation to its 2% objective and that financial conditions have tightened significantly in response to policy actions. While he acknowledged that the economy is accelerating, Powell cautioned against complacency, adding that it will take time for the full effects of monetary restraint to be realized, especially on inflation. He also stated that reducing inflation may require a sustained period of below-trend growth and some softening of labor market conditions. Powell's comments suggest that the Fed will continue with its policy of monetary restraint until its goals are achieved.
In this section, Federal Reserve Chair Jerome Powell discusses the Fed's efforts to bring inflation down to two percent, noting that financial conditions have tightened significantly over the past year and that policy actions work through financial conditions, which in turn affect the economy. He says that while many things can move financial conditions over time, the Fed's focus is not on short-term moves but on persistent moves. He adds that the Fed's best estimate is that the peak rate for interest rates will be five percent or more in the fives and that inflation risks are to the upside. Powell adds that the pace at which the Fed moves is no longer important, but rather getting to the ultimate level and assessing how long to remain at that level will be the key question. He notes that the Fed will need to stay at its restrictive stance until it is confident that inflation is coming down in a sustained way, which he believes will be some time.
In this section, Fed Chair Powell addresses the components of inflation, stating that goods inflation has turned quickly but services inflation will take a longer time to come down. He also mentions that the strong labor market is the biggest cost of non-housing related core services inflation, but acknowledges that there may be a need to raise rates higher to achieve their inflation targets. When asked about whether the projected slow GDP growth and soft labor market indicate a recession, Powell clarified that these projections are not indicative of a recession because there is still positive growth, albeit slow, and the unemployment rate is still at 4.7%. He also stated that the Fed has not made a judgment regarding the size of the rate hike but will be mindful of the incoming data.
In this section, Powell addressed questions related to the FOMC's projections for unemployment, core inflation, and policy rates for the upcoming year. He explained that the FOMC had expected faster progress on inflation than was made and that slower progress required tighter policy and the probability of higher rates held for longer. Additionally, Powell noted that the strong labor market was due to the huge overhang of vacancies, and that companies do not want to lay off workers due to what feels like a structural labor shortage. Finally, Powell mentioned that the estimate for the SCP is the best estimate as of today for how high the FOMC needs to raise rates and tighten policy to control inflation and that they will make another estimate for the next SCP.
In this section, Chairman Powell addresses inflation and its sources, stating that it primarily comes from the goods sector. He predicts that lower inflation rates will begin in the housing service sector by mid-2023, but the non-housing service sector relies on the labor market to provide a better balance between supply and demand for wage increases that align with a 2% inflation rate. Chairman Powell also addresses the potential for rate cuts in 2023 and says that while they are not currently being considered, it could be plausible if the committee is confident that inflation is moving down in a sustained way. Finally, he discusses China's reopening and how it could impact inflation rates due to the offsetting effects of weaker output and improving global demand.
In this section, Federal Reserve Chairman Jerome Powell acknowledges that there is good news regarding housing new leases showing declining inflation, although ultimately, the big piece is core services excluding housing, representing more than half of PCE core index, and it is about the labor market and wages. He confirms that the current inflation and Fed policies will take some time to resolve. Although lower inflation reports for a period of time could increase the chances of a return to price stability that involves significantly less increase in unemployment, no one knows whether there will be a recession or not. Chairman Powell admits that if the FED did not raise the rates high enough or allowed inflation to become entrenched in the economy, it would cause the worst pain for the country.
In this section, Federal Reserve Chair Jerome Powell discusses the potential pain of not acting to control inflation, and the measures already taken to raise interest rates. He notes that there will still be some softening in labor market conditions, but the Fed is committed to getting inflation under control and keeping its inflation target at 2 percent. Later, Powell emphasizes the goal of restoring strong labor market conditions, which he says would be good for the economy and the country. The Fed does monitor wage growth and unemployment data, including unemployment rates by different groups, and Powell believes that restoring price stability will pay dividends over the long term. In the event of a recession, Powell stresses that the Fed will continue to use its tools to support maximum employment and price stability.
In this section of the FOMC press conference, Federal Reserve Chair Jerome Powell discusses the strong labor market, which is currently experiencing maximum employment and the lowest unemployment rate in 50 years. However, inflation is a major concern and needs to be brought under control. The labor market also faces a structural labor shortage, with a shortage of at least three and a half million people. Powell stated that there are easy ways to get to bigger numbers, for example, increasing legal immigration, but it's not the Fed's job to prescribe solutions. He also responded to questions regarding economic growth forecasts for next year and the possibility of a recession.
In this section, the speaker discusses the possibility of cutting rates and mentions that the decision will depend on whether there is confidence that inflation will come down in a sustained way. They note that there is not a clear understanding of what the neutral rate and real rates are, so it will not be a mechanical decision. The speaker also suggests that a sustained decrease in inflation would be their test for cutting rates.
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