Powell: Getting inflation down amid current unemployment conditions would be success

Fed Chair Jerome Powell said on Wednesday in his post-Fed meeting press conference that if the Fed doesn’t see progress on inflation, it will react. However, Powell mentioned that soon enough there will be some progress on bringing inflation back down and that he thinks the Fed’s guidance is still credible.

Powell also said that if the Fed can bring inflation down whilst the unemployment rate only rises to 4.1%, that would be a successful outcome, as that is still a historically low level. The Fed does not seek to put people out of work, of course, Powell continued, but it is not possible to sustain the current strong labour market in the absence of price stability.

The Fed is not trying to induce a recession, Powell noted, restating the Fed’s goal to get inflation back to 2.0% whilst maintaining a strong labour market. The pathway to achieving this has become more challenging, Powell conceded, noting that the Fed will get rates up to where ever they need to be in the coming months.

Additional Remarks:

“It is unusual to get data late during the Fed’s blackout period”.

“We won’t declare victory until we really see compelling evidence inflation is coming down”.

“We are going to be careful about declaring victory”.

“Our policy will be sensitive and flexible”.

“I do think our goal is to bring inflation down to 2% while the labor market remains firm”.

“What is becoming clear is many factors we don’t control will play a large part in if that happens”.

“We can’t control supply-side issues”.

“There is a path for us to keep a firm labor market, but it’s not getting easier”.

“The US economy is very strong and is well positioned to handle tighter monetary policy, Fed Chair Jerome Powell stated on Wednesday in the post-Fed meeting press conference”.

“We will do all we can to achieve our dual goals”.

“We always aim to provide as much clarity as we can about our intentions”.

“In the current circumstances, we think it helpful to provide more clarity than usual on policy”.

“When I offered guidance of 50 bps hike at the last meeting, I said that if data came in worse than expected, we would consider a more aggressive move”.

“The CPI data and inflation expectations data last week made us realize 75 bps was the way to go”.

“We want to see a series of declining monthly inflation readings”.

“We had expected to see inflation flattening out by now”.

“But inflation surprised to the upside”.

“We thought strong action was needed at this meeting”.

“We decided we needed to do more frontloading”.

“The next meeting could well be a decision between 50 bps and 75 bps”.

“It is desirable to be up to neutral on interest rates”.

“That would get us to a more normal range, and then would have optionality”.

“The Summary of Economic Projections really says that we want to see policy at modestly restrictive level at end of this year”.

“That is generally a range of 3 to 3.5%”.

“For much of the yield curve now, real rates are positive, but that’s not true for the short end”.