May 4, 2022 Chair Powell’s Press Conference PRELIMINARY

Transcript of Chair Powell’s Press Conference

CHAIR POWELL. Good afternoon. It’s nice to see everyone in person for the first time

in a couple years. Before I go into the details of today’s meeting, I’d like to take this opportunity

to speak directly to the American people. Inflation is much too high and we understand the

hardship it is causing, and we’re moving expeditiously to bring it back down. We have both the

tools we need and the resolve it will take to restore price stability on behalf of American families

and businesses. The economy and the country have been through a lot over the past two years

and have proved resilient. It is essential that we bring inflation down if we are to have a

sustained period of strong labor market conditions that benefit all.

From the standpoint of our Congressional mandate to promote maximum employment

and price stability, the current picture is plain to see: The labor market is extremely tight, and

inflation is much too high. Against this backdrop, today the FOMC raised its policy interest rate

by 1/2 percentage point and anticipates that ongoing increases in the target rate for the federal

funds rate will be appropriate. In addition, we are beginning the process of significantly

reducing the size of our balance sheet. I’ll have more to say about today’s monetary policy

actions after briefly reviewing economic developments.

After expanding at a robust 5-1/2 percent pace last year, overall economic activity edged

down in the first quarter. Underlying momentum remains strong, however, as the decline largely

reflected swings in inventories and net exports, two volatile categories whose movements last

quarter likely carry little signal for future growth. Indeed, household spending and business

fixed investment continued to expand briskly.

The labor market has continued to strengthen and is extremely tight. Over the first three

months of the year, employment rose by nearly 1.7 million jobs. In March, the unemployment

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rate hit a post-pandemic and near five-decade low of 3.6 percent. Improvements in labor market

conditions have been widespread, including for workers at the lower end of the wage distribution

as well as for African Americans and Hispanics. Labor demand is very strong, and while labor

force participation has increased somewhat, labor supply remains subdued. Employers are

having difficulties filling job openings, and wages are rising at the fastest pace in many years.

Inflation remains well above our longer-run goal of 2 percent. Over the 12 months

ending in March, total PCE prices rose 6.6 percent; excluding the volatile food and energy

categories, core PCE prices rose 5.2 percent. Aggregate demand is strong, and bottlenecks and

supply constraints are limiting how quickly production can respond. Disruptions to supply have

been larger and longer lasting than anticipated, and price pressures have spread to a broader

range of goods and services. The surge in prices of crude oil and other commodities that resulted

from Russia’s invasion of Ukraine is creating additional upward pressure on inflation. And

COVID-related lockdowns in China are likely to further exacerbate supply chain disruptions as

well.

Russia’s invasion of Ukraine is causing tremendous loss and hardship, and our thoughts

and sympathies are with the people of Ukraine. Our job is to consider the implications for the

U.S. economy, which remain highly uncertain. In addition to the effects on inflation, the

invasion and related events are likely to restrain economic activity abroad and further disrupt

supply chains, creating spillovers to the U.S. economy through trade and other channels.

The Fed’s monetary policy actions are guided by our mandate to promote maximum

employment and stable prices for the American people. My colleagues and I are acutely aware

that high inflation imposes significant hardship, especially on those least able to meet the higher

costs of essentials like food, housing, and transportation. We are highly attentive to the risks that

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high inflation poses to both sides of our mandate, and we are strongly committed to restoring

price stability.

Against the backdrop of the rapidly evolving economic environment, our policy has been

adapting, and it will continue to do so. At today’s meeting the Committee raised the target range

for the federal funds rate by 1/2 percentage point and stated that it anticipates that ongoing

increases in the target range will be appropriate. We also decided to begin the process of

reducing the size of our balance sheet, which will play an important role in firming the stance of

monetary policy. We are on a path to move our policy rate expeditiously to more normal levels.

Assuming that economic and financial conditions evolve in line with expectations, there is a

broad sense on the Committee that additional 50 basis point increases should be on the table at

the next couple of meetings. We will make our decisions meeting by meeting, as we learn from

incoming data and the evolving outlook for the economy. And we will continue to communicate

our thinking as clearly as possible. Our overarching focus is using our tools to bring inflation

back down to our 2 percent goal.

With regard to our balance sheet, we also issued our specific plans for reducing our

securities holdings. Consistent with the principles we issued in January, we intend to

significantly reduce the size of our balance sheet over time in a predictable manner by allowing

the principal payments from our securities holdings to roll off the balance sheet, up to monthly

cap amounts. For Treasury securities, the cap will be $30 billion per month for three months and

will then increase to $60 billion per month. The decline in holdings of Treasury securities under

this monthly cap will include Treasury coupon securities and, to the extent that coupon securities

are less than the monthly cap, Treasury bills. For agency mortgage-backed securities, the cap

will be $17.5 billion per month for three months and will then increase to $35 billion per month.

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At the current level of mortgage rates, the actual pace of agency MBS runoff would likely be less

than this monthly cap amount. Our balance sheet decisions are guided by our maximum

employment and price stability goals, and in that regard, we will be prepared to adjust any of the

details of our approach in light of economic and financial developments.

Making appropriate monetary policy in this uncertain environment requires a recognition

that the economy often evolves in unexpected ways. Inflation has obviously surprised to the

upside over the past year, and further surprises could be in store. We therefore will need to be

nimble in responding to incoming data and the evolving outlook. And we will strive to avoid

adding uncertainty to what is already an extraordinarily challenging and uncertain time. We are

highly attentive to inflation risks. The Committee is determined to take the measures necessary

to restore price stability. The American economy is very strong and well positioned to handle

tighter monetary policy.

To conclude, we understand that our actions affect communities, families, and businesses

across the country. Everything we do is in service to our public mission. We at the Fed will do

everything we can to achieve our maximum employment and price stability goals. Thank you,

and I look forward to your questions.

NICK TIMIRAOS. Nick Timiraos, the Wall Street Journal. Chair Powell, the

unemployment rate at 3.6 percent in March is now essentially at the level that the Committee had

expected would prevail over the next three years. And at the bottom end of FOMC participants’

projections for the longer run rate that you submitted in the projection to the last meeting. How

has your outlook for further declines in the unemployment rate changed since March? What does

this imply for your inflation forecast? And how has your level of confidence changed with the

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regard -- with regard to the feasibility of slowing hiring without pushing the economy into

recession? Thanks.

CHAIR POWELL. Thank you. So, you're right, 3.6 percent unemployment is just about

as low as it's been in 50 years. And I would say that I expect and Committee members generally

expect that we'll get some additional participation. So people will be coming back into the labor

force. We've seen that particularly among prime age people. And that will, of course tend to hold

the unemployment rate up a little bit. I would also expect though, that job creation will slow. Job

creation has been, you know, more than half a million per month, in recent months, very, very

strong, particularly for this stage of the economy. And so we think with fiscal policy less

supportive with monetary policy, less supportive we think that job creation will slow as well. So,

it is certainly possible that the unemployment would go down further. But so I would expect

those to be relatively limited, because of the additional supply and also just the slowing in job

creation. Implications for inflation really the wages matter a fair amount for companies,

particularly in the service sector. Wages are running high, the highest they've run in quite some

time. And they are one good example of or good illustration really of how tight the labor market

really is. The fact that wages are running at the highest level in many decades. And that's because

of an imbalance between supply and demand in the labor market. So we think through our

policies, through further healing in the labor market, higher rates, for example of vacancy filling

and things like that, and more people coming back in we'd like to think that supply and demand

will come back into balance. And that, therefore, wage inflation will moderate to still high levels

of wage increases, but ones that are more consistent with two percent inflation. That's our

expectation. Your third question was?

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NICK TIMIRAOS. Your level of confidence that you can slow hiring without pushing

the economy into a downturn.

CHAIR POWELL. So I guess I would say it this way. There's a path. There's a path by

which we would be able to have demand moderate in the labor market, and have, therefore have

vacancies come down without unemployment going up, because vacancies are at such an

extraordinarily high level. They're 1.9 vacancies for every unemployed person, 11 and a half

million vacancies, six million unemployed people. So we haven't been in that place on the

vacancy, you know, sort of the vacancy unemployed curve, the Beveridge curve. We haven't

been at that sort of level of a ratio in the modern era. So in principle, it seems as though by

moderating demand, we could see vacancies come down. And as a result, and they could come

down fairly significantly. And I think put supply and demand at least closer together than they

are. And that that would, that would give us a chance to have lower, good to get inflation down,

get wages down, and get inflation down without having to slow the economy and have a

recession and have unemployment rise materially. So there's a path to that. Now, I would say I

think we have a good chance to have a soft or softish landing or outcome, if you will. I'll give

you a couple of reasons for that. One is households and businesses are in very strong financial

shape. You're looking at, you know, excess savings on balance sheets, excess in the sense that

they're substantially larger than the prior trend. Businesses are in good financial shape. The labor

market is, as I mentioned, very, very strong. And so it doesn't seem to be anywhere close to a

downturn. therefore the economy is strong, and is well positioned to handle tighter monetary

policy. So, but I'll say I do expect that this will be very challenging, it's not going to be easy. And

it may well depend, of course on events that are not in our under our control. But our job is to

use our tools to try to achieve that outcome. And that's what we're going to do.

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MICHELLE SMITH. Steve.

STEVE LIESMAN. Steve Liesman, CNBC. Thanks for taking my question, Mr.

Chairman. You talked about using 50 basis point rate hikes or the possibility of them in coming

meetings. Might there be something larger than 50? Is 75 or a percentage point possible? And

perhaps you could walk us through your calibration? Why one month should or one meeting

should we expect a 50? Why something bigger? Why something smaller? What is the reasoning

for the level of the amount of tightening? Thank you.

CHAIR POWELL. Sure. So 75 basis point increase is not something the committee is

actively considering. What we are doing is we raised 50 basis points today. And we said that,

again, assuming that economic and financial conditions evolve in ways that are consistent with

our expectations, there's a broad sense on the committee that additional 50 basis increases should

be on, 50 basis points should be on the table for the next couple of meetings. So we're going to

make those decisions at the meetings, of course, and we'll be paying close attention to the

incoming data and the evolving outlook, as well as to financial conditions. And finally, of

course, we will be communicating to the public about what our expectations will be as they

evolve. So the test is really just as I laid it out, economic and financial conditions evolving

broadly in line with expectations. And, you know, I think expectations are that we'll start to see

inflation, you know, flattening out. And not necessarily declining it but we'll see more evidence.

We've seen some evidence that core PCE inflation is perhaps either reaching a peak or flattening

out. We want to know, we'll want to know more than just some evidence. We'll want to really

feel like we're making some progress there. And but I mean, I -- we're going to make these

decisions, and there'll be a lot more information. I just think we want to see that information as

we get there. It's a very difficult environment to try to give forward guidance, 60, 90 days in

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advance. There are so many things that can happen in the economy and around the world. So,

you know, we're leaving ourselves room to look at the data and make a decision as we get there.

STEVE LIESMAN. I'm sorry, but if inflation is lower one month and the unemployment

rate higher, would that be something that we would calibrate towards a lower increase in the in

the funds rate?

CHAIR POWELL. I don't think the one month, one month is not, no. No. One month

reading would not -- doesn't tell us much. You know, we'd want to see evidence that inflation is

moving in a direction that gives us more comfort. As I said, we've got two months now where

core inflation is, is a little lower, but we're not looking at that as a reason to take some comfort.

You know, I think we need to -- we need to really see that our expectation is being fulfilled.

Inflation, in fact, is under control, and starting to come down. But again, it's not like we would

stop. We would just go back to 25 basis point increases. It'll be a judgment call when these

meetings arrive. But my, again, our expectation is, if we see what we expect to see, then we

would have 50 basis point increases on the table the next two meetings.

MICHELLE SMITH. Okay. Let's go to Colby.

COLBY SMITH. Thank you. Colby Smith from the Financial Times. Given the

expectation that inflation will remain well above the Fed's target at year end, what constitutes a

neutral policy setting in terms of the fed funds rate? And to what extent is it appropriate for

policy to move beyond that level at some point this year?

CHAIR POWELL. So, neutral. When we talk about the neutral rate, we're really talking

about the rate that neither pushes economic activity higher, nor slows it down. So it's a concept

really. It's not something we can identify with any precision. So we estimate it within broad

bands of uncertainty. And the current estimates on the Committee are sort of two to three

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percent. And also, that's a longer-run estimate. That's an estimate for an economy that's at full

employment and two percent inflation. So really the way, really what we're doing is we are --

we're raising rates expeditiously to the -- what we see as the broad range of plausible levels of

neutral. But we know that there's not a bright line drawn on the road that tells us when we get

there. So we're going to be looking at financial conditions, right. Our policy affects financial

conditions and financial conditions affect the economy. So we're going to be looking at the effect

of our policy moves on financial conditions. Are they tightening appropriately? And then we're

going to be looking at the effects on the economy. And we're going to be making a judgment

about whether we've done enough to get us on a path to restore price stability. It's that. So if that

path happens to evolve levels that are higher than estimates of neutral, then we will not hesitate

to go to those levels. We won't. But again, it's it there's a there's a sort of false precision in the

discussion that we as policymakers don't really feel. You know, you're going to raise rates, and

you're going to be kind of inquiring how that is affecting the economy through financial

conditions. And of course, if higher rates are required then we won't hesitate to deliver them.

MICHELLE SMITH. Neil.

NEIL IRWIN. Thanks Chair Powell. Neil Irwin with Axios. Do you see evidence that

inflationary psychology is changing that -- in areas like workers wage demands, businesses

willingness to raise prices? Do you see evidence that there is a psychological shift going on

inflation? Thanks.

CHAIR POWELL. We don't really see strong evidence of that yet, but that does not in

any way make us comfortable. I think if you see, look at short term inflation expectations, they're

quite elevated. And you can look at that and say, well, that's because people expect inflation to

come down. And in fact, inflation expectations come down fairly sharply. Longer term inflation

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expectations are, have been reasonably stable, but have moved up to but only two levels where

they were in 2014, by some measures. So, you can look at that. And I think that's a fair

description of the picture. But it's really about the risks. We don't see a wage price spiral. We see

that companies have the ability to raise prices, and they're doing that, but there have been price

shocks. So I just think it takes you back to the basic point was that we know we need to

expeditiously move our policy rate up to ranges of more normal neutral levels. And we need to

look around and keep going if we don't see that financial conditions have tightened adequately,

or that the economy is behaving in ways that suggests that we that we're not where we need to

be. So again, you don't see those things yet. But I would say there's no basis for feeling

comfortable about that. It's a risk that we simply can't -- we can't run that risk. We can't allow a

wage price spiral to happen. And we can't allow inflation expectations to become unanchored.

It's just something that we can't allow to happen. And so we'll look at it that way.

MICHELLE SMITH. Jeanna.

JEANNA SMIALEK. Great. Thanks, Chair Powell. Jeanna Smialek with the New York

Times. You mentioned in the statement, both the upside risks to inflation from Russia and China.

Obviously, those are very much supply shocks rather than demand side. And I wonder what you

meant to convey by adding them. I wonder what you meant to convey by adding those?

CHAIR POWELL. Well. So we -- our tools don't really work on supply shocks. Our tools

work on demand. And to the extent we can affect really oil prices, or other commodity prices, or

food prices and things like that, so we can't affect those. But there's a job to do on demand. And

that you can see that in the labor market where demand is substantially in excess of supply of

workers. And you can see it in the product markets as well. But I guess I'm just pointing out that

a couple of things. For both the situation in Ukraine and the situation in China, they're likely to

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both add to headline inflation. And people are going to be suffering from that, you know. People

don't, people almost suffer more from food and energy shocks then, but even though they don't

actually tell us much about the future path. So the second thing is that they're both capable of

preventing further progress in supply chain, in supply, chains healing. And so or even making

supply chains temporarily worse. So they're not, they're going to weigh on the process of supply,

of global supply chain healing, which is going to affect broader inflation, too. So they're in a way

there two further negative shocks that have hit really in the last, you know, 60 days, 90 days.

MICHELLE SMITH. Victoria.

VICTORIA GUIDA. Hi. Victoria Guida from Politico. I want to follow up on that,

because you all have obviously highlighted that there are both supply and demand issues at play

and inflation. And I'm just wondering, you know, if these supply chain issues continue because

of Russia, because of China, or just because these things take a while to work out. Does getting

back down to your two percent mandate require that the supply chain issues get resolved, since

you can only handle the demand side, as you said? Or will you have to crimp demand maybe

even further if the supply chain issues don't resolve themselves in order to try and get inflation

back down to where you want it to be?

CHAIR POWELL. So, you know, I'll just say for now, we're focused on doing the job

we need to do on demand, and there's plenty to be done there. Again, if you look at it's

essentially almost two to one vacant job vacancies to unemployed people. There's a lot of excess

demand. They're more than five million more employed plus job openings than there are the size

of the labor force. So there's an imbalance there that will, that we have to do our work on. A very

difficult situation. If you can't, you know, you would look at core inflation, which wouldn't

include the commodity price shocks. And, you know, we would -- that's one of the reasons we

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would tend to focus on that, because we can have more of an effect on that, but would be a very

difficult situation. I mean, we have to be sure that inflation expectations remain anchored. And I

mean, that's part of our job, too, so we'd be watching that carefully. And that does -- it puts any

central bank in a very difficult situation.

MICHELLE SMITH. Howard.

HOWARD SCHNEIDER. Oh, Howard Schneider with Reuters. And thanks, and nice to

be back. So the two questions. One quick one. You cited the 1.9 to 1 figure. So often now, I got

to ask you what would be a good figure there? What would you like to see that come down to, to

think that you're in sort of a non-inflationary vacancy to unemployed rate? And secondly, on

help from inflation, how much are you counting on wealth effects through a stock market

channels? Equity markets broadly down quite a bit since late fall, first of the year, how are you

mapping that into household consumption? Have they come down enough? Do you need another

leg down in equity values to think that households are going to stop spending at the rate we need

them to stop spending?

CHAIR POWELL. Okay, so in terms of the vacancy sign unemployment ratio, we don't

have a goal in mind. There's no specific number that we're saying we got to get to that. It's really

you've got to get to a place where the labor market appears to be more in balance. And that

depends not only on the level of those things, it also it depends on how well the matching

function in the labor markets are working. Because, you know, the longer these expansions go

on, you can get very efficient with all of that, and the Beveridge curve shifts out. And that also

tends to, you know, to help. So there isn't a specific number. I will say we were, you know, I

think I think when we got to one to one, in the, you know, in the late teens, we thought that was a

pretty good number. But again, we're not shooting for any particular number. What we'd like to

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see is progress, but we're not really looking at that. That's not, that's an intermediate variable.

We're looking at wages and we're looking at ultimately inflation. So, you know, there are a

bunch of channels through which policy works. You can think of it as, you know, interest

sensitive spending, and then you can think of another big one as asset values broadly. And, you

know, they're big models with a lot of, you know, a lot of difference channels that are related to

that. You know, we don't we don't focus on any one market, the equity market or the housing

market or we focus on financial conditions broadly. So we wouldn't be targeting any one market

as you suggest for going up or down, or taking a view on whether it's at a good level or a bad

level. We just would be looking at very broad measures of financial conditions, all the different

financial conditions, indexes, for example, which include equity. But they also include debt and

other many other things, credit spreads things like that too.

MICHELLE SMITH. Rachel.

RACHEL SIEGEL. Hi, Chair Powell. Rachel Siegel here from The Washington Post. To

follow up from your message from the very beginning, what is your message to the American

people about when they will start to feel the effects of say a 50 basis point rate hikes or multiple

hikes? How do you explain to them what that does to their grocery bill, or their rent, or their gas

bill? Thank you.

CHAIR POWELL. So first, the first thing to say is that we understand, and some of us

are old enough to have lived through high inflation and many aren't. But it's very unpleasant. It's

just something people don't, when they experience it, for the first time, you're paying more for

the same thing. If you're a normal economic person, then you're probably don't have that much

extra, you know, to spend. And it's immediately hitting, your spending on groceries on, you

know, on gasoline, on energy and things like that. So we understand the pain involved. So how

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do you get out of that? And the -- it's our job to make sure that inflation of that unpleasant high

nature doesn't get entrenched in the economy. That's what we're here for. One of the main things

we're here for. Perhaps the most fundamental thing we're here for. And the way we do that is we

try to get supply and demand back in sync with each other, out of imbalance, back in balance, so

that the economy is under less stress and inflation will go down. Now, the process of getting

there involves higher rates, so higher mortgage rates, higher borrowing rates, and things like that.

So it's not going to be pleasant either. But in the end, everyone is better off. Everyone,

particularly people on fixed incomes, and at the lower part of the income distribution are better

off with stable prices. And so we need to do everything we can to restore stable prices. We'll do

it as quickly and effectively as we can. We think we have a good chance to do it without

significant increase in unemployment or, you know, really sharp slowdown. But ultimately, we

think about the medium and longer term, and everyone will be better off if we can get this job

done the sooner the better.

MICHELLE SMITH. Thank you. Edward.

EDWARD LAWRENCE. Thank you, Chair Powell. Edward Lawrence with the Fox

Business Network. So you've talked in the past about consumer spending and how that's driving -

- drives the economy. Are you concerned with this high level of inflation that the consumer will

stop spending pushing us into and what's the level of your concern pushing us into a recession?

CHAIR POWELL. So the economy is doing fairly well. It's -- we expect growth to be

solid this year. And we see, you know, household spending and business investment as fairly

strong. And even in the first quarter, which was relatively slow on some other fronts. So in the

labor market, if you look at the labor market for people who are out of work and looking, there

are lots of job opportunities for wages are moving up and at rates that haven't been seen in quite

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a long time. So it's a very -- it's a good time to be a worker looking to, you know, either change

jobs or get a wage increase in your current job. So it's a strong economy and nothing about it

suggests that it's close to or vulnerable to a recession. Now, of course, given events around the

world, and fading fiscal policy effects and higher rates, you could see some slower economic

activity. Certainly it will not be -- last year was an extraordinarily strong growth year as we

recovered from the pandemic, as I mentioned, growth over five percent. But most forecasters

have growth this year at, you know, at a solid pace above two percent.

EDWARD LAWRENCE. But we've talked with economists who have advised democrats

and republican presidents who both said that the Fed is so far behind the curve on inflation that a

recession is inevitable.

CHAIR POWELL. So and as I said, I think we have a good chance to restore price

stability without a recession, without, you know, a severe downturn without materially high,

higher unemployment. And I mentioned the reasons for that. So I see a strong economy now. I

see a very strong labor market for example. Businesses can't find the people to hire, they can't

find them. So typically in a recession, you would have unemployment. Now you have surplus

demand. So there should be room in principle, to reduce that surplus demand without putting

people out of work. The issue will come that we don’t have precision surgical tools. We have

essentially interest rates, the balance sheet, and forward guidance, and they’re famously blunt

tools. They’re not capable of surgical precision. So I would agree. No one thinks this will be

easy. No one thinks it’s straightforward, but there is certainly a plausible path to this, and I do

think there, we've got a good chance to do that. And, you know, our job is not to rate the

chances, it is to try to achieve it. So that's what we're doing. There are a range of opinions,

though, and that's only appropriate.

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MICHELLE SMITH. Steve Dorsey.

STEVE DORSEY. Thanks, Steve Dorsey, CBS. You mentioned earlier just now, fading

fiscal policy. Do you feel that the Fed has been supported enough from policies at the White

House and in Congress in combating inflation?

CHAIR POWELL. You know, it's really the Fed that has responsibility for price stability.

And we, you know, we take whatever arrives at the Fed in terms of fiscal activity, we take it as a

given and we don't evaluate it, we don't, it's not our job, really. We don't have an oversight

function there. And we look at it as our job to what given all the factors that are happening to try

to sustain maximum employment and price stability. So if Congress or the administration has

ways to help with inflation, I would encourage that, but I'm not going to get into making

recommendations or anything like that. It's not -- it's really not our role, we need to stay in our

lane and do our job. When we get inflation back under control, then maybe I can, you know, give

other people advice. Right now we need to focus on [laughs], just focus on doing our job. And

I'll stick to that. Stick in our lane.

MICHELLE SMITH. Steve Matthews.

STEVE MATTHEWS. Steve Matthews with Bloomberg News. A number of your

colleagues have said that rates will need to go above neutral into a restrictive territory to bring

down inflation. One, do you agree with that? And two, you've recently spoken great praise of

Paul Volcker, who had the courage to bring inflation down with recessions in the 1980s. And

while it's certainly not your desire, the soft landing is the big hope of everyone, would this

FOMC have the courage to endure recessions to bring inflation down if that were the only way

necessary?

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CHAIR POWELL. So I think it's certainly possible that we'll need to move policy to

levels that we see as restrictive as opposed to just neutral. We can't know that today. That

decision is not in front of us today. If we do conclude that we need to do that, then we won't

hesitate to do it. I'll say again, there's no bright line, you know, that you're stepping over. You're

really looking at what our policy stance is, and what the market is forecasting for. You're looking

at financial conditions, and how that's affecting the economy and making a judgment. You know,

we won't be arguing about whose model of the neutral rate is better than the other one. It's much

more about a practical application of our policy tools. And we're absolutely prepared to do that.

It wouldn't hesitate if that's what is taken. So I am, of course, who isn't an admirer of Paul

Volcker. I shouldn't be singled out in this respect. But I knew him just a little bit and have

tremendous admiration for him. And I would phrase it this way. He had the courage to do what

he thought was the right thing. That's what it was. It wasn't that he -- it wasn't a particular thing.

It was that he always did, he always did what he thought was the right thing. If you read his last

autobiography that really comes through. So that's the test is, it isn't will we do one particular

thing. I would say, we do see though, we see restoring price stability as absolutely essential for

the country in coming years. Without price stability the economy doesn't work for anybody,

really. And so it's really essential, particularly for the labor market. If you think about it, like if

you look at the last cycle, we had a very, very longest, longest expansion cycle in our recorded

history. In the last two, three years, you've had the benefits of this tight labor market going to

people in the lower quartiles. And it was, you know, racial wealth and income. Not wealth, but

income gaps were coming down, wage gap. So it's a really great thing. We'd all love to get back

to that place. But to get back to anything like that place, you need price stability. So we've been -

- basically we've been hit by historically large inflationary shocks since the pandemic. It's not --

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this isn't anything like regular business. This is we have a pandemic, we have the highest

unemployment, you know, in since the Depression. Then we have this outsize response from

fiscal policy and monetary policy. Then we have inflation, then we have a war in Ukraine, which

is cutting the commodity, you know, patch in half. And now we have the shutdowns in China. So

it's has been a series of inflationary shocks that are really different from anything people have

seen in 40 years. So we have to look through that and look at the economy that's coming out the

other side. And we need to get, we need to somehow find price stability out of this. And it's

obviously going to be very challenging, I think, because you do have, you know, numerous

supply shocks, which are famously difficult to deal with. So, I guess that's how I think about it.

MICHELLE SMITH. Chris Rugaber.

CHRIS RUGABER: Thank you, Chris Rugaber, and Associated Press. Earlier, you just

said that if necessary, I think were the words that you would, or if it if it turned out to be

necessary, or you said it's possible that we'll need to move policy to restrictive levels. Given

where inflation is, and the hot economy is, or certainly the hot labor market, as you described it,

why still the hesitation? I mean, it shouldn't it be, what else do you need to see in order to

determine that? Wouldn't the Fed naturally be looking to go to a restrictive level at this point?

Thank you.

CHAIR POWELL. So I didn't, I said, necessary. I meant to say appropriate. We're not

going to be erecting a high barrier for this. It's more if we think it's appropriate. You know, the

point is, we're a very long way from neutral now. We're moving there expeditiously. And we'll

continue to do so. And we don't have to make -- we can't make that decision really today. The

decision for about how high to go, will get, will be on the table to be made when we reach

neutral. And, you know, I expect we'll get there expeditiously, as I've mentioned. So it's not that

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we're not -- we don't want to make making that decision today wouldn't really mean anything.

But I'll say again, if we if we do believe that it's appropriate to go to those levels, we won't

hesitate.

MICHELLE SMITH. Michael McKee.

MICHAEL MCKEE. Mike McKee from Bloomberg Television and Radio. The balance

sheet, why did you decide to wait until June 1st to begin letting securities roll off and not start

immediately start in the middle of this month say? And do you have another, a newer or a better

estimate for the monetary policy impact of letting the balance sheet decline? And then finally,

I'm just curious why you felt the need to address the American people at the top of your

remarks? Are you concerned about Fed credibility with the American people?

CHAIR POWELL. So why June 1, it was just pick a date, you know, and that happens to

be that happened to be the date that we picked. It was nothing magic about it. You know, it's not

going to have any macroeconomic significance over time. We just picked that. Sometimes we

publish these calendars on the first day of the month and that's what we're doing. I wouldn't read

anything into it. In terms of the effect, I mean, I would just stress how uncertain the effect is of

shrinking the balance sheet. You know, we, you -- we run these models, and everyone does in

this field, and make estimates of what will be the -- how do you measure, you know, a certain

quantum of balance sheet shrinkage compared to quantitative easing? And, you know, these are

very uncertain. I really can't be any clearer. There won't be any clearer. You know, people

estimate that broadly on the path we're on, and this is -- this will be taken, probably too seriously.

But sort of one quarter percent, one rate increase over the course of a year at this pace. But I

would just say with very wide uncertainty bands, very wide. We don't really know, there are

other estimates that are much smaller than that, by the way. And some of you may read about

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that. That's kind of a mainstream estimate. We know that it does -- that it is part of returning to

more normal and more neutral financial conditions. And, you know, our strategy is to set up a

plan and have it operate. And really have, you know, have the interest rate be the active tool of

monetary policy. In terms of speaking to the American people. So I feel like sometimes I just

want to remind us really that that's who we work for, and that it's the -- it's inflation that people

are feeling all over the country. And it's very important that they know that we know how painful

it is, and that we are working hard on fixing it. I thought it was quite important to do that. And so

that was really the thinking behind that.

MICHAEL MCKEE. Do you think the Fed has a credibility problem?

CHAIR POWELL. No, I don't. And a good example of why would be that, so in the

fourth quarter of last year, as we started talking about tapering sooner and then raising rates this

year. You saw financial markets reacting. You know, very appropriately. Not to bless any

particular day's measure. But the way financial markets, you know, the forward rate curve has

tightened in response to our guidance and our actions really amplifies our policy. I mean, its

monetary policy is working through expectations now, to a very large extent. We've only done

two rate increases. But if you look at financial conditions the two year is at 280 now. In

September, I think it was at 20 basis points. And that's all through the economy. People are

feeling those higher rates already. And we so that is -- that shows that the markets think that our

forward guidance is credible. And I think that's -- we want to keep it that way.

MICHELLE SMITH. Scott Horsley. Okay. Brian Cheung.

BRIAN CHEUNG. Hi there. Brian Cheung with Yahoo Finance. To expand on Steve's

question about Paul Volcker. There was also a great pain that came with that as well, higher

interest rates, obviously affecting households and businesses. I'm wondering how you kind of

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square what might be demand disruption. Are you already seeing that. Is the idea here to

incentivize a lack of spending, to decrease consumption, to perhaps table business investments.

Is that essentially what's happening through this hiking cycle? Thanks.

CHAIR POWELL. Well, so as I mentioned, we're -- you can see places where the

demand is substantially in excess of supply. And what you're seeing as a result of that is prices

going up, and at unsustainable levels. Levels that are not consistent with two percent inflation.

And so what our tools do is that as we raise interest rates, demand moderates, and it moves

down. Interest rates, you know, businesses will invest a little bit less, less consumers will spend a

little bit less. That's how it works. But ultimately, getting those, getting supply and demand back,

you know, back in balance, is what gives us two percent inflation, which is what gives the

economy a footing where people can lead successful economic lives and not worry about

inflation. I mean, so, yes, there may be some pain associated with getting back to that. But, you

know, the big pain is in not dealing over time, is in not dealing with inflation, and allowing it to

become entrenched.

MICHELLE SMITH. Greg Robb.

GREG ROBB. Thank you. Thank you, Chair Powell. Greg Robb from MarketWatch. I

was wondering if you could take a step back and talk about in March the dot plot had, you know,

steady look like steady quarter point rate hikes, get the funds rate up to two percent at the end of

the year. Now, where it seems like you're much more aggressive. So could you talk about the

thinking that's behind that? Thank you.

CHAIR POWELL. So look, I think you've what you've seen is really, I would say last

fall, in the middle of last fall, there was a time when our policy stance was still pretty much in

sync with what the data were saying. If you remember, there were a couple of weak jobs reports.

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And inflation had actually come, month by month, inflation had come down till September, a

few months in a row stayed low. And then around the end of October, we got four, three or four

really strong readings that just said, no, this is a much stronger economy. And by the way, then

with the with the restatement of the jobs numbers, it looked like the job market was much more

even and stronger in the second half of the year. But that hadn't happened yet. Anyway, we got

an ECI reading, Employment Compensation Index, reading the Friday before the November

meeting. Then we got a really strong jobs report, then we got a really high CPI report. And so I

think it became clear to the Committee that we needed to adjust and adapt. And we have. Ever

since then, really, ever since then, we've been adapting. We, you know, there were -- the

Committee moved by the time of the December meeting to a median of three rate increases, then

to a median of seven increases at the March meeting. And that process is going on. And it's

clearly continuing. And that's why I say, and I actually mentioned this in at the March meeting

that no one should look at any single SEP as sort of a real resting place for 90 days because we're

in a fast evolving situation. And that's what's happened. You can see unanimous vote today, of

course, and I told you the guidance that broad support on the Committee to have 50 basis point

hikes on the table at the next couple of meetings. So you're right. And by the way other

forecasters have been doing the same thing. And it's just us adapting to the data and to the

situation and using our tools to deal with it.

MICHELLE SMITH. Thanks. We'll go to Nancy for the last question.

NANCY MARSHALL-GENZER. Hi, Nancy Marshall-Genzer with Marketplace. Chair

Powell, I want to ask how you're able to balance your dual mandate, stable prices, and maximum

employment, especially when the unemployment rate for black workers is still roughly double

roughly twice the rate for white workers.

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CHAIR POWELL. So unemployment rates for all racial groups have come down a lot

and are now much closer to where they were, before the pandemic hit. So that's one thing I

would say. And that's important. But the bigger point is this. I do not at this time, see the two

sides of the mandate as an as intention. I don't, because you can see that the labor market is out

of balance. You can see that it's -- there's a labor shortage. There aren't enough people to fill

these job openings. And companies can't hire and wages are moving up at levels that would not

over time be consistent with two percent inflation over time. And of course, everyone loves to

see wages go up. And it's a great thing, but you want them to go up at a sustainable level.

Because these wages are to some extent, being eaten up by inflation. So what that really means

is, to get the kind of labor market we really want to get, we really want to have a labor market

that serves all Americans, especially the people in the lower income part of the distribution,

especially them. To do that you've got to have price stability, and we've got to get back to price

stability so that we can have a labor market where people's wages aren't being eaten up by

inflation and where we can have a long expansion too. That's the good thing. As we have, we've

had several of the longest expansions in U.S. history have been in the last 40 years, and that's

because it's been a time of low inflation. And long expansions are good for people and good for

the labor market. So that's the way I think about it. I don't -- I think we, you know, our tools

work. We have to think in the in the medium and longer term. And I do think that the best thing

for everyone is for us to get back to price stability to support really a sustained period of strong

labor market conditions.

Thanks very much.

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