Transcript: Questions and Answers from Federal Reserve Press Conference 

 

"I will say that it is gratifying to see the disinflationary process now getting underway, and we continue to get strong labor market data. So -- but we'll update those forecasts in March" - Federal Reserve Chairman Jerome Powell. 

 

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Chairman Jerome Powell has indicated the Federal Reserve (Fed) is near a "sufficiently restrictive" level of interest rates and that it's cycle of increases may soon be over but this suggestion came with numerous caveats, details of which can be found in the below transcript of Wednesday’s press conference. 

The Fed Funds rate was raised by a quarter of a percent to 4.75% overnight on Wednesday, in line with economist and market expectations, but Fed Chairman Jerome Powell told a press conference that a "sufficiently restrictive" level of interest rates could be reached with as little as “a couple” more increases.

If the next two increases are of the same size as that announced on Wednesday, they would leave the Fed Funds rate sitting in the 5% to 5.25% range that was flagged in December’s Federal Open Market Committee forecasts as the likely peak for the cycle. 

But U.S. bond yields fell on Wednesday and interest rate derivative markets have been reluctant to price-in the above-referenced peak for interest rates, while there were many remarks highlighting in the press conference how and why the Fed could yet wrongfoot this market consensus.

The below omits the opening remarks of Chairman Powell, the official record of which is here, but includes the questions and answers session. 


Source: Youtube, Federal Reserve. 


Chairman Powell

00:10

Good afternoon, and welcome [introductory statement]…Thank you, and I look forward to your questions.

Unknown Speaker

06:59

Chris...

07:05

Chris Rugaber Associated Press. Thank you for doing this. As you know, financial conditions have loosened since the fall with bond yields falling, which has also brought down mortgage rates and the stock market posted a solid gain in January. Does that make your job of combating inflation harder? And could you see lifting rates higher than you otherwise would to offset the increase in -- or to offset the easing of financial conditions.

Chairman Powell

07:32

So it is important that overall financial conditions continue to reflect the policy or strength that we're putting in place in order to bring inflation down to 2%. And of course, financial conditions have tightened very significantly over the past year. I would say that our focus is not on short-term moves, but on sustained changes to broader financial conditions. And it is our judgment that we're not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate. Of course, many things affect financial conditions, not just in our policy. And we will take into account overall financial conditions along with many other factors, as we said, policy.

Unknown Speaker

08:12

Great

08:19

Rachel Siegel from the Washington Post. Over the last quarter, we've seen a deceleration in prices, in wages and a fall in consumer spending, all while the unemployment rate has been able to stay at a historic low. Does this at all change your view of how much the unemployment rate would need to go up, if at all, to see inflation come down to the levels you're looking for?

Chairman Powell

08:41

So I would say it is a good thing that the disinflation that we have seen so far has not come at the expense of a weaker labor market. But I would also say that this inflationary process that you now see underway is really at an early stage. What you see is really in the good sector, you see inflation now coming down because supply chains have been fixed. Demand is shifting back to services and shortages or have been abated. So you see that in the other -- in the housing services sector, we expect inflation to continue moving up for a while, but then to come down, assuming that new leases continue to be lower. So in those 2 sectors, you've got a good story. The issue is that we have a large sector called nonhousing service core where we don't see disinflation yet. But I would say that so far, what we see is progress but without any weakening in labor market conditions.

Unknown Speaker

09:48

Our go ahead.

Speaker 3

09:50

Has your expectation for where the unemployment rate might go change since December?

Chairman Powell

09:54

We're going to write down new forecasts at the March meeting, and we'll see at that time. I will say that it is gratifying to see the disinflationary process now getting underway, and we continue to get strong labor market data. So -- but we'll update those forecasts in March.

Unknown Speaker

10:14

Neil...

Speaker 4

10:17

Chair Powell Neil Irwin with Axios. You and some of your colleagues have emphasized the possibility that job openings could come down and that would let some of the air out of the labor market without major job losses. We saw the opposite in the December Jules this morning. job opening is actually rising. That also has coincided with a slowdown in wage inflation. Do you believe that openings are an important indicator to be studying to understand where the labor market is and where wage inflation might be heading?

Chairman Powell

10:42

So you're right about the data, of course. We did see -- we've seen average hourly earnings and now the employment cost index abating a little bit, still off of their highs of 6 months ago and more, but still at levels that are fairly elevated. The job openings number in Jolts has been quite volatile recently. I did see that it moved up back up this morning. I do think that it's probably an important indicator. The ratio, I guess, is back up to 1.9 job openings to unemployed people. People are looking for work -- so it's an indicator. But nonetheless, you're right, we do see wages moving down. If you look across the rest of the labor market, you still see very high payroll job creation and quits are still at an elevated level. So my -- by many, many indicators, the job market is still very strong...

Speaker 5

11:48

Colby Smith with the Financial Times. Given the economic data since the December meeting is the trajectory for the Fed funds rate in the most recent SEP, still the best guidepost for the policy path forward? Or does ongoing now mean more than 2 rate rises now?

Chairman Powell

12:05

So you're right, at the December meeting, we all wrote down our best estimates of what we thought the ultimate level would be. And that's obviously back in December and the median for that was between 5% and 5.25%. At the March meeting, we're going to update those assessments. We did not update them today. We did, however, continue to say that we believe ongoing rate hikes will be appropriate to attain a sufficiently restrictive stance of policy to bring inflation back down to 2%. We think we've covered a lot of ground and financial renditions have certainly tightened. I would say we still think there's work to do there. We haven't made a decision on exactly where that will be. I think we're going to be looking carefully at the incoming data between now and the March meeting and then the May meeting. I don't feel a lot of certainty about where that will be. It could certainly be higher than we're writing down right now. If we come to the view that we need to write down to move rates up beyond what we said in December, we would certainly do that. At the same time, if the data come in, in the other direction, then we'll make data-dependent decisions at coming meetings, of course.

Speaker 5

13:17

Just as a quick follow-up. How are you viewing the kind of balance of risk between those 2 options of the likelihood of maybe falling short of that or going beyond that level?

Chairman Powell

13:27

I guess I would say it this way. I continue to think that it's very difficult to manage the risk of doing to live and finding out in 6 or 12 months that we actually were close but didn't get the job done and inflation springs back and we have to go back in. And now you really do worry about expectations getting unanchored and that kind of thing. This is a very difficult risk to manage. -- whereas, of course, we have no incentive and no desire to overtightenBut if we feel like we've gone too far, we can certainly -- and inflation is coming down faster than we expect, then we have tools that would work on that. So I do think that in this situation where we have still the highest inflation in 40 years, the job is not fully done. As I mentioned -- start mentioned earlier, we have a sector that represents 56% of the core inflation index, where we don't see disinflation yet. So we don't see it. It's not happening yet. Inflation in the core services ex housing is still running at 4% on a 6- and 12-month basis. So there's nothing happening there. In the other 2 sectors representing less than 50%, you actually, I think, now have a story that is credible that's coming together, although you don't actually see disinflation yet in housing services, but it's in the pipeline, right? So for the third sector, we don't see anything there. So I think it would be premature. I be very premature to declare victory or to think that we've really got this. We need to see -- our goal, of course, is to bring inflation down. And how do we get that done? There are many, many factors driving inflation in that sector, and they should be coming into play that have inflation -- the disinflationary process begin in that sector. But so far, we don't see that. And I think until we do, we see ourselves as having a lot of work left to do.

Unknown Speaker

15:23

Alex?

Speaker 6

15:25

Howard Schneider with Reuters, and thanks as usual. So I just want to connect a couple of dots here. The statements made a number of changes that seem to be saying things are getting better. You're saying inflation diseases. That's new. You've taken out references to the war in Ukraine is causing price increases. You've taken out references to the systemic. You've eliminated all the reasons that you said prices were being driven higher, yet that's not mapping to any change in how you describe policy. We still have ongoing increases to come. So I'm wondering why is that the case? And does it have more to do with uncertainty around the outlook or more to do with you not wanting to give a very overeager market a reason to get ahead of itself and overreact.

Chairman Powell

16:09

So I guess I would say it this way. We can now say, I think, for the first time that the disinflationary process has started. We can see that, and we see it really in goods prices so far. Good price is a big sector. This is what we thought what happened since the very beginning, and now here it is actually happening and for the reasons we thought, it's supply chains that shortages and it's demand revolving back towards services. So this is a good thing. This is a good thing. But that's around 1/4 of the PCE price index, core PCE price index. So the second sector is housing services, and that's driven by very different things. And we -- as I mentioned, with housing services, we expect and other forecasters expect that measured inflation will continue moving up for several months, but will then come down. assuming that new leases continue to be soft, and we do assume that. So we think that, that's sort of in the pipeline. And we actually see this inflation in the good sector, and we see it in the pipeline for 2 sectors that amount to a little less than half. So this is good. And we note that when we say inflation is coming down, this is good. We expect to see that this inflation process will be seen, we hope soon, in the core goods ex housing -- sorry, the core services housing sector that I talked about. We don't see it yet. It's 7 or 8 different kinds of services, not all of them are the same. And we have a sense of what's going on in each of those different subsections. Probably the biggest part of it, probably 60% of that is research, which show is sensitive to slack in the economy. And so the labor market will probably be important. Some of the other ones, the liver market is not going to be important. Many other factors will drive it. In any case, we don't see this inflation in that sector yet. And I think we need to see that. It's the majority of the core PC index, which is the thing that we think is the best predictor of headline PCE, which is our mandate. So it's not that we're not -- we're neither optimistic or pessimistic. We're just telling you that we don't see inflation moving down yet in that large sector. I think we will fairly soon, but we don't see it yet. Until we do, I think we see ourselves -- we got to be honest with ourselves. We see ourselves as having perhaps more persistent -- we'll see more persistent inflation in that sector, which will take longer to get down. And we're just going to have to complete the job. I mean, that's what we're here for.

Speaker 2

18:48

Nick Timiraos, the Wall Street Journal. Chair Powell, you observed several years ago that we learned we can have a low unemployment rate without above-target inflation. And we have learned lately that inflation can come down from its uncomfortably high level despite a historically low unemployment rate. Given that, and given how much you did over the last year, why do you think further rate increases are needed? Why not stop here and see what transpires in the coming months before raising rates again?

Chairman Powell

19:16

So we've raised rates 4.5 percentage points, and we're talking about a couple of more rate hikes to get to that level, we think is appropriately restrictive. And why do we think that's probably necessary. We think because inflation is still running very hot. We're, of course, taking into account long and variable lags and we're thinking about that. It really -- the story we're telling about inflation is to ourselves and the way we understand it is basically the 3 things that I've just gone through a couple of times. And again, we don't see it affecting the services sector ex housing yet. But I mean, I think our assessment is that we're not very far from that level. We don't know that, though. We don't know that. So I think we're living in a world of significant uncertainty. I would look across the rate -- the spectrum of rates and see that real rates are now positive by an appropriate set of measures are positive across the yield curve. I think policy is restrictive. We're trying to make a fine judgment about how much is restrictive enough. That's all. And we're going to -- that's why we're slowing down to 25 basis points. We're going to be carefully watching the economy and watching inflation and watching the progress of the disinflationary process.

Speaker 2

20:29

You or your colleagues discuss the conditions for a pause at this meeting this week?

Chairman Powell

20:37

We -- you'll see the minutes will come out in 3 weeks, and we'll give you a lot of detail. We spent a lot of time talking about the path ahead and the state of the economy. And I wouldn't want to start to drive the -- describe all the details there, but that was the sense of the discussion was really talking quite a bit about the path forward.

Unknown Speaker

21:00

Victoria Guida.

Speaker 3

21:04

Hi Chair Powell. I wanted to ask about the debt ceiling. Given that we've now hit up against it, I was wondering if the U.S. goes past the x date, will the Fed do whatever the treasury directs as it relates to making payments is the fiscal agent? Or will it do its own analysis of any legal constraints.

Chairman Powell

21:22

So your question is would we -- what was your question again?

Speaker 3

21:26

Will the Fed do what treasury directs as it relates to making payments? Or will it do its own analysis of any legal constraints?

Chairman Powell

21:34

So you're really asking about -- you're asking about prioritization in effect, is that you're -- so I feel like I have to say this. There's only one way forward here, and that is for Congress to raise the debt sailings so that the United States government can pay all of its obligations when due. And any deviations from that path would be highly risky and that no one should assume that the Fed can protect the economy from the consequences of failing to act in a timely manner. -- in terms of our relationship with the treasury, we are their fiscal agent, and I'm just going to leave it at that.

Speaker 3

22:07

Are you actively doing any planning of what might happen in the event that, that would happen?

Chairman Powell

22:12

I'm just going to leave it at that. This is a matter that's to be resolved between really -- it's really Congress' job to raise the debt ceiling and I gather there are discussions happening, but they don't involve us, we're not involved in those discussions. So we're the fiscal agent.

Speaker 5

22:35

Jeanna Smialek from the New York Times. I wonder, was there any discussion today of the possibility of pausing rate increases and then restarting them, Lori Logan from the Federal Reserve Bank of Dallas seemed to suggest that, that would be a possibility and a recent speech. And I wonder if that view is broadly shared on the committee.

Chairman Powell

22:54

So the committee, obviously, did not see this as a time to pause. We judge that the appropriate thing to do at this meeting was to raise the federal funds rate by 25 basis points, and we said that we continue to anticipate that ongoing increases in the target range will be appropriate in order to attain that stance of sufficiently restrictive monetary policy that will bring inflation down to 2%. So that's the judgment that we made. We're going to write down new forecast in March. And we'll certainly be looking at the incoming data as everyone else will.

Speaker 5

23:29

Sorry, I should have been clear. I mean, would it be possible to take a meeting off, for example, and then Rusme, -- could you rather than just doing at every meeting to move, go a little bit more slowly take some gaps in between moves?

Chairman Powell

23:43

I mean I think this is not something that the committee is thinking about or exploring in any kind of detail. In principle, though, we used to think we used to do was go every other meeting, if you remember, 25 basis points. And that was considered a fast pace. So I think a lot of options are available. And I mean, you saw what the Bank of Canada did and they left it that they're willing to raise rates after pausing. But this is not something that the TherOpen Market Committee is on the point of deciding right now.

Speaker 7

24:16

Steve Liesman, CNBC. Mr. Chairman, the SEP has the PCE inflation rate in 2023 at 3.1%. Meanwhile, the 3-month annualized PCE is 2.1%, and you've achieved this without going to your 5.1% funds rate, which is what you have penciled in for this year. And you've also achieved it without the 1 percentage point increase in the payment rate, which you have canceled in for this year. I'm wondering if you've considered the idea whether or not your understanding of the inflation dynamic may be wrong, and it's possible to achieve these things without raising rates that high and also without the surge of unemployment. And specifically, I wonder if you might comment on the speech given by Vice Chair Lalande, who said to the extent that inputs other than wages may be responsible in part for important price increases for some nonhousing services, an unwinding of these factors. In other words, it may not be wages, the idea that it may not require unemployment rising to get this sector of inflation under control.

Chairman Powell

25:24

So a couple of things. First, on the forecast, you're right, if you take very short-term 3-month say measures of PCE, core PC inflation, they're quite low right now, but that's because that's driven by significantly negative readings from goods inflation. Most forecasters and would think that the significantly negative readings will be transitory. And that goods inflation will move up fairly soon, back up to its longer-run trend of something around 0, something like that. So a lot of forecast would call for core PCE to go back up to 4% by the middle of the year, for example. So that's really where the sustainable level is, is more like at 4%. So that would suggest there's work left to do. let's say, inflation does come down much faster than we expect, which is possible. As I mentioned, obviously, our policy is data dependent, we would take that into account. In terms of the non -- sorry, the core nonhousing services, as I mentioned earlier, it's a very diverse sector, 6 or 7 sectors. And so sectors that represent 55% or 60% of that subsector of that sector are we think, are sensitive to slacking the economy sensitive to the labor market in a way. But some of the other sectors are not. And for example, financial services is a big sector that's really not driven by labor markets, wages. So that's why I said, there are a number of things that will affect -- take restaurants, right? So clearly, labor is important for restaurants, but so are food prices. and transportation services is going to be driven by fuel prices, for example. So there are lots of things in that mix that will drive inflation. I would say overall, though, my own view would be that you're not going to have a sustainable return to 2% inflation in that sector without a better balance in the labor market. And I don't know what that will require in terms of increased unemployment, your question. I do think there are a number of dimensions through which the labor market can soften. And so far, we've got, as I mentioned, in goods, we have inflation moving down without the softening in the labor market. I think most forecasters would say that unemployment will probably rise a bit from here. But I still think -- I continue to think that there's a path to getting inflation back down to 2% without a really significant economic decline or a significant increase in unemployment. And that's because the setting we're in is quite different. The inflation that we originally got was very much a collision between very strong demand and hard supply constraints, not something that you really have seen in prior business cycles. And so now we see good inflation coming down for the reasons we thought, and we understand why housing inflation will come down. And I think we'll -- a story will emerge on the nonhousing services sector soon enough. But I think there's ongoing disinflation, and we don't yet see weakening in the labor market. So we'll have to see.

Speaker 7

28:48

Can we get there with the 5%?

Chairman Powell

28:50

Certainly possible.

Unknown Speaker

28:52

Yes. Absolutely. It's possible...

Chairman Powell

28:53

It's a question -- no one really knows. I think it's because this is not like the other business cycles in so many ways. It may well be that as that it will take more slowing than we expect and I expect to get inflation down to 2%. But I don't -- that's not my base case. My base case is that the economy can return to 2% inflation without a really significant downturn or a really big increase in unemployment. I think that's a possible outcome. I think many, many forecasters would say it's not the most likely outcome, but I would say there's a chance of it.

Speaker 8

29:40

Michael McKee from Bloomberg TV and Radio. I'd like to pick up on what you were just saying about a substantial downturn and ask with the full weight of your tightening, not in place yet. And with the progress against inflation, there's still a lot of talk about very, very slow growth going forward in 2023. And the recession indicators are all suggesting that we are going to see recession this year. So I'm wondering if you've changed your view or you have a more nuanced view of what you think the danger to economic growth is going forward and whether you're very close to perhaps tipping it into the wrong place, which calls for more restraint on your part?

Chairman Powell

30:27

So I do think you most forecast and my own assessment would be that growth will continue. Positive growth will continue but at a subdued pace. -- as it did last year. We had growth of GDP growth of 1% last year and also final sales growth, which we think is a better indicator of about 1%. I think most forecasts and certainly, my assessment would be that growth will continue at a fairly subdued level this year. There are other factors, though, that need to be considered. You will have seen that the global picture is improving a bit, and that will matter for us potentially. The labor market remains very, very strong. And that's job creation, that's wages. As inflation does come down, sentiment will improve -- you also -- state and local governments are really flushed these days with money and many of them are considering tax cuts or even sending checks. So I think that's going to support they're also spending a lot. There's a lot of spending coming in the construction pipeline, both private and public. And so that's going to support economic activity. So I think there is a good chance that those factors will help support positive growth this year. And that's -- my base case is that there will be positive growth this year.

Unknown Speaker

31:53

Great, Rich

Rich Miller from Bloomberg. First of all, -- how are you doing? Fine. Thanks Good. Second off...

Speaker 8

32:05

I think it's early on the post conference. You said you need to see substantially more evidence of inflation coming down. Can you give us some idea of what you're thinking of -- you mentioned 3 months than we've seen 3 months in a row of governor or wallet or suggested you might want to see 6 months. Is it just the inflation data? Or do you have to see the labor market coming back into better balance to have that substantially more evidence

Chairman Powell

32:31

I don't think there's going to be a light switch flip or anything like that. I think it's just an accumulating -- accumulation of evidence. So of course, we'll be looking by the time of the March meeting, we'll have 2 more employment reports, 2 more CPI reports, and we'll be looking at those carefully as all of us will, and we'll be asking ourselves what are they telling us? And soon after that, we'll have another ECI wage report, which, as you know, is a report that we like because it is just for composition and it's very complete. And the one we got -- I guess it was yesterday, was constructive. It shows wages coming down, but still at a high level, are still at a level that's way above -- well above where they were before the pandemic. So I don't want to put a number on it in terms of months. But as the accumulated evidence comes in, it's going to be reflected in our assessment of the outlook, and that will be reflected in our policy over time. But I will say, though, we -- it is our job to restore price stability and achieve 2% inflation for the benefit of the American public. We're not -- market participants have a very different job. And it's a fine job. It's a great job. Victor. I did that job for years, but in one form or another. But we have to deliver that. And so we are strongly resolved that we will complete this task because we think it has benefits that will support economic activity and benefit the public for many, many years.

Unknown Speaker

34:13

Thank you...

Speaker 9

34:14

Thank you. So you've talked about we had solid job growth Evern lawrence from Fox business, by the way. We had solid job growth, a slight falling in the increase in consumer spending. It seems so far, it's been relatively mild from the economy to go to -- from a 9.1% CPI inflation to 6.5% CPI inflation. Is the hard part yet to come to go from 6.5% to 2?

Chairman Powell

34:37

I don't think we know, honestly. The -- so we, of course, expected goods inflation to start coming down by the end of 2021. And it didn't come down all through '22. And now it's coming down, and it's come down pretty fast. So I would say these are -- this is not a standard business cycle, where you can look at the last 10 times there was a global pandemic, and we shut the economy down and Congress did what it did and we did. It's just -- it's unique. So I think certainty is just not appropriate here. Inflation, it's just harder to forecast inflation. It may come down faster. It may take longer to come down. And our job is to deliver inflation back to target, and we will do that. But I think we're going to be cautious about declaring victory and sending signals that we think that the game has won because it's -- we've got a long way to go. It's just -- it's the early stages of disinflation and it's most welcome to be able to say that, that we are now in disinflation. But that's great, but we just see that it has to spread through the economy and then it's going to take some time. That's all.

Speaker 9

35:47

How long do you see then the federal funds rate remaining at this elevated level?

Chairman Powell

35:51

So again, my forecast and that of my colleagues, as you will see from the SEP and I mean there are many different forecasts. But generally, it's a forecast of slower growth, some softening in labor market conditions and inflation moving down steadily, but not quickly. And in that case, if the economy performs broadly in line with those expectations, it will not be appropriate to cut rates this year to loosen policy this year. Of course, other people have forecast with inflation coming down much faster. That's a different thing. If that happens, if inflation comes down much faster than we'll be seeing that, and it will be incorporated into our thinking about policy.

Speaker 10

36:36

Chairman Renwick with the economist. I may ask a further question about the language around ongoing increases. That, of course, implies at least 2 further rate rises. If you look at Fed fund futures pricing, the implication is that you'll raise rates one more time and then pause. Are you concerned about that divergence? Or do you think that everything breaks right? Is that a plausible outcome?

Chairman Powell

37:02

I'm not particularly concerned about the divergent now because it is largely due to the market's expectation that inflation will move down more quickly. I think that's the bigger part of that. So again, as I just mentioned, our forecast, the different participants have different forecasts. But generally, those forecasts over for continued subdued growth some softening in the labor market, but not a recession, not a recession. And we have inflation moving down into the -- somewhere in the mid-3s or maybe lower than that this year. We'll update that in March, but that's what we thought in December. Markets are past that. They show inflation coming down in some cases, much quicker than that. So we'll just have to see. And we have a different view and a different view. It's a different forecast, really. And given our outlook, I just -- I don't see us cutting rates this year. If we get our outlook turns through, as I mentioned just now, if we do see inflation coming down much more quickly, that will play into our policy setting, of course.

Speaker 9

38:11

Scott Horse for NPR.

Speaker 11

38:13

One of the changes in the statement this month is that the committee is no longer listing public health is among the data points you'll consider in assessing conditions. What should we make of that? Does the Federal Reserve no longer see the pandemic as weighing on the economy?

Chairman Powell

38:30

That's the general sense of it. Look, we understand -- I personally understand well that COVID is still out there. But then it's no longer playing an important role in our economy, and we kept that statement in there for quite a while. And I think we just -- we knew we would take it out at some point. There's never a perfect time, but we thought that people are handling it better in the economy and the society or handling it better now. It doesn't really need to be in the Fed's monthly post-meeting statement as an ongoing economic risk as opposed to a health issue.

Speaker 3

39:14

Chair Pal, Nancy Marshall Genser with Marketplace. I wanted to go back to another thing that Fed by Sharlene said recently. She said she doesn't see signs of a wage price spiral. And I'm wondering if you agree with that.

Unknown Speaker

39:31

I do...

Chairman Powell

39:32

Yes, I do. You don't see that yet, but the whole point is if you -- once you see it, you have a serious problem. That means that effectively, in people's decision-making, inflation has become a really salient issue. And once that happens, that's what we can't allow to happen. And so that's why we worry that the longer we're at this, and the longer people are talking about inflation all day long every day, the more risk of something like that. But no, there's not much -- it's more of a risk. It always has been more of a risk than anything else. By the way, I think it's becoming less salient and people are -- we picked that up in conversations, and I've seen some data to that people are gradually -- they're glad that inflation is coming down. People really don't like inflation. And as we see it coming down, that could also add a boost to economic activity. You look at the sentiment surveys now, and they're very, very low with 3.5% unemployment and high wage increases is nominally by historical standards. Why can that be? It has to be inflation, right? So I think once inflation is seemed to be coming down in coming months, even you will also see a boost to sentiment, I hope.

Speaker 3

40:43

So that's what you're looking at most closely is consumer expectations...

Chairman Powell

40:48

That's at the very hard. It's consumers and businesses. Essentially, we believe that expectations of future inflation are a very important part of the process of creating inflation. That's a sort of a bedrock belief in one way or another, it has to be -- we think it's important. And in this case, I would say the risk 8 months ago or so, longer-term inflation expectations had moved up. We moved quite vigorously last year. Expectations are -- seem to be well anchored, including at the shorter end, now, not just the longer end. So -- it's -- and that's -- I think that's very reassuring. I think the markets have decided and the public has decided that inflation is going to come back down to 2%, and it's just a matter of us following through. That's measurably helpful to the process of getting inflation down. The fact that people now do generally believe that it will come down, that will be part of the process of getting it down, and it's a very positive thing.

Speaker 10

41:55

Chair, Rob from Market Watch. In the minutes of the December meeting, there was a couple of sentences that struck people is important. When the committee said participants talked about this unwarranted easing of financial conditions was a risk, and it would make your life harder to bring inflation down. I haven't seen -- heard you talk much about that today or in the statement. So I was wondering, has that concern eased among members? Or is that still something you're concerned about?

Chairman Powell

42:26

I would put it this way. It's something that we monitor carefully. Financial conditions didn't really change much from the December meeting to now. They mostly went sideways or up and down, but came out in roughly the same place. It's important that the markets do reflect the tightening that we're putting in place. As we've discussed a couple of times here, there is a different difference in perspective by some market measures on how fast inflation will come down. we're just going to have to see. I mean, I'm not going to try to persuade people to have a different forecast. But our forecast is that it will take some time and some patience and that we'll need to keep rates higher for longer, but we'll see.

Speaker 12

43:03

Good to Brendan for the last question.

Speaker 13

43:08

Brendan Peterson with Punchbowl News. I wanted to ask if the Fed takes into account at all the debt ceiling when it comes to quantitative tightening, given the fact that rapid or faster quantitative tightening could bring us closer, faster to that drop debt ceiling deadline. Could it play in effect as we get closer to that drop-dead deadline this summer?

Chairman Powell

43:36

Look, it's very hard to think about all the different possible ramifications. And I think the answer is basically, I don't think there's likely to be any important interaction between the 2 because I believe Congress will wind up acting. And as it will and must in the end to raise the debt ceiling in a way that doesn't risk the progress we're making against inflation and the economy and the financial sector. I believe that, that will happen. I believe it will happen. We, of course, will monitor money market conditions carefully. As the process moves on, for example, the treasury general account will shrink down and then it will grow back up, and we understand there'll be lots of flows between there and the overnight repo facility and reserves. We understand all that. We're watching it carefully. We'll just be monitoring it.

Speaker 0

44:27

Thank you very much.