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FOMC Press Conference on 20th March - Key Transcript

By Wong Kon How

One of the most important conferences or seminars we should attend is the press conference after each FOMC meeting. The reporters will have their translations, but I prefer to hear from Jerome Powell himself, as it provides information on what the Fed is thinking.

It is a 24-page transcript, and I have highlighted some of his key statements with added subtitle.

The Economy

The economy has made considerable progress toward our dual mandate objectives. Inflation has eased substantially while the labor market has remained strong, and that is very good news. But inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain. We are fully committed to returning inflation to our 2 percent goal.

The Economy in more details

Recent indicators suggest that economic activity has been expanding at a solid pace. GDP growth in the fourth quarter of last year came in at 3.2 percent. For 2023 as a whole, GDP expanded 3.1 percent, bolstered by strong consumer demand as well as improving supply conditions. Activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates. High interest rates also appear to have weighed on business fixed investment. In our Summary of Economic Projections, Committee participants generally expect GDP growth to slow from last year’s pace, with a median projection of 2.1 percent this year and 2 percent over the next two years.

The median unemployment rate projection in the SEP is 4.0 percent at the end of this year and 4.1 percent at the end of next year.

The Fed’s view on inflation

Inflation has eased notably over the past year but remains above our longer-run goal of 2 percent. Estimates based on the Consumer Price Index and other data indicate that total PCE prices rose 2.5 percent over the 12 months ending in February; and that, excluding the volatile food and energy categories, core PCE prices rose 2.8 percent. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. The median projection in the SEP for total PCE inflation falls to 2.4 percent this year, 2.2 percent next year, and 2 percent in 2026.

When will Fed to cut rates?

We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2 percent. At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.

The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably down toward 2 percent. Of course, we are committed to both sides of our dual mandate, and an unexpected weakening in the labor market could also warrant a policy response. We will continue to make our decisions meeting by meeting.

Fed’s projection on rate cut

In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward. If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 percent at the end of this year, 3.9 percent at the end of 2025, and 3.1 percent at the end of 2026—still above the median longer-term funds rate. These projections are not a committee decision or plan; if the economy does not evolve as projected, the path for policy will adjust as appropriate to foster our maximum employment and price stability goals.

How confident Fed will cut rate this year?

So, I just would say that the Committee wants to see more data that gives us higher confidence that inflation is moving down sustainably toward two percent. I also mentioned, and we don't see this in the data right now, but if there were a significant weakening in the data, particularly in the labor market, that could also be a reason for us to begin the process of reducing rates again. I don't, there's nothing in the data pointing at that but those are the things that we'll be looking at at coming meetings and without trying to refer to any specific meeting.

Question from a reporter:

Well you've talked about the desire to have confidence that inflation is continually moving down. Has the recent numbers we've gotten for inflation data dented that confidence at all?


It certainly hasn't improved our confidence. It doesn't raised anyone's confidence, but I would say that the story is really essentially the same and that is of inflation coming down gradually toward two percent on a sometimes bumpy path, as I mentioned. I think that's what you still see. We've got nine months of 2-1/2 percent inflation now and we've had two months of kind of bumpy inflation. We were saying that we'll, it's going to be a bumpy ride. We consistently said that. Now here are some bumps and the question is; are they more than bumps? And we just don't, we can't know that. That's why we are approaching this question carefully, it is very important for everyone that we serve that we do get inflation sustainably down and I think the historical record, it's every situation is different, but the historical record is that you need to approach that question carefully and try to get it right the first time and not have to come back and raise rates again perhaps if you cut inappropriately, prematurely.

The Fed’s mandate

Our mandate is for maximum employment and price stability and the other things that we do and that's what we're trying to accomplish.

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