Fed Chair Powell: Labor demand still exceeds supply; expect rebalancing to continue
Statement:
- Banking system remains resilient
- Prepared to adjust policy if risks emerge
- Economic activity has been expanding at a solid pace
- Job gains have slowed in recent months but remain strong
- "inflation remains elevated" and Fed remains "highly attentive to inflation risks."
Post rate decision press conference
- Squarely focused on dual mandate
- FOMC strongly committed to bringing inflation to 2%
- Without price stability we won't have a strong jobs market
- Full effects of tightening yet to be felt, have covered a lot of ground
- Fed is in position to proceed carefully on firming rate
- Decisions will be based on incoming data and evolving riskoutlook
- Growth in real GDP has come in above expectations
- US economic activity expanding at solid pace; consumer spending particularly robust; housing activity has picked up
- Higher rates weighing on business fixed investment
- Labor market remains tight but better balance is seen; unemployment at 3.9% remains low
- Nominal wage growth has shown some signs of easing
- Inflation well above goal; has moderated somewhat but expectations appear well anchored; have long way to go; aware that inflation poses significant hardship
- Current policy stance is restrictive; will remain restrictive until inflation is at 2%- Fed estaimtes core PCE rose 3.9% y/y in august
- Projections are not a plan, policy will adjust as appropriate; will make decisions meeting by meeting; in a position to proceed carefully; mindful of uncertainties
- Reducing inflation is likely to require a period of below-trend growth,, some softening of labor conditions
Q&A
- The fact we decided to keep rate where it is doesn't mean we have decided or have not , reached stance of policy we are seeking
- We are not making a policy decision about if rates are sufficiently restrictive
- Want to see convincing evidence we've reached appropriate level; need to see more progress
- Real rates are meaningfully positive now; need to be positive for some time
- Summary of economic projection is not a plan
- Economic activity has been stronger than all expected
- Proposal at the meeting was to maintain the current policy stance, unanimous support for that
- Recent labor market report was good example of what we want to see
- People want to be careful not to jump to a conclusion one way or the other; thats why given how far we've come, we are in a position to proceed carefully meeting by meeting
- As a group its a pretty tight cluster around end-of-year rate view
- We are fairly close to where we need to get
- Wouldn't attribute huge importance to one hike in macroeconomic terms
- Stronger economic activity is main reason for needing to do more with rates
- In terms of neutral rate, we only know when we get there; it may be that the neutral rate has risen and is higher than the longer-run rate
- Still thinks there will need to be some softening of labor market; natural rate of unemployment is coming down