ウィスパリング同時通訳研究会コミュのFOMC press conference, November 3, 2021

Jerome Powell: (01:35)
Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us, maximum employment and price stability. Today, the FOMC kept interest rates near zero, and in light of the progress the economy has made toward our goals, decided to begin reducing the pace of asset purchases. With these actions, monetary policy will continue to provide strong support to the economic recovery. Given the unprecedented nature of the disruptions related to the pandemic and the reopening of the economy, we remain attentive to risks and will ensure that our policy is well positioned to address the full range of plausible economic outcomes. I will say more about our monetary policy decisions after reviewing recent economic developments.
(02:26)
Economic activity expanded at a 6.5% pace in the first half of the year, reflecting progress on vaccinations, the reopening of the economy and strong policy support. In the third quarter, real GDP growth slowed notably from this rapid pace. The summer’s surge in COVID cases from the Delta variant has held back the recovery in the sectors most adversely affected by the pandemic, including travel and leisure. Activity has also been restrained by supply constraints and bottlenecks notably in the motor vehicle industry. As a result, both household spending and business investment flattened out last quarter. Nonetheless, aggregate demand has been very strong this year, buoyed by fiscal and monetary policy support and the healthy financial positions of households and businesses. With COVID case counts receding further and progress on vaccinations, economic growth should pick up this quarter resulting in strong growth for the year as a whole.
(03:32)
Conditions in the labor market have continued to improve and demand for workers remains very strong. As with overall economic activity, the pace of improvement slowed with the rise in COVID cases. In August and September, job gains averaged 280,000 per month down from an average of about 1 million jobs per month in June and July. The slow down has been concentrated in sectors most sensitive to the pandemic, including leisure and hospitality and education. The unemployment rate was 4.8% in September. This figure understates the shortfall in employment, particularly as participation in the labor market remains subdued. Some of the softness in participation likely reflects the aging of the population and retirements, but participation for prime aged individuals also remains well below pre-pandemic levels, in part reflecting factors related to the pandemic such as caregiving needs and ongoing concerns about the virus. As a result, employers are having difficulties filling job openings. These impediments to labor supply should diminish with further progress on containing the virus, supporting gains in employment and economic activity.
(04:52)
The economic downturn has not fallen equally on all Americans and those least able to shoulder the burden have been hardest hit. Despite progress, joblessness continues to fall disproportionately on African Americans and Hispanics. The supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizeable price increases in some sectors, in particular bottlenecks and supply change disruptions are limiting how quickly production can respond to the rebound in demand in the near term. As a result, overall inflation is running well above our 2% longer run goal. Supply constraints have been larger and longer lasting than anticipated. Nonetheless, it remains the case that the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, specifically the effects on supply and demand from the shutdown, the uneven reopening and the ongoing effects of the virus itself.
(05:55)
We understand the difficulties that high inflation poses for individuals and families, particularly those with limited means to absorb higher prices for essentials such as food and transportation. Our tools cannot ease supply constraints. Like most forecasters, we continue to believe that our dynamic economy will adjust to the supply and demand imbalances and that as it does, inflation will decline to levels much closer to our 2% longer run goal. Of course, it is very difficult to predict the persistence of supply constraints or their effects on inflation. Global supply chains are complex. They will return to normal function, but the timing of that is highly uncertain. We are committed to our longer run goal of 2% inflation and to having longer term inflation expectations well anchored at this goal. If we were to see signs that the path of inflation or longer term inflation expectations was moving materially and persistently beyond levels consistent with our goal, we would use our tools to reserve price stability. We will be watching carefully to see whether the economy is evolving in line with expectations.
(07:07)
The Fed’s policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people along with our responsibilities to promote the stability of the financial system. Our asset purchases have been a critical tool. They helped preserve financial stability early in the pandemic. And since then have helped foster smooth market functioning and accommodate financial conditions to support the economy.
(07:32)
Last September, sorry, December, the committee stated its intention to continue asset purchases at a pace of at Least $120 billion per month until substantial further progress has been made toward our maximum employment and price stability goals. At today’s meeting, the committee judged that the economy has met this test and decided to begin reducing the pace of its asset purchases. Beginning later this month, we will reduce the monthly pace of our net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities.
(08:09)
We also announced another reduction of this size in the monthly purchase pace starting in mid-December since that month’s purchase schedule will be released by the Federal Reserve Bank of New York prior to our December FOMC Meeting. If the economy evolves broadly as expected, we judge that similar reductions in the pace of net asset purchases will likely be appropriate each month, implying that increases in our securities holdings would cease by the middle of next year. That said, we are prepared to adjust the pace approaches if warranted by changes in the economic outlook. And even after our balance sheet stops expanding, our holdings of securities will continue to support accommodative financial conditions.
(08:53)
Our decision today to begin our tapering our asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate. 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 complete the recovery in employment and achieve our price stability goal. Thank you. I look forward to your questions.

Speaker 1: (09:29)Thank you. We’ll go to Nick at The Wall Street Journal
Nick Timiraos: (09:34)Hi, Nick Timiraos of The Wall Street Journal. Chair Powell, the markets anticipate you will raise rates once or twice next year, are they wrong?

Jerome Powell: (09:49)
So I would say it this way. We try to focus on what we can control, and that is how to communicate as clearly as possible in this highly uncertain world how we’re thinking about the economic outlook and the balance of risks and how policy will evolve in that case and also in the cases which are frequent, where the economy evolves in unexpected ways. So the focus at this meeting is on tapering asset purchases, not on raising rates. It is time to taper, we think, because the economy has achieved substantial further progress toward our goals measured from last December. We don’t think it’s time yet to raise interest rates. There is still ground to cover to reach maximum employment, both in terms of employment and in terms of participation.
(10:38)
Getting to your question, our baseline expectation is that supply bottlenecks and shortages will persist well into next year and elevated inflation as well. And that as the pandemic subsides, supply chain bottlenecks will abate and job growth will move back up. And as that happens, inflation will decline from today’s elevated levels. Of course, the timing of that is highly uncertain, but certainly we should see inflation moving down by the second or third quarter. The time for lifting rates and beginning to remove accommodation will depend on the path of the economy. We think we can be patient. If a response is called for, we will not hesitate. So what I will tell you is we’re watching carefully to see whether the economy evolves in line with our expectations and policy will adapt appropriately. And that’s what I would say.

Nick Timiraos: (11:30)Well, based on if I could follow up, based on your current outlook for the labor market, do you think it’s possible or likely even that maximum employment could be achieved by the second half of next year?

Jerome Powell: (11:44)So if you look at the progress that we’ve made over the course of the last year, if that pace were to continue, then the answer would be yes. I do think that that is possible. Of course, we measure maximum employment based on a wide range of figures, but it’s certainly within the realm of possibility.
Nick Timiraos: (12:04)Thank you.

Speaker 1: (12:06)Thank you. Next, we’ll go to Jeanna at the New York Times.
Jeanna: (12:11)Hi, Chair Powell. I was wondering If you could detail a little bit how you’re thinking about wages at this moment. Obviously, we’re seeing strong wage growth, particularly for people in lower income fields. I wonder if you see that as a positive thing or as a potential start to a wage price spiral and sort of how you delineate those two things.

Jerome Powell: (12:32)
So wages have been moving up strongly, very strongly. And in particular, I would point to the Employment Compensation Index reading that we got last Friday. Now, in real terms, they had been running a little bit below inflation. So real wages were not really increasing. I think with the ECI reading, it becomes close to not, maybe not increasing, but close to back to zero in terms of the real increase. So wages moving up, of course, is how standard of living increases over the years for generation upon generation. It’s very important. And it’s generally a good thing.
(13:12)
The concern is somewhat unusual case, where if wages were to be rising persistently and materially above inflation and productivity gains, that could put upward pressure on or downward pressure on margins and cause companies to their employers really to raise prices as a result, and you can find yourself in what we used to call a wage price spiral. We don’t have evidence of that yet. Productivity has been very high. The ECI reading is just one reading. Again, if you look back, we… So we’ll be watching this carefully, but I would say that at this point, we don’t see troubling increases in wages and we don’t expect those to emerge, but we’ll be watching carefully.

Speaker 2: (14:07)Next one is Steve Liesman from CNBC?
Steve Liesman: (14:13)Thank you, Mr. Chairman. I wonder if you could perhaps give us your thinking about the tradeoffs between inflation and unemployment. You’ve talked about the shortfall in unemployment rate before the pandemic, and yet you have inflation, which is affecting everybody. Are we at or close to a point where the risk of inflation is greater than the benefit that you’d from recovering these lost jobs so that now from a risk management standpoint, it makes sense to move more aggressively on rate hikes? A kind of a related question, the statement today says, you’ll keep policy accommodative once you hit that 2% inflation target. Our survey show, looking for 5% inflation this year, 3.5% percent next year, it sure seems like you’re on track to modestly or moderately exceed that 2% target. Thanks.

Jerome Powell: (15:06)Yeah. So I’m not sure I totally got your first question, but I would say… In fact, could you just quickly succinctly say your first question again?

Steve Liesman: (15:16)Sure. The idea that the trade between inflation unemployment, that you would keep policy accommodated to put this five million folks or find these five million jobs again. At the same time, all Americans will be suffering from higher inflation. Is that trade off worth it or is it better or smarter to raise rates right now to combat inflation and perhaps not lean so heavily on the employment side of the mandate?

Jerome Powell: (15:39)
Yeah. So this isn’t the traditional Phillips curve situation where there’s a direct trade off where that’s really what we’re talking about. The inflation that we’re seeing is really not due to a tight labor market, it’s due to bottlenecks and it’s due to shortages and it’s due to very strong demand meeting those. So I think it’s not the classical situation where you have that precise trade off. But in this situation, we do have a provision in our statement on longer run goals, as you know, that says when those two things are intention, what we do is we take into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the mandate. So we used to call that the balanced approach paragraph. We have to think about the amount of the deviation, we have to think about the time it will take, and we have to make policy in a world where the two goals or intentional. It’s very difficult.
(16:41)
But what it really boils down is something that’s common sense, and that is risk management. We have to be aware of the risks, particularly now the risk of significantly higher inflation. We see shortages and bottlenecks persisting into next year, well into next year. We see higher inflation persisting, and we have to be in position to address that risk should it create a threat of more persistent, longer term inflation. And that’s what we think our policy is doing now. It’s putting us in a position to be able to address the range of plausible outcomes.

Speaker 3: (17:23)Thank you. Next, we’ll go to Colby Smith of The Financial Times.
Colby Smith: (17:29)Thank you. Chair Powell, what are the economic conditions that would perhaps warrant a faster pace of tapering? And I’m wondering how you would also characterize the risks that the fed may actually need to accelerate that process eventually. Thank you.

Jerome Powell: (17:45)
So I guess as I said in my opening remarks, assuming the economy performs broadly as expected, the committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month and we’re prepared to deviate from that path if warranted by changes in the economic outlook. So I’m not going to give you a lot more detail on what that might be. Of course, if we do see something like that happening, if it becomes a question, then we’ll communicate very transparently and openly about that. But I’m just going to leave it with the words that are in the statement. Sorry, was there a second part?
Colby Smith: (18:22)Yeah. It’s just on characterizing the risks that you might actually have to do so later on.

Jerome Powell: (18:29)
I would just leave you with the words we have here. We are prepared to speed up or slow down the pace of reductions asset purchases if it’s warranted by changes in economic outlook. And again, if we feel like something like that’s happening, then we’ll be very transparent. But we wouldn’t want to surprise markets. We’ll say in light of this factor or these factors, we are considering doing this, and then we would either do it or not do it. But I’m not going to start making up examples of what that might be today. Thanks.
Colby Smith: (19:04)Thank you.

Speaker 3: (19:10)Next [inaudible 00:19:11] Rachel Siegel of The Washington Post.
Rachel Siegel: (19:14)
Hi, Chair Powell. Thank you so much for taking our questions. You mentioned at the beginning that the fed understands the difficulties that high inflation poses for individuals and families especially those with limited means. What is your message to those families or consumers that are struggling with higher prices right now? And do you feel that your expectations around transitory inflation, that message is reaching them? Thank you.

Jerome Powell: (19:40)
Yeah. So first of all, it is our job and we accept responsibility and accountability for inflation in the medium term. We’re accountable to Congress and to the American people for maximum employment and price stability. The level of inflation we have right now is not at all consistent with price stability. By the way, we’re also not at maximum employment, as I mentioned. So I would want to assure people that we will use our tools as appropriate to get inflation under control. We don’t think it’s a good time to raise interest rates though because we want to see the labor market heal further and we have very good reason to think that that will happen as the Delta variant declines, which it’s doing now. So transitory is a word that people have had different understandings of. For some, it carries a sense of short lived and there’s a real time component measured in months, let’s say. Really for us, what transitory has at is that if something is transitory, it will not leave behind it permanently or very persistently higher inflation.
(20:55)
So that’s why we took a step back from transitory. We said expected to be transitory, first of all, to show uncertainty around that. We’ve always said that, by the way, in other context, we just hadn’t done it in the statement. But also to acknowledge really that it means different things to different people. And then we added some language to really explain more what we’re talking about in paragraph two and paragraph three. We said that supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizeable price increases. Then we said progress on vaccinations and an easing of supply constraints are expected to support continued gains and economic activity and employment, as well as a reduction in inflation. So we’re trying to explain what we mean and also acknowledging more uncertainty about transitory. I mean, it’s become a word that’s attracted a lot of attention that maybe is distracting from our message, which we want to be as clear as possible.
(21:52)
Ultimately, the only other thing I would say is, look, we understand completely that it’s particularly people who are living paycheck to paycheck are seeing higher grocery costs, higher gasoline costs, when the winter comes, higher heating costs for their homes. We understand completely what they’re going through and we will use our tools over time to make sure that that doesn’t become a permanent feature of life. Really that’s one of our principle jobs along with achieving maximum employment. And that’s our commitment.

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