ウィスパリング同時通訳研究会コミュのFed Chair Jerome Powell holds a press conference following FOMC meeting

December 15, 2021 CHAIR POWELL. 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, in support of these goals, the Federal Open Market Committee kept interest rates near zero and updated its assessment of the progress that the economy has made toward the criteria specified in the Committee’s forward guidance from interest rates. In addition, in light of the strengthening labor market and elevated inflation pressures, we decided to speed up the reductions in our asset purchases. As I will explain, economic developments and changes in the outlook warrant this evolution of monetary policy, which will continue to provide appropriate support for the economy. Economic activity is on track to expand at a robust pace this year, reflecting progress on vaccinations and the reopening of the economy. Aggregate demand remains very strong, buoyed by fiscal and monetary policy support and the healthy financial positions of households and businesses. The rise in COVID cases in recent weeks, along with the emergence of the Omicron variant, pose risks to the outlook. Notwithstanding the effects of the virus and supply constraints, FOMC participants continue to foresee rapid growth; as shown in our Summary of Economic Projections, the median projection for real GDP growth stands at 5.5 percent this year and 4 percent next year. Amid improving labor market conditions and very strong demand for workers, the economy has been making rapid progress toward maximum employment. Job gains have been solid in recent months, averaging 378,000 per month over the last three months. The unemployment rate has declined substantially, falling six tenths of a percentage point since our last meeting and reaching 4.2 percent in November. The recent improvements in labor market conditions have narrowed the differences in employment across groups, especially for workers at the lower end of the wage distribution, as well as for African Americans and Hispanics. Labor force participation showed a welcome rise in November but remains subdued, in part reflecting the aging of the population and retirements. In addition, some who otherwise would be seeking work report that they are out of the labor force because of factors related to the pandemic, including caregiving needs and ongoing concerns about the virus. At the same time, employers are having difficulties filling job openings, and wages are rising at their fastest pace in many years. How long the labor shortages will persist is unclear, particularly if additional waves of the virus occur. Looking ahead, FOMC participants project the labor market to continue to improve, with the median projection for the unemployment rate declining to 3.5 percent by the end of the year. Compared with the projections made in September, participants have revised their unemployment rate projections noticeably lower for this year and next. Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation. In particular, bottlenecks and supply constraints are limiting how quickly production can respond to higher demand in the near term. These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus. As a result, overall inflation is running well above our 2 percent longer-run goal and will likely continue to do so well into next year. While the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, price increases have now spread to a broader range of goods and services. Wages have also risen briskly, but thus far, wage growth has not been a major contributor to the elevated levels of inflation. We are attentive to the risks that persistent real wage growth in excess of productivity could put upward pressure on inflation. Like most forecasters, we continue to expect inflation to decline to levels closer to our 2 percent longer-run goal by the end of next year. The median inflation projection of FOMC participants falls from 5.3 percent this year to 2.6 percent next year; this trajectory is notably higher that projected in September. We understand 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 committed to our price stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. We will be watching carefully to see whether the economy is evolving in line with expectations. The Fed’s monetary policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people. In support of these goals, the Committee reaffirmed the 0 to 1/4 percent target range for the federal funds rate. We also updated our assessment of the progress the economy has made toward the criteria specified in our forward guidance for the federal funds rate. With inflation having exceeded 2 percent for some time, the Committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment. All FOMC participants forecast that this remaining test will be met next year. The median projection for the appropriate level of the federal funds rate is 0.9 percent at the end of 2022, about a half a percentage point higher than projected in September. Participants expect a gradual pace of policy firming, with the level of the federal funds rate generally near estimates of its longer-run level by the end of 2024. Of course, these projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. At today’s meeting, the Committee also decided to double the pace of reductions in its asset purchases. Beginning in mid-January, we will reduce the monthly pace of our net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities. If the economy evolves broadly as expected, 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 mid-March, a few months sooner than we anticipated in early November. We are phasing out our purchases more rapidly because with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support. In addition, a quicker conclusion of our asset purchases will better position policy to address the full range of plausible economic outcomes. We remain prepared to adjust the pace of purchases if warranted by changes in the economic outlook. And even after our balance sheet stops expanding, our holdings of securities will continue to foster accommodative financial conditions. 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.
MICHELLE SMITH. Mr. Chair, we'll go to Rachel from the Washington Post.
RACHEL SIEGEL. Thank you very much, Michelle. And thank you, Chair Powell, for taking our questions. The latest FOMC materials say that the FOMC thinks it will be appropriate to keep rates near zero until labor market conditions reach levels consistent with maximum employment. And there are also three rate hikes penciled in the projections for next year. In order to set up those hikes, what will maximum employment have to look like? When will you know that that threshold has been met? And how will that be communicated? Thank you. CHAIR POWELL. So maximum employment, if you look at our statement of longer-run goals in monetary policy strategy, maximum employment it -- is something that we look at a broad range of indicators. And those would include, of course, things like the unemployment rate, the labor force participation rate, job openings, wages, flows in and out of the labor force in various parts of the labor force. We'd also tend to look broadly and inclusively at different demographic groups and not just at the headline and aggregate numbers. So that's a judgment for the Committee to make. The Committee will make a judgement that we've achieved labor market conditions consistent with maximum employment when it makes that it is admittedly a judgment call because it's a range of factors, unlike inflation, where we have one number that sort of dominates. It's a broad range of things. So, as I mentioned in my opening remarks, in my view, we are making rapid progress toward maximum employment. And you see that in -- of course, in some of the factors that I mentioned.
MICHELLE SMITH. Great, thank you. Steve at CNBC.
STEVE LIESMAN. All right. Thank you, Mr. Chairman. My question is if -- It's often said that monetary policy has long and variable lags, how does continuing to buy assets now, even though it's at a slower pace, address the current inflation problem? Won't the impact of today's changes not really have any impact for six months or a year down the road on the current inflation problem? Aren't you actually lengthening that time by continuing to buy assets such that it could be not until the long and variable lag after you end purchases sometime in March, that you will start to have any impact on the inflation problem?. So, on the first part of your question, which is, why not stop purchasing now, I would just say this, we've learned that we're -- in dealing with balance sheet issues, we've learned that it's best to take a careful sort of methodical approach to make adjustments. Markets can be sensitive to it. And we thought that this was a doubling of the speed. We'll -- We're basically two meetings away now from finishing the taper. And we thought that was the appropriate way to go. So we announced it and that's what will happen. You know, the question of long and variable lags is an interesting one. That's Milton Friedman's famous statement. And I do think that in this world where everything is -- or the global financial connect -- markets are connected together, financial conditions can change very quickly. And my own sense is that they get into -- financial conditions affect the economy fairly rapidly, longer than the traditional thought of, you know, a year or 18 months. Shorter than that, rather. But in addition, when we communicate about what we're going to do, the markets move immediately to that. So, financial conditions are changing to reflect, you know, the forecasts that we made and -- basically, which was, I think, fairly in line with what markets were expecting. But financial conditions don't wait to change until things actually happen. They change on the expectation of things happening. So, I don't think it's a question of having to wait.
STEVE LIESMAN. Can I just follow up, thinking about having to wait, is it still the policy or the position of the Committee that you will not raise rates until the taper is complete? Thank you.
CHAIR POWELL. Yes. I -- The sense of that, of course, being that buying assets is adding accommodation and raising rates is removing accommodation. Since we're two meetings away from completing the taper, assuming things go as expected, I think if we wanted to lift off before then, then what we -- you would stop the taper potentially sooner, but it's not something I expect to happen. But I do not think it would be appropriate and we don't find ourselves in a situation where we might have to raise rates while we -- while we're still purchasing assets.
MICHELLE SMITH. OK, let's go to Colby at the FT. COLBY SMITH. Thank you, Michelle. Chair Powell, I'm curious exactly how much distance you think there should be between the end of the taper and the first interest rate increase. Back in 2014, the guidance was -- that was given was for the Fed funds rate to remain at the target level for a considerable time after the end of the asset purchase program. Is that an approach you support now or does the current economic situation warrant something a bit different? Thank you.
CHAIR POWELL. So we haven't made any decision of that nature. And so, no, I wouldn't say that's our position at all, we really haven't taken a position on that. I will say that we did talk today. We had our first discussion about the balance sheet, for example. And we went through the way the sequence of events regarding the runoff and that sort of thing with the balance sheet last time. And I think people thought that was an interesting discussion. They thought that it was informative, but people pointed out that this is a significantly different economic situation that we have at the current time, and that those -- the differences that we see now would tend to influence how we think about the balance sheet, and the same thing would be true about raising rates. I don't foresee that there would be that kind of very extended wait at this time. The economy is so much stronger. I was here at the Fed when we lifted it off last time and the economy is so much stronger now, so much closer to full employment. Inflation is running well above target and growth as well above potential. There wouldn't be the need for that kind of long delay. Having said that, I -- you know, we'll make this decision in coming meetings and it's not a decision that the Committee has really focused on yet.
MICHELLE SMITH. Let's go to Nick at the Wall Street Journal.
NICK TIMIRAOS. Thank you, Nick Timiraos at the Wall Street Journal. Chair Powell, in March, you answered a question about maximum employment like this. You said 4 percent would be a nice unemployment rate to get to but it'll take more than that to get to maximum employment. More recently, you have hinted at a possible distinction between the level of maximum employment that's achievable in the short run versus in the long run. Has your view of the level of maximum employment changed this year? And if so, how? And how close is the economy right now to your judgment of the short-run level of maximum employment? Thank you.
CHAIR POWELL. Right. So the -- You know, the thing is, we're not going back to the same economy we had in February of 2020. And I think early on, that was the sense was that that's where we were headed. The post-pandemic labor market and the economy, in general, will be different. And the maximum level of employment that's consistent with price stability evolves over time within a business cycle and over a longer period, in part reflecting evolution of the factors that affect labor supply, including those related to the pandemic. So I would say, look, we're at 4.2 percent now and it's been -- the unemployment rate has been dropping very quickly. So we're already in the vicinity of 4 percent. The way in which the -- The important metric that has been disappointing really has been labor force participation, of course, where we had widely thought, I had certainly thought that last fall as unemployment insurance ran off as vaccinations increased, that schools reopened, that we would see a significant surge, if you will, or at least a surge in labor force participation. So we've begun to see some improvement. We certainly welcome the 2/10 improvement that we got in the November report. But, I do think that it's -- it feels likely now that the return to higher participation is going to take longer. And, in fact, that's been the pattern in past cycles that labor force participation is -- tend to recover in the wake of a strong recovery in unemployment, which is what we're getting right now. So, you -- It could well have been if this cycle was different because of the short nature of it and a very strong -- the number of job openings, for example, you would have thought that that would have pulled people back in. But, really, it's the pandemic, it's a range of factors. But the reality is, we don't have a strong labor force participation recovery yet and we may not have it for some time. At the same time, we have to make policy now. And inflation is well above target. So this is something we need to take into account.
NICK TIMIRAOS. If I could follow up, you've talked recently about risk management. And so, does that mean that the Committee might feel compelled to raise interest rates before you're convinced that you've achieved the employment test in your forward guidance?
CHAIR POWELL. So this is not at all a decision that the Committee has made, but you're really asking a question about how our framework works. And, yes, there is a -- there's a provision, it used to be called the balanced approach provision that says, in effect, that in situations in which the pursuit of the maximum employment goal and the price stability goal are not complementary, we have to take account of the distance from the goal and the speed at which we're approaching it. And so that is, in effect, an off-ramp which could in concept be taken and it's in our framework, it's been in our framework a long time. I've talked about it on a number of occasions. It is a provision that would enable us to, in this case, because of high inflation, move before achieving maximum employment. Now, we're -- as I said, we're making rapid progress toward maximum employment in my thinking, in my opinion, and I don't at all know that we will -- that we'll have to invoke that paragraph. But just as a factual matter, that is part of our framework and has been really for a very long time.