ウィスパリング同時通訳研究会コミュのChairman Powell FOMC Press Conference, January 26, 2022

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 its policy interest rate near zero and stated its expectation that an increase in this rate would soon be appropriate. The Committee also agreed to continue reducing its net asset purchases on the schedule we announced in December, bringing them to an end in early March. As I will explain, against a backdrop of elevated inflation and a strong labor market, our policy has been adapting to the evolving economic environment, and it will continue to do so. Economic activity expanded at a robust pace last year, reflecting progress on vaccinations and the reopening of the economy, fiscal and monetary policy support, and the healthy financial positions of households and businesses. Indeed, the economy has shown great strength and resilience in the face of the ongoing pandemic. The recent sharp rise in COVID cases associated with the Omicron variant will surely weigh on economic growth this quarter. High-frequency indicators point to reduced spending in COVID-sensitive sectors, such as travel and restaurants. And activity more broadly may also be affected as many workers are unable to report for work because of illness, quarantines, or caregiving needs. Fortunately, health experts are finding that the Omicron variant has not been as virulent as previous strains of the virus, and they expect that cases will drop off rapidly. If the wave passes quickly, the economic effects should as well, and we would see a return to strong growth. That said, the implications for the economy remain uncertain. And we have not lost sight of the fact that for many afflicted individuals and families, and for the healthcare workers on the front lines, the virus continues to cause great hardship.

The labor market has made remarkable progress and by many measures is very strong. Job gains have been solid in recent months, averaging 365,000 per month over the past three months. Over the past year, payroll employment has risen by 6.4 million jobs. The unemployment rate has declined sharply, falling 2 percentage points over the past six months to reach 3.9 percent in December. The improvements in labor market conditions have been widespread, including for workers at the lower end of the wage distribution, as well as for African Americans and Hispanics. Labor demand remains historically strong. With constraints on labor supply, employers are having difficulties filling job openings and wages are rising at their fastest pace in many years. While labor force participation has edged up, it remains subdued, in part reflecting the aging of the population and retirements. In addition, some who would 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. The current wave of the virus may well prolong these effects. Over time there are good reasons to expect some further improvements in participation and employment. Inflation remains well above our longer-run goal of 2 percent. 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. 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, and 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 over the course of the year. 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. In addition, we believe that the best thing we can do to support continued labor market gains is to promote a long expansion, and that will require price stability. 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. And 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. As I noted, the Committee left the target range for the federal funds rate unchanged and reaffirmed our plan, announced in December, to end asset purchases in early March. In light of the remarkable progress we have seen in the labor market and inflation that is well above our 2 percent longer-run goal, the economy no longer needs sustained high levels of monetary policy support. That is why we are phasing out our asset purchases and why we expect it will soon be appropriate to raise the target range for the federal funds rate. Of course, the economic outlook remains highly uncertain. Making appropriate monetary policy in this environment requires humility, recognizing that the economy evolves in unexpected ways. We will need to be nimble so that we can respond to the full range of plausible outcomes. With this in mind, we will remain attentive to risks, including the risk that high inflation is more persistent than expected, and are prepared to respond as appropriate to achieve our goals.

To provide greater clarity about our approach for reducing the size of the Federal Reserve’s balance sheet, today the Committee issued a set of principles that will provide a foundation for our future decisions. These high-level principles clarify that the federal funds rate is our primary means of adjusting monetary policy and that reducing our balance sheet will occur after the process of raising interest rates has begun. Reductions will occur over time in a predictable manner primarily through adjustments to reinvestments so that securities roll off our balance sheet. Over time, we intend to hold securities in the amounts needed for our ample reserves operating framework, and in the longer run we envision holding primarily Treasury securities. Our decisions to reduce our balance sheet will be guided by our maximum employment and price stability goals. In that regard, we will be prepared to adjust any of the details of our approach to balance sheet management in light of economic and financial developments. The Committee has not made decisions regarding the specific timing, pace, or other details of shrinking the balance sheet, and we will discuss these matters in upcoming meetings and provide additional information at the appropriate time. 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 Federal Reserve will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions. MICHELLE SMITH. Thank you. For the first question, we'll go to Chris Rugaber, Associated Press.

CHRIS RUGABER. Thanks, Michelle. And thank you, Chair Powell. So it's expected that the Fed will hike rates perhaps every other meeting. But certainly in the past, the Fed has hiked at every meeting. So I just wanted to ask, you know, are rate hikes at consecutive meetings on the table this year? Is every meeting a live meeting? And, on that note, would the Fed consider frontloading some of its rate hikes, even if it doesn't raise every meeting? Thank you.

CHAIR POWELL. Thanks. So, as I referred to in my opening statement, it's -- it is not possible to predict with much confidence exactly what path for our policy rate is going to prove appropriate. And so, at this time, we haven't made any decisions about the path of policy. And I stress again that we'll be humble and nimble. We're going to have to navigate cross-currents and actually two-sided risks now. So -- and I'll say also that we're going to be guided by the data. In fact, what I'll say is that we're going to be led by the incoming data and the evolving outlook, which we'll try to communicate as clearly as possible, moving steadily in transparency -- transparently. So more to your question. We know that the economy is in a very different place than it was when we began raising rates in 2015. Specifically, the economy is now much stronger. The labor market is far stronger. Inflation is running well above our 2 percent target, much higher than it was at that time. And these differences are likely to have important implications for the appropriate pace of policy adjustments. Beyond that, we haven't made any decisions.

MICHELLE SMITH. Thank you. Let's go to Victoria Guida at Politico.

VICTORIA GUIDA. Hi, Chair Powell. I wanted to ask, you were talking about the health of the labor market. And I'm curious whether you would characterize where we're at right now as maximum employment? And also, along those same lines, obviously, rate hikes on the table this year, do you think that the Fed can raise rates, bring inflation under control without hurting jobs and wages?

CHAIR POWELL. Sorry. Just getting both parts of your question written down. So, I would say -- and this view is widely held on the Committee -- that both sides of the mandate are calling for us to move steadily away from the very highly accommodative policies we put in place during the challenging economic conditions that the economy faced earlier in the pandemic. And I would say that most FOMC participants agree that labor market conditions are consistent with maximum employment in the sense of the highest level of employment that is consistent with price stability. And that is my personal view. And, again, very broad support on the Committee for the judgement that it will soon be appropriate to raise the target range for the federal funds rate. The other thing is maximum employment will evolve over time and through the course of a business cycle. In the particular situation we're in now, it may well increase max - - the level of maximum employment that's consistent with stable prices may increase. And we hope that it will as more people come back into the labor market, as participation gradually rises. And the policy path that we're broadly contemplating would be supportive of that comment -- that outcome as well. So, the thing about the labor market right now is that there are -- there are many millions of more job openings than there are unemployed people. So you ask whether we can -- whether we can raise rates and move to a less accommodative and even tight financial conditions without hurting the labor market. I think there's quite a bit of room to raise interest rates without threatening the labor market. This is, by so many measures, a historically tight labor market, record levels of job openings, of quits. Wages are moving up at the highest pace they have in decades. If you look at surveys of workers, they find jobs plentiful. Look at surveys of companies, they find workers scarce. And all of those readings are at levels really that we haven't seen in a long time and, in some cases, ever. So, this is a very, very strong labor market. And my strong sense is that we can move rates up without having to, you know, severely undermine it. I also would point out that there are other forces at work this year, which should also help bring down inflation. We hope including improvement on the supply side, which will ultimately come at the timing and pace of that are uncertain. And also, fiscal policy is going to be less supportive of growth this year, not at the level of economic activity but the fiscal impulse to growth will be significantly lower. So there are multiple forces which should be working over the course of the year for inflation to come down. We do realize that the timing and pace of that are highly uncertain and that inflation has persisted longer than we thought. And, of course, we're prepared to use our tools to assure that higher inflation does not become entrenched. MICHELLE SMITH. Thank you. Let's go to Nick Timiraos at the Wall Street Journal.

NICK TIMIRAOS. Good afternoon, Chair Powell. Nick Timiraos of The Wall Street Journal. I have a couple of questions on the balance sheet. The statement on the balance sheet today calls for significantly reducing your holdings. What does that mean? And then, apart from moving sooner and faster to shrink the holdings, are there any other ways in which you and your colleagues are seriously thinking about recalibrating this process? And, finally, how much disagreement is there around how you should use this tool, including active sales rather than passive sales or changes in the composition of reinvestments? Thank you. CHAIR POWELL. So I'm afraid to tell you that those are all great questions, and they're questions that the Committee is just turning to now. So we had a discussion, as you know, at the last meeting, an introductory discussion of the balance sheet and teeing up of the issues. At this meeting, we've gone through and carefully put together a set of principles at a high-level. And those are meant to guide the actual decisions we'll make about the pace and about all of the questions that you're asking. And I expect that this process will be something that we spent time on in coming meetings. I can't tell you how many; I can't say how long it will take. But -- and then, you know, at the appropriate time, we'll provide additional information. So, I did -- the last cycle when we went through balance sheet issues, we did find that over the course of two or three meetings, for example, we did come to interesting and better answers, we thought. So we're just in that process now. And at the next meeting, we'll be turning to, you know, more of the details that you're asking about. I would say this. The balance sheet is much bigger. I'd say it has a shorter duration than the last time. And the economy's much stronger, and inflation is much higher. So -- and I think that leads you to -- and I said -- I've said this, being willing to move sooner than we did the last time and also perhaps faster. But, beyond that, it's really not appropriate for me to speculate exactly what that would be. And -- but I would point you to principle number one, which is the Committee views changes in the target rate for the federal funds rate as its primary means of adjusting the stance of monetary policy. So, we do want the federal funds rate, we want to operationalize that. And we want the balance sheet to be declining in a predictable manner, and we want it to be declining primarily by adjusting reinvestments.

NICK TIMIRAOS. So, if I could follow on that, raising rates and reducing the balance sheet both restrain the economy, both tighten monetary policy. How should we think about the relationship between the two? For example, how much passive runoff is equal to every quarter percentage point increase in your benchmark rate?

CHAIR POWELL. So, again, we think of the balance sheet as moving in a predictable manner, sort of in the background, and that the active tool meeting to meeting is not -- both of them, it's the federal funds rate. There are rules of thumbs. I'm reluctant to land on one of them that equate this. And there's also an element of uncertainty around the balance sheet. I think we have a much better sense, frankly, of how rate increases affect financial conditions and, hence, economic conditions. Balance sheet is still a relatively new thing for the markets and for us, so we're less certain about that. So, again, our -- I think our -- the pattern we'll follow is to arrive at a, you know, a timing and a pace and composition and all those things and then announce that with advance notice, and it will start in the background. And then we will look to have that just running in the background and have the interest rates, again, be the active tool of monetary policy. That's at least the plan. I can't tell you much more about any of the very good issues about size, pace, composition, those sorts of things. But we'll be turning to all of those at coming meetings.

NICK TIMIRAOS. Thank you.