Jerome Powell, Speech/Interview: FOMC Opening Statement and Press Conference

Fed Funds & Terminal Rate

“And I would point you to the SEP again for our current assessment of what — of what that peak level will be. As you will have seen, 19 people filled out the SEP this time, and 17 of those 19 wrote down a peak rate of 5 percent or more, in the 5’s. So that’s our best assessment today for what we think the peak rate will be.”

“What we’re writing down today is our best estimate of what we think that peak rate will be based on what we know. Obviously, if data — if the inflation data come in worse, that could move up. And it could move down if inflation data are softer.”

A Step Down to 25bps

“But, you know, what you said is broadly right, which is having moved so quickly and having now so much restraint that’s still in the pipeline, we think that the appropriate thing to do now is to move to a slower pace (25bps). And, you know, that will — that will allow us to feel our way and — you know, and get to that level, we think, and better balance the risks that we face.”

Rate Cuts

“Historical experience caution strongly against prematurely loosening policy. I guess I would say it this way: I wouldn’t see us considering rate cuts until the Committee is confident that inflation is moving down to 2 percent in a sustained way. So that’s the — that’s the test I would articulate.”

Restrictive Stance

“At a certain point, though, we’ll get to that point. And then the question will be how long do we stay there. And there, the strong view on the Committee is that we’ll need to stay there, you know, until we’re really confident that inflation is coming down in a sustained way. And we think that that will be some time.”

Soft Landing & Recession

“You know, to the extent we need to keep rates higher and keep them there for longer and inflation, you know, moves up higher and higher, I think that narrows the runway. But lower inflation readings, if they persist in time, could certainly make it more possible. So I just — I don’t think anyone knows whether we’re going to have a recession or not and, if we do, whether it’s going to be a deep one or not. It’s just it’s not knowable.”

Economic Cost of Rate Hikes

“Reducing inflation is likely to require a sustained period of below-trend growth and some softening of labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. The historical record cautions strongly against prematurely loosening policy. We will stay the course, until the job is done.”