FOMC Press Conference July 31, 2019

FOMC Press Conference July 31, 2019


Transcript of Chair Powell’s
Press Conference July 31, 2019 CHAIR POWELL. Good afternoon, and welcome. We decided today
to lower the target for the federal funds rate by
¼ percentage point to a range of 2 percent to 2¼ percent. The outlook for the U.S.
economy remains favorable, and this action is designed
to support that outlook. It is intended to insure
against downside risks from weak global growth and
trade policy uncertainty, to help offset the effects these
factors are currently having on the economy, and to promote
a faster return of inflation to our symmetric 2
percent objective. All of these objectives
will support achievement of our overarching goal:
to sustain the expansion, with a strong job market
and inflation close to our objective, for the
benefit of the American people. We also decided to
conclude the runoff of our securities portfolio in
August rather than in September, as previously planned. And I’ll discuss the thinking
behind today’s interest rate reduction and then turn
to the path forward. As the year began,
both the economy and monetary policy
were in a good place. The unemployment rate
was below 4 percent, and inflation had been running
near our 2 percent objective for nine months. Our interest rate
target was at the low end of estimates of neutral. Over the first half of
the year, the economy grew at a healthy pace and job
gains pushed unemployment to near a half-century low. Wages have been rising,
particularly for lower-paying jobs. People who live and work in low- and middle-income
communities tell us that many who have struggled to find work
are now getting opportunities to add new and better
chapters to their lives. This underscores for
us the importance of sustaining the expansion so that the strong job
market reaches more of those left behind. Through the course of the
year, weak global growth, trade policy uncertainty, and muted inflation
have prompted the FOMC to adjust its assessment of the appropriate
path of interest rates. The Committee moved from expecting rate increases
this year to a patient stance about any changes and
then to today’s action. The median Committee
participant’s assessments of the neutral rate of interest
and the longer-run normal rate of unemployment have
also declined this year, reinforcing the case for a somewhat lower
path for our policy rate. These changes in
the anticipated path of interest rates have
eased financial conditions and have supported the economy. At our June meeting, many
Committee participants saw that the case for lowering
the federal funds rate had strengthened, but the Committee
wanted to get a better sense of the overall direction
of events. Since then, we have
seen both positive and negative developments. Job growth was strong
in June and, looking through month-to-month
fluctuations, the data point to continued strength. We expect job growth to
be slower than last year but above what we
believe is required to hold the unemployment
rate steady. GDP growth in the second quarter
came in close to expectations. Consumption-supported
by rising incomes and high household confidence-is
the main engine driving the economy forward. But manufacturing
output has declined for two consecutive quarters, and business fixed investment
fell in the second quarter. Foreign growth has disappointed,
particularly in manufacturing and notably in the
euro area and China. In response to this
weakness, many central banks around the world are
increasing policy accommodation or contemplating doing so. After simmering early
in the year, trade policy tensions nearly
boiled over in May and June but now appear to have
returned to a simmer. Looking through this
variability, our business contacts tell us that the ongoing uncertainty
is making some companies more cautious about their
capital spending. The domestic inflation
shortfall has continued. Core inflation, which
excludes food and energy prices and is a better gauge
of future developments than is total inflation,
has run at 1.6 percent over the past 12 months. We continue to expect
that inflation will return over time to 2 percent. But domestic inflation
pressures remain muted, and global disinflationary
pressures persist. Wages are rising,
but not at a pace that would put much upward
pressure on inflation. We are mindful that
inflation’s return to 2 percent may
be further delayed, and that continued below-target
inflation could lead to a worrisome and difficult-to-reverse
downward slide in longer-term expectations. So taking all of that on board, the Committee still sees a
favorable baseline outlook. Over the year, however, incoming
information on global growth, trade policy uncertainty, and muted inflation
have led the Committee to gradually lower its
assessments of the path of policy interest rate that
would best support that outlook. Today, we judge that those
factors warrant the policy adjustment I described: “As
the Committee contemplates the future path of the target range
for the federal funds rate, it will continue to
monitor the implications of incoming information for the
economic outlook and will act as appropriate to
sustain the expansion, with a strong labor market and inflation near its
symmetric 2 percent objective.” Thank you. I am happy to take
your questions. JEANNA SMIALEK. Hi, Chair Powell. Jeanna Smialek with
the New York Times. Per your statement here,
I guess the question is, is there any reason to believe that a 25 basis point cut
is going to be sufficient to expediently return inflation
to your 2 percent target? And, if not, what are you going
to be looking at to convince you that you need to
cut rates again? What is the hurdle rate there? CHAIR POWELL. So I think you have to look at
not just the 25 basis point cut, but look at the Committee’s
actions over the course of the year. As I noted in my
opening statement, we started off expecting
some rate increases, we moved to a patient
setting for a few months, and now we’ve moved here. I think what you’ve seen over
the course of the year is, as we’ve moved to a more
accommodative policy, the economy has actually
performed just about as expected with that gradually
increasing support. And I think-I wouldn’t take
credit for all of that, but I do think that increasing
policy support has kept the economy on track and kept
the outlook favorable. In terms of the rest
of your question, the Committee is really
thinking of this as a way of adjusting policy to a somewhat more
accommodative stance to further the three
objectives that I mentioned: to insure against downside
risks, to provide support to the economy, that those
factors are-where factors are pushing down on economic growth,
and then to support inflation. So we do think it will serve
all of those goals, but again, we’re thinking of it as
essentially in the nature of a midcycle adjustment
to policy. MICHAEL MCKEE. Michael McKee from Bloomberg
Television and Radio. There’s a perception out there
that perhaps, in this case, the Fed is something of a
hammer in search of a nail, because the latest
consumer spending reports, as you suggested, don’t seem to
show any kind of demand problem in the U.S. And when you
look at mortgage rates, auto lending rates,
they’ve all come down. And so, wondering exactly what
problem lower capital costs will solve. CHAIR POWELL. So, you’re absolutely right. The-the performance of the economy has
been reasonably good. The position of the economy
is as close to our objectives as it’s been in a long time,
and the outlook is also good. What we’ve been monitoring since
the beginning of the year is, effectively, downside
risks to that outlook from weakening global growth,
and we see that everywhere: weak manufacturing, weak
global growth now, particularly in the European Union and China. In addition, we see trade
policy developments, which at times have
been disruptive and then have been less so, and also inflation
running below target. So we see those as threats to what is clearly a favorable
outlook, and we see this action as designed to support them and
keep that outlook favorable. And, frankly, it
is a continuation of what we’ve been doing all
year to provide more support against those very same risks. MICHAEL MCKEE. But the follow-up question
is, how does it do that? How does cutting
interest rates lower-or, how does cutting interest rates
keep that going, since the cost of capital doesn’t seem
to be the issue here? CHAIR POWELL. You know, I-I really think it
does, and I think the evidence of my eyes tells me that our
policy does support-it supports confidence, it supports
economic activity, household and business confidence, and through channels
that we understand. So it will lower
borrowing costs. It will-and it will work. And I think you see it. Since-you know, since
we noted our vigilance about the situation in June, you saw financial
conditions move up, and you saw-I won’t take
credit for the whole recovery, but you saw financial
conditions move up. You see confidence,
which had troughed in June-you saw it move back up. You see economic activity
on a healthy basis. It just-it seems to work through
confidence channels as well as the mechanical channels
that you are talking about. HEATHER LONG. Hi, Heather Long from
the Washington Post. You always say that the
Fed is data dependent, and much of the data
that we’ve seen since the June meeting has
surprised to the upside or at least been in
line with expectations. Can you give us a sense of how that better-than-expected data
impacted the FOMC’s thinking? And if we keep seeing
these upside surprises, does that change or evolve any
FOMC thinking going forward? CHAIR POWELL. So, yes. I mean, I think
we-of course, you know, what we do at every meeting, as
I noted, is, we do a deep dive into U.S. economic activity and
global activity and, certainly, carefully went through
U.S. economic activity, which there has been some
positive and some negative, but, overall, the U.S. economy has
shown resilience during the intermeeting period. But, again, the-the issue
is more the downside risks and then the shortfall
in inflation, and we’re trying
to address those. So, in addition, going
forward, I would say, we’re going to be
monitoring those same things. We’ll be monitoring the
evolution of trade uncertainty, of global growth,
and of low inflation. And we’ll also, of course, be watching the performance
of the U.S. economy. As I mentioned, it had
shown some resilience here to those issues, and we’ll be
putting all of that together, and that’s how we’ll be thinking
about policy going forward. STEVE LIESMAN. Steve Liesman, CNBC. I just want to follow
up on that. Would you say we’re sort
of-you guys have gotten into a new regime here? This is sort of an insurance cut
and not a data-dependent cut? And are we now more in the
realm of watching headlines of trade talks than we are
watching unemployment rate and inflation numbers,
or-and growth numbers? What-how do we know what
you’re going to do next, and why now in this new regime? CHAIR POWELL. Yes. So I gave three
reasons for what we did, and that is to insure against
downside risks to the outlook from weak global growth
and trade tensions. So that is-in a sense, that
is a risk-management point, and that is a bit of insurance. But we also feel like
weak global growth and trade tensions are having
an effect on the U.S. economy. You see it now in
the second quarter: You see weak investment, you see
weak manufacturing-so support demand there and also
to support return of inflation to 2 percent. But there’s definitely an
insurance aspect of it. Trade is unusual. We don’t-you know, the thing is,
there isn’t a lot of experience in responding to
global trade tensions. So it is a-it’s something
that we haven’t faced before and that we’re learning
by doing. And it is not-it’s
not exactly the same as watching global growth,
where you see growth weakening, you see central banks and
governments responding with fiscal policy, and you
see growth strengthening, and you see a business cycle. With trade tensions-which
do seem to be having a significant
effect on financial market conditions
and on the economy-they evolve in a different way, and
we have to follow them. And, by the way, I
want to be clear here. We play no role whatsoever
in assessing or evaluating trade
policies other than as-as trade policy
uncertainty has an effect on the U.S. economy in
the short and medium term. We’re not in any way
criticizing trade policy. That’s really not our job. NICK TIMIRAOS. Thank you. Nick Timiraos of the
Wall Street Journal. So, Chair Powell, you and your
colleagues have offered three reasons to cut rates:
a lower neutral rate that may have made policy
a little bit tighter than anticipated,
the global slowdown and the darker risk picture
from the trade tensions, and this desire to
re-center inflation and inflation expectations. I wonder, which of
those factors, if any, weighs most heavily on you? And, more importantly, is
a ¼ point cut really going to address all of that,
let alone any one of those? CHAIR POWELL. So I actually think different
people have different-different weightings has been my
experience on those things. You mentioned lower r*, trade slowdown-and I would
actually add, lower natural rate of unemployment too has moved
down, all of which kind of point to more accommodation. So, again, I don’t think asking about a ¼ point is
really the right question. I think you have to look back
over the course of the year and see the Committee moving
away from rate increases to a neutral posture
to, now, a rate cut. So I think we’ve
been providing-and that affects the
forward rate path, and it affects financial
conditions, and financial conditions
affect the economy. You see an economy which is
actually performing pretty well. Growth in the first half of this
year is about the same as it was in all of ’18 and actually a
little better than our forecast for growth in 2019-at
the end of 2019. So I think, in a way, that’s
monetary policy working. And, again, I wouldn’t just
look at the 25 basis point cut as the right question. NICK TIMIRAOS. If I could follow up, I
guess in May-in May it seemed as if you were setting a
higher bar to cut rates: There would need to be a
deterioration in the outlook. In June, you seemed to suggest that if the outlook
didn’t improve, there might be a rate cut. Where is that bar right now, because I think there’s
some confusion about how the Committee
is responding. CHAIR POWELL. Yes. So we, as we noted-we noted
at the bottom of the statement that language, which really says
how we’re thinking about it. So it says, as we’re
contemplating the future path of the target range for
the federal funds rate, we’ll continue to
monitor the implications of incoming information-and
it talks about that language. So, you know, I can’t-all I can
tell you is, we’ll be looking at weak global growth. We’ll be looking very carefully
to see how that’s happening. And I think you see-you
learn-every cycle you learn about these things. So we will see whether
growth is picking up, whether it’s bottoming out. We’ll see that picture. We’ll also see on trade. You know, we’re going to be seeing-I think
we’ve learned a lot on trade in this cycle. I think we’ll continue to learn
more, and on inflation we will. So, in addition, the U.S.
economy itself is-the performance of the U.S.
economy will enter into that. So I would love to be more
precise, but with trade, it is a factor that we have to
assess in kind of a new way. Those are the things that we’ll
be looking at, and-you know, in making our decisions
going forward. EDWARD LAWRENCE. Edward Lawrence with
Fox Business Network. So a rate hike last December
was seen by some economists and the St. Louis Fed president, James Bullard, as
a step too far. Now the Fed’s waited about
seven months for a rate cut. You said today you were
concerned about downside risks. So could some of the
weakness on the business side, with that fixed investment
and the sluggish side on the business side, be
because the Fed waited so long? I want to get your thoughts on
that and talk about why you feel that this nudge is
the right level. CHAIR POWELL. Yes. So we don’t hear
that from businesses. They don’t come in and say,
“We’re not investing because, you know, the federal
funds rate is too high.” I haven’t heard that
from a business. What you hear is that demand
is weak for their products. You see manufacturing being
weak all over the world. Investment-business
investment is weak. And I wouldn’t lay all of that
at the door of trade talks. I think there’s a-there’s a
global business cycle happening with manufacturing
and investment, and that’s-that’s
been, you know, definitely a bigger
factor than, certainly, we expected late last year. I think global-global
growth started to slow down in the middle of last
year, but that has gone on to a greater extent. And, by the way, trade policy
uncertainty has also been, I think, more elevated
than we anticipated. In terms of, is this the-we
believe this is the right move for today, and we think it’s-we
think it will serve the three ends that I mentioned. And I’ve already gone
over how we’re thinking about going forward. ANN SAPHIR. Ann Saphir with Reuters. You called it “a midcycle
adjustment to policy.” And, I mean, what should
we take this to mean, and what message do you mean
to send with this move today about future rate moves? CHAIR POWELL. Well, the sense of that
is-I mean, that refers back to other times when
the FOMC has cut rates in the middle of a cycle. And I’m contrasting it there
with the beginning-for example, the beginning of a
lengthy cutting cycle. ANN SAPHIR. So we’re not at the beginning
of a lengthy cutting cycle? CHAIR POWELL. That is not-that’s not
what we’re seeing now. That’s not our perspective
now or outlook. JAMES POLITI. Hi there. Are there
any circumstances under which you would
decide to pause-pause at one interest rate cut,
today’s interest rate cut, and not-not, not go ahead with further monetary
easing at this stage? Or are you predicting that,
you know, once you’ve embarked on this easing, you will
have to at least move by one more notch going forward? CHAIR POWELL. You know, so our policy is-will
depend on the implications of incoming data for the
economic outlook as well as evolving risks
to that outlook. And so we’re going to be
monitoring the implications of incoming information for
the outlook, as I mentioned. And, so I-that’s really where
I would leave you with that. VICTORIA GUIDA. Hi. Victoria Guida
with Politico. On capital, Vice Chairman
Quarles has said that the level of capital requirements
that exists right now are such that it’s basically like the countercyclical capital
buffer is already turned on, and that he would like
the ability to be able to turn it down in a downturn. I was wondering if
you agreed with that. And then, also, just quickly, on real-time payments-larger
banks have suggested that if the Fed built
its own system, that would be a bait-and-switch,
because the Fed asked-or called for a private-sector system. Do you think that that
is a fair assessment? CHAIR POWELL. Okay. So, on the first, I
would say that I view the level of capital requirements
and the level of capital in the system as
being about right. I do agree with that. The idea that you’re talking about is one that’s-that Vice
Chair Quarles has talked about. It’s a-it’s one under
consideration. The idea being, in a
sense, we’ve chosen, in the United States, to have
high through-the-cycle capital requirements by doubling
the SIFI surcharge, which is the surcharge
that the largest banks have in their capital requirements. We’ve, in effect, already put in place substantial
countercyclical buffers. And so, conceptually, you can
think of-I’m not saying it’s the same thing as a countercyclical
capital buffer. So that’s-that’s
really the point-is that we don’t rely-our
system doesn’t rely on our ability-it doesn’t
mainly rely on our ability to identify the right
time in the cycle to trigger a countercyclical
tool. We rely on through-the-cycle,
always-on high capital and liquidity requirements. And I think that’s
a good thing to do. The idea of putting it in
place so you can cut it, that’s something some other
jurisdictions have done, and it’s worth considering. I think the United
Kingdom, in particular, has a countercyclical capital
buffer that’s always on, but the one point of
it is that you can cut when there’s a downturn and therefore give
the banks more room. So this isn’t something
we’ve decided to do. It’s just under consideration. In terms of the real-time
payment system, your second question, so this is
something we-the United States is far behind other
countries in terms of having real-time payments
available to the general public. The Fed, really, coming out of the Reserve
System-the Reserve Banks and the Board together-convened
all of the stakeholders around the table to talk
about how we can move forward. This is consumer groups,
technology companies, banks, card companies-pretty
much all of the groups who would be interested-and
worked on a project for several years. And one of the things that came
out of that was a recommendation that the Fed should build a 24
x 7 x 365 real-time settlement system to solve that
problem-to address that problem. We put out a proposal in October
of last year about, you know, should we do this, and we
got quite a lot of comments. They were overwhelmingly
favorable. And I would point out that
in our payment system, in many places, the Fed operates
alongside private-sector operators-for example, in
wholesale payments, in ACH, and in check-so it
wouldn’t be unusual or out of keeping with-with how
we’ve done things in the past. We have not made a
decision on this, but it’s something we’re
looking at carefully and something I do expect
we’ll make a decision on soon. CRAIG TORRES. Craig Torres from Bloomberg. I’m trying to parse
what you’re saying here. On the one hand, you
say the policy tilt in the statement has eased
financial conditions, and that’s helping the economy. In that tilt, market participants are
interpreting this language, “will act as appropriate,” as
still being in the statement. And, on the other hand,
you say it’s not the start of a-of an easing cycle. So what are you saying? Does that mean, you
know, with one or two more cuts you’ll be done, and this policy bias comes
out of the statement? Or simply that this
policy bias will come out of the statement sooner
than market participants think? CHAIR POWELL. So it is-as I mentioned,
it’s going to depend on the evolving data and
the evolving risk picture. But as we look at the situation
now and the outlook now, what we see is that
it’s appropriate to make an adjustment in policy to a somewhat more
accommodative stance. That’s what we’re seeing. And that’s what we’re going
to be looking-you know, we’ll be looking at incoming
data, at all of the-at the risks that I mentioned,
and the performance of the U.S. economy,
and at low inflation. We’ll be looking at that to make
our decisions going forward. SCOTT HORSLEY. Thank you, Mr. Chairman. Scott Horsley for NPR. You’ve talked a number of
times about the people who feel like they are just
recently getting to the punchbowl 10 years
into this expansion. Can you elaborate a little bit on how this rate cut is
expected to help them? CHAIR POWELL. Well, I think the
best thing for people who are-who are feeling that-and
we are getting lots of feedback from people who work
and live in low- and moderate-income
communities to the effect that they’re now feeling
the recovery, and, in fact, they haven’t felt a better labor
market in anybody’s memory, so this is great to hear. And I guess my view is,
the best thing we can do for those people is to sustain
the expansion, keep it going, and that’s one of the overarching
goals of-of this move and all of our policy moves. There really is no reason why
the expansion can’t keep going. Inflation is not
troublingly high. If you look at the-at the
U.S. economy right now, there’s no sector that’s booming
and therefore might bust. You have a fairly well-balanced,
in a sense, economy. Now, the engine, though, is
really a consumer economy, which is 70 percent
of the economy. The manufacturing
economy-the investment and manufacturing part
of the economy-is more or less not-not growing much. It’s at a healthy level
but not growing much. So-and we hope to help
that with this rate cut. But, I would say, overall, we’re
trying to sustain the expansion and keep, you know, close
to our statutory goals, which are maximum
employment and stable prices. DONNA BORAK. Chairman Powell,
Donna Borak with CNN. The President has repeatedly
called for this rate hike and for the Fed to end the
runoff of its balance sheet. What do you say to those
that say that the Fed gave into what the President
wanted today? And could you also
elaborate a little bit further on why the Fed decided to speed up its balance sheet runoff
two months earlier today? CHAIR POWELL. So I gave my-my reasons for-our
reasons, really-for doing this. And, you know, just to
touch on that again, this action is designed to
insure against downside risks to the outlook from weak global
growth and trade tensions, offset the negative effect that those factors
are already having, and promote a faster return
of inflation to 2 percent. That’s what we’ve been
talking about all year long, and we’ve gradually moved
our policy in the direction of more accommodation. I think what you
see is an economy that has reacted well to that. So that’s what we’re doing,
and that’s why we’re doing it. We never take into account
political considerations. There’s no place in our
discussions for that. We also don’t conduct
monetary policy in order to prove our independence. We conduct monetary policy
in order to-to move as close as possible to our
statutory goals, and that’s what we’re
always going to do. We’re always going to
use our tools that way. And then, at the
end, we’ll-you know, we’ll live with the results. In terms of the balance sheet,
that was really just a matter of simplicity and consistency. Really nothing more
to it than that. GREG ROBB. Thank you, Chairman Powell. Greg Robb from MarketWatch. I was wondering-we
weren’t in the room, but I think it’s a
fair assumption to know that the two dissenters
probably spoke about financial stability
concerns. So I was wondering
if you could talk about what you-what was
your response to them when those concerns were raised? I’ve collected a couple
of things from the IMF, and the Bank of International
Settlements said that it’s just-when you have low
rates, you just get more debt in the economy, and that
there’s also this feeling that it makes it
harder to raise rates. So could you talk about that? Thank you. CHAIR POWELL. Yes. So, first, let me
say-I’ll just speak for myself, but I understand those
concerns very well. I do. I’ve-you know,
I’ve studied them, I’ve spoken about them, and
I take them very seriously. But as I look at today’s
situation, I don’t see them as a reason not to
take this action today. I just don’t think-that
would be my point. And one of the reasons
why I think that is, if you look-if you look-so
we have a financial stability framework now for
the first time. Before the crisis,
we didn’t have this, but now we have it,
and we publish it. And we look at, really,
four big things so that we know we can-you know, the public can hold
us accountable and compare us meeting
to meeting, and-you know, and see whether we
got this right, because it’s transparent now. But the four things we look
at are valuation pressures. And we do see notable valuation
pressures in some markets but, you know, honestly, not at
a highly troubling level. In terms of household
borrowing, household and business borrowing
is the second thing. Households are in a
very good shape overall. I’ll come back to
business borrowing. Leverage in the financial system
is low, and funding risk is low. So, overall, staff’s view has
been-and my view has been-that if you look overall, financial
stability vulnerabilities are moderate. The place that gets all the
attention right now-a lot of attention-is business
borrowing, and we look very
carefully at that. What’s happening with
business borrowing is, the loans have moved off the
balance sheets of the banks and into market-based vehicles,
which tend to be stably funded. But, nonetheless, it’s clear that the highly leveraged
business sector could act as an amplifier to a downturn. So we’re watching
that very carefully. But, again, I think
if you look overall at the U.S. financial system,
what you see is a high level of resilience-much higher than it was before the
crisis-and that’s something to take comfort from. And I think all of that
gives us the ability to use monetary policy for its
purposes and rely on supervisory and regulatory tools
to-you know, to keep the financial
system resilient. GREG ROBB. So you’re not doing something
today for-to help today, and then it’s going to cause
problems down the road? You’re not worried about
that kind of dynamic? CHAIR POWELL. There are very few things that
I don’t worry about at all. So, of course, of
course, we monitor. We have-every quarter we
have an extensive briefing on financial stability,
and we had that yesterday. So we look at this
on an ongoing basis. We have a great team. We liaise with central
banks around the world. You know, one of my
colleagues is the head of the Financial Stability
Board globally, so we’re very, very much monitoring
these things all the time. And we worry about
them all the time. We’re always looking at
the-we’re looking for that thing that we may have missed
a lot of the time. But the things we
haven’t missed, I think they paint
a mixed picture, but not one that
should prevent us from taking monetary
policy actions that we think are appropriate
to support the economy. MARTIN CRUTSINGER. Marty Crutsinger, AP. You’ve talked in
this press conference about being data
dependent going forward, and that this is not the start
of a series of rate cuts. But the financial markets seem
to think that this is the start of a series of rate cuts, and they’re predicting
three, four cuts this year. Is this your effort to try
to damp down that-that thing? CHAIR POWELL. No. Let me be clear. What I said was, it’s
not-it’s not the beginning of a long series of rate cuts. I didn’t-I didn’t say it’s
just one or anything like that. What I said is, when you think
about rate-cutting cycles, they go on for a long time, and the Committee is not
seeing that-not seeing us in that place. You would do that if you
saw real economic weakness and you thought that the
federal funds rate needed to be cut a lot. That’s not what we’re seeing. That’s not what we’re seeing. What we’re seeing is that it’s
appropriate to-to adjust policy to a somewhat more
accommodative stance over time, and that’s how we’re
looking at it. What I said was, it’s not a long
cutting cycle-in other words, referring to what we do
when there’s a recession or a very severe downturn. That’s-that’s really
what I was ruling out. I think, if you look back at
other midcycle adjustments, you’ll see-you know, I
don’t know that they’ll be, in the end, comparable or not, but you’ll see examples
of these. DON LEE. Don Lee
with the L.A. Times. You mentioned the difficulty
of assessing trade tensions in the economic outlook. Could you say how much of a factor the U.S.-China
trade conflict was in the Fed’s decision
to cut rates? And if the current
stalemate and the threat of more tariffs continue,
what would that mean for future interest
rates and possible cuts? CHAIR POWELL. So, you know, I wouldn’t
bring it down to any one trade
thing or any one factor. I think we look at a
broad range of factors, and trade uncertainty-trade
policy uncertainty is one of them. That certainly includes
the discussions with China, but I wouldn’t-I
wouldn’t be able to tell you how much
of it is due to that. And without knowing-you
know, I think we-with trade, we have to react to
the developments, and we don’t know
what they’ll be, and so it’s hard to exactly say. Certainly, we’ve seen, though, that when there’s a
sharp confrontation between two large
economies, you can see effects on business confidence
pretty quickly and on financial
markets pretty quickly. We saw that in June. But then we saw them unwind
after that, to some extent. You’ve seen it returning to-to a
much lower temperature, I think. Again, with-with trade policy,
we’re just going to be watching and trying to assess
the implications for the-for the U.S. outlook. DON LEE. How much of an
effect could the tariffs have? CHAIR POWELL. You know, the mechanical effects
of the tariffs are quite small. They’re not large as it
relates to the U.S. economy. The real question is, what
are the effects on the economy through the-through the
confidence channel-business confidence channel? And, again, very, very
hard to tease that out. I’ve seen some research,
which-you know, which says that they are
meaningful-meaningful effects on-on output. That’s to say, not trivial. And I think that that sounds
right, but it’s quite hard to get-there is no way to
get an accurate measure. You have to look at
a range of estimates, and I think businesses will
tell you that it’s a factor, particularly businesses that
have-manufacturing businesses that have supply chains that cross international
borders will all tell you that it’s been a challenge. Many of them have made
adjustments, and they’ve gotten to a place where it’s okay,
but it’s-it’s been a challenge. PAUL KIERNAN. Paul Kiernan from
Dow Jones Newswires. Thanks for the question,
Chairman. As the press conference-as
this press conference has gone under way, markets
have declined. The Dow is down as
much as 400 points. What I’m hearing is a reluctance
to provide more guidance around the future path of rates. And I’m wondering if that
reflects a greater lack of consensus on the Committee. And, you know, how much
consensus do you want to see around these decisions, and how
split are people about this? CHAIR POWELL. You know, you’re right. There’s a range of
views on the Committee, and-but the Committee is
unified, completely unified on our dedication to making
the best policy decisions that we can make. And that means people
have a responsibility to do their best thinking
and to present that thinking, and I wouldn’t have
it any other way. In terms of the way forward, we
will be monitoring the factors that I mentioned, and we laid
that out in the-you know, in the postmeeting statement, and that’s the roadmap
we’re going to be following going forward. We’re going to be
data dependent. We’re going to be, as we
always are, doing what we need to do-what we believe
we need to do to support the economic
expansion. JOHN HELTMAN. Hi, John Heltman
with American Banker. So it’s been about 18 months since the Fed issued
its enforcement action against Wells Fargo. And I was wondering if you
could characterize the progress that the bank has made towards
the shortcomings that it had in its risk-management
processes. And I’m also curious
whether their lack of a permanent CEO has
hampered progress, in your eyes. CHAIR POWELL. So the problems at Wells
Fargo-that arose at Wells Fargo around risk management and
consumer-the way they dealt with the consumer were
actually pretty deep, and I think the company
realizes that. And they’re not going to be fixed-they haven’t been
fixed quickly, and, frankly, we didn’t expect them
to be fixed quickly. So they’re-you know, they-they
will be under the growth cap, our enforcement action, until
the Board votes to lift it, and that’s not something we’re
considering doing right now. And the Committee-I mean,
the company is working away to address these
issues, but, as I said, they’re deep-seated issues, and it just takes
time to address them. I wouldn’t comment
on the CEO question. I don’t really have
anything for you on that. JOHN HELTMAN. I mean, I just-I’d like to
clarify, like, are you pleased with the responsiveness
you’re getting from them? Do you feel like
this is going the way that you kind of
wanted it to go? CHAIR POWELL. I’m not going to
characterize it. You know-I mean, I
have characterized it. We have-we have an
enforcement action in place. The company is working
away at addressing it. They take it seriously. I think they do see it as we do, as something that
has to go deep. And, you know, we’ll lift the
growth cap when we’re satisfied. NANCY MARSHALL-GENZER. Nancy Marshall-Genzer
with Marketplace. So when we have our
next recession, the Fed will have less room-it
will happen-the Fed will have less room to maneuver
cutting interest rates since you’re cutting now. How big of a problem
will that be? CHAIR POWELL. You know, the premise is not-I
will question your premise for a second. If you remember whether-again,
one of the purposes of our-of our cut today is
to support the expansion. And we don’t know when-and
if it really works-if that works very well and the
economy gets going again, you know, you don’t know
where the-where the funds, in other cycles-and I don’t know
whether this will happen or not, but in other cycles, the Fed
wound up raising rates again after a midcycle adjustment. Again, I’m not predicting that,
but I don’t think that we know that we won’t have-that
we’ll have less ammo because of these things. That’s one thing. So- NANCY MARSHALL-GENZER. But you won’t be able to cut
as much if-if rates are low. I mean, you will have-have
less ammo, in that sense. CHAIR POWELL. Well, but you’re assuming that we would never
raise rates again, that once we’ve cut these rates that they can never
go back up again. Just as a matter of principle,
I don’t think that’s right. In other-in other
long, long cycles, long U.S. business cycles have
sometimes involved this kind of event where the Fed
will stop hiking-in fact, will cut-and then will
go back to hiking. Again, I don’t know whether
that’ll happen right here. It doesn’t seem-it doesn’t seem like something that’s in-you
know, particularly likely, frankly, but we don’t know that. And the other thing is, I
think by extending the cycle, you-you do have a lot
of benefits from that. And I think, you know, we will
use the tools that we have. A couple of rate hikes one
way or the other isn’t going to matter so much if
there is a downturn. And you’re right, there
will eventually be one. We’ll use all of our
tools aggressively, as we need to, when
that time comes. JEAN YUNG. Hi, Jean Yung with MNI. Can you give us an update
on the ongoing reassessment of the inflation framework? And have the discussions so far this year had any
bearing on today’s decision? CHAIR POWELL. So the monetary policy review
is really for-it’s really there to look at the way we make
policy in the longer run. It’s not something
that enters directly into our discussions today. We’ve had-so far we’ve
had a series of meetings, called Fed Listens, at
almost all the Reserve Banks. Soon it will be all
the Reserve Banks. And we meet there with the
constituencies that we serve, and they’ve been
very, very successful, hearing from people-not
just-not just economists, but people who are
not economists, how-how their lives
interact with the Fed’s work. It’s been-it’s been great. I’ve got to say, it’s been even
better than I hoped it would be. We’re just now beginning the
process of incorporating all of that feedback, and we’re
going to be having a series of meetings, beginning today
and yesterday, as we evaluate, you know, the questions that we’re asking
about our framework. So it’s very early to say where
that’s going, but, you know, we’re setting the table now and
looking at what our framework is and looking at how
it’s performed, looking at how all
frameworks performed around the world during the
Global Financial Crisis. I expect we’ll be
at this a while. I’m very excited about it. I think it’s been
a good exercise. I think it’s opened us up
to sunlight and perspectives that we might not
have gotten otherwise. And I think it’s a good time. You know, you have-10
years after the crisis, you’re really living in a
new normal for the economy and monetary policy, and it’s
a really good time to step back and ask whether there are
some things that we can do to improve our framework. COURTENAY BROWN. Hi, Mr. Chairman. Courtenay Brown from Axios. Can you give us a sense of whether the Committee
feels constrained at all by the market’s expectations
for more cuts or other developments
in financial markets? CHAIR POWELL. So I think this was-this
was well telegraphed. What we did today
was-was very consistent with what we had said
we were going to do. I had mentioned the
reasons for it. They’ve been well telegraphed,
and I think-you know, I think they will-they
will achieve their goals. We do know that monetary policy
works through communications and then actions
that are consistent with those communications,
and we think that the changes that we’ve made this
year have really worked. Of course, we always
retain the flexibility to adjust our communications
and our actions to-in light of incoming data and the
evolving risk picture, but-I’ll leave it there. BRIAN CHEUNG. Hi, Brian Cheung
with Yahoo Finance. Just to expand on that point
about communication, I mean, we saw that markets have
been particularly sensitive with regards to New York Fed
President John Williams’s remarks before the
blackout period. So the Fed added language
in the statement that says that the Committee is
contemplating the future path of the target range for
the federal funds rate as it monitors implications. I’m wondering-now there’s
kind of this inflection point about whether or not
the downside risk, because you’ve had to cut
rates, outweighs the fact that you still see
a positive outlook of the U.S. economy
at a baseline. So, just wondering if you can
kind of clarify all those things within the context of the
challenges of communicating it. CHAIR POWELL. Yeah, so again, I see the U.S.
outlook as being a positive one. And we do-we have
had these global, really, risks to the outlook. There really-there really is
nothing in the U.S. economy that presents a-you know, a prominent near-term
threat to the U.S. economy. As I mentioned, there’s
no-there’s no segment that’s really-or sector that’s really
boiling over and overheating. Nothing like that. It’s-it’s within-within
the economy. It’s-it’s healthy,
so I would say that. Downside risks are
really coming from abroad. And, of course, we are concerned
about-about low inflation. But-and, by the way, those risks from abroad are affecting
the manufacturing sector here and business investment-fixed
investment. So-thank you.

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