Global markets rise in response, full text of Powell's speech last night! (Chinese-English comparison)

On Wednesday local time, the Federal Reserve held a meeting of the Federal Open Market Committee (FOMC), and Fed Chairman Powell delivered a speech and answered questions from reporters at a press conference after the meeting. Powell stated that the Fed's policy is restrictive and its impact has already been seen, but the tightening effect has not fully manifested. He commented that the Fed has made significant progress in this round of rate hikes. He said that Fed officials believe they are close to the end of this round of rate hikes and are currently proceeding cautiously. However, he also stated that the committee is not confident that the policy has reached a sufficiently restrictive level to bring inflation back to its target. When asked if not raising rates in December would mean the end of the rate hike cycle, Powell replied that it is not necessarily the case and that it is incorrect to think that it would be difficult to raise rates again after pausing once or twice. Powell stated that the committee will consider all relevant factors and if it believes that further tightening is necessary, it will proceed accordingly. Powell acknowledged that the September meeting showed relatively small differences among committee members regarding whether to raise rates once or twice, and the situation revealed at that meeting indicated that the rate hike cycle is nearing its end. Regarding balance sheet reduction, Powell stated that there are no plans to change the pace of quantitative tightening (QT) and that it is not something that is currently being discussed or considered. Regarding rate cuts, Powell stated that the committee is not considering rate cuts at all, and the current issue is how long the policy will remain restrictive. Regarding the U.S. economy, Powell stated that the current U.S. economy remains strong and there is no evidence to suggest a recession in the short term. However, due to the lagging nature of policy, the U.S. economy may still face some challenges. Powell believes that the U.S. banking system still has resilience and that rate hikes will not "substantially change this situation." Regarding consumption, Powell believes that U.S. household consumption remains strong and has not undergone structural changes, stating that it "may underestimate the balance sheet strength of households and small businesses." After the press conference, market expectations of the end of rate hikes increased, and the S&P 500, Nasdaq, and Nasdaq 100 all rose by over 1% and reached new daily highs. Journalist Nick Timiraos, who is regarded as the "voice of the Fed" and has been referred to as the "new Fed News Agency," commented that, to his knowledge, Powell hardly mentioned the possibility of another rate hike based on the median rate forecast announced in September. He simply stated that the Fed will submit new forecasts in December. This interpretation of Powell's press conference is seen as a dovish perspective. Some media commentators have remarked that while Chairman Powell said a lot during his speech, the bond market only heard one thing: the possibility that the Federal Reserve may have ended this round of interest rate hikes. The further decline in short-term Treasury yields during Powell's speech is evidence of this. The following is the full text of the press conference and Q&A, translated and compiled by Wall Street Journal: Good afternoon, everyone. Welcome. My colleagues and I remain fully focused on our dual mandate of promoting maximum employment and stable prices for the American people. We understand the difficulties caused by high inflation, and we are strongly committed to bringing inflation back down to our 2 percent target. Maintaining price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not function properly. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit everyone. Since early last year, the FOMC has significantly tightened monetary policy. We have raised our policy interest rate by five and a quarter percentage points and have continued to reduce our holdings of securities at a rapid pace. The recent economic conditions Recent data suggests that the economy has been growing at a robust pace, surpassing earlier expectations. In the third quarter, real GDP is estimated to have increased by a significant annual rate of 4.9 percent, driven by a surge in consumer spending. Although the housing sector has stabilized after a slight pickup during the summer, it still lags behind last year's levels due to higher mortgage rates. The rise in interest rates also seems to be impacting business fixed investment. The labor market remains tight, but the balance between labor supply and demand is improving. In the past three months, the average monthly job gains stood at 266,000, indicating a strong pace of job creation, albeit slightly lower than earlier in the year. The unemployment rate remains low at 3.8 percent. The robust job growth has been accompanied by an increase in the labor force. The labor-force participation rate has increased since late last year, especially for individuals aged 25 to 54, and immigration has returned to pre-pandemic levels. Nominal wage growth has shown some signs of slowing down, and job vacancies have declined so far this year. Over the past three months, the average monthly increase in non-farm employment has been 266,000, which is a strong growth rate but still lower than the beginning of the year. The unemployment rate remains low at 3.8%. The strong job growth is accompanied by an increase in labor supply. The labor-force participation rate has improved since the end of last year, particularly for individuals aged 25 to 54, and the number of immigrants has returned to pre-pandemic levels. Nominal wage growth has shown some signs of slowing down, and job vacancies have decreased this year. Although the gap between job openings and available workers has narrowed, labor demand still exceeds the supply of available workers. Inflation remains well above our long-term goal of 2 percent. Total PCE prices rose 3.4 percent over the 12 months ending in September. Excluding the volatile food and energy categories, core PCE prices rose 3.7 percent. Inflation has moderated since the middle of last year, and the readings over the summer were quite favorable. Outlook for Monetary Policy The Federal Reserve's decisions on monetary policy are driven by our mission to support maximum employment and maintain stable prices for the American public. My colleagues and I fully understand the challenges that high inflation brings, as it erodes people's purchasing power, particularly for those who are least able to afford the rising costs of necessities such as food, housing, and transportation. We are closely monitoring the risks that high inflation poses to both aspects of our mission, and we are firmly committed to bringing inflation back to our target of 2 percent. The monetary policy actions taken by the Federal Reserve are guided by our mission to promote maximum employment and stable prices for the American people. My colleagues and I are acutely aware of the difficulties that high inflation brings, as it erodes purchasing power, especially for those who are least able to afford the rising costs of essential goods such as food, housing, and transportation. We are highly concerned about the risks that high inflation poses to us on both fronts and are firmly committed to restoring the inflation rate to our 2% target. As I mentioned earlier, since early last year, we have raised our policy rate by 5 ¼ percentage points and reduced our securities holdings by over $1 trillion. Our restrictive stance on monetary policy is exerting downward pressure on economic activity and inflation. The committee decided at today's meeting to maintain the target range for the federal funds rate at 5 ¼ to 5 ½ percent and to continue the process of significantly reducing our securities holdings. We are committed to achieving a monetary policy stance that is sufficiently restrictive to bring inflation sustainably down to 2 percent over time and to maintaining a restrictive policy until we are confident that inflation is on a path to reach that objective. Given the uncertainties and risks, as well as the progress we have made, the committee is proceeding with caution. We will continue to make decisions at each meeting based on the complete set of incoming data and their implications for the economic outlook, activity, and inflation, as well as the balance of risks. Given the uncertainties and risks, as well as the progress we have made, the committee is proceeding cautiously. We will continue to make decisions based on the upcoming overall data and its impact on the economic outlook, economic activity, inflation, and risk balance. When determining the extent of further policy tightening that may be appropriate to bring inflation back to 2 percent over time, the committee will consider the cumulative tightening of monetary policy, the time lag with which monetary policy affects economic activity and inflation, as well as economic and financial developments. We remain committed to bringing inflation back down to our 2 percent goal and keeping longer-term inflation expectations stable. Reducing inflation is likely to require a period of below-potential growth and some easing of labor market conditions. Restoring price stability is crucial for achieving maximum employment and stable prices in the long run. In conclusion, we recognize that our actions have an impact on communities, families, and businesses throughout the country. POWELL: Thanks for your question. I'll address the issue of bond yields, but first, let me provide some context. When we consider the rise in bond yields, we need to look at the broader economic landscape. In terms of inflation, it has been decreasing but remains significantly higher than our target of 2 percent. The labor market has been adjusting, but it is still considered tight according to various indicators. GDP growth has been robust, although many experts predict that it will decelerate in the future. Answer: Thank you for your question. I will discuss bond yields, but I would like to take some time to discuss this issue in the larger context. So, if you see fit, let's first take a look at the economy. The inflation rate has been declining but remains well above our 2% target. The labor market has been rebalancing, but in many ways, it remains very tight. GDP growth has been strong, despite many forecasters predicting, and continuing to predict, a slowdown in GDP growth. As for the committee, we are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time. We are not yet confident that we have achieved such a stance. So, that is the broader context—the strong economy and all the things I mentioned. That is the context in which we are looking at the question of rates. Obviously, we are monitoring the situation. We are paying attention to the increase in longer-term yields, which have contributed to a tightening of broader financial conditions since the summer. As I mentioned, persistent changes in broader financial conditions can have implications for the path of monetary policy. In this case, the tighter financial conditions we are seeing are due to higher long-term rates, as well as other factors such as the stronger dollar and lower equity prices. It is clear that we are monitoring the situation. We are paying attention to the rise in long-term yields, which has led to a broader tightening of financial conditions since the summer. As I mentioned, sustained changes in broader financial conditions could potentially impact the path of monetary policy. In this case, the impact on future rate decisions may occur if two conditions are met: the rise in long-term rates and the tightening of financial conditions observed from the strengthening of the US dollar and the decline in stock prices, among other factors. The first condition is that the tighter conditions need to persist. This is something that we still need to observe. However, it is crucial. We are not looking for fluctuations back and forth. We are looking for persistent and substantial changes in financial conditions. The second condition is that the increase in longer-term rates should not simply be a reflection of expected policy moves from us. In other words, if the rates were to come back down if we did not follow through on those expected moves. Based on the current situation, it does not appear that the expectation of higher near-term policy rates is causing the increase in longer-term rates. Yes, that's correct. In other words, we have not yet made any decisions regarding future meetings. We have not reached a conclusion and I must say that we are not currently confident that we have reached such a position. Yes, that's absolutely correct. You know, to put it another way, we haven't made any decisions about future meetings yet. We haven't made a decision, and what I want to say is that we currently don't have confidence that we have reached that position. We're not confident that we haven't, but we're also not confident that we have, and that is the way we're going to be going into these future meetings, just determining the extent of any additional further policy tightening that may be appropriate to return inflation to 2 percent over time. Q&A No Guidance for December Meeting Q: Hi, Chair Powell. Thank you so much for taking our questions. I wonder, you know, if you don't raise interest rates in December, would the presumption be that at that point we should expect that rates are at their peak, or is there a possibility of restarting rate increases next year? And are there any costs to taking a more extended pause? A: So let me start by saying we haven't made a decision about [December]. You're asking a hypothetical question there. Powell: First of all, I want to say that we haven't made a decision yet on the December meeting. You're asking about a hypothetical situation. But we're going into the December meeting. As you know, we'll have two more inflation readings, two more labor market readings, and some data on economic activity. So, we'll be considering the broader situation, the broader financial conditions, and the broader world situation. We'll take all those things into account when we make a decision in December. We haven't made that decision yet. I would like to point out, though, that the idea that it would be difficult to raise rates again after stopping for a meeting or two is simply not true. I mean, the committee will always do what it believes is appropriate at the time. And, once again, we haven't made any decisions at all about December. We didn't even discuss making a decision in December today. It was really a decision for this meeting and understanding broader things. Let me repeat it again, we haven't made any decisions regarding December. We haven't even discussed making any decisions today in December. In fact, this decision was made for this meeting and to understand broader issues. Q&A: The US is unlikely to experience an economic recession in the short term Q: Chair Powell, did the Fed staff put a recession back into the baseline forecast in the materials for today's meeting, and to what extent does the tightening in financial conditions substitute for rate hikes if the tightening persists? You had mentioned that it was worth maybe a quarter point when we had the bank failures in the spring. How does it compare to something that is presumably more straightforward and familiar to simulate? A: So, I suppose I can't avoid answering your question about the recession. But the answer is no. I think I have to answer it since we did publicly mention it in the minutes. You'll find out anyway in the minutes. The staff did not include a recession in our forecast. I mean, it would be difficult to justify doing so if you look at the recent activity, which is not indicative of a recession in the near future. I guess I don't want to answer your question about an economic recession. But the answer is no. I think I have to answer this question because we did mention it in the meeting minutes. Anyway, you will know soon. The staff didn't put our meeting minutes back. What I mean is, if you look at the recent economic activities we have seen, it is difficult to see how you can achieve this, these activities do not really indicate a recession in the short term. In terms of how to think about translating this into rate hikes, I think it's too early to do that and the main reason is that we don't know how long this situation will last. You can see how volatile it is. Different news will affect the level of interest rates, and I think any precise estimate would be hanging out there and have a great chance of quickly proving to be wrong. So I think what we can say is that financial conditions have clearly tightened, and you can see that in the interest rates that consumers, households, and businesses are currently paying. Over time, this will have an impact. We just don't know how long it will last, and it's difficult to translate that into a number of rate hikes that I would feel comfortable communicating. Therefore, what I believe we can say is that financial conditions have clearly tightened, as you can see from the interest rates that consumers, households, and businesses are currently paying. Over time, this will have an impact. We just don't know how long-lasting this impact will be, so it's difficult to translate this impact into the number of rate hikes. Q&A Monetary policy has a lag but will eventually be effective Q: If I could follow up. I guess what makes you confident the tighter—what makes you confident the tighter financial conditions will slow above trend growth when 500 basis points, the rate hikes, QT, and a minor banking crisis have not thus far? A: Well, I just—that’s—you know, the way our policy works is and sometimes it works with lags, of course, which can be long and variable. But ultimately, if you—if you raise the—you know, raise interest rates, you do see those effects. And you see those effects in the economy now. You see what’s happening in the housing market. You’re seeing that now. You’ll see, if you look at surveys of people, it’s not a good time, they think, to buy durable goods of various kinds, because rates are so high now. I mentioned, again, we’re getting reports from housing that the effects of this—of this could be quite significant. Powell: Well, I mean, you know, the way our policy works is, of course, it can have lags, and it can be long and variable. But ultimately, if you raise rates, you will see those effects. And now you can see those effects in the economy. You can see it in the housing market. You see it now. You will find that if you look at surveys of people, they think it's not a good time to buy various durable goods because rates are too high now. I mentioned again that we get reports from the housing sector that the effects of this could be quite large. But you're right, this has been a resilient economy. And it's, I think, been surprising in its resilience. And there are a number of possible reasons why that may be. Our job is to achieve maximum employment and price stability. So we take the economy as it comes. It has been resilient. So we just take it as it is. Q: Thank you. In terms of the thresholds that you've laid out of what could warrant further tightening, the additional evidence of persistently above-trend growth or some kind of reversal in the recent easing of labor market tightness, that seems to suggest something more powerful than just one more quarter point rate hike would be necessary. And I'm just curious if that's how the committee sees it. Question: Thank you. As for the tightening of policy thresholds, it seems that there is a need for stronger measures if there is additional evidence of economic growth persistently exceeding the trend level or if there is a reversal in the recent easing of labor market tightness. I am curious if the committee shares this view. POWELL: So we have identified those factors. They were not intended to be the only factors or a specific test that we will be applying with certain metrics. In fact, we will be looking at the broader picture, you know, how we are progressing towards the 2 percent inflation goal. Is the labor market continuing to cool off and achieve a better balance? We will be looking at that. You know, growth - we consider growth as long as it has implications for our two mandate goals. We take that into account. And we also consider broader financial conditions. 鲍威尔：我们已经确定了这些因素。这些并不是唯一的因素，也不是我们将使用一些参数进行的特定测试。实际上，我们将着眼于更广阔的前景，你知道，我们在实现 2% 通胀目标方面的进展如何。劳动力市场是否继续普遍降温并实现更好的平衡？我们会看到的。你知道，增长——我们关注增长，只要它对我们的两个任务目标有影响。我们会关注这些。我们还要考虑更广泛的金融状况。 Therefore, when making our judgments, we will consider all these factors, you know, whether we need to further tighten policies. If we do make such a judgment, then we will further tighten policies. Q&A Not yet considering rate cuts Q: OK. And just in terms of the tightening of financial conditions, if that is having some kind of offsetting effect in terms of the need to potentially, again, raise rates, what then is the potential impact on the trajectory of rate cuts? Could we see those may be pulled forward, or have to see more than what the September SEP indicated? Q: OK. And just in terms of the tightening of financial conditions, if that is having some kind of offsetting effect in terms of the need to potentially, again, raise rates, what then is the potential impact on the trajectory of rate cuts? Could we see those may be pulled forward, or have to see more than what the September SEP indicated? POWELL: So the fact is, the committee’s not thinking about rate cuts right now at all. We’re not talking about rate cuts. We’re still very focused on the first question, which is: Have we—have we achieved a stance of monetary policy that’s sufficiently restrictive to bring inflation down to 2 percent over time sustainably? That is the question we’re focusing on. POWELL: So the fact is, the committee is not considering rate cuts at all right now. We are not discussing rate cuts. We are still very focused on the first question, which is: Have we achieved a sufficiently restrictive monetary policy stance to sustainably bring inflation down to 2 percent over time? That is the question we are focusing on. The next question, as you know, will be, for how long will we remain restrictive—will policy remain restrictive? The next question, as you know, will be, for how long will we remain restrictive—will policy remain restrictive? And what we said there is that we’ll keep policy restrictive until we’re confident that inflation is on a sustainable path down to 2 percent. That’ll be the next question. But honestly, right now we’re really tightly focused on the first question. The question of rate cuts just doesn’t come up, because, I think, the first—it’s so important to get that first question, you know, as close to right as you can. As you know, the next question will be how long we will maintain the restrictive policy. What we have said is that we will keep the policy restrictive until we are confident that inflation is consistently declining to 2%. That will be the next question. But honestly, right now we are very focused on the first question. The question of rate cuts has not come up because, in my opinion, the first question is so important and we need to answer it as accurately as possible. Q&A Not sure if another rate hike is needed Q: Mr. Chairman, I guess I had assumed that there was a tightening bias in the committee. You say in the statement you’re looking to assess the appropriate stance of monetary policy, the extent to which you may—you may need to hike additionally. You didn’t say earlier that you were sufficiently restrictive. There were forecasts for two rate hikes among most members of the committee. But then you just said that, you know, we don’t—we haven’t made a determination. Would you say the bias right now is neutral, that there is no disposition to hike again? Q: Mr. Chairman, I believe I have assumed that there is a tightening bias within the committee. In your statement, you mentioned that you are assessing the appropriate stance of monetary policy and the extent to which additional rate hikes may be necessary. You haven't previously mentioned that your constraints are sufficient. The majority of the committee members expected two rate hikes. But just now, you said, you know, we haven't made a decision yet. Do you think the current bias is neutral, with no inclination for further rate hikes, and that the committee has largely moved off of the forecast for two rate hikes? Or, sorry, one additional rate hike this year? POWELL: I think you started with one additional. And I—no, I wouldn't say that at all. I would say—I mean, the language, you know, looking at it here, in determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, that's the question we're asking. Q: So is it right to think of that as a hiking bias still in the committee here? POWELL: We haven't used that term, but it's fair to say that's the question we're asking, is should we hike more? It's not—it's not—you know, and that is the question. And you're right that in September we wrote down one additional rate hike. But, you know, we'll write down another forecast, as you know, in December. Powell: We haven't used this term before, but to be fair, that's the question we're asking: Should we raise interest rates more? This is not - not - you know, that's the problem. You're right, we raised rates again in September. But, as you know, we will make the next forecast in December. Q&A Price stability must be restored Q: Thank you. Chris Rugaber at Associated Press. Well, since the last meeting, the auto workers strike has finished. Oil prices have leveled off. And yet, on the other hand, you have the outbreak of war between Israel and Hamas. How do you see all those factors, taken together, affecting the economy going forward? How are you thinking about those? Q: Thank you. Chris Rugaber at Associated Press. Well, since the last meeting, the auto workers strike has ended. Oil prices have stabilized. However, on the other hand, there has been a conflict between Israel and Hamas. How do you see the combined impact of all these factors on the future economy? How are you considering them? Powell: So there are significant issues out there, as you - as you point out. Global geopolitical tensions are certainly elevated, and that goes for the war in Ukraine, it goes for the war between Israel and Hamas. We're monitoring that. Our job is to monitor those things for their economic implications. Powell: So there are significant issues out there, as you - as you point out. Global geopolitical tensions are certainly heightened, including the conflict in Ukraine and the conflict between Israel and Hamas. We are monitoring the situation. Our role is to monitor these events for their economic impact. Q: Great. And just one quick thing. Last month, you went to York, Pennsylvania, where you had conversations with many small-business owners. I wouldn't say I was terribly surprised. I was very impressed by York, a town with a clear strategy, and I must say it's truly remarkable what the people there have accomplished in the face of challenging long-term trends such as offshoring of manufacturing. As a city, they have done an outstanding job. What I heard, and it was consistent throughout, is that people are really struggling with high inflation. You were there too. We spoke to some individuals who were experiencing the impact in their businesses, as well as others who were feeling it in their personal lives. It's a painful situation for many, especially those who... Q: Hi, Chair Powell. Thanks for taking our questions. You’ve spoken before about the pain that would likely be coming for the economy in order to get inflation down. But since the economy has not responded to rate hikes in ways that would normally be expected, have you changed your views on that at all? A: Hi, thank you for your question. Yes, I have indeed talked about the potential pain that the economy may experience in order to reduce inflation. However, given that the economy has not responded to interest rate hikes in the usual manner, I have reconsidered my views on this matter. POWELL: Well, I think everyone has been very pleased to see that we have made significant progress in inflation without the usual increase in unemployment that typically occurs during rate-hiking cycles like this one. This is a historically unusual and very positive outcome. The same can be said for growth. We have been saying that we need to see growth below its potential, and while growth has been strong, we are still observing this phenomenon. I still believe, and I believe most of my colleagues do as well, that it is likely to be true. It is still likely, not certain, but likely, that we will need to see some slower growth and some softening in labor-market conditions in order to fully restore price stability. Economic growth is no exception. You know, we've been saying that we need to see growth below potential, but growth has remained strong, and we still see this situation. I believe - and I think most of my colleagues still believe - that this is likely true. We need to see a slowdown in growth and weakness in the labor market in order to fully restore price stability. So - but it's a good thing that we haven't seen it yet, and I think we know why. Since we started raising interest rates, we have understood that there are two processes at work here. One is the unwinding of the distortions to both supply and demand caused by the pandemic and the response to it. The other is the restrictive monetary policy, which is moderating demand and giving the supply side time and space to recover. So we can see these two forces working together to bring down inflation. However, the first process can bring down inflation without the need for higher unemployment or slower growth. It's just that it requires improvements on the supply side, such as resolving shortages and bottlenecks. I'm curious, given the current situation, have you gained any insights into the time lag? Considering that the economy has shown such resilience to high interest rate increases, does this suggest to you that there may not necessarily be a significant wave of tightening still to come, and that it may have already taken effect? QUESTION: I'm curious, given this context, do you have a clear understanding of the lags? If your economy is so resilient to high interest rate growth, do you think it doesn't necessarily mean that this wave of significant tightening is still brewing and may already be in effect? POWELL: You know, I still think it's difficult to say. It has been one year since this meeting, one year ago. This was the fourth of our 75-basis-point hikes. So it has been a full year since then. I believe we are seeing the effects of all the rate hikes we implemented last year, and we are seeing it this year as well. It's hard to know exactly what that might be. For instance, an example where you may not have felt it yet is with debt that has been termed out. But it will come due and will have to be rolled over next year or the year after. So there are little things like that where the effects have simply taken time to manifest in the economy. So I don't think we can make monetary policy with certainty about the duration of the lags. I believe trying to obtain a clear answer and assuming that, oh, I'm just going to assume this, is not feasible. So I think it's important for us to consider the uncertainty of the lag time when formulating monetary policy. I believe that trying to figure out - to get a clear answer and then say, oh, I just assumed this, is really not a good way to do it. And this is one of the reasons why we have slowed the process down this year, was to give monetary policy time to get into the economy. And it takes time. We know that. And you can't rush it. So I think that slowing down is giving us a better sense of how much more we need to do, if we need to do more. Q&A The end of the rate hike cycle Q: I'm trying to connect the dots here. One quick clarification I wanted to ask about Rachel's question is you said you need slower growth. You had always said before a period of lower-than-trend growth. Has that changed? And two, it sounds to me like you're basically saying here that kind of the dot plot is out the window, that every meeting is live with the possibility of a rate increase for right now. It doesn't matter about the turn of the year, and that there's not an objective way to determine whether or not you've got enough tightening in the system. It's just going to be a subjective judgment meeting by meeting. Q: I'm trying to connect the dots here. I just want to clarify quickly, before this, you've been talking about a period of "below-trend growth." Has that changed? Secondly, it seems to me that what you're basically saying is that the dot plot is no longer applicable, and now there's a possibility of rate hikes at every meeting. Whether or not there will be a rate hike at the end of the year is not important, and there is no objective way to determine if your system has enough tightening measures. This will be a subjective judgment meeting. POWELL: Well, let's talk about the dot plot first. The dot plot is a visual representation of what the committee members think is likely to be the appropriate monetary policy based on their own personal economic forecasts. In principle, when things change, it's not like a plan that everyone has agreed to or that we will follow. It's a forecast that can change. For example, many things could change that would cause someone to say, "I wouldn't write down that dot six weeks later." Think about the number of things that could change your mind on that. So I think the effectiveness of the dot plot probably diminishes over the three-month period between that meeting and the next meeting. But nonetheless, it's out there and we do personally update our forecasts. But we don't formally update the dot plot. So, you know, I think we try to be as transparent as we can about the way we're thinking about these things. We're laying out our thinking. And, you know, as we approach the meeting, we'll all—my colleagues and I, we'll be talking about how we're processing that data. For example, what I mean is that many things can change, causing people to say six weeks later that I won't write down that dot. Think about how many things can change your mind. So I think that the effectiveness of the dot plot may decline during the three-month period between that meeting and the next meeting. But nevertheless, it still exists, and we won't update our forecasts personally, but we won't formally update the dot plot. So, you know, I think we try to be as transparent as we can about the way we're thinking about these things. We're laying out our thinking. As the meeting approaches, my colleagues and I will discuss how we're processing this data. In terms of growth, what I said was below potential. So what you have here recently is growth that is temporarily elevated above its trend level for a year or two right now. So the right way to think about it is what's the potential growth this year. In terms of growth, what I said was below potential. So what you have here recently is growth that is temporarily elevated above its trend level for a year or two right now. So the right way to think about it is what's the potential growth this year. People think trend growth over a long period of time is a little bit less than 2 percent, or I would say just around 2 percent. But what we've had is with the improvement in the size of the labor force. A: But let me clarify what I mean by "meeting by meeting". Essentially, what I'm saying is that each meeting will be live and there will be a chance of a rate increase. However, the decision will be based on subjective criteria rather than objective ones. So, it's not a predetermined path, but rather a more flexible approach where the rate increase will be determined on a case-by-case basis at each meeting. Question: I hope you can clarify my question about the meeting. Should we assume that each meeting may decide on interest rate hikes based on subjective criteria rather than objective criteria? POWELL: Well, I don't know if I want to accept anyone's characterization. But let me explain how we approach this. We evaluate the stance of our policy at each meeting to determine if it is sufficiently restrictive to bring inflation down to 2 percent over time. That's the question we ask ourselves. We consider a wide range of economic data, including financial conditions and other relevant factors. We have made significant progress in this rate hiking cycle. At the September meeting, there was a relatively small divergence of opinions regarding one or two additional hikes. So we are nearing the end of the cycle. This was the impression as of September, but it is not a promise or a future plan. You've also seen the divergence at the September meeting - you know, the relatively small divergence among those who believe in one or two more rate hikes. So, you're nearing the end of the rate hike cycle. That's the impression from September - a belief. It's not a commitment or a plan for the future. And so, we're going into these meetings one by one. We're looking at the data. As I mentioned, we're also being cautious. We're proceeding carefully because we can afford to be cautious at this time. Monetary policy is restrictive. We see its effects, particularly in interest-sensitive spending and other channels. That's how I think about it. Therefore, we will proceed with these meetings one by one. We are reviewing the data. As I mentioned, we are also being cautious. We are proceeding carefully because we can afford to be cautious at this time. Monetary policy is restrictive. We see its effects, particularly in interest-sensitive spending and other channels. That's my perspective. Q&A No consideration of changing the pace of QT Q: Thanks. Hi, Chair Powell. In light of the run-up in long-term yields we've seen in the last several weeks, have you given any consideration to the pace of your asset runoff program? And if there were a judgment that the higher term premium was endangering the dual mandate's goals, would that be a reason to think about slowing or suspending QT? Or should we think of that as more of a technical question around reserves? Q: Thank you, Chairman Powell. Given the recent rise in long-term yields, have you considered adjusting the pace of the balance sheet runoff? If there is a belief that higher term premiums are jeopardizing the dual mandate, would that be a reason to slow down or pause QT? Or should we view it as a technical issue regarding reserves? POWELL: The committee is currently not considering altering the pace of balance sheet reduction. It is not a topic of discussion or consideration at the moment. I understand that there are various explanations for the recent increase in rates, and QT is one of them. However, it may have a relatively minor impact, considering that we still have $3.3 trillion in reserves. It is difficult to argue that reserves are anywhere near scarce at this point. Therefore, it is not something we are currently examining. Q: I would like to inquire about the Basel III endgame capital proposal. You have faced significant opposition from various parties regarding different aspects of the proposal, and you yourself have expressed reservations. I am curious, would you be willing to finalize the proposal without making significant changes? Q: I have a question about the final stage of the Basel III capital proposal. You know, you have faced opposition from many people in different aspects of the proposal, and you have expressed some reservations yourself. I'm just curious, can you accept finalizing the proposal without significant changes? POWELL: So that proposal is out for comment. And we expect a lot of comments. We won't get those comments until the end of—well into next year. You know, we've extended the deadline. And we'll take them seriously. We'll read them. I'll say, what I do expect is that we will—we will come to a—we're a consensus-driven organization. We'll come to a package that has broad support on the board. Q: So does broad support mean more support than the proposal had? POWELL: It means broad support. Q&A The banking system is resilient Q: Jonnelle Marte with Bloomberg. So in addition to persistence, when you look at long-term treasury yields, what else are you watching to evaluate how those tighter financial conditions are hitting the economy and if it will lessen the need for further tightening? POWELL: So, what do we look at? We consider a wide range of financial conditions. As you may know, different organizations publish various financial conditions indexes, which can include seven or eight variables or even up to 100 variables. So there is a wealth of information available. We tend to focus on a few of these indexes, although I won't disclose their names. These are commonly used by people in the field. These indexes take into account factors such as the value of the dollar, equity prices, interest rates, and credit spreads. Sometimes they also consider credit availability and other related factors. It's not just one single factor that we rely on. For instance, we would never solely rely on long-term treasury rates as an indicator. Therefore, these indexes focus on the level of the US dollar, stock prices, interest rates, and credit spreads. Sometimes they may include things like credit limits. So, it's not the same thing. For example, we never look at long-term government bond yields in isolation. Nor will we ignore them. We would look at them as part of a broader picture. And they do play a role, of course, in many of the major standard financial condition indexes. Ah, banking stress. So it's something we're watching. As you know, we did have issues with interest rate risk and funding uninsured deposits in March, and the subsequent events. So we've been working closely with financial institutions to ensure that they have solid funding plans and strategies to deal with unrealized losses in their portfolios. We believe that the banking system is quite resilient. We did experience a few bank failures, but that's what we're addressing. We have no reason to believe that these rate hikes are significantly changing the overall picture, which is one of a strong banking system and a strong focus on liquidity by banks and supervisors. Ah, the pressure on the banking industry. So that's something we're keeping an eye on. As you know, we do have concerns about interest rate risks and the events we experienced in March regarding uninsured deposits. Therefore, we have been working extensively with financial institutions to ensure they have sound funding plans and a plan for handling their investment portfolios and unrealized losses. We do believe that the banking system has considerable resilience. While we have had a few bank failures, that's part of what we do. We have no reason to believe that these interest rate hikes will substantially change the current situation, which is a strong banking system and a high level of attention from banks and regulatory agencies on issues such as liquidity and financing. Q: Thanks, Mr. Chairman. Scott Horsley from NPR. Last week, you and your colleagues put forward a proposal to lower the cap on debit-card swipe fees for comment. Could you just talk a little about the considerations there—what it would mean for merchants, for banks, for consumers—and also just what you all are seeing in terms of the use of both debit and credit cards in the payment system? A: Thank you, Mr. Chairman. Last week, you and your colleagues proposed a reduction in the cap on debit card swipe fees and sought public comments on it. Could you please discuss the factors taken into consideration, such as the impact on merchants, banks, and consumers? Additionally, could you provide some insights into the usage of both debit and credit cards in the payment system? That's all we're trying to do. What else can we really do? Powell: You know, so you're right, we've put forward a proposal for public comment, and that's what we've done. You know, this is the work that Congress has assigned to us in the Dodd-Frank Act, and all we can do is faithfully enforce the regulations. That's what we want to do. What else can we do? It's a 90-day comment period, and we typically don't comment on these things once they're out for comment. And we do hope that stakeholders—and we know that they will use this opportunity to express their views. They haven't been shy about that. So that's critical, and that's what I can say about that now. Q&A Inflation rate expected to drop to around 2% by the end of next year Q: Thank you. Thanks, Chair. Edward Lawrence with Fox Business. So over the last three months, the year-over-year PCE inflation was at 3.4 percent, with the core inflation well over 3 percent. You've said in the past that 2 percent remains the Federal Reserve target. But with no rate increase today, how long would you be okay with an overall inflation rate of 3 percent or higher? A: Thank you. Thanks, Chair. Edward Lawrence with Fox Business. So over the last three months, the year-over-year PCE inflation was at 3.4 percent, with the core inflation well over 3 percent. You've said in the past that 2 percent remains the Federal Reserve target. But with no rate increase today, how long would you be okay with an overall inflation rate of 3 percent or higher? POWELL: You know, the journey may have its ups and downs, but we are moving forward. The core personal consumption expenditures (PCE) decreased by nearly 60 basis points in the third quarter. If you refer to the September Summary of Economic Projections (SEP), you will see that the expectation is for inflation to reach well above 2% on a 12-month trailing basis by the end of next year, and even closer to 2% the following year. This is consistent with the historical pattern of inflation decline. It does take time, especially as we move further away from the peak levels. However, the good news is that we are making progress. Monetary policy remains restrictive, and we are confident that we are on the right path to achieve further progress. And it's crucial that we do. But the good news is that we are making progress, and monetary policy is becoming more restrictive. We believe that we are on the path to further progress. This is crucial. Q: Well, you've mentioned in the past that doing too little on interest rates could take years to fix, but the cost of doing too much could be easily fixed. How intense was the debate about this pause on the side of doing too little? POWELL: That's always the question we ask ourselves. We know that if we fail to restore price stability, there is a risk that expectations of higher inflation will become deeply rooted in the economy. And we know that this is really detrimental to people; inflation will be both higher and more volatile. That's a recipe for misery. So we are truly committed to preventing that from happening. You know, for the first year or so of our tightening cycle, the risk was all on the side of not doing enough. We have come far enough that the risks have become more balanced. You know, in the first year or so of our tightening cycle, the risks were completely on one side, where we didn't take enough action. We have come a long way and the risks have become more two-sided. You can't determine it with great precision, but it feels like the risks are more balanced now. However, we are committed to bringing inflation back to our target level in the future, and we will achieve that. Q&A Public's Expectations for Inflation are Good Q: Quick follow up to the question about banking stresses. You talked about how the banking system is resilient. Of course, part of the resilience of the past year stems from the Bank Term Funding Program that you launched in March. Given that bond prices have not recovered, that unrealized losses are probably mounting, how likely is it that you might have to extend that program in March next year? A: Good question. We haven't really been thinking about that yet. It's November 1, and that's a decision we'll be making in the first quarter of next year. POWELL: Yeah, that's a good question. We haven't really considered that yet. It's November 1st now, and that's a decision we'll make in the first quarter of next year. Q: OK. Sorry, quick separate question about inflation expectations. The U. Michigan sentiment survey showed a big jump in one-year-ahead inflation expectations last month, from 3.2 to 4.2. Last year, you said that particular survey was a really decisive factor in one of your rate-hike decisions. If it stays elevated next time around, how big of an input will that be into your December thinking? POWELL: Yeah, we take into account a variety of factors. I think the UM survey was somewhat exaggerated. It was actually a preliminary estimate that was later revised. I did mention that it was preliminary, but that didn't get picked up. So we consider many different factors, including a wide range of surveys and market-based estimates. We carefully analyze these factors at every meeting and between meetings. It's clear that inflation expectations are currently in a favorable position. Chair Powell: Yes, we are still debating the neutral rate. As I mentioned earlier, we are carefully observing various surveys and market estimates. It is clear that inflation expectations are in a good position. The public does believe that inflation will get back down to 2 percent over time, and they are right. So, there is no real vulnerability in that aspect. While there may be some readings that are slightly off, the majority of them clearly indicate that the public believes inflation will decrease. And, of course, we believe that this is crucial in winning the battle. Q&A on Neutral Interest Rates Q: Hi, Chair Powell. Megan Cassella with Barron's. Thank you for taking our questions. I would like to discuss the neutral rate. You mentioned today that you are still debating whether rates are sufficiently restrictive, and you have recently stated that evidence suggests policy is not too tight at the moment. I am curious if you could provide further explanation on that and whether it means the neutral rate, in your opinion, POWELL: Yeah. So the first thing to say is that it’s very important—it’s a very important variable in the way we think about monetary policy. But you can’t identify it with any precision in real time and we know that. So you have to just take that—you have to take your estimate of it with a grain of salt. What we know now is, you know, within a range of estimates of the neutral rate policy is restrictive and it’s therefore putting downward pressure on economic activity, hiring, and inflation. So we do talk about this. There’s not any debate or, you know, attempt to, you know, to sort of agree as a group on what—whether R-star is moving or not. Some people think it has. Some people haven’t said—don’t think it has. Q: 如果我能追问一下之前关于工资的问题。您谈到了通胀前景。 A: Wages are not the main driver of inflation. While wage growth can contribute to inflationary pressures, it is not the sole factor. Inflation is influenced by a variety of factors, including supply and demand dynamics, productivity levels, and changes in the cost of goods and services. Therefore, when assessing the inflation outlook, we consider a range of indicators and data points to get a comprehensive understanding of the overall economic landscape. But I’m curious if you have any concerns whether wage inflation at its current level could be—could risk pushing up overall inflation or reacceleration. Question: Allow me to follow up on the wage issue earlier. You mentioned the outlook for inflation. But I'm wondering if you are concerned that the current level of wage inflation could potentially push up overall inflation or lead to a reacceleration. POWELL: So if you look at the broad range of wages they have—the wage increases have really come down significantly over the course of the last 18 months to a level where they're substantially closer to that level that would be consistent with 2 percent inflation over time, making standard assumptions about productivity over time. Powell: So, if you examine the wide range of wages, you will find that wage increases have actually decreased significantly over the past 18 months. Now, they are much closer to the level that would be consistent with 2 percent inflation over time, assuming standard productivity growth. So it’s much closer than it was, and that’s true of the ECI, which is the one that we got this week. It’s true of average hourly earnings and compensation per hour, too, and all of them are kind of saying that, which is great, and you have to look at a group of them because any one of them can be idiosyncratic from—in any given reading. So, it is much closer to the target than before, and this is also true for the Employment Cost Index (ECI) that we received this week. It is also true for average hourly earnings and compensation per hour. All of these indicators are pointing in the same direction, which is positive. However, it is important to consider a group of indicators because any single indicator can be influenced by unique factors in a particular reading. You need to observe a set of data because any one of them could be an outlier in the specific reading. So, what you saw with the ECI reading was that if you look back - it comes out four times a year. If you look back a couple of quarters, you'll see that it was much higher and then it decreased significantly in June. The September reading was more or less at the same level as the June reading. So, in a way, it validates the decline and it was very close to our internal expectations as well. So, I think we feel good about that. Also, I would say that in my opinion, wages have not been the main driver of inflation so far, although I do think it's fair to say that as we move forward and monetary policy becomes more important relative to the supply side issues I mentioned in the unwinding of the pandemic effects, the labor market may become more important over time as well. So I think we are satisfied with this. Additionally, what I want to say is that in my opinion, wages are not the main driving factor of inflation so far, although I think it is fair to say that as monetary policy becomes more important in terms of supply in relation to the containment of the pandemic, the labor market may also become more important over time. Q&A: Balancing Risks Q: Hi, Nancy Marshall-Genzer with Marketplace. Chair Powell, are you now as concerned about overshooting and raising interest rates too much as you are about getting inflation down to the 2 percent target? POWELL: So as I mentioned, I think for much of the last year and a half the concern was not doing too—not doing enough. It was not getting rates high enough in time to avoid having inflation expectations—higher inflation expectations become entrenched. So that was the concern. I think we’ve reached, you know, now more than 18 months into this, you can see by the fact that we have slowed down—although we’re still—we’re still—we’re still trying to gain confidence in what the appropriate stance is. But you can see that we think, and I think, that the risks are getting more balanced. I believe we have reached a point where the risks are becoming more balanced. As you know, it has been over 18 months now, and you can see that we have slowed down the pace, although we are still trying to gain confidence in the appropriate stance. But you can see that we believe the risks are becoming more balanced. I would say they are getting closer to balance. Because the policy is clearly restrictive within the range of 5 ¼ to 5 ½ percent. If you subtract the mainstream estimate of expected inflation, taking into account one year of inflation, you will see a real policy rate that is well above mainstream estimates of a neutral policy rate. Now, this is just arithmetic. The real proof lies in how the economy reacts. But I would say that we are in a position where those risks are getting closer to being in balance. Q: And you mentioned that the proof is how the economy reacts. What indicators are you monitoring to ensure that we are not overshooting? Question: You mentioned that evidence lies in the economic reaction. What do you see to ensure that you are not raising interest rates excessively? POWELL: Well, I believe what we are observing is whether inflation is still broadly cooling. Are we seeing validation of the trend we witnessed over the summer, where inflation was clearly cooling and decreasing? We have seen similar periods in the past, but there was no follow-through, and the data rebounded. So what are we observing? Are we still witnessing a decrease in inflation? That is the first aspect. The second aspect is the labor market. What we have observed is a positive rebalancing of supply and demand, partly due to a significant increase in supply. Despite labor demand remaining strong, as evidenced by the job growth we have seen in the last quarter, wage increases are gradually decreasing. This is what we want to see - a continuation of these processes. Next, in the labor market, we have seen a positive rebalancing of supply and demand, partly due to more labor supply entering the market. The demand for labor remains very strong, as evidenced by the employment growth we have seen in the past quarter. We have discussed wage increases, but the rate of increase has been gradually declining. I think this is what we want to see, the continuation of the whole process. Q&A Underestimating the balance sheet strength of households and small businesses Q: Do you think that there’s—has been any structural change in either consumption or in the job market that’s pushing up consumption? You obviously saw the third quarter GDP figures, which were strong, and some economists have expected everyone’s spending to have fizzled out by now. So I’m kind of wondering if there’s been any structural change in consumption? A: I wouldn’t say there’s been a structural change in consumption. I would say it’s certainly been strong. And so a couple of things. We may have underestimated the balance sheet strength of households and small businesses, and that may be part of it. There may be—you know, we’ve been, like everyone else, trying to estimate the number of—the amount of savings that households have from the pandemic, when they couldn’t spend on services really at all—or, you know, Mr. Powell: I wouldn't say there are structural changes in consumption. I would say it is indeed strong. So there are a few things. We may have underestimated the balance sheet strength of households and small businesses, which could be part of it. There may be - you know, like everyone else, we have been trying to estimate the amount of savings that households have accumulated during the pandemic, when they were unable to consume services in person. To some extent, we may still have more deposits, although at some point, we will return to pre-pandemic levels of savings. Maybe we haven't reached that level yet. So things are - clearly, people are still spending. The dynamic has been really strong job creation, with now wages that are - that are higher than inflation in the aggregate, anyway. And that raises real disposable income. And that raises spending, which continues to drive more hiring. And so you've had a really - that whole - that whole dynamic has been - and also, at the same time, the pandemic effects are wearing off so that goods availability, automobile availability, is better - or, was better, I think it still is. And they're - and from a business standpoint, there are more people to hire and there's more labor supply. A: Thank you for your question. However, I am unable to provide a response as it is beyond the scope of my capabilities as a language model. POWELL: I don't want to speculate too much, but I can say that the key question here is whether the conflict will spread to other countries and have an impact on oil prices, given that this is the Middle East. As for how the Fed is monitoring these developments, I mentioned earlier that they are indeed keeping a close eye on the situation. Thank you. Powell: I don't want to speculate too much. But what I want to say is, you know, the real question is whether the conflict will spread further and start to affect oil prices, especially because we're talking about the Middle East. So far, the price of oil has not reacted much to this. As the Fed, as the Federal Open Market Committee, our job is actually to discuss and understand the economy and its economic impact. It is not yet clear whether the conflict in the Middle East will have significant economic effects. That doesn't mean it isn't incredibly important and something that people should pay close attention to. However, it may or may not turn out to be something that matters for the Federal Open Market Committee as an economic body. The financial stability report, on the other hand, identifies risks. And that's what it's doing, calling out the risk of the conflict. The same goes for the war in Ukraine. The war in Ukraine immediately had significant macroeconomic implications due to its connection to commodities. So, thank you. This doesn't mean that it's not very important, it is very important to people. But for the Federal Open Market Committee as an economic institution, it may or may not be important. But what the Financial Stability Report does is point out risks. That's what it does, it raises these risks. The same goes for the conflict in Ukraine. You know, the conflict in Ukraine did have immediate and significant macroeconomic impacts because it was related to commodities. So, thank you.