Full text of Powell's speech: Policy stance will not be easily adjusted, waiting for more clarity.

Source: Jin10

In his latest speech on Friday, Fed Chairman Jerome Powell reaffirmed the Fed’s commitment to maximizing employment and stabilizing inflation (2% target), pointing out that the current economy is stable but facing uncertainties such as trade policy, the labor market is balanced, inflation is slowing but still under pressure, and monetary policy will remain prudent and adjust flexibly based on data to avoid short-term shocks from turning into persistent inflation. He mentioned uncertainty several times and said that we need to wait and see and wait for more clarity. Regarding tariffs, he said the tariff increase would be larger than expected, and the economic impact could also be more significant than expected.

Full Text of Powell’s Speech

Thank you for inviting me today. Monetary policy is more effective in helping the public understand what we are doing and why at this time. Through your work, journalists like you have helped facilitate a deeper understanding. I believe the journalists present here must have quite a few questions they would like to ask. Before answering some questions, I will briefly outline the outlook for the economy and monetary policy.

At the Federal Reserve, we focus on achieving the dual mandate given to us by Congress: maximizing employment and stabilizing prices. Despite the high level of uncertainty and rising downside risks, the economy remains in good shape. The latest data indicate that economic growth is robust, the labor market is balanced, and inflation is close to but still above our 2% target.

Recent economic data

After several years of steady growth, many forecasters expect a slowdown in growth this year. Preliminary data for the first quarter GDP will be released later this month. Limited hard data aligns with a relatively slow but still robust growth outlook. Meanwhile, survey reports from households and businesses indicate a decline in expectations, increasing uncertainty about the outlook. Survey participants point out that new federal policies, particularly those related to trade, are having an impact. We are closely monitoring the contradictions between these hard data and soft data. As new policies and their potential economic impacts become clearer, we will better understand the effects of these policies on the economy and monetary policy.

From multiple indicators, the labor market appears to be in a roughly balanced state and has not become a significant source of inflationary pressure. This morning’s employment report shows that the unemployment rate for March is 4.2%, remaining at a low level since early last year. In the first quarter, non-farm employment averaged an increase of 150,000 jobs. The low layoff rate, moderate employment growth, and a slowing labor force participation rate are all contributing to the stability of the unemployment rate.

Turning to another aspect of the dual mission, inflation has fallen sharply from the peak of the pandemic in 2022. This decline was achieved without experiencing the pain of high unemployment, which usually accompanies tighter monetary policy. Recently, inflation has made progress towards the 2% target, but this progress has slowed. Personal consumption expenditures (PCE) prices rose 2.5% year-on-year in February. Core PCE, which excludes the two volatile categories of food and energy, rose 2.8%. Looking ahead, higher tariffs will gradually impact our economy and could drive inflation higher in the coming quarters. Both market expectations and survey data point to an increase in inflation expectations in the near term. By most measures, long-term inflation expectations (i.e., expectations in the next few years) remain stable and consistent with our 2% inflation target. We remain committed to a sustainable return of inflation to our 2% target. **

monetary policy

When it comes to monetary policy, we face a highly uncertain outlook, with risks of higher unemployment and higher inflation. The new government is implementing significant policy changes in four different areas: trade, immigration, fiscal policy, and regulation. Our monetary policy stance is prepared to address these risks and uncertainties and will be adjusted once we have a clearer understanding of the policy changes and their potential impacts on the economy. It is not our responsibility to comment on these policies. Instead, we assess their possible effects, observe economic behavior, and adjust monetary policy accordingly to best achieve our dual mission objectives.

We have made it clear that assessing the potential impact of increased tariffs on the economy is very difficult until more information is available regarding the details of the tariffs, such as the target of the tariffs, the rates, and the duration, as well as the retaliatory measures from trade partners. Currently, although uncertainty remains high, it is now apparent that the increase in tariffs will be larger than expected. The economic impact may also be more significant than anticipated, including higher inflation and slower growth.

The scale and duration of these effects remain unclear. While tariffs are highly likely to lead to at least temporary inflation increases, they may also lead to more lasting effects. The key to avoiding this outcome lies in maintaining stable long-term inflation expectations, the scale of the impacts, and the timing of these impacts being passed through to prices. Our responsibility is to ensure that long-term inflation expectations remain stable and that one-off price level increases do not turn into a persistent inflation problem.

We will continue to closely monitor the upcoming data, changes in the economic outlook, and the balance of risks. Our policy stance will not be easily adjusted until we have a clearer understanding of the future economic outlook. It is still too early to conclude what the appropriate path for monetary policy is.

Conclusion

We understand the benefits of a robust economy—allowing workers to find jobs and keeping inflation low and predictable. We also understand that excessively high levels of unemployment or inflation can harm and hurt communities, families, and businesses. That is why we at the Federal Reserve will continue to do everything we can to achieve our goals of maximum employment and price stability.

Thank you all. I look forward to your questions.