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FED CHAIR JAY POWELL SPEAKS LIVE
Recorded: April 4, 2025 Duration: 0:31:53Space Recording
Short Summary
In a recent discussion, economic leaders highlighted the disconnect between positive economic indicators and public sentiment, with rising concerns about inflation and potential recession. Despite low unemployment and growth, uncertainty prevails as businesses and the Federal Reserve await clarity on new policies and their implications for the economy.
Full Transcription
I don't want to be seen to be doing that.
It's just not appropriate for me.
But the situation, I think, is this.
And people, when they're surveyed, they are unhappy about the economy.
That seems to largely reflect the increase in the price level that happened when inflation was high, 2021, 22, and 23, largely.
Inflation is now back down to much more normal levels.
Unemployment is low.
The economy has been growing.
But people are still experiencing that high price level.
In other words, prices don't go down.
They know they're paying much more for the basic necessities of life.
And they're right that they are.
And they're not happy about it.
And they're right not to be happy about it.
So I think that accounts for the negative sentiment.
We, of course, we're looking at inflation, which is the change in prices,
and we're seeing that that has come down quite a bit
and that unemployment is actually low.
It's sort of very close to measures of maximum employment
and the economy's growing.
So all those statistics are good,
but the price increases of the past few years
are weighing on people's budgets.
So I'm from Milwaukee, and I've been talking to business leaders, executives, and consumers in our community, our region, the last few weeks.
Mostly before this week's news.
Chairman, they're troubled and they're nervous.
One business owner told me if there's a hint of a recession, we're cooked.
And he asked me to share that with you. What's your response? One business owner told me if there's a hint of a recession, we're cooked.
And he asked me to share that with you.
What's your response?
So I guess I would say let's start with the fact that the incoming data right through this morning's employment report,
which admittedly is from roughly a month ago, the week of March 12, they took the data.
And it still shows a solid economy. Unemployment's still low.
I understand the uncertainty that's weighing on people.
You ask about a recession.
We don't actually, we don't make a probability forecast
of how likely it is for there to be a recession,
but many outside forecasters do.
And many of them have raised the likelihood, albeit from very low levels.
It's not something that anybody now is forecasting, or some people are starting to.
So I can't, there's not much more I can say about that.
I realize that the uncertainty is high, and, you know, what we've learned is that the tariffs are higher than anticipated, higher than almost all
forecasters predicted. We still don't know where that comes to rest though and we're just going to
have to see that through. At a congressional hearing last year, one of the U.S. representatives
said that you were pretty boring and you thanked him and said that you consider that a very high compliment
and in fact i feel like it's one of the roles of the federal reserve especially since the housing
crisis to be kind of a a ballast especially in the face of the the volatility of the markets
and the dramatics that we've been experienced with the economy um Very steady, no surprises, very reliable. In a moment like this, which also has a
lot of drama and unpredictability, but it is not necessarily from an economic crisis, it's by
design, it's political. How do you see your role in this moment? So I think all of the values that
you touched on are in fact the
values that that we try to live by. You know we're we're driven by you know analysis and careful
thought and discussion and debate and the merits of things. We try to stay as far as we can from
the political process. We don't look at political cycles or things like that. So I think people
expect that from us.
They expect us to tell the truth, and that's what we're going to do.
But at the same time, we don't want to be part of the broader political discussion about the wisdom of policies that are not assigned to us.
We're not responsible for trade policy, immigration policy, fiscal policy.
So we don't comment on those decisions are made by others and
we what we do is we use our tools to try to achieve the goals that Congress
assigned us which is maximum employment and price stability. So I like to think
that over time we're a source of calm rational analysis and and also of
stability. That's really what the business that we're in is providing
financial and macroeconomic stability to the public. That's really what the business that we're in is providing financial and macroeconomic stability to the public.
That's really our purpose.
So how can businesses and individuals and the Fed make plans for the future when so much is being dictated by the actions of a single person?
And do you see yourself as the consolular-in-chief on economic matters?
No, I think, take a step back.
What's happening is, as I mentioned, the new administration is making significant policy changes in trade, immigration, fiscal policy, and regulation.
And this is, you're still just a couple of months into the administration.
And that process will take place.
And at a certain point, the new policies will be on the table. They will be having the effects
they're going to have on the economy, and uncertainty will decline. Right now, there's
a lot of uncertainty about where all that's going to sort out, the forms it will take,
and what the economic effects will be. If you fast forward a year from now, the uncertainty
should be much lower. The actual effects of the policies should then be pretty manifest and clear. So I
think I understand why it just is highly uncertain, both what the policies will turn out to be,
exactly what they'll turn out to be, and also what their effects will be in the near term.
We just have to go through that process. And it is just kind of a manifestation of our election cycle and a new administration coming in with new policies.
I mean, given all of the change happening and the fact that we are in a period where things have not settled in yet,
and that the Federal Reserve and you as chair are very projection data-driven, policy-driven, how do you handle a moment like now i mean can you
tweak your plans and projections do you just kind of do you have to reset them so it you know we
what we've had since um in the last few months is uh from the staff has been a placeholder rather
they wouldn't call it a forecast because it's so uncertain they call it a placeholder and that's
kind of how we've been thinking about it so. So it's a good time to take a step
back and let things clarify. That's why it's just too soon to say what the appropriate
monetary policy response will be to these new policies. It is just too soon to say.
We can't say with any confidence today. So that's what we're doing. We've taken a step
back and we're watching to see
what the policies turn out to be
and the ways in which they will affect the economy.
And then we'll be able to act.
Fortunately, our policy stance is in a good place
for us to do that.
You know, we're probably moderately restrictive, let's say.
So it's not really tight policy,
but it's, which is appropriate
since inflation is a bit above target. So we think we're not, it's not really tight policy, but it's, which is appropriate since inflation is a bit above target.
So we think we're well positioned
to address whatever may come.
And in the meantime, I'd say we're, you know,
we're waiting for greater clarity
before we consider adjustments.
This is sort of something that Wisconsin has told me
that they can't make their plans.
They wanna expand, want to build a new
facility. They want to hire or do whatever the future calls for. They say
we're trying to look around the corner. We're not even sure where the corner is
and we're not even sure what's around the corner. Sounds like they're in the
same position as you are.
No, we hear the same thing. Of course, we have an incredible network of contacts
with businesses and also universities, nonprofits, all different sectors through the reserve banks and
also through the Board of Governors. And that's what we hear. But again, it's a process. We're
going through it. And, you know, I think we will know when we know what the policies are exactly
and what their implications will be for the economy,
that will all become clear. And I think that'll be a time when people can make decisions.
In the meantime, though, I get it. We're hearing that a lot from people and we are kind of in the
same place, which is waiting for clarity about what our policy path should be.
We'll have to see.
As you're talking about placeholders right now and having something
in the place when there's so much that we don't know, it does occur to me that this is not the
first economic shock that you have steered the markets and the economy through. Obviously,
there was COVID almost exactly five years ago. It seems similar in certain ways with
a lot of uncertainty, a lot of shock,
also potential disruptions to prices and to supply, which is very much in the Federal
Reserve's wheelhouse.
I mean, from where you sit, can Liberation Day be compared to kind of the economic effects
of COVID?
Are they totally different, somewhat related?
You know, I think each situation is different.
You know, there was COVID, there was also then, and the response to COVID,
then there was high inflation, and then there was soft landing,
and then there was, and now we have new administration and changes in policies,
and every situation, you know, it kind of rhymes, but it's not exactly the
same thing. And so in this situation, what we face is what I mentioned in my remarks is you actually
have risks for higher unemployment and higher inflation, and that's difficult for a central
bank because our tools, which consist of interest rates, you know, either slow down or speed up the economy
over time. And, you know, higher unemployment would call for speeding up the economy and higher
inflation would call for slowing it down. So you can be in a situation, if we find ourselves in
that situation, we look at how far each of the two variables is from its goal. And we ask ourselves,
how long would it take to get back? And we weigh those things and make a decision about what to do.
But there's no question that's a different situation, very difficult situation.
When we faced high inflation, it was painful for the country, painful for the people that we serve.
But we knew what policy needed to be.
We knew we needed to raise rates quite a bit.
During the pandemic, we knew what we needed to do.
It was very clear the direction that we needed to take.
We needed to take with force, and we did. It's almost a situation potentially where
the dual mandate is at odds with itself. The two goals are, as we say, intention,
or they may be. I'd say that's not what we're seeing right now. But the effects at the margin
right now would be for higher inflation and perhaps higher unemployment.
But that's a marginal effect.
I would say that's not – you're not in a situation like we were in the 1970s
where the two goals were really both pulling in opposite directions and required.
That's – you know, it's just very hard for a central bank to be the answer to the situation like that.
But that's not the situation we're really in today.
One of the questions from the audience that we had is,
if unemployment takes off and inflation takes off,
which lever do you go for?
Which lever do you, what do you do?
So we actually have a, you know,
we have a document called our consensus statement, or the longer version is statement on longer run goals and monetary policy strategy.
And the sixth paragraph of that actually contemplates when the two goals are in tension.
And what it says is, think about how far each variable is from its goal, and think about how long it would take for each to get back.
So in a way, it's an equation.
You're comparing two quantities, which each have two variables.
And then you say, you look at that and you think, what do we need to do?
And typically, this doesn't happen very often, but if one of them is further away, then you
would focus on that one.
In the case of high inflation, they actually both pointed in the same direction.
The labor market was overheated and inflation was very high.
So both of those called for tight monetary policy.
This could be different, but again, we're not actually facing that today.
I feel like there's another tension inherent in your job,
which is that you're looking at the macro economy,
at the global economy, really, and the U.S. places in it,
but also the data you're looking the global economy, really, and the U.S. places in it, but also the data you're
looking at is very profoundly human, as Jim has been pointing out. Jobs, I think, and prices are
probably the two most human pieces of data, and certainly in our day-to-day experience, probably
the things that loom the largest. How do you reconcile those two things when you're looking at the data, like both the
global markets and knowing that the data represents a lot of lives and jobs and egg prices and things
like that? So we, I think at the Fed, we always keep a focus on the people that we serve and we
know, we know and are very conscious daily that the things that we do
have a real effect on people's lives. We know that and it really does focus the mind and I think if
you talk to people at the Fed there's a very strong commitment to serving the public as well
as we possibly can. Economic events are just very, very unpredictable at times and there are shocks
that you can't see coming. But nonetheless job is to whatever happens use our tools to bring
the economy back to stability, back to price stability, back to maximum
employment and that's what we do. But you're right we try to keep we try to
keep everybody in the room with us when we're thinking about what to do.
So in response to the last round of terms, Harley-Davidson, which is based in Milwaukee,
moved some production to Thailand. Now the company might be whipsawed again by the new tariffs.
It could be really devastating for sales, for employment, for the future of that company.
But a lot of companies are in that same position. And what do you say to companies like Harley-Davidson and their workers?
So it just isn't, I really want to stick to our knitting.
I mean, we have this great thing called our independence of monetary policy, and that's
critical for us to be able to do our job.
But for us to keep that independence, we need to not succumb to the temptation to want to
be a player on issues that are not assigned to us.
And trade policy is one of those.
There are many, many issues that people love to try to pull us in on, almost every issue, really.
And we just need to stick to our knitting, not get pulled into those things.
And so trade policy is a classic one.
Energy policy is another.
Climate change, you know, immigration is not not real although all of those things have
economic implications and it gets argued that way but if we if we treated those as our job
the the case for our independence would disappear so i i really can't comment on i mean i we hear
the same stories stories like that but honestly you know the policy makers who are charged with
that they're probably hearing the same stories too,
and they're reaching a judgment about what's in the best interest of the country in the long run.
That's what they are doing, I guess. So it's not for us to comment on that.
What happens inside the Fed at a moment like right now, when there's so much change and quite a bit of uncertainty,
when you're watching things unfold? What does that look like, practically speaking?
What are people doing inside the building? So I'm very proud to work with the people I work with.
I can tell you that in times like this, or times like the pandemic, where the, you know, the global financial markets were shutting down, the global economy was shutting down, people step forward,
and they say, we've got this. These are career people who were here for the global financial crisis. They've got 25 years, 35 years of
experience with crises, and they step forward and it's just incredible what they can do
and how good they are. It's a great honor to work with them. So right now isn't that
situation. You know, we have the situation we have. So, you know, our trade people and our inflation people and our macroeconomists are all working hard to, you know, to kind of digest the
news of this week and try to filter that into the forecast that they'll make. And policymakers are
doing very much the same thing. And we're reading everything we can about what's happening and lots of outside analysis too. We don't have an FOMC meeting until May 6 and 7. So that's really a process that lasts
several weeks, but we're not quite at that stage yet. But we're kind of thinking ahead to that
and working through all of that. I will say though, you know, it feels like we don't need
to be in a hurry. It feels like we have time to- Really? Yes you know, it feels like we don't need to be in a hurry. It feels like we have time to-
Really?
Yes. Yes. It feels like we don't. No, I mean, it's like I said, you have inflation
is going to be moving up and growth is going to be slowing, but it isn't really, to me,
it's not clear at this time what the appropriate path for monetary policy will be. And we're
going to need to wait and see how this plays out before we can start to make those adjustments.
Question from the audience, from one of our SEBU members,
is are you in contact with other central bankers in other countries at a time like this?
Yes, yes, pretty frequently.
Absolutely.
I mean, the same was true during the other crises I've been through.
Not only that, though, we do meet very regularly.
You know, the IMF World Bank meetings here in Washington twice a year.
We go to Basel multiple times a year to meet. That's all central bankers.
And there are also G20 meetings, G7 meetings that's all central bankers.
And there are also G20 meetings, G7 meetings
where the central bankers are there.
So we're kind of regularly meeting and talking.
And when we're not doing that,
we're also texting each other and-
Is there a group chat?
I'm not at liberty to say.
Liberty to say.
No, there's not.
No, there's not.
Have you talked to those central bankers this week?
Recently.
Yeah, I didn't want to get too specific about this, but yes, I have.
What's their sentiment?
Can you characterize that?
I'd rather, you know, again, I don't comment on what my international colleagues say.
It's not appropriate.
But, you know, we're talking about events, we're talking about the implications for the economy,
we're discussing what we're hearing from markets and from business people and from the elected governments too.
It's all the things you would expect us to be talking about on a regular basis.
It's one of the best things about this role is that the central banks have a lot.
We're all nonpolitical, so we think about things in quite similar ways, and they're real bonds.
We're not lobbying each other ever on policy.
That's just not a thing because we do our policy here.
They do their policy there, but we develop really good relationships and bonds with them. That's one of a thing because we do our policy here, they do their policy there, but we develop really, really good relationships and bonds with them.
It's one of the real pleasures and benefits being able to talk about this,
just not only with the great people at the Fed, but also with the leaders around the world.
I mean, it's interesting because it is a job of enormous responsibility and power,
but it's also a job. I it, I mean, how would you characterize
the job of FedShare? Like, how is it as a job? Honestly, that's what it is. I really feel just
like another person doing that job. Really? Yeah. You just like... That's how it is. I'm doing a job.
I have a job to do. I actually really like the job. I like it a lot. I enjoy it. It can be stressful at times,
nonetheless incredibly interesting, great people to work with, really important, you know, what
more could you want? But that's what it is. And, you know, I again, I'm blessed by working with
great colleagues who are really committed to getting it right. I mean, fully appreciate how
important it is that we get it right and do everything we possibly can to bring the best thinking, the best analysis and debate things, you know, over and over until we feel like we're in the right place.
At the same time, there is no certainty in this. You can you can be wrong because economy can can zig when you thought it was going to zag.
So your term as Fed Chair ends about a year from now. What do you think about your job security?
I fully intend to serve all of my term.
Excellent. I mean, as we're getting close to wrapping up, I did want to ask something a little bit out of the box. I think because you do have a position of such great responsibility, people are very curious about you. And I think people tend to read into everything a Fed chair does,
small gestures, word choice. I know it's part of our jobs in this room to pour over every word you
choose. I did want to ask about one thing that I've wondered about for years, which is your tie.
You always seem to wear a purple tie, and every time I think I've seen you, you've worn a purple tie,
and I'm wondering if there's significance to that?
At the beginning, the only significance was that I like purple ties.
Okay.
But I will say, you know, so then the next press conference I reach
for a blue tie or a red tie and I go hmm maybe not, you know, and so I wind up
wearing purple ties and then it becomes a thing and now I now I definitely wear
purple ties all the time. Okay. But I felt like you know you didn't it just
felt a little awkward to be wearing one that was identified. We are strictly
non-political. I can't stress that enough. We are not, it's not
that we're bipartisan, we are non-political. We don't do that and so purple is a good color for
that. That's all. Plus I like purple ties. Sorry, I didn't give you a purple guitar pick.
I have one other Milwaukee question that I overlooked here, but in Milwaukee and other
parts of the country, the housing market is out of whack
in our market alone in southeastern Wisconsin there's 5,000 the market's out of whack by like
5,000 houses that need to be on the market for it have equilibrium and this report this week said
tariffs could tack on some six thousand bucks to the cost of building a new home. How long
are people going to sit on their cheap mortgages from COVID? Thank you very much. But and before
they move on, before the market frees up. So you have several things there. The first is we just
haven't built enough housing and it's we haven't kept up with the demand for housing so there's an
underlying shortage before before the pandemic you know we there was a real housing shortage
and by the way that's that's happening in many comparable democracies around the world the second
thing is you know lock-in as you say there were very very low mortgage rates during covid and
people are kind of locked in it would be very expensive to move and that'll that'll of course
People are kind of locked in, it would be very expensive to move, and that'll of course wear off over time.
You also mentioned the costs of materials that might be imported, lumber and nails and things like that.
And yeah, and also labor. A lot of labor in the home building business has been traditionally immigrant labor.
So yeah, the housing, the sort of new build market,
it may face some cost pressures as well. That's just, that may very well be the case.
That's what we're hearing from home builders, for example, both on the labor side and on the
materials side. But even once these short-term things happen, we're still going to have not
enough houses. And so it's all, you know, I think for a long time, we're still going to see
upward pressure on housing prices, you know, maybe until population growth slows or until we catch up.
You mentioned that we're kind of in a period of waiting right now to see how policy ripples out
through the economy. How long do you expect that to take? How long do you expect these big policy
changes to show up
in our day-to-day lives and prices and supplies and things like that?
So for a while we didn't know what was coming on April 2. Now we know what came on April 2.
We don't know. There's a lot more to be said about what about how all that shakes out. But
that's we've come through that and I think you now know that the tariffs are larger than people were generally expecting.
That much you know now at this point.
And you'll know more as you start to see the effects on the economy.
So as the months go by, well, it's hard to say exactly when you'll know, but clearly
that learning process is ongoing.
We're just seeing that these are new policies, not just the tariff policies, but the other ones as well. There'll be important fiscal legislation coming up fairly soon,
and there'll be regulatory changes, significant regulatory changes. You have to really look at
all of that to see what the overall effect will be. So I can't give you a date, but all of that
is now kind of coming into place at sort of the speed you would expect policy
changes to be. And then we'll begin to see the real economic effects as the year goes on.
But again, I can't give you a really specific date. Is the fiscal legislation the tax cuts?
Well, yes. I mean, I know they're contemplating, and we don't comment on fiscal policy, but
what I read is that they're contemplating you know making the the tax cuts and jobs
act cuts permanent and also perhaps some other things as well we we wouldn't be
we have a sort of a placeholder for that too but that's really not ours to
comment on but that's what that's what I was talking about yes so I have a
question from from a friend in Milwaukee who said she has clients that have deals ready to go.
Businesses that are ready to launch from their garage to a private equity deal.
And they're just stuck in their garage right now.
How long do you think, what do you think the impact of the uncertainty these days will have on the private equity deals?
So again, we're hearing a lot of that. People are just, they're just kind of waiting and for clarity, waiting for clarity.
So, and I can't tell you when that will pass, but, you know, ultimately it will pass.
You know, we know that, you know, at a certain point we'll know enough to know what the new,
the uncertainty will decline and we'll be able to know what the new, the uncertainty will
decline and we'll be able to see with real clarity what the policies are and what their
effects are.
So, but you're right, we hear the same thing from businesses and just from people that
they're kind of waiting and seeing.
There's a lot of waiting and seeing going on, including by us, and that just seems like
the right thing to do at a time of elevated uncertainty. What economic indicators are you watching right now? Very famously, you look at the
CPE and obviously the CPI and things like that. But are there any economic indicators
in this moment in these circumstances that you are watching, focused on, interested in?
Sure. So the basic two big data pools are the data around prices and around employment.
And in the employment area, we get just really, that's an area where we actually get pretty good data,
although the survey response rates have been lower.
Nonetheless, we get a lot of different data.
And it's not just unemployment, it's participation, it's by age group and things like that.
It's wages, it's many, it's by age group and things like that, it's wages, it's many,
many different things. It's jobs, it's quits, all the job creation quits, openings, all those things.
So that's one thing. On inflation, we do, we target PCE, personal consumption expenditure
inflation, not CPI, and the two are broadly, they move in, they move together, but 25 years ago, the Fed switched to PCE.
The public looks at CPI, it's kind of a little bit of a thing,
but because we think, you know,
it's really just a better way to capture the inflation,
the cost pressures that households and businesses feel.
We think it's a better measure.
And that's what we look at, but they're not that different.
I mean, they're just, they look at different measures ultimately they're pretty close
together those things you know on growth you look at what's happening with
consumer spending the economy is overwhelmingly driven by by by spend by
consumer spending so you look at Howard consumer surveys how are they feeling
how are they spending sometimes the surveys are very negative but they keep
spending that happens that's been happening really for a while. People spent right
through the pandemic, and they spent right through this time of higher inflation. They kept spending,
and forecasters kept thinking, like us, kept thinking that consumption would slow down.
That's a really critical thing. After that, business investment is a big chunk. And you look at that and that is also susceptible to sentiment. You know, businesses, if they don't know what
to do, they're not going to do an acquisition, they're going to hold off on building a factory
or plant or hiring people, things like that. So we look at, I mean, I could go on for a long time,
we look at a lot of data and we try to make sense. We also talk to people who are in the real economy. You know,
I grew up, my career was mostly in the private sector talking to, you know, to people who ran
businesses. And for me, the story doesn't come together until I actually hear from people who
are in the economy doing things and what they're feeling and seeing. And then it sort of fits
together better. Is this like via the Beige Book or?
The Beige Book.
Thank you for mentioning the Beige Book.
And I hope you read it.
I actually love the Beige Book.
See, that's great.
Everyone should read the Beige Book.
The Beige Book comes out sort of mid-FOMC cycle,
and it's all the 12 reserve banks and all of their incredible context,
what they're saying about what's going on in the economy.
So if you want to know, you can look at the national data, but if you want to know what's going on in regions and at different industries,
you look at the Beige Book. So it's really a critical, critical thing. And actually,
the Reserve Bank system that we have is an enormous strength of the Federal Reserve System.
We have these 12 Reserve Banks with their own, you know, economics departments and own
participants on the FOMC. So that's a great thing to look at.
I'd like to ask you about another body of work that many of us know that you're familiar with,
and that's the Grateful Dead. So question for you, sir. American Beauty or Terrapin Station?
American Beauty. Well, it's not even a plot. That was so fast.
That's my era. That's my era. Working Man's Dead? Yes. Or Europe 72? Both. We're in the same era here. So that's, for me, it's late 60s to mid 70s.
So you're... Touch of Grain? What do you think? It was their only hit, but it's a good song. Okay.
Okay. Finally, we're gonna do this? I feel like you're speaking another language.
Finally, we're going to do this. I feel like you're speaking another language.
There's a well-known Grateful Dead bootlegger who would,
newly the permission of the band, Dick's Picks, who's put out. So what's your recommendation of
those hundreds of... I don't have any Dick's Picks. Like I said, my real interest was
late 60s to mid 70s.
I saw them a bunch of times and I know every note on every song from that era,
but since then I've been busy actually.
We thank you for taking your time, taking time out of your schedule to join us here.
And we appreciate your work.
Thank you very much. Thanks everybody.
