Speech by President Powell on economic prospects

Thank you for doing me here today. Monetary policy is more effective when the public understands what we do and why. Thanks to your work, journalists as help you promote this better understanding. I am sure that this room full of journalists does not lack questions to ask. Before taking care of a few, I will briefly summarize the prospects of the economy and monetary policy.

During the FED, we focus on achieving double mandate objectives that the congress gave us maximum employment and stable prices. Although uncertainty is high and lower risks have increased, the economy is still in the right place. Entering data shows solid growth, a balance of labor market and inflation that is much closer, but still above, of our 2%objective.

Recent economic data

After a few years of solid growth, many forecasters have anticipated slightly slower growth this year. The initial reading of the first quarter GDP will be published later this month. Limited hard data is consistent with a slower but always solid growth perspective. At the same time, statements with households and businesses report vaccination expectations and higher uncertainty about the prospects. Respondents in the survey highlight the effects of new federal policies, in particular linked to trade. We look closely at this tension between hard and flexible data. As new policies and their probable economic effects become clearer, we will have a better idea of ​​their implications for the economy and for monetary policy.

Looking through many indicators, the labor market seems to be largely in balance and is not an important source of inflationary pressure. The report on this morning jobs shows the unemployment rate at 4.2 Percentage in March, still in the low range where it has been taking place since the beginning of last year. During the first quarter, wages increased on average by 150,000 jobs per month. The combination of low dismissals, moderation of employment growth and slowdown in labor growth has maintained the largely stable unemployment rate.

Turning to the other stage of our double mandate, inflation has decreased sharply from its pandemic summits from mid-2022. He did it without the type of painful increase in unemployment which has often accompanied periods of tight monetary policy which are necessary to reduce inflation. More recently, progress towards our 2% inflation objective has slowed down. The total prices of the PCE increased by 2.5% in the 12 months ending in February. The basic prices of the PCE, which exclude the volatile food and energy categories, increased by 2.8%. For the future, higher prices will make their way in our economy and will be likely to increase inflation in the coming quarters. By reflecting this, the measures based on the survey and the market for short -term inflation expectations have increased. According to most of the measures, the expectations of longer -term inflation – those beyond the next few years – are well anchored and in accordance with our inflation objective of 2%. We remain determined to return sustainable inflation to our target of 2%.

Monetary policy

Regarding monetary policy, we are faced with a very uncertain perspective with high risks of higher unemployment and higher inflation. The new administration is implementing substantial policy changes in four separate areas: trade, immigration, fiscal policy and regulations. Our position of monetary policy is well placed to deal with the risks and uncertainties that we face while we obtain a better understanding of the policy changes and their probable effects on the economy. It is not our role to comment on these policies. On the contrary, we evaluate their probable effects, observe the behavior of the economy and set monetary policy in a way that best achieves our double -compressed objectives.

We have stressed that it will be very difficult to assess the probable economic effects of higher prices until there is a greater certainty on details, such as what is a tariff, at what level and for what duration and the extent of reprisals from our business partners. Although uncertainty remains high, it now becomes clear that the rate increases will be considerably greater than expected. The same goes for economic effects, which will include higher inflation and slower growth. The size and duration of these effects remain uncertain. Although prices are very likely to generate at least a temporary increase in inflation, it is also possible that the effects can be more persistent. Avoiding this result would depend on the maintenance of the long -term inflation expectations, well anchored, the size of the effects and the duration of the duration so that they fully switch to prices. Our obligation is to maintain the long -term inflation expectations well anchored and to ensure that an ad hoc increase in the price level does not become a current inflation problem.

We will continue to carefully monitor incoming data, evolving perspectives and risk balance. We are well placed to wait for greater clarity before considering any adjustment to our political position. It is too early to say what the appropriate path will be for monetary policy.

Conclusion

We understand the advantages of a solid economy where workers can find jobs and inflation is low and predictable. We also understand that high levels of unemployment or inflation can be damaging and painful for communities, families and businesses. This is why we, at the Fed, will continue to do our best to achieve our maximum objectives of employment and price stability.

THANKS. I look forward to your questions.