Key Facts
- ✓ Federal Reserve Chair Jerome Powell addressed the economic outlook and monetary policy
- ✓ Inflation has eased but remains above the 2 percent target
- ✓ The policy rate is likely at or near its peak for this tightening cycle
- ✓ Economic activity expanded at a solid pace in the third quarter
- ✓ Labor market conditions have moderated but remain strong
Quick Summary
Federal Reserve Chair Jerome Powell addressed the current economic landscape and monetary policy outlook in recent remarks. Powell highlighted the progress made in reducing inflation while emphasizing the Federal Reserve's commitment to achieving the 2 percent target.
The Chair noted that the policy rate appears to be at or near its peak for the current cycle, though the Committee remains prepared to adjust policy if necessary. Key points from the address include:
- Inflation has eased significantly from its peak but remains above target
- The policy rate is likely at or near its peak
- Economic activity expanded solidly in the third quarter
- Labor market conditions have moderated but remain strong
- Future decisions will depend on incoming data
Inflation Progress and Targets
The Federal Reserve has made significant progress in its fight against inflation over the past year. According to Chair Powell, the Personal Consumption Expenditures (PCE) price index has declined substantially from its peak, though it remains above the Committee's 2 percent target.
The inflation data shows that goods prices have moderated as supply chain issues resolved, while services inflation has been more persistent. Powell emphasized that bringing inflation back down to 2 percent remains the Federal Reserve's primary objective, as price stability is essential for a healthy economy.
The Committee is closely monitoring various inflation indicators to ensure that the disinflationary process continues. While recent data has been encouraging, Powell cautioned that the Federal Reserve needs to see more evidence that inflation is moving sustainably toward the target before considering policy adjustments.
"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
— Jerome Powell, Federal Reserve Chair
Monetary Policy Stance
The Federal Open Market Committee (FOMC) has maintained the target federal funds rate at its current level following a series of increases. Chair Powell stated that the Committee believes the policy rate is likely at or near its peak for this tightening cycle.
However, the Federal Reserve remains prepared to tighten policy further if risks emerge that could impede progress toward the inflation target. Powell made clear that the Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.
The approach to future policy decisions will be data-dependent and meeting-by-meeting. The Committee will continue to assess incoming information and its implications for the economic outlook and the balance of risks.
Economic Activity and Labor Market
U.S. economic activity has expanded at a solid pace in recent quarters. Real GDP growth was particularly strong during the third quarter, driven by robust consumer spending and business investment.
The labor market has shown signs of rebalancing after a period of tight conditions. Job gains have moderated but remain solid, and the unemployment rate has stayed low. Powell noted that labor market conditions have eased somewhat, with the ratio of job openings to unemployed workers declining from very high levels.
Despite the moderation, the labor market remains healthy. Wage growth has been elevated but shows signs of slowing, which should help ease inflationary pressures. The Federal Reserve will continue to monitor labor market developments as part of its dual mandate to promote maximum employment and stable prices.
Forward Guidance and Risks
The Federal Reserve's approach to forward guidance emphasizes transparency and data dependency. Chair Powell reiterated that the Committee is not on any preset course and will continue to make decisions based on incoming data and the evolving outlook.
The risks to the economic outlook are becoming more balanced. While inflation remains above target, the Committee sees upside risks to inflation as having diminished and downside risks to employment as having increased.
The Federal Reserve remains highly attentive to inflation risks and stands ready to adjust policy as appropriate. Powell concluded that restoring price stability is essential for achieving maximum employment and stable prices over the long run, and the Committee will continue to use its tools to achieve these goals.
"We are strongly committed to returning inflation to our 2 percent goal."
— Jerome Powell, Federal Reserve Chair
"The policy rate is likely at or near its peak for this tightening cycle."
— Jerome Powell, Federal Reserve Chair
