Jerome Powell’s May 3, 2023 Press Conference – Notable Aspects

On Wednesday, May 3, 2023 FOMC Chair Jerome Powell gave his scheduled May 2023 FOMC Press Conference. (link of video and related materials)

Below are Jerome Powell’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript.  These comments are excerpted from the “Transcript of Chairman Powell’s Press Conference“ (preliminary)(pdf) of May 3, 2023, with the accompanying “FOMC Statement.”

Excerpts from Chairman Powell’s opening comments:

Good afternoon. Before discussing today’s meeting, let me comment briefly on recent developments in the banking sector.  Conditions in that sector have broadly improved since early March, and the U.S banking system is sound and resilient.  We will continue to monitor conditions in this sector.  We are committed to learning the right lessons from this episode and will work to prevent events like these from happening again.  As a first step in that process, last week we released Vice Chair for Supervision Barr’s Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank.  The review’s findings underscore the need to address our rules and supervisory practices to make for a stronger and more resilient banking system, and I am confident that we will do so.


Today, the FOMC raised its policy interest rate by 1/4 percentage point.  Since early last year, we have raised interest rates by a total of 5 percentage points in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.  We are also continuing to reduce our securities holdings.  Looking ahead, we will take a data-dependent approach in determining the extent to which additional policy firming may be appropriate.  I will have more to say about today’s monetary policy actions after briefly reviewing economic developments.


At today’s meeting the Committee raised the target range for the federal funds rate by 1/4 percentage point, bringing the target range to 5 to 5-1/4 percent.  And we are continuing the process of significantly reducing our securities holdings.  

With today’s action, we have raised interest rates by 5 percentage points in a little more than a year.  We are seeing the effects of our policy tightening on demand in the most interestrate-sensitive sectors of the economy, particularly housing and investment.  It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.  


We remain committed to bringing inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored.  Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions.  Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run.

Excerpts of Jerome Powell’s responses as indicated to various questions:

STEVE LIESMAN.  Oh, thank you. Steve Liesman, CNBC. Can you tell us what the Federal Reserve Board did in the wake of that February presentation where you informed that Silicon Valley Bank and other banks were experiencing interest rate risks? And can you tell me what supervisory actions you’ve done in the wake of the recent bank failures to make sure that banks are currently appropriately managing interest rate risk. And kind of part 3 but it’s all the same question here, do you still think this separation principle that monetary policy and supervision can be handled with different tools? Thank you. 

CHAIR POWELL.  Sure. So, the February 14 presentation, I didn’t remember it very well. But now, of course, I’ve gone back and looked at it very carefully. I did remember it. And what it was, was a general presentation. It was an informational briefing of the whole board, the entire board. I think all members were there. And it was about interest rate risk in the banks and lots of data. And there was one page on Silicon Valley Bank, which talked about, you know, the amount of losses they — mark to market losses they had in their portfolio. There was nothing in it about — that I recall, anyway, about the risk of a bank run. So, it was — I think the takeaway was they were going away to do an assessment, a vertical — sorry, horizontal assessment of banks. It wasn’t — it wasn’t presented as an urgent or alarming situation. It was presented as an informational non-decisional kind of a thing. And I thought it was a good presentation and, as I said, did remember it. In terms of what we’re doing, of course, I think banks themselves are — many, many banks are now attending to liquidity and taking opportunity now, really, since the events of early March, to build liquidity. And you asked about the separation principle. I — you know, like so many things, it’s very useful. But, you know, ultimately, it has its limits. I mean, I think in this particular case, we have found that the monetary policy tools and the financial stability tools are not in conflict. They’re both — they’re working well together. We’ve used our financial stability tools to support banks through our lending facilities. And, at the same time, we’ve been able to use our monetary policy tools to foster maximum employment and price stability. 

STEVE LIESMAN.  Mr. Chairman, I’m sorry. I don’t mean to be argumentative, but the staff report said SVB has significant interest rate risk. It said, interest rate risk measurements failed at SVB. And it said, Banks with large unrealized losses face significant safety and soundness risks. Why was that not alarming? 

CHAIR POWELL.  Well, I mean, I didn’t say it wasn’t alarming. It was — they’re pointing out something that they’re working on and that they’re on the case, that — that, you know, that I’m not sure whether they mentioned — I think they did, actually. They mentioned that they had taken regulatory action matter or supervisory action in the form of matters requiring attention. So I think that was also in the presentation. I think it was to say, yes. This is a bank and there are many other banks that are experiencing this — these things, and we’re on the case. 


EDWARD LAWRENCE. Thank you very much, Chair Powell. Edward Lawrence with Fox Business. So, if the Federal Reserve gets down to the 3 percent inflation as the projections show at the end of this year or close to it, would it be okay for you for a prolonged period of 3 percent inflation and hoping for some outside event to move down to 2 percent target?

CHAIR POWELL.  Look. I think we’re always going to have 2 percent as our target, and we’re always going to be focusing on getting there. You would be okay with a prolonged 3 percent. You know, it’s — let me just say that’s not what we’re looking for. We’re looking for inflation going down to 2 percent over time. I mean, we — that’s not a question that’s in front of us, and it would depend on so many other things. But ultimately, we’re not looking to get to 3 percent and then drop our tools. We have a goal of getting to 2 percent. We think it’s going to take some time. We don’t think it’ll be a smooth process. And, you know, I think we’re going to – we’re going to need to stay at this for a while. 

EDWARD LAWRENCE.  How does the other side of the mandate, the jobs side, once you get to 3 percent, going from 3 to 2, how does the other side of the mandate balance? 

CHAIR POWELL. I think they — you know, they will both matter equally at that point. Right now, you have a labor market that’s still extraordinarily tight. You still got 1.6 job openings, even with the lower job openings number for every unemployed person. We do see some evidence of softening in labor market conditions. But, overall, you’re near a 50-year low in unemployment. Wages, you all will have seen that the wage number from late last week, and it’s — whenever it was. And, you know, it’s a couple of percentage points above what would be — what would be consistent with 2 percent inflation over time. So, we do see some softening, we see new labor supply coming in. These are very positive developments. But the labor market is very, very strong, whereas inflation is, you know, running high, well above our — well above our goal. And right now, we need to be focusing on bringing inflation down. Fortunately, we’ve been able to do that so far without unemployment going up.



The Special Note summarizes my overall thoughts about our economic situation

SPX at 4060.13 as this post is written