Jerome Powell’s June 14, 2023 Press Conference – Notable Aspects

On Wednesday, June 14, 2023 FOMC Chairman Jerome Powell gave his scheduled June 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 June 14, 2023, with the accompanying “FOMC Statement” and “Summary of Economic Projections” (pdf) dated June 14, 2023.

Excerpts from Chairman Powell’s opening comments:

Since early last year, the FOMC has significantly tightened the stance of monetary policy.  We have raised our policy interest rate by 5 percentage points and have continued to reduce our securities holdings at a brisk pace.  We have covered a lot of ground, and the full effects of our tightening have yet to be felt.  In light of how far we have come in tightening policy, the uncertain lags with which monetary policy affects the economy, and potential headwinds from credit tightening, today we decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings.  Looking ahead, nearly all Committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2 percent over time.  I will have more to say about monetary policy after briefly reviewing economic developments.


Inflation remains well above our longer-run 2 percent goal.  Over the 12 months ending in April, total PCE prices rose 4.4 percent; excluding the volatile food and energy categories, core PCE prices rose 4.7 percent.  In May, the 12-month change in the Consumer Price Index came in at 4.0 percent, and the change in the core CPI was 5.3 percent.  Inflation has moderated somewhat since the middle of last year.  Nonetheless, inflation pressures continue to run high and the process of getting inflation back down to 2 percent has a long way to go.  The median projection in the SEP for total PCE inflation is 3.2 percent this year, 2.5 percent next year, and 2.1 percent in 2025.  Core PCE inflation, which excludes volatile food and energy prices, is projected to run higher than total inflation, and the median projection has been revised up to 3.9 percent this year.  Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.


In light of how far we have come in tightening policy, the uncertain lags with which monetary policy affects the economy, and potential headwinds from credit tightening, the Committee decided at today’s meeting to maintain the target range for the federal funds rate at 5 to 5-1/4 percent and to continue the process of significantly reducing our securities holdings.


We remain committed to bringing inflation back down to our 2 percent goal and to keeping 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:

COLBY SMITH. Thank you. Colby Smith with the Financial Times. I’m curious what gives you and the Committee the confidence that waiting will not be counterproductive at a time when the monthly pace of core inflation is still so elevated? Interest rate sensitive sectors like housing. While they felt the drag of the past Fed actions, have started to recover in some regions and financial conditions, you know, most recently were easing.

CHAIR POWELL.  So, I guess I would I guess I would go back to the beginning of this tightening cycle to address that. So as we started our rate hikes earlier last year, we said there were three issues that would need to be addressed kind of in sequence. And then of the speed of tightening the level to which rates would need to go and then a period of time over which we’d need to keep policy restrictive. So at the outset, going back 15 months, the key issue was how fast to move rates up. And we moved very quickly by historical standards. Then last December, after four consecutive 75 basis point hikes, we moderated to a pace of 50 of a 50 basis point hike, and then this year to 325 basis point hikes at sequential meetings.

So it seemed to us to make obvious sense to moderate our rate hikes as we got closer to our destination. So the decision to consider not hiking at every meeting and ultimately to hold rates steady at this meeting, I would just say it’s a continuation of that process. The main issue that we’re focused on now is determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, so that the pace of the increases and the ultimate level of increases are separate variables given how far we have come. It may make sense for rates to move higher, but at a more moderate pace. I want to stress one more thing, and that is that the Committee decision made today was only about this meeting. We didn’t make any decision about going forward, including what would happen at the next meeting, including we did not decide or really discuss anything about going to an every other meeting kind of an approach or really any other approach. We really were focused on what to do at this meeting.


RACHEL SIEGEL. Hi, Chair Powell. Rachel Siegel from The Washington Post. Thanks for taking our questions. I wanted to ask further on the lag effects – when you’re considering when you would hike again throughout the course of the year, are there things that you would expect to kick in as those lag effects come – come into effect that would inform your decisions? Have you learned things over the past year that give you some sense of timeline for when to expect those lags to come into effect?

CHAIR POWELL. Yeah. So it’s a – it’s a challenging thing in economics. It’s sort of standard thinking that monetary policy affects economic activity with long and variable lags. Of course, these days, financial conditions begin to tighten well in advance of actual rate hikes. So if you, if you look back when we were lifting off, we started talking about lifting off – by the time we had lifted off the two year, which is a pretty good estimate of where policy is going, had gone from 20 basis points to 200 basis points.

So in that sense, tightening happens much sooner than it used to in a world where news was in newspapers and not, you know, not on the wire. So that’s, that’s different. But it’s still the case that what you see as interest sensitive spending is affected very, very quickly. So housing and durable goods and things like that, but broader demand and spending and asset values and things like that, they just take longer.

And you can pretty much find research to support whatever answer you would like on that. So there’s not any certainty or agreement in the profession on how long it takes. So, you know, then that makes it challenging, of course. So we’re looking at the calendar. We’re looking at what’s happening in the economy. We’re having to make these judgments again.

It’s one of the main reasons why it makes sense to go at a slightly more moderate pace now as we seek that ultimate – I can’t point to that ultimate endpoint. I can’t point to a specific data point. I think we’ll see it when we see inflation, you know, really, really flattening out reliably and then starting to soften.

I think we’ll know that we’re, that it’s working and ideally by taking a little more time, we won’t go well past the level where we need to go.

RACHEL SIEGEL. I was curious if you could give us an update on what you’re seeing on credit tightening, since the bank incidents for March and how you’re teasing that out apart from these lag effects.

CHAIR POWELL. So it’s too early still to try to assess the full extent of what that might mean. And, you know, that’s something we’re going to be watching, of course. And, you know, if we were to see what we would view as significant tightening beyond what would normally be expected because of this channel, then, you know, we would factor that into account on – in making rate decisions. So that’s how we think about it.


EDWARD LAWRENCE. Thank you for taking the question, Mr. Chairman. Edward Lawrence with Fox Business. So I want to go back to comments you made about in the past about unsustainable fiscal path. The CBO projects the federal deficit to be 2.8 trillion in ten years. CBO also says that federal debt will be 52 trillion by 2033. At what point do you talk more firmly with lawmakers about fiscal responsibility? Because assuming monetary policy cannot handle alone the inflation or keep that inflation in check with the higher level spending.

CHAIR POWELL. I don’t do that. That’s really not my job. We hope and expect that other policymakers will respect our independence on monetary policy. And we don’t see ourselves as, you know, the judges of appropriate fiscal policy. I will say, and many of my predecessors have said that we are on an unsustainable fiscal path and that needs to be addressed over time. But I think trying to get into that with lawmakers would be would be kind of inappropriate given our independence and our need to stick to our knitting.

EDWARD LAWRENCE. Is there any conversation then about the Federal Reserve financing some of that debt that we’re seeing coming down the pike?

CHAIR POWELL. No, under no circumstances. 



The Special Note summarizes my overall thoughts about our economic situation

SPX at 4434.57 as this post is written