Special Fed Coverage: Powell Press Conference
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What is the main topic discussed in this episode?
Your Money Briefing. Money and market stories from the Wall Street Journal.
Welcome to this special Federal Reserve edition of Your Money Briefing. I'm J.R. Whalen in New York. In a unanimous vote on Wednesday, the Fed raised short-term interest rates by a quarter point to a range between 1.75 and 2 percent.
What was the Fed's rate decision announced at the press conference?
The Fed also projecting four rate hikes for 2018, and it sounded a more aggressive tone for rate increases in 2019. Mark Hamrick is Senior Economic Analyst for Bankrate.com. He joins us from the Fed for some analysis. So, Mark, let's start with the path of rate hikes that Fed Chairman Jay Powell discussed. The Fed expects two more rate increases this year and a faster pace of rate increases next year. Here's Chairman Powell.
We are aware that raising rates too slowly might raise the risk that monetary policy would need to tighten abruptly down the road. in response to an unexpectedly sharp increase in inflation or financial excesses jeopardizing the economic expansion. Conversely, if we raise interest rates too rapidly, the economy could weaken and inflation could continue to run persistently below our objective.
You know, Mark, this is like the Fed walking a tightrope because a move too far in any one direction could cause unwanted ripples in the economy.
That's a good analogy. I was thinking of a dance as well, because there's sort of one step forward and then a pause. And that's really what we've been having with these rate increases. The chairman obviously is walking a delicate balance.
How many rate hikes did the Fed project for 2018 and 2019?
That is that tightrope you referenced. And so obviously the Fed doesn't want to make the same mistake that earlier iterations of the central bank have made in the sense of seeming to tighten too soon. But obviously also they do not want imbalances to build up and lead to essentially a financial crisis as we saw about a decade ago.
Coming up next, more from Chairman Jay Powell and how far are we from a neutral Fed funds rate and why is that important to the economy? This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. Chairman Powell also said the Fed expects unemployment to continue trending lower and GDP to remain strong. And that while the Fed still has its eye on sustained inflation at about 2 percent. And he expects inflation, as he put it, to bounce around. That adds to uncertainty and really no set formula for the Fed to follow. Here's Powell again.
This uncertainty is why the fact that we live in that uncertainty is why we've been gradually raising rates. We're not waiting for inflation to show up. We're going ahead and moving gradually and trying to navigate between two risks, really. One would be moving too quickly. Inflation never gets back to target. If we do that and the other is moving too slowly, and then we have too much inflation or financial instability and we have to raise quickly, and that can also have bad outcomes.
You know, Mark, a common theme from Powell's news conference on Wednesday was really some caution and essentially saying we learned a lot from the last 10 years in trying to build back the economy from the Great Recession.
Yes, and I also would caution not to take issue with the chairman, but to say that we always live in uncertain times. We have changing perceptions about the range of uncertainty that we're facing. You know, 2006, 2005, we thought things were rosy and turned out to be just the opposite. So there's always uncertainty right now. However, you know, there's no recession on the horizon. The outlook is not for a recession, you know, in the next two or three years from where the Fed sits. And that's a pretty nice place to be, I'd say.
What cautionary 'tightrope' did Chairman Powell describe about raising rates?
And Mark, another thing that Chairman Powell was asked about several times was about neutral Fed funds rate and finding that level. What exactly is that?
Well, you know, you think about the Fed either putting on the brakes or keeping the foot on the gas pedal. Right now, the foot's still on the gas pedal to a degree because what the Fed is doing is still meant to essentially encourage further economic activity.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–0:20
2
What was the Fed's rate decision announced at the press conference?
0:20–1:28
3
How many rate hikes did the Fed project for 2018 and 2019?
1:28–3:39
4
What cautionary 'tightrope' did Chairman Powell describe about raising rates?
3:39–6:22
Speakers
3 identifiedMore from WSJ Your Money Briefing
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