Jerome Powell Discusses Long-Term Inflation: Our ‘Expectations Are Mostly Well Anchored’

20 hours ago

During a press briefing on Wednesday, Federal Reserve Chair Jerome Powell answered questions about long term inflation expectations.

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Transcript

00:00inflation expectations as well anchored, but has your confidence

00:03in that assessment changed at all, given the increase

00:05in certain measures and the high degree of uncertainty expressed

00:09by businesses, households, and forecasters?

00:12So on inflation expectations, of course,

00:13we do monitor inflation expectations very,

00:15very carefully, basically every source we can find in, you know,

00:19short-term, long-term households, businesses,

00:22forecasters, market-based.

00:24And I think the picture broadly is this.

00:26You do see increases widely in short-term inflation expectations,

00:32and people who fill out surveys and answer, you know,

00:36questionnaires are pointing to tariffs about that.

00:39If you look in the survey world, if you look a little further out,

00:44you really don't see much in the way of an increase.

00:47Longer-term inflation expectations are mostly

00:51well-anchored.

00:52If you look at the New York, for example.

00:54Then you have market-based, and it's the same pattern.

00:56You know, people in markets are pricing in break-evens.

01:01Some higher inflation over the next year must be related

01:04to tariffs, we know from the surveys.

01:07But if you look out five years or the five-year,

01:10five-year forward, you'll see that break-evens are either flat

01:14or actually slightly down in the case of the longer-term ones.

01:17So we look at that, and we will be watching all

01:20of it very, very carefully.

01:22We do not take anything for granted.

01:24It's at the very heart of our framework,

01:25anchored inflation expectations.

01:27But that's what you see right now.

01:29And how much weight do you put on the deterioration

01:32in consumer confidence surveys?

01:34You said recently that this is perhaps not the best indication

01:39of future spending, but I'm curious, you know,

01:42what you think is behind this deterioration,

01:45and to what extent it could be a leading indicator for hard data.

01:49So let's start with the hard data.

01:51You know, we do see pretty solid, hard data still.

01:54So growth looks like it's maybe moderating a bit,

01:58consumer spending moderating a bit, but still at a solid pace.

02:01Unemployment is 4.1 percent.

02:03Job creation, most recently, has been at a healthy level.

02:06Inflation has started to move up now, we think,

02:10partly in response to tariffs.

02:11And there may be a delay in further progress

02:15over the course of this year.

02:17So that's the hard data.

02:18Overall, it's a solid picture.

02:20The survey data, both household

02:22and businesses, show significant rise in uncertainty

02:26and significant concerns about downside risk.

02:28So how do we think about that?

02:29And that is the question.

02:31As I mentioned the other day, as you pointed out,

02:35the relationship between survey data

02:38and actual economic activity hasn't been very tight.

02:41There have been plenty of times

02:42where people are saying very downbeat things

02:45about the economy and then going out and buying a new car.

02:47But we don't know that that will be the case here.

02:50We will be watching very carefully for signs

02:52of weakness in the real data.

02:53Of course we will.

02:55But, you know, given where we are, we think our policy is

02:58in a good place to react to what comes.

03:02And we think that the right thing to do is to wait here

03:04for greater clarity about what the economy is doing.

Jerome Powell Discusses Long-Term Inflation: Our ‘Expectations Are Mostly Well Anchored’

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