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Gina Smile (New York Times): Thank you for taking our questions. I wonder if you could talk a little bit about why officials think it's appropriate to cut rates at all in 2025 if inflation is expected to remain firm throughout the year? What would you expect at this point the timing might look like? Would a January cut potentially be possible, or does a pause next month seem more likely?
J. Powell: Well, let me start by saying why we cut today and then move to the future. Today was a closer call, but we decided it was the right decision to foster both our goals: maximum employment and price stability. The risks are two-sided: moving too slowly could undermine economic activity and the labor market, while moving too quickly could undermine our progress in inflation. The labor market is cooling gradually, and we don’t think further cooling is necessary to bring inflation down to 2%. Inflation has made progress, with 12-month core inflation estimated at 2.8%, down from 5.6%. Housing services’ inflation is steadily declining, albeit slower than preferred. Recent high readings in non-market services and goods create some bumpiness, but the disinflationary trend remains intact. Today’s decision includes signaling that we’re near a point in slowing further adjustments. For 2025, slower cuts reflect higher inflation readings this year and expectations of sustained inflation. Future cuts will depend on data, particularly further inflation progress and labor market strength.
Gina Smile (Follow-up): Why would you make those cuts? What would be the trigger to cut further after this point?
J. Powell: We’ve reduced the policy rate by 100 basis points to 4.3%, closer to neutral, though still restrictive. Additional cuts will depend on inflation progress and labor market strength. If the economy and labor market remain solid, we can approach further cuts cautiously.
Howard Schneider (Reuters): This seems similar to the 2016 transition to the Trump administration, where the committee anticipated tighter policy due to fiscal policy expectations. How much of this decision reflects recent inflation data versus expectations of inflationary fiscal policy next year?
J. Powell: The economy is in good place, with 2.1% growth, inflation down from 5.6% to 2.6%, and unemployment lower. The slower rate cut path reflects several factors: stronger-than-expected economic growth, higher inflation readings for this year and next year, closer proximity to the neutral rate, and increased uncertainty around inflation and fiscal policy.
Howard Schneider (Follow-up): You mentioned the risk and uncertainty indexes toward the back of the document. Is it fair to say November 5th is the main driver of the higher upside risk to inflation?
J. Powell: Not entirely. Inflation forecasts for this year rose by 50 basis points compared to September due to higher readings in September and October. November data is back on track, but overall, inflation has underperformed expectations. Further cuts will require clearer progress on inflation and maintaining a solid labor market.
Chris Rabber (Associated Press): In September 2018, the Fed staff discussed a policy of looking through new tariffs as long as inflation expectations remained anchored. Does that analysis still apply?
J. Powell: The 2018 teal book simulations are a good starting point. While tariffs are not currently a question for the committee, we’ve explored how tariff-driven inflation could affect the economy and policy decisions. A careful assessment will depend on actual policy details.
Chris Rabber (Follow-up): Does the recent bout of inflation make it riskier to look through tariffs?
J. Powell: Many factors determine tariffs' impact on inflation, including size, duration, and retaliatory actions. The past inflation episode may not be a good model for future scenarios, given trade diversions and other changes. A cautious, deliberate approach is needed when actual policies are implemented.
Nick Timo (Wall Street Journal): Chair Powell, to clarify, participants revised their core PCE inflation projection for 2025 to a central tendency of 2.5% to 2.7%. As Howard noted, most of the committee sees upside risks to these projections. If inflation only declines from 2.8% this year to 2.5%-2.7% next year, what compels the committee to cut rates in this scenario?
J. Powell: Core inflation coming down to 2.5% next year would represent significant progress, better than this year's 2.8%-2.9%. While not yet at our 2% target, it’s meaningful. We also account for labor market conditions, which continue to cool gradually and orderly. Both inflation progress and labor market stability influence our policy decisions.
Nick Timo (Follow-up): The statement includes "extent and timing" language, often used when the committee anticipates a hold. Could this be the last rate cut for some time?
J. Powell: That’s not a decision we’ve made. The "extent" refers to how much further rates can be cut while remaining consistent with a neutral stance, which has already narrowed by 100 basis points. The "timing" indicates we’re near a level where it’s appropriate to slow the pace of adjustments, assuming the economy is evolving as expected. Uncertainty remains, and future decisions depend on economic developments.
Michael McKee (Bloomberg): Despite a 100-basis point cut this year, mortgage, auto loan, and credit card rates remain elevated. Are you concerned that markets resisting rate changes could increase the risk of a slowdown?
J. Powell: Those are longer-term rates influenced by various factors, not just Fed policy. While mortgage rates have risen since September, overall financial conditions are aligned with restrictive policy. The economy continues to perform well, with growth at 2.5%, outpacing global peers. There’s no indication that a downturn is more likely than usual, but we remain vigilant to ensure inflation reaches 2%.
Michael McKee (Follow-up): Earlier, you mentioned the need for confidence in inflation moving toward 2% before cutting rates. Given the revised inflation forecasts, do you maintain confidence in this path?
J. Powell: Yes, I’m confident inflation has declined significantly and will continue to do so. Housing services inflation is steadily falling, goods inflation has normalized, and labor market pressures are modest. We’re unwinding shocks from 2021-2022, such as in housing and insurance, and these trends should keep inflation on track to 2%. Our policy will ensure continued progress.
Kobby Smith, Financial Times: The unemployment rate as of November, while still very low, is within spitting distance of the level that generated a lot of concern about the labor market over the summer, leading to the 50-basis point cut in September. Hiring has also narrowed to just a handful of sectors. Now the committee appears comfortable skipping cuts at upcoming meetings. What has changed about the committee's assessment of the risks confronting the labor market? Is there just less concern now on that front, or is it just about there being a more upside risk to inflation that now needs to be accounted for?
J. Powell: The unemployment rate is now the same as it was in July—4.2%. While it has moved up and down, it has remained steady. Job creation has slowed but is steady at a level slightly below what would maintain a constant unemployment rate. If job creation continues at this level, unemployment might decline very gradually, perhaps a tenth every other month. The labor market is cooling by many measures, but not in a quick or concerning way. FOMC participants feel that risks and uncertainties in the labor market have improved as conditions have gotten slightly better. While further labor market softening isn’t necessary to achieve 2% inflation, it would still be welcome.
Steve Liesman, CNBC: I did not hear you use the word “recalibration” today. Is the recalibration phase over? What would you call this new phrase? Are the criteria for changing rates now different and higher than they were before?
J. Powell: We’re not renaming the phase yet, but we are in a new phase in the process. This is because we’ve reduced our policy rate by 100 basis points, bringing us significantly closer to neutral. We still believe rates remain meaningfully restrictive. From this point forward, it’s appropriate to move cautiously and look for progress on inflation. Cutting rates by 100 basis points has supported economic activity, which was the right decision. Now, we’re at a place where risks are broadly balanced, and further policy adjustments will depend on inflation progress.
Follow-Up: How much are you or the committee looking through recent high inflation numbers, like those caused by hurricanes affecting car prices or avian flu impacting egg prices? Additionally, how do you view the potential for housing inflation to decrease, as it recently did?
J. Powell: We try to avoid dismissing data we don’t like, as it’s easy to focus on high months and ignore low ones. For instance, November core PCE inflation could be idiosyncratically low. However, we look at longer trends rather than reacting to two or three months of good or bad data. Inflation has gradually declined over a long period, with 12-month headline inflation at 2.2% and core inflation at 2.8%. This is significant progress, though there’s still work to do. Policy needs to remain restrictive to continue this progress.
Neil Irwin, Axios: Financial markets have been buoyant all year. Is the committee comfortable with current financial conditions, or do you see a risk that looseness in financial conditions could undermine progress toward your inflation target?
J. Powell: We monitor financial conditions closely, but our primary focus is on how we affect the economy and our goal variables. Over the last year, inflation has come down significantly, and the labor market has cooled, indicating our restrictive policy is effective.
Interest-sensitive sectors like housing are particularly low due to our policy. This demonstrates that our policy is working and transmitting the intended effects. While we don’t control financial conditions directly, we’re seeing the expected outcomes in our goal variables.
Follow-Up: Speaking of buoyant assets, do you see any value or benefit in the U.S. government building a reserve of Bitcoin?
J. Powell: The Federal Reserve is not allowed to own Bitcoin under the Federal Reserve Act, which defines what we can own. We’re not seeking a law change, as that’s a matter for Congress to consider. Currently, the Federal Reserve has no plans to advocate for such a change.
Andrew, Unnamed Outlet: Happy holidays, Mr. Chairman. Are you satisfied with how 2024 is ending? Are you confident we’ve avoided the recession that forecasters predicted as inevitable a couple of years ago?
J. Powell: It’s clear we’ve avoided a recession. Growth this year has been solid, with domestic final purchases—the best indicator of private demand—likely coming in around 3%. This is a remarkable number. The U.S. economy has performed exceptionally well, especially compared to slow growth and inflation struggles globally.
Follow-Up: Unemployment is low, but prime-age employment has fallen recently. Do you think there’s more downside momentum in the labor market than the unemployment rate alone is signaling?
J. Powell: No, I don’t think so. Prime-age participation remains high, but the hiring rate is low, which indicates lower demand. Layoffs are minimal, so people with jobs are doing well. The labor market is softening gradually and in an orderly way. This softening isn’t something we need to reach 2% inflation, but it’s part of why we moved ahead with another rate cut today.
Mara Mug, Bloomberg News: Can the labor market remain strong without further cuts? Or does it still need support to avoid cooling further?
J. Powell: We can’t know for certain, but we believe our policy balances the risks. The labor market remains solid despite gradually cooling. Job creation is positive, and wages are sustainable relative to inflation. While risks in the labor market appear diminished, we remain vigilant because it’s one of our mandate goals.
Elizabeth Schey, ABC News: Why is inflation proving more stubborn than expected, and how is that impacting households still burdened by high prices?
J. Powell: Inflation has been more stubborn partly due to technical issues, like the way we calculate housing services, which reflect market rents more slowly than expected. Additionally, the impact of global inflation from previous years is still being felt in high prices for essentials like food and transportation. While inflation has come down significantly, people feel the burden of those elevated prices. Our goal is to achieve sustainable real wage increases where compensation grows faster than inflation year after year. That’s what will restore confidence in the economy, and we’re committed to reaching that target.
Follow-Up: Looking ahead, what do you see as the biggest challenge to the economy under the next administration?
J. Powell: I feel very optimistic about the economy and our policy position. The U.S. economy is in a good place, and I expect another strong year in 2025.
Edward Lawrence from Fox: So you say that we're closer to the neutral rate. What percentage do you see and the committee believes where is that neutral rate?
J. Powell: So, um, I'll say a couple things. First of all, when we write down the thing we write down in the summer of economic projections, it is the longer-run neutral rate, which is the neutral rate at a time when supply and demand are in balance, the full economy is in balance, and no shocks are hitting the economy. That is not where we are right now. So, when we're making monetary policy at the Fed, that's not the question we're asking. You can't do a straight read between those longer-run numbers that we write down and what we think the appropriate policy should be. Basically, at any given time, various shocks are hitting the economy, and so what we're doing in real time is we're looking at our policy stance, and we're looking at the way it's hitting the economy. Particularly, we look at the effects it's having as we try to move the economy toward maximum employment and price stability. The answer can be that there are things that affect the economy that are lasting but not permanent, and the ones that are permanent are the ones that would be in our star. The ones that could be lasting but nonetheless go away over time could actually affect.
Follow-Up: What's sort of technically the appropriate neutral stance in the near term.
J. Powell: So, we're looking at that, and you know we don’t know exactly where it is, but as I like to say, we know it by its works. And I think what we know for sure is that we're 100 basis points closer to it right now. There are many estimates of where that might be, and we know we're a lot closer to it. I think we're in a good place, but I think from here it's a new phase, and we're going to be cautious about further cuts. I think that the markets are looking for a little more clarity. I've heard estimates from 2.9% to 4%. I think the markets would like to see a little more clarity about a year out, 18 months out, as to where that goalpost, for lack of a better term, is. Now, it looks big. Honestly, there are countless models of what a neutral rate might be at any given time. They're empirical models, they're theoretical models, there are things that combine them, and they have as many different answers as you'd like. So, there is no real certainty, and I mean, it's actually a good thing to know that we don't know exactly where it is. So, you're not tempted to think, "Oh, I think this model or this estimate is right." You just must be open to the empirical data that is coming in and also how it's affecting the outlook. It's not made any easier by the fact that our policy works with long and variable legs. Nonetheless, that is the job we have. I think it's appropriate for us now to proceed cautiously now that we're 100 basis points closer to neutral. We'll do so while the economy seems to be in good shape, and these cuts will certainly help to support economic activity and the labor market while we can still make progress on inflation because policy is still meaningfully restrictive.
Victoria Guido with Politico: I just wanted to make sure I understood what you were saying at the beginning about inflation. Are you saying that progress on core PCE counts as progress on inflation even if headline inflation ticks up? And, since that's what's projected in the SCP, I was wondering what accounts for that? Why do you all see core PCE going down and potentially headline inflation ticking up?
J. Powell: As I imagine you know, the goal overall is headline inflation because that's what people experience. People don't experience core inflation; they experience inflation, and that includes food and energy costs. So that's the overall goal. But as we know, headline inflation contains energy and food. Those prices can fluctuate for reasons that are not related to tightness in the economy, and therefore are not good predictors of future inflation. It turns out that core inflation is a better predictor of overall inflation than overall inflation is, so we look at core inflation because it's a better measure of what future inflation is likely to be. It's a better measure of what inflation pressures exist. So, it's complicated, but ultimately, we, you know, our goal is headline, not core. So, your second question was why do you all see the core going down, but headlines are potentially ticking up? Well, headlines can be affected by energy prices and food prices. There will be things in the headline forecast that are due to forecasts of energy prices, whereas core will be much driven by things like tightness in the economy. That's why the two can go in different directions. Headlines have been lower, as you know, most of this year because energy prices have been coming down, which is a great thing for people, but energy prices will come down and then they will go up. It won't really be telling us anything about how tight the economy is or how future inflation will perform.
Victoria Guido with Politico: Do geopolitical risks factor in at all to how you're thinking about energy?
J. Powell: We monitor geopolitical risks very carefully, but I would say so far, those risks haven't really led to anything important for the United States economy. The single thing that you would look to is the price of oil, given that we're talking about the Middle East and Ukraine. That is a good summary statistic for the kind of thing that could go wrong with global turmoil. But the price of oil has been coming down because of supply conditions. So, the U.S. is not really feeling the effects of geopolitical turmoil. But we are certainly at a time of elevated geopolitical turmoil, and it remains a risk.
Kelly Ogle from CBS News: I want to go back to something that you said a minute ago—that wage growth is outpacing inflation now. It wasn't the case for some time, of course, and that's partly why Americans haven't felt much relief in their wallets from prices yet. But with inflation ticking up, how worried are you that the progress in closing that gap could go away?
J. Powell: Yeah, so inflation, again, we don't overreact to a couple of months of higher reading or a couple of months of lower reading. What we had was, in September, we had four months of nice readings, and then September and October were higher, but then November was much lower. So, I don't really think the public is experiencing that as a surprising upside risk to inflation. I think inflation is much lower than what the public is feeling. They're right about it—that prices are just the price level went up because of past inflation, and it's going to take some time for real wages to recover over a period of years, in which your real compensation is growing. In other words, your compensation is growing meaningfully faster than inflation. That's exactly the kind of economy we have now, and we just want to hold on to it. That process will probably take some years, but that's what's going on right now. I don't think that a couple of months of higher inflation really signal anything of the nature you're suggesting.
Kelly Ogle from CBS News (Follow-up): Let's look more long term. You previously predicted hitting the 2% inflation target in 2026. It's now been pushed out to 2027. You said you're focused on enabling further progress on inflation. That's not necessarily progress in the right direction. Are you confident that the target isn't going to move further out?
J. Powell: We're talking about when you're projecting the economy two or three years out. You're talking about high uncertainty, very high uncertainty. You know, at that point, it's not possible to confidently predict where the economy is going to be in three years. So, what we're doing is looking at what's happening now and projecting that the same kinds of things are happening. We keep a strong labor market, housing services inflation comes down, goods inflation settles down, and non-market services return to their prior level. All those things should happen over time, and there's every reason to think that they will. The timing of it is highly uncertain. But you're not wrong, though. It's been a bit frustrating because, while we've made progress, it has been slower than we had hoped. Nonetheless, we're still on track. If two years ago you'd said we were at 4.2% unemployment and 2.8% inflation, people would say, "I'll take that." I mean, that's a pretty good interim place to be. The job's not done, but we're feeling good about where we are and where we're headed.
Nancy Marshall Ginzer from Marketplace: You said a couple of times that inflation has been moving sideways, appears to be settling in around 2.5%. Do you think the Fed is just going to have to settle for that and accept that you're not going to get to your 2% target?
J. Powell: No, we're not going to settle for that. I think we certainly have every intention and expectation that we'll get inflation back sustainably to 2%. That is, and I am confident we will achieve that. It has taken longer, but we are making progress. We've made a great deal of progress, and we'll continue to do so and get back to 2% inflation. That's what we owe the public, and we're committed to achieving it.
Nancy Marshall (Follow-up): In that case, can you rule out a rate hike next year?
J. Powell: You don’t rule things completely in or out in this world. That doesn't appear to be a likely outcome. I think we're at 4.3%, and that's meaningfully restrictive. I think it's a well-calibrated rate for us to continue to make progress on inflation while keeping a strong labor market. So, thank you very much.
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