PCE inflation data is ‘in line with what we want to see’: Fed’s Jerome Powell

Friday’s core PCE report, running at +2.8% Y/Y in February was “pretty much in line with our expectations.. it’s good to see something coming in line with expectations,” said Federal Reserve Chair Jerome Powell during an interview the San Francisco Fed’s Macroeconomics and Monetary Policy Conference on Friday.

Today’s report was “more or less in line with want we want to see,” he added, noting that he still wants to see more “good” inflation data.

“Growth is strong right now,” and the Fed will be careful about it’s decisions. The strong growth means the central bank doesn’t need to be in a hurry, he said.

12:09 PM ET: “We’re not going to take the step” of cutting rates until the Fed is confident that inflation is on a sustainable path to 2%. With that, the interview concluded.

12:08 PM: “Productivity is a key thing” in why the U.S. economy is stronger than most other economies, Powell said.

12:06 PM ET: The Fed needs to “be forceful when appropriate” to avoid further Silicon Valley Bank situations.

12:05 PM ET: The banking system is in a good place and has settled down from the stresses of a year ago, he said. Commercial real estate issues “will be with us for some time.”

12:02 PM ET: An independent Fed has broad support from both parties, Powell said.

11:56 AM ET: The Fed’s actions don’t drive growth in the U.S. economy, Powell said. Rather, the central bank’s role is to keep the economy stable and step in during times of crisis, he added.

11:53 AM ET: The Fed’s relatively recent policy of telling the public what it’s doing and why helps the central bank in implementing monetary policy, he said. That contrasts with its earlier policy of telling the public nothing. The Fed didn’t start announcing its rate actions until 1994.

11:50 AM ET: Regarding the Fed’s expectation that it will soon slow the pace of its balance sheet runoff, “the thing with the balance is we want to be transparent and predictable” to avoid disruption to markets.

11:49 AM ET: When asked about what would happen if the Fed loses its political independence, Powell responded that countries with central banks that have weak or no independence don’t have price stability.

11:46 AM ET: When asked about Powell’s legacy, he said: “The thing that I care about the most… we aspire to be that place that transcends politics… I feel accountable and responsible for the institution to transfer it to the next generation.”

11:45 AM ET: “Is the possibility of recession elevated at this time? I would say no,” he said.

11:42 AM ET: As inflation comes closer to 2%, the Fed sees risks to both its mandates — stable prices and full employment — in better balance. So the, central bank can pay some more attention to the employment part of its mandate than it did when inflation peaked. Still, “the work’s not done” on inflation until it’s down to 2%.

11:39 AM ET: “We don’t really know where rates are going to go when this whole thing is over,” Powell said. “My own sense is that I don’t think rates will go down to the very low levels they were at before the pandemic hit.” Short-term rates are likely to come down from where they are now, he said.

11:37 AM ET: “We’re just going to have to let the data tell us” if higher inflation in January and February is just a bump in the economy or something more than that.

11:36 AM ET: “Inflation came up, stayed up, and took a long time to heal,” Powell said in discussing how the economy didn’t bounce back and inflation wasn’t as transitory as the Fed expected it to be in the aftermath of the pandemic.

11:32 AM ET: Powell said he has scheduled calls with every voting and non-voting member of the Federal Open Market Committee before the committee’s policy meetings. That helps to create a consensus, although it’s no problem if there’s some dissent in the FOMC, he said.

Updated at 11:30 AM ET: Monetary policy is well placed to react to a range of different paths for the economy, Powell said.

Developing… check back for updates.

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