Chair Powell (00:00):
Recent indicators suggest that growth of economic activity has moderated. GDP rose at a 1.2% pace in the first half of this year, down from 2.5% Last year. Although the increase in the second quarter was stronger at three percent, focusing on the first half of the year helps smooth through the volatility in the quarterly figures related to the unusual swings in net exports. The moderation in growth largely reflects a slowdown in consumer spending. In contrast, business investment in equipment and intangibles picked up from last year's pace. Activity in the housing sector remains weak.
(00:41)
In the labor market conditions have remained solid. Payroll job gains averaged 150,000 per month over the past three months. The unemployment rate at 1.4%, remains low and has stayed in a narrow range over the past year. Wage growth has continued to moderate while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment. Inflation has eased significantly from its highs in mid 2022, but remains somewhat elevated relative to our two percent longer run goal. Estimates based on the Consumer Price Index and other data indicate that total PCE prices 2.5% over the 12 months ending in June, and that excluding the volatile food and energy categories, core PCE prices rose 2.7%. These readings are a little changed from the beginning of the year, although the underlying composition of price changes has shifted.
(01:44)
Services inflation has continued to ease. While increased tariffs are pushing up prices in some categories of goods. Near-term measures of inflation expectations have moved up on balance over the course of this year on news about tariffs, as reflected in both market- based and survey-based measures. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our two percent inflation goal. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today's meeting, the committee decided to maintain the target range for the federal funds rate at four-and-a-quarter to 4.5% and to continue reducing the size of our balance sheet. We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook and the balance of risks. Changes to government policies continue to evolve and their effects on the economy remain uncertain.
(02:47)
Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level, but it is also possible that the inflationary effects could instead be more persistent and that is a risk to be assessed and managed. Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem. For the time being, we're well positioned to learn more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance. We see our current policy stance as appropriate to guard against inflation risks. We're also attentive to risks on the employment side of our mandate. In coming months, we will receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate.
(03:52)
At this meeting, the committee continued its discussions as part of our five-year review of our monetary policy framework, we focused on potential revisions to our statement on longer-run goals and monetary policy strategy and are on track to wrap up any modifications by late summer. The Fed has been assigned two goals for monetary policy, maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our two percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. We understand that our actions affect communities, families and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions.
Speaker 2 (04:51):
Thanks Chair Powell. There's a lot of lean in the markets and not to mention out of the administration for a rate cut now in September. Is that expectation unrealistic at this point?
Chair Powell (05:06):
So as you know, today we decided to leave our policy rate where it's been, which where I would characterize as modestly restrictive. Inflation is running a bit above two percent. As I mentioned, even excluding tariff effects, the labor market's solid, historically low unemployment. Financial conditions are accommodative and the economy is not performing as though restrictive policy, we're holding it back inappropriately. So it seems to me and to almost the whole committee, that the economy is not performing as though restrictive policy is holding it back inappropriately and modestly restrictive policy seems appropriate. All that said, there's also downside risk to the labor market. In coming months, we'll receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate.
Speaker 2 (05:57):
Just to follow up, by coming months, does that include the possibility, you'll be getting essentially two rounds of jobs and inflation data between now and the September meeting. Is that potentially adequate to make a decision to lower rates at that point?
Chair Powell (06:12):
So you're right, we do have-this is an inter-meeting period when we'll get two full rounds of employment and inflation data before the time of the September meeting. We have made no decisions about September. We don't do that in advance. We'll be taking that information into consideration and all the other information we get as we make our decision at the September meeting.
Speaker 3 (06:35):
Thank you, Mr. Chairman, you took out the word or the notion that uncertainty has diminished from this statement. Does that mean uncertainty has increased and I'm just wondering, the administration has struck several deals with large trading partners where it seems like we now know what the rate is going to be. Does knowing that rate add to your certainty to change policy or do you need to wait to see the economic effects?
Chair Powell (07:04):
So essentially, the statement in our statement about uncertainty reflects what's gone on since the last meeting. So at the time of the last meeting, uncertainty had moved down a little bit, but it was more or less even this time. So we had diminished, because it didn't diminish further. So there's not really much in that. And then your second question is, say again.
Speaker 3 (07:32):
There've been several deals that have been struck and now we seem to have an idea of what the tariff rates are going to be with some of our large trading partners. Does that not add to the kind of certainty you might need or is it, you're waiting for the economic effects to show themselves?
Chair Powell (07:46):
No, I think we're still, so you're right, it's been a very dynamic time for these trade negotiations and lots and lots of events in the inter-meeting period. But we're still a ways away from seeing where things settle down. We are clearly getting more and more information and I think at this point people's estimates, our outside estimates of the likely effective level of tariffs is not moving around that much at this point. But at the same time, there are many uncertainties left to resolve. So yes, we are learning more and more. It doesn't feel like we're very close to the end of that process and that's not for us to judge, but it feels like there's much more to come as well, looking ahead.
Speaker 1 (08:39):
Hi, Mr. Chairman. Neil [inaudible 00:08:41] with Axios. This morning we got a GDP report in, which final domestic private purchases decelerated slowest patients, '22. There was a weakness in the interest-sensitive sectors and residential investment commercial structures. Are those not signs that monetary policy is a little too restrictive right now given current economic conditions?
Chair Powell (08:58):
So the GDP and PDFP numbers came in pretty much right where we expected them to come in. You got to look at the whole picture. So, certainly as I mentioned in my opening remarks, economic activity data, GDP, private domestic final purchases, which we think is a narrower, but better signal for future, for where the economy is going has come down to a little better than one percent, 1.2%, I think in the case of GDP for the first half, whereas it was two and a half last year. So that has certainly come down. But if you look at the labor market, what you see is by many, many statistics, the labor market is kind of still in balance. It's things like quits, job openings, and let alone the unemployment rate, they're all very, by many measures, very similar to where they were a year ago. So you do not see weakening in the labor market.
(09:51)
You do see a slowing in job creation, but also in a slowing in the supply of workers. So you've got a labor market that's in balance, albeit partially, because both demand and supply for workers is coming down at the same pace. And that's why the unemployment rate is remained roughly stable, which is why I said we do see downside risk in the labor market. Our two mandate variables right, are inflation and maximum employment, stable prices and maximum employment, not so much growth. So the labor market looks solid, inflation is above target. And even if you look through the tariff effects, we think it's still a bit above target and that's why our stance is where it is. But as I mentioned, downside risks to the labor market are certainly apparent.
Speaker 1 (10:38):
So given the fluid labor supply situations, there are a number for this jobs report we get on Friday that would look to you like equilibrium job growth.
Chair Powell (10:46):
Yeah. The main number you have to look at now is the unemployment rate, because it's true that the demand for workers in the form of let's call it just say payroll jobs, that number has come down, but so has the break-even number, kind of in tandem. So that puts the labor market in balance. The fact that it's getting into balance due to declines in both supply and demand though I think, it is suggestive of downside risks. So of course we'll be watching that carefully.
Colby smith (11:21):
Thank you. Colby Smith with the New York Times, two of your colleagues called for a quarter-point cut today, and I'm wondering what aspects of their argument were most compelling to you and how you're weighing their views against those on the committee, who, as of the June forecast, were in the camp of the Fed, holding interest rate study for the remainder of the year. And just in terms of the June SEP in particular, is that still the best representation of where the core of the committee is?
Chair Powell (11:49):
So on the dissents, what you want from everybody and also from a dissenter, is a clear explanation of what you're thinking is
Chair Powell (12:00):
... And what are the arguments you're making? And we had that today, so I think basically this was quite a good meeting all around the table where people thought carefully about this and put their positions out there. As I mentioned, sort of the majority of the committee was of the view that inflation is a bit above target, maximum employment is at target. That calls for, in my way of thinking, modestly restrictive stance of policy for now. But we had two dissenters who think-you, you want that clear thinking and expression of your thinking, and we certainly had that today, I think all around the table.
(12:42)
You asked about the June SEP, that you're right, that's what it says and I couldn't point to it six weeks later as expressing people so you really can't do that. We don't run an SEP and I don't like to substitute in my own estimate of what the SEP might be, we don't have one. So I'll just say that we haven't made any decisions about September, we'll be monitoring all the incoming data and asking ourselves whether the federal funds rate is in the right place.
Speaker 4 (13:12):
And just on the point about policy being only modestly restrictive, does that mean that there's actually not much scope to reduce rates once the conditions for a cut are met, barring a significant weakening of the labor market?
Chair Powell (13:25):
So let me say my own estimate is modestly restrictive and there are a range of views of what the neutral rate is at this moment for our economy, and so others may say it's more restrictive or less restrictive. We're going to be, at some point when we return to moving toward a more neutral stance, we'll be making that judgment as we go. I don't think we have a preset course, it's not so mechanical as saying, "We've derived with great confidence the neutral rate and that is our destination," because really we understand that no one actually knows what the neutral rate is. We know it by its works and that will be have the way the economy reacts over time to slightly looser policy.
Speaker 5 (14:12):
Nick.
Speaker 6 (14:16):
Nick Timiraos, the Wall Street Journal. Chair Powell, my question is about what have you learned over the last few months about the inflation generating and price pass-through process? And just to drill down, the June CPI report showed evidence of tariff- induced goods inflation. Now the tariff landscape is only starting to be settled with some of these more recent deals. Given the lags between when tariffs are announced and when they show up in goods prices, is two months a long enough horizon to evaluate the impact and be confident that tariffs aren't impacting the broader inflation process?
Chair Powell (14:52):
I think you have to think of this as still quite early days. And so I think what we're seeing now is substantial amounts of tariff revenue being collected in the order of $30 billion a month, which is substantially higher than before. And the evidence seems to be mostly paid only to a small extent through exporters lowering their-lowering their price, and companies or retailers, sort of institutions that are upstream from the consumer, are paying most of this for now. It's starting to show up in consumer prices, as you know, in the June report, we expect to see more of that and we know from surveys that companies feel that they have every intention of putting this through to the consumer but the truth is they may not be able to in many cases. So I think we're just going to have to watch and learn empirically how much of this and over what period of time.
(15:50)
I think we've learned that the process will probably be slower than expected at the beginning, but we never expected it to be fast and we think we have a long way to go to really understand exactly how it will be. So that's how we're thinking of it right now.
Speaker 6 (16:07):
So if I could follow up, is the reticence to look through core goods inflation being driven by the judgment during the pandemic, expectations proved more adaptive than anyone at the Fed expected, is it being driven by uncertainty over how restrictive policy is?
Chair Powell (16:23):
You could argue we are a bit looking through goods inflation by not raising rates. We haven't reacted new inflation, but I wouldn't insist upon that. But I think, as I said, a reasonable base case is that these are one-time price effects. Of course in the end there will not be, this will not turn out to be inflation because we'll make sure that it's not, we will throw our tools, make sure that this does not move from being a one-time price increase to serious inflation. We want to do that efficiently though, efficiently, and that means if you move too soon, you wind up maybe not getting inflation all the way fixed and you have to come back, that's inefficient. If you move too late, you might do unnecessary damage to the labor market. So there won't be in the end a big inflationary problem, what we're trying to do is accomplish that in a way that is efficient, but in the end there should be no doubt that we will do what we need to do to keep inflation under control. Ideally we do it efficiently.
Speaker 5 (17:36):
Mike McKee.
Speaker 7 (17:36):
Michael McKee from Bloomberg Television and Radio. The One Big Bill, leaving aside the adjectives, do you expect it to add stimulus to the economy in 2026 and would that be an argument for remaining on hold or cutting back on the number of rate cuts you would expect for next year?
Chair Powell (17:54):
So of course let me just ritual disclaimer that we don't express any judgments or anything on fiscal legislation or other legislation for that matter, but I would say when you think that the biggest part of the bill was making permanent existing law on taxes, I don't think we see it as particularly stimulative. There should be some stimulative effect but it shouldn't be significant over the next couple of years.
Speaker 7 (18:23):
And to follow up, well, I don't want to put this in terms of you and the President, so let me ask it this way, do you have concerns about the cost to the government of keeping rates elevated for longer in terms of interest rate charges?
Chair Powell (18:43):
We have a mandate, and that's maximum employment and price stability, and it's not something we do to consider the cost to the government of our rate changes. We have to be able to look at the goal variables Congress has given us, use the tools they've given us to achieve those goals, and that's what we do. We don't consider the fiscal needs of the federal government, no advanced economy or Central Bank does that, and if did do that, it would be good neither for our credibility nor for the credibility of US fiscal policy, so it's just not something we take into consideration.
Speaker 5 (19:23):
Victoria.
Speaker 8 (19:28):
Hi, Victoria Guida with POLITICO. When it comes to the renovations of the Federal Reserve's headquarters that the administration has been looking into, do you see their interest in that issue as being directly tied to the President's push to get you to lower interest rates?
Chair Powell (19:44):
Not for me to say. I will say we had a nice visit with the President, it was an honor to host him. It's not something that happens very often at the Federal Reserve to have the President come over, let alone to visit a building, but it was a good visit.
Speaker 8 (19:59):
Are there any aspects of the project that they've raised that you see as making you reconsider any aspects of the project?
Chair Powell (20:06):
So this project was hatched and conceived almost a decade ago now, and we went through the very long process of clearing it through historic preservation at the National Capital Planning Commission, and a lot of back and forth there was very constructive. We started out to do the work, and we're very well along on that work, and I was quite pleased to have the president say multiple times that what he really wanted to see was us getting this construction completed as soon as possible. That is our focus and that's what we're going to do.
Speaker 5 (20:43):
Andrew.
Speaker 9 (20:49):
Thanks Mr. Chairman. Andrew Ackerman with the Washington Post. What message do you take from the fact that inflation hit 2.1% last September and has bounced higher since? Why do you think financial conditions are restrictive and in neutral rates below 4% when inflation has stopped falling for almost a year?
Chair Powell (21:08):
So inflation, when you talk about these twelve-month inflation measures, you're always battling residual seasonality. So we'll have, for example, two months of high inflation sometimes early in the year and then inflation turns lower, and a lot of that may just be an artifact, so that's why we look at the twelve-month numbers. I think inflation is most of the way back to 2%. There are things like the catch-up inflation, so for example, all the insurance costs, they're only now going through inflation, but they actually reflect inflationary pressures from two, three years ago, so that's got to go through.
(21:44)
In addition, now we have three or four-tenths of inflation in core inflation from tariffs. We can't really separate that out, we're not going to have a separate kind of inflation that isn't the tariffs, we're always going to be dealing with all of inflation but the composition, as I mentioned, has really changed. And if you go back to the last couple of years, it was all about services inflation, which was being very sticky. Now services inflation is coming down nicely, goods inflation was well-behaved before and now goods inflation is going up, so the story has really changed. That's partially because of tariffs, it's also partially because we had restrictive policy in place and we-and we've seen the result of that gradually work its way through the services economy.
Speaker 9 (22:31):
The other thing I wanted to ask is, are you comfortable if BLS can continue performing their mission effectively if they take an 8% reduction in headcount and authorized spending as the administration's proposed?
Chair Powell (22:42):
Not going to comment on the administration's proposal. I do think, as I've said, I think that we're getting the data that we need to do our jobs and I think it's really important that good data helps not just the Fed, it helps the government but it also helps the private sector. People in the economy, they use this data a lot too so it's quite important for our economy and certainly for the Fed's work and other government agencies work that we continue to get better at data. That's what we've been doing for a hundred years, we've been getting better and better and better. It's very hard to accurately capture in real time the output of a twenty-plus trillion-dollar economy, and the United States has been a leader in that for a hundred years and we really need to continue that in my view.
Speaker 5 (23:30):
Edward.
Speaker 10 (23:33):
Thank you Mr. Chairman. Edward Lawrence from Fox Business. How concerned are you with the data that we're showing coming in, showing no significant upward trend in inflation over the past six months, that the wait-and-see approach for inflation is actually giving companies cover to raise prices?
Chair Powell (23:50):
How concerned am I that the... say that again?
Speaker 10 (23:52):
That the wait-and-see approach is giving-
Chair Powell (23:54):
The wait-and-see approach, what do you mean by that?
Speaker 10 (23:56):
For cutting rates. You're waiting to see if the tariffs will affect
Speaker 10 (24:00):
... Fact inflation. So it's a wait-and-see approach.
Chair Powell (24:04):
Policy's restrictive when we start cutting, it'll go toward neutral.
Speaker 10 (24:07):
Okay. This delay though, where you're saying is there one-time price increase for tariffs which possibly could lead into bigger inflation, or more inflation? Is that giving companies cover though to raise prices?
Chair Powell (24:20):
Well, what may be giving ... It's not our policy stance. What may be giving ... Some companies will certainly be taking advantage of the fact of the tariffs and all the discussion of how they're going to ... Companies will raise prices when and as they can. And you saw it famously in the first administration of President Trump during those tariffs. Washing machines were tariffed, but dryers weren't. But what do you know? The price of dryers went up too, just like washing machines. So companies will often just take ... They'll cross the street in a group, if you know what I mean. That'll happen. We don't see a lot of that. I mean, what we see now is basically the very beginnings of whatever the effects turn out to be on goods inflation. And I'll say again, they may be less than people estimate or more than people estimate. They're not going to be zero. Consumers will pay some of this, businesses will pay some of this, retailers will pay some of this, but we're just going to have to see it through.
Speaker 10 (25:25):
Just a follow-up if I could, some additional tariffs have been in place since February and things really haven't broken yet with the economy. So how do you justify to somebody who's looking for a house, who's facing a 7% mortgage and maybe can't afford those rates? How do you justify that?
Chair Powell (25:41):
Well, so the housing is a special case. We don't set mortgage rates at the Fed. We set an overnight rate and the rates that go into mortgages are longer-term rates like Treasury rates. It might be thirty-year rates, it might be shorter than that. But it's not the overnight Fed's rate. It's not that we don't have any effect. We do have an effect, but we're not the main effect. There are other things though going on in the housing sector and one of those is just there's a long-term housing shortage that we have. We haven't built enough housing. This is not something the Fed can help with. But then that'll be the case even after things normalize.
(26:21)
So I think the best thing that we can do for housing is to have 2% inflation and maximum employment and that's what we can contribute to housing. There are lots of other jobs to do for the private sector in Congress, but that's what we're trying to get to and we've made a lot of progress toward that. We have a very good labor market right now. Inflation, we were very close to 2%. We're seeing some goods inflation move us away. But so far, not very far away.
Speaker 11 (26:51):
Chris.
Chris (26:54):
Hi Chair Powell. Thank you. Well, can you give us a little more about what kind of economic data does the Fed need to see before you'll be ready to cut? I mean, do you need inflation back nearly to target? Are there other things in the pricing that you look for? Do you need to see weakening in the job market? What kind of things are you looking for?
Chair Powell (27:14):
I mean ultimately it could be any of those things, but if you saw that the risks to the two goals were moving into balance, if they were fully in balance, that would imply that you should move toward a more neutral stance of policy. This is the special situation we're in, which is we have two-sided risk, risk to both of our goals. When we paused, inflation was above target and the labor market was pretty good. So that was a time when policy was restrictive when we paused and to be restrictive is to be supporting a return to our inflation target. So as the two targets get back into balance, you would think you'd move in a way closer to neutral and that the next steps that we take are likely to be in that direction. What will it take? It'll be the totality of the evidence. As I mentioned, there's quite a lot of data coming in, which before the next meeting will it be dispositive of that? It's really hard to say we don't make those decisions right now, so we'll have to see.
Chris (28:24):
Well, I guess just in terms of inflation though, for example, some people would point to if it remains only in goods and it doesn't bleed over to services, then maybe that's evidence that the tariff effect is going to be a temporary one-time thing. Is that kind of thing affect your thinking or do you just need to see the number come down closer to two?
Chair Powell (28:44):
We'll look at everything. As I mentioned, a pretty reasonable base case is that this will be a one-time price increase and in the end we'll make sure that that's the case. We're just trying to do that efficiently and efficiently means getting the timing right. So again, if we cut rates too soon, maybe we didn't finish the job with inflation. History is dotted with examples of that. If you cut too late, then maybe you're doing unnecessary damage to the labor market so we're trying to get that timing right and that's effectively what we're doing.
Speaker 11 (29:22):
Claire.
Claire Jones (29:25):
Claire Jones, Financial Times. Just a question on the dollar, we've seen it decline quite heavily this year. I was wondering if there's been any discussion about that at the meetings and to what degree that may be complicating your attempts to get inflation back to target?
Chair Powell (29:42):
So this goes back to the division of labor between the Fed and the Treasury as you, I'm sure, know. And the Treasury only speaks to the dollar. It's not something that's been a topic of major discussion at all at the Fed. I wouldn't say it doesn't come up. The transcripts when they come out in a few years, they'll probably reflect some mentions of the dollar, but it would never be a major focus.
Claire Jones (30:11):
And just to follow on if I may, to Andrew's question, I think the amount of imputed data in CPI now is up to 35%. I mean, is there any discussion of that as well? Is there any consideration of looking at alternative measures, data scraping and so on, in order to just ensure you've got a good read on what's happening to prices in the U.S. economy? Thank you.
Chair Powell (30:34):
So we're monitoring the situation, we do of course. I mean as during the pandemic we looked at a whole lot of new kinds of data. People are looking at big data sets that you can get from all sorts of places and we do all of that. But the government data really is the gold standard in data and we need it to be good and be able to rely on it and we're not going to be able to substitute for that, but we will have to make do with what we have. But I certainly hope that we get what we need.
Speaker 11 (31:15):
Jay O'Brien.
Jay O'Brien (31:15):
Hi Mr. Chairman, Jay O'Brien, ABC News. President Trump has obviously invoked your name a lot. He has personally pressured you. Are you concerned the way that conduct might impact the Fed's independence going forward?
Chair Powell (31:29):
I'll just say, so I think that having an independent central bank has been an institutional arrangement that has served the public well. And as long as it serves the public well, it should continue and be respected. If it didn't serve the public well, then it wouldn't be something that we should just automatically defend. But what it gives us, and other central banks, what it gives you is the ability to make these very challenging decisions in ways that are focused on the data and the evolving outlook, the balance of risks and all the things we talk about, and not political factors. And so governments all over the advanced economy world have chosen to put a little bit of distance between direct political control of those decisions and the decision-makers. So if you were not to have that, that would be a great temptation of course to use interest rates to affect elections for example. And that's something that we don't want to do. So I think that's pretty widely understood. Certainly it is in Congress and I mean I think it's very important. I'll just say that.
Speaker 11 (32:40):
Maria Eloisa.
Speaker 12 (32:48):
Afternoon Chair Powell, Maria Eloisa Capurro from Bloomberg News. You mentioned a slowdown in consumer spending and I wanted to see if you could walk us through what was the discussion with the committee around that. We've seen delinquency rates rising for upper-income households. How do you see that evolving in the next few months? How much of a vulnerability that is for the economy going forward?
Chair Powell (33:12):
Consumer spending had been very, very strong for the last couple of years and had repeatedly forecasters, not just us, had been forecasting it would slow down and now maybe it finally has. So I would say if you talk to credit card companies, for example, they will tell you that the consumer's in solid shape and that spending is at a healthy level. It's not growing rapidly, but it's at a healthy level and delinquencies are not a problem. You mentioned high-end delinquencies. I don't know what to make of that. I read the same thing. But so generally, and if you look at the banks and when the banks talk about in their earnings calls, the performance of credit has been good. So essentially you have a consumer that's in good shape and is spending, not at a rapid rate but it's true. And it was again, right, right in line with what we expected, the GDP data that we got this week.
(34:11)
And I think it's still a little bit difficult to interpret because you have these massive swings in net exports, which may also be affecting ... Some of that can affect consumer spending as well. Look, it's one of the data points that we pay most careful attention to, and there's no question that it's slowed and we're watching it closely, but we also watch the labor market and the performance of inflation. Those are our two variables that we're assigned to maximize.
Speaker 12 (34:42):
And just to follow up on what my colleagues were asking about this [inaudible 00:34:46], Governor Waller said that the labor market is on edge and he was pointing to weaknesses on the private sector. I was wondering, you said that the main number to look at is the unemployment number overall, but what was the discussion about the state of the private jobs market?
Chair Powell (35:02):
So I'm not going to talk about any individual's comments, I wouldn't do that. But look, I think what we know is that private sector job creation, certainly in the last report that we'll see on Friday, had come down a bit. And if you take the QCEW adjustment seriously, it may be even low, it may be close to zero. But the unemployment rate was still low. So what that's telling you is that demand for workers is slowing, but so is the supply. So that's in balance, oddly enough. You've got a very low unemployment rate and it's kind of been there for a year as job creation has moved down. But also we know that because of immigration policy, really, the flow into our labor forces is just a great deal slower. And those two things
Chair Powell (36:00):
... Have slowed more or less in tandem. If you look at things like I mentioned quits, look at wages. Wages are gradually cooling. Look at vacancies to unemployment. Those things have been pretty stable for... They haven't really moved a lot in a full year. I think if you take the totality of the labor market data, you've got a solid labor market, but I think you have to see that there are downside risks. You don't see weakening in the labor market, but I think you've got downside risks in a world where unemployment's being held down because both demand and supply are declining. I think it's worth paying close attention to it and we are.
Speaker 13 (36:39):
Nancy.
Nancy Marshall-Genzer (36:44):
Hi, Chair Powell. Nancy Marshall-Genzer with Marketplace. One more question on the lack of unanimity in today's decision, the two dissents, was there talk during the meeting, I know you're not going to talk about exactly what individuals said, but in general was there talk during the meeting of cutting rates and what was the case against that at the meeting?
Chair Powell (37:05):
Sure. We have an economic go-around where people talk about the economy and that's yesterday. And then, today we have a monetary policy going all the way around the table. Everyone gives their views. The discussion around policy was... The majority view was still what it has been, which is that inflation's running above target, maximum employment is right at target, that means policy should be a little bit restrictive, somewhat restrictive, because we want inflation to move all the way back to its target. That's where people have been and still are.
(37:41)
Two of our members felt that the time had come to cut for the reasons that they're going to express. I won't tell you their reasons, they'll issue some kind of a thing in the next day or so. But that's the story. And I would say well-argued, very thoughtfully argued all around the table. Good arguments, and it's a situation, and a unusual situation, the economy is in good shape but it's an unusual situation where you have risks to both your employment mandate and your inflation mandate. That's the nature of a supply shock, and it's probably not surprising that there would be differences and different perspectives on that as well as different views of where the neutral rate is, so the different views of how tight policy is. We have those. I will say what you hope is that people explain their positions very thoughtfully and clearly and we absolutely had that today all the way around the table. I would call it one of the better meetings I can recall, from that standpoint.
Nancy Marshall-Genzer (38:46):
And you've said you're waiting to be confident inflation is heading toward your 2% target before you start cutting rates. When you do get that confidence, would you be in favor of lowering rates right away?
Chair Powell (39:00):
It's not quite the way I would put it. I said that's why we think policy should be restrictive is because inflation is above target. When we have risks to both goals, one of them is farther away from goal than the other, and that's inflation. Maximum employment's at goal. That means policy should be tight because tight policy is what brings inflation down.
(39:26)
If you came to the view that the risks to the two were more in balance, that would imply that policy shouldn't be restrictive. It should be more neutral, more a neutral stance, and that would be somewhat lower than where we are now. No one knows exactly where that is. That's the framework I think I'd be taking, and we'll just have to see. We're going to be, obviously, looking at a lot of data in the next cycle. It is one of the cycles where we have two employment and two inflation reports and we'll see where that takes us.
Speaker 13 (39:57):
Jeff Cox.
Jeff Cox (40:04):
Thank you, Mr. Chairman, for taking the question. Jeff Cox from CNBC.com. A metric that you like to cite a lot is the final sales to private domestic purchasers. That was down to a 1.2% gain in second quarter from 1.9% in Q1, suggesting that there's some softening in underlying demand. I just wonder if you look at that and you combine that with some of the housing numbers, the weakness that you acknowledged at the top of your remarks that the housing market is in fact weak, and the inflation numbers from GDP today came down to 2.1% for headline, 2.5% for core. I'm wondering how much more movement you would need to see from these data points before you would be comfortable with cutting in say September.
Chair Powell (40:49):
It's going to be the total... Hard to answer that specifically. PDFP, I think, for the first half, probably domestic final purchases, or final sales as people call it, was 1.6 on the first half. GDP, I believe, was 1.2%. That's the whole half. You mentioned the quarters. Those are slower. But GDP is bumpy quarter to quarter, half to half, and often gets revised after the fact.
(41:17)
The labor market data we continue to think is the best data we have on the economy and that shows a 4.1% unemployment rate. It shows wages still at a healthy level, but moving ever closer to what we would regard as long-run sustainable, consistent with longer-run productivity and 2% inflation, so the labor market is actually still quite solid. Inflation is above target. Even ignoring tariffs, it's a little bit above target and tariffs, so we're watching all of that, and again trying to do the right thing in what is a challenging situation because you're being pulled in two directions and you have to decide which of those to go in. And actually at some point, if they're sort of equally at risk, then you really want to be at a neutral policy stance, which we're not right now.
Jeff Cox (42:11):
So it'd be safe to say that if the data kind of stays in line with where it is right now that you wouldn't be comfortable with cutting in September.
Chair Powell (42:17):
I'm not going to say that, no. I just think we're going to need to see the data and it can go in many different directions, the inflation data and the employment data, and we're going to make a judgment based on all of the data and based on that balance of risks analysis that I mentioned.
Jeff Cox (42:38):
Thank you.
Speaker 13 (42:41):
Greg Robb, for the last question.
Greg Robb (42:45):
Thanks, Chair Powell. Greg Robb from MarketWatch. The Treasury Secretary has said recently that it would be confusing for the markets if you stayed on as a governor after your term on this Chair ends, and I was wondering if you had any update for us on a decision on that front.
Chair Powell (43:03):
Sorry, I do not have any update for you. Thanks very much everyone.
Speaker 13 (43:06):
Thanks.
Greg Robb (43:06):
Thanks.
Speaker 13 (43:06):
Thank you.