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Chair Powell Asked By How Much The Economy Is Being Restrained By The FFR

FED
  • Q:How much is the economy really being restrained right now by Fed funds rates? How much does it need?
    • A: I think you do see it in housing; the disinflationary process has come through the healing of supply chains, and the labor market. Supply side recovery, with tighter policy, is the mixture that has enabled this. I would point to the interest rate sensitive parts of the economy, as well as spending generally, but it is a complicated story.
  • Q: Do you think the labor market is back to normal?
    • A: I think the labor market is in many measures at or nearing normal, but not totally back to normal. Job openings are not quite back to where they were. Wage increases are not quite back to where they would need to be in the longer run. The economy is broadly normalizing. So is the labor market. That process will probably take some time. It probably will take a couple years to get all the way back. And that is okay.
    • You saw today's ECI reading. The evidence is that wage increases are still at a healthy level, but they are gradually moving back to levels that would be more associated - given assumptions about productivity - with 2% inflation.
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