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Chair Powell Asked On How The Efficacy Of Rates Has Changed

FED
  • Q: What is your thinking about how the efficacy of rates has changed? How do you think about the distributional consequences (mortgage holders at low rates vs others):
    • A: Fair to say the economy has been stronger than many expected given higher rates. One explanation is that private sector balance sheets have been stronger than we had understood and spending has held up. The savings rate for consumers has come down a lot.
    • Could be that for other reasons the neutral interest rate is higher for various reasons, we don't know that.
    • It may be that policy hasn't been restrictive enough for long enough.
  • Last Q: The Beige Book showed Fed surveying nonprofits and community groups about low/moderate income Americans: are you going to use this for a quarterly survey, and from your readings, how are those Americans doing?
    • A: I don't know about the quarterly survey, that's an idea we can think about.
    • Those Americans are clearly suffering from high inflation. It's a very hot labor market and real wages are positive, so overall households are in good shape. But surveys are showing dissatisfaction and I think a lot of it is just people hate inflation which causes people to say the economy is terrible, but at the same time they are spending money.
  • Press conference ends
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