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Chair Powell Asked What Is Required To Have Confidence On Inflation

FED
  • First Q: What do you need to see for confidence on inflation, and how are you weighing consumption/activity data vs inflation?
  • A: We have confidence - we're looking for greater confidence that inflation is moving sustainably to 2%. We want to see more good data, it's not that we are looking for better data but a continuation of the better data. We've had 6 months of good data but the question is, is it sending us a true signal that we are on a sustainable path down to 2%.
  • We have had very strong growth, and have had a very strong labor market, and we have had inflation coming down. So whereas a year ago we thought we needed to see softer economic activity, that hasn't been the case. So we don't look at stronger growth as a problem. We are not looking for a weaker labor market but for inflation to come down as it has been the last 6 months.
  • It seems to be the likely case we will achieve that confidence on inflation, but we have to achieve it, and we haven't yet. You can look behind those numbers and see that a lot of it has been coming from goods inflation, for example. It is a reasonable assumption that over time, because inflation will flatten out, that would mean the services sectors have to contribute more. In other words, what we care about is the aggregate number, not so much the competition, but we need to see more. That is where we are at a committee. We need to see more evidence that sort of confirm what is we think we are seeing.
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