Chair Powell On Decisions On Size of Hikes

Q: How are you deciding the size of the hikes? Why not 100?

• A: Looking for compelling evidence inflation pressures are abating. We'd expected to see inflation flattening out right now. Want to see a series of declines. Contrary to expectations, surprised to the upside, expectations have risen, and projections for this year moved up notably, so thought strong action was needed at this meeting. Over the 7 months since we pivoted, we have seen financial conditions tighten noticeably. But Fed funds rate is 1.6%. We're moving expeditiously to more normal levels. We'd like to do a little more front loading on that. This was about the speed at which you get to the levels on the SEP. Next meeting could be a decision of between 50 and 75, in that more normal range, and that's desirable because you have more optionality there.
• The SEP says that committee would like to see policy at a modestly restrictive level by the end of the year. That's generally 3-3.5% knowing what they know now; need to show resolve but be flexible on incoming data. Could do less, could do more.
• Next year a little more tightening; FOMC sees that as the appropriate path for getting inflation back toward 2%.