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FED: Powell believes Fed is Seeing a Normalizing Labor Market

FED
  • Q: Is the Fed worried about long and variable lags on the way down?
    • A: I think the lags have showed up here in the last six months, you really do now see the restriction.  Even a few months ago, people were questioning how restrictive policy was.  Look at the labor market now.  Look at ... rate sensitive, interest sensitive spending.  You see now that policy is restrictive.  It is certainly effectively restrictive.  Yes, the lag should be on the way - It should take some time to get into the full economy and financial conditions, and that affects economic activity, hiring, and that kind of thing and ultimately inflation.  It is not instantaneous.
    • Re falling behind the curve on the downside:  It is a difficult challenge in judgement.  We don't want to go too soon.  We don't want to go too late.  We are certainly very well positioned to respond to weakness.  We have a lot of room to respond.  If we were seeing weakness - that's not what we're seeing.  Look at the numbers for the first half, it is not signaling a weak economy.  It is not signaling an overheating economy.
    • What we think we're seeing is a normalizing labor market.  We're watching carefully to see if it turns out to be more.  If it starts to show signs it is more than that, we're well positioned to respond.
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