MNI TRANSCRIPT: Powell on 2018 Economy

     WASHINGTON (MNI) - The following is the portion of a transcript from

Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting

Wednesday:

     Q: You started by talking about Paul Volker who cast a long shadow. I

wonder if in hindsight that shadow was too long, and if in the decade since his

tenure and in particular last year, if the fed was too quick to raise interest

rates, to attack an inflation boogeyman that didn't materialize.

     A: This wouldn't be, my response will not be about Paul Volker. But so

though you started with Paul Volker. If you look at 2018, I'll take you back to

the beginning of 2018, we had a economy growing at 3 percent, we had inflation

at 2 percent. We had a trillion and a half dollars worth of stimulus arriving

and the federal funds rate was 1.4 percent. It wasn't that, we moved policy up

during the course of the year. We never got policy even at the level of what we

thought the neutral rate was at the time. There was no sense of it being

restrictive. We took steps to make it less accommodative. That seemed to be the

right thing. It still seems to me to be the right thing in hindsight. The idea

that we were trying to slow the economy down, we were really just trying to get

near neutral, and even with the last rate increase a year ago, we were still

meaningfully below the median estimate on the committee of what the neutral rate

was. Policy was always accommodative during the course of that year. What

happened is obviously, the facts on the ground have changed. You saw the global

economic slowdown begin in the middle of last year, gather force and then

continue to go on this year. You have seen a continue all weakening. Look at the

IMF forecast of growth from the spring of 2018 and compare them to now. You have

had quite a significant -- that does affect us. Also the trade situation was

just beginning in the middle of '18, and I think it has had, there will be very

wide range of estimates of the effect, but it's had a meaningful effect on

output through the uncertainty channel and to a lesser extent through the tariff

effects. That is not to make a judgment. It is not up to us to make a judgment

about that. That is what, that will be my story.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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