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Powell Admits Statement Language is Evolving

FED

Q: You dropped the language in the statement saying the pandemic is weighing on the economy. Is this the effective end of the pandemic in your view as a constraint on econ activity?

  • A: It is a continuum. What you have seen with the pandemic is sharply declining cases, hospitalizations and deaths, and that is great and that should continue. But you also saw in the UK which has at least as high if not higher vaccination rates, they have had a outbreak of the Delta variant. You are not out of the woods at this point, it would be premature in my thinking, premature to declare victory. Vaccination still has a ways to go to a substantially higher level, and that can only help.
  • But you are right, the statement language is evolving. I would expects it to continue to evolve, there is a lot of judgment in that, but you can expect us to drag our feet a little on that, because that is what you do with statement language. It is great to see progress, but I would not declare victory yet.
  • I would say it is great to see the reopening of the economy though and to see people out living their lives again. Who doesn't want to see that? It appears to be safe and I would encourage people to continue to get vaccinated.
  • Clearly, since March, people [FOMC members?] have grown more confident in these very strong outcomes that they will be achieved, strong outcomes in the economy will be achieved. There are more grounds for confidence. We have seen growth come in higher than we expected, we have seen strong labor demand. We have seen inflation above target though, and even though in our forecasters' case they do see inflation coming back down over 2022 and 2023 into areas that are consistent with our mandate.
  • Nonetheless, the risk is something that they can factor into peoples' thinking about appropriate monetary policy. These are 18 different forecasts. I can't stand here and say exactly what was in all 18 peoples' minds. But that is something that can factor into things as well, factor into forecasts as well.
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