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Powell Believes That Policy Is Tight With 2% Real Rates

FED
  • Q: Why is it necessary to raise rates today if the point of lowing down was the see the effects of moves, and the last two meetings you've seen the effects of these moves?
  • A: We're trying to reach and then stay, for an extended period, at a policy stance that is sufficiently restrictive to bring inflation down 2% over time. I think slowing down was the right move, enabled us to see more data and it will continue to do so. We always have to balance the risk of not doing enough. And not getting inflation under control against the risk of maybe slowing down economic activity too much. And we thought that this rate hike along with the meaningful change in our policy statement was the right way to balance that.
  • This assessment will be an ongoing one.
  • I think that policy is tight. You have 2% real rates. That's meaningfully above what many people would assess as neutral. You see that in interest sensitive activities, and more and more other activities. If you put the credit tightening on top and the QT that's ongoing, I think you feel like we may not be far off. Possibly even at that level.
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