Powell Says Econ Conditions Will Be Met Sooner Than Previously Anticipated

Q: If the conditions in SEP for GDP and unemp and core PEC achieved by end-year, would that constitute significant further progress? Can you describe the tone of the discussion (re rate hike median in 2023) - are we moving towards a post pandemic stance, is there greater confidence that the recovery will be a full recovery sooner than expected.

• A: The judgment of when we have arrived at substantial further progress is one that the Committee will make. It would not be appropriate for me to lay out particular numbers that do or do not qualify. That is the process that we are beginning now, at the next meeting, we will begin meeting by meeting to assess that progress and talk about what we think we are seeing, and do all of the things that you do to clarify your thinking around the process of deciding whether and how to adjust the pace and composition of asset purchases.
• Re the discussion and dots: Let me say a couple things, first of all not for the first time about the dot plot, these are of course individual projections, not a committee forecast. They are not a plan. We did not have a discussion actually of whether liftoff is appropriate at any particular year, because discussing liftoff now would be highly premature, wouldn't make sense. If you look at the transcripts from five years ago, you will see that sometimes people mention their rate path in their interventions, but often they don't. The last thing to say is the dots are not a great forecaster of future rate moves. That is not because, it is because it's highly uncertain.
• Re this meeting, the committee spelled out in our statements the conditions that it expects to see before a adjustment of the target range is made. It is outcome based, not time based. It is labor market conditions consist he wants with maximum employment, inflation at 2% and on track to exceed 2%. The projections give some sense of how participants see the economy evolving in their most likely case.
• The main message I take away from the SEP is that participants, many participants are more comfortable that the economic conditions in the committee's forward guidance will be met sooner than previously anticipated. That would be a welcome development, it means the economy will have made faster progress toward our goals.
• Rate increases are not the focus of the committee. The focus of the FOMC is the current state of the economy, but in terms of our tools, it's about asset purchases. That is what we are thinking about.
• Lift off is well into the future, the conditions for liftoff are far from maximum employment for example, it is a consideration for the future. The near term thing is, that we learn from discussion that we will begin, is really about the path of asset purchases. As I mentioned, we had a discussion about that today. And we expect to in future meetings continue to think about our progress.