(Kitco News) – Federal Reserve Chair Jerome Powell stuck to his guns at this afternoon’s post-FOMC press conference, telling reporters the central bank would maintain restrictive rates as long as necessary and refusing to offer specific triggers or timeframes for hikes, holds, or cuts to the benchmark interest rate.
After the FOMC held the Fed Funds rate unchanged at 5.5% as expected, Powell was asked whether cuts were still on the table this year after several recent high inflation readings.
“I would say my personal forecast is that we will begin to see further progress on inflation this year,” he said. “I don't know that it will be enough, sufficient. I don't know that it won't. We're going to have to let the data lead us on that.”
When asked whether elevated inflation warranted a rate hike, Powell demurred, though he stopped short of ruling one out. “I think it's unlikely that the next policy rate move will be a hike,” he said. “I would say it's unlikely.”
Powell was also asked whether the FOMC was satisfied with 3% inflation, and if it was now the Fed’s base case for the duration of 2024, and he pushed back forcefully against the notion. “Of course we're not satisfied with 3% inflation,” he said. “3% can't be in a sentence with satisfied. We will return inflation to 2% over time.”
Another journalist raised the specter of stagflation, pointing to slowing GDP growth and still-high inflation readings, and Powell was having none of it.
"I was around for stagflation. It was brutal,” the FOMC chair responded. “Ten percent unemployment, high-single-digit inflation, and very slow growth. Right now, we have 3% growth, which is pretty solid growth, I would say, by any measure. And we have inflation running under 3%.”
“I don't really understand where concerns about stagflation are coming from,” he added. “I don’t see the stag or the flation.”
Others questioned the potential impact of the upcoming Presidential election on the Fed’s monetary policy decisions. Powell insisted that neither he nor the other members of the FOMC take elections into consideration and defied anyone to find evidence that they ever had.
"We just don't do that,” he replied. “You can go back and read the transcripts forever. This is my fourth presidential election here. Read all the transcripts. See if anybody mentions, in any way, the pending election. It just isn't part of our thinking. It's not what we're hired to do. If you start down that road, I don't know how you stop.”
Powell was also pressed on whether there had been any discussion at all about a rate hike over the two-day meeting. “The policy focus has really been on what to do about holding the current level of restriction,” he said. “That’s where the policy discussion was in the meeting.”
Asked if there was a timeframe after which persistent inflation could trigger a rate hike, Powell again rejected the premise.
“There isn’t any rule. You can’t look to a rule,” he said. “These are going to be judgment calls. Clearly, restrictive monetary policy needs more time to do its job. That’s pretty clear, based on what we’re seeing.”
The Fed Chair was also asked about the possibility that the FOMC would diverge from the monetary policies of other central banks, as many are expected to begin cutting this year, and likely before the Fed.
“You’re right, I think that may happen,” Powell replied. “I think the difference between the United States and other countries that are now considering rate cuts is that they’re just not having the kind of growth we’re having. Their inflation is performing about like ours, or maybe a little better, but they’re not experiencing the kind of growth we’re experiencing. So we actually have the luxury of having strong growth and a strong labor market, very low unemployment, high job creation and all of that. We can be patient.”
Challenged on whether the unemployment rate ticking above 4% would be enough to trigger a cut, Powell again rejected a specific figure.
“An unexpected weakening is the way I characterized it,” he said. “I’m not going to try to define exactly what I mean by that, but it would have to be meaningful, and get our attention, and lead us to think that the labor market was really significantly weakening for us to want to react to it.
“A couple of tenths in the unemployment rate would probably not do that.”
Gold prices rallied during the press conference, with spot gold rising to a session high of $2,328.43 on Powell's remarks. It last traded at $2,319.05, up 1.44% on the day at the time of writing.