FOMC Press Conference January 30, 2019: Introductory Statement

TL;DR

Chairman Powell provides an overview of the economic outlook for the U.S., including a summary of the discussion around interest rate policy and the balance sheet. The Federal Reserve maintains its commitment to sustain the economic expansion while closely monitoring crosscurrents and uncertainties.

Transcript

Transcript of Chairman Powell's Press Conference January 30, 2019 CHAIRMAN POWELL. Good afternoon, everyone, and welcome. I will start with a recap of our discussions, including our assessment of the outlook for the economy and the judgments we made about our interest rate policy and our balance sheet. I will cover the decisions we made today as we... Read More

Key Insights

• 💪 The Federal Reserve emphasizes its commitment to sustain the economic expansion and maintain a strong job market.
• 🐢 Slowing growth in China and Europe, unresolved government policy issues, and tighter financial conditions contribute to a somewhat uncertain economic outlook.
• ☠️ The FOMC adopts a patient approach to interest rate changes and continues to monitor data and risks.
• 💦 The Federal Reserve is working towards finalizing plans for the remaining stages of balance sheet normalization, taking into account the financial system's demand for reserves and potential risks.
• ❓ The FOMC's decisions and statements reflect a data-dependent approach, focusing on economic conditions and their implications for policy adjustments.
• 🛟 Financial institutions' demand for reserves and the potential impact of the balance sheet normalization process are subjects of ongoing discussion within the Federal Reserve.

Questions & Answers

Q: Has the current economic outlook influenced the Federal Reserve's decision to adopt a patient approach to interest rate changes?

Yes, the FOMC believes that its current policy stance is appropriate given the positive outlook for the economy and the presence of uncertainties. The goal is to sustain the economic expansion while monitoring risks.

Q: How does the Federal Reserve view the risks posed by slowing growth in China and Europe?

The FOMC acknowledges the impact of slower growth in major foreign economies, particularly China and Europe, on the global economic outlook. These risks, along with unresolved government policy issues and tighter financial conditions, have contributed to a somewhat contradictory picture of strong U.S. macroeconomic performance.

Q: How does the Federal Reserve assess the impact of the partial government shutdown on the economy?

The Federal Reserve recognizes the potential economic impact of the government shutdown, particularly if there were to be another shutdown. However, if the shutdown is resolved without further disruptions, the lost GDP would likely be regained in the second quarter.

Q: What are the Federal Reserve's plans regarding the balance sheet normalization process?

The FOMC has made progress in clarifying the path forward for balance sheet normalization. The Committee has decided to continue using the current operating procedure, which involves actively managing reserves to control the federal funds rate. The ultimate size of the balance sheet will be driven by financial institutions' demand for reserves, with a buffer to prevent frequent market interventions.

Summary & Key Takeaways

• The U.S. economy is in a good place, with a strong job market and stable inflation.

• The Federal Reserve expects the economy to grow at a solid pace in 2019, but crosscurrents and uncertainties pose risks to the outlook.

• The Federal Open Market Committee (FOMC) decided to adopt a patient approach regarding future interest rate changes in light of global economic and financial developments and muted inflation pressures.