FOMC press conference, November 3, 2021

TL;DR

Chair Powell discusses the Federal Reserve's commitment to achieving maximum employment and price stability, announces a reduction in the pace of asset purchases, and highlights the challenges posed by inflation and supply chain disruptions.

Transcript

Transcript of Chair Powell's Press Conference November 3, 2021 CHAIR POWELL. Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Today, the FOMC kept interest rates near zero and, in light of the progress the economy has made tow... Read More

Key Insights

• 💼 Economic activity has expanded, but the recovery has been affected by COVID cases, supply constraints, and bottlenecks.
• 🏃 Inflation is running above the Fed's target due to pandemic-related effects on supply and demand.
• ⚾ The Fed will begin tapering asset purchases based on progress towards economic goals.
• ✳️ The Fed remains focused on achieving maximum employment and monitoring inflation risks.
• 🛀 The labor market has shown improvement, but job gains have slowed, particularly in sectors sensitive to the pandemic.

Questions & Answers

Q: Are the markets wrong to anticipate rate hikes next year?

The focus now is on tapering asset purchases, not on raising rates. The economy has achieved substantial progress towards employment goals, but there is still ground to cover. Rate hikes will depend on the economy's path and inflation outlook.

Q: Can maximum employment be achieved by the second half of next year?

If the current pace of progress continues, it is possible to achieve maximum employment by the second half of next year. However, there are uncertainties related to labor force participation, retirements, and the impact of COVID.

Q: How does the Fed balance the tradeoff between inflation and unemployment?

The Fed takes a risk management approach, considering the level of deviation from goals and the time it will take to return to those levels. The recent rise in inflation poses risks, and the Fed is prepared to take appropriate action to preserve price stability.

Q: What is the Fed's assessment of the impact of bond purchases on the economy?

Bond purchases lower longer-term rates, stimulate borrowing and economic activity. While the exact impact is difficult to quantify, most research suggests that asset purchases support economic activity.

Summary & Key Takeaways

• The Federal Reserve remains committed to achieving maximum employment and price stability, providing strong support to the economic recovery. Economic activity expanded in the first half of the year but slowed in the third quarter due to COVID cases, supply constraints, and bottlenecks.

• Conditions in the labor market have improved, but job gains have slowed recently. Unemployment rates remain subdued, particularly among prime-aged individuals. Joblessness continues to disproportionately affect African Americans and Hispanics.

• Inflation is running above the Fed's 2% target due to supply constraints and disruptions caused by the pandemic. The Fed believes that higher inflation is primarily connected to pandemic-related effects on supply and demand.

• The Fed will begin tapering asset purchases, reducing the monthly pace of net asset purchases. The speed of tapering reflects the strong demand and progress towards economic goals.

• The Fed remains focused on achieving maximum employment while monitoring inflation risks. The timing of raising interest rates will depend on the path of the economy and inflation.