FOMC Press Conference Introductory Statement, June 16, 2021 | Summary and Q&A

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June 16, 2021
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Federal Reserve
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FOMC Press Conference Introductory Statement, June 16, 2021

TL;DR

Fed Chair Powell reaffirms commitment to achieving maximum employment and price stability, notes continued support from fiscal policy and vaccinations. Economic indicators and employment continue to improve, but recovery is still incomplete and risks to the economic outlook remain. Inflation has increased but is expected to be transitory. The Fed's new framework emphasizes well-anchored inflation expectations. Fed will provide advance notice before adjusting asset purchases and maintains accommodative stance of monetary policy.

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Key Insights

  • 🥅 The Fed aims to achieve its monetary policy goals of maximum employment and price stability. It will provide powerful support to the economy until the recovery is complete.
  • ❓ Economic indicators and employment have been strengthening, but the recovery is still incomplete.
  • 🧑‍🏭 Inflation has increased in recent months, driven by factors related to the reopening of the economy. The Fed expects inflation to be transitory and move back toward its longer-run goal.
  • 👶 The Fed's new framework emphasizes the importance of well-anchored inflation expectations and will adjust monetary policy if necessary.
  • 📼 The Fed will provide advance notice before adjusting asset purchases and maintains an accommodative stance of monetary policy.

Transcript

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 Federal Open Market Committee kept interest rates near zero and maintained our asset purchases. These measures, along with our strong guidance on interes... Read More

Questions & Answers

Q: How has the economy and employment been impacted by the pandemic?

The economy has been strongly affected by the pandemic, but indicators of economic activity and employment have been improving. Sectors most affected by the pandemic remain weak, but household spending is rising, and the housing sector and business investment are strong.

Q: What is the current state of the labor market?

Employment has been improving but at an uneven pace. The unemployment rate remains elevated, and factors related to the pandemic, such as caregiving needs and unemployment insurance payments, are weighing on employment growth. However, as vaccinations increase and the economy reopens, it is expected that employment will experience more rapid gains.

Q: Is the Fed concerned about inflation?

Inflation has increased notably in recent months due to factors like supply bottlenecks, rebound in spending, and reduced pandemic-related effects. The Fed acknowledges the possibility of inflation remaining higher than expected but believes that these factors are transitory. The Fed will monitor inflation closely and use its tools to address any persistent high inflation.

Q: How will the Fed approach tapering its asset purchases?

The Fed will consider tapering its asset purchases when substantial further progress has been made toward its goals of maximum employment and price stability. The exact timing will depend on the pace of progress and will be communicated well in advance. The Fed aims to ensure an orderly, methodical, and transparent tapering process that does not erode the overall strength of bank capital requirements.

Summary & Key Takeaways

  • Powell reaffirms commitment to monetary policy goals of maximum employment and price stability.

  • Economic indicators and employment continue to strengthen, but recovery is still incomplete.

  • Inflation has increased, but factors driving it are expected to be transitory.

  • Fed emphasizes importance of well-anchored inflation expectations and will adjust policy if necessary.

  • Fed will provide advance notice before adjusting asset purchases and maintains accommodative monetary policy stance.

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