FOMC Press Conference, July 28, 2021 | Summary and Q&A

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July 28, 2021
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Federal Reserve
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FOMC Press Conference, July 28, 2021

TL;DR

Fed Chair Powell affirms the Fed's commitment to achieving maximum employment and price stability, while acknowledging the progress in vaccinations and fiscal policy actions in supporting the economic recovery. He expects inflation to remain elevated in the coming months before moderating, and emphasizes the importance of having well-anchored inflation expectations. The labor market has improved, but there is still progress to be made, particularly for lower-wage workers and minority groups.

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Key Insights

  • 💪 The Fed expects strong job growth and believes that Americans want to work, but there may be factors such as ongoing pandemic-related concerns and generous unemployment benefits that are currently impacting labor force participation.
  • 😄 Inflation is driven by supply-side factors rather than robust demand, and it is expected to moderate in the long run as supply constraints ease and price increases become more balanced.
  • 💪 The Fed's regulatory policies, including strong capital requirements, are designed to ensure the stability and resilience of the banking system, which ultimately supports access to credit for all communities.
  • ⚾ The Fed will continue to assess economic data and make decisions based on progress towards its goals and the need to support the economy and maintain price stability.

Transcript

Transcript of Chair Powell's Press Conference July 28, 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 Federal Open Market Committee kept interest rates near zero and maintained our asset purchase... Read More

Questions & Answers

Q: How does the Federal Reserve define "substantial further progress" in terms of maximum employment?

"Substantial further progress" is a broad range of data related to the labor market, including unemployment rates, labor force participation, wages, and job openings. The Fed is looking for strong job numbers and significant improvement in these areas to reach maximum employment.

Q: Is the recent rise in inflation meeting the Fed's threshold of moderately exceeding 2 percent for some time?

The recent rise in inflation is above the Fed's 2 percent target, but it is considered transitory. It is driven by temporary factors such as supply bottlenecks and the reopening of the economy. The Fed expects inflation to moderate in the long run and is closely monitoring inflation expectations.

Q: How does the Delta variant of COVID-19 impact the Fed's thinking on tapering its asset purchases?

The Delta variant poses significant health risks and could have economic implications if people reduce their activities due to fear of infection. The extent of the impact on the economy will depend on factors such as vaccination rates and the specific measures taken to contain the virus. The Fed will monitor the situation carefully.

Q: Is the Fed considering different approaches to tapering its purchases of Treasury securities and mortgage-backed securities?

There have been discussions about the timing and pace of tapering asset purchases, including MBS purchases. While some participants have raised the possibility of tapering MBS purchases at a different pace, there is little support for tapering them earlier than Treasury purchases. The decision on tapering will be based on the progress towards the Fed's goals and the overall economic conditions.

Summary & Key Takeaways

  • The Federal Reserve remains committed to achieving maximum employment and price stability.

  • The progress in vaccinations and fiscal policy actions are supporting the economic recovery.

  • Economic indicators show continued improvement, but some sectors are still constrained by supply shortages.

  • The labor market has improved, but unemployment rates do not fully reflect the shortfall in employment.

  • Inflation has increased, largely due to supply bottlenecks, but is expected to moderate in the long run.

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