TRANSCRIPT: Fed’s Powell: Outlook Highly Uncertain for Effect of Higher Gasoline Prices on Consumption

WASHINGTON (MaceNews) – The following is a rough transcript of Federal Reserve Chair Jerome Powell’s post Federal Open Market Committee news conference Wednesday:

Powell>> Good afternoon, my colleagues and I remain squarely focused on achieving our dual mand goals for the maximum employment for the benefit of the U.S. people.

The employment is stable and prices and the jobless rate is little changed and inflation is somewhat elevated. Today, the FOMC decided to leave our policy rate unchanged. We see the current stance of monetary policy as appropriate to promote progress toward our maximum employment and 2% inflation goals.

The implications of developments in the Middle East for the U.S. economy are uncertain. We will remain attentive to risks to both sides of the dual mandate. I will have more to say about the monetary policy after briefly reviewing economic developments.

Available indicators suggest economic activity is expanding at a solid pace. Consumer spending resilient and fixed investment continues to expand. In contrast, activity in the housing sector has remained weak.

In the summary of economic projections, median participant projections are GDP will rise 2% this year and 2.3% this year, somewhat stronger than projected in December. In the labor market, the unemployment rate is 4.4% in February and changed little since late last summer.

Job gains have remained low. A good part of the slowing in the pace of job growth over the past year reflects a decline in the growth of the labor force due to lower immigration and labor force participation though labor demand has softened as well.

Other indicators, including job openings, layoffs, hiring, nominal wage growth generally show little change in recent months.

In our SEP, the median projection of the unemployment rate is 4.4% at the end of this year and edges down thereafter.

Inflation eased from the highs in mid 2022 but remain somewhat elevated relative to the 2% goal. The data indicates that the total PCE prices rose 2.8% over February and excluding the volatile food and energy, core prices rise 3.3%. The elevated readings reflect inflation in the goods sector boosted by the effects of tariffs.

Near term measures of inflation expectations have risen in recent weeks, likely reflecting the disruptions in oil. Longer term expectations remain consistent with the 2% goal. The median for the total inflation is 2.7% and 2.2% next year, a bit higher than projected in December.

Our monetary policy actions are guided by our dual mandate to provide maximum employment and stable prices for the American people. At today’s meeting the committee decided to maintain the target range at 3.4 and 3.75%. Last December we lowered the percentage rate to a range of plausible estimates of neutral.

This normalization of the policy stance should continue to help stabilize the labor market while allowing inflation to continue the downward trend toward 2%. The implication of the events in the Middle East for the U.S. economy are uncertain. In near term, higher energy prices will push-up overall inflation, it is too soon to know the scope and duration of the potential effects on the economy.

We will continue to monitor the risks to both sides of the mandate. We’re well positioned to determine the time of adjustments to the policy rate based on the incoming data, evolving outlook and balance of risks.

In our SEP, FOMC participants wrote down their individual assessments of the appropriate path of the federal funds rate under what each participant judges to be the likely scenario for the economy. The median participant projects that the appropriate level of the federal funds rate will be 3.4% at the end of this year and 3.1 at the end of this year, unchanged from December.

As is always the case, the individual forecasts are subject to uncertainty and not a committee plan or decision.

Monetary policy is not on a preset course and we’ll make our decisions on a meeting by meeting base.

To conclude, the Fed has been assigned two goals for monetary policy, maximum employment and stability prices. We remain committed to supporting maximum employment bringing inflation sustainably to the 2% goal and keeping longer term inflation expectations well anchored.

The success on delivering on the goals matters to all Americans. We at the Fed will continue to do our jobs with objectivity, integrity and deep commitment to serve the American people. Thank you. I look forward to your questions.

Question – Colby Smith, “New York Times.” There is debate that the Fed which look through the higher oil prices from the Middle East conflict. Is that the right approach at this juncture accident to what extent is the inflation above target for roughly five years influence the committee’s thinking around this? 

Powell>> First, let me say we’re well aware of the performance of inflation over the last few years how a series of shocks have interrupted progress we made over time. That happened most recently with tariffs and now there will be some effects on inflation going forward.

The thing that is really important that we see this year is progress on inflation through a reduction in goods inflation as the one-time effects on prices of tariffs go through the system and the economy. That is the main thing we’re looking for, going into this exercise. And we need to be seeing that to, you know, to sort of understand that we actually are making progress because on net we didn’t make progress. If you look at total inflation, I’m sorry, total core inflation, it is about 3%. Some big junk between half and three quarter is tariffs, we’re looking for progress on that.

The question of whether we look through the energy inflation doesn’t arise until we have checked that box.

Of course, it is standard learning that you look through energy shocks, but that has always been dependent on remaining inflation anchors.

And now what you mention the broader context of inflation above target. We have to keep all of those thing in mind.

The question of looking through when it does arise will be one to approach not lightly, but in the context that you mentioned.

>> QUESTION: Just on the SEP, can you help us make sense of why there is still a bias to cut from most officials, despite the revision for core inflation and unchanged forecast for growth and unemployment?  Curious, what is the genesis — what is the need for the cut? 

>> There are 19 people, 19 reasons, 19 individual submissions. But, if you notice, the median didn’t change, but there was actually some movement toward a meaningful amount of movement towards fewer cuts by people.

So four or five people went from two to one, let’s say, two cuts to one cut.

And each person has individual, you know, stories behind what they want to do.

Essentially it is that, you know, the forecast is that we will be making progress on inflation. Not as much as we hoped, some progress on inflation. It should come, as we start to see in the middle of the year, progress on tariffs, going through once and tariff inflation coming down. We should be seeing that you know, the rate forecast is conditional on the performance of the economy. So if we don’t see that progress. Then you won’t see the rate cut.

>> QUESTION: Thank you, Howard Schnieder with Reuters. To follow up and be clear. Is the higher inflation penciled in here for 2026 solely a result of the oil shock or something else? 

>> That is going to be part of it. You know, that wouldn’t be most of core. The oil shock for sure shows up here. Some of that will be in core as well. No, there is also just the feeling that we haven’t seen, you know, the progress that we hoped for on core goods. And on tariffs and on the rest of it. You know, for whatever reason people did write up their inflation forecast, that would certainly be tied to the events in the Middle East and price of oil.

It is also a reflection of this slow progress we have seen on tariffs. Which we believe we will see. Is it a question of how long it takes for them to get all the way through the economy. It just takes time.

>> QUESTION: And is the lack of change in the SEPs to explicate this a little bit, more due to the expectation that the oil portion of this will pass-through?  Or more out of concern that there is a potential blow to consumption and growth coming in the form of wealth effects with the stock market down and form of gas prices, diverting spending from other parts of the economy? 

>> I didn’t get the second part of the question.

>> QUESTION: The consumer will be potentially diverting money to gasoline from other parts of the economy. Could be a gross shock or redistribution of consumption, wealth effects. Is the rate forecast not changing because the oil shock will be temporary or you are sure you are positioned because growth starts to slow.

Powell>> I want to emphasize, nobody knows, the economic effects could be smaller or much bigger. We just don’t know.

People are writing down what seems to make sense to them.

But no conviction. To your point, if we have a long period of much higher gas prices that is going to weigh on consumption and disposable personal income and consumption. We don’t know if it will happen. Could be much lower than expected pass-through. People write down, you know, this is one of the SEPs where a number of people mentioned if we were ever to skip an SEP, this is a good one. We just don’t know.

I wouldn’t say there is a conviction that this is going through quickly or not quickly. You have to write something down. And this is something that is — that people wrote down. So, you know, we don’t debate how do you do that. We wouldn’t be able to debate the length or size of the effects would be. We have to make an individual statement.

Also what you have written down before, you would be reluctant to move too far away from that, because you don’t know. It is so unclear what the direction from this particular end will be.

Meanwhile, the economy, the growth is solid, the inflation, overshoot is mainly from the goods and tariffs.

And, you know, the labor market is unemployment rate is little changed since September.

Very, very low break even rate apparently for new jobs with little growth in demand or supply. The U.S. economy is doing, you know, pretty well.

It is just we don’t know what the effects of this will be. Really no one does.

>> QUESTION: Mr. Chair, in the past, the staff suggested that higher oil prices, they have hit the consumption that was being talked about, but that is somewhat offset by increase to domestic production. Could you talk about that dynamic especially to the extent how much U.S. production is happening right now.

>> CHAIR: So, the first thing is there is, you know, the original thinking, the longstanding thinking is that you do look through energy shocks. As I mentioned that is conditioned on inflation expectations that kind of thing. Your question was? 

>> QUESTION: The staff was saying and has said in the past.

>> CHAIR: Offsets.

>> QUESTION: Offsets, yeah.

>> CHAIR: That is true. We’re a net exporter of energy. Any effects on employment, economic spending, that would be offset by some extent by the fact that oil companies will be more profitable and do more drilling. If you ask oil companies about more drilling, they will want to see a consistent rise in oil prices from where they were before the build up for the war. And they’re going to want to believe that that is going to be persistent for a fairly long time. They’re not sitting there waiting for oil to go over $70 a barrel and start drilling. They’ll make a reasoned judgment that we’ll have higher oil prices for an extended period of time.

Meaningfully higher. Not much would be happening, but some could happen over time if you see that. You know, the net of it, of the oil shock will still be some downward pressure on spending and employment and upward pressure on inflation of course.

>> QUESTION: If I can follow up on Colby’s question. How much do you worry that having looked through tariff inflation and running above target and looking through the oil price shock would undermine the credibility to the commitment to the 2% target? 

>> CHAIR: We have to do our analysis and think the things through carefully. Of course, that is on everyone’s mind.

We’re well aware of the history. You don’t want to overreact to that. You want to make the best judgment you can based on the facts. I don’t think we will let it color our decision-making more than is appropriate. It is more the thought that it has been five years and we had the tariff shock, the pandemic, and now we have an energy shock of some size and duration. We don’t know what that will be actually. It is one of the things where it is a repeated set of things.

You worry that that is the kind of thing that can, you know, cause trouble for inflation expectations. And so we worry a lot about that. You know, we are strongly committed to doing what it takes to keep inflation expectations anchored at 2%. I think it is important that we do that. Very important.

>> QUESTION: Nick Timiraos, Wall Street Journal. If the ongoing overshoot in housing services not just goods and economy doing fairly well as you outlined, what gives you confidence that inflation returns to target over the next couple of years? 

>> CHAIR: Okay. I would say the rate, you can characterize it in the high end of neutral or characterize it as perhaps mildly restrictive, even modestly restrictive. No one knows for sure. It is in the range where it is somewhere around the borderline between restrictive and not.

Remember that a big part of the disinflation we’re looking for is just the runoff of when tariffs are put into place.

When they do is raise prices to some extent, to the extent the prices or tariffs are paid by consumers on a one-time basis. We’re waiting for that process. It takes eight, nine, 10, 11 months, a year to go through the system. We’re waiting for the tariffs, which are put in place over the course of the middle part and later last year, we’re waiting for that to go through the system. So that goods inflation will return closer to what it has always been. It used to be for many years, it was negative. And you know, the year before tariffs came in, it was zero. And it is running at like 2% now. So that is kind of goods inflation is running at 2%.

That is not coming from standard Phillips curve restrictive, you know, policy. It is coming from the runoff of a one-time thing. We also think it is important, though, to keep policy mildry restrictive or close to that. Not too restrictive because of the weakness in the downside risk of the labor market.

We’re balancing the two goals in a situation where the risks to the labor market or downside, which would call for lower rates and the risks to inflation are to the upside or higher rates, not cutting.

We’re in a difficulty situation. We feel like the framework calls to balance the risks. We feel where we are now is on the higher borderline of restrictive versus not restrictive, we feel-like that is the right place to be.

>> QUESTION: Some on housing feel like it hasn’t come down in the last year. If the wage and labor market is loosened.

Why is housing inflation not slower to follow? 

>> CHAIR: It is a good question. It is frustrating. Non-housing services have basically moved sideways for a year. At the same level. We expect they’ll come down. Stay bunch of idiosyncratic things.

At the same time that is something we should see. To your point, the labor market is clearly not a source of inflationary pressures. That should matter for non-housing services. We’re not seeing progress there.

What we expect for next year is continue — for this year, we want to continue having progress on housing services, finally seeing the goods inflakes come back down because of the tariffs are and also get help from not housing services. That is what we would like to see. It is a good question of why we didn’t see much of that last year.

>> QUESTION: Edward north with Fox business. In December we saw employment numbers revise down to negative 17,000. Revised January and February posted a loss. Is the employment side a far greater risk than employment. PCE has ticked down overall.

>> CHAIR: You know, I wouldn’t say that. I wouldn’t say that is clear at all. That one is more a risk than the other.

You can point to the unemployment rate being stable. You know, in a world where both supply and demand for workers have come down very sharply over the course of the past year due to immigration policy largely. You know, a ratio is going to be a better thing to look at than job creation for example. The ratio is the unemployment rate stable since September.

That tells that inflation, you know, you can — we’re at 3.0% core inflation 2.8% headline.

So we have been well above the 2%, that amount, whatever it is. 0.7, 0.8, full percentage point for some time. That is a concern. We need to be below 2%. We need to focus on that.

Even though we face new inflation from energy. I would be hard-pressed that is one is obviously more at risk than the other.

>> QUESTION: If I may, what happens if there is no Federal Reserve chairman confirmed on May 15. Would you stay on? 

>> CHAIR: If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. That is what the law calls for. That is what we have done on essentially occasions including involving me. And what we will do in this situation.

And while I’m at it. On the question on whether I will leave while the investigation is ongoing. I have no intention of leaving the board until the investigation is well and truly over with transparency and finality, I would refer you to the statement that was in the Fed’s brief that you all have seen. I won’t have anything more for you on that.

On the question of whether I will serve as a Governor after my term ends and the investigation is over, I have not made that decision yet. I will make that decision based on what I think is best for the institution and for the people we serve. Figuring you probably were going to set the dominoes off there. I’m not going to have any more to say on those issues, by the way.

>> QUESTION: Claire Jones Financial Times. Thank you very much. People have drawn few historical parallels, with the current situations, we have seen oil shock in the past. The Fed response on the growth risks is the right parallel to what extent would you agree with that and what extent are we in a different place today?  Thank you? 

>> CHAIR: It is hard to say until we see the actual situation. In some circumstances that might be the right case. In fact, for example, if we see the kinds of disinflationary progress we expect to see due to tariffs that I mentioned, I think it is hard to say. It will depend on some extent on the size and duration of effects we’re seeing on prices. It will depend a lot on what we see in inflation expectations.

>> QUESTION: One follow-up if I may on the BLS report mentioned there. It doesn’t seem from the projections or comments you made today about the unemployment rate and focusing on that. Your view on the labor market story to a large part in the supply side story changed, despite the negative number in February.

Would that be the right take?

Was there anyone else in the room who thought differently and that the February job report was cause for concern?

>> CHAIR: I think you have to take the two together. In a way, the January report was a positive surprise and the February report was a negative surprise. If you put them together, you get something not quite in the middle. You have to really as you do, realize there was a strike. There was weather. That is about 80,000 of the negative effect total on the February report.

Notwithstanding that — what do you see if you take a step back overall. A number of indicators that suggest the degree of stability. The thing that a good number of people on the committee are concerned about, is just the very low level of job creation.

If you adjust what has been the trend job creation over the past six months, if you adjust that for what our staff thinks is the overstatement due to overcounting, effectively there is zero net job creation in the private sector.

Actually that looks like that is about what the economy needs in terms of dealing with very low nonexistent growth in the labor force. Which we never had in our history. So you have got a sort of zero employment growth equilibrium.

Now, that is balance, okay.

But, you know, I would say it does have a feel of downside risk. And it is not kind of a really comfortable balance.

You know, we look at that, we see it, we get it. Everybody understands the arithmetic.

You can say the break even is zero. But nonetheless, it is something we’re watching carefully. You know, are concerned about, but ultimately, you can argue it is a consequence of deliberate policy, which is really the changes to immigration. That is the biggest factor there.

But nonetheless, something we watch carefully.

>> QUESTION: Thanks, chair Powell. The economy experienced a series of supply shocks, COVID, tariffs, two oil price shocks. Do you think that is bad luck or something has changed in the world that makes supply shocks more common and does the Central Bank need to take into account the supply shocks as a more common problem? 

>> CHAIR: We did go through a long period where the shocks were all demand shocks. We had a lot of practice in thinking about supply shocks in the last four or five years for sure. It is a much more difficult thing. It does immediately raise the question of tension between the two parts of our mandate.

But, you know, has the world changed?  COVID is a one-time thing, right? 

This energy supply shock is a one-time thing. It is not because of some broad tendency, I don’t think.

The oil shock with Ukraine was a consequence of military action. I don’t know that the world changed that there will be more supply shocks but people have written that paper and that speech a number of times. People tried to make the case that is the case. In fact, we have seen more supply shocks in the last five years than we have seen in many years before that. It is a fact.

>> QUESTION: Okay. You said last year the Fed was reviewing the communication strategy including the SEP as part of the framework review.

What happened to that?  I have like five follow-ups to that.

But I guess, what would you change about the communications if you had a time? 

>> CHAIR: What happened about that was not much. I will tell you why. So … we looked carefully at many aspects of the SEP and our communications. And there just weren’t any ideas that had very broad support on the committee. You don’t want to make a change to your communications unless you have the committee behind that. So we didn’t really make changes on that. I had hoped that some things I wanted to do. They didn’t attract broad support.

We already made all the changes we made to the framework. That was a critical thing.

So we didn’t. You know, I wish we had been able to do some things. But, you know, we didn’t. So maybe the next chair will take a look. I’m sure he will.

>> QUESTION: Michael McKee Bloomberg television and radio. Some members wanted to include a two-sided guidance on policy?  Was that discussed today?  Given the rise in inflation expectations how much support for a two-sided policy warning would there be?

>> CHAIR: It did come up today. The possibility that our next move might be an increase did come up at the meeting as it did the last meeting. The vast majority of participants don’t see that as their base case. We don’t take things off the table. You correctly characterized, you know, what was in the minutes that several panes indicated something very much like the conversation did happen. What was the second question? 

Question – But follow-up is there are a lot of goods besides oil trapped in this trade and a lot of supply chains getting snarled. How much concern do you have about whether this is an inflation problem beyond oil whether there is anything you can or would do about it, given the efficacies of monetary policy? 

>> CHAIR: You know, you can worry about other commodities. You can worry about all of the ways that oil commodities go into manufacturing. That kind of thing. The truth is it is completely out of our hands. Like everybody else, we have to wait and see what happens. It will come down to how long the current situation lasts. And then what are the effects on prices and how consumers react. That kind of thing. I really wouldn’t speculate. There is not a lot to do other than watch and see.

>> QUESTION: Mara Lisa, Bloomberg news. You said longer term merges of inflation expectations deflect confidence that it will get back to the 2% goal. There are colleagues that pointed to higher dispersion in household service and business as well. That is a signal that inflation expectations may be less tricky than in the past. I wonder if there was a discussion in this meeting across the committee. What are the views of the stage of inflation expectations and the risk from higher oil and gas prices? 

>> CHAIR: So at this meeting, a number of people mentioned and staff briefed on short-term expectations having moved up quite a lot. For reasons we understand well.

Long-term expectations you can find one that is troubling or some aspect of one that is troubling. Ultimately through this whole period, the overwhelming majority of the things we look to including markets, including surveys of the public and also of forecasters, they have all been pretty solid on longer term inflation expectations being right where they need to be, consistent with 2%. That continues to be the case. We didn’t have a lot of conversation about that. I think everyone does agree that, you know, we will be watching those extremely carefully as we see the effects of the price increases come through from the conflict.

>> QUESTION: And how the discussion went across the committee before coming to this meeting, there were members that were discussing the risk of slow growth and a time of inflation remains high. It doesn’t seem that most members are penciling the slow growth. Is there any discussion of the risk of stagflation at this point? 

>> CHAIR: People wrote up the growth forecast by a 10th. That is probably with just growing confidence in productivity. Sorry, the second question was …

>> QUESTION: If there were discussions about the risk of stagflation? 

>> CHAIR: There is tension between the two goals. The upward risk for inflation and downward risk for employment.

That puts us in a different situation. You know, when we use the term stagflation, I have to point out that was a 1970s term at a time when unemployment was double figures and inflation and misery index. That is not the case. We have unemployment really close to longer run normal and inflation that is one percentage point above that. Calling that stagflation, I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we’re in.

What we have is some tension between the goals. We’re trying to manage our way through it. Very difficult situation nothing like what they faced in the 1970s. I reserve stagflation for that period, maybe that is just me.

>> QUESTION: Elizabeth with ABC news. President Trump said prices will go down rapidly when the war ends. Do you agree with that? 

>> CHAIR: I don’t have a forecast on that? 

>> QUESTION: Thinking about the impact of American households, they’ve faced the prices for years and an almost $1 increase in gas. How worried about you about lower income families feelingg the price hikes and some people will be braced for costs of food now?

>> CHAIR: We don’t know how big the effects will be. Of course, people are already seeing gas prices up almost a dollar a gallon. We hope that isn’t for a long period of time. Of course, people will feel that. I don’t want to speculate about what that might mean. Honestly that would sound like I have an idea of what will happen.

We’ll see how it works out. I would leave it at that.

>> QUESTION: Hi, Victoria Guida, Politico.I want to ask for purposes of the next meeting, how the Middle East war develops between now and then, how are you thinking about what might guide action at the next meeting?  If we have oil prices, you know above $100 a barrel the entire time until the next meeting, will that change your weight in C stance?  What would lead you to move?  Are you on hold indefinitely? 

>> CHAIR: We will have to wait and see. I mean, you know, we always say we will learn more by the next meeting and usually we do. In this case, we will learn a lot. We will learn six weeks to the day until the next meeting. We will see whether what happens — it is going to be very important for the way the economy looks and the way the outlook evolves with what happens in the Middle East.

That will be a big factor. We’ll know that then. I don’t know how it will impact our thinking. I don’t.

We did talk about alternative scenarios but it is — I wouldn’t bring it in here. It is very uncertain. I want to remember that we don’t know.

We shouldn’t assume it will be one thing or another. We will see.

>> QUESTION: Is it a matter of you don’t know how the situation itself will evolve or even if things remain as they are, the economy could still remain durable in the face of them? 

>> CHAIR: That is true, too.

The U.S. economy has just, you know, made — it has been strong through a whole bunch of challenges.

If you go back two 2023 when we raised rates a lot in 22 and 23. And close to 100% of economists called for a recession which didn’t happen. 2023 was a really strong year. So the U.S. economy has really been just … just doing pretty well through a lot of significant changes. It has been amazing to see.

I don’t know what will happen in the next intermeeting cycle or in the Middle East. I wouldn’t want to speculate.

>> QUESTION: Hi chair Powell, thanks for taking the questions. What makes you certain the tariff related price increases will be a one-time effect. I don’t think we have seen you since the tariff Supreme Court decision.

Powell – None of us know what the shock will be for the tariffs being overturned. What makes you question the tariffs are a one-time price effect.

I would not use the word certain about my views on that. I’m not certain. I’m uncertain. If you think about what it is, it is a one-time increase in the price of a good. Right?  And what inflation is, it is, you know, ongoing increases in prices this year, next year, the year after. That is what inflation is. It is not a one-time price increase. It is a big difference. The public doesn’t focus on that. That is the difference. Tariffs should be, you know, in theory, unless they cause people to start expecting still more tariffs the next year and still more tariffs the next year they should be a classic one-time thing. People say the same thing traditionally about an energy price spike.

Traditionally, prices go up and back down. By the time the monetary policy reacts, it would be over. So I don’t have tons of confidence on that. I think the theory is right. As usual, the time it takes to get all the way through the economy is very uncertain. We found that coming out of COVID. The inflation did go away. Largely for the reasons we thought it would. But it took two years longer than we thought.

So I think we have to be humble about knowing how long it will take for tariffs to go all the way through the economy. So what we have been doing is our staff has been doing, it is very interesting, you know, they started off with just an estimate because there wasn’t a real history.

Based on the history they’re seeing of tariffs coming through into prices, they’ve now had an arc and for all of the tariffs they can say, you know … I think we have a slightly more confidence that we will see tariff inflation coming down. Not prices. But you won’t see further increases. We should see that more and more in the middle parts of the year. We expect that.

You are right, the level of tariffs came down fairly meaningfully in the wake of the Court decision. But the administration said they’re going to move and get that rate right back up to where it was. So, we assume that they’ll do that over time.

That is how we think about it.

>> QUESTION: Thank you.

>> QUESTION: Hi, thank you, Chris Rugaber with the associated press. You talked about the shortcoming of the SEP, I wanted to ask about or throw in the additional thing, it is happening before transition. Is there still value perhaps in the public knowing what other fed officials are thinking?  The ones that will stay on the rest of the year and beyond? Does that even handicap your successor in any way?  In terms of having a whole committee expressing its views?  Is that something that locks them in for the rest of the year?  Upon.

>> CHAIR: No, never. The SEP, people are more than happy to change their SEP dots. No way bound by them. It is your opinion at a moment in time which can change based on events sometimes very quickly.

It never locks people in. You know, people are more than happy to be proven wrong in either direction.

So I just think we do it. You know, I mentioned this is a time when it is hard to do it.

During the pandemic, we took one meeting off, I think. We don’t like to do that because it is hard to do. We should just keep doing it.

I should say for this one, I think it is more than usual and take the forecast with a grain of salt. Subject to high levels of uncertainty.

>> QUESTION: Brian Chung NBC news. You mentioned you are well aware of the history of inflation running above target. It seems like that might underpin the signs on Main Street. Is that impacting the psychology of the consumer, given that they’re a big driver of the overall economic activity.

>> CHAIR: I’m not sure what it is all about. I will tell you what we think in surveys.

People there were big price increases. All around the world, by the way. Everywhere in countries like the United States had basically the same kind of thing. Global inflation coming out of the pandemic. Everywhere real wages have been going up for three years, roughly. People are not feeling good about it yet. It will take some years of positive real earning gains for people to feel good again, we think. You are right. When you talk to people, they do feel squeezed. You know, there are areas where prices are still going up. Insurance, various insurance are getting more and more expensive. That is catching up really from inflationary pressures that take a while to get into the price.

We take it very seriously. We don’t dismiss it at all. It is a real standpoint from the standpoint of what people are experiencing. What it does for us is, you know, makes us even more committed, if that is possible, to getting inflation back to 2% on a sustained basis.

>> QUESTION: How does the Fed’s independence play into the affordability? 

>> CHAIR: Independence allows us to do our job. Stable prices is half of the mandate.

Maximum employment being the other. Every — look at every advanced economy that looks anything like the United States anywhere in the world.

In a market economy. In a democracy upon. You will see pretty much Central Bank independence and looks in some cases stronger than we have.

It is critical to have that so we can do things to do them to preserve price stability. It is an accepted standard practice. I think it has a lot of support, certainly in Congress, which is where our oversight is, is in Congress.

You see that among Democrats and Republicans in the House and Senate.

>> QUESTION: CBS news, thanks for doing this, chair.

How high would oil prices and broader inflation have to go and for how long for the committee to consider hiking rates? Secondly, diesel prices are rising faster than gas prices. How concerned are you that these will lead to more inflation prices.

>> CHAIR: I won’t give an example on the specific question. We are prepared to do what needs to be done. I don’t want to hypothesis ices — I had pothize what that might be. The question there on diesel prices —

>> QUESTION: How concerned and whether or not it will drive up the cost of food and other goods that reply on it to go across country.

>> CHAIR: It is diesel prices because that is transportation of oil and other things. And there are derivatives in many things. Big effects on headline inflation and things like that leak into core. The effects are material. We’re watching it. We’re right at the beginning. You don’t know how big it will be and how long it lasts. May or may not be something that really makes a big impact on the U.S. economy. We’ll have to wait and see.

>> QUESTION: Thank you.

>> QUESTION: Thanks very much.

To stare into the future for a little bit, I was looking at the longer run of the SEP. I noticed the growth estimate was revised up from 1.8 to 2 and long-term fed funder as well. Is that AI productivity or what is going on there exactly? 

>> CHAIR: That is productivity, we started seeing meaningfully higher productivity some four or five years ago.

And that is not because of you know, because of generative AI. We won’t know for years what it is due to. It could be due to the things people did during the pandemic to economize and somehow become more productive because of the incredible labor shortage.

I think the economy forecasts are very skeptical of periods of high productivity because they’re so rare. They’re often revised away. For many, I never thought I would see this many years of high productivity and expected to continue.

And we haven’t really started to see the effects of Generative AI. And that should certainly contribute to that.

So it is quite unusual. And it is, you know, the higher productivity is the thing that allows incomes to rise over time. So it is a great thing. Is that your question.

>> QUESTION: I was curious what lay behind that. Briefly on that as well to finish up, you hear the argument a lot this is a story and you believe the productivity, it could pull down where rates end up. Do you agree with the line of thinking. Do you not think you should think like that about the rates? 

>> CHAIR: You have to be cautious. Particularly if talking about generative AI.

Remember, in the short term, what is happening is we’re building data centers everywhere. That is putting pressure on all kinds of goods and services that go into building these things. That is actually probably pushing inflation up at the margin. In addition, it probably raises the neutral rate. So in the near term. You are looking at something that would immediately call for lower rates or that would be lowering inflation.

Over time, though, sure, it can be — if it is expanding potential output, which is what productivity does, then it actually can be. I think it is an empirical question. It is what is the demand growing faster or slower than the supply side. I think we just don’t know that answer ex-ante going in. We have to wait and see. Thank you very much.

-0-