Federal Reserve Chair Jerome Powell, in a press conference held on June 14, 2023, laid out a roadmap for the Federal Reserve's strategic response to the ongoing inflation situation. Amid concerns of high inflation causing hardship to the American people, Powell stressed the Federal Reserve's commitment to restore price stability.
"Price stability is the responsibility of the Federal Reserve," Powell said. "Without price stability, the economy doesn’t work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all."
The Fed Chair also reflected on the Federal Reserve's monetary policy over the past year, which has seen a significant tightening. "Since early last year, the FOMC has significantly tightened the stance of monetary policy," Powell commented. "We have raised our policy interest rate by 5 percentage points and have continued to reduce our securities holdings at a brisk pace."
Despite these measures, the full effects of the tightening remain to be seen. Highlighting the uncertain effects of monetary policy on the economy and potential headwinds from credit tightening, Powell indicated that the Fed decided to leave the policy interest rate unchanged.
The U.S. economy has notably slowed, Powell stated, with projections for real GDP growth estimated to be 1.0 percent this year and 1.1 percent in 2024, significantly below the long-term normal growth rate. Meanwhile, the labor market continues to be tight with a robust average of 283,000 jobs added per month over the past quarter.
Inflation remains a pressing issue. "Inflation remains well above our longer-run 2 percent goal," Powell acknowledged. "Inflation pressures continue to run high and the process of getting inflation back down to 2 percent has a long way to go."
Addressing the next steps, Powell emphasized that the Federal Reserve's actions are guided by a mandate to promote maximum employment and stable prices for the American people. He highlighted the potential necessity of a period of below-trend growth and some softening of labor market conditions to reduce inflation and restore price stability.
Powell reaffirmed the Federal Reserve's commitment to its public mission, stating, "We understand that our actions affect communities, families, and businesses across the country. Everything we do at the Fed is in service to our public mission. We will do everything we can to achieve our maximum employment and price stability goals."
