FOMC Press Conference June 19, 2019. ¿Lower interest rates ahead?

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Transcript of Chair Powell’s Press Conference Opening Remarks
June 19, 2019
CHAIR POWELL: Good afternoon, and welcome. My colleagues and I have one
overarching goal: to sustain the economic expansion, with a strong job market and stable prices, for
the benefit of the American people.

At the Federal Open Market Committee (FOMC) meeting that concluded today, we
maintained our policy interest rate, but made some significant changes to our statement. Since the
beginning of the year, we have judged that our current policy stance was broadly appropriate, and
that we should be patient in assessing the need for any changes. In light of increased uncertainties
and muted inflation pressures, we now emphasize that the Committee will closely monitor the
implications of incoming information for the economic outlook and will act as appropriate to sustain
the expansion, with a strong labor market and inflation near its 2 percent objective.
I’d like to step back and review how the changing economic and financial picture brings us to
today’s decision. So far this year, the economy has performed reasonably well, with solid
fundamentals supporting continued growth and strong employment. Inflation has been running
somewhat below our objective, but we have expected it to pick up, supported by solid growth and a
strong job market. Along with this favorable picture, we have been mindful of some ongoing
crosscurrents, including trade developments and concerns about global growth. At the time of our
last FOMC meeting, which ended on May 1, there was tentative evidence that these crosscurrents
were moderating. The latest data from China and Europe were encouraging, and there were reports
of progress in trade negotiations with China. Our continued patient stance seemed appropriate, and
the Committee saw no strong case for adjusting our policy rate.
In the weeks since our last meeting, the crosscurrents have reemerged. Growth indicators
from around the world have disappointed on net, raising concerns about the strength of the global
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economy. Apparent progress on trade turned to greater uncertainty, and our contacts in business and
agriculture report heightened concerns over trade developments. These concerns may have
contributed to the drop in business confidence in some recent surveys and may be starting to show
through to incoming data. Risk sentiment in financial markets has deteriorated as well. Against this
backdrop, inflation remains muted.
While the baseline outlook remains favorable, the question is whether these uncertainties will
continue to weigh on the outlook and thus call for additional monetary policy accommodation. Many
FOMC participants now see that the case for somewhat more accommodative policy has
strengthened. Let me explain the basis for this judgment, starting with the outlook for jobs and
Participants see unemployment remaining low this year and next. Monthly job gains in May
were lower than expected, however, and in light of recent developments this bears watching. Still,
many labor market indicators remain strong. Community, business, and labor leaders all tell us that
the prospects for job seekers have seldom been better, and that this is true even for those who have
traditionally struggled to find work. Wages are rising, and this is particularly so for lower-paying
Committee participants’ growth projections from 2019 are little revised from March, with a
central tendency of 2.0 percent to 2.2 percent, just above their estimates of longer-run normal growth
rate. The growth projections for the year as a whole mask some important details about the
composition of growth. Annual growth will b
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limited evidence available at this time suggests that growth in business income has slowed in the
second quarter. Moreover, manufacturing production has posted declines so far this year. Thus,
while the baseline outlook remains favorable, many FOMC participants cited the investment picture
and weaker business sentiment, and the crosscurrents I mentioned earlier, as supporting their
judgment that the risk of less favorable outcomes has risen.
After running close to our symmetric 2 percent objective for most of last year, inflation
declined in the first quarter. Data since then show some pickup. Participants broadly see inflation
moving back up toward our 2 percent objective, but at a slower pace than had been expected. The
central tendency for 2019 core inflation–which omits volatile food and energy components–is
between 1.7 and 1.8 percent.
Setting aside short-term fluctuations, Committee participants expressed concerns about the
pace of inflation’s return to 2 percent. Wages are rising, as noted above, but not at a pace that would
provide much upward impetus to inflation. Moreover, weaker global growth may continue to hold
inflation down around the world.
We are firmly committed to our symmetric 2 percent inflation objective, and we are well
aware that inflation weakness that persists even in a healthy economy could precipitate a
difficult-to-arrest downward drift in longer-run inflation expectations. Because there are no
definitive measures of inflation expectations, we must rely on imperfect proxies. Market-based
measures of inflation compensation have moved down since our May meeting and some surveybased expectations measures are near the bottom of their historic ranges. Combining these factors
with the risks to growth already noted, participants expressed concerns about a more sustained
shortfall of inflation.
Overall, our policy discussions focused on the appropriate response to the uncertain
environment. The projections of appropriate policy show that many participants believe that some
cut in the federal funds rate will be appropriate in the scenario that they see as most likely. Though
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some participants wrote down policy cuts and others did not, our deliberations made clear that a
number of those who wrote down a flat rate path agree that the case for additional accommodation
has strengthened since our May meeting. This added accommodation would support economic
activity and inflation’s return to our objective.
Uncertainties surrounding the baseline outlook have clearly risen since our last meeting. It is
important, however, that monetary policy not overreact to any individual data point or short-term
swing in sentiment. Doing so would risk adding even more uncertainty to the outlook. Thus, my
colleagues and I will be looking to see whether these uncertainties will continue to weigh on the
outlook. And, we will use our tools as appropriate to sustain the expansion.
Thank you. I will be pleased to take your questions.

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