Special Fed Coverage: Powell Press Conference

Summary

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WSJ Your Money Briefing

Special Fed Coverage: Powell Press Conference

Date: June 13, 2018
Host: J.R. Whalen
Guest: Mark Hamrick (Senior Economic Analyst, Bankrate.com)

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Episode Overview

This special edition of WSJ's "Your Money Briefing" breaks down the latest Federal Reserve rate hike and Chairman Jerome Powell’s post-meeting press conference. The discussion unpacks the Fed's strategy on interest rates, economic outlook, and plans for increased communication with the public. Senior economic analyst Mark Hamrick joins live from the Fed to add context and clarity for consumers navigating these monetary shifts.

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Key Discussion Points & Insights

1. Fed Rate Hike & Forward Guidance

• [00:33–01:17]

  • The Fed unanimously raised short-term interest rates by a quarter point, targeting a range between 1.75% and 2%.
  • The Fed now projects a total of four rate hikes for 2018, signaling a more assertive path for 2019.

• Quote (Jay Powell, 01:17):
  “We are aware that raising rates too slowly might raise the risk that monetary policy would need to tighten abruptly down the road in response to an unexpectedly sharp increase in inflation or financial excesses, jeopardizing the economic expansion. Conversely, if we raise interest rates too rapidly, the economy could weaken and inflation could continue to run persistently below our objective.”

• Analysis (Mark Hamrick, 01:47):

  • Describes the Fed’s approach as a balancing act, akin to “walking a tightrope” or “a dance...one step forward and then a pause.”
  • The Fed wants to avoid past mistakes of tightening too early or too late, aiming to prevent imbalances that could spark a crisis like the one a decade ago.

2. Managing Uncertainty & Economic Outlook

• [02:18–03:24]

  • The Fed expects continued decreases in unemployment and strong GDP.
  • Inflation is projected to move around but is expected to settle near 2%.

• Quote (Jay Powell, 02:54):
  “This uncertainty is why ... we've been gradually raising rates. We’re not waiting for inflation to show up. We’re going and moving gradually and trying to navigate between two risks, really ... moving too quickly ... and the other is moving too slowly and then we have too much inflation or financial instability and we have to raise quickly. And that can also have bad outcomes.”

• Reflection (Mark Hamrick, 03:38):

  • Emphasizes that uncertainty is ever-present in economic policy.
  • “2006, 2005, we thought things were rosy and turned out to be just the opposite.”
  • Currently, there’s no recession on the horizon for the next 2–3 years, which is an enviable position.

3. Understanding the 'Neutral' Fed Funds Rate

• [04:09–04:53]

  • The neutral rate is when the Fed’s policy is neither stimulating nor slowing the economy.
  • Currently, policy is still accommodative ("the foot's still on the gas pedal").
  • Getting to neutral will require more rate hikes; only then can the Fed assess the true impact.

• Explanation (Mark Hamrick, 04:17):
  “You think about the Fed either putting on the brakes or keeping the foot on the gas pedal. Right now, the foot’s still on the gas pedal...When you get to the so-called neutral rate, it’s neither braking nor accelerating.”

4. Fed Communication: More Frequent Press Conferences

• [04:53–06:34]

  • Fed will increase the frequency of its press events to every FOMC meeting (every six weeks), instead of every other meeting.
  • Goal: Promote transparency and minimize speculation in financial markets.

• Significance (Mark Hamrick, 05:07):

  • “First of all, it's huge because the Fed only began holding regular news conferences in April of 2011... making a specified or specific effort to speak more plainly... ultimately that's a benefit... for everyone, consumers, savers, investors and borrowers.”

• Potential Impact (JR Whalen/Mark Hamrick, 05:57–06:34):

  • Increased communication could cut down on market speculation but also introduces new dynamics.
  • “...there would be a news conference basically every six weeks ... it may have some interesting consequences... the impact could be to try to ... dampen speculation. And of course, many investors like to speculate.”

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Notable Quotes & Memorable Moments

• Jay Powell (on balancing rate hikes, 01:17):

  “We are aware that raising rates too slowly might raise the risk…”

• Mark Hamrick (on the Fed's approach, 01:47):

  "I was thinking of a dance as well...one step forward and then a pause...the chairman obviously is walking a delicate balance."

• Jay Powell (on uncertainty, 02:54):

  “We’re not waiting for inflation to show up. We’re ... trying to navigate between two risks..."

• Mark Hamrick (on living with uncertainty, 03:38):

  “We always live in uncertain times... Right now, however, there's no recession on the horizon."

• Mark Hamrick (on Fed communication, 05:07):

  "The chairman is making a specified ... effort to speak more plainly ... that's a benefit ... for everyone."

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Important Timestamps

• 00:33 — Introduction & Fed rate hike details
• 01:17 — Jay Powell on the risks of moving too slow or too fast with rates
• 01:47 — Mark Hamrick likens the Fed's approach to a tightrope/dance
• 02:54 — Powell on why the Fed is raising rates gradually
• 03:38 — Hamrick on uncertainty and lessons from the last decade
• 04:17 — Explanation of the "neutral" Fed funds rate
• 05:07 — Significance of more frequent Fed press conferences
• 06:01 — Expected impact on speculation and market dynamics

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Takeaways

• The Fed is raising rates steadily to avoid both runaway inflation and economic overheating.
• Chairman Powell stresses a cautious, data-driven approach amid ongoing uncertainty.
• The concept of a “neutral rate” is key: it’s a moving target, where policy neither stimulates nor constrains the economy.
• More frequent Fed press conferences promise to improve transparency, with impacts yet to be seen on market behavior.
• For consumers, understanding these moves can help inform decisions on borrowing, saving, and investing in a changing rate environment.

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End of Summary

Transcript

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[JR Whalen]

money and market stories from the Wall Street Journal. Welcome to this special Federal Reserve edition of youf Money Briefing. I'm JR Whalen in New York. In a unanimous vote on Wednesday, the Fed raised short term interest rates by a quarter point to a range between 1.75 and 2%. The Fed also projecting four rate hikes for 2018, and it sounded a more aggressive tone for rate increases in 2019. Mark Hamrick is senior economic analyst for Bankrate.com he joins us from the Fed for some analysis. So Mark, let's start with the path of rate hikes that Fed Chairman Jay Powell discussed. The Fed expects two more rate increases this year and a faster pace of rate increases next year. Here's Chairman Powell.

[Jay Powell]

We are aware that raising rates too slowly might raise the risk that monetary policy would need to tighten abruptly down the road in response to an unexpectedly sharp increase in inflation or financial excesses, jeopardizing the economic expansion. Conversely, if we raise interest rates too rapidly, the economy could weaken and inflation could continue to run persistently below our objective.

[JR Whalen]

You know, Mark, this is like the Fed walking a tightrope because a move too far in any one direction could cause unwanted ripples in the economy.

[Mark Hamrick]

SJR that's a good analogy. I was thinking of a dance as well, because there's sort of one step forward and then a pause. And that's really what we've been having with these rate increases. The chairman obviously is walking a delicate balance that is that tightrope you reference. And so obviously the Fed doesn't want to make the same mistake that earlier iterations of the central bank have made in the sense of seeming to tighten too soon. But obviously also they do not want imbalances to build up and lead to essentially a financial crisis, as we saw about a decade ago.

[JR Whalen]

Coming up next, more from Chairman Jay Powell. And how far are we from a neutral Fed funds rate and why is that important to the economy? This is your money briefing from the Wall Street Journal. Welcome back, everybody. Chairman Powell also said the Fed expects unemployment to continue trending lower and GDP to remain strong and that while the Fed still has its eye on sustained inflation at about 2%. And he expects inflation, as he put it, to bounce around. That adds to uncertainty and really no set formula for the Fed to follow. Here's Powell again.

[Jay Powell]

This uncertainty is why the fact that we live in that uncertainty is why we've been gradually raising rates. We're not waiting for inflation to show up. We're going and moving gradually and trying to navigate between two risks, really. One would be moving too quickly. Inflation never gets back to target if we do that and the other is moving too slowly and then we have too much inflation or financial instability and we have to raise quickly. And that can also have bad outcomes.

[JR Whalen]

You know, Mark, a common theme from Powell's news conference on Wednesday was really some caution and essentially saying we learned a lot from the last 10 years in trying to build back the economy from the Great Recession.

[Mark Hamrick]

Yes. And I also would caution, not to take issue with the Chairman, but to say that we always live in uncertain times. We have changing perceptions about the range of uncertainty that we're facing. You know, 2006, 2005, we thought things were rosy and turned out to be just the opposite. So there's always uncertainty. Right now, however, there's no recession on the horizon and the outlook is not for a recession in the next two or three years from where the Fed sits. And that's a pretty nice place to be, I'd say.

[JR Whalen]

And Mark, another thing that Chairman Powell was asked about several times was about neutral Fed funds rate and finding that level. What exactly is that?

[Mark Hamrick]

Well, you know, you think about the Fed either putting on the brakes or keeping the foot on the gas pedal. Right now the foot's still on the gas pedal to a degree, because what the Fed is doing is still meant to essentially encourage further economic activity. When you get to the so called neutral rate, it's neither braking nor accelerating. And so the Fed would like to get to that point and basically perhaps even turn off the ignition for a while and not have to make adjustments with interest rates. But of course it will only know what the situation is once they get, let's say, another 4/4 point rate increases under their collective proverbial belts.

[JR Whalen]

There's also a little bit of news that he made. Not really tied to the economy or to rates, but it's the fact that the Fed is going to be a little bit more aggressive in distributing information out to the public and holding more press events. Why do you think that they're doing that?

[Mark Hamrick]

First of all, it's huge because the Fed only began holding regular news conferences in April of 2011. And while it seems like this is very commonplace now, the reality is that we're still only holding news conferences after every other FOMC meeting. So number one, that the chairman is making a specified or specific effort to speak more plainly essentially to all of us, but also speak more often with reporters and have the opportunity to answer questions, obviously put his own framing of the issues out there. I think ultimately that's a benefit, obviously to journalists like us, but ultimately for everyone, consumers, savers, investors and borrowers who need to try to basically navigate where the economy may be headed so they can fine tune their own financial decision making. So that's a very good thing, I think.

[JR Whalen]

And I guess it would cut down on any speculation which can sort of spook markets.

[Mark Hamrick]

Well, he certainly always has that opportunity, whether it's through his own comments or the comments of Federal Reserve Board officials. But you're absolutely right to the extent that there would be a news conference basically every six weeks after every FOMC meeting, that'll be something we've never seen before. And it may have some interesting consequences in the financial markets because the impact could be to try to, as you say, dampen speculation. And of course, many investors like to speculate. So there's that part as well.

[JR Whalen]

All right. Well, lots more coverage to come in the coming months here on WSJ.com that's Mark Hamrick. He's senior economic [e-mail], joining us from the Fed. Mark, thanks for being with us.

[Mark Hamrick]

Great to be with you, J.R. thanks so much.

[JR Whalen]

And thanks for listening to this special edition of youf Money Briefing. I'm JR Whalen in New York for

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