Federal Reserve Leaves Rate Unchanged, Signals Cuts | WSJ

Federal Reserve Leaves Rate Unchanged, Signals Cuts | WSJ

Federal Reserve Chair Jerome Powell spoke about the current state of the U.S. economy at a press conference. Here are the key points from his remarks:

Economic Developments

  • Inflation has eased without a significant increase in unemployment, but it is still too high.
  • Recent indicators suggest that economic activity has been expanding at a solid pace.
  • GDP growth for Q4 2022 was 3.3%, and for the year as a whole, GDP expanded at 3.1%.
  • The labor market remains tight, with payroll job gains averaging 165,000 jobs per month over the past three months.
  • Nominal wage growth has been easing, and job vacancies have declined.

Inflation

  • Inflation has eased over the past year but remains above the Fed's 2% goal.
  • Total PCE prices rose 2.6% over the 12 months ending in December, and core PCE prices rose 2.9%.
  • Longer-term inflation expectations appear to remain well anchored.

Monetary Policy

  • The FOMC decided to leave the policy interest rate unchanged and continue to reduce securities holdings.
  • The Fed's strong actions in tightening monetary policy have moved the policy rate into restrictive territory.
  • The risks to achieving employment and inflation goals are moving into better balance.
  • The timing of any adjustments to the target range for the federal funds rate will be based on incoming data.

Confidence in Inflation Outlook

  • More evidence is needed to build confidence that inflation is moving sustainably down to 2%.
  • The committee wants to see continuation of the good data on inflation and a sustained path toward the goal.
  • The committee is data dependent and will make decisions meeting by meeting.

Balance Sheet

  • The balance sheet runoff will be discussed at the next meeting in March.
  • The Fed sees the balance sheet runoff as an independent tool from rate cuts.

Conclusion

  • The economy is solid, the labor market is strong, and inflation is coming down.
  • The Fed's goal is to achieve sustained period of strong labor market conditions and price stability.
  • The committee is focused on its public mission and committed to its goals.

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