Federal Reserve Chairman Powell talks about slowing down the rate of quantitative easing.

A press conference was held immediately after the FOMC meeting on the 20th (local time).
“Discussion of Weakening of Shortening Rate of Marketable Securities”
“Wage growth is slowing down and jobs are decreasing.”

Before the US Central Bank (Fed) decided to freeze the base interest rate at 5.25-5.50% per annum on the 20th (local time), Fed Chairman Jerome Powell hinted that he would adjust the pace of quantitative tightening. In addition, labor market rebalancing, including slowing wage growth and reduced job openings, is expected to continue to dampen inflationary pressures.President Powell said at a press conference after the regular meeting of the Federal Open Market Committee (FOMC) in March.
“We will continue to substantially reduce our securities reserves,” he said, but “we have discussed easing the pace of reduction.” The Fed sells its securities in the market and absorbs the currency to implement a policy of quantitative tightening. The softening of the rate of contraction of marketable securities can be interpreted as an opportunity to adjust the rate of quantitative tightening. President Powell also added: “The members of the Federal Reserve have judged that the rate of reduction (of marketable securities reserves) will soon be greatly reduced.”

President Powell also said: “As inflation has eased recently, I think the employment and inflation targets are coming into balance and interest rates are at their highest.” He also mentioned that he believes that interest rates can be lowered at some point in case of recovery of economic activity.

He said. “In the last two months (January-February), we have seen bumpy inflation rates. “It will be a bumpy ride going forward,” he said, adding that “past examples of monetary policy teach us that a cautious approach is needed to avoid hastily lowering and then raising interest rates.”

Regarding the state of the labor market, President Powell said: “Wage growth is moderating and jobs are decreasing. Although demand for labor exceeds supply, FOMC members expect labor market rebalancing to continue to moderate pressure on inflation.”

Below we present the question-and-answer session of the press conference.

▶The core inflation rate (PCE) rose slightly and the growth rate was also revised upwards. What can we conclude?
“The economy is quite good. “Inflation has also increased slightly, but progress has been made in the direction of reducing inflation.”

▶You said you were willing to keep interest rates high.
“We are working to maintain our 2 percent inflation target and the market needs to believe we can do it. “Over time, we will reach our goal.”

▶If housing-related inflation does not ease, will there be difficulties in moderating general inflation?
“It will take time, but we will reach our goal of bringing it down to 2 percent. “Inflation of housing services should be mitigated”.

▶I think the first rate cut will have a big impact on the market. The current interest rate level is higher than the neutral rate, do you think a rate cut would have a significant impact?
“There are two risks at the moment. Cutting it too soon could cause inflation to rise again, and cutting it too late could have a negative impact on employment. That is why we should look at these two risks and proceed with caution. “Currently, the economy is growing and inflation is decreasing.”

▶How is the inflation situation different this year compared to the second half of last year?
“CPI and PCE growth rates were higher (than expected) in January. It is possible that there was a seasonal factor. However, I do not want to ignore the results that came out higher than expected. The general atmosphere has not changed much. Inflation is slowly decreasing. “I don’t think there is any doubt that we are heading towards the 2% inflation target.”

▶If you look at the forecast, the neutral interest rate has increased. Do you think high interest rates will continue in the future?
“There was a slight change. An increase in long-term interest rates was recorded. Interest rates will not return to extremely low interest rates again. “There are countries where long-term interest rates are now 0 percent, but I don’t think they will go that low.”

Leave a Comment