Monetary policy may need to become restrictive at some point, but the Summary of Economic Projections is “not a signal” that it will, Federal Reserve Board Chair Jerome Powell said Wednesday.
"The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%."
“I don’t believe policy is restrictive,” he said at a press conference. “There would be circumstances where it would be appropriate to go past neutral,” and there would be circumstances where it is not appropriate.
With the latest rate hike to 2.25% to 2.50%, the Fed has “reached the bottom end of the range” that the committee sees as neutral.
He stressed all rate hikes are data dependent and the forecast for 2019 is “positive” following “the best year since the financial crisis.”
With inflation remaining slightly below target, the Federal Open Market Committee has “the ability to be patient.”
Powell also said, responding to a question about the effect of President Trump's tweets criticizing rate hikes, the panel will do its Congressionally mandated job and will not bow to political pressure.
With press conferences after each of the eight Fed meetings next year, Powell said, it would be positive and help communication by allowing him to explain the Board’s thinking. It also means the FOMC can take action at any meeting, although the Summary of Economic Projections will be updated only quarterly.
