Shadowing Practice: FOMC Press Conference March 21, 2018 - Learn English Speaking with Video
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CHAIRMAN BERNANKE.
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I have a brief statement, and then I'll be happy to respond to your question.
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The job market remains strong.
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The economy continues to expand, and inflation appears to be moving toward the FOMC's 2 percent longer -run goal.
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As you already know, we decided today to raise the target rate for the federal funds rate by one -quarter percentage point, bringing it to one -and -a -half - to one -and -three -quarter percent.
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This decision marks another step in the ongoing process of gradually scaling back monetary policy accommodation,
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job gains averaged 240 ,000 per month over the past three months, well above the pace needed in the longer run to absorb new entrants into the labor force.
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The unemployment rate remained low in February at 4 .1 percent, while the labor force participation rate moved higher.
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Over the past four years, the participation rate has remained roughly unchanged.
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That's a sign of improvement, given that the aging of our population has increased is putting downward pressure on the participation rate.
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And we expect that the job market will remain strong.
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Although the growth rates of household spending and business investment appear to have moderated early this year, gains in the fourth quarter were strong, and the fundamentals underpinning demand remained solid.
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Indeed, the economic outlook has strengthened in recent months.
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Several factors are supporting the outlook.
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Fiscal policy has become more stimulative.
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Ongoing job gains are boosting incomes and confidence.
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Foreign growth is on a firm trajectory, and overall financial conditions remain accommodative.
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Against this backdrop, inflation remains below our 2 percent longer -run objective.
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Overall consumer prices, as measured by the price index for personal consumption expenditures, increased 1 .7 percent in the 12 months ending in January.
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The core price index, which excludes the prices of energy
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and food and is typically a better indicator of future inflation rose 1 .5 percent over the same period.
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However, as we have noted for some time, the shortfall of inflation from 2 percent reflects, at least partly, some unusual price declines that occurred nearly a year ago.
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In coming months, as those earlier declines drop out of the calculation, inflation should move up closer to 2 percent and stabilize around that level over the medium term.
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Of course, various forces will continue to affect inflation, at times it may be above 2 percent just as at times it may be below.
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Our inflation objective is symmetric in the sense that we are trying to prevent persistent deviations from 2 percent in either direction.
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Based on the projections that Committee participants submitted for this meeting, the median projection for the growth of inflation -adjusted GDP is 2 .7 percent this year,
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2 .4 percent next year, and 2 percent in 2020, a bit above its
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The median projection for unemployment -for the unemployment rate stands at
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3 .8 percent in the fourth quarter of this year
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and runs at 3 .6 percent over the next two years
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-almost a percentage point below the median estimate of its longer -run normal rate.
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Finally, the median inflation projection is 1 .9 percent this year, 2 percent next year, and 2 .1 percent in 2020.
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Compared with the projections in the year, As made in December, real GDP growth is stronger, the unemployment rate is lower,
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and inflation is slightly higher. As I noted earlier, today's decision to raise the federal funds rate is another step
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in the process of gradually scaling back monetary policy accommodation as the economic expansion continues.
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This gradual process has been underway for more than two years, and it has served, and should continue to serve, the economy well.
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In making our policy decisions over the next few years, we will continue to aim for inflation of 2 percent while sustaining the economic expansion and a strong labor market.
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In the Committee's view, further gradual increases in the federal funds rate will best promote these goals.
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By contrast, raising rates too slowly would raise the risk that monetary policy would need to tighten abruptly down the road, which could jeopardize the economic expansion.
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At the same time, we want to avoid inflation running persistently below our objective, which could leave us with less scope to counter an economic downturn in the future.
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Participants' projections of the appropriate path for the federal funds rate reflect our gradual approach.
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The median projection for the federal funds rate is 2 .1 percent at the end of this year, 2 .9 percent at the end of 2019, and 3 .4 percent at the end of 2020.
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By 2020, the median federal funds rate is modestly above its estimated longer -run trend.
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Most participants revised up their projections since December, although the median projection for this year did not change.
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The medians for 2019 and 2020 are somewhat higher than in December.
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Of course, we'll be watching how the economy evolves in the months
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and years ahead relative to our maximum employment and price stability objectives.
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If the outlook changes, we will adjust monetary policy appropriately.
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Finally, I'll note that our program for reducing our balance sheet, which began in October, is proceeding smoothly.
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Barring a very significant and unexpected weakening in the outlook, we do not intend to alter this program.
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As we've said, changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy. As always,
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the Committee would be prepared to use its full range of tools
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if future economic conditions were to warrant a more accommodative monetary
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policy than can be achieved solely by reducing the federal funds rate.
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Thank you, and I'll be happy to take your questions now.
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Mr. Chairman -oh, right, the microphone.
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Mr. Chairman, uh, welcome.
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Interesting changes in the forecast -a higher growth forecast, a full point above the long run,
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lower unemployment, seven -tenths below the long run, and yet very little change in inflation.
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What does that say about what you and the Committee believe about the inflation dynamic, and how is it that,
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in that context, you justify three rate hikes this year, and I said it will be three next year, and a full 600 billion,
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an, I guess, annual rate decline in the balance sheet.
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Where's your biggest concern here?
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Is it in overkill when it comes to rates or underkill?
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CHAIR POWELL.
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So you're right that the outlook did improve, as I mentioned and as you -as was in your question.
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The Committee's estimates of growth went up.
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The Committee's estimates of unemployment went down, and there was a very slight increase in inflation.
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And I think that reflects, essentially, if you think back to the era after the crisis, unemployment was 10 percent.
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It's now 4 .1 percent.
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You've only seen very gradual upward pressures on inflation and wages despite that very large increase.
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And that suggests that the relationship between changes in slack and inflation is not so tight.
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But it has diminished, but it's still there.
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So I think when you see those small changes in unemployment, that simply reflects the, you know, the flatness of the Phillips curve, if you will.
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And your biggest concern, your biggest risk here, You know, I think we're trying to be -to take the middle ground there.
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So, you know, on the one hand, the risk would be that we wait too long, and then we have to raise rates quickly, and that foreshortens the expansion.
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We don't want to do that.
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On the other side, if we raise rates too quickly, inflation then really doesn't get sustainably up to 2 percent, and that will hurt us going forward.
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We need that, and it's -you know, we need to make sure that inflation expectations are anchored at 2 percent.
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So we're trying to take that middle ground, and the Committee continues to believe that the middle ground consists of further gradual increases in the federal funds rate,
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as long as the economy is broadly on this path.
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CHAIR POWELL.
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Let's go to Nick, and then - NICK TAMAROSA of The Wall Street Journal.
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Chair Powell, I want to ask about the symmetric inflation target, what you outlined in your remarks as preventing persistent deviations.
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I want to understand what symmetry means in the context of
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inflation being allowed to run above the 2 % target now
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that that's part of the projection for at least for core PCE next year.
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How do you define symmetric relative to the experience of the past five years?
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Would the Fed be willing to accept the type of overshoot of its target as it has seen during the undershoot?
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And how high above 2 % is too high to maintain a target that is symmetric?
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Is it too You know, so -so, as you noted,
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the -what we've said in the longer -run statement of goals
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and monetary policy strategy is that we would be concerned with sustained or persistent deviations of inflation, either above or below.
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We've also said in minutes and in speeches and things like that that that is a symmetric objective.
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So that's how we think of it.
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And I think it's -I wouldn't characterize what we've done over the last five years, but I think it's -we -I wouldn't as tolerating, you know, an undershoot of inflation, we were always pushing toward 2 percent,
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and I think that is how we look at it.
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I can't give you an exact number.
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It just, you know, we haven't agreed on that.
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It just is that we're always going to be seeking 2 percent inflation.
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And in doing that, we're going to be considering, by the way, the other side of the mandate.
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You know, we have to balance that against the deviation of employment from -unemployment from its goal, and also just the duration of it as well.
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Hi, Mr. Chairman.
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Jim Pusengarra with the LA Times.
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Even with the extra -fiscal stimulus of the tax cuts, your median growth projection is just up to 2 .7 percent, and then this year, and then drops back down to 2 percent by 2020,
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is the continued talk in Washington about tax cuts bringing growth to 3 percent or higher on a sustained basis, overselling their potential impact?
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CHAIR POWELL.
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You know, let me say what that really is.
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So the summary of economic projections is really a compilation of the individual rate forecasts.
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The Committee made really one decision at this meeting, and that was to raise the federal funds rate by 25 basis points.
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The summary of economic projections is individual forecasts compiled and written down, and you've identified the median as 2 .7 percent.
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I would -and that's an interesting statistic.
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I would also say that the central tendency is interesting, the full range is interesting.
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So you have a range of views around the table.
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One of the great benefits of our system is
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that we do have reserve banks with their own staffs and governors with different views, and so we discuss these things.
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So the Committee doesn't vote or agree upon the medians.
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So you're going to have a range of views.
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That's really all I can say.
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2 .7 just happens to be the median for 18, but it doesn't really say, you know, what we think is possible.
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But do you think you would get the 3 percent on the sustained wages?
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CHAIRMAN POWELL.
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You know, I would say it's hard to say, but it would take -you know, that is well above almost all estimates -current estimates of potential long -run growth.
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It would take, you know, significant increases in productivity and labor force participation to get there.
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Gina.
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Hi, Gina Smiley with Bloomberg News.
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So obviously you guys reduced your NARU estimates slightly today, but if you continue to see job gains, around $200 ,000 a month,
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prime age labor participation rising slightly, pretty sustainably, you know, moderate wage increases,
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at what point are you guys going to start to question whether you're actually overshooting full employment?
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And if you start to question that, how is that going to impact policy?
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CHAIR POWELL.
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So I guess I'd start by saying that the natural rate of unemployment is not something that we can observe directly.
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We look at a wide range of indicators on that, you know, 15 or 20 of them at least.
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And also, I think we all understand that any point estimate is surrounded by very wide uncertainty bands.
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So, as the actual unemployment rate has declined from 10 percent to 4 .1 percent,
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the Committee's median estimate of the natural rate of unemployment has also declined by a full percentage point.
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So the Committee and, I think, people are generally influenced by data as they see unemployment going lower.
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They're looking at a variety of aspects of the labor market, including wage inflation and price inflation.
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So I don't think we -we -we're mindful of the uncertainty of that, and we'll be looking at that.
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So as -if unemployment does continue to go down, we'll continue to do that.
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As I mentioned earlier, there is no -there's no sense in the data that we're on the cusp of an acceleration of inflation.
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We have seen moderate increases in wages and price inflation, and we seem to be seeing more of that.
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We'll be alert to that.
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I guess the idea -the theory would be that if you get below the sustainable rate of unemployment for a sustained period, you would see an acceleration of inflation.
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So we would know that then.
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And we're very alert to it, but it's not something we observe at the present.
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CHAIRMAN BERNANKE.
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Thanks very much.
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Sam Fleming from the Financial Times.
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You and other policymakers have talked about headwinds turning into tailwinds recently.
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Does that imply that you think now a high neutral rate of interest is operative in the U .S economy,
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and how would you assess the implications for monetary policy?
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The second question -this is obviously your first press conference, so it's a little early to ask this question, but would you like to do this more often?
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Thanks.
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CHAIR POWELL.
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Longer -run values, like the neutral rate of interest, the natural rate of unemployment, the potential growth rate of the economy,
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are pinned down by slow -moving forces over time.
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So they don't move around very much.
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So I wouldn't expect the Committee's, you know, predictions or projections or estimates of those values to move quickly.
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They'll move slowly.
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So is it possible that -
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that uh the neutral rate of interest would move up
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because of of uh for example greater fiscal expansion there's there's literature
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that says that there's there there are reasons that
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that might be the case in fact it did tick up
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one -tenth as you as you will know in the um in the median
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at this at this time uh
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but it's i i think um generally speaking the committee sees the neutral of interest as still quite low
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and is not seeing it as having moved up and is open to the possibility that it will.
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Any questions, please?
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Ah, press conferences.
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So that's something that I'm going to be carefully considering.
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I have not made a decision about it.
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My colleagues and I are committed to communicating as clearly as possible about what we're doing and why we're doing it.
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I would want to think very carefully about it and make sure
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that no one would take more frequent press conferences as a signal of the path of policy.
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And so it's something that I'll be thinking about.
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Adam Shapiro with the Fox Business Network.
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You brought up the fiscal stimulus and the impact it's having, and I was curious, how is the change in the federal budget deficit, because the stimulus is coming with great debt,
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Has it changed your approach to how many securities you're going to allow to roll off the balance sheet?
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And is there a level of Treasury supply at which the Fed would consider adjusting its balance sheet roll -off, given how much the U .S government's going to have to borrow going forward?
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And then a second question, things beyond your control.
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The President's expected to announce new tariffs against China.
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And does the Committee discuss what potential impacts that could have in regards to inflation?
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And do you have a timeline as to how you would respond to that?
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So, in terms of the balance sheet, we've said that, you know, we carefully developed this plan, we carefully socialized it in a series of meetings last year.
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We announced it, and we said we wouldn't change it, really, unless there were a significant downturn that required, you know, meaningful reductions in interest rates.
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And I have no inclination to revisit that.
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We're going to use monetary policy as the principal tool of adjusting, you know, our policy.
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So, on the second question, on tariffs, a number of participants in this FOMC did bring up the issue of tariffs,
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and if I could summarize what came out of that, it was, first, that there's no thought,
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I think, that changes in trade policy should have any effect on the current outlook.
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The second thing is -I would say is
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that a number of participants reported in -about their conversations with business leaders around the country
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and reported that trade policy has become a concern going forward for that group.
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MARTHA KRETSINGER.
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Marty Kretzinger with the Associated Press.
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You talked about the fact
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that the summary of economic projections is based on the outlook of all the members of the FOMC.
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Can you tell us anything, though, about the staff forecast and how that was impacted by the -we had a $1 .5 trillion tax cut.
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We've had $300 billion in increased government spending.
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The staff forecast that you're working with, are those reflected -how were they impacted by that, and how did that impact the discussions?
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So we look at the staff forecast and the board forecast, and, by the way, There are 12 excellent Reserve Bank staffs who have their own views and do their own work.
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We look at those as informing the decisions of the policymakers.
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So -and it's really the policymakers' views that we talk about in the SEP.
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We don't -we don't, you know, talk about the staff forecast.
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It's a particular thing under -done under particular rules and circumstances, and really it's the policymakers that then take that as input and create their forecasts,
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which are what draw it policy.
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CHAIR POWELL.
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That had no impact, though?
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I mean, such a -that's a major increase in government stimulus that you're -that had an impact on the discussions,
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I would think.
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CHAIR POWELL.
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Well, the -you're right.
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So, fiscal stimulus is a, you know, a meaningful input into,
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you know, into the SEP and particularly in the changes over the course of last year and this year.
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And individual policymakers went through, with their staffs, a range of estimates, a range of literature,
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and did their own thinking and came up with their own estimates and submitted those as their summary of economic projections, as their projections.
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It's not -those are not the staff's projections.
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Those are our projections.
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CHAIRMAN BERNANKE.
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And I think that's a good question for you.
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Heather Long, Washington Post.
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What would it take to get to four rate hikes this year?
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It's clear from the dot plot that many members do think four would be appropriate, but clearly something was holding a number of the FOC members back.
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Is it concerns about these potential trade tariffs that are going into effect?
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Is it just that people want to wait and see a little longer before they raise?
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Can you give some more insight into why people didn't go to four this time, the median, even though the economic projections look very healthy?
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CHAIR POWELL.
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I would go back to the thought that, you know, we made one decision at this meeting, and that decision was to raise the federal funds rate by 25 basis points.
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The projections are really just individual projections.
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They're submitted and then compiled.
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And, you know, you're mentioning the median, But, you know, I think,
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like any set of forecasts, those forecasts will change over time, and they'll change depending on the -on the way the outlook for the economy changes.
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So that's really all I can say.
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It could change up, could change down.
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I wouldn't want to -for now, these are the best forecasts that people could make.
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And, you know, it could be that if the economy is a little bit stronger or a little bit weaker, then the path could be a little less gradual or a little more gradual.
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So it wasn't one factor that was holding -it's kind of a hard discussion?
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No, I mean - Okay.
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Jim?
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Mr. Chairman, a quick follow on the trade question and then a productivity question.
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On trade, what would have to happen in policy, and in particular in potential retaliation from countries around the world,
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for trade policy to become a concern for the Committee's outlook?
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And then the second question is -you mentioned productivity growth earlier.
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What's your current assessment of the path of productivity growth?
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And has anything in policy -any policy change in recent months changed that assessment?
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CHAIR POWELL.
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You know, for trade, what I mentioned is that our FOMC participants reported in that they had heard, you know,
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concerns which were relatively new about future trade actions, really
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and they're seeing it as a risk to the outlook kind of thing.
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So -and the kind of things people are talking about would be, you know, more widespread retaliation and more widespread actions back and forth kind of thing.
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I can't be any more specific than that.
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In terms of productivity, productivity, as I'm sure you know, has been very weak since the financial crisis.
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It's averaged only about 0 .5 percent a year for the last six years, I guess.
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So that's well below, you know, longer -run averages, and it would certainly be a good thing to see it move up.
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It has moved up just a little bit, but not kind of decisively.
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And, you know, you asked me about fiscal policy and the connection to productivity.
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I think in the tax bill,
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there are incentives for -there -a tax cut bill that it allows expensing of investment should encourage additional investment.
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That should encourage productivity.
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In theory, an individual tax bill that lowers tax rates should encourage more labor force participation.
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So I do think it's very important that we have a focus on productivity in the country.
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It's not something that we can really do at the Fed.
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But, you know, we're certainly hopeful that there will be supply -side effects like that from the tax bill.
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I think estimates are really all over the place in terms of the amount and the timing of those.
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Jonathan.
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Chairman Powell, Jonathan Spicer with Reuters.
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Take your caveats on the dot plot, as it were, but I'll ask another question.
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In 2020, it shows that policymakers expect the policy rate to get up almost to 3 .5 percent, which is quite a ways, or definitively anyways, above the neutral rate.
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Does that increase the risk of a Fed -induced recession and decrease the risk of a soft landing,
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which is asking, in a way, about the fiscal policy?
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And as a follow -up,
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is that fiscal stimulus starting to lead to questions within the Fed around this narrative of secular stagnation
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and the economy entering a new, sort of, low -rates environment?
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Thanks.
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You know, I would say that -remember that forecast three years So,
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you're right, in 2020, there's a -I think it's 3 .4 percent is the - of the SEP dots for 2020,
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which is 40 basis points above the estimates of the neutral rate, which I would characterize as, you know, modestly restrictive, modestly tightening policy.
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But that's three years in the future.
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It's highly uncertain.
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You know, we don't have the ability to see that far into the future.
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So I really wouldn't put a lot in that.
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It could make sense.
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You could imagine narratives in which that would make sense, But I -honestly, I wouldn't put too much on that.
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Sorry, your second question was - Secular stagnation narrative, whether it's a fiscal policy that's leading to questions from the Fed around the world.
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CHAIR POWELL.
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You know, we've been through many years of growth around 2 percent, and I've given a number of public remarks where I've called on,
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you know, the country to focus more on potential growth and productivity and labor force participation, which drive potential growth.
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So, you know, I think it's really important
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that we do something -do what we can as a country to increase our potential growth rate.
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I would say, in the bill that passed Congress -the Tax Cuts and Jobs Act -there were elements that should encourage productivity,
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as I mentioned -sorry, encourage investment, which should help productivity, encourage labor participation.
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We don't know how big those effects are going to be.
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We don't know what the timing would be.
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I think as you look around the table at the FOMC, There's a wide range of views on the amount and the timing of those.
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I think all of us would agree that we hope that they will be large.
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MICHELLE SMITH.
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Michael Derby.
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Hi.
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Mike Derby from Dow Jones Newswires.
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I have a question about the future of the mechanics of monetary policy.
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I wanted to know whether you favor sticking with the system
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that you have now of keeping interest on excess reserves and reverse repo, the reverse repo rate to control interest rates,
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or do you want to shift back to the old way of doing things at some point of targeting the Fed
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And do you have any concern that, if you do stick with the current system, that as rates rise
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that you might see issues where the Fed is being criticized for paying out ever -larger shares of money to banks,
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to, you know, to control interest rates that some might perceive as a subsidy to the banks that are getting this money?
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CHAIR POWELL.
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Sure.
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Our current framework for implementing monetary policy is working very well.
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We have excellent control over rates and it's working,
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and it's -you described it accurately -we haven't made a decision to keep that as our longer -run framework.
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We haven't really addressed that question.
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We've had meetings where we've talked about it, and we've agreed that it's working well, but it's -and it's not something I see us as needing to urgently address.
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I think we're continuing to learn about this framework.
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For example, one -in the long run, the size of the balance sheet's going to depend on the public's demand for our liabilities, including currency and reserves.
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So we don't know what the demand is for reserves.
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In a world where you have, you know, you have regulations that require banks to hold lots of high -quality liquid assets, and reserves are one of those.
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So it's not something we're looking at resolving in the near term.
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You mentioned the question of interest on excess reserves, and I think it's a little bit of a misnomer to think that there's a subsidy there.
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We pay interest on excess reserves.
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We can't pay interest on excess reserves that are -it's above the general level of short -term interest rates.
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So we're paying rates
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that banks can get from other interest rates from other -any other investment in the short -term money markets.
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In addition, remember that those liability -those are our liabilities.
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The assets that we have on the other side are Treasury securities and mortgage -backed securities, which yield much higher than interest on reserves.
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So, in fact, it's not a subsidy, and it's not a cost to the taxpayer.
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CHAIRMAN BERNANKE.
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Greg, and then Victoria.
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Over here.
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Thank you, Chair.
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Thank you very much.
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Greg Robb from MarketWatch.
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Several of your colleagues recently have been speaking and expressing concern about financial imbalances and rising signs of financial imbalances.
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I was wondering if you could give us your view on the asset markets.
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Do you see any bubbles?
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And do you have the tools you need, you think, to combat those?
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Thank you very much.
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CHAIR POWELL.
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Since the financial crisis, we've been monitoring financial conditions and financial stability issues very carefully,
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and the FOMC receives regular briefings about the staff framework and sort of measures of various aspects of financial stability risks.
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And the current view - of the Committee is that financial stability vulnerabilities are moderate, let's say.
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And I'll go through a couple of pieces of that.
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So, if you look at the banking system, particularly the large financial institutions, you see higher capital, you see much higher liquidity,
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you see them more aware of their risks and better able to manage them with stress testing.
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And if something does go wrong, you've got better ability to deal with the failure of those institutions.
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And so, therefore, you don't see high leverage.
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You don't see excess risk -taking in great quantity the way you did before the crisis.
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If you look at households, household balance sheets are in much better condition.
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If you look at nonfinancial corporations, you see -you do see relatively elevated levels of borrowing,
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but nothing that suggests, you know, serious risks.
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And, of course, default rates are very low.
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So those readings look okay.
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I should mention also that, for large financial institutions, they're no longer funded by a lot of short -term wholesale funding, which can disappear very quickly.
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So they're far less vulnerable to liquidity issues.
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Overall, those aspects, I think, suggest low levels of vulnerability.
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You identified really one area where -which is an area of focus, which is asset prices.
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So, in some areas, asset prices are elevated relative to their longer -run historical norms.
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You can think of some equity prices.
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You can think of commercial real estate prices in certain markets.
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But we don't see it in housing, which is key.
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And so, overall, if you put all of that into a pie, what you have is moderate vulnerabilities, in our view.
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In terms of whether we have the tools, you know, we have some tools, and I think we certainly will use them.
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We have -I think the stress test is a really important tool
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that we have for the largest financial institutions and for the smaller financial institutions.
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We regularly use that as a way to test against various,
368
you know, market shocks, certainly for the larger institutions.
369
Hi.
370
Vittoria Guido with Politico.
371
More on the regulatory side, you know, the Fed might soon be getting more power to decide exactly
372
which regulations -which stricter regulations to apply to banks with between 100 and 250 billion in assets.
373
And so I had a couple of questions about that.
374
So for CCAR, those stress tests, since that's based around, you know,
375
having a punitive penalty of potentially being able to restrict dividend payouts or stock buybacks,
376
is there any kind of logistical challenge that could be posed if you don't have CCAR every year for certain banks?
377
Is it possible to have CCAR not on an annual basis?
378
And then my other question is,
379
you know, you've talked a lot about how size isn't the only thing that causes banks to pose systemic risk,
380
and I was wondering what other factors do you think would cause a bank to potentially pose a systemic risk?
381
Okay, so this is -this is a matter that Congress has under consideration.
382
It's not something -you know, so Congress is looking at raising the threshold for applying enhanced financial standards to -from 50 billion to 250 billion
383
while leaving us with the ability to reach below 250 billion and apply those standards where we think it's appropriate.
384
And, you know, we haven't been shy about doing that because, of course, one of the eight SIPIs is below 250 already.
385
So we are fully prepared to do that.
386
But this is a decision that's in the hands of Congress.
387
It's not something that's been taken.
388
The version of the bill, I think, that passed the Senate did have -did give us the ability
389
to do supervisory stress tests periodically as opposed to annually is the language.
390
We haven't made any decision about that at all.
391
We would want to think very carefully about that.
392
And, you know, we would -whatever we do decide to do, we'd put that out for comment.
393
Is it, you know, logistically possible?
394
I would think it would be, but it's certainly not something that we've decided to do.
395
And the second question you had was?
396
About what causes banks to post the Senate press beyond size?
397
CHAIR POWELL.
398
Sure.
399
Well, it's -I guess the next thing on the list would be activities.
400
So, you know, we -regular way commercial banks that do deposit taking and lending and don't speculate in markets,
401
you know, that's one business model.
402
Another business model might be, you know, think of a hedge fund, right?
403
That's what they do.
404
They're speculating on markets.
405
And, you know, so very different business models and different levels of risk and that sort of thing.
406
So that would be the next thing on the list.
407
I mean, there would be a range of things, you know, how well capitalized is the institution, but mainly those things.
408
Michael McKee from Bloomberg Television Radio.
409
I'd like to go back to the idea of the additional growth
410
that you're getting from the fiscal package
411
and ask you how much you think comes from the supply side and how much from demand.
412
And you used words like might and should about what results should come from this process.
413
But around the table, did any of the presidents or governors report that businesses are actually getting ready to spend?
414
Is this something that's going to happen?
415
Do we know that there's going to be a supply -side effect, or are you just guessing at this point?
416
Remember that there are 15 FOMC participants, and each of us has his or her own forecast.
417
So, there's a real diversity of views on this, particularly on these fiscal issues.
418
If I could try to summarize, it would be that, I think,
419
broadly speaking, participants believe there will be meaningful increases in demand from the new fiscal policies for at least the next, let's say, three years.
420
I think there's a general view as well that supply -side issues -that there There could be supply -side effects as well.
421
And you would see that, again, through higher investment driven by lower corporate tax rates and the expensing of some investment, which would drive -tend to drive productivity over time.
422
If you make investment more attractive, companies should do more of it.
423
It's uncertain, though.
424
You know, I mean, I spent many years of my life working with companies and discussing, and, you know, the cost of capital is one of many factors that they'll consider.
425
It isn't the only factor or the principal factor, but it should result in more investment, and investment should drive productivity.
426
At the same time, the -you know, I mentioned labor supply.
427
You should see some labor supply effects over time from lower individual effective tax rates.
428
The whole thing is very uncertain, and particularly, the supply -side effects should
429
and would be expected to take longer to appear and would be less certain in amount.
430
So that's really as good as you can go.
431
You know, we've all looked at the literature carefully.
432
We've all thought about it.
433
We've discussed it with our in -house experts and come up with our own views, and they're disparate.
434
But that's -I'd say that's about where the views are.
435
CHAIR POWELL.
436
Donna, and then Nancy.
437
Hi, Chair Powell.
438
Donna Borak with CNN.
439
Just to go back to trade policy,
440
if you don't mind, you said that participants today generally feeling that the trade policy shouldn't necessarily affect the current economic outlook.
441
But I am wondering if there was any discussion, if there are fears about inflationary effects, should there be trade barriers imposed.
442
And, secondly, you know, we might be on the verge of a tick -for -tack trade war with China.
443
I'm wondering what your thoughts are of how that might dampen the economic -the global economic outlook going forward should that occur.
444
CHAIR POWELL.
445
You know, at this stage, what our FOMC participants discussed,
446
what -it wasn't -it was just that this is a new risk that had been probably a low -profile risk,
447
which has become, you know, a more prominent risk to the outlook.
448
That's really what people were saying.
449
They didn't get into talking about particular, you know, whether it's inflation or growth or whatever it would be.
450
So that's not something that did come up.
451
You know, your second question, sorry, was China?
452
Yeah.
453
I mean, in the event that the United States and China -
454
In the event that the U .S
455
and China end up in a tick -for -tack trade war or any other retaliatory actions that are imposed elsewhere
456
against the United States, what that means for the global economic outlook and whether that was something that was discussed, and are you worried about?
457
CHAIR POWELL.
458
That didn't -it's not something that came up in particular.
459
And let me say, you know, we don't do trade policy here at the Fed, and, you know, I would be reluctant to comment on any particular situation with any particular country.
460
Nancy Marshall -Gensler, with Marketplace.
461
Does the interest rate hike today suggest that Americans are being paid enough?
462
Are you satisfied with the rate of wage growth right now?
463
CHAIR POWELL.
464
As I mentioned, you know, we've had unemployment decline sharply since, I guess, 2010, in 2010 when it peaked at 10 percent and down to 4 .1 percent now.
465
And we've seen only modest increases in wages.
466
So, on the one hand, what wages should, in theory, represent is inflation plus - plus productivity increases.
467
You should get paid for your productivity plus inflation.
468
And productivity has been very low, inflation has been low, so these low -wage increases, in a sense, they do make sense in that, from that perspective.
469
On the other hand, as the market has tightened, as labor markets have tightened, and we hear reports of labor shortages, and we see that, you know,
470
groups of unemployed are diminishing, and the unemployment rate is going down, We haven't seen, you know, higher wages, which is going up more.
471
And I would -I think I've been surprised by that, and I think others have as well.
472
In terms of what's the right level, I don't think I have a view on what the right level of wages is, but I think we will know that the labor market is getting tight
473
when we do see a more meaningful upward move in wages.
474
CHAIRMAN BERNANKE.
475
VIRGINI MONTEAU, AGENCY FRENZ PRESS.
476
If the economy behaves as the Fed is predicting, by the time of the midterm elections,
477
the rate will keep on rising, and the prime rate will be well above 5 percent,
478
a level not reached in 10 years for what is the base of consumer credit.
479
And we know that historically, raising rates, especially in campaign times, has never been very popular in the White House.
480
Does this prospect of a possible pressure and dichotomy of concerns keep you awake at night?
481
No, that doesn't keep me awake at night.
482
We don't consider the election cycle.
483
You know, we're looking very carefully at our assigned responsibilities of maximum employment, stable prices, and that's really our focus.
484
You can count on us to stay focused on the jobs that Congress has assigned us, and count on us to use the tools we have to achieve them.
485
You're right, that's the highest rate.
486
By the way, I'm hearing the 10 -year thing a few times these days, and it's true that rates are higher than they've been in 10 years.
487
On the other hand, the economy is healthier than it's been since before the financial crisis, So, it's a healthier economy than it's been in 10 years.
488
The financial crisis, of course, was just really getting going 10 years ago.
489
MICHELLE SMITH.
490
Miles, the last one.
491
Thanks, Miles Uddin, Yahoo Finance.
492
Chair Powell, I'm curious if the Fed would be willing to tolerate an inverted yield curve.
493
We've continued to see the spread between the two -year and the 10 -year tighten, even with longer -term yields coming up since the beginning of the year.
494
This is a dynamic that has typically preceded recessions, and we're likely to see shorter -term rates come up as the Fed continues to increase rates.
495
So I'm just curious if you guys have discussed that, if you'd be willing to push back against that, or if that's a dynamic you'd be comfortable with.
496
CHAIR POWELL.
497
You know, it's an interesting question, and there are a range of views there.
498
I mean, I think it's true that yield curves have tended to predict recessions if you look back over many cycles,
499
but a lot of that was just situations in which inflation was allowed to get out of control, and the Fed had to tighten, and that put the economy into a recession.
500
That's really not the situation we're in now.
501
So I don't know that that's -I don't know that -I don't think that recession probabilities are particularly high at the moment, any higher than they normally are.
502
But having said that, I think it's -there are good questions about what a flat yield curve
503
or an inverted yield curve does to intermediation.
504
It's hard to find in the research data, but, nonetheless, I think those are issues that we'll be watching carefully.
505
Thank you very much.
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Vocabulary and speaking notes for this lesson
This video has 505 sentences and 6951 words to shadow. The speech runs for 43:11. The speaker talks at a natural 161 words per minute, close to everyday conversation. 84% of the words are among the 3,000 most common in English; the rest is worth studying before you start.
Key vocabulary in this video
15 words from the video worth learning, with pronunciation and meaning:
| Word | Pronunciation | Meaning |
|---|---|---|
| inflation noun | /ɪnˈfleɪ.ʃən/ | An act, instance of, or state of expansion or increase in size, especially by injection of a gas or liquid. |
| projection noun | /pɹəˈd͡ʒɛkʃən/ | Something which projects, protrudes, juts out, sticks out, or stands out. |
| unemployment noun | /ʌn.ɪmˈplɔɪ.mənt/ | The state of having no job; joblessness. |
| productivity noun | /ˌpɹɒdʌkˈtɪvəti/ | The state of being productive, fertile, or efficient. |
| forecast noun | /ˈfɔːkɑːst/ | An estimation of a future condition. |
| outlook noun | /ˈaʊtˌlʊk/ | A place from which something can be viewed. |
| median noun | /ˈmiː.di.ən/ | A line segment joining the vertex of triangle to the midpoint of the opposing side. |
| estimate noun | /ˈɛs.tɪ.mət/ | A rough calculation or assessment of the value, size, or cost of something. |
| wage noun | /weɪd͡ʒ/ | An amount of money paid to a worker for a specified quantity of work, usually calculated on an hourly basis and expressed in an amount of money per hour. |
| fiscal adjective | /ˈfɪskəl/ | Related to the treasury of a country, company, region or city, particularly to government spending and revenue. |
| monetary adjective | /ˈmʌnɪtəɹi/ | Of, pertaining to, or consisting of money. |
| participant noun | /pɑːɹˈtɪsəpənt/ | One who participates. |
| carefully adverb | /ˈkɛɹf(ə)li/ | With care; attentively, circumspectly. |
| participation noun | /pɑːˌtɪs.ɪˈpeɪ.ʃən/ | The act of participating, of taking part in something. |
| gradual adjective | /ˈɡɹæd͡ʒuəl/ | Proceeding or advancing by small, slow, regular steps or degrees |
Phrasal verbs you will hear
| Word | Meaning |
|---|---|
| move up verb | To promote, put onto a higher level. |
| come up verb | To emerge or become known, especially unexpectedly. |
| go back to verb | To stem from; to originate in. |
| go down verb | To descend; to move from a higher place to a lower one. |
| going forward adverb | In the immediate future and beyond. |
| bring up verb | To mention. |
| come up with verb | To manage to produce, deliver, or present (something) by inventing, creating, thinking of, or obtaining it. |
| go up verb | To move upwards. |
Pronunciation to watch
The speaker uses 136 contractions and reduced forms, such as don't, we've, we're. Say them the short way, as you hear them.
- The “th” sounds: nonetheless /ˌnʌnðəˈlɛs/, threshold /ˈθɹɛʃ(h)oʊld/
- The “sh” and “zh” sounds: inflation /ɪnˈfleɪ.ʃən/, projection /pɹəˈd͡ʒɛkʃən/, participation /pɑːˌtɪs.ɪˈpeɪ.ʃən/, sheet /ʃit/, recession /ɹɪˈsɛʃn̩/
- Long words — get the stress right: unemployment /ʌn.ɪmˈplɔɪ.mənt/, productivity /ˌpɹɒdʌkˈtɪvəti/, monetary /ˈmʌnɪtəɹi/, participant /pɑːɹˈtɪsəpənt/, participation /pɑːˌtɪs.ɪˈpeɪ.ʃən/
How to practise with this video
- Listen to the whole video once without speaking and note the words you do not know.
- Start at 0.75× speed, shadow it sentence by sentence, then go back to normal speed once it feels easy.
- Record yourself and compare with the original, paying attention to words like inflation, projection, unemployment.
Grammar in this video
The structures the speaker uses most, with the exact words from the video:
| Structure | In the video |
|---|---|
| Conditional sentences if + clause, will/would + verb — a condition and its result | If the outlook changes, we will adjust · if the Fed would be |
| Present perfect continuous have/has been + -ing — an action that started earlier and is still going on | have been speaking · we've been monitoring |
| Present perfect have/has + past participle — a past action that still matters now | has remained · has increased · has strengthened |
| Passive voice be + past participle — the focus is on what happens, not who does it | would be prepared · can be achieved · are anchored |
What is the Shadowing Technique?
Shadowing is a science-backed language learning technique originally developed for professional interpreter training and popularized by polyglot Dr. Alexander Arguelles. The method is simple but powerful: you listen to native English audio and immediately repeat it out loud — like a shadow following the speaker with just a 1–2 second delay. Unlike passive listening or grammar drills, shadowing forces your brain and mouth muscles to simultaneously process and reproduce real speech patterns. Research shows it significantly improves pronunciation accuracy, intonation, rhythm, connected speech, listening comprehension, and speaking fluency — making it one of the most effective methods for IELTS Speaking preparation and real-world English communication.