The following summary represents direct quotes (with minor immaterial changes to make reading easier) from the press conference.
A. Backdrop – Prepared Remarks
- Dual Mandate Affirmation
Squarely focused on achieving dual mandate goals of maximum employment and stable prices – keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem.
- Current Economic Conditions
Despite heightened uncertainty, the economy is still in a solid position. Private domestic final purchases, or PDFP—which excludes net exports, inventory investment, and government spending—grew at a solid 3 percent rate in the first quarter, the same as last year’s pace. Within PDFP, growth of consumer spending moderated while investment in equipment and intangibles rebounded from weakness in the fourth quarter. Surveys of households and businesses, however, report a sharp decline in sentiment and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns. It remains to be seen how these developments might affect future spending and investment.
- Labor Market Conditions Remain Solid
Payroll job gains averaged 155 thousand per month over the past three months. The unemployment rate, at 4.2 percent. Wage growth has continued to moderate while still outpacing inflation.
- Inflation Remains Elevated Short-Term
Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal and core PCE prices rose 2.6 percent. Near-term measures of inflation expectations have moved up, as reflected in both market- and survey-based measures due to tariff policies. Beyond the next year, most measures of longer-term expectations remain consistent with our 2 percent inflation goal.
- Future Economic Conditions
The risks of higher unemployment and higher inflation appear to have risen, and the current stance of monetary policy is well positioned to respond in a timely way to potential economic developments.
- Substantial Policy Changes
The new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. The tariff increases announced so far have been significantly larger than anticipated. All of these policies are still evolving, however, and their effects on the economy remain highly uncertain. If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived—reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored.
- Monetary Policy Consideration
Challenging scenario may arise where the dual-mandate goals are in tension. If that were to occur, consideration would be given as to how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close. For the time being, we are well positioned to wait for greater clarity before considering any adjustments to policy stance.
B. Q&A
- Rates – We are in a Good Place
The economy is still solid. There is no need to hurry in making policy change and remain patient while watching incoming data.
- Tariffs & Inflation
The long-term inflation expectation remains well-anchored. It is very difficult to have a precise assessment of how much of inflation is coming from tariffs and from other. Goods inflation moved up pretty significantly in the first two months of the year. A good part of it is coming from tariffs. But we’ll be working to try and find the best possible way to separate non-tariff inflation from tariff inflation. If inflation is transitory, it can be the case that it’s appropriate sometimes to look through inflation if it’s going to go away quickly without action. Tariffs tend to bring growth down and bring inflation up in the first instance.
Longer-term inflation expectations being well-anchored. Short-term inflation expectations have increased widely, and people who fill out surveys and answer are pointing to tariffs. Hard Data is pretty good: growth and consumer spending remain solid; and employment is at healthy level. Inflation has moved up. Survey Data on the other hand shows significant rise in uncertainty and concerns about downside risks. Thus, the relationship between survey data and actual economic activity hasn’t been very tight. The right thing to do is to wait here for greater clarity about what the economy is doing
Given the scope and scale of the tariffs, certainly the risk to higher inflation and higher unemployment have increased. And if that transpires, if the tariffs are ultimately put in place at those levels, then further progress toward stated goals would be delayed – at least for the next year, there would not be progress toward those goals. There’s so much uncertainty about the scale, scope, timing, and persistence of the tariffs.
https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20250507.pdf