FOMC November 7, 2024, Press Conference Q&A Summary

The following summary represents direct quotes (with minor immaterial changes to make reading easier) from the press conference.

A. Backdrop

The economy is strong overall and has made significant progress toward our goals over the past two years. Recent indicators suggest that economic activity has continued to expand at a solid pace. GDP rose at an annual rate of 2.8 percent in the third quarter, about the same pace as in the second quarter. Growth of consumer spending has remained resilient.

The labor market has cooled from its formerly overheated state and remains solid with conditions remain solid. Payroll job gains have slowed from earlier in the year. Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed. Overall, a broad set of indicators suggests that conditions in the labor market are now less tight than just before the pandemic in 2019.
The labor market has cooled a great deal from its overheated state of two years ago and is now essentially in balance. It is continuing to cool, albeit at a modest rate, and we don’t need further cooling, we don’t think, to achieve our inflation mandate.
Inflation has eased substantially. Overall, inflation has moved much closer to our 2 percent longer-run goal, but core inflation remains somewhat elevated. Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.
We have greater confidence now that inflation is moving down to 2 percent, but our plan is that we will be at 2 percent over time. Policy is still restrictive.
We continue to be confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2 percent.

B. Decision to Cut in November

Lowering the target range for federal funds rate by 1/4 percentage point, to 4-1/2 to 4-3/4 percent, further recalibrates the policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we move toward a more neutral stance over time.
Reducing policy restraint too quickly could hinder progress on inflation; while reducing policy restraint too slowly could unduly weaken economic activity and employment. Policy is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.
Even with today’s cut policy is still restrictive.

C “Don’t guess, we don’t speculate, and don’t assume”

The election will have no effects on our policy decisions. The economy is quite difficult to forecast looking out past the very near term. Here, we don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy would be, specifically, whether and to what extent those policies would matter for the achievement of our goal variables, maximum employment and price stability.
Right now there’s nothing to model. We’re in such an early stage. We don’t know what the policies are, and once we know what they are, we won’t have a sense of, when they’ll be implemented. The real question is not the effect of that law, it’s all of the policy changes that are happening, what’s the net effect and the overall effect on the economy at a given time.

D. Future rate decisions: Data dependent and have No Idea

In every meeting we’re going to be looking at the incoming data and how that affects the outlook.
We’re trying to steer between the risk of moving too quickly and perhaps undermining our progress on inflation or moving too slowly and allowing the labor market to weaken too much. We’re trying to be on a middle path where we can maintain the strength in the labor market while also enabling further progress on inflation.
There is a fair amount of uncertainty in that the path that we’re on, we don’t know the right pace, and we don’t know exactly where the destination is; so the point is to find the right pace and the right destination as we go. And I think there’s a fair amount of uncertainty about that and you don’t want to tie yourself up with guidance, you want to be able to make sensible decisions as you go.
And as a general matter, as we move ahead we are prepared to adjust our assessments of the appropriate pace and destination as the outlook evolves.
Inflation, continuing to come down on a bumpy path over the next couple of years and settling around two percent. That story is intact, and one or two really good data months or bad data months aren’t going to really change the pattern at this point now that we’re this far into the process.

E. The pace of cut

Nothing in the economic data suggests that the Committee has any need to be in a hurry to get there. We are seeing strong economic activity. We are seeing ongoing strength in the labor market. We’re watching that carefully, but we do see maintaining strength there.

The right way to find neutral is carefully, patiently. There’s nothing in the SEP that suggests a rush to get this done.

F. The Base Case

Our baseline expectation is that we’ll continue to move gradually down towards neutral, that the economy will continue to grow at a healthy clip, and that the labor market will remain strong.