May 3, 2023
Jerome H. Powell
May 3, 2023 FOMC Press Conference
- The chair said the FOMC removed the sentence from the March statement that "anticipates that some additional policy firming may be appropriate," replacing it with language about taking into account cumulative tightening, lags, and economic developments, marking a meaningful change in forward guidance.
- The chair said the Fed staff's forecast, independent of participants' views, was broadly for a mild recession, characterized by a rise in unemployment smaller than typical in modern-era recessions, though he declined to detail the staff's current forecast, deferring to the minutes.
- The chair said a failure to raise the debt ceiling in a timely way would be unprecedented, put the U.S. in uncharted territory, and could have highly uncertain and potentially quite adverse consequences for the U.S. economy, and that no one should assume the Fed can protect the economy from such effects.
- The chair said the February 14 presentation on interest rate risk was an informational briefing to the whole Board, with one page on Silicon Valley Bank discussing mark-to-market losses, but it contained nothing about the risk of a bank run and was not presented as urgent or alarming.
- The chair said the monetary policy and financial stability tools are not in conflict and are working well together, citing the use of lending facilities to support banks while using monetary policy tools to foster maximum employment and price stability, and he noted the separation principle has its limits.
From the opening statement
Press conference
CHAIR POWELL. Good afternoon. Before discussing today’s meeting, let me comment briefly on recent developments in the banking sector. Conditions in that sector have broadly improved since early March, and the U.S banking system is sound and resilient. We will continue to monitor conditions in the sector. We are committed to learning the right lessons from this episode and will work to prevent events like these from happening again. As a first step in that process, last week we released Vice Chair for Supervision Barr ’s Review of the Federal Reserve’s Super vision and Regulation of Silicon Valley Bank. The review’s findings underscore the need to address our rules and supervisory practices to make for a stronger and more resilient banking system, and I am confident that we will do so.
From the perspective of monetary policy, our focus remains squarely on our dual mandate to promote maximum employment and stable prices for the American people. My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all.
Today, the FOMC raised its policy interest rate by ¼ percentage point. Since early last year, we have raised interest rates by a total of 5 percentage points in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. We are also continuing to reduce our securities holdings. Looking ahead, we will take a data-dependent approach in determining the extent to which additional policy firming may be appropriate. I will have more to say about today’s monetary policy actions after briefly reviewing economic developments.