View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

July 31, 2019

Chair Powell’s Press Conference

FINAL

Transcript of Chair Powell’s Press Conference
July 31, 2019

CHAIR POWELL. Good afternoon, and welcome. We decided today to lower the target
for the federal funds rate by ¼ percentage point to a range of 2 percent to 2¼ percent. The
outlook for the U.S. economy remains favorable, and this action is designed to support that
outlook. It is intended to insure against downside risks from weak global growth and trade
policy uncertainty, to help offset the effects these factors are currently having on the economy,
and to promote a faster return of inflation to our symmetric 2 percent objective. All of these
objectives will support achievement of our overarching goal: to sustain the expansion, with a
strong job market and inflation close to our objective, for the benefit of the American people.
We also decided to conclude the runoff of our securities portfolio in August rather than in
September, as previously planned. And I’ll discuss the thinking behind today’s interest rate
reduction and then turn to the path forward.
As the year began, both the economy and monetary policy were in a good place. The
unemployment rate was below 4 percent, and inflation had been running near our 2 percent
objective for nine months. Our interest rate target was at the low end of estimates of neutral.
Over the first half of the year, the economy grew at a healthy pace and job gains pushed
unemployment to near a half-century low. Wages have been rising, particularly for lower-paying
jobs. People who live and work in low- and middle-income communities tell us that many who
have struggled to find work are now getting opportunities to add new and better chapters to their
lives. This underscores for us the importance of sustaining the expansion so that the strong job
market reaches more of those left behind.

Page 1 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

Through the course of the year, weak global growth, trade policy uncertainty, and muted
inflation have prompted the FOMC to adjust its assessment of the appropriate path of interest
rates. The Committee moved from expecting rate increases this year to a patient stance about
any changes and then to today’s action. The median Committee participant’s assessments of the
neutral rate of interest and the longer-run normal rate of unemployment have also declined this
year, reinforcing the case for a somewhat lower path for our policy rate. These changes in the
anticipated path of interest rates have eased financial conditions and have supported the
economy.
At our June meeting, many Committee participants saw that the case for lowering the
federal funds rate had strengthened, but the Committee wanted to get a better sense of the overall
direction of events. Since then, we have seen both positive and negative developments. Job
growth was strong in June and, looking through month-to-month fluctuations, the data point to
continued strength. We expect job growth to be slower than last year but above what we believe
is required to hold the unemployment rate steady.
GDP growth in the second quarter came in close to expectations. Consumption—
supported by rising incomes and high household confidence—is the main engine driving the
economy forward. But manufacturing output has declined for two consecutive quarters, and
business fixed investment fell in the second quarter. Foreign growth has disappointed,
particularly in manufacturing and notably in the euro area and China. In response to this
weakness, many central banks around the world are increasing policy accommodation or
contemplating doing so. After simmering early in the year, trade policy tensions nearly boiled
over in May and June but now appear to have returned to a simmer. Looking through this

Page 2 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

variability, our business contacts tell us that the ongoing uncertainty is making some companies
more cautious about their capital spending.
The domestic inflation shortfall has continued. Core inflation, which excludes food and
energy prices and is a better gauge of future developments than is total inflation, has run at
1.6 percent over the past 12 months. We continue to expect that inflation will return over time to
2 percent. But domestic inflation pressures remain muted, and global disinflationary pressures
persist. Wages are rising, but not at a pace that would put much upward pressure on inflation.
We are mindful that inflation’s return to 2 percent may be further delayed, and that continued
below-target inflation could lead to a worrisome and difficult-to-reverse downward slide in
longer-term expectations.
So taking all of that on board, the Committee still sees a favorable baseline outlook.
Over the year, however, incoming information on global growth, trade policy uncertainty, and
muted inflation have led the Committee to gradually lower its assessments of the path of policy
interest rate that would best support that outlook. Today, we judge that those factors warrant the
policy adjustment I described: “As the Committee contemplates the future path of the target
range for the federal funds rate, it will continue to monitor the implications of incoming
information for the economic outlook and will act as appropriate to sustain the expansion, with a
strong labor market and inflation near its symmetric 2 percent objective.”
Thank you. I am happy to take your questions.
JEANNA SMIALEK. Hi, Chair Powell. Jeanna Smialek with the New York Times. Per
your statement here, I guess the question is, is there any reason to believe that a 25 basis point
cut is going to be sufficient to expediently return inflation to your 2 percent target? And, if not,

Page 3 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

what are you going to be looking at to convince you that you need to cut rates again? What is
the hurdle rate there?
CHAIR POWELL. So I think you have to look at not just the 25 basis point cut, but look
at the Committee’s actions over the course of the year. As I noted in my opening statement, we
started off expecting some rate increases, we moved to a patient setting for a few months, and
now we’ve moved here. I think what you’ve seen over the course of the year is, as we’ve moved
to a more accommodative policy, the economy has actually performed just about as expected
with that gradually increasing support. And I think—I wouldn’t take credit for all of that, but I
do think that increasing policy support has kept the economy on track and kept the outlook
favorable.
In terms of the rest of your question, the Committee is really thinking of this as a way of
adjusting policy to a somewhat more accommodative stance to further the three objectives that I
mentioned: to insure against downside risks, to provide support to the economy, that those
factors are—where factors are pushing down on economic growth, and then to support inflation.
So we do think it will serve all of those goals, but again, we’re thinking of it as essentially in the
nature of a midcycle adjustment to policy.
MICHAEL MCKEE. Michael McKee from Bloomberg Television and Radio. There’s a
perception out there that perhaps, in this case, the Fed is something of a hammer in search of a
nail, because the latest consumer spending reports, as you suggested, don’t seem to show any
kind of demand problem in the U.S. And when you look at mortgage rates, auto lending rates,
they’ve all come down. And so, wondering exactly what problem lower capital costs will solve.
CHAIR POWELL. So, you’re absolutely right. The—the performance of the economy
has been reasonably good. The position of the economy is as close to our objectives as it’s been

Page 4 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

in a long time, and the outlook is also good. What we’ve been monitoring since the beginning of
the year is, effectively, downside risks to that outlook from weakening global growth, and we see
that everywhere: weak manufacturing, weak global growth now, particularly in the European
Union and China. In addition, we see trade policy developments, which at times have been
disruptive and then have been less so, and also inflation running below target. So we see those
as threats to what is clearly a favorable outlook, and we see this action as designed to support
them and keep that outlook favorable. And, frankly, it is a continuation of what we’ve been
doing all year to provide more support against those very same risks.
MICHAEL MCKEE. But the follow-up question is, how does it do that? How does
cutting interest rates lower—or, how does cutting interest rates keep that going, since the cost of
capital doesn’t seem to be the issue here?
CHAIR POWELL. You know, I—I really think it does, and I think the evidence of my
eyes tells me that our policy does support—it supports confidence, it supports economic activity,
household and business confidence, and through channels that we understand. So it will lower
borrowing costs. It will—and it will work. And I think you see it. Since—you know, since we
noted our vigilance about the situation in June, you saw financial conditions move up, and you
saw—I won’t take credit for the whole recovery, but you saw financial conditions move up. You
see confidence, which had troughed in June—you saw it move back up. You see economic
activity on a healthy basis. It just—it seems to work through confidence channels as well as the
mechanical channels that you are talking about.
HEATHER LONG. Hi, Heather Long from the Washington Post. You always say that
the Fed is data dependent, and much of the data that we’ve seen since the June meeting has
surprised to the upside or at least been in line with expectations. Can you give us a sense of how

Page 5 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

that better-than-expected data impacted the FOMC’s thinking? And if we keep seeing these
upside surprises, does that change or evolve any FOMC thinking going forward?
CHAIR POWELL. So, yes. I mean, I think we—of course, you know, what we do at
every meeting, as I noted, is, we do a deep dive into U.S. economic activity and global activity
and, certainly, carefully went through U.S. economic activity, which there has been some
positive and some negative, but, overall, the U.S. economy has shown resilience during the
intermeeting period. But, again, the—the issue is more the downside risks and then the shortfall
in inflation, and we’re trying to address those.
So, in addition, going forward, I would say, we’re going to be monitoring those same
things. We’ll be monitoring the evolution of trade uncertainty, of global growth, and of low
inflation. And we’ll also, of course, be watching the performance of the U.S. economy. As I
mentioned, it had shown some resilience here to those issues, and we’ll be putting all of that
together, and that’s how we’ll be thinking about policy going forward.
STEVE LIESMAN. Steve Liesman, CNBC. I just want to follow up on that. Would
you say we’re sort of—you guys have gotten into a new regime here? This is sort of an
insurance cut and not a data-dependent cut? And are we now more in the realm of watching
headlines of trade talks than we are watching unemployment rate and inflation numbers, or—and
growth numbers? What—how do we know what you’re going to do next, and why now in this
new regime?
CHAIR POWELL. Yes. So I gave three reasons for what we did, and that is to insure
against downside risks to the outlook from weak global growth and trade tensions. So that is—in
a sense, that is a risk-management point, and that is a bit of insurance. But we also feel like
weak global growth and trade tensions are having an effect on the U.S. economy. You see it

Page 6 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

now in the second quarter: You see weak investment, you see weak manufacturing—so support
demand there and also to support return of inflation to 2 percent. But there’s definitely an
insurance aspect of it.
Trade is unusual. We don’t—you know, the thing is, there isn’t a lot of experience in
responding to global trade tensions. So it is a—it’s something that we haven’t faced before and
that we’re learning by doing. And it is not—it’s not exactly the same as watching global growth,
where you see growth weakening, you see central banks and governments responding with fiscal
policy, and you see growth strengthening, and you see a business cycle. With trade tensions—
which do seem to be having a significant effect on financial market conditions and on the
economy—they evolve in a different way, and we have to follow them.
And, by the way, I want to be clear here. We play no role whatsoever in assessing or
evaluating trade policies other than as—as trade policy uncertainty has an effect on the U.S.
economy in the short and medium term. We’re not in any way criticizing trade policy. That’s
really not our job.
NICK TIMIRAOS. Thank you. Nick Timiraos of the Wall Street Journal. So, Chair
Powell, you and your colleagues have offered three reasons to cut rates: a lower neutral rate that
may have made policy a little bit tighter than anticipated, the global slowdown and the darker
risk picture from the trade tensions, and this desire to re-center inflation and inflation
expectations. I wonder, which of those factors, if any, weighs most heavily on you? And, more
importantly, is a ¼ point cut really going to address all of that, let alone any one of those?
CHAIR POWELL. So I actually think different people have different—different
weightings has been my experience on those things. You mentioned lower r*, trade slowdown—
and I would actually add, lower natural rate of unemployment too has moved down, all of which

Page 7 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

kind of point to more accommodation. So, again, I don’t think asking about a ¼ point is really
the right question. I think you have to look back over the course of the year and see the
Committee moving away from rate increases to a neutral posture to, now, a rate cut.
So I think we’ve been providing—and that affects the forward rate path, and it affects
financial conditions, and financial conditions affect the economy. You see an economy which is
actually performing pretty well. Growth in the first half of this year is about the same as it was
in all of ’18 and actually a little better than our forecast for growth in 2019—at the end of 2019.
So I think, in a way, that’s monetary policy working. And, again, I wouldn’t just look at the
25 basis point cut as the right question.
NICK TIMIRAOS. If I could follow up, I guess in May—in May it seemed as if you
were setting a higher bar to cut rates: There would need to be a deterioration in the outlook. In
June, you seemed to suggest that if the outlook didn’t improve, there might be a rate cut. Where
is that bar right now, because I think there’s some confusion about how the Committee is
responding.
CHAIR POWELL. Yes. So we, as we noted—we noted at the bottom of the statement
that language, which really says how we’re thinking about it. So it says, as we’re contemplating
the future path of the target range for the federal funds rate, we’ll continue to monitor the
implications of incoming information—and it talks about that language. So, you know, I can’t—
all I can tell you is, we’ll be looking at weak global growth. We’ll be looking very carefully to
see how that’s happening.
And I think you see—you learn—every cycle you learn about these things. So we will
see whether growth is picking up, whether it’s bottoming out. We’ll see that picture. We’ll also
see on trade. You know, we’re going to be seeing—I think we’ve learned a lot on trade in this

Page 8 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

cycle. I think we’ll continue to learn more, and on inflation we will. So, in addition, the U.S.
economy itself is—the performance of the U.S. economy will enter into that. So I would love to
be more precise, but with trade, it is a factor that we have to assess in kind of a new way. Those
are the things that we’ll be looking at, and—you know, in making our decisions going forward.
EDWARD LAWRENCE. Edward Lawrence with Fox Business Network. So a rate hike
last December was seen by some economists and the St. Louis Fed president, James Bullard, as a
step too far. Now the Fed’s waited about seven months for a rate cut. You said today you were
concerned about downside risks. So could some of the weakness on the business side, with that
fixed investment and the sluggish side on the business side, be because the Fed waited so long? I
want to get your thoughts on that and talk about why you feel that this nudge is the right level.
CHAIR POWELL. Yes. So we don’t hear that from businesses. They don’t come in and
say, “We’re not investing because, you know, the federal funds rate is too high.” I haven’t heard
that from a business. What you hear is that demand is weak for their products. You see
manufacturing being weak all over the world. Investment—business investment is weak. And I
wouldn’t lay all of that at the door of trade talks. I think there’s a—there’s a global business
cycle happening with manufacturing and investment, and that’s—that’s been, you know,
definitely a bigger factor than, certainly, we expected late last year. I think global—global
growth started to slow down in the middle of last year, but that has gone on to a greater extent.
And, by the way, trade policy uncertainty has also been, I think, more elevated than we
anticipated.
In terms of, is this the—we believe this is the right move for today, and we think it’s—we
think it will serve the three ends that I mentioned. And I’ve already gone over how we’re
thinking about going forward.

Page 9 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

ANN SAPHIR. Ann Saphir with Reuters. You called it “a midcycle adjustment to
policy.” And, I mean, what should we take this to mean, and what message do you mean to send
with this move today about future rate moves?
CHAIR POWELL. Well, the sense of that is—I mean, that refers back to other times
when the FOMC has cut rates in the middle of a cycle. And I’m contrasting it there with the
beginning—for example, the beginning of a lengthy cutting cycle.
ANN SAPHIR. So we’re not at the beginning of a lengthy cutting cycle?
CHAIR POWELL. That is not—that’s not what we’re seeing now. That’s not our
perspective now or outlook.
JAMES POLITI. Hi there. Are there any circumstances under which you would decide
to pause—pause at one interest rate cut, today’s interest rate cut, and not—not, not go ahead with
further monetary easing at this stage? Or are you predicting that, you know, once you’ve
embarked on this easing, you will have to at least move by one more notch going forward?
CHAIR POWELL. You know, so our policy is—will depend on the implications of
incoming data for the economic outlook as well as evolving risks to that outlook. And so we’re
going to be monitoring the implications of incoming information for the outlook, as I mentioned.
And, so I—that’s really where I would leave you with that.
VICTORIA GUIDA. Hi. Victoria Guida with Politico. On capital, Vice Chairman
Quarles has said that the level of capital requirements that exists right now are such that it’s
basically like the countercyclical capital buffer is already turned on, and that he would like the
ability to be able to turn it down in a downturn. I was wondering if you agreed with that.

Page 10 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

And then, also, just quickly, on real-time payments—larger banks have suggested that if
the Fed built its own system, that would be a bait-and-switch, because the Fed asked—or called
for a private-sector system. Do you think that that is a fair assessment?
CHAIR POWELL. Okay. So, on the first, I would say that I view the level of capital
requirements and the level of capital in the system as being about right. I do agree with that.
The idea that you’re talking about is one that’s—that Vice Chair Quarles has talked about. It’s
a—it’s one under consideration. The idea being, in a sense, we’ve chosen, in the United States,
to have high through-the-cycle capital requirements by doubling the SIFI surcharge, which is the
surcharge that the largest banks have in their capital requirements. We’ve, in effect, already put
in place substantial countercyclical buffers. And so, conceptually, you can think of—I’m not
saying it’s the same thing as a countercyclical capital buffer.
So that’s—that’s really the point—is that we don’t rely—our system doesn’t rely on our
ability—it doesn’t mainly rely on our ability to identify the right time in the cycle to trigger a
countercyclical tool. We rely on through-the-cycle, always-on high capital and liquidity
requirements. And I think that’s a good thing to do. The idea of putting it in place so you can
cut it, that’s something some other jurisdictions have done, and it’s worth considering. I think
the United Kingdom, in particular, has a countercyclical capital buffer that’s always on, but the
one point of it is that you can cut when there’s a downturn and therefore give the banks more
room. So this isn’t something we’ve decided to do. It’s just under consideration.
In terms of the real-time payment system, your second question, so this is something
we—the United States is far behind other countries in terms of having real-time payments
available to the general public. The Fed, really, coming out of the Reserve System—the Reserve
Banks and the Board together—convened all of the stakeholders around the table to talk about

Page 11 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

how we can move forward. This is consumer groups, technology companies, banks, card
companies—pretty much all of the groups who would be interested—and worked on a project for
several years. And one of the things that came out of that was a recommendation that the Fed
should build a 24 x 7 x 365 real-time settlement system to solve that problem—to address that
problem.
We put out a proposal in October of last year about, you know, should we do this, and we
got quite a lot of comments. They were overwhelmingly favorable. And I would point out that
in our payment system, in many places, the Fed operates alongside private-sector operators—for
example, in wholesale payments, in ACH, and in check—so it wouldn’t be unusual or out of
keeping with—with how we’ve done things in the past. We have not made a decision on this,
but it’s something we’re looking at carefully and something I do expect we’ll make a decision
on soon.
CRAIG TORRES. Craig Torres from Bloomberg. I’m trying to parse what you’re
saying here. On the one hand, you say the policy tilt in the statement has eased financial
conditions, and that’s helping the economy. In that tilt, market participants are interpreting this
language, “will act as appropriate,” as still being in the statement. And, on the other hand, you
say it’s not the start of a—of an easing cycle. So what are you saying? Does that mean, you
know, with one or two more cuts you’ll be done, and this policy bias comes out of the statement?
Or simply that this policy bias will come out of the statement sooner than market participants
think?
CHAIR POWELL. So it is—as I mentioned, it’s going to depend on the evolving data
and the evolving risk picture. But as we look at the situation now and the outlook now, what we
see is that it’s appropriate to make an adjustment in policy to a somewhat more accommodative

Page 12 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

stance. That’s what we’re seeing. And that’s what we’re going to be looking—you know, we’ll
be looking at incoming data, at all of the—at the risks that I mentioned, and the performance of
the U.S. economy, and at low inflation. We’ll be looking at that to make our decisions going
forward.
SCOTT HORSLEY. Thank you, Mr. Chairman. Scott Horsley for NPR. You’ve talked
a number of times about the people who feel like they are just recently getting to the punchbowl
10 years into this expansion. Can you elaborate a little bit on how this rate cut is expected to
help them?
CHAIR POWELL. Well, I think the best thing for people who are—who are feeling
that—and we are getting lots of feedback from people who work and live in low- and moderateincome communities to the effect that they’re now feeling the recovery, and, in fact, they haven’t
felt a better labor market in anybody’s memory, so this is great to hear. And I guess my view is,
the best thing we can do for those people is to sustain the expansion, keep it going, and that’s one
of the overarching goals of—of this move and all of our policy moves. There really is no reason
why the expansion can’t keep going. Inflation is not troublingly high. If you look at the—at the
U.S. economy right now, there’s no sector that’s booming and therefore might bust. You have a
fairly well-balanced, in a sense, economy.
Now, the engine, though, is really a consumer economy, which is 70 percent of the
economy. The manufacturing economy—the investment and manufacturing part of the
economy—is more or less not—not growing much. It’s at a healthy level but not growing much.
So—and we hope to help that with this rate cut. But, I would say, overall, we’re trying to sustain
the expansion and keep, you know, close to our statutory goals, which are maximum
employment and stable prices.

Page 13 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

DONNA BORAK. Chairman Powell, Donna Borak with CNN. The President has
repeatedly called for this rate hike and for the Fed to end the runoff of its balance sheet. What do
you say to those that say that the Fed gave into what the President wanted today? And could you
also elaborate a little bit further on why the Fed decided to speed up its balance sheet runoff two
months earlier today?
CHAIR POWELL. So I gave my—my reasons for—our reasons, really—for doing this.
And, you know, just to touch on that again, this action is designed to insure against downside
risks to the outlook from weak global growth and trade tensions, offset the negative effect that
those factors are already having, and promote a faster return of inflation to 2 percent. That’s
what we’ve been talking about all year long, and we’ve gradually moved our policy in the
direction of more accommodation. I think what you see is an economy that has reacted well to
that. So that’s what we’re doing, and that’s why we’re doing it.
We never take into account political considerations. There’s no place in our discussions
for that. We also don’t conduct monetary policy in order to prove our independence. We
conduct monetary policy in order to—to move as close as possible to our statutory goals, and
that’s what we’re always going to do. We’re always going to use our tools that way. And then,
at the end, we’ll—you know, we’ll live with the results.
In terms of the balance sheet, that was really just a matter of simplicity and consistency.
Really nothing more to it than that.
GREG ROBB. Thank you, Chairman Powell. Greg Robb from MarketWatch. I was
wondering—we weren’t in the room, but I think it’s a fair assumption to know that the two
dissenters probably spoke about financial stability concerns. So I was wondering if you could
talk about what you—what was your response to them when those concerns were raised? I’ve

Page 14 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

collected a couple of things from the IMF, and the Bank of International Settlements said that it’s
just—when you have low rates, you just get more debt in the economy, and that there’s also this
feeling that it makes it harder to raise rates. So could you talk about that? Thank you.
CHAIR POWELL. Yes. So, first, let me say—I’ll just speak for myself, but I
understand those concerns very well. I do. I’ve—you know, I’ve studied them, I’ve spoken
about them, and I take them very seriously. But as I look at today’s situation, I don’t see them as
a reason not to take this action today. I just don’t think—that would be my point. And one of
the reasons why I think that is, if you look—if you look—so we have a financial stability
framework now for the first time. Before the crisis, we didn’t have this, but now we have it, and
we publish it. And we look at, really, four big things so that we know we can—you know, the
public can hold us accountable and compare us meeting to meeting, and—you know, and see
whether we got this right, because it’s transparent now.
But the four things we look at are valuation pressures. And we do see notable valuation
pressures in some markets but, you know, honestly, not at a highly troubling level. In terms of
household borrowing, household and business borrowing is the second thing. Households are in
a very good shape overall. I’ll come back to business borrowing. Leverage in the financial
system is low, and funding risk is low. So, overall, staff’s view has been—and my view has
been—that if you look overall, financial stability vulnerabilities are moderate.
The place that gets all the attention right now—a lot of attention—is business borrowing,
and we look very carefully at that. What’s happening with business borrowing is, the loans have
moved off the balance sheets of the banks and into market-based vehicles, which tend to be
stably funded. But, nonetheless, it’s clear that the highly leveraged business sector could act as
an amplifier to a downturn. So we’re watching that very carefully. But, again, I think if you

Page 15 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

look overall at the U.S. financial system, what you see is a high level of resilience—much higher
than it was before the crisis—and that’s something to take comfort from. And I think all of that
gives us the ability to use monetary policy for its purposes and rely on supervisory and
regulatory tools to—you know, to keep the financial system resilient.
GREG ROBB. So you’re not doing something today for—to help today, and then it’s
going to cause problems down the road? You’re not worried about that kind of dynamic?
CHAIR POWELL. There are very few things that I don’t worry about at all. So, of
course, of course, we monitor. We have—every quarter we have an extensive briefing on
financial stability, and we had that yesterday. So we look at this on an ongoing basis. We have a
great team. We liaise with central banks around the world. You know, one of my colleagues is
the head of the Financial Stability Board globally, so we’re very, very much monitoring these
things all the time. And we worry about them all the time. We’re always looking at the—we’re
looking for that thing that we may have missed a lot of the time. But the things we haven’t
missed, I think they paint a mixed picture, but not one that should prevent us from taking
monetary policy actions that we think are appropriate to support the economy.
MARTIN CRUTSINGER. Marty Crutsinger, AP. You’ve talked in this press
conference about being data dependent going forward, and that this is not the start of a series of
rate cuts. But the financial markets seem to think that this is the start of a series of rate cuts, and
they’re predicting three, four cuts this year. Is this your effort to try to damp down that—that
thing?
CHAIR POWELL. No. Let me be clear. What I said was, it’s not—it’s not the
beginning of a long series of rate cuts. I didn’t—I didn’t say it’s just one or anything like that.
What I said is, when you think about rate-cutting cycles, they go on for a long time, and the

Page 16 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

Committee is not seeing that—not seeing us in that place. You would do that if you saw real
economic weakness and you thought that the federal funds rate needed to be cut a lot. That’s not
what we’re seeing. That’s not what we’re seeing.
What we’re seeing is that it’s appropriate to—to adjust policy to a somewhat more
accommodative stance over time, and that’s how we’re looking at it. What I said was, it’s not a
long cutting cycle—in other words, referring to what we do when there’s a recession or a very
severe downturn. That’s—that’s really what I was ruling out. I think, if you look back at other
midcycle adjustments, you’ll see—you know, I don’t know that they’ll be, in the end,
comparable or not, but you’ll see examples of these.
DON LEE. Don Lee with the L.A. Times. You mentioned the difficulty of assessing
trade tensions in the economic outlook. Could you say how much of a factor the U.S.–China
trade conflict was in the Fed’s decision to cut rates? And if the current stalemate and the threat
of more tariffs continue, what would that mean for future interest rates and possible cuts?
CHAIR POWELL. So, you know, I wouldn’t bring it down to any one trade thing or any
one factor. I think we look at a broad range of factors, and trade uncertainty—trade policy
uncertainty is one of them. That certainly includes the discussions with China, but I wouldn’t—I
wouldn’t be able to tell you how much of it is due to that. And without knowing—you know, I
think we—with trade, we have to react to the developments, and we don’t know what they’ll be,
and so it’s hard to exactly say. Certainly, we’ve seen, though, that when there’s a sharp
confrontation between two large economies, you can see effects on business confidence pretty
quickly and on financial markets pretty quickly. We saw that in June. But then we saw them
unwind after that, to some extent. You’ve seen it returning to—to a much lower temperature, I

Page 17 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

think. Again, with—with trade policy, we’re just going to be watching and trying to assess the
implications for the—for the U.S. outlook.
DON LEE. How much of an effect could the tariffs have?
CHAIR POWELL. You know, the mechanical effects of the tariffs are quite small.
They’re not large as it relates to the U.S. economy. The real question is, what are the effects on
the economy through the—through the confidence channel—business confidence channel? And,
again, very, very hard to tease that out. I’ve seen some research, which—you know, which says
that they are meaningful—meaningful effects on—on output. That’s to say, not trivial. And I
think that that sounds right, but it’s quite hard to get—there is no way to get an accurate measure.
You have to look at a range of estimates, and I think businesses will tell you that it’s a factor,
particularly businesses that have—manufacturing businesses that have supply chains that cross
international borders will all tell you that it’s been a challenge. Many of them have made
adjustments, and they’ve gotten to a place where it’s okay, but it’s—it’s been a challenge.
PAUL KIERNAN. Paul Kiernan from Dow Jones Newswires. Thanks for the question,
Chairman. As the press conference—as this press conference has gone under way, markets have
declined. The Dow is down as much as 400 points. What I’m hearing is a reluctance to provide
more guidance around the future path of rates. And I’m wondering if that reflects a greater lack
of consensus on the Committee. And, you know, how much consensus do you want to see
around these decisions, and how split are people about this?
CHAIR POWELL. You know, you’re right. There’s a range of views on the Committee,
and—but the Committee is unified, completely unified on our dedication to making the best
policy decisions that we can make. And that means people have a responsibility to do their best
thinking and to present that thinking, and I wouldn’t have it any other way.

Page 18 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

In terms of the way forward, we will be monitoring the factors that I mentioned, and we
laid that out in the—you know, in the postmeeting statement, and that’s the roadmap we’re going
to be following going forward. We’re going to be data dependent. We’re going to be, as we
always are, doing what we need to do—what we believe we need to do to support the economic
expansion.
JOHN HELTMAN. Hi, John Heltman with American Banker. So it’s been about
18 months since the Fed issued its enforcement action against Wells Fargo. And I was
wondering if you could characterize the progress that the bank has made towards the
shortcomings that it had in its risk-management processes. And I’m also curious whether their
lack of a permanent CEO has hampered progress, in your eyes.
CHAIR POWELL. So the problems at Wells Fargo—that arose at Wells Fargo around
risk management and consumer—the way they dealt with the consumer were actually pretty
deep, and I think the company realizes that. And they’re not going to be fixed—they haven’t
been fixed quickly, and, frankly, we didn’t expect them to be fixed quickly. So they’re—you
know, they—they will be under the growth cap, our enforcement action, until the Board votes to
lift it, and that’s not something we’re considering doing right now. And the Committee—I
mean, the company is working away to address these issues, but, as I said, they’re deep-seated
issues, and it just takes time to address them.
I wouldn’t comment on the CEO question. I don’t really have anything for you on that.
JOHN HELTMAN. I mean, I just—I’d like to clarify, like, are you pleased with the
responsiveness you’re getting from them? Do you feel like this is going the way that you kind of
wanted it to go?

Page 19 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

CHAIR POWELL. I’m not going to characterize it. You know—I mean, I have
characterized it. We have—we have an enforcement action in place. The company is working
away at addressing it. They take it seriously. I think they do see it as we do, as something that
has to go deep. And, you know, we’ll lift the growth cap when we’re satisfied.
NANCY MARSHALL-GENZER. Nancy Marshall-Genzer with Marketplace. So when
we have our next recession, the Fed will have less room—it will happen—the Fed will have less
room to maneuver cutting interest rates since you’re cutting now. How big of a problem will
that be?
CHAIR POWELL. You know, the premise is not—I will question your premise for a
second. If you remember whether—again, one of the purposes of our—of our cut today is to
support the expansion. And we don’t know when—and if it really works—if that works very
well and the economy gets going again, you know, you don’t know where the—where the funds,
in other cycles—and I don’t know whether this will happen or not, but in other cycles, the Fed
wound up raising rates again after a midcycle adjustment. Again, I’m not predicting that, but I
don’t think that we know that we won’t have—that we’ll have less ammo because of these
things. That’s one thing. So—
NANCY MARSHALL-GENZER. But you won’t be able to cut as much if—if rates are
low. I mean, you will have—have less ammo, in that sense.
CHAIR POWELL. Well, but you’re assuming that we would never raise rates again, that
once we’ve cut these rates that they can never go back up again. Just as a matter of principle, I
don’t think that’s right. In other—in other long, long cycles, long U.S. business cycles have
sometimes involved this kind of event where the Fed will stop hiking—in fact, will cut—and
then will go back to hiking. Again, I don’t know whether that’ll happen right here. It doesn’t

Page 20 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

seem—it doesn’t seem like something that’s in—you know, particularly likely, frankly, but we
don’t know that.
And the other thing is, I think by extending the cycle, you—you do have a lot of benefits
from that. And I think, you know, we will use the tools that we have. A couple of rate hikes one
way or the other isn’t going to matter so much if there is a downturn. And you’re right, there
will eventually be one. We’ll use all of our tools aggressively, as we need to, when that time
comes.
JEAN YUNG. Hi, Jean Yung with MNI. Can you give us an update on the ongoing
reassessment of the inflation framework? And have the discussions so far this year had any
bearing on today’s decision?
CHAIR POWELL. So the monetary policy review is really for—it’s really there to look
at the way we make policy in the longer run. It’s not something that enters directly into our
discussions today. We’ve had—so far we’ve had a series of meetings, called Fed Listens, at
almost all the Reserve Banks. Soon it will be all the Reserve Banks. And we meet there with the
constituencies that we serve, and they’ve been very, very successful, hearing from people—not
just—not just economists, but people who are not economists, how—how their lives interact
with the Fed’s work. It’s been—it’s been great. I’ve got to say, it’s been even better than I
hoped it would be.
We’re just now beginning the process of incorporating all of that feedback, and we’re
going to be having a series of meetings, beginning today and yesterday, as we evaluate, you
know, the questions that we’re asking about our framework. So it’s very early to say where
that’s going, but, you know, we’re setting the table now and looking at what our framework is

Page 21 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

and looking at how it’s performed, looking at how all frameworks performed around the world
during the Global Financial Crisis. I expect we’ll be at this a while.
I’m very excited about it. I think it’s been a good exercise. I think it’s opened us up to
sunlight and perspectives that we might not have gotten otherwise. And I think it’s a good time.
You know, you have—10 years after the crisis, you’re really living in a new normal for the
economy and monetary policy, and it’s a really good time to step back and ask whether there are
some things that we can do to improve our framework.
COURTENAY BROWN. Hi, Mr. Chairman. Courtenay Brown from Axios. Can you
give us a sense of whether the Committee feels constrained at all by the market’s expectations
for more cuts or other developments in financial markets?
CHAIR POWELL. So I think this was—this was well telegraphed. What we did today
was—was very consistent with what we had said we were going to do. I had mentioned the
reasons for it. They’ve been well telegraphed, and I think—you know, I think they will—they
will achieve their goals.
We do know that monetary policy works through communications and then actions that
are consistent with those communications, and we think that the changes that we’ve made this
year have really worked. Of course, we always retain the flexibility to adjust our
communications and our actions to—in light of incoming data and the evolving risk picture,
but—I’ll leave it there.
BRIAN CHEUNG. Hi, Brian Cheung with Yahoo Finance. Just to expand on that point
about communication, I mean, we saw that markets have been particularly sensitive with regards
to New York Fed President John Williams’s remarks before the blackout period. So the Fed
added language in the statement that says that the Committee is contemplating the future path of

Page 22 of 23

July 31, 2019

Chair Powell’s Press Conference

FINAL

the target range for the federal funds rate as it monitors implications. I’m wondering—now
there’s kind of this inflection point about whether or not the downside risk, because you’ve had
to cut rates, outweighs the fact that you still see a positive outlook of the U.S. economy at a
baseline. So, just wondering if you can kind of clarify all those things within the context of the
challenges of communicating it.
CHAIR POWELL. Yeah, so again, I see the U.S. outlook as being a positive one. And
we do—we have had these global, really, risks to the outlook. There really—there really is
nothing in the U.S. economy that presents a—you know, a prominent near-term threat to the U.S.
economy. As I mentioned, there’s no—there’s no segment that’s really—or sector that’s really
boiling over and overheating. Nothing like that. It’s—it’s within—within the economy. It’s—
it’s healthy, so I would say that. Downside risks are really coming from abroad. And, of course,
we are concerned about—about low inflation. But—and, by the way, those risks from abroad are
affecting the manufacturing sector here and business investment—fixed investment. So—
thank you.

Page 23 of 23