Original Article Title: "Powell Press Conference Full Transcript: Wait and See, No Preemptive Rate Cut"

Original Source: Wall Street News

Facing tariff uncertainty, the Federal Reserve once again chose to stand pat, with Powell repeatedly conveying a message of wait-and-see during the press conference.

On Wednesday, May 7, the Fed announced after the Federal Open Market Committee (FOMC) meeting that the target range for the federal funds rate would remain unchanged at 4.25% to 4.5%. This marks the Fed's third consecutive decision to pause its monetary policy meetings. The Fed has cut rates at the past three meetings since September last year, totaling 100 basis points, but has held off since Trump took office in January.

During the FOMC press conference, Powell said that the announced tariff increases to date have been larger than expected. However, all of these policies are still evolving, with their economic impact highly uncertain. As the economic situation evolves, the Fed will continue to determine the appropriate monetary policy stance based on future data, outlook, and risk balance.

Powell stated that the economy has remained resilient, the policy stance is appropriate, and the Fed is now in a favorable position to wait and see without needing to rush into action, with the cost of further observation being quite low. Regarding the recent divergence in U.S. soft and hard data, Powell said, "Looking back over the past few years, the link between sentiment data and consumer spending has been very weak, fundamentally not a very strong link."

In response to Trump's calls for rate cuts, Powell made it clear that this has no direct impact on the Fed's decision-making process, as the Fed's decisions are independent and based on economic data and analysis. Powell also said, "I have never requested a meeting with any president and will not do so in the future." He believes that the Fed chair should not actively seek meetings with the president.

Below is a transcript of the Q&A session after the FOMC meeting:

Powell: Good afternoon. My colleagues and I remain focused on achieving our dual-mandate goals: maximum employment and stable prices to benefit the American people. Despite heightened uncertainty, the economy remains solid. The unemployment rate remains low, and the labor market is at or near full employment. The inflation rate has declined significantly but remains slightly above our 2% long-term target. To support our goals, the Federal Open Market Committee today decided to maintain the policy rate unchanged. Risks to the outlook relating to the rise in the unemployment rate and inflation rate appear to have increased, and we believe that our current monetary policy stance allows us to respond promptly to potential economic developments.

After a brief review of the economic development, I will further discuss monetary policy.

Following a 2.5% growth last year, the report shows a slight contraction in GDP in the first quarter. This was reflective of export fluctuations, possibly due to businesses importing goods ahead of potential tariff implementations. This unusual fluctuation has made the measurement of last quarter's GDP complex. Private domestic final purchases (PDFP), which excludes net exports, inventory investment, and government spending, grew steadily by 3% in the first quarter, on par with the same period last year. Within PDFP, consumer spending growth has slowed, while equipment and intellectual property investment have rebounded from the softness in the fourth quarter. However, surveys of households and businesses indicate a sharp decline in consumer confidence, intensifying uncertainty about the economic outlook, largely reflecting concerns about trade policy.

How these developments will affect future expenditures and investments remains to be seen. The labor market conditions remain robust. Over the past three months, employment has been increasing by an average of 155,000 jobs per month, the unemployment rate remains low at 4.2%, and has stayed within a narrow range over the past year.

Wage growth continues to moderate but remains above the inflation rate. Overall, a range of indicators suggests that the labor market conditions are broadly balanced, consistent with full employment expectations.

The labor market is not a significant driver of inflation pressures. The inflation rate has fallen significantly from its mid-2022 peak but has inched up relative to our 2% long-term target. Over the 12 months ending in March, the total personal consumption expenditures (PCE) price index rose by 2.3%, and excluding the volatile food and energy categories, the core price index rose by 2.6%. Recent inflation expectations have increased, reflected in market-based and survey-based indicators. Respondents including consumers, businesses, and professional forecasters point out that tariffs are a driving factor behind rising inflation.

However, looking beyond next year, most longer-term indicators are still aligned with our 2% inflation target. Our monetary policy actions are aimed at promoting full employment for the American people and price stability. At today's meeting, the committee decided to maintain the federal funds rate target range at 4.25% to 4.5% and continue to reduce the balance sheet. The new administration is implementing significant policy reforms in four different areas: trade, immigration, fiscal policy, and regulation.

The announced increases in tariffs to date have far exceeded expectations. However, all these policies are still evolving, and their impact on the economy remains highly uncertain. As conditions evolve, we will continue to determine the appropriate monetary policy stance based on future data, outlook, and risk balance.

If the already announced significant tariff increases persist, it is likely to lead to rising inflation, slowing economic growth, and an increase in the unemployment rate. The impact of tariffs on inflation may be temporary, reflecting a one-time change in price levels. The inflation effect could also be more persistent. Whether this scenario can be avoided depends on the scale of the tariff effect, the time required for full pass-through to prices, and ultimately, whether long-term inflation expectations can be effectively stabilized.

Our obligation is to control longer-term expectations and prevent a one-time price increase from evolving into a sustained inflation issue. In fulfilling this obligation, we will balance the dual mandate of full employment and price stability, keeping in mind that without price stability, we cannot achieve a long-lasting, stronger labor market condition that benefits all Americans.

We may find ourselves in a challenging position of pursuing dual-mandate goals. In such a scenario, we can consider the economic distance to each goal and the expected timeframes to close these gaps. Currently, we are in a favorable position to await clearer developments before considering adjustments to our policy stance.

During this meeting, the Committee continued discussions on the five-year review of the monetary policy framework, with a focus on inflation dynamics and their implications for the monetary policy strategy. The review encompasses outreach and public engagement activities, involving broad participation from various stakeholders, including the nationwide "Fed Listens" events and the research conference scheduled for next week.

Throughout this process, we welcome new ideas and critical feedback and will draw lessons from the past five years to eventually solidify our research conclusions. We plan to conclude the review by the end of summer. The Fed has two monetary policy goals: maximum employment and stable prices. We will continue to strive for full employment, aim to sustain an inflation rate of 2%, and maintain long-term inflation expectations stability.

The achievement of these goals affects all Americans. We deeply understand that our actions impact communities, families, and businesses nationwide, as everything we do is in service of our public mission. The federal government is working tirelessly to achieve the dual mandate of maximum employment and price stability. Thank you. I look forward to your questions.

CNBC Reporter: Thank you for answering my question. A lot has happened since the last meeting. Tariffs have fluctuated, and Congress is advancing a bill. I wanted to ask about the final part of your speech. Are you now closer to determining which goal will need urgent attention first?

Powell: Well, as we mentioned in the post-meeting statement, we see increased risks of rising unemployment and inflation, which, of course, is based on data compared to March. So, that's what we can say.

I think we cannot predict how things will unfold. There is a lot of uncertainty, such as how the tariff policy will ultimately be resolved and when, and what impact it will have on the economy, growth, and employment. I think it's premature to draw conclusions at this point.

What I mean is, we ultimately believe our policy rate is in a good place as we are waiting for further clarity on tariffs and their ultimate impact on the economy.

CNBC Reporter: When I hear you describe what you’re looking for in making a decision, it sounds like a lengthy process, and then you get comfortable, or the Committee gets comfortable taking action based on data telling you what to do.

Powell: I think we don't know. If you look at our current situation. Our economy, if you look closely at the distortion in first-quarter GDP, you will find that the economy is growing steadily, the labor market also seems robust. The inflation rate is slightly above 2%. So, it's a resilient and strong economy, and our policy is accommodative or appropriately accommodative. It’s 100 basis points lower in terms of accommodation than it was last fall. So, we think that puts us on a wait-and-see footing. We think we don't need to be in a hurry. We think we can be patient. We will be looking to the data. Data can change quickly or slowly. But we do think that we’re in a good position to be patient and let the situation evolve and be more clear on the monetary policy response.

Wall Street Journal Reporter: Some argue that the current situation is significantly different, with energy costs down, a housing market imbalance different from four years ago, labor demand seemingly cooling off, wage growth below 4%. Besides this year’s rise in commodity prices, what other factors do you think could drive inflation up?

Powell: I think the outlook for inflation is favorable. As you see, the current inflation rate is slightly above 2%, and the data on housing services and non-housing services has been pretty good, and housing services are a significant part of inflation, and that part of inflation is moving up steadily.

But there's so much we don't know. I think—and that's where we are in a favorable position to wait and see right now. We don't need to be in a hurry. The economy has shown resilience and performed quite well at present. Our policy stance is right. We think the cost of further waiting is quite low.

So, that's what we're doing. You know, we’ll see the government engaging with many countries on tariff issues. As the weeks and months go by, we'll have more clarity on the ultimate direction of tariffs. And as we see the situation darken, then we will know what the implications are. So, we think we will continue to learn. I can't tell you how long that will take, but for now, it seems we have made a fairly clear decision, and that decision is to watch and wait.

Wall Street Journal Reporter: When you say you don’t need to be in a hurry, does that mean the outlook could shift enough that you may need to change course at the next meeting?

Powell: As I said, we are satisfied with our policy stance. We believe now is the right time to monitor developments. We feel there is no need to rush, and patience is appropriate. Of course, when developments occur, we have proven, at the right time, that we can act swiftly. But we believe that the most appropriate approach at the moment is to monitor developments. There is too much uncertainty. If you talk to businesses, market participants, or forecasters, you will find that everyone is monitoring developments. Then we can better assess the appropriate path for the fourth round of monetary policy.

So, we have not reached that point yet, and as developments unfold, I really cannot give you a timeframe.

Bloomberg Reporter: Many economists have increased the possibility of an economic recession, with some pointing out that given the higher risk of inflation, the Fed may find it more challenging to cut rates preemptively. So, considering the outlook, do you still believe in the possibility of a soft landing for the economy? What is the outlook for a soft landing?

Powell: Well, I mean, let's review our current situation. Let's look back from 2024 to now. You know, our unemployment rate has been below 4% for over a year, and the inflation rate has been declining and is now around 2% at the lower end. Our economic growth rate has reached 2.5%. That's the economic situation we see now.

Given the scope and scale of tariffs, we are likely to see increased risks of inflation and unemployment. If that is indeed the case, and if these tariffs ultimately materialize at the levels currently envisaged (though that is uncertain), we will find it difficult to continue making progress towards our goals, and there may even be setbacks. I believe that in our view, we have always been committed to achieving our established goals and have never deviated. But at least in the coming year, we may not make significant progress in this regard. Of course, all of this depends on how the tariffs ultimately land.

The issue is, we are not clear about this. There is too much uncertainty about the scale, scope, timing, and duration of the tariffs. So, that's it.

Speaking of being preemptive, I think you can look back at the rate cuts in 2019. I don't think our approach last fall was entirely preemptive. If there is any difference, it was a bit late. But in 2019, we did cut rates three times. The situation at that time was that the economy was weak, and the inflation rate was 1.6%. So, in that situation, you can be preemptive. Now our inflation rate has been above target for four consecutive years. It is no longer significantly above target now, and we expect that if the situation changes, inflation will face upward pressure. If you look at forecasters' views, they all predict inflation will rise.

So, this does indeed create this situation — we've also received forecasts of economic softness, some even predicting a recession. We won't make or release any forecasts on this. We won't make any assessment forecasts of the likelihood of an economic recession. But anyway, we can't prepare in advance because we actually don't know how to respond to these data correctly until we see more data.

New York Times Reporter: How weak does the labor market and the overall economy need to get for the committee to cut rates again? Is it a certain rise in the unemployment rate over a period of time, or a certain number of negative monthly job reports? How do you make that assessment?

Powell: First of all, we haven't seen that yet. Our unemployment rate is 4.2%, labor force participation is strong, wage performance is strong, as I mentioned before, labor force participation is at a strong level. So, for the labor market, we will focus on overall data. We will focus on the level of the unemployment rate, focus on the pace of change. We will analyze a vast amount of labor market data to understand if the situation is really deteriorating. At the same time, we will also pay attention to the other side of the question. We may need to strike a balance between these two aspects, which is certainly a very difficult balancing act.

New York Times Reporter: On the balancing issue, you mentioned the committee will consider how far the economy is from each goal and how long it will take to get back to that goal. But what does this mean in practice? Is the assessment largely based on forecasts or data?

Powell: It's a mix of both. I mean to say, it can be said, this will be a complex and challenging judgment we have to make. And that's not the situation we're in now. If there is a contradiction between the two goals, such as the unemployment rate rising in an unsettling way, the inflation rate also rising, etc. This is not the situation we assume. But we will consider how far they are from the goal, estimate how far they are from the goal, and estimate how long it will take to get back to the goal. We will consider all these factors and make a difficult judgment, which is already included in our framework. This has always been part of our thinking. We haven't faced this issue in a long time. So, I emphasize again, this is a very difficult judgment to make. And the situation we face today is not such. We may never encounter it. But, you know, we have to keep that in mind now.

Fox Business News Reporter: The just-released Consumer Price Index report shows that inflation on employment rose for the first time in three years. The employment report has been robust. At the same time, we are facing new tariffs. Should the Fed cut rates this year given this?

Powell: It depends. I think you have to take a step back and realize that the reason we are in the current situation is because we need to see how things unfold. In some cases, a rate cut this year was appropriate. In some cases, it was not. We don't know yet. Until we have a better sense of how things are going to evolve and feel confident about our understanding of the implications of those for the outlook for employment and inflation, I can't say with confidence that I know which way the path will be the right one.

Fox Business News Reporter: So, next, President Trump called for you personally and the Fed to cut rates. How does that impact today's decision and the challenge of your job?

Powell: It doesn't impact our work at all. So we will always do the same thing, which is to use our tools to promote maximum employment and stable prices, benefiting the American people. We will always only look at the economic data, the outlook, the balance of risks, and that's it. So, in fact, it will not affect our work or our way of doing our work.

Reuters Reporter: Thank you for your time. Given the first-quarter GDP data and the complexity of the future, I wanted to get a sense of your intuition on the current economic fundamentals. Many of your colleagues have expressed that they feel economic growth is slowing down. If that's the case, can you predict the extent and degree of the slowdown? What does your intuition tell you about the current situation?

Powell: The uncertainty about the economic outlook is high, and the downside risks have increased somewhat. As we noted in our statement, the risks of rising unemployment and inflation have increased. But these risks have not materialized. They really haven't. These risks have not really shown up in the data yet. So, that is more convincing than my intuition, because I think actually, it's plain that what we really should be doing is that we're in a good place, our policy is in a very good place, and what we should be doing is waiting to see how things evolve further.

Usually, things will gradually clarify, and the right way will also gradually become clearer. That usually happens. It's hard to say exactly what it will be like now.

At the same time, the economic situation is good. Our policy is not — you know, it's not highly restrictive. It's just somewhat restrictive. It's 100 basis points less restrictive than last summer, so we think the economic situation is good, and we're better off watching to get a clearer understanding of the economic outlook.

Reuters Reporter: I want to emphasize your statement about the current good economic conditions, because the last time I carefully read the Beige Book, I found a lot of negative information in it... Everyone is focusing on weak data, you have mentioned it yourself, and market sentiment is low. Some industries are starting to lay off workers, prices are rising in some areas, and a lot of investment decisions are on hold. Doesn't this foreshadow an economic slowdown?

Powell: This is very likely to happen, it just hasn't shown up yet. You know, we all look at various sentiment indicators, we read a lot of individual comments to better understand the situation. Overall, both businesses and households are indeed worried, and they are indeed postponing various types of economic decisions. Yes, if this situation continues and there is no relief from these worries, then you can expect that this impact will eventually be reflected in economic data. It may not show up overnight, but it is possible within weeks or months. This may be what is going to happen next, it just hasn't happened yet. At the same time, there are indeed events that could change this expectation, although these things have not yet occurred, we can imagine they will. In any case, right now we, like everyone else, are closely monitoring the situation, but in the current economic data, we haven't seen too many definitive signs.

By the way, consumers are still spending, credit card spending is continuing, the economy is still healthy. Despite both individuals and businesses being shrouded in some very subdued sentiment.

Bloomberg Television Reporter: Former Fed board governors have recently criticized the Fed, stating that the policy tools you are using are likely to prevent you from taking more aggressive action in the future. Do you think this criticism is fair? Is this something you are considering?

Powell: Once again, criticism.

Bloomberg Television Reporter: The Fed has relied too much on new tools to solve problems, and has gone overboard. Is the criticism based on the Fed's implementation of quantitative easing and beyond your mandate?

Powell: Well, what I mean is, this actually did not exceed our mandate. I would say that we did some things which, by their nature, during the pandemic, were in an emergency situation that lasted for years. If people look back at what we did and say, "Hey, you could have done better, done it differently," that's very fair, and very welcome. One of the things we often hear is that we could have better explained our quantitative easing policy. We indeed think that our explanation at that time was tailored to the circumstances. I fully accept the idea that we could have explained it better.

Many people think that our quantitative easing policy lasted too long. I can tell you that we did this because we were concerned that the economy was still fragile, didn't want to see a sharp contraction, and a deterioration in financial conditions, so we did maintain quantitative easing for a long time, then gradually tapered, then immediately entered a period of quantitative tightening, ultimately reducing by trillions of dollars. But I know, in hindsight, we certainly could have tapered earlier or faster. This is entirely correct.

But all of this is very popular. You know, we realized at the time that real-time decision-making couldn't be perfect. Such retrospective reviews are very important. And as we review some issues, we are also doing similar work.

Bloomberg Television Reporter: Another part of the criticism is that you talked about some topics beyond your mandate, such as climate change, and trying to ensure that certain groups benefit from your economic policies in terms of employment.

Powell: Okay. Regarding climate, if you listen to me saying over and over again, we will not be climate policy makers. Our role on climate is very, very limited. I think we are indeed so. We have really done very little on climate.

You could say we have done a little too much. But I don't want to leave any impression that we have taken into account climate and other things we put a lot of time and effort into. We have not. Our scope is very, very narrow.

We did one thing, provided guidance to banks, and then we did a stress test, a climate stress test, that's it. We have exited the network focusing on the financial system. We have done little on climate. But—I do think, I've said publicly several times, I think trying to take on such a task is really dangerous for us because it's so far afield from what we do. The risk is if you go do something that's really not in your mandate, then why are you independent? I think that's a very fair question. I do think we have done much less on climate than some people believe. Anyway, that's—

Bloomberg Television Reporter: Should you be considering lowering the unemployment rate for specific groups?

Powell: We have not done that. We have said we have never set an unemployment rate target for any race or population group. What we have said is that full employment is a broad and inclusive goal. I think that when we say that, what we mean is that in setting a full employment goal, we take the entire country into account. Of course, we never intended to target any specific group. But I think some people, you know, want to hear that kind of thing. But that's not at all what we mean.

So, that's not the correct read on us—I understand—You know, maybe people find it confusing, and we have to take that into account.

CBS News Channel Reporter: Hi, Chairman Powell, thank you for answering our questions today. You just said that the current economic situation is good, but the impact of tariffs has already shown up at the port, and businesses big and small have told us they are feeling it. Most importantly, they say consumers are feeling it too, the challenge has arrived, and there's no more waiting to see. For the mainstream market, where is the tipping point? What specific events need to occur to trigger a rate cut?

Powell: Well, so we haven't seen significant economic impacts from the data yet. What we've seen is market sentiment, people worried about things like inflation. So, people are worried about inflation right now. They're worried about the impact of tariffs. But in fact, that impact hasn't arrived yet.

So, as we assess what actions we should take, we're not only looking at sentiment data, but also at actual economic data. Remember, this will bring two kinds of impacts. One is economic weakness, a weakening of economic activity leading to a rise in unemployment. The other is the possibility of rising inflation. Again, I want to stress that the timing, scope, scale, and duration of these impacts are all very, very uncertain. So, the appropriate response of monetary policy to these effects is not yet clear. And I would say our policy is in a good place, so we think we can be patient and let the situation clarify itself before taking action. Mr. President, we're really quite clear what we should be doing.

So, people are feeling pressure and concern, but unemployment hasn't risen, job creation is doing well. Wage conditions are good. You know, people haven't been laid off—the number of layoffs hasn't increased significantly. Initial claims for unemployment benefits haven't shown any significant increase. So, the economy itself is still doing okay.

CBS News Channel Reporter: Just a follow-up. President Trump has now stated that he does not intend to dismiss you from your chairmanship. What are your thoughts upon hearing this news?

Powell: On that issue, I don't have anything more to say. I've pretty much covered that question. Thank you.

Associated Press Reporter: I just wanted to follow up. You previously mentioned that the Fed's rate decisions for later this year are unclear. There was guidance in March that two rate cuts might be on the table, and two rate cuts were planned for this year. Has the guidance from the last press conference been superseded by the current situation?

Powell: You know, we don't do an economic forecast summary at every meeting, but we do it every other meeting, so we didn't do it at this meeting. And we also don't conduct opinion polls, so I really don't want to make specific predictions about our current economic situation.

Six weeks from now, we'll have the June meeting, followed by another SEP meeting. Today, I don't want to speculate about the specifics.

Again, what I would say is that we feel that our policy rate is in a good place. We think that enables us to respond in a timely way to developments. That's where we are today. And depending on how things develop, that could mean cutting rates—sorry, I meant lowering rates. You know, or it could mean staying where we are. We just need to watch how things evolve and then make decisions accordingly.

AP Reporter: I'd like to continue with this question. When you talk about how the Fed will address the continually rising unemployment rate and the continually rising inflation, how do you view the fact that addressing one issue may exacerbate the other? So, cutting interest rates to lower the unemployment rate may worsen inflation, and vice versa. How do you tackle these challenges?

Powell: You accurately pointed out just now — this is precisely the trade-off problem we face in achieving the two goals. It's a very challenging issue. Sometimes, one variable deviates significantly more from its target than the other, and if that's the case, you need to focus on the goal that's more off track. Frankly, there have been times when this has indeed been the case — well, though there wasn't truly a conflict between the two goals at the time. But when you look back at 2022, we clearly needed to focus on controlling inflation. The labor market was also very tight at the time, so this wasn't really a true trade-off situation.

I think you know how our framework document talks about this. It says we will look at how far each variable is from its target and also consider the time it will take to reach the goal. So, it can be a very difficult judgment to make. But the data could exhibit some degree of divergence. I just feel we don't know. The data could easily tilt one way. And right now, we're simply—there's no need to choose, nor is there a real basis for it.

Politico Reporter: Congress is extending tax-cut policies, and I know you've mentioned multiple times that the trajectory of debt is unsustainable. But considering we are now also talking about an economic slowdown, potentially even a recession, I wanted to ask, would spending cuts at this point likely significantly drag on economic growth?

Powell: We don't provide fiscal advice to Congress. They will—We take our approach as given and incorporate it into our models and economic assessments. So, I don't want to speculate on that. I think we do know that the level of debt is on an unsustainable path, on a path that's unsustainable—not at an unsustainable level, but on an unsustainable path—and Congress should find a way to get us back onto a sustainable path, you know, we shouldn't be giving them advice.

Politico Reporter: Do you think they should take into account the macroeconomic situation when looking into this issue?

Powell: I think they don't need my and our advice on how to make fiscal policy. Just as we don't need their advice on monetary policy.

Washington Post Reporter: Last year, during your speech at Jackson Hole, you mentioned that you did not want the labor market conditions to further cool down, with the unemployment rate being 4.2% at the time, which it is now as well. Many forecasters are now predicting a higher unemployment rate. How has your tolerance for weak labor market conditions changed compared to a year ago?

Powell: The situation is entirely different. Last year's situation was that in six to seven months, the unemployment rate rose almost a full percentage point. And every month, it was like, 'click-click-click,' and everyone was talking about the downside risks to the labor market.

Meanwhile, jobs data was getting softer and softer, so people were clearly concerned about the downside risks to the labor market. So at Jackson Hole and subsequently in September, we wanted to address this head-on; we wanted to show—we mean, we've been focused on inflation for years, we also wanted to show that we're focused on the labor market. It was very important to send that signal.

Fortunately, since then, the labor market and the unemployment rate have been moving sideways and have stayed within the mainstream estimate of full employment, so people's concerns have eased significantly. So, the unemployment rate is now 4.2%. I think our situation was different back then. Now, as we've said in our statement, the risks are tilted to the high side, with both inflation and the unemployment rate rising. We must closely monitor both. We might be facing a situation where we have a 'tropical wave' between the two. That's where we are now, and that's why I think the situation is different.

Washington Post Reporter: How much of an increase in the unemployment rate can you tolerate?

Powell: I can't give—I won't try to give a specific number. I'd say we have to be looking at both these variables now. If one of the variables needs our attention more than the other, which one needs our attention will determine how we think about policy. If the distance between them is roughly the same, or whether it's equal or not equal, then it doesn't require an assessment. You know, the key to assessment is waiting.

So, I won't try to specify what we need to see in the data. But if we do see a significant deterioration in the labor market, which of course is one of our two variables, we will work to support that. You wouldn't want it to happen in a period when inflation becomes quite high. Again, we are speculating. We don't know these things. We don't know anything. It's just all guesses. We'll have to wait and see how things evolve.

Financial Times Reporter: To clarify some issues, we held some talks between Geneva and China and the U.S. Many economists attach great importance to the information we heard from these talks. How important do you think these talks are in judging the future direction of the U.S. economy? Similarly, some economists have suggested that if we do not ease tensions between China and the U.S., the U.S. economy could soon face the risk of shortages and price hikes similar to those seen during the pandemic, and this could happen in a matter of days rather than weeks. So, I would like to hear your thoughts on this as well.

Powell: We were not involved in these negotiations at all. So, I really can't comment directly. However, what I would say is that after the meeting in March, the public had widely assessed the direction of tariffs. The results of the meeting on April 2 showed that the magnitude of the tariffs is indeed much greater than what I had seen in previous forecasts and our own forecasts.

So, we are now in a different phase—we seem to be entering a new phase where the government is starting negotiations with some of our key trading partners, which could or could not substantively change the situation. So, I think the ultimate outcome will be very important. But we can only wait and see. This could certainly alter things, and we are careful not to make definitive judgments about the future as facts evolve.

Financial Times Reporter: Given that these tensions have led to a decrease in freight from China, are you also concerned that if this issue is not resolved quickly, we may begin to see shortages and price hikes in the coming weeks?

Powell: You know, I don't want—we shouldn't verbally intervene in the timing of these things. Yes, of course, we will be monitoring all data. We look at shipping data. We understand all of this data. But ultimately, it's up to the government to handle this. It's their responsibility, not ours. I know, as you have seen, they are engaging in negotiations with many countries, which could substantially change the situation. So, we can only wait and see.

Financial Times Reporter: Thank you. Import volumes in the first quarter increased significantly. Do you think this decision will lead to a delayed impact of tariffs on inflation, meaning that reducing uncertainty will take longer?

Powell: Our decision today? Which decision?

Financial Times Reporter: Future decisions. Import volumes, import quantities have increased significantly. Therefore, the impact on input inflation may be delayed. So, how does this affect your future decisions?

Powell: Okay. So, what I mean is, we believe — imports surged dramatically, which is very good, indeed reaching a historical high. To counter tariffs, this situation should now reverse, so it's the difference between exports and imports. Imports were huge. Therefore, it had a very negative contribution to the US GDP, which is what we call the first quarter annualized GDP.

So, this situation might reverse in the second quarter, when we will see an exceptionally large contribution, an exceptionally positive growth. This is likely to happen because imports have sharply decreased.

You might also — very likely you will see first-quarter data being revised. The results will show that consumer spending was higher, and inventories were also higher, so you will see these data being revised upward. This may also affect the third quarter. So, I think the whole process will slightly increase the difficulty of providing a clear assessment of US demand.

I mentioned private domestic final purchases, excluding inventories, and also government inventories — government inventories. In any case, this more clearly reflects private demand. But this may also be slightly overstated due to strong import demand offsetting tariffs. This may be overstated. First-quarter PDP grew by 3%, which is indeed a good figure. I don't think this will influence our decision-making. However, I have to say, this is a bit confusing, and as we try to explain this point, we may be more easily confused than the public. It's very complex, with GDP and PDFP both signaling. It's indeed a bit confusing, but I think we understand what's happening, and this won't really change our current situation.

Axios Reporter: We've discussed some potential layoffs, price hikes, and economic slowdown scenarios, all of which are evident in soft data. I'm curious, why does the Fed need to wait for this data to translate into hard data before making any type of monetary policy decision, especially when hard data is not timely enough, or may be influenced by tariff-related factors? Are you concerned that soft data may be some kind of false alarm?

Powell: No. Look at the current economic situation. The labor market is strong, inflation is low. We can afford to wait and see how things unfold. At the moment, waiting doesn't have any real cost.

And, it feels like we're not sure what the right approach is. Inflation should pick up, unemployment should also rise. These require different responses. So, until we know — there might need to be different responses. So, until we know more information, we have the capacity to wait and see. This seems like a fairly clear decision. Everyone on the committee supports waiting. So, that's why we're waiting.

Axios Reporter: Just a quick follow-up. In the past, there was a situation where the sentiment expressed by soft data did not translate into hard economic data. How do you view this issue when interpreting some more moderate survey data?

Powell: I think that looking back over the past few years, the link between sentiment data and consumer spending has been consistently weak, not a very strong link at all.

On the other hand, we've never experienced such speed and scale of fluctuations. So, we're not going to completely discount that. But that's another reason why we're watching. As you say, during the pandemic, we've had a couple of years where people were very negative on surveys, and then people went out and spent. So, that could happen, and to some extent, it may well happen. We just don't know. But this is a huge swing in market sentiment. So, no one's looking at all this and saying we're completely confident about it. We're not.

CNN Reporter: You previously mentioned monitoring shipping data, and from shipping data, we've seen a significant decrease in goods imported from China to the Port of Los Angeles. This has raised concerns about potential shortages. If tariffs do indeed lead to severe supply chain disruptions, what tools does the Fed have to ensure that prices and inflation expectations do not spiral out of control?

Powell: I mean, we don't have tools to deal with supply chain issues. We just don't. That's really a job for the government and the private sector.

We can use interest rate tools to support demand, to a greater or lesser extent, but that's a very inefficient way of addressing supply chain issues.

But we haven't seen inflation yet. Of course, we, like others, are reading the same reports, looking at the same data. Right now, we see inflation running at relatively low levels with some upward pressure.

CNN Reporter: Can I ask another question? President Trump has already indicated that after your Chairmanship term ends next year, he may appoint a successor. However, I believe your Board term runs until January 2028. Even if you are no longer Chair, would you consider staying on the Fed Board?

Powell: In terms of that, I really have nothing for you on that. Our attention is all on, you know, trying to get through this difficult period that we find ourselves in now, trying to make the right decisions. We want to make the best decisions for the people we serve. That's what we're focused on day and night. It's a challenging situation, and that's 100% where our focus is right now.

Yahoo Finance Reporter: So far this year, your publicly disclosed schedule shows that you have not met with President Trump. Former Presidents Obama, Bush, and Clinton have all met with the Fed Chair, and you also met with him during President Trump's first term. Why haven't you requested a meeting with the President?

Powell: I have never requested a meeting with any president, and I never will. I won't do it. I've never had a reason to request a meeting. It's always been this way.

Yahoo Finance Reporter: If given the opportunity for more information, would you be willing to meet with him?

Powell: I've never been proactive about this. It's always been incoming—it's the case that I believe the Fed Chair should not be reaching out to the President. Although some people may have done that. But I have not done it. I can't imagine doing it. I think it's always been the other way around, that the president wants to meet with you, but it hasn't happened.

Yahoo Finance Reporter: On the issue of monetary policy. When a rate cut is needed, in a situation of weak employment, how would you determine the extent to which rates need to be cut to maintain the balance of the inflation target?

Powell: You know, I think once you have a direction, a clear direction, you can judge the speed of action and so on. So, I think the really difficult question is the timing and when that will become clear. Fortunately, as I mentioned, our policy is in a good place, the economy is doing well, and we think that waiting patiently as things evolve is very appropriate, because what we should be doing will become more clear. Thank you very much.

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