RedThat

Source: Board of Governors of the Federal Reserve System
Event: Adam Smith Award Address and Q&A Session — National Association for Business Economics
Speaker: Jerome Powell, Chair of the Federal Reserve
Date: October 14, 2025
Location: Washington, D.C.
Duration: Approximately 52 minutes
Posted: 15 minutes after event ended
Link to Original Video: [Insert link if available]

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Jerome Powell 0:17
It.

Here we go. Thank you very much. You got a camera somewhere? I thought we did, but maybe not. There we go. We don’t have a camera.

There we go.

Thank you. Thank you so much.

Thank you, Emily, and thanks to the National Association for Business Economics for the Adam Smith award. It For Me is an unexpected honor, just to be mentioned alongside many of your past recipients, including particularly my predecessors, Janet Yellen and Jen Bernanke. So thank you very much for this recognition. I will say on a more personal note, I have greatly enjoyed my regular visits to your annual meeting and your conferences. It’s really been my favorite venue all these years. It’s a place,

this is a place where we can talk about economic issues and not worry that someone’s eyes might Blaze over. I also appreciate the warm welcome I’ve always received here and putting fed staff aside for a minute. I can’t think of a more lovable group of econ nerds anywhere. Up. So thank you again for for this prestigious award and for the opportunity to speak to you here today. So as we all know, monetary policy is more effective, more effective when the public understands what the Federal Reserve does and why. With that in mind, I hope to enhance understanding of one of the more arcane and technical aspects of monetary policy, reserves, balance sheet. A colleague recently compared this topic to a trip to the dentist, but I sound that comparison somewhat unfair to dentists.

So today I’ll discuss the essential role that our balance sheet played during the pandemic, along with some lessons learned. I’ll then review our ample ample reserves implementation framework and the progress we’ve made toward normalizing the size of our balance sheet, and I conclude with some brief remarks on the economic outlook. So the primary purposes of a central bank is to provide the monetary foundation for the financial system and the broader economy. This foundation is made of central bank liabilities on the Fed’s balance sheet. The liability side of the ledger total $6.5 trillion as of October, eight and three categories account for roughly 95% of the total. First Federal Reserve notes that is physical currency total $2.4 trillion

June 2020 we slowed our purchase pace to a still substantial $120 billion per month in December of 2020 as the economic outlook remain highly uncertain, the FOMC said that we expected to maintain that pace of purchases until substantial further progress has been made toward the committee’s maximum employment and price stability goals. That guidance provided assurance that the Fed would not prematurely withdraw support, while the economic recovery remain fragile amid unprecedented conditions, and we maintain that piece of asset purchases through October 2021

by then, it become apparent that elevated inflation was not likely to go away without a strong monetary response. At our meeting in November to 2021 we announced a phase out of our purchases. And our next meeting in December, we double the pace of that taper, and said that asset purchases would conclude by mid March of 2022 the entire period of purchases are securities holdings increased by $4.6 trillion so a number of observers, observers have raised questions fairly enough about the size and composition of asset purchases during the pandemic recovery throughout 2020 and 21 the economy continue to face significant challenges as successive ways of COVID cause widespread disruption and loss during that tumultuous period, we continue to purchase in order to avoid a sharp, unwelcome tightening of financial conditions at a time when the economy still appeared to be highly vulnerable, Our thinking was, pardon me, was informed by recent episodes in which signals about reducing the balance sheet had triggered significant tightening in financial conditions, and we were thinking of the events of December 2018

as well as the 2013 taper tantrum

regarding the composition of our purchases. Some have questioned the inclusion of agency MBS purchases, given the strong housing market during the pandemic recovery, outside of purchases aim to specifically market functioning MBS purchases are primarily intended, like our purchases of Treasury securities, to ease broader financial conditions when the policy rate is constrained by the effect of lower bound extent to which these MBS purchases disproportionately affected housing market conditions during that period is challenging to determine Many factors affect the mortgage market, and many factors beyond the mortgage market affect supply and demand in the broader housing market. With the clarity of hindsight we could have, and perhaps should have stopped asset purchases sooner. Our real time decisions were intended to serve as insurance against downside risks. We knew that we could unwind purchases relatively quickly once we ended them, which is exactly what we did. Research and experience tell us that asset purchases affect the economy through expectations regarding the future, size and duration of our balance sheet, so that when we announced our taper, market purchase participants began pricing in its effects, pulling for the tightening and financial conditions, stopping sooner could have made some difference, but not likely enough to fundamentally alter the trajectory of the economy. Nonetheless, our experience, since 2020 does suggest that we can be more nimble in our use of the balance sheet and more confident that our communications will foster appropriate expectations among market participants, given their growing experience with these tools. Some have also argued that we could have better explain the purchases that. Are the purpose of asset purchases in real time. There’s always room for improved communication, but I believe our statements were reasonably clear about our objectives, which were to support and then sustain smooth market functioning and to help foster a company of financial conditions over time, the relative importance of those objectives evolve with economic conditions, but the objectives were never in conflict. So at the time, this issue appeared to be a distinction without much of a difference. That’s not always the case, of course. For example, the March 2023 banking stress led to a sizable increase in our balance sheet through lending operations, we clearly differentiated these financial stability operations from our monetary policy stance, indeed, we continue to raise the policy rate through that time.

Turning my second topic,

our ample reserve regime has proven highly effective delivering good control of our policy wide range of challenging economic conditions while promoting financial stability and supporting a resilient payment system. In this framework, an ample supply of reserves ensures adequate liquidity in the banking system, and control of our policy rate is achieved through this through the setting of our administered rates, interest on reserve balances and the overnight repurchase rate, reverse REPO rate. Rather, this approach allows us to maintain rate control independently of the size of our balance sheet, and that’s important given large on predict when predictable swings and liquidity demand from the private sector and significant fluctuations in the autonomous factors affecting reserve supply, such as the T, G, A, this framework has proved resilient, whether the balance sheet is shrinking or growing. Since June 2022 we’ve reduced the size of our balance sheet by $2.2 trillion from 35% to just under 22% of GDP, while maintaining effective interest rate control. Long stated plan is stop balance sheet run off when reserves are somewhat above the level we judge consistent with ample reserves conditions. We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision. Some signs have begun to emerge that liquidity conditions are gradually tightening, including a general forming a repo rates, along with more noticeable but temporary pressures on selected dates. The committee’s plans lay out a deliberately cautious approach to avoid the kind of money market strains experienced in September 2019 over the tools of our implementation framework, including the standing repo facility in a discount window, will help contain funding pressures and keep the federal funds rate within our target range through this transition to lower reserve levels. Normalizing the size of our balance sheet does not mean going back to the balance sheet we had before the pandemic. In the longer run, the size of our balance sheet is determined by the public’s demand for our liabilities, rather than by our pandemic related asset purchases, non reserve liabilities currently stand about $1.1 trillion higher than just prior to the pandemic, thus requiring that our securities holdings be equally higher. Demand for reserves has risen as well, in part, reflecting the growth of the banking system in the overall economy, regarding the composition of our securities portfolio relative to the outstanding universe of Treasury securities, our portfolio is currently over eight overweight longer term securities and underweight shorter term securities. The longer run composition will be a topic of committee discussion. Transition to our desired composition will occur gradually and predictably, giving market participants time to adjust and minimizing the risk of market disruption, consistent with our long standing guidance, we aim for a portfolio consistent primarily of Treasury securities over the longer run, some question whether the interest we pay on reserves is costly to taxpayers. In fact, that is not the case. The Fed earns interest income from Treasury securities that back reserves. Most of the time, our interest earnings from Treasury holdings more than cover the interest paid on reserves, generating significant remittances to the Treasury. By law, we remit all profits to the Treasury after covering expenses, and since 2008 even after accounting for the recent period of negative net income, our total remittance is to Treasury have totaled more than $900 billion while our net interest income has temporarily been negative due to the rapid rise in policy rights to control inflation. This is highly unusual. Our net income will certain soon turn positive again, as it typically has been throughout our history. Of course, having negative net income has no bearing at all on our ability to conduct monetary policy or meet our financial obligations. It’s our ability to pay interest on reserves and other liabilities were eliminated, the Fed would. Lose control over rates, the stance of monetary policy would no longer be appropriately calibrated to economic conditions, and would push the economy away from our employment and price stability goals to restore rate control, large sales of securities over a short period of time would be needed to shrink our balance sheet and the quantity of reserves in the system, the volume and speed of these sales, constraint Treasury market functioning and compromise financial stability. Market participants would need to absorb the sales of Treasury securities and agency MBs, which would put upward pressure on the entire yield curve, raising borrowing costs for the Treasury and private sector even after that ball to volatile and disruptive process, the banking system would be less resilient and more vulnerable to liquidity shocks. The bottom line is, our ample reserve regime has proven remarkably effective for implementing monetary policy and supporting economic and financial stability. So I will close with a brief discussion of the economy and the outlook for monetary policy. Although some important government data have been delayed due to the shutdown, we routinely review a wide variety of public and private sector data that have remained available. We also maintain a nationwide network of contacts through the Reserve Banks who provide valuable insights, which will be summarized in tomorrow’s Beige Book. Based on the data we do have, it’s fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago. Data available prior to the shutdown, however, show that growth in economic activity maybe, on a somewhat former trajectory than expected. While the unemployment rate remains low through August, payroll gains have slowed sharply, likely in part due to a decline in labor force growth due to lower immigration and lower labor force participation in this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen, while official employment data for September are delayed. Available evidence suggests that both layoffs and hiring remain low and that both households perceptions of job availability and firms perceptions of hiring difficulty continue their downward trajectories. Meanwhile, 12 month core PC inflation was 2.9% in August, up slightly from earlier this year, as rising core goods inflation has outpaced continued disinflation in housing services available data and surveys continue to show that goods price increases primarily reflect tariffs, rather than broader inflationary pressures consistent with these effects, near term inflation expectations have generally increased this year, while most longer term expectation measures remain aligned with our 2% goal. Rising downside risks to employment have shifted our assessment of the balance of risks. As a result, we judged it appropriate to take another step toward a more neutral policy stance in our September meeting, there is no risk free press for policy as we navigate the tension between our employment and inflation goals. This challenge was evident in the dispersion of Committee participants projections at the September meeting, and I’ll stress again that these projections should be understood as representing a range of potential outcomes whose probabilities evolve as new information informs our meeting by meeting approach to policy making. Said policy based on the evolution of the economic outlook in the balance of Rick’s risks, rather than following a pretty determined path. And with that, thank you again for this wonderful Warren and for inviting me Here today, I look forward to our discussion. Thank you.

Host asking questions 19:04
Thank you Chair Powell for the

excellent remarks in the Adam Smith address, and we will have about half an hour for questions so long. So let me start with before I go to some of the questions coming into the audience. And do you use the Connect app to generate those you have said and you repeat it again here that there are no risk free paths for the Fed now. So in light of that, and in particular risk where the recent inflation data are running. Let me. Let me group this with some of the questions that we’re seeing coming in on the app as well. Obviously, always data dependent, but thinking about the dual mandate of maximum employment and price stability, how concerned are you that the if. If the rate of pass through tariffs is slower, that that might begin to look like more persistent inflation, as opposed to a one time, as if the if the tariff adjustment came through all at once, and then it would be quite clearly a one time price level shift.

Jerome Powell 20:16
So that that’s certainly a risk.

You know, the as I mentioned, there really isn’t a risk free path. Now, since inflation is is certainly is running above our target, and appears to be continuing to increase quite gradually, but increase, it’s still on the way up. So there’s a risk there that that would, that would lend to greater persistence. But now the labor market has demonstrated significant downside risk. Says payroll jobs have decline in both the supply and demand for for labor as the coin decline quite sharply. So you know those two, those two states of affairs for our two variables or two goal variables call for different monetary policy responses, so as they come more in the balance, I think the idea has been that the policy should move from being, you know, tight to some degree, to being more neutral as those two things balance out. But it is clear, though, that, you know, if we move too quickly, and we may leave the inflation job unfinished and have to come back later and finish it. If we move too slowly, there may be unnecessary losses, painful losses, in the employment market. So we’re in the difficult situation of balancing those two things. I think for for the last few months, we’ve been able to maintain a restrictive stance, because the labor market was still pretty, pretty solid. I think that the data we got right after the July meeting showed that which, which adjusted back all the way through May, showed that the labor market is actually soft and pretty considerably, and puts us in a situation where the two risks are closer to being in balance. Let’s

Host asking questions 21:55
move to the other risk then and talk about employment a little bit. We had Anna Paulson here yesterday, and she spoke about the break even unemployment, break even employment growth rate, and that’s a question from the from the audience as well. So I believe she said that it’s certainly lower than it was, and the standard error around those estimates probably include some numbers that might even be negative.

Where do you see the monthly break even employment growth rate?

Jerome Powell 22:24
I’m not going to try to give you a pinpoint number, but as you pointed out, the standard error around this, you know, 50,000 plus or minus, something like that. And you know that would certainly, I think the range of plausible numbers for for the break even rate is probably, probably does go below zero, accounting for the standard errors, it’s clearly come down a great deal. And that’s what, what’s so challenging about this, is it, both supply and demand in the labor market have come down so sharply, so quickly, and the fact that they’re that the unemployment rate has barely moved is kind of remarkable in and of itself, and suggests that they’re moving at roughly the same path pace, although, of course, the unemployment rate has ticked up, which suggests that demand is moving a little faster than supply. I wouldn’t want to point to a, you know, a specific number, other than to say that it’s come way down. And there are many, many many estimates out there, by the way, there are many ways to calculate it. So you’re going to get different estimates,

Host asking questions 23:27
certainly in a in a volatile and changing environment. So one question I have is whether you see any changes in the transmission mechanism of monetary policy action. So when we speak of long and variable lags as we do, are those changing? And in particular, do you think there might be any difference in the impacts of policy on inflation versus unemployment? Is one changing more than the other?

Jerome Powell 23:53
Looks like two or three questions, so I might have to come back to you so on, on transmission. You know, they’re in theory, at least there I see two things. One is, you know, what we say and what the actions that we take on monetary policy and how quickly that gets into financial markets. So you go back to when I was in college, that part network would have taken, you know, weeks, months, probably at now, that happens essentially instantaneously. But the rest of it, you know, once it’s in the financial markets, how quickly does it affect economic activity, unemployment, employment, inflation, etc, you know, I think that’s more dependent on on the conditions in the economy. For example, if you take the, you know the group, the group of people who had extremely low rate mortgages, right? And even so, if you can cut rates, but they’re a long way down, and they’re sort of in a place where it’s going to be expensive to take out a to move and to take out a much higher rate mortgage, even even assuming significant numbers of cuts. So that is. Probably blunted the, you know, the transmission of lower rates into into that part of the economy. But overall, I think it’s, I think it still works the way we think it works, which is, you know, long and variable lags means a lot of uncertainty about how it’s being affected. I think the Lord, last part your question, the Lord, has been that inflation and employment come later. You know, the first decisions are purchasing decisions, hiring decisions and things well, purchasing decisions, you know, can be affected probably more quickly, but then those would eventually affect employment and inflation. So longer legs are when people, the research channel shows longer and longer legs for for employment and inflation.

Host asking questions 25:45
And I guess the variable part of that comment get does give us a bit

of coverage, a lot of uncertainty.

So you spoke about the adjustments or the challenges that you’re facing with some government data not currently being published, beyond the headline unemployment rate, which we’re not going to see right away. What other labor market indicators are you monitoring most closely to gage that side of the mandate?

Jerome Powell 26:13
You know? So we’re, I think everyone’s looking at the same non government data. So there’s, there’s a set of gotten on government data around or non federal government data around labor markets, for example, state level, unemployment claim reports. You can totally add those up and get a pretty decent estimate. And that’s, that’s, that’s a really good one. There’s also ADP has as its data and employment. So in the employment space, there’s there’s some plausible data, I will say generally, the the private data, the alternative data that we look at, is better use as a supplement for the underlying governmental data, which is the gold standard, and it’s not as it won’t be as effective as the main course, as it would have been as a supplement. So we don’t expect that we’d be able to replace that they were not getting. So I think in Job, you know, in employment space, there’s some pretty good substitutes, less so in inflation space and and in economic activity space. And also, they’re just, you know, they’re different. Private data providers use different universes and different levels of rigor in their in their data analysis. So, you know, we’re, we’re looking at lots of things, and, you know, we, you know, Will, and we’re going to make our decisions according to the FOMC schedule. But I think it will be a lot better once we start getting, for example, the, you know, September employment report is going to be very important report, and we were not on track to have that, we there would still be time for us to get that. We will get, of course, the September inflation, the CPI and PPA reports. So that’s, that’s a positive. But, you know, we’re, we’re not comment on fiscal matters, but from our standpoint, we’ll start to miss that data, and particularly the October data. If this goes on for a while, they won’t think and it could become more challenging.

Host asking questions 28:11
You use the term gold standard, and you didn’t this context, but I’m going to pivot here, because there’s a question from the from the audience. It’s getting a lot of up votes. So one of your predecessors, Alan Greenspan, used to view the price of gold as an indicator of inflation risk. So in that context, how do you view the rally that we’ve seen in gold? And if you want to throw in Bitcoin, you can comment on that too.

Jerome Powell 28:35
You know, I’m not gonna on any particular asset price, including that one. And I think we think of inflation as driven by, you know, fundamental supply and demand factors, and it’s not something we look at, you know, actively.

Host asking questions 28:57
The September projections we saw revised GDP growth projections provides upward for both 2025 and 2026 now sometimes it’s just an issue to issue thing, but how do you reconcile that projection of stronger growth seeing in terms of a likely weakening labor market?

Jerome Powell 29:18
So even subsequent to the September Sep, we’ve seen, so even subsequent to the September Sep, we’ve seen economic activity data which are, which are surprising to the upside. And I mentioned, as I mentioned in my remarks, so you do have a bit of a tension there between, you know, the labor market data, see very little some job creation, and yet people are spending so economic activity is strong, and it’s, you know, we have to see how that plays out right now. Of course, we’re not getting any any new new government data on any new federal government data on that. But it does create, you know, of course, if the economy, if economic activity, were stronger than that. Would tend to support labor market activities and hiring, and so we’ll have to see how that works out.

Host asking questions 30:10
Another topic that has permeated the conference over the last two days has been AI, so as the Federal Reserve, like all of us, Graham with the implications of generative AI, what plans are in place to assess its long term impact on productivity, applications for labor markets and overall economic stability, and does that present any new risks to monetary policy or financial stability?

Jerome Powell 30:35
So you’re right. We’re doing what people are doing, which is, you know, reading all the things that image so many researchers are working on AI now, it’s just amazing. And so we follow all that. We also people at the Fed who are doing lots and lots of research on AI. And, you know, in terms of it just such early days to be looking for the kind of things that will happen. So, you know, question of productivity, you know, it was it Robert solo, who said that technology showing up everywhere but in the productivity data. So this could be the same kind of thing, where we, where we where it’s there, but it takes a long time, kind of to show itself, because you would think of another big technological advance this potentially raising productivity. But I think it’s early to say that we’re seeing it also you’re seeing, I think some some researchers have found effects on hiring from AI for entry level people and and for voters and things like that. So there’s probably some of that out there, but it’s it’s just so early to say what it will be. We also monitor very carefully what public companies are saying increasingly old statements from, you know, from big, large, mainly large private companies on things that they think they can do across their own business area with AI and either, you know, sort of freeze hiring where it Is, or reduce hiring. And, you know, I think we’re pretty aware of what the potential outcomes over the range of potential outcomes is very broad, I will say in terms of what the Fed can do. You know, we’re a we deal with supply and demand. You know, we have interest rate and we also do regulation, that kind of thing. But if what’s needed is greater education and skills. I mean, I’ve always liked the model that, you know, technology can work for everybody is as long as, because everybody’s getting the app skills and aptitudes, they need to use that technology. This is golden cats, you know, their work, which actually spoke about it, Jackson Hole this year, but said, you know, it’s a 20 year old book that they wrote. So we can’t do that. That’s not something the Fed can do. We also can’t, we can’t address the potential societal disruptions. It could happen, you know, potentially we, you know, if there’s really significant job loss. So the lot of, I mean, we’re the least of it that they’re potentially really significant implications for people in the labor force. And I think we were all speculating about what those might be, but it’s only the beginning of this story,

Host asking questions 33:14
looking at some of the other questions that are getting uploaded, and you can get into the weeds as you want, but you know this is where people want to go. So let me, let me try this one. As you think of the appropriate level of reserves in the system, what indicators are most important is it the price of money, so repo levels, or the volume of borrowings from the Fed, like the discount window

Jerome Powell 33:37
and so on. So we have a we have a nice spider chart and a five main indicators, one of which is sort of repo, repo levels. And I think overall, what they’re showing is that we’re still at ample reserves above, sorry, abundant reserves were still at abundant reserves meeting above our goal of of of ample reserves, a little bit above ample reserve. So, but we’re beginning to see, you’re starting to see a little bit of tightening and money market conditions, particularly repo rates, have moved up. And those are the things we’re going to be watching. So we think we’re still in abundant and, yeah, and we’re, you know, the pace of runoff is now very, very slow, so we’re going to be watching all those factors very carefully. And we’re not, we’re not so far away now, but there’s a ways to go.

Host asking questions 34:31
I think we’re not going to get away without addressing this one. So I’ll try to, again, group some of these together. First, there’s definitely appreciation from the audience, your ability to try to remain above the political fray, and I think also, as in your remarks, he said, gradually and predictably, and that sounds really nice

right about now, but

with those that ongoing scrutiny of the policy decisions of the Fed, i. What measures is the Federal Reserve taking, and are you taking to ensure and demonstrate the continued dependence in setting monetary policy?

Jerome Powell 35:09
So the main thing we can continue to do is to do our work the way we’ve always done it, which is, you know, think really carefully about evolving economic conditions and the evolving outlook and the balance of risks, and try to make good decisions to sub to best serve, you know, the American public, and and then explain those decisions and talk about them in a way that that makes sense and is grounded in the data and and our overall approach, I think we’re going to keep doing that, and as long as we’re doing that, people will be able to tell if we start doing something else, I think people will be able to tell that too. But that’s that’s just not something where we’re going to do we’re always going to keep doing our work. We don’t engage in back and forth with with people. It’s just not that that is that gets to be political sort of right away. So we just do our work and do it as best we can. I mean, overall, I would say the Fed comes through the last if you think about it, go back to the beginning of the global financial crisis. We’ve had two world historical crises back to back, essentially, and the US economy. It was quite, has been quite a ride for the US economy and for American citizens, but we come through it as well, or better than any other country in the world, and we had to innovate. And did innovate when there wasn’t really no choice. We can look back now, and as I did today, and second guess ourselves, which is only appropriate that we’ve been doing it for 10 years, since I got to the Fed 12 years ago, we were already doing a lot of that. So that’s an ongoing process. You. process.

But I think if you step back, the Fed is a government agency that does a good job for the public that it serves and and that is our as our only goal. And I think we do it pretty well. Don’t look for perfection. You know, these are, these are close calls that have to be made in real time,

Host asking questions 41:36
and in that context, then internally to the FOMC, how important is it that you have consensus on it? I mean, we’re economists, we understand the value of spirited debate. And is that important in terms of communicating the results and the decisions of the committee?

Jerome Powell 41:52
I mean, consensus is great, but I mean the most important thing of all is to get it right. And you know that you come to places not very commonly, but sometimes you come to places where people are going to be have different views, and this is one of them you have. You have a situation here where, literally, inflation is above target and generally rising. The labor market is subject to pretty, pretty clear downside risks. What do you do? How do you think about that? That’s not a problem that we’ve that you face very often in central banking or in the economy, and people are going to have different weights and different risk aversion and different risk appetites on those things. It would be kind of surprising if, if you had no no debate over those things. So we healthy debate going. I think it’s very healthy. I think these meetings that we’ve been having are as good as any we’ve had, you know, in terms of people sincerely, you know, giving their absolute best argument for their positions. But they’re different positions. That’s some I mean, when I was an investor, I always felt like the most dangerous thing is if everybody agreed on something, because you need someone to come in and try to explain why this is a terrible idea, hopefully somebody really smart and then and that would give you the ability test your thinking. So I think that’s, that’s a healthy discussion that we’re having right now. And I’m not at all surprised that we have people across the board. I do think we also, as an institution, do try to come together around around, you know, a central answer, and that’s, of course, part of what I try to do is, is, you know, find an answer that will attract as much sport as possible.

Host asking questions 43:34
I know you probably won’t want to come in great detail on global conditions, but there are few questions around that, and what that implies for us monetary policy, and also just looking at the interest rate differentials between the US and other advanced economies and how long that could persist, and is there a risk there for the interest rate differentials between the US and other advanced economies. Yeah, I mean,

Jerome Powell 44:05
you know, we said interest rates according to, you know, the place where our economy is, domestically, you know, taking into account the international aspects of our economy. So again, it’s not surprising for me. You could name many, factors. But you know, for example, tariffs are clearly more disinflationary for countries that are subjected to them, and they’re more, I would say, heavily inflationary. But there, there’s some inflationary pass through to consumers from countries that are putting tariffs on so this is very different monetary response, potentially just in that. So, you know, I think we need to set as every other central bank does, they’re sitting there setting rates in their whatever their, you know, remit is geographically, and they’re going to be different answers.

It’s not unusual.

Host asking questions 44:58
So we have a large number. Young economists in the audience today. Could you talk a little bit about as we look back? You know, it’s the momentous awards, a nice time to reflect. If you looked back on your early career and your early goals, how do you think that young Jerome Powell would would view where Jerome Powell is sitting today as chair of the Federal Reserve.

Jerome Powell 45:25
Surprised.

No, I would say, so what I would tell young economist is, you’ve chosen a great profession, a tremendous profession. You know you’re basically you’re getting the tools to analyze public policy and what works and what doesn’t work, and what should be expected to work and wouldn’t and why, and also, what’s the state of the economy. And guess what? It’s, it’s not just hard, it’s basically impossible, but it’s, it’s a very, very difficult thing, but it yields itself up over time, and you know, it’s just an incredibly important subject that carries the capability to do, to do really good things for the general public, who may not feel great gratitude toward economists, but sometimes, but no, it’s, it’s really important. You made a great choice, and I would say, wish you the best of luck.

Host asking questions 46:19
Thank you agree. Okay, we’ll do a little bit of a late and round trip. He has about five minutes left, so I’ll ask a bunch of questions that that you may not want to get into great

detail in anyway.

Speaker 2 46:34
Some of these, some of these are pretty straight forward, but so we talked quite a bit about labor markets, but we have not specifically asked the question about the effect of immigration policies on labor supply. How restrictive Do you think that current policy is, and is that something that

Jerome Powell 46:54
will destroy immigration policy? Yeah, yes, let me. Let me start by saying that we don’t, we don’t have a view on immigration. It’s not our job to have a view. So we take that as completely, you know, it is what we take it as it arrives. More, I’d say, stronger policy than most people had expected. You know, we’ve seen, you know, very sharp decline in growth of the labor force and, and in people entering the country and, and, yeah, I think you’re, you’re, you’re only beginning to see the strength of that policy to their, their, you know, there’s more expulsions, those are rising, and that kind of thing. So, yeah, that’s, that’s a that’s a big, that’s a big economic factor. So that will mean, you know, fewer people to work you you have anecdotal evidence of industries that they’re just having a hard time finding people. You don’t see it in wages or anything like that at this point. You don’t see, I at least in the aggregate, you know. But, yeah, it’s, it’s going to be a really important economic fact for because, you know, that’s new people who come into the workforce. They create their their supply, but they also create demand. They create their own demand. And, you know, again, from our standpoint, we’re just, you know, our job is to, is to achieve maximum employment, or maximum sustainable employment, and that will depend both on the supply of workers and the demand for workers.

Host asking questions 48:29
Back to the balance sheet. Some questions again, all kind of try to group these together around mortgage back securities and housing affordability, again, not directly part of the dual mandate. But would the Fed ever look at any specific actions with regard to MBs to address mortgage rates or affordability for housing? Answers?

Jerome Powell 48:53
Look, we look at overall inflation and not we don’t look at, we don’t target housing prices and also bite. I don’t know how you would I we would not engage in mortgage backed security purchases as a way of addressing mortgage rates or housing directly. That’s that’s not what we do. We do have, as I mentioned, a very large amount of mortgage backed securities, and they’re running off, but they run off pretty slowly.

Question on the beverage curve,

Host asking questions 49:30
maybe that’s not a lightning round question, but let’s try it. So do you think that the shift in the beverage curve is a structural shift or just a blip? I think,

Jerome Powell 49:43
you know, further

declines in job openings might very well start to show up in unemployment. You know, you’ve had this amazing time where you came straight down and but, you know, I just think you’re going to reach a point at which unemployment starts to go. Up, and we haven’t really. We may be hitting that now, but it’s been remarkable how, how that line, it just comes down, and

which has been, you know, really a great part of the recovery.

Host asking questions 50:15
All right. Well, we have just a couple minutes left. I think we’ll, we’ll end with with another sort of philosophical question. Michael bar spoke to the policy conference in 2024 I believe it was, and he gave some advice to economists. What would your advice be the economist in the room, in terms of how we can best serve the challenges that are that are facing us collectively in this moment,

Jerome Powell 50:45
I would, I mean, I would, I’m inclined to say, keep your heads up. You know, it’s a time when people are challenging expertise. And, you know, I think it’s a distinguished profession. It’s a very high order profession. You should be proud of your work and keep at it, you know. I mean, ultimately, we’re learning about how the economy works and how society works. Mean, our understanding is so basic and so uncertain, really still after all these years. But, you know, you got to think we’re making some progress and doing some good and imposing, you know, sort of an analytical framework around the kind of decisions people make about the economy, so I just want to give you a vote of support and say, keep at it.

Host asking questions 51:26
I like his name supports you.

Thank you so much. Thank you. Thank you.

Jerome Powell 51:44
Thank you very much.

Speaker 3 51:54
Yes. you.