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Jerome Powell Speech
Jerome Powell Speech
Noon EDT
October 19, 2023
Opening Remarks
by
Jerome H. Powell
Chair
at the
Incoming data over recent months show ongoing progress toward both of our dual
Inflation
By the time the Federal Open Market Committee (FOMC) raised rates in March
2022, it was clear that restoring price stability would require both the unwinding of
pandemic-related distortions to supply and demand, and also restrictive monetary policy
to cool strong demand and give supply time to catch up. These forces are now working
After peaking at 7.1 percent in June 2022, 12-month headline PCE (personal
PCE inflation, which omits the volatile food and energy components, provides a better
indicator of where inflation is heading. Twelve-month core PCE inflation peaked at 5.6
Inflation readings turned lower over the summer, a very favorable development.
The September inflation data continued the downward trend but were somewhat less
encouraging. Shorter-term measures of core inflation over the most recent three and six
months are now running below 3 percent. But these shorter-term measures are often
volatile. In any case, inflation is still too high, and a few months of good data are only
1
Descriptions of PCE inflation include Board staff estimates of the September 2023 values based on
available information, including the September 2023 consumer price index and producer price index data.
The September 2023 PCE inflation data will be published by the Bureau of Economic Analysis on October
27, 2023.
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the beginning of what it will take to build confidence that inflation is moving down
sustainably toward our goal. We cannot yet know how long these lower readings will
persist, or where inflation will settle over coming quarters. While the path is likely to be
bumpy and take some time, my colleagues and I are united in our commitment to
In the labor market, strong job creation has met a welcome increase in the supply
pandemic levels. 2 Many indicators suggest that, while conditions remain tight, the labor
market is gradually cooling. Job openings have moved well down from their highs and
are now only modestly above pre-pandemic levels. Quits are back to pre-pandemic
levels, and the same is true of the wage premium earned by those who change jobs. 3
And indicators of wage growth show a gradual decline toward levels that would be
2
The labor force participation rate has increased by about one-half percentage point since the end of last
year.
3
For example, according to the Atlanta Fed's Wage Growth Tracker, the median wage growth for job
switchers is now only slightly higher than that of job stayers. The size of this gap is now similar to what
was normal pre-pandemic after being elevated in recent years.
4
A measure of job availability drawn from Conference Board data—showing the difference between the
share of consumers saying that jobs are plentiful and the share saying that jobs are hard to get—was
elevated in 2021–22 but is now below its 2019 average. In data from the National Federation of
Independent Businesses, the share of small business owners reporting difficulty filling job openings has
likewise declined considerably in the last two years and is now only slightly above its 2019 average.
5
One recent indicator, average hourly earnings, grew 0.2 percent in September, resulting in an annualized
3-month growth rate of 3.4 percent and a 12-month growth rate of 4.2 percent. By comparison, 12-month
average hourly earnings growth peaked at 5.9 percent in early 2022.
-3-
Growth
To date, declining inflation has not come at the cost of meaningfully higher
of supply chains in conjunction with the rebalancing of demand and supply in the labor
market has allowed disinflation without substantially weaker economic activity. Indeed,
economic growth has consistently surprised to the upside this year, as most recently seen
in the strong retail sales data released earlier this week. Forecasters generally expect
gross domestic product to come in very strong for the third quarter before cooling off in
the fourth quarter and next year. Still, the record suggests that a sustainable return to our
2 percent inflation goal is likely to require a period of below-trend growth and some
Geopolitical tensions are highly elevated and pose important risks to global
economic activity. Our institutional role at the Federal Reserve is to monitor these
developments for their economic implications, which remain highly uncertain. Speaking
for myself, I found the attack on Israel horrifying, as is the prospect for more loss of
innocent lives.
Monetary Policy
Turning to monetary policy, the FOMC has tightened policy substantially over the
past 18 months, increasing the federal funds rate by 525 basis points at a historically fast
pace and decreasing our securities holdings by roughly $1 trillion. The stance of policy is
6
For example, the October Blue Chip consensus estimate for annualized real gross domestic product
(GDP) growth in the third quarter is 3.5 percent. Some projections anticipate even stronger growth, such as
GDPNow, which currently anticipates 5.4 percent annualized growth in the third quarter, additional
information is available on the Federal Reserve Bank of Atlanta’s website at
https://www.atlantafed.org/cqer/research/gdpnow. The Bureau of Economic Analysis will release its
advance estimate of third quarter real GDP on October 26.
-4-
restrictive, meaning that tight policy is putting downward pressure on economic activity
and inflation. Given the fast pace of the tightening, there may still be meaningful
sufficiently restrictive to bring inflation sustainably down to 2 percent over time, and to
keeping policy restrictive until we are confident that inflation is on a path to that
objective. We are attentive to recent data showing the resilience of economic growth and
tightness in the labor market is no longer easing, could put further progress on inflation at
Along with many other factors, actual and expected changes in the stance of
monetary policy affect broader financial conditions, which in turn affect economic
recent months, and longer-term bond yields have been an important driving factor in this
financial conditions can have implications for the path of monetary policy.
Conclusion
percent over time. A range of uncertainties, both old and new, complicate our task of
balancing the risk of tightening monetary policy too much against the risk of tightening
too little. Doing too little could allow above-target inflation to become entrenched and
ultimately require monetary policy to wring more persistent inflation from the economy
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at a high cost to employment. Doing too much could also do unnecessary harm to the
economy.
Given the uncertainties and risks, and how far we have come, the Committee is
proceeding carefully. We will make decisions about the extent of additional policy
firming and how long policy will remain restrictive based on the totality of the incoming