00:00Based on the available data for September, it is estimated that the PCE price index rose 2.8% in the 12 months ending in September, significantly above our 2% target.
00:13Core inflation, which excludes the volatile food and energy categories, was also estimated to be 2.8%.
00:22Both of these readings are as high or higher than their readings a year before, propped up by an increase in tariff-affected goods prices.
00:33My outreach to business leaders suggests that the pass-through of tariffs to consumer prices is not yet complete.
00:41Many firms have adopted a strategy of running down their inventories at lower price levels before raising prices.
00:47Others have reported waiting until tariff uncertainty is resolved before passing increases on to consumers.
00:57New car models, clothing lines, and other products will be coming onto the market, and that process will continue to provide firms with an opportunity to level set prices.
01:09As such, I expect inflation to remain elevated for the next year.
01:13Nonetheless, the effect of tariffs on prices, in theory, should represent a one-time increase.
01:23It is encouraging that most long-run inflation expectations, including from the New York Fed Survey of Consumer Expectations, are low and stable at this juncture.
01:33When excluding tariffs, 12-month core PCE inflation through September appears to be about a half percentage point lower at about 2.3%, suggesting that underlying inflation has continued to make progress toward target.
01:52My assessment is that inflation is on track to continue on its trend toward our target of 2% once the tariff effects are behind us.
02:01The big caveat is that tariff effects must prove not to be persistent, and that monetary policy remains appropriately focused on achieving that goal.
02:13Looking ahead, policy is not on a predetermined path.
02:18We are at a moment when risks to both sides of the dual mandate are elevated.
02:24Keeping rates too high increases the likelihood that the labor market will deteriorate sharply.
02:29Lowering rates too much would increase the likelihood that inflation expectations will become unanchored.
02:37As always, I determine my monetary policy stance each meeting, based on the incoming data from a wide variety of sources, the evolution of my outlook, and the balance of risks.
02:51Every meeting, including December's, is a live meeting.
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