00:00Today, as you know, our committee decided to vote by a 9-3 vote to maintain the target
00:06range for the federal funds rate at 3.5% to 3.75%.
00:11The committee is continuing its policy of making ample reserves in the banking system.
00:17The economy is showing impressive resilience.
00:20Even with recent shocks, the trends are positive and reveal solid growth.
00:26Job gains have kept pace with the workforce, and the unemployment rate has changed little.
00:33Inflation remains elevated relative to the committee's 2% goal.
00:38The committee remains resolute.
00:40You've heard this before, but we will deliver price stability.
00:45As before, the policy statement conveys just the facts.
00:49It's steering clear of forecasting, a choice we consider especially prudent at these
00:55uncertain times.
00:58Uncertainty, however, does not mean a lack of clarity.
01:02For some households, businesses, and market professionals, five years of high inflation
01:08have left a mistaken impression that's hard to shake, that the Fed's implicit inflation
01:14target was somehow above 2%.
01:16Let me reiterate, there is no soft inflation target.
01:22There is no soft implicit target, not on this committee's watch.
01:28There's only a target, and it's 2%.
01:32Not one of my FOMC colleagues is under any illusion.
01:36We have begun a new chapter.
01:38And we understand that the five-plus years of inflation above target cannot be cured in
01:45nine weeks, or by a single month of modest price decreases.
01:51This Fed will not waver.
01:54Our credibility rests on performing our duties and delivering on our responsibilities.
02:01Americans are right to expect that, because our nation's prosperity depends on it.
02:06To the regulars here in the press room, today's assessment might sound familiar.
02:12Yet there was nothing inertial about our discussions, our policy, or our strategy.
02:19Two economic developments are worth highlighting.
02:22The first is a very notable change since our last meeting 42 days ago.
02:29Nominal and real yields are materially higher across the Treasury curve.
02:34In fact, some of the increases in market interest rates between FOMC meetings are among the
02:42most significant in the last two decades, ranking around the top decile or so.
02:48But if the committee didn't change its policy rate, what happened?
02:53In the intermeeting period, market attention centered on real data and real economic developments.
03:00Prices reacted in real time to incoming information.
03:05And the reduction in forward guidance may have been a factor.
03:10Market participants are learning to play the ball, not the referee.
03:15And market prices will continue to respond in the direction and magnitude they see fit.
03:22This is, in my view, a change for the better.
03:25And we're just getting started.
03:27After all, the central bank need not always and everywhere be the center of attention.
03:34I understand the desire for rolling forecasts and commentary from this committee.
03:40But for our part, we need to observe market reaction to developments, direct and unfiltered.
03:47I want to stress, of course, that decisions by this committee matter a great deal.
03:54And where necessary and appropriate, we will not hesitate to act.
03:59A second economic development is one that I noted at the Congressional Oversight Hearings
04:05this month.
04:06But it's worth repeating.
04:07The most striking feature of the economy is the strong growth of business investment.
04:14The surge in high-tech capex has been remarkable.
04:18But that does not necessarily make the Fed's role any easier.
04:23In the AI-related category of high-tech equipment and software, the most recent data shows four-quarter
04:30growth rates of nearly 20 percent.
04:34This is helping to sustain the healthy momentum of manufacturing output.
04:39More generally, capex is preparing the ground for future growth.
04:46Nonetheless, the precise timing and magnitude of effects on the supply side remain hard to
04:52predict.
04:54FOMC meetings produce policy decisions.
04:58But just as important is candid discussion of the big things that matter most.
05:05That too is a priority in this new chapter at the Fed.
05:09In our meeting, vigorous discussion centered on four questions, which I will enumerate.
05:15First, we talked a lot about the implications of the past five years of high inflation on the
05:22current policy conjuncture.
05:25To echo an old phrase, has the past really passed?
05:31Second, my colleagues and I considered the economic shocks of recent years.
05:37First, strain supply chains arising from the pandemic, military conflicts, energy supply
05:44disruptions, substantial increases in tariff rates, and yes, the surge in AI-related investment.
05:53These differ in their sources.
05:55Do they also differ in their effects on output and employment?
05:59Third, we took up the related question of price increases arising from shocks.
06:06The business capex boom, for example, is driving up prices of memory and logic chips and associated
06:12AI infrastructure.
06:15Do these changes indicate a broader inflationary dynamic?
06:19Or do we just focus on them, because they are under the bright streetlight?
06:25Finally, we discuss monetary policy tools and strategies for achieving stable prices.
06:33If, as the Fed has long held, interest rate policy should be its primary monetary policy instrument,
06:40how much accommodation are we getting from the balance sheet?
06:44In all of this, our work is advancing at the Fed.
06:48Instead, we're asking the right questions.
06:51And in this consequential time, we know how very much depends on getting the right answers.
06:58Of course, you've all arrived with questions of your own, so let's turn to them now.
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