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Federal Agency

Jan. 10, 2019 – Final

Federal Reserve Board Chairman Jerome Powell Delivers Remarks at Economic Club of Washington

LIST OF SPEAKERS

RUBENSTEIN:

So we’re very honored at the Economic Club of Washington today to have as our special guest the 16th chairman of the Federal Reserve Board, Jerome Powell, also known as Jay Powell.

(APPLAUSE)

Jay, you were nominated to be chairman of the Fed by President Trump, and you had previously served as a member of the Fed as your predecessors had, as well. Ben Bernanke and Janet Yellen both served as members of the Fed before they became chairs. Now that you’ve been a member and you’ve been chair, is being chair all that it’s cracked up to be?

(LAUGHTER)

POWELL:

First, thank you, David. Thanks. It’s great to be here today. So I did; I was a governor for six years, and I think I had every job on the Board of Governors that there is to have other than chair, and it’s a very different job. Whereas I was focusing on a million different things, now I’m really focused on the economy, public communication, monetary policy and the institution. And so it’s quite a different thing. And yes, it’s a great job, and it’s a great honor to come to work every day.

RUBENSTEIN:

Do you enjoy the job but you don’t wish you were just a member?

(LAUGHTER)

POWELL:

No, I do enjoy the job. I really do. I’m very grateful for the opportunity. It’s a great honor, and I do, I enjoy it.

RUBENSTEIN:

Do you find that as a chairman your jokes are laughed at out more quickly as than a regular member?

(LAUGHTER)

Or do you get any putts in golf that you didn’t get before?

POWELL:

Well I guess we’ll find out about the jokes.

(LAUGHTER)

I don’t play much golf anymore, but no, I think my jokes have always been well received, frankly.

(LAUGHTER)

RUBENSTEIN:

So last week you had a very interesting interview at the American Economic Association with your two predecessors, and at that interview you seemed to say that the Fed’s position going forward is that you’re reasonably comfortable where you are with the Fed funds rate. Is that the proper interpretation, or should people be reading more into what you said last week?

POWELL:

So maybe I’ll provide a little bit of context there. So 2018 was a very good year for the U.S. economy. It’s the strongest growth we’ve had in more than a decade by so many measures. The labor market is very strong, historically low unemployment, the lowest in 50 years, wages going up, labor force participation going up, which is very important for us. And inflation’s staying right near our target. So, and we see continued momentum from the data right through the beginning of this year. We also see, though, we see the financial markets expressing a view of concern about downside risks, really associated with–with global growth and with trade. So how do we put those two different signals together? So, and I think we’re actually in a good place. I think where that leaves us, particularly with inflation low and under control, is we have the ability to be patient and watch patiently and carefully as we see the economy evolve and figure out which of these two narratives is going to be the story of 2

019.

RUBENSTEIN:

But at the end of last year, in December, people thought that perhaps two Fed fund rates increases in 2019 were part of your plan. Is it fair to say that that is not part of your plan right now, today?

POWELL:

I think the better way to think about it is that there is no such plan. We–you know, we don’t actually vote on a path or a plan for interest rates. We have–each individual participant on the FOMC submits his or her individual projections four times a year, and we did that in December, and two rate increases was the median. And it was conditional on a very strong outlook for 2019, an outlook which may still happen. But the good thing is we’re in a place where we can be patient and flexible and wait and see what does evolve. And I think for the meantime we’re waiting and watching.

RUBENSTEIN:

All right, so I shouldn’t anticipate at your next FOMC meeting a big increase in interest rates?

(LAUGHTER)

POWELL:

You should anticipate that we’re going to be patient and watching.

(LAUGHTER)

RUBENSTEIN:

Okay, all right, okay, all right, well–

POWELL:

And waiting and seeing.

RUBENSTEIN:

I have no doubt. Okay, so by the way, FOMC, what does that stand for?

POWELL:

Federal Open Market Committee.

RUBENSTEIN:

And who’s on that?

POWELL:

So that consists of all of the members of the Board of Governors, which there can be seven but there are currently five. Those are nominated by the president and confirmed by the Senate and all 12 of the Reserve Bank presidents around the country who are actually chosen by their Boards of Directors, subject to the approval of the board.

RUBENSTEIN:

Have you thought of a better acronym because FOMC is hard to say? Can you pick some other acronym for that?

(LAUGHTER)

POWELL:

You know, we actually–we may have to hire a branding consultant and–

(LAUGHTER)

RUBENSTEIN:

Okay.

POWELL:

–and get some better thinking on that. But we–for us it’s, you know, it’s a very basic acronym.

(LAUGHTER)

RUBENSTEIN:

All right, last–

(LAUGHTER)

–yesterday the Fed released the minutes of your last FOMC meeting. Now you release your minutes not the day after the meeting. Why don’t you release your minutes the day after a meeting?

POWELL:

We release a statement which summarizes the decision, and the language is very carefully structured to express the rationale for the decision, and then we actually go back and read the transcript very carefully. We cumulate the perspectives offered by 17 different members, and it takes sort of three weeks to go through that process, and we publish them. We used to publish them with a couple of month delay. Now we publish them with a three-week delay. So they’re meant to amplify what’s in the decision.

RUBENSTEIN:

Okay, in those meeting–minute meetings, it said that there was (INAUDIBLE) about whether you should increase interest rates, the Fed funds rates or not, but the opinion was unanimous. So was it fair to say that it was the united view of the FOMC that you should increase interest rates when it turns out that the debate was more divided than maybe the vote was?

POWELL:

You know, so I would say one of the great things about our system is that we really have institutionalized diversity of perspectives. Twelve different Reserve Bank presidents, each of whom has his or her own economic staff, and they come in, and so at every meeting we have a robust discussion, debate, and often disagreement over the path of policy. And I personally think that’s a great way to reach a better decision. So in the end people have to choose to vote with the proposal or not. In this case every one voted for, although there were disparate views expressed at the meeting, as the minutes reflected.

RUBENSTEIN:

And when people don’t vote for the proposal it’s recorded that they didn’t vote for it. Is that right?

POWELL:

That’s right. They dissent, and they’ll often issue a, you know, a statement of why they dissented, and they’ll explain themselves. The whole thing, explain yourself carefully to the public and transparently, and we try to put all of that out on the record for people to see.

RUBENSTEIN:

On Capitol Hill when your committee chair, it is said you don’t call for a vote unless you know that you’re going to win that vote. When you’re the head of the FOMC as the chairman of the Federal Reserve Board is, do you know where the vote’s going to be before that meeting starts?

POWELL:

Yeah, so I speak to, and I think my predecessors did, too, I speak to every Reserve Bank president and every member of the Board of Governors in great detail before every meeting. We discuss the issues, and I certainly know, you know, what people will support and what they won’t. So the proposal that gets made is generally one that attracts overwhelming support, but often not unanimous, though. Dissents are not uncommon.

RUBENSTEIN:

So if you call somebody who is a member of the FOMC and you say we’re going to have our meeting in a couple days, and this is what I think, and they say they think a different view, do you try to lobby them, or you don’t do that in the FOMC; nobody lobbies anybody else?

POWELL:

No, I really don’t. I really respect the right of each individual participant to make up his or her own mind, and express that view, and put it on the record and explain it. I see nothing but value in that. It’s not a question of lobbying. You know, we–it would be more likely that–and this hasn’t happened, but more likely that we would adapt a proposal to be something that a person could support than it would be for me to actually lobby someone.

RUBENSTEIN:

Now your immediate two predecessors had PhD’s in economics, one from, I guess Princeton, and one from Yale.

POWELL:

Actually Harvard and–Ben was from Harvard, yeah.

RUBENSTEIN:

Ben was from Harvard. He taught at Princeton.

POWELL:

Oh, Ben was MIT actually.

RUBENSTEIN:

MIT; you’re correct. He was at MIT. He taught at Princeton, and Janet had hers from Yale, if I recall.

POWELL:

Right.

RUBENSTEIN:

So you don’t have–you have a law degree from Georgetown. You’ve practiced law, but is there a disadvantage to not having a PhD, and is there an advantage to having a private equity background?

(LAUGHTER)

POWELL:

You know, I wouldn’t say it’s a disadvantage not having a PhD. I’ve been at the board seven years. I’ve had a lot of time to learn the monetary economics. You really have to do that if you’re going to serve at the board and you’re not a PhD economist. You’ve very much got to invest in learning, and of course I’ve done that. But my career–part of my career is doing different things and learning different things. I have an interesting story for you, as a matter of fact.

RUBENSTEIN:

Okay.

POWELL:

I know a guy–know a guy who founded a private equity firm with no business degree, no experience–

(LAUGHTER)

–and made a success of it. So it can be done.

(LAUGHTER)

(APPLAUSE)

RUBENSTEIN:

Sometimes–sometimes it’s better to be lucky than anything else.

(LAUGHTER)

But, so let me ask you this. Recently the president of the United States, who appointed you, has been less than favorable in some of–about some of your decisions. Does that bother you in any way?

POWELL:

No. So we’re very, very focused on our job. Congress has given us a very specific job. It’s an important job. We’re here to serve the American people, all of the American people, try to use our tools to achieve maximum employment and stable–price stability. So that’s what we’re focused on. We don’t get distracted by other things. We do not take political factors into consideration, either in our discussions or in our decisions at all. And that’s just who we are.

RUBENSTEIN:

The president’s head of the National Economic Council, Larry Kudlow, has suggested that maybe the president will have a meeting with you. Have you received that invitation yet?

POWELL:

No, no invitation. I will say Fed chairs do meet with presidents. I’m not aware of any Fed chair in my lifetime that hasn’t met with the president. These tend to be–meetings tend to be rare. I think there’s only been one or two during my time here. And I’m not aware of any Fed chair turning down an invitation from the White House, nor do I think that would be appropriate. So, but I really don’t have any news for you on that.

RUBENSTEIN:

All right, so if you had an invitation you’d be happy to accept it, right?

POWELL:

I’m not aware of anyone not accepting it.

(LAUGHTER)

RUBENSTEIN:

Okay, so let’s talk a moment about the economy. The Fed in its–in its FOMC minutes pointed out that there is a disparity a little bit. The financial markets seem to be a little bit uncertain from time to time but the core economy seems to be doing quite nicely. So how do you explain why the financial markets seem to be nervous and the core economy seems to be growing at a pretty good rate?

POWELL:

So financial markets, really beginning in the fourth quarter, got more volatile and–and seemed to be pricing in a more pessimistic outlook, which as I mentioned seems to be rooted in concerns about slowing growth and–and a related concern of the ongoing trade negotiations. So if you–but if you look at the incoming data right through the end of the year and into the beginning of this year, you don’t really see any evidence of a slowdown. And so we–we’re in a situation where we have factors pointing at different directions.

And by the way, this is not uncommon. This is–this is something that actually happens not infrequently. And when we–when we–when we have that what we do is we–we apply sort of risk management principles. In other words, we’re not just concerned about the baseline case. We’re thinking about what are the risks and we’re–we’re–we’re using our–our tools to address those risks.






Political Insider

About Pete Davis

Pete Davis

Pete Davis advises Wall Street money managers on Washington, DC policy developments that affect the financial markets. Visit his website here daviscapitalinvestmentideas.yolasite.com.

Articles by Pete Davis

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