Jerome Powell is downplaying the significance of the FOMC projection holding at three rate hikes this year and not moving up to four as many had expected. Powell is emphasizing that the decision at today's meeting was specifically a rate increase, not a change in projections which he said represent the member's individual assessments and which can shift if the economy slows or accelerates.
The chair said the rise in the FOMC's forecast for GDP, now at 2.7 percent this year vs 2.5 percent in the December forecast, is well above long-term projections and may or may not, given the members' separate assessments, reflect any expected boost from fiscal stimulus and tax cuts. Powell did note that it would take significant gains in productivity and also further growth in the labor market to reach the 3 percent level.
On inflation, Powell said the committee continues to seek a 2 percent goal and downplayed the significance of increased projections for the core, now at 2.1 percent for 2019 and 2020. He said members are seeing only moderate increases in wages and price inflation and are not right now, though very sensitive to it, seeing an acceleration in inflation.
Powel said high asset prices, including equities and commercial real estate in some markets, are a vulnerability to policy but he stressed that housing, a key sector, is not overheating. On the administration's imposition of tariffs on primary metals, Powell noted that members do not now see them as having any effect on the current outlook though he noted that the Fed's business contacts are citing tariffs as a concern.
Among final details, Powell said he is thinking about increasing the number of chair press conferences, now at four per year, but will make this decision carefully. He also noted that he has no inclination, despite the risk of higher borrowing needs from the government, to make any changes in balance-sheet unwinding. And, for the record, he said the probability of a recession is not high.