Federal Reserve Meeting Transcript: Employment Stabilizes, Powell Remains "No Comment"

No economic forecasts/dot plots at this meeting

Opening remarks and Q&A session

Good afternoon. My colleagues and I remain focused on achieving our dual mission: to achieve maximum employment and price stability for the benefit of the American people.

The U.S. economy expanded at a solid pace last year and is poised for a strong start in 2026.

While job growth remains low, the unemployment rate has shown some signs of stabilizing. Inflation, however, remains somewhat high.

To support our objectives, the Federal Open Market Committee (FOMC) decided today to maintain the policy rate unchanged. Given that we have cut rates by a total of 75 basis points in previous meetings, we believe the current stance of monetary policy is appropriate and conducive to achieving our dual goals of maximum employment and 2 percent inflation. I will discuss monetary policy further after a brief review of economic developments. Existing indicators suggest that economic activity has been expanding at a solid pace. Consumer spending has remained resilient, and business fixed investment has continued to expand. In contrast, activity in the housing sector remains weak. The temporary shutdown of the federal government likely weighed on economic activity last quarter, but these effects should reverse as the reopening of the government boosts growth this quarter. On the labor market front, indicators suggest that conditions may be stabilizing after a period of gradual weakening. The unemployment rate was 4.4% in December, little changed in recent months. Job growth remains low. Nonfarm payrolls have decreased by an average of 22,000 per month over the past few months, which includes changes in government and private sector employment. This reflects a slowdown in labor force growth due to reduced immigration and a lower labor force participation rate, although labor demand has clearly also weakened. Other indicators, including job openings, layoffs, hiring, and nominal wage growth, have remained largely unchanged in recent months. Inflation remains somewhat high relative to our 2% long-term target. Estimates based on the Consumer Price Index (CPI) show that overall PCE prices rose 2.9% in the 12 months ending in December; core PCE prices rose 4.3% excluding food and volatile categories. This higher reading primarily reflects price increases in the goods sector driven by the effects of tariffs. In contrast, deflation in the services sector appears to be continuing. Since peaking last year, indicators based on market surveys and longer-term inflation expectations remain consistent with our 2% inflation target. Our monetary policy actions are guided by our dual mandate of promoting maximum employment and price stability for the American people. Since September of last year, we have lowered the policy rate by 75 basis points (0.75 percentage points) to bring it back to neutral. This normalization process should help stabilize the labor market and allow inflation to resume its downward trend toward 2% once the effects of tariffs subside. We are well-positioned to determine the magnitude and timing of policy rates based on incoming data, the evolving outlook, and risks. Monetary policy is not predetermined; we will make decisions at each meeting. In summary, our two goals are maximum employment and price stability. We remain committed to supporting maximum employment, bringing inflation sustainably back to our 2 percent target, and keeping long-term inflation expectations anchored. Our success in achieving these goals is critical to all Americans. We, the Federal Reserve, will continue to work with objectivity and integrity, and remain committed to serving the American people. Thank you. I look forward to answering your questions. Q: Hello, Associated Press. Thank you. I'd like to ask, you attended the Supreme Court hearing on the Lisa Cook case last week, and Treasury Secretary Scott Betten criticized the move as political. Could you explain why you attended and how you will respond to the Secretary's criticism? (Answer by Chairman Powell): First, I don't respond to comments from other officials, whoever they may be. It's inappropriate to do so. I will tell you why I attended. I want to say that this case is arguably the most important legal case in the Fed's 113-year history. When I considered this, I felt it would be difficult to explain if I didn't attend. Furthermore, Paul Volcker (former Fed Chairman) also attended a Supreme Court hearing around 1985, so there is precedent. I thought it was appropriate, so I went. Q: I'd like to quickly follow up on the job market. Last month you mentioned that household survey data might be distorted, and you also mentioned that employment figures might be overestimated, suggesting we're still in a negative hiring pace. So, do you think the decline in the unemployment rate is solid? What's your basis for saying the situation has stabilized? Thank you. A (Chairman Powell): This is actually two questions. First, we are moving away from the data distortion caused by the government shutdown. Whatever the distortion was in November, it decreased in December, so we're in a phase where those distortions are no longer significant. They still exist, but are only slightly adjusted. The reason we amended the statement—let me look it up—is simply because the previous statement said that “downside risks to employment have increased in recent months.” The data we need to see shows some signs of stabilization. I won’t overemphasize this, but there are indeed some signs of stabilization. At the same time, there are also signs of continued cooling, so we believe the previous description is no longer accurate. Furthermore, the outlook for economic activity has improved significantly since the last meeting, which should, in time, impact labor demand and employment. For these two reasons, we decided to remove that phrase from the statement. Q: Wall Street Journal. Chairman Powell, you usually avoid direct political involvement, but the January 11 statement was an exception. What's different this time? Are you worried this will drag the Fed into further political debate? A (Chairman Powell): Today I only suggest you refer to my statement from January 11th. I won't expand on or repeat it. I'm not going to… This is really an occasion about press conferences, the economy, and the decisions we made today. While somewhat relevant, I won't delve into that topic. Q: Can you disclose whether the Fed responded to the subpoena? A (Chairman Powell): On that, I have no comment today. Q: Bloomberg Radio and Television. Have you decided whether to remain as Chairman of the Federal Reserve? If so, can you tell us what your decision is? If not, when can we expect a decision? A (Chairman Powell): No, again, I have nothing to say on that today. Q: In this situation, why would you want to leave? Answer (Chairman Powell): Similarly, I don't want to discuss this. These questions have appropriate times and places, but not the ones I want to discuss here and now. Thank you. Question: Financial Times. Thank you very much for taking the question. There is another question that may need to be answered later, and we have seen a lot of volatility in the dollar exchange rate in recent days. What do you think has driven the dollar lower? Are you concerned about the level of volatility we have seen this week? Thank you. Answer (Chairman Powell): Claire, as you know, we do not comment on the dollar. In fact, the administration, especially the Treasury, is responsible for overseeing matters such as currency and exchange rates. We do not comment on these. That is not our role. So I have no comment on that. Q: But what do you think is the reason behind market volatility? Is it asset management companies diversifying their investments? A (Chairman Powell): We don't talk about the dollar, or what's driving it. It's not appropriate for us to do that. That's really the Treasury's business. That's their responsibility, and we don't get involved. We do monetary policy and other things, but we don't comment on the dollar. Sorry. Q: Axios. Obviously, there was no Summary of Economic Projections (SEP) at this meeting, but given the slightly stronger wording on growth and the labor market in the statement, should we assume that the timetable for further rate cuts is later than people expected in December? Answer (Chairman Powell): First, if you look at the incoming data since the last meeting, the growth outlook is clear; all the data, including the Beige Book, indicates a solid start to the year. Inflation has been broadly in line with expectations, and as I mentioned, some labor market data show signs of stabilization. So, overall, the forecasts are indeed stronger, if that's your question. I'm not sure if I've answered your question. Q: I mean, regarding the timing or pace of any additional easing? A (Chairman Powell): Oh. So, we haven't done anything yet… What we're saying here is that after this meeting, after the last three rate cuts, we are well-positioned to address the risks we face on both sides of our dual mandate and will continue to make decisions on a meeting-by-meeting basis, based on incoming data, impacts, the balance of the outlook, and risks. We haven't made any decisions about future meetings, but the economy is growing at a solid pace, unemployment is broadly stable, and inflation remains somewhat high, so we will focus on our target variables and let the data guide us. Q: CNBC. Continuing with some questions you might be able to answer, thank you. You previously described the current policy rate as being at the higher end of the neutral range. If you look at the long-term SEP, 16 out of 19 officials actually believe that long-term interest rates are below current levels. Is the Fed still in the process of lowering it to the middle of the neutral range? What conditions are needed to get there? (Answer by Chairman Powell): I counted 4 out of 19 at or above that level. Maybe I miscalculated. I thought it was 4. If you look at the dealer survey, it's 10 out of 58 at or above that level—so you're right. That's the higher end of the range. But for some, I think that's neutral. I think many of my colleagues also believe that it's difficult to look at the incoming data and say that current policy is significantly restrictive. It could be accommodatively neutral, or slightly restrictive. It depends on the observer's perspective, and of course, no one can know for sure. Any follow-up questions? Q: I agree with you, but some officials have described the Fed as being in a pattern of eventually lowering rates over time. Are you still in that pattern, or is this a place to stay? A (Chairman Powell): Yes, no. I would say that if you look at the December SEP, most people expected additional normalization, but in the meantime, we've already completed most of the normalization process. Since we started cutting rates in September 2025, we've moved 75 basis points, and before that, 175 basis points. So, you've come a long way, and we think we're in a good position to see how the economy forms. We're looking at the data. We don't make decisions at future meetings, but we do believe we are in a good position after three rate cuts to let the data speak for itself. Question: Thank you, Chairman Powell. Bloomberg News. To what extent did the Committee discuss the possibility of a rate cut? Was there broad consensus on a rate cut and the conditions for one? Answer (Chairman Powell): There was broad support on the Committee's decision to keep rates unchanged today—I would say very broad, including non-voting members. That's the reality. Of course, some people did want a rate cut and disagreed, but the Committee was fairly broadly in favor of keeping rates unchanged today. We're not trying to set a benchmark for when or whether to cut rates next time. What we're saying is that we're in a good position as we make decisions at each meeting, looking at the incoming data, the evolving outlook, and all the other factors. We're in a position where there's still some tension between employment and inflation, but it's less than before. I think both the upside risks to inflation and the downside risks to (employment) have likely diminished somewhat. So, we'll be watching that. It's about how you weigh the risks of the two goals, how big those risks are—and quantifying them, so the committee has different perspectives, and we'll find our way forward as the data evolves. Q: Thank you, Mr. Chairman. Edward Lawrence from Fox Business. Has the impact of tariffs already been passed on to economic prices? A (Chairman Powell): A lot has been passed on. Basically, there are many different estimates, and they are all highly uncertain, but most of the excess inflation in commodity prices comes from tariffs. This is actually good news because if it weren't from tariffs, it would likely be from demand, which is a very difficult problem to solve. We do think that tariffs may have passed on as a one-off price increase. So, most of the excess inflation—if you remove that part, you get—I mean, inflation, a portion of core inflation, is running at slightly above 2%, after removing the impact of tariffs on goods. Another piece of good news is that if you look at services rather than goods, you'll see that all service categories are continuing to deflate, which is a healthy development. That's what's happening. The expectation is that we'll see the impact of tariffs on goods prices peak and then begin to decline, assuming no new major tariff increases are initiated, which is what we expect to see this year. If we see this, it will tell us that we can ease policy. Furthermore, if we see some signs that the labor market hasn't stabilized, in fact, downside risks have re-emerged, or the data simply worsens, we will have to pay attention to both. We have a two-way mandate. Q: If you don't mind, what would it be like if President Trump selected a new Fed Chair before May? What would the transition look like? A (Chairman Powell): I have no comment on that. It will depend on Congress's actions and things I can't speculate on. Q: Reuters. Thank you for taking the question. Given the changes in the statement and everything you just said, is it fair to say that the risks on both sides of your dual mandate are roughly balanced, and the next step will inevitably be a rate cut? Answer (Chairman Powell): I would say upside—again, the upside risks to inflation and the downside risks to employment have diminished, but they remain. So there is still some tension between the mandates. Are they perfectly balanced? It's hard to say. It's hard to say. And, you know, again, we believe our policy is in a good position. I just discussed the reasons why we might change policy, and, you know, we will have to see how the data guides us. Question: I was wondering why you said you felt your expectations were in line with your mandate, but the two-year and ten-year break-even inflation rates have fluctuated quite significantly in the past few weeks. Are there any concerns about this? Q: I mean, I've looked at all the surveys recently, and market-based short-term inflation expectations have fallen significantly. They were in a good position at the beginning of last year. They surged around Labor Day and have now completely retreated in the last few months, so that's very encouraging. Long-term inflation expectations remain very consistent with long-term 2% inflation, so expectations have been solid, reflecting confidence in a return to 2%. Q: Sorry if this is a bit repetitive, but you've said in the past that the reason for cutting rates was that risks in the labor market outweighed risks on the inflation front. Is that still the case now? A: You know, you're right. We haven't done it yet... We saw the labor market weaken, and we took action. I think that was the right thing to do. We will always have to address the economic deviations we see from our targets. The risks to both variables are a little smaller, I think the upside risk to inflation, again, is a little smaller than the downside risk to employment. (This is ambiguous due to colloquialism; please refer to the original video for details.) I just want to say that I'm not making a judgment, you know, that one is riskier than the other. It's just that the risks to both have diminished. Q: Okay, thank you. The Bank for International Settlements (BIS) wrote a paper last summer concluding that global investors are hedging against dollar risk in ways they haven't done before because of policy uncertainty. Do you believe the BIS's statement? Answer (Chairman Powell): We haven't really seen much of that, the whole story. There isn't much data to suggest that's true. Question: Thank you. Question: The New York Times. Can you elaborate on what you need to see in the labor market before concluding it's time to resume easing? Do you need to see further deterioration in the labor market, or is weak inflation alone sufficient? Answer (Chairman Powell): We will always be watching both aspects. There could be countless combinations that would lead us to act. A weak labor market would be a reason for easing policy. But if inflation worsens at the same time, things become difficult. So, we will be watching both. Clearly, a weaker labor market calls for a rate cut. A stronger labor market suggests that interest rates are in a good place. However, we must also make a similar judgment about inflation. Question: If inflation picks up and the labor market does not show signs of further deterioration, is it possible that you would raise interest rates instead of keeping them unchanged? Do you see this possibility? Answer (Chairman Powell): Currently, rate hikes are not anyone's baseline scenario, but ultimately we will do what we believe is right, but that's not the direction people are currently expecting. Question: POLITICO. I'd like to ask, you've spoken in the past about concerns about the trajectory of U.S. fiscal policy, and we've recently seen a lot of volatility in the Japanese bond market, partly due to their fiscal and long-term economic outlook. Are you worried that the U.S. might at some point find itself in a similar situation to Japan for fiscal or demographic reasons? Answer (Chairman Powell): Over time, U.S. interest rates haven't actually changed much, for some time now, but that's not because of what happened in Japan. So, it's more of a long-term issue. The U.S. federal budget deficit is undeniably on an unsustainable path, and that path is unsustainable. The sooner we address it, the better. We're currently running a very large deficit with near full employment, so the fiscal situation needs to be addressed. And it's not actually being addressed, so that's important. I'm by no means linking it to recent market events, but ultimately this is something we'll have to deal with. In the final stages, you'll find yourself in a difficult situation, but that's not our situation now, nor is it Japan's situation now, but it's certainly not our situation now. Q: Long-term interest rates haven't changed much overall. Does this weaken the effect of your rate cuts? A (Chairman Powell): I wouldn't say that. The thing is, I mean, technically, higher long-term interest rates mean less accommodative financial conditions, but remember, many, many things affect long-term interest rates. It's not necessarily because of what happened to short-term rates. Adjusting our policy can have an impact, but it's more about assessments of factors like the fiscal path, fiscal policy, and risks that drive the 10-year rate's volatility. You can look back and find periods in a year when we were very aggressive in adjusting policy rates, and I know that in those years, the 10-year rate came right back to where it started. So, there's no strong correlation between the 10-year rate and the overnight rate. Q: Thank you very much. ABC News. Senate Banking Committee Republican Senator Thom Tillis said he will block any Federal Reserve nominee, including the chairman, until the investigation into you is resolved. Do you support the senator's move? What conversations have you had with the senator? A (Chairman Powell): I have no comment on that. Q: More broadly, what would happen to American households if the Federal Reserve lost its ability to operate independently of politics? Answer (Chairman Powell): Actually, the significance of independence isn't about protecting certain individuals or anything like that. It's about advancing an institutional arrangement that serves the people, where there's no directly elected political control over monetary policy. The reason is that monetary policy can be used during election cycles to influence the economy in a politically advantageous way. I'm not referring specifically to the United States. This is the case in any developed economy and democracy, regardless of size. So, it's good practice. It's common practice in almost all countries like the United States. I think if you lose that, first of all, it's very difficult to restore the institution's credibility. If people lose confidence, no longer believe that we make decisions solely based on our assessment of what's best for everyone, for the general public, rather than trying to benefit a particular group or another, if you lose that, it's very difficult to recover. And we haven't lost it. I don't believe we will. I certainly hope we won't, but it's very important. It's important because it enables central banks to generally—though not perfectly—serve the public very well. Q: Are you confident that you can maintain this independence at this time? A (Chairman Powell): Yes. I mean, I'm firmly committed to it, and so are my colleagues. Q: The Economist. Regarding the stabilization of the labor market, how much of the weakness over the past six months or year do you think was due to the data illusion surrounding immigration and the now-resolved shutdown? And how much do you believe is a genuine strengthening of the labor market? Answer (Chairman Powell): As you said, part of the reason is that labor supply growth has essentially stalled, from the fairly rapid growth driven by immigration in the past few years to a standstill caused by the sudden halt in immigration. So, this can lead to a variety of outcomes. You know, supply has fallen sharply. As a result, labor demand has also fallen by a very similar amount. Perhaps a little more, which is why unemployment has risen. So, I don't know if it's a coincidence, but that's exactly what's happening. If you look at other things, like, to give a few examples, the Conference Board's Employment Availability Index—I don't know if it was released yesterday or today—it shows that workers feel the employment availability reading is low. It's just a reading, but it's a sign of weakness. The number of people working part-time for economic reasons, a subcategory within the broader U-6 category, has risen significantly. So, there are many—and I could go on and on. There are many small signs that the labor market has softened, but you're right. The weakness in some jobs is because growth in both labor supply and demand has declined. So, this makes it difficult to interpret the labor market right now. You know, so maybe they've both declined so much that there's no job growth. Is this full employment? In a sense, yes. If supply and demand are balanced, you could say that's full employment. But at the same time, do we really feel that's a maximum-employment economy? You know, this is challenging—it's a very challenging and rather unusual situation. Q: Thank you. One more question. Regarding growth and the strong growth outlook, how much of the strong outlook you're seeing now comes from fiscal stimulus such as tax cuts? (Answer by Chairman Powell): You've already seen it. I think you're right about the outlook. It's about financial conditions and fiscal policy in 2026. But you already have strong consumption, which happened before the financial conditions provided support and before the fiscal effects really materialized. So, essentially, the economy is once again surprising us with its strength. This isn't the first time. Consumer spending, while uneven across different income categories, has good overall figures, and we've also benefited from AI construction in data centers. That's another thing we've benefited from. But overall, economic growth seems to be on solid ground. It's not just those things. It's just that consumers are filling out surveys that sound very negative, and then they keep spending. So, for some time now, there's been a disconnect between the gloomy survey results and the fairly good spending figures. Question: NBC News. You talked about how consumer spending is uneven. The president says inflation has been beaten and resolved. The FOMC says inflation is somewhat high, but you talked about those consumer confidence surveys and polls showing that most households say the cost of living is still the number one problem. How did you and your colleagues view the situation when affluent consumers seem to be driving the economy much, while many households are still feeling like they're not making ends meet after five years of rising prices? What was the discussion like? Answer (Chairman Powell): There are a few things. First, there is some truth to that. We know that high-income households tend to own real estate and stocks/securities, and these assets have been appreciating, so the increase in wealth does indeed support spending over time. This is clearly part of the story. We also know that for some time now, about a year or so, we've been hearing the same thing from retailers serving low-income customers, whether it's food or large supermarkets: our consumers are looking to save. They're turning to cheaper brands, buying less, and this is changing their buying habits, and so on. So, we've seen this, this is the reality we're seeing. They're still consuming, but feeling it differently. I'd like to say something broader, about affordability. You know, we have a huge network through the Reserve Bank and the Council, we talk to small and large businesses and households. So, we really hear a lot of questions about affordability, and we take it very seriously and keep it in mind. One of our jobs is price stability, so the best thing we can do for those who are struggling is to control inflation, frankly, to get inflation down to 2%. Q: You mentioned that AI development is positive for economic growth this year. I'm wondering, when you see that last year was the weakest year for job creation since 2003 in a non-recessionary year, are you worried that AI might replace more entry-level jobs and positions? How does this affect your view of the labor market? Answer (Chairman Powell): You know, everyone is watching AI and its deployment, trying to understand exactly what's happening. There are a wide range of possibilities. It's hard to say. Of course, anyone using it will be amazed at what it can accomplish, right? So, every wave of technology eliminates some jobs and creates others. That's always been the case. If you look back at wave after wave, there will be disruptions, but ultimately technology increases productivity, which is the basis for wage increases. It may not all happen immediately, but over time, it makes income increase with productivity. So, we always ask, will this time be different? We don't know. In any case, we may see jobs eliminated by AI capabilities in the short term. We may see that. We just don't know what the overall effect will be. So, how do we think about this? In macroeconomic terms, it's difficult. We can look at aggregate data. We can analyze, for example, that there seems to be some link between low hiring rates for recent college graduates and AI. But that's not the primary or only driver. However, you hear big companies, many big companies, say they won't be hiring for a while, or they're hiring less, or they're laying off employees, and they tend to cite AI when they do this. So, we're all watching and learning. It will certainly have a fairly significant impact on the economy, the workforce, and society. We don't really have the tools to address potential concerns, but we have many people focused on analyzing it and trying to understand what the macroeconomic impact is—that's our job. Q: Thank you, Chairman Powell. AFP. You mentioned inflation earlier, and the general expectation is a one-off price increase followed by a decline. Is inflation still cooling in the second half of 2026? Can you elaborate on how far we are from our target right now? Thank you. Answer (Chairman Powell): Regarding how far we are from the target, as I mentioned in my opening remarks, core PCE inflation was 3.0% in the 12 months ending in December, which is similar to the previous year. So, there's no progress, but the story behind it is moderately positive because most of the overshoot is in commodity prices, which we believe is related to tariffs. Ultimately, we believe these won't lead to inflation, but rather a one-off price increase. So, that's the current situation. As for your question—nobody thinks they can really clearly and precisely understand when this will happen, but the expectation is that sometime in the middle of the year, we will see tariff inflation peak. So, what we're going to do is, when tariffs are implemented, we track the impact of those tariffs over a period of six to nine months, and you can see how long it takes for that tariff to reach a point where it affects price levels, and then it's over. So, we're getting better and better at that. We estimate it will be sometime in the middle of the year. We're not expecting to be very precise, but we'll be able to see if things are moving in that direction. I think we'll be able to see that. Q: Thank you, Chairman Powell. CBS News. I'd like to see what's happening outside the U.S. and how it affects the U.S. The Canadian Prime Minister said last week that the global order has broken down. I'd like to know how you think about the geopolitical risks associated with the U.S. economy? Answer (Chairman Powell): I cannot comment on that speech or statement or anything like that. You know, for us, geopolitical risks are largely centered around energy/oil. Despite the volatility, as you know, oil prices have fallen, so we haven't really seen much impact. In the long run, it's trade. You have to say, given the significant changes in trade policy, the economy—our economy—has weathered the storm and performed quite well. Part of the reason is that far fewer measures were implemented than initially announced. Furthermore, other countries haven't retaliated, and a large portion of the impact hasn't yet reached consumers. It's being borne by companies positioned between consumers and exporters. So, that's the status quo. Question: Thank you, Chairman Powell. Yahoo Finance. The third quarter GDP grew by 4.4%, and the fourth quarter is expected to see growth in the 5% range when you think the government shutdown will reduce growth. You have tariff benefits, and tax cuts are coming soon. In this environment, how can you cut interest rates without stimulating inflation? (Answer by Chairman Powell): Well, we didn't cut interest rates today, but it depends on the rate of growth of potential output, right? I'm just saying in principle. I'm not saying that's what's happening right now, but there is growth, and how fast potential output is growing. During periods of high productivity growth, potential output is rising, so what really matters is whether potential output is growing as fast as actual output. This will have an impact over time. The figures you cited are quarterly, and quarterly GDP can be very volatile. Last year, the first quarter GDP was negative, so the overall figure is not like that at all. The whole year was more in the middle of around 2%. Q: How do you explain the current discrepancy between strong economic growth and the labor market? Is productivity filling the gap? Is current productivity driven by AI? A (Chairman Powell): So, we—you are right. There is indeed a discrepancy between robust growth and a seemingly weak labor market. This can be explained by productivity gains. But I would say we are indeed seeing signs of stabilizing unemployment, so perhaps we are seeing both things begin to resolve. Also, as you may know, the rule of thumb is that when GDP and labor market data conflict, the labor market data is ultimately more reliable. GDP data is difficult to collect and interpret. But despite this, I think we may be seeing some easing of that tension. However, it's too early to say with confidence. Question: Chairman Powell, you have two more meetings left as Fed Chair after today. You've obviously had a lot to do during your time as Fed Chair, serving under several presidents. I'd like to know what advice you have for your successor. Answer (Chairman Powell): I'd like to say a few things. First, stay away from electoral politics. Don't get involved in electoral politics. Don't do that. Another thing is, you know, our window to democratic accountability is Congress. Going to Congress and talking to people isn't a passive burden for us. It's an active, regular obligation. You need to earn the trust of elected oversight bodies, so that's something you need to work on, and I've already done that. Finally, it's easy to criticize government agencies in various ways. I'll tell you that whoever succeeds you, you're about to encounter some of the most qualified people you've not only worked with, but will work with. When you meet the Federal Reserve staff—not all of them are perfect—there's no more professional cadre dedicated to the public good than the Federal Reserve staff. Q: Thank you for your answer. If I may follow up, I believe you've noticed the recent historic surge in gold and silver prices. I'd like to know how much attention you've paid to this (if at all), and what information you've gleaned from the significant rise in precious metal prices? A (Chairman Powell): Not much information on the macroeconomy. The argument that we're losing credibility or something similar simply doesn't hold water. If you look at where inflation expectations are, our credibility is where it needs to be. We're not anxious about changes in the prices of specific assets, although we certainly monitor them. Q: Some prominent critics accuse the Fed's economic models of being somewhat backward-looking and should be more forward-looking, incorporating factors like productivity gains from AI. How do you incorporate current and future analysis into your decision-making? Do you have any response to these critics? (Chairman Powell): Yes. So, in general, as an insider, these criticisms are unfounded, and I'll tell you why. Every FOMC participant writes down a forecast every quarter. That's the Summary of Economic Projections (SEP), which is a representation of how we think about the economy. Another thing is, you know, what economic models can do is grind through all the data from the past few years—say, 50 years—and they can identify the relationships between variables A, B, C, D, and so on. It can tell you what will happen in the macroeconomy if you change one of those variables. That's how it works; however, the structure of the macroeconomy is constantly changing. For example, we haven't had a pandemic in 100 years. It's not in the model. We knew from the beginning that it wasn't in the model. We haven't seen a trade war of this scale in 100 years, so there's enormous uncertainty at different points. Another thing I want to say is, you know, when it comes to technological developments that increase potential output, some kind of technological revolution, like the AI ​​that happened in the 90s and might be happening now, we're completely focused on that. Everyone's studying those periods, and we're very aware that this higher productivity may or may not continue. We're not—nobody sits there unaware of the possibility of higher productivity. We've been discussing it for three years. It existed long before the current situation. It's been going on for five or six years, and our productivity has increased. We've been discussing this all along. It's in our minds, we're very clear that higher productivity means higher potential output, and it changes the way you think about inflation, labor, growth, and all of these things. It's all in our models. If you question whether there are better models, bring them out. Where are they? We will adopt that approach, but I think we certainly stay in touch with anyone doing economic modeling, and we always want to do better in this area, that's my take on the question.

Q: Quick follow-up question. Talk about the transmission of tariffs over the past few months. The trade landscape is still constantly changing, announcements, threats, negotiations are constantly shifting. So, I'd like to know how you actually track these? What are the most critical data or channels for tracking these in reality? What are the effects of tariffs and how have they changed?

A (Chairman Powell):I think our staff does a very good job of aggregating this information in real time. After tariffs are implemented, you can track their impact on almost everything, including pricing. You build a model that includes all the tariffs. Initially, this is largely predictive. Now, as each cycle goes by, it becomes more informed by actual data.

Moreover, you know, our predictions weren't too far off. But what changed, as I said before, was that the scale of the implementation was smaller than the announced one. Furthermore, we haven't seen international retaliation. Retaliation was widely expected because we've seen it along past paths. This is also really important. Another thing is the transmission; we didn't know how quickly it would pass to consumers, how much exporters would bear, how much intermediaries would bear, and how much consumers would bear. It turns out that intermediaries were strongly committed to passing the rest on, which is one of the reasons we need to pay attention to inflation and not declare victory prematurely.