tv Federal Reserve Chair on Monetary Policy CSPAN September 22, 2021 9:20pm-10:17pm EDT
opposing points of view. using c-span video clips, which are easy to find and access at c-span.org. c-span's studentcam competition awards $100,000 in cash prizes, and you have a shot of winning the grand prize of $5,000. entries must be received before january 20, 2022. for roles and how to get started, visit our website at studentcam.org. >> next, federal reserve chairman jerome powell talks about a potential interest rate hike if the economy continues to recover. he takes questions from reporters about raising the debt ceiling, and efforts to create a u.s.-backed digital currency. this is about one hour. >> good afternoon. at the federal reserve, we are strongly committed to achieving
the monetary policy goals that congress has given us -- maximum employment and price stability. today the role open market committee kept interest rates near zero, and maintained our current pace of asset purchases . these measures along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to support the economy until the recovery is complete. progress on vaccinations and unprecedented fiscal policy actions are also providing strong support to the recovery . indicators of economic activity and employment have continued to strengthen. real gdp rose at a robust 6.4% pace in the first half of the year and growth is widely expected to continue at a strong pace in the second half the . the sectors most adversely affected by the pandemic have improved in recent months, but the rise in covid-19 cases has slowed their recovery.
housing prices rose in the first half of the year, but flattened out in july and august as covid soft and sectors such as travel and restaurants. near-term supply constraints are restraining activity. these are particularly acute in the motor vehicle industry, where the worldwide shortage of semiconductors has a sharp the curtailed production. partly reflecting the effects of the virus, forecasts from fomc participants for economic growth this year have been revised somewhat lower since our june summary of economic projections, but disciplines still foresee rapid growth. as with overall economic activity, conditions in the labor market have continued to improve. demand for labor is very strong and job gains averaged 750 000 per month. in august, however, job gains
slowed markedly, with the slowdown concentrated in sectors most sensitive to the pandemic , including leisure and hospitality. the unemployment rate was 5.2% in august. this understates the shortfall in employment, or to clearly as participation in the labor market has not moved up from the lower rates that have prevailed over the last year. factors related to the pandemic, such as caregiving needs and ongoing fears of the virus appeared to be weighing on employment growth. these factors should diminish with progress on containing the virus, leading to more rapid gains in employment. looking ahead, fomc participant's project the labor market to continue to improve, with the median projection for the unemployment rate standing at 4.8% at the end of this year , and 3.5% in 2023 and '24. economic downturn has not fallen equally on all americans and those least able to shoulder the burden have been hardest hit in
particular, despite progress, joblessness continues to fall disproportionately on low-wage workers in the service sector, and on latin americans and his next -- and on african-americans and his next. inflation is elevated and will likely remain so in the coming months before moderatin,. as the economy continues to reopen and spending rebounds we are seeing upward pressure on prices particularly because supply bottlenecks in some sectors have limited how quickly production can respond in the near term. these bottleneck effects have been larger and longer lasting than anticipated, leading to upward revisions to participants inflation projections for this year. while these supply effects are prominent for now, they will abate and as they do inflation is expected to drop back toward
our longer-term goal. the median inflation projection from fomc participants falls from 4.2% this year to 2.2% next year. the process of reopening the economy is unprecedented as was the shutdown at the onset of the pandemic. as the reopening continues bottlenecks hiring difficulties and other constraints could again prove to be greater and longer lasting than anticipated , posing upside risks to inflation. our framework for monetary policy emphasizes the importance of having well anchored inflation expectations both to foster price stability, and to enhance our inclusive maximum employment goal. indicators of longer-term inflation expectations appear broadly consistent with our longer run inflation goal of 2 percent. if sustained higher inflation were to become a serious concern, we would certainly respond and use our tools to assure that inflation runs at levels that are consistent with
our goal. the path of the economy continues to depend on the course of the virus, and risks to the economic outlook remain the delta variant has led to significant increases in covid-19 cases, resulting in significant hardship and loss. the fed's policy actions have been guided by our mandate to promote maximum employment and stable prices for the american people, along with our responsibilities to promote the stability of the financial system. our asset purchases have been a critical tool they helped preserve financial stability and market functioning early in the pandemic, and since then, have helped foster accommodative financial conditions to support the economy at our meeting that concluded earlier today the committee continued to discuss the progress made toward our goals since the committee adopted its asset purchase guidance last december. since then, the economy has made
progress toward these goals. if progress continues, we expect the committee judge that a moderation in the pace of asset purchases may be warranted. we discussed the appropriate pace of tapering asset purchases. while no decisions were made, participants generally view that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate. in been after our balance sheet stops expanding, our elevated holdings of longer-term securities will continue to support accommodative financial conditions. the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff for which we have articulated a different and substantially more stringent test. we continue to expect that it will be appropriate to maintain the current 0% to 0.25% target range for the federal funds rate
until labor market conditions have reached levels consistent with the committee's assessment of maximum employment and inflation has risen to 2%, and is on track to moderately exceed 2% for some time. half of the fomc participants forecast that these favorable economic conditions will be fulfilled by the end of next year. as a result, the median projection for the appropriate level of the federal funds rate lies slightly above the effective lower bound in 2022 . participants expect a gradual pace of policy firming that would leave the level of the federal funds rate below estimates of its longer-run level through 2024. of course, these projections don't represent a committee decision or plan. the economy -- to conclude, we understand our actions affect communities, families, and businesses across the country. everything we do is in service
to our public mission. we will do everything we can to support the economy for as long as it takes to complete the recovery. thank you, and i look forward to your questions. >> thank you. we will go first to rachel siegel. >> thank you for taking our questions. when it comes to the taper and eventually to any rate increases, i'm wondering if you can walk us through what substantial further progress looks like given the latest batch of productions that have pce inflation coming in a little higher, then the june unemployment rate also being higher, and the change to gdp, lower than june. if you could sort through what substantial progress looks like, that would be great. mr. powell: the test for beginning our taper is that we have achieved substantial progress toward our goals of inflation.
and maximum employment. for inflation, we have achieved more than significant progress so that test is achieved in my view. the question is really on the maximum employment test. there are a good number of indicators. you will see that since last december when we articulated the test and the readings today, in many cases, more than half of the distance for example between the unemployment rate in december of 2020, and typical estimates of the natural rate, 50% or 60% of that road has been traveled. so that could be substantial further progress. many on the committee feel that the test for employment has been met. others feel that it is close, they want to see more progress. there is a range of perspectives. the substantial further progress test for employment is all about matt.
once we have met those two tests, once the committee decides they have been met, and that could come as soon as the next meeting, the purpose of the language is to put noticed that it could come as soon after meeting, the committee will consider that test and also look at the broader environment during that time and make a decision whether to taper. >> we will go to howard schneider. >> thanks, chairman powell. we are basically four years of inflation above target and policy never gets to the longer run rate. i am wondering if you could address that through two perspectives, one through the framework developed last year, and second, from the perspective of the average household who is now being asked to pay higher prices, increasingly higher prices, for four years running, and we saw this year, real wages
have actually gone down. chairman powell: the inflation forecasts have moved up a little bit. that is a think a reflection of the fact that the bottlenecks and the shortages we are seeing in the economy have not began to abate in a meaningful way yet. those seem that they will be with us for a few more months and perhaps into next year. i guess inflation rates for next year and 2023 were also marked up, but just for a couple. we are looking at two point 2%, 2.1% two years and three years out, these are very light. i don't think households are going to notice a couple of
tenths of an overshoot. that just happens to be people's forecasts. we want to foster a strong labor market and foster inflation averaging 2% over time. i think we are on track to achieve those things. in terms of the framework, i see this is very consistent with the framework. we went inflation expectations to be anchored at around 2%. that is really the ultimate test of whether we are getting this done under the framework. and we do want inflation to run moderately above 2%. i would not put too much on a couple of tenths of 2% in 2023 and 1/10 over 2024, but those are the numbers. reporter: chair powell, you
mentioned ongoing discussions about the tapering timeline. i am wondering what the contours of that debate have been for those who want to move a bit more quickly. is it about maintaining option nullity 42022 as interest rates increase, or is it about financial stability risk, or concerns about efficacy of asset purchases at a time when we have supply constraints? thank you. chairman powell: there is very broad support in the committee for this land, both as to the timing of the taper, quite broad support. you are correct that there are some who would prefer to move sooner and they have made their arguments publicly. for some of them, it is a financial stability concern. others, it is other concerns, they can make their own arguments. this is an approach that the
committee will broadly support, and it will it will put us having completed our taper sometime around the middle of next year, which seems appropriate. the as a purchases, as i mentioned, were very, very important in the early stages of the crisis. they were essential in restoring market function in the treasury. and other markets. then as the recovery got going, they supported aggregate demand, as they will do. they still have a use, but it is time for us to begin to taper up them. their usefulness is much less as a tool than it was at the very beginning. this framework is all about how we deal with rate increases. we think this is the appropriate way to go. and again, broad support on the committee. reporter: hi. from the wall street journal. chair powell, you have said that
the test for lift-off is more stringent than the test for tapering. but if you're near projections today are credible, more of your colleagues seem to think that rate liftoff and not just a taper, may be closer at hand . does the committee have a different opinion than than you do about the threshold for liftoff that you've articulated , or do they believe that either inflation or economic growth will necessitate a rate increase sooner than usual? chairman powell: substantial further progress toward our goals is the test for taper. the taper takes some months in everyone's figuring. you're going to be well away from satisfying the lift-off test when we begin the taper. in terms lift-off test, it is what we adopted last september. it is labor market conditions consistent with maximum employment, and while we while
we have interesting signs that in many ways the labor market is very tight, we also have lots of slack in the labor market. we think those imbalances will sort themselves. inflation at 2% and on track to achieve moderately higher inflation, that depends on the path of inflation. really if inflation remains higher during the course of 2022, then we will have already met that test by the time we reach liftoff, so i just think if you look at if you look at what people are writing down for year and 2022 numbers some people are writing down very low unemployment rates. that is only one indicator, but it suggests a very strong labor market. i think they are writing down in good faith what they see as meeting the test. but there is a range of perspectives about where the economy will be. by the way, all but one participants have us lifting up during 20 23, so it is not really an unusually wide array
of views about this thank you >> will go to gina. reporter: thank you for taking our questions. prior to recent media reports, were you aware that presidents kaplan and rosengren were participating in the last year, and i wonder if you thought those were appropriate. chairman powell: i was not aware of the specifics of what they were doing. let me just say a couple of things about the subject, we understand very well that the trust of the american people is essential for us to effectively carry out our mission. that is why i directed the fed to begin a comprehensive review of ethics rules around permissible activity by fed officials. those rules are, in many
respects, the same as those of government agencies, plus a number of things that suppress difficult apply to us. one of those is ownership of certain assets is not allowed -- banks, securities, and other things. secondly, there are times we are not allowed to trade at all, to buy and sell financial assets, and that is the period immediately before or during an fomc meeting. third, regular disclosure. ownership and activities are all disclosed on an annual basis. i would've had to go back and read people's financial disclosures to know what their activities have been. this has been our framework for a long time. you could say it has served us well. it is now clearly seen is not adequate to the task of really sustaining the public's trust. we need to make changes, and we
are going to do that as a consequence of this. this will be a thoroughgoing and comprehensive review. we will look at ways to further tighten our rules and standards. reporter: thank you, mr. chairman. i want to follow up on that question. the issue of ownership of these stocks and trades, do you think it is appropriate for federal reserve officials to be owning the same assets that the federal reserve is buying? is that one of the modifications you are looking at? you said yourself it is not seen as appropriate. the fed's code of conduct says officials should avoid giving the appearance of conflict. those trades in fact, and holdings, violate the code of conduct?
chairman powell: i don't have a timeline yet, we can start with that. so, let me address the muni question, since that is in there . i personally own municipal securities for many, many years. in 2019, i froze that. meaning i am holding those securities by my wife and item maturity. muni's were always thought to be a safe place for a person in the fed to invest, because the lore was that the fed would never buy municipal securities so it was not an uncommon thing. then comes the covid crisis. i reversed that policy without hesitating. the reason was that the
financial markets, including the municipal financial market, were very much on the verge of collapse. we checked with the office of government ethics. they said that i didn't have a conflict. so that is one answer. i do not want to get ahead of the process here and regulate about particular outcomes, but again, this comprehensive and deliberate process, we are going to make changes. i want to look back on this years from now and know that we rose to meet this challenge and handled the situation well. that what we did made a lot of sense and protect the public's interest. reporter: i am sorry, i just want to follow up. you said i was right when you said that the fed should not own federal government -- should not own the same assets they are buying? chairman powell: that is a reasonable thing. we don't -- it was a real
coincidence. i happened to pre-own these muniz. they were bought many years ago. but as a general principle, yes, it makes sense. reporter: thank you. reporter: thank you, chair powell. a question about jobs and the fed schedule, the fed policy framework you have laid out here. you and other fed officials have often talked about a job market pickup in september as more children return to school, freeing up more parents to work. covid abating. you mentioned in the past the extra unemployment benefits expiring. there is real-time data suggesting that we may not be seeing much of a return of labor supply.
do you still expect to see that in the next couple of jobs reports? and how would a relatively weak jobs report in september affect your plans? thank you. chairman powell: you are right, we have a, i will call it a unique situation, whereby many measures, the labor market is tight. 11 million job openings, very widespread reports from employers saying it is quite difficult to hire people. wages moving up. tight labor market. so our view, widespread review a few months ago, was that several things were coming together in the fall, including kids back to school, which would lighten caregiving duties, including the
what what happened is delta happened. you have this very sharp spike in delta cases. that affects, for example, when schools are open 60% of the time, or when they are always at a threat of being closed because of the delta variant, you might want to wait, rather than starting work only to have to quit three weeks later. you are going to want to wait until you are confident. some of that may have happened. also, as you know, hiring and spending in these face-to-face service industries, it kind of stopped doing those months. that is really the big shortfall in jobs, was largely in travel and leisure, clearly because of delta. that all happened. we know it did happen. it may just be that it is going to take more time, but it still
seems that in inexorably, people , these were people who were largely working back in february of 2020. they will get back to work, it just may take longer time. with any force in september, a little that was delta. in terms of the, you asked about the test for november, if the economy continues to progress broadly in line with expectations, then, and also the overall situation is appropriate for this, then i think we could easily move ahead at the next meeting. or not, depending on whether we feel like those tests are met. reporter: if i could just quickly follow up, how much of that will depend on what type of jobs report we get in september? are you in a data-dependent
phase here, where you need certain numbers, or are we had a point where you have accumulated enough progress? chairman powell: it is accumulated progress. for me it would not take a knockout-great super strong implement report, it would take a reasonably good employment report to feel like that test is met. many on the committee feel like the test is already met. others want more progress. we will work it out as we go. i would say that in my own thinking, the test is all but met. i don't personally need to see a very strong employment report, but i need to see a decent employment report. again, not to be confused with the test for lift-off, it is so much higher. reporter: great, thank you. reporter: hi chair powell.
i want to ask about the vice chair for supervision, and i want to ask about how you view that role and to the extent which you defer to that person on policy. as you know, the vice chairmanship and the next month. will he retain a supervisory portfolio until his replacement? chairman powell:. frank created this supervisory position, it is actually a specific assignment in. frank. it -- that chair is charged with setting the regulatory agenda. it is a specific grant of authority. 10 years almost that i have been at the fed, that person has really done that. dan certainly did it. vice chair quarles did as well. i respect that authority, that is a person that will set the
regulatory agenda going forward. furthermore, it is appropriate to look at a new person to come in and look at the current state of regulation and supervision, and suggest appropriate changes. in in terms of vice chair quarles' term, i don't have any update on that for you today. reporter: chair powell, i wanted to ask about the inclusive monetary policy framework. in particular, bloomberg surveyed economists and found that they predict lift-off will happen when the u.s. and employment rate is 3.8%, but the black unemployment rate is 6.1%,
and i am wondering if a 6.1 percent unemployment rate for african americans is consistent with full employment, or whether it would need to be lower as part of your inclusive growth strategy. chairman powell: the point of the broad and inclusive and implement rate was not to target a particular unemployment rate for any particular group. we look at a broad range of metrics, and one of the things we look at is unemployment rates and wages for different demographics and age groups. we will do all of that. if you look back, we all saw the benefits of a strong labor market. if you look at the last two or three years before the pandemic headed, you saw, after a lotto long progress, you saw a really
strong labor market, and you saw wages at the low-end moving faster than anywhere else. something that was great to see. we also saw the lowest unemployment rates for minorities, for african-americans, for example, and participation rates. they really, really healthy set of dynamics. and by the way, there was no reason why it couldn't continue. there were no imbalances in the economy. then along came the pandemic. there was nothing in the economy that looked like a buildup of imbalances that could cause a recession. so i was thinking that the country could benefit from a few years of this. it would have been great. so we are all eager to get back to that. we also said we wouldn't raise rates just in response to very low unemployment in the absence of inflation. that was another aspect of it, because we saw how that really benefited the labor market
participants in a broad and inclusive way. that is of course, not the current situation. we have significant slack in the economy, and inflation well above target, not moderately above target. so that is really how we think about it. it is not just targeting headline and numbers, it is taking all those things into account in your thinking about what constitutes maximum employment. reporter: just to follow up, should there be a significant gap between black unemployment and overall unemployment for structural reasons that are outside of the control of the fed, that other people should be doing something about? or should the gap be narrowed, if not down to zero? chairman powell: well, first of all, ideally, there wouldn't be any gap. of course, we would all love to see such gap. this is a persistent gap.
and it is very hard to explain based on typical metrics. it is quite troubling. but we have, you know, famously brought in blunt tools. i think eliminating inequality and racial discrimination, racial disparities and that kind of thing, is really something that fiscal policy and other policies frankly -- education policies and that kind of thing -- are better at focusing on, and i think we have identified the part that we can do and we will do that part. but i have always been clear that it is going to take policies broadly across society to work on these problems. reporter: thanks. reporter: -- for dealing with a debt default that included prioritization, that included changes end bank regulations and possibly selling defaulted --
not defaulted treasuries, and buying those that are. are any or all of those still on the table? do you think any of those would work? and what would happen to the economy, in your view, should the debt ceiling not be raised? chairman powell: i missed a few words, but i think i got your question. it is very important that the debt ceiling be raised in a timely fashion so that the u.s. can pay its bills when and as they come due. that is a critically important thing. failure to do that would cause severe damage to the economy and the financial markets. it is not something we should contemplate. i will not comment on particular tactics or things like that, i will just say that we can all agree that the united states should not default on any of its
obligations. no one should assume that the federal anyone else can protect the markets or the economy in the event of a failure. reporter: have you discussed this with members of congress? chairman powell: i don't generally talk about the conversations i have with elected officials or other appointed officials. but you can see that this is a major focus among those who have responsibility for it, including elected people. reporter: thanks so much. senator warren sent you a letter last week urging the fed to break up wells fargo, citing what she called "ungovernable behavior from the bank." i am curious what circumstances
would the fed actually consider in revoking a financial holding company's license, and if the indiscretions at wells fargo warrant such action. chairman powell: we are, of course, closely monitoring wells fargo's efforts to fix its widespread and pervasive problems. they represent a serious matter to us in the firm is required to remediate them. we will take appropriate supervisory action if the firm fails to meet our expectation. we continue to hold the firm accountable for its deficiencies with an unprecedented asset cap that will stay in place until the firm has comprehensively fixed its problems, and we are not going to remove that asset cap until that is done. but online, we will take strong supervisory action if a firm is engaging in unsafe and unsound practices or violating laws but i can't speak to our our confidential super supervisory
assessment of any individual bank. reporter: thank you for taking my question. earlier in the press conference, you noted that you weren't aware of the trading activity of the boston and dallas fed bank presidents. all 12 regional fed bank presidents just went through the renomination process early this year, and governor brainard described it as a rigorous process. did anybody at the board level no about the stock trading activity? going forward, do you still have confidence in the dallas and boston fed bank presidents to do their job? chairman powell: i need to tell you, people file these reports annually, and i think they were just quite recently filed for 2020, so i don't have any reason to think the people at the board would have known about particular trading that's going on.
the people at the fed who see the trading reports when they are annually filed. in terms of having confidence in that sort of thing, i think no one is happy. no one on the fomc is happy to be in this situation, to be having these questions raised. it is something we take very, very seriously. this is an important moment for the fed, and i am determined that we will rise to the moment and handle it in ways that will stand up over time. i am very reluctant to get ahead of the process and speculate about different things. when we have things to announce, we will go ahead and do that, but that is really what i have for today. reporter: one small follow-up, i know you didn't have the 2020 forms in hand, but you would've had past-year forms in hand. at least in the case of the dallas disclosure forms, similar
trading activity was shown in in years past. that in theory could have been something that came up in the process. chairman powell: the five-year review that we do under this unusual law where all the reserve bank presidents are reviewed for reappointment at the same time every five years, that is really a broad review about their leadership and if there were a concern, we would not wait for the five-year -- we would not wait that day. you are right, as i mentioned, we have had a framework for a long time and it is similar to what other government agencies have only it is stricter. it is that you can trade financial instruments but not specific ones like that, you can trade during the fomc period. then you disclose all of this.
all of these things have been a matter of public record. nonetheless, it was seeming to work ok and that you look at it and see this, we need to do better and we will. it has not been part of the process, and appropriately, i do not think it should have been. i do not blame the people who conduct that review. if someone had race -- raise concerns, it would have been raised instantly. reporter: thank you. reporter: i want to ask about how the fed would balance the dual parts of the mandate. if inflation state elevated, but
we still have a labor shortage and participation remains lower than ideal. would you hold off on raising rates? chairman powell: let me say one thing, you are looking for conditions consistent with maximum employment to lift off. those can change over time. you are not necessarily found by a particular level of the unemployment rate or participation rate. more to your point, we actually have the paragraph in our framework and something like this has been there for a long time. paragraph six. you're talking about a situation in which the two goals are not complementary, their intention. if that is the case, what it says is we take into account the employment shortfalls and inflation deviations.
we used to call that the balanced approach paragraph because it had those words. it's a difficult situation for any central bank to be in a situation where the two goals are intention. that paragraph tries to address that by weighing the equities, how long will that take, how big are the gaps? we are sort of in that situation in a short-term way, but we do expect because of the covid shock, you are seeing this temporarily. reporter: thank you mr. chairman. with corporate debt, is ever grand a preview?
what is your level of concern right now, and would you consider the evergrande group issue a warning signal? chairman powell: no. corporate defaults are very low in the united states. corporate leverage built up over the course of the long expansion that ended with the pandemic, we were very concerned in the last year or so. we were very concerned at the beginning of the pandemic that if you had a highly leveraged company and revenue stops for an uncertain period, as things happened at the beginning of the crisis, we were very concerned. it did not happen. to a significant extent because of the cares act and the response we undertook in all about. it was a much stronger response than we ever had and for whatever reason, you have very low default rates among corporate debt.
the evergrande situation seems particular to china, which has very high debt or an emerging market economy, really the highest that any emerging market economy has had, and the government is working to get it under control. this is part of that effort. the government put new structures in place for highly leveraged companies and evergrande and managing. in terms of implications for us, there is not a lot of direct united states exposure. the big chinese banks are not tremendously exposed. you would worry that it would affect global condition through competent channels. i would not draw a parallel to the united states corporate sector. reporter: just wondering if you can give us an update on whether
or not you have had conversations with the white house about reappointment, and whether or not you would like to be reappointed? chairman powell: i think the phrase goes, i have nothing for you are not today. sorry. i'm focused on doing my job every day for the american people and i do not have any comment on that. reporter: thank you for taking my question. i was wondering if it's in your discussion about tapering, officials think it's appropriate to end around the middle of the year. if there is any discussion about what happens to the balance sheet? i've heard some officials say [inaudible] was that discussed and what is your stance on tricking the balance sheet? chairman powell: my thinking on this is let's get through the
taper decision, then let's turn to those issues. there are a number of related issues. you mentioned one. we will do that, and we want to get through this taper decision and then turn to those issues, rather than start thinking about them now and having the minutes discussed and get people thinking we are focused on those issues. we are really not. we have the experience of what we did last time, we watched other countries and what they have done. i think we will be able to get to a sensible decision fairly expeditiously. it is just not time yet. reporter: you talked a little bit about inflation expectations , and there does seem to be something of a divide between
market expectations and the views of professional economists which are in line with fomc members, and lay people's expectations at least as reflected in the recent new york fed survey. how much weight do you put on lay people's expectations, and what you think accounts for that the bot? -- that divide? chairman powell: let's take the household surveys generally. the new york fed survey, it is only an eight-year-old survey. it does seem as though they are looking three years out. it seems like there's a high correlation between three years and one year. for the most part, surveys are showing that households expect higher inflation in the near term but not in the longer term. that is what expectations are showing. there are many different inflation measures, and that is
why we have this thing all the cie. it's an index of market-based measures, it fashion all four forecasters and its household surveys. it does not have a grand theory, put them all in and measure the change. you measure things like dispersion in that part of the year. we tell the story of inflation expectations moving up, many measures will show inflation expectations moving up to where they were in 2013. which was before the drop in inflation expectations in 2014 and 2015. that's not a troubling thing. inflation expectations are terribly important, we spend a lot of time watching them. if we did see them moving up in a troubling way and running persistently above levels that
are consistent with our mandate, we would react to that. we do not really see that now. we see a moderate increase, which is welcome. inflation expectations had drifted down and it was good to see them get back up a bit. again, we watched carefully. reporter: thank you for taking my question. on the taper,, you said the middle of next year. but with your concerns for the potential of upside risk to inflation, which you think you might need to have lift off happen before you finish the taper? chairman powell: that is not my expectation.
we have not decided to taper yet and we have not decided the pace. we can certainly speed up or slow down the taper if it becomes appropriate, absolutely. back in 2013, we were not on a preset was. this will be a shorter period. it makes sense to allow the runoff to happen. it's a gradual taper, it will be. we certainly have the freedom to speeded up or slow it down. reporter: you would not expect rate lift off to happen when you're finished with that process? chairman powell: as long as you are buying assets, you are adding accommodation. it would not make any sense to then lift off. what you would do is speed up
the taper, i think. we do not expect to be in that situation, but i do think it will be wiser at that point to go ahead and speed up the taper. reporter: thank you, mr. chairman. i just wanted to check in with you to see if you have an update on the digital currency? i believe the report was supposed to come down this summer. the drumbeat seems to be getting louder to see where the fed is heading on this, just wondering if you can provide some updates. chairman powell: i would be glad to. we think it is really important that the central bank maintain a stable currency. we also live in a time of
transformational innovation around digital payments, and we need to make sure the fed is able to deliver to the public a stable and trustworthy public and payment system. there is extensive private innovation, a lot taking place outside of the regulatory matter -- perimeter. where the public's money is concerned, we need to make sure appropriate regulations are in place. with that in mind, and with the creation of. private currencies and currency like products, we are working proactively on whether to issue a cbbc, and if so in what form. we have two work forms, technology. the other is to identify and i'd count -- analyze public policy issues. we intend to publish a discussion paper soon that will
be the basis for a period of public engagement with many groups, including elected officials. we think it's our obligation to do the work on technology and public policy to form a basis for making an informed decision. the ultimate test will apply when assessing a central bank digital currency and other digital innovations is, are there clear and tangible benefits? we are also investing heavily right now in building a new settlement system for instant payments in the u.s., the first such major expansion of our payment system since the 1970's. we found the case for this quite compelling for consumer businesses and ensuring all financial institutions have access. bottom line, we have not made a decision about the cbbc, but we will be issuing a discussion paper soon in order to form the basis of this public interaction. thank you very much.
reporter: can i get a quick follow? are you concerned that all with falling behind in the global race for digital currency? chairman powell: i think it's important that we get to a place where we can make an informed decision about this and do so expeditiously. i do not think we are behind, i think it's more important to do this right than to do it fast. we are the world reserve currency. i think we are in a good place to make that analysis and decision. which will be a governmentwide decision, we would have to have a meeting of the minds with the administration and also, we need
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