Jerome Powell told Judy Woodruff that he has not had private conversations with Donald Trump following the president's criticism during the summer of the Federal Reserve's rate-hike program. Powell repeated that Fed policy makers are "a group who are quite removed from the political process" and who don't allow political concerns to "distract us".
Outside of politics and the Fed's relationship with the administration, his comments offered few surprises and were in line with both yesterday's speech in Boston and with last week's press conference following the FOMC's most recent rate hike.
Powell acknowledged that the economy is currently enjoying a "remarkably positive set of economic circumstances" including 3 percent GDP growth and sub-4 percent unemployment. He said the current cycle, though unlikely to last forever, can continue for "quite some time, effectively indefinitely."
On monetary policy, he once again cited the careful interplay going on right now between the risk of moving rates too high and too fast, which would end the expansion prematurely, and raising rates too slowly and allowing the economy to overheat and with this inflation and financial instability to ensue. He described rates as still "accommodative", which is of note following the removal of this word from last week's FOMC statement, and said the Fed needs "to gradually, very gradually" move rates back to neutral.
He once again noted that the traditional trade off between unemployment and inflation, when the former goes down the latter goes up, may be in abeyance, though there's no guarantee. Powell once again cited the positive anchoring of inflation expectations as key and which has been limiting fluctuations in actual inflation.
Powell said it's a "mystery" why strong demand for labor has not raised wages at a faster rate but is confident that, despite the rise underway in both job openings and the quits rate, there is no immediate danger that wages will move high enough and fast enough to affect overall price inflation. He noted that globalization, which allows employers to tap into a wider workforce, may be behind the lack of worker bargaining power.
In other comments, he downplayed the risk that the labor market and the economy may not be as strong as they look. Powell said most economic indicators are "very healthy" including the labor participation rate, which is just below 63 percent despite an aging population, and once again said the economy is "pretty close to full employment".
Powell also cited the need for Americans to keep up with global competitors and improve their education in order to limit any negative effects from increasing automation. He repeated that the Fed is not responsible for trade and again noted that policy changes underway, if they open markets and lower tariffs, would benefit all countries. He said China is a very important economy and that weakening in its economy would have effects on all countries. He did not address fiscal policy in the interview.
Saying "no one wants a central banker who sleeps well", Powell stressed that his main concern is getting monetary policy right and that the next set of challenges is not likely to be the prior set of challenges, namely a collapse of the banking system due to the taking on of excessive risks.