Key Takeaways from Powell's Major Hawkish Press Conference Q&A
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Key Takeaways from Powell's Major Hawkish Press Conference Q&A
Powell has repeatedly emphasized that the Fed will make decisions meeting by meeting, unaffected by market pricing of rate cut expectations or any political factors and issues, but will instead move at "a pace appropriate to the data at the time—faster or slower—as warranted."
Navigating Web3 tides with focused insightsCompiled by: Du Yu, Wall Street Insights
Powell emphasized first that any rate cut decision by Federal Reserve officials will be based on current economic conditions and data. Currently, the risks between inflation and employment are balanced, so it's time to start cutting rates to support the labor market.
Second, the Fed will make decisions meeting by meeting, without being influenced by market pricing of rate cut expectations or political factors and issues, but rather taking action "at a pace appropriate for the circumstances—either faster or slower."
Third, Powell does not believe that large rate cuts signal an imminent U.S. recession or that the job market is on the verge of collapse. Rate cuts are more of a preventive measure aimed at maintaining the economy and labor market in a "solid" state.
Fourth, he acknowledged that nonfarm payrolls might be revised downward but remains an important reference point. Other labor market indicators monitored by the Fed include: unemployment rate, employment-to-population ratio, wage growth, vacancy-to-unemployment ratio, quit rate, among others:
The key point is, "the issue isn't about the exact level of specific numbers," but rather that conditions have changed over the past few months—the upside risks to inflation are clearly receding while downside risks to employment are rising. Therefore, the Fed is now adjusting its policy stance to support the labor market.
Below is Wall Street Insights' full transcript of Powell’s press conference following the September FOMC’s significant rate cut:
Question 1: Strong third quarter GDP running 3%—so what changed to make the committee go 50? And how do you respond to the concerns that perhaps it shows the Fed is more concerned about the labor market, and I guess should we expect more 50s in the months ahead? And based on what should we make that call?
With the U.S. GDP expected to grow strongly at 3% in Q3, what prompted the Fed to cut rates by 50 basis points? Does this suggest greater concern about the labor market, and should we expect further 50-basis-point cuts going forward? What should guide our expectations?
Answer 1:
Let me jump in. Since the last meeting, we've had a lot of data come in—we’ve had the two employment reports for July and August, and also two inflation reports, including one released during the blackout period. We had the Quarterly Census of Employment and Wages (QCEW) report, which suggests that the payroll numbers we’re getting may be artificially high and will likely be revised down. We’ve also seen anecdotal data like the Beige Book. So we took all of these into account, entered the blackout period, reflected carefully on what to do, and concluded that this was the right move for the economy and for the people we serve—that’s how we reached our decision.
A good place to start is the Summary of Economic Projections (SEP). But let me begin with what I said: we will make decisions meeting by meeting, based on incoming data, the evolving outlook, and the balance of risks. If you look at the SEP, you’ll see it reflects a process of recalibrating our policy stance—moving away from where we were a year ago when inflation was high and unemployment low—toward a stance more appropriate given where we are today and where we expect to be. This process will unfold over time. Nothing in the SEP suggests the committee is rushing to complete this. It evolves gradually.
Of course, the SEP is just a projection—a baseline scenario. As I mentioned earlier, actual actions will depend on how the economy evolves. We can move faster if appropriate, slower if appropriate, or even pause if needed. That’s what we’re contemplating. Again, the SEP simply reflects today’s views of individual committee members under their own forecast assumptions.
Question 2: The projections show that Fed officials expect the federal funds rate to still be above their estimate of the long-run neutral rate by the end of next year. Does that suggest you view rates as restrictive throughout that entire period? Could that threaten the weakening of the job market you said you’d like to avoid? Or does it imply that perhaps the short-run neutral rate is perceived as slightly higher?
The projections indicate Fed officials expect the federal funds rate to remain above their estimate of the long-run neutral rate through year-end next year. Does this mean you consider rates restrictive over that entire span? Could that risk weakening the labor market you aim to prevent? Or might it reflect a higher perceived short-term neutral rate?
Answer 2:
I would characterize it this way: each individual on the committee writes down their own estimate. If you asked every single person on the committee about their level of certainty around that number, they’d say there’s a wide range of possible outcomes. We don’t know the neutral rate precisely—there are model-based and empirical approaches, but realistically, we only know it by observing its effects. This leaves us expecting, in the base case, to continue removing policy restraint. We’ll monitor how the economy reacts, which will guide our ongoing assessment: Is our current policy stance appropriate?
Looking back, the policy stance adopted in July 2023 came at a time when unemployment was 3.5% and inflation was 4.2%. Today, unemployment has risen to 4.2%, and inflation has fallen to just slightly above 2%. Given the progress on inflation and the labor market moving toward a more sustainable level, it’s clear it’s time to recalibrate policy. The balance of risks is now even. This marks the beginning of the process I mentioned—shifting toward a more neutral stance—and we’ll adjust at whatever speed we deem appropriate in real time. The dot plot represents individual participants’ baseline estimates.
Question 3: How close was this decision? You have the first dissent by a governor since 2005—was the weight clearly in favor of a 50-basis-point cut, or was this a very close vote?
This is the first dissent by a Fed governor since 2005—how strong was the consensus for a 50-basis-point cut?
Answer 3:
I think we had a good discussion. I touched on this at Jackson Hole, though I didn’t address the size of the cut then. I think we left it open heading into blackout. There was a lot of back-and-forth, healthy diversity of views, and excellent discussion today. I think there was broad support for the decision the committee ultimately voted on. Also, look at the SEP—all 19 participants projected multiple cuts this year. All 19. That’s a big shift from June, right? Seventeen of the 19 projected three or more cuts, and 10 projected four or more. So yes, there is a dissent and a range of views, but actually, there’s quite a bit of common ground too.
Question 4: On the pacing here, would you expect this to be happening every other meeting?
At this pace, should we expect such large cuts every other meeting?
Answer 4:
Once we get into next year, we’ll take it meeting by meeting, as I’ve said. There’s no sense that the committee feels rushed. We made a strong, decisive start—which frankly reflects confidence that inflation is sustainably moving toward 2%. That gives us room to act boldly now. I’m pleased we did—it makes economic and risk-management sense. But going forward, we’ll proceed carefully, making decisions meeting by meeting.
Question 5: Your colleagues in your economic projections today see the unemployment rate climbing to 4.4% and staying there. Historically, when unemployment rises that much over a short period, it typically doesn’t stop—it keeps rising. So could you walk us through why you expect the labor market to stabilize? What’s the mechanism, and what are the risks?
Your colleagues’ projections today show unemployment rising to 4.4% and stabilizing. Historically, such a rise often continues. Why do you expect stabilization? What mechanisms support this, and what risks exist?
Answer 5:
The labor market is actually in solid condition, and our policy action today is intended to keep it that way. The same applies to the overall economy. The U.S. economy is in good shape, growing at a solid pace. Inflation is coming down. The labor market remains strong. Our goal is to preserve this strength—that’s exactly what we’re doing.
Question 6: Nick Timiraos, “The New York Times Fed Whisperer,” asks: Given recent major revisions to employment data, does today’s action represent catching up? Or is this larger-than-typical cut due to higher nominal policy rates, suggesting an accelerated pace of cuts could continue?
Answer 6:
Multiple questions packed in there. First, we don’t think we’re behind. We don’t feel behind at all. We believe this move is timely—but you can interpret it as a strong signal of our commitment not to fall behind. It’s a powerful move.
Recall, we entered this cycle with a policy stance set in July 2023—a time of high inflation and very low unemployment. We’ve been extremely patient in lowering rates. While central banks worldwide have cut several times, we waited. That patience has paid off: we now have greater confidence that inflation is sustainably moving below 2%. That confidence enabled today’s bold step.
But I don’t think anyone should interpret this as setting a new pace. You must think in terms of the base case. Of course, things can happen. In the base case, as shown in the SEP, cuts proceed gradually. The idea is we’re recalibrating policy over time toward a more neutral level, at a pace appropriate to economic developments. The economy may evolve in ways that prompt faster or slower adjustments—but that’s what the base case indicates.
Question 7: Following up on the balance sheet—in 2019, when you did a mid-cycle adjustment, you halted balance sheet runoff alongside a larger rate cut. Today, should we infer any signal about how the committee would approach the endpoint of balance sheet policy?
In 2019, during a mid-cycle adjustment, you stopped balance sheet runoff and cut rates significantly. Should we read any signal today about the committee’s approach to the final state of balance sheet policy?
Answer 7:
Currently, reserves have remained stable—they haven’t declined. Reserves are still abundant and expected to stay so for some time. As you know, the shrinkage in our balance sheet has primarily come from overnight reverse repurchase agreements (RRP). So this tells you we’re not thinking about stopping runoff at all. We know both tools—rate cuts and balance sheet reduction—can operate side by side; both are forms of normalization. For a period, you can shrink the balance sheet while cutting rates.
Question 8: Following up on rising unemployment—is your view that this is merely a function of a normalizing labor market amid improved supply? Or is there anything suggesting something more concerning, especially given that other measures of labor demand have softened? If policy remains restrictive, why shouldn’t we expect further deterioration?
On rising unemployment: is this simply labor market normalization amid better supply? Or do softening labor demand metrics suggest deeper issues? With policy still restrictive, why wouldn’t labor conditions worsen further?
Answer 8:
Clearly, labor market conditions have cooled by any measure—as I discussed at Jackson Hole—but they remain at a solid level. These conditions are actually quite close to what I’d call maximum employment. So we’re near, perhaps at, our mandate on that front. What’s driving the change? Payroll job creation has clearly slowed over recent months—something worth watching. By many other measures, the labor market has returned to or fallen below 2019 levels, which was already strong, but now resembles 2018 or 2017. So it bears close scrutiny. But ultimately, we believe that with appropriate policy recalibration, we can sustain economic growth, which supports the labor market. Look at recent data—retail sales, second-quarter GDP—all indicate the economy is still growing solidly. Over time, that should support the labor market.
Follow-up: We’re watching closely, especially as layoffs may begin to rise. If that happens, wouldn’t the committee already be too late to avoid recession?
We began recalibrating policy proactively. We’re not seeing rising unemployment claims, increasing layoffs, or signals from companies that mass layoffs are imminent. We’re not waiting because the principle is: support the labor market when it’s strong, not after distress signs emerge. That’s the situation we’re in. We’ve begun the cutting cycle and will keep monitoring. Layoffs will be one factor we consider. But as always, we’ll assess the totality of data meeting by meeting.
Question 9: What would constitute a deterioration in the labor market for you and the committee? You’re effectively pricing in about 200 basis points of cuts by end-2025 just to hold unemployment at a higher level. Are you shifting toward a more preemptive monetary policy style—rather than, as with inflation, waiting for data to confirm a trend?
What constitutes labor market deterioration for you and the committee? You're pricing in ~200 bps of cuts by end-2025 just to cap unemployment. Are you adopting a more preemptive policy stance, unlike your wait-and-see approach with inflation?
Answer 9:
We’ll watch all the data. As I said, if the labor market slows unexpectedly, we have the ability to respond faster with additional cuts. We’re also focused on our other mandate. We now have greater confidence inflation is moving sustainably toward 2%. Our plan is to reach that target over time. Policy remains restrictive, which should continue helping bring inflation down.
Follow-up: I’m curious how sensitive you’ll be to labor market changes, given you forecast higher unemployment requiring significant easing just to stabilize it.
Here’s what I’d say: we don’t believe further labor market deterioration is necessary to achieve 2% inflation. We have a dual mandate. View today’s action as part of a broader goal: achieving price stability without the painful unemployment spikes often associated with disinflation. That’s what we’re striving for. Today’s move signals our strong commitment to that outcome.
Question 10: You describe the view that the Fed isn’t behind on the job market. Can you walk us through the specific data points most helpful in your discussions? You mentioned a few—what does your dashboard tell you about the current labor market?
You say the Fed isn’t behind on jobs. Which specific data points were most useful in your discussions? Beyond those mentioned, what else should we monitor?
Answer 10:
Sure. Start with unemployment—the single most important indicator. At 4.2%, it’s higher than last year’s lows in the mid-3%s. But historically, that’s still a low, very healthy rate. Anything in the low 4%s still reflects a solid labor market. Labor force participation is high—even adjusting for demographics and aging, it’s at robust levels. Wage growth remains slightly above the long-term pace consistent with 2% inflation, but it’s clearly trending toward sustainability. Job openings per unemployed person have declined but remain strong—down from a peak of 2:1 to about 1:1, which is still healthy. Quits have returned to normal levels. The list goes on.
There are many labor indicators. Collectively, they say the labor market remains solid. The question isn’t the level—it’s that conditions have shifted, especially over recent months. As upside inflation risks have clearly diminished, downside risks to employment have increased. Because we’ve been patient—holding off on cuts while inflation fell—we’re now well-positioned to manage risks to both mandates.
Follow-up: What data between now and November will help determine the size of the next cut?
More data—standard stuff. We’ll get another jobs report—actually, the next one comes out the Friday before the November meeting. We’ll also get inflation data. We’ll watch it all. The key is always: what do incoming data imply for the evolving outlook and risk balance? Then we go through our process: is policy appropriately positioned to support our goals over time? That’s how we decide.
Question 11: Payroll gains averaged just over 100,000 per month the last three months. Do you view that pace as worrying or alarming? Would you be content if this continued? Relatedly, a welcome trend recently has been labor market cooling via falling job openings rather than job losses. Do you think that trend can continue? Or might further cooling require actual job losses?
Payrolls grew by just over 100K/month lately. Is that concerning? Would you accept that pace? Also, cooling via falling vacancies vs. layoffs has been positive—can this continue, or will further cooling require job losses?
Answer 11:
Job creation depends on inflows. If millions enter the labor force while only 100K jobs are created, unemployment rises. So it hinges on underlying trends in labor supply—like immigration flows, which have been substantial and partly explain the rising unemployment rate. Slower hiring is another factor we monitor closely. Supply-side dynamics matter.
Most on the committee felt job openings were so elevated they could decline substantially before translating into higher unemployment or job losses. It’s hard to pinpoint exactly when that threshold is reached, but we appear very close—if not already at it. Further declines in vacancies may now feed more directly into unemployment. Still, the drop in tightness so far has been beneficial—easing pressure without reducing overall employment.
Question 12: There’s speculation the fed funds rate could go to 3.5% or under 4%. A whole generation experienced zero or near-zero rates—could cheap money become the norm again?
Some speculate the fed funds rate may fall to 3.5% or below 4%. A generation knew near-zero rates—will ultra-low rates return as the norm?
Answer 12:
This is speculative—what happens after this cycle ends. Intuitively, most people would say we’re unlikely to return to an era of trillions in sovereign bonds trading at negative yields, long-term debt at negative rates, where even the neutral rate seemed possibly negative. That world feels distant now. My sense is we won’t go back. The neutral rate today is probably meaningfully higher. How high? We don’t know yet—we only learn by observation.
Follow-up: How do you respond to criticism that deeper cuts before the election may have political motives?
This is my fourth presidential election at the Fed—and it’s always the same. We go into each meeting asking: what’s best for the people we serve? We deliberate, decide collectively, announce it—that’s all. Never about politics. No other considerations enter. Also, our actions affect the economy with lags. Our job is to support the economy for all Americans. If we succeed, it benefits everyone. This focus is paramount. We apply no filters—if we start, I don’t know where it ends. So we don’t.
Question 13: Very simply—what message are you sending American consumers and the public with this unusually large rate cut?
Simply put, what message does this unusually large cut send to American consumers and the public?
Answer 13:
The U.S. economy is in a good place, and today’s decision aims to keep it there. Specifically, growth is solid, inflation is moving closer to our 2% target over time, and the labor market remains strong. Our intent is to preserve this strength. We’ll do so by bringing rates down from their high levels—set initially to control inflation—over time toward a more normal, neutral level.
Follow-up: Hearing you say inflation is meaningfully moving toward 2%—is the Fed effectively declaring victory over inflation?
No—we don’t say mission accomplished. Our goal is sustained 2% inflation. We’re close, but not fully there yet. We want to see inflation near 2% consistently for some time. We’re not claiming victory, but we’re encouraged by the progress.
Question 14: I just want to know how the committee views persistent housing inflation—do you believe overall inflation can return to 2% with housing costs still so high?
Answer 14:
Housing inflation is the one component lagging a bit. Market rents are behaving as we’d hope—rising moderately. But lease rollovers aren’t declining as fast, and Owners’ Equivalent Rent (OER) remains high. So it’s progressing slower than expected. We now understand it will take time for lower market rents to flow through. But the direction is clear. As long as market rents stay under control, the effect will eventually register—though it may take years, not just one or two lease cycles. I don’t doubt the outcome, provided rent inflation stays contained. Meanwhile, the rest of core PCE components have behaved well despite volatility. I believe we’ll reach 2% inflation—and eventually resolve the housing piece too, despite some concerns.
It’s hard to predict. The housing market has been partly frozen due to low-rate mortgage lock-in—people don’t want to sell because refinancing is costly. As rates fall, mobility will increase—this may already be starting. But remember, each seller becomes a buyer elsewhere—so net demand impact isn’t straightforward. The real issue is structural: we haven’t built enough homes and aren’t on track to fix that. Zoning, land availability, construction challenges—all make supply difficult. The Fed can’t solve this directly. But by normalizing inflation, rates, and the housing cycle, we create the best environment for households. Supply solutions must come from markets and governments.
Question 15: Following up on labor market discussion—you noted monetary policy operates with long and variable lags. How much of your ability to limit unemployment increases stems from acting now versus inherent labor market strength? Also, is today’s 50-basis-point cut partly a catch-up for not cutting in July—putting you in the same place?
Policy has long lags—how much does acting now help contain unemployment versus relying on labor strength? Also, is today’s 50-bp cut partly compensating for not cutting in July?
Answer 15:
You’re right about lags. But look at the overall economy: solid growth, forecasters and businesses expect 2025 to be good too. Broadly, the economy is fine. I believe our move is timely. You can view the 50-bp cut as a commitment to stay ahead of the curve. On July: if we’d seen the July jobs data before that meeting, we might have cut then. But we didn’t. That’s not the question we ask now. Today, we looked at July and August employment, two CPI reports (one during blackout), and all other relevant data. Everyone on the committee agreed it’s time to act. The debate was about size and pace—not whether to move. This decision had broad support. I’ve outlined the path forward.
Question 16: Mortgage rates have already dropped in anticipation of this announcement. How much further should borrowers expect them to fall over the next year?
Mortgage rates have already fallen ahead of this move. How much further might they drop in the next year?
Answer 16:
It’s hard for me to say specifically. I can’t speak directly to mortgage rates. It will depend on how the economy evolves. Our intention is that policy, while still restrictive, should begin moving toward a more neutral stance. We expect this process to take time, as shown in today’s projections. If the economy follows that path, other rates should decline too. But the pace depends entirely on economic performance. We can’t predict the economy a year out.
Follow-up: What do you say to households frustrated that home prices remain high despite high rates?
I’d say: we faced a sharp inflation surge—many countries did. Part of the response was raising rates to cool demand and reduce inflationary pressures. It wasn’t pleasant, but the goal is restoring price stability—where people no longer worry about inflation in daily decisions. That’s the long-term benefit. Price stability helps everyone over time. We’re making real progress. I don’t tell people how to feel—high prices are painful. But we’re working to restore lasting stability.
Question 17: You said early on that entering blackout, the committee was open to either 25 or 50 basis points. After speeches by Governor Waller and NY Fed President Williams suggesting a gradual approach, I wonder: would you have cut 50 if markets priced in low odds—say, like last Wednesday after CPI, when a 50-bp cut seemed unlikely? Does market pricing influence your decisions?
Entering blackout, 25 vs. 50 was open. After Waller and Williams hinted at gradualism, would you still have cut 50 if markets saw it as unlikely? Does market pricing affect your decisions?
Answer 17:
Thank you. We always try to do what we believe is right for the economy at the time. That’s what we did today.
Question 18: You mentioned closely watching the labor market, but payroll numbers have become less reliable due to big downward revisions. Does that shift your focus overwhelmingly to the unemployment rate? And given the SEP projects 4.4% as the likely peak, would exceeding that trigger another 50-basis-point cut?
Given payroll data unreliability from revisions, are you focusing more on unemployment? And if unemployment exceeds the SEP’s 4.4% peak, would that prompt another 50-bp cut?
Answer 18:
We’ll continue assessing the full range of labor data, including payrolls—we’re not discarding them. But we’ll mentally adjust for the QCEW revision you mentioned. There’s no bright line. Unemployment is vital, but no single statistic or threshold dictates our actions. At each meeting, we’ll examine inflation, activity, and labor data holistically to judge whether policy supports our medium-term goals. I can’t say we have a fixed trigger in mind.
Question 19: I know you said the Fed acts solely on economic merits. But generally, do you believe a sitting U.S. president should influence Fed rate decisions? Former President Trump suggested this. The Fed is designed to be independent—why is that so important?
You say the Fed acts independently. But should a sitting president have input on rate decisions? Trump suggested so. Why is independence so crucial?
Answer 19:
Democratic nations like the U.S. have independent central banks. Experience shows insulating monetary policy from political control prevents favoring incumbents over others. Data clearly show countries with independent central banks achieve lower inflation. We serve all Americans—not politicians, causes, or parties. Our sole goals are maximum employment and price stability for everyone. This institutional design works well for the public. I strongly believe it must continue.
Question 20: Two regulatory developments this week: First, Vice Chair for Supervision Michael Barr outlined views on Basel III endgame changes. Are you aligned with him? Does the Board broadly support this? Are other agencies on board?
Last week, Supervision Vice Chair Michael Barr outlined Basel III rule changes. Do you support his approach? Are other agencies aligned?
Answer 20:
Yes, those changes were negotiated across agencies with my support and involvement. The plan is to re-propose the changes Barr discussed, then solicit public comment. So yes, this is happening with my backing—but it’s not final. We’re seeking feedback, will revise as needed, and don’t yet have a timeline. The idea is all agencies move together—not separately. I don’t know the exact status, but we’ll jointly release for comment soon. Comments will come in 60 days later, we’ll review them, and aim to finalize in early 2025.
Follow-up: Yesterday, other bank regulators finalized merger reforms. How does this align with the Fed’s position?
I’d refer that to Vice Chair Barr. It’s a good question, but I don’t have details today. Thanks, Jennifer, for the last question.
Question 21: You said today’s decision reflects appropriate recalibration to maintain labor market strength amid moderate growth. Though the statement says risks to inflation and job growth are roughly balanced, I’m curious—are you actually more concerned about jobs and growth than inflation? Aren’t they unbalanced?
You said today’s move maintains labor strength amid moderate growth. Despite stating risks are balanced, are you more worried about jobs/growth than inflation? Aren’t they unbalanced?
Answer 21:
No—I believe, and we believe, they are now roughly balanced. For a long time, the dominant risk was inflation. We had a historically tight labor market, severe labor shortages, a very hot job market, and inflation far above target. That told us: focus on inflation. We did—for a while, and maintained that stance for 14 months, aimed at bringing inflation down. Part of that process involved cooling the economy and slightly cooling the labor market. Now, the labor market has cooled—partly due to our actions. That signals it’s time to shift stance. We did. This recalibration moves policy gradually toward neutrality. Today, I believe we made a strong start. It was the right decision. It sends a signal: we’re committed to a good outcome.
Follow-up: Could such a large cut shock markets into fearing a recession?
I don’t think so. Looking at the economy now, I don’t see anything suggesting the likelihood of a downturn—or recession—is elevated. I see solid growth, inflation coming down, and a labor market still at solid levels. So no, I don’t see that now.
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