Federal Reserve Chair Jerome Powell speaks as Fed holds key interest rate steady — 1/28/2026

Federal Reserve Press Conference - January 31, 2024 Summary

Key Concepts:

• Dual Mandate: The Federal Reserve’s statutory goals of maximum employment and stable prices.
• Federal Funds Rate: The target rate that the Federal Reserve sets for commercial banks to charge one another for the overnight lending of reserves.
• PCE (Personal Consumption Expenditures) Price Index: A measure of the price changes of goods and services purchased by consumers, used by the Fed as a key inflation gauge. Core PCE excludes volatile food and energy prices.
• Basis Points: A unit of measurement used in finance, where 100 basis points equal 1 percentage point.
• Neutral Rate: The estimated interest rate that neither stimulates nor restricts economic activity.
• SCP (Summary of Economic Projections): A quarterly publication by the Federal Open Market Committee (FOMC) detailing forecasts for key economic variables.
• Quantitative Tightening (QT): The process of reducing the Federal Reserve’s balance sheet by allowing previously purchased securities to mature without reinvestment.
• Labor Force Participation Rate: The percentage of the civilian noninstitutional population that is working or actively looking for work.

I. Monetary Policy Decision & Economic Outlook

The Federal Open Market Committee (FOMC) decided to maintain the target range for the federal funds rate at 3.5% to 3.75%. This decision follows a cumulative 75 basis point reduction over the previous three meetings. The Committee views the current monetary policy stance as appropriate to promote progress toward both maximum employment and the 2% inflation goal.

The US economy experienced solid growth in 2023 and entered 2024 on a firm footing. While job gains have slowed, the unemployment rate has stabilized at 4.4% in December, with minimal change in recent months. However, inflation remains somewhat elevated. Total non-farm payrolls declined by an average of 22,000 per month over the last three months, while private payrolls rose by 29,000 per month. This slowing job growth is partially attributed to declines in labor force growth due to lower immigration and participation rates, alongside a softening in labor demand. Indicators like job openings, layoffs, and wage growth have shown little change recently.

Inflation, as measured by the Consumer Price Index (CPI), rose 2.9% over the 12 months ending in December. Core PCE inflation (excluding food and energy) rose 3.0% over the same period. Elevated readings are largely driven by inflation in the goods sector, boosted by tariffs. Disinflation continues in the services sector. Near-term inflation expectations have declined, while longer-term expectations remain consistent with the 2% goal.

II. Detailed Economic Indicators & Analysis

• Economic Activity: Consumer spending remains resilient, and business fixed investment continues to expand. However, the housing sector remains weak. The temporary federal government shutdown likely dampened economic activity in the last quarter of 2023, but this effect is expected to reverse with the reopening.
• Labor Market: The unemployment rate is 4.4% (December). Job gains have slowed significantly. The decline in labor force growth is a key factor, linked to lower immigration and labor force participation.
• Inflation: Total PCE prices rose 2.9% year-over-year (December). Core PCE prices rose 3.0% year-over-year. Tariffs are identified as a significant contributor to goods price inflation. Disinflation is occurring in the services sector.
• Productivity: The possibility of rising productivity, potentially driven by AI, is being closely monitored as it could impact potential output and inflation.

III. Monetary Policy Guidance & Future Outlook

The Fed has normalized its policy stance, bringing the federal funds rate within a range of plausible estimates of neutral. The Committee will assess the extent and timing of additional adjustments based on incoming data, the evolving economic outlook, and the balance of risks. Monetary policy is not on a preset course and will be determined on a meeting-by-meeting basis.

The Fed remains committed to supporting maximum employment and sustainably bringing inflation back to the 2% goal, while keeping longer-term inflation expectations anchored. The Committee believes the economy is on a solid footing, with improved growth prospects. The impact of previous rate cuts is expected to stabilize the labor market and allow inflation to resume its downward trend.

IV. Q&A Session – Key Points & Responses

• Supreme Court Case (Lisa Cook): Chair Powell defended his attendance at the Supreme Court hearing regarding the Lisa Cook case, stating it was the most important legal case in the Fed’s 113-year history and that it would have been difficult to explain why he didn’t attend. He referenced Paul Volcker’s attendance at a similar case in 1985.
• Labor Market Distortions: The Fed acknowledges potential distortions in the household survey data, particularly related to the government shutdown and potential overcounting of jobs. However, they see signs of stabilization in the labor market.
• Dollar Volatility: The Fed declined to comment on recent movements in the US dollar, deferring to the Treasury Department’s role in overseeing currency matters.
• Fiscal Policy: Chair Powell expressed concern about the unsustainable path of the US federal budget deficit, emphasizing the need for addressing it in the long term.
• AI & Productivity: The Fed is closely monitoring the potential impact of AI on productivity and its implications for potential output, inflation, and the labor market.
• Tariff Impact: The Fed believes that the effects of tariffs are largely one-time price increases and that, excluding their impact, core PCE inflation is closer to the 2% target.
• Future Rate Cuts: The Fed has not made any decisions about future rate cuts and will continue to assess data on a meeting-by-meeting basis.
• Independence of the Fed: Chair Powell strongly emphasized the importance of maintaining the Federal Reserve’s independence from political influence, stating it is crucial for credibility and effective monetary policy.

V. Notable Quotes

• “That case is perhaps the most important legal case in the Fed's 113-year history. And I, as I thought about it, I thought uh it would might be hard to explain why I didn't attend.” – Chair Powell, on attending the Supreme Court hearing.
• “Our success in delivering on these goals matters to all Americans. We at the Fed will continue to do our jobs with objectivity, integrity, and a deep commitment to serve the American people.” – Chair Powell, concluding remarks.
• “We don’t comment on the dollar. It’s not our role.” – Chair Powell, deflecting a question about dollar volatility.

VI. Synthesis & Conclusion

The Federal Reserve remains cautiously optimistic about the US economic outlook, acknowledging both progress on inflation and signs of stabilization in the labor market. While maintaining the current policy rate, the Committee emphasized a data-dependent approach to future decisions, remaining prepared to adjust policy as needed to achieve its dual mandate of maximum employment and stable prices. The Fed is closely monitoring developments related to tariffs, productivity, and geopolitical risks, recognizing their potential impact on the economic outlook. Maintaining the Fed’s independence from political influence is considered paramount to its effectiveness.