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Fed Chairman Powell addresses interest rates, potentially meeting President Biden

Yahoo finance reporter Brian Cheung breaks down the key takeaways from Federal Reserve Chairman Jerome Powell's appearance at The Economic Club of Washington, D.C.

Video transcript

ADAM SHAPIRO: All right, eight minutes to the closing bell on a day when we're seeing markets pull back slightly from record highs, on a day when Bernie Madoff died, on a day when the banks, three of them hit their earnings reports out of the ballpark. Jay Powell spoke. Oh, yeah. Brian Cheung, what does the Federal Reserve chair have to say?

BRIAN CHEUNG: Well, nothing particularly new. It seems like on a day where we already got a lot of news, I guess the Fed may be blessing us with a bit of a quiet commentary on monetary policy. He reiterated that they are not eager to raise rates, and said it's unlikely to see any movement from the near-zero target rates, at least this year. But he also downplayed the economic projections from the Fed's March meeting. And for that, take a listen.

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JEROME POWELL: Most members of the committee did not see raising interest rates until 2024, but that isn't a committee forecast, it isn't something we vote on or act on as a group. It really is just our own assessment. And so I think there's a tendency of markets to focus too much on what we call the dot plot, the summary of economic projections. And I would focus more on the outcomes that we've described and the best assessment we can make of our progress toward achieving those.

BRIAN CHEUNG: And that commentary happened at the Economic Club of Washington around noon today. This is likely the last that we'll hear from the Fed chairman before the Fed's next policy setting meeting, which is going to be in about two weeks or so. And we got another interesting tidbit from his appearance today. He said that he hasn't yet met with President Joe Biden. This is despite the fact that the administration's been in place for the last three months.

Obviously, a very different tonal change from the Trump administration, in which obviously, the president was trying to jawbone the Fed actions through his Twitter account. So it seems like Joe Biden taking a very different approach to the Federal Reserve, trying to be hands off and let the independent Fed handle itself, guys.

SEANA SMITH: It certainly does seem like that over the last couple of months. Brian, we also heard from Fed Vice Chair Richard Clarida. He was speaking, a few headlines crossing just a few minutes ago. What can you tell us?

BRIAN CHEUNG: Yeah, his remarks actually only began about 10 minutes ago. But the breaking heads from the speech appeared to reiterate the Federal Reserve's new framework. This was a fairly technical speech where he was talking about the ins and outs of the Fed projections and how they relate to the Federal Reserve's reaction function with regards to its interest rate and asset purchase policy. But broadly speaking, a few things worth translating.

He was saying that one big change in the framework was that the way that they're defining maximum employment is the highest level of employment that does not generate sustained pressures that put the price stability mandate at risk. That all sounds like absolute jargon, but a translation is, there's going to be no rate hike until they see inflation persistently running above its 2% target. Which means even if core personal consumption expenditures hit 2%, that is not a green light for a rate hike. It's going to take more sustained figures before the Federal Reserve wants to then tighten policy.

And another interesting bit, was that he was saying that when policymakers pencil in projections for those summary of economic projections, which we get every three months or so, that's not necessarily going to require any sort of rate hike if the unemployment rate falls below the longer run projections from these policymakers, which all is to say the Federal Reserve has a much more high bar for wanting to raise rates in the future.

ADAM SHAPIRO: Brian Cheung, always keeping an eye on the Fed for us. Thank you very much.