Powell: For most workers now increases in wages are being offset by inflation

Today I will offer a progress report on the Federal Open Market Committee's (FOMC) efforts to restore price stability to the U.S. economy for the benefit of the American people. The report must begin by acknowledging the reality that inflation remains far too high. My colleagues and I are acutely aware that high inflation is imposing significant hardship, straining budgets and shrinking what paychecks will buy. This is especially painful for those least able to meet the higher costs of essentials like food, housing, and transportation. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. We currently estimate that 12-month personal consumption expenditures (PCE) inflation through October ran at 6.0 percent (figure 1).1 While October inflation data received so far showed a welcome surprise to the downside, these are a single month's data, which followed upside surprises over the previous two months. As figure 1 makes clear, down months in the data have often been followed by renewed increases. It will take substantially more evidence to give comfort that inflation is actually declining. By any standard, inflation remains much too high. For purposes of this discussion, I will focus my comments on core PCE inflation, which omits the food and energy inflation components, which have been lower recently but are quite volatile. Our inflation goal is for total inflation, of course, as food and energy prices matter a great deal for household budgets. But core inflation often gives a more accurate indicator of where overall inflation is headed. Twelve-month core PCE inflation stands at 5.0 percent in our October estimate, approximately where it stood last December when policy tightening was in its early stages. Over 2022, core inflation rose a few tenths above 5 percent and fell a few tenths below, but it mainly moved sideways. So when will inflation come down? tweet at 1:32pm: Fed’s Powell: Expect Housing Services Inflation to Begin Falling Sometime Next Year, if Lease Trends Continue Fed’s Powell: Moderation in Labor Demand Growth Will Be Required to Restore Labor Market Balance tweet at 1:48pm: Fed’s Powell: Initial Surge of Inflation Not Related to Wages, but Wages Are Going to Be Important Going Forward tweet at 1:48pm: Fed's Powell: In The Service Sector In Particular, Wages Need To Rise At A Level Consistent With 2% Inflation Over Time tweet at 1:49pm: Fed's Powell: Probably 1.5 To 2% Above That Now Given Adjustments For Productivity

tweet at 1:30pm: Powell: Fed Will Need to Hold Policy at Restrictive Levels 'For Some Time' Powell: Ongoing Rate Increases Will Be Appropriate to Bring Inflation Down Powell: Fed Has 'A Long Way to Go' in Bringing Inflation Down tweet at 1:30pm: Powell: Fed Likely to Need 'Somewhat Higher' Rates in 2023 than Anticipated in September Projections tweet at 1:31pm: Powell: Expects PCE Inflation to Decelerate to 6% in Oct from 6.2% in Sept Powell: Expects Core PCE Inflation to Ease to 5% in Oct from 5.1% in Sept tweet at 1:31pm: Fed’s Powell: Far Too Early to Declare Goods Inflation Vanquished, but if Trend Continues, Goods Prices Should Begin to Exert Downward Pressure on Overall Inflation in Coming Months Fed’s Powell: Have so Far Seen Only ‘Tentative’ Signs of Moderation in Labor Demand, Wage Growth tweet at 1:31pm: POWELL: TIME FOR MODERATING HIKE PACE MAY COME AS SOON AS DEC.

tweet at 1:58pm: Powell: Slowing Down At This Point Is A Good Way To Balance Risks tweet at 2:04pm: Powell: Still Thinks There Is A Path To A Soft Or "Softish" Landing, Without A Severe Recession tweet at 2:05pm: Powell: Path To That Is Pretty Clear, That Labor Market Softens, Goods And Housing Inflation Decline tweet at 2:08pm: Powell: In Hindsight Would Not Tie Rate Liftoff To Achieving Conditions Of Maximum Employment And Achievement Of Inflation Target tweet at 2:10pm: FED'S POWELL: ONE RISK MANAGEMENT TECHNIQUE IS TO GO SLOWER, ANOTHER IS TO HOLD ON LONGER

tweet at 2:10pm: Powell: “I Don’t Want to Overtighten" Cutting Rates Is Not Something to Do Soon tweet at 2:12pm: *Powell: "Very Disappointing" Labor Force Participation Is Not Improving tweet at 2:13pm: Powell: For Now Fed Has to Assume Balance in Labor Market Has to Come From the Demand Side tweet at 2:27pm: Powell: China Shut Downs Will Have Implications for the U.S. but Hard to Assess to What Degree tweet at 2:28pm: *Powell: U.S. Does Have A Long-Run Housing Supply Problem