Transcript of Jerome Powell Remarks On The Outlook For The U.S. Economy — 4/16/2025

While job growth has slowed relative to last year, the combination of low layoffs and lower labor force growth has kept the unemployment rate in a low and stable range.

Meanwhile, the ratio of job openings to unemployed job seekers has remained just above 1, near its pre-pandemic level. Wage growth has continued to moderate while still outpacing inflation. Overall, the labor market appears to be in solid condition and broadly in balance and is not a significant source of inflationary pressure.

Inflation Progress and Policy Changes

As for our price stability mandate, inflation has significantly eased from its pandemic highs of mid-2022 without the kind of painful rise in unemployment that has frequently accompanied efforts to bring down high inflation. Progress on inflation continues at a gradual pace and recent readings remain above our 2% objective. Estimates based on the most recent data from last week showed that total headline PCE prices rose 2.3% over the 12 months ending in March and that excluding the volatile food and energy categories, core prices rose 2.6%.

Looking forward, the new administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. These policies are still evolving and their effects on the economy remain highly uncertain. As we learn more, we will continue to update our assessment.

The level of tariff increases announced so far is significantly larger than anticipated and the same is likely to be true of the economic effects which will include higher inflation and slower growth. Both survey and market-based measures of near-term inflation expectations have moved up significantly with survey participants pointing to tariffs. Survey measures of longer-term inflation expectations for the most part appear to remain well anchored as well. Market-based breakevens continue to run close to 2%.

Tariffs and Inflation Risks

As we gain a better understanding of the policy changes, we’ll have a better sense of the implications for the economy and hence for monetary policy. Tariffs are highly likely to generate at least a temporary rise in inflation. Inflationary effects could also be more persistent.

Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and ultimately on keeping longer-term inflation expectations well anchored. Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem.

As we act to meet that obligation, we will balance our maximum employment and price stability mandates. Keeping in mind that without price stability we cannot achieve the long periods of strong labor market conditions that benefit all Americans, we may find ourselves in the challenging scenario in which our dual mandate goals are in tension.

If that were to occur, we would consider how far the economy is from each goal and the potentially different time horizons over which those respective gaps would be anticipated to close. As that great Chicagoan Ferris Bueller once noted, life moves pretty fast.

For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance. We continue to analyze the incoming data, the evolving outlook and the balance of risks. We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families and businesses. We will continue to do everything we can to achieve our maximum employment and price stability goals. Thank you and I look forward to our discussion.

Discussion with Raghuram Rajan

RAGHURAM RAJAN: Thank you very much Chair Powell for those remarks. I look forward to your elaborating on them in the course of the next 40 minutes or so. I understand last time you were here Mellody Hobson interviewed you. Well, I’m a poor substitute, but I’ll try and compensate in the quality of the questions.

As you repeatedly emphasize, communication and transparency are very important for the Fed. I would like to get more from you on some of what you just said. As a former central banker, the only sort of caution I’ve been given by the economic club is to not lapse into central bank speak. So I’ll try my best not to do that.

Let me start by saying you’ve guided the Fed through some really difficult events, including the pandemic, the dash for cash in March 2020, the great inflation, the banking crisis centered around Silicon Valley Bank. And then over the course of the last year we’ve seen a growing possibility of a Fed engineered soft landing. And now it seems like everything has changed in the course of a couple of months. JP Morgan has shifted to estimating the probability of a recession this year at around 60%. What do you think about all this?

Navigating Economic Challenges

JEROME POWELL: Well, first of all, thank you for being here today. It’s a pleasure to be here with you. Actually the speech, the appearance I did here was my very first appearance as Chair 7 and a half years ago. So it’s great to be back and I would agree with you that it’s been an eventful seven years, putting it mildly. I keep waiting for the three months of calm that never comes.

But to your question, I guess to set the stage, let’s look back at 2024. 2024 was a year where the economy grew 2.4%. Unemployment remained in the low fours, close to mainstream estimates of maximum employment and inflation came down and was running at the end of the year around two and a half percent. That’s the economy that we had and I won’t decide how to characterize that, but that’s where things were.

Where we are now, again to your question, is the administration is implementing significant policy changes and particularly trade now is the focus and the effects of that are likely to move us away from our goals. So unemployment is likely to go up as the economy slows in all likelihood and inflation is likely to go up as tariffs find their way. And some part of those tariffs come to be paid by the public.

So that’s the strong likelihood. And my hope is that we’ll get through this and get back. We’re always going to be aiming for maximum employment and price stability. That’s what we do. I do think we’ll be moving away from those goals probably for the balance of this year and then, or at least not making any progress and then we’ll resume that progress as we can.

Impact of Tariffs on Inflation and Growth

RAGHURAM RAJAN: Let’s talk a little more about tariffs. I mean you recognize that some of the effects of the tariffs will be one-off transitory. But you also have said that perhaps they will give room for a number of firms to raise prices. You mentioned dryers. When washing machine prices went up because of tariffs, dryer prices also went up in tandem even though they weren’t tariffed. What’s your sense about the effects of tariffs on inflation? What would make them more persistent and what would make them have effects on growth?

JEROME POWELL: Kind of a simple starting point is one tariff comes in that gets passed along in prices and raises inflation. But it’s just a one-time thing. So the price level goes up and that’s it. And that can happen in some circumstances, but it depends on a number of things which we don’t know yet. And I would point to a couple of them or three of them actually.

One is just the size of the effects and as I mentioned, the tariffs are larger than forecasters had expected, certainly larger than we expected, even in our upside case. We looked at a range of cases. So that’s one.

The second one is how long does it take for the tariffs to have their effects on inflation? To the extent it takes longer and longer, that raises the risks that the public will begin to experience higher inflation. They’ll come to expect it and companies will come to expect it. So that risks higher inflation.

And the third is just what I mentioned in my remarks, which is we’ve got to keep inflation expectations well anchored. So if we have those three things under control, that’s what it will take. And indeed our role is to make sure that this will be a one-time increase in prices and not something that turns into an ongoing inflation process. That’s a big part of our job.

Supply Chain Disruptions

RAGHURAM RAJAN: What about the effects of tariffs on quantities? You know, with the level of tariffs that for example have been currently applied on China, there’s a fear that the supply chain may get disrupted, that firms may not be able to import their relevant stuff from China. Given the level of prices, if it turns into a supply shock, would the Fed’s response be different than if it was primarily something which affected just prices?

JEROME POWELL: So I actually had dinner at the Chicago Fed last night with a number of directors of various parts of the Chicago Fed and many of them are CEOs of significant companies and this uncertainty that they’re feeling and the issue with imported components to their products is just a huge issue.

But if you look back at the pandemic, if you remember there was a shortage of semiconductors and that led to a shortage of cars at a time of extremely high car demand. And it was a prolonged shortage because production couldn’t keep up. And that led to an extended period of inflation.

So when you think about supply disruptions, that is the kind of thing that can take time to resolve and it can lead what would have been a one-time inflation shock to be extended, perhaps more persistent. And we would worry about that in this case.

You can look at the car companies which, their supply chains are likely to be disrupted significantly. And you would worry that that process will take some years and that the inflationary process might be extended. So all of this is highly uncertain. We’re just thinking now really before the tariffs have their effects, how they might affect the economy. And that’s why we’re waiting really to see what the policies ultimately are and then we can make a better assessment of what the economic effects will be.

Immigration and Labor Markets

RAGHURAM RAJAN: Let’s move to immigration. You talked about the labor market being in reasonable equilibrium right now. Of course, what we’ve seen over the last few months, the last months of the previous administration continuing to this administration is immigration has fallen off considerably. What’s your sense on how that will affect the labor market?

JEROME POWELL: So part of why growth was so strong in the last couple of years was just very high levels of immigration. And those people went to work, the economy hired them. You know, there was a lot of demand. We were still working off the labor shortage.

What’s happened since the prior administration changed their policy? As you mentioned, immigration has fallen very sharply and therefore the growth of workers has really stopped. It’s really stagnant. But at the same time, demand has also fallen. And so demand for workers, so payroll job creation has also fallen. And they’ve kind of fallen in tandem, which is why the unemployment rate has been pretty stable for about a year.

So in a way, demand and supply for workers has fallen in terms of the effect on the labor market. Right now we’re still at full employment and labor force participation is still strong. Wages have moved back down to levels that are now pretty sustainable given an assumption about productivity. So the labor market’s in a really good place longer term.

The effects of immigration are not thought to matter much for inflation. The effects on demand and supply will more or less cancel each other out. So we wouldn’t expect there to be a big impact on inflation.

RAGHURAM RAJAN: You’ve seen in recent weeks substantial talk about layoffs in government as well as freezes in research establishments and universities in jobs. How soon and how big will this be in its impact on labor markets?

Federal Reserve’s Assessment of Government Layoffs and Economic Impact

JEROME POWELL: So it’s too soon to say. But what I can say is, of course, the people being laid off in government, this is highly significant to them. We don’t know how big that’s going to be right now. It’s not big enough to affect a workforce of 170 million people materially.

In terms of the cutbacks in funding for science and things like that, we do see in areas, particularly in cities that have a lot of universities and research hospitals and research institutions, we’re really hearing significant layoffs and significant impacts on unemployment. I don’t know how much that will total up to.

And of course, cutting back on scientific research may have implications for economic growth, for productivity, for health, for all kinds of things. But those are very difficult to estimate in real time.

RAGHURAM RAJAN: Now, given that we’re talking about the future, you may be confronted in the not so distant future with both higher levels of unemployment as well as potentially higher inflation. And of course, the policies that each one requires could be different. You talked a little bit at the podium about how the Fed would see these two and how it would address it. Just giving you a chance again to elaborate on that.

Balancing Unemployment and Inflation Concerns

JEROME POWELL: Right. So most of the time when the economy is weak, inflation is low and unemployment is high, and both of those call for lower interest rates to support activity and vice versa. So most of the time the two goals are not in tension.

Now, the labor market is still strong, but the shock that we’re experiencing, the impulses we’re seeing and feeling, are for higher unemployment and higher inflation. And our tool only does one of those two things at the same time. So it’s a difficult place for central banks to be in, in terms of what to do.

The best we can do is we actually have a little provision in our consensus statement, which is the thing that we vote on to embody how we approach these questions. What we say is we will look at how far the economy is from each of those two goals, and then we’ll ask, might there be different paces at which they would approach those goals? We’ll look at those things and think about them and we’ll make what will no doubt be a very difficult judgment. Again, we’re not experiencing that now, but we could well be in that situation, as I mentioned in my remarks.

Economic Uncertainty and Its Effects

RAGHURAM RAJAN: I want to pick up on a word that is often used today, uncertainty. As the respondent to a Dallas Fed survey said, “I’ve never felt more uncertainty about my business in my entire 40-plus years career.” The worry today is not just about immediate policy uncertainty but an entire change in the U.S. economic philosophy. Not just policy uncertainty, so to speak, but structural uncertainty.

One of the effects as you pointed out of higher levels of uncertainty is that firms postpone investment, for instance, even after the tariffs stabilize. Firms that contemplate reshoring production percentage facilities will hesitate, not knowing if the tariffs will be reversed in the future, maybe by the next administration. How do you take such longer term uncertainty into account in your policies?

JEROME POWELL: Let me just agree that what comes back very strongly—and everyone will understand this—these are very fundamental policy changes in some cases long-held policies in the United States. And there’s not any real experience. I mean the Smoot-Hawley tariffs were actually not this large and they were 95 years ago. So there isn’t a modern experience of how to think about this.

Businesses and households are saying in surveys that they are experiencing incredibly high uncertainty. There’s a lot of research, some of it from the Fed showing that that does lead to businesses and households stepping back from decisions which of course makes common sense. And you hope that that’s something that you go through a phase and then things become more certain and, therefore, people can resume normal economic activities given their understanding of what is the new normal.

Your question really is what if the uncertainty remains high? I think that’s a difficult environment. I think people’s expected rates of return would have to be higher. That would weigh on investment just in general. If the United States were to become a jurisdiction where risks are just structurally higher going forward, that would make us less attractive as a jurisdiction. We don’t know that at this point, but I think that would be the effect.

Financial Market Volatility and Fed Response

RAGHURAM RAJAN: Well, let me turn to financial markets. We’ve seen some volatility, especially stock market volatility. I mean the levels of the VIX are up to the levels they were in the early days of the pandemic, coming off somewhat now. Some people believe the Fed will intervene if the stock market plummets. The so-called Fed put. Are they correct?

JEROME POWELL: I’m going to say no with an explanation. What I think is going on in markets is markets are processing what’s going on. And it’s really the policies, particularly the trade policy. And really the question is, where is that going to come in, where’s that going to land? And we don’t know that yet.

Until we know that, you can’t really make informed assessments. That would still be highly uncertain. Once you know what the policies are, it will still be highly uncertain what the economic effects will be. So markets are struggling with a lot of uncertainty, and that means volatility.

But having said that, markets are functioning conditional on being in such a challenging situation. Markets are doing what they’re supposed to do. They’re orderly, and they’re functioning just about as you would expect them to function.

RAGHURAM RAJAN: We’ve seen volatility also in the bond market. And at a time when usually there’s a traditional flight to safety, we saw yields on the German bond and the Japanese government bond come down, but we saw yields on US Treasuries go up. What do you attribute this to?

JEROME POWELL: I think it’s very hard to know in real time. I’ve had a lot of experience with significant moves in the bond market where there’s a narrative that people land on and then two months later you look back and go, that was completely wrong. So I think it’s very premature to say exactly what’s going on.

Clearly there’s some delevering going on among hedge funds in levered trades and things like that. It’s also, again, the markets processing historically unique developments with great uncertainty. And I think you’ll probably see continued volatility. But I wouldn’t try to be definitive about exactly what’s causing that. I would just say markets are orderly and they’re functioning kind of as you would expect them to in this time of high uncertainty.

Fed Balance Sheet and Liquidity Management

RAGHURAM RAJAN: So the Fed in its last meeting slowed the pace of shrinking of its balance sheet. Was this driven by uncertainty about how much reserves and liquidity the market needed? And you wanted to take a little more time to find that out. And flip side, you said the market was orderly. What if market disruptions emerge? Would the Fed intervene?

JEROME POWELL: We think that reserves are still abundant. So we don’t think we’re particularly close to the point where we would stop. But we were facing a situation in which for other reasons, there were going to be big flows into and out of reserves as it had to do with the debt ceiling and the Treasury General Account. For those of you who are treasury market people, that’ll make sense.

While those big flows are happening over a period of six months, we would actually be shielded from being able to see evidence that we were or were not getting close to the level of less abundant reserves. And so we decided to slow the pace. We thought about pausing and instead we debated. It’s one of these great debates that we have at the FOMC. We decided to slow the pace instead.

People really came to see the merits of that because the slower we go, the smaller the balance sheet can get without disruptions. And we want that process to continue. And now it’s at quite a slow pace. So we think that’s a really good thing. That means it can go on for a longer amount of time and we’ll be able to reach very carefully what we think is the right level of reserves. Still plenty of reserves.

International Dollar System and Central Bank Cooperation

RAGHURAM RAJAN: What about the international dollar-based system with all these disruptions? Do you stand ready to supply dollars to central banks as you’ve done in the past when there’s been a global shortage of dollars?

JEROME POWELL: Sure, absolutely we do. Just for everyone’s knowledge, we have standing dollar swap lines with five large central banks and they go to the jurisdictions where there are big overseas dollar funding markets.

In effect those are overseas markets where, for example, a European or Asian institution is buying an asset-backed security that is backed by loans to American consumers. So in effect these are loans to American consumers and we support that. We want to make sure that dollars are available. They need dollar funding to hold those dollar assets.

The way it works is when needed, we lend to the central bank in dollars and they pay us back in dollars. They then pay in their currency, they lend on in dollars. And so we take no credit risk or anything like that. And it supports dollar funding markets. Dollar funding markets are very sensitive during times of crisis and it’s very helpful. The reason we do it is it’s really good for US consumers. So we’ll continue to do that just as part of the dollar being the most important reserve currency. And we will do that.

U.S. Fiscal Situation and Debt Sustainability

RAGHURAM RAJAN: You mentioned amongst the issues you were focused on was the U.S. fiscal situation. Well, clearly U.S. sovereign debt continues to rise. What are your thoughts on the longer term implications for interest rates and economic stability? How much further can we go in terms of national debt before we cross a line that might be unsustainable in the long term?

JEROME POWELL: The U.S. federal debt is on an unsustainable path. It’s not at an unsustainable level. And no one really knows how much further we can go. Other countries over time have gone much farther. But we’re now running very large deficits at full employment. And this is a situation that we very much need to address. Sooner or later we’ll have to. And sooner is better than later.

If I can say from my time working on these issues—it’s not the Fed’s issue, but if you look at a pie chart of federal spending, the biggest parts and the parts that are growing are Medicare, Medicaid, Social Security and now interest payments. And so that’s really where the work has to be done. And those are issues that can only be touched on a bipartisan basis. You know, neither party can figure out what to do without both parties being at the table. So that’s critical.

All of domestic discretionary spending, which is essentially where 100% of the conversation is, is small as a percentage of federal spending and is already declining as a percentage of federal spending. So when people are focusing on cutting domestic spending, they’re not actually working on the problem. Domestic discretionary spending is already going down. I like to make that point because so much of the dialogue that the politicians offer is about domestic discretionary spending, which is not the issue.

RAGHURAM RAJAN: Well, let’s turn to stability and regulation. Turning to the US Financial sector, we still have some concerns about distressed commercial real estate loans on bank balance sheets, whether they’ve been fully dealt with so far. There’s some sense that they haven’t. Add to that the very rapid growth in various forms of private credit over the last few years, which arguably haven’t been tested by a full-blown recession. How would you put the resilience of our financial institutions at this point and their ability to weather potentially uncertain times?

Banking System Resilience and Commercial Real Estate

JEROME POWELL: So I think our banking system is well capitalized with liquidity and is quite resilient right now to the kinds of shocks that it may face. I do believe that in terms of commercial real estate, there are some banks, mostly medium and small sized banks, who have elevated concentrations of commercial real estate, some of it troubled. We’ve been working on this for four or five years now.

We’ve been working to make sure that those banks have a plan, have capital and can absorb the losses. So that’s been going on for some time. The very largest banks don’t tend to have high concentrations. This is a problem that we have known would take years to work through, but we’re really well into the process of working through it.

In terms of the non-bank financial sector, it’s grown enormously. The provision of credit by non-banks has grown really fast. Most of it has been funded with a private equity like structure where limited partners are signed up for 10 years to a general partner to invest that money. They’re not depositors who can run – your money’s committed. So that funding model is kind of run-proof, though that isn’t some law of nature.

You do start to see shorter-term funding creeping in. To your point though Raghu, this very fast growing and now quite large private credit part of the economy has not really been through a significant credit event. It’s really grown since the pandemic. Just for that reason and for how fast it’s growing, we have a close eye on it. It doesn’t have the same kind of prudential regulation that the banking system has. So we’re watching it carefully. It’s a more stable funding source to the extent it’s institutional investors signed up for a long period. But we’re watching carefully.

RAGHURAM RAJAN: Wearing my banking research hat, banks are also involved in one of these institutions in a big way. We do know the administration wants to relax regulations in many areas, one of which may well be banking. What can you tell us about the Basel III endgame, so to speak, which is at this point primarily focused on additional capital for the large banks?

Basel III and Banking Regulations

JEROME POWELL: The Fed view, in my view, is that we should proceed to complete the Basel III accord, and we would have to do that and would look forward to doing that in conjunction with the FDIC and the OCC. Our view, and I think the banks’ view as well, is we should complete that. You need international minimum standards, that’s kind of a common good. The United States has plenty of input into what those accords contain. So our view is strongly that we should complete those and we could do it relatively quickly. We’re not so very far away from what would be a good outcome.

RAGHURAM RAJAN: Let me move to something which is more about technological change and new kinds of instruments. Cryptocurrencies – how do you see the potential for more favorable regulations coming on them and potential risks from that for the system?

Cryptocurrency Regulations

JEROME POWELL: We went through a wave of failures and fraud and things like that were the headlines for a couple of years. During that period, we worked with Congress to try to get a framework, a legal framework for stablecoins, which would have been a nice place to start. We were not successful.

I think the climate is changing and you’re moving into more mainstreaming of that whole sector. Congress is again looking at a framework, a legal framework for stablecoins, both in the Senate and the House. Depending on what’s in it, that’s a good idea. We need that. There isn’t one now.

Stablecoins are a digital product that could actually have fairly wide appeal and should contain consumer protections of the typical sorts and transparency. That’s what the Senate and the House are working on. So that’s a positive thing.

I also think we took a pretty conservative perspective on the guidance and rules we imposed on banks. Other bank regulators took an even more conservative perspective. I think there’ll be some loosening of that, and I think we’ll try to do it in a way that preserves safety and soundness, but permits and fosters appropriate innovation. But that does so in a way that doesn’t put consumers at risk in ways they don’t understand or make banks less safe and sound.

RAGHURAM RAJAN: You have a policy review underway now. Surveys recently tell us there seems to be a distinction between a rise in the level of prices, which is what the public seems to worry a lot about, and the rate of increase in prices, which certainly they worry about in passing. But the Fed worries much more about the rate of inflation. So even though we’re coming down to 2%, people remember that over the last few years, there’s been over 20% increase in prices. As you start thinking about the policy review, is there any thought about how you might want to address this sort of challenge? That it’s the path of prices as much as the rate of change, which matters.

Inflation and Public Perception

JEROME POWELL: First of all, I think you’re right and I think the public is right. When we say inflation is back down to 2%, 2.5%, and we think that’s a good thing – it is a good thing. But if you’re paying 20% more than you were paying in 2021, that doesn’t help you much. You’re still paying a lot more than you used to be paying for the necessities of life. So it’s just another way of saying people hate inflation. And it’s easy to understand why.

All we can really control is a world in which prices don’t go down in the aggregate, except in extreme times that we don’t want to court. So I don’t think we could have a framework where we’re going to bring prices down by 10% or something. That’s not something we’ll be looking at.

We’re essentially looking at the best way to foster 2% inflation over time. The changes we made in 2020 were really innovations around what to do when you’re stuck near zero. Now we’re well above zero. It may be that we still need to have in our framework a way to deal with that, but perhaps the main case is not one where you’re dealing with the effective lower bound. And that would be a framework that looks a lot more like the one that we had before 2020.

RAGHURAM RAJAN: Now, one of the tools you brought in to deal with the zero lower bound was quantitative easing, but you’ve also used quantitative easing to fix disruptions in the financial markets. Are you going to be more specific about what your objective is with quantitative easing as you go through this review?

Quantitative Easing Objectives

JEROME POWELL: In the beginning, it’s typically we’re using it for financial market function. That was the case with the global financial crisis and with the pandemic. We did try to explain ourselves through the pandemic, and our explanations did change. But I think it’s fair to say we might have done a better job of being clear about why we were doing it. And that’s something that we’re aware of and looking at.

RAGHURAM RAJAN: I mean, no discussion is complete without talking about AI. With AI coming fast and furious, it could affect productivity, it could affect employment. There are some people who say we will see for the first time technological unemployment in a serious way. With AI, what are your thoughts about it and how will it impact the Fed going forward?

AI and Economic Impact

JEROME POWELL: Like everyone who’s been exposed to what it’s capable of, it’s beyond what I expected. I started thinking about it as like a better version of Google, but it’s not. It’s like a better version of a person. It can do amazing things.

All through the 250 years of technological innovation, technology evolves and people worry that it’s going to replace human labor and people will be unemployed. And that hasn’t been the case. It may be the case in the short run, but in the long run, what it’s done is raise human productivity and therefore living standards.

So is this going to be the case where it eliminates more jobs than it creates? We just don’t know. If you come back in 20 years, will it be the case that people are much more productive in their work because of AI, or will it be the case that AI has just replaced a lot of people? I think it’s very hard to say, but it truly is remarkable in what it’s capable of.

We had a demonstration by a Wharton professor recently, and you speak to it like it’s a person and it kind of responds like a person. The things that it can do are really amazing. And by the way, this is early days. They’re talking about even the next couple of years bringing more dramatic breakthroughs.

I think it’s one of the two or three things most likely to bring dramatic change to the economy all around the world in the next 20 years. And I’d say it’s very hard to see how it shakes out.

RAGHURAM RAJAN: Let me turn to your job. An important man once said of your job, it’s the greatest job in government. You show up to office once a month and you say, let’s see, flip a coin. And then everybody talks about you like you’re a God. What is it that you normally do every day in the office? Is it fulfilling and, dare I say, enjoyable, and do you really feel like a God?

The Fed Chair’s Job

JEROME POWELL: I would agree. I think it’s the best job in government. And I really do enjoy it. Yes, I love the job. It’s a great honor to serve. It’s quite humbling because everybody makes mistakes. The economy is just not very predictable. So all of that is true.

I do what everybody expects me to do. My colleagues and I do more reading as part of our daily regime than a typical executive would do. In terms of being a God, I would say that we are blessed with a large number of amply compensated critics who would tend to undercut that, so we don’t feel like a God.

RAGHURAM RAJAN: So let me go to the more mundane in that office. What are the key indicators you look for? What are the sources of data that you go to as you try and make up your mind?

Key Economic Indicators

JEROME POWELL: I’d say start with labor. There’s more labor market data and more and better reliable labor market data than probably anywhere else. It’s new jobs, it’s payroll, it’s wages, it’s participation. You can break all of those down in different categories. It’s a million different things. So there’s a lot of labor market data. It’s a great field if you’re going into economics because there’s just so much to do.

Then we look at the inflation data also. I keep track of global developments pretty carefully and I talk to my global counterparts pretty regularly just to stay aware of what’s going on. Financial markets are really important. Lately we’re paying close attention to what’s going on around the world in currency markets, in fixed income markets, in equity markets, all of that.

For me, though, my background was more in the private sector as an investor for a significant part of my career. I have to talk to outsiders about what they’re seeing and what they’re dealing with for it to really kind of fit together for me. I can look at only so much data, but to really get the story and the narrative, it’s more talking to outsiders. Anecdotal data does help things kind of fit together for me, I would say.

RAGHURAM RAJAN: You told us about speaking with business people last night and getting a sense of what was going on in the Midwest. Let me turn to Fed independence. You’ve reiterated that you intend to stay in office until the end of your term, and that certainly reassured many in financial markets. What are the levers the government or the legislature have to pressure the Fed and should one worry about threats to the Fed’s independence once you’re gone?

Federal Reserve Independence

JEROME POWELL: So our independence is a matter of law. Congress has, in our statute, we’re not removable except for cause. We serve very long terms, seemingly endless terms. So we’re protected in the law. Congress could change that law. But I don’t think there’s any danger of that. Fed independence has pretty broad support across both political parties and in both sides of the Hill. So I think that’s not a problem.

There’s a Supreme Court case people will have read probably in today’s Journal, at which the Supreme Court may decide whether independent agencies generally, whether their authorizing laws, can contain a provision that prevents the President from firing members of a commission other than for cause. And that’s a case that people are talking about a lot. I don’t think that decision will apply to the Fed, but I don’t know. It’s a situation that we’re monitoring carefully.

Generally speaking, Fed independence is very widely understood and supported in Washington, in Congress, where it really matters. And the point is we can make our decisions and we will only make our decisions based on our best thinking, based on our best analysis of the data about what is the way to serve our, to achieve our dual mandate goals as we can to best serve the American people. That’s the only thing we’re ever going to do. We’re never going to be influenced by any political pressure. People can say whatever they want to, that’s fine, that’s not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors.

Personal Life

RAGHURAM RAJAN: Well, I have time for one more question. I know the question that’s on all your minds, what are you going to do on interest rates next? But I’m not sure that you know and I’m not sure you would tell even if you knew. So I’m not going to ask that question. The question I want to ask is a more personal one. What is it that you like to do most at home after an exhausting day flipping coins in the office?

JEROME POWELL: You know, I play one of my guitars. I do zoom calls with my kids and my grandkids. And I go to the gym a lot, too, just to stay in shape.

RAGHURAM RAJAN: We need you healthy. We need you healthy. Thank you very much, Chair Powell.

JEROME POWELL: Thank you.

RAGHURAM RAJAN: And please join me.

UNIDENTIFIED SPEAKER: On behalf of the Economic Club of Chicago. Thank you, Chair Powell and Dr. Rajan, for such a wonderful conversation. You are a national treasure and I hope all of us can see how important Chair Powell’s role is in our business and personal lives. And thank you for sharing your important…

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