Transcript: Fed Chair Powell's Economic Club of Washington Appearance

"Now you see the labor market report and I think again, financial conditions are, are, now more well aligned with that than they were before" - Federal Reserve Chairman Jerome Powell.

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U.S. Dollar exchange rates were lower with modest losses in many cases by the mid-week milestone after Federal Reserve (Fed) Chairman Jerome Powell's appearance at the Economic Club of Washington prompted a wave of what might have been profit-taking on speculative trading positions. 

Sterling was trading back near the 1.21 handle on Wednesday as Dollars were sold for Norwegian Krone, Pounds, Swiss Francs and Euros after Chairman Jerome Powell welcomed the tightening of financial conditions that followed last Friday's strong non-farm payrolls report. 

Dollars were also tendered for more than half of the other currencies in the broader G20 basket on Wednesday while U.S. bond yields were trendless and futures continued to price a 5% to 5.25% Fed Funds rate for September.

Source: CNBC Television, Youtube. 

Meanwhile, stock indices were a mixed bag across the board in price action that is potentially reflective of ongoing uncertainty over whether it will be possible for the Fed to achieve its 2% inflation target without causing injury to a robust labour market and resilient economy. 

The Fed chair did not rule out that scenario in Tuesday's discussion with David Rubenstein, President of the Economic Club of Washington.

Below are third-party transcripted answers to a variety of questions that were asked and answered at the event. 

Above: Pound to Dollar rate shown at 15-minute intervals alongside CHF/USD, EUR/USD and an upside-down USD/NOK. Click image for closer inspection.

Did the market interpret February's policy decision wrong?

"What we said at the meeting was, was that...ongoing rate increases will be appropriate. Uh, and the reason is we're trying to achieve a stance of policy that is sufficiently restrictive to bring inflation down to 2% over time, and we don't think we've achieved that yet. So we said that. Uh, and I, and you know, now you see the labor market report and I think again, financial conditions are, are, now more well aligned with that than they were before." 

"The labor market's extraordinarily strong, and by the way, it's good. It's a good thing that inflation has started to come down without it [inaubile] happening at a cost of the strong labor market. So, and of course since then, the labor market, sorry, financial conditions have tightened significantly"

Are markets right to assume they're correctly pricing the interest rate outlook?

"So we never say this is what we think will happen. We, you know, we make a tentative forecast and then we let the data come in. For example, if the data were to continue to come in stronger than we forecast. And we were to conclude that we needed to raise rates more than is priced into the markets or than we wrote down at our last group forecast in December. Then we would certainly do that. We would certainly raise rates more." 

Why is the labor market so strong?

"Well, the labor market is strong because the economy is strong and uh, as I mentioned, it's a good thing that we've been able to see the beginnings of disinflation without seeing the, the labor market weaken. Um, it's just that, uh, it, there's a lot of demand for workers. In fact, if you, if you look at the supply of workers versus demand for workers, demand for, for US workers is now more than 5 million greater than the available supply and the available supply consists."

How do you coordinate with other central banks and do you have regular conversations with them?

"I meet six times a year in Switzerland with the heads of all the, of many, many central banks, you know, even the, even the small and medium sized ones at the, at bo in Basel, at the bank for international settlements. In addition, among the major central banks, I have regular dialogues going with, with most of them. And so we, we we're talking though about is really what's happening in the economy and how are you thinking about policy and that kind of thing. It's very important that, that we keep those discussions going. Particularly in a crisis, you're gonna need to know each other and you're gonna need to know, you're gonna be able to trust each other."

Does the Fed control its own inflation rate?

"We have the tools, the Fed has the tools to achieve our 2% goal over time. Uh, , uh, inflation in the United States is of course very closely related to things that happen here, including the balance between supply and demand. It's also affected by, for example, commodity prices that are really set on the global markets. You know, oil and main agricultural commodities are, are priced globally. So there, there, there are certainly it's an integrated global economy and global markets."

Are you a little worried about the debt limit not getting extended?

"We're not a policy maker on that. And I will just say, This can, this really can only end one way, and that is with Congress raising the debt ceiling in a timely fashion so that the US can pay all of its bills when it has due. That's what has to happen. And if that doesn't happen, no one should think that the Fed has the ability to shield the financial markets or the economy from the consequences of, of moving too slow."