Full version of the debut Q&A! Federal Reserve Chairman Waller: Sticking to the 2% inflation target, establishing five special working groups, individual did not submit the dot plot

Author: Yang Chen

In his debut, Waller sent multiple strong signals indicating that change is imminent, including a significant reduction in the length of statements and a shorter press conference duration. Waller stated that the committee is clearly and unanimously committed to achieving price stability and a 2% inflation target. He announced the establishment of special working groups, including one to review the Federal Reserve's $6.7 trillion balance sheet and to study whether monetary policy comes from interest rate tools or balance sheet tools. Waller did not submit a "dot plot" interest rate forecast, while other officials did, with half expecting at least one rate hike this year and half believing rates will remain unchanged or decrease. Following the Federal Reserve's statement and press conference, U.S. stocks plummeted, and U.S. Treasury yields soared.

Federal Reserve Chairman Waller announced at his first FOMC press conference that the interest rate would remain unchanged at 3.5%-3.75%, stating that the committee is clearly and unanimously committed to achieving price stability and a 2% inflation target.

At the same time, reforms are being implemented, with this statement eliminating the long-standing "forward guidance" and announcing the immediate establishment of five special working groups (communication mechanisms, balance sheet, use of data sources, productivity and employment, and the Federal Reserve's inflation framework), which will propose improvement suggestions by the end of the year.

One of the special working groups will review the Federal Reserve's $6.7 trillion balance sheet and study whether monetary policy comes from interest rate tools or balance sheet tools.

Waller declined to submit personal economic projections (SEP). The 18 policymakers who submitted forecasts showed a clear divergence on the direction of interest rates. Half expect at least one rate hike this year, while the other half believe rates will remain unchanged or decrease.

During the period of the interest rate decision until Waller finished speaking, U.S. stocks and other risk assets fell across the board, gold dropped more than $150, the 2-year U.S. Treasury yield rose by 15 basis points, the dollar index surged nearly 100 points, and interest rate futures pricing increased the expected rate hike this year by 18 basis points to 39 basis points.

Upholding the 2% Inflation Floor, Indicating Current Policy is Restrictive "Uneven"

In the face of persistently high prices over the past five years, the market is highly concerned about the Federal Reserve's tolerance for inflation. Waller was uncompromising on this:

"Today, I announce that this committee clearly and unanimously decides that we will achieve the (2%) target.

The members of the FOMC clearly and unanimously believe that this committee will achieve price stability."

When asked whether the 2% inflation target would be revised, Waller dispelled market speculation with his characteristic sharp language:

"There is no need to revisit it until we re-establish our commitment and ability to achieve the 2% inflation target."

Regarding whether the current interest rate level is sufficiently restrictive, Waller provided a thought-provoking assessment—"uneven." He pointed out:

"If I look at the real estate market as an example, the Federal Reserve's policy seems somewhat restrictive. But if I were to describe what is happening in the financial markets, it is difficult to use the term 'restrictive.'"

This statement implies that the Federal Reserve has recognized that the surge in asset prices does not reflect the tightening effects of current monetary policy.

Establishing Five Working Groups to Review the Federal Reserve's Balance Sheet and Reduce Data Errors

To fundamentally change the way the Federal Reserve operates, Waller announced the immediate establishment of five special working groups, focusing on: Federal Reserve communication, balance sheet, use of data sources, productivity and employment (impact of AI), and inflation framework. He expects these working groups to reach conclusions by the end of this year.

Waller stated that one of the independent working groups he is forming will "review the benefits and risks of the current ample reserves system and the composition of the balance sheet," studying "whether monetary policy comes from interest rate tools or balance sheet tools."

When discussing the data working group, Waller sharply criticized the existing economic statistical methods. He believes that the outdated survey methods relied upon by central bank officials do not accurately reflect the current U.S. economy, and there is a significant lag in data releases. "We receive some data... that may just be 'echoes of the past.' We need to reduce these error ranges. What we are really interested in is what is happening now, not echoes of history."

This time, the elimination of forward guidance and the unprecedented refusal to submit a dot plot by the chairman

In this meeting, the most surprising aspect for investors was the "significant slimming down" of the Federal Reserve's policy statement. Waller candidly stated at the press conference:

"You may have noticed a difference in today's policy statement. It is shorter, more concise, and omits some old wording. The so-called 'forward guidance' is no longer included, as we unanimously believe it is not suitable for the current policy mix."

Moreover, as the Federal Reserve chairman, Waller broke with tradition and explicitly refused to submit his own economic projections summary (SEP) and dot plot. He explained:

"I reviewed the dot plot, and when I saw the submissions, I noticed that all submissions were written in pencil, you know, the kind with a big eraser... For me, this does not help with policy implementation."

Although Waller himself did not submit a forecast, the median values from the SEPs submitted by other participants indicate that the expected real GDP growth rate is 2.2% this year and 2.3% next year; the overall PCE inflation rate is expected to be 3.6% this year and 2.3% next year; and the unemployment rate is about 4.3%. The median expected federal funds rate is projected to be 3.8% at the end of this year and 3.6% at the end of next year.

Breaking the "feeding" style of market interaction, stating that AI brings huge demand

For a long time, Wall Street has been accustomed to pricing based on the speeches of Federal Reserve officials. Waller made it clear at the meeting that he wants to break this "feeding" style of market interaction. Waller emphasized:

"When financial markets merely reflect what we say, we are taking away the most important source of information and ignoring it.

I want us to build a system that removes these blindfolds, allowing the market to follow the data they find reliable. They will bring us better information through market prices, enabling us to make more informed decisions."

Regarding the market hot topic of artificial intelligence (AI), Waller defined AI as "the most significant change experienced in adult life" and pointed out that AI has brought huge demand (reflected in data centers, electricity, etc.), but there is still uncertainty in inferring the expansion of the supply side.

"AI may be the most significant change in the economy, business, and households that I have experienced in my adult life. If we do our job well, we can make strong growth, low prices, and strong employment compatible."

The original translation of Waller's press conference remarks is as follows:

Waller
Good afternoon, everyone. It is an honor, a true honor, to return to the Federal Reserve and take on this role at such a moment of significant impact. The warm welcome from old friends and new colleagues is especially encouraging. I have also listened carefully to the opinions of my FOMC colleagues, absorbing many new ideas, new thoughts, and a sincere willingness to move the Federal Reserve forward.

Waller
This week's FOMC meeting fully embodies the best traditions of the Federal Reserve: rigorous debate, an open mindset, commitment to our mission, and a sense of responsibility and accountability for performance. In this industry, all of this boils down to one point: to formulate the right monetary policy, or to get as close to it as possible—this is our North Star.

Waller
My colleagues and I are here to fulfill our statutory responsibilities, as you have heard us say before: price stability and maximum employment. These goals guided our work in the meeting we just concluded.

Waller
As you saw a few minutes ago, the committee decided to maintain the target range for the federal funds rate at 3.5% to 3.75%. To support the Federal Reserve's dual mandate, the committee also reaffirmed its policy of maintaining ample reserves in the banking system. Despite heightened uncertainty due to conflicts in the Middle East and other factors, economic activity continues to expand at a steady pace. Productivity growth and capital investment are both strong, employment growth is in line with labor force growth, and unemployment rates have not changed significantly. We recognize that inflation has remained well above the Federal Reserve's long-stated 2% inflation target. This situation has persisted for more than five years. Persistently high prices are a burden for the American people, but past experiences do not necessarily predict the future.

Waller
I am pleased to report that the members of the FOMC clearly and unanimously believe that this committee will achieve price stability. In any institution, leadership transitions are a natural and timely opportunity to reaffirm its mission, examine current practices, and consider whether those practices best align with our goals. My Federal Reserve colleagues and I will work closely together to explore what changes may help improve the implementation of monetary policy.

Waller
At this point, you may have noticed a difference in today's policy statement. It is shorter, more concise, and omits some old wording. This statement simply aims to present the facts to you as accurately as possible based on our judgment. The so-called "forward guidance" is no longer included, as we unanimously believe it is not suitable for the current policy mix.

Waller
This afternoon, you will also receive the routine Summary of Economic Projections (SEP). The committee's consistent practice is to have participants submit these projections, and I encourage my colleagues to continue doing so. However, I did not provide any projections myself, which aligns with my consistent view of the SEP (at least in its current structure). In terms of median projections, the expected real GDP growth rate is 2.2% this year and 2.3% next year; the overall PCE inflation rate is expected to be 3.6% this year and 2.3% next year; and the unemployment rate is about 4.3%. The median expected federal funds rate is projected to be 3.8% at the end of this year and 3.6% at the end of next year.

Waller
Now, please allow me to say a few words about a key initiative we announced today. I will appoint a special working group for each of five areas that are critical to the broad implementation of monetary policy. First, the Federal Reserve's communication; second, the Federal Reserve's balance sheet; third, our use and reliance on existing data sources; fourth, productivity and employment during a transformative period; and finally, the Federal Reserve's inflation framework.

Waller
These topics are timely and important, and in my view, worth re-examining. My colleagues and I have had vigorous and purpose-driven discussions about them over the past few days. For each independent working group, I am recruiting some of the best talent, including individuals from both inside and outside the field of economics. They will be supported by subject matter experts from our excellent Federal Reserve staff and will undertake a clear mission.

Waller
Starting from first principles, posing sharp questions, examining current practices, considering alternatives, and ultimately providing recommendations for policymakers on next steps. Since last summer, my colleagues have discussed potential ways to improve the form and function of Federal Reserve communication. This new working group will continue that effort, and I expect it to propose some thoughtful reform suggestions, including recommendations for the SEP I just mentioned. The second working group, focused on balance sheet policy, will review the benefits and risks of the current ample reserves system and the composition of the Federal Reserve's balance sheet. They will assess alternative frameworks for implementing and operating monetary policy.

Waller
The third working group, the data working group, will evaluate new sources of information and consider methodological changes to improve data collection, aiming to provide policymakers with more accurate, relevant, timely, and perhaps most importantly, actionable information about our economic conditions.

Waller
Fourth, the productivity and employment working group will examine the pace, scope, and economic impact of new general-purpose technologies, including artificial intelligence, and explore their potential implications for the Federal Reserve's pursuit of employment and inflation objectives.

Waller
The final working group, the inflation framework working group, will study the drivers of inflation. Fundamentally, it will explore various ideas for achieving price stability in a changing economy. In the coming weeks, you will hear more about these working groups and this overall initiative. For now, I will make a simple statement: each working group will serve everyone in the system, serving the shared goal of everyone who has gathered around the table with me over the past few days—a Federal Reserve that has a clear understanding of its mission, aligns with its goals, and looks to the future. Thank you all for your attention, and I am happy to answer your questions.

Speaker 2
Hello, Chairman Waller. It’s great to see you again, welcome back. With so many things starting up so quickly, what is the timeline you envision for each of the working groups?

Waller
I think it depends on the individual working groups. It also depends on how urgently we need clear answers. My expectation—I'm still in the process of recruiting and finalizing members—is that the working groups will begin their work in the coming weeks. We will start receiving more information from them by late summer to understand their frameworks for viewing the issues. I hope most (if not all) will reach conclusions by the end of the year.

Speaker 2
Specifically regarding the inflation framework, you mentioned first principles. Does this include a review of the 2% target itself? You have mentioned that the number to the right of the decimal point is not important. Does this mean starting from the premise that "2% as a point target is too rigid"?

Waller
Let me break it down into two parts. First, regarding the review of the inflation framework, its responsibilities are: What are the drivers of inflation? To what extent is the Federal Reserve responsible for inflation? How do we measure inflation? But this will overlap with my data working group. As for the 2% inflation target, this is the long-held target of the Federal Reserve. You have heard me say before that I tend to focus on the numbers to the left of the decimal point. Well, 2 is now the number to the left of the decimal point, and zero is to the right. I believe there is no need to revisit it until we re-establish our commitment and ability to achieve the 2% inflation target. So this is not within the scope of our current work.

Speaker 3
Kobe, thank you very much. I’m Kobe Smith from The New York Times. You have said that inflation is a choice. In the policy statement, you included the commitment to achieve price stability that you reiterated today. But looking at the SEP, most of your colleagues expect core PCE to be around 3.3% by the end of this year, and the 2% inflation target won’t be achieved until 2028. So I’m curious, at this current juncture, how patient can the Federal Reserve be in waiting for a one-time inflation wave to pass, and in waiting for inflation to fall after years of high inflation? Under what circumstances would you support the Federal Reserve taking action and raising rates?

Waller
Okay, there are quite a few questions here. Let me try to break it down. First, we have the capability and commitment to achieve the 2% price stability target. That is precisely what we intend to do. In the Federal Reserve's review of its strategy over the past few years (including in January)—including the strategy we are still bound by—the Federal Reserve statement notes that inflation is primarily determined by monetary policy. Of course, that is the case. I have been saying for years that inflation is a choice. Of course, that is the case. Today, I announce that this committee clearly and unanimously decides we will achieve this goal. The rest of your question sounds like you are encouraging me to provide forward guidance. We have abandoned forward guidance. Some people on the committee, I think, have abandoned it, and I suspect from our discussions over the past few days that it feels inappropriate to provide forward guidance at this current moment. Others have different views, believing that as a general proposition, forward guidance is not the business we should be engaged in. But that will be handled by the communication working group and my policymaker colleagues. We will seriously consider expert opinions and then make our own decisions. But I cannot provide any forward guidance on our next steps. The good news is that we will meet again in six weeks.

Speaker 3
So, I’d like to follow up regarding the current policy setting. Given the data flow we are seeing and predicting, how restrictive do you think the current policy is?

Waller
I have heard various descriptions both inside and outside the Federal Reserve. Let me share my own view: uneven. If I look at the real estate market as an example, the Federal Reserve's policy is not the only factor determining the state of the real estate market. But overall, I think the Federal Reserve's policy there seems somewhat restrictive. If I were to describe what is happening in the financial markets, it is difficult to use the same description of "restrictive." So I say it is uneven. This may be a function of the different transmission mechanisms of monetary policy, whether monetary policy comes from our interest rate tools or balance sheet tools. The good news is that we also have a working group on this, and the balance sheet working group will delve deeper into this issue.

Speaker 4
You said you don't like forward guidance, and you removed it from the statement this time. However, the dot plot shows that nine members indicated they would like to raise rates before the end of this year, and the market has interpreted this as forward guidance. So what does this mean for how you guide the market and the future of the dot plot?

Waller
I have to give you the same answer I gave to Ms. Smith. We have a working group responsible for this matter. I’ll add a bit more. I reviewed the dot plot, and when I saw the submissions, I noticed that all submissions were written in pencil, you know, the kind with a big eraser. This means that I think the colleagues in the room submitted their dots understanding that the world changes quickly, and they do not feel bound by the situation six weeks or six days from now. In case things change... I also want to point out a few other things. What I heard at the table is that when they submit model forecasts—let's be clear, this does not mean that this is more likely than other possibilities, it simply means it is more likely than other scenarios. So I did not hear a great deal of confidence. What I heard was a sense of humility, and I think we should have that humility. I did not submit a dot. For me, this does not help with policy implementation. I suspect, as I mentioned in my opening remarks, that by the end of the year, we will review all aspects of communication—press conferences, dot plots, meetings, transcripts, minutes. This will be part of it. I do not want to preempt the outcome, but I am quite open to possible outcomes. Frankly, in the past few days, in the past three weeks, my colleagues have shown a great openness to change and the risks of easy change, which has left a very deep impression on me. But our primary goal is to formulate the right monetary policy. The way to formulate the right monetary policy is to fulfill the responsibilities Congress has given us, achieving price stability, with no disagreement on these issues.

Speaker 4
You might get the same answer regarding the working groups... On communication, what are your thoughts on these press conferences? Do you think you will continue to hold them after each meeting? Do you find them useful? What is the future of Kevin Waller's communication style?

Waller
Well, there may still be 15 to 20 minutes left, so I do not want to preempt the outcome. Press conferences can be a very useful way to communicate with households, businesses, and more broadly through media like yours. I had a great late mentor named George Shultz, whose saying was that press conferences are useful, but when you hold them, make sure you have something important to say. Today, I believe we have important things to say: our commitment to achieving price stability and our commitment to rethinking practices to move the Federal Reserve forward. To make you and the American people feel that these are not just empty ideas, but concrete thoughts, we will seek the best talent—whether the best ideas from within the Federal Reserve or the best people I know in business, economics, academia, technology, and other fields—to share their perspectives. That is what we will do here, pursuing the truth. I believe we will propose some new and interesting things. We made some changes today. I expect there will be more changes, some of which may warrant holding press conferences.

Speaker 5
Hello, I’m Chris Rugaber from the Associated Press. Thank you for answering our questions. Can you tell us about your long-term view on inflation? I know you may not comment on short-term fluctuations, but is this primarily driven by energy prices and the war in Iran? Or do you have any concerns about potential inflationary pressures in the economy? Thank you.

Waller
I cannot say it better than the committee just did, so let me reiterate. Inflation remains elevated relative to the committee's 2% target, partly reflecting supply shocks that have driven up prices in certain sectors, including energy. This statement goes on to clarify that the Federal Reserve will achieve price stability. My own judgment is that the committee has spent quite a bit of time discussing this issue, not just in these two days but over the weeks. That is what we are prepared to say about inflation. But the commitment to achieving this goal is firm, unanimous, and clear. I believe this is an important message we have missed over the past five years, and we will correct that.

Speaker 5
Okay. Additionally, regarding your data working group and other aspects, I mean, overall, I think people feel that the Federal Reserve has considered all data. Of course, that was the feeling before. Is there any data that you feel has not received enough attention? I mean, you have previously mentioned the trend of "mean reversion," but similarly, this is well known to most Federal Reserve members. So what is this working group looking at? What are the possible outcomes? I know you do not want to preempt the outcome, but are there examples of data you expect to receive more attention? Thank you.

Waller
So, you are asking my question. Let me say, I do not want to preempt the outcome. I also do not want to elaborate too much on what they will do because I still need to make a couple of calls before finalizing the candidates. I am very interested in the views of external experts on this matter. I would say this: generally speaking, most of the data consumed by U.S. central bankers and other government officials comes from outdated survey methods based on national accounts... The description of the U.S. economy looks very different from what it will be in 2026. The response rates of survey methods do not meet our needs, and the questions asked may have been very applicable a generation ago but are not as applicable now. Therefore, even within official statistics, if the working group and our best thinking propose suggestions on how to use new analytical methods to elevate these official statistics to meet the standards of our times, I would be open to that. I would also say that almost every CEO of a private company running their own business is using real-time information that does not go through extensive revisions and can tell them what just happened. As you know, there are normal, long, and variable lags in the implementation of monetary policy. What we are really interested in is what is happening now. We are less interested in echoes of history. From my answer, you can hear that some of the data we receive, such as the payroll index we wait for every first Friday of the month or other data, may just be historical echoes, although they are quite useful at their third revision. We need to reduce these error ranges because we must make tough decisions in real-time. I am very confident that we can learn a lot of new data sources from the private sector, reforms in the official sector, and new analytical techniques that are far more sophisticated than simply asking a question about whether something is core or non-core.

Speaker 6
Thank you. Welcome, Chairman. I’m from Fox Business Channel. So if you do not provide a lot of ongoing forward guidance, will the market be more volatile? Shouldn't Americans know more about your future thoughts?

Waller
I believe financial markets perform best when reacting to incoming data. I think when financial markets ask, "How will the Federal Reserve respond to incoming information?" they are less efficient. The more the market focuses on what is happening in the real economy, judging what is good data and what is bad data, the better financial markets can price in the most likely scenarios and tail risks. Market prices may be the most important source of information guiding central bankers. However, when financial markets merely reflect what we say, we are taking away the most important source of information and ignoring it. I want us to build a system that removes these blindfolds, allowing the market to follow the data they find reliable. They will focus on the data, and we will focus on the data. They will bring us better information through market prices, enabling us to make more informed decisions. But ultimately, the goal I set at the beginning—to achieve the price stability target mandated by Congress—is what we must work on.

Speaker 6
If I could take you back to the meeting a bit. This is your first meeting. The board members seem quite hawkish. When you overall listen to their remarks, was there any discussion about the possibility of future rate cuts?

Waller
Today? There was only one proposal on the table. There was no discussion of any other proposals. Regarding that proposal, I would say the discussion was quite limited. Everyone was clear and unanimous about it. The practice of this central bank and others is to have a range of alternatives. Today, we only had one. I think further discussion deepens understanding and clarifies what we need to do and how to achieve it. I do not want to preempt what will happen in the future, but there is only one important issue for us. We accepted it. We had some good internal debates about it over the past few days, and ultimately I think we are in a better position.

Speaker 7
Thank you very much, I’m Claire Jones from the Financial Times. You know, in reading this very brief statement, which I think everyone present appreciates, people might wonder, given what you said here about U.S. inflation risks and your responsibilities, why not raise rates today? I want to ask, why not? What do you need to see to take action on rate hikes? Secondly, regarding your working groups, will you consider drawing on any best practices from other central banks? Thank you.

Waller
I’m glad they are used to letting you ask two questions because my answer to your first question will be very brief: I have nothing to say beyond the statement itself. In response to the question I received earlier, the market's reaction to our unfiltered remarks, I believe is more helpful than improvising after releasing a statement. Regarding best practices for working groups, this is something I have thought about. I have also participated in one or two working groups in my life. The best practice is: find the smartest people; ensure the working group has individuals with different backgrounds and inclinations so they can engage in some internal debate; and ensure that when you establish a working group, the team receiving the information also feels they have a stake in it. That is why we are looking for—though the final list is not yet determined—some of the most important talents in our building and across the reserve banks, from every field, and in a sense, loaning them to this small group for a few months. This way, the working group leaders can understand how the most analytically capable central banks in the world view this and can reflect that in the final best practices. We are not outsourcing decision-making to anyone. The management and past reserve banks chose the 19 people at the table. These will be our decisions. We can agree on some recommendations, disagree on others, and have good internal debates about them. But their outcomes, I hope and believe, will make our internal discussions better, stronger, and more dialectical so that we can ultimately achieve the price stability target.

Speaker 7
Regarding the market perspective you mentioned, just a quick follow-up. If you look at the 2-year Treasury yields, they actually indicate that the market thinks more tightening is needed. Is this also your interpretation of the message conveyed by the 2-year yields?

Waller
Well? We were in a good state. I think that is why we are not answering the third question. I do not intend to comment on the market's reaction over the past 30 or 60 minutes. What we are giving the market is a new chapter for the central bank, some new thinking. What we are giving to the market, households, and businesses, I believe, is a commitment to pose difficult questions to ourselves so that we can fulfill the promises we made in the past. This is a lot for financial markets to digest. I am not particularly interested in their initial reactions in the first few minutes or even days. I think what is most important is that financial markets, at least equally importantly, households and businesses know that this central bank will achieve price stability.

Speaker 8
Hello, Chairman Waller. I’m Brian Chung from NBC News. Thank you for answering our questions. So when you say we have abandoned forward guidance, for the average person, this might sound like the Federal Reserve will say less or provide less insight into the direction of its borrowing costs. So for those you might encounter in the grocery store, whose price tags are rising faster than their wages, how would you explain this? I don’t know, maybe "working groups" is the answer. But how would you communicate this era, this chapter of the Federal Reserve?

Waller
If I told someone in front of the milk shelf that I have a working group to handle this, I think that would be a terrible response. So I appreciate your question. If I encountered someone in the grocery store, I would tell them: we cannot have a very large impact on specific prices, like today’s oil prices or even the price of a dozen eggs. This does not have a primary impact on what we do. But we have a very important task there, which is to ensure that these changes in oil, beef, eggs, or milk do not spread throughout the economy and do not produce second and third-round effects. That is our job, our commitment, our ability, and we will achieve it.

Speaker 8
Is the relationship between the Federal Reserve and the Treasury also under review? There are usually breakfast meetings with the Treasury Secretary. Do you plan to continue this? Since your swearing-in, have you had any conversations with the President?

Waller
Regarding the President, I have nothing to tell you. Regarding the Treasury Secretary, he has been releasing photos of breakfast meetings. So I guess I cannot deny the long-standing tradition of the central bank chairman meeting with the Treasury Secretary weekly. I believe we have had three meetings so far. I believe he is overseas this week, so this week will be an exception. I think these discussions are very useful. The goals of the central bank and our roles and responsibilities are quite clearly distinguished from those of the fiscal authorities. In my view, monetary policy is independent in what we do. But that does not mean we are not interested. What happens with the fiscal authorities, my way of thinking is that this central bank needs to have a broad vision but focused responsibilities. We need to be quite interested in what is happening in the world. I won’t leak that we are very interested in what is happening in the Middle East. That will indeed have some impact on our daily work. That does not mean it is our responsibility, but I believe we will maintain a broad perspective. So far, my meetings with Secretary Basant have helped broaden that perspective. So we can be aware of things that may impact our daily work, even if that is not our direct responsibility.

Speaker 9
Steve Liesman, CNBC. Chairman, thank you. Thank you for answering my question. You have said before you became chairman that you believe productivity is one reason the Federal Reserve could lower rates. Do you still believe that?

Waller
The committee discussed productivity today. AI was mentioned. My previous view on this, as well as the view on socialization, is that artificial intelligence, the latest generation of general-purpose technology, may be the most significant change in the economy, business, and households that I have experienced in my adult life. It is full of tremendous opportunities and risks. I value both highly. You may have heard me say that AI is shorthand for American creativity. That does not mean it will be easy. It certainly does not mean it will not be disruptive. But in the long run, my belief—which I heard quite a bit of support for today in the committee—is that America is the winner, and as we walk down this path, America will ultimately be better. Now, back to the implementation of policy, timing, scale, speed, and the impact on output and employment, that is one of the things we set up the working groups to do.

Speaker 9
If you don’t mind following up from another angle, when you see strong job growth, high inflation, GDP seeming to perform well, and the stock market seemingly soaring. You examine this economy and feel the federal funds rate is restrictive?

Waller
So that is your second question. I will give the same answer as before. I said that when I think about policy implementation, what matters is the effect of the policy, not what we said, but what happened. The best way I can describe it is uneven. I do see some restrictions in areas like the real estate market. But it is difficult to use the same description anywhere else. I will add one more thing. You mentioned one of our dual mandates and employment. I do not believe we face a cruel choice. I disagree with the view expressed generations ago that the Federal Reserve chairman stands at such a podium and says you must choose, you must decide whether you are willing to tolerate higher inflation to allow more people to be employed. I do not believe that. What I believe is that if we do our job well, we can make strong growth, low prices, and strong employment compatible. So what you heard from the committee today is that we still have some work to do on price stability.

Speaker 10
Thank you, I’m Nick Timiraos from The Wall Street Journal. Chairman Waller, you have said multiple times that credibility is earned through delivery. If credibility needs to be earned through delivery, then action should be tightening, or at least threatening to tighten. Now, you did not do that today. Why?

Waller
The judgment you expressed has not been articulated by any of the 19 people in the room. We will meet again in six weeks and will discuss this issue again.

Speaker 10
If I could ask about AI. Infrastructure development is generating huge demand. Capital expenditures, data centers, electricity, the returns on productivity may be further out. So in your judgment today, is AI more about increasing demand or supply?

Waller
This is a good question for central banks and the economics community. We spend most of our time calculating demand. That is easier; we can see it, we can calculate it, we can check it, we can revise it. But what we need to do is infer supply. You will notice that in the second paragraph of what you described as a very brief statement, we have one sentence about the demand side and one of the same length about the supply side. Both are important; just because we can better calculate one does not mean we will favor it over the other. Regarding AI and the growth of data centers and related infrastructure, we are calculating the demand side, and there is no doubt that this is reflected in GDP data. When we infer the timing and extent of growth on the supply side, we are less certain. Intuitively, the supply side will expand, but it will take longer. I describe it this way: there is a race between supply and demand. Milton Friedman said that the only thing we know about economics is that there is a supply line and a demand line. They will eventually intersect. What does this mean for policy? The good news is that we have a working group to address this issue.

Speaker 11
Thank you, Chairman. It sounds like regarding the data working group, you are considering a thorough reform of the national accounts system, that is, the way the government measures the economy. Is that your goal?

Waller
To answer in one word: no. To answer in a few words: most of this data collection happens in other government agencies, and we have great respect and deference for them. But if in the process we propose suggestions—Federal Reserve staff have already begun developing these suggestions—about what they can do to help us as policymakers obtain information, we will not hesitate. Again, I do not want to try to define the scope of the data working group's research. But I do believe there will be a review of official statistics, and at least as importantly, consideration will be given to introducing best practices from the private sector and new analytical tools brought by AI. This way, we can integrate them to provide us with better real-time information. Thus, as I mentioned earlier, when we make decisions, we base them on real-time data, not on what we call real-time data, which is actually echoes of history.

Speaker 11
Okay, thank you. Another question I want to ask is about the building renovations. Are you considering making any changes to the renovation projects, given that they have become somewhat of a political football over the past year?

Waller
I have heard some things about that. I think I am not leaking anything, but my point is that when you enter a new institution, you should meet with the inspector general; that is just a good practice. I hope to continue this practice. I have already had one meeting with the inspector general. He told me things that I think everyone knows, and he will release a report on the building and building projects later this summer. I will be interested in reading that report. From my perspective, looking forward, what can or should we do from now until the projects are completed to be the best stewards of taxpayer funds and ensure we fulfill the commitments we made? There is still some work to be done. You might not be surprised that in the initial weeks, I have been somewhat busy with other matters, but I am committed to fully addressing all of the Federal Reserve's tasks in the coming weeks.

Speaker 12
Victoria Gida from Politico. I know you did not submit forecasts, but you are the authorized spokesperson for the FOMC. So I wonder if you can tell us, in the SEP, is the rise in inflation expectations all due to the war in Iran? What was the discussion like regarding the rise in inflation expectations and the potential slowdown in growth?

Waller
My interpretation of the discussions in the meeting is—I must admit, the SEP shows that half of the colleagues believe that given all developments, the policy rate should be at current levels or lower by the end of the year; the other half believe it should be higher. The 19th voter is me, and I did not submit. There are a range of views on the first and second-round effects, with no consensus or firm views reached. But we will meet again in six weeks. I think by then we will know more, and I believe my colleagues will be very attentive to new developments from now until then.

Speaker 13
May I quickly follow up on the SEP? You said you are still encouraging your committee colleagues to submit forecasts, even if you do not. So what do you see as the benefits of them doing so (even if you do not)?

Waller
This is a commitment made by the FOMC, and it is a commitment I hope we can fulfill. The commitment we made is to achieve price stability. I expect we will fulfill it by the end of this year. As I mentioned, if a new communication framework emerges, I would not be surprised. There will be some changes. Regarding the SEP, that is a committee discussion, a vigorous discussion. I believe we will have such discussions. I believe we will reach a better communication mix to fulfill our commitments. But I do not want to preempt what those will be. But before that, I will continue to expect colleagues to submit their SEPs. Some of them, I believe, think the current structural approach is fine, but I have heard a lot of interest in making real reforms on all these topics. You did not ask this, but I will answer. The past few days have been very friendly, and the past few weeks have been quite warm. This institution wants to figure out how we can do better. The institution is returning to first principles. What encourages me is that what we have done in the statement, the changes we are considering regarding the SEP, that instinct to open a new chapter is real. By the end of this year, I hope we can achieve some accomplishments both in form and substance.

Speaker 13
Could you please outline some principles guiding your own reaction function and tell us some conditions under which you believe the Federal Reserve should react?

Waller
This will be a very unsatisfactory final answer to the question. The Federal Reserve has many responsibilities, not only in monetary policy but also in supervision and regulation, consumer affairs, and payments. My own view is that our credibility comes from delivering on what we say in everything we do. In my initial three weeks, I have spent more time on monetary policy than on anything else. However, the more we deliver on our commitments as good regulators and supervisors, the more benefits we gain, and the more our credibility in monetary policy is enhanced. Look, when we achieve our price stability target— and we will—the American people will feel that the difficulties they have experienced due to inflation over the past five years are in the past. And that credibility will yield dividends in what we do. This institution will come to press conferences with the momentum of reform and the drive to do better. But we will achieve some accomplishments.

Speaker 14
The situation of labor data in various regions. How do you summarize the labor market?

Waller
The labor market now, do you think it is stable, or could it be a source of inflation? Thank you. Okay, yes. If I were to capture the committee's view, the committee believes the labor market is stable. Some members of the committee believe the trend is better than this. Trends are more important than data points. What happens over three months or six months is more important than any single data point or any single data release. I would say employment data has been moving in a positive direction. If I have heard one more thing about this topic in the past few days, it is that strong productivity driving growth is not something we fear but something we embrace. Thank you very much, everyone.