2019 CHAIR POWELL.

Good afternoon, everyone, and welcome.

I will begin with an overview of economic conditions

and an explanation

of the decisions the Committee made at today's meeting.

My colleagues and I have one overarching goal:

to sustain the economic expansion,

with a strong job market and stable prices, for the benefit

of the American people.

The U.S. economy is in a good place, and we will continue

to use our monetary policy tools to help keep it there.

The jobs market is strong, showing healthier wage gains

and prompting many people to join or remain in the workforce.

The unemployment rate is near historic lows,

and inflation remains near our 2 percent goal.

We continue to expect that the American economy will grow

at a solid pace in 2019, although likely slower

than the very strong pace of 2018.

We believe that our current policy stance is appropriate.

Since last year, however, we have noted some developments

at home and around the world that bear close attention.

Given the overall favorable conditions in our economy,

my colleagues and I will be patient in assessing what,

if any, changes in the stance of policy may be needed.

Let me explain in more detail how incoming data warrant our

current stance and a wait and see approach to changes.

With the benefit of fiscal stimulus and other tailwinds,

growth in 2018 was strong-in fact, at 3.1 percent,

the strongest year in more than a decade.

For some time, most forecasts have called for growth

to continue in 2019 at a somewhat lower

but still healthy pace.

For example, last September,

Committee participants saw growth coming in at

about 2.5 percent this year.

Data arriving since September suggest

that growth is slowing somewhat more than expected.

Financial conditions tightened considerably

over the fourth quarter.

While conditions have eased since then,

they remain less supportive of growth than during most of 2018.

Growth has slowed in some foreign economies-notably,

in Europe and China.

While the U.S. economy showed little evidence of slowdown

through the end of 2018, the limited data we have

so far this year have been somewhat more mixed.

Unusually strong payroll job growth in January was followed

by little growth at all in February.

Smoothing through these variations,

average monthly job growth appears to have stepped

down from last year's strong pace, but job gains remain well

above the pace necessary to provide jobs

for new labor force entrants.

Many other labor market indicators continue

to show strength.

Weak retail sales data

for December bounced back considerably in January but,

on balance, seem to point

to somewhat slower growth in consumer spending.

Business fixed investment also appears to be growing

at a slower pace than last year.

Inflation has been muted, and some indicators

of longer-term inflation expectations remain

at the low end of their ranges in recent years.

Along with these developments, unresolved policy issues,

such as Brexit and the ongoing trade negotiations,

pose some risks to the outlook.

Much of the discussion at our meeting focused

on what we should make of the varied indicators.

Today's Summary of Economic Projections, the SEP,

reflects the assessments

of individual Committee participants.

And these views are in line with a broad range of other forecasts

and point to a modest slowdown,

with overall conditions remaining favorable.

FOMC participants sought-now see 2019 growth

at roughly 2 percent, with the unemployment rate remaining

below 4 percent.

Core inflation, which omits the effects of volatile food

and energy prices, remains close to 2 percent.

Declines in oil prices since last fall are expected

to push headline inflation below 2 percent for a time,

but this effect is likely to be temporary.

Now, I'm describing views of the most likely outcomes,

but historical experience reminds us that growth

and inflation this year could be stronger or weaker

than what we now project.

The federal funds rate is now in the broad range of estimates

of neutral-the rate that tends neither to stimulate nor

to restrain the economy.

As I noted, my colleagues and I think

that this setting is well suited to the current outlook

and believe that we should be patient in assessing the need

for any change in the stance of policy.

"Patient" means that we see no need to rush to judgment.

It may be some time before the outlook for jobs

and inflation calls clearly for a change in policy.

In discussing the Committee's projections,

it's useful to note what those projections are,

as well as what they are not.

The SEP includes participants' individual projections

of the most likely economic scenario, along with their views

of the appropriate path

of the federal funds rate in that scenario.

Views about the most likely scenario form one input

into our policy discussions.

We also discuss other plausible scenarios, including the risk

of more worrisome outcomes.

These and other scenarios and many other considerations go

into policy but are not reflected in projections

of the most likely case.

Thus, we always emphasize that the interest rate projections

in the SEP are not a Committee decision.

They are not a Committee plan.

As Chair Yellen noted some years ago, the FOMC statement,

rather than the dot plot, is the device that the Committee uses

to express its opinions about the likely path of rates.

Today the Committee released Balance Sheet Normalization

Principles and Plans-revised Balance Sheet Normalization

Principles and Plans.

We have long said that the size

of the balance sheet will be considered normalized

when the balance sheet is once again

at the smallest level consistent

with conducting monetary policy efficiently and effectively.

We have sought to make the normalization process

transparent, predictable, and gradual in order

to minimize disruption and risks to our dual-mandate objectives.

Today's announcement is the result of discussions

over the past four FOMC meetings about how best

to achieve these goals.

The plans have many technical details, and I'll be happy

to answer questions on those details.

But, for now, I'll summarize the key elements.

Since October 2017, we have been allowing our asset holdings

to decline by not reinvesting all of the payments we receive

as securities matured or were prepaid.

Today we announced that we intend to slow the runoff

of our assets starting in May and to cease runoff entirely

in September of this year.

In September, reserve balances may still be somewhat

above the level required

to conduct policy efficiently and effectively.

If this is so, we may hold the size

of our asset holdings roughly constant for a time.

During this time, ongoing gradual increases in currency

and our other nonreserve liabilities would imply very

gradual declines in reserve balances.

When the Committee judges

that reserves should not decline further,

securities holdings will again begin to rise,

as dictated by the growth of demand for our reserve

and nonreserve liabilities.

We believe that these plans will facilitate a predictable,

transparent, and smooth process,

and we will make additional adjustments

if conditions warrant.

The Committee will soon turn

to a few remaining normalization topics,

including the desired maturity composition of our portfolio

of Treasury securities.

We maintain our long-stated intention to return

to a portfolio consisting mainly of Treasury securities.

Thank you.

And I will be glad to take your questions.

HEATHER LONG.

Heather Long from the Washington Post.

On the broader economy, can you clarify how worried the FOMC is

about a steep slowdown?

Some of the actions today look like there is more worry.

And on the balance sheet, can you clarify:

Does the FOMC see the runoff as a form of monetary tightening?

CHAIR POWELL.

So, on the outlook, our outlook is a positive one.

So, as I mentioned, FOMC participants continue

to see growth this year of around 2 percent,

just a bit below what we saw back in-at the end of last year.

And part of that is seeing

that economic fundamentals-underlying economic

fundamentals are still very strong.

You have a strong labor market by most measures.

You have rising incomes.

You've got very low unemployment.

You have confidence surveys for households and also

for businesses that are at attractive levels,

and you also have financial conditions

that are more accommodative

than they were a couple of months ago.

So we see the outlook as a positive one.

As far as balance sheet-the balance sheet plan,

the answer to that is, you asked whether that's related

to our monetary policy, in effect,

and the answer is really "no."

We are-we still-we think of the interest rate tool

as the principal tool of monetary policy, and we think

of ourselves as returning the balance sheet to a normal level

over the course of the next six months.

And we're not really thinking of those

as two different tools of monetary policy.

STEVE LIESMAN.

Steve Liesman, CNBC.

Mr. Chairman, can you talk

about how global developments are affecting the U.S.?

What's the cause of the weakness over there?

How much is it responsible for the downgrade in GDP over here?

And what impact are tariffs, both in the United States

and retaliatory tariffs, having on both the U.S.

and the global economies?

Thank you.

CHAIR POWELL.

So the global economy was a tailwind

for the United States in 2017.

That was the year of synchronized global growth.

And we began 2018 expecting and hoping for more of the same.

What happened instead is that the global economy started

to gradually slow, and now we see a situation

where the European economy has slowed substantially-and

so has the Chinese economy,

although the European economy more.

And just as strong global growth was a tailwind,

weaker global growth can be a headwind to our economy.

How big is that effect?

It's hard to be precise about it, but,

clearly, we will feel that.

It is an integrated global economy,

and global financial markets are integrated as well.

In terms of what's causing it,

it seems to be a range of different things.

In China, you have, you know,

factors that are very specific to China.

The main point, though, is that, I would say,

the outlook-let's look at the outlook.

Chinese authorities have taken many steps since the middle

of last year to support economic activity,

and I think the base case is that, ultimately,

Chinese activity will stabilize at an attractive level.

And in Europe, you know, we see some weakening, but, again,

we don't see-we don't see recession,

and we do see positive growth still.

You ask about tariffs.

I would say, tariffs may be a factor in China.

I don't think they're the main factor.

I think the main factors are the delevering campaign

that the government undertook a couple of years ago

and also just the longer-term slowing

to a more sustainable pace of growth

that economies find as they mature.

In terms of our own economy,