Federal Reserve raises interest rates at its first meeting of 2023

Federal Reserve Reporter Jennifer Schonberger recaps the Fed's policy statement and press conference on Wednesday, Feb. 1.

Video transcript

DAVE BRIGGS: All right, to breaking news. Jerome Powell just gave that speech after the eighth rate increase this year, 25-point basis hike. And he reiterated that language from March of ongoing increases.

Our own Jen Schonberger is there. She was there for the entire speech. Jen, nice to see you. What was your biggest takeaway from the Q&A session?

JENNIFER SCHONBERGER: Hey there. Good afternoon, Dave.

Yeah, Fed Chair Powell striking a hawkish tone yet again, saying that while inflation has come down the past three months, they still need to see more substantial evidence that it is coming down on a sustained basis. Fed Chair Powell saying there's more work to do and that the Fed could raise rates higher than what was previously projected back in December of that range of 5% to 5 and 1/4%. Take a listen.

JEROME POWELL: We think we've covered a lot of ground, and financial conditions have certainly tightened. And I would say we still think there's work to do there. We haven't made a decision on exactly where that will be.

I think, you know, we're going to be looking carefully at the incoming data between now and the March meeting and then the May meeting. I don't feel a lot of certainty about where that-- where that will be. It could certainly be higher than we're writing down right now. If we come to the view that we need to write down, you know, to move rates up beyond what we said in December, we would certainly do that. At the same time, if the data come in in the other direction, then we'll make data-dependent decisions at coming meetings, of course.

JENNIFER SCHONBERGER: Powell said we could get back to 2% inflation without a significant downturn in the economy and without a significant spike in the unemployment rate. He says that the committee right now is-- and I should note he does not see cutting rates this year. He reiterated that again. Now, Powell said the committee is not exploring resuming raising rates after pausing, as Dallas Fed President Lorie Logan had perhaps indicated in a recent speech.

On the wage-price spiral and the potential there, he agreed with Vice Chair Brainard that he does not see a wage-price spiral right now and it's less of a risk and that as inflation continues to come down and people see that, then that could help with sentiment there as well.

Now, Powell did address failure to raise the debt limit, saying there's only one way forward and that is for Congress to raise the debt ceiling, that any deviations from that path would be highly risky. He says this is a matter to be resolved by Congress. This doesn't involve us. He ultimately believes Congress will act on this. Back to you.

SEANA SMITH: Jen, what about the comments in regards to a recession? Because it seems like Powell once again remaining pretty optimistic, saying that there was a good chance that we might be able to avoid one.

JENNIFER SCHONBERGER: Yeah, he seems to have a different outlook than the market does. He says his base-case scenario is that we basically have that soft landing where the unemployment rate doesn't spike that much and the economy doesn't have a significant decline.

To his credit, that is what we're seeing right now. There are some signs flashing red, though, if you look at the manufacturing data out this morning. We'll get a jobs report on Friday morning. So we'll see how this goes.

The Fed has projected just half a percent of growth overall this year, but that would still technically be positive. So he-- Fed Chair Powell very firmly staying in that camp right now of no recession this year. Of course, we'll see how things play out. The private sector certainly believes otherwise.

DAVE BRIGGS: A hawkish tone, but the markets see it otherwise, don't they? They are very much in the green. Jen Schonberger, great job. Thanks so much.