00:03Chair Powell, my question is about what have you learned over the last few months about the inflation generating and price pass-through process?
00:11And just to drill down, the June CPI report showed evidence of tariff-induced goods inflation.
00:16Now, the tariff landscape is only starting to be settled with some of these more recent deals.
00:21Given the lags between when tariffs are announced and when they show up in goods prices, is two months a long enough horizon to evaluate the impact
00:31and be confident that tariffs aren't impacting the broader inflation process?
00:37I think you have to think of this as still quite early days.
00:41And so I think what we're seeing now is substantial amounts of tariff revenue being collected on the order of $30 billion a month,
00:48which is, you know, substantially higher than before.
00:52And the evidence seems to be mostly not paid, paid only to a small extent through exporters lowering their price.
01:02And companies or retailers, sort of people who are upstream, institutions that are upstream from the consumer, are paying most of this for now.
01:10Consumers are starting to show up in consumer prices, as you know, in the June report.
01:15We expect to see more of that.
01:16And we know from surveys that companies feel that they have every intention of putting this through to the consumer.
01:25But, you know, the truth is they may not be able to in many cases.
01:28So I think we're just going to have to watch and learn empirically how much of this and over what period of time.
01:34I think we've learned that the process will probably be slower than expected at the beginning.
01:41But we never expected it to be fast.
01:45And we think we have a long way to go to really understand exactly how it will be.
01:49So that's how we're thinking of it right now.
01:51So if I could follow up, is the reticence to look through core goods inflation being driven by the judgment that during the pandemic expectations proved more adaptive than anyone at the Fed expected?
02:03Is it being driven by uncertainty over how restrictive policy is?
02:07You could argue we are a bit looking through goods inflation by not raising rates.
02:12You know, we haven't reacted to new inflation.
02:15But, I mean, I wouldn't insist upon that.
02:17But I don't think – I think the base case – as I said, a reasonable base case is that these are one-time price effects.
02:28Of course, in the end, there will not be – this will not turn out to be inflation because we'll make sure that it's not.
02:36We will, through our tools, make sure that this does not move from being a one-time price increase to serious inflation.
02:43We want to do that efficiently, though, efficiently.
02:45And that means we want to do it – if you move too soon, you wind up maybe not getting inflation all the way fixed, and you have to come back.
02:55That's inefficient.
02:56If you move too late, you might do unnecessary damage to the labor market.
03:00So there won't be, in the end, a big inflationary problem.
03:05What we're trying to do is accomplish that in a way that is efficient.
03:10But, in the end, there should be no doubt that we will do what we need to do to keep inflation under control.
