Transcripts For BLOOMBERG Bloomberg Markets Americas 20240714

Of 131. 10. S a bit ago, we crossed the 3000 fed for the s p 500 on the chairs remarks. The 10 year yield at 2. 06 right now. Dq a day be interesting. Q a will be the interesting. We will see if that moves anything. Terms of analyst action, deere is down about three quarters of 1 . It had a huge move higher over the last few months, up 20 or so. Analysts saying maybe that is baking in the full valuation now. Comcast up 2. 1 on an upgrade now as well. Guy Jerome Powell is in the room. We will take you there very shortly. Stoxx 600 up, the euro up come of the german twoyear narrowing its losses on powell. It really is the only story this afternoon moving markets. The dollar is down, stocks higher, bonds a bigger move in the United States then here in europe, but the gravitational effect of what Jerome Powell said in his statement is having a big effect around the world. Vonnie on a slightly different note, lets take a look at a live event in new york city, a tickertape parade, not to rub your nose in it or anything, guy, to honor the u. S. Womens team for the world cup victory on sunday. The parade is happening along the canyon of heroes in lower manhattan, a stretch of broadway from battery park to city hall. You can follow along live on your bloomberg. Of course, people turning out in the thousands to welcome the soccer team. You still have a chance in cricket though, guy. Guy thats still going. And then of course, the main event of the year, the Rugby World Cup coming up in japan. Vonnie thats for sure. Thats a good analysis. Market participants are awaiting jay powells two day testimony on capitol hill. We are anticipating lawmakers will grill chair powell on matters young Interest Rates as well. Joining us from washington is michael mckee. Missing the tickertape parade here, but theres lots of talk in washington this morning, and there could be some fireworks from some of the committee members. What are we anticipating they will grill chair powell about . Michael it is an interesting case because theres not going to be a lot of disagreement on capitol hill with the stance the fed is taking. Members of congress have to run for reelection in 2020, so they are not going to be upset but the idea the fed is cutting rates to boost the economy ahead of that. We dont see a partisan divide there. We may see it come in talk of the president and his efforts to politicize the fed, so it will be interesting to see what Jerome Powell says about that. With reporters, hes been very circumspect, saying that he has a fouryear term and he intends to serve it. We have new regulations for bank capital, whether they are enough , whether the bank is cutting back too much. We may see more of that in the senate tomorrow. In terms of Monetary Policy, look for more detailed looks at why the fed thinks we may need an Interest Rate cut now, and look at chair powell try to explain that withouts adjusting the economy is in trouble. Guy hes got to thread the needle, but hes definitely turned more dovish. That would be my sense of what we seen so far in terms of the statement. The indication that things have got worse from the last meeting is highly significant. The market kind of retreated post payrolls. Should we now be pricing in, or would you expect to see more people pricing in the possibility of further rate cuts beyond the 25 in july . Michael youve got two priced in at the moment, and i think the fed will underscore that. But i think same time, try to keep some sort of wiggle room for themselves on the second one. Theyve pretty much locked in a cut, and powell has done nothing to disabuse that. It is the second and third cut, the idea that they will go again , that he will try to tie to data dependence. He will repeat that formulation they have been using, that they will act as appropriate. Vonnie it is interesting that powell and his statement talks about the debt ceiling, the they will runting out of money. How much do you think lawmakers will focus on this part of the statement . Michael he may get a question or two on that. Typically the fed chairman says the u. S. Cant default, it would be a terrible thing, and leaves it up to congress to figure out how to pay the bills, urges them to do something, but says it is not in his purview to make suggestions on what. He will turn aside probably any particular kind of question on what they should do, but endorse the idea of getting some sort of agreement. Guy he talks about the fact that inflation and the inflation shortfall looks to be a bit deeper then maybe was anticipated a little while ago. Talk me through how the fed is going to think about this inflation problem. We talked about it in the past a great deal. This is basically an indication that they are not fulfilling their mandate, at least on one half of that mandate. In order to get inflation up to target or keep it at target, what does the fed need to do, do you think . Michael that is a really important question that i dont think theres a good answer to at the moment. Powell will say cutting rates should help with that. The textbooks will tell you it should help with that because if it makes imports more expensive, it raises prices. But at this point, weve had zero rates for quite some time. We had them for seven years and didnt get inflation sustainably to target. The headwinds to inflation we have seen over the last couple of years remain in place, so why do they think a 25 or 50 basis point rate cut would raise inflation . I dont know, and i would be interested to hear an explanation. Vonnie he begins the statement by talking about Congress Giving the fed an important degree of independence. Will some lawmakers focus on this in order to send a message to the administration . Michael sure, expect that. It as maxineget waters begins the chairs opening statement. That may definitely come up. Guy in terms of the market reaction, in some ways the fed needs to see this because there is this kind of argument that the hold is basically a hike because if they hold, financial conditions will likely tighten. We are not seeing that now, so at 3000. S now this is the kind of reaction the fed needs to get the because if it doesnt, then that is really going to tighten things up. Lets take a listen. Lets not answer that question right now. Lets listen to congressman waters. He has said the fed doesnt have a clue, and called it the most difficult problem for the u. S. According to media reports, he has discussed firing chairman he has fireds others he does not agree with. Lets be clear, it is essential that the Federal Reserve maintain its independence from the executive branch, and so i urge chairman powell and other Federal Reserve board governors not to submit to the highpressure tactics of this president , who continues to push reckless and harmful economic and social policies. Another issue i hope chairman powell will address today is facebooks recently announced plan, along with 27 other companies, to develop a cryptocurrency and digital wallet. I and other democrats on the committee have raised concerns that facebooks planned products may ultimately be intended to establish a parallel banking and Monetary Policy system to rival the dollar. In a letter last week, we ask facebook to agree to a moratorium on any Movement Forward on its plans to create a cryptocurrency or digital wallet. I believe that facebook, what they are planning raises Serious Problems for trading, national security, and Monetary Policy concerns for consumers, investors, u. S. Economy, and the Global Economy. Facebooks foray into this field should signal to all of us that our Current System of regulation lacks adequate coordination, safeguards, and attention to cryptocurrencies. Chairman powell, the fed should be a leader on this issue, and should not take a waitandsee approach when it comes to examining a Financial System involving 2. 4 billion people. I look forward to hearing your views on facebooks plans to create a cryptocurrency today. Another issue i would like to discuss is bank regulation. I remained concerned about the Federal Reserves actions to weaken actions that predecessors put in place following the financial crisis. It appears that the fed may be following the trump administrations deregulatory plan to weaken the capital and liquidity buffers of some of the largest banks. As ive said before, i believe this to be ill advised, particularly when many economists, including at the Federal Reserve, believe that current Knight Capital levels are on the low end current bank capital levels are on the low end of what would be able to withstand a financial crisis . I look forward to discussing withstand a financial crisis. I look forward to discussing these matters with you today. The Ranking Member for an opening statement. Chairman powell has prioritized outreach to this congress, and birds of this committee have and members of this committee have benefited greatly since then. We thank you for your return. I know the markets are interested in your testimony, but we as policymakers are interested in your testimony. February, the economy over the last two and a half years have witnessed remarkable growth, and an limit has reached lowes many believed were impossible reached lows many believed were impossible. Republican bled tax relief and reform have made these possible. We are seeing this in wage growth, continued job growth, and all americans are benefiting from this. These benefits continue to endure five months since your last testimony, and in the most recent fomc statement, the fed concluded that the labor markets remain strong and Economic Activity is rising. Job gains have been solid, and the unimplement rate remains low, but we cannot the Unemployment Rate remains low, but we cannot take our foot off the pedal. He said was undertaking target rulemaking to allow Financial Institutions to operate efficiently and compete globally. I hope that you will continue to work to undertake these efforts with a sense of urgency, especially in the rulemaking category. I also encourage chairman powell to retain transparency in community she was capitol hill, especially when the fed is considering changes to policies and operations. At our last hearing, the chairman noted the fed continues to support its current inflation target, but there are numerous proposals that would affect how the fed might pursue that target. I hope the fed will approach such proposals with an appropriate level of prudence given the limitations of central bank toolkits at this point in our economic cycle. Until we fully understand how thesetation limitations have emerged and how they can be overcome. Finally, let me reiterate my concerns. My concern shared by the fed itself that Global Economic uncertainty can result in headwinds here at home. Europe and china represent risks that the fed will continue to monitor, and where appropriate, work to medicate. I hope work to mitigate. I hope we can continue to work on those. Let me highlight china in particular. Beijing has attended to make certain marketoriented reforms. I am concerned that these may not be deep enough. When the worlds second largest economy is a oneparty state without the rule of law, without transparent decisionmaking, where Monetary Policy and allocation of capital bends to politics and cronyism, where one million citizens can be locked up in camps while another million take to the streets to defend their freedoms, then we all need to focus on that country and its regime as a unique source of risk to the global stability and Global Growth. I would encourage the chairman to work with his colleagues, both here and abroad, so we have a sufficient understanding of china, as well as a sufficient set of tools within Central Banks if something were to go wrong. Again, thank you, chairman powell, for returning today. Thank you for your responsiveness. Your candor is welcome and encouraged. We thank you for i temping to speak like a normal human being, even amidst a very complex Financial Market and complex decisionmaking within our independent Monetary Policy group called the Federal Reserve. Thank you. Rep. Waters the chair mr. Cleaver for one minute. Rep. Cleaver thank you for being here. I wanted to discuss the impact of this trade war. We are 500 days in this trade movebut i cant hardly because the number one concern im having is that this publiclyation is very trying to force Financial Markets and the Federal Reserve to lower Interest Rates, so i be anet what i think to irrational trade war and poor fiscal policies. , and in january i will have been on this committee for 15 years, and i have never seen a president inal a president meddle the Federal Reserve at this president has, and it is deeply disturbing, and the problem is it seems to be working. We are moving in the direction hes been ordering. Hopefully you can address some of this when we get back into the question and answer period. Thank you, madam chair. Waters the chernow recognizes the subcommittee Ranking Member mr. Stivers. Rep. Stivers thank you. Welcome back to the committee. Because of the taxcut and regulatory reforms, the u. S. Has seen record Economic Growth, wage growth, and Consumer Prices. We have seen a mostly study economy was unemployment at 3. 7 and Consumer Prices only edging up about 0. 1 , but ive heard anecdotal evidence of slowing investment and price increases. I want to thank you for your steady hand on Monetary Policy. That is an important part of our economic success. While acknowledging the recent success, i know the fomc meetings have pointed to uncertainties in comic outlook, meaning your data may be telling you the same thing ive been hearing. I agree with chair waters that i want to hear about your perspective on facebooks cryptocurrency. I think they are attending to undermine the dollar as the worlds currency. I also am interested in hearing your views on where we are in the Business Cycle and what we can do to support you on fiscal and other policies. I yield back the balance of my time. Rep. Waters thank you very much. I want to welcome our distinguished witness Jerome Powell, chair of the board of governors for the Federal Reserve system. He has served on the board of governors since 2012, and as chair since 2017. Mr. Powell has testified before this committee, and i believe he does not need any further introduction. Without objection, your written statement will be made part of the record. Mr. Powell, you are now recognized to present your oral testimony. Chair thank you, powell thank you, and good morning. I am pleased to present the Federal Reserves semiannual Monetary Policy report to congress. Let me start by saying my colleagues and i strongly support the goals of maximum employment and price stability that congress has set for us for Monetary Policy. We are committed to providing clear explanations about our policies and activities. Congress has given us an important degree of independence so we can effectively pursue our statutory goals aced on objective analysis and data. We appreciate that our independence brings with it an obligation for transparency so that you and the public can hold us accountable. Today i will review the current Economic Situation and outlook before turning to Monetary Policy. I will also provide an update on our ongoing public review of our framework for Monetary Policy. The economy performed reasonably well over the first half of 2019, and he current expansion is now in its 11th year. However, inflation has been running below the fomcs symmetric two point symmetric 2 objective, and concerns about Global Growth have been weighing on Economic Activity and outlook. The labor market remains healthy. Job gains averaged 172,000 per month from january through june. This number is lower than the average of 223,000 jobs per month last year, but above the pace needed to provide jobs for new workers entering the labor force. Consequently, the unemployment ine moved down from 3. 9 december 2 3. 7 in june, close to its lowest level in 50 years. Job openings remain point of and employers are increasingly willing to hire workers with fewer skills and train them. As a result, the benefit of a strong job market have been more widely shared in recent years. Wage gains have been higher for lower skilled workers. That said, individuals and some demographic groups and certain parts of the country continue to face challenges. For example, Unemployment Rates for africanamericans and hispanics remains well above the rates for whites and asians. The share of the population with a job is higher in urban areas than rural communities. This gap has widened over the past decade. A box in the july monetary comparesport individuals with Different Levels of education. Annual rated at an of three point 1 in the First Quarter of 2019, similar to last years pace. This strong reading was driven largely by net exports and inventories, components that are not generally reliable indicators of ongoing momentum. The more reliable drivers of growth in the economy are Consumer Spending and Business Investment. While growth in Consumer Spending was weak in the First Quarter, it is now running at a solid pace. However, growth in Business Investment seems to have slowed notably, and overall growth in the Second Quarter appears to have moderated. The slowdown in business fixed investment may reflect concerns about trade tensions and Slower Growth in the Global Economy. In addition, Housing Investment and manufacturing output declined in the First Quarter and appeared to have decreased again in the Second Quarter. After running close to our 2 objective over much of last year , overall Consumer Price inflation measured by the 12 month change in the price index for personal consumption expenditures climbed this year and stood at 1. 5 in may. A 12 month change in core pce inflation, which excludes food and energy prices, has also come down this year at 1. 6 in may. Our baseline outlook is for Economic Growth to remain solid, labor markets to stay strong, and inflation to move back up over time to the committees 2 objective. However, uncertainties about the outlook have increased in recent months. In particular, economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the u. S. Economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and brexit. There is a risk that week inflation will be even more persistent than we currently anticipate. We are carefully monitoring these develop ins and will continue to assess their implications for the u. S. Economic outlook and inflation. The nation also continues to confront longerterm challenges. Labor force per dissipation by those in their prime working force is now lower in the United States force participation by those in their prime working years is now lower in the United States than other parts of the world. A relative stagnation of middle and lower incomes and low levels of upward mobility for lower income families are also ongoing concerns. In addition, finding ways to boost productivity growth, which leads to rising wages and Living Standards over the longerterm, should remain a High National priority. I remain concerned about the longerterm effects of high and rising federal debt, which can restrain private investment and reduce productivity and overall Economic Growth. The longer run vitality of the u. S. Economy would benefit from efforts to address these issues. Against this backdrop, the fomc maintains the target range for the federal funds rate at 2. 25 to 2. 5 in the first half of this year. We stated that we would be patient as we determined what future adjustments to the federal funds rate it be appropriate to support our goals of maximum employment and price stability. At the time of our may meeting, we were mindful of the ongoing crosscurrents from Global Growth and trade, but there was tentative evidence that these crosscurrents were moderating. The latest data from china and europe were encouraging, and there were reports of progress in trade negotiations with china. Our continued patient stance seemed appropriate and the committee saw no strong case for adjusting our policy rate. , theseur may meeting crosscurrents have reemerged, creating greater uncertainty. Apparent progress on trade turned to greater uncertainty, and are contact in Business Developer reports highlighted this. Growth around the world has disappointed around the world grows around the world has disappointed, and will continue to affect the u. S. Economy. These may have contribute it to the drop in Business Confidence in some recent surveys and may have started to show through to incoming data. At our june meeting, we indicated that in light of increased uncertainties about the Economic Outlook in muted inflation pressures, we would closely monitor the implications of incoming information for the Economic Outlook and would act as appropriate to sustain the expansion. Thatfomc participants saw the case for a somewhat more accommodative Monetary Policy stands strengthened, based on incoming data and other develop its. It appears that uncertainties around trade tensions and the strength of the Global Economy continue to weigh on the Economic Outlook. Inflation pressures remain muted. The fomc has made a number of important decisions this year about our framework for implement and Monetary Policy and our plans for completing the reduction of the fed securities holdings. At our january meeting, we decided to continue to implement Monetary Policy using our current policy regime with ample reserves and emphasize that we are prepared to adjust any of the details for completing Balance Sheet normalization in light of economic and financial develop its financial developments. In may come of the decline in the fed aggregate securities the july Monetary Policy reports provides details on these decisions. The report also includes an update on Monetary Policy rules. The fomc routinely looks at policy rules that recommend a level for the federal funds rate based on inflation and Unemployment Rates. I continue to find these rules helpful, although using these requires careful judgment. We are conducting a public review of our Monetary Policy strategy, tools, and commune occasions, the first review of its kind and communications, the first review of its kind for the fomc. The review has started with outreach to and consultation with a broad series of groups which fed listens events. The fomc will consider questions related to the events, and will publicly report the outcome of our discussions. Thank you, and i will be happy to respond to your questions. Rep. Waters thank you very much, chairman powell. I now recognize myself for five minutes for questions. On june 18, facebook announced its plans to launch libra, a new global cryptocurrency, as well as a new Payment System which will facilitate libra transactions. On june 21, the Federal Reserve banks chairman of supervision wrote a letter in his capacity to g20 leaders noting a wider use of new types of cryptocurrency, of curto assets for retail payment purposes, would of Crypto Assets for retail payment purposes, would being would warrant subject to Higher Standards of regulation. Chairman powell, did the Federal Reserve speak with facebook about their libra currency . Raised . Ere any concerns does the Federal Reserve have any authority to supervise and regulate what could be the Worlds Largest Payment System . Does the Federal Reserve have any concerns about Monetary Policy with regard to libra . Chair powell thank you, madam chair. Meetingctually have a with representatives of facebook a couple of months before the announcement. They made a fairly broad set of visits to authorities around the world. Getting to your questions, let me start by saying that we do support responsible innovation in the Financial Services industry as long as the associated risks are appropriately identified and managed. As we will discuss, while the project sponsors hold out the possibility of public benefits, including improved Financial Access for consumers, libra raises many serious concerns regarding privacy, money laundering, consumer protection, and price stability. These should be thoroughly addressed. We set up a working group to focus on these set of issues. We are coordinating with colleagues in the government, in gillett torrey agencies at the treasury, with desh in regulatory agencies at the treasury, and with banks around the world. We think this should be a patient and careful one and not a sprint to implantation to implementation. The fed has our own working group. Believee f sock i there is another working group. Rep. Waters is this group reviewing the extent of policy questions and the impact that libra has . Chair powell i believe they are. There was a staff level meeting just last week to focus on libra , so all the agencies were there. I think the answer to your question would be yes. Do using they are considering designating the Libra Association as systemic financial utilities or Nonbank Financial Companies to be enhanced to enhanced Regulatory Oversight . Chair powell i think it is early to say. There hasnt been a principals meeting since the libra announcement. While there have been conversations, i think it is highly likely that fsoc will take this on any meaningful way. Rep. Waters you very much. If you got a thank you very much. If you got a call from the president saying, im firing you, what would you do . Chair powell of course, i would not do that. Rep. Waters i cant hear you. [laughter] chair powell my answer would be no. Rep. Waters you would not pack up and leave . Chair powell no. Rep. Waters because you believed the president is not have the authority . Pres. Trump i believe ive said chair powell i believe ive said what i mean to say on this issue, that i am afforded a fouryear term, and i intend to serve it. Rep. Waters . I hope that everyone heard that rep. Waters i hope that everyone heard that. I will now defer to the Ranking Member, mr. Mckendry. Your testimony, you said you would use macro data to determine whether lower Interest Rates are required at the end of the month or not. Would likely data lead to your recommending a change in rates . Chair powell between now and the end of the month, theres data coming in on almost everything. You have labor market data, secondquarter gdp, retail sales , a broad range of data coming over the next three weeks, and we will be looking at all of that. I wouldnt point to any one data point or any period. We try to look over longer periods of time and assess what is really going on at a more fundamental level. That is what we will do as we evaluate the incoming data. Also anenry there is understanding of the market assumption of what the federal will do as well, is there not . Chair powell we look at a broad range of financial conditions. Our policy works through financial conditions, so we will look at a broad range of things in Financial Markets. Rep. Mchenry so a broad range of things, macroEconomic Data. Emotion . Chair powell emotion . Not on our part. We will try to be rational and very analytical and transparent about how we think about these things. Rep. Mchenry so along the lines of transparency, the velocity of the economy you speak to in the larger global macroeconomic issues that are at play here as well. , is theose lines Federal Reserve does the Federal Reserve have the capacity to make independent Monetary Policy decisions under . Aw chair powell yes we do. Carol is that rep. Mchenry is that impeded by people saying negative things about you . Is that enhanced or diminished by people saying negative or positive things about you . Chair powell neither. We will always do it to the best of our ability and based on objective analysis. Rep. Mchenry we have a significant change to libor policy. I wrote to vice chair corals along those lines. Theres been major progress made in terms of the swaps and derivatives contracts. I remain concerned about legacy retail contracts as well. Has the fed undertaken analysis along those lines about legacy retail contracts and the use of libor . Chair powell indeed we have. That is a very important art of project going forward. Weve reached out to revisited ofs of users two representatives of users of libor for some time now to deal with that. As you know, a significant quantity of libor contracts are in fact mortgages and the like. That is a really important area. We did the derivatives things first, but we are working hard on the retail side now. Rep. Mchenry is there any estimate on the number of loans that have to be renegotiated because of this policy change . Chair powell i dont have a number for you. Rep. Mchenry all right. I also want to touch on project libra. You mentioned and answered a number of those questions. It looks like you are quite prepared for that. You mentioned Financial Stability as a concern. Why . Why is project libra a question of Financial Stability in your view . Chair powell really due to the possibility of quite broad adoption. Facebook has a couple billion plus users, so you have for the first time the possibility of a very broad adoption. If there were problems there associated with money laundering, terror financing, any of the things we are focused on, including the company, they would rise to systemically important levels just because of the mere size of the facebook network. The company has said so expose atlee. Rep. Mchenry is at a problem said so explicitly. Rep. Mchenry is any problem we dont have a Regulatory Regime for these companies in the United States . Chair powell that is a question of whether we are impeding blockchain. I dont believe so. I dont know the answer to that. Rep. Mchenry theres an opportunity here for Financial Inclusion and innovation benefits if this worked well, is there not . Chair powell there is that possibility, and that is the main benefit the company is holding out. I also mentioned that we are open to financial innovation. We just want it to take place in a safe and sound way. Rep. Mchenry thank you. Rep. Waters the gentlewoman from new york, ms. Maloney, is now recognized for five minutes. Thank you. In june, the fed decided not to cut Interest Rates and to take a waitandsee approach instead. In your press conference, you said this approach was justified because, we will see a lot more on all of these issues in the very near term. Last week we got the job numbers for june, and they were very strong, with employers adding 224,000 jobs. The june jobs did report change your outlook for whether a reduction in Interest Rates is appropriate in the near term . Chair powell a straight answer to your question is no, but i will give you the context. We look at a broad range of data. Lets start abroad, where i think since the june meeting and for a period before that, the data have continued to disappoint. That is very broad across europe and around asia, and that continues to weigh and by the way, manufacturing, trade and investment are weak around the world. In the United States, we did get a job report that was positive. That is great news. We had some other reasonably good news. U. S. Data came in about as expected. That, lets goy to trade, weve agreed to begin discussions again with china. While that is a constructive step, it doesnt remove the uncertainty that we see as overall weighing on the outlook. I would say that the bottom line for me is that the uncertainties around Global Growth and trade continue to weigh on the outlook. In addition, inflation continues to be muted, and those things are still in place. Rep. Maloney some economists and many market to spence believe the fed should cut interest Market Participants believe the fed should cut Interest Rates by a full 50 basis points in july instead of the normal 25 points. Personally, i dont see the reason. What economic factors would you think would justify cutting rates by a full 50 basis points . Chair powell in our meeting in three weeks, we will be looking at a full range of data. I would just take you through the story i just told you. What we are thinking about is the extent to which trade to the elements and concerns over Global Growth are weighing on the outlook, and also the performance of inflation. Those are the factors weve identified, and all of that will go into our decisionmaking. Rep. Maloney you have repeatedly stressed that uncertainty about trade policy is a Major Economic headwind and is one of the factors that could lead to cut rates this month. As we have seen from the president , we will likely not get any certainty on trade policy because it changes every day. What kind of progress in trade negotiations do you need to see in order to put your mind at ease about trade developments not being a headwind to Economic Growth . Chair powell i guess i ought to start by saying that one could interpret what im saying about any criticisms as of trade policy. I do not play a role in criticizing or assessing trade policy. We recognize anything that can affect our ability to achieve the dual mandate goals you assign us as something that could be a percival call for a policy response a principle call for a policy response. Right now that is global weakness and trade that are widely thought to have that effect. That is all. I wouldnt want to prescribe a specific answer, and it wouldnt be hours to do in the first place. Rep. Maloney hopefully we will have some answers on trade soon, and thank you for your service, and i yield back. Theie rep. Waters gentlewoman from missouri, ms. Wegner, is recognized for five minutes. Rep. Wagner thank you for being here today to has to fight to testify. Vice chairman quarrels indicated the fed would revive its stress capital buffer proposal in the near future. The vice chairman indicated one option would be to look at an average of stress test results over a number of years. Are you in agreement with vice chairman quarrels that this is something that needs to be considered, and what factors might necessitate this change . Chair powell we are in the process of evaluating in the late stages how to put into effect the stress capital buffer, which merges the results of the stress tests with the underlying overall capital framework. It is a comp look at it exercise. There are many moving pieces. I wouldnt want to single anyone a single or importance for our consideration. Rep. Wagner so the average number of stress tests is under consideration, but may be a change you are not necessitating just yet . Chair powell we are very much in the process of evaluating all of those. I would not want to single any one as in or out. There are many pieces, but yes, that is one. Rep. Wagner you said you are in the late stages. What is your timeframe for coming up for an option in terms of the stress capital buffer proposal . Chair powell i would have to come back to you with a date, let it would be soon, in the near future. Your januaryat press conference, you were asked whether a 4 trillion been motes sheet gave you sufficient firepower 4 trillion Balance Sheet gave you sufficient firepower to handle a recession, and you said yes. The share of gdp is about where the japan Balance Sheet was potential to the financial crisis. Today, the bank of japan has ended up with a Balance Sheet as large as the japanese economy, with mixed results on inflation and limited room to handle another downturn. Has japans experience affected your thinking on the appropriate size of the feds Balance Sheet . Chair powell i think there are a lot of lessons to be learned from japan over the last quartercentury. Rep. Wagner and if i may, why should we feel certain that the u. S. Could avoid a similar fate . Perhaps you could elaborate. Chair powell what japan has found itself in a situation is that inflation has gotten itself they for a long time, and have tried many extensive asset purchases and all sorts of Forward Guidance to move inflation backup. They have not met with much excess, with much success, muchhey can with success, although they continue to try to do that. My main take away from that, honestly, is that the fed needs to stand here and try to keep inflation symmetrically at 2 . We dont want to get on that declining to the extent that inflation and expectations continue to decline. That will show up in lower Interest Rates, which will give the fed even less firepower. I think it is quite important that we fight at 2 to keep inflation up to 2 and use our tools to achieve that symmetrically, and we are strongly committed to doing that. Rep. Wagner the most recent Monetary Policy report stated, Consumer Spending in the First Quarter was lackluster, but appears to have picked up. You talked a little bit about this in your opening statement. Can you please explain the possible variables behind the lackluster Consumer Spending, and why the recent turnaround . Chair powell i think the consumer part of the economy is 70 of the economy, and it is healthy. It is strong. Good job creation, rising wages. Workers think jobs are plentiful. Businesses think workers are scarce. A good place for the consumer part of the economy, and you see that in surveys. You see it in Consumer Spending. Rep. Wagner concerns about workforce develop into and having enough able workforce is very key, youre right. Chair powell they are. I think a tight labor force is lifting all sorts of communities into the labor force, and it is good. The issue really is more now on the business side, where we see Business Confidence and investment weakening of it. Rep. Wagner i am out of time. I yield back to the chair. Thank you. Rep. Waters the gentleman from missouri is now recognized. Thank you for your visit today. Published just yesterday, the st. Louis Federal Reserve noted that a rise in uncertainty is widely believed to have detrimental effects on macroeconomic, microeconomic, and Financial Market outcomes and induce responses for monetary, fiscal, and regulatory policy makers. Suggest al models rising uncertainty can affect Economic Activity and decisionmaking in various ways. In authors explained particular that firms may delay , and mayt and hirings reduce spending by increasing their Savings Rates if they anticipate possible changes in their income or wealth. Financing costs may rise as risk premiums increase, and even in your own testimony submitted to this committee, you noted that Consumer Spending has bounced back from a sluggish First Quarter and is chugging along. Is exacerbatedy for consumers in missouri when the president is gloating about how gray to the economy is, yet the Federal Reserve how great the economy is, yet the Federal Reserve is considering a rate cut. How do you interpret these mixed messages . Chair powell we do think that businesses can cause to hold back on investment and hiring. In oureen hearing that discussions with businesses around the country. Household confidence has i think that, but is a pretty standard finding. Clay isey rep. That good or bad for families to say . Chair powell the savings rate has actually been fairly high lately. It is good for people to save what they need to save. Americansal fact, need to save more for retirement than they have. They are not over saving. They are under saving in the aggregate. Clay could they also be over saving in anticipation of an economic calamity occurring . Chair powell yes, it is good to save, but at the same time if there is a shot to confidence, you can see people pulling back from their regular consumption patterns, and that will show up in demand and the economy will weaken. Rep. Clay as far as the decisionmaking on the part of the fed, are you relying on conventional Economic Data or being swayed by jawboning of the president . Chair powell we see the economy as being in a good place, and we are committed to using our tools to keep it there. As weve discussed, the overall economy is performing reasonably crosscurrents,e principally traded elements and concerns over Global Growth, and many fomc president s saw those as weighing on the outlook and calling for possibly more, data policy. Clay thank you for that response. We still find that Financial Services industry is largely white and male at its highest level. What more can you do as chair to incentivize diversity and equity within the Federal Reserve system . Chair powell thank you for that question. We put a very high value on diversity. Diverse perspectives around the table leads to incentives, and having a culture where people are encouraged to be heard speaks to all levels of diversity. Weve made a lot of progress at the fed. I would never say there isnt more to do. Is a lot more we can do, and i think we are very focused on that as an organization. I would say most of my career was in the private sector. I saw that really successful companies, one of the things they do well is diversity because thats how you get better results, with diverse perspectives. We are strongly committed to that. Clay thank you. I jewel my time back. Rep. Waters i yield my time back. Rep. Waters mr. Stivers is now recognized. Rep. Stivers thank you. Youve been available to all of us, and i appreciate that. This Committee Hearing is about Monetary Policy and the state of the economy. I will stay focused on those issues and leave the regulatory issues when vice chair quarles is here. I really appreciate you keeping the 100 million venezuelan boulevards i gave you venezuelan bolivars i gave you. Once inflation starts rolling, it is really hard to get control of, as the venezuelans have found. The fact that you have a stable price target and are sticking to it makes a huge difference. I know theres a lot of potential shocks, including tariffs and other things, that can impact that, but so far you have done a great job on Monetary Policy. Question about unemployment and the tight labor markets, i think you talked about the fact that wages are starting to go up and starting to actually benefit people whove not benefited from this economic expansion over the last 10 years, which is a good thing. I know some observers have been calling for a socalled hawk Monetary Policy on the premise that further tightening will benefit those dim a graphics that missed out on the expansion and drive up wages and make labor markets help those folks. Can you comment on whether members of the fomc have talked about those views, and what the potential risks and benefits associated with that policy might be . Chair powell i guess i would start by saying we dont have any basis or any evidence for calling this a hot labor market. Pardon me. We have wages moving up at a little above 3 , and that is good. It was more like 2 five years ago, but 3 barely covers activity. It doesnt really cover productivity increases and inflation, and it certainly isnt a high enough wage to put any upward pressure on inflation. Seen, as this long cycle has gone on, wages moving up as sharply as they have in the past. I do think it is gratifying that for the last two years, wage gains have gone to people at the lower end of the wage and education spectrum. Rate,s a low unemployment but to call something hot, you need to see some heat. Ofle we hear lots of reports companies having a hard time finding qualified labor, nonetheless we dont see wages really responding, so i dont really see that as a current issue. Rep. Stivers great. If we want to see wages continue to grow, we need Economic Growth. One of the things this congress has in front of it is the usmca. I know a lot of the questions you get are going to be about trade war with china, but can you comment about the importance of the usmca in the north American Investment that a lot of companies have made in a north American Supply Chain . Chair powell i wouldnt take a position on the details of the usmca, but i will say that having it pass would remove a bit of the uncertainty that is weighing on the outlook, and i think it would be quite a positive thing from that standpoint. Rep. Stivers i think that is what we all need to focus on is fighting the uncertainty. There are things we can do with that, and as policymakers we need to come together and do that. Librast question is on and facebook. If facebook cant sufficiently answer your questions about antimoney laundering, what would your message be to the banks that provide banking to facebook, and what would your advice to facebook be . Chair powell well, i dont think that the project can go just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering, all of those things. The number of concerns i listed at the beginning, data protection, consumer privacy, will need to be addressed very thoroughly and carefully, and in a deliberate process that will not be a sprint to them limitation. Rep. Stivers i want to sprint to implementation. Rep. Stivers i want to echo your comments that we want innovation that addresses these things that are so important to our economy. Thank you. I yield back the balance of my time. The waters mr. Scott, gentleman from georgia, is recognized for five minutes. Rep. Scott welcome, chairman powell. Good to see you again. The first thing i want to say to you is i want you to say strong to stay strong, be courageous. It is important for this nation and the economy of the world that the fed remain strongly independent. The other thing i want to say to you is, have no fear. The president cant fire you. And we in congress, both democrats and republicans, got your back. Now, i want to go to what i it has beenand mentioned a couple of times this libra business is really disturbing. It is a serious problem, and let me tell you why. First of all, i think we all know libra is the london interbank offered rate. Very critical. Standard for the the base rate for hundreds of trillions of dollars, both overnight and term loans, debt derivatives, and it is the standard that has been used internationally and extensively in the United States, affecting individuals, small businesses, large corporations. So weve got a big issue here, but because of pervasive manipulation, it is apparent leave usa is going to or be removed, so this creates a big problem. I want to ask you, because the most critical part of this is parties to both sides of the financial contracts should be concerned in the shortterm about the potential ramifications of the end of of this physically libor, specifically in contracts that do not have a fallback position