Median the long one remains unchanged at 2 1 2 . The economy is very much the same as it was in fact, i dont have any changes at all Economic Activity rising at a moderate rate. Job gains solid on average Unemployment Rate remained low the only weak spot there and inflation running below the feds 2 target. The fed used to morninger Global Developments and inflationary pressures. Those two things animating fed policy, very much on its radar there in terms of what is behind or motivating policy right now finally, a little bit on the Unemployment Rate. They lowered the Unemployment Rate forecast to 3 1 2 from 3. 7 and in the long run, down to 4. 1. Thats a sign that the fed at the current rate is willing to tolerate a lower Unemployment Rate thats a number that ases now over the years has come down and down and down. Tyler . Ill pick it up from here, steve. No, its okay do not worry about it, listen, man. You got your hands full there. I love these word counts, back from the old days when i covered the Federal Reserve, i like to go in and compare the old statement to the new statement and search for words like strength and expansion theyre all the exact same i havent been able to do it completely, i wonder is this statement almost or exactly the same literally just faxed it in its quite a bit different, tyler. Its different in that this is a statement in which the Federal Reserve is signaling that its on hold. Its from an economic point of view how its describing the economy, its exactly the same as i reported. But what is different i hear is that the language you want to key in on is where it says the current stance of policy is appropriate. Appropriate to what . Appropriate to sustaining the expansion, and bringing inning nation back up to 2 thats a new sort of term of art. Also assess, and uses that term, it will assess the appropriate path from the last statement description of Economic Activity, youre right its exactly the same some new language where the fed is signaling to the market, these are the new q words, the market has to get used to, where the fed is signaling its on hold, i think the word appropriate is one you should have at the top of your dictionary heres my question, since the decision coming out of this is largely what you expected and what you told us we would hear yesterday, what will be the burning question you want answered from the chairman you know, i dont think my question this month is different from the question i would have asked last month, which is, we continue to probe what the parameters are for a change in policy i get a feeling here the fed is hunkering down being on hold for a while here the chairman has used phrases like a Material Change to the outlook. Talked about a significant rise in inflation i think we want to know how close the fed is so heres what we want to know and why we want to know it what i want to know is when an Unemployment Rate comes in, higher or lower. Jobs number comes in, i think this is what the market wants to know this is why we do these things to begin with, when it comes in and we cant ask powell a question, we want to know how he and the committee will react its called the reanswer wen watt to know how policy would function given a new piece of data. The questions are going to surround what would it take to change policy and come off of old. I think another question we have is about the repoe rate. The repo market, the overnight lending market is ready. And theres sufficient amounts of cash in there for the end of the year, which is always a bumpy ride i want to get to that issue mona, first, what should it take for the fed to consider taking action you know, i think theres a couple things on the table there. We have u. S. China trade like we talked about still out there december 15th is a kui date. We dont know clarity or have clarity around that. Its interesting since they last met, we have the shift in Market Sentiment that perhaps were in this process in the economy. Last year well see a mid cycle inflationary story i wonder if the fed is also alongside the rest of us, watching to see if the data proves that out. We talked about pmis earlier. Well be watching to see if those stabilize in the u. S the fed is watching the u. S. Global economy trade just like the rest of us, and any material deterioration will cause them to move going back to that fed survey, we saw confidence in even a limited trade deal falling. It was 83 in september, 54 in december how crucial is trade to what we will see unfold over the next year i think its very crucial the best we can hope for here is a gradual ceasefire lets read the problem, Global Business is holding back from investing, because we dont know what the rules are going to be around trade. I think the administration seems to think if the markets go up, thats a positive. I think the real positive is uncertainty around that. I think thats going to be an anchor on both global Interest Rates frankly. If you look at these go ahead. Im going to say, most people i talk to think theres mostly down side risk on trade. In part because they think the damage thats been done to the economy from trade is already done and the question is, does it become worse the expectation that contessa was talking about, most people i talk to dont think theres too much economic benefit of that, other than eliminating down side risk a limited trade deal that means the damage has been done for 2020. Weve had those tariffs down for two years . When do you start thinking this is the way things are. The definition of insanity is doing the same thing over and over again and hoping for a different outcome. We talked about the repo a little bit some people think its nothing some people, a couple people think it could be everything where do you stand i stand closer to everything than nothing it is something. For sure, i think its absolutely critical. A former Federal Reserve strategist whos now a strategist at Credit Suisse put out a note saying that its going to spike yields and its going to screw up the effects market, which is going to send stocks crashing. Well, if things arent addressed, that can happen it could. Right you agree, those things could happen thats where the dollar is going. Liquidity, it all starts in the repo market, if you cant get financing, which is the base rate of the market, that creates problems thats what the financial crisis was all about. We talked about something here, i want to change course a little bit im uncomfortable with this fed statement, even in the way things are being addressed right now. Effectively, what the fed is saying, theyre going to let the economy run high that sounds great, im a fixed medication investor, what does that mean for me does that mean we allow Interest Rates to move higher it means youre a wimp. If fixed income investors have been wimps for a long time you do not ask for inflation compensation, you continue to buy u. S. Bonds at real negative rates. And you will take what youre given i think is what the u. S. Government is saying, and whats been happening here. The fed, i think, is following the market on this and i mean no disrespect, im just kidding around here the market has been taking down a trillion plus of u. S. Debt and a negative yield not demanding inflation compensation the fed has followed this, and the ideas is that it doesnt see the inflation out there. Neither does the fixed income market we have Investment Grade which is up 14 right now. This is a great year for treasuries a lot of that is because the fed had this mid cycle reset and pushed rates down. Which i think is great and its appropriate. What about next year you mentioned financial conditions earlier and what the feds reaction function is what if, for example, we dont get a 20, 25 basis point move higher in yields that ufrn ralphs what the fed has done this year, in terms of easing financial conditions. Yes, the bond market, were big boys, we can take it, but i think a lot of passive investing thats in the markets right now are going to be very upset and disappointed and given the fact that equities and fixed income have become highly correlated if we remember back to this time last year. The fed was nervous if when the equity markets started to fall i would argue that if Interest Rates move high enough, that would cause that domino effect to start to move i think within the band if rates go up 20, 25, 30 basis points, no big deal, we can handle that. If its 50 or 75 basis points, it becomes more of a system wide problem across Financial Markets. I dont see it that way, the problem is, these bonds are valuable if rates are falling. Once you set this miserable yield, its all but below cpi inflation. If you dont see it come downwards onraits, i think thats going to continue to funnel money to the u. S. Equity market, theyre not making money in cash or blondes, theyre scared of the rest of the world. Thats whats behind the lift in the u. S. Equity market all the year long. That continues if rates go up, that starts to if listen, with all due respect to everybody i like everybody, which is this a year and a half ago, everybody on our desks on every show all day long said that the 10year was going to be with the exception of a couple people, they couldnt have been more wrong now the Federal Reserve and their dot plots is their projection materials they see a 1 to 1 1 2 increase in their rate in two years, which should put ten year yields at the aforementioned 3 to 3 and a half percent am i wrong again i think these demand for u. S. Tenyear bonds. Demand from where why . Pension funds, there are people out there, investors out there that need these assets when the yield starts creeping up, you have this huge influx and that caps your yield thats one factor thats happening. The other factor were seeing, theres this long term inflationary depression cycle going on thats due to structural factors like globalization and the aging demographics theres structural factors that are keeping yields low i dont see the ten year going back to 3 if you look back 18 months, what didnt we get we didnt get the administration was serious about this trade war. Everyone knows that tariffs kill the Global Economy tariffs kill the u. S. Economy. If you want to take one point. They havent yet. They killed the Global Economy. And this u. S. Economy. Given how manufacturing data is Getting Better in parts of europe better from a very low level. Think about how much stimulus we put into a full employment economy. We should have been roasting at 3 gdp growth which would have caused higher inflation and higher Interest Rates. These tariffs rained on the economic stimulus, thats whats changed. I think people just didnt realize were going to have this on again trade talk. And were beginning to get warnings that the tariffs could affect the u. S. Consumer, which Everybody Knows is we had those warnings for two years. I hear them as more serious now than they have been. Just real quick, the phrase Global Developments is a catch phrase of everything you guys are talking about. The chatter around here, the skerngs with the tariffs, december 15th, this sunday theyre going to happen, and if they do, we might see a market that begins to price in more aggressively a rate cut in 2020. Well see, but the chinese have been eating a lot of this on their supplier ended i wonder how much of any of that is trickling down to the American Consumer at all well thats the thing. What i can tell you, brian, is that we went into this year last this time last year, we were at a 3 tenyear rate, we were expecting a fed fundses rate that was going to approach 3 this year that has all changed and david kelly has in my opinion, it precisely right. Delta is what happened with the trade war, and that trade war is the surprise, and its like saying brian, everything was okay, guess what rate cut, rate cut three of them. 75 basis points lower in addition to not the rate hikes we were going to have. About 200 basis points of additional stimulus in the system today fair enough theyre up 15 steve thank you very much. Lets get a stock markets rate its like the white whale, the blue whale of the stock market s p probably about 5 points very good reason were not doing anything right now. No real signs of any rate hikes. This move here, mostly industrials and texts that you saw. Caterpillar, 3m move up. Bank stocks not moving much, flattish on the yield. Down just a little bit in the last few minutes will nothing very good. One thing that was interesting, not a lot of changes in the individual Interest Rate sectors. The fed said the new line here, they will monitor muted inflation pressures. A lot of Central Banks would like to see it drives a little bit. Youll see that tomorrow from christine la guard i dont think given this comment about muted inflation pressures we are monitoring, the fed would reject to rates going up a little bit higher. I think the key here putting off addition altar is for december 15th, that would take risk off the table. It may not make a lot of difference necessarily in some of the earnings pictures those tariffs went in, it would certainly impact some Technology Companies overall. Lets see how this picture evolves. You see the dow industrials moving. How the bond market responding to the decision lets start out with what is moving more. It isnt the bond Market Making new lows, right before and continually after the feds statement. Open the chart up for 8 or 9 sessions and you see how important this is we havent closed below in quite a while. And the dollar being heavy, does make sense lets get back to the fixed income you can see that we are now hovering on new low yields, if you open the chart up to a week, its important, not as important as a violation of 160, theres a bit of a cushion look at the ten year ten year also flirting with the new low yield on a day it was 180 on the statement. If you open that chart up, you can see how important this mark has been finally, how do you wrap all this together . Listen, i remember in the last administration were all looking for green chutes at the end of the day, you can say what you want about uncertainty. Its kevlar un certainty coated. Well said, rick santelli. Thank you very much. Lets thank our panel, by the way, david it was a good discussion appreciate it coming up, much more reaction to todays Federal Reserve decision and we are just minutes away from the News Conference what Jerome Powell is going to say about the economy in 2020. And what the fed is likely to do next year. That really is, guys theres a couple new voting members aselmu wl ch were back right after this each day our planet awakens with signs of opportunity. But with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. Welcome back, no surprise for the Federal Reserve. Everybody expected rates to be left unchanged stocks are mostly higher, thats not all the story. Joining us now is former Federal Reserve board governor good to have you back on. Youre not going to get to say, Nothing Happened at this fed meeting. There is a lot to discuss. What would be topic number one for you . I think the issue is going to be worrying about uncertainty. The second issue is, whats going to happen with inflation the feds making a bet. They decided to cut rates from a point of view of where the economy is i think the concerns about uncertainty,they acted more preemptively im not sure that was the right thing to do but there is an issue that inning nation is low it never seems to show itself we have wage gains, tariffs, all these things that should be inflationary arent there. Its clearly a puzzle, one of the key things about successful policy is to admit when you dont know the reality is, were not sure what that number is i tend to worry more about this issue than running an economy, this type of economy could cause problems at some point in the future what kind of problem . Theres a view that clearly stated that phillip seems to be dead the tight economy is not producing any inflation. That view may be not quite correct. That has a lot to do with how the fed has operated in the past and theyll continue to do so in the future on the other hand if we havent seen the rise in inflation that wed like to see, from that viewpoint the fed thats the real concern its justified they want to spruce up the economy a little bit. There is some expectation that the fed in this meeting would have discussions about whether they should change the target inflation rate. The Federal Reserve right now is doing an extensive strategy the issue of changing the inflation target is not the right answer the way you do the target is a big issue. Think have to say that there are times when youve been undershooting the inflation target, we should be happy about overshooting on average, theres an inflation target by gones are by gones, we still shoot for 2 theres been a lot of talk about this, the reasons why it solves some problems, but can create others greenspan got it right, when we worry about inflagsz, it starts to affect inflation. We have a moment, jump in there, guys. We think the language around symmetry, makes a lot of sense from the feds perspective, its been running cold for five years plus now could they let it creep up i think the inflation metric almost gets taken out of the equation and theyre back to the others they want to continue this expansion. Global uncertainty around trade and global growth. I think those metrics come to the forefront from the feds decision the problem is, the policy to keep things stable goes to the root its important to add that to considerations here. This policy just pumps up prices thanks so much. The fed consistently mentioned due to the uncertainty of the negotiations with china lets get to kayla. What are the outcome of those talks. The Business Roundtable held a briefing for reporters where jamie diamond gave his views on the trade talks. It will take five years to determine whether these tariffs worked tariffs are a tool, not one we would want to use. It actually did bring us to the table. This imbalance has to be fixed it cannot go on any longer he also said, he thinks there will be a phase one deal on his personal view that delays tariffs. That certainty imt is hanging over Decision Making they showed outlook for investments. Even though they expected gdp to rise 2. 1 this year. Mirroring the trump add ming stations hardline on trade. We await the fed chairman Jerome Powell. Today we got more certainty about fed policy yes, we did theyre clearly saying they dont want to change rates and their statement makes that point. Also this weekend, we could have a clear path toward brexit here. And then also if we have a deal to not go ahead with the december 15th tariffs, its more uncertainty. We always talk about uncertainty rising this is a week in which uncertainty might fall there are major protests going on for hong kong fighting for democracy, the chinese may come in with a heavier hand the currency is sliding, their economy is getting shakier, theyre not talking about its a great point. They have every incentive to come to the table to have some sort of win. Yes, we have a political election in 2020, where President Trump needs that as well think about where were waiting from were waiting for a point where bonds and cash arent matching inflation. Therefore, i think you think about equities look beyond 2020 if you do that, i do think theres a lot of inninger National Opportunity avoid equities also make sure about International Exposure ill say quickly. Risk assets across the board can do quite well. We continue to favor equities here as well we continue to see Global Equities playing some catchup next year, that could be great i know everyones focused on apple and all the fang stocks. In the last couple weeks and months it looks like its caught fire you have the european markets doing okay its not just about buying the fang stocks. Having some of that value component makes sense here, if you look historically, they do start to move upwards. The value sector goes up with it its a very real potential going into 2020. The Election Year can do well for markets. David, you said that you need to be invested in international are there particular regions i think emerging markets in general will do better. David, glad you didnt say ireland. Thank you very much we have to go. Jay powell, lets listen in. To begin, id like to say a few words about paul volker who as you know, passed away earlier this week. He served as Federal Reserve chair from 1979 to 1987 he accomplished many things during his long and distinguished career hes known best for taming the doubledigit inflation what is perhaps most admirable about him. More than his many accomplishments was his character. He believed there is no higher calling than public service, and he dedicated the lions share of his life to it with courage, integrity and tenacity, he always pursued the policies he believed would benefit all americans. My colleagues continue to draw conclusions. We decided to leave the rate unchanged. As always, we base our decisions on judgment of how best to achieve the goals congress has given us, maximum deployment our Economic Outlook remains a favorable one. With our decisions through the course of the past year, we believe that Monetary Policy is well positioned to serve the American People by supporting continued economic growth, a strong job market and inflation near our 2 goal the economic expansion is in its 11th year. Household spending has been strong in contrast, Business Investment and imports remain weak. And manufacturing output has decleaninged over the past year. As has been the case for some time the overall economy has been growing moderately, and with a strong household sector and support of monetary and financial conditions, we expect moderate growth to continue. As seen from participants most recent projections, the median expectation for real gdp growth slows slightly over the next few years, but remains at 2 the Unemployment Rate has been at half century lows for well more than a year participation in the labor force by people in their prime working years, 25 to 54 has been raising. And wages have been rising for lower paying jobs. People who live and work in low and middle income communities tell us, that many who struggle to find work are finding new opportunities. Employment gains have been broad based along all racial and ethnic groups. These developments underscore for us, the importance of sustaining the expansion, so that the strong job market reaches more of those left behind we expect the job market to remain strong. The median of participants projections for the unimemployment rate remains under 4 for the next several years. Inflation continues to run below our symmetric objective. Total pce inflation was 1. 3 and core inflation, which excludes volatile food and energy pritss was 1. 6 while low and stable inflation is certainly a good thing inflation that runs persistently below our objective can lead to an unhealthy dynamic in which expectations move down in turn, Interest Rates would be lower as well as a result, the scope for Interest Rate regukss to support the economy would be diminished against the backdrop of a Strong Economy and supportive Monetary Policy, we expect inflation will rise to 2 the median participants production rises to 1 next year were strongly committed to achieving our 2 inflation goal. Over the course of the past year, our views about the path of Interest Rates that would best achieve employment objectives as the year progressed, we adjusted the stance of Monetary Policy to cushion the economy from these developments and provide some insurance against the associated risks. In addition, inflation pressures were unexpectedly muted. Rather than modestly increasing the target rate for the federal funds rate this year we reduced it by three quarters of a percentage point this shift has kept the outlook on track the median of participants participation for economic growth, the Unemployment Rate and inflation are little changed from a year ago, aside from a lower inflation projection we believe the current stance of Monetary Policy will support sustained growth, a stronger labor market and inflation as long as incoming inflation about the economy remains inconsistent with this outlook the current stance likely will remain appropriate looking ahead, we will be monitoring the effects of our recent policy actions along with other information bearing on the outlook, as we assess the path of the target of course if developments emerge that cause material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course finally, i wanted to note weve been purchasing treasury bills consistent with the plan we announced in december. These technical operations are aimed at maintaining an ample level of reserves. Our operations have gone well so far. Pressures in money markets have been subdued to address possible pressures in money markets over the year end, weve been conducting term repo operations we stand ready to adjust the details much our operations, as appropriate to keep the federal funds rate thank you, and ill be happy to take your questions. I was struck by the disconnect that exists between the behavior of unemployment and inflation. You seem to have unemployment pencilled in here now for three years running, more. Underneath the longer run level. Yet inflation never really accelerates. What are we to make of that. Thats some whats happening there is the fact that the relationship between unemployment and inflation has just gotten weaker and weaker over the years if you go back 50 years, you would have seen when labor markets were tight and unemployment was low, inflation moved right up as the fed got control of the inflation, the connection got weaker and weaker and weaker, to the point where theres still a connection, but its a very faint one. And i what that suggests is, you would need to keep policy somewhat accommodative, we believe that policy is somewhat accommodative. We think that thats the appropriate place for policy to be, in order to drive up inflation. Its faint and nonexistent. It suggests your policy as it exists now isnt influencing prices at all. In that case, what do you do to reach a target i dont think thats right. The relationship between slack in the economy and inflation is weak, has been weak. The co efficient is something like. 1. It is quite faint. Its still there you see it, look at where wages were three or four years ago, theyre running around 2 . And now the whole group of different wage measures that we monitor has moved up to 3 and 3 1 2 , that suggests tightening the same thing is true but much less true of inflation the relationship between in a way the wage phillips curve has a higher co efficient than the price phillips curve does. We do still see some relationship and thats what youre seeing in those numbers. Mr. Chairman. You used the analogy to 1998 to distract the rate cults we just went through im wondering if we can continue the analogy within 7 months of those rate cuts. The fed took them back and then some were these those kind of rate cuts, the kind you need to take back sb or are we at a neutral rate, take back. Risks you say that are cushioning materialize or is this now a new sort of steady state for the economy at this rate . This is the right rate for the economy you see goingforward. Theres similarities, concept youll similarities in 95 and 98 when the fed cut three times. Only to resume raising rates the notion is, that its raising the economy, but not the end of the expansion. Thats the same expansion we believe that were in here we did turn out to do three rate cuts, that wasnt in the plan in any kind of specific way at the beginning. Thats the same, whats different is you have a different you have a different structural characteristic in the economy. Particularly around inflation. So now as you can see inflation is barely moving up, notwithstanding that unemployment is at 50 year lows and expected to remain there so the need for rate increases is less. And by the way, its a good thing that we think we can we think weve learned that unemployment can remain at quite low levels for an extended period of time without unwanted upward pressure on in234r5igs. In fact we need upward pressure its quite different in 95 and 98 i did the same thing as howard the bis concluded in september that the spike was not a one off confluence of random events, but reflected structural and regulatory issues id like to ask you, given that youre approaching year end for the markets. Will you be taking extra steps to ensure that the funding is available there was a report yesterday suggesting theres a good chance that we will see disruptions. And one of the reasons they put forward, the fed is at this point buying only t bills and market wants to sell coupons do you have any plans to sell coup coupons . Im going to take a step back, and i will get to your specific questions on the year end and on t bills i want to start by stressing are these are very important operational matters, but that are not likely to have any Macro Economic implications. We decided back in january to remain at an ample reserve regime that means well be setting the federal funds rate were committed to robustly implementing that framework as you can see by our actions the the purpose of all of this is to remember that our Monetary Policy decisions will be transmitted to the federal funds rate we have the tools to accomplish that, and we will use them the purpose of all this is not to eliminate this we very gradually allowed the Balance Sheet to shrink. We slowed that gradual pace in half by march, and then ended it in july. Meanwhile, we surveyed all the banks. And said whats your comfortable level of reserves. It came out at a level that was well below where we were in september. We saw in september, that the markets act as though the markets become scarce. What happened was, liquidity which existed didnt flow into the repo market. So the other question is, why did that happen. Weve been very carefully looking at the reasons why that may have happened, there are payments issues, there have been a number of supervisory and regulatory issues, were looking carefully at those were open to ideas for modifying supervisory and regulartory practices to go through its sort of like in time, we started off really on september 17th with overnight operations, by october 11th, we had created and put into effect a plan its working, for the past couple months, repo markets are functioning well you asked about year end temporary upward pressures are not unusual around year end. In both our repo operations and treasury build operations are ready to mitigate risks. We think the pressures appear manageable and we stand ready to adjust the details of our operations as necessary to keep the federal funds rate in that target range our strategy has been essentially the key to our strategy is to supply reserves in the near term through both overnight and term repo, at the same time, were raising the underlying level of reserves through bill purchases well take that now. We said that we were willing to adapt our strategy, were not at this place, but if it becomes appropriate for us to purchase other short term coupon securities, we would be prepared to do that, if the need arises we dont were not in that place. It looks like the bills those bill purchases are going well, just according to expectations i mean, the other thing ill say is that were in very regular contact with Market Participants all the time well be providing, continuing that and were prepared to adjust our tactics were focused on year end as well to adjust our operations as appropriate. The possibility of a standing repo the standing repo facility, weve had a couple meetings where weve discussed that, i think the standing repo facility is something that will take the time to revaluate, at the moment what were focused on is, were focused on year end after year end, the sense of it is as the reserves move up because of bill purchases, as that happens, there will become a time when it will be appropriate to decline we cant know what the timing of that will be thats the way we see it going all the time heather long from the washington post. A number of your colleagues think Interest Rates shouldnt be raised until core inflation is back at 2 . They think there should be a rule where do you stand on that well, we think our policy rate is appropriate and will remain appropriate as long as incoming data broadly in keeping with our outlook and in order to move rates up, i would want to see inflation thats persistent. And thats significant a significant move up in inflation thats consistent before raising rates to address inflation concerns thats my view i guess im wondering why its not a statement we havent tried to turn it into an official Forward Guidance it happens to be my view that thats what it would take to move Interest Rates up in order to deem with inflation gina with the new york times. Following up on heathers question if you look at the sep today it looks like inta nation is never overshooting 2 and is only getting up to 2 by the end of 2021 how do we square that circle with Interest Rates increasing i think what youre seeing is we have a full year of the median being flat which is modestly accommodative as we discussed. That underscores the challenge of getting inflation to move up. The committee has wanted inflation to be at 2 . Squarely at 2 for ever since i arrived. It hasnt happened, its just, theyre disinflationary forces around the world and theyre stronger than people understood them to be. In terms of those out year rate increases, whats your youre looking at rate increases, people have their own expectations for how they do this i think what may be behind some of that is just the thought that over time, it would be appropriate if you believe the neutral rate is 2 1 2 , it would be appropriate for your rates to move up in that direction. I will also say to you that a number of people wrote gown you cant see this at this level of detail today. But a number of people did write down overshoots of inflation as under appropriate policy. Appropriate policy given that inflation, whichever measure you choose, remain where it is or not increased over the past year as youve been dropping the policy rate, what is it that gives you confidence that the fed has the tools to get inflation back up to target or overshoot as you indicated some people are considering doing . Unemployment and inflation. Its relatively weak that means we can run at low levels of unemployment and have an historically good, in some dimensions, labor market without having to worry about inflation. It also means, though, its not easy to move inflation why is there confidence . I would say theres more humility than there is confidence in this, at this point. Its been very challenging to get inflation to be at target. If you look around the world, all Major Economies has been closest to it, but hasnt quite been able to achieve it. I would point out that this year, which has been a good year for the economy, inflation, core inflation is running at 1. 6 it rain close to 2 most of last year its a real challenge. Were using our tools as best we can to meet that challenge. Nick . Wall street journal chair powell, some kind of debate over allowing an overshoot in that context, its saying you want to get inflation to stay at the target or would it compel some kind of policy action to achieve that outcome if thats the direction in which the Committee Goes would a change in the framework make it easier whether saying it is enough to create credibility, the answer to that is no the changes to the framework, i think they take all that have on board. What theyre designed to do is strengthen the credibility of that inflation target but only if followed by policy. Ultimately it will take time to establish, to move Inflation Expectations up from where they are will not happen overnight. The fed has great inflation credibility, but its anchored at their 25year average. We talked a lot about inflation. I want to ask about uncertainty. Canada and mexico signing off on it, do you see that uncertainty easing now so Business Investment could pick up, or are the trade tensions with china the big elephant in the room where you wont see those pick up i did see the news today that it appears theres an agreement to move forward, to vote on usmca. Its not our role to comment on particular trade policies or criticize them or evaluate them. If the deal were to be enacted, i believe that would be a positive for the economy negotiations with chien camera havent reached that point yet many people we talk to in the reserve banks that wind up being written up in the beige book theyve been telling us a year and a half that trade uncertainty is weighing on the without the agreement removal of uncertainty around that would be a positive for. Do you see, not commenting on the deals themselves. One way to look at it is whats been moving Financial Markets . News about china not so much usmca. Deference between nafta and usmca is smaller than the difference between current, you know, aarrangements with china and whats being negotiated. In terms of the inflation side of the mandate and shore up Inflation Expectations the fed listens events and Something Else you recently acknowledged is that the fed has also been systematically labor utilization throughout this expansion. Im wondering if you could talk about the extent to which the review is looking at the employment side of the mandate as well. With regard to unemployment . Thank you. The focus is on how to achieve but we talk a lot about inflation. I think more broadly over a period of years, many years, weve been learning that the natural rate of unemployment is lower. In estimates not just the fed but broadly among economists, labor economists have seen that the connection, that we can sustain much lower levels thats a good thing that means we dont have to worry so much about inflation. The fed listens event are about inflation to a much lesser extent than they are about maximum employment if you listen to or attended any of those, the discussion, we always focus on inflation as well the discussion is really around whats happening in low and moderate income communities and amongst Small Businesses and i think you get a perspective, which we were already getting that from our extensive outreach i think the fact that these communities have so much, such high levels of unemployment and low levels of Labor Force Participation tells you that there slack out there. I think that does also inform our understanding of what we mean by maximum employment its been a very positive i would say that the fed listens events have been extraordinarily positive and are certainly something we will repeat from the business perspective, companies are taking all kinds of measures to look through things on peoples resume that would would have, perhaps, disqualified them in other kinds of environments, training is moving up. There are a lot of things going on that suggest people in the margins are being pulled in and given chances, which is a great thing. Victoria . Ill follow up briefly. Is there any way to systemize these insights we talk about makeup strategies. Is there anything similar you could do on the employment side . For several years, youve seen us moving down our estimates of maximum employment. Its already understood, i think, that theres more, even though were at 3. 5 unemployment theres more slack out there in a sense our tools are relatively low i think we know that. Hi. Victoria with politico i wanted to ask about the repoe issues are you currently, for example, telling the examiners not to prefer reserves over treasuries for supervisory purposes are you talking about reducing level of accountability at the fed and on the standing repoe facili facility, is it, you know, that you would be inclined to do it, or what would kind of drive the decision on whether or not to do that so on treasuries versus reserves, weve done a ton of work on that weve talked to supervisors. Its interesting if you look at the banks, theyre all over the place on the composition of their buffer. So you have to have a Business Model. And that Business Model suggests what your stressout flows will be and that suggests what your buffer will be you see them making quite different choices. Some of them have lots of reserves and fewer treasuries and then they change their mind and switch its not obvious theres one thing happening there. Talking to the supervisors, in terms of the