Since the beginning of the year have judged that our current policy stance was only appropriate and that we should be patient in assessing the need for any changes. In light of increased uncertainties and muted inflation pressures, we now emphasize that we will closely monitor incoming information for the Economic Outlook and will act as appropriate to sustain the expansion with a strong labor market and inflation near its 2 objective. I would like to take a step back and review how the changing picture and financial brings us to todays decision. So far this year the economy has , performed reasonably well with solid fundamentals supporting continued growth and strong employment. Inflation has been running somewhat below our objective but we expect it to pick up supported by solid growth and a , strong job market. Along with this stable picture, we have been mindful of some ongoing crosscurrents, including trade development and concerns about Global Growth. At the time of our last fomc meeting, which ended on may 1, there was tentative evidence that these cross currents were moderating. The data was encouraging and there were reports on progress with trade negotiations with china. Our continued patient stance seemed appropriate and the committee thought no strong case for adjusting our policy rate. In the weeks since our last meeting, the crosscurrents have reemerged. Growth indicators from around the world have disappointed on net, raising concerns about the strength of the global economy. Our contacts in business and agriculture report heightened trade developments. These concerns may have contributed to the drop in Business Confidence in some recent surveys and may showing through an incoming data. Risk sentiment in Financial Markets has deteriorated against this doctoral. Inflation remains muted. While the baseline outlook remains favorable, the question is whether these uncertainties will continue to weigh on the outlook and thus call for additional Monetary Policy accommodation. Many fomc participants now see that the case for somewhat more accommodative policy has strengthened. Let me explain the basis for this judgment, starting with the outlook for jobs and growth. The unemployment low this year and next. It was lower than expected however and in light of recent developments, this bears watching. Many labor market indicators remain strong. Labor leaders tell us the prospects have seldom been better. This is true even for those who have traditionally struggled to find work. Ands are rising this is particularly so for lowpaying jobs. Committee participants growth projections are little revised from march with a central tendency of 2 to 2. 2 , just above their estimates of longer than normal growth. The growth projections for the year as a whole mask some important details about the composition of growth. Annual growth will be boosted by the surprisingly strong firstquarter which had just then reported up a time of the may fomc meeting. As i noted then, the unexpected strength was largely in net exports and inventories. Components that are not generally reliable indicators of ongoing momentum. While consumption was weak in the first quarter, incoming data show it has bounced back and is running at a solid pace. In contrast, the limited evidence available at this time suggests growth in business fixed income has slowed in the second quarter. Moreover, manufacturing production has posted declines so far this year. While the baseline outlook of themfavorable, many seeing participants say the investment picture and weaker Business Sentiment and the crosscurrents i mentioned earlier are supporting their judgment that the risk of less favorable outcomes has risen. To our 2 ing close objective for most of last year, inflation declined the first quarter. Shows somethen pickup. Participants broadly see inflation moving back up towards our 2 objective, but at a slower pace than had been expected. The central tendency for 2019 core inflation, which omits volatile food and energy components, is between 1. 7 and 1. 8 . Shorttermde fluctuations, Committee Participants expressed concerns about the pace of inflations returned to 2 . Wages are rising, as noted above, but not at a pace that would provide much upward impetus to inflation. Moreover, weaker Global Growth may continue to hold inflation down around the world. We are firmly committed to our 2 inflation objective and we are well aware that inflation weakness that persists even in a healthy economy could precipitate a difficult downward inflationonger run expectations. Because there are no definitive measures of inflation onectations, we must rely imperfect proxies. Marketbased measures of inflation compensation have moved down since army main meeting and some surveybased expectation measures are near the bottom of their historic ranges. Combining these factors to the noted,o growth already participants expressed concern about a more sustained shortfall of inflation. Overall, our policy discussions focused with the appropriate response of the uncertain environment. Projections of appropriate policy show that many participants believe that some cut in the federal funds rate would be appropriate in that scenario that they deem most likely. Though some participants say policy cuts did not those deliberations made clear those that were flat the case for additional accommodation has strengthened since may. Added accommodation would support Economic Activity and inflation returning to our objective. Surrounding that baseline that has clearly risen since our last meeting it is important that policy not overreact to a data point or shortterm swing of sentiment. Doing so would risk more uncertainty to the outlook thus my colleagues and i will look to see whether these uncertainties for continue to weigh on the outlook and we will use our tools as appropriate to sustain the expansion. Thank you. I will be pleased to take your questions. Wall street journal. Chair powell, did you consider a rate cut today . Was it one of the policy options in the teal book . Is the committee considering moving given all the uncertainty you address, changing its policy before the next meeting . The committeeso had, you know our usual long , discussion of global and domestic economic and financial conditions and then spend this morning talking about Monetary Policy. Came to the view that i expressed to you, which is that we are going to be monitoring the crosscurrents and the other items that we mentioned, but that we would like to see more Going Forward, particularly, we would like to see whether these risks continue to weigh on the outlook. Mentioned,y, as i many on the committee do see a strengthening case. Eight of those eight wrote down rate cuts. A number of others see the case has strengthened. The committee wanted to see more, as i mentioned, and i also mentioned that some of these developments have been quite of recent vintage. We will be learning a lot more on all these issues in the near term, and that is our focus. Do you think something could change before the next meeting . Chair powell i am sure that things will change before the next meeting. I expect a full range of data and information of all issues we are looking at. I think we will learn a great deal more about them, and i think we think thats the right way to move. Again, many of these developments happen part of the way through the last meeting period. Only seven weeks ago we had a great jobs report and came out of the smc meeting feeling that the economy and policy was in a good place. We want to see and react to developments and trends that are sustained, that are genuine, and not react just two data points or just to changes in sentiment, which can be volatile. At the same time, we are quite mindful of the risks to the moveok and are prepared to and use a virtual as needed to sustain the expansion. Could you walk us through your thinking about trade . It was really the threat of cause the market to threat of tariffs against mexico that caused the market to be definitive in pricing in the rate cuts. So for example, there is a deal with china, does that take the possibility of rate cuts off the table . Chair powell i would say we are not looking at any one thing. I guess i would start by agreeing with your premise that news about trade has been an important driver of sentiment in the intervening period, but we are also looking at Global Growth. It is really trade developments and concern about Global Growth that are on our minds. We are not exclusively focused on one event or one piece of data. Risks seem to have grown. In the meantime we have incoming , data in the United States that has been pretty good, particularly for the consumer. Consumer spending is solid, supported by a healthy job market, high levels of employment, wages going up. We do see some areas we are looking at, business fixed short, and the prolonged inflation, and perhaps jobs growth. We do not like to look at one job report. We like to average over three month for six months, but still, that theres watching. We will be monitoring the implications of all of those. We expect to learn a good deal more and we will be asking the question whether those risks will continue to weigh on the outlook, and in the end, we will use our tools as appropriate to sustain this long expansion. Other long from the washington post. Could you clarify what you would do if the president tweets or calls you to say he would like to demote you as fed chair . Chair powell i think the law is clear that i have a fouryear term, and i fully intend to serve it. Hi, chair powell. From the New York Times. I was hoping that you could clarify for us a little bit how youre thinking about the risks of waiting too long to cut rates versus the risks of cutting rates prematurely. Sort of what the balance of risks are and how you talk about that. Chair powell so were always trying to balance that risk, but i would say that given the quite recent nature of some of the events, i think the committee felt that the right thing to do was to wait and see more. And we will see a lot more on all of these issues in the very near term. So i dont think the risk of waiting too long is prominent right now. I would say, as a general matter, its always something that we have to weigh, but i think we believe that the right thing here is to watch carefully in the near term and see how these risks unfold and see whether they continue to weigh on the outlook. Obviously, we try to avoid going prematurely as well. In this case, you know, theres always some judgment in these things, but i would just say that the risks that we see having emerged are risks that have gotten our attention and that have called a number of us to write down rate cuts and a number of those who havent to see that the case is strengthened. Marty . With the ap. You had your first dissent in your time as chairman. Does that give us a sense that there was debate among a group that was pushing for a rate cut this time . And how do you, do you expect further dissents Going Forward . Chair powell let me say the same thing as i said last time before there were any dissents, and that is i think the process of careful, thoughtful dissent is a very healthy one, and ive always believed that, and i feel like you make better decisions when you hear a disparity of views. So i really do look at it that way. I would add though that the support for the path we took for the policy statement that we adopted was quite broad. James polizzi with the financial times. Mario draghi at the ecb yesterday sent a strong signal of new stimulus for the eurozone. Do you think such actions to ease policy at other Central Banks around the world will put more pressure on the fed to do the same . Chair powell well, first, i think all Central Banks are focused on their their mandates are domestic, and theyre focused on Economic Conditions from a domestic standpoint, and that goes for the European Central bank, it goes for the fed, it goes for all Central Banks. So thats our principal focus. So it could cut either way, you know . I would think that to the extent you see stronger financial conditions and stronger activity in the ecb after a rate cut, that would support, tend to support activity. So were really focused on, you know, the risks to our on the baseline outlook which is still a pretty favorable one and the risks to those outlooks. Thats our principal focus. Howard, then chris. Thanks. This is the first time that youve been really issuing steps in an era when rates are going to be going down. Two sort of related questions. Is there concern that youll be causing a sort of dot deflation by telling people dont buy your car now, because itll be cheaper in six months . Thatll fulfill itself. And secondly on inflation, that was a pretty big drop in expected pce, and yet without reacting to it, are you not sort of undermining your own credibility in terms of commitment to 2 target . The 2 target . Chair powell ill take the inflation one first. I didnt quite follow your dodd question. Well, the fact that expected inflation went from 1. 8 to 1. 5 met the fact that youre not responding. Chair powell thats the inflation question. Yes. Chair powell im saying. No, the fact that you signaled rate cuts are coming, was there any concern in the committee that this would tell consumers, tell people dont borrow now, dont spend now because itll get cheaper later . Ice chair powell i see. All right. Let me answer the inflation question first. So what were saying i noted in the statement and also in what i said here we saw that marketbased measures of inflation expectations, breakevens dropped. We noted that also in the statement. And i noted it as a reason for us to, one of several reasons why it feels to us that the case for more accommodation has strengthened. So we find that notable. Not only that, the actual forecast for inflation for this year among fomc participants dropped a couple of tenths. So that means a prolonged shortfall of inflation. Let me say, on inflation, its something ive been concerned about for quite a long time. Its one of the principal reasons why i called for the review. In a world where policy rates are going to be closer to the effective lower bound than just as a general matter, we need to be really strong on 2 inflation. So i think, you know, we certainly dont want to be seen as weak on inflation, and i dont believe we are. In terms of the dots, youre right, this is the first time, i believe, weve had weve talked about cutting in the dot era. I guess the dot era began in january 2012, and you know, we are working our way through it. I think it is just something that we do. They overall provide useful information for people. Do our we need to absolute best to explain what they are and are not. They are not a forecast of the group, they are not discussed or debated at the meeting. They are an input of policy rather than an output. So in a situation where there is relatively high uncertainty, there is the most likely case. But the second was likely might only be a little less likely. But that does not show up in the. The dot. So if you pay to close attention, you may loose sight of the larger picture. Chris, bloomberg news. Chairman, if and when the committee decides to cut rates, i expect there will be a debate about whether to move by 25 or 50 basis points. There is a pretty substantial body of academic literature asking that a central bank close to the zero or lower bound ought to act sooner than it otherwise would. I wonder what you think of that prescription and if you could spend a couple of minutes discussing the pros and cons of a 50 basis point cut. Chair powell on the specific question of that, it is just something we have not really engaged with you. It will depend very heavily on incoming data and the evolving risk richer. Can say about that is specific to the nearterm question. More generally, the research you refer to, essentially, notes that in a world where you are closer to the effect of lower bound, Research Shows this. To prevent a react weakening from turning into a prolonged weakening. Ounce ofwords, an prevention is worth a pound of cure. That is a valid way to think about policy in this era. It is in the minds of policymakers during this era because it is well understood to be correct. Elizabeth warren has recommended revaluing the dollar. President trump and overvalued dollar has impacted competitiveness. Do you believe it undervalues american competitiveness and would you support some kind of effect on this issue . Chair powell we dont comment on the level of the dollar. We have a responsibility for maximum employment and stable prices. Can we use our tools to achieve that. We do that through changing financial conditions, and one of those is the dollar, but we do not target the dollar. Effect, Central Banks for nations about when they get together, routinely adopt a communique that says we will target our domestic financial conditions and not our exchange rate. The unitedthis states and the g20 communicate adopted. Ped paul and then edwards. Thank you, chairman. Paul from dow jones. According to the dot plot, if the most likely case is that you will have to cut rate in the next 18, and given some of the concerns about policy needing to react sooner and more aggressively, what would have been the downsides to cutting rates now . Why not just cut now . Thank you. Chair powell why not now . Say there was not much support for cutting rates now at this meeting. It was, as you see, a number of people wrote down rate cuts. All but one apparently felt that it would be better to see more before moving. I gave a couple reasons why that is the case. The fact is that some of these developments are so recent we want to see whether they will sustain. We felt it would be better to get a clear picture of that we would learn a lot about these developments. Ultimately, the question we are asking is are these risks going to be continuing to weigh on the . Utlook and we will act as needed including if it is appropriate, and use our tools to suspend sustain the expansion. Thank you, chairman how do you reconcile the conflicting Economic Data coming in. On one hand, you have strong, the otherowth, on hand, manufacturing numbers were a little bit weaker. You have growth in jobs and then you have low inflation. Are youally, what data looking at that you have decided not to have a rate cut . Chair powell you did a pretty good picture. It is obligated, and the answer is that we look at all of it but the big pieces are this, the baseline outlook has been a good one, and that has basically been Consumer Spending to back up in the second quarter, that is coming true. Consumer spending is at a healthy level and that makes sense. You have got a tight labor market. You have got companies in surveys saying that labor is scarce. Jobsave got workers sank are plentiful. You got wages going up, high levels of household confidence so all of those underlying fundamentals is quite solid. You take an, if three average is still well above the level of entry into the workforce. So that part of the economy is solid. You mentioned manufacturing, we are seeing this around the world. Manufacturing investment and trade has been weaker compared is not solely a domestic issue and it may be that there are a range of factors contributing including, for example, when china has done over the last couple of years and working to bring down its leverage. Some of it may be uncertainty over your supply chains due to trade developments. The boeing 737 issues may be contributing in their own way. Although they are also leading to lower gas prices. So there are many, many things. Not one thing that explains it all, but it is something we are watching. But you do see growth in services. This pattern around the world of has led tocturing low unemployment, good job those are kind of the two big pieces that you see. Then you see the crosscurrents on top of that and concerns about Global Growth and trade developments heard you have the full picture. And but we took away from that picture that would like to see risksthat we do see these , and what we want to do is watch and see whether they continue to weigh on the outlook. Michael mckee, Bloomberg Television and radio. If spending is solid and investment has been slowed by a certainty, i would like to get your thinking on what a fed rate cut would do. Have you modeled the additional growth and inflation . Identified any sectors that would benefit from a lower cost of capital . Or is this really about the fed being the only game in town . Chair powell we have the tools we have and we are committed sees them. They support Economic Activity through a number of channels that are reasonably well understood. That it generally believe our Interest Rate policy can support demand and Business Investment as well. Tools as wese those to achieveopriate our directors, which is to sustain its expansion. The reason we say sustain the expansion is that you are seeing ,ow, for the first time communities that are being brought in to the benefits of this expansion. We are 10 years deep into this. Is why i think it is so important to ask to sustain. He expansion cap fed policy solve those problems . Chair powell we take the cross currents as a given. We react to anything in principle that could undermine our achievements of our school of ouroals mandated goals. That is just how we look at it. Victoria with politico. Fed does not the take shortterm Political Considerations into account. I am wondering if there is a point at which you think, publicly or privately, you should push back on the president s criticisms rather than ignoring him . You and thek president have the same goals what comes to Monetary Policy . I dont discuss elected officials publicly or privately, really. I would just say that we at the fed are deeply committed to andying out our mission that our independence from direct political control we see as an important institutional features that has served the economy and country well. Nancy . Nancy marshall with marketplace. Are you concerned that new digital conservancies like libra could undermine the fed and you your your power erode power . Facebook talk at to anybody at the fed before libra was unveiled this week . When your specific question of Digital Currencies replacing centralbank currencies, i think we are a long way from that. Digital currencies are in their infancy. Concernedy, not too that Central Banks will no longer be up to carry out Monetary Policy because of crypto currencies. Facebook has made quite broad withs around the world regulators, supervisors, and lots of people to discuss their plans. That certainly includes us. It is something we are looking at. We will meet with a broad range of private sector firms all the time. There is just a tremendous amount of innovation going on out there. There are potential benefits and risks, particularly of a currency that could potentially have large applications. Echo what Governor Carney said. We will wind up having quite High Expectations from a sort of safety and soundness regular very Strange Point standpoint. Will you be involved in regulating libra . Chair powell we dont have Regulatory Authority over cricket currencies as such. But i would say that, through , we haveonal forms significant input into the patent system. And as you know, play an Important Role in the united dates. Thank you, chairman. I want to take you back to and the preview of your Monetary Policy strategy. Something interesting is that outs outside experts are in favor of you shifting inflation targets to around 4 . They think that they hope Monetary Policy, not sanctimonious or anything, it seems you have taken that off the table. Off have you taken it off the table . What are your thoughts on that . Chair powell we have said we thed not look at raising target rate for inflation. We did say that. The reason is that it has become a global norm, 2 . Our statutory mandate is price stability. Lesse actually taking radical ideas. Is me a chance to say a couple things about purview and chicago, in particular. It is a new thing for us which i thought was appropriate appropriate and important for us to do. It is meant to be a way for us to look, let the sunshine in, and have dialogue and criticism with the constituencies that we serve . Serve. We have had an academic conference this month with papers written and criticized. But i will say again that the heart of the conference was the two panels with those who live in low to moderate income communities and are part of the communities. People were quite struck by uniformlyrvention is around how important maximum employment is. The idea being that they have not had a bull market. What they have had was low unemployment and lots of social just now, you have companies who want to hire are brainy people into and are bringing people into the labor market. For someone who does this work, it was very focusing and motivating. Everybody thought it was quite worth doing. Some people at the beginning recommended that we just talked to economics phds about this, but that is not we chose to do. Even those two panels you just referenced, when the people were asked about 2 inflation or higher, they kind of just shrugged their shoulders. His 4 inflation radical, and to whom . A 4 powell is inflation radical, and to who . Chair powell you see this inflationary pressures around the world. You see Central Banks having a hard time getting inflation up to their objective. You have seen them do better than other large Central Banks. But it is quite challenging to get inflation even from very high levels. Inflation has been lingering and not getting back up to target in a sustained, symmetric way. To say you are going for 4 , i wonder how credible that would be. I have a question about Bank Regulators and leverage lending as you know, the gao had a letter saying they thought it was a rule it sort of went away. In yet leverage lending is a source of concern. Creditrself said that underwriting quality seems to be deteriorating. The fed has tools to supervise banks and to prevent leverage lending from becoming too much of an issue. Is the 2013 guidance still . Epresentative fed have any intention to issue either a leverage lending rule or new guidance that is less problematic . Or is the plan to just kind of carry on with supervision as you are . The 2013 guidance is not binding. But that is really the beginning of the story. Tohave the authority we need examine the banks for safety and soundness exposure. So the first thing you start with is the risks that the bank is taking to themselves. But the obligations they have undertaken, we monitor that very carefully. Ec exposure that was much smaller than before. Test that regularly in the stress test. We kind of have a sense of what that is. There was a lack of knowledge about what the losses would be. So that is where it starts for us. The risks that the banks are running on their own books and to themselves and to each other. And if you like that is in a good place, but we never say Mission Accomplished on that. We will keep monitoring that carefully. What is happening is the paper is now owned by marketbased vehicles, collateralized loan obligations, mutual funds, and things like that. We have a good sense of domestically where the paper is. Nternationally, not as much the Financial Stability board is looking more carefully. We monitor those vehicles to see what they are. They are actually stably funded in the sense there is no run risk. But there is still a macroeconomic risk. This is something we take very seriously. Fsoc isf sock looking at that. It is not really a Financial Stability risk in the sense that it could undermine the ability of the financial system. Is there any intention to create additional clarity . So that people know what the expectations are for leverage lending. Is anything else coming . Or is it just going to remain like bilateral conversations with banks. The issue is not that the banks do not understand the roles, the issues is that the risk is not the banks. So i not in the market longer and daytoday involves. But my sense is that it is really not the problem not saying it is perfect, but i think we do understand what risks of the banks are running. The question is how concerned should we be about Large Holdings by marketbased based vehicles . We are very carefully assessing that and we take all of these risks seriously. Brian with yahoo finance. Can you expand on the labor market . The statement noted the labor market remains strong but missed estimates. I am wondering how you reconcile that with the fact that we only got 3. 1 yearoveryear wage growth. What does that tell you about employment . And are closer or farther away so that full employment . Chair powell we have to be closer because more jobs are being created then people entering the labor force. Numbers,ots of lots of the labor market is in a good place. The level of wages is very consistent with what it should isin the sense that it approximately equal to inflation plus productivity increases. What is surprising is that you could reach these levels of unemployment long into a cycle and not see higher wages. Wages at this level, even though , they are notng growing at a rate that would provide much upward thrust. We watch all of this are carefully. We are very careful about not there is no more slack in the neighbor market labor market. It has just gone down and down and down. You have not seen wages pick up. You have not seen real signals that we are at maximum employment. You have seen a tightening labor market. The surveys will all show that the labor market has tightened, but not over tightened. Gene with the last question. Gene young with market news. Did the fomc discuss the change to its Balance Sheet policy . Perhaps ending runoffs earlier than planned . And with the committee be inclined to do Something Like that before september . Chair powell we have not made any decisions yet. Sheet runoff is very close to the end of its plant life. Planned life. If we do provide more accommodation, we will certainly keep in mind what we said earlier this year. Which is that we will always be willing to adjust Balance Sheet policy. Thank you very much. Cspans washington journal, live every day with news and policy issues that impact you. Coming up thursday morning, we will talk about the epas repeal of clean water plans the competitive prize institute. And then we discussed federal spending and efforts to avoid another government shutdown. Be sure toch watch cspans washington journal. Join the discussion. Is a look at our live coverage thursday. On cspan, the house is back for general speeches, legislative business starts at 10. 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