Transcripts For CSPAN3 Federal Reserve Chair Jerome Powell Testifies On The State Of The Economy 20240714

The committee will come to order. Without objection, the chair is authorized to declare recess of the committee at any time. This hearing is entitled Monetary Policy and the state of the economy. I recognize myself for four minutes to give an opening statement. Today this committee convenes for a hearing on Monetary Policy and the state of the economy. Chairman powell, welcome back. Today i would like to start by addressing the current elephant in the room when it comes to Monetary Policy and the fed. This president has made it clear that he has no understanding or respect for the independence of the Federal Reserve. He has said the fed, quote, doesnt have a clue, quote, unquote, called it the most difficult problem for the u. S. According to media reports, he discussed firing chairman powell because of policy he doesnt agree with. Lets be clear, it is essential that the Federal Reserve maintain its independence from the executive branch. So i urge chairman powell and other Federal Reserve board governors not to submit to the High Pressure 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 crypto currency 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 asked facebook to agree to a moratorium on any Movement Forward on its plans to create crypto currency or digital wallet. I believe what theyre doing raises National Security and Monetary Policy concerns for consumers, investors and the Global Economy. With facebooks foray into this field should signal to all of us the Current System of regulation lacks adequate coordination, safeguards, attention to crypto currency. Chairman powell, the fed should be a leader on this issue, shouldnt take a wait and see 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 crypto currency today. Another issue i would like to discuss is bank deregulation. I remain concerned about the Federal Reserve actions to weaken safeguards that congress and chairman powells predecessors put in place following the financial crisis specifically. It appears the fed may be following the Trump Administration deregulatory plan to weaken the capital and liquidity buffers of some of the largest banks. As i have said before, i believe this to be ill advised, particularly when many economists, including economists at the Federal Reserve believe bank levels are on the low end of what is necessary to withstand another financial crisis. I look forward to your testimony and to discussing these matters with you today. The chair recognizes the Ranking Member of the committee, the gentleman from north carolina, mr. Mchenry for four minutes for opening statement. I thank the chair woman for yielding. I would like to welcome chairman powell back to the committee. Chairman powell prioritized outreach to congress and members of this body benefitted greatly from hearing his thoughts in february and in individual meetings since then. So we thank you for your return. I know the markets are interested in your testimony, but we as policy makers, too, are interested in your testimony. As i stated in the hearing in february, the economy in the last twoandahalf years witnessed remarkable growth. Unemployment reached lows that many believe were impossible. Republican led tax relief and Regulatory Reform have supported these trends with millions of americans benefitting from our policies. Were seeing it in wage growth, were seeing it in continued job growth, and we are all americans are benefitting from this. These benefits continue to endure five months since your last testimony, and in the most recent fomc statement, the fed concluded the labor markets remain strong and Economic Activity is rising. Job gains have been solid, and the Unemployment Rate remains low. But we cannot take our foot off the pedal. In february, discussed how the fed was undertaking targeted rule making for regulatory relief that allows Financial Institutions to operate efficiently in the communities they serve and compete globally as well. I hope that you, chairman powell, will continue to work to undertake these efforts with a sense of urgency, especially in the rule making category. I also encourage chairman powell to maintain commitment to transparency and proactive km g communication with capitol hill, especially when they consider changes to policies and operations. At our last hearing, frinor instance, the chairman said they support the current inflation target. There are numerous proposals that effect how the fed might pursue that target. I hope the fed will approach such with a level of prudence, given limitations of central bank tool kits at this point in our economic cycle. And also until we fully understand how the limitations have emerged and how they can reliably be overcome. So finally, let me reiterate my concerns, concerns shared by the fed it is he have, Global Economic could resuuncertainty home. The risks that the fed would continue to monitor, where appropriate, work to mitigate. I hope we can touch on those things today. Let me highlight china in particular. When the chairman last appeared before the committee, he noted the chinese economy is state run but beijing has attempted to make certain market oriented reforms. I am concerned these reforms may not be deep enough. When the worlds second largest economy is a one party state without the rule of law, without transparent Decision Making, where allocation of capital bends to politics and cronyism, where one million citizens can be locked in camps, 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 sufficient set of tools within Central Banks if something were to go wrong. And again, thank you, chairman powell for returning. Thank you for your responsiveness. Your candor is welcome and encouraged. We thank you foray tempting to speak like a normal human being. Complex Financial Markets and complex Decision Making within our independent Monetary Policy group called the Federal Reserve. Thank you. The chair recognizes mr. Cleaver for one minute. We are pleased to have you here again, mr. Chairman. Thank you for being here. I wanted to discuss the impact of the trade war. Over 500 days in the trade war. But i cant hardly move there because the number one concern im having is that this administration is very publicly trying to force Financial Markets and Federal Reserve to lower Interest Rates to offset what i think to be an irrational trade war and poor fiscal policies. And the issue for me in january i will have been on the committee 15 years, i have never seen a president meddle in the Federal Reserve as this president has. And it is deeply disturbing. And the problem is that it seems to be working because were moving in the direction he has been ordering. Hopefully you can address some of this when we get back into the question, answer period. Thank you, madam chair. The chair now recognizes the subcommittee Ranking Member mr. Stiefrs for one minute. Thank you, madam chair. Chair powell, welcome back to the committee. Because of the tax cut, Regulatory Reforms, the u. S. Has seen unprecedented Economic Growth, wage growth and record low unemployment and stable prices, and since the last time you were here, weve seen mostly steady economy with unemployment at 3. 7 . And Consumer Prices only edging up. 1 . But i heard anecdotal evidence of slowing investment and price increases. I want to thank you for your steady hand on Monetary Policy. Thats an important part of our economic success. And while acknowledging recent success, i know the fomc meetings point to uncertainties and Economic Outlook, meaning your data may tell you the same thing i have been hearing. I agree with chair waters that i want to hear about your perspective on facebooks crypto currency. I think theyre attempting to undermine the dollar as the worlds currency. I also am interested in hearing your views of 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. Thank you very much. I want to welcome to the committee our distinguished witness, jerome powell, chairman of board of governors of the Federal Reserve system. He has served on the board of governors since 2012, as its 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. Thank you, and good morning. Chair woman waters, Ranking Members and other members of the committee, i am pleased to present the 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 statutory goals based 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 returning to Monetary Policy. I will provide an update on our ongoing public review of framework for setting Monetary Policy. The economy performed reasonably well over the first half of 2019 and the current expansion is now in its 11th year. However, inflation has been running below the fomc 2 objective, and cross currents such as trade tensions, concerns about Global Growth are weighing on Economic Activity and the outlook. The labor market remains healthy. Job gains averaged 172,000 a month from january to june. This number is lower than the average of 223,000 jobs last year, but above the pace needed for new workers entering the labor force. Consequently, Unemployment Rate moved down from 3. 9 to 3. 7, close to the lowest level in 50 years. Job openings remain plentiful, employers are increasingly willing to hire workers with fewer skills and train them. As a result, the benefits of a strong job market have been more widely shared in recent years. Indeed, wage gains have been higher for lower skilled workers. That said, individuals in some demographic groups and certain parts of the country continue to face challenges. For example, Unemployment Rates for African Americans and hispanics remain well above rates for whites and asians. Likewise, share of the population with a job is higher in urban areas and Rural Communities, and the gap has widened in the past decade. A box in the july Monetary Policy report provides comparison of employment and wage gains over the current expansion for individuals with Different Levels of education. Gdp increased at an annual rate of 3. 1 in the First Quarter of 2019, similar to last years pace. This strong reading driven largely by net exports and inventories, components that are not generally reliable indicato indicators of momentum. More reliable drivers are Consumer Spending and Business Investment. While growth in Consumer Spending was weak in the First Quarter, incoming data shows it bounced back, and 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 slow down in business fixed investment may reflect concerns of trade tensions, Slower Growth in the Global Economy. In addition, Housing Investment and manufacturing output declined in First Quarter, appeared to have decreased again in the Second Quarter. After running close to 2 objective over much of last year, overall Consumer Price inflation measured by the 12 month change in price index for pce inflation declined earlier and stood at 1. 5 in may. 12 month change in core pce inflation, which excludes food prices and tends to be better indication of future inflation has come down, was 1. 6 in may. Our baseline outlook is for Economic Growth to remain solid, labor markets to stay strong, inflation to move back up over time to the committees 2 objective. However, uncertainties about the outlook increased in recent months. In particular, economic momentum appears to have slowed in some major foreign economies, and that weakness could effected the u. S. Economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, federal debt ceiling and brexit. And weak inflation more than we currently anticipate. We are carefully monitoring these developments. The nation continues to confront longer run challenges. Labor force participation by those in their prime working years is now lower in the United States than in most other nations with comparable economies. As i mentioned, there are troubling labor market disparities across demographic groups in different parts of the country. Relative stag nation of middle and low inspection in addition, finding ways to boost productivity growth that leads to rising wages and Living Standards should remain a High National priority. I remain concerned about longer term effects of high and rising federal debt which can restrain private investment, and reduce productivity and Economic Growth. The longer run vitality of the economy would benefit from efforts to address these issues. Against this backdrop, the fomc maintained the target range for federal funds rate at 2. 25 to 2. 5 the fishrst half of the ye. We stated we would be patient as we determined what future adjustments to federal funds rate might be appropriate to support our goals of maximum employment and price stability. At the time of our may meeting, we were mindful, but there was tentative evidence the cross kurns were moderating. Latest data from china and europe were encouraging and reports of progress in trade negotiations china. Our continued patient stance seemed appropriate and the committee saw no strong case for for adjusting the policy rate. Since the may meeting, cross currents have reemerged, creating greater uncertainty. Apparent progress on trade turned to greater uncertainty and contacts in business and agriculture report heightened concerns over trade developments. Growth indicators around the world disappointed on net, raising concerns weakness in the Global Economy will continue to effect the u. S. Economy. These concerns may have contributed to the drop in Business Confidence in some recent surveys, 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 and muted inflation pressures, we would closely monitor implications of incoming nchgs for the Economic Outlook an act as appropriate to sustain the expansion. Many saw the case foray come date i have policy stance had strengthened. Since then, based on incoming data and other developments, uncertainties around trade tensions, concerns about strength of the Global Economy continue to weigh on the u. S. Economic outlook. Inflation pressures remain muted. Fomc has made a number of important decisions this year about framework for implementing Monetary Policy and plans to complete reduction of the fed security holdings. In the january meeting we decided to continue to implement Monetary Policy using our current policy regime with ample reserves, emphasize we are prepared to change details in light of economic and financial developments. In the march mooting we communicated to slow decline in aggregate securities holdings, end reduction in holdings in september. The july Monetary Policy report provides details on these decisions. The report includes an update on Monetary Policy rules. Fomc routinely looks at rules that recommend a level of federal funds rate based on inflation and Unemployment Rates. I continue to find these rules helpful, although using these rules requires careful judgment. We are conducting public review of Monetary Policy strategy, tools and communications. The first review of its kind for the fomc. Our motivation is to consider ways to improve the current policy framework, best position the fed to achieve max employment and price stability. A broad range of people and groups through a series of fed listens events. Fomc will consider questions related to the review at upcoming immediameetings. Thank you. I will be happy to respond to questions. Thank you very much, chairman powell. I now recognize myself for five minutes for questions. June 18, facebook announced plans to launch libre, new Payment System, calibre. June 24, the vice chairman of supervision randall quarrels, quote, a letter in his capacity as chairman of the Financial Stability board to the g 20 leaders noting wider use of new types of crypto currency, crypto assets, retail payment purposes would warrant close scrutiny by authorities to ensure theyre subject to high standards of regulation. End quote. Signaling global regulatory coordination of facebook will be a priority, chairman powell, did the Federal Reserve speak with facebook about their libre currency, and if so, were concerns raised . Does the Federal Reserve have authority to supervise, regulate what could be the Worlds Largest Payment System . Does Federal Reserve have concerns about Monetary Policy with regard to libre . Thank you, madam chair. We did actually have a meeting with representatives of facebook a couple months before the announcement. I think they made fairly broad set of visits to authorities around the world. But getting to your questions, let me start by saying we do support responsible innovation in the Financial Services industry, as long as associated risks are identified and managed. As well discuss, while the project sponsors hold out the possibility of public benefits, including improved Financial Access for consumers, libre raises many serious concerns regarding privacy, money laundering, consumer protection, Financial Stability. These are concerns should be thoroughly, publicly addressed before proceeding. Thats why at the fed we set up a working group to focus on this set of issues. We are coordinating with our colleagues in the government, in the United States, regulatory agencies and treasury, coordinating with Central Banks and governments around the world to look into this. And ill just add the process of addressing these concerns we think should be a patient and careful one, not a sprint to implementation. So are you speaking of a working group within we have our own working group. I believe fsoc has a working group at the staff level. Fsoc has a crypto currency working group. Are they reviewing the extensive policy questions and potential impact that libre and calibre are . Do you know what theyre doing . There was a staff level meeting last week to focus on libre. All the agencies were there. I think the answer to the question would be yes. Do you think fsoc, are they considering designating it as systemic Financial Market utilities or nonbank financial companies, and subject them to enhanced Regulatory Oversight . Are you aware of that . I think it is early to say. Hasnt been a principals meeting since the announcement. While there are conversations, i think it is likely fsoc will take it on in a serious way, thats in the hands of the treasury secretary that chairs fsoc. Mr. Chairman, in you got a call from the president today or tomorrow and he said i am firing you, pack up, it is time to go, what would you do . Of course i would not do that. I cant hear you my answer would be no. And you would not pack up and you would not leave . No, maam. Because you think the president doesnt have the authority . Is that why you would not leave . I have kind of said what i intended to say on the subject and what i said is the law clearly gives me a four year term and i fully intend to serve it. I hope everybody heard that. With that, i will yield to the gentleman from north carolina, the Ranking Member, mr. Mchenry. So chairman powell, in your testimony you said you would use Macro Economic data to inform the decision whether lower Interest Rates are required at the end of the month or not. What specific data would likely lead to recommending a change in rates . Between now and the end of the month theres data coming in on almost everything. Youll have labor market dated a, Second Quarter gdp, retail sales, youll have a broad range of data coming in the next three weeks and well be looking at all of that. I wouldnt point to one data point or period. We try to look over longer periods of time, assess whats really going on at a fundamental level. Thats what well do as we evaluate the incoming data. And theres also an understanding of the market assumption of what the open markets committee will do as well, is there not . There is. We look at a broad range of financial conditions, dont focus on any one thing. Our policy works through financial conditions. So well look at a broad range of things in the Financial Markets. So a broad range muof things. Macro Economic Data. Emotion . Emotion . Not on our part. We try to be rational and an lit cal and transparent how we are thinking about things. Along the lines of transparency, the velocity of the economy you speak to and larger global Macro Economic issues that are at play here as well. So along those lines is the Federal Reserve, does the Federal Reserve have capacity to make independent Monetary Policy decisions under law. Yes, we do. Is that impeded by people saying negative things about you . Is that enhanced or diminished based off people saying positive or negative things about you . Neither. We will always focus on doing the job youve signed us, we will always do it to the best of our ability. Along those lines, we have significant change to policy, i wrote to vice chair quarrels along those lines. There has been major progress made in terms of swaps and derivatives contracts. I remain concerned about legacy retail contracts. Has the fund undertaken analysis about legacy retail contracts. Indeed we have. Thats a very important part of the project Going Forward. We have reached out to representatives of retail users of libor, in our meeting with them and developing plans to deal with it. As you know, as you pointed out in your letter, significant quantity of contracts are mortgages and the like. Thats an important area. We did the dertives, but are working on the retail side now. Are there loans that have to be renegotiated because of this policy change . Again, i dont have a number for you. So i also want to touch on project libre. You look like youre quite prepared for that. You mention Financial Stability as a concern. Why . Why is project libre a question of Financial Stability in your view . Really due to the possibility of quite broad adoption. Facebook has a couple billion plus users, so you have i think n for the first time possibility of broad adoption. If there were problems there associated with moneylaundering, terrorist financing, any of the things were focused on, including the company, they would immediately rise to systemically important levels because of the size of the facebook network. And the company has said so explicitly. Is it a problem we dont have Regulatory Regime permissive of technologies to be developed in the United States . I dont know that thats a problem. Thats a question of whether were impeding block chain. I dont believe so, but i dont know the answer to that. But theres an opportunity for Financial Inclusion benefits, innovation benefits if it worked well. There is a possibility. Thats the main benefit the company is holding out. And i also mention that we are open to financial innovation. We want it to take place in a safe and sound way. Thank you. The gentlemen woman from new york, miss maloney, recognized for five minutes. Thank you, madam chair, Ranking Member, thank you for your service, chairman. Chairman, in june, the fed decided not to cut Interest Rates. To take a wait and see approach instead. In your press conference, you said this was justified because, and i quote, we will see a lot more on all these issues in the very near term. End quote. Last week we got the job numbers for june and they were very strong with employers adding 224,000 jobs. So my question is did the june jobs report change your outlook whether reduction in Interest Rates is appropriate in the near term . A straight answer to your question is no, but i will give you the context. We look at a broad range of data. So lets start abroad. Since the june meeting, for a period before that, data continued to disappoint. And thats very broad across europe and around asia, and that continues to weigh. By the way, manufacturing trade and investment are weak around the world. We have a box that talks about that in the Monetary Policy report. In the United States, we did get a job report that was positive. And thats great news. And we had other reasonably good news. I would say u. S. Data came in about as expected. And i would also say that lets go to trade. We have agreed to begin discussions with china. And while thats a constructive step, it doesnt remove uncertainty we see as overall weighing on the outlook. So i would say that the bottom line 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. Some economists, many Market Participants believe the fed should cut interest points 15 points, rather than normal cut of 25 basis points. I dont see the case for cutting rates 50 basis points because the economy is strong now. What economic factors do you believe would justify taking the unusual step of cutting race 50 basis points . At our meeting in three weeks, well be looking at a full range of data. I would take you through the story. That will be what were thinking about, the extent to which is trade developments and concerns over Global Growth weighing on outlook, and also performance of inflation. Those are the factors we identified, all of that goes into Decision Making. And also, mr. Chairman, you repeatedly stressed that uncertainty about trade policy is a Major Economic head wind and is one of the factors could lead the fed to cut rates this month. As we have seen under the president , it is unlikely well get much certainty on trade policy. You keep changing every day. So my question is 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 head wind to use your term to Economic Growth . I guess i ought to start by saying no one should interpret what im saying about trade head winds as in any way criticism of trade policy. We do not play a role in assessing or criticizing trade policy. It is not something assigned to us. We react to anything that in principle, anything that can effect our ability to achieve the dual mandate goals you assigned us as something that could call for policy response. Right now, that is global weakness and trade developments are things that are widely thought to have that effect. Thats all. So i wouldnt want to try to prescribe a specific answer. And again, it wouldnt be ours to do in the first place. Well, hopefully well have some answers on trade soon. Thank you for your service. I yield back. The gentle woman from missouri, miss wagner, is recognized for five minutes. Thank you, madam chair woman. Thank you, chairman powell for being here to testify. Chairman powell, vice chairman quarrels yesterday indicated Federal Reserve would revise its stress capital buffer proposal in the near future. 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 this is something that needs to be considered and what factors might necessitate this change, sir . So we are in the process of evaluating i think in the late stages of evaluating 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 complicated exercise, there are many moving pieces. Thats one of them. I wouldnt want to single any one out as important for our consideration, but thats so the average, taking an average of stress test results is something under consideration but is maybe a change youre not necessitating just yet or were very much in the process of evaluating all those ideas. I wouldnt want to single that one out as either in or out, just there are many pieces, but yes, that is one of the pieces. You said youre in the late stages. Whats your time frame for coming up with an option in terms of the stress capital buffer proposal . I would have to come back to you with a date, it would be within soon, in the near future. Thank you. Chairman powell, at the january press conference you were asked whether a 4 trillion Balance Sheet gave you sufficient fire power to handle a future recession, and you answered yes. However, the feds Balance Sheet as a share of gdp is about where the bank of japan Balance Sheet was prior to the financial crisis. Today, the bank of japan 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, sir, effected your thinking on the appropriate size of the feds Balance Sheet . I think there are a lot of lessons to be learned from the experience of japan in the last quarter century, and all of us have looked carefully at that. And to the point, if i may, why should we feel certain the u. S. Could avoid similar fate. Perhaps you could elaborate. What japan found itself in a situation where inflation has gotten down close to zero for a long time, and tried many things, including as you mentioned extensive asset purchases and all sorts of Forward Guidance to move inflation back up and have not met with much success, although they continue to struggle to do that. My main take away from that, by the way, European Central bank is fighting that as well, my main take away from that honestly is that the fed needs to stand here and try to keep inflation symmetrically 2 . That will show up in lower Interest Rates, which will give the Central Bank Less fire power to react. We see that road is hard to get off of. It is important that we fight at 2 to keep inflation up to 2 . And use our tools to achieve that symmetrically. And were strongly committed to doing that. The most recent Monetary Policy report stated Consumer Spending in the First Quarter was lackluster, but appears to have picked up. You talked about this in your opening statement, mr. Chairman. Can you explain the possible variables behind lackluster Consumer Spending and why the recent turnaround . Well, i think the consumer part of the economy is 70 of the economy, and it is healthy, it is strong, it is good job creation, it is rising wages. Workers surveys show they think jobs are plentiful, business surveys shows they think workers are scarce. This is a good place for the consumer part of the economy, and you see that in surveys, you see it in Consumer Spending. Concerns about Work Force Development and having enough able work force is key. They are, but a tight labor force is lifting all sorts of communities into the labor force, and it is good. The issue is more on the business side where you see Business Confidence and Business Investment weakening a bit. I thank you. I yield back to the chair. Thank you, sir. Mr. Clay, the gentleman from missouri, is recognized five minutes. Thank you, madam chair. Thank you, chairman powell, for your visit today. In this published yesterday, st. Louis Federal Reserve noted that riegs in uncertainty is widely believed to have detrimental effects on macro, micro economic, and Financial Market outcomes, and induce responses from monetary fiscal and regulatory policy makers, they wrote. Theoretical models suggest rising uncertainty can effect Economic Activity and Decision Making in various ways. The authors explain in particular they noted firms may delay investment and hiring. Households may reduce spending by increasing savings rate, if they anticipate possible changes in income or wealth. Financing costs may rise if 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. And this uncertainty is exacerbated for consumers in missouri when the president is gloating about how great the economy is, yet the Federal Reserve is considering a rate cut. How do you account for the mixed messages . Well, i havent seen that blog post, but i would strongly agree with the sense of it. We do think that uncertainty can cause businesses to hold back on investment and hiring. In fact, we have been hearing that in our fomc based discussions with businesses around the country. Household confidence has remained high but over time uncertainty can cause households to hold back as well. I think thats a pretty standard finding. What about the factor of savings . I mean how does that play into . Savings . Yes. Is that good or bad . Sorry . Is that good or bad for families to save . Well, savings rate has actually been fairly high lately and thats its good for people to save what they think they need to save. I think as a general thought, as a general fact, americans need to save more for retirement than they have. They are not over saving, they are under saving in the aggregate. So its a good thing. Could they also be saving in anticipation of a calamity, an economic calamity occurring . Yes. Theres also its good to save, but at the same time theres a shot to confidence you can see people pulling back from their regular Consumption Patterns and that will show up in the demand and the economy will weaken. As far as the decisionmaking on the part of fed, are you relying on conventional Economic Data or being swayed by jaw boning of the president . We see the economy as being in a good place, and were committed to using our tools to keep it there. As we discussed, the overall economy is performing reasonably well, but we see what we call cross currents, principally trade developments and concerns over Global Growth and we see those and significant, many fmoc participants at the last meeting saw those as weighing on the outlook and calling for possibly for accommodating policy. Thank you very much. Chairman powell, despite data Diverse Companies produce more successfully we find Financial Services industry is largely white and male and at its highest level. What more can you do as chair to snefti incentivize diversity within the Federal Reserve system . We thank you for that question. We put a very high value on diversity. I strongly belief having diverse perspectives around the table leads you to better decisions and having a culture where people are free to speak and will be heard and that goes to all different dimensions of diversity. So weve head, i think, a lot of progress at the fed. I think i would never say there isnt more to do. Theres a lot more we can do. I think were very focused on that as an organization. I would say in most of my career was in the privatesector. I saw that really successful companies, one of the things they do well is they do diversity well. Because you get better results with diverse perspectives. So were strongly committed the to that. Thank you. My time is up. Yield back. Mr. Stieger, the gentleman from ohio is now recognized for five minutes. Thank you, madam chair. Chairman powell, i really appreciate you being here. I want to thank you for your transparency and accessibility as fed chair and youve been available to all of us in our offices and our office and i appreciate that. This Committee Hearing is about Monetary Policy and the state of the economy and ill stay focused on those issues and leave the regulatory issues to when the vice chair is here and with regard to Monetary Policy when i was in your office i really appreciate you keeping the 100 million venezuela bolivars i gave you as you answered the question to japan once inflation starts rolling its really hard to gate control of, as the venezuelans have found and so the fact that you guys have a stable price target and are sticking to it i think 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 guys have done a great job on Monetary Policy. And in your question, to another question about unemployment and the tight labor markets, i think you talked about the fact that wages are starting to go up. Starting to actually benefit people who actually have not benefitted from this economic expansion over the last ten years, which is a good thing and i know some observers have been calling for a socalled hot Monetary Policy on the premise that further tightening of the labor market will benefit those demographics that missed out on the expansion and drive you wages and make labor markets tight and help those folks. Can you comment on whether members of the fmoc have talked about those views and what the potential risks and benefits associated with a hot Monetary Policy might be . You know, i guess i would start by saying we dont have any, any basis pardon me or any basis for calling this a hot labor market. Pardon me. We have wages moving up at a little above 3 and thats good. Thats good because it was more like 2 five years ago. 3 barely covers productivity. Doesnt even cover productivity increases and inflation and not a high enough end wage to put any upward pressure on inflation. We havent seen, as this long cycle has gone on, we havent seen wages moving up as sharply as they have in the past. I do think its very gratifying that for the last two years the greater part of wage gains have gone to people at the lower end of the wage spectrum and education spectrum. Thats a very positive thing. But, 3. 7 is a low Unemployment Rate, but to call something hot you need to see some heat. We hear lots of reports of labor, of companies having a hard time finding qualified labor, nonetheless we dont see wages responding. I dont see that as a current issue. Great. And, you know, if we want to see wages continue to grow well need Economic Growth and one of the things that this congress has in front of it is the usmca. I know a lot of questions youll get will be about the trade war with china but can you comment about the importance of the usmca and north American Investment that a lot of companies have made in a north American Supply Chain . So, i wouldnt take a position on the details of the usmca, though. But i will say having it pass would remove a real bit of the uncertainty that is weighing on the outlook and i think it will be quite a positive thing from that standpoint. Thats what we all need focus on is fight the uncertainty and there are things we can do with that. As policymakers we need to come together and do that. The last question is on libra and facebook. If facebook cant sufficiently answer your questions about antimony laundering what would your message about to the banks that provide banking to facebook and what would your advice to facebook be . I dont think that the project can go forward and i dont think i 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 that i list at the beginning, data protection, Consumer Privacy all of those things will need to be addressed very thoroughly and carefully and again in a deliberate pro se that will not be a sprint to implementation. I want to echo your comments we all want innovation but we want nifgs thotification that p Data Security and antimony laundering laws that are so important to our economy. Thank you. I yield back the balance of my time. Mr. Scott, the gentleman from georgia is now recognized for five minutes. Thank you very much. Welcome chairman powell. Good to see you again. First thing i want to say to you is i want you to stay strong, be courageous. It is important for this nation and the economy of the world that the fed, Federal Reserve remains 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 think and its been mentioned a couple of times, this libra basis is really disturbing, and its 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. It has and is the standard for 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 individual, small businesses, large corporations. So we got a big issue here. But because of pervasive manipulation now, it is apparent that libra is going to leave us or be removed within the next year or so. So this creates a big problem. And so i want to ask you, because the most critical part of this is that parties to both sides of the financial contracts should be and must be concerned in the short term about the potential ramifications of the end of libra, specifically in contrast that do not have a fall back position. And as you know, without a fall back language or some appropriately established safe harbor, until a new reference rate can be used, significant legal problems and challenges are likely to occur. So, with this in mind, as libras scheduled end nears and so far and so far its a secured overnight financing rate, apparently will take its place, tell us chairman, what can we do . What can to be done to accommodate the numerous contacts that do not have fall back positions . Thank you, mr. Scott. I think you said it very well. I think theres 320 trillion plus in contracts referencing libor in five different currencies, and the manipulation was revealed really almost a decade ago and i think the Financial Conduct Authority which supervises the libor banks has said will not compel the banks to submit libor past the end of 2021 and libor could then end. So we spent many years now looking at ways to make sure that contracts do have fall backs and were work with you know, we worked with the retail groups in particular now for mortgages and things like that to find a way so if libor is not published there will be a rate that is the fall back rate and that has to be put into contracts one way or another. Its a vast project. One that many, many people are working on. And working hard to meet that deadline. Libor will be gone, am i right, in michael can you allocations, are they right, within the next year or so . Iactually i think the end of 21. Wont necessarily be gone but the banks will no longer be required to submit their estimates of the interbank borrowing rates. So it may go away. Were requiring people to assume that it will so they will be ready if it does. When you say ready for the dust, what if it does go away. If it does go away. If it does go away what will the situation be like . Ideally, the situation were aiming for is one in which people have either moved their obligations to security overnight funding rate or some other rate or failing that they have a rate in their contract where libor is no longer published the other rate seamlessly falls into place the two parties to the contract the consumer and the bank they know what the rate is. Thats what we need to accomplish. Were working hard on that. Thank you, chairman. Thank you. The gentleman from tennessee is now recognized for five minutes. Thank you, madam chairman. Thank you for convening todays hearing. Thank you, mr. Chairman, for appearing today. If i could, i would like to follow up on a line of questioning that congressman styvers had relating to the usmca. If you could, were going to face the option of passing it or not passing it in this congress. What is the effect to our economy if we do, in fact, pass the usmca and conversely what is the effect to the economy if we fail to pass the usmca . I dont actually have a precise evaluation for you of what the effects of passage would be. Overall its pretty similar to, to, you know, nafta. So i would imagine that the longer term difference the differences will show up over the longer term. I think the effects of not passing it would really depend on what happens to nafta. If nafta were to then be terminated there could be quite a lot of uncertainty. Theres some uncertainty now about what will happen. I think the passage of it would remove that uncertainty and thats a good thing. Would also be positive for our farmers and ag communities if usmca were passed . Yes, i think it would. Do you have an opinion how the passage or nonpassage of the usmca affects our leverage with china and negotiations and trade negotiations . I dont. I dont think it will be appropriate for me to comment on those negotiations. I dont i really dont have an answer for you on that. In next the week, next several weeks, reportedly well be voting on a proposal to wait to raise the minimum wage to 15 an hour. There was a cbo report that came out in the last day or so that estimated that a raise in the minimum wage to 15 an hour could cut, should cut 1. 3 million jobs, up to 3. 7 million jobs. What would the effect be to the economy if congress were to pass a minimum wage bill of raising the minimum wage to 15 an hour . The question of the minimum wage is really one for you. I think the study, there are a range of studies that have different outcomes but like the cbo study what they tend to show is that a number of people get higher wages, and then there are people that lose their jobs. Those numbers will change depending on what assumptions you make. That really is theres no consensus among economists. Economists are all over the place on this. So its really a question for you to sort of look i would look at a range of studies and not take any single one. I would weigh that and say are the benefits worth the likely cost . Whats the effect to the economy if 1. 3 Million People lose their jobs or 3. 7 Million People lose their jobs as a result of the rise of minimum wage to 15 an hour . It would depend on, again, there would be cost in benefits. Some people would get higher wages and they would presumably be better off and spend more. So its not a judgment that we make on net, its a judgment you have to make that there will be people who are better off. And other people who have a higher minimum wage. Other people will lose their jobs. Would the Federal Reserve be concerned if 1. 3 Million People to 3. 7 Million People lost their jobs because the minimum wage was raised to 15 an hour . Again, we do not take a position, we have never taken a position on the minimum wage. And we would take whatever decision you make as the decision that we would put in our models and take as a given. We wouldnt express either support or disapproval. When im back home in west tennessee what i hear from employers, small, medium and large the economy is good. Were making money. Were making more money than we made in 20 or 30 years. We cant find enough employees. We cant find employees with soft skills. We cant find employees who have the skills we need for the jobs. We cant find employees who can pass a drug test. Specifically, and youve talked about this publicly, the effect of the Opioid Crisis on the orchestrate force. What is your feeling on that and how does the Opioid Crisis affect the workforce . An extraordinary number of people are taking opioids in one form or another and i want weighs on Labor Force Participation, largely but not exclusively on younger males, also younger women. Its a national crisis, really. I mean theres humanitarian aspect of it is completely compelling. But the Economic Impact is also quite substantial. Thank you, mr. Chairman. Thank you. The gentleman from colorado is now recognized for five minutes. Chairman, good to say. Thanks for your testimony today. Let me just start with some questions that mr. Scott was asking on libra. Given the uncertainties and inability to manage this new currency, would the Federal Reserve, would you support some postponement in their implementing a libra or any kind of a moratorium until we have a better understanding of the impact on our economy and our ability to manage money . You know, i think that there are deep important serious questions across a range of issues here that will need to be addressed and the process of doing that is going to have to be patient and thorough and not a sprint. Thats what i would say. I do think theres a lot of work going on at the fed and at other agencies and i think in the government to understand these issues. I think its something that doesnt fit neatly or easily within our regulatory scheme. It does have systemic scale. It needs a careful look. So i strongly believe we need all to be taking our time here. Ill take that as a yes. Thank you. Now i really i got a couple of other questions and i dont know if you have your booklet in front of you, but i always like the graphs that you folks prepare because they are very informative. And especially graph 2, in my district in colorado, graph 2 is really the Unemployment Rate, and the fact that for about nine, ten years now theres been a steady decrease in unemployment in my district in colorado. Weve enjoyed under 3 for about seven years running which is pretty remarkable. I want to thank you and thank the Federal Reserve for the role youve been playing there. But one of your answers really, i think, is important to what we face as members of congress is the fact that for most americans their wages still, they are struggling, you know, month to month, year to year to get ahead. To really be able to deal with the costs that we all see. So, in your prediction, in what the Federal Reserve is doing, do you see improvement in what every day americans are making and sort of catching up and getting ahead where they lost a ton through the recession and the years right after that . What were hearing, were hearing this quite a lot from people who work and live in low and moderate income communities is that there really hasnt been a recovery for these people until recently. But now they are feeling with this tight labor market they are feeling employers who are waving, you know, issues that might have prevented people from being in the workforce, they are willing to look past those. They are recruiting people who have been outside of the labor force. In fact, weve had people say to us that this is really the best feel theyve had for many years if ever. Really in my thinking and our thinking just says how important it is for us to continue to sustain this expansion. This has really come together in just the last weve had a long as you can see from that chart labor market has improved steadily for ten years now. Justin last couple of years it started to reach communities at the edge of the workforce and its just so important for us to continue that process for a couple of years and thats why were so committed to using our tools to sustain the expansion. Thank you. My last question, the only graph that i saw that really is kind of perplexing and problematic is on page 31 of your, of the Monetary Policy report. Is thats policy uncertainty. And if theres a place that i think we as members of congress are concerned, and i think both democrats and republicans, it is on trade policy. And this graph, if i read it correctly, shows that it isnt just members of congress that are concerned about the president s trade policy, its the people that you surveyed. Can you tell me what that graph says . It shows trade policy as quite elevated and i think we know that. In our beige book we report discussions from acrowned the country from all kinds of business and Community Folks and i think trade policy has been elevated. Its been particularly elevated since may. Its spiked in may with those developments. No question its elevated. Thank you for you testimony, sir. The gentleman from indiana is now recognized for five minutes. Good afternoon, i really appreciate you being here. Good morning rather. I can tell time. Doesnt bode well for my questions. I want to talk about your use of your word throughout your the testimony and written testimony, symmetry. What do you mean by symmetry around 2 . What does symmetry mean to you . In our longer run statement of longer run policy goals and Monetary Policy strategy we define symmetry to mean that the committee would be concerned if inflation were to run persistently above or below 2 . Its really a symmetry of concern or of intention as opposed to outcome. So over the last ten years, right, its run persistently below 2 . Does that imply a willingness or acceptability for inflation to run for a period of time, moderately or slightly above 2 , given some of the disinflationary pressures from around the world. If inflation is above 2 or below we would look at that symmetrically and use our tools to guide it back. To 2 . To 2 . A central question were asking as part of our Monetary Policy review is that the right way to think about it when, in fact, all of the deviations from 2 have been below, not above. So inflation has been averaging less than 2 . Its unmistakable when you look around the world. Theres a lot of traps associated with very low inflation and how persistent that is around the world. Youve expressed that on many occasions we dont want to get may mired in low inflation we want stable prices, stable around 2 . When you think about where the economy is today, where inflationary pressures are today, is there a desire to ensure we dont fall in the same trap by pushing the economy faster, being more accommodating in Monetary Policy to push that 2 , as you said, if its symmetrical to push inflation to that 2 . Well, through the indirect means that you have available to you. Im sorry. Through the indirect means that you have available to you. I think we, i think we want inflation to be symmetrically at 2 and not at 1. 7 or 1. 8 because that will ultimately lower inflation, will ultimately work its way into expectations and into short term Interest Rates and that will mean we have less and plus we really want inflation at 2 . One of the things you talked about is peoples expectation for future inflation which has been very much anchored by their recent history with inflation, that recent history in the past ten years has been below 2 inflation and in order to move peoples expectations Going Forward they need to experience slightly faster paces of inflation. I think most Research Continues to indicate that recent experience forms expectations Going Forward. I want to come back and better understand what you are saying around that symmetrical, the goal is to push inflation up to 2 or have a willingness or tolerance to run to above 2 , to bring it back down 2 . Is that what you snaen our current framework is the one i described for you where we would push back to 2 . Were looking at different ways by the way that framework seem to achieve errors on one side which is consistent with the framework. Were asking the question is that the right way to keep doing it or should we look at something that produces more symmetric outcomes. Were looking at that as part of this. One of the dialogues weve had in the past and i want to continue publicly especially to encourage you to continue that research and develop that framework. I think its important seeing what weve seen around the world and other countries falling into this persistent low inflation, that we should think about how we continue to manage what were doing to Monetary Policy and reflecting those concerns so i appreciate the work youre doing. One last question. What have we learned over the past ten years about the limits of Monetary Policy and how do those limits inform what the next steps might be with regard noip if you can answer that broad question in 12 seconds. I will. Its not good the to have Monetary Policying the main game in town let alone the only game in town. Fiscal policy is very powerful and more powerful and there comes times for example after the financial crisis any fiscal policy to lift the economy. So it is not a good thing to have Monetary Policy be responsible exclusively for things and it shouldnt be. I thank you for being here and thank you for your great work. The gentleman from connecticut is now recognized for five minutes. Thank you, chairwoman and thank you mr. Chairman for being here. I have two questions, one on Monetary Policy, one on the broader Regulatory Environment around the banks. Lets start with a couple of minutes, wake up the room with a discussion on interest paid on excess reserves. The feds policy, obviously, changed dramatically in 2008. If the numbers im reading correct excess reserves today are in the neighborhood of 1. 5 trillion. I have a couple of sort intuitive at least concerns with that. That, obviously, has a pretty dramatic effect on liquidity in the system. It creates a Business Model for banks, obviously, who can essentially get risk free money from the fed in a way thats not available to my constituents. But i suppose what really terms me in terms of Monetary Policy, im sure youre aware of a report published by the minneapolis fed, the individual who wrote it. What potentially matters about high excess reserves is that they provide a means by which decisions made by banks not those made by the Monetary Authority could increase inflation inducing liquidity dramatically and quickly. My question is at a minimum if thats true that could be a significant impairment of the fmocs ability to actually control Monetary Policy. So my question is, what is the future of the policy with respect to interest paid on excess reserves . Not familiar with that from the Federal Reserve bank of minneapolis. As im sure youre aware during the financial crisis we bought a lot of assets and offsetting liability the way we paid for it is issuing reserves. At the same time we vastly increased the required liquidity that largest Financial Institutions have to hold. Vastly correct that. Many of them choose to hold reserves. Demand for reserves even after the Balance Sheet shrinks is so much higher and were trying to find what that demand is and it might be somewhere a bit below the current range that its in. But, sir, the demand is to some extent driven by the rate thats paid on those reserves. You control the demand for reserves above and beyond required reserves. To some extent we do. Banks have to hold a certain quantity. They have to hold treasuries. They like reserves because they are high ly liquid. In terms of ioer, in our framework, in our chosen framework, ioer is the critical rate. Its now we manage, thats how we manage Monetary Policy. Weve been doing that for ten years now and we decided earlier this year we would remain in that system. Getting to a system where instead of using administered rate you manage the quantity of reserves on intelligent of scarcity and set the price that way, which we did, would be very, very tough given the level of demand for reserves. So as you know there was a fairly dramatic policy shift in 2008. Some have said that the amount of interest paid on excess reserves was well in excess of what congress envisioned. Is the this a status quo tool . Absolutely. This is our principal tool for implementing Monetary Policy. Let me shift because time is short to a broader regulatory question. We heard from ceos of banks, we heard from the vice chairman and others that generally speaking the Banking System is safe and sound, well capitalized. When the ceos of large banks were in front of this committee a couple of months ago they identified two things with some consistency as being of concern. One is leverage lending. Most leverage loans get put into clos which are taken outside of the Banking System. They also said shadow banking. By definition you dont have control over shadow banking but given the consistency of that, given the fact that risk from leverage lending which they identified as risky, concerning not risky, how are you thinking about potential risk bubbling up in the broader shadow Banking System. Particularly on leverage lending we called out the risk. The risk is not so much located in banks its located in clos, hedge funds, Insurance Companies and all those sorts of things. Its not its not subject, those vehicles are not subject to runs in the same way that precrisis banks were and no longer are. The Systemic Risk question is not a prominence one. More a Macro Economic question. If the corporate sector gets very highly levered, then in the event of a downturn youll see companies that have to lay off workers and stop spending and that kind of thing. It could be a Macro Economic multiplier. This is a subject that the Oversight Council is working on now and the Financial Stability board globally is looking carefully at leverage lending and, you know, we think its something that requires serious monitoring. Thank you. Im out of time. Mr. Gonzalez, the gentleman from ohio is now recognized for five minutes. Thank you, madam chair, and thank you chairman powell for being here. First, i want to thank you on your transparency and all the data that you provide. I think theres a sense that some of these decisions may be made behind closed doors. When youre transparent and open what the data is youre looking at it helps me found. I want to summarize two things youre talking about, with regard to all the data youre looking at and if im understanding you correctly im hearing trade uncertainty and persistent low inflation short of our 2 target are kind of the two biggest for you, am i summarizing that correctly . Thats correct. Okay. I think we did a nice job covering importance of passing usmca to help from a certainty standpoint. You didnt weigh in on the deal itself. It makes things more certain. On the inflation side it seems to me that in a world where were still short of our target, and we have trade uncertainty, and those are the two biggest factors youre considering, that raising rates would certainly be irresponsible. I would argue for lowering them. But would it be fair to characterize based on what were seeing on those two factors specifically that a electronic case could be made for lowering and not to commit you to that but is that sort of where things seem to be headed . Yes. As i mentioned, we think that uncertainty around trade policy and also Global Growth, its not all down to trade policy. Theres something going on with growth around the world particularly around manufacturing and investment and trade. And so that uncertainty is, we think, weighing on the domestic economy. Its starting to show up a little bit we think in Business Sentiment readings which moved down and also in weaker business fixed investment. Then as you point out the other piece of it is inflation. We see the risk of a more prolonged short fall of inflation from our target. Thats not something we desire. Its something we want to avoid. A more accommodative policy. Many on the committee see that as strengthening the case for a more accommodative policy. So in january you announceed a major shirt, i thought it was a major shift in terms of how we were going manage the rate Going Forward which shift towards administered rates, pause the draw down of the Balance Sheet. Can you kind of walk me through the logic on that a little bit. My concern here is are we going to still be prepared to handle another financial crisis if that sort of thing were to happen while we have an expanded Balance Sheet, and in the long run do you see us moving more towards, back towards open market operation which historically is how we did this. Actually since the qe era began, reserves have been super abundant. We have not set Monetary Policy we took Monetary Policy to zero and count go any lower. So we never we didnt have to have scarce reserves. We only needed scarce reserves when we lifted off in 2017. We didnt. We used the administered rates. Weve been using them for a long time. What was new, having thought about it for years, we said, we decided after much deliberation that this would be our permanent framework. We think it works well. It has a lot of benefits. In terms of room for further quantitative easing, manufacturers are busy. Theres plenty of them out there. And would be no shortage of them to buy. There are questions about the efficacy and a lot of Research Going on how much quantitative easing affects Interest Rates and the economy but i dont see the size of our Balance Sheet as limiting our ability to buy more as a practical matter. Okay, thank. Then with my last sort of question, when you look at libra specifically i see it as three different things. Libra which is the currency. The wallet. Then the Libra Association itself. As were evaluating how to approach this, what are the three buckets we should look at and two what gives the biggest concern. You said lets pause it broadly. Maybe im running out of time. Well submit this in written questions. Any feedback on that would being a greatly appreciated by this committee. Thank you, i yield back. Mr. Lawson, the gentleman from florida is now recognized for five minutes. Thank you, madam chair. Mr. Powell and the committee. Could you elaborate how the top 1 of u. S. Families own 40 of the wealth in this country . How did we get to that particular point . Do you see any kind of chaepgofn america. Were a very rich country compared to other countries. How did we get to the point where 1 own 40 of the wealth in this country . What ive seen and what ive mentioned in my testimony thats troubling is that a couple of things. First median incomes and lower incomes have stagnated compared to those at the high end. There was a time not so long ago when theres also a disparity between the wealthiest and the least but nowhere this large. Those people in the middle and lower end of the wage and wealth spectrum have seen their, their wealth and wages move up but much less than not at the top. That is thats troubling. The other thing thats troubling, sort of a separate issue is lack of mobility. So the chances of being if youre born in the bottom 25 of wealth of anything you can calculate what are the chances empirically youll move into the middle or top quintile. They are lower in the United States than similar advanced democracies. These are troubling things down. I would put them down to a combination of technology, globalization and education, really. It comes down to the Education System needs to produce people who can take advantage of advancing technology and globalization and what youve seen a stag destination in Educational Attainment in the United States relative to other countries beginning about 40 years ago. That has been, i think, the underlying force thats driving this phenomenon. Okay. Another question, as recently as june in ontario, canada minimum wage went to around 13. 25 an hour. And earlier you stated that our minimum wage at the federal level is around 7. 25. Hasnt changed since 2009 or something of this nature. In your testimony you said its up to congress to really make that happen and theres been a lot of discussion on whether, whats going to happen to businesses and so forth. The reason why i say that is, in 2020, in ontario, kcanada they o to 15 plus per hour for the economy. Do you see and you talked before a gradual increase in the minimum wage in this country is going to affect businesses to the point that they will be closing because what you see mostly at the end of the year is a lot of these businesses have a very big sur plus to invest, to pay taxes on. So what is the difference in passing those increases to their employees instead of giving it back to the federal government, giving the money to some charity . Can you weigh in on the minimum wage increase as far as stability of the my . We dont really take a position on minimum wage and the reason is, you know, that theres a lot of research and it shows costs and benefits. Tend to show costs and benefits, depending on what you assume and how fast you make. How quickly you move up is an important indicator. When you raise the minimum wage some people lose their jobs and some people benefit they get higher wages. Can you look at a range of studies and they will come up with as many different economists that study this have different answers. You can weigh that. Thats a trade off you make. Weve never taken a position on minimum wage. Its a classic thing for a legislature to do and not for us to do. One quick question. Do you ever look at the way Credit Card Companies increase their interest and finance charges compared to the way the economy is going . Credit card companies. The way Credit Card Companies do what . Increase their finance charges compared to the way the economy is going . You know economy is stable right now but Interest Rates, i know i got to close, some of the Credit Card Companies have 28 , 29 , so forth. I might have to send you information on that. I would happy to follow up on that with you. Thank you. Mr. Rhodes, the gentleman from tennessee is now recognized for five minutes. Thank you for being with us, chairman powell. Im a vocal advocate for putting our federal government on a more sustainable fiscal path. Our federal debt now stands at 22 trillion, more than 22 trillion. Interest on that debt is a big spending item. That was approximately 8 of all federal spending. Interest on the debt is becoming the fastest rising element of our federal budget. Our net interest expense could increase substantially if and when the Interest Rates event l eventually return to more historical levels. We may spend more on interest than on our national defense. Because we have to in order to service our debt. The president s own budget from 2018 forecasted that net interest expense will exceed defense Discretionary Spending by 2026. It looks like the federal deficit this year will exceed 1 trillion as ill will in the next several years after that based on current prediction. Its hard to see how the federal government can issue that much new debt without further driving up Interest Rates. One of your predecessors one said theres no question that as deficits go up, it does affect long term Interest Rates. He continued, a rise in the debt increases the amount of interest expenses which, in turn increases the debt still further and theres an accelerating pattern after you reach a certain point of no return. Could you talk with us today a bit about some of the potential risk to Financial Stability posed by our current fiscal path and in particular current federal spending . I think United States federal budget is on an unsustainable path in the sense that spending is growing faster than the economy, and ultimately that becomes unsustainable at some point. I think were racking up greater and greater debt. The debt is growing faster than the economy. Debt as a percentage of gdp is going up and thats unsustainable i meant to say. Its something that we need to get back to and assess and its not up to us to say how to do that. What combination of spending and taxes. Thats totally the province of the legislature. But its something thats important over the longer run. What will happen if we dont do it is well wind up spending more and more on interest and less and less on the things we need to spend money on, educating our grandchildren and all of the important things that we do, you know, for the benefit of the public with federal tax dollars. What are your views about the Federal Reserves role in monitoring financial the stability imposed by the deficits . We do have a broad role in monitoring Financial Stability. I would say, you know, the four key pillars we look at are leveraging the Financial System, leveraging away from the banks, funding risk, and asset prices. We dont really think of longer run fiscal unsustainability and a Financial Stability risk. Its more of were the worlds reserve currency. We keep being able to brother. My predecessor who predicted more debt would lead to higher Interest Rates would be surprised with the debt we have we still borrow at very low Interest Rates because were the worlds reserve currency. We havent seen higher rates. To the extent we go on raising debt to gdp, we will, well just wine up spending more and more money on interest and less on things we need. Talk about the impact of higher Interest Rates if, in fact deficits lead to higher Interest Rates on the stability of the Financial System in the aggregate. Well, i think down the road at some point, ultimately theres a price to pay. That has to be true at some point. Japan has far higher debt to gdp than we do and pay as lower Interest Rate. Its hard to say. Ultimately i think that the debt that were racking up is veal going or the current consumption. And were passing the bills on to future generation. Our generation is entitled to spend whatever money we think we need for ourselves during our lifetimes. We taught pay for it. Rather paying for it rather than passing the bills to the next generation. Finally in three seconds is there a point much no return . Somewhere way out in the future there has to be in principle. I yield back. The gentle woman from michigan is now recognized for five minutes. Thank you marks dam chairwoman. Thank you chairman for coming before our committee. As you i know represent michigan which face strong head winds in the current climate right now in the Auto Industry is at a added disadvantage in the current trade war with china. In addition automakers have been laying off workers. Really at the core is corporate greed. What we saw in wayne county and the detroit Area Unemployment rose between april 2013 to 2018 from 4. 2 to 4. 6 . Given that the detroit area hasnt fully recovered why should we believe the Federal Reserve has the tools to prevent another deep downturn . We talk about National Level Unemployment Rates. We understand thats not true in all parts of the country, in all regions of the country, all demographics of the country. When we do this at the fmoc we always have presentations that call out those disparities. And ultimately if we were to face another your question really is do we have the tools to address another severe downturn. We dont expect a severe downturn. If we had one we would use your tools as aggressively as we needed toto do that. That would include all the tools in our toolkit, Interest Rates, Balance Sheet and whatever else we could devise. And i do think our tools would be adequate. If we had another recession and interest would be lower and then cut to zero and we flounder, should we expect it will take another ten years for unemployment to recover should the people in my district expect to wait for a decade for a job. We see this shift in certain parts not just in detroit but the Wayne Community area surrounding the city of detroit. I would think not. The rumor that the Great Recession was the most severe in a very long time and we saw unemployment go to 10 . We hadnt seen that since the early 80s. Youre starting now at 3. 7 . If you take a typical recession, a more typical recession were still at 5 in my district. What additional tools or authority do you need to prevent another downturn you talked about tools and so forth. What specifically and, again, direct us to what we can do to support making sure that our families are able to provide i think we have the tools we need. I think what we would hope for is support from fiscal policy. Which is to say support of fiscal policy that would, you know, support Monetary Policy in a downturn. In the last recession the fed stepped in to ensure the corporations bore roger in the commercial paper market would still get credit. When governments in places like detroit or puerto rico cannot issue bonds at reasonable terms that has real consequences, like the inability to provide safe water in my district, for instance, a lot of infrastructure issues. If the fed is responsible for ensuring businesses have access to credit through the commercial paper markets why isnt it equally important to ensure state and local governments have access to credit . You know, we dont have authority, i dont believe, to lend to state and local governments. I think we that could be a tool. I dont think we want that authority. I think we want i think thats something for congress to do. We dont want to be picking winners and losers. We want to help the economy broadly to the maximum extent possible. Whats the difference we do it for corporations. Why is this a different standard. This is genuinely really curious. What you had is, you had credit markets, for example, that financed Auto Receivables and commercial paper and things like that, that were failing and breaking down and the economy was grinding to a halt. So we devised programs to support to reopen the Capital Markets in a way without regard who the borrowers were or picking a particular borrower. We had to do that and thats what got the economy back on track. We can do something similar in state and local government . We could talk about this. I know. Look i come from a city, the first i think ever to file for bankruptcy. The people that were actually directly hurt and still continue to hurt are pensioners. We havent been able to, you know, the 7. 2 miles of downtown and some of these surrounding neighborhoods havent been able to get investments but you still see a deterioration and its directly tied to unemployment. Thank you, madam speaker. Thank you. The gentleman from wisconsin, hes recognized for five minutes. Thank you very much chairwoman waters and thank you for being here chairman powell. In your opening remarks you said you supported maximum employment and overall the market is healthy. The Unemployment Rate was 3. 8 . Its 2. 8 in my home state of wisconsin. You also noted that employers are hiring lower skilled workers and training them. I view this as a quite positive step. Also in your opening remarks you identified key risks that youre track including brexit, trade instability and rising debt. What i did not hear you bring up is a proposed 15 National Minimum wage that some of my colleagues are advocating. As you may know the cbo analyzed this proposal to increase the minimum wage. The report found a federal minimum wage increased to 15 an hour may cause 1. 3 million americans to lose their jobs and in a worst Case Scenario 3. 7 million americans could lose their job. Thats even more than the entire civilian electrical workforce in the state of wisconsin which is 3. 1 million workers. How would the fed respond to the impact of a 15 minimum wage both on inflation and real wages as well as the precipitous fall in employment outlined in that cbo report . So, we see the question of minimum wage that is squarely in your court and not ours. There are many, many studies of minimum wages and their effects on the economy. It doesnt tend to be a consensus but they do show some degree, some people will lose their jobs and other people will benefit. So if i were sitting in your chair, i would be looking at 20 of these studies and try to get a sense of what the right tradeoff is and what youre willing to make it. Ilt not a question for the fed. Without knowing we just continue take a position on that. Its not something i imagine there would be it would be challenging to make an aggregate assessment without taking a point estimate in whats a highly uncertain range of possibilities. I appreciate that. Can you comment on the discussion on the 15 minimum wage would create uncertainty that may slow hiring . Just not going its not for us to be a referee on the question of federal minimum wage. Fair enough. Let me shift gears, chairman powell. I would like to ask you about an issue thats a major focus of many members of this committee, the International Insurance capital standards. In previous appearances youve assure us that the fed wants to negotiate an International Agreement that works with our regulatory system. As you know we expect the final version of the ics to be completed at an International Association of insurance supervisors meetings this november. Can you comment as to what instructions youre providing to your staff who are negotiating the ics to ensure u. S. Regulatory approach is formally . So we coordinate very heavily with the office of insurance and very much with the state insurance regulators which is where a lot of the regulation happens in our system. Really, all the regulation. I think were all resoundingly agreed that whatever capital standard is adopted has to work for the u. S. System. The u. S. Has a particular system of regulation for Insurance Companies based at the state level. Anything that get s s adopted h to work for the United States system or we cant adopt it. Is the fed prepared to then oppose the ics if it was unsuccessful in achieving formal equivalency for the u. S. Regulatory system . I think were clear that whatever is adopted has to work for our system. I appreciate that. I appreciate your time today. I yield back. Thank you. Thank you. The gentlewoman from where is she from . Is now recognized for five minutes. Thank you. Thank you, chairman powell for being here. Im loud and proud about iowa. A great state that it is. Chairman, you said that in february that income inequality would be our economys biggest challenge for the next ten years. I couldnt agree more. You also said that income decreased for people in the middle and bottom end of the income spectrum while growth at the top has been very strong. Thats something i hear a lot when im talking to folks in iowa. To make that disparity more clear, the fed put out its distributional financial accounts showing that over the last 30 years, the total wealth of the top 1 has increased by more than 21 trillion while the total wealth at the bottom half of american s has gone down. My colleague mr. Lawson asked why this was happening. I would like to expand and ask you, is that inequality something that should be are e considered when setting Monetary Policy . We try to inform ourselves about whats happening in the economy. Thats a lot of what we do. This is an important factor. We dont actually have the tools to directly address these issues. I think theyre more around education and skills. The principle way we can get at this issue though real sly is t take seriously congress order that we achieve maximum employment. I assume you can see in your community that the expansion is reaching groups that are at the marginal labor force. Thats because were pushing ahead and having a very long expansion with quite low unemployment. Thats really benefitting these people at the margins. You mentioned a couple of what i believe are possible solutions. You said education and training, i believe. Can you expand on that a little bit . What other solutions do you see to help us with this inequality . I think i guess my underlying model of the problem is that theres no shortage in the world of good jobs. We just have to produce qualified people qualified workers who can live at the standard of a wealthy country and do the work they can do. That means better education. Its easy to say. Its very hard to do. We need workers who can compete with the other advanced economies for the good jobs. Its manufacturing jobs. Its a lot of Service Economy jobs. Its not easy to do. Fixing the educational system and improving it is a very challenging thing. I spent no small amount of time on that earlier in my life. I think thats ultimately that it is. At the end of the day the country is its educational system. The people who are in the country, they are a product of that system. We need to get ours producing people who can compete in the Global Economy and i think thats at the bottom of the pile. Lets pivot to look at regional differences. Iowas per capita income is more than 1,500 below the national. New yorks is almost 5,000 higher. Im concerned too much of the discussion focuses on the rural urban divide. I would like to raise the issue of regional shifts within the Economic Growth moving to the coast. Can you talk about that income inequality interacts with regional inequality . We had a box in february on disparities between rural and urban, if that goes to your question. They have gotten worse over time since the financial crisis. There are drivers were not sure of. Theres no widely accepted explanation. Younger generation appears to want to live in cities. So they are moving into cities. They are moving out of rural areas. Its leading to people in other words, people who can move to cities do. They get thats where the jobs are. Thats where the growth has been. Its a phenomenon we have been seeing for some time. Its gotten worse in the last decade. Do you have any particular solutions that we should be looking at . I dont. Unfortunately. Okay. Fortunately, several of us from these rural areas are working on this. Im hoping we can make an impact there. I thank you. One thing you didnt quite get to, you mentioned rural and urban again. A little bit more about the regional shift. We have had a lot of opportunity in states that are in the midwest, but we dont have as much access to that opportunity that some of our coastal areas have. What are your solutions there . I dont know that we have those tools. I will say we have researchers who are doing a lot of good work in this area. We would be happy to connect you with them. Appreciate that. Thank you. The gentleman from virginia is now recognized for five minutes. Thank you. Thank you, chairman powell for appearing here today. Its good to see you. We were talking earlier about fiscal policy. One of the good things about going near the end is i hear a lot of good things. Talking about fiscal policy and trying to prevent a downturn. A couple questions to talk about incentivizing investment. Looking at policy, some thoughts about looking at is it higher taxes, lower taxes . Is it the usmca or something that we have discussed before . What are some of the quick take on the policies that would help as far as Economic Growth for the average american . I wanted to get some of your thoughts on that. I think generally, i think we need policies that will pardon me. Policies that will support Labor Force Participation. Policies that will qualify people to hole job hold jobs as through their can a rears. Thats a place where the United States lags behind. How can we raise Labor Force Participation . Productivity. Incentives for investment in technology, which drives row duckivety. I think basic research by the government is under underlying driver over long periods of time. Its skill and aptitude of the work force. Its more productive workers have more skills and more training and that thing. Population growth as well. Assuming a labor of population growth. I think we talked, you said 62. 8 of the people support 100 of the population. I thought that was an interesting stat. I want to commend you and thank you and your colleagues at the fed for the substantial support, guide and assistance you have provided. I want to commend the fed for its proposal to facilitate private sector real Time Payment Solutions by providing Liquidity Services which i understand could be affectduaaffectuated. My fed seeks to justify this potential action in part on need for resiliency which raises important questions. I would say first, its the notion that having two systems would provide resiliency assumes every bank in the country or a majority would have to connect to two systems, private sector and the yet to be built government run system. This is based on my experience in big data when you talk about what i have had to do in the military with electronic warfare. Looking at this and trying to interoperate systems. This would create enormous inefficiency and impose cost on the american taxpayer unless the fedrun system would be interoperable with the private sector operatives. If im a Community Banker and i participate on the fed system, what guarantees can you give that community barpg todnk toda they will be fully int interoperable . This was based on a proposal from the faster payment Tax Task Force which had very broad representation, including the Smaller Banks who were supportive of this idea. We asked for Public Comment on this. Were reviewing that. We got 400 comment letters or 900. A lot of comment letters. Were in the middle of that Decision Making process. In terms interoperability it was the Community Banks who strongly pushed the fed to move forward with this. In terms of interoperability, its a good issue, a good question. We will need to work to make that happen. At least to the level that its functional. It may not be perfect, but will certainly if we move forward with this, we would look at that as a characteristic to achieve. Thank you. It goes back to resiliency for me. I think its the concern about resiliency that i had and we had our discussions in committee is that, if there are concerns about resiliency and its based on my experience in the private sector when it comes to big data, couldnt you probably address those concerns through the regulatory and Supervisory Authority that exists in your space . Thats what i was getting to here. Were talking about resiliency with the multiple data centers and redundant systems that could be a problem with interoperability. Do you think resiliency could be something thats a function of what you are doing right now and keeping with one sort of faster time Payment System . The gentlewoman from massachusetts is now recognized. Thank you. Thank you, chairman powell before appearing before the committee. Federal reserve can do more to support the needs of hard working american families. As it stands, working families wait to have their checks clear. When you are living paycheck to paycheck and rent is due there can be no room for error. As a central bank in america, the Federal Reserve has a responsibility to speed up the process of clearing payments. I want to bring up a report that was issued two years ago. The Faster Payments Task force. They called for a statement system in the United States that is faster, ubiquitous, inclusive, safe, highly secure and efficient by 2020. Mr. Chairman, 2020 is less than six months away. Yes or no . Will we have a faster Payment System by then . No. Were working on it but were not going to be done by 2020. Were getting there. The task force concluded broad access to Settlement Services will help level the Playing Field and enhance Competition Among providers of faster payment services. Yes or no . Do you agree this is an issue of accessibility and equality . I do agree with that. Thats one of our motivating factors. Would the fed like to see a world where all americans have access to faster, secure payments . Yes, we would. Thats why we have been working on you mentioned that report. This is a project thats been going on for five years. If you can clear payments between the accounts of commercial banks held within the fed, why not consumers . Whats the delay . Its not its a service that hasnt etxisted. Immediately available funds has existed for banks. We dont have authority over the Payment System as some other Central Banks do. We convened a group of people and institutions maybe five, six years ago. Lets work toward this. Thats the report you saw was i think the last report that we issued. Were working to implement some of the recommendations. Just trying to better understand the delay in the implementation of this report. Have you received pushback fromfro fromfrom the credit card industry . I think were determined to do what we see the right thing as. Were not looking have you received push did the pushback . I have not personally. Do you aa lack of a real time Payment System is exploited by Credit Card Companies like mastercard and visa . And outside of that industry by facebook to create a Digital Currency . I wouldnt want to use these terms. I do see a faster Payment System simply as a public good. The lack of action here creates a void in the lives of consumers everywhere. These voids are increasingly being exmroiploiexploited. Facebooks labor is being trotted as a solution. However, i struggle to see how this solves an issue of resources. Instead, we should be using preexisting infrastructure to ensure all people have the ability to safely and securely and with no cost access and move their money 24 7, 365 days a year. Lets not lose sight of the plot, mr. Chairman. The plot is the american people. I hope to see your organization become more reflective of the lived experiences and the Everyday Needs of americans. Thank you. I yield back. The gentleman from wisconsin is now recognized for five minutes. Thank you, madam chair. Mr. Chairman, on your lefthand corner. Welcome. One of my leagcolleagues said t president implemented harmful economic processes. You have said the economy is doing quite well. Is that correct . Yes, i would say the economy has performed i said reasonably well so far this year. Last quarter was 3. 1 growth. Pretty great. Isnt it . Just if you take it through the middle of the year, we will have growth probably in the mid twos. Thats a solid performance. Where i come from, obviously, we like our Rural Communities to grow as well as our urban communities. By and large, the biggest complaint that i hear from my employers is that they dont have enough labor. They cant get people into their shops to fill the positions that are open. Then theres some that will come in and they dont want to work. Leads me to immigration. But im not going to go there with you. We have problems with immigration. Theres competition for labor. When theres competition for labor, dont you see salaries rise, hourly wages rise when theres competition for labor . Yes. Am i wrong on that . Its very interesting. We have seen wages moving up. We do hear lots of reports like what you said about labor shortages and cant find qualified people. We would have expected to see wages move up. They are moving up at a healthy level on average, a little more than 3 . Thats a good thing. You would want a tight labor market to produce solid wages. Is this a tight labor market . It is by almost every measure. I would say that the thing that doesnt show the tightness through is the wages, which could be higher. In a tight labor market an hr but they are worth 15 an hour, what do you think happens . In economic they will leave one job and go to someone else that will pay them 15 an hour . Everyone is looking for labor. If a guy is making 15 an hour but worth 11, what happens . They might get fired, right . Or you might automate. The markets work to pay people the value of the services they provide the company. That happens in a tight labor market, which i know you wont make the point on a 15 minimum wage, but my concern is that if we increase that too high and we have people who arent worth arent at the value of 15 an hour, they will lose their job and fall into deeper despair. Thats my concern. With regard to trade, you are not commenting on the policies of the president with regard to trade. You look at our longterm horizon. You mentioned debt and the problems were going to have. With regard to trade, if we have countries that will steal our technology you have a company that invests 500 million in a new technology and someone steals it from you and has to pay a hacker in a basement and you come to market with the same product at zero cost versus your 500 million, how do we compete in the long run with that environment . If you have a country that manipulates their currency to make sure we cant have some ee k ee kwa lib yum with regard to trade, how do you deal with countries like that but for the policies that the president has pushed . Those are entirely appropriate considerations for those who have responsibility for trade policy. We are very unusual in that we have this independence to do our jobs. I think that means we need to stay in our lane. I try hard not to get pulled into things were not responsible for. With regard to someone mentioned corporate greed. We want to see companies and individuals behave responsibly and honorably. But we also want them to make a profit. Right . Do you have an objection to companies and individuals making a profit, making money . We do have a marketbased system. If they make too much, is that a problem for you . Its not how much is too much . Not for us to judge. Do you support a market economy . Do you think its a good thing . Our economy has been marketbased. I think thats served the public well. Probably the greatest economy on the face of the earth, fair to say . I yield back. Ms. Ocasiocortez is recognized for five minutes. Thank you. Thank you so much, mr. Powell, for coming in today. The Federal Reserves mandate one mandate is to maintain price stability and maximum employment . Yes. A lot of folks would interpret that as meaning to aim for the lowest Unemployment Rate possible without runaway inflation, correct . Yes. Generally. I kind of wanted to dig in today with you a little bit about this relationship between Unemployment Rates and inflation. In early 2014, the Federal Reserve believed that the long run Unemployment Rate was around 5. 4 . In 2018, it was estimated it was around 4. 5 . Now the estimate is around 4. 2 . What is the current Unemployment Rate today . 3. 7 . 3. 7 . What we had previously thought of perhaps as far back as 2014 and long run Unemployment Rate is around 5. 4 , what were experiencing is 3. 7 , lower than that estimate. Unemployment has fallen about three full points since 2014. Inflation is no higher today than it was five years ago. Given the facts, do you think its possible that the feds estimates of the lowest sustainable Unemployment Rate may have been too high . Absolutely. We overshot in what our long run Unemployment Rate is . I think we have learned that you cant identify this is something you cant identify directly. Its substantially lower than we thought. Ive been seeing lately that economy i haves are economists are worried that the idea of a phillips curve is no longer describing what is happening in todays economy. Have you been considering on that . What are your thoughts on that . Very much so. We spend a great deal of time on that. The connection between slack in the economy or level of unemployment and inflation was very strong if you go back 50 years. It has gotten weaker to the point where its a faint heartbeat. Its still there. But i think we really have learned that the economy can sustain much lower unemployment than we thought without troubling levels of inflation. I think i would look at todays level of unemployment as well within the range of potential estimates of plausible estimates of what the natural rate of unemployment is. Why do we think that were seeing this decoupling in a relationship we had seen in the economy deck aade ago . One reason is just that Inflation Expectations are so settled. Thats what we think drives inflation. For example, when unemployment went way up, you didnt see inflation go down. You dont see inflation reacting to unemployment the way it has because inflation just seems to be anchored. Could that have implications in terms of policy making, theres room for increased tolerance for policies that have been thought to increase inflation . Arguments about minimum wage or other policies that directly target middle class americans is that they could drive inflation. Do you think that that decoupling is something we should consider in modern policy considerations . I think we i wouldnt want to get into the minimum wage discussion directly. I think we have learned that inflation that really downward inflation is stronger than we thought. You see countries all over the world not getting being below their inflation targets. When i was young, they were above. Now they are below. The United States has done better but were still below our target. One last question. Earlier you had suggested that in the event of a recession or a contraction, we like to see more fiscal policy that supports Monetary Policy. Can you further articulate what some of those fiscal options and considerations should be in terms of specific options we should consider . I was referring really to severe or significant downturn. If that were to happen, then i think it would be important that fiscal policy come into play. Automatic stabilizers that happen. In addition, things were done at the beginning of the financial crisis in terms of spending increases and tax cuts that helped to replace the demand that had been lost in the private sector and get us through a rough patch. Something like that. Those are things i would reserve for pretty severe downturns. Thank you very much. Thank you. The gentleman from kentucky is recognized for five minutes. Thank you. Chairman powell, welcome back to the committee. Let me say, i appreciate my colleague from new york recognizing that the strong trump economy has not produced inflation, challenging the credibility of the phillips curve. Let me say without quibbling about the details, i think you are doing an outstanding stand. I want to especially appreciate the much improved communications with congress about the direction of Monetary Policy. I do want to take up this issue of fed independence. So much has been made in the media of president trumps criticism of fed policy in recent months and his reference to quantitative tightening, his criticism of socalled quantitative tightening. Many members of the committee, especially on this side of the aisle, criticized your predecessors for overly accommodating Monetary Policy for an extended period of time. Socalled quantitative easing. What i want to just say is that my view is that all of this feedback from both the executive branch and legislative branch say necessary and constructive part of oversight and is part of holding the fed accountable. It in no way compromises fed independence since you and other governors are given 14year terms with a provision that make u. S. Removable only for cause. Do you agree or disagree with that . I would just say it this way. Were completely and totally focussed on carrying out our jobs. Nothing will distract us from that. Our accountability in our system really does lie with this committee and with the other committee on the senate side. You have oversight over us. A lot of other systems, its the finance ministry. But in our system of government, its congress. My only point is that criticism from congress or the president does not, in my view, in any way compromise your independence. Mr. Chairman, i heard an economist say over the weekend that the fed doesnt set Interest Rates, that it follows Interest Rates. I thought this was an interesting comment, especially in light of low longterm rates and the inverted yield curve. Has the case for lower the fed fund rate strengthened because the fed is following rates as opposed to setting them . I wouldnt say that. I didnt see that comment. I cant react to it. I wouldnt say it quite that way. Our focus is on real economy values, in particular maximum employment and stable prizeces. We use our tools to achieve that. We know our policy works through financial conditions. We look at a broad range. They do matter for us. What matters is if there are big changes in financial conditions and they are sustained for a period of time. Where are we today in terms of the proximity of the Feds Fund Rate to the neutral rate . Thats another one where we we can only estimate the neutral rate as you know. Its interesting. Estimates have come down as well. I would point out that we published the medians of the in our summary of economic projections. We public the medians of the committee. That number has come down by 50 basis points since september of last year. The median estimate is now 2. 5 nominal. Which would be a half a percent real. It was 3 in september. Were learning. Were always learning about the natural rate of unemployment and about the neutral rate of interest. Right now, understand that its estimated within fairly broad uncertainty bounds. As you know, ive been critical of previous fed positions or policy that i would characterize as overly improvisational. As you communicate and forecast where fed policy is going and you talk about in your testimony that the case for a more accommodating policy, that argument is strengthening. I appreciate that. I think its habituating the market as oppose tod to surpris. Last question. You cite in your testimony uncertainties in trade developments as perhaps one of the reasons why the case for a more accommodating policy has strengthened. What would passage by the congress of usmca and enactment do in terms of the Economic Outlook and the future trajectory of Monetary Policy . It would remove uncertainty about our trade policy with mexico and canada to have that pass. I think that would be a positive thing. Of course, i wouldnt comment on the merits. It wouldnt be appropriate. The passage of it would remove uncertainty. I think that would help in the current environment. I do have actually one final question. You had responded to my question about the surcharge. You said a proposal to simplify it by integrating a supervisory test result into regulatory capital requirements, where are we on that . Moving forward. Working ton. I yield back. The gentlewoman from virginia is recognized. Thank you. Thank you, chairman powell, for joining. Do you think the u. S. Should go back to the Gold Standard for our currency . Let me say, i wouldnt this could be considered commenting on a nominee. Wasnt to make sure that this isnt interest prpreted that wa. I dont think it would be a good idea. Congress would have to pass a law. That law would say that our job with Monetary Policy is to manage the level of the dollar, stabilize the dollar price of gold. We would then not be looking at maximum employment or stable prices. There have been times in the recent history where the price of gold has sent signals that would be negative for either of those goals. I dont think thats something that would be attractive. No other country uses it. Its more volatile linking it to gold . Its not connected to you have assigned us the job of two direct real economy objectives. Maximum employment, stable prices. If you assigned us stabilize the dollar price of gold, Monetary Policy could do that. The other things would fluctuate. We wouldnt care. We wouldnt care if unemployment went up or down. That wouldnt be our job anymore. It would be thats not a positive mission for the fed . A better mission is what you are doing . This is consider every country in the world that abandoned the Gold Standard some decades ago. That reluctance or that desire not to go back to the Gold Standard is something that you have in common with the ceos of the seven worlds globally systemic banks before us in april and said the same thing. Its worth noting that last week the president nominated judy shelton for a seat on the fed. She is similar to two of his other wouldbe nominees in she does favor a return. I assume you dont share that view . Sg i dont share that view. But i would never comment on the views of any particular nominee. We dont play a role in the nomination process. Its totally up to the president and the senate. We just are completely on the sidelines there. My concerns about ms. Shelton are not just her questionable views about Monetary Policy but she also seems to be by most accounts a political opportuni t opportunist. I would caution concern when looking into the nomination and confirmation of this candidate. I do want to talk about debt. There have been a lot of questions about it. In particular, the debt ceiling. On monday, the Bipartisan Policy Center projected the u. S. Treasury could run out of money by Early September if congress doesnt raise the debt ceiling. Thats because the government brought in far less in Corporate Tax revenue than this year than was projected as a result of the tax cultts. Spending is only one side. We need to look at revenue. Theres a possibility the u. S. Could default on its debts. What would our what would Congress Fail your to raise the debt ceiling what would that mean for the u. S. Economy . I think its essential that congress raise the debt ceiling in a timely way so that the United States continues to pay its bills when and as due. Any other outcome is unthinkable. We have never failed to pay our bills when due. I assume and believe that the debt ceiling will be raised in a timely fashion. What would it mean for the economy and for Interest Rates if we failed to do so . I think it would be very uncertain territory if the United States were to stop paying its bills. It would be i wouldnt be able to capture the range of possible negative outcomes from that. The loss of confidence in our ability to run our fiscal house could be substantial. It would be a lot of uncertainty. I just think its beyond contemplating that. Yet, we must contemplate it, mr. Chairman. Thank you. I agree. I want to encourage leadership on both sides of the aisle and both chambers of congress to not wait until the last minute to make sure we raise that ceiling. Thank you. I yield back. Thank you. The gentleman from texas is now recognized for five minutes. Thank you, madam chair. Chairman powell, the board has done a great deal of work with regard to foreign banking organizations. Im concerned theres a lack of harmonization across jurisdictions with respect to these foreign banking jurisdictions. I want to make sure that you are working to ensure that our u. S. Firms are not disadvantaged in the foreign marketplace. Could i hear about your plans for that . I think here we want to give National Treatment equal treatment to foreign institutions. We fully expect and anticipate that we will get that from in foreign jurisdictions. Thats why we give it here. Plus, we want foreign institutions to come in and do business here and lend capital to people and take part in the capital market. That only helps our economy. We want our institutions to be able to take part in foreign economies. Many banks are work across national and International Lines now. It is essential that there be fair treatment for nonnative banks all around the world. Thank you. I appreciate that stance. On your written testimony, you mentioned trade tensions and slowed Global Growth as potential threats to the u. S. Economy. Between these and the debt ceiling and the lack of consensus in congress, what would you say are your biggest concerns out of those . Out of those, i really think that the most important thing is the what we have been calling the cross currents, which are trade tensions and concerns over slowing growth, Global Growth around the world. Those are related. Theres a box in our Monetary Policy report that i recommend to you about slowing global groernl a growth. Which is something were seeing around the world. That is the thing that weighs on our outlook. We see it here. We see weak manufacturing here. We see confidence surveys among businesses. The consumer part is doing well, but thats where the weakness is. Thats where the concern is. The other things are concerns, too. I would put those at the top, along with low inflation. Thats a concern. Thats the other half of our mandate. We are concerned that inflation not run below 2 more persistently than we thought it would. Putting that together, the state of the economy, where you see us going, on a scale of one to ten, how would you rate where we are with respect to an economy, one being bad, ten being great. I will say this. We are in the 11th year of this expansion. Thats a first. Since we began to keep records on this. Were at 3. 7 unemployment. Thats a 50year low. We have been there for 15 months. Theres no reason why that cant continue. We are committed to using our tools to make sure that it does continue. I just would again point out that this expansion is now reaching groups that hadnt been reached in the first few years. Theres a box on that as well in the Monetary Policy report. All the more reason why its so important that we keep the expansion going to the maximum extent we can. I agree. I yield my time back. Thank you. Thank you for convening the hearing. Mr. Powell, thank you for being here for your thoughtful testimony. You and the rest of the board of governors have a very monumental task. You have made good decisions. Im also heartened to see you are maintaining your independence and not allowing yourself to be bullied. Let me just put a couple of things on the record. We have had a lot of discussion here about the cbo report and minimum wage. I just want to add Something Else to the equation. That is that, yes, theres been some discussion about losses. But i think we need to consider the fact that raising the wage will elevate 27 million low wage workers. We need to be concerned about the fact that so many people are really living at the poverty level. A lot of those folks live in my state of north carolina. When we look at the fact that were going to raise people up, when we look at this 15 that we keep hearing about, ive done the math on it. Its like 1. 55 a year. Let me move on having said that. A question about the unemployment inequality in terms of black unemployment. The overall Unemployment Rate is about 4 . The Unemployment Rate for africanamericans was about almost 7 . In this recent bureau of labor statistic report. Which almost doubles the Unemployment Rate for whites, which is 3. 5 in the same report. Let me these Unemployment Rates have been steadily falling since 2011. What if any analysis does the Federal Reserve do to evaluate the degree to which economic inequality afebfects the africanamerican Unemployment Rate . Affects the africanamerican as a feature of our labor markets, africanamerican unemployment has often run at double. So that means it comes down faster when times are good and it goes up faster, twice as fast. Thats not a good feature of our employment market. Thank you. What more do you think can be done to ensure that unemployment among minority groups gets as low as white unemployment . What role can the Federal Reserve play, if any, in reducing these disparities . The tools that we have theres a box in Monetary Policy report that talks about different its not by africanamericans. Its by Different Levels of education. But it does talk about the outcomes for people. In term what was we can do, i think again it goes back ta takitake i to taking seriously the job you have given us. We are seeing in these tight labor markets communities, including africanamerican communities, that are being reached by the jobs market in a way they havent felt really ever or certainly in a very long time ago when we had 3. 7 unemployment. Which you and i can remember. Not everyone can. Thats right. I do remember that. What is supposed to come out of the Monetary Policy review that happened earlier last month . Were there any important takeaways sfl will there be changes to the way that you and the board conduct the Monetary Policy because of this review . There may be changes. We vnhavent decided. We are just taking a close look. Were really looking at the question, are there ways we can change our toolbox or our strategy or communication to enable us to better serve the public. We want to get the best thinking and c come out of this with the best way to serve the public with our tool kit. That discussion lies ahead of us. Thank you very much for your service. Thank you for not allowing yourself to be bullied. I think thats important in terms of the job that you are doing. Madam chair, i yield back my time. Mr. Williams, the gentleman from texas, is now recognized for five minutes. Thank you, madam chairman. Thank you for being here today. As you know, im a small businessowner, main street america. Very much interested in what has happened at the fed. I wanted to reiterate my past statements about Interest Rates. Even the slightest changes can have Significant Impact on many parts of the economy. We both remember a time when Interest Rates were 20 . The balance for these rates compared to today was low. When a new car cost 6,000 in 1970, now the same vehicle can be 60,000 and even the slight increase to the Interest Rate can crush businesses with high inventory costs and results in lower sales. We discussed this before. I wanted to commend you for you having a good pulse on the economy and making the appropriate Interest Rate adjustments. Before i begin my questions, i wanted to make sure nothing has changed since you came before this committee. Are you still a capitalist . Or have you undergone a drastic change of thought and now believe socialism would be a better Economic System . No drastic change. Thank you. Yesterday in boston you stated in the stress tests do not evolve, they risk becoming a compliance exercise. You continue to say that banks will need to be ready not just for expected risk but for unexpected. You understand the importance of these stress tests to ensure our Financial System is resilient. I heard criticism that the fed stress test had been watered down to let the biggest bank s z off easy. Do you believe they have been make easier . How do these simulated stress skep scenarios relative to the 2008 financial crisis . I dont believe we made them easier. We do have the intention of having them evolve. I do think were ten years into this. I think we have done nine cycles now. I think there is a risk that if we dont continue to adapt to the markets and to the institutions and to the state of the economy that they will become stale and people will get complace complacent. They have been a very successful innovation. Maybe the most successful regulatory innovation since the financial crisis. I think even the banks would agree to that. We intend them to be continue to be strong Going Forward. Thank you. In february, when you were in front of this committee, i asked you about the Labor Force Participation rate, even though there are over 7 million job openings. Its hard to hire people right now. You mentioned some factors keeping this around 63 such as a skills gap, poor education and the Opioid Crisis. The fed has no control over these factors. We must deal with them here in congress. With that being said, you have noticed have you noticed any of these factors improving and getting more people into the work force since you were here in february . I think Labor Force Participation rate has held up pretty well. Theres a declining trend due to aging in the population. Its 62. 9 now. Thats where it was in late 2013. Thats a big gain against the trend. Its a good thing. More anecdotally, we are hearing a lot from phone folks who live work in moderate opportunities that there are companies coming in and want workers. Theyre going to look through some of the problematic things people may have had in their lives and hire them anyway. We think thats really healthy. In a tight labor market that lasts for a long time, thats what you are going to get. We think its thats a relatively new development and a very positive one. According to the most recent Monetary Policy report, Consumer Spending was down at the beginning of the First Quarter, which you touched on. But appears to have picked up. As a business person, we have seen it pick up. What factors do you see as contributing to this . I think its strong job creation. Its wages moving up. As you mentioned, tight labor market. Its workers who we survey workers. They say jobs are plentiful. Businesses say, we cant find workers. Thats a world where the worker and family is feeling people are quitting their jobs. Its a world where they feel good about the economy. Relatively. When you have more jobs than workers, it has a tendency to drive up wages. We see that on main street america. Thank you for your service. Appreciate you being here today. I yield my time back. Thank you. The gentlewoman from pennsylvania is now recognized. Thank you. Thank you, chairman powell, for your expertise, your service and for coming in and explaining things to us. I learn a lot when i hear you speak. I thank you for that. I wanted to examine a little more closely some of the things you talked about. Consumer side looking strong. Business side weakening. I want to compare that and ask you, what are some of the triggering to the weakening on the business side . As i look at the chart trade policy uncertainty, you said its no question uncertainty is elevated. What would greater certainty look like . What are some of the things creating uncertainty . What would greater certainty look like . What would the impact be on the economy . We think that the place where uncertainty is showing up is in Business Investment. Businesses make investments. Those have to work for a longer period of time. When businesses become uncertain about the future and about future demand, they may hold off. They may decide to wait before they build something or buy something. They may hold off. What were seeing is business fixed investment, which was strong Business Investment was very strong through 17 and most of 18. It slowed down now. We do connect that. Theres no perfect way to identify these things. We do connect that to trade uncertainty and weak manufacturing around the world. What specifically in trade policy do you think is connected to that, pulling back on investment . I think its just there have been the people who are responsible for trade thats not us. We dont criticize them for what they do. We have a broad series of trade discussions going on. If you are a Manufacturing Company in our economy of any size, the chances are good that your supply chain goes across national boarders to canada or mexico or china or vietnam. That supply chain is part of the way you do business. You just assume that its working. You can focus on your clients. When the supply chain is called into question we hear this a lot from businesses. Its called into question, you pull back and you dont you have less certainty about how this is going to work. You may have to change it. Many companies have changed their supply chain away from china. Because of the tariffs . Many moved to mexico or vietnam. Now i think that uncertainty is something that we call out for the economy. I wouldnt want to suggest that that in any way is a criticism of those who are conducting the policy. We dont have a responsibility for evaluating that. Thats for them. I understand and appreciate your independence there. Im hearing the same thing on the ground from my businesses in montgomery and berks county, pennsylvania. The tear polic tariff policy is conservatism. Let me shift to Something Else you talked about. I care deeply about gun violence, the Opioid Crisis. Im wondering through your complex lens, could you talk about the Opioid Crisis and or gun violence . One of the reports on gun violence says it costs our economy somewhere in the area of 230 billion a year. I know you are not involved in gun policy or the Opioid Crisis policy. Through your lens and through your the tools you are using, what are you seeing . What could we in Congress Learn about how we could minimize reduce that Economic Impact . I can probably do better talking about opioids. Theres been some great research, including by the economist kruger who passed away about the effect of the Opioid Crisis. An extra if you take a prime age men who are out of the labor force, an extraordinary percentage, i think it was 44 , are taking some kind of painkiller. Its a big number. Its a big number of people that are on opioids and for the most part missing from the labor force. We want the u. S. Economy to grow faster and be larger and we want prosperity to be broadly shared. Here are people who are in the prime working years who are on opioids. Its a national crisis. I know people are working on it. Its out there. Theres a human tragedy but theres an economic motivation to get these people into the labor force where they can lead healthy lives. I appreciate that in terms of direct cost to labor and also if you think about the numbers, 72,000 people in a single year dieing of overdose. Think of the lost economic or the impact to the individual family, but then to the communities, to their children and elsewhere. I thank you very much for your work. I always learn something from you. Thank you. I yield back. Thank you. The gentleman from oklahoma, mr. Lucas, is recognized for five minutes. Thank you, madam chair. Thank you for being here today, again, chairman powell. You know and we discussed many times the nature of my area. The action of the fed and the treasury is a direct impact on my constituency. Im very in particular sensitive about fed actions. My part of the world suffered the most at the end of the 1920s and 1930s. Before we sophisticated in how we handle the policies. You are the fourth chairman that has appeared before this committee since ive been here. T has appeared before this committee since ive been here. You are the fourth chairman that has appeared before this committee since ive been here. I found you to be as upfront and straightforward as anyone could be in your position. In some ways, really quite impressive. Compared to the things in the past. That said, i also learned in my time to try and focus on things that matter to my people back home that would make a difference to them even if it appears to be done in the weeds. I have a suspicion a bright fellow that you are, you know where we are going with this next question. I have been raising the issue of initial margin for nearly five years now. While regulators have agreed the requirements are an issue to be addressed, we have not yet been given any indication of timing. When many congrein congress can action, chairman . I wish i could be lehere to give you clarity on that. Neither am i completely emptyhanded. I do know this is the subject of active discussions at the moment. I am hopeful that those will be fruitful. You know, chairman, like a bird dog on point that i would reiterate the u. S. Is the only g20 country to impose these. This has created an unlevel Playing Field for United States institutions. My second respectful question, last month a committee on banking supervision agreed to provide an offset for client cleared initial margin under the leverage ratio. The commissioners support this. Im looking forward to the fed and other implementing this global rev revisi revision. I will have to come back to you on that one. Fair enough. You are following in the fine tradition dates back to mr. Greenspan. I respect that. I say that respectfully. Once again, one final question. I want to again voice my concern about higher capital charges will cause banks to pass those costs on to Commercial End users engaged in oct transactions. Congress clearly sought to provide relief for end users as a part of doddfrank. I fear this threatens to undermine congressional intent. I suspect you are aware of these concerns. I hope that we will see them addressed. Just noting from my perspective as a member of congress from Third District of oklahoma, the food we produce, the energy we provide, those resources need these kind of Risk Management tools because of the sheer capital intensive nature of the businesses. Focus, mr. Chairman. I know you will. I appreciate you very much. Thank you. That last one i think you are aware is out for comment. After a lot of work. Progress, mr. Chair. I like that. Yield back. Thank you. The gentlewoman from mexico is recognized. Thank you. Thank you, chairman powell for your endurancendurance. We are almost at the end of the item. I just want to focus a little bit on the income inequality gap we have been talking about. I wanted to follow up on your answers to mr. Lawson. We have seen the gains accruing. Can you expand on the risks that such inequality would introduce in the economy if it continues on the present course and into the into the future . I think the history has been that people have generally been able to progress and through time be economically better off than their predecessors and parents and grandparents. I think thats how people think about that have thought about life in our system. And i think the data shows thats less and less true. Its still true for many, but its true for fewer than it used to be, and thats not good. I mean, we want prosperity to be spread as broadly as it possibly can, and we want there to be progress upward for lots of people who want mobility from the bottom to the top, and vice versa. We want the outcomes to be fair. So and if you dont have that, you ask whats the cost of it really. I think the costs are big, and that would include a loss of faith in our institutions to deliver that in our society. So i think its its a very important problem to address, and i also, by the way, i see lots of businesses and people coming around to that view that maybe werent thinking that way five years ago. You hear that a lot. You hear a lot of discussion about this now in the business community. And they see it in terms of good employees and things like that but also in terms of people to buy their products. I think this is a national problem, and i so what happens to the bottom . I mean, its not as simple as haves and haves notes. If its shifting and the goal is always to move up, if you will, what happens to the bottom . Do you all track and look at the poverty rates . Do you all look and track at the lower income levels . Researchers do. And are the people that are going, as representative pressly said that are paycheck to paycheck . We do, and lots of economists outside the fed do track all of that. I didnt see any data on poverty rates or what its doing. I mean, your book talks about the inflation rate of a goal of 2 , the Unemployment Rate, as low as possible, but what is the bottom that we can reach in terms of a poverty rate . I dont have a number for you. We have all that data. We dont put it in every Monetary Policy report. You probably saw the box that talked about desperate Labor Market Outcomes for people with a lot of education and people with less education. What do you find is unacceptable in terms of a poverty rate . Before it skews everything else. Any positive number. Any positive number . Yeah. I think, i mean, i think our goal should be to not have poverty. I mean, whats an acceptable number . In our country, there no amount of poverty should be acceptable it seems to me. I know we have a lot of poverty, but if you ask that question that would be my goal to. For others it may not. The president wants to change the poverty line and how we index it to the cpi or the chained cpi. Theres a proposed rule change. Some people would rather just pretend that there is no poverty or that theyve done something to reduce poverty and changing the rules on how to calculate it doesnt get us anywhere. I just wondered if you have looked at that proposal and whether you favor it or disfavor it. I wouldnt have an opinion on that. I havent looked at that. Im glad you agree that the goal should be zero. Thats something ive worked with my entire life and will continue to do. And i think the minimum wage increase would be a step in that direction and a number of other initiatives that i hope well be able to get through congress. I appreciate your time. Thank you. Thank you. Thank you, madam chair, i yield back. Thank you. The gentleman from minnesota, mr. Phillips is recognized for five minutes. Thank you. Welcome, chairman powell. When you get to me, youve reached the finish line. My first question, why is the u. S. Dollar the worlds reserve currency . The u. S. Dollar is the worlds reserve currency. There tends to be one. If youre if you go to the country with the best institutions, the largest economy, the rule of law and relatively open to commerce and a trading nation, you can be that. Now, so what happens is there tends to be one reserve currency and it tends to be a stable equilibrium for a period of time. The pound was the reserve currency for many, many years but now the dollar has been for some time. So what do you consider risks to that changing at some point in the future . Its a very longrun thing. Its a fairly stable week librium. You have to think what currency out there would compete with the dollar . There really would be the euro. Its hard to see the dollar not being in the reserve currency for quite some time. That doesnt mean that every there can be multiple reserve currencies. There could be an equilibrium where there are two or three and that would be fine. Right now it really is the dollar, and i dont see that under threat right now. Of course, in the long run it will come down to fiscal sustainability and maintaining our rule of law and Democratic Institutions and prosperity and being a relatively open trading nation. Those are essential. In your opening remarks you talked about concerns to rising federal debt. Would that be a concern relative to the u. S. Dollar. In the longrun, absolutely. Second question, when you contemplate rate changes how much to do you give to current day versus i think its Monetary Policy is always about the outlook. You have to understand and take into account the current position of the economy in our case is very strong. Low unemployment. And stable relative price stability. Were always about looking forward because Monetary Policy works with a lag. You asked about the yield curve, and thats something we do look at, of course. Because theres a message in there. There are a couple of messages in there. You have to think carefully about what they might be, and its not a single thing that is a dominant financial condition. There are many, many things we look at in Financial Markets. And thats just one of them. Its certainly one. Okay. And lastly, do you believe that the Federal Reserve has the reck wiz it tools to fulfill its mandate at the zlb without assistance of fiscal policy . First, we do have the tools that we have and we will use them aggressively and we believe theyll be adequate. As i mentioned in a severe downturn, there comes a time when fiscal policy support is necessary and appropriate, and one of those times was during the Global Financial crisis and the Great Recession. Fiscal policy is very powerful, and i think is important to have. I think for the most part, the fed can handle counterslick cal policy, but there will always be an Important Role for cyclical policy. Is it important or not at this time . I dont think were seeking that. Were really not looking at that. Well have plenty of treasuries to buy if it comes to that. If it comes to buying assets, there will be no shortage of u. S. Treasurety securities. I dont think were looking at youre referring to the fact that other Central Banks have the ability to buy equities and all different kind of things. Its not an authority were seeking or looking at or think we need. Okay. Thank you, mr. Chairman. I yield back. Thank you very much. And so now we have the gentleman from california, mr. Sherman. Were trying to honor your 1 00 time that we agreed upon, and we are just running a few minutes over, but we only have two. We have mr. Sherman. Mr. Sherman, would you i thank the chairwoman and chairman for their indulgence. Spent a couple decades in this room. Ive watched republicans come here and condemn the fed for overly loose money and condemn you for quantitative easing. I for one have been pushing in the other direction. Its interesting to see how with trumps i think one of our colleagues said the republicans seemed to be in favor of loose money only when theres a republican president. The fact is that you havent hit your 2 inflation goal, and as weve talked earlier, it should be a 2. 5 inflation goal, because we and while unemployment is low, we havent had the big wage increases. Youve told us that wages have grown, but basically by 1 over inflation which doesnt make up for 30 years of negative or stagnant wage growth in this country for those without a college degree. On trade ive seen versed roles in another way. Democrats voted against mfn for china, against nafta, kafta but now that trump is flailing at the trade deficit, i hear an occasional democratic saying we should ignore it. I dont think flailing or ignoring is the right approach. I know theres been significant discussion here about cryptocurrencies. This constitutes criminakrip to currencies an attempt to transfer power from the United States government to sanctions evaders, tax evaders and drug dealers while reducing the importance as the chairman indicated of the United States dollar as the reserve and trade currency. M madam chair we have an executive from facebook joining us, but ultimately its time to bring Mark Zuckerberg here. He is the one that has made billions of dollars out of us, relies on the u. S. Government to protect his billions, and now wants to undermine the system, but i see his problem. And that is he wants to invade the privacy of the average american and sell our data, and in order to compensate for that, he wants to provide privacy to drug dealers and terrorists, there by, establishing how dedicated to privacy he is. I look forward to bringing him here, because the libra is an attempt to create a crypt currency that you could actually use to buy things. Right now we can kind of monitor the bitcoin because to actually buy something you need to convert it to the dollar. Mr. Chairman, i want to shift to another issue. Weve talked last time you were here about wire fraud. We got 40 of our members to write you, and we just got the response today about the need for a namematching system. So that when you wire money, you wire money not just to an account number but to a name. Because especially in real estate transactions weve had a lot of people tricked into wiring money into an account because a hacking and spoofing and has caused them to do that. The United Kingdom is moving to a safeguard system where when you wire the money, you wire it not just to an account number but that you match it with a name. Your response indicated that there would be some difficulty in doing that here. I know that we have state laws here that establish some rules, but you certainly have the capacity to regulate the Financial Institutions. You have regulations in this area. You could adopt regulations that say if youre going to accept a wire transfer, it has to be wired to an account name, not just to an account number. How do you plan on addressing this issue where people are conned into wiring money into an account number thinking thats the owner of the property that theyre trying to buy. So we understand its a serious issue and that its something that they do in a very organized crime kind of a way. Hacking into a list of real estate transactions, they try to hack into the players and try to divert the payments. Its organized crime. You accurately obviously summarized the contents of that letter, and i would say we have concerns about the matching name idea because it conflicts with some state laws. We think that really the way to get after it is to get banks to have appropriate i. D. From customers but what i will propose is let me get the experts in this to talk to you and your staff and try to and i would point out, this is clearly in interstate commerce and federal jurisdiction legal and weve grach granted you the power. Please use it. Thank you, the gentleman from washington is now recognized. Thank you. Mr. Chair, thank you for staying back. I have a straightforward question. Five days ago the president of the United States said we have a fed that dont know what theyre doing. So for the record, sir, do you . I would say lets take a look at the economy and let that be the report card. So, again, were the economy is into its 11th year of expansion. The longest in modern history. Since we kept records which began, i think in the mid 19th century. Unemployment is at a 50year low and has been for 15 months and we expect that to continue. So i think inflation is below where wed like it. We as you know, were concerned about uncertainties and other factors that are weighing on the outlook and looking at changing our policy, but overall, id say our economy is on a solid footing. So despite disagreements we may have had in the past about the actions i think the fed should have taken with respect to Interest Rate raises, i want to state for the record, i do think you know what youre doing. I thank you for being here. I thank you for your willingness and courage to stay independent. I thank you for your accessibility. Youre only the third fed chair that ive had the privilege to work with, but youre amazingly accessible, and i thank you especially for your remarks earlier in conversations with various members notably regarding wage growth and in particular not being tempted to characterize recent wage growth as adequate. Because it isnt adequate. As you know, ive been asking since i came to this committee when does america get a raise . And its long overdue. But it sets up a bit of a as it were, a dilemma for me. Youve characterized here today that the cross currents confronting the American Economy are trade and Global Growth. I want to know why it is given that the fed and you have accurately pointed to the fact that our economy is 70 consumer driven, why hasnt the fed called out more than a generation of lack of wage growth a threat to this economy . If we want to have a healthy economy thats 70 consumer driven, weve got to have some decent wage growth, and we havent. We have to have a prosperous growing middle class, and we havent. Why doesnt the fedex police italy call out this lack of wage growth as a threat to the growth of this economy and the health of this economy . Well, i think we do. I mean, i think weve been trying to promote you were asked and you said the cross currents are trade and Global Growth. The other cross current, the other downward factor is the absence of wage growth. Is it not . I think its really if you look at the last go back to your point, go back to the turn of the century, what you saw was a decline in labor share. So that has not been reversed. Were focusing on the change in wages, but really, the level, theyre missing wages are missing ten years of growth. So i think thats really the underlying problem. Were getting reasonable wage growth, but we missed all of those years beginning again at the beginning of this century. So i think its a very serious problem, and we should do a better job of calling it out. I look forward to you doing just that. Phillips curve. There was a recent article in the wall street journal that said in japan the phillips curve is dead. And obviously the connection as was discussed here or alluded to earlier has become more tenuous even in this country. I would pause it and ask for your reaction. The fact is that if you measure the phillips curve in terms of u3, the connection has been more tenuous, but if you do as you just now indicated in terms of percentage of especially 25 to 64, 25 to 54yearolds participating in the work force, then the phillips curve isnt dead and thats why in part were beginning to see traction. Why would we continue to use u3 when it clearly isnt reflective of what has gone on, especially in the aftermath of the Great Recession. People coming out of the wood work to join the work force and the Unemployment Rate goes lower and lower but we keep adding hundreds of thousands of people to the work force. Is it not have we repealed the law of supply and demand or can we if we continue to add people to the work force expect continued wage growth . So u3 is a number to it. Its not this number. We refer to it quite a bit but we look at a broad range of employment indicators. Im not sure i took your question, though, on this. Well, i think my point is that we havent reached full employment as long as people keep coming out of the thats wood work. I mean, thats what were learning. Were learning this. A lot of the margin will weve seen the improvement has been in Labor Force Participation rather than unemployment. Thats great. People come in. You could actually see and you have seen in some months youve seen Labor Force Participation increase enough that the Unemployment Rate ticks up. Thats a good thing. So im way over and the chair indulged me to allow me to ask questions again for which im grateful. Two things. We need more wage growth. Secondly, i believe you know what youre doing, sir, and i thank you for it. Thank you. Thank you very much. Mr. Powell, we have one more member, the gentleman from georgia, and then we will wrap it up. Thank you. Chairman powell, thank you. I will try to be quick and concise. I do have just a few questions, and so ill i wont make any statements. First one, realtime payments you and i have had this discussion before. Do you have any idea when you may announce the decision of whether to get into realtime payments or not . Were were in the middle of we havent actually gotten to a place where were getting ready to make a decision, but i think theres been a ton of work and so were moving forward to try to make a decision when its ready to do. Okay. What are the factors youre weighing . So as you know, this was something that came out of the Faster Payments Task norse. That was a group involving small banks, large banks, you know, community activists, technologists, card companies, all of that. And there was broad support, particularly among the Smaller Banks as i mentioned earlier for us to play a role of in final settlement. That was a recommendation that came out of that. We put out a proposal last year, and we asked for i think we got 400 comment letters and were piling through those, and working our way through assessing the issues. You know, we have to look at two things. One is just the requirements under the monetary control act. And theres also just the big policy question which is is there a role here . There are people who feel strongly that there is a role here for us and there are others who feel not. So were having to make a decision on that, and well be doing that. Okay. I appreciate if you keep us in the loop on that. We have several parties, especially in georgia very interested in the direction youre going, and so another issue regarding the tayloring of propose or tailoring of the Comment Period is closed. When do you expect final rules to be issued . The tailoring of regulation for domestic and foreign banks. Okay. For i dont know. I dont have a date for you. I know i think the Comment Period is recently closed. From my understanding the Comment Period recently closed on that. Foreign closed in june. For domestic it closed in january. I have to come back to your office on that. I think they said we see most things being wrapped up by the end of the third quarter, and darn near everything wrapped up by the end of the year. Do you anticipate domestic and foreign will be done together . I dont know. To be honest. With the remaining time one other issue. This important especially back in georgia. Small dollar lending. When the fdic chair mcwilliams testified back in may, i asked her if they planned to address a small dollar lending issue for banks, and she said she was going to work with the other regulators to get this done. Is the fed committed to working with the fdic and occ to come up with a plan for the small dollar lending . I think were doing that. I think theres an Interagency Group thats carrying that forward right now. Okay. Would that with that, i think were ready to end a very long morning. I appreciate that, and madam chair, thank you for your indulgence and i yield back. Thank you. Id like to thank chairman powell for his testimony today. Without objection all members will have five legislative days within which to submit additional questions for the witnesses which will be forwarded to the chaurm for his response. I asked you to respond as properly as youre able. All members have five legislative days to submit extraneous documents. I thank you for your patience, mr. Powell. The House Oversight Sub Committee on civil rights and Human Services holds a hearing on the treatment of children at the southern border. It starts at 2 30 eastern on cspan3. Tomorrow the questioning of mark mille ye, the current u. S. Army chief nominated to be the next chair of the joint chief of staffs. Watch live coverage thursday at 9 30 a. M. Eastern on cspan3. You can listen live with the free cspan radio app. Britains ambassador to the u. S. Has resigned after his emails to the British Government were leaked. The secret emails were critical of president trump. President trump responded and said the wacky ambassador that the uk foisted upon the United States is not someone we are thrilled with a very soutupid g. Heres what theresa may had to say this morning. Thank you, mr. Speaker. Mr. Speaker, this morning i have spoken to sir kim. I have told him it is a matter of great regret that he has felt it necessary to leave his position as ambassador for washington. The whole cabinet rightly gave its full support to him on tuesday. Sir kim has given a lifetime of service to the United Kingdom, and we owe him an enormous debt of gratitude. Good government depends on Public Servants being able to give full and frank advice. I want all of Public Servants to have the confidence to be able to do that. And i hope the house will reflect on the importance of defending our values and principles, particularly when theyre under pressure. There has been discussion about an appearance before congress. Any testimony from this office would not go beyond our report. It contains our findings and analysis and the reasons for the decisions we made. We chose those words carefully and the work speaks for itself. And the report is my testimony. I would not provide information beyond that which is already public in any appearance before congress. Former special Counsel Robert Mueller is set to appear before two committees of congress on wednesday, july 17th at 9 00 a. M. Eastern he gives testimony to the House Judiciary Committee and later in the day hell take questions from the house intelligence committee. Both open sessions. Our coverage of Robert Muellers congressional testimony will be live on cspan3, online at cspan. Org or listen with the free cspan radio app. For 40 years cspan has been providing america unfiltered coverage of congress, the white house, the supreme court, and Public Policy events from washington d. C. And around the country. So you can make up your own mind. Created by cable in 1979, cspan has brought to you by your local cable or satellite provider. Cspan, your unfilters view of government. Now you nighted airlines ceo on leadership style at United Airlines as well as how united views its role on a global scale. He spoke at the Bipartisan Policy Center. Welcome, everyone, to what i was informed is the 11th installment of our series on leadership. I think some of you have been with us before, and i think as youve seen from some of these sessions, the meaning of leadership, lots of people have different interpretations, but