Weak. In the two statements two fed precedents dissented, kansas city president Esther George and boston president rosengren dissented that is the third time they both dissented. Jim bullard did not dissent on decision. He thinks this is where the fed needs to be with the 25 basis point cut. He believes this is enough. He wanted since last meeting, he want ad 50 basis point cut. This time he got the level he believes. Fed lowered rate on excess reserves to accompany rate cut is 1. 55 . The big news, the Federal Reserve cutting the federal funds rate quarter of a point but signaling a pause for future rate cuts, changing act as apappropriate to assess going forward. Charles edward, thank you. Here to discuss key words and phrases from powell to be impact on this market, former dallas fed advisor Danielle Dimartino booth, paul schatz and former Jpmorgan Chase chief economist anthony chen. We have Katherine Rooney vera. I have to start with you, danielle. The dow is up four points. We were saying change in language from act as appropriate to assess, seen as a signal of pausing. Is that the interpretation that youre getting . I do. I think that the message that jay powell wants to convey and will convey when he comes to the podium the fed is now truly data dependent. I think that makes markets more volatile going forward. In last minutes release several members of the open Market Committee wanted to indicate a pause and emphasize the markets do not make Monetary Policy. That is huge shift from what weve seen over the past three decades. Charles anthony . What you see here the Federal Reserve is mimicking what the Financial Markets telling you. They will in fact pause until they get justification for cutting rates. One of the things that caught my attention, they mentioned a global slowdown and weakness in Business Investment the weakness in Business Investment is because of trade uncertainty. That is being lifted. We dont have to worry as much. The global slowdown, Central Banks around the world, whether japan, European Central bank, theyre concerned about that. That still gives them the option to cutrates if data gets weaker, utilize midcycle correction, adjustment is off the table. They have cut 75 basis points, slowdown globally charles speaking of global, let me let the audience know around the world who is cutting rates. More recentlies australia, chile, south korea, brazil, china, denmark, all of europe, hungary, indonesia, japan, mexico new zealand, poland, russia, saudi arabia south africa, swift lan and turkey. There is indeed a global slow down, katherine, does the fed need to keep in step with other Central Banks . It is a reason to cut rates further but the u. S. Economy is in far superior position than the countries you mentioned. U. S. Is growing at solid clip. 3 q data is very good. Were far from deceleration that many called for recession and there is high business and Consumer Confidence and inflation is slowly but surely ticking up. I think were a different animal compared to other countries. Ecb is negative 50 basis points. Negative. 5 on deposit rate. That is tax on banks. We have to steer very clear dropping rates to zero and even worse, negative. Charles paul, pretty clear to me wall street is waiting for the q a session despite the fact this would be a pause. If you hear the term pause, you would think we would be off at least 100, 200 dow point at kneejerk reaction. Are you surprised were unchanged . This is compromise. Markets were acting for, expecting. Everyone we speaking with were acting for and expecting. Midcycle adjustments or 8th inning charles dont call it midcycle adjustment. Whatever you call it this cycle is over. I dont think theyre done. I think well look at more rate cuts next year. I think it is the appropriate thing. I argue adlong time, i cant find all reasons theyre cutting with dual mandate. They have maximum employment. Inflation is under wrap. Where is the reason for more cuts . Charles danielle, theyre worried about drifting inflation, right . Global economy was mentioned as well as muted inflation. You know, just a few month ago when john williams, new york fed chief put out the paper and talked about deflation, you know people went nuts. He had to clarify his position. I think he let the genie out of the bottle, if debt is a problem, they have to use limited tools they have now, rather than wait for it to become a fullblown crisis. Right. I think that the fed is going to be aware of the fact, for example, that home prices had their first monthovermonth decline in the biggest 20 cities in the country. That is one of the stickiest forms of inflation. According to the metric they follow at 1. 7 . Theyre underneath where their inflation metric needs to be, to the dissent of rosen again and george, there is some concerns about Financial Stability on the federal open Market Committee and this statement makes mo mention at all of the billions and billions of dollars the fed is pumping into the market which is its own form of easing giving it license to step back as greenspan did in 1995 and 1998 after three rate cuts. The economy continues to expand. The rally continues to go. Powell is looking for cinderella outcome. Charles dont call it qe. Dont call it account qe. Charles consumers remain strong, consumers were up, goods was up. I thought big thing residential up first time after sick quarters in a row being down, eight of nine quarters being lower. Between this housing starts, housing permits im seeing growth, more household formation i think is finally here. Youre an economist. I think this is one of the key underpinnings of the economy, forgetting the market for a moment, the fed risks derailing this, by doing anything other than pausing with Interest Rates. I think youre spot on. In fact i was very excited to see residential investment growing a little over 5 . Mortgage rates have come down. Keep in mind, since that number was baked into the third quarter, Mortgage Rates started to creep back higher. So i dont think 5. 1 or so, gain in residential investment will be replicated in the fourth quarter. Still coming off a high base. I think residential will continue to be positive, continue to help. And if the trade situation improves, we will also see Business Investment picking up. I think there is a possibility that in 2020 we could actually see faster growth. Charles catherine, there were three days in august, two and 10yearyearolds inverted, wall street lost its mind. Main street lost its mind. A remarkable comeback. The gulf between the two widened out. My question does the fed still have the august data in the current modeling if so what would they do about it . The fed is reluctant to do what they did back in december, rate hike precipitated 20 cut in markets. They knew that was error. They retraced error. Fed yield will move higher if we get scenario, current one, strong Economic Growth and more importantly a fed that doesnt cut anymore. Market is pricing in two additional rate cuts. If we dont get that charles two cut next year, early next year . Correct. So two more. We could get them. If we get a meltup scenario which a lot of my client are asking about, corporate earnings which have been pretty good, better than expected, continue to come in okay or strong, u. S. Economic Growth Continues strong, we get some framework deal stage one, phase one, whatever theyre calling it, between china and the u. S. , equities could go higher. My biggest fear in february, super tuesday, we could get and warren who really rattles market, rattles consumer sentiment, rattles confidence. Charles anthony, youre shaking your head . When i look at fed funds market, probabilities of a rate cut well into next year well below 50 . It is not zero. I would argue that number is understated. As the data gets weaker that goes high. At the moment a lot of those numbers are below 50 . Charles paul you mentioned the dual mandate with the fed. Over and over particularly with the q a session, i read reports. He reads danielles report every morning. He should. Charles he should. I know he does. He admits reading a bunch of research. He watches the market. Watches a lot of things. Whether the official mandate is dual a lot of factors go into it. If we get the meltup catherine is talking about how does that change dynamics . Wall street would like cake and eat it too, massive market rally and still rate cuts . Many rate cutting cycles it will be really difficult for stocks to melt up. Say eventually we hit my target of 30,000, without at least some kind of acceleration, earnings, economy, something on the good side. Charles all that could happen next year . I think it will happen next year. Sooner rather than later. Charles danielle is skeptical about the economy . In the adp report we saw this morning, exactly one sector that saw upside, that was financials. Whether Small Businesses or any other sector you can name, there is marked slowdown. We have seen in surveys from companies as well as the National Association of business economics that hiring intentions in the Services Sector which employs four out of every five americans have come down, some cases with Market Services Employment Index to a 10year low. My greatest concern, you have to get the trade deal up and out the door before there is seepage from the industrial recession on going into the Services Side of the economy. Charles danielle, paul, anthony, catherine, please stay right here. I want to go down to the floor of the New York Stock Exchange to see how this rate cut is impacting traders down there. Gerri willis, how is it going . This is interesting. This is almost word for word what traders were expecting. They were expecting 25 basis points. They even expected december to be a no, there would be a rate cut then. As you know the fed said they are pausing for future rate cuts. So all of this expected. One trader telling me that he likes now the slope of the yield curve now that this has happened. This morning coming in, gold going higher. Crowding into bonds. The rate cut, the slope of the yield curve is better. Funniest thing i heard today, everybody is waiting for the cringe moment. That would be when Federal Reserve chairman gets up and speaks. There is tendency when he talks for the market to sell off or go lower. Theyre watching for that. Frankly some of the worry, concern, anxiety this morning was about that and not necessarily what the fed might do. There is a whole lot to watch when it comes to the fed and the markets. There is a possibility that without meaning to, the Federal Reserve chairman might Say Something that would send markets lower. Charles gerri, thank you very much. I think this is a curious initial reaction. If the idea the fed is you in on pause, instead acting appropriately, will continue to assess data, im not surprised the market reacted more violently down to the downside. Bring back the panel. Danielle dimartino booth, paul schatz and catherine ran vera. I think gerri made the point, the last q a, special gathering that jay powell was at, he deliberately took shots at President Trump in his own way. Listen he is a human being. The tweets have probably worn him down. He is feeling a lot of pressure. I thought he got after track doing that. That is when we got the midcycle adjustment, some other sloppy terms. How important he sticks to the script . I mean literally, read as script and sticks to that today . Jay powell look a lesson from couple press conferences ago which was a total failure and shockingly bad when we talked about the midcycle cut. There were a lot of things that really jarred the market. He did the right thing last time. Basically what he did was read from a script. I suspect he is going to do exactly the same thing today. I think he will get a lot of questions, charles, on the repo markets, what we cant call qe, effect testifily by definition is. Where do we stand with regard to liquidity in the system. It is incredible were even talking about this after taking the Balance Sheet from one to four 1 2 trillion dollars. That is what i will be look being for. He has to be very careful with hits words. We took it to four trillion. Went back under three trillion. Gets back to credibility with the fed. They certainly lost a lot of credibility last year without a doubt. Feels like jay powell had epiphany early january. Wage inflation is not the same as price inflation. The market staged a remarkable rally. This whole thing with liquidity. Every wall streeter i ask about this, sloughs it off like no big deal. The number is increasing. We started 60 million, billion. The numbers keep going up. The time limit of the time of this keeps going up. It feels like it has been sloppily handled. How do we get into a position where the Financial System runs out of cash . It has been poorly handled not just by powell but janet yellen as well. Raising rates, sucking liquidity out of the system. Nobody thought it would work. It was utopian solution. Charles was that a way of them taking a victory lap, saying Mission Accomplished well unwind all of it . It was their way of doing it. It clearly didnt work. You have a problem, global shortage of dollars. Global. This is not just a u. S. Problem. People who downplay liquidity will find out really quickly, once that liquidity stops, the fed gets behind the curve significantly, it will be gail over. Charles danielle, im reading they may have to do something, implement something permanent. This whole sort of patchwork of okay, well extend it, well raise it, not working out. Every time they do that im pretty sure they lose more credibility . There was a permanent repo facility debated at june federal open Market Committee. They opted not to go in that direction, which was rather surprising. People at open market operation at the new york fed are trying to play catchup. They increased overnight facility from 75 billion to 120 billion every night. Increased two week term from 35 billion to 45 billion. Of course jay powell uninverted the curve. He is buying short end of the curve. Forced rates down by 60 billion a month were not supposed to be calling qe. These are massive numbers, bigger than what we saw at the height of qe. Charles anthony you want to chime in. Simple what i see shrunk the Balance Sheet too much. Yet components were growing, currency in circulation, treasury account was growing. When you shrink the Balance Sheet. All of sudden these things are growing something has got to give. In the new Regulatory Environment banks are holding more reserves. So you have to have more. Tough do it permanently. Charles im not sure. I keep asking a question why is the Federal Reserve paying banks not to lend money . It was their attempt to control the fed funds rate. Right now the real situation there is shortage of reserves, what happens to the fed funds rate . It starts rising. Repo rate rising above the fed funds rate. Its a problem. Way to solve the problem, add sufficient amount of reserves on annual basis. I ace plumbing problem. Charles anthony, where we are visavis Interest Rates and main street. The Housing Market clearly has benefited from the sea change and fed from hiking rates to cutting rates. Can this continue . Can other things, other aspects of main street benefit from where the fed is right now . I think right now interest sensitive sectors will do great with lower Interest Rates. The question, do we need super lower Interest Rates. My suspicion at this moment we dont. We got real good gdp given the Interest Rates. Weve seen a few cuts which by the way wont impact the economy for several quarters. At the moment i think were okay. Charles look at chart on screen, u. S. Existing home sales, after they stopped hiking rates, they turned around and went up like a rocket. Catherine, this curious reaction to the fed being on pause. Were not down 200 points. Were creeping up higher at highs of the session. It is surprising. A lot of us were expecting a more hawkish fed especially after the recent inflation tick up. One thing i would add, to anthonys point, how many rate cuts do we need and what do we achieve with them. Consumption growth 4. 6 in the last quarter this quarter 2. 6 . Consumption is strong with confidence high. We had Interest Rate cuts affect housing which is good. Economy is driven by consumption. How are additional rate cuts which actually there are 70 chance priced in by fed funds futures right now after this cut today of an additional cut. It is higher than 50 . 70 chance of an additional rate cut to what end . The economy is already growing at about potential with some inflationary pressures. So i would tell the fed to be cautious. Let the market work. Charles the fed talked about Household Spending being strong. They are sensitive. Every time Jerome Powell speaks he talks about expectations from households. This last Consumer Confidence or sentiment number, the combination of households anticipating low inflation, something maybe 2. 3 and 2 3 expecting higher wages, alltime record, that is a hell of a combination. That means the american public, paul is expecting it to be a wonderful goldilocks period for some time . The fed will have to accommodate that, no . I hope the fed can accommodate that. Here is what is amazing. In august when the yield curve inverted, go to a bar on the corner, talk about the yield curve being inverted. Now it is steep again. What is the risk . Yield curve inversion is not the risk then. It is 6 to 18 months down the road. Our eyes are off the ball. Charles i was asking, do they still have this in their modeling even though it happened in august . Again the new york fed has recession probability model based on three month 10year inversion. Studies have shown since 1950, every single time that curve inverted for three month or more it charles 18, 24 months. Not a 2020 event. Since 1950 it never failed if the curve is inverted . Theyre manipulating the markets to such a extent it renders the yield curve not as accurate a measure as historically. Charles well find out next 18, 24 months. Thank you very much. Were watching markets. Jay powell will hold a News Conference any minute now. After cutting rates for the third time this year. So stay with us. Of a different kind. Adp helps canyon ranch place the right people in the right jobs, so employees like dave can achieve what theyre working for. To earn j. D. Power chevdependability awards. Across cars. Trucks. And suvs. Four years in a row. Since more than 32,000 real people. Just like me. And me. And me. Took the survey that decided these awards. It was only right that you hear the good news from real people. Like us. Im daniel. Im casey. Im julio. Only chevy has earned j. D. Power dependability awards across cars, trucks and suvs. Four years in a row. Charles in moments fed chair Jerome Powell will follow Federal Reserve decision to cut rates. This is Third Straight time. What does powell need to say in wake of this move, particularly what happened in the past . What should investors do now that the fed got to this point . Joining me to discuss, clear state advisors managing director james awad, fox businesss Jennifer Schoenberger back with us as well as Danielle Dimartino booth. You had a chance to go through this. The initial headline was a change in the language. Are there any other kernels that jump out at you we should be talking about as well . Look it, it underscores the fed thinks that they should take a step back and pause right now. Powell sort of telegraphed that when he said previously that the fed was working under the same realm as mid 1990s when they cut three times, took a step back, wanted to see how things worked through. If you looked at the minutes from september actually, several members thousand it would be food to telegraph in the statement when to recalibrate its policy, based on trade uncertainty. So here we go, we look what is going on in the trade front, we look at what is going on with negotiations with china, things are looking up. Not that things will go well, looking at that, looking at q3 gdp report, consumer is doing just fine, looking at statement, which shows the fed beliefs the job market remains strong even though job growth is slowing, seem to indicate the fed thinks were in an okay place to take a pause. Charles hal, it is interesting, because if you look at weakness in gdp, Business Investment and trade they both revolve around the trade battle. If there is a resolution, well not get anything overnight, phase one, another round of olive branches including pushing off the december 15th potential rate hikes, the potential tariff hikes, what would that mean for the Federal Reserve . Would they have to change their thinking a lot more . I think the fed is definitely watching that very closely. And if we were to get a phase one deal. That i think would give them confidence to take a permanent stand, than to be on hold. I hope chairman powell doesnt say theyre on hold at the press conference, versus a pause. That would be a negative. That would box them in. If we look where we are today, what changed over the last few month . We still dont have a china trade deal. Europe is still basically in recession. Negative Interest Rates all over the world. China is at 30year slow down in the growth rate and our growth rate has slowed. I dont see there is massive change in the rate cuts. 10year is from 1. 5 to 1. 8. That is inmaly, german bonds, negative 70, to negative 35. The bond market is pretty smart. The 10year still at 1. 8. If we have truly 2 inflation the bond market somewhere is wrong. Somebodys wrong. Who is it . Trillions of dollars going into the bond market buying low rates. Or is the fed still too high . I think potentially the fed should potentially cut more here. Charles tim . I think the economy is in a good place and fed is in a good place. The idea of being ambiguous and flexible going forward. Do no harm. Charles you like the fed being ambiguous . For now. Saying it could go either way. Economy may be Strong Enough to keep rate the way they are. It may heat up a little bit. Maybe the trade deal may fall apart. In which case you would lower rates. Theyre at a point where there is no clear case to do anything other than to stand pat. Charles, can i just add something . I think it is really important to unscore there is a lot of Division Within the Federal Reserve right now. Half the if he members think there should be more easing. Half dont want to cut. There were two dissents. Kansas city fed president Esther George. Rosengren both dissented. How do you telegraph further rate cuts from here when you have that kind of Division Within the fomc . Charles danielle . Comes down to the word in the statement, which is assess. They will follow every data point that comes out. If they were data dependent before. I think fed will be hyper data dependent. I think it will make market as little more volatile. Look Mortgage Applications are coming out or initial jobless claims. The market will be super sensitive. They know the fed is in assessing mode. Charles let me ask you a main street question from one of our viewers. Does our guests do not think, rate increases specially for home equity loans put more money for consumers. Home equity are extremely high. So are credit card rates. Recent reduction in rates are helping auto sales, home sales, appliance sales. Home equity, no. Right, absolutely. Charles helping housing overall. Looks like household formation is back. Hal, what if we dont get the rate cut we should get though . I think it depends what happens with china. Again what the data points show. One of the things i would say probably disagree with some guests on the show, i think potential gdp growth rate is much higher. Charles we would be at two, 3 today if it wasnt for the trade battle probably. There could well be the 2 or 3 because charles heres the fed chair Jerome Powell. Good afternoon, and welcome. My colleagues at the Federal Reserve and i are dedicated to serving the american people. We do this by steadfastly pursuing the goals congress has given us, maximum employment and stable prices. Were committed to making the best decisions we can based on facts and objective analysis. Today we decided to lower the Interest Rates for the third time this year. We took this step to help keep the u. S. Economy strong in the face of Global Development and to provide some insurance against on going risks. As i will explain shortly, the policy adjustments we made since last year are providing, and will continue to provide meaningful support to the economy. We believe that Monetary Policy is in a good place. The u. S. Economy is in its 11th year of expansion. The baseline outlook remains favorable. The overall economy is growing at a moderate rate. Household Spending Continues to be strong, supported by healthy job market, rising incomes and solid Consumer Confidence. In contrast Business Investment and exports remain weak. Manufacturing output has declined over the past year. Sluggish growth abroad and trade developments have been weighing on those sectors. Looking ahead we continue to expect the economy to expand at a moderate rate reflecting solid Household Spending and supportive financial conditions. The job market remains strong. The Unemployment Rate has been near half century lows for yearandahalf. The pace of job gains has eased this year but has remained solid. We expected some slowing after last years strong pace. Participation in the labor force by people in their prime working years has been increasing. Wages have been rising particularly for lower paying jobs. People who live and work in low and middle Income Community tell us that many who have struggled to find work are now getting opportunity to add new and better chapters to their lives. This underscores for us the importance of sustaining the expansion, so that the strong job market reaches more of those left behind. Inflation continues to run below our symmetric 2 objective. Over the 12 months through august total pce inflation was 1. 4 , and core inflation was 1. 8 . Inflation pressures remain muted and indicators of longer term Inflation Expectations are the lower end of their historic ranges. Were mindful that continued below target inflation could lead to an unwelcome downward slide in longterm Inflation Expectations however against the backdrop of a Strong Economy and supportive Monetary Policy we expect inflation will rise to 2 . Overall we continue to see sustained expansion of Economic Activity, a strong labor market, and inflation near our symetric 2 objective as most likely. While this has been our outlook for quite some time, our views about the path of Interest Rates that will best achieve these outcomes have changed significantly over the past year. As i mentioned weakness in Global Growth and trade developments weighed on the economy and posed ongoing risks. These factors in conjunction with muted inflation pressures led us to lower our assessment of the appropriate level of the federal funds rate over the past year. In both july and september we reduced the target rate for the federal funds rate by one quarter percentage point. We did so again today, bringing the range to 1 1 2, to 1 and 3 4 . The policy adjustment we made to date will provide continued support for the economy. Since Monetary Policy operates with a lag, the full effect on these adjustments on Economic Growth, the job market, inflation will be realized overtime. We see the current stance of Monetary Policy as likely to remain appropriate. As long as incoming information about the economy remains broadly consistent with our outlook. Of moderate Economic Growth, a strong labor market, and inflation near our symmetric 2 objective. We believe Monetary Policy in a good place to achieve these outcomes. Looking ahead well monitor effects of our policy actions along with other information bearing on the outlook as we assess the appropriate path of the target range for the fed fun rate. Of course if development emerge that cause a material reassessment of our outlook we would respond accordingly. Policy is not on a preset course. Let me end with a few words about our technical Monetary Policy operations. In january we made the key decision to continue to implement Monetary Policy in an ample reserves regime. In that operating framework we control the federal funds rate primarily by setting our administered rates, not through frequent interventions to actively manage the supply of reserves. In the transition to the efficient and effective level of reserves in this regime we slowed the gradual decline in the Balance Sheet in march. We stopped it in july. In response to the funding pressures in money markets that emerge in midseptember, we concluded that it would be appropriate to maintain over a time, over time, a level of reserve balances at or above the level that prevailed in Early September of this year. To achieve this ample level, we announced on october 11, that we would purchase treasurys bills at least into the Second Quarter of next year, as well as continued temporary open Market Operations at least through january. These actions are purely technical measures to support the effective implementation of Monetary Policy as we continue to learn about the appropriate level of reserves. They do not represent a change in the stance of Monetary Policy. In particular, our Treasury Bill purchases should not be confused with the largescale asset purchase programs that we deployed after the financial crisis. In those programs, we purchased longer term securities to put downward pressure on longer term Interest Rates and ease broader financial conditions. In contrast, increasing the supply of reserves by purchasing Treasury Bills only alters the mix of short term assets held by the public. Should not materially affect demand and supply for longer term securities or financial conditions more broadly. Thank you. I will be happy to take your questions. Reporter michael mckee, Bloomberg Radio and television. The question is this it . Do you consider rates to be accommodative enough now to achieve your goal of sustaining the expansion . As far as global wall streets primary question, what kind of change in the economy would cause you to reassess . Some sort of significant deterioration in what . So what we said to repeat is that we see the current stance of policy as likely to remain appropriate, as long as incoming information about the economy remains broadly consistent with our outlook. And we say that really because both of the performance and the economy and stance of policy. The performance of the economy has been particularly the household sector, has been strong, has been resilient, with low unemployment, attractive levels of job creation, wages moving up, Labor Force Participation moving up, household confidence and solid gains in many measures of consumer spending. Manufacturing sector, particularly manufacturing and also investment and exports have been weaker. Overall weve seen moderate growth, strong labor market, inflation moving up. We see outlook more of the same. We see risks to the outlook perhaps moving in a positive direction over the course of this intervening period although some things remain to be seen. So thats the economy. Turning to policy, we moved the stance of policy over the course of the year to a more accommodative stance. After cuts at the last three meetings, the federal funds rate is between 1 1 2 and 1 3 4 . We feel policy is wellpositioned to support the outlook i described. You asked what it would take to move. As i mentioned were going to be watching all factors. If developments emerge that cause a material reassessment of our ott look, we would respond accordingly. That is what it would take. Material reassessment of our out look. If the markets decide you need to cut rates again will you [inaudible] well look at a full range of data about the economy and risks to the outlook and ive given you a sense what our outlook is. It is for moderate growth, a strong labor market, inflation near our 2 objective. If something happens to cause us to materially reassess that outlook, that is what would cause us to change our views on the appropriate stance of policy. Heather. Reporter hi, heather long from the washington post. You just said that the risks to the outlook are moving in a positive direction. Im wondering if you could specify, is that on trade or other matters . This morning we obviously learned that we have now had two quarters of contracting Business Investment which would seem to be moving the outlook in the other direction. So in terms of risks what i was referring to there, the principle risks that weve been monitor having been, really slowing Global Growth and trade policy developments as well as muted inflation pressures. I was really referring there to trade developments. We have, that phase one potential agreement with china, which, if signed and put into effect, could have the effect of reducing trade tensions and producing uncertainty and that would bode well we think for Business Confidence and perhaps activity over time. So that has, has the potential for being an improvement in the risk picture. Brexit i would say as well, it appears, the risk of a, of a no deal brexit seems to have materially declined. I think on both situations, there is plenty of risk left but i would have to say the risks seem to have subsided. You asked about Business Investment. Thats right, Business Investment has been weak. Todays reading was weak as well. It was, it was broad across, across equipment and, other parts of the, all parts of business fixed investment were weak. That is consistent what weve seen. That is the economy weve had this year. What weve had is an economy where the consumer is really driving growth, and, you know, personal consumption expenditures were almost 3 in this quarter. In this First Reading for the quarter. So overall, we see the economy having been resilient to the, you know the winds that have been blowing this year. Follow up quickly. There is this concern that i sometimes hear, that with businesses have cut investment. Are they going to turn around and cut employment . If they continue to be concerned, can you give a sense how the committee is thinking through that possibility . Yes. So that is a risk. That is a risk weve been monitoring. We dont see it yet. We dont see rising initial claims or layoffs or anything like that but the risk you mentioned in weakness of manufacturing and export invest, Business Investment parts of economy, getting into the consumer side of the economy. We dont see that. We continue to see good job creation. Unemployment has declined again in the household survey. It is now at a 50year low. Has been very close to 50 year lows for 18 months now. So it is a very positive, consumer facing companies that we talk to, in our vast network of contacts report, you know, that consumers are doing well, they are focused on you know, the good job market and rising incomes. That is the principle focus. So that is the thing pushing the economy forward. It doesnt seem to have been affected so far by weakness in other areas. Reporter gina smiley from the new york times. Questions. You previously sort of compared this rate cutting cycle to the insurance cuts in the 90s and in both of those instances the greenspan fed took those cuts back after a while. They raised rates again fairly quickly. Im just curious what the onus is for doing that in this cycle . What would make you guys decide it is appropriate to raise Interest Rates again . So, the reason why we raised Interest Rates is because generally, is because we see inflation as moving up or, in danger of moving up significantly. We dont really see that now. Inflation moved down in the First Quarter of this year. We thought that was due to some extent due to i had crow idiosyncratic factors. That is moving up again, so we dont see that risk. Inflation expectations moved down both and sideways and really recent months and you know we think that Inflation Expectations are very important in driving actual inflation. Were strongly committed to achieving our 2 inflation objective on a symmetric basis. We think it is essential that we do that. So were not thinking about raising rates right now. There obviously will be times in the future where that will be appropriate. What were really thinking is, that our current stance of policy is appropriate and will remain so, as long as the outlook is broadly keeping with our expectations. Steve liesman, cnbc. Mr. Chairman, not to make light of it but im a little bit, help me out with the appropriate understanding of the word appropriate here. So, the statement says that the committee is going to monitor implications of incoming information for the outlook as it assesses the appropriate path of the target range. That tells me you could go either way. You came in, you used the word appropriate, that the current rate is likely to remain appropriate, which means youre on hold. So how do i walk away from this, what should we walk away from this believing what appropriate means . Are you on hold and need to be proved wrong you should remain on hold or is it really you could go either way here . Thank you. We think the current stance of policy is likely to remain appropriate, likely to remain appropriate as long as incoming information about the economy is broadly consistent with our outlook which is a positive one of moderate Economic Growth, strong labor market and inflation moving close to 2 . That is what were saying about that. We also say, of course if developments emerge that cause a material reassessment of that outlook, we would respond accordingly. So that is really how were thinking about it. I cant point to one data point or one thing that would change our minds. It really would be reassessment of, material reasment of our overall outlook which i described. Reporter why isnt the phrase, likely to remain appropriate in the statement if that is the sense of the committee . Well there is, is a lot of practice and science and history in terms of how much you put in the actual postmeeting statement as opposed what we say in a press conference statement. Its a judgment call. Im saying it now. Thank you. Reporter thank you, nick timmer from the wall street journal you said Inflation Expectations are very important. What if anything would the committee be prepared to do to address this slide in Inflation Expectations if it continued . So, as i mentioned we do think Inflation Expectations are, theyre quite essential, quite central in our framework how we think about inflation. We need them to be anchored in a level that, at a level consist 10 with our symmetric 2 inflation goal. And, we think that we need to conduct policy in a way that supports that outcome. That is what were doing now. Were also as part of our review looking at potential innovations, changes to the way we think about things, changes to the framework that would lead us, that would be more supportive of achieving inflation on symmetric 2 basis overtime. That is the very heart of what were doing in the review. It is too early to announce decisions we havent made them yet, but were in the middle of thinking about ways we can make that symmetric 2 inflation objective more credible by achieving symmetric 2 inflation. It comes down to using policy tools to achieve 2 inflation. And that is the, that is the thing that must happen for credibility in this area. So were committed to doing that. Reporter how soon do you think that review might be announced to the public . Were empty middle. Were quite in the middle of it now and my thinking it will run into the middle of next year. These changes to Monetary Policy frameworks happen, they dont happen really quickly lets say. Inflation targeting took many years to evolve. I dont think well take many years here. I think well wrap it up around the middle of next year would be my guest. I have some confidence in that. Reporter edward lawrence, fox business, thank you, mr. Chairman for taking this. How big of a change to Monetary Policy would there be if you get some of that uncertainty clearedded up . , specifically the u. S. China trade deal finish and usmca ratified . How could of a change could that be to the Monetary Policy stance. Or rate hikes next year . Rate hikes next year . I heard the argument, trade causing uncertainty. Uncertainty keeping prices low, i heard that argument from one of the fed president s from one of the districts if you remove the uncertainty prices could naturally rise. Could there be a point, my question is how big of a impact on Monetary Policy would removing that uncertainty . I would just say, if we were to have a sustained reduction in trade tensions, broad reduction of trade tensions, resolution of uncertainties, that would bode well for Business Sentiment which is trade uncertainties has been weighing on Business Sentiment in our judgment and judgment of many, many analysts. And ultimately, it could affect activity. I wouldnt expect that the effects on activity or confidence would be immediate or, would there be immediate effects in economic act at this time . I think it would take some time after the recent things but i think it would be quite positive over time. You come back to the question of raising rates. That is really about inflation and we havent yet, just touched 2 core inflation to pick one measure. Just touched it for a few months. Then we fallen back. So i think, i think we would need to see a really significant move up in inflation that is persistent before we would consider raising rates to address inflation concerns. Reporter brendan greeley, financial times. The other thing you talked about in the review, the gains that a super High Pressure labor market have, particularly for the communities that youre talking about. You mentioned it just now when you were talking. Is that something that youre identifying . Is that something the fed is learning more about this year, why not continue to push those gains, particularly for people who are reentering the labor force . I think were doing that. I think were keeping, i think we made very substantial adjustment to policy over the course of this year, if you think about it. We entered the year expecting further rate increases. We went to patient. Now weve done three rate cuts. That is a very substantial shift. The effects will be felt over time. We feel like the shifts are appropriate to support exactly the out comes youre talking about, a continuing strong labor market. Continuing strong job creation. Reporter if you describe the shift that you made so far, it wasnt just about trade uncertainty . It was specifically these High Pressure labor gains . We said it was about three things. It has been about the slowing Global Economy. You have synchronized slowdown in Economic Activity around the globe t has been building for about 18 months now. That is having effect on u. S. Activity. That is part of the weakness in manufacturing export and Business Investment. Weve had trade policy uncertainty which we think also has been weighing on activity, investment. And sentiment. Weve had inflation which weve called out the risk of inflation running persistently below 2 as a risk we needed to address. So weve been doing it to address all of those things. I would say, the gains in the labor market have been great to see. It is particularly the fact that people at the lower end of wages have been getting most of the benefit of most of the wage gains in the last couple years. Thats a great thing. You know from our fed listens events, we hear from people who live and work in lower, moderate income communities, this is the best labor market they have seen in their lifetime, things like that. By the way, there are still so many people who are, you know, still not in the labor market yet. That there is just a lot more good that can be done there. At the same time we have to think about the whole economy. And but yes, those gains are very positive. We call them out. They are a reason for us to want to extend the expansion. That something were committed to doing. Reporter the feds Balance Sheets. You all recently resumed purchases of Treasury Bills. I was just wondering, how long do you expect that to continue . Given the fact that you know, the repo operations, it seems like the fed is having to increase the amount of liquidity, temporary liquidity it is injecting into the system, do you still feel like it is just, that there is not enough reserves in the system . Do you feel like you have a good sense what is going on there. So on how long, what we said is, we expect bill purchases to continue at least into the Second Quarter of next year. We said that temporary open Market Operations we expect to continue until at least the end of january i believe. Through january. In terms of causes, so there is a lot of forensic work going on by us and Market Participants and all kinds of analysts. You know, one thing is, we think we need reserve to back up to the level, minimum level of reserves we can have during the various fluctuations that you see with reserves. It is Something Like, 1. 45 trillion or a little higher. That is the level in Early September. So were going to be adding reserves to get to that place. That is one thing. There are also, it may be, one thing that was surprising about the episode was liquidity didnt seem to flow as one might have expected. We had surveyed banks carefully about what was their lowest comfortable level of reserves. Many banks well above that level did not take that excess cash and invest it in the repo market at much higher rates. They didnt, they didnt do that. So the question is why . Are there things that we can do that would, adjustment we could make that would allow liquidity to flow more easily in the system without in any way sacrificing safety and soundness or Financial Stability. So were looking at those. Those are not things that can happen that can really address the situation in the short term but those are a range of things were looking at as well. Reporter Howard Schneider with reuters. Thanks for the questions. I wonder if you give us a little more texture, sort of what the strongest or most important case for feeling that you have now taken out adequate insurance . Is it the response youre seeing in housing and other parts of the economy, arguably to the cuts made so far . Is it fact risk environment out there globally shifted a bit, abated a bit or Something Different in the Financial Markets . The fact that the yield curve righted itself, the . Honestly really, there isnt any one factor. It is really a whole range of economic data. Also what we see, better our stance of policy which we believe is the appropriate stance. It is really both of those things. If you look at performance of the economy through this, the Consumer Sector has been quite resilient. Witness todays gdp report. And it is just, again all things i went through earlier suggests that sector continues to be strong. We know manufacturing investment, trades export sector has been weak. That continues. Overall we have economy showing moderate growth. Were 1. 5 to 1. 75 . That is, we believe an accommodative level, a level that will support that outlook that we have. Reporter followup. This is kind of a onelegged recovery . Unless you get some impetus from other things, exports, investment, that its going to weaken further at some point . You know we dont see any evidence of that. What we see, what we see is that the Consumer Sector continues strong, again, low initial claims. It is all, we monitor obviously broad range of data. We see now i think more clearly the effects of more accommodative Monetary Policy on various kinds of consumer activity. Youre seeing strong durable goods sales. Youre seeing housing now contributing to growth for the first time in a while. 2 i think this quarter. And youre seeing, youre seeing retail sales. The retail sales number, pce number as i mentioned in todays release was 2. 9 . So thats good. More broadly Monetary Policy is also supporting Household Spending and home buying keeping the labor market strong. Keeping worker incomes rising, keeping Consumer Confidence at high levels where it currently is thank you, mr. Chairman you are talking about how they affect consumer behavior, is a less potency on the Business Investment side that youre pushing on a string . Rooted Monetary Policy works through the channel that we understand. I think the effects are clear and what we think of the interestrate sensitive sectors which are some of the ones that i mentor. I think Interest Rates are a factor in Business Investment but i dont believe that the main factor and main driver and i think what one would like to see to support greater manufacturing activity, Business Investment and export would be a Global Recovery and theres a lot of Monetary Policy accommodation and fiscal accommodation made in the Global Economy now, not here but perhaps elsewhere. That should support both in the Global Economy. Again, resolution ameritrade issues would contribute to that over time as well. Thank you, chris associated press. You mentioned a couple of times of what you heard from people of how its benefited the lower income workers, the job market that we have, has the fed thought about institutionalizing Something Like fed listings and taking in some of the input from people you dont always hear from like the focus of businesses and bringing under bringing in folks more regularly chris mark. We think the fed listens has been a Great Success for us and im not sure what will repeat it, i would imagine this entire Monetary Policy review will be constitutionalize and be done every few years. I would say this, we talked to educational institutions, healthcare institutions, community groups, labor groups, not just businesses. All of those groups are represented on the boards of regional banks. We also meet quite regularly at the board with representatives of low and moderate income communities paid were very conscious that we represent all americans and hear all of their perspectives. Thats when we talk about low on appointment rate, the aggregated unappointed rate in groups of having experienced that. So we try to remind herself that we serve everybody. Steve matthews with bloomberg. You mentioned the
comparemela.com © 2020. All Rights Reserved.