Transcripts For FBC The Intelligence Report With Trish Regan 20160921

For Economic Growth for the year. Heres the key line in the statement. Quote, the Committee Judges that the case for increase in the federal funds rate has strengthened but decided for the timebeing to wait for further evidence of continued progress towards its objectives. It has two more meetings this year, november and december. The dissenters were rosengren and lemmas sister from cleveland and es store george from kansas city. Trish. Trish you say case has strengthened for them to raise rates . Compared to the first half of the year the economy is getting stronger in the second half he despite some numbers weve seen recently. Retail sales a little softer. Jobs report a little softer. They took the growth forecast for gdp in 2016 from 2 in june to 1. 8 . So a slight downgrade. Trish peter barnes. Neil thank you very much. I am joined on set by ashley webster, our own ashley webster. Kathleen witt is from Donald Trumps economic team. Steve cortez an Economic Advisor to donald trump. Also at bgc capital. As well as our own lori rothman down on the exchange. I can see, lori, the markets are trading up higher on this news. The market was up about 20. Now were up nearly 60 points. Perhaps some people breathing a sigh of relief there is no rate hike today . Breathing a sigh of relief, there was no rate hike but a hawkish report as well. Three dissenters as peter reported. Talking about the case for raising a rate hike. Fed chief yellen said the case was strengthening economy for to with stand raising Interest Rates, that things were Getting Better for that to happen. Stocks are climbing. Dow is up about 50 points. Dont forget you have the market taking serious concerns and serious digestion with the bank of japan. This rate control that the boj going to control with, keeping benchmark 10year yield at zero. Right now it is negative territory. That will create a steeper yield curve in japan. That is very good for u. S. Banks in particular. Right now we are seeing stocks climb here on a dovish action by the fed. No rate hike, but look at fed funds futures. See what theyre saying about december. Chances are the folks here well see rate tightening before end of 2016. Trish were quoting Charlie Brady neil cavuto saying to him, 58 chance according to fed funds futures right now of a rate hike before the end of the year. Ashley, however, i got to say, i feel like once again were living in this world where the fed tells us one thing but does something different. Yeah. Trish theyre downgrading their Economic Outlook. Things are not as good as they thought. 1. 8 is the projection for annual growth for 2016 and yet the case has strengthened for rate hike. I hate to use the word clueless but im going to use it, clueless. Four rate hikes this year, fourth next year and four in 2018. Cut it to two this year and now one this year. They are scrambling. To peters point retail sales down, production manufacturing down, Housing Starts down 5. 8 in august. Jobs numbers not that great, latest jobs numbers. It is a weak environment but another part of me, wants to, rip the bandaid off. Go with a rate hike right now. Shock the market, say get out of this artificial world and get down to business. It didnt happen. I think theyre clueless. They need fiscal policy support as much as they do monetary support. Good point. Let me go to kathleen on that one. Youre advising donald trump on the economic front. When ashley says you have to have both monetary and fiscal policy working together, what does he mean . Well, i think he means they can be at odds with one another and i would like to add, as the previous guest just said, that you know, this may be a utmost important for banks and a real catalyst for the markets. The stock markets. Using fiscal and monetary measures as a means of stimulating Economic Growth through this long, slow, Recovery Period has been very underwhelming and i think it is very interesting that Donald Trumps Economic Policy is not real heavy on monetary or fiscal policy. It is very heavy on lets let competitive markets work. Turn the free actors, the investors, Small Business people loose. Cut their taxes. And get a Regulatory Burden off of them. Trish have to have fiscal policy though, right . You have to have washington doing its part. That would be according to donald trump via lower taxes, thereby unleashing some of that entrepreneurism youre talking about kathleen. Youre right. Trish let me go to you for a minute, mr. Kelly. You tell me your thoughts whether or not we see a rate hike anytime this year . I dont think well see a rate hike this year. One. Most important data points came out recently, the nonmanufacturing pmi. That is a leading economic indicator. It is lowest in six years, 2009 levels. Contraction. That is majority of our economy. One of the reasons why the market is rising right now because the defensive names are trading at historical multiples because earnings are worth more in low Interest Rate environment. 10year treasury tells you everything you need to know. 2. 3 last time fed raise the rates. It is 1 1 2 right you now. They are telling you they can not raise rates. That is tightening mode. Will hurt economy more. Guess what the data is getting worse and worse and worse. Jobs number, two data points. Mandates. It is job and inflation. Inflation is nowhere close. Starting to creep up. If they tighten wont get to the 2 number. Should we get into another environment where we start to get towards recession zone . They dont have anymore bullet. What are they going to do . The problem is fed lost all of their meaning. Exactly. Trish lost all their meaning, all their credibility, all their ammunition. Steve, what could they do . Is there anything evident are out there . You look at japan had to improvise and get innovative in terms of its Monetary Policy what else can we do if anything . What we can do trish, not on monetary side to inflate and almost structural disinflation occurring today. Kevin, we have decelerating economy. We had a long time for that manufacturing, now were seeing that in the service sector. It is wrong time to normalize policy as much as i want to see that happen as free market guy. Having said all that, the fed will do it in december. Ill tell you why because they so fear this they have lost credibility. They dont have the guts to do it right now weeks in front of a u. S. Election. Trish talk about that though. Walk me through that. If they in fact do this come . Or do you see people take money off the table . Well see replay what we you saw last december. Will they start doing this every december . Will this be Christmas Present fed delivers to us once a year they raise rates . I hope they do it more than that. Last december, january was a mini meltdown in global markets. I anticipate if im about doing in december. Well have tumultuous start for the new year. Steve you bring up a great point. They raised in december and saw volatile january. That was because of guidance and already guided the taking market to one raise this year. If it happens in december i dont think the market will be really surprised by it. People have positioned their portfolios, we saw in jewel utilities came down over 7 , theyre anticipating a hike in Interest Rates. What the fed guides they will continually do a gradual pace, the market will blow up just like it did in january. If they come out and raise one time and then they say well grabbed all, but we dont know when were going to do it, i think the market will be tempered in july. Forward guidance really matters. Why should we listen to their Forward Guidance . They dont have a clue what theyre doing. All bets could be off. Trish good point. Janet yellen may lose her job. Donald trump said time and time again he may fire her. If she doesnt he get a Interest Rate hike in december, she is out of a job come january 20th. What are traders telling you down on the floor . What is your thought whether or not it happens before i want to address your important question, hey if the economy, theyre downgrading expectations of growth why is the economy shaping up to withstand a Interest Rate hike for statement this june . Look at reaction in gold. Gold prices shot up in the wake of the decision up about 18 bucks an ounce. You have part of the statement, the fed projects pc inflation, inflation gauge of 1. 3 this year. That will be little shy of 2 forecast. This market is preparing itself. Interest rates are higher. Preparing for higher inflation. Were looking likely at rate hike end. Year. Trish rate hike before the end of the year. Wouldnt that be amazing. It is so weak. Trish let me ask you about this. Topic we brought up a few times on the show. Disparity in incomes that youre seeing right now in this country. A lot of people want to blame president obama. Certainly there is blame there. Certainly blame on congress and d. C. For their lack of policy they have been able to generate on the economic front. But big thing of course is the federal reserve. By leaving rates as low as they have left them for the last eight years. Have they inadvertently do you think actually created an environment in which only those with capital are benefiting . In other words, you got to have money to be able to take on the kind of risk to be in the equity market in the first place. There is a very good argument to be made. Feel sorry for retirees whose savings, what are you getting on saving . Absolutely nothing. Being rewarded to save money. In this environment that is not the way to go. People with all the capital own hely ones that make gains. To touch base on that, the fed has focused on wealth effect. You havent seen it translate to earnings. We saw peak earnings two years ago. Where has the wealth come from . From multiple expansion. Gone from normalized 16 pe, to where we are now, 19 forward earnings. Trish that is not crazy. Not too crazy. We can trade at historical highs, cost of debt is so low. As we start to increase rates it will hurt earnings. What are companies doing with cheap money . Trish theyre buying other companies. Theyre doing some acquisitions. A lot of it goes into share buybacks. Trish che buybacks and acquisition, neither which translate into jobs. If you buy another company, buy out the competition, typically that will lead to job losses. Go ahead, steve. Both are fiscal side because of huge regulation and confiscatory regulation and monetary side. What were Encouraging Companies to do, almost begging them to do is financial engineering. That is how they are rewarded near term with higher stock price, rather than capital expenditures, investing in technology and plant and hiring people. By the way, i think this is why there is so much angst out there right you now. Why my candidate donald trump is doing so well. Because he offered solutions to the man on the street who is not seeing his portfolio change. Trish doesnt change the fact Corporate America has one goal, steve. That is to maximize, maximize earnings potential. Maximize profitability. In an environment such as we live in right now, the best way in most cases to maximize profitability is to actually send a lot of your operations offshore because it is more cheap to do so. Youre going to get cheap labor. Sure. Trish how does america compete in environment where all of these stocks, these companies are publiclytraded. There is all pressure to the shareholders to be profitable as possible . How do americans continue to succeed and get jobs when investors effectively, boards have a different goal than the average worker . Steve first. And then well get everyone in. I think we can align the two goals. Right now, youre right, no doubt there is disparity between the average worker and corporate boardroom. I dont blame the companies. Theyre supposed to rewarded shareholders and take their interest first. Because theyre responding to perverse incentive. Twofold, number one we have to reform taxes, much simpler tax code and much, much lower rates on particularly Corporate Tax code. That would encourage companies to repatriate capital an invest here. They want to. Incentives are not there. Incentive in manufacturing would be Energy Policy. If we get our Energy Policy right we could have a renaissance in manufacturing again. Trish i want to get to the labor issue, kathleen, lets face it an executives job is to squeeze all the profitability out of a company to do best for his or her shareholders. Part of that equation labor, you want to get the cheapest labor you can if youre an executive, shareholder, owner of the company, you want that profitability. How do we account for that, in an environment where things are increasingly global and globalization has effectively taken over . Well, i would love to respond to that, i think there are some factors which have not been considered that important or opportunities considered totally futile by, to allow American Manufacturing for labor to become cost competitive across the world. Two factors, energy which was mentioned. Now we sit on top of a vast store of oil and natural gas in this country. Why prices are fallen. The reduction in many, many industries, the greatest input is the cost of energy that they use to make their products. If that is, remains in the ballpark it is now, they can become competitive there. Another subject often so boring to talk about, but it is quite a beast. The Regulatory Burden is unbelievable and what that adds to the cost of production in this country. You get realistic light regulation and trish does that mean benefit goes to the workers . You think it will . Well get rid of regulation and you will spend less money on all the lawyers but executives, wont they say, oh good, now im more profitable than ever before or transfer money to workers . Quickest way to do this repatriate the money back here at 10 to 15 and peg it to jobs and reinvestment. We see what happened when superstate interceded between two private parties. Trish little bit of a carrot out there. You create jobs, you get incentive. We have the highest tax rate in the g20, right . Guess what, if we peg it to jobs as well as business reinvestment, you will start to see Companies Start pulling that capital here. Trish we tried at that once before. We did try that. In all fairness, we didnt give it a real shot because it was temporary tax holiday. Right. Trish it didnt quite work. We havent actually heard donald trump, correct me if im wrong, steve, donald trump has not actually suggested we peg it to that. He wants one big tax cut . 10 . But it will be permanent. Trish i got more time. How about that always good thing to hear from the producer. You have workers that need to get paid. You have shareholders got, have gotten in some ways very lucky over the last several years in that companies have become increasingly profitable. I mean profitability has been really Companies Found out they could do the same amount of revenue and sales with a whole lot less people. Trish right. We havent really gotten back. Other jobs gone overseas. To kevins point, wouldnt it be great to peg the tax advantage to job creation. I get so tired, it is so unpatriotic Big American Companies are Holding Money overseas. Trish can you blame them . The Founding Fathers would say, you know what is unpatriotic . 35 Corporate Tax rate. We would hire more people to work with us if we had a, tax break, because i knew i had capital to pay the labor. Because of a high tax environment i cant do that. Conceptually for ceos, think about what happened to tim cook, right . He had an agreement with ireland. A super state came in and interhe seeded and it was the eu any of these politicians should go to leaders and say im hire to foster your environment. Trish lori a lot of Business Leaders feel feel like the United States is not an environment they can guarranty or depend on. I heard that over the last eight years. Ceo after ceo, after ceo said to me we need certainty. They have not gotten that. Being transparent, transparency, excuse me and feeling their hands are tied because of overregulation. Let me address quickly, trish, why the markets are fading. The dow hit a high of the session of 99. Fading with a gain of 62. As i go through the details of fed statement, decision to leave rates unchanged, we had three dissenters, someone who wanted to hike rates this meeting, eric rosengren, boston fed, has been a noted dove. Because he has been in favor of the historic low rates a long time, put out a piece being very concerned about commercial real estate being the next bubble to burst. That speaks volumes. That will be very interesting to say the least how the market react as we start to hear comments from the fed chief himself. Leading sectors no, surprise, energy, oils, really spiking, telecom, industrials. And that will, i will just leave it at that. I hear you. It is very interesting on eric out of boston. Danny blanch flower, economist, frequent guest on the show, dartmouth Economics Department have been advisor to him. You cant get more dovish than danny. He is watching right now, we know you, dan i in. You want more and more out of the fed. So you would anticipate that eric would be also of that frame of mind and he has been previously. But he he is is starting to shift. So he three of them now. Trillions of dollars. Got 1 gdp . He wants more . Trish you know. The fed should stop worrying about asset prices everywhere else and talk about dual mandate. They talked about asset prices overvalued in biotechnology, biotechnology went up 50 . Focus on Core Competencies and dual mandate of jobs an inflio across the globe, theyre searching for yield and coming here to the states to buy that up. Look at chinese buying buildings here in new york. There is nothing the fed can do about that. Trish wellput. We are of course waiting, i should remind everyone on janet yellen, she is going to have the big news conference. She will be addressing the public there. So we are waiting on that. Out of the fed. Were going to be back with it right after this. This is very important because you need to hear what she is going to say about the future and whether or not we are going to get a rate hike this year. See you back here in two. The microsoft cloud helps us stay connected. The microsoft cloud offers infinite scalability. The microsoft cloud helps our customers get up and running, anywhere in the planet. Wherever theres a phone, youve got a bank, and we could never do that before. The cloud gave us a single platform to reach across our entire organization. It helps us communicate better. We use the microsoft clouds advanced analytics tools to track down cybercriminals. This cloud helps transform business. This is the microsoft cloud. And pull and struggle and fight and love to run your business. And when you need legal help with that business, were here for you. Were legalzoom. And over the last 10 years weve helped one million Business Owners navigate every day challenges. 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I am ready to put hep c behind me. I am ready to be cured. Are you ready . Ask your hep c specialist if harvoni is right for you. Also a trumpet Economic Advisor. Lori is on this floor of the new york stock exchange. Were talking about this issue here along with ashley and kevin globalization and basically you have a real disparity right now. Between labor and the needs of investors and shareholders. And how do you deal with that their interests are so diverse and when you can easily had a robot replace a worker or a worker in china or mexico replace the u. S. Worker to make it they could make it for 12 10 an hour and 725 here what are they going to do. What am i to say. You should be striving for this productivity but how do you do this. People come out with the trade. Whatever the trade is there been very successful in training people there getting ll. Dentials for jobs that are the additive we are missing from this is skilled labor. Our Workforce Needs to get back to that. We need to incentivize the labor force to get those skills. It almost feels like a generational shift that needs to happen. And thats can be influenced from that end. You can see investors backing off. We look at a market that is just up to 29 points. Theyre backing off as they wait for janet yelling to Say Something lori what are the traders down there on the floor telling you. The noted investor have told me. Then i can do anything but the toss the markets. To prepare everyone that the easy money cannot continue forever and the rate hike in 2017. The Financial School that puts it best on the rate hikes. Orton in a half chance. Quickly a couple of comments. The traders on the likelihood of whether or not if the trump winds. They tend to be focused on the election more than the fed. And they tend to lean towards Hillary Clinton. Trish weve seen a lot of big bank money go towards Hillary Clinton when you look at the statement in the last report they said its expanding the economy in the u. S. This time they just use the expression as picking up. That will speak to corporate earnings. Its a biggie though. They dont want to do anything they dont want to look like they are influencing the economy ahead of that election so theyre always reluctant but i wonder they will like it if Hillary Clinton wins is that because kevin you stayed consistent its game on the fed continues to be as active as ever. We probably still get nothing out of washington to give another repeat that is good for investors and shareholders take us back to the only game in town because there wont be fiscal policies it will be more of the same but the problem is the fed has lost it they have lost credibility. When they mentioned the british the british referendum. Guess what happened the exact opposite of what they said. And their specifics about the smartest people that are dictating Monetary Policy. So guess what what happens here is we need fiscal policy so Hillary Clinton and a presidency we dont know if that will push the market one way or another. You should know that it will probably help help in the way of growth. All they care about is a level of that. The fed stays as active as ever. I just question at what point and what point does it all start to crumble because you cannot continue to reach record levels in the market if you have an economy that is as lousy as this one. Hold your thoughts on that because janet yelling is yellen is about to speak. We are watching carefully to see what she indicates about the future. Will there be a rate hike this year. Lets listen in. In our meeting that concluded earlier today my colleagues and i in the federal open Market Committee discussed Overall Economic conditions and decided to keep the target range for the federal funds rate at one quarter to one half percent. We judged that the case for an increase has strengthened but decided for the time being to wait for further evidence of continued progress towards our objectives. Our current policy should help move the economy towards our statutory goals of maximum employment and price stability. I will have more to say about it i will review the Economic Development in the outlook. The growth which was during the first half of the year appears to have picked up. Spending continues to be the key source of that growth. The spending has been supported by solid increases in Household Income Business Investment however remains soft both in the Energy Sector and more broadly. The Energy Industry has been hardhit by the drop in oil prices is mid 2014 and investment in that sector continues to detract through the first half of the year. However, drilling is now showing signs of stabilizing. Overall we expect to see economy will expand at a moderate pace over the next few years. Turning to employment sharp gains averaged about hundred 80,000 a month over the past four months. About the same solid pace recorded since the beginning of the year. In the longer run that as well above the pace that we estimate is needed to provide work for new entrants in the job market. But so far this year most measures of labor market slack have shown little change. The Unemployment Rate in august 4. 9 was the same as in january and a broader measure of unemployment has also flattened out the measure that includes people who want and are available to work but have not searched recently as well as people who are working parttime but would rather work fulltime. The fact that unemployment measures have been Holding Steady while the number of jobs has grown solidly shows that more people presuming late in presumably in response to better Employment Opportunities and higher wages have started actively seeking and finding jobs. This is a very Welcome Development both for the individual involved and the nation as a whole. We continue to expect that label Market Conditions will strengthen somewhat with her overtime ongoing Economic Growth and improving job market are key factors supporting our inflation outlook. Overall Consumer Price inflation as measured by the price index for personal consumption expenditures was less than 1 over the 12 months ending in july. Still short of her 2 objective. Much of the shortfall continues to reflect earlier declines in energy and import prices. Core inflation which excludes energy and food prices that tend to be more volatile than other prices has been running about one and half percent. As the influence holds down inflation and as the job market strengthens further we continue to expect inflation to rise to 2 over the next two to three years. Our inflation outlook also arrests importantly on our judgment that longer run Inflation Expectations remain reasonably well anchored. However we cant take the stability of longer run inflation for granted and we will continue to carefully monitor actual and expected progress towards our inflation goal. Indeed we are fully committed to achieving our 2 inflation objective. Let me turn to the Economic Projections now extending through 2019 that were submitted to this meeting by the federal open Market Committee participants. As always it is a beds condition their predictions on their own view of appropriate monitoring policy which in turn depends on each participant and their assessment of the multitude of factors that shape the outlook. The projection for growth of inflation adjusted is 1. 8 this year. This figure is somewhat lower than projected in june as a result of the weaker than expected growth seen in the first half of the year. In 2017 and 2018 the median growth projection is unchanged at 2 . Somewhat higher than the median estimate of longer run normal growth. In 2019 edges down to 1. 8 in line with the estimated longer run rate which has been revised down a bit since june. The projection for the Unemployment Rate stands at eight at the end of this year touch higher than in june. Over the next three years the median Unemployment Rate runs near four and a half percent. Modestly below the estimate of its longer run normal rate. Finally, the median inflation projection is 1. 3 this year and rises to 1. 9 next year and 2 in 2018 and 2019. Returning to Monetary Policy the recent pickup and Economic Growth and continued progress had strengthened the case for an increase in the federal funds rate. Moreover they choose the risk to be roughly balanced. So why did didnt we raise the federal funds rate at todays meeting. We make our decision does not reflect a lack of confidence in the economy. Conditions in the labor market are strengthening and we expect that to continue. And while inflation remains low we expected to rise towards 2 objective overtime. But with labor markets slack and being taken up at a slower pace than in previous years scope for some further improvement in the labor market remaining and inflation continuing to run below are 2 target we chose to wait for further evidence of continued progress towards our objective. This cautious approach to peering back Monetary Policy support is all the more appropriate given the shortterm Interest Rates are still near zero which means that we can more effectively respond to surprisingly strong inflation pressures in the future by raising rates than to a weakening labor market and falling inflation by cutting rates. We continue to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate overtime to achieve and maintain our objectives. That is based on our view that the neutral nominal federal funds rate that is the Interest Rate that is neither expansionary note can traction or he keeps the economy operating on an even keel is currently quite low by historical standards. With the federal funds rate modestly below the neutral rate the current stance of Monetary Policy should be viewed as modestly accommodative which is appropriate to foster further progress towards our objectives. But since Monetary Policy is only modestly accommodative it appears that theres little risk of falling behind the curve in the near future in gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years. This view is consistent with participant projections of appropriate Monetary Policy. The median projection for the federal funds rate rises only gradually to 1. 1 at the end of next year 1. 9 percent at the end of 2018 and 2. 6 percent by the end of 2019. Compared with the projections made in june the median path for the federal funds rate has been revised down to a quarter to one half percentage points. Most participants marked on the estimate of the longer run normal federal funds rate with the median now at 2. 9 percent. As i had noted on previous occasions participant projections for the federal funds rate including the median path are not a fixed plan for future policy. Policy is known on a preset course and they represent participants of appropriate policy given their projections of Economic Growth employment inflation and other factors at a particular point in time. However, the Economic Outlook is uncertain in any assessment of the appropriate path to federal funds rate will change in response to changes to the Economic Outlook and the associated risk. Only, we will continue to reinvest proceeds from Treasury Security and principal payments from agency debt and mortgagebacked securities. As our statement says we anticipate continuing this policy until normalization and the level of the federal funds rate is well underway. Maintaining our sizable holdings of longerterm securities should help maintain accommodative financial conditions and should reduce the risk that we might have to lower the federal funds rate to zero in the event of a future large adverse shock. Thank you. I would be happy to take your questions. Madam chair critics have said that you look for any excuse not to hike but the goalpost constantly moves. It looks like there is new goalpost now. Looking for further evidence and you suggest that evidence that labor markets slack is being taken up could you explain what for the time being means and what that further evidence you would look for in order to hike Interest Rates and also the notion that the goalpost seem to move and you have introduced a new goalpost with the statement. I will try to respond to those questions. This is how the Committee Sees the economy and what we are looking for. We are generally pleased with how the u. S. Economy is doing. Growth was weak in the first half of the year we are seen evidence that the economy is now expanding more externally. As i mentioned payroll gains in recent months have been solid averaging around hundred 80,000 per month which is less than the pace in 2015 but as i mentioned its well above what is needed to provide jobs for new entrants into the labor force overtime. The Unemployment Rate is pretty close to most participants estimates of its long equilibrium a value. But as i mentioned that rate and other measures of labor utilization are little change since the beginning of the year. I dont see that as bad news because it may reflect the strong labor market that is attracting people from outside the labor force back into employment. The participation rates increase is on a declining demographic trend and the fact that it has increased shows substantial number of people being contracted. The employment to population ratio is also continuing to increase. We were not certain that this was something that would happen. They did have that potential. We are not seen strong pressure. They have a little bit more room to run. They are expected to move up overtime. The risk to the outlook. And we are generally agreed that increases to remove what is a modest agreed degree of accommodation. We dont see the economy is overheating now. Most of them judged that the case is stronger but would be sensible the finding of a bit more running room to wait to see some continued progress and evidence that we continue to progress. For the time being were going to watch them with incoming evidence that you can see from the sep that most participants do expect i would expect to see that if we continue on the current course there are no major new rifts that develop and we simply stay on the current course. The study drift down in some of the projections. Into the march towards a rate hike. If they continue coming down. Why not wait for the dust to settle on that before moving away. Its true that our estimates are coming down and that is what is largely responsible for that shift. At the same time we generally agree that the stance of Monetary Policy is somewhat accommodative. So i hundred 80,000 jobs per month is a faster pace of employment growth in the sustainable and the longer run. We have seen people come into the labor force and may be more than would be expected. Its why it has not fallen. Its probably not something that would be possible without the economy overheating on an indefinite basis. So policy needs to be forwardlooking. We dont want the economy to overheat. Our 2 inflation objective that is one risk that we need to address i think we generally agree that some gradual increases to remove that accommodation will be appropriate if we stay on this course but as i emphasized its not that much accommodation and the economy has shown evidence that there are more people who are being attracted back into the labor force so in that sense i would characterize it as we had found the economy has a it has a bit more running room and nevertheless we dont want the economy to overheat and if things continue on the current course i think some gradual increases will be appropriate. They were issues affecting the tommy the timing. Last month in your speech you seemed to rates expectations that Sherman Fisher they seem to support that. They sent the markets plunging. Or is this just a normal thing that we should be looking forward to at this time. My laptop for a rate increase it strengthened it is included in todays statement. Most of my colleagues agree with that assessment. I think we are trying to understand some difficult issues there is less disagreement you might think of listening to listening to speeches and comment carry the economy is making progress that we are close to an Unemployment Rate. We are under shooting our inflation goal. We want to make sure that we stay on the course that raises it to 2 and we are struggling with difficult set of issues about what is the new normal in this economy and the Global Economy more generally which explains why we keep revising down the rate path. It is very important that in a body like ours that a whole range of views are expressed. We have independent independentminded people. They will discuss the issues. These are complex issues and it just isnt straightforward exactly what is appropriate policy and what is going on in the economy my sense is that Market Participants i think it is a very good thing. Its one of the different worries. They are debating and discussing that. Donald trump the republican president ial nominee has charged that theyre keeping them artificially low to support the obama administration. I would like to hear what you have to say to that charge. I want to ask you. It has strengthened that. Thank you. I think they very widely establish that. To indicate the Monetary Policy. I can say emphatically that partisan politics plays no role in it. We are trying to decide what the best policy is you to manage we do not discuss politics. We dont take that into account in our decisions. The decision not to raise rates today. We are continuing on this course. Its a largely based on the judgment we are seen evidence that there be drawn in. Especially in larger numbers than i wouldve expected if we continue along it would be inappropriate to raise the federal fund rates. Every meeting is life and we will assess as we always do in the evidence. And decide whether or not a move is warranted. What data would convince you and the committee that that neutral federal funds rate is starting to move out. I am struck by your opening remarks that the economy isnt overheating but does that mean the Committee Sees it going on right now as is very lowcost to its policy thanks . What evidence would suggest that the neutral rate is moving up . If you saw us doing that. Revising down our estimates with an unchanged path for policy if unemployment were moving down faster than we had anticipated if we sought faster growth that would be suggested over the appropriateness of real value rating. While the economies made a lot of progress and only me that progress in the context of the Monetary Policy for very long time. You act about global factors. And what of the committees and if they saw that as a cost. In most advanced nations now they seem to be necessary for countries to be able to achieve their inflation and employment objectives and that is characteristic of an environment in which the neutral rate. That is an environment if we did have to live with that for a long time we have to be aware that it does give rise to a yield as individuals and investors seek to take on the risk. To seek higher yield and i think we should be concerned about that to the extent that it creates Financial Stability risk. With the assessments of the financial ability assessments. Overall i would say that the threat to Financial Stability i would characterize at this point it is moderate. I would characterize it as moderate in general i would not say that the asset valuations are out of line with historical norms but there are areas my colleague president is focused on commercial real estate where the price to rent ratio are very high. It is something that has caught our attention we have a variety of tools to address such risks. Issued new guidance pertaining to commercial real estate. In the area of commercial real estate while valuations are high we are seeing some tightening of lending standards and less debt growth with the rise in prices. Were not seen signs of leverage building up or maturity transformation in the way that we sought in the run up to the crisis and were keeping a close eye on it. Bill dudley earlier this year suggested that a Political Uncertainty must by an uncertainty. Have you seen anything further that they are holding back. I was up follow up on your jackson hole speech. The sense of that. You did raise the question are you concerned that there is a fiscal backup lumped on the shoulders of central bank. Starting with the issue of Political Uncertainty. Investment spending really has been quite weak for some time. We are really not certain exactly what is causing that part of that hasnt been a huge contraction with the Falling Oil Prices but the weakness expends beyond that sector and im not certain of exactly what explains that im not aware of evidence. Certainly i would agree with the finding that it has been a week. Consumer sentiment is perfectly solid. And Consumer Sentiment certainly seems to be solid. You ask about scope for further Monetary Policy action. I was careful in jackson hole we indicated weve a number of tools that we had used before. And could use again. I did indicate that i do have concerns about the scope for Monetary Policy nevertheless at this point our Balance Sheet is large and were not at what we see for the normal level for with the moment the funds rate is very low. It is below that the normal level