Transcripts For CNBC Power Lunch 20240714

Cut. Seven of them are forecasting two quarterpoint cuts this year one is forecasting one cut eight are on hold. And one is forecasting a high cut. Eight forecasting a cut. Ser seven is two cuts. One is one cut, one on hold, one hike the result is actually unchanged. However, its down by 50 basis points for 2020 to 2. 1 , down by 1 for 2021 to one quarter point to 2. 4 . The long run also down by a quarter. The long run fund rate to 2. 5 from 2. 8 all of this took place, by the way, without much change in the Overall Economic forecast. A little tweak here on jdp, unemployment let me get to what the statement says about the economy the labor market in the statement says remain strong Economic Activity rising at a moderate rate and thats down from a solid rate in the last. Job gains solid, it says the Unemployment Rate remains low. Same language as last time Household Spending picked up from earlier in the year Business Investment was soft, and they had said it slowed. Overall inflation running below 2 and marketbased measures have declined. So unchanged, but the Federal Reserve in its forecast is indeed has disagreement but many of them are forecasting at least some cuts this year, and overall, theyre forecasting cuts next year all right, steve stay with us reaction from our panel now. All of the main things he rattled off off the bat, guys, no change. They removed the p word, alicia, added closely monitor, said well act as appropriate and bullard had a dovish dissent. I would say july is on the table here and i think that its very reasonable to think there are two cuts this year with this change in the dot. Its very clear the fed is really looking to ensure the expansion continues, and its positive for the market. This is what the market needed to see the rates market is pricing this in so this is all in sync so pretty good its a good statement for the market. We were saying that the fed was going to walk a high wire act, basically, this afternoon in terms of navigating the markets. And, you know, the statement did it quite well in that it adopted the language that Jerome Powell used in chicago. Seems to satisfy the markets, at least for now. We have a positive bias to the markets, but still largely unchanged. David . Well, yeah. I think the stock market may like this in the short run but i think were in some dangerous territory here first of all, two wrongs dont make a right and its inappropriate to have a overly easy Monetary Policy to enable an overly aggressive trade policy because what i think i hope people in washington get by the way, do you think anyone on the fed is actually trying to enable an aggressive trade policy i think the problem is the fed has taken the position that monetary policies should be independent, and therefore, they will not tell the administration what to do if the administration would please stop telling them what to do one part one side is keeping that agreement but i do but the danger here is, if they ease first thing, if they cut in july, everybody is going to expect them to cut again. 81 of the time when the fed cuts, they cut again within the next six months. So people will just build in a series of rate cuts. And as rates fall, people will expect, well wait a while and see if i can borrow cheaper rates. Doesnt stimulate the economy. So theres a danger they will make things worse by cutting rates in this environment. John, would you agree with that that in a nutshell is the case against an insurance cut yeah. So the things that i would focus on here, i actually think it was notable they didnt commit to july there is nothing in here about a next meeting, there is nothing in here about, you know, the g20. Of course, theyre going to leave that out so i think theyre keeping options open and i think that is appropriate. They dont want to be seen as, you know, doing anything thats going to interact with trade policy at the ex ante. Maybe after the fact they might. But i dont think they want to do that ex ante. The other thing i would focus, were seeing the Movement Towards concern about inflation. They have been talking about up to now about Market Expectations being low. But now theyre saying theyre outright they have declined thats a change, something to focus on and, again, i think thats the way theyre going to justify a cut. Theyre never going to say they were cutting because trade policy got too aggressive to use davids words. But they will say, and i do think this is likely, they will say inflation is too low, we need to get it higher and therefore were going to use policy what youre seeing today is kind of the careful laying of the ground work. They dont want to get caught up in the trade dispute, dont want to get caught up in this meeting or that meeting, but they are carefully laying the ground work for easing policy next year or sorry, later this year i think thats bondpositive, equitypositive and well see how this plays out but i think thats what theyre doing here theyre laying that ground work. Bondpositive, equitypositive, winwin situation. Steve, whats your interpretation i think so far, weve gotten what the market expected i think it was clever and kind of classic of powell to drop that phrase, well act as appropriate in the june 4th or june 3rd chicago speech. And then to repeat in the in the statement. I think thats something the market can learn to rely on. Its a way that former chairmen have acted and so now we can say powell is a guy that will drop these hints along the way and we can pick up on them and they end up being policy. Thats important i still think there are some hurdles to a cut i dont know if you have that screen, guys, about how divided the fed is but youve got eight on hold eight calling for a cut. One for a hike and thats why you get unchanged median for this year we can talk about the math of the median, if you like. But there it is. And thats look, the median remains 2. 4 but, you know, ive said all along, you have this xi meeting coming up in japan the june employment report the Second Quarter gdp before that and to johns statement, they almost never would fully officially signal a change at the next meeting they would drop hints along the way. And i think the data still have to cooperate, although i would say john is 100 right the root by which they would do this is flew thein federation route. The idea that inflation is muted, declined below the 2 would be very interesting to see in the Upcoming Press conference if chairman powell changes his tune about the nature of the declining inflation being transitory if thats the case, then i think you can take the cut in july to the bank. Yeah, but david could i thats something that the fed doesnt like talking about, low inflation, period. Theyre happy to talk about growth slow downs, happy to talk about this and that. Thats a whole different ball game for them. Well, but if they cut rates, its safer to say theyre doing it because inflation is a little on the low side. Nobody is going to panic over that rather than we think the economy is heading for recession david david . I just want to chime in before you one of the interesting elements of this whole exercise here is how little they changed the rest of the forecast the growth forecast, very little change the unemployment forecast, very little change. There is a change in this year on the inflation forecast. So it would i mean, i guess you could call it a bullish cut. Ive not heard that term used before but the idea that were not cutting because growth is weak, were only cutting because of inflation. Im glad you mentioned that that would play directly into the hands of the administration. We were talking to larry kudlow on this program not too long ago, a week and a half ago, asked about a potential cut and i said if the economy is so great, why bother. He said because of inflation this is exactly what the Trump Administration ordered up, john. Well, what i was going to say is, you know, as were getting ready for the press conference, a lot of people have been saying its a tight rope, hes got a hard message i actually dont think its that hard i think hes going to do exactly what steve said, which is stick to the talking points. The talking points are pretty clear. Theyve laid them out in speeches over the past few weeks. Its about sustaining the recovery its about acting as appropriate, and its about getting inflation up over time as long as he sticks to those three things, and i think he will, i think hell do that repeatedly, almost to the point that it gets tiresome. But as long as he sticks to those, i think its going to be fine some people are talking about, its really tricky i dont think its that tricky i think you stick to the talking points, we know what the taking points are, and i think he makes it to the press conference with the message very much intact. John said this is bondpositive, equitypositive i just want to mention that the tenyear yield has been falling, so the first week it held, rising now you can see the charts right in front of you, back to 2. 05 if this is such a bullish, you know, discussion, why is that happening . I dont think its bullish for the economy overall. I mean, i think the problem is that these rate cuts, if we this is signaling july, but, you know, as jay powell will say, its too early weve got these things that will be resolved by the time we meet in july. So thats why were not moving today. But the more they cut rates, maybe people dont talk about how weak the economy is now. But if we go to the Second Quarter gdp report and the fed then follows that with a rate cut, suddenly that question is going to become more central theyll say its about inflation. Which sounds nonthreatening. But the media is going to start picking up on how is growth looking, particularly for the 2020 election. And abraham lincoln, didnt he say you can fool some of the market some of the time . David kelley is on to something very, very important can the fed finesse a cut without spooking the market. I know yep. Thats one of the things they have been thinking a lot about. But its a very difficult thing to do. Want to mention, by the way, its not just the move in bond yields, its also the dollars fallen half a point now, something the president was specifically upset about after mario draghi earlier this week lets get Rick Santelli in here. Well see if the president has any reaction to this news. Yeah, you know, i cant speak to the president or kind of the fairy tales of what people think the fed is going to do the reality of the marketplace is clear the dollar believes that rates are going to go down at some point. It was a down a quarter percent as you see on the chart. Now down a half cent and still going down now, we talk about the rest of the coupon curve, all about steepening, with all rates going down a unique form of steepening. Look at twoyear note yields at 280. 283, 284, 288. And they just kept falling were now down seven basis points a day as you go to tens, youre right, kelly. Yields have come down. But they were hovering around 206 before the statement theyre at 204 now even at 204, down four basis points, theyre down half as much as a twoyear and 30year bonds, theyre sleeping by a tree the long end isnt moving much 255, basically unchanged on the day. What charts i can show you is the most important chart of all. June fed fund futures did not have the rate cut. So they are selling off. Which means the next log as that one rolls off the cliff, because each month is unique but based on the previous months pricing, the july this morning, the next meeting, it was spending most of the day up one. It is now down four. It sold off five basis points. See, thats the way fed fund futures work even though the bullishness gets squeezed down the toothpaste tube so you now see that september, october, november is up five. Up 5. 5 so the reality is, the markets are Still Holding on to this notion, theres going to be an ease but the fed funds contract has to deal with realities and therein lies the problem to put so much credence in the marketplace, because this fed chair hey, rick doesnt seem to be the touchyfeely guy hes a nuts and bolts guy. Rick yes. I have a fed funds forecast of 2. 4. Just talk prices. The forecast is calculated in a way i dont agree with rick, just work with me here. It sold off five ticks in the front and went up five tickses in the back. Just hold on. The cme, i get it. Im looking at the Federal Reserves own forecast for the fed funds rate two years from now. At 240 you just which the chairman said to ignore hold on where did you say the twoyear is trading the twoyear right now is at 180, flirting with 179 it started yesterday at 187. Is one rich to the other . Or is which one which one has this wrong theres 60 basis points i could tell you that whats rich is that the people buying it may be buying it for a fed that wont deliver their promises, but that might be the smallest portion of it thank you. It might be more of foreign demand, because mario draghi pulled the plug in the bathtub, because he wants to have more water going into the main structure of plumbing. Yes. All right, guys thats why. Thank you Rick Santelli, steve liesman, stay with us we want to talk stocks now bob pisani with reaction to the fed station. Utilities, which hit a 52week high off the back of this decision, as well as health care defensive tilt yeah. But utilities up because yields are down, banks are down look, this was a masterful statement. The risk was tremendously to the down side. They misplaced a comma, and the markets could have gone down on this but they handled it tremendously well look, slight downgrade to the Economic Outlook moderate job growth instead of solid job growth the key is uncertainties about the outlook have increased thats the tipoff, what everyone likes in light of these uncertainties the community will monitor incoming information for the Economic Outlook and act appropriate to sustain the expansion. Thats the tipoff you throw in the dot plot, talking about two quarterpoint raises, a big move and you add 2916 on the s p 500 going in year. We went into 2928. Thats a big move up, considering we have 1 from historic highs and a huge move up in the last couple of weeks thats quite a feat. You saw as i mentioned with the yields down, bank stocks actually moved down. Utilities moved up were back in historic high territory. So now we go into the press conference where almost anything could potentially happen obviously, its going to be asked about trade and tariffs and whether the g20 meeting matters at all a lot of people listening to that response. Back to you. Thats where the action could happen bob pisani at the New York Stock Exchange thanks to john bellows, david and alicia stick around to help us digest the rest of this meantime, we go to break the fed leaving rates unchanged. We get ready for chairman powells press conference. Cion sets the stage for the next desi in july power lunch fed day. Stay with us welcome back to power lunch. Moments away from fed chair powells News Conference policymakers just left rates unchanged and removed the word patient from the policy statement. The fed saying uncertainties to the outlook, and all buzz words are important for the market joining us is fred mishgen welcome to you the big debate is whether the fed is signaling and talking about a slow down scare or whether this is just a discussion about inflation well, i think that right now the problem is we really dont know what the situation is the fed is being cautious and appropriately so im not a fan of the fed cutting rates and i think we should wait until we get more information. The key thing, were in a highpressure economy. The phillips curve still is alive. Research shows its alive. Which means as we as Unemployment Rate falls it could go up, but since its a hibernation it wont appear until you have certain things happen. So thats actually a concern that there could be issues on the up side. On the other hand, theres a lot of issues now on the down side many coming from the political sphere so and thats very hard to predict. So my view is the fed should be waiting right now. I would like them to articulate a little better how they will react, given different scenarios. This is something the fed has never done as well as it should. Again, this is an issue that i looked quite a bit at, and explaining what they would do in the future so the markets can understand that what scenarios are you thinking of now that you would like an explanation for. Learly, scenarios are we could see that trump meets with xi and threatened everybody. And thats a very different world than now clearly, a lot of the negative aspects that were worried about in the economy are coming from the geopolitical sphere. The issue of trade war is a scary thing and will have very negative impacts, not only on the economy in the u. S. But clearly elsewhere. And thats something that the fed will have to take account of but on the other hand, trump is a negotiator thats what its all about the art of the deal. And, in fact, if he can say he has a good deal, whether it is a good deal or not, then, in fact, we may be in a very different environment, and in that case, if the fed has cut rates, then, in fact, they would have made a mistake. So i think they have to wait to see how things are going to play out. They should explain that, in fact, here are the negative things that could happen but they might not happen. You basically have a series of scenarios choose your own adventure i think thats really a key thing, that where really the fed gets boxed in is from the projections of what Interest Rates will be. And statements about that. Thats been a big problem where they get boxed in. Where theyre not is depending on what happens, we could do very, very different things. In fact, the dot plot may actually not be the likely outcome, because it could be things are indicate we should be tightening or, in fact, we should be cutting or cutting very rapidly so it depends a lot on what the circumstances are. And if the market understands that, they can actually do some of the heavy lifting of the fed even before the fed acts if something happens, the markets will act in a way that will actually help Monetary Policy. Speaking of the markets, just a percent away from record highs. How does that, how should that factor in, in your view . Clearly right now, the financial conditions are actually quite good. And i think thats actually a key factor in terms of the fed saying to itself, you know, were not sure that things are going to really turn south on the other hand, that could change quickly and, again, were actually in a situation of tremendous uncertainty in terms of what policies will be and thats having a big effect on the markets and could have a big effect on the economy. I mean, some might say the markets are going higher or are 1 away from record highs because of the expectation of the fed cut. Thats right. And i think its just surprising that the market is so close to its old high i mean, yes, yields are low, rates are low. However, there is so much event risk in the next lets call it four to six weeks about whether or not not just that theres a deal, but theres 25 tariffs put on 325 billion of goods imported from china, which could hit the consumer, and the consumer has been whats been holding up the economy so we know theres been a manufacturing slow down globally here, but also overseas. And the sentiment data has started to roll over the consumer is holding the economy up if you hit the consumer, then you hit the growth story yeah. And the problem is, cutting rates if you have a situation where you have higher tariffs and lower rates, its not going to help Global Consumers or u. S. Consumers. So, you know, to freds point, i think one of the big problems the fed is having is expectations get built into the market as to what the fed is going to do and kind of get forced into either causing a market selloff or they have to acquiesce. But its extremely important, as a basic principle central bank, not be driven by the markets. Markets have information for you that you should use. On the other hand, youve got to make a decision based on the information thats out there and if the markets dont agree with you but horse is out of the barn, isnt it every step of the way for jay powell, he has been reacting, at least for the past eight months, reacting to the markets. Well, it depends on what you mean by reacting to the market clearly, the markets actually tell us something about the assessment of a lot of professionals that have a good feel for a lot of things and thats useful to you on the other hand, the markets frequently get it wrong. They are frequently wrong about where Interest Rates should head and whats really key is that the Federal Reserve not follow what the market. So the market has been calling for a lot of cuts. I think that would be a mistake right now, and in fact, only if that happens its got to be because things are bad and, in fact, thats not good for the stock market and let me just ask one final point on this, personnel wise. Is there posturing bullard had a dovish descent if people believe theyre in play to become fed chair because the president might possibly change the chairmanship, does that affect the dynamic in that room or the outcome . I dont know. There is always a lot of grandstanding. And it turns out that you actually see it much more from Bank President s than you do from governors. And theres a good reason for that the boards of the banks love it if their president is on tv. In fact, sometimes the more outrageous the president of the bank is, the happier the board is, particularly in certain locations where boards are more unusual. I refer to dallas usually. But dallas actually now has a very different president than in the past so thats always been a problem for the fed, because the amount is tremendous. And although our system is actually very good from a political viewpoint of having reserve president s which are not in washington, i think that has a lot of value in terms of the way the discussion occurs instead of having everybody sort of in new york or washington to determine what goes on it does create a lot of problems for fed communication. And that its dovish pressure these days. And it may be dovish, but i should tell you, the key players here that really matter are not these Bank President s. So you listen to jay, who is clearly the chair, you listen to rich claireter, vice chair, those are the guys you want to listen to, and the ones who dont want to grandstand, because what they say matters and they also know their incentives are to get things right and Bank President s love to get attention and thats fine. Thank you. Very welcome. We are Just Moments Away from fed chair jay powells News Conference we will take you there live as soon as it binegs. Markets are closer to flat line right now. Stay with us on power lunch. Rates on change a minute away final thoughts from our panel. David, what are you looking for . Inflations running low. Yes, might do july too early to call. Thats why they didnt take any action now i hope he tries to put a limit on how many times the fed may cut rates. If its just low inflation, thats not an excuse to head towards zero i think the fed needs to do something to be hawkish. My question to jay powell would be, we have seen such tightness in the labor market, such low wage growth its really been sitting at 3, 2, 3, 4. How can we have full employment without wage growth growing . If thats the case, is there an inflation spike possible we heard fred say the phillips curve is not dead. And if there is a step function in there somewhere that there is a certain amount of tightness that can get, you know, wages going again, that would be an interesting question jay powell is approaching the podium s p 500 up 4 financials have gone negative. Lets listen in. Good afternoon, and welcome my colleagues and i have one overarching goal to sustain the economic expansion with a strong job market and stable prices for the benefit of the American People at the fomc meeting that concluded today, we maintained our policy interest rate, but made some significant changes to our statement. Since the beginning of the year, we have judged that our current policy stance was broadly appropriate, and that we should be patient in assessing the need for any changes. In light of increased uncertainties and muted inflation pressures, we now emphasize that the committee will closely monitor the implications of incoming information for the Economic Outlook, and will act as appropriate to sustain as the expansion with a strong labor market and inflation near its 2 objective. Id like to take a step back and review how the changing economic and financial picture brings us to todays decision. So far this year, the economy has performed reasonably well with solid fundamentals supporting continued growth and strong employment. Inflation has been running somewhat below our objective, but we have expected it to pick up supported by solid growth and a strong job market. Along with this favorable picture, we have been mindful of ongoing cross currents, including trade developments and concerns about Global Growth at the time of our last fomc meeting, which ended on may 1, there was tentative evidence that these cross currents were moderating the latest data from china and europe were encouraging, and there were reports of progress in trade negotiations with china. Our continued patient stance seemed appropriate and the committee saw no strong case for adjusting our policy rate. In the weeks since our last meeting, the cross currents have reemerged. Growth indicators from around the world have disappointed on net, raising concerns about the strength of the Global Economy apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture report heightened concerns over trade developments these concerns may have contributed to the drop in Business Confidence in some recent surveys and may be starting to show through to incoming data. Risks in Financial Markets have deteriorated as well against this backdrop inflation remains muted. While the baseline outlook remains favorable, the question is whether these uncertainties will continue to weigh on the outlook and thus call for additional Monetary Policy accommodation. Many fomc participants now see that the case for somewhat more accommodative policy has strengthened let me explain the basis for this judgment, starting with the outlook for jobs and growth. Participants see unemployment remaining low this year and next monthly job gains in may were lower than expected, however, and in light of recent developments, this bears watching still, many labor market indicators remain Strong Community business and labor leaders all tell us that the prospects for jobseekers have seldom been better and this is true even for those who have traditionally struggled to find work wages are rising and this is particularly so for lower paying Jobs Committee participants growth projections from 2019 are little revised from march with a central tendency of 2 to 2. 2 , just above their estimates of longerrun normal growth the growth projections for the year as a whole mask some important details about the composition of growth. Annual growth will be boosted by the surprisingly strong First Quarter, which had just been reported at the time of the may fomc meeting as noted, the unexpected strength was largely in net exports and inventories, components that are not generally reliable indicators of ongoing momentum the more reliable drivers of growth in the economy are spending on consumption and Business Investment. While consumption was weak in the First Quarter, incoming data show that it has bounced back and is now running at a solid pace in contrast, the limited evidence available at this time suggests that growth in business fixed income has slowed in the Second Quarter moreover, manufacturing production has posted decline so far this year. Thus, while the wabaseline outlk remains favorable, many participants cited the investment picture and weaker Business Sentiment and the crosscurrents i mentioned earlier as supporting their judgment that the risk of less favorable outcomes has risen after running close to our symmetric 2 objective for most of last year, inflation declined in the First Quarter data since then shows some pickup participants broadly see inflation moving back up toward our 2 objective, but at a slower pace than had been expected the central tendency for 2019 core inflation, which emits volatile food and energy components, is between 1. 7 and 1. 8 setting aside shortterm fluctuations, Committee Participants expressed concerns about the pace of inflations return to 2 wages are rising asnoted above but not at a pace that would provide much upward impetus to inflation. Moreover, weaker Global Growth may continue to hold inflation down around the world. We are firmly committed to our symmetric 2 inflation objective and we are well aware that inflation weakness that persists, even in a healthy economy, could precipitate a difficult to arrest dawn ward drift in longerrunin Inflation Expectations because there are no definitive measures of Inflation Expectations, we must really on proxies. Some surveybased expectations measures are near the bottom historic ranges. Combining these factors, participants express concerns about a more sustained shortfall of inflation overall, our policy discussions focused on the appropriate response to the uncertain environment. The projections of appropriate policy show that many participants believe that some cut in the federal funds rate will be appropriate in the scenario that they see as most likely though some participants wrote down policy cuts and others did not, our deliberations made clear that a number of those who wrote down a flat rate path agree that the case for additional accommodation has strengthened since our main meeting. This added accommodation would support Economic Activity and inflations return to our objective. Uncertainty surrounding the baseline outlook have clearly risen since our last meeting its important, however, that Monetary Policy not overreact to any individual data point or shortterm swing in sentiment. Doing so would risk adding even more uncertainty to the outlook. Thus, my colleagues and i will be looking to see whether these uncertainties will continue to weigh on the outlook and we will use our tools as appropriate to sustain the expansion. Thank you, and i will be pleased to take your questions nick timeros, wall street journal. Chairman powell, did you consider a rate cut today . Specifically, would was it one of the policy options in the teal book . And is the committee considering moving, given the uncertainty you addressed, changing its policy before the next meeting so the committee had our usual long discussion of global and domestic economic and financial conditions and then spent this morning talking about Monetary Policy. And came to the view that i expressed to you which is that we are going to be monitoring the cross currents and the other items that we have mentioned. But that we would like to see more Going Forward particularly wed like to see whether these risks continue to weigh on the outlook so generally, as i mentioned, many on the committee do see a strengthened case. Eight of those strengthen case for cutting rates. Eight wrote down rate cuts a number of others see that the case is strengthened but the committee wanted to see more, as i mentioned, and i also mentioned that some of these developments have been of quite recent vintage and so we do expect that well be learning a lot more on all of these issues in the near term. And thats our focus and do you think something could change before the next meeting . Im sure that things will change before the next meeting i expect a full range of data and information on all of these issues that we are looking at. I think well learn a great deal more about them. And i think thats we think that thats the right way to move here. Again, many of these developments happen, you know, part of the way through the last meeting period only seven weeks ago, we had a great jobs report, and came out of the last fomc meeting feeling that the economy and our policy was in a good place. So we want to see we want to see and react to developments and trends that are sustained, that are genuine, and not react just to data points or just to changes in sentiment, which can volatile at the same time, we are quite mindful of the risks to the outlook, and are prepared to move and use our tools as needed to sustain the expansion mr. Chairman, steve liesman, cnbc could you walk us through your thinking about trade was really the threat of tariffs against mexico that caused at least the market to become definitively bank pricing in rate cuts. If, for example, theres a deal with china, does that take the possibility of rate cuts off the table . Yeah, so i would say that were not looking at any one thing. I guess i would start by agreeing with your premise that news about trade has been an important driver of sentiment in the intermediating period. But were also looking at Global Growth its really trade developments and concerns about Global Growth that are on our minds. So were not exclusively focused on one event or one piece of data risks seem to have grown in the meantime, we have incoming data in the United States thats been pretty good particularly for the consumer. Consumer spending is solid, supported by healthy job market, high levels of employment, wages going up we do see, though, some areas that were looking at, such as i mentioned, business fixed income so also the prolonged shortfall in inflation and perhaps job growth we dont like to look at one job report we like to average over three or six months but still, that bears watching so well be monitoring the implications of all of those developments for the u. S. Economic outlook we expect to learn a good deal more, as i mentioned and well be asking the question whether those risks are going to continue to weigh on the outlook and use tools as appropriate to sustain this long expansion. Hi. Heather long from the washington post. Could you clarify what you would do if the president tweets or calls you to say he would like to demote you as fed chair i think the law is clear. That i have a fouryear term and i fully intend to serve it hi, chair powell. I was im from the new york times. I was hoping you could clarify for us how youre thinking about the risks of waiting too long to cut rates versus the risks of cutting rates prematurely. Sort of what the balance of risks are, and how you talk about that right so were always trying to balance that risk. But i would say that given the quite recent nature of some of the events, i think the the committee felt that the right thing to do was to wait and see more and we will see a lot more on all of these issues in the very nearterm. So i dont think the risk of waiting too long is prominent right now. I would say as a general matter, its always something that we have to weigh. But i think we believe that the right thing here is to watch carefully in the nearterm and see how these risks unfold and see whether they continue to weigh on the outlook [ inaudible question ]. Obviously, we try to avoid going prematurely, as well in this case, you know, theres always some judgment in these things but i would just say that the risks that we see having emerged are risks that have gotten our attention, and that have called a number of us to write down rate cuts and a number of those who havent to see that the case has strengthened marty kruts inger with the ap you had your first dissent in your time as chairman. Does that give us a sense that there was debate among a group that was pushing for a rate cut this time . And how do you do you expect further dissents Going Forward let me say the same thing as i said last time before there had been a dissent and i think that i think the process of careful, thoughtful dissent is very healthy, and ive always believed that, and i feel like you make better decisions when you hear disparity of views so i really do look at it that way. I would add, though, that the support for the path we took for the policy statement that we adopted was quite broad. James polidi with the financial times. Mario draghi yesterday sent a strong signal of new stimulus for the eurozone do you think that such actions to ease policy at other Central Banks around the world will put more pressure on the fed to do the same well, first i think all Central Banks are focused on their domestic their mandates are domestic and theyre focused on Economic Conditions from a domestic standpoint. And that goes for the European Central bank, the fed, all Central Banks. Thats our principle focus so it could cut either way i would think that to the extent you see stronger financial conditions and stronger activity in the ecb after a rate cut, that would support tend to support activity so were really focused on, you know, the risks to our on the baseline outlook, which is still a pretty favorable one, and the risks to those outlooks. Thats our principle focus this is the first time that youve been really issuing steps in the era when rates are going down two related questions. Is there concern that youll be causing a sort of dot deflation by telling people, well, dont buy your car now, because it will get cheaper in six months because were cutting rates. And that that could sort of fulfill itself and secondly, on inflation, that was a pretty big drop in expected pce yet, you know, without reacting to it, are you not sort of undermining your own credibility in terms of commitment to the 2 target ill take the inflation one first. I didnt quite follow your dot question well, the fact that expected inflation went from 1. 8 to 1. 5, the fact that youre not responding to thats the inflation question. Yes. Im saying you on no, the fact that youve signaled rate cuts are coming, was there any concern on the committee that this would tell consumers, tell people, dont borrow now, dont spend now, because rates will get cheaper later. All right okay so let me answer the inflation question first so were saying that we i noted in the statement and also in my what i said here. We saw that marketbased measures of Inflation Expectations, breakevens, dropped. We noted that in the statement and i noted it as a reason for us to one of several reasons why it feels to us that the case for more accommodation has strengthened so we find that notable. Not only that, the actual forecast for inflation for this year among fomc participants dropped a couple of tenths so that means a prolonged shortfall of inflation let me say on inflation, its its something ive been concerned about for quite a long time its one of the principle reasons why i called for the review in a world where policy rates are going to be closer to the effective lower bound than just as a general matter, we need to be really strong on 2 inflation. So i think, you know, we certainly dont want to be seen as weak on inflation and i dont believe we are in terms of the dots, youre right. This is the first time i believe weve had weve talked about cutting in the dot era i guess the dot era began in january of 2012. And were working our way through it and i think its just something we do. My view on the dots is they overall provide useful information for people but that we need to do our absolute best to explain what they are and what they are not speaking of which, they are not a forecast of the group. Theyre not discussed or debated at the meeting theyre an input to policy more than an output of policy and theyre also only the most likely case. So in a situation where theres relatively high uncertainty, theres the most likely case, but the secondmost likely case might only be a little less likely but that doesnt show up in the dot. The dot is either one thing or its another so i just would say that if you pay too close attention to the dots, then you may lose sight of the larger picture chris thank you chris condon, Bloomberg News mr. Chairman, if and when the committee decides to cut rates, i suspect there will be a debate whether to move to 25 or 50 basis points indeed, there is a substantial body of academic literature arguing that a central bank ought to act sooner and more aggressively than it otherwise would. Wondering what you think of that prescription, and if you could spend a couple of minutes discussing the pros and cons of a 50basis point cut and how you approach that question. On the specific question of that, thats just something we havent really engaged with yet. And it will depend very heavily on incoming data and the evolvingyes, but it involves the risk picture as we move forward, so nothing i can say about that is specific to the nearterm question we face more generally, though, the research you refer to essential notes that in a world where you are closer to the effective lower bound, its why research kind of shows this, its wise to react, for example, to prevent a weakening from turning into a prolonged weakening. In other words, sort of an ounce of prevention is worth a pound of cure. Thats a valid way to think about policy in this era i dont know and its always in the i think its in the minds of policymakers, you know, during this era, because its well understood to be correct. Again, i dont know what that means in terms of the size of a particular rate cut Going Forward. That will depend heavily on the actual data and evolving risk picture. Reporter donna borak with cnn, thanks, chairman powell Elizabeth Warren has provided a proposal to revalue the u. S. Dollar in order to address concerns about rising trade deficits the president himself has routinely complained about the strength of the u. S. Dollar, saying it resulted in tread competent it i have advantage with places like china and others do you think an would you support an intervention of some kind on this issue the u. S. Treasury has responsibility for Exchange Rate policy, not the fed. We dont comment in that sense on the level of the dollar we have a responsibility for maximum employment and stable prices we use our tools to achieve that of course, we do that think changing financial conditions, one of those is the dollar, but we dont target the dollar its just not something we do. In for a cant, Central Banks or nations when they get together develop a communication that says we will target our and not other Exchange Rate, and that includes the United States, that includes the g20 communique we adopted ten days ago. So im not the right person to ask about that sort of dollar policy innovation. Paul chironen from if the most likely case is you will have to cut rates in the next 18 months, and given some of the concerns about policy needing to react sooner, what would have been the down side to cutting rates now . Why not just cut them now . So why not now . And on i would say there was not much support for cutting rates now at this meeting. There was, as you see, a number of people wrote down rate cuts, but all of those but apparently one felt that it would be better to see more before moving. I gave a couple reasons why that is the case. First, its just the fact that some of these developments are so recent that we want to see whether theyll sustain. So we felt it would be better to get a clearer pictures of things, and that we would in fact learn a lot about these developments ultimately the question well be asking ourselves is are these risks going to continue to weigh on the outlook, and we will act as needed, including promptly, if thats appropriate, and use our tools to sustain the expansion. Reporter thank you for doing this, chairman Edward Lawrence from Fox Business Network how do you req size the conflicting Economic Data . On the one hand strong overall growth, Consumer Spending is strong on the other hand, manufacturing numbers were a bit weaker, you have growth in jobs, but coming in a bit weaker, and lower inflation. Data railroad looking at that you decided not to have a rate cut. You gave a pretty good picture. The answer is we look at all of it but i would say the big pieces are this the baseline outlook has been a good one, that has basically been Consumer Spending coming back up in the Second Quarter. That is coming true. And Consumer Spending is at a healthy level. That makes sense you have a tight labor market. You have companies in surveys say labor is scarce. You have workers in surveying saying jobs are plentiful. So all of that underlying fundamentals for the consumer, spending prisoner of war of the company, which is 70 of the economy, is quite solid. Job creation, if you take a threemonth average, is still well above the level of entry into the workforce that part of the economy is solid. You mention manufacturing, and were seeing this all around the world. Manufacturing investment and trade have been weaker its not solely a domestic issue, and it may be that there are a range of factors contributing to that, including, for example, what china has done the last couple years in working to bring down its leverage some of it may be uncertainty over your supply chains due to trade developments the boeinging 737 issues may be contributing in their own way. Lower oil prices lead to lower investment, but also lead to lower oil costs, which leads to more spend so its something were watching you do see growth in services, so this pattern around the world of weak manufacturing, but growth in the far larger part of the services economy, which has led to low unemployment, good rising wages, that is the two big pieces you this you see the crosscurrents on top of that, concern about Global Growth and trade developments, you have the full picture i think what we took away from that picture is that wed like to see more that we do michael key, Bloomberg Television and radio if Consumer Spending is solid, and Business Investment has been slowed by uncertainty i would like your thinking about what a fed rate cut would do. Have you model, what you might get from a rate cut. Can you identify any sectors that would benefit from a lower cost of capital . Or is this really about the fed being the only game in town . Well, we have the tools we have, and were committed and sworn to use them to support Economic Activity. They do spout through a number of channels, some more directly tied to Interest Rates than others, but we do generally believe our Interest Rates policy can support demand and support Business Investment as well so well use those tools and use them as we see as appropriate to achieve our objectives, which really are to sustain this expansion. I would just make a note of that, the reason why we say sustain the expansion, youre seeing now for the first time, you know, communities being brought into the benefits of this. Youre ten years deep into this, and thats why a loot we heard at the conference in chicago. Its one of the reasons why we think its so important to sustain the expanse, keep it going, we are benefiting groups that havent seen this prosperity in a long time. Do you think fed policy can solve those problems we take the crosscurrents as a given. We have our tools its worthy of our attention, and thats just how we look at it. Hi, victoria guaido, politico you say the fed doesnt and youve defended the feds independence is there a point at which you think that publicly or privately you should push back on the president s criticisms rather than ignores him due think you and the president have the same goals . I dont discuss elected officials publicly or privately really i would say that at the fed we are deeply committed to carrying out our mission, and also that our independence from direct political control we see as an important that has served it is country well. Chairman powell, are you concerned that new different acurrencies like libra, that was unveiled this week, would erode your power to influence and did anybody at facebook talked to anyone at the fed before libra was unveil so on your on specific question