Transcripts For FBC Cavuto Coast To Coast 20240714

In the United States, are expected them to cut rate another quarter point, dropping the ball on all of this and president declaring not even two weeks ago that hes an enemy, reminder how easy it is to make friends in the city, dow 75 points, lets get the latest first on the trade front on whats going on there and growing talk that at least the talks are back on and so far no one is throwing dagerds. No one is throwing at each other, the jobs are fundamentally strong, 130,000 jobs in august, 3. 3 over the past months, the white house economic adviser say it doesnt really matter that the jobs missed the estimate because the Labor Force Participation edged up. The people on the fringes of this come are coming in and getting jobs, if you peel back some of the numbers, consumer is still spending and thats in construction 14,000 jobs in construction, half in Residential Home construction, people buying homes, consumers are buying, the other half divided among specialty trade construction and nonresidential building, the Manufacturing Sector still growing, adding 3,000 jobs in august, that makes an average of 6,000 jobs per month this year compared to 22,000 jobs per month last year, still, the job reports fits in with the Federal Reserve and the theory, the thinking in the market that there will be rate cut coming up. Federal reserve chairman Jarome Powell speaking at Swiss National Bank Conference and wages are growing and will see its not enough to put the inflation pressures on there and thats one of the things Federal Reserve members are looking at is the inflation number going to reach 2 target or not, does not look like this jobs report has that inflation pressures in it which it would be more likely the Federal Reserve would have rate cut in september, neil. Neil half point that traders want, we shall see. Chief investment strategist, listen, let me ask you first on the prospect of the cut, its not a matter of whether, but how much, right, and most seem to be coalescing around the quarter point cut level, are you . Yeah, you know, the market has certainly has that as an expectation, theres some mild expectation that it could be 50, im not sure the jobs number moved the needle significantly, we have been in 25basis point camp and the data that we have seen recently doesnt move us out of there. They will continue to cut rates in subsequent meetings but for its the best bet. Neil we do know that the Labor Participation rate is improving, all good, we also know that job growth has slowed from the pace it did last year, 150,000, not bad on monthly basis, whats your sense about where we are going now . Well, payroll growth has slowed, its not just what you reflected on the numbers but lost a little bit in the trade news was about a few weeks ago the labor statistics of benchmark revision to payrolls for year ending in march of 2019 and instead 2 and a half million jobs created during that period it was down to 2 million jobs, that was a 20 haircut, thats preliminary, we will get the final data next february, that meant that for that span of time instead of 210,000 a month we were at 168 a month, so the bottom line, though, is that the payroll gains are still sufficient to keep the Unemployment Rate from rising but unquestionably we have seen a slowdown, the thing to watch is the leading indicater of initial unemployment claims which are 50 to 60 year lows, whats important to watch, claims in area that are most by trade war, more manufacturingoriented, manufacturing is 20 of the u. S. Economy, theres a reason why manufacturing data is embedded of indexes of leading indicators, what happens in manufacturing does lead, right now we have a firm dividing line between weak manufacturing and stronger consumer, thats what to watch, to see if theres any breaking of that that right now pretty firm dividing line between the two sectors of the economy. Neil real quick, the president and view of trade talks, he said that the chinese need this deal more than we do and our economy is going gang buster and theirs not so much, thats preface to this, what do you think . Well, our economy has been weakening, chinas economy has been weakening, certainly in the case of china demographics being primary among them, i dont know this is not somebody win or somebody loses, weve had a fairly pessimistic view about the impact of trade on any any economy thats involved in kind of a tariffs dispute here and im not sure its sort of one winner or one loser, its negligent i have negative for both economies, in the near term it still very low likelihood. Neil does look that way, thank you, good seeing you, have a good weekend. Thanks, neil. Neil once they do formally sit down blake berman at the white house, a couple of very special guests are going to update the president on that very matter. Yeah, neil, small signs today that the trade war is still very much ongoing, maybe somewhat at least for the time being, here is what chinese sources have told fox business, that the phone call earlier this week involving Robert Lighthizer and top colleagues greenlit the way for deputy level talks later this month to work on the following potential compromises and i stress potential, china making ag purchases along with reducing joint ventures and increasingly whollyforeignowned enterprises which would alter how ip theft is handled in china, while the u. S. Would dlait tariff increases on 250,000 in goods which are set to rise at 5 , the u. S. Could rise currency manipulation that has been recently placed on china, according to chinese sources, u. S. Officials have not being willing to weigh in the details, talking to stuart varney, larry kudlow said the highlevel discussions likely to take place in early october, specific date has yet to be nailed down, cuddly said that all the big sticking points that have the negotiations. The ip theft, the forced transfer of technology, the cyberspace, the clouds, financial services, all that will be on the table. Meantime in china today, central bank amount of reserves, thats freeing up 900 billion yuan or 125 billion in liquidity inside that country, so move today from china, neil. Neil blake berman at the white house, thank you very much. We have been telling you about protests resuming in hong kong as we speak, a little after midnight in hong kong right now and protesters even though the chinese caved on the issue of extradition order demanding that that be stopped and that they thought protests would stop, they have not, host of other demands, i want to raise one right now with former ambassador to china, ambassador, you had last time we chatted talked about this is definitely an issue but the president at the time wasnt making it a huge issue, the chinese feel that he wont make it a big issue, i think you echoed the same recently in cnbc interview, is it your view thats separate something from whatever we do on trade . I do. And i do think that we are getting beginning of some resolution in hong kong. It was pretty clever by lam to try to separate more peaceful protestors from the militant protestors by removing the extradition treaty, that was what started everything. The hunch that more peaceful protestors are going to say, okay, we are not happy, thats enough, thats a start. Nevertheless its clear to me that china existential that hong kong be handled in a peaceful way, thats more important than anything else because that threatens legitimacy of the party and the party cannot tolerate any successful question of legitimacy. Neil you know we are coming on october 1st, 70th an anniversary, you do think china will not keep dragging through that period, the question is how do they respond, what do you think . Well, certainly during october 1st, big demonstration thats in hong kong. The chinese will do anything to prevent it. China cannot afford that. We will have neil why are you so sure of that . A lot of people looked at this, i hope youre right, fear that china at its core military power and will not suffer this much longer. Because there are other tools, other mechanisms, you dont need to send pla, it will not. Neil security force, sorry. Pla is their army, pla is their army, the security forces, Police Forces in hong kong can be strengthened too to stop a lot of protestors. The difficulty here there are no leaders, this is water flowing, if protestors are all on their cell phones talking to one another, maybe today we will try to shut down the airport, next day we will try to shut down the government buildings, it is no real reason, thats one big problem that china is facing, theyll find a way, theyre tough, they are really tough, they care so much about this and they will find a way. Neil finally, ambassador, Rating Service has downgraded hong kong debt just a notch, but enough to send the remind tore china, i guess, if it needed it that this is now impacting in an area that you like making money and that might do the trick, what do you think of that . Well, its all more reason why i think the tycoons in hong kong are going to step up a little more. They are fairly responsible for some of the problems because over time in handover, china has had control over hong kong, the chief executive have some control and tycoons have some controls, there are things they can do, lets together find a way to stop this thing, tycoons can do more. Neil ambassador, pleasure having you, of course, referring to lam, the Regional Authority there, the sort of chinese defacto ruler, more administrative person running things in hong kong, again, that debt downgrade today was only by a single notch, its still considered pristine in global sense but it is a reminder here this has added financial uncertainty to the region and that my friends is probably an understatement, we will have more afteriv this. I would tell them, you need to join usaa because they have better rates, and better service. Were the gomez family. Were the rivera family. Were the kirby family, and we are usaa members for life. Get your Auto Insurance quote today. 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Weaker than expected employment report for the month of august, 30,000 jobs added to the economy, they were expecting about 20,000 more than that, the 3. 7 Unemployment Rate remains the same, but the trend has been going down a little bit, still up but might give wiggle room to the Federal Reserve or justification for continuing cuts that were going to happen whether that number was strong or weak, speaking of which Jarome Powell addressing regional bankers for the european community, chairman its going to be handling the q a, we will go to that as soon as it begins, we figure even though it could last a while he is the most consequential financial figure of the planet even though deemed by the white house as enemy of the state, we will follow that, this is the first time we will hear from mr. Powell since big world conference on Federal Reserve which he said there are no recent precedents to guide policy response to currency situation, his way of saying, i dont know, we are following that very, very closely, also following the government now taking action against those automakers probing exactly why they made con decisions to california while not necessarily honoring federal standards, trying to keep that mark, over litigation, nonetheless the Justice Department is rounding the wagon, so to peak, grady has the latest on that hey, grady. Hey, neil, the big question in this probe by the department of justice is whether those automakers are limiting competition and thereby limiting because of agreement they struck with california, basically four automakers, ford, honda, bmw and volkswagen, tougher emission standards, cars will be more fuel efficient where the president we wanted to roll back obamaera admission standards and thats frustrated him for a while now because california has a lot of authority in terms of emissions and what other states, do there are about other state that is fall in line with whatever decision that california makes so they have a lot of authority beyond just the state of california in terms of emission standards, so the president separate from the probe is trying to prevent california from being able to do this, right now they have a legal waiver that allows them to set their own standard, the president is looking into ways to undo that and take away that authority from them, this is going to be a long protracted legal battle because of all the moving parts and this new latest antitrust investigation by the department of justice, just another wrinkle in that, itll be going on for some time. Neil all right, grady, thank you very much, what the administration is concerned is what happened out west doesnt stay out west considered what seattle wants to do when it comes to natural gas, ban it altogether because of fossil fuels and dirty fossil fuels, even though its pretty clean, i dont care view, but many concerned whats going on out there could spread elsewhere and people will be compromising our Energy Independence, phil flynn insiding all of that, what do you think of this, phil . I think its crazy, absolutely crazy, neil, here you have the only fiel in the entire world that is responsible for reducing greenhouse emissions and cities like seattle, four other cities in california that are trying to ban it, you have to think, neil, you have to get rid of dish washing machines, dryers, okay, whats going to power this . You will replace with electric, electric appliances, whats going to power the electric appliances, think about it, all right, neil, you will use more electricity, you will have to generate the electricity from something, maybe theyll come out of the air, maybe come from Renewable Fuels but the bottom line is itll probably be natural gas because natural gas is the most affordable fuel out there right now, so this is just crazy, i think its a strategic wonder for the cities, its going make the cities less livable, its going to make utility bills go through the roof and at the end of the day its going to cause businesses to leave because natural gas is one to have major Power Sources for manufacturers, so, if you cant get natural gas you go to a different city. Neil think about it, say what you will on some of the other fossil fuels that are dirty, lets say coal comes to mind, i wouldnt apply that to natural gas. I dont know whether id give him stake for execution, but you have other bigger targets and i think it comes at a time when we finally got our energy independent, one thing it was coming out of cost for clean usa but actually improving it. Wherever peoples politics are, im looking at the facts and this one seems to be unfair target. Its a totally unfair target, in fact, i think the Energy Industry should get kudos for reducing greenhouse emissions. The u. S. Energy industry is serious about it and they are trying to do in a way where it wont cause us jobs, when i hear democratic debates, bernie sanders, i want to ban fracking, elizabeth warren, we have to get rid of natural gas, its like what do they want to replace it with, they dont give you a clear answer, Renewable Fuels, windmills, wind, solar, what do you think it takes to build that kind of stuff . Steel, youre not going to build steel without natural gas, ive never seen a steel plant in my life have solar panel to create steel, neil, not yet. If you can build that, im on board with that, until that happens, forget about it. Neil yeah, the all in on all types of energy but the picking and choosing as we have established as Energy Independence awkward timing, we will watch it closely, my friend, thank you very much. I dont know if this matter will come up when Jarome Powell or Federal Reserve chairman is questioned by largely a lot of european bank, a lot of american bankers are there but hes speaking at this conference thats host bid the Swiss National bank, the swiss, by the way, have arguably the lowest, actually the most negative rates on the planet, even more than germany, in other words, they pay, you know, you the money when you owe and then you pay them which is awkward to put it mildly, anyway, Jarome Powell will be feeling questions from them that might include prospects of interest cuts in the United States but also the proposal of little more than an hour ago where Federal Reserve is demanding Insurance Companies, take a look at how much capital they have on hand just in case, raised some eyebrows, interesting timing as we worry about meltdown, no big deal, lets move on, but he tends to answer reporters questions and tends to be clear even though the president of the United States said hes an enemy of the country. More after this. Neil controversial financial figure on the planet and quite literally the world is waiting to hear from Jarome Powell, chairman of the Federal Reserve, 2 more than 2 weeks ago declared enemy of the state by the president of the United States, hes talking to an audience set up by swiss bank, tomas with questions and handled through him and this is timely as they get, report good but not as good as people were expecting and growing sentiment that in a world of declining rates, in the room where everybody is gathering, the lowest on the planet, thats in switzerland where negative Interest Rates are the most negative they are in all of europe and all of the world and Alan Greenspan said a couple of weeks ago, they think we are on that path to negative Interest Rates, we are there, in the meantime we have former dallas fed adviser, we have the daily caller Chris Bedford but certainly not least my buddy charlie gasparino, maybe you can help me with this, daniel, this pressure the Federal Reserve is under to cut rates, keep cutting them by the president s tune a lot more than you have been, mr. Powell, what do you think . Well, look, i think the president wants him to kick it into high gear because he does sees like country like switzerland their money makes money when they sell a bond, can you imagine people inside the beltway would be if the u. S. Government would make money on treasuries, i mean, wow, we could spend like forever, no limits at all, those are the kinds of statements that really frighten me, though, and for me its going to be more interesting, i wish it would be a fly of the wall for the rest of the weekend because powell is staying in switzerland and see how he truly feels about negative Interest Rates because past comments prior to becoming fed chair suggests he really does not like the idea of negative Interest Rates, ill be curious to see if anybody up on stage asks him about that, neil. Neil i have a feeling they will and Chris Bedford, i do know he will be talked about his relationship with the president who has called him an enemy with his nonstimulus policy, this idea that, look, the president doesnt like the guy, regrets hiring the guy, made it clear he wouldnt hire the guy, we wanted to fire the guy, hes trying to be, you know, apart from that dismiss that and not talk about, its going to come up today. [laughter] but if youre working for President Trump on Federal Reserve and Federal Reserve or on trade you dont get the luck, these are issues that the president has focused on for decades and decades, had a voice, deeply [laughter] you know, im sure he mentioned the world trade came out of his mouth, donald trump the real estate stuff. I dont remember about trade policy. [inaudible conversations] [laughter] thank you, thank you very much. Let me ask you, criticism that the Federal Reserve is sort of got, you know, gotten behind the curve and thats something that has to be addressed and some members in Federal Reserve that are urging more aggressive action, you should look at half point but we are not so weak to need that, i always get worried that we are following europe and as i said many times on this show, thats like using me as a guide on physical fitness, i would not imitate myself in that regard. I wonder youre so right, by the way, the fed was behind on the softening of the economy but the softening economy came because of Donald Trumps trade policy and thats whats causing the employment number which wasnt great to be what it is. I think youre the most consequential financial man in the world and not Jarome Powell. Neil youre right about that. [laughter] neil all kidding aside, the money shot will be when Jarome Powell gets to the microphone and start filling questions, im not sure where the exact structure of the event, they get a lot of quick things out of the way and then its time for the star of the moment, the chairman of the Federal Reserve to be peppered with questions, so that is what we are waiting for, but daniel, im sure the question will come up how low do you go, right, and no fed chairman or chairwoman will ever answer that, at least black and white but im going to ask you, how dlow you think rates have to go in this country . Trade war is taking great toll, serious ratcheting back in manufacturing hires, good chunk of july were revisions in manufacturing, so if the economy is turning the corner, weve had 5 back to back months of downward revisions to these job numbers, if we are slowing down and job growth at the slowest pace of the entire last decade of expansion, then the fed will be discussing and already is discussing, i can assure you, what to do after rates get back to zero. Neil can the fed do much more . Charlie one thing where banks need liquidity, at this point thats not really the case, economic slowdown that i dont know if lower Interest Rates can reverse the negative effects of a trade war. The numbers just sometimes dont add up. I mean, i cant tell you if they will or they wont, you know, you know when the fed can lower Interest Rates and it helps, helps generally when banks have liquidity problems, we need them to lend, we are not at that point, this is weird, lower Interest Rates are going to necessarily make the trade war, really . Neil thats a good point, daniel, could i ask you about that, status of Financial Companies and all that, the fed is required a lot of Insurance Companies maybe to address capital reserves, in other words, have more money on hand i guess just in case, what did you make of that, almost got no attention, maybe itll come up in this event. What do you think . These are 10 huge Insurance Companies and you have to bear in mind but low Interest Rate policy is the insurers that are trying to make safe returns so that they can pay obligations when they arise which is the nature of Insurance Company and while theyre on their knees the fed is going to require them to keep more capital on hand, i understand the sound and safety argument and that we need to have strength in our Financial System and its infrastructure but by the same tone while the fed is lowering Interest Rates its asking companies that its hurt to go keep more capital on hand two policies go against one another. Neil youre right about that and i want to make sure, Chris Bedford, i want to raise this with you, what what was the problem during the meltdown is that a lot of the financial insurance, you name it, capital is just melt get away at the corner, their reserves were going away, they didnt have enough on hand, that was the argument, boost their reserves, would at least cushion them in event of future crisis but you have another meltdown, you can have trillions on hand, but chris, on political impact here, but we have to be cognizant of the environment and the world we live, the president doesnt want to see this economy slowing down to the degree that he fears it might, if the Federal Reserve doing more to boost it. He turned his back on on looking at another tax cut because says the economy is strong enough, doesnt need it, hes eager to see rates go down, to provide the same stimulus, what do you think of the political box hes in and might my extension putting Jarome Powell in . Might make more sense. Nancy pelosi certainly isnt interested in that, not Corporate Tax rate and i can tell you neil hes talking about a payroll tax rate that would benefit everybody, but i agree with you, its just not happening. Its not, if they can lower Interest Rates, i know folks like me that can be paying less on house loans. Neil how much less . That would juice the incomes to have local bars in our neighborhood. Mortgage rates, Mortgage Rates are low already, you dont get much bang for a buck on lower fed b fed bonds anymore. Marginally higher and a lot of this has to do with trade, i mean, i think if donald trump wants gdp to grow, stock market to keep going, he has to do something on trade, whether its like nothing but, you know, declare victory and nothing happens but this war has to end. Well, you know, good point, charlie, we are in this pickle where we are reporting onus on the Federal Reserve precisely of the president s policies, we are hearing at survey of corporate ceos who scaled back hiring plans because they are uncertain, they dont know whats going to happen, thats the president s doing, might work out for him but thats the environment that he created that he wants the Federal Reserve to help him out, right . He does, the problem is that the feds got one hammer and everything is not a nail and they can only do so much to address what is ailing companies, we have fresh layoff figures come out yesterday and for the first time weve had over 10,000 jobs in one month attributable specifically to trade war, the Federal Reserve cant do squat to address that, they really cant, thats not what their policy is for, do i want to go back to the idea of supporting the local watering holes in the country, push back against what charley set, refinancing activity is up 150 , so households are clearly, clearly saying to the fed that if you keep lowering my mortgage rate, im going to keep that going keep taking money out of my house. Gdp is going down because youre pushing on a string at some point, listen, im all for low Interest Rates, im telling you theres so much the fed can do. Among the more absurd that donald trump has said in presidency, the chairman of the fed being the enemy of the people, really . Is this like any ridiculous. Neil i certainly wouldnt bite the hand that is financially feeding you. One of the thing i looked at, chris, for those joining us, thomas jordan, the head of the Swiss National event hosting the event that will feature Jarome Powell, jerome of the Federal Reserve and global uncertainty, do you think that the fed will save the day, thats what the pressure is on for Jarome Powell now, to save the day. Certainly not going to be able to to reverse the president s trade policy like pushed by new york chair and save neil to support a president s policies . I dont think that wall street should hold breaths of things returning before china trade. Whether its President Trump and china neil we are listening, they started speaking here, Jarome Powell is going to be speaking. Lets listen in a little bit and see if they are. Okay, lets start with relaxing question, whats your relationship with switzerland, how do you perceive our country to write, do you visit it, do you do sports, hiking, swimming, the people are curious . Thats a lot of questions, i could take a full hour on that. First of all, martin, thank you, thank you very much for your kind remarks and thanks to everyone for your warm welcome, i really appreciate it. So switzerland is a place where central bankers come on a regular basis and place where we meet with each other internationally, we share candid views and as equals person to person we develop close personal relationships with other central bankers around the world, so its absolutely essential in this globalized world that we live in that we have strong multilateral relationships like that and they really come together importantly here in switzerland. In addition, of course, i came to switzerland many, many times on vacation with my wife and long time ago as well, talking earlier 44 years ago was my first trip to switzerland and we did not climb, i know it to be a beautiful, welcoming place and friendly place and and a nation with which we feel strong kinship always. Yes, there was that too. [laughter] you started your career as lawyer and later moved to investment banking, what prompted you to join the Federal Reserve and monetary theory . So im i have had a veriyed career, i was briefly an attorney, after that i was investment banker for some years and then private Equity Investor for a large part of my career, but ive also periodically left the private sector to do Public Service and thats something that more typical of the american system and i think of many other systems and i think theres a great benefit to it, i think that private sector work can really inform your your role as Public Servant and vice versa, i feel very fortunate to have had that. I got involved inned in in the debt ceiling and i was appointed by then president obama and then President Trump appointed me to chair in 2018. Did you ever regret to make the step to [laughter] Public Sector . Never, never, absolutely never. It is a great honor to serve and particular to serve at the Federal Reserve which, of course, is committed to nonpolitical decisionmaking based on the best analysis that we can muster, its a great place that has a very strong ethic and very high morale among our people, really because of that commitment to nonpolitical Public Service. Very important. No question about that. So lets go little bit more into the details of our discussion of tonight, Global Economy has lost momentum and it is set to grow at slower pace this year than 2018, what do you think maybe cause of this slowdown . Also question for thomas . I shall start . Please. With your permission, martin, i will start by pointing out that the United States economy has continue today perform well and is in a good place, in fact, we are well into the 11th year of this expansion which began back in second half of 2009, its now the longest such expansion since we began keeping Global Records and the outlet, the most likely outlet for our economy remains a favorable one with moderate growth, strong labor market and inflation back close to 2 goal, all that said, there are significant risks and weve been monitoring those including as you mentioned slowing global growth, uncertainty around trade policy and also persistently low inflation. I will make quick comments on that, i think we grew at 2 and a half percent in the first half of the year, for the year 2 to 2 and a half percent. Consumer has been strong, the manufacturing trade and Business Investment side has been weaker and is in fact, sideways to slightly down, its a smaller part of the economy and by the way, that pattern of a strong consumer economy and weaker manufacturing investment and trade economy is fairly common now around the world, meanwhile our labor market is in quite strong position, for year and a half we have been at half century lows in unemployment, higher Labor Force Participation, wages moving up by so many measures, i think today labors Market Report is very much consistent with that story and weve got inflation moving back up to 2 , overall we are in god place and the outlook as good as well, part of the reason the outlook is as good the fed has through the course of the year seen fit to lower the expected Interest Rates that has supported the economy, thats one of the reasons why the outlook is still a favorable despite cross roads we have been facing, you asked about the global growth, its been slowing since middle of 2018, we see that continuing with china and eu and many factors that are driving that trade policy uncertainty, its one of them, but its not the only one, but trade policy uncertainty will be weighing on Business Investment decisions and that sort of thing, so still, though, just wrap up by saying we see the most likely case for the u. S. And for the world too as as continued moderate growth and we are going to as we move forward continue to watch all of the factors and all of the geopolitical things that are Going Forward for expansion. Very much, let me say a few words about switzerland, we are small open economy, very open and biggest market is europe, but United States became much bigger market for our export in the last couple of years, so very important what is going on in the United States for us, so we are observing the situation and seeing that the Global Economy is slowing down, not much in u. S. , so we see swiss economy is still growing but the pace of growth is little slower than it used to be and we have to that i can take that into consideration, conditions are appropriate, next economic situations, of course, inflation, inflation is very low, its also low in switzerland and lower than it used to be in the past, so this is something that comes that youre observing at this moment in the Global Economy. But, of course, impacting a lot, these are the three regional parts that have big impact on the swiss economy. Uncertainty, for example, the uncertainty related to trade policy and brexit negotiations be playing a role in global role . I think they are. I think that is the case, weve been hearing from our we have vast array of contacts within the u. S. Economy as you would imagine and we talked on cycle on which there are 8 every year, reserve banks go out and we have been hearing quote a bit of uncertainty, for businesses particularly to make longerterm investments in plant or equipment or software, they want some certainty that demand will be there, they want certainty that theyll be growth and supply chain is secure and i think we would never comment on trade policy, we dont do trade, not responsibility of the fed but i think the case that uncertainty around trade policy is causing some companies to hold back now on investment and so our obligation is to use our tools to support the economy and thats what we will be continue to do. Recession fears, u. S. Recession, given all the talk in the media, particular talk that could trigger . We are not forecasting or expecting recession. Most likely outcome outlook for the United States economy is still moderate growth, strong labor market and inflation continuing to move back up. I went through the numbers, i will say a little more about the labor market, payroll jobs are coming in at well above the levels that new people are entering the labor market and that means that the labor market is still still tightening at the margin by so many measures the labor market continues to strengthen, the consume certify in good shape and really theres our main expectation is not at all that theyll be a recession. I did mention, though, that there are the risks and we are monitoring them very carefully and conducting policy in a way that will address them but no, i wouldnt see a recession as the most likely outcome for the United States or for the World Economy for that matter. Right. Thomas. Base scenario is not one of a recession neither for Global Economy or swiss economy. I have to say that Monetary Policy meeting again and in 10 days you will have a new base scenario, new noar cast, forecast, let me come back to trade issue, i think its a very important one, functioning of global trade is key, we depend on functioning Global Economy, its possible to trade import and export, uncertainty at the moment in Global Economy is having rather negative impact and not only the trade but those at brexit discussion creating a lot of uncertainty, consumers and also investors are unsure whether they should buy, invest or do anything, so, of course, this creates uncertainty and has rather made impact at this point. So from point of view of small open economy, i think its wish to everybody in the world also to contribute to, i think, reasonable solution for the trade disputes. Additional question, having a look at europe, european union, do you think or do we have to see problems we are in the middle of europe, we are not part of the european union, but economic integration is great for european union, exports and import are big, we export a lot but we also import a lot and mutual interest to adhere seasonal Economic Conditions and, of course, every time european economy is not growing, that has big impact on us, so if germany, france, italy have lowgrowth situation or a recession, has big impact on us as well. We have big interest in a functioning, wellfunctioning and growing economy in europe. Absolutely. Now, challenges facing Monetary Policy, the Federal Reserve, powell conducting review of Monetary Policy strategy tools and communication practices, what prompted you to conduct review . Yes, so the challenge is that Central Banks face of all over time and sometimes they rise to the level where we need to assess policy framework needs to be update today deal with different challenges, the god examples of that is after great inflation of late 60s and 70s, Central Banks really didnt do a good job of getting control of inflation but coming out of that came a new commitment to getting control over inflation which was successful and and the framework of whats called inflation targeting and i think weve had a number of decades now of where inflation has been under control and actually other economic outcomes have been better as well, so i think if we look back now over the last decade we, again, see a new Macro Economic landscape which looks like this, slowerred growth, lower inflation and lower Interest Rates and the implication of that is that Central Banks, closer to zero, Central Banks will have less ability to support the economy in downturn should one come and this, i think, this is the main challenge for central banking now, the biggest challenge we face with lower neutral rates an lower inflation and we see whats happened in in japan and now to some extent europe, so we thought that was a great time to look at our framework and see whether we can find new ways to, you know, to address that new tools, a new strategy, tools and communication, so we are also, i would say an important part of it is, we have done Public Engagement at a scope that really the fed has never done before. The fed has never done this kind of public review before, so we thought it was an appropriate thing. So weve had the meetings around the country, we call them fed listen events and theyre live streamed on the internet and we are meeting with Community Groups and labor groups and business groups and all different constituencies not just academic monitory economists although we meet with them too, of course, and i would say that the gains from that have been very striking, you know, we for anyone who has been through the events you are really struck by how much people care, how important it is in your lives what we do. So just to get to wrap up, we are taking all of that and meetings and looking carefully at our tools, strategies and communications and will announce decisions on that sometime next year but so far we think its quite a healthy exercise. Going to the country so to say could it be model, what do you think about that for switzerland . Not exactly same exercise but you have ongoing dialing with many, many groups in switzerland regarding Monetary Policy and those about Monetary Policy, but you get as reaction everywhere people like ability, this is mandate and no one complains of high inflation, price stability and we have this is different than many other Central Banks, definition of price stability, range of point target, this is important for us because it is rather difficult to steer inflation over short, mediumterm in precise manner but in average over medium to longterm, inflation was stable in switzerland over last 20 to 25 years, that was success. We have at this moment very little reason to change that. Obviously as chair mentioned before, the possibility to lower rates indefinitely is, of course, an issue, but so far we could circumvent it to steer lets talk about the Interest Rate. Very important topic. Controversial, too. It has declined substantially over the last two decades. What are the natural economic implications of this decline . Yes. So i think really, for the last 20 years, weve seen what we would call the neutral Interest Rate decline by at least two or three Percentage Points and there are people making arguments its actually more than that. And so why is that happening . Its a lot of factors. Its the aging of the population which leads to higher appetite for safe assets and more savings relative to investment, its low productivity, its low growth, its all of those things, and so you get in a world where the neutral real rate is low but inflation is also low, and what that means if you add those two together, you get the Interest Rate. So the implications are, as i mentioned earlier, that Central Banks will have less ability to counteract a downturn by cutting rates. Typically, in the United States, since world war ii, weve cut more than five full Percentage Points or as we say, 550 basis points, we cut in a typical downturn. Now our federal funds rate is about 2. 1 . So we wont have that ability here. So one implication is that we need other tools, and so when we got to the zero lower bound during the financial crisis, we used quantitative easing and we used Forward Guidance without the Interest Rate and we feel that they worked, although are not perfect substitutes for the Interest Rate. I think one essential feature of this from our standpoint is not to allow inflation to move materially below target, because if that happens, that will work its way into Interest Rates. So were very committed to defending the 2 inflation target on symmetric basis. Weve seen low inflation become the case moving down, and you get on this you seem to get on this road that its hard to get off of. Were trying not to get on that road and actually defend our 2 inflation target where it is now. Thomas, your policy on that topic . I think this is one of the absolute key questions at this moment. Having this lower mutual rate is difficult so all this was built on higher Interest Rates. This is a real phenomenon, not only monetary phenomenon. So yes, its difficult and its very difficult to explain that to the public. So of course, the room to maneuver for Central Banks to react is smaller today than it used to be maybe 20 years ago. Jay mentioned this means that Central Banks have to find ways in order to have instruments available in case, if necessary, to impact monetary conditions. This is much more demanding than it used to be 20 years ago. This is true. And gets more and more difficult, more challenging, lets say. Challenging. The challenge is in the way that on a global scale, it is to some extent the normalization. We went all the way down to zero with the hope everything would go back to normality but that did not happen because of Economic Cycle and because inflation did not come back exactly as expected. Now we are in a little bit of a new situation, where low level of inflation, already low Interest Rates, maybe some instruments are necessary and this is the event you just started. Central bank governors, how do you coordinate when making Monetary Policy decisions . In the United States were blessed with a fairly Large Committee so as many of you will know, at full strength, there are seven governors on the federal open Market Committee. Those are all nominated by the president and confirmed by the senate and we serve 14year terms. We also have 12 reserve banks around the country and those reserve banks on a rotating basis share five additional votes. So effectively, but when we have our meetings, you know, everyone has a voice at the table. So what that means is that i talk to every other participant on the fomc at least once per fomc cycle and thats eight of those a year. I think that this arrangement of reserve banks around the country and also the seven governors, it guarantees that we will have a diversity of perspectives around the table. The reserve Bank President s are chosen by their boards of directors who are largely private sector people, but with the approval of the board. I think this system guarantees again, a diversity of opinion. Theres that risk of groupthink if everyones in the same building and went to the same schools and took the same professors. We dont have that. We have people coming in every eight weeks with different views, and i have to say, i wouldnt have it any other way. I really do, i mean, i spent a lot of years as i mentioned in the investment business, and what you really want before you make an investment is to have the smartest person in the room try to explain to you why this is a bad idea. Not after you make the investment, but before. So i place huge value on that. I have terrific colleagues on the fomc and i really do actually welcome all of that. So its a lot of consulting, but again, i wouldnt have it any other way. [ inaudible ]. To some extent. To a large extent its a policy of putting together consensus. My nature is to want to incorporate peoples thinking and develop a consensus. Sometimes its me convincing, sometimes its trying to move people into a group. But i think collective Decision Making can work and i think in our case, it has worked well. Do you find this true . Its different history and different institution. We are blessed with a small board. But a very wellfunctioning board. The situation is a little bit different. We have a lot of discussion also with our economists so theres a variety variety within the bank but theres tradition in the central bank and the government that you have a college, that the College Takes together the responsibility and also tries to find a consensus and tries to defend this view vis a vis the public. Thats worked over 100 years very well at the Swiss National bank. It also forces you to find a solution even in difficult times, and we are small country, exposed to this international [ inaudible ] so in our case, our country, its really to find a consensus and then to defend its view vis a vis the public together and that worked well. Im personally convinced i do not speak for other countries, its really something that is very specific, should not be changed and it helps not only at the central bank but also at the government very well. Unless you see that you have better options, but this is also risky. So actually, its the same in the United States. We have two failed Central Banks, at the very beginning of the republic, if you ever saw hamilton the musical, thats the first one. There was another one. The second one died in 1836. The difference was they were very much east coastbased and you know, the rest of the country was sort of suspicious in those times about having power over money and banking concentrated there. So the beauty of our system is what i mentioned. We have reserve banks all around the country and this turns out to be a much more balanced and sustainable structure. We are 106 years old i guess now, and i think this federated structure we have has served the country well and is also rooted in our history, as you say. Some have suggested that the fed consider the impact of its decisions on the outcome of the 2020 president ial elections. Do you consider electoral politics to be a new part of your mandate . Absolutely not. Political factors play absolutely no role in our process, and my colleagues and i would not tolerate any attempt to include them in our Decision Making or our discussions. Thats not our dna. Our dna is what i mentioned earlier. We are strongly committed to nonpolitical Decision Making. We serve all americans regardless of their political party, and its just simply wrong. The idea we would deviate from that is just simply wrong. So the answer would be a hard no, lets say. We couldnt agree more. Are Central Banks missing out on the challenges but also the opportunities represented by Digital Currency . I think i dont think so, no. I think, of course were following very carefully the whole question of Digital Currencies. Its not something that were actively considering. Other Central Banks, more than we are. For us, it raises substantial significant issues that we would want to see, you know, carefully resolved. For example, you know, if you think about one currency that was for the United States or for frankly a multinational currency it would really need to be cybersecure, because its one thing to be able to counterfeit paper currency. Its another thing to be able to hack into a cybercurrency and create with a computer however much of it you want. So the cyber issues are quite daunting. Its also not clear to us that theres really demand for this. Consumers have plenty of payment options. Theyre not clamoring for this. I dont want to sound like im ruling it out, but i think theres another question, too, which is if people are leaving their money in a cybercurrency and holding it there, theyre not putting it in a bank. What happens with banks is people deposit their money and banks lend the money out. So what will happen to intermediation process, what will happen if everyone is just investing in this cybercurrency . I would say look, were in favor of financial innovation, were following these things very carefully but we dont see Digital Currencies from a central bank as something happening in the near term. How do you see it . Well, we looked at that very carefully, and we have a similar view, probably. So we do not believe that its a very good idea to have a currency for essentially the same reason and you need theres almost no advantage to make a payment with a central bank Digital Currency for the public at large. What may be a little bit different situation, so if we have new Financial Market infrastructure where banks among them create securities and you need to also create some new money that comes from Central Banks that make this system more efficient, so we are looking at that very carefully but this is not yet sure. It is not yet sure whether new forms of securities are more efficient than old ones and whether this new infrastructure actually need Digital Central Bank currency. It is possible the link to the central bank may be sufficient today in the system but its a very important and very interesting question, and we are also happy to be part of this situation that looks at those issues very carefully. I think its very important that banks are aware of all these innovations and all the possibilities. Absolutely. Absolutely. What is your take on the libra, the new facebook currency, with headquarters in geneva . So i want to start again by saying that we do want to see responsible financial innovation. We think thats key. We think that will enable people to be better served and drive costs out of the system. Its important that we be open to that. I think as i have said before about libra, with facebooks very Large Network of more than a couple billion people, a stable coin could be systemically important very quickly if it were to have wide adoption and thats not a foregone conclusion. Because of that, we would think that libra would need to be held to the highest standards. It could be systemically important right away potentially, and because of that, it would have to be held to the highest regulatory and supervisory expectations. It is not obvious to see how that would happen under our current regulatory system. So its the kind of thing where we said this is not going to be a sprint to implementation. This is going to be a careful, thoughtful conversation about how we can do our job of protecting the public from cyber risk and all the other risks that come with something thats systemically important. If i take your answers all in all, you are quite optimistic. That true . Well, about things in general, yes. But i would say you always want to be an optimist but i would say libra has a burden of proof to carry. Again, were not we dont want to just be an obstacle about this. I think its appropriate for us to say what we think our expectations will be and appropriately so. They will be very, very high for something that could have some broad adoption and theyll have to be met, so thats the way to think about libra, i believe. Okay. Thank you very much. I think we should open the discussion to a few questions. I see some ladies and gentlemen who would like to ask one, behind there. Far behind the second row. Hello, mr. Powell. Welcome to switzerland. I would like to know what you think, because the market is widely expecting to have accommodation. Do you feel like meeting that accommodation will be enough to support the economy, or do you feel like you might need to do more to provide that accommodation . Im just going to go back to what i said earlier which is were watching all of these developments, the geopolitical risks, we mentioned brexit, there are others, the events in hong kong, watching those carefully, watching incoming data and really looking at financial conditions broadly, and were going to be assessing those as we go into our next meeting and future meetings, and what we have said is that were going to act as appropriate to sustain the expansion. I dont have anything other than that to say here tonight. Wait for the microphone. Mr. Powell, you spoke about the diversity of views on the fomc and we have seen in the past couple of weeks exactly what that diversity of views means. We heard Eric Rosengren at the boston fed saying he doesnt see the need for further accommodation, yet James Bullard from the st. Louis fed is looking for an immediate 50 basis point cut in rates. How do you square that circle . How do you consider these opposing views . Sometimes its easy when the path is clear. How fast to move and things like that. Sometimes things are relatively clear. Other times its murky out there. And you dont really, you know, theres a range of views. I think this is one of those times. Trade policy uncertainty is not something Central Banks have a lot of practice in dealing with. So as i mentioned in other occasions, we are trying to look through shortrun developments and try to assess what the implications for the outlook in the medium and longer term will be of those developments. Its challenging and we are clearly at a time where theres a range of views. Again, i do think thats very healthy thing. We will, of course, reach a decision. I expect we will have a strong support for the decisions that we made, as we had in july. I expect that will continue. But this process of having disparate views i think is not something that i feel concerned about. In fact, i think its appropriate given the situation were in right now. Thank you very much. I have a question for both of you. Kind of a delicate question, im sorry, but thats why were here. Whats the relationship with the Chinese Central Bank in these days . We have this Political Tension but you are technocrats. How is the relationship with china and how independent is the Chinese Central Bank really . Is it enough to just talk to central bank governor, or are you talking to the Science Ministry all the time or to other people . Its very hard frto recognize h this cooperation is really working. You know, remember, were not part of the government. We dont talk about trade. Trade is not an issue for us. The Chinese Central Bank attends these International Forums and we have discussions about the Global Economy but were not in the room, we as the fed are not in the room on trade discussions. Were not an adviser to the government in any way. That is not the case for the Chinese Central Bank. They are part of that conversation in china. We dont see that part of the world but i mean, part of the reason of having these International Forums is that even when there are difficulties, there are places where we can sit down and hear whats happening in each others economies but we dont cross the line into what governments there are issues consigned to elected governments and we dont comment on those. We dont take part in those. We stick to the things we are responsible for which are stable prices, maximum employment. So thats how i think about it. I fully agree. Let me just add one thing. I think all Central Banks among each other have relatively good relationships. We have stable relationship to the fed but also to the Chinese Central Bank. This is very important. You have to get a really good view about the Global Economy. This is maybe the most important element of monetary cooperation. You never coordinate decisions but knowing exactly what is the situation in china or the u. S. Helps everybody else to understand the situation, and this is much better, it limits spillovers and spillbacks so we have this relatively open exchange of views so we get a good grip on the situation in asia, in america, in europe. This is a very open dialogue and i think this is something that was developed extremely well during the last couple of years. This is exactly because we are not part of the government. We are technocrats and can have this open issue or open dialogue. You mentioned you have been working on a new monetary framework in the United States. I was wondering whether it has an international dimension, you have been thinking also about an International Monetary framework . Are you happy with the way the International Monetary system has been working . Are there any thoughts about contributing to something new . Has thomas had any ideas on the International Monetary . This is the first question. The second question concerns the phillips curve. From your comments, you said things are very good in labor market, wages are going up, and we are just hoping inflation is going to go up. Is it just Wishful Thinking about seeing the return of the phillips curve or is there some bigger reason . So the first question was our review is not about, you know, returning to a different International Monetary framework or even, you know, having a global currency or anything like that. Its really about our domestic tools in our domestic context. For example, were looking at strategies where there would be a makeup for inflation below target. This is an idea thats been around for a couple of decades. The idea is if inflation is meaningfully below target for a sustained period, then the central bank would communicate so the people understand that there will be a makeup period, meaning a boom of inflation above target, and if the public understands and acts upon that, it will actually limit the damage from the recession. Its a great idea. The reason no central bank has really done it, its hard to find a way to implement it practically. We are looking really carefully at those ideas. Thats a classic idea that we need some of those ideas to work at the zero lower bound. I will talk about the phillips curve briefly. So there was 50 years ago, there was a close relationship between the level of slack, for example, level of unemployment in the economy, and the level of inflation. That has gone away. Really, its still there but its a faint, faint heartbeat. But its not what it was. There are a number of possible candidate reasons for that. One of them just is that Central Banks have kept inflation under control so much, so well for so long now, really particularly over the last 25 years, that Inflation Expectations are well and truly anchored and therefore, inflation doesnt go down much when the economys weak and doesnt go up much when the economys tight. I think thats really where it is. Theres always a question of is there a steep portion of the phillips curve, have we, for example, is the problem not the slope of the phillips curve but that weve got the wrong estimate of the natural rate of unemployment, for example. Maybe the labor markets not as tight as we think and it will get tighter and suddenly we will get this steep phillips curve. Havent seen it. Havent seen any evidence of it. I dont think we know the answers to these questions. I think thats why i think we have to use a huge dose of common sense and Risk Management in our policies. You know, in terms of the global the International Monetary system, i would say i think the system of personally i think the system of floating rates along with a commitment from Central Banks not to target their domestic economies and not the Exchange Rate itself as such is working broadly. I dont know, thomas . Not sure, but probably you are alluding to the fact we have also dollar dominance in the International Monetary system and there is sometimes a discussion about that, but this is the result i think of the Economic Dominance of the United States and in Financial Markets, and in fact, you can only change that if other nations gain in economic importance. This is something that has evolved and its a fact that we have also a Banking System globally where dollar funding remains one of the dominant Funding Forces and as long as this is the case, the dollar will be by far the most dominant currency. Its even increased during the last couple of years during the financial crisis. This will only change once the economic importance of europe has become bigger again, then the other currencies also gain importance. Otherwise, i think its very very difficult. This brings me to a point that for emergency situation, the distribution among Central Banks is something that is absolutely key. So the swap agreements that exists between all major Central Banks is really one major element of this safety net of the International Monetary system. We have to cut soon but maybe two or three questions, if you put short questions, you will get further on. Governor powell, you are very happy inflation in the u. S. Is around 2 . I also learned that japan was trying to get inflation up to a certain degree unsuccessfully. On the other hand, i hear from the National Bank that price stability is [ inaudible ]. But somehow i have the feeling that europe is not very successful to get inflation up to a certain point and many other countries maybe are looking also at that. Would you have a recommendation how to get the inflation to this 2 which would be healthy for balance sheets, for the future, for credit, for lending . Recommendation for europe . No. No. I wouldnt presume to make i will just say that, you know, we have inflation which is just below 2 and it seems to be bouncing around between 1. 5 and 2 . You would think ten and a half years into an expansion with historically low unemployment and strong growth, you would think that inflation would have been more kind of symmetrically around 2 . Its not the case. Our strategy is to avoid this problem of having Inflation Expectations slip down. Once youre on that road, it seems to be hard to get off it. I wouldnt presume to offer any advice to thomas or to our ecb colleagues. Maybe somebody from the Students Group . Nobody daring to do that . You, please. With the black shirt. Mr. Jordan, why dont you give every swiss 500 francs . Its a very good idea. [ applause ] if we could, we would do it immediately. But its against the constitution, against the law. This is not foreseen that we give gifts to the population. This is not something that makes sense. Also to say that in the situation that you are at the moment, ideas like helicopter money doesnt make really any sense. We are in a situation where Unemployment Rate is 2. 3 , the growth is something between 1 and 2 on average over the last couple years. This is relatively a good situation. So when we give you 500 swiss franc and somebody else comes, we would like 1,000 swiss francs, its a good project for this or that, et cetera and at the end, these are not decisions that should be taken by a central bank. This is something that is really political and has to be in the parliament or by the government taken, and not by a technocratic central bank. Giving away money for free, giving it as a gift, this is really a political decision and not a decision that should be taken by a central bank. Okay. Heres the last question. No, sorry. We give it to the lady. Excuse me. Ladies first. Thank you very much. Good evening, mr. Powell. Id like to ask a followup about the libra project and the feds working group thats tracking the project. When you mentioned the burden of proof that falls on the project, can you speak at all to how the association has been meeting this burden of proof, what further input you have received in recent months . And how you feel it should fall within the regulatory scheme . Finally, speaking to your coordination efforts with other Central Banks, is this something you and mr. Jordan have been discussing at all on this visit . On libra, theres not a lot i can add. We do have a working group among all the financial agencies in washington. I assume theres something going on around the edges were discussing but honestly, i wouldnt speculate on that. In terms of coordination, i would just echo that we come here, its about the central bank, its about the economy, not about the political issues. Sometimes its about Monetary Policy. Its very fair to question each others approach to Monetary Policy and that kind of thing. Its a great forum. Thomas is of course right that the swap lines that we use, the dollar swap lines we have with many Central Banks were absolutely essential in the financial crisis. Those are the kinds of things we can do in collaboration and its greatly aided by the fact that we know each other. We are comfortable working with each other and in regular contact. By the way, the same is also true of the elected governments. Theres the g20 and the g7, so with finance ministers in the room theres a lot of International Coordination that goes on, so that people do know each other and are just talking which i think is a very healthy thing. Okay. Your last question. Thank you. Governor powell, this morning again, you were mocked by President Trump in a tweet. Do you find the constant criticism from the president , does that make your job easier or more difficult . How do you manage to tune this out . So were completely and totally focused on our jobs. I think just to understand, i feel like the fed is a very important american institution. The things we do affect peoples lives. We are going to focus on using our tools to do the best job we can to achieve the goals that congress has given us under the law. Thats all were going to focus on. We dont get involved in other things like that so thats our entire and total focus. Wonderful. In you, we trust. Thank you. Thank you. [ applause ] before we proceed to present your gift, which is a tradition at this institute, i would quickly show the next evening. Coming soon in october, here it is, robert kagan, famous writer, columnist also from the united stat states. So the discussion will go on and you are more than welcome. Neil we are going to continue following this, but man, oh, man, you wanted to get a good sense of where some of the most influential financial players on the planet are right now, this was interesting as it could get. I know it depends on your cup of tea there. But you have been watching a discussion on the course of Interest Rates not only in the United States but the world right now, featuring the chairman of our Federal Reserve and the guy who heads switzerlands central bank, their Federal Reserve, if you will, the Swiss National bank, thomas jordan, the gentleman who runs that. Now, in the course of this conversation, of course everyone was keen to get a sense of where Interest Rates might be going in this country. The Federal Reserve meets a little over a week from now and will likely cut Interest Rates. Nothing that Jerome Powell said dissuaded anyone of that notion. He says were watching developments very very clearly and intensely and we will act appropriately. Signaling there that he will probably go ahead and respond to this trade situation which has rattled the Global Economy as well as the chinese go at it on trade. He also ignored sort of the fighting and backandforth and tweeting from the president of the United States, dodged that one to say that the Federal Reserve is focused not on politics but on doing its job. Also said Something Interesting about the inflation rate here. Times have gotten so weird that right now, the idea was to contain inflation. Now the Federal Reserves goal is to make sure that it stays around the 2 level. In other words, actually to try to get it up to that level, not down to that level. Thats how far and quickly the world has changed. Keep in mind, this was an environment in which the swiss have negative Interest Rates, about the lowest on earth, almost a negative 1 for their tenyear bund or bond, if you will, very similar to germanys but if you think where these gentlemen were, switzerland, right above that germany, right above that denmark, and these three economies are dealing with negative Interest Rates and they are in a real pickle how to deal with that Going Forward. Because the lower they go, the Federal Reserve of course is now considered to be under the same amount of pressure. Allan greenspan said just a couple of days ago that we cant avoid this trend ourselves, negative Interest Rates are coming to these shores as well. In case you were hoping to see that Jerome Powell would sort of zing donald trump, the closest i saw was saying that his predicament might have been worsened, im using the word worsened, might have been made more problematic because of this trade war. Of course, the president has said he has failed his country, referring to Jerome Powell, and hes all but an enemy of the state as a result. He compared him for awhile to the chinese president. He dialed back that criticism of the chinese president but never did about mr. Powell. We might also focus on how the markets were doing as he was speaking. If you buy the notion that he would act appropriately, the markets took that to mean hes going to go ahead and cut rates, they are going to come rally around the consensus, presumably, to cut rates. There are some members of the federal open Market Committee, the group that decides the course of Interest Rates in this country, some of whom are advocating to st. Louis fed president bullard advocated cutting them by half a point, forget about the quarter point. That debate will coalesce around a common theme that again, mr. Powell was very confident would rally around a move to cut rates, the only debate i guess is how much. Again, the only zinger if you call it that, because hes a pretty lowkey, gentlemenly kind of corporate guy, he referred to the 11 years of this recovery and crediting the Federal Reserve for shepherding that entire process, clearly saying that whatever the president is bragging about, it all started with the Federal Reserve helping out his predecessor, keeping Interest Rates low, the quantitative easing and all of that. I think thats the closest i ever heard Jerome Powell to saying you can take it but youre not all that and a cup of tea. He didnt say that but that was clearly my impression of what he said. Anyway, we have the former dallas fed adviser Danielle Dimartino booth. What did you think . What signal was he spending . I think that powell sent a very confident and articulate signal that he still feels the economy is on solid footing, that despite the more dovish members of the federal open Market Committee would have him do in september on the 18th, that i think they are going to hold the line at a quarter point Interest Rate cut and he took all of the data we have seen as a glass half full, and we saw a full reversal in the price of gold as a result, as the market began to price completely out of any type of overly accommodative Federal Reserve. But i do think that the confidence he exudes, the fact that hes as articulate as he is, is why we are seeing such a nice underpinning in stocks following his remarks. Neil obviously the fact hes telegraphing an Interest Rate cut acknowledges that he overshot it with the hikes that were going on as recently as christmastime last year and of course, the fear that he had overdone it. Hes adjusting, pivoting. Thats what Central Banks have to do sometimes. But he resisted obviously the temptation, it came up a couple of times, to say that the president is going too far in criticizing him, or in saying that hes an enemy of the state or any of that stuff that came up. Im wondering how, no matter what he does, he will always be seen under the microscope of responding to political pressure. How does he get away from that . Well, i think hes very graceful in dancing around that. I was a bit astonished to hear the host of the event say in you, we trust at the very end. Neil we dont trust a guy, we trust you. Exactly. It was a very interesting way of getting that across. To your point from earlier, hes definitely giving the Federal Reserve the credit that he believes that it deserves for maintaining an even keel in this economy and i think that in a very gentlemanly way, the fact that powell wont even respond to criticism from the white house demeans the bullying that is coming from donald trump and makes it seem as if hes chosen to take the higher ground, which clearly he has. He didnt even respond when he said you know, does it make your job more difficult to be constantly criticized. He sidestepped that completely and said we are focused on what congress has mandated us with our responsibilities of price stabilization and maximum employment. So hes not answering any of these questions directly. And i find it to be a very cordial way of going about defusing this criticism, saying we must do our job, Everything Else that happens outside is ancillary to what our responsibilities are. I can only imagine how much his stance infuriates President Trump. Neil getting a lot of email on this. We decided to go walltowall with this speech and these remarks on the part of the Federal Reserve. One viewer says finally, i found someone duller than you. That was from my wife. No, no, seriously. One of the things i did find interesting, the reason why we wanted to be on this, not only because its a ratings juggernaut not but we felt this was a very consequential, important Inflection Point both in the markets and the economy and the recovery, the backandforth on trade and Everything Else, talks that are going to resume to get the lay of the land from the guy who is going to backstop the president , who really capsizes him to say weve got your back, mr. President , even though you are kicking me in mine. One of the things thats interesting in this phillips curve analogy which gets wonky but the premise is the better the economy is doing, the more inflation picks up, the oddity i guess what he was saying there is ill be darned, its not happening that way. In other words, economy picking up, inflation is not, unemployment is very low, so those rates going down but its not having the usual historical return in inflation, and that has made his job and all Central Banks jobs across the planet very very difficult, hasnt it . Well, you know, theres a certain irony here. I think you will probably agree with what im about to say. That is that the more debt that low Interest Rates artificially repressed Interest Rates, the more debts government can take on because of that, the more it is going to drag on Economic Growth and prohibit investment banks from hitting their inflation rate targets. We have seen that in japan. We have certainly seen that in europe and we are seeing it in the United States as well. So if powell would like to get online with me oneonone after he leaves switzerland, i can explain to him that it is a simple matter of debt that is keeping inflation lower than what he would have it be otherwise and had the Central Banks gotten out of the way, on a fiscal level we would be in much better shape today. Neil everyone has the sin of getting in deep, though, right . They are all there. Now we are trying to dig our way out. Good luck on that front. Danielle, great perspective on this. Great read on this. I would look forward to seeing you two go back and forth. You would be as polite as the swiss guy was. Thank you very much. Lets get the read on all of this with mike murphy. We have Small Business and Entrepreneur Council president Karen Kerrigan and glenn hall. Karen, it was an unusual venue for the Federal Reserve chairman to essentially say im trying to do my job, im ignoring the noise, the political pressure, but he must feel it, right . He must feel it because even, you know, smart folks like yourselves are saying you overdid it when you hiked. Now you have to dial that back. So everything he does risks looking like its bending to political pressure, doesnt it . I think he did a great job. I thought he was a straight shooter and he just sort of delivered the facts. But i also found it very interesting, little zinger there, like you said, we are the ones that are keeping the economy going. Neil saying that that recovery is into its 11th year which long precedes this president. Thats right. And entrepreneurs, investors, businesspeople, would, you know, they would take issue with that. But its interesting, i know we expect the rate cut, the quarter point rate cut, but you know, in listening to him and if that wasnt sort of a predetermined decision, i would have thought well, you know, gosh, maybe he wont cut rates, given that hes talking about how strong the economy, its in good shape . Neil i definitely got the impression thats the way the market reacts. You kind of know whats coming on the 17th and 18th, the twoday fomc meeting, but i did get the same feeling, dont expect a lot more of these. Im making that leap but that was my impression. Mine as well. Neil when you hear all of this, hes really facing a conundrum. That is, look, normally we try with the rate hikes were doing to get ahead of the inflation genie. Now you almost want to bring it back a little bit, keeping to 2 means also lifting it to the point that you can. Its a weird position. It is a weird position. I think if you look back, maybe there were some mistakes made here but i think now what you are getting and the reason the markets reacting favorably, we will get a 25 basis point cut from the fed minimum, probably just 25 basis points, this month. Then there are going to be more data dependent. So if we dont see inflation spiking up, they are going to continue to be accommodative and that is positive. If you take a Strong Economy and extremely historically low Interest Rates, thats a good time to be an investor. Neil you know, looking at that and the fact he would act as appropriate, thats come up a number of times. Appropriate, appropriately, do whats appropriate, again and again. I was just doing a quick search of his wording on this. Sometimes its nebulous. That appropriate comes up a lot. Im wondering what is appropriate . In other words, if we dont have a lot of wiggle room with Interest Rates where they are now, its not as if typically when these start and the averages, the overnight Bank Lending Rate is 5 , 5. 5 , its far less than half that right now and people wonder what else is in your wiggle room there. Right . This language is carefully constructed, the idea being that we want you to know that we are prepared to act and maybe even biased towards but they want the wiggle room to decide when and how. So i think they really are just being very cautious. It makes sense, because if you think about all of the variables, powell brought this up, think about china trade and how that could suddenly change everything. There are a series of challenges in the Global Economy. So were feeling good now about how we are in america, but what does it look like two weeks from now . Neil dont you find it ironic, the Federal Reserve kept stipulating, we have nothing to do with trade. We have to clean up the mess afterwards if something goes wrong. I think thats the gist of it. But were not weighing in on this. Any trade question that came up, he kind of waved aside. One thing i got from him is that the appropriate remark, addressing that, you know, the criticism he gets from the white house, hes the president s backstop. Hes the president s friend on this regard. I know personal relationships can always be salty depending on the president , the fed head at the time. But this one is particularly problematic, isnt it . The relationship . Neil yeah. Well, it is. Ill be interested to see what the president s tweets are after this, to see where they are in their relationship right now. You know, but he has sort of a backstop in a sense. The key thing that, you know, they have been really, he continues to bring up time and again and it is related to trade, its all about Business Investment, right. Where is Business Investment going to go. The longer this uncertainty goes on in trade, that continues to sort of suck Business Investment. Neil uncertainty around it, it feeds that narrative. Over and over again in the earnings calls and investor calls where executives are saying were just not sure how to act right now, and that caution is slowing their spending. Neil when the president said a lot of them are using it as an excuse. Like using the tariffs and the trade war t good ceos, the Good Companies are performing. Look at the earnings. If you are investing in a couple and they say we arent doing well because of the trade war with china, you want to look a little deeper because there are companies that are performing right now in this current environment. Neil we want to take a quick break here. Again, we thought we owed it to you to hear from the chairman of the Federal Reserve, get his take on things, because a lot of people say, whether or not you agree or disagree, hes the last financial adult standing in the room to address this. Whether you think he overdid it by hiking and now has to do a 180 and reverse that, has been reversing that, the question then becomes how far does he go and as we have been saying, waiting for tweets from the president whether he is going to go far enough. Theres no way of knowing. Then there is the added factor, karen got into this, about trade and where we are with china. And to add some sort of drama to that, hong kong. Theres another protest. We are heading into our 23rd weekend of planned protests. That is a lot of noise and for folks like central bankers, a lot of worry. After this. I dont know whats going on. Ive done all sorts of research, read earnings reports, looked at chart patterns. Ive even built my own historic trading model. And youre still not sure if you want to make the trade . Exactly. Sounds like a case of analysis paralysis. Is there a cure . Td ameritrades trade desk. They can help gut check your strategies and answer all your toughest questions. Sounds perfect. See, your stress level was here and i got you down to here, ive done my job. Call for a strategy gut check with td ameritrade. Here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Sleep number 360 smart bed. St sale of the year on a you can adjust your comfort on both sides your sleep number setting. Can it help us fall asleep faster . Yes, by gently warming your feet. But can it help keep us asleep . 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They have a host of other demands here and its all that uncertainty that prompted the folks at fitz rating, a debt rating firm, to slightly nick hong kongs credit rating, a single notch, to double a from single a1. That adds to the financial uncertainty itself. The wall street Journal Editorial Board member Dan Henninger joins me now along with our guests. Dan, the fact that this is still going on and we are only a few weeks away from the 70th anniversary of the communist state in china, so to speak, they dont have a lot of time to resolve this. Are they going to resolve it . Its hard to see they are going to resolve it given the way the protesters in hong kong are insisting that they have put down a marker that they want the mainland chinese in beijing to respect their independence, respect their freedom, and there is no evidence that they are going to do that. Something really enormous is at stake here. You mentioned this october 1st anniversary of the 70th anniversary of the communist party. What is at play here is a competition between the basic mainland Chinese Communist model of control of the billion people who live there, and the hong kong model of independence and freedom for the people who live in hong kong. That was always going to be at stake as they tried to resolve whether the hong kong, you know, agreement that they had made with the uk three decades ago was going to be honored. Now these young people in hong kong have just put down this marker to say we are insisting that you honor the agreement you made with the brits back then, and let our freedom persist. I dont think xi jinping is going to be able to do that. Neil mike murphy is with us. Dan, its mike. Had a question. When you look at the trade war between the u. S. And china, it seems as though the protests, the more they heat up in hong kong, that kind of plays right into President Trumps hands, as it forces the chinese to look closer to home and maybe take their eye off the fight here against the u. S. Am i reading that right . Well, i think that the trade war is being pulled into this now. Xi jinping has got both trying to deal with donald trump on the one hand, and keeping his economy going and make no mistake, the chinese model depends heavily on creating jobs over there. So hes got to figure out a way to get the hong kong thing off the table and get back to resolving the trade disagreement with donald trump. You know, they have somehow got to pull the extradition bill which was a political disaster, pull that back and somehow make a concession, i think, to the hong kong people. I really honestly do not know how this gets resolved because as i just said, the basic chinese model of control and command is under pressure now from hong kong and with the runup to this october 1st anniversary in which the chinese are going to be celebrating what theyve done in that country for the last 70 years, i just dont see how this is resolvable. I think it may impede the possibility of getting that trade agreement, and we have been seeing how the stock market is just reacting like a hair trigger to the possibility that a trade agreement could be done between mr. Trump and xi jinping. I dont see it happening right now. Neil you could look at this as well, as you did, its a separate issue. Not that youre saying that, but that the president is saying he hopes the chinese act humanely, treat the protesters humanely. He has not made this a central cause or brought it into the talks. How does that play out . Yeah, this is an area where we have seen some caution there. A little bit of, you know, dont cross this line way over here but neil got to watch that, right . Not getting too hardlined about it. So i think it is a challenge, because as the president he wants to make sure hes standing up for democracy and the independence of hong kong, on the other hand he wants to get this deal. Hes got a lot riding on getting this deal. Our economy, as we were talking about, has a lot riding on this deal. Neil he has been arguing about it for some time that china needs the deal more than we do. This is a week we had mixed data. The employment report today, still very good, im not knocking it, but it does represent a slowdown, job growth now is averaging a little over 115,000 new workers every month from 210,000, 215,000 a year ago. So its slowing down. Im not saying chinas on fire here. But you know, the Services Sector rebounded in a big way, highest numbers weve seen there in a couple of years, three months in a row of such growth. So im wondering if we are seeing a role reversal here. What do you think . Well, i think theres no deal, its a loselose situation for china. I think we both get burned. Chilling in their economy, chilling in our economy and the uncertainty in general of the market, the pullback in Business Investment. You know, one thing i was going to ask dan, carrie lam on the leadership, is that something that perhaps can be changed . Because i think everyone thinks shes not doing a great job given the probeijing supporters there in hong kong. She lashed out at fitch in terms of the downgrade. Do you think neil would you have been surprised . Shes living in a different world, in a different hong kong, for sure because she said hey, were doing all we can to firm up the [ speaking simultaneously ] if theres something they can do in terms of or will they do any type of change in leadership. I mean, carrie lam, good question, just how independent shes acting at the moment. I mean, i dont think anyone should think that carrie lam is really in charge of the Hong Kong Police right now. Thats the chinese operation. Now, certainly carrie lam could resign on principle and step down, which would probably lead to other resignations as well, which would put tremendous pressure on xi jinping to come to terms with these protesters. Neil what if hes not letting her step down . Well, you know, thats her choice. It would be an act of extraordinary courage for her to step down, for sure, but she has gotten to the point where shes, you know, between the devil and the deep blue sea literally here, and i just dont see how she can continue in this role, just trying to sustain this kind of balance between beijing and these protesters in the street who obviously no one ever expected, neil, that those protesters, those kids, really, would sustain this for as long as they have. And its been extraordinarily courageous on their part. At some point, carrie lam has to decide which side is she on, beijing or her colleagues, the fellow citizens in hong kong. Neil where do you think this goes . Because if our markets were panicking about this, even if the Chinese Markets were panicking about it, they have a funny way of showing it. This to them seems to be resolvable. Maybe to our own markets, resolvable. So we would go back to the trade deal and dont focus on the craziness there in hong kong. Its a big deal. The protests going on. But from an investment standpoint, you have seen protests in greece, you have seen protests here in the United States. You see protests all around the world. What the Media Coverage and what the social media now, you get them realtime, a live feed. Neil you dont get that in china. The chinese in the mainland arent getting the same. I mean more from the standpoint of an investor here in the United States watching your show, i dont think it has at this point in time, it has no impact whatsoever. Neil what do you think . The impact that it could have, if it turns violent in some way, or if we see a more overt sign from the chinese that they are going to change the standard neil you dont see that happening, right . You dont see that happening . They wont pull the trigger . I dont mean to crassly use that analogy, but you dont see that . Its not a Tiananmen Square deal . It doesnt feel like that kind of a thing. They have been very patient and been trying to allow it to wind down but as dan was saying, nobody expected it to run this long and it still seems to have some strength. But theres a lot that they dont want to see happen before they get to their celebration. Neil we could get a trade deal before the election . What do you think . Before the election . I think so, before the election. Yeah. Hopefully before the end of the year. Neil all right. Dan, quick thought on that. What do you think . Trade deal doable before the election . I think it is doable. Because both sides really need it. Donald trump, the economy is slowing. I think if hes going to sustain that economy, hes got to get this deal with xi jinping one way or another. Neil all right. I want to thank everybody. Very patient with a lot of the breaking news and the comments we did want to share with you live because they are that significant here. Again, the chairman of the Federal Reserve telegraphing hes going to be doing something, hes going to be acting appropriately, which we have heard a term used here and that seems to indicate a quarter point cut in rates is coming. Anyones guess as to whether it could be bigger or more down the road. But responding to a globe right now where deflation is the issue, not inflation. Right now the hope is that they can just contain that. Now to charles payne. Charles charles hey, there two things, im glad you shared the line, secondly, thats one heck of a suit, my man. [laughter] i just painted it myself. The comments im getting. Thank you, buddy. Charles good afternoon, everyone, im charles payne, this is making money. Moments ago we did hear from the man himself, jay powell, the fed chair commenting on the state of our economy and also world outlook, this perhaps Public Comments before that nextgaterring after report that saw giant surge in labor force, in the labor force and also wages continue to be stronger than anticipated. Plus attorney generals are launching separate antitrust