Age could go higher. Get there faster. All right, he's We're getting a summary here on what Powell's supposed to be saying here. Let's listen in.

higher than anticipated if data indicates the finished period to increase the pace of rate hikes. He also says reporting restoring price stability will require a restrictive policy stance for some time. The historical record Power warns Uh warns against prematurely loosening policy quote. We will stay the course until the job is done.

It goes on to say the decisions will be made meeting by meeting, and the full effects of tightening have yet to be felt in the economy. He talks about the recent data where he says the January data partly reverse the softening Trends they've seen late last year. This likely reflects he said unseasonably warm weather, but He suggests that if even if you take out the warm weather, it still suggests inflation is running higher than expected On inflation, Power says the process of reducing it has a long way to go and is likely to be bumpy more. on inflation issue says it's moderated somewhat, but still well above Target He expects housing inflation to decline in the year ahead, but there's little sign of disinflation in the area that he continues to point out, which is Core Services ex-housing on the economy.

Powell says there will likely be a softening in the labor market this year while wage gains have slowed Powell says they have remained above levels consistent with the Fed's two percent inflation. Target The U.S economy slows significantly last year. Uh, and as for consumer spending, it is rising this quarter at what he calls a solid Pace There's been some recent indicators that point to subdued growth and spending and production, but overall, he says the labor market remains extremely tight. So there it is guys.

The possibility of a higher rate, the possibility of getting there faster, and the idea of staying there for a long time back to you. We're seeing the market reaction, not taking it particularly well. Stock sliding yields pairing some of their earlier losses Steve Taken as as pretty hawkish I'm not sure what the market expected after we've had a string of positive data and a lot. look at that.

look at that. nice drop the news here. Yeah, I mean Sarah he didn't adopt the uh uh, full out Max hawkish ideas of Governor Waller but he did come a ways to talking about how January was kind of like a a game changer as you know Sarah both and how uh, the January data uh exceeded expectations on inflation and growth and how they went back in revised December uh Waller called that a game changer It's very interesting to me here that uh, he is embracing this possibility of faster rate increases that is returning to Uh 50 basis points and I do want to check while I have you here Sarah What's happened to those probabilities? Okay, this is really interesting. Um, you've had an increase in the probability of a 50 base Point hike in March it had been I'll give you the number here.

uh 23. it is now 37 but more interesting and I've been following this for a few days now. is this probability of a 50 in May Sarah And I'll tell you right now that had been at 41 percent, it already was elevated and now it looks like it's at 70 percent the probability of 50 base rate like in May. So that would bring us right up to five and a quarter.

So yeah, Five and a quarter. Five and a half. and guys I don't know if you have the Fed rate Outlook chart on the Uh able to bring it up right now, but I can tell you what those numbers are. The new Peak rate is Five Five Sixty That's a new record.

Wow for that contract. Um, year end 544. that's a new record for that contract and then also Sarah Something we've been monitoring is the back end of this into the 2024 and that's now for June of 2024 480. So across the board, you've had this rise now in the outlook for the funds rate as the market I think positions itself for the possibility of higher rates for longer if the data indicate that's what the FED needs to do.

Yeah, got it. Steve Thank you very much. Stronger, dollar weaker stock. So that's actually really interesting saying seeing a 5.6 percent terminal rate expectation.

Now Honestly, that's putting us on that course of five and a half to six percent from the FED uh, potentially this idea that maybe we're opening up to that idea of uh, of of, uh, going back to 50 BP Uh, I don't I I Really doubt that I Really, really still doubt that. But boy, this will certainly Shake confidence a little bit in that idea. Uh, you've got uh, we're still waiting for Powell to start here, but uh, looks like we're now sitting at 3.98 on the 10-year treasury yield as uh, as we sort of get, uh, more pain, uh in stocks as a result of this. Now if we jump on over to Uh Congress we can see the testimony, which we're gonna obviously get started here watching the testimony in just a moment.

Once Powell starts speaking, they're just on introductory remarks for the semi-annual monetary policy report to Congress That is what this particularly looks like here. Let's go ahead and listen. In here we go. You have no other sure doesn't look like Corporation Hold on a sec I think I have a couple instances of this video open, so give me one second here.

Uh I certainly do you want? yeah, hold on. this is Mr Brown Here we go, let's listen in and then Powell will be speaking shortly. The FED should make clear that raising profit margins or spurring inflation companies have passed higher costs onto consumers, but they've also taken advantage of circumstances to expand profit margins The broadening of inflation Beyond Commodity prices is more profit margin expansion than wage cost pressures. Think about that from a chief.

Economist at UBS I'll say it again. they've taken advantage. These companies have taken advantage of circumstances to prove to expand profit margins. The broadening of inflation Beyond Commodity prices is more profit margin expansion than wage cost pressures.

Unquote the FED Understandably, the FED can't force corporations to change their ways or rewrite the Wall Street business model on its own, but the FED can talk about it. High interest rates, falling wages, increasing unemployment are all Hallmarks of failed policies that end up helping. Wall Street The largest corporations in the country, the wealthiest people in the country. Because let's be clear what we're talking about.

when people use the economic speak that can Cloud This conversation: cooling the economy means laying off workers. Lowering demand means workers get fewer raises. Of course, there are times when the FED must act. We can't allow inflation to become entrenched.

We've seen encouraging trends. that is that that isn't happening and there are other ways we can bring prices down instead of lowering demand again, making people poor, laying people off, denying worker raises. We can speed up and strengthen our supply chains. We can bring critical manufacturing back to the U.S We can rebuild our infrastructure.

It's what we're doing with the chip Sack with the Inflation Reduction Act with a bipartisan infrastructure bill for the first time in decades, we're finally recognizing the damage that I and many of my colleagues warned corporate of the corporate offshoring would do to our economy. Look at East Palestine Ohio about community that Senator Vance and I have visited a number of times recently. America Learned about this small town last month, but in Norfolk Southern Train derailed and spewed hazardous material into this community East Palestine is more than just a disaster. Headline: Columbiana County was once the center of American Ceramics manufacturing at one time producing 80 percent of Ceramics of dishware in this country.

One County produced 80 percent of it when I was there last week. I was talking to the sheriff at the 1820 Candle Company He was talking about how the last one closed just a few years back. Like so many Industries these jobs moved overseas and we know why. The same reason Norfolk Southern cuts cost at the expense of safety eliminating one-third one-third of its Workforce in the last 10 years, Then you're surprised with these derailments.

It's the same reason corporations now keep prices. High Even as Supply chains stabilize, it's the Wall Street Business Model chair Paul Knows that I Know that my Republican colleagues and Democratic colleagues know that it's a Wall Street business model quarter after quarter, Corporations are expected to cut costs at any cost. They skimp on safety. They move production overseas the countries where they can pay workers less because of trade deals that they lobbied for, and Wall Street demands they post-profit increases even in the middle of a global pandemic.

That's the problem with our economy. and not only will higher interest rates not solve it, if they're overdone, they'll make it worse. We can't risk undermining one of the successes of our current economy. For the first time in decades.

Workers are finally, finally starting to get a little power in this economy. Unemployment's in a historic low 3.4 percent. That's not just a number. That means Americans have more opportunities, more options, even in places that have seen a lot in recent years.

It means people have the power to demand raises and retirement security and paid sick days and some control over their schedules. It means more. Americans have the dignity, have the dignity that comes with a good job that provides for your family. We must hear ensure that all Americans have the opportunity for that Dignity of work.

It's a critical time. The consequences of missteps could be severe. Mr Chairman Two more things that affect affect your job. It's not just monetary policy that threatens American pocketbooks.

Some of my colleagues have threatened the nation's full faith and credit by holding the debt ceiling hostage for partisan politics. Instead of paying our bills on time, they're threatening, essentially threatening all Americans the Fifth Circuits. Consumer Financial Protection Bureau Ruling could also cause unimaginable instability and Chaos for families for consumers but also as The chair knows, for a financial system, the fifth Circuit is wall. Street's no doubt about it, the fifth Circuit is Wall Street's favorite.

Courthouse It recently ruled the Cfpb's independent funding if funding is unconstitutional, If the Supreme Court upholds the Fifth Circuit's ruling, it will not only devastate Cfpb, it will threaten the independent funding of many other federal agencies including the Federal Reserve I Look forward today, hearing today's hearing how the FED will bounce its dual mandate and continue to promote an economy where everyone who wants a good job can find one an economy that works for everyone Scott Sorry, sorry good morning Jermabel! Sitting here looking at my repair my prepared remarks thinking about hey, there's an opening coming or Vice Chairman Brainerd's moving on I Think it's really important for us to make sure that all the information that we need in order to make a good decision on the next Nom that we have in a timely fashion. So I would really implore the chair to make sure that happens that every question, every questionnaire that is uh asked from the person we get, every member of this committee has their questions answered in a timely fashion and that the staff as their answers in timely fashion. Listening to Chairman Brown I Thought to myself: Fascinating, truly fascinating I concluded that well I know Chairman Baum pretty well. I Am sure he is sincere in his rant, but let me just say this: Spending and printing trillions of dollars caving to the radical left in this country, seeing policies posited and then implemented that led to the worst inflation in 40 years.

Seeing our inflation at 9.1 percent, seeing American families struggle because of the weight of the government on their shoulders, seeing the devastation from South Carolina to Ohio is unbelievable. That's progressives in this country who caused a 9.1 percent inflation within turn somewhere besides in the mirror. To see the absolute devastation caused by their out of control spending is remarkable. Remarkable To stop the out of control inflation caused by the out of control spending, the FED steps in to cool the economy Well, the definition of coolant economy is necessary because we've seen the most radical approach to a problem that was in our rear view mirror being used as a trojan horse to bring in a level of socialism and spending that our nation has not seen in my lifetime.

The facts are very simple when you get to 9.1 percent inflation in this nation. As a kid who grew up in a single parent household mired in poverty a 40 today a hundred percent just a year ago, increasing the gas prices devastates single mothers around this country for seniors on fixed income whose savings are being depleted with an average cost just last month of a 433 dollar increase because of inflation. Hey, so just to catch you up with what's going on, these are the introductory statements before Drum Powell speaks. We already got a release of Jerome Powell's statement, which potentially suggests they might have to revert back to faster rate hikes.

That's why the Market's selling off. So if you're wondering like oh my God why is the market plummeting? it's because of this uh of this statement that maybe we have to go back to 50 basis point Heights if the data keeps coming in strong if January wasn't just a blip, right? So TBD hopefully we'll get some more color today. uh from Jerome Powell's Q A and that'll be coming up soon here. so let's keep listening in here.

Jerome Powell Will be speaking shortly. Pandemic As a way to usher in a form of spending that takes the money out of the pockets of everyday Americans and puts it in the coffers of the government. There is a better way. The better way is to trust the American people.

And when you do so, we don't have to have the FED come in and raise interest rates so high to quell the challenges in our economy so that today versus 18 months ago, the price of the same house for your mortgage payment is twice as high. Why? Because of the runaway spending of our friends on the other side of the aisle I'm sure I do not have time for my opening comments, but I will say without any question as I look around the country and I ask myself how devastating is it that today it cost 433 more dollars than it did a year ago. The answer is it is a crisis when the average family in our country just a couple years ago didn't have four hundred dollars in their savings for an emergency to have prices go up by this amount. It's devastating to have a conversation about rents around the country looking at the inflationary effect and the absolute Devastation of a snarling supply chain that we haven't seen in my lifetime.

run by my friends in the Progressives. Unbelievable to get the youth chairman Powell One of the comments that you've made that I think is really important and one of the speeches you gave in January and I apologize for my rant I Want to make sure my rant was consistent with my friend here. Um, it is essential. You said that we stick to our statutory goals and authorities and that we resist the temptation to broaden our scope to address other important social issues of the day.

Taking on new goals However, worthy without a clear statutory mandate would undermine the case of our independence. You further noted that and I quote without explicit Congressional legislation. It would be inappropriate for us to use our monetary policy or supervisory tools to promote a Greener economy or to achieve other climate-based goals. We are not and will not be a climate policy maker.

Do you still stand by those comments? Thank You! Finally, we're not in the question I know I get it? Finally, Yeah! I Knew the Chairman would dock that from my time and I appreciate you Uh doing so. It was a great human. great humor. Finally, several of my Republican colleagues and I sent a letter to you discussing Vice chair supervisors Vice Chair of Supervision Michael Barr's plan to conduct a holistic review of capital standards I Look forward to discussing those Capital standards uh during my Q A and I will thank you for our recent conversation that we had That Uh helped illuminate some of the necessary challenges that we face as a nation and your answers to it.

Thank you thank you! Speaking of Illuminating Thank you? Yes, all right, thank you for allowing me to use it today. We'll yeah today we'll hear from chair of the Federal Reserve Jerome Powell and monetary policy in the state of our economy. and I Don't expect Carapow to weigh in on uh, the many debate we just had. but I think we all know that the debt increase was much larger under President Trump and a Republican Senate and has been since Karen Paul Thank you for your service and your testimony today.

Cameron Brown Uh, ranking member Scott and other members of the committee I Appreciate the opportunity to present the Federal Reserve's semi-annual Now he's reading the report. My colleagues and I are acutely aware that high inflation is causing significant hardship, and we're strongly committed to returning inflation to our two percent goal. Over the past year, we've taken forceful actions to tighten the stance of monetary policy. We have covered a lot of ground in.

The full effects of our tightening so far are yet to be felt. Even so, we have more work to do. Our policy actions are: Guided. By our dual mandate to promote maximum employment and stable prices without price stability, the economy does not work for anyone in particular.

Without price stability, we will not achieve a sustained period of labor market conditions that benefit all Out review the current economic situation before turning to monetary policy. The data from January on employment, consumer spending, manufacturing, production, and inflation have partly reversed the softening trends that we'd seen in the data just a month ago. Some of this reversal likely reflects the unseasonably warm weather in January in much of the country. Still, the breadth of the reversal, along with revisions to the previous quarter suggests that inflationary pressures are running higher than expected at the time of our previous Fomc meeting.

From a broader perspective, inflation has moderated somewhat since the middle of last year, but remains well above the Fomc's longer run objective of two percent 12-month change In total, Pce inflation has slowed from its peak of seven percent in June to 5.4 percent in January as Energy prices have declined and supply chain bottlenecks heavy. East over the past 12 months, core Pce inflation, which excludes the volatile food and energy prices was 4.7 percent as supply chain bottlenecks of ease and Tighter policy has restrained demand inflation in the core Goods sector Has Fallen And while Housing Services inflation remains too high, the flattening out in rents evident in recently signed leases points to a deceleration in this component of inflation over the year ahead. Had said, there's a little sign of disinflation thus far in the category of core Services excluding housing, a category that accounts for more than half of core consumer expenditures. To restore price stability, we'll need to see lower inflation in this sector, and there will very likely be some softening in the labor market conditions.

Although nominal wage gains have slowed somewhat in recent recent months, they remain above what is consistent with two percent inflation and current trends in productivity. Strong wage growth is good for workers, but only if it's not eroded by inflation turning to growth, the U.S economy has slowed significantly last year, with real GDP rising at a below Trend pace of 0.9 percent. Although consumer spending appears to be expanding at a solid Pace this quarter, other recent indicators point to subdued growth of suspending of spending and production activity in the housing sector continues to weaken, largely reflecting higher mortgage rates, higher interest rates, and slower output growth also appear to be weighing on business fixed investment. Despite the slowdown in growth, the labor market remains extremely tight.

The unemployment rate was 3.4 percent in January, its lowest level since 1969. job gains remained very strong in January. While the supply of labor has continued to lag as of the end of December, There were 1.9 job openings for each unemployed individual close to the all-time Peak recorded last March While Unemployment Insurance claimed claims have remained near historical lows, turning to monetary policy. with inflation well above our longer run goal of two percent and with labor market remaining extremely tight, the Fomc has continued to tighten the stance of monetary policy.

raising interest rates by four and a half percentage points over the past year, We continue to anticipate that ongoing increases in the target range for the Federal Funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two percent over time. In addition, We are continuing the process of significantly reducing the size of our balance sheet. We are seeing the effects of our policy actions on demand in the most interest-sensitive sex or sectors of the economy. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.

In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, the committee slowed the pace of interest rate increases over its past two meetings. We will continue to make our decisions. meeting by meeting, taking into account the totality of the incoming data and their implications for the outlook for economic activity and inflation. Although inflation has been moderating in recent months, the process of getting inflation back down to two percent has a long way to go and is likely to be bumpy.

As I mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we'd be prepared to increase the pace of rate hikes. Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time. Our overarching focus is using our tools to bring inflation back down to our two percent goal and to keep longer-term inflation expectations well anchored.

Restoring price stability is a sense essential to set the stage for achieving maximum employment and stable prices over the longer run. The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done. Include we understand that our actions affect communities, families, and businesses across the country.

Everything we do is in service to our public mission. At the Federal Reserve we will do everything we can to achieve our maximum employment and price stability goals. Thank you I Look forward to your questions. Uh, thank you Mr chair There are 23 of us on this committee.

Almost everyone will be here today. I Ask each of us to stay as close to the five-minute Mark as we can because we have votes at 11 30. So uh, thank you all for your cooperation Chair: Paul Thank you! Job growth is strong as unemployment remains historically low. You might not know that from the opening statements.

Uh, many drivers of inflation, corporate greed Rising inequality, supply chain disruptions Russia's uh, bestiality if you will. In Ukraine won't get better because of interest rate increases. Every indication is that this post-pandemic economy is different. Should we be worried Mr Chair that the FED is treating this economic period as it has in the past instead of reacting differently.

Thank you Mr Chairman Uh, so we've been aware since the very beginning and have said have discussed this uh public on many occasions that there are some differences this time. Uh, we in particular have not seen the kind of uh, supply side collapse that we saw at the very beginning of the inflation outbreak. also the outbreak of a war which had significant effects on commodity prices a year ago. So all that is different.

There are also there were some similarities there. There is a mismatch between supply and demand. You can see that uh in in the good sector. Still, you saw it in in housing prices going up uh, over 40 percent since the Uh since before the pandemic.

And you see it in the labor Market where we have 1.9 job openings for every opening for every unemployed person. So we're well aware that that this this particular situation involves a mix of cycles of sorry of forces not all of which are our tools can affect, but there is a job here for us to do in in better. aligning Demand with Supply Like okay, understanding, you have limited tools to address inflation in our conversations. Um, in the past to show my concern about continued rate increases, that that may not actually address the root cause of inflation, they hurt workers and I Just like many of us contend, we can't follow the same old Playbook Uh.

Next question. Last year, Three Banking Regulators issued proposed updates on the Community Reinvestment Act to account for changes in our banking system. My question is, does the FED remain committed to work with FDIC and OCC to finalize the CRA Rule And when will that rule likely be finalized? Yes, we do remain committed and uh, I believe we are in Broad agreement with the other two agencies on on on the revisions to the rule. So now we're in the process of writing all that down and that'll take some time and then after that, of course economy it will come to the board of of Governors for a vote and that will involve briefings and and discussions.

And I I Can't give you an exact date, but as quickly as possible Yes, but it will be some months. Remember, the goal here is for them to sort of align their political agenda as well and get to extract political information from Powell as well provided by Congress We now see a spike in loan delinquencies and increase in overall risk. Banks are again plowing billions, billions as many other corporate leaders always defended by people on that side of the aisle into stock. BuyBacks which makes me concerned that there's a downturn in the economy Banks could end up with too little Capital That's why I'm worried about any potential rollbacks of safeguards or regulations.

Can you assure me that the FED will keep Capital requirements strong and exercise more long-term Forward Thinking than corporate CEOs that seem to be focused on the short term and assure you as to the first part that we'll we'll keep Capital requirements strong I didn't expect you to comment on you give me an opinion about you're looking more forward than than companies that look at the short term benefits of stock. BuyBacks Uh, Mr Chair When you last testified asking about the risk posed by crypto assets stablecoin, the Fed, and other regulated possibilities, how's the FED Evaluating the risks of crypto related activities by your by your supervised institutions. So this is something we've been. We've been quite active in this area and and I'll say that uh, we We believe that Innovation is very important over time to the economy.

We don't want a stifle Innovation. We don't want regulation to uh, stifle innovation in a way that just, uh, favors incumbents and that kind of thing. But like everyone else, we're watching what's been happening in in the crypto space. And you know what we see is you know, quite a lot of turmoil.

We see fraud, We see a lack of transparency, We see run risk lots and lots of things like that. And so what we've been doing is is making sure that the that the regulated financial institutions that we supervise and regulate are careful are taking great care in the ways that they engage with the um, you know with the whole crypto space and that they give us prior notice and we've issued along with the FDIC and the OCC a number of of you know issuances over of notices to that effect. Thank you and I will close with this I've long pushed for the FED to prioritize workers and for the leaders of the FED we reflect the diversity of our country. We've made progress but our work is not done.

We have a new opening understanding your job to appoint the new Fed Fed member of we have it and we have a number of upcoming vacancies at the reserve banks. I support Senator Reid from Rhode Island Senator Menendez from New Jersey and other colleagues who are pushing for more diverse, uh, diverse voices at The FED Senator Scott Thank you Chairman! Obviously the Chairman and I both have strong passions about challenges that we face as a country. The one thing that I do believe that we agree on is the importance of having a strong Capital markets as it relates to making sure that Americans have the ability to continue to grow their businesses and to solve their challenges. And frankly I hope that we get their building on the same comment that Sherman had her own Capital Standards is where I'm going to go with my thoughts today.

but I think back on these last few years. It's hard not to recognize the extraordinary efforts our financial institutions of all sizes frankly undertook to administer a program like the PPP all while weathering is shut down of our global economy. I Welcome your thoughts. but from my viewpoint, our banking system was resilient.

Our financial institutions stepped up and delivered Aid to support families and businesses every single day. That's why advice chair bars broad comments around holistic review of our capital. Me so much. We should be laser focused on our economy and addressing the needs of everyday Americans trying to afford a new future and helping them open the door to opportunity.

As you and I both know, capital and its quality must be continually scrutinized, but increased Capital does not necessarily provide an increased benefit and requiring Banks to hold Capital that is not risk based and appropriately tailored to a bank size scope and activities can cause more harm than good. At a time of record inflation where everyday needs are more expensive, we should not be pursuing actions that are harmful. Rather, we should be supporting the engine of our economy: small businesses. While I remain greatly concerned by the Vice chair's comments, I am hopeful that you will ensure this review is appropriate.

Keeping the impacts on our banking system front and center, we must promote and further the growth of our economy and thereby our people. Anything less should be unacceptable to that end. Will you commit that any ongoing Capital review by the Federal Reserve will follow the law and that any follow-on regulatory proposals will be risks based and tailored to an institution's activity, size and complexity and not a one-size-fits-all Yes, I can easily commit to that. You know we're very strongly committed to tailoring and uh, that'll be I Can say that anything we do will reflect uh, tailoring, which is a long-held principle for us and also now a requirement in the law.

Yes sir, thank you very much! Two weeks ago I sent a letter with Chairman McHenry to Chair Ginsler regarding the Sec's Climate Disclosure rule, urging him to rescind his proposal and reminding him that the SEC is a market regulator, not a climate forecaster much like Congress designed the SEC to protect investors, to maintain Fair orderly and efficient markets, and to facilitate Capital formation and not to advance Progressive Climate Change Policies Congress Designed the Federal Reserve to promote price stability and maximum employment not to play politics to that end I Find worrying the Fed's announcement of recent actions to consider climate related scenarios coupled with remarks by the by steer of supervision as attempts to incorporate broader Aesg policies into the financial. Services System Banks have and continue to account for weather-related risks and their risk management. but efforts that attempt to predict climate change far into the future fall outside the scope of the of their Authority Importantly, the level of speculation required in these models should highlight their arbitrary and capricious nature At a time when our economy is suffering from historically High inflation I Expect our Central Bank to focus its time and resources on bringing inflation down, not on policy aside of its mandate. I Noted in my opening statement: a recent speech that you've given about the state of the Fed and how you should resist the temptation to broaden its scope and to address social issues.

Do you agree that the Federal Reserve does not have the authority or statutory direction to use its monetary policy or supervisory tools to wade into the ESG or other climate policies. I Do I Do as you know, there is a there's a tightly focused role that we do have that I Believe that we have, but but I would agree with your statement. Yeah sermon I Have 20 seconds left I'm going to defer because of my earlier questions about opening statement thank you Senator Scott Senator Menendez is close, but not here yet so uh Senator rounds whatever. Thank you Mr Chairman Uh, Mr Chairman First of all, welcome.

Um, it's always good to have you in front of our committee. As you know, both core and headline inflation have remained persistently elevated and over the past 12 months, real average hourly earnings fell by 1.8 percent. Uh, four percent Since President Biden took office, make ends meet as prices increase more Americans are leaning on credit cards. At the end of 2022, credit card debt hit a record of 930.6 billion dollars and 18.5 Spike from a year earlier and an average credit card balance Rose to 5 805 dollars.

Over the past year, the FED has acted aggressively to tame inflation and yet we are still seeing price increases as we've discussed this several times. But I recognize that it's been an ongoing discussion. But I believe that this further proves that we have, uh, long been feeling the effects of a policy induced inflation resulting from Decisions by the by the administration primarily cutting off uh, the the Uh, the resources necessary to improve and increase domestic energy production. I Continue to be concerned that if you attempt to use the tools that are available at this time for the FED uh, then I believe that we're going to have a challenge of not being able to address specifically the challenges brought out When you have a policy of promoting higher prices with regard to to energy as opposed to what you're trying to do which is to bring down the total overall cost.

I Just wanted to ask I guess and you're going to think this is something that we've heard before. But do you believe that you currently have the monetary policy tools to actually reduce inflation? and I Just put it in this perspective. In January of 2021, the CPI was 1.4 percent when the Biden Administration began in January of 2022 and this is before the Russian invasion of of of Ukraine CPI was at seven and a half percent. Seven point five percent.

Today March of 2022 CPI is 8.5 percent. Wouldn't it be fair to assess that a lot of the policy or the inflation that we've seen here may very well be due to policy Decisions By this Administration Senator not our not for us to uh to point fingers Uh, our job is to use our tools. You asked whether we have the tools to get this job done and we we do. Over time there are some things that we can't affect, but over time we we can achieve two percent inflation and and we will.

In other words, you've got a limited number of tools available to you and The Limited number of tools that you have are designed to impact simply the reduction in prices and so forth. And yet, if there are competing interests out there that are pushing prices higher, you don't have the wherewithal to decide one tool versus another based on whether it's policy induced or whether it is a matter of a shortage in supplies from outside or whether it's War related. That's right, our our tools essentially work on demand, moderating demand. and we.

so that's that's what we can do. So if if there were policies in place that actually help to reduce inflation, in other words, and by that, I'm just going to look at energy alone just as a good example. If policies were in place that were actually allowing Energy prices to come down in the United States then you would have less of a need to use the very blunt tools that you do have right now with regard to increasing rate increases. Is that a fair statement, sir? In a sense it is.

But I would just say on energy We I'm not trying to get you to a policy discussion with with what the President's doing on his on his energy policy I Just want to make it clear that you have to respond to what's in front of you and it doesn't matter where the inflation is coming from or what's driving it up, you're simply trying to bring it back down to that two percent number with with the only tools that you've really got. Yes, But I will say on energy, energy has tended over time, time to fluctuate up and down and is not. It's not mainly affected by our tools. so um, the things we look at are the thing are really things that are tightly linked to demand in the US economy those we can affect and I think just the fact fact that you've been increasing inflate or you've been increasing interest rates and yet inflation continues to ride up.

Would suggest just as you've just indicated that when you have high energy prices, it's tough to impact that part of it with the power the monetary policy that you've got available to you. So we're really we focus on everything, but we also focus on core in particular, which doesn't include Energy prices. And what's happened is core core. Inflation has come down, but nowhere near as fast as we might have hoped and it has a long way to go.

Thank you! One last question last June Vice Chairman of Supervision Michael Barr Testified before this committee that he would defend the use of the aggregation method as an alternative approach to the insurance Capital standards the ICS proposed by the Iais as the final compatibility criteria set to come out later this year. Can you confirm that you share Vice Chair bars views on this Am I Will confirm that, but I'll have to get back to you on the status of that. Okay, thank you thank you Mr Chairman Thanks In around Center Menendez of New Jersey it's recognized. Thank you Mr Chairman Mr Chairman I Want to take this moment? Uh, to remind my colleagues that there are more than 62 million Latinos that call the United States home.

We are the largest minority group in the country. We account for nearly 20 percent of the United States population. We contribute almost three trillion dollars in GDP Yeah, Latinos have no representation in the Federal Reserve's leadership in the 109 year history of the Federal Reserve Remember folks, a lot of this stuff will end up being political. Unfortunately, we're looking for hints from the Fed and this is an example.

here. When we start getting into like racial representation, it's just politics. politics sucks of. Our country's people are repeatedly drowned out when the FED is making critical decisions on economic policy decisions that affect whether a Latino family can afford their first home, find a job that pays a living wage, send their children to college, save for a comfortable retirement, or get a loan to expand their business.

Right now, the Biden Administration has a clear opportunity to make history with this next nomination to the Board of Governments. It has identified a number of Highly qualified Latino candidates who have dedicated their careers to the fields of economics, who are committed to the Fed's jewel mandate, who will preserve the independence of the Central Bank. The Administration has rightly nominated and advocated for a number of diverse candidates with similar qualifications both at the Fed and elsewhere. But despite having five opportunities over the past two years to nominate a qualified Latino Economist to serve at the Federal Reserve this Administration has repeatedly chosen not to representation or lack thereof does not happen by accident.

It is a choice. And I hope the administration makes the right choice with this nomination. Mr Chairman Uh, would you say that it is um, uh uh, a tourism that the United States dollar is the reserve of choice in the world? Yes, I would. And that brings those enormous benefits? Is it not? Yes, it does.

Now 12 years ago, a republican house brought us to the brink of defaulting on the debt for the first time in history of this country, jeopardizing our credit in the world economy. I'm getting a sense of deja Vu because once again, Republicans are recklessly demanding Draconian spending cuts to programs that hard-working U.S families rely on in exchange for allowing the treasury Department to pay for spending that Congress including most of them have already voted to authorize. If you want to talk about spending cuts, it seems to me that the budget is the time to do that, but not to put the full faith and credit of the United States as risk Chairman Kapow, can you talk about the catastrophic damage a debt default would inflict from the economy? Uh, so I guess I will start if I can by saying that these are really matters between the Executive Branch and and Congress We We do not seek to play a role in these policy issues. Um, but at the end of the day, there's only one solution that to this problem and that is Congress Whatever else may happen will happen.

But Congress really needs to raise the debt ceiling. That's the only only way out in a timely way that allows us to pay all of our bills when and as due. And if we fail to do so. Um I Think that the consequences are hard to estimate.

Uh, but they could be extraordinarily averse, adverse, and could do long-standing harm. Well, it. I I Think that's a that's a mild statement of what would happen. Uh, I Understand I didn't ask you to engage in the Congressional Executive branch roles I asked you about the the abstract question of what happens if you have a debt default.

Uh, isn't even this constant fight putting into question the possibility that the United States will not honor its full faith and credit have consequences within the economy? In principle, it could I think markets tend and and observers tend to watch this and tend to think that it will work out and it has in the past worked out. so it needs to work out this time too. Now seeing your your testimony before the committee, is it fair to say that you'll do whatever is necessary to tame inflation? We have a do We serve a dual mandate and we will. We will do what we can everything we can to restore price stability while also serving maximum employment.

And primarily that means uh, additional rate increases? Would it not this? What other tool do you have? That's where we have the balance sheet. The shrinkage of the balance sheet will continue to, but it's principally rate hikes. So the question is, when does that part of doing anything necessary to tame employment I mean to tame inflation come into conflict with your other Mandate of Maximum employment? It's a good question. Not now.

Uh, where when we have the lowest uh unemployment in 54 years and where we have you know, a labor market that is, uh, extremely tight? Uh, extremely so. But in in that that time could come. but it really isn't Now where we're very far from our Uh from our price stability mandate and in effect, the economy is past uh, most estimates of of uh of Maximum employment. Thank you Senator Kennedy of Louisiana is recognized.

Thank you Mr Chairman, Uh Chairman Powell Thank you for being here foreign. Thank you for to you and your team for helping to save the economy during the pandemic meltdown. For what it's worth, I'm generally supportive of the actions of the FED right now and I'm not going to ask you to that today to blame anybody. Um, when Congress spends money, it stimulates the economy.

Does it not Well, It would depend on whether that's funded by tax increases or not. So there's a spending that's that's not accompanied by taxes would have a net at the margin stimulative effect. Well, and when Congress borrows money to spend even more, that stimulates the economy even more. Does it not at the margin? Yeah.

Congress Reduced variety of growth in its spending and reduced the rate of growth in its debt accumulations. This is more. this has been a second. It would make your job easier in reducing inflation, would it not? I Don't think fiscal policy right now is a big factor driving inflation at this moment, but it's absolutely essential that we do slow the pace of growth.

particularly for the areas of the all right. Let's try to unpack this then. I'm not trying to trick you. You're raising interest rates.

You're raising interest rates to slow the economy. Are you not pull the economy off? Um, and one of the ways you measure your success other than fluctuation and gross domestic product, is the unemployment rate. Is it not? Yes, one of the measures. Okay, so in effect.

I'm not being critical. When you're slowing the economy, you're trying to put people out of work. That's your job. Is it not not? Really, We're trying to.

We're trying to restore price stability. No, you're trying. You're trying to raise. It's not wages.

You're trying to raise the unemployment, right? Yeah, that me I Know you don't like the phrase. So let me strike it. you're trying to raise the unemployment rate. Are you not? Now, we're not trying to raise it.

We're trying to realign supply and demand, which could happen through a bunch of channels like for example, uh, you know, just job openings. Let me put it in another white. Okay, the economists get a wonderful study. They look to at 10 disinflationary periods in America going all the way back to the 1950s.

This inflation is what you're trying to do. It's a slowing in the rate of inflation. Am I right? Yes, in other words, prices don't go down. They just don't go up as fast.

Deflation is when prices actually go down. You're trying to achieve this inflation, Are you not? Yes, we are Okay based on history. In the 10 times that we got inflation down disinflation since the 1950s, in order to reduce inflation by two percent, unemployment had to go up 3.6 percent. Now that's history, is it not? I Don't have the numbers in front of me.

But yes, the standard has been that there have been recessions and downturns when Fed has tried to reduce. Now right now, the the current inflation rate 6.4 percent in the current unemployment rate is 3.4 percent. Now if history is right, I'm not asking you to to again blame anybody. But if history is Right unless you get some help in order to get inflation down from 6.4 percent to, let's say, 4.4 percent and the unemployment rate is going to have to rise to seven percent based on history, That's what the record would say.

Okay, and to get inflation down to 2.2 percent based on history, an immutable fact, unemployment would have to go to 10.6 percent. Would it not? No. I wouldn't I wouldn't That's what the record. That's what the history shows.

Yeah, I Don't think that kind of a number is is at all in place. I Know you're reluctant to admit it and you don't want to get in the middle of a policy, uh, dispute. but I think it's undeniable. It's undeniable that the only way we're going to get this sticky inflation down is to attack it on the monetary side, which you're doing and on the fiscal side.

Which means Congress has got to reduce the rate of growth of spending and reduce reduce the rate of growth of death accumulation. Now I Get that? you don't want to get in the middle of that fight. but the more we help on the fiscal side, the fewer people you're going to have to put out of work. Isn't that a fact? Please answer.

Good workout. Okay sir, it could work out that way. Yes sir, Thank you thank you sir. County Senator Reid of Rhode Island is recognized.

Thank you very much Mr Chairman Uh, thank you Chairman Uh for being here today. Uh, we saw in the wake of covert, the globalized supply chain disrupted significantly and we're in the process of some respects of rebuilding a supply chain with emphasis on sourcing in the United States. What extent did that disruptive supply chain contribute to inflation and to what extent will the new if you envision it, the new supply chain that is located in the United States and other friendly countries affect inflation? So the initial outbreak of inflation was all about uh spending on Goods where people couldn't spend on services. So good spending went way up and the the global supply chain Many many goods are imported.

the global supply chain has collapsed and that was the source of the original inflation. It is now spread over the last two years to housing and also to the rest of the service sector. So to your question we are seeing Goods Prices Goods Inflation has been coming down for some time now. it's still too high, but it's coming down.

Housing Services Uh is is there's in the pipeline, You see the new leases that are being signed and what that tells you is that in the next six to 12 months we will see that come down. But this this big service sector that's everything else which is financial services, medical services, travel, and Leisure uh all of those things. That's really where this, that's the source of the inflation we have now which had nothing to do with the supply. Not much to do with the supply chains.

That's where that's where the challenge is now. And is there anything that you can do that would Target that service area without affecting the other areas? There's not really, you know we are. Our monetary policy tools are are famously powerful, but blunt. Uh, a different topic and that is is you probably aware the assistive circuit to live at a ruling in the Community Financial Services Association versus Cfpb that the Cfpb's funding mechanism is.

By the way, that argument there on unemployment was fantastic. Like really good little debate there. Unemployment: Ten percent? No way. seven percent.

Maybe very interesting, virtually identical ways. If the Board of Governors funding structure will be found unconstitutional, what would the implications be for the country and monetary policy? Well, it would be very significant. but I Have to say I Am we have significant responsibilities, but I would be reluctant to comment on a case that's before The Supreme Court Uh. but it is A it is certainly something that you've had people examine for possible ramifications.

Yes, and you know the central banks tend to be self-funding because of the way that the way they work and that's a key factor of our independence. Uh, uh. We've gone back and forth on the impact of rate Heights on on workers and uh, you've indicated previously that wages uh, have not been spiraling upwards necessarily and that inflation expectations are currently stable. Uh, but uh, the impact on increased interest rates are usually felt more by low to moderate income people.

Um, is there any way you can work yourself out of that dilemma? Um, so where we are right now, of course, is very low unemployment. Wages have been moderating and they've been doing so without. uh, softening in the labor market without a rising unemployment, really. And that's a good thing.

So um, we we really don't know this. The current situation is a combination of more typical supply and demand issues, but also just things that we haven't seen before like like the war in Ukraine like the like the supply chains that you mentioned. So we have many unusual factors and I don't think anybody knows with confidence how this is going to play out. Thank you very much Mr Jim Thank you I'm gonna read: uh Senator Brett Alabama is recognized.

Thank you Mr Chairman, uh Chairman Powell It's great to have you here today. Uh, over the past two years we've seen the highest inflation of my lifetime, driving up costs for American families across the board. According to the U.S Department of Labor, the annual inflation rate in 2021 was seven percent and in 2022 it was 6.5 According to the U.S Department of Agriculture, the cost of food went up 10 in 2022. And the real effects of that is moms and Dads across this nation that are working to put food on the table for their kids for their babies had a harder time doing that.

This has devastated hard-working Americans causing a kitchen table she's really Smiley while saying this terrible stuff as the price of food energy have all skyrocketed. In response, the Federal Reserve has the Federal Reserve more than four percentage points. Being far from transient, inflation has remained persistent, high and well above the Fed's long run goal of remaining under two percent in the coming year. What factors and indicators are you paying attention to as you and the Federal Open Market Committee decide on whether to increase rates? So um, I'd say a couple things to that first.

Uh, we're looking. We're going to be looking at inflation in the three sectors that I mentioned the good sector, the housing sector, and then the broader service sector. And we need the the inflation that's already underway in a good sector to continue and that's really important in in the in the housing sector, we just need the time to pass so that that reported inflation comes down and it's effectively in the pipeline as long as as long as new leases are being signed at relatively small increases. So we'll be watching very, very carefully though at at the larger service sector, which is 56 percent of the of consumer spending and more than that of what of what's currently inflation.

So that's one thing we'll be. We'll be watching that very carefully. Also, we raised rates very quickly last year and we know that monetary policy tightening policy has delayed effects. It takes a while for the full effects to be seen in economic activity and inflation, so we're watching carefully to see those effects coming uh into play.

So we're and we're We're aware that we haven't seen the full effect yet and we're taking that into account as we as we think about rate hikes. you're looking at this Um session. but if there were an increase of energy production in this country, do you feel like that would help drive down inflation? Well I think over time more energy would mean it would mean lower energy prices. but we we were very focused on the on the on what we call Core inflation because that really is that is what is driven by.

you know really by demand and our tools are really aimed at Demand Right understood. But I feel like the cost of energy is not just what you pay at the pump, it ends up affecting every good um across this great nation. Additionally, I'd like to ask you about Labor participation. So when you look at the unemployment rate and we've heard my colleagues discuss people having to be displaced in order for us to maybe get to the inflation rate that that we would like as a nation I'd like to focus on the labor participation rate.

so right now it's 62.4 percent. If there were an increase and people coming back into the workforce, um, would that be a positive factor with regards to driving us down to the two percent rate that you actually want to achieve? I I Think that it would I Mean remember those people coming into jobs that would be that would be great because the economy clearly wants more people than are currently working. Of course those people would then spend more so it wouldn't be a zero-sum game, but it would be great for the country and great for them if they were to come into the labor force. Amen.

Um I Believe that increasing in capital requirements on financial institutions would have a chilling effect act on the economy and the availability of financial services. And last week I joined many of my colleagues in sending you a letter that expressed concerns that if the Federal Reserve decides to conduct a quote holistic review of capital standards as we heard Senator Scott talk about earlier, so is the Federal Reserve Concerned that the impact to the economy of increasing Capital requirements on financial institutions at a time when inflation remains persistently high would would cause an issue? So I think it's always a balance. We know that higher Capital makes Banks safer and Sounder We also know that you're you will at the margin provide less credit the more Capital you have to have I So but I think it's It's never exactly clear that you're a perfect equilibrium and it's a fair question I Think to look at that. um, out of respect for the Chairman and trying to stay in my time I Will just end by saying um I heard what you said Obviously, as you have said, the Federal Reserve Reserve is not and will not be a climate policy maker I Just want to thank you for your public statement on that I Agree with you that there's a difference between policy makers and financial regulators and certainly look forward to working with you in the future.

Thanks Enterprise Senator Uh, Warner from from Virginia is recognized. Thank you Mr Chairman Chairman Powell It's good to see you again. Let me, um, start by saying I depending on who's asking questions or either pounding you for how quickly we're going to drive that inflation back to two percent or pounding you on making sure that we don't push the economy into a recession and drive up unemployment I Got to tell you, you know and it's uh, these are maybe not the cheap seats uh, but I actually think you've done a pretty good job in in terms of both ratcheting uprights and then starting to tail tail off a little bit. I Think we all were concerned by the January numbers were popped up a little bit more.

um I Wish Mr Chairman we're actually having this hearing two weeks from now because we're gonna have a lot more data later in this week and next week. But I want to net net? Um, it's We've still got ways to go and the January numbers were concerning. but I do think your tailored approach um, we can all second guess but I think it has been the right approach. I'm going to commend you on that.

I'm going to get into get two questions in one. One of the areas that I am very worried about is commercial debt. I mean we've got a a Bloomberg story here showing you we're going to hit a six trillion dollar wall this year on refinancing. Where I'm particularly concerned is the issue around commercial real estate.

Um, as we recover from Covid, a lot of things are getting back to normal, but clearly the transformation of where people work is going through a fundamental transition. and uh, I hope people do return more to the office, but lots of folks prefer working working elsewhere. That's going to fundamentally change the real estate market. Uh, in on the commercial side and I do believe we're going to hit potentially a cliff here of uh of of a totally unexpected problem in terms of commercial real estate.

How are you looking at that issue and recognizing there's lots of bumps coming out of covert? This one seems to be more unique in nature and and how are you thinking about that issue? So the first one on Commercial debt, business debt. generally the it's It's kind of been moving sideways as a percent of GDP so you don't see, you don't see a big spike going on or anything like that. Um, uh. However, of course there are pockets of of concern and particularly you pointed to.

Um, see to uh, the refinancing Spike that has to happen. and I've seen those come and go before. Generally, markets can absorb them, maybe at a much higher rate this time, but it's something that we were well aware of and watching carefully. In terms of cre, I would agree with you the The: The: the occupancy of Um of office space in many major Uh cities is just remarkably low and and you you wonder how that can be that's over time some of that's going to be made into Condominiums and things like that since we know we don't seem to have quite enough housing um in some places.

Um, but the question is, what's the financial stability risk? It's it's not great for the largest institutions don't tend to have a lot of direct exposure to that. Some smaller Banks actually do medium and small size. Banks Do we carefully monitor it? We we agree that that's a that's a an area that requires a lot of monitoring and um, you know I'd say we're on the case So well that will morph me into my last question. Something we've talked about in a lot of my colleagues have talked about what the large institutions otherwise I mean I I Do think even some of the biggest critics of Dodd-Frank I think would acknowledge our banking system is a heck of a lot stronger and then was able to withstand um, uh, coveted in a very healthy way.

But what we've also seen evolve is a vast amount of financial institutions move beyond the regulatory perimeter. You know the fact that we now have way over half of the mortgage origination coming from um, non-financing institutions because a lot of the the large entities um, hedge funds, other funds that may be doing some of this commercial debt or some of the cre, uh, debt? um I'd like you to talk. generally in the last 40 seconds or so of you know how you think about this regulatory perimeter. I'm a big believer I Know some of my colleagues are that you know, uh, that we ought to look less at Charter and look at same risk.

same regulation maybe as a as a guiding principle and you know Senator Warren's been working on some work I've been working on some work around crypto around that that area, but there's a vast amount of activity that's taking place outside the regulatory perimeter. How should we be thinking about that? And how do we make sure that doesn't create the kind of uh, crisis sneak up that happened in 2008 on the non-regulated side of the house. I Think you articulated the principle very well. It's same activity, same regulation and that's that covers crypto and and all kinds of other activities people are going to assume when when they deal with something that looks like a money market fund that it has same regulations, money market fund or bank deposit and so stable coins need need some attention in that respect.

I Just think that's that's the basic principle and you're right, So much of our uh, so much of intermediation has moved away from the regulated Banks really for a long period of time and we got to keep an eye on that. we can keep looking at it. Thank you Senator Vance I'm sorry Senator Hagerty of Tennessee Thank you Chairman Brown And um, thank you very much Ranking Member Scott for holding this hearing Chairman It'