Thank you! What's going on guys, it's Ricky here with talk about Solutions So Jerome Pal is going to be speaking live today answering some questions. um and I thought that I would live stream it here so it's going to be live in hopefully three minutes. So 11 A.M Eastern Time or one and a half hours from when the Market opens. I Appreciate you guys tuning on in.

Um, if you guys have any questions along the way, feel free to ask me anything. You do have to be subscribed to the YouTube channel to partake in the little live chat. Uh, but yeah, ask me anything. I'd be more than happy to answer any questions you might have.

So now we pretty much wait. They got some soothing music in the background. Not bad. not bad here.

It goes big. JP during water. Is that Jakey some water? Oh you got it. We gotta drink water with the boys.

You see them all drinking water There We go there, we go. Oh, they don't drink out of a plastic bottle I have to drink it out of the cup. All right. As of right now, we have NASDAQ Market at support range so please be aware of that.

So I'm gonna be going back and forth just checking on the NASDAQ Market Of course it is a true honor today. Chair Jay Powell and former chair and hope you guys enjoy! Thank you very much for being here! I've very much been looking forward to this conversation I'm sure our audience has too, so let's just get to it. Um, this conference, uh as everyone knows is dedicated to the memory of Tomas Laubach And earlier this morning we heard some personal Reflections on working with Thomas from secretary Janet Yellen also former chair of the Fed and from President John Williams and both of you worked closely with Tomas as well. So I'd like to give you both an opportunity to share your own thoughts about Thomas's contributions as an economist as a central Banker as a colleague.

then maybe we can start with you sure and it's great to be here. I was Thomas's thesis advisor and he worked with me on a book on inflation targeting when he was still a graduate student and that was a long time ago and he was not yet in his exalted position at the FED when I was doing Jay's job. So I don't have any short little anecdotes to give. but I do want to say that I think there are sort of two kinds of accomplishments that a person can have.

They can have curriculum Vitae accomplishments and they could have what I call Eulogy Curriculum Vitae accomplishments are things like published papers and promotions and awards and recognition. Eulogy accomplishments are the things your family remembers. You know, your, your kindness, your your support, uh, helping other people and so on. Uh, Tomas was one of the people who a few people who uh scored high on both dimensions um on on the CV side.

Uh, you know, beginning with his work with with me, he had a tremendous input into the Federal Reserve's framework. uh, working on inflation targeting. Working on the more recent Fed framework, he did work I'm sure John Williams talked about his work with Tomas on the on the on the natural rate. He worked on the effects of deficits on interest rates.

Again, another contribution. So a person who made a lot of intellectual contributions to important points. but as a person he was just a very warm, kind, friendly, helpful person. and he was just a joy to work with.

And you know I'm glad to be here to you know say to say this about him. Thank you Okay, thank you Trevor Um, first of all, let me say this: This conference is a very fitting tribute to Tomas and I'm really delighted and honored to be part of it. my thing. My thanks to those of us who made all this happen here today.

So I I First met Tomas when I joined the board as a governor uh in May 2012 almost exactly 11 years ago and in preparing to join the board and then in the early years at the board, I I was very focused on developing. You know, a deeper background in macroeconomics and monetary policy. Many people here at the board supported me in that process. too many to name here, but I will say Tomas really stood out and it was during the process of reading.

You know the literature And discussing it that I really started to get to know him. He had this great ability to communicate complicated ideas, he obviously loved talking about economics and he his great enthusiasm and willingness to engage with me a you know, a new governor was uh, immediately evident. He was very gracious to me and we had a lot of informant informative discussion. So rather than being his teacher I was really his student in those early years.

As you know by the time as you noted to her, by the time I became chair in 2018, Tomas was the head of the Division of monetary Affairs and in that role he was a trusted advisor to me and to the Fomc. His leadership was particularly important as the Fomc conducted our first ever public Monetary Policy review. He played a major role in organizing that, identifying key topics, and organizing the staff all through the Federal Reserve System. He also played an absolutely essential role during the critical period of the pandemic at the very beginning when we were marshalling our forces and our tools to stabilize the financial system to protect the economy from even more dire consequences.

And through it all he he did come through as not just for his dedication, his great intellect, and his his Mastery of monetary economics, but also just for his kindness as a human being and just as it being a terrific, great colleague and a great person. Thank you! I Think there's a lot of agreement for the sentiments that both of you have expressed. Appreciate that Um, before we get to some questions on some current issues, I Did want to ask you both about any formative experiences that you may have had that have shaped your views, particularly about your thinking about monetary policy. Paul Volcker in his oral history interview, tells the story of his mother, who was adamant that he received the same dollar value monthly allowance when he was in college that his older sisters did 10 years prior.

and of course he was not too happy about that because inflation in the interim obviously eroded the real purchasing power of that allowance. So as The Story Goes that was the beginning of his personal commitment to Christopher. So Jay do you have any such uh stories to tell? Maybe maybe not quite that on point, But so I graduated from college in 1975 during what we now call great inflation and at same same College year as Ben and I started working as a lawyer in the financial sector in the late 1970s I Recall from that time a growing sense that high inflation was essentially a permanent part of the landscape, just something that we all had to accept and deal with, and that the cost of getting rid of it were too high so you just were getting used to it. Of course.

Ultimately, the FED did step up and restore price stability. And one lesson from that era is that price stability is really the foundation of a strong economy, and that the economy doesn't work for anyone without price stability. Another is that high inflation is it is. When we have high inflation, it is the responsibility and the obligation of the Central Bank to restore and sustain price stability.

So today, while inflation isn't as high as it was when I was in college, it's nonetheless far above our two percent objective and many people are currently experiencing High inflation for the first time in their lives. It's not a headline to say that they really don't like it, you know? So we are very aware that high inflation imposes significant hardship as it, uh, it reduces purchasing power, especially for those who are at the margins of the economy and living. paycheck to pack to paycheck, you need to use all of their incoming income to pay for food, housing, and transportation and other other. Essentials And that's why the committee is so strongly committed to returning to our two percent goal.

We think that failure to get inflation down would would not only prolong the pain, but also increase ultimately, the social cost of getting back to price stability, causing even greater harm to families and businesses. And we aim to avoid that by remaining steadfast in pursuit of our goals. Thank you! Sounds hawkish. Well, I had mentors Uh, Dale Jordan said at Harvard and Stanley Fisher at MIT in particular.

but I'm going to tell you about something that happened to me when I was six years old I used to visit my grandparents in Charlotte North Carolina during the summer a lot of Stories on the front porch of their house and listen to my grandmother tell stories about her life and she told about how she raised her family in Connecticut in the 1930s during the Great Depression and it was a town that was specializing in shoe manufacture and during the Depression a lot of the factories were shut down and she told me that uh, you know it was a very hard time. a lot of the kids went to school and tattered shoes or maybe no shoes at all and I said Grandma why would they do that and she said well, because their fathers lost their jobs, why did they lose their jobs because the shoe factory shut down now I was only six years old but I could see the problem with that argument I said well, why didn't they just open the shoe factory and make shoes for their children and she said it doesn't doesn't work that way but I think it was really it was a puzzle to me that you had to same productive capacity in 1933 that you had in 1928 and in 1928 people were dancing to Charleston In 1933 they were in red lines and that really impressed on me. You know that that economics can make really big difference in people's lives and monitoring policy is like that. I Mean it's as uh Jay of course and all of you well know that the decisions made in this building have a very Broad and real effect on people's lives For that reason besides it's intellectual Fascination studying and understanding.

Thank you I Know that's certainly a key motivation for many people in this room to be working so hard. Um, okay, let's now turn to some Uh topics of more current interest. Um, and I'd like to start the Nexus between the financial system and the macro economy. Um, both of you, uh, during your 10 years as chair have faced very significant historic Financial crises.

Then obviously you confronted the global financial crisis and Jay the global pandemic. Those episodes were clearly acute. very Vivid examples of the connections between the macro economy and the financial system as well as I think a good illustration of the role of central banks in such episodes. But then your research, importantly, and the research that you have inspired has really demonstrated that understanding the connections between the financial sector or credit markets and Banks and the real economy is critical for even understanding traditional business.

Cycles So with that is background, we have just experienced a period of stress in certain parts of the banking system here in the United States So I Want to get your take on those developments, how you think they've they match up compared to some previous episodes and what they might mean for the economy. well in some Dimension The recent crisis has followed as the standard sequence I don't know anything about Silicon Valley Bank other than what I read in the paper so please you don't misinterpret this, but it was a classic situation where they had assets that were subject to risk in particular as interest rates Rose the value of their long-term assets fell and their Capital fell. They had hoped to hedge that by their deposit franchise where as interest rates Rose and interest rates moved more slowly on deposits that would partially compensate, but they were dealing with customers who were very media social media Savvy and that didn't really work. So after the decline in capital you had the second stage which is runs people taking out their money which ultimately LED uh to the collapse of the bank.

despite I may add the good efforts of the Fed and the FDIC to provide liquidity and provide support for depositors. The third stage of the banking crisis is Contagion and people looked at other Banks and said oh they look sort of vaguely like Silicon Valley Bank got the same number of letters in their name and all kinds of things like that and and that caused for caused people to begin to remove you know, deposits uh elsewhere. And finally the the reason this is important is that It ultimately affects credit conditions. and the Federal Reserve is of course, looking at the effects of of Bank problems and and other Financial issues on the extension of credits and therefore on on on the real economy.

Um, so you know in that respect I think it's very similar to other crises I Think it's different from the global financial crisis in many ways, including its scale and scope of course. But I would mention a couple of things. A couple of important differences. One is that the impaired asset in this case was U.S treasuries.

uh, which are very different in Assets in kind from subprime mortgages in that U.S treasuries can always be valued accurately and so there's not the uncertainty. Yeah, Jerome Powell is going to speak after this mortgages. And secondly, as the economy declines, if it does decline, uh, U.S strategies actually become more valuable rather than less valuable. and so there's this kind of a counter-cyclical effect.

So that's that's one very important difference. I think and then the other. uh. Worth mentioning it, but very important is that relative to say that GFC or the Great Depression overall, borrowers are in much better shape you know than they were in these previous episodes.

and that makes a big difference both in terms of the stability of the banks and also in terms of the impact on consumer spending and the economy in general. Yeah, so for those that are unaware, which is the guy that just spoke the previous, the former chair of the Federal Reserve took Uh through through the use of your liquidity tools and including the creation of the bank term funding program. However, in deploying these liquidity tools that is common, you know, against this backdrop where the preeminent monetary policy concern is high inflation. and that's of course, a little different from some of the earlier episodes and has raised uh, renewed discussions about Uh, the so-called separation Principle, right? And so I wanted to ask you how you think about uh, the use of financial stability tools and liquidity tools as opposed to more traditional monetary policy tools and how they fit together.

It's an interesting question, but I Want to start by saying though, that the overall, the banks and the banking system are strong and resilient and well positioned to deal with the challenges they may face now or in the future. So as you pointed out, we do have separate tools: monetary policy to achieve our macroeconomic objectives, liquidity Supervisory, and Regulatory tools to address Financial stability issues. But I see an important distinction between this separation isn't the separation principle separation and Independence Our tools can have separate objectives, but their effects are often not entirely independent. so the tools are complementary almost all of the time.

because financial and macroeconomic stability are so deeply intertwined. In fact, our consensus statement notes that sustainably achieving maximum employment and price stability depends on a stable Financial system. So because they're so intertwined to me, there's not likely to be an absolute and complete separation of the tools. nor is that possible or desirable.

And I Think As Ben's research, research and the global financial crisis demonstrated Financial stability affects macroeconomic stability and vice versa. We saw that clearly at the outset of the pandemic. As a result, the tools that we use to address concerns in either Arena can and will affect both the especially during extreme circumstances. That said, yes, the tools are separate.

they have individual purposes, and most of the time each can be used for its intended purpose without comprising compromising the other. For example, as you pointed out, when banking stresses emerged in early March, we used our liquidity tools, the discount window, and the bank term funding program to make liquidity available to banks that might need it, and that liquidity supported the stability of the financial system without restricting the use of our monetary policy tools to promote price stability. While the financial stability tools help to calm conditions in the banking sector, developments there, on the other hand, are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring, and inflation. So as a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals.

Of course, the extent of that is is highly uncertain. Thank you Um. And of course that and I think the effectiveness of those tools is reflected in in the fact that the Fomc Um has actually raised interest rates twice since the emergence of the banking strains. Uh, of course in that largest drops from the inflation issue.

Which brings us to our next topic which is in fact inflation. Um, you know, in the Pandemic in the aftermath, we've had many renewed discussions of the important and classic textbook distinction between Supply shocks and demand shocks. and in particular the particular challenge is that Supply Chuck can present to to a central bank. Um.

And that's also raised a lot of questions in in Academia and policy circles as to whether or not the inflation process post-pandemic is going to look quite different than prior. Um Jay Maybe we can start with you. A number of folks have uh argued that we are entering a new period where Supply shocks will be more frequent. We'd love to hear your views on your whether you think that's a possibility and what that might mean for central banks.

so it's it's a great question and it's one I think we'll be dealing with for for quite a long time and I'd say it's certainly possible that we'll see continued Supply shocks. I Also think it's just very hard to forecast that with any confidence as Yogi Berra is thought to have said Ben you're the baseball expert you can you can confirm or deny this, but it is difficult to make predictions, especially about the future. So I Think that the best we can do at this stage is probably to just identify the factors that we think can lead to further. uh, negative Supply Shocks I Will say that though that's positive Supply shocks related to Globalization largely probably contributed significantly to the period of low inflation that either ended or was interrupted by the onset of the pandemic.

and I'm thinking there of the vast increase in global labor Supply the development of efficient Global Supply chains you know, facilitated by technological advances and things like that. and I would say those positive Supply shocks do not seem likely to be repeated at the same time. The drivers of the current inflation area search certainly included a sequence of large negative Supply shocks to the global supply chain for goods, which also experienced a large and persistent shift in demand from services to good to goods and also the supply of workers. On top of that, Russia's war against Ukraine brought shot further shocks to Global Supply chains, particularly supplies of energy.

Non-emergency Commodities So we we can't know how persistent those shocks will be or whether further negative Supply shocks will come along. Will the globe? Will globalization be partially or or fully halted or reversed? Will it resume again as the pandemic mercifully recedes into memory? We can't really know that now, But for policy makers, the bottom line is that central banks will continue to be responsible for providing providing price stability and that will require us to navigate navigate whatever additional Supply shocks do occur. So as Tomas and Ben and their co-authors wrote in the inflation targeting book, what a central bank can do is control inflation and that is true over time, even in the presence of Supply shocks or should they come Ben would love to hear your reviews on this. So unusual events which disrupt normal economic functioning often are followed by inflation.

Examples are: World War One World War II the Korean War And now the pandemic and the pandemic just makes it harder for policy makers to understand what's happening and to react appropriately. And in particular, the pandemic scrambled the labor market made it harder to judge the state of the labor market. It the opening led to a very extended rise in commodity prices which was difficult to deal with. We had supply chain issues which was a pretty much a new thing which was also a contributor to do inflation.

So there are many features of the pandemic that made this an unusual episode and a difficult episode to address. Um. That being said, I think that and I've done some research on this with Olivia Blanchard that we're presenting next week. Um, the the basic mechanisms I think are still the same if you, but you have a bunch of bad shocks that's going to give you, a problem.

but uh, the underlying mechanisms of Supply sharks and hate Vapor markets and so on are really the same. So I think you know I don't think it's been a major change in the underlying process that generates inflation only. Uh, a series of shocks related to the pandemic that gave us this uh, this episode going forward I agree with Jay that we we can't predict. Um, you know what new shocks will come.

We've got new technologies out there that might you know, make big changes in our economy. Um, we've got uh, you know Green investment things like that that might affect the price and availability of fossil fuels. and so there are many, many things that we can't can't predict. But I I Think that broadly speaking, that uh, the inflation process has not changed and it's one aspect of that which is very good news is that the Federal Reserve's credibility has helped keep inflation expectations, particularly longer term inflation expectations reasonably well anchored, which is always sort of the first step in getting control of inflation.

You mentioned the role of the labor market tightness in the inflation process. I Think it's quite striking that prior. Right on the eve of the pandemic, the unemployment rate was around three and a half percent. to you know, five decade low.

yet at the same time, inflation was kind of struggling to get up to two percent on a sustained basis. Here we are in 2023, the unemployment rate is roughly at the same level as it was prior to the pandemic, but of course, inflation is far above, uh, two percent. Um, so in that context, should we be thinking about the relationship between slack in the labor market and inflation differently? Do we not have the right measures of slack? Is it the problems with understanding what the natural rate of unemployment is? Or is that really? Or it's like, really, not the key to understanding inflation in the first place? Okay, you want to take that away first, as I was talking about before. I Think that the pandemic, to some extent scrambled the usual signals to the labor market, and the Federal Reserve over time has begun to put more weight on things like the vacancy to unemployment ratio, which seems to give a better signal in a period of change when the labor market matching process is a change then the unemployment rate.

So there has been some scrambling of those signals. That being said, it's a simply not true that you know even in people who understood since the 70s, that there's not a simple inverse relationship between inflation and unemployment. In particular, what can break that relationship is Supply shocks. And so during the 70s, we didn't particularly have tight labor markets.

Most of the time we had high inflation a because we had oil price shocks, which the FED did not respond to adequately be because inflation expectations were not well anchored and there was a strong tendency for price increases to feed into wage increases to feed into price increases. So because of the presence of Supply shocks and inflation expectations Dynamics There's no reason why you know low unemployment and high inflation can't coexist, but the remedies might be. you know, depending on the situation might be somewhat different. Okay, how are you thinking about that? It's a very much in agreement with that, you know it.

It's certainly true that we had uh, both before and after the pandemic. Inflation Very sorry. Unemployment: very low, close to three and a half percent, but that we only had high inflation after the pandemic. Does that mean that our understanding of the relationship between slack and inflation is badly wrong, or that has changed fundamentally after the pandemic and my answer would be tentatively no to both of those questions I Think what? What really is different? This time was a series of unexpected and persistent Supply shocks that featured in the inflation process.

Think labor market slack was a particularly important getting rejected off that moving average inflation when it first spiked in. Spring It's like it's likely to be an increasingly important factor in inflation going forward. In particular, inflation and monetizing services is showing signs of real persistent in this highly diverse sector. Labor costs are a high proportion of total costs, and and that sector happens to account for more than half of of of the core Pce index.

Um, But all of this, the point is, all of this can be explained I Think using our standard framework for understanding labor markets like you could say it this way that the natural rate of employment probably Rose sharply as the pandemic severely disrupted the labor market. and the implication of that would be that an unemployment rate of say four percent uh indicated a much tighter labor market in 2021 than it did in 2018.. And as Ben mentioned, of course, after the pandemic, we began looking at much more closely at alternative measures particularly vacancies but also quits which have been signaling even greater tightness than the unemployment rate alone might have been might have thought to have to signal I mean to to put some numbers on it. Um, We at the end of 2018 and the end of 2021, we had four percent, roughly unemployment.

In both cases, in 2018, the vacancies to unemployment ratio was one to one. Essentially, in 2021, it was two to one and that was a much better indicator obviously at that time of the simple stand-alone unemployment rate. although as I mentioned, you could also think of it as the the natural rate being highly elevated. The other thing is, you know the it may also be the case that the Phillips curve has steepened, meaning that inflation has returned at least for now to being more responsive to changes in the labor market in labor market slack.

But you know, the Phillips curve. Um was once thought to be fairly steep after flattening relationships in the economy like the Phillips curve evolve over time. So I would not characterize that as a problem for our understanding of inflation. Very good.

Thank you. Maybe we can pivot here to the topic of Central Bank Communications It's widely understood now that the better the public understands the conduct of monetary policy, the more effective it will be. But fostering that type of understanding really requires a lot of communications. and of course, that can be hard.

Both of you have been powerful advocates for advancing monetary policy Communications both with an eye toward making policy more effective, but also for the purposes of promoting transparency and accountability. Um, then you've obviously played a critical role here, advancing the Fomc's communications, including the introduction of press conferences after Fomc meetings, the introduction of the Summary of Economic projections. So what changes over this period? Uh, since the communications say Revolution began, Would you highlight as being some of the most effective, most important, and where does some remaining challenges exist? Well, let me talk about communication because I Think you need to understand that it serves multiple purposes I mean one of its purposes. the narrow purpose is to try to align Market expectations with the Fed's own thinking.

I think that goes back to Alan Greenspan or you go back to 1994. The first Fomc statement I mean since then, uh, you know the FED has tried at least to give some indication of what's thinking and what it sees as the risk to the economy. But beyond that you mentioned transparency and accountability. This is a powerful institution.

It's very important that it be account to the Congress and to the public and best way to do that is explain what we think, what we're doing. Look at that you know and how and how we're going to go about that. There's other reasons for Uh communication. One I would talk about is social support.

Right now we're having a conference here. Um If The Fed puts out the issues that it's concerned about. Um Economists will write articles or or tweets and respond to that. Or in the case of the FED Listens program, Maybe it would be more ordinary people who are explaining you know how monetary policy affects them.

One final thing I would mention is is diversity of views because the FED has a consensus culture and that very few dissents. Normally the outside perception is the Fed is the subject to group think which of course is possible. but with people talking about you know their own views and explaining why they you know why they see the economy as as they do it does. I Think watch for the breakup support on NASDAQ That's a range of opinion Here it goes on.

Committee in terms of of Uh tools: I I guess I Do feel proud about the press conferences which I introduced four times a year after the summary of economic rejections in which chair Powell has taken to an art form um and uh the Uh I think Also, you know just the Uh, the inflation Target the Uh Lodge the forecast that we release and there's a cultural change which some people don't like but I think I know net is is good, which is it used to be. If you look back at speeches in the Greenspan era, the President of the Federal Reserve Bank of Minneapolis you know would talk about you know, harvests or something wouldn't talk very much about the global or national economy. Now you have a lot of people talking about. You know the different aspects of the Federal Reserve's views and uh again, that contributes Uh to both Uh Market transparency and also to accountability to the local consistency into The National constituency.

They of course have continued to push forward on the communications and transparency fronts. Welcome your thoughts, you know I Think the broader setting is that um transparencies especially important today. Polling data show that many important things look in private institutions globally have struggled to retain The public's trust and support in recent years. Now we're an institution that serves a critical public.

Mission But to to be here and work here is to know that the particulars of what we do and how we do it are not generally top of mind for for most people. Um, and on top of that, we have a critical and a rare Grant of Independence And all of that to me means that we have a special obligation to explain ourselves clearly what we do. Why we do it to provide transparency to the public and their elected representatives in Congress so that we can earn and deserve their trust and support. And that's that's a critical task if we are going to sustain our Democratic legitimacy through this this, uh, interesting period.

My colleagues and I really take that as a primary and affirmative, proactive obligation and not something we see as a burden or of sector second order importance. So in that, Spirit to your point, we have followed the example of Chairman Greenspan beginning in 1994 with the first post-mating statement. through Ben's you know Innovations and Janet as well and looking to Foster greater transparency and accountability and a couple of examples. We now do a press conference after every meeting, not just every other one.

We have greatly expanded our Congressional Outreach to be certain that we hear directly from lawmakers on an ongoing basis so that they and also so that they have the information that they need to conduct appropriate oversight. As I mentioned in, in 2019 and 20, we conducted a public review of our monetary policy framework, seeking input from a broad range of people and groups all around the country, we've also significantly expanded transparency Beyond Monetary Policy for example. we now publish semi-annual Financial Stability and Supervision and Regulation reports. Of course, there are always communication challenges, especially I find about communicating the uncertainty that attends assessments of economic conditions.

and the Outlook And a good example of this is, despite our persistent efforts to explain otherwise, the policy policy paths from the SCP seem regularly taken as a firm plan or a committee decision rather than what they are, which is a compilation of individual participants' best assessments on a particular day of appropriate policy. Well, the movies Baseline forecasts. That's just the challenge that we we constantly face in the context. it does certainty.

Despite that. I Would say though, that the Summer of Economic Projections has actually been very useful during this time. yesterday's resistance. You know, long before they're actually implemented testing three, three, six, your last Point really? uh brings up the idea of communications as being an effective policy tool.

Uh. and I Guess the key element of that is the use of forward guidance. Um. Jay In one school of thought, forward guidance is a tool and more to it should really only be deployed when interest rates are at the effective lower abound.

and so eight thousand dollars Further, not too shabby. Communicating about the policy in the future keep adding to it. But another school of thought: oh yeah, you want to to convey the committee's policy I'm waiting for the break below 36 dollars a share. Circumstances: I I Do think that forward guidance can be useful when policy makers have a materially different or clearer after a super slow week After a couple of my red days public, it's nice to be back.

We have the effective lower bound when we need to provide more stimulus by indicating an intent to keep policy accommodated longer than the public expects. there's there's a use case there. I Also would say though, that Communications for the audience to ask about admissions sparingly when the course of policy is either reasonably well enough that's why we're here, or on the contrary is so, uh, dependent on uncertain future developments. That little really can be said, uh, constructively about the future.

And a good example of that was the March 2020 FMC meeting the Pandemic watch for the break below 36 the level of certain he was almost done. If we could hit ten thousand dollars at that point. Really, our view was that releasing a forecast at that time might have been more of an obstacle to clear communication than a help. Uh, 36.

as I mentioned a minute ago, Ford guidance has really been a useful and effective tool during the current tightening cycle. as Financial conditions have tightened well in advance of actual rate increases. You know the two-year Titan between the September 21 meeting and the and liftoff in March So 20 had tightened by 200 basis points before we ever actually lifted rates. And that's significantly because of our communication.

Until recently, it's been relatively clear of course how overbought we are in our forward guidance has said so Huge pullback potential. Now however, we've come a long way in policy tightening and The Stance of policy is restrictive uncertainty about it. You could always find the support here or tightening so far and about the extent of credit tightening from recent banking stresses. So today our guidance is limiting limited to identifying the factors we'll be monitoring as we assess the extent to which additional policy firming may be appropriate to return inflation at two percent Two Six is the best that you're going to get today.

All right, let's see will be an ongoing one as we move ahead meeting by meeting. Having come this far, we can afford to look at the data and the evolving Outlook and make careful assessments is Lee correct, Thank you Jay you mentioned or yeah, this can be useful at times when the public may expect a very different policy path than policy makers. How do you think about those sorts of situations? You're right. So recently, it has sometimes been the case that markets appear to be pricing at a different rate path than the committee expects will be appropriate.

But I assume that disconnect does not seem to reflect a misunderstanding of our reaction function or a lack of belief that we'll do what's necessary to bring inflation down. Rather, it appears to reflect simply a different forecast, one in which inflation comes down much more quickly than the committee committee participants think is most likely perhaps due to a significant downturn I would say. Also, so far, the data can have continued to support the committee's view that bring inflation down will take some time. Oh, moreover.

uh, Anyway, something we we often don't remember to think about is that market prices always reflect both expectations and compensation for risk. And what? Martis what Market participants say in surveys of their expectations is actually closer to the views in the Sep than what is reflected in market pricing. So ultimately, my colleagues and I have our forecasts and Market participants have theirs. Our role is not to advocate for our forecast.

What we can do is be clear about our expectations for growth, unemployment, and inflation and the likely implications. Let's go for policy as well. Policy economy were to differ material before our expectations. And of course we do lay out our individual forecasts quarterly.

All right, let's not get too excited again. then. what would your takeaways be For my reminder again for all of our beginner Traders out there guidance as a policy tool. Do not hesitate.

Don't be greedy, lock and profits whenever you see a city, I'm getting excited I Want to lead by example: I Want to make sure that you guys you know don't go from Green trade to a red trade? Uh, one thing that we always try to preach to our learn plant profit team is never afraid to lock in profit have an exit plan. Yet it's good to get excited. It's a Friday I get a lot of excitement out there I Wish you guys nothing but the best Locking those profits or at least have an exit plan so you don't give it all back I'm always trying to look out for the beginner Trader Please just because I have an open position doesn't mean that you need to have an open one. Just a friendly reminder actually helps achieve the objective.

Stealthic forward guidance is basically just a forecast. Here's what we think: I like that day tomorrow I Think something different, but we're just trying to. As part of our transparency, we're just trying to give you a sense of where the economy is going and how we think policy will will react. Watch that.

as Jay points out there, there are some problems in practice. Um, let's go. One is people don't understand, right? the difference in a forecast which is enormous. So I I Don't think you can do without some forward guidance because the idea of transparency says here's what we see and here's how we're thinking.

And so the idea that there's no guidance at all most of the time I mean I I Take March 2020 as a counter example. but most of the time you do want to give at least a sense of where you think the economy according to the policy are heading. I think Uh, just okay. so Bed Bernanke is speaking again.

he's the former chair of the Federal Reserve I think he I was looking him up right now. He served from 2000 he said for two presidential full elections 2006 to 2014. So obviously has a lot of experience under his belt. I think a total of four.

What is that? Well, eight years, right? So uh, both under uh, George W Bush and Barack Obama Um, One thing that I want to share with you guys is, uh, what we're looking at on the five minute time frame. Uh, again, my job is just to make you aware of what I'm looking at right in my opinions. Uh, based off of yesterday's resistance range, we are approaching that potential resistance range. Old resistance levels can become new support levels.

Again, there's no benefit of me telling you this because obviously I want the market to drop. I'm making you aware of this because I don't want you to be super hopeful that the market has to continue to drop. But then it finds a support here and then you're like Well Ricky Why didn't you tell me If you knew that this could be a support range, this is why I'm sharing it with you. Not because I think that it needs to, but because it can't remember.

It's just to share open opinions. As long as you're aware you can make a more informed decision. Should I Hold Should I sell? You know what do I want to do? What do I think is best for my future self? Be super selfish, Look out for your for your future self. Please make sure that you know I'm not going to be here like all the other Reddit traders that are like no, you need to hold hold for the movement I Don't care right? Look out for yourself.

Lock in those profits if you see it to be fit. never afraid to lock in profit to remember. you'll never catch a trade perfectly. It's not about being a perfect Trader locking those profits when you see it to be fit.

Or if you view the risk to outweigh the reward, best way to that's the great moderation. Uh I would say approach. So that statement has never been more apt than it is today. If you look back, the pandemic, the global shutdown, the historically forceful response, and the reopening.

All of that had no modern precedent, so it has been a time of historically elevated uncertainty and of unexpected outcomes. No Advance economy had ever faced a shutdown in a reopening and now all of them would face it at the same time. So no matter what happened, the outcome was going to be unprecedented level of uncertainty pose real challenges for policy and policy. Communications On the one end we wanted to be, we had to be nimble to be able to respond to the evolving situation.

On the other hand, we want to be as clear as possible about about what we're doing unless we add to uncertainty. So I would say policy certainly has been Nimble um, consistent with what within our expectations. The data did actually watch for a drop gaining inflation through September of 2021, but then turned decisively against that expectations thereafter. And we, in response, we accelerated our policy firming ultimately as you noted, raising rates by 500 basis points in just over a year.

Over this period, we communicated that the object was to reach a stance of policy that is sufficiently restrictive to return inflation to two percent over time, but we also communicate that the level of race that would ultimately be required was highly uncertain. Now, until very recently, it's been clear that further policy firming would be required. As policy has become more restricted, the risks of doing too much versus doing too little are becoming more balanced, and our policy has adjusted to reflect that fact. So we haven't made any decisions about the extent to which additional policy forming will be appropriate.

But given How Far We've Come As I noted, we can afford to look at the data and the evolving Outlook and make careful assessments. Then when you became a policy maker, you were well versed in sort of. the academic literature moved from that side to this side. Yeah, how does it work? Uncertainty when your academic is trying to decide whether your error term is gaussian or not.

um in, uh, in in actual policy making, you don't even know what the current quarter GDP is because it's going to get revised, you know, several times down the road. I Remember uh when I was sitting uh on the just as a member of the board and and Greenspan was in in the chair and uh, we had responded to some inflation data and a little bit later it turned out that that inflation change had been revised away and I asked the chair, do you think we can revise our interest rate policy? Um, it is very difficult I mean this? I've got to laugh with that. but uh, you know, just trying to make policy, it involves not just uncertainty about you know, the data, about the model, about all the things that can happen about the social and economic and political environment. So it's very difficult.

and unfortunately or fortunately, the given that monetary policy works with a lag given that there are risks on both sides of the of the mobile forecast looking for lower highs here. so as long as we don't form higher highs, then we should be good. If it begins to form higher highs here, then I'm going to consider exiting out of the Ashiki cube position. Just a heads up.

Very good. Thank you. We are getting close to the end of our allotted time. Maybe we could wrap up with just a question.

Looking ahead. Um, Jamie we can start with you. what do you? What would you point to with some of the key issues that will be most relevant to the research Community as well as to the policy making community. So I guess I guess I would start with the labor market and you know what we talked about earlier of um, vacancies in particular and the beverage curve and and the whole discussion over over whether the extraordinarily high level of surplus demand in the labor market can be lessened through the vacancies Channel Without a significant increase in Uh in unemployment, that would be more akin to what has happened in all prior Cycles or most prior Cycles So that's that's going to be a question that we will resolve empirically.

but I think we're learning new things about the workings of the labor market at least in this one situation. I Think on to look back and try to understand how inflation spread from what was very uh at the beginning. very focused on the good sector due to the rotation of demand from services to goods and and the tremendous amount of support that that Goods purchases got from so close and monetary stimulus. How did it spread then through uh, really into the service sector? we're we're now significantly resides much progress.

It's got the signal, not goods and we are. We have progress in 30 minutes, 30 minutes. But where we see persist inflation is now in the service sector. So what is the mechanism by which that happens and what are the implications? Then you have the last word.

Well I Think one of the things that I would urge researchers to look at is the relationship between monetary policy and financial stability. Very very difficult relationship. Um, if you read the papers, you see that everybody has a very strong opinion about this subject, but they don't necessarily correlate as Mark Twain Once said, the things you don't know can hurt you as much as the things that you know for sure but ain't so. Um, so uh, you know I think that we really do not understand to the extent that we need to.

uh, the relationship between different aspects monetary policy? uh, risk taking? uh, balance sheet? Behavior Etc Um, and uh, it's just something. a lot of good work being done. Don't get me wrong, but uh I think we need to understand much better. Uh, you know what the you know what the channels are and and to modify the relationships so that we can think about what extent.

we need to take that into account in modern policy. Very good. Well let me thank both of you tremendously for sharing your perspectives with us today. I Wonder if they're gonna highlight answer questions? um and so thank you very much.

All right, let's see which way the market goes. Wow I Thought that they would have answered questions and there goes another. Buy Signal for Tkq, uh or for the overall NASDAQ Market NASDAQ Market Beginning to Gap up. Surprise surprise.

the Bulls are trying to come back. Looking at this on the one minute time frame, we're still trading below the moving average, but of course Direction ultimately can end up changing I think one of my biggest takeaways. To kind of summarize what it was that Jerome Powell said um, is that the stock market could be factored in something and they have their own intention or their own forecast, but the Federal Reserve doesn't necessarily have to align with it I Think that was one of my biggest takeaways where they still said like their focus and their expectation of how long it will take for the actual inflation rate to be at that two percent Target is going to be a little bit longer than what they believe the stock market is factoring in. at least that was one of my biggest takeaways.

That's when we saw the market break below 336 um 0.42 and then drop to lows of 335.59 So um, we'll we'll have to see how the market I mean it's going to take a little bit of time for the market to actually digest what is said. All these different headlines are going to be coming out, All these different news articles are going to be coming out and we'll see which way the market ends up actually swaying right. It's been a very, very bullish week. Let's let's give it credit where it's due if you look at the overall.

Market Market's been extremely extremely bullish, so it wouldn't really surprise me if the market does try to rally by the end of the day. But as of right now, still trading below the moving average, it's still forming lower highs and lower lows. So this is a really nice rip up. Um, and it's just really presenting for me, at least another dip by opportunity.

D On Sqq if we actually end up getting rejected, the R size overbought the macdues overbought, that's the way that I'm seeing it right now. If we actually end up getting rejected if we break below the EMA line, I'm going to add probably another 2500 to 5 000 shares on Skq if we get that confirmation. I Don't want to be too aggressive too early on, but definitely something that I'm going to have to follow up with. Um, can you guys hear me? Okay, well the microphone was a little bit.

um um, what you call the microphone was a little bit far for me so hopefully you guys could hear me. Okay, one thing that I do want to remind you is again, you guys definitely don't have to. But because we hosted our free live training session I give away another one thousand dollars. So that means a total of three, uh, weeks in a row I've given away a thousand dollars.

Um, but today for any new member that signs up for Lpp 2.0 you guys can refresh your screen. It's the second link in the description down below. They get access to being able to watch me trade live every day. and on top of that I know a lot of you guys have been asking about our GTR giveaway.

There's only 16 days left for our GTR giveaway. Meaning I'm gonna be handing one of you guys the keys right now for Lpp. If you sign up using the second link in the description down below, you will earn up to 10 000 entries just by signing up for Learn Plan Profit 2.0 You'll also get the biggest discount which is 175 off Lpp 2.0 And here it goes: beginning to indicate signs of an uptrend. So I'm going to add another 2500 shares and then I'm gonna add the remaining once we're actually forming higher highs and higher lows.

So definitely not what I want to be on the day we gave back some of the profit as obviously we pulled on back. but that's part of it. There's no such thing as a perfect Trader There's no such thing as a perfect trade. There's the give and takes right and one thing that we said when we were up here is: remember: beginner Traders There's no such thing as getting in or getting out perfectly.

Just get out when it makes sense to you. And if you want to lock in profit so you don't give back how much you've already made, then being selfish is never a bad idea in the stock market. Be selfish. Be greedy, look out for yourself.

That's all we ever want to see. You do is you know, keeping as much money that you've made as possible? Yes, there's always more money to be made. But guess what? You have a lot to learn and you have nothing but time to learn it. So really do appreciate you guys time.

I Hope that you guys enjoyed this live session and again this is something that I provide for our learn. Plan: Profit: Team Every single day, write Out Market Open for about 30 minutes to an hour. A lot of you guys got a taste of what it's like. so if you like what you see and you want to experience this every single day, it's the second link down below.

One-time payment, lifetime access, biggest discount, 175 off, and 10 000 entries for the GTR giveaway. Imagine one of you guys sign up for Lpp today and then in two weeks or 16 days I hand you guys the keys to the GTR So very excited about that. If you guys have any questions, shoot me a direct message. All the links are down in the description I Hope that I earned a thumbs up.

Please consider subscribing. I'll keep you guys up to date with the market. and like always, let's make sure that we end the year on a green note.