Foreign guys, it's Ricky and Jerome Powell should be going live in just three minutes and he is going to be speaking on the economic Outlook conflation and the labor market. In very simple words, we're pretty much looking to have a better understanding of you know what the next interest rate hike is going to be. So I Hope that you guys learned something new. Please make sure that you guys subscribe I upload new videos every single day about the stock market and I would love to be of value for you. All you literally have to do is send me a direct message via Instagram or Discord which is the first or third link in the description down below anytime that you have any questions I cannot help you if you do not reach out. Friendly reminder: I Have one Instagram account, it's linked third link in the description: I'm verified and that is my only Instagram account. I Can promise you every other account is fake I will never message you first I will never ask you for money I will never trade for you I Just want to make sure that I explain that to anyone that is new to following me because there's fake accounts for every Finance YouTuber or influencer that will pretend to reach out to you asking you for money. So please make sure that you're aware of that, look out for yourself. The only thing that I offer is learn, plan profit, and that's to be able to watch me trade live every day. And that's that second link in the description if you want to save 150 off, so should be in one minute. Uh, that the Federal Reserve should be going live And we got big JP Going to be talking today so it should be fun I Hope that you guys enjoy! How are you guys all doing today? Doing good, feeling good NASDAQ Market is as choppy as it ever is. Lows highs, lows, highs lows highs if you guys follow me on. Instagram If you guys watch our live trading session today, we literally talked about this. that I mean markets literally just anticipating what's to be set. No one knows what's going to happen. You can try to predict as much as you want, but at the end of the day, it's it's all about. You know what is actually set. And here goes. it should be any second. Now there we go. I'm Glenn Hudsons co-chair of the Brookings board. Best of luck My great pleasure to Welcome All of You Pandemic in-person audience here at house. Great to see Uh as well as our sizable broadcast and online audience. Thank you for joining us today when President Obama named Jay Powell to the Federal Reserve Board governor in 2012. whoa including I suspect Jay Expected him to become Fed chair when President Trump named whoa, the Governor the chairman in Uh in 2018. Hardly anyone anticipated the global pandemic. And don't forget that then the Fed's challenge was too little, not too much inflation. So Jay Pal has repeatedly been forced to confront the unexpected and had to steer the United States economy through uncharted waters. He's done it with a steady hand, great personal Integrity Independence and an unwavering commitment to the Fed's Dual mandate: price stability, and maximum sustainable unemployment. The employment, though I Don't think I need to explain any of you that today, despite stiff headwinds both economic and political. So we're pleased to Welcome to the stage today. Um on behalf of the Brookings institution and the Hutchinson Center on fiscal monetary policy K Powell Follow his remarks: Mr Powell field questions from David Wessel the director of Hudson Center and from the audience Jay Thank you for joining us Big JP Foreign It's great to be here today. It's great to be back at Brookings Um. So today, I'm going to offer a progress report on the Fomc's efforts to restore price stability to the U.S economy for the benefit of the American people. Be careful and that report must begin by acknowledging the reality that inflation remains far too high. Oh, that's not Catholics and I are acutely aware that high inflation is imposing significant hardship, restraining budgets, and shrinking what paychecks will buy. This is especially painful for those least able to meet the higher costs of Essentials like food, housing, and transportation. Price stability is the responsibility of the Federal Reserve and serves as the Bedrock of our economy without price stability. The economy does not work for anyone, in particular, Without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. We currently estimate that 12-month Pce inflation through October ran at 6.0 percent, while the October inflation data received so far showed a welcome surprise. To the downside, these are a single month's data which followed upside surprises over the previous two months. As figure One makes clear down, once in the data have often been followed by renewed increases. It will take substantially more evidence to give comfort that inflation is actually declining. and by any standard, inflation remains far too high. This is not good. I Don't know why the market I'll Focus My comments on core Pce inflation, which omits the food and Energy inflation components which have been lower recently, but can be quite volatile. Our inflation goal is for total inflation, of course, as food and energy prices matter a great deal for household budgets. Yeah, but core inflation often gives a more accurate indicator of where overall inflation is heading. 12-month core core Pce inflation stands at 5.0 percent in our October estimate, approximately where it stood last. December When policy tightening was in its early stages over 2022, core inflation Rose A few tenths above five percent, and it fell a few tenths below. But mainly it moves sideways. So when will inflation come down? I could answer this question by pointing to the inflation forecast. So private forecasters or of Fomc participants which broadly show a significant decline over the next year, but forecasts have predict have forecasts have been predicting just such a decline for more than a year, while inflation has moved stubbornly sideways. The truth is that the path ahead for inflation remains highly uncertain. For now, let's put aside the forecasts and look instead to the macroeconomic conditions we think we need to see to bring inflation down to two percent over time. For starters, we need to raise interest rates to a level that is sufficiently restrictive to return inflation to two percent. There's considerable uncertainty about what rate will be sufficient, although there's no doubt that we've made substantial progress raising our target range for the Federal Funds rate by 375 basis points. Since March as our last post-meeting statement indicates, we anticipate that ongoing increases will be appropriate, it seems to me likely that the ultimate level of race will need to be somewhat higher than thought at the time of the September meeting and the summary of Economic projections. I will return to policy at the end of my comments, But for now, I'll simply say that we have more ground to cover. Uh, not good. Not attending the stance of policy in order to slow growth in aggregate demand, slowing demand growth should allow Supply to catch up with demand and restore the balance that will yield stable prices over time. Restoring that balance is likely to require a sustained period of below Trend growth Last year, the ongoing reopening of the economy boosted real GDP growth to a very strong 5.7 percent. This year, GDP was roughly flat through the first three quarters, and inequate indicators point to modest growth this quarter, which seems likely to bring the Year in with very modest growth. Overall, several factors contributed to this slowing growth, including the waning effects of reopening and of pandemic fiscal support, the global implications of Russia's war against Ukraine, and our policy actions which tightened Financial conditions, and are affecting economic activity, particularly in inter-sensitive sectors such as housing. So we can say that demand growth has slowed, and we expect that this gross growth will we need will need to remain at a slower pace for a sustained period. Despite the tighter policy and slower growth over the past year, we have not seen clear progress on slowing inflation. To assess what it will take to get inflation down, it's useful to break core inflation into three component categories. This doesn't sound cool at all. Housing Services Inflation and inflation and core Services Other than housing Core: Goods Inflation has moved down from very high levels over the course of 2022, while Housing Services Inflation has risen rapidly. deflation in core Services X Housing has fluctuated, but shown no clear trend, and I'll discuss each of these items in turn. Early in the pandemic, Goods Prices began Rising rapidly as abnormally strong demand was met by pandemic hampered. Supply Please be careful. just a reminder. Issues are now easy. Both Fuel and non-fuel import prices have fallen in recent months, and indicators of prices paid by manufacturers have moved down. While 12-month core. Goods Inflation remains elevated at 4.6 percent, it has fallen nearly three percentage points from earlier this year. It is far too early to declare Goods Inflation vanquished. But if current trends continue Goods Prices should begin to exert downward pressure on overall inflation in coming months. Housing Services Inflation measures the rise in the price of all rents and the rise in the rental equivalent cost of owner owner-occupied housing. Unlike Goods Inflation Housing Services Inflation has continued to rise and now stands at 7.1 percent over the past 12 months. housing inflation tends to lag other prices around inflation Turning points. However, because of a slow rate at which the stock of rental leases turns over, the market rate on new leases is a Time layer indicator of where overall housing will go over the next year or so. Measures of 12-month inflation in new leases Rose to nearly 20 percent during the pandemic, but have been falling sharply since about mid-year as figure three shows. However, overall, Housing Services Inflation has continued to rise as existing leases turn over and jump in price to catch up with a higher level of rents for new leases, and this is likely to continue well into next year. But as long as new lease inflation inflation keeps falling, we would expect Housing Services Inflation to begin falling sometime next year. Indeed, a declining a decline in this kind of inflation underlies most forecasts of declining inflation. Finally, we come to Core Services Other than housing, and this spending category covers a wide range of services from health care and education to haircuts and hospitality. This is the largest of our three categories, constituting more than half the core Pce index. Thus, this may be the most important category for understanding the future evolution of core inflation. Because wages make up the largest cost in delivering these Services The labor market holds the key to understanding inflation in this category. In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with two percent inflation over time. Thus, another condition we're looking for is the restoration of balance between supply and demand in the labor force. The labor Market signs of elevated labor market tightness emerged suddenly in mid-2021. the unemployment rate at the time was much higher than the 3.5 percent that had prevailed Without major signs of tightness before the pandemic, employment was still Millions below its level on the eve of the pandemic. Looking back, we can see that a significant and persistent labor Supply shortfall opened up during the pandemic, a shortfall that appears unlikely to fully close anytime soon. Comparing the current labor force with the Congressional Budget Office's pre-pandemic forecast of Labor Force growth reveals a current labor force shortfall of roughly three and a half million people. This shortfall reflects both lower than expected population growth and a lower labor force participation rate. Participation dropped sharply at the onset of the pandemic because of many factors including sickness, caregiving, and fear of infection. Many forecasters expected that participation would move back up fairly quickly as the pandemic faded, and for workers in their Prime working years, it mostly has. Overall participation, however remains well below pre-pandemic trends. Some of the participation Gap reflects were oh, excuse me I'm just I'm caught in awe. Um, if anything, if this is a bull trap this reminds me so much of but uh, like two CPI data reports ago Market went up and then Market quickly corrected itself. All I'm ever here to encourage you to do is if you find it to be too risky, follow with the trailing stop loss. Follow with a stop loss. something to lock in profits if you're trading this, please I Don't want you to get caught on the wrong side of a trade. Health issues have surely played a role, as Covet has posed a particularly large threat to the lives and health of the elderly. In addition, many older workers lost their jobs in the early stages of the pandemic, when layoffs were historically High. The cost of finding new employment may have appeared particularly large for these workers given pandemic related disruptions to the work environment and health concerns. Also, gains in the stock market and Rising house prices in the first two years of the pandemic contributed to an increase in wealth that likely facilitated early retirement for some people. The data so far do not suggest that excess retirements are likely to unwind because of retirees returning to the labor force. I Like that, MMR Older Workers are still retiring at higher rates and retirees do not appear to be returning to the labor force in sufficient numbers to meaningfully reduce the total number of excess retirees. So the second Factor contributing to labor to the labor Supply shortfall is slower growth in the working age population. A combination of a Plunge in net immigration and the surge in deaths during the pandemic probably accounts for about one and a half million or missing workers. 285 results To support labor Supply are not the domain of the Fed Our tools work principally on demand and without advocating any particular policy. However, I will say that policy to support labor forces participation could over time bring benefits to the workers to join the labor force and support overall economic growth. Such policies would take time to implement and have their effects. For the near term, a moderation of Labor demand growth will be required to restore balance to the labor market. Currently, the unemployment rate is at 3.7 percent near a 50-year lows and job openings exceed available workers by about 4 million. That is about 1.7 job openings for every person looking for work. So far, we've seen only tentative signs of a moderation in labor demand With slower GDP growth this year, job gains have stepped down for more than 450 000 per month over the first seven months of the year to about 290 000 per month over the past three months, but this job growth remains far in excess of the pace needed to accommodate population growth over time about a hundred thousand per month by many estimates. Job openings have now fallen by about a million and a half this year, but remain higher than at any time before the pandemic very quickly. I Think that this is a great sign that market is just I mean it's finding any specific reason on why to go up, right? We've talked about this before where we can't be surprised if the market does sell off, but I I think with what we've seen so far, I mean we still have that Fed interest rate hike, but with what we've seen so far, it looks like we're very, very close to the bottom at least for now. So I think this is a step in the right direction, but please do not be hopeful if you're a day trader if the stock is moving up right. If direction is in your favor, have an exit plan in place. A a goal without a plan is a plan to fail. It doesn't matter where you set it at right. One of the worst feelings ever is going from a green trade to a red trade. So put yourself in a position in which you can tolerate even reducing your position size a little bit. You're never going to be perfect. Don't be perfect. Don't try to be. Just be good. Make sense of your entries, make sense of your exits. That's all I have to say I Want you guys to keep these profits I Don't need you guys to be scared. You can continue to hold. but if there's a change of Direction what does that look like for you? Okay, two percent inflation over time. So despite some promising developments, we have a long way to go in restoring price stability. Returning to monetary policy, my Fomc colleagues and I are strongly committed to restoring price stability. After our November meeting, we noted that we anticipated that ongoing rate increases will be appropriate in order to attain a policy stance that is sufficiently restrictive to move inflation down to two percent over time. That's not good news. Monetary policy affects the economy and inflation with uncertain lags and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. the time for moderating the pace of rate increases may come as soon as the December meeting our progress in tightening policy. The timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation and the length of time it will be necessary to hold policy at a restrictive level. It is likely that restoring price stability will require holding policy at a restricted level for some time prematurely loosening policy and I'll close by saying that we will stay the course until the job is done. Thank you. That's not good. No pivot, no pivot. So far they talked about possibly slowing down, but no pivot so far. All right. thank you very much. Chair: Powell Uh, I Think it spared me the chore of asking you to pick between 50 and 75. so I won't have to ask you that. Thank you for your last paragraph. But I Want to talk a little bit about wages and inflation. So as you said, wages are rising faster than consistent with a two percent inflation rate assuming reasonable. Remember, just because the market is dropping a little bit doesn't mean that you have to sell your Tqs and go into Sqs. Remember anytime that you open a position, you're open to risk. There is no confirmation that we are selling off. If you lock in profits on Tqs, that's one thing. It doesn't mean that you have to enter the other side hoping for the market to sell off, you can lock in profits and you could have done that well. It doesn't mean you always have to trade the other side. More often than not, you'll put yourself in a bad position. Just remember that at the beginning of this episode, in Back In March of 21 was not really related to wages at all. It was related to tightness in in Goods markets, largely due to supply chain issues. Over time, though, inflation is now spread broadly through the economy. and while I would still say that the inflation we're seeing now is not is not principally related to wages, we think that wage increases are probably going to be a very important part of the story going forward, particularly as it relates to that third category of core Services X housing. So um, so we think it is an important thing going forward, and ultimately in a service sector in particular, where wages and benefits are are by far the largest cost. Um, wages need to go up. And of course, we want wages to go up. We want wages to go up it strongly, but they've got to go up at a level that is consistent with two percent inflation over time making basic assumptions about productivity um, and I would. So if you look at the principal uh, wage measures that we look at I would say that you're one and a half or two percent above that with with current wage increases. Wow. So particularly the employment Compensation index and average hourly earnings index, look at those two. It's about one and a half percent higher. Remember, even if it's a day trade, right? If you don't trust that this is going to last for a long period of time, even if it's a day trade, you don't need to be scared to take advantage of it. Remember, a great way to manage risk is to manage your position size. You can buy one share, You can buy five. You can buy a thousand. Do not buy more than you can tolerate. At worst case scenario, please remember everyone looking for a job. Um, they're the so-called Jobs Workers Gap is about four million. Meaning, if you, if you look at all of the available jobs including people who are working, isn't this so much fun? No, just me. It has to be quick for you guys too. Um, it's a four million shortfall. So you're in that world and you know we think, um, that we there's a job for it for moderating demand in there and getting the labor force back into balance. You don't think that there's a possibility that we could. we should have a period of ketchup of wage increases above the sustainable level, and that businesses with relatively Fair profit margins can absorb some of that without passing it through. So that that's a you know the question of um, the the worker share of profits and that kind of thing is not really related to this. Right now, people's wages are being eaten up by inflation. So what you want to do is you want to have inflation stable and then have a very strong labor market where the biggest wage gains are going to the people to buy them into the Spectrum And we had that at the end of the very long expansion that ended with the pandemic. That's not what we have now now. for most workers, for most workers, the increases they're getting in wages are being eaten up by inflation. That's actually not true at the bottom end where wage increases are are higher than inflation and that's a good thing. But if you want to have sustainable, strong labor market where real wages are going up right across the wage, that especially for people at the lower end, you've got to have price stability. Do you guys see that Rolex on for the two years before the pandemic hit, and did you take Uh, when you looked at today's Jolts data which measures the vacancies and quit rates, did you find that encouraging? More More or less in line with expectations? But that's going the right direction? That's a good thing, right? So yeah, so uh, I guess job openings came down by several hundred thousand to to Uh to where they are now. And yeah, that's a positive thing. As you know, the relationship between Uh job openings and unemployment is is a very fraught one. and job openings right now are compared to unemployment are all near their all-time high levels. So it has been our view that there's a possibility that in this highly unusual situation in the labor market, labor market could come back into balance to some extent through a decline in job openings. Remember the reason that they're asking him about Um job openings is because the Federal Reserve has a goal of like 4.1 or 4.7 4.4 percent unemployment by next year. Right now, it's currently at 3.9 or 3.7 So they want unemployment to increase, right? They want the economy to feel the pressure. Remember that? So their goal is for things to actually slow down. And what they're saying right now is for every person that's actually looking a job for a job, there's 1.7 jobs available for every one person that's looking for a job. Meaning that's not good, right? And someone just made a funny joke of like I just bought um JP that Rolex with you know what? I made off of the stock market. That's funny. We're it out that job vacancies is starting to come down, But to the extent that the FED still relies on a Phillips curve kind of relationship going forward, is the natural rate of unemployment? a useless concept? How will the FED What measures will the FED use to judge labor market slack as we look ahead to policy in the coming years? Actually, you guys see that signs of a resistance. Just be careful. think about it of course. And a standard way to think about it is it's the gap between the actual unemployment rate and the natural rate of unemployment that matters right? And the issue really? it's not that that framework doesn't make sense, it does make sense. But the issue is that the natural rate of unemployment is is very hard to identify with certainty even in normal calm times. But when there's a you know, a violent disruption in the labor market, it can move very substantially so. And that happened at the beginning of the pandemic you had. The labor market was very much disrupted and we assume that the that the natural rate had moved up meaning that for any level of unemployment, the labor market is tighter. So we knew that I Think what was different in this cycle was really that you had to look at things like job openings and quits and reservation wages and just wages overall to tell you that that the natural rate of unemployment had really moved up quite a lot. But I Don't think it's a problem with the framework, but it's it is A. It is a fact though that it's very hard to pin down where the natural rate of unemployment might be when there's this massive disruption in the labor market going on. So do you think that the this adult state of the job vacancies per unemployed worker that that's going to be allowed lasting measure of Labor Market tightness for you at Defend He? Yes I You know I Think people will attend them. for now, people will tend to look at it but when you tell them you're looking at it, they tend to look at no look at it. I've noticed that that's right I Think it. I'm just say in this particular situation we think it's important and we're going to find out empirically whether that was true for the reason. I The reasons I Explained: We think that we can see a big decline in job openings and less of the lesson you would expect of an increase in unemployment. So it was. This was a unique once we're uh, since we're on the topic about a Rolex I Actually just spoke to our team this morning and um I don't know what you guys I mean we're just talking about JP's Rolex that he has going on. We just did a giveaway for excuse me We just did a giveaway for attack buttons apparel we're thinking of giving away in the month of December we're running One Giveaway it's gonna be 30 days and giving away a Rolex You guys let me know in the comments section what you think and if you think that would be a good idea. So if you buy anything on the site, you get automatically entered to win a Rolex drop a thumbs up If you think that we should do that, do you share that? Okay, so that's this is a great set of questions that we've all been thinking about a lot and Leo's speech was really terrific on that ice. and Carson has given a couple of speeches on the same topic including: One at Jackson Hole this year the head of the bank International settlements. Yes, exactly. Uh, so um. I mean the question is, what's is? there's a new normal going to be unlike this normal that we've had where supply side disruptions and constraints were relatively. you could look through them. The the lore has been for a long time that you don't need to worry about that, it'll sort itself out. You know, a supply shot from oil prices or whatever. Are we going into a situation a little bit like the 70s where there will be ongoing repeat shocks and which would tend to have to tend to put more upward pressure on inflation over time? We don't really know I mean that that's a it's a great question, but the question I Guess the real question is, if that's true, what are the implications? We still have a two percent inflation Target and we still have to use more tools to achieve it. Tqq almost at five percent team. Um, but it's same resistance as of now. Very hard to know. it's Very hard to know. the answers to these things. I Mean we. we tend to assume things will go back to the way they were just naturally. but that doesn't seem to be happening so far. Right Right now, you mentioned in your remarks that forecasts of inflation have not only those that the Board of Governors but in the private sector as well have been lousy. Okay, inflation has not behaved the way the forecaster said so I wonder how you think about using forecasts of inflation and making policy if you can't tell us or if your staff can't tell you with with some degree of confidence what inflation is going to be 6 12, 18 24 months out? How do you think about that in deciding when you make policy decisions? So I'll say that the um it is very difficult to forecast inflation now and one of the reasons is just happy to have you. Eddie The situation is so different from the normal one and as I mentioned a lot of this just that the difficulty is just these supply side constraints that we've had. We had no no experience in forecasting that it was. You know this was a case of first impression. so so that was great about difficult. Nonetheless, sure we have, we do big forecasts. We'll continue to make forecasts. Um, what the way I tried to get around my remarks was you guys? let's put the forecast aside for a second and let's try to identify the macroeconomic conditions. Where are my Bulls at? Where are my Bulls Let me see it in the chat. If you're a bull, make sure you smash that like button forecast. And if you're a bull, you better have some form of acquisite plan. If you're a day trader, right? If you're an investor, you know you have your own plan. You're a day trader. You better have for your own good, Not for me, not for anyone else. For your own good, it better be a trailing stop loss. A stop loss. Something to lock in profits I Want you to lock in profits when it makes sense to you If that's if that's all you're doing. Let's see it. We have 724 bulls. Do we have a thousand? Bulls is a good way to balance the risks. 22, 22, 22. Check that bad boy out. No problem. If you, If you can't use today's inflation rate to set policy and you're not sure what tomorrow's inflation rate is, you're saying the inflation forecast will be secondary to the economic conditions that you think are likely to generate more or less inflation. Is that basically Why does he sound so rough? It's a very difficult situation in which to forecast deflation, and really very few professional forecasters have gotten it right. So I think we'll look at various things. We'll look at our forecasts. We'll look at the actual data, We'll look at the 1 000 people I Like the elements of those three pieces of of core inflation that we're looking at, we will, uh, you know, look at these macroeconomic conditions where you know We, for example, we will try to identify a a level of a stance of policy that's sufficiently restrictive to bring inflation down. We can't identify that with great precision and confidence. but we'll make we'll We'll look at the changes in financial conditions and and the effects that those financial condition changes are having on the real economy. We'll look at all of those things and make a judgment. And it'll have to be judgment as to as to what you know what that is. I have an Exit Plan please. Not that you need to sell now and it's not what we're saying. Policy have an exoplanet Direction begins to change. Always prepared, the definition of restrictive is above some neutral rate of interest, the one that will prevail when all is common. You gave a speech at Jacksonville a number of years ago pointing out how identifying all these things, the natural rate of unemployment, the natural rate of interest. The problem is that we don't know what they are. So how will you know when policy is restrictive? How do you think about what the neutral rate is under the current conditions of the economy? And the answer to that is if there isn't any one perfect summer statistic. So the way I think about it I Think The way we generally think about it is we make our policy changes and they affect financial conditions. Actually, the interpretation is tightening an expectation now a different 40 used to be. Oh boy. tightening of financial conditions. We look at at the history of these Financial conditions indexed and we ask how tight how tight are Financial conditions. We also look at the effect that that tighter Financial conditions are having on the real economy particularly now. uh, interest sensitive spending. But also, you know other things as conditions tighten, we also look. so. what are the financial conditions we look at? We'll we'll look at at the whole, the entire rate curve. If you think about risk-free the treasury rate curve, we'll look to see positive, significantly positive real rates across the curve and you know you have that. I Think you can argue about the short end, but you've got to pick some sort of a forward-leading forward-looking reading for inflation. and I think you know inflation compensation. The markets definitely reflects confidence in us bringing down inflation. So so you real rates really across the whole deal curve. You also look though at credit spreads and what are private companies borrowing at? Because most borrowing doesn't happen at the federal funds rate, it happens in many other places. We look at asset prices. We look at at uh, you know, exchange rates which are just another asset price. We look at all those things and we we try to make a judgment about about whether whether looking at put some weight on you know, on the on the real, the real interest rate curve. some weight on the other aspects I Talked about. I Think you have to make a judgment at the end though that you're restrictive. So an estimate of the neutral rate of interest didn't seem to be one of the big factors in that list. No, it's in there you you? It's in there. And looking at the real rate curve. So you look at the real rate curve. you you want policy real rates to be above what we'd estimate as the longer run neutral rate. The issue is, you know they're no longer run. Neutral rate is is a rate at a time of Full Employment and two percent inflation. And and the economy and perfect people learning that isn't where we are? Yeah, um. I'm going to turn to questions from the audience in a minute. Uh, what criteria you're going to use to decide when to end the strategy of the balance sheet? Is it the economy? Is it what the market Money money markets are functioning well? Is it whether the treasury is having trouble raising money? How do you decide when you've shrunk enough when you end the shrinking? So I I should refer you to a piece of a document that is that lays all this out in detail. What? I really should be reading to you? but I'll paraphrase it. thank you I Don't get it exactly right. Relax. So we're in an ample Reserve machine and what that means is that you know changes in the reserve level will generally not affect the Federal office rate. So there's there's more than enough Uh reserves in the system. so we're not close to reserve scarcity. So what we've said is that we would allow reserves to decline until we're somewhat above the level that we think is Uh is consistent with an apple. You know, with scarcity, right? And then for a while, what you do is you is you. You hold a balance sheet constant and non-reserve liabilities grow while reserves shrink. So we sort of shrink gradually down to that, and in a certain point, we're just going to call it. We're not looking to really go back into proving that they're scarce, because what happens is, and you saw this back a few years. the demand for reserves is not stable and it can move up and down very substantially. So we want to stop at a place that's safe. You know, having a lot of reserves. Slight signs of a resistant tier for Ttq. Just be careful. they have plenty of reserves, plenty of liquidity in the markets and in the banking system. the financial system. General So that's how that's how we would do it. Um, in the minutes. Uh, the last Fomc meeting, it said this: the staff had a forecast that is not a forecast below potential growth, but not a recession. But then there was this interesting sentence where the staff said the possibility that the economy would enter a recession sometime over the next year is almost as likely as their Baseline forecast. Is that where you are you looking? Yeah, See that common resistance range. This is the temptation to handicap it Yeah 288 I Think I'll continue 290. be careful. I I Do continue to believe that I love this to a soft or softish Landing I Do believe that And the definition of a softish landing is what. Unemployment I'll speak after this. Yeah, unemployment goes up, but not it's not. It's not a hard Landing it's not a severe reception. JL You have to be nice employment going up, but not not. you know, really spiking as it does in some in some recessions. So that's how I think about it. and I think the path is pretty clear. It's we. You know, the labor market. Uh, conditions soften. We see inflation and you know the goods. Inflation gets better. Housing Services Inflation gets better and the labor market softens. Oh my goodness. Uh, and and you see inflation as well. Just broke above 287.50 I Don't want to be the handicapper on it and you know of course our job is to try to achieve that. And I think it's still achievable. Although you know if you look at the history, it's not a likely outcome. But I would just say this is a different set of circumstances. You said at the last press conference that you thought the path to that soft Landing had narrowed has, has it continued to narrow? Or is it widened? or I don't know if you can have a wider soft Landing But I I don't know that it's changed since that was as what Five six weeks ago I was asked the question: has it narrowed? Is it still possible and has it? Narrows It's definitely still possible and it has narrowed because if you look over the course of this year, nobody expected us to raise rates this much. No one expected inflation to be this strong and this persistent and this this is insane to move up to have spread so broadly through the economy and so the extent we need to get keep rates higher or keep them higher longer, That's going to narrow the path to a soft landing. On the other hand, if we get good inflation data and we get evidence that all the things that I've talked about, if all those things start to swing the away, then we could very much achieve this. In August 2020, you announced a new framework for monetary quality. the Flexible Average Inflation I am in a position uh I'm trading off of my phone I'm sure you guys can guess what I'm in I'll show you ask you what I have I have one lucky share. Someone thought that I was shorting the market. they're like Ricky how much are you down I'd hold one share of ask Kiki Cube So we had someone get upset last time I hosted a live stream. believe it or not and it was. it was a free live stream. It's like this and they're like Ricky Um, you are trying to encourage other people to trade the same thing I just want to use this as an example. I am trading something it's obviously not as Kiki Cube you guys could imagine what it is. um I'm I'm very grateful for how it's playing out I just didn't want to be a reason on why you buy or why you sell a specific position, right? I Wanted you guys to make your own decision. This is not a Learn Plan Profit live stream. I'm not here to instruct you. that's the live stream that I host with my Learn Plan Profit Group every morning. so just making sure that you guys are aware again, it's what I was asked to do. So I'm here to do it, especially when it's free. Uh, and if you you know that's the whole point of Lpp himself until we saw both Maximum Employment Price Stability and I don't think I don't think I would do that again because I think it limited. it's it's uh, the tail risk. You know you. We tend as human beings to underestimate tail risk and I think we didn't We didn't think it seems so unlikely. If you remember 25 years of low inflation, right? and on, many years after the pandemic, Adaptive Vehicle Financial Crisis of inflation everywhere in the world, it's all disinflation, just didn't seem likely. And and yet here we are. So so. It turns out that when you invite the chairman of the Federal Reserve to speak at Brookings a lot of people email you questions. Most of them are questions I've already asked or questions that were so poorly framed that I couldn't even understand the question. But um, somebody asked me this one and so I want to give that person an opportunity to get an answer. What do you like to do in the morning before you start work? Be careful here. Be careful here for a change of Direction Remember to plan again. You are here to hold yourself accountable. If you cannot hold yourself accountable, no one else will, right? It's not about being perfect. It's about if there is a change of Direction and your intention was to day trade that you hold yourself accountable. You will never be perfect, right? And by looking less at the exact dollar amount that you're up or down, you focus so much more on what's important. And that's the actual trade opportunity itself. We call it the blind Trading Challenge if you're part of our Lpp team, just a heads up who you are and you need to remember that this is not an opportunity for you to make a speech or tell the FED what it should do. It should be a question. It should be short and questions end with a question mark. So uh, come down here when somebody uh Joe and then Jonathan thank you uh Jebel here from Brevin Harris So you've spoken both about risk management considerations in the inherent danger of inflation becoming entrenched. So I was wondering what how much do risk management considerations suggest? A terminal rate higher than would normally be expected to achieve your policy goals. So I think there will. There are a number of dimensions and it wouldn't necess one of them. One of them would be potentially a higher rate, but more I would think uh. One risk management technique is to go slower, right to go slower and feel your way a little bit to to what we think is the right level. Another is to is to hold on longer at a at a high level and not not um, you know, losing policy too early I am I I Don't want to over type certainly waste My colleagues and I do not want to over tighten because you know we I think that cutting rates is not something we want to do soon. so that's why we're slowing down and you know going to try to find our way to what that right level is. I Mean theoretically it's another dimension, but it's not. It wouldn't be my first choice. And remember, we upload new videos every single day about the stock market. So if you're just watching for the first time, I would encourage you that if you're just getting into this I upload new videos every single day I would encourage you to consider subscribing. Dropping a thumbs up. And anytime that you have any questions, please shoot me a direct message via Discord First link. Or shoot me a direct message via Instagram And that's that third link in the description. If you want to watch me trade live as soon as tomorrow, you can take advantage of our sale. And that's that second link down below. we're expecting. Um, that participation really moves back up all the way to a pre-coveted peak. And related to that is, you know, the follow-on question. You know how much of the realignment do you think needs to be done through restricting labor demand as opposed to the ability of Supply to catch up? Oh one Labor force participation? I Think I Think it's useful to go back, You know, 10 years And the forecast that that mainstream labor economists had was that you're right Aging, Aging the population leads to declining Labor First participation. and I was standing. That labor First participation was A was in effect flat and a little bit up from 2013 to 2020 roughly and that was because you had a strong, tight labor market. One thing that we talk about pretty often within our learn plan profit live trading session is progression and if progression begins to slow down, an open position is a risky position. I'm thinking of selling my position and it's because this thing is beginning to slow down. Just because I'm choosing to do something does not mean that you need to, but it's something to keep an eye on if you see that you're no longer making higher highs and it's beginning to show signs of a resistance, especially when it goes from a break-even day to being up eight percent. Just take it into consideration where either reducing your position size or formulating an Exit Plan you don't have to sell. So get that out of your head, you don't have to sell. But if it breaks below, let's say the EMA or whatever you make up of like hey, if it breaks below this I'm out. I'm going to keep some of these profits I just made. That's all. I Want you to plan right now if you're a day trader and you intended to sell. if you're an investor and you have no intent attention to sell then it's different. Just please please please look out for yourself I Don't care if you sell right now, my thing is have an exit plan at worst case scenario to keep some of those profits in your pocket to work during coven. And given that immigration is well below the levels that were projected before the pandemic, does most of the balancing have to come on the demand side? Well, I think for now, we have to assume that we have to assume that we would. That's why I talked about, you know, supply side policies on labor of although they're not for us to recommend or to answer questions about. Um, no good please. So yeah, the answer is yeah. I mean that's what I Kind of said that in my speech. we we have to do what it takes to restore balance in the labor market to get back to two percent inflation. um, resistance at 22.50 so far. really just by slowing growth, job growth rather than pretty people at work. Okay, yeah, thank you. Joe Canyon Peterson Institute uh, chair. Powell Back in 2018, you gave a speech questioning the role of the so-called star variables that the FED uses to navigate and there was a simple possibility raise that maybe unemployment could fall well below what the staff thought. the natural right you star was then without causing inflation. But then covet came and turned everything around it. As you just said, one interpretation of covet is that you star went way up and we were on the wrong side of it. which is inflationary. My question is going forward. Is it likely? Do you think it's likely that things could reverse as a dust settles from Covet and we could end up back in that world where maybe we're on the other side of U-star We don't know it. It's hard to tell what. what lessons did you learn from that period that that got forgotten because of covet? perhaps? Well, unemployment went below. So what? We write down what the staff writes. that's uh, if you're going to ask him a question or a longer run estimate of the natural, that's what you're going to choose about Kovitz. One thing I should say is that during the course of a long, relatively gradual I mean okay, so we only have one experience right to generalize from. But what I learned from that experience was long, relatively slow, not super fast. uh, expansion. You really saw the natural rate of unemployment. the shorter term natural income? Way down. We had three and a half percent unemployed with really a little sign wages were just getting up to that level of productivity and two percent inflation. So we could be back in that place. Um, I think we could certainly be back in that place. Uh, yeah, but what we've what we've seen, you know it's it's another n equals one situation. Beautiful pandemic. It's also unique. I'd Also point out though we did see the inflation we saw at the beginning, we did have one remember resistance range probably significantly, but again, the original inflation itself. Oh my gosh. I think another way to frame test question is I think a lot of us thought that a lesson we learned when unemployment fell very far and we didn't get inflation but maybe over time before you were in charge. the Fed was aired on the side of being too tight. It was too worried about the unemployment rate falling and I think the concern is that will we fight the last war And because of this experience, the FED will be reluctant to experiment. I'm not up 100K I Promise you that I'm not I'd love to have that problem again. If we can get back to it, you know. Okay, so you got like three years left in your term, You think you can pull this off for the next two years we can run the N equals two experiment. Absolutely yeah. Claudia's song. so I'm Consulting So the question I had is we've had unexpectedly fast and large rate increases this year and that has pushed up the dollar relative to basically any currency in the world. We've seen likely more financial market instabilities. So the Federal Reserve School managers in the United States and yet are you worried that in severe Global recession or financial Market turmoil would come back to make it harder for us to achieve the U.S dual mandate. So we do. We do of course look at Global developments. we have a domestic Mandate of course as every Central Bank does. but in in this world, Uh Global Financial Markets and the global economy really matter for us. So we we monitor all that very carefully. Um, we really think and my colleagues and I really think that the best thing we can do for ourselves and for the global economy is to get inflation under control as quickly as possible. We don't think, of course it's a better place if we if we take our time and and inflation becomes entrenched and then we have to go in later. The evidence is that the employment costs of bringing inflation down only rise with delay. So at the same time we're not going to work. but we don't want to do any more than we have to do. But we feel like as a risk management matter we we need to be. We needed to do what we did and uh and feel like we're now in a place again. As I said, where we can where we can slow down and and try to reach that that ultimate level. Uh, but how much do you worry about? What qualities question implies is we do something with rates? Other people are forced to do things with rates and that ends up spilling back to us and makes it harder for you to do it. so you have to take that possibility into consideration. We we absolutely believe that we take that into consideration. The model is explicitly taken into consideration. Of course, they're not perfect. No one can. No one would say we do it. We do it perfectly. But we we I mean we have a very large Global model that we use for the global economy and it absolutely takes into account what what's happening with real, the real economy and monetary tightening and currency and all those things will be perfect. But we do that. Um, and we also sort of understand generally that the you know there's a lot of research and things talk. people are talking about this a lot right now that you know maybe that the whole is bigger than the sum of the parts when it comes to tightening. Maybe it is. Maybe it isn't but we're aware of the risk of that. But again, I come back to look where we are. we've we've raised. you know, 375 basis points. Markets are working so we haven't done. I don't regret getting to where we are. and I think broadly. Wow. If we can get this over quickly. Okay, 10 day if you're part of our learn plan profit group, we talked about it I mean it could have gone either way, right? We waited. for there it goes. 10 Tqq 10.

um two questions if they're short. Uh yeah, very short. Um, so one question on the labor market is, how do you reconcile? You know, the characterization of the labor market is very tight with, um, the fact that wage growth isn't keeping up with inflation and the labor share of GDP really hasn't risen since Uh 2020. And and then second question is how much Credence or what kind of research do you rely? Be careful here. be careful. Think about the notion that a very tight labor market will lead firms to invest in. Okay, well, they're asking more questions now about um I Think now. A big concern for a lot of people is it is to be said that this is going to be the recap, right? So what was the whole point of this? Everyone wanted to know if the Federal Reserve will begin to moderate how aggressive they raise interest rates and that is exactly what Jerome Powell said. So if you go back to the interview the last paragraph that Jerome Powell said and the host thanked him for saying it where he didn't have to ask about a 0.75 or a point five percent. They said that they're willing to moderate interest rate hikes as soon as December. It does not mean that they're going to stop interest rate hikes, which is a concern or a question that a lot of people had, but they said that they will begin to moderate as soon as September I'm sorry December did I say September I meant December So that's the next interest rate hike and I'll make sure that I live stream that on our YouTube channel as well for free, right? I Cannot stress this enough. so I'm very grateful for the NASDAQ Market going up. We waited for the market to react. We took advantage of this opportunity. If you're part of my Lpp team, that is all we talked about of waiting for the market to react, waiting for the market to react, not predicting, not hoping, but waiting for the market to react. Now that the market is this overbought, it doesn't have to pull back. but it wouldn't be a surprise if it begins to give back some of its gain. A 10 day is very significant I'm only talking to you day Traders If you're an investor and you have no intention of selling anytime soon, Hold Your Position I I don't I'm not here to speak to you right? But if you're a day trader, these are not the times to be greedy. There's always more money to be made. I Just all I ever want you to do is even if you follow with the trailing stop loss or a stop loss, something that if it breaks below a specific price point, you allow that stock to continue to try to rally to make more money. But there has to be a breaking point that if it breaks below something, you're just like. All right. I'm gonna cash out and I'm Gonna Keep at least 500 profit. A thousand dollars profit. Whatever it is that you're up already. Please, please please look out for yourself. The Federal Reserve Jerome Powell Just said that as soon as December they intend to moderate their interest rate hike. This is what the market was waiting for. So it was the very last paragraph of what he said: Do not be surprised if the market screen today, but possibly if in the next couple of days the market could always reverse, right? We still have I Mean this was the most important thing for this week to my understanding, but we have next week and then we have that CPI data report early to mid December I mean we still have a lot of things around the corner, right? I Live stream every single day for my learn plan profit group their private live streams. It's where you can watch me trade live. It's where I share my thought process. You do not have to join but if you want my time, if you want my assistant if you want to work with me on a closer basis I offer one thing and it's the alarm time profiting and that's that second link in the description and we're running our biggest sell into 150 off so you can choose to join also I Wanted to let you guys know for the live stream you don't have to do it, but if you guys head on over to Shoptechbuds.com or the fourth Link in the description down below, we are running a free flag sale. so a lot of you guys liked the flag that I had behind me. You get a free flag with every order today. just add it to your cart. So if you want a Wall Street shirt or you want a mouse pad, add a flag to your order and at checkout it will automatically discount the flag for free. No coupon code needed. That's just for you. Tuning on in into the FED live stream and again, we're gonna host more of these later down the road. So ah, if you're part of my Learn Playing profit team, I'm going to share with you my profits If you're not, I'm going to post it on Instagram but again, this is. well, yeah. I'm just I'm very grateful for today and um, I am I'm in awe I Just this was a solid setup Market Momentum Direction Right, It's just. it's amazing. So I hope that you guys enjoyed this stream I Hope that we earned your thumbs up. Please consider subscribing if you're absolutely new to the stock market. I Welcome you to send me a direct message via Instagram or via Discord and that's that first or third link in the description I Cannot help you if you do not reach out I will never reach out to you first. those are all fake accounts I have one Instagram and it's verified. Third link in the description or send me a direct message via Discord I Offer one thing. It's my learn plan profit group that is all. I All for nothing else. That's that second link in the description I Appreciate your time like always. Let's make sure that we end the year on a green note. Take it easy team! Wow! Love it.