Oh man, it's one of our favorite days. Uh well. when the market goes up afterwards unless of course you're a bear the Japal Federal Reserve Fomc Federal Open Market Committee meeting. So today we will be covering exactly what Drome Pow says is a supressor.

We'll add commentary. Obviously, we are going to play Fed bingo in 5 minutes. We will be getting the Feds rate decision. Obviously, we expect the rates presently to be held St T What we are most interested in though, are going to be the revisions in how the Federal Reserve conveys that they are setting up for cuts.

We're looking for the removal of the phrase additional Policy firming So within the next few minutes I Want you to pay attention. When this document comes out, we're looking for the removal of the phrase additional policy firming uh and that'll probably be replaced by some some form of phrase like adjustments to the Target rate I I Don't think they'll directly say anything about uh, uh, rate cuts. At this point, we'll keep that optionality open for the Federal Reserve And um, yeah, we'll We'll see what what teasers they give for either a March 20th rate cut or an April or May 1st Rate cut. Uh, so we'll see those are about five weeks apart right now.

The betting Market before for the meeting gives us about a 95.9% chance that we're are getting no rate change right now. There is a 4% chance right now that we are going to get a rate cut today. Nobody thinks that that would somewhat signal this concern that the Federal Reserve is worried about something. Which maybe they ought to be worried about.

Something like how about the New York Community Bank Holy crap. If you have not yet seen my video on the New York Community Bank I highly encourage you go go watch it because it's basically like a bank failure occurring in our face right now. So go watch that video either after this or whatever you want to do. Okay, so the um, these Regional Bank headlines are going to be a big deal.

Uh, so we. we'll watch this. Uh, now. the odds of a rate cut in March are now sitting at 55.5% That's a that's a jump.

Uh, actually. no there. Let me add this together. I'm sorry 57.8% Let's add that correct.

That's wild. So we've gone from like a 38% chance of a cut to 57% We got some movement here. This is also leading to movement in the Bond market. Bond Market 10 year down 9.2 bips right now.

2year down 11. Uh9. That's actually going to put us at a steepening 102 curve. Lot of bears waiting for that inflection point.

The inflection points not too far away. We're -28 basis points inverted right now. 5year break even in inflation. What does the market think inflation's going to do over the next 5 years? Next 5 years, we're looking at 2.25 for the 5year break even comes after ECI this morning.

Employment cost index which came in at 0.9 annualized. That works out to 3.6% 5e forward which would not be the next 5 years, but the 5 years thereafter sitting at 2.31 Okay, we are now. Uh, within two minutes of the statement being released. What we are going to do is I'm going to look over here this way and I'm just going to read off the headlines from the actual document.

Then we will go through the actual document. After we go through the actual document, we are going to make Fed. Bingo! So I want you to start thinking about: is the Fed going to talk about the banking crisis? Are they going to talk about the bank term funding program? Where and what is the Federal Reserve going to do? This is a big deal. Uh, let's see here.

Okay, so at the same time I'll also work on uh, making sure we've got some of these updates going over to ehack. uh as we're actually receiving the updates. so I'll be uh, kind of doing that. Uh, live.

which I kind of enjoy doing Anyway, it's perfect. So uh, then we are. Let's see here. We are obviously also going to watch.

We've got CNBC ready to go. We've got them right here. We've got the Q's up so we can see how the Q's react the cues right now. keep in mind they are down.

uh, but they are also down because of uh, the apple or sorry, the Google and AMD earnings which weren't actually that bad. they just weren't I think as juicy as people had hoped. So that's okay. So we've got uh, a lot of things going.

Got the iPad ready to go? We got our angles, we got everything boys and girls. So uh, this should be pretty fun. All right. So let's get into it again.

I'm waiting for the headlines. The headlines are going to be out within the next 5 seconds or so and then I'm going to start reading off the headlines ready. Uh, okay. and we have does not expect it will be appropriate to reduce rates until there is greater confidence that inflation will go down.

Okay, so Uh does not expect to reduce rates yet. Obviously the rate, as expected, stays stable. They did not change the rate. Fed judges risk to achiev being employment and inflation goals are moving into better balance.

Uh leaves key overnight policy rate unchanged. It doesn't not expect it will be appropriate to reduce rates until great their confidence towards 2% Uh, okay. Uh. Outlook remains uncertain.

Highly attentive to inflation risks. Recent data suggests economic activity has been expanding at a solid Pace Job gains have moderated, but strong unemployment remains low. Inflation has eased but remains elevated. Fed says economic Outlook Uncertain activity has been expanding F That's the F Same thing.

Jobs have moderated but remain strong. Unemployment remains low. Reaffirm statement on longrun goals in monetary policy. Uh, in favor of the policy.

was unanimous, unanimously reaffirmed statement on longer run goals. We have staff with access to most sensitive Fomc information may need to submit brokerage or other transaction statements to verify disclosure accuracy. That's fine. Will tighten restrictions on Fed regarding confidential information and this is nonsense.

Uh, additional information increases the number of Staff covered by the most stringent restrictions on investments. Uh, so more people at the FED will fall under this disclosure rule. Okay, whatever. So it's an update on the disclosure rules.

Uh, rates stay the same, and then again, the big line here does not expect it will be appropriate to reduce rates until there is greater confidence. Inflation is moving sustainably. Uh, uh, towards 2% Uh, the Q is falling slightly on this. Not a lot.

This is, not, in my opinion, a big deal because again, they don't want to signal that it's time to cut now. We knew that we expected that. Instead, we expect them to leave their optionality open. Do we go for March 20th? Or do we go for May 1st.

That's what we're expecting. We are looking at uh, higher likelihood right now that we're going to get them in March by March 20th because of the banking crisis. That might be uh, rejuvenating. but uh.

TBD You'll get two Inflation and Jobs reports between now and Uh, the Uh March 20th meeting and you'll get three between now and the May 1st meeting for Jobs and Inflation reports Okay, here it is. Job gains have moderated. We saw this. Uh, okay.

this is actually good that they're paying attention to this. Job gains have moderated because they actually are like it's a big deal, that job gains are moderating. Uh, and it's going to be worse. Uh, it's It potentially causes a uh, uh, a labor recession.

so it's It's not great. uh, so better balance. Okay, let's see inflation has eased over the past year but remains elevated. The committee seeks to achieve maximum employment inflation rate of 2% over longer rad.

We already know that. Uh, okay. the committee judges the risk to achieving its employment. Inflation goals are move or moving into better balance.

This is really the first time I think we've seen seen this on the Fomc statement. Outlook is uncertain. Okay, so they got where's the adjustment in Consider Here it is in considering any adjustments. Okay, remember what they had beforehand before it was determining the extent of additional policy firming that's gone.

uh and now we have inconsiderate other adjustments. Okay, actually let me see if I could just get the side by side view here: I Can Uh. We have different voters also, so you're going to see a little bit on different people voting. That's normal because we are.

This is the first Fomc meeting where you're in, uh, the new calendar year. so you're going to have some names get replaced. That's normal. Uh and okay.

here is the flip. Uh, let look at the strike sheet. Recent indicators suggest growth has slowed, that was removed. Growth of economic activity has slowed that's been removed and been replaced with been expanding at a solid Pace Job gains have moderated since early last year, but remain strong.

US Banking system is sounding resilent. Oh, they took that out. Whoa. Uh, that's very interesting.

No way would do do they end up reaying this somewhere that's wild. Look at that. They removed the US Banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity.

They remove that as well. Highly attentive to inflation risk. Better balance. Okay, uh.

here's the additional policy firming section which was replaced with. In considering any adjustments to the Target rate for the FED funds rate, the committee will carefully assess incoming data. balance of risk the committee does not expect it will be appropriate to reduce. This is the line here.

This is how they're defending themselves. Now does not expect it will be appropriate to reduce the target range until it has greater confidence. Yeah, but that could come in the next two CPI reports. So that's okay.

This is not a big deal, but this is what we expect them to do. Near-term bearish, longer term bullish. This is fine. Uh.

committee will continue reducing its Holdings of treasuries as described. Uh. And then they get into and assessing the appropriate stance of monetary policy. What? why? Where they completely got rid of the banking comment That's wild to me? Uh, that's very, very very interesting to me.

So the removal of this banking thing I Want to see if anybody else is catching on this? the dollar Index getting closer to unchanged the way I read this is I'm totally in agreement with Bob Bani it's a giant Roar Shack Pretty much if you look at all the data points uh, whether it was ECI ADP Regional fed service like Chicago Philly There's definitely weakness coming into the economy. You can still argue labor Market's doing better. We did see jolts. We did see consumer confidence.

So there's some cross signals going on. But maybe some of the best signals are, you know, Hearken back to 2018 2019 when the newspapers were all upset with the President, political meddling, and rate setting. You know, heresy. But yet, look at what's been going on the last couple days on the 30th.

Tuesday shared Brown Senator Shered Brown writs a letter to Chairman P saying you really need to ease over the weekend on Sunday you had Elizabeth Warren Senator hoper uh Jackie Rosen uh Sheldon White House all write letters a letter and all sign them all four you need the lower rates. Seems though the Senators are a bit nervous I would think based on the verbiage of most of the FED speak I See, they're going to keep talking tough, but they're going to give the market more than three rate Cuts this year I'm not sure if it's going to match the Market's ultimate aggressiveness. Yeah, all right, we've heard enough of this. Okay, so we we need to.

We need to really think about this. This is very interesting I Want to see what some of the other suits are saying? The removal of this sound and resilient part. Why did they remove that? Every line they leave in here is a big deal? Uh, so I want to see see what the suits are paying attention to? So the suits are saying. Remember that it isn't over until the FED Sheriff speaks duh, the FED removing reference to further hikes.

but uh, they emphasize that cuts aren't imminent. That's just a way of balancing right. It's It's a way of balancing the statement to say hey, like, uh, hey, we don't urgently need to cut in March Uh, maybe it's May right? maybe May Uh, who knows? That's That's basically what they're trying to say with that. Okay, remember two CPI and Jobs reports between now March 20th three between now and May 1st.

Okay, uh. this suggests a neutral to doish stance. Stocks: Uh, let's see some knee-jerk disappoint I mean uh yeah. I Guess a little bit here in the stock market you've got sort of a little adjustment down.

maybe about 30 bips to the downside there Tesla as well. Uh, if we go to the minute chart on BTC little bit of a down candle as well. No support over here obviously for uh, the new New York Community Bank So keep watching the these here. But anyway, this is a very interesting removal.

Let's see what else they say. The language about the policy. Uh, let's see here. the language about uh, okay, what do we have here? What do we have here affirming policy? That's fine.

nobody's talking about. where's the bank part? How is nobody catching this? Bank part. Nope. Here's the full better balance.

They're also seeing the economy is uncertain. They've literally said that same thing forever. Uh, the committee. Uh, the committee does not expect it will be appropriate to reduce until 2% That's fine.

Not the word adjustments. It's not easing specifically, but it. but it is a cutting bias. That's fine.

Uh, firming in policy has been removed to a neutral word. That's fine. Where's the bank talk? No suit is talking about the bank. What is this? Stocks, but not significantly so.

so. Maybe there was just an incremental amount of development with regard to expectations. Yeah, this is stupid. How could you say in the I See you here in the comments Mark How are the banks less relevant? You must not have seen the New York Bank video.

Uh, this morning. Uh, you know, have you seen 38% on New York Community Bank Rip? Like that's a big deal. Uh, so uh, you know this. Uh, this is very, very strange I'm trying to understand how to piece this together, but what we need to do is create Fed Bingo Now for what's going on.

but I think Jerome Powell is going to pick up on the fact that they didn't mention anything on the banks and it's a problem. So uh, let's make Fed Bingo and try to get to the bottom of what uh, what we think they're going to say and then obviously we'll compare. So go ahead, do me a favor and uh, start throwing out some suggestions. uh for what we're going to put in Fed Bingo Let's quickly also look at Yields Bond yields down 7.1% on the 10.

This is a slightly hawkish adjustment. the way markets are reacting. It's not a very uh uh, it's not like a sky rocket or crash or anything. Honestly, I think that's what the FED wanted.

Okay, one sec. One, we got to make our bingo card. Two three yeah are four lines to make a bingo I I'm so bad at getting fed Bingo but I get so close all the time I'm going to start taking like what Bingo boards actually do into heart and I'm going to stop forcing myself to get the M middle Bingo and um, we're well. you know what? We'll make it an easy one in the middle because I still think it's fun.

Okay J pal on time. The guy's like a clock. Okay, we'll give us an easy one. Okay, we need to hear banking like.

okay. I'm going to put on the edge here because they got rid of it sound and resilient. I Think Jpow is going to realize that people are like, wait, why didn't you say anything about the banks and then I think he's going to have to like quickly comment that, don't worry, no, we didn't mean to take that out. We actually we forgot.

uh, we accidentally hit the backspace button too many times. This is like on a day. literally, a bank is essentially collapsing. You remove the phrase sounding resilient.

That's sus all right. Uh, let's see here. let's see here. Uh, okay.

Okay, okay. okay. uh. sticky inflation, geopolitical conflicts.

Uh, that's pretty good. Okay somebody. I See your comment here? Uh, what? What do we have here? Okay, it's fine. All right.

Uh. Election Sure. call. No, we're not going to do sh caller soft Landing Are we going to get soft? Landing That's interesting.

Uh, okay, let's consider that. So uh okay. Okay, okay, let's put soft Landing in the corner over here soft Landing So we'll just have reference of soft Landing How about um, there's going to be a question on Cuts right? So let's write this down. Uh, Jerome Powell I'm going to say Jerome Powell punts question on March versus may cut So some kind of Punt on this.

How about let's go with Uh Financial Conditions: Okay, I think that's a pretty easy one I Mean we'll probably hear about that. Uh, we should say we talk about easing Financial Conditions: How about are we going to get anything on housing here or jobs labor for sure? Uh, we need to have uh, labor easing labor easing it'd be. We're probably going to see something on uh Services becoming less sticky. Maybe Services less sticky with.

and then we could talk about uh core uh PC at or below Target right? That would be good. poor core PC below these levels. That would be very good. Uh, okay.

let's see I want to see what else you all have here in the comments By the way I'm looking I'm watching the NASDAQ recover right now. Uh, so that's good. Uh, one sec. Okay, there we go.

Uh, with there we go. Okay, good looking at your comments here. Uh War I mean certainly geopolitical. Uh, Geopolitics is a good one.

Bank Term? Uh, yes, yes. Bank term funding program. Absolutely. Bank term funding program we want to hear talk about.

Are they going to extend it? Uh, you know what happens if a bank has a problem. Let's get New York Community Bank in here I'm going to put that on the Edge Let's Get Uh, Red Sea I'm going to throw that on the Edge Let's Get Uh, we need geopolitics. uh and Iran in here. How about uh, a slowing in uh, slowing in Germany slowing in Germany Oh oh oh okay, all right, this is just going to be a fun one.

I Got to throw a fun one right here. Okay, uh Nick T Nick T sits next to uh, the blonde from The New York Times I Have to I have to um uh o I Don't think he'll say the word recession. uh, he? he doesn't do the iPad anymore. Yellen's not going to step down I I Don't know I Want to get bingo I mean I don't want an easy Bingo but uh, deflation.

ooh QT talk Okay, uh, slowing. QT That's a good idea. Uh, deflation. The risk of deflation? You know what? I'll write that one down.

Deflation election He re he's If he says anything about the election, it's just going to be that they're uh, you know, like something to the effect of like we don't let politics affect us, right? Uh, we don't let which which we know is probably BS but whatever. At least they can say that. Housing affordability Taylor if another reporter mentions Taylor Swift oo uh by Kevin's ET oh that's interesting. uh buy the courses on building your wealth coupon code expiring today which is true by the way.

Uh, we've got some more videos coming out too, which is fun. Uh, stocks all-time high H Yeah, we never get them to talk about fate, but uh huh. H I'm going to I'm going to write that one down here so that we're going to put like Runner UPS Fate? uh housing? I Mean we could say something about rents. How about declining rents in multifam? I Like that, declining rents and so it's specific, right? Multifam? We could do, uh, like loans coming due, stuff like that deflation.

We have glasses actually fall dual mandate. yeah, the balance around the labor easing and and so like I like that idea like something where we're basically like, look, uh, dual mandate balance but then also something like um, you know, uh, attentive to layoffs or uh, too much easing here right in labor? Yeah, that's good. yeah. declining rents in SF Yes, it's crazy man.

rents right now are not fall fall uh GDI ooh generative. AI Co Hire no longer Shut the effing door China Let me quickly see, let's see if we can get some inspiration from what what some of the other things are that we're expecting. Uh, we'll also watch the cues here. So speaking of two elements in the Fed's Mandate Remember that the minutes of the December meeting showed that a few policy makers were worried about the possibility of focusing uh, on inflation causing damage to the jobs Market That's true.

Fed's trying to normalize rates. Yeah, well, they're going to have to come down. Note the new language. At this point, the shift in stance we've been discussing until now is getting inflation mandate back to Target.

That's fine. The better Balance part is interesting. We'll have to see if Howwell gives us any insight on whether the Fomc will discuss balance sheet changes. That's true.

Uh New York Community Bank Corp News Today CL Clarita says it does not seem systemic for now. Uh-huh uh unless I've Oh, there we go. The suits are picking it up. The suits are picking it up unless I've missed it.

There's no reference to the banking system. Yep, Okay, very interesting I guess Clarita went right on after this to that's crazy. They instantly had Korita go on Bloomberg to to to shut up the banking price crisis talk. That's wild.

uh Clarita uh so after the the notes came out, Clarita quickly went on Bloomberg to clarify. uh New York Community Bank is not systemic New York Community New York Community Bank not systemic. That's kind of wild I Want to see if I can get a shot of that I don't know? No, probably not. Um, Wow.

Okay, well that's okay. We have the notes Here of what was said, it was just to clarify. Well, actually let me just type in I can go just look up his name and then we'll get everything that he said Clara News Okay, okay. I got it.

Okay, that's not going to be easy for me to play that. That's okay. Oh yeah, No. okay, that's a 20-minute segment.

We don't need that. I Just give me the bottom line here folks. uh Clarita Oh Disney Lawsuit against Ronda Santis dismissed by federal judge I like how they tried to VAR that in the FED headlines Clarita Warns Fed raid hikes still in play on strong economy. That's old news.

No oh sorry, no, that's that's super old. Okay, never mind. I can't get the transcript right now. but screw it.

Uh, let's go. How what would another way be Okay, What do we have? We have 10 minutes to go until we actually have the um, what's it called Fed special. Yeah, 10 minutes to go until Jpow comes out. Let's see, do they have a that's Robert Tip: that's not Clarita see where they had him? Oh there he is Rich Clarita He came on no way.

He was there within three minutes of releasing the statement to talk about the bank. Okay, okay, we're going to do it. Hold on. It's going to look funny, but anything to understand what was just said.

Okay, here we go. Okay, he's just yapping Dallas Fed trim mean mid twos on inflation D hold on. Why is the Fed not prepared to embrace the rate cut conversation he says I actually agree I'm looking at the data I I Thought March would be too soon and remember he's not at the FED anymore. Okay, okay, lot, yeah.

okay, all right, but it's so that's really interesting so we know he's not there anymore. but he's a buddy of JP and so I think they sent him on Bloomberg to clarify this I Want to see the banking comment though? Yeah, here it is. They're just now asking about it I'm going to feed this to you once. I We just say it given what I know right now The reality is we have a bunch of regional Banks blah blah blah Fed did what they needed to do right now.

This doesn't appear to be systemic. that's Clarita but it's on their radar. Yeah, okay, all right, that's not a big deal deal I mean it's not a big deal for a few parts, mostly because I mean he's not at the FED anymore. That's part one.

Part two is uh, you know I don't know the way they phrase that question I don't know that he really came in prepared knowing about New York Community Bank he may honestly not even know what's going on I mean I don't know, but uh yeah, he's over at like Pimco asset managers now or whatever. It's funny how you go from working at the FED to jumping over to to uh, basically um, collecting your your pay as a as a fund manager got to get those bips. But anyway, yeah, I think this is uh, this is pretty wild. Let's see what they're saying over here.

too soon, inflation could reare up when perhaps it's not completely under control. I think the what's on their minds at the moment is this very strong Topline growth in the economy and if they were to cut too soon, they might might very well stimulate to the point of a Resurgence in inflation. So they they certainly don't want to risk that. if if the if the growth numbers were closer to Trend more around 2% or or even a little bit lower might be a different story.

But uh, they're running the risk of of adding fuel to a fire that could create a reversal of the inflation picture. See yeah. I I So disagree with that. I mean I know us.

viewers already know that and I know a lot of you. Also disagree with me I don't think growth creates inflation. We didn't have. uh I mean we had growth since 82 and we had the opposite of inflation.

So uh, but anyway. uh but I do think money printing causes inflation, but that just drives us out of deflation. It's it's crazy. But let's let's write that down.

Let's finish our bingo card. So how about uh, growth leading uh, growth? uh to the extent growth growth causes inflation? Something like we don't know, right? we don't like I would expect Powell to say something like that. What else would Powell say today? So we got uh banking. uh banking is going to be a big de like the everybody's going to ask about banking today.

uh, premature rate Cuts that's uh, that might that would be interesting. We don't want to cut prematurely. Okay, don't want to cut prematurely. Oh, and then of course we need like doing nothing.

We need Jpow to start planting the seed of cutting right. Plant seeds of cutting by saying doing nothing increases tightness, right? Some something like this. So plant seeds of cutting by saying doing nothing increases tightness or somehow explaining that right. So, or uh, or explaining that.

Okay, got it. Uh, then we need we have three more to do. Uh fate I mean I could throw fade on here if I really need it. uh I like I really don't think they're ready to pull that cat out of the bag yet? I Can't I think they're kind of holding that one.

Price stability election If that's not going to happen. uh. Yield curve Yield curve Systemic risk Price stability I mean yeah. I mean we might throw o ever evergr n probably not too big of a deal.

Um, how about uh, let's see some kind of like, how about manufacturing? That's one manufacturing uh, manufacturing deemed to be in a recession. It's also related to slowing in Germany And then we'll throw in. You know what we'll throw in China Why not? And then let's throw in. We got geopolitics, credit defaults.

We're on the right path o that's a good time. Mass layoffs I Don't think he's going to use those heart of words, but let me make sure I have enough. Yeah, Lab labor easing over here, increased layoffs and um, uh, but still, but still openings. so you know some kind of reference to GDP Probably honestly.

Uh, GDP above Trend Oh yeah, yeah, yeah, that that's what we should do for the last one. GDP Uh, above Trend but below potential or some variation? those are. those are key words he's used before where he kind of. it's like there's Trend and then there's potential and he just wants GDP to be below potential Poal not necessarily below Trend which is a funny, like sort of like redefining of this.

Okay, see what else we have here? Uh, while the markets got worked up over the news, that and New York Community Bank missed their earnings estimates. The complete removal of the statement around uh, the tightening of financial statements shows the FED is not concerned. Yeah, or they forgot. Uh yeah, this is interesting too.

They could have easily said hey, we're just going to look at uh, you know, future data but instead preconditioning. Cuts Did they really precondition? Let me see here and considering any adjustments, we do not expect it would be appropriate to reduce the target range until the FED Yeah, I Guess that would be a precondition once they have greater confidence that inflation is moving sustainably. it already is, but we knew they weren't going to cut today. Okay, we can always print that's true, but you don't want to cause that unnecessary hardship.

Yeah, um. the blonde girl from The New York Times is going to ask a super question. She actually is very smart. Uh, she's she's very good.

Uh, that her name's it's like Jenna Smiac or something like that. Her and Nick T usually ask very good questions. Uh, uh. Some people though, just ask these like horrible moronic questions and they just drive me nuts.

So there's the door. Okay, two more. one more minute. now when printer printer's back there.

Jenna Smiley SM Smile, smile smile smile, Whatever. Yeah, let's check if the March rate cut estimate changed. That's a good idea. Good idea, Good idea, Good idea.

Okay here we go: Fed Rate: Cuts Uh, 56% chance. Yep, so we're going to write that down on Ec.com really quick and we're just going to say pre-speech 56% chance of cut? uh March 20 2024 Let's listen. So if I cut you off, it's only for a good reason. A final question is depending on when Jay pal comes in.

the market reaction: you mentioned pullback. How significant could it really be given that Financial conditions are as relatively easy as they've been for a while now. Yeah, unless something changes on that front, the credit front, or if rates really take take flight from here or something I don't think that the stock market is set up for something nasty. Therefore, usual 3 to 5% random pullbacks.

I'm going to be writing notes by the way at Eac.org going so that I don't have to be like super interruptive which I I Usually don't think I'm super interruptive, but uh, it'll help. All right. He's on time, he's on time. That's the first.

Uh first. Bingo piece Good afternoon. My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices. For the American people, the economy has made good progress toward our dual mandate objectives: Inflation has eased from its highs without a significant increase in unemployment.

That's very good news, yes, but inflation is still too high. Ongoing progress in bringing it down is not assured and the path forward is uncertain. I Want to assure the American people that we are fully committed to returning inflation to our 2% goal. Restoring price stability is essential to achieve a sustained period of strong labor market conditions that benefit all.

Today, the Fomc decided to leave our policy interest rate unchanged and to continue to reduce our Securities Holdings Over the past two years, we have significantly tightened The Stance of monetary policy. Our strong actions have moved our policy rate well into restrictive territory, and we've been seeing the effects on economic activity and inflation. As labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals are moving into better balance. I Will have more to say about monetary Policy about Monetary policy.

After briefly reviewing Economic Developments, Monetary about Monetary, recent indicators suggest that economic activity has been expanding at a solid Pace GDP Growth in the fourth quarter of last year came in at 3.3% for 2023. As a whole, GDP expanded at 3.1% bolstered by strong consumer demand as well as improving Supply Conditions Activity in the housing sector was subdued over the past year, largely reflecting High Mortgage rates MH High Interest rates also appear to have been weighing on business fixed investment. The labor market remains tight, but supply and demand conditions continue to come into better balance. Over the past 3 months, payroll job gains averaged 165,000 jobs per month, a pace that is well below that scene a year ago, but still strong huh? The unemployment rate remains low at 3.7% Strong job creation has been accompanied by an increase in the supply of workers.

The labor force participation rate has moved up on balance over the past year, particularly for individuals aged 25 to 54 years, and immigration has returned through prepandemic levels. Nominal wage growth has been easing and job vacancies have declined. Although the jobs to workers Gap has narrowed, labor demand still exceeds the supply of available workers. Inflation has eased notably over the past year, but remains above our longer run goal of 2% Total Pce Prices rose 2.6% over the 12 months, ending in December due the excluding the volatile food and energy categories.

Core Pce prices: Rose 2.9% theow Lower inflation readings over the second half of last year are welcome, but we will need to see continuing evidence to build confidence that inflation is moving down sustainably toward our goal. Longer term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. The Fed's monetary policy actions are: Guided By our mandate to promote maximum employment and stable prices for the American people, my colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of Essentials like food, housing, and transportation. We're highly attentive to the risks that high inflation poses to both sides of our mandate, and we're strongly committed to returning inflation to our 2% objective.

Over the past two years, we have raised our policy rate 5 and a Qu percentage points, and we've decreased our Securities Holdings by more than $1.3 trillion. Our restrictive stance of monetary policy is putting downward pressure on economic activity and inflation. The committee decided at today's meeting to maintain the target range for the Federal Funds rate at 5 and A4 to 5 a half% and to continue the process of significantly reducing our Securities Holdings. We believe that our policy rate is likely at its peak for this tightening cycle and and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.

But the economy has surprised forecasters in many ways. Since the pandemic and ongoing progress toward our 2% inflation objective is not assured, the economic Outlook is uncertain and we remain highly attentive to inflation risks. We are prepared to maintain the current target range for the Federal Funds rate for longer if appropriate. It as labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals are moving into better balance.

We know that reducing policy restraint too soon or too much could result in a reversal of the progress we've seen on inflation and ultimately require even tighter policy to get inflation back to 2% At the same time, reducing policy restraint too late or too little could undo weaken economic activity and employment. In considering any adjustments to the target range for the Federal Funds rate, the committee will carefully assess the incoming data, the evolving Outlook, and the balance of risks. The committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2% We will continue to make our decisions. Meeting by meeting, we remain committed to Bringing inflation back down to our 2% goal and to keeping longer run, longer term inflation expectations well anchored.

Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. To conclude: we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public. Mission We at the FED will do everything we can to achieve our maximum employment and price stability goals.

Thank you I Look forward to our questions. Here we go: P Great smiling from The New York Times Thanks Taking our questions obviously in the statement and just in your uh' remarks. There you note that you don't want to cut interest rates without greater confidence that inflation is coming coming down fully. I Wonder what do you need to see at this point to gain that confidence? And as you make those decisions, how are you weighing recent strong growth in consumer spending data against the sort of solid inflation progress you've been seeing? Sorry, see that last part.

How How are you weighing the growth data and consumption data which have been surprisingly strong against inflation data? Okay, so what are we looking for to get greater confidence? Um, let me say that we have confidence. We're looking for greater confidence that inflation is moving sustainably down to 2% Implicitly we do have confidence and has been increasing, but we want to get greater confidence. What do we want to see? We want to see more good data. It's not that we're looking for better data, it's we're looking at continuation of the good data that we've been seeing.

And a good example is inflation. So we have six months of good inflation data. The question really is that six months of good inflation data? Is it sending us a true signal that we are in fact, on uh, a path sustainable path down to 2% inflation? That's the question. and the answer will come from some more data that's also good data? It doesn't.

It's not that the six-month data isn't isn't low enough, it is. It's just a question of can we take that with confidence that we're moving sustainably down to 2% That's really what we're thinking about in terms of of Uh. growth. Um, we've had strong growth.

If you take a step back, we've had strong growth. Very strong growth last year, going right into the Fourth Quarter. Um, and yet we've had a very strong labor market and we've had inflation coming down. So I think whereas a year ago we we were thinking that we needed to see some softening in economic activity.

Hasn't been the case. So I Think we we look at. we look at Uh Stronger growth. We don't look at it as a problem.

I Think at this point, we want to see strong growth. We want to see a strong labor market. We're not looking for a weaker labor market. We're looking for inflation.

Yes, to continue to come down as it has been coming down for the last six months. Okay, that's very bull. If I could just follow up very quickly that when when you say that you want to make sure that it's a true signal, is there anything that you're seeing in the data that makes you doubt that it's a true signal at this stage? No. I think I I would say it.

It seems it seems to be the likely case that that we will achieve that confidence, but we have to achieve it and we haven't yet. And so I mean it's a good story. We have six months of good inflation, but you can and you know this. You can look behind those numbers and you can see that a lot of it's been coming from Goods inflation for example, and goods inflation running significantly negative.

It's a reasonable assumption that over time Goods inflation will flatten out probably approximate zero. That would mean the services sectors would have to contribute more. So in other words, what we care about is the aggregate number, not so much the composition, but we we just need to see more. That's where we are as a committee.

We need to see more evidence that sort of confirms what we think we're seeing and that tells us that we are on, gives us confidence that we're on, uh, on a path to a sustainable path down to 2% inflation. Nick This is all about just reiterating that six-month Trend that the six-month trend is already good enough. Chair pal, It seems to me you raised rates rapidly over the last two years for two reasons. One was the risk of a wage price spiral.

two y there risks of inflation expectations becoming unanchored. Gone This morning's ECI report for the Fourth Quarter shows private sector payroll growth running at a sub four% Pace Inflation expectations are very close to where they were before the inflation emergency of the last three years, and given that you appear to have substantially cut off these two tail risks and that you've judged Uh here today, current policy is well into restrictive territory. What good reason is there to keep policy rates above 5% Are you really going to learn more waiting 6 weeks versus three months from now that you have avoided those two risks? Six Weeks is March smart? Um, As you know. Um, Uh, almost every participant on the committee does believe that it will be appropriate to reduce rates and uh, for for partly for the reasons that you say.

You know we, we feel like inflation is coming down. Uh, growth has been strong, The labor market is strong. Um, we're what we're trying to do is identify a place where we're really confident about inflation. Get it getting back at 2% so that we can then begin, uh, the process of dialing back the restrictive level.

Uh, so overall I Think I Think people do believe in. as you know, the median participant wrote down three rate Cuts this year. Uh, but uh I Think To get to that place where we feel comfortable starting the process, we need some confirmation that inflation is in fact coming down sustainably to 2% if I could ask differently. Uh, if if you hold rates high as inflation moderates as it as it has been, Target rates will exceed the prescriptions of the tailor rule or its variance.

What would be the reasoning for holding rates higher than the levels recommended by those rules? Uh, in the current instance, well, I look I Think As you know, we consult the range of tailor rules and and non-tail kind of rules. We consult them regularly. They're in our our tealbook and and uh, they're in all the materials that we look at. but you know I Don't think we've ever been at a state.

At a place where we were where we were setting policy by them. Um, and they're depending on the rule. Uh, it will tell you different things there many different formulations. Another way to think about it is implicitly is.

um, so in theory, of course, real rates go up if holding all else equal as inflation comes down. But that doesn't mean we can mechanically adjust policy as real rates. sorry, as inflation comes down doesn't mean that at all. Because for one thing, uh, we we don't know.

we look at more than just the FED funds we look at broadly Financial conditions. But in addition, we don't know with great confidence where the neutral rate of interest is at any given time. But that also doesn't mean that we wait around for uh to see. uh, you know, the economy turned down because that would be too late.

So we're really in a risk management mode of managing the risk. as I mentioned in my opening remarks, managing the risk that we move too soon and move too late and I think to move, which is which is where almost everyone on the committee is is in favor of of moving rates down this year? Uh, but the timing of that is going to be linked to our gaining confidence that inflation is on a sustainable path down to 2% All right, thanks chair. I'd like you to. He didn't fall for the six month thing six week thing.

In the statement that inflation Still Remains elevated. Um, you've pledged to cut rates before inflation reached 2% So that implies that there's some sort of intermediate step here on inflation, and that a cut would be consequent with a change in the statement language that inflation remains elevated. What's the step down from there? Yeah, I don't know that we' worked out the particular statement language in that kind of thing. I Would just say if you look at you, look at where where 12-month inflation is and it's you Know it's it's still well above.

Core is 2.9% For example, 12 months which is way down from where it was. Very very positive development, very fast decline, and and you know the the the case is likely that it will continue to come down. So so that's where that's where it is. But we're you know, we're wanting to see you know more data.

So uh, if if I could follow up on that, the statement um, allows that you want greater confidence on uh, inflation falling before you cut. but it doesn't mention the other side of the Mandate a SL in employment would a slided employment Also, Uh, bring you to the point of of cutting rates. Yes, So uh, let me say that we're not looking for that. That's not something we're looking for.

But yes, if you think about, you know in in the base case, uh, the economy is performing well, the labor market remains strong. If we saw an unexpected weakening in in, certainly in the labor market, that would certainly weigh on cutting sooner. Absolutely. And if we saw inflation being being stickier or higher, or uh, those sorts of things would argue for moving later.

Uh, in the base case though, where where the economy is healthy and we have as you know, we have ongoing growth, solid growth. We have a strong labor market. We have inflation coming down. That's what people are writing their Sep around.

And in that case, what we're saying is based on that, we think We can and should, uh, take advantage of that. And and be careful as we approach that question of when to begin to dial back, restri notice quickly on screen here how he's dodging the six-month talk he's always come up previously and talked about six and three months. not today to, um, the greater confidence aspect of the statement. Um, there's been a lot of unanimity in recent meetings I'm just wondering going forward when it comes to all needing greater confidence is the unanimity or at least consensus among Fomc members about what the threshold for that great confidence is.

And if not, could you maybe tell us a little bit about the discussion today on you know what the variations between Fomc members was on what constitutes enough confidence to cut rates, and also if there was any variation on how quickly that greater confidence threshold could be reached. Thank you, We're not. We're not really at that stage. You know we're we're we're There was no proposal to cut rates.

Uh, some people did you know talk about their view of the rate path I would point you to the SCP uh as as a you know as good evidence of where people are although it is, it is one cycle later so you know we are, we're not. We're not at a place of of really working out those kinds of details because we weren't actively considering. You know, a moving moving the Federal Funds rate down today I Will say there's a there is a wide disparity, a healthy disparity of views, and you see that in public uh, public statements in the minutes uh, and the transcripts when they're released every 5 years. So we do have a healthy uh set of differences.

and I think that's actually essential for making good policy. We're also able to reach agreement generally because we listen to each other, we we compromise, and even though not everybody loves what we do, they're able to for the most part able to join it. And to me, that's a that's a well functioning public institution. Rachel Hi chair Pal Rachel Seagull from The Washington Post Thanks for taking our questions! So over the past few years there have been all these realtime indicators that helped us gain a sharper understanding of where the economy was like open table data or office attendance.

You've talked about vacancies in the past and I'm wondering at the start of this year what might be on that dashboard for you? That's giving you the clearest picture of the economy, including on runs if you could touch on that, including rent, rent, cost. Yeah, well, so we're not. You know, it's not the pandemic, so we can actually rely on more more traditional uh forms people are working, they're getting wages, uh, and and the economy is largely reopened and is broadly normalizing as you see. So I wouldn't say we're looking at that that sort of more Innovative data as much.

Um, you know you point to rents. So of course we follow the components of inflation very carefully. which would be Goods inflation I Talked about that a little bit. You mentioned housing inflation.

So the question is when will these lower Market rents find their way into measured rent d as measur measured in Pce inflation And we think that's coming. We know it's coming. It's just a question of when and and how big it'll be so, but that's in in everyone's forecast I would say so that will that will help, but at the same time we think Goods inflation will probably. It's been giving a lot of disinflation to the effort and probably that declines over time, but it may well have some some more time to run.

You know these, the supply chains are not perfectly back to where they were. In addition, it takes time for the healing process to get into prices, so there may be still a Tailwind we'll find out with with that. So we look at the things that relate to our mandate very carefully and uh, as you would imagine I guess just as a quick followup. do you feel comfortable at this point saying the economy has reached a soft Landing Or is that part of looking for more confidence? Here we go.

No. I wouldn't I wouldn't say we've achieved that and I I Think we have. We have. a ways to go.

Inflation is still. You know core inflation is still well above Target on a 12- Monon basis. 12 months is our our Target Certainly I'm inour enaged and we're encouraged by the progress. but uh, you know we're we're um, we're not.

We're not declaring victory at all at this point. We think we have a ways to go. Okay, thank you Mr Chairman. Um, you've said that you would know the neutral rate by its works.

So I'm wondering what you could tell me. how do you believe the neutral rate is working? We're telling you right now that growth is stronger. In other words, how much is the economy really being restrained right now by the current funds rate and how much restraint does it really need? Additionally, if inflation is still coming down, yeah, so it's I Think you. You do see in the interest sensitive parts of the economy you do see for example, housing.

you see the effects you do your. Your second question though really I think is important and that is a lot of this has come through. Uh, a lot of the disinflationary processes come through the healing of Supply chains and also of the labor market. So you've seen the you know that other set of factors is really different from other cycles and has brought that working with tighter tighter policy which has enabled the supply side to recover.

I think is the that mixture has been behind what has enabled this? Um, so no. We really do think that we're having an effect broadly across the economy I would point to the intensitive uh uh parts of the economy as well as as spending generally. Um, but it's a it's a joint story. it's a complicated story I think I Just heard this cycle is different imparting to the economy.

Would you say relative to the neutral rate, it's so I Think it's it's of course you know that it's not something you can identify with any Precision but if if you a standard approach would be to take the nominal rate 5.3% let's say and subtract sort of a a forward measure of inflation. If you do that, there are many, many ways to calculate that neutral rate. but that's one I like to do and you you're going to get to something that is materially above mainstream estimates of neutrality of the neutral rate. You will and but at the same time you look at the economy and you say this is an economy That Grew 3.1% last year and and you say what does that tell you about the neutral rate? What's happening though is the supply side has been recovering in the middle of this so that that won't go on forever.

So a lot of the growth we're seeing is not Is it isn't just a tug of war between between interest rates and demand you're getting. You know more activity because because of the of Labor Market healing and Supply chains healing. So I so I think the question is when that Peters out I think the the you know the the Restriction will show up probably more more sharply. Thank you.

Sorry, thanks for taking the question Mr Chairman Um, you mentioned earlier, we're not seeking a weaker labor market I think that you said, can you talk a little bit more about that Do do you think the neighbor market now is back to quote unquote normal and that um, uh, the we can uh achieve uh the inflation Target without wage gains coming back down to what they were pre pandemic? Even with today's ECI levels, they were still above those pre pandemic levs. I Think the labor market by many measures is at or nearing normal, but not totally back to normal and you pointed to one or more of them. So I Think you know job openings are not quite back to where they were wages or wage increases rather are not quite back to where they to where they would need to be in the longer run. I I Would look at it this way though.

um, the the economy is broadly normal normalizing and so is the labor market and that process will probably take some time. So wage setting is something that happens. It's it's you know. probably will take a couple of years to get all the way back and that's okay.

that's okay, but we do. See you saw today's ECI Reading you know the evidence is that that wage increases are still at a healthy level. Very healthy level. but they're gradually moving back to levels that would be more.

Associated G Given assumptions about productivity are more typically associated with 2% inflation, it's it's an ongoing process, a healthy one. And and you know I Think we're we're moving in the right direction so that process can continue without a weakening of the labor market. Basically, you're saying well I Think the the labor market is it I Don't know if it's rebalancing clearly that the there was a uh, fairly severe imbalance between demand for workers and Supply at the beginning of the pandemic. So we lost several million workers at the beginning of the pandemic from people dropping out of the labor force.

and then when the economy reopened, you remember 2021 you had a severe labor shortage and it was just it was everywhere Panic on the part of businesses couldn't couldn't find people. So what's happened is uh, we expected labor the Labor uh Supply labor market to come back quickly and it didn't And and 2022 was a disappointing year and you know we were kind of thinking well, maybe we won't get it back and then in 2023 we did. As you know, so labor force participation came back strongly in 23 and so did immigration. Immigration came to a halt during the pandemic.

So and so those two forces have significantly lowered the temperature in the labor market. to will is still a very strong labor market. It's still a good labor market for wages and for finding a job, but it's getting back into balance and that's what we want to see. And you know one great way to look at that is what's happening with with wage increases and you see it now across the the major things that we that we track.

It isn't every quarter, but overall there's a clear Trend still at high levels but back down to where would be what would be consistent with with where we were before the pandemic and with 2% inflation Chris hi uh Chris Rugaber at Assist Press thank you I Wanted to follow up on Rich's question. uh, it sounded like you suggested that uh, you're not worried about faster growth so much so. wanted to see if you're seeing anything that suggests that inflation could re Accelerate from here And it sounds like you're saying you're not worried that U solid growth from here on out poses any risk to inflation. Thank you No I think that that is a risk.

the risk that inflation would uh would re accelerate I think the the greater risk is that it would that it would stay stabilize at a level meaningfully above 2% That's that's to me more likely of course if lab if if uh if um, inflation were to Surprise by moving back up, that would we would have to respond to that and that. That would be a surprise at this point. But I Have to tell you, that's why we keep our options open here and why we're not. you know, rushing.

So um I I think both of those are risks. but I think the more likely risk is the one that I mentioned. which is you. You've had six good months, very good months.

But what? What's really going to shake out here? You know, where what what will When we look back, what will we see, will will inflation have dipped and then come back up? Are the last six months flattered by by factors that are that are oneoff factors that won't repeat themselves. We don't think so, we don't. You know that's not what we think, but that's the question we are asking. We have to ask and we want to get Comfort on that and just one quick follow.

Uh Governor Waller had mentioned the um uh revisions that are coming on February 9th for the CPI dat is that something you're watching as well and if if we see those revisions fairly minor? uh, is that going to give you more confidence uh where things are going, we'll just have to see. Yeah, we'll We look at those. Last year was a was a a surprise. Okay meetkevin.com radio and television.

Uh, if you don't want to use the term soft Landing Uh, would you say at least that? Uh, from your point of view. Now the other scenario of a hard Landing caused by the FED is off the table or the risks have diminished uh, very much. And uh, you mentioned um below 2% inflation for on a three-month basis. Core PC has been running at 1.5% and there are those on Wall Street who think that if you maintain the level of restriction you have right now, you could end up with inflation running below your target.

Uh, how do you see that? Good question. So how to Des Your first question: How to describe where we are? So I guess I Would just say this Executive summary would be that growth is solid to strong over the course of last year. Um, the labor Market 3.7% U unemployment indicates that the labor market is strong. We've had just about two years now of of unemployment under 4% That hasn't happened in 50 years.

So it's a good labor market and we've seen inflation come down. We've talked about that. so we've got 6 months of good inflation data and an expectation that there's more to come. So this is.

this: is A This is a good situation. Let's be honest, this is A This is a good economy. But what's the Outlook that's looking in the Riew The Outlook We do expect growth to moderate. Of course we have expected it for some time and it hasn't happened.

but we do expect that it will, uh moderate as supply chain and labor market normalization runs its course. Um, labor market Market is rebalancing. As as I mentioned, job creation has slowed, the base of job growth has narrowed. Um and of course 12 12- month uh inflation is is above Target And and getting you know, getting down closer to Target is not guaranteed.

but we do seem to be getting on track for that. So those are the risks, uh and and questions we have to answer. But overall this a pretty good picture It it is a good picture. Um, your second question was uh sorry, could you get uh inflation that is below Target end up with inflation below Target and you have to do something about that.

So we the thing is, we're not looking for inflation to tap the 2% base once we're looking for it to settle out over time at 2% And the same thing is true. if we have a month or two of lower and we have that now of of inflation that's annualized at at a lower level, that wouldn't be good. we're not. You know we're not looking to have inflation anchor below 2% %.

We're looking to have an anchor at 2% So if we do face those circumstances then we'll have to deal with that I think I Think as of now you know the the Um question we want to take advantage of this situation and finish the job on inflation while keeping the labor market strong. Okay, that's bullish. Don't want inflation to go below. Um Edward Lawrence from Fox Business than you Mr Chairman for taking this Um.

So as as I've heard from some District fed presidents, is it in your view, a little premature to think that rate cuts are right around the corner? And then when we do see that First Rate cut is that should we interpret that as the beginning of a rate cut cycle or is it a one-off Oo? So I'll point to that language on your first question. We we we included that language in the statement um to Signal Clearly that with strong growth, strong labor market inflation coming down, the committee intends to move carefully as we consider when to begin to dial back uh, the restrictive stance that we have in place place. So if you take that to the current context, current context, we're going to be data dependent. We're going to be looking at this meeting by meeting um based on the meeting today.

I Would tell you that I don't think it's likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that killed March That's that's to be seen. Um so I wouldn't call. You know when you say when you ask me about in the near term I'm here ing that as March I would say uh I don't think that's it's probably not the most likely case or what we would call the base case. Then your second question is on on the is this the start of a when we see a cut? Is it the start of a cutting cycle? or is it Could it just be a oneoff? You know that's going to depend on the data.

The whole thing is, this is going to depend on the data. We're going to be looking at the economic data as it affects the Outlook and the balance of risks and we're going to make our decisions based on that. and uh, It could wind up. You know we'll We'll have another Sep at the March meeting and people will write down what they think.

But in the end, it's really going to depend on how the economy evolves. We talked about, there are risks that would cause us to go slower. For example, stronger inflation, more more persistent inflation. There are risks that would cause us to go if they happened, that we cause us to go faster or and sooner and that would be a weakening in the labor market or for that matter, very very persuasive, lower inflation.

Those are the kinds of things. So we're just. we're just