Hey everyone, welcome back! This is a big day. We have uh, what we're expecting to be a 50 basis point height coming up from the Federal Reserve Within the next four minutes I will announce that the second it comes we're expecting that. That's not a surprise. Obviously, higher or lower would be a surprise.

What uh is more interesting to me though is what comes on that summary of Economic projections I Want you to have my predictions of the Summary of Economic projections That way we can compare and see what actually happens. So uh, my predictions for the Summary of Economic projections quickly. Uh, to catch you up since we've only got a few minutes before they come out. I Believe the most important piece is going to be the FED funds rate projection.

Last time they were at 4.6 I Expect that to go up to 4.8 and next year potentially to actually go down to 3.7 by the end of next year. Although that could be dangerous. so you know the more. I Think about this.

now. this actually could be dangerous because it would. It would tell the entire Market that they're going to cut rates next year. they did that last time too.

So I'm not sure about that. I'm gonna stick with that, but it's possible it's possible that this ends up going to like 4.1 to 4.2 something like that. Just so they reiterate like, yeah, look, we're gonna go up. Maybe we'll cut, but don't expect big, right? The second most important thing.

uh I guess I numbered this in a funny way. Uh, this would actually be one, two, three, four. There we go. More like that.

Second most important. well I guess Oh no no. I numbered it like this. Okay, that's why I did this yesterday.

That's right. The second most important thing is the range that we'll get on the summary of economic projections in my opinion. Which is this right here? Uh, how like how much dissension is there or how much Unity is there from the Federal Reserve And then of course we'll get the change in Real GDP This will be more interesting. like their projections for unemployment and stuff like that.

That's going to be interesting but not like super critical. I think so. uh again, we're expecting it to go to 4.25 Uh, for the lower bound. that's the expectation.

That's a 50 basis point hike. We will know that in the next two minutes which is very exciting. Whoo! I Always get so nervous right before this. Uh, the uh Federal Reserve Chairperson Mr Jerome Powell will be speaking in 33 minutes.

We'll get the release in three minutes. What we're looking for again is that summary of economic projections. We'll spend about the next 30 minutes or so going through all of that as we wait for Jerome Powell Uh, this is exciting. Uh, it's exciting.

It's a little nerve-wracking Uh, you know nobody really knows what JPY is going to do. But I will tell you this. We're going into this with good news. Okay, so I have faith that we're going into this with optimism and good news.

Optimism, Good news means uh, that we're going to see hopefully. Uh, when I say we're going into this optimism Good news. It means we had two good CPI reports in a row, right? That hopefully means that. Jerome Policies Okay, look, even airlines are now complaining that things are slowing down.

It's just a matter of time before unemployment goes up. We're We're probably in a good place in terms of tightening historically, and this is a video I made this morning. We are at the point where rate hikes should stop today after the 50 basis point hike today. technically rate hikes Peak after 22 weeks after inflation.

Peaks We're at 22 and a half weeks right now. Whoo! I'm excited. So again, we'll be watching Uh Jay Pal's stream. Uh, right.

Uh, the okay. so we'll watch Jay pound 30 minutes. We're gonna go through the Fomc uh. summary of economic projections Now in about a minute.

First thing I'm going to do is I'm going to shout out whether we got the 50 or not I'm expecting the 50. Uh. Also, uh, I did we? We are caught up with emails. Uh, if you needed a custom bundle coupon code, you can email us.

Probably be able to get back to you pretty quick. Kevin Mekevin.com for the programs on building your wealth link down below popular ones right now obviously zero to millionaire real estate, investing, Stocks and Psychology Money and the Elite Hustlers Of course there are other ones as well, but uh, those are the popular ones right now. Okay, here we go. Uh, and we extended that coupon to tonight.

So that's couponpee. All right, 10 seconds away. So again, I'm expecting to see 4.25 pop up on screen here. That's going to be a 50 basis point hike.

Here we go should be three seconds now. and 4.25 It's a 50 basis point hike. As expected, That's no surprise. Now we're waiting for the summary of Economic projections.

The statement is out. I'm looking for the summary summary summary of economic projections Here we go. Got it? Okay. Summary: Here We go, here, We go.

here, we go. This is so exciting. Where is that? Where is that? Where is it? Come on. it's right here there.

There Fed funds rate 5.1 that's on the higher side 5.1 4.1 That's on the higher side. Uh, I was guessing 4.8 5.1 that's on the higher side. They revised GDP up. Uh, let me put this in the little editor thing and the range is 5.1 to 5.4 It's It's definitely on the higher side.

Uh, so not not so great. Uh, definitely a little bit more hawkish on the statement than we were hoping for. So let's do some highlighting here. So this coming in.

Number One Issue: 5.1 That's that's higher than I was hoping for. They did end up going for the 4.1 over here. Uh, the range is 5.1 to 5.4 That's it's pretty high. We're not seeing anything in that direction of five of six, which is good.

Let's look at the Dot Plot So this is the Dot Plot What? It actually ended up looking like Uh, you actually wow. You've got a couple people over here in the range of 5.5 to 5.75 That's pretty high and that's scary. Almost everybody is over five percent. That's not ideal.

The Fomc vote was unanimous. This is, uh, this is a little bit a hawkish. Uh, this is. uh, this is a little bit of a of a negative here.

Uh, for the market. I I Would say almost certainly here. if I look at QQQ we are. We just turned negative.

It looks like uh yeah, we got a nice little bar straight down. That's not a surprise just to compare here to my Dot Plot expectation. This is my Dot Plot expectation right here. the orange and when you compare that to theirs, this right here is the five percent line.

I Thought most of them would actually be under the five percent line. Wrong. Most of them are. Almost all of them are above it.

I Mean if you take out the highs at five point, you know six, seven, five. Basically, you know five and and uh, a 5, 8 or something of that effect. If you take out this, you take out this, you are sitting uh with a terminal rate of five, that's probably going to be five and a quarter. Certainly five to Five point five.

That's our terminal rate range right now, which is higher than what the market has been pricing in, so a little bit more hawkish here on the summary of economic projections. Not ideal. Uh, definitely no. uh no, no u-turn there or freezing hikes priced in by this.

So This projection right now is telling us that we're actually probably looking at we got the 50 we were expecting in December That brings us to 4.25 Now we're going to be looking at uh Feb Feb ones probably going to bring us to 4.5 March is probably going to bring us. that's March 22nd. it's probably gonna bring us to 4.75 This is. This is the problem is that they're probably looking at this going.

Let's just keep hiking. Let's not stop right and then. So they basically just keep doing 25 25 25 and so that's a little bit of that crash and burn you're seeing right now in markets. that's uh, that's again, not so ideal.

Uh, it's a little bit more hawkish than we were expecting. Uh, we will look at some of the other items that we have on the chart right here. we have okay looking looking looking. That's gonna be okay.

We've got change in Real GDP They revised up for this year. they revised up for next year. which is, you know, really showing. They believe we can avoid a recession.

That's really interesting because Jerome Powell kind of implied that. Hey, you know it's looking harder to be able to pull this off without a recession. So I'm a little bit surprised by uh by by no indication really here of an average recession. but then again, these are year numbers right? Okay, so those are year numbers then we have.

The unemployment rate is uh looking. They think, wow, They actually think it'll go up to 4.6 and stay up there next year while at the same time they think that inflation will plummet to 3.1 Uh, then to 2.5 That's a little bit slower than what they had previously estimated in the last one. but then inflation did run a little bit higher for longer. Okay, that's not bad.

No, no crazy ranges in inflation here. This? they're pretty. You can. This is good.

Actually, they seem to be pretty United that inflation's going to come down. You can see these. That's the central tendency here. Let me look at the range range for next year.

The high is only 4.1 So this is very United I actually like this I Think this is good right here. Oops uh this is good. Oh come on, why is it not filling in? stupid iPad There we go. Uh, then you've got uh United front over here as well for really the longer run.

So this is good. Uh, they're the. The problem with this is they're just United to the high side on, uh, on on the rates right here on this portion and it doesn't look like we should really be expecting rate cuts until 2024. Right here? So 2024? and that's not even a that's not even a substantial level of rate.

Cuts So that's a little unfortunate. And again, the dot plots right here. You can see they've gotten really confident about where to go for 2023 and then you have a lot of diversity for for next year. In terms of you know, it seems like we have a lot of folks wanting to bring rates to about four percent next year, but a lot of concentration there above above that five percent level.

That's uh, unfortunately. a little a little bad. Uh, uh, okay, not great. Okay, so fed swap rates uh, are now edging higher median forecast for joblessness rate 4.6 We saw that Uh, let's see here.

some Market participants think the unemployment rate has to go to six percent. Not great. We don't want to hear that. Let's look at their statement.

uh, it's always a big deal. Like me. a sec downloading this right now I'm actually already downloading the comparison version so we'll look at the difference in what changed here. This statement I think is actually less important this time around than uh uh than us just seeing what's going on with uh uh, what's it called? uh the the SCP right here I think the SCP is critical.

Okay, this is gonna take me a second. Let's listen in to here just for a moment. Decision did not do anything to change anything from that. Trend standpoint David Kelly I I'd like to bring you in the in.

the rest of the panel back into the discussion here: David The markets are reacting no doubt about it and equities are softer. They've moved to the downside. We've seen rates Spike higher, but it all in the context of where we all right. I got it.

So we've got uh, there's actually really no difference in the statement. The statement's almost exactly the same. The war and related events are contributing to Upward pressures on inflation is the current versus previously they said creating additional upward pressures so they went from creating to contributing. That's the only change they made here.

So the statements a A nothing Burger nothing Burger changes really in the statement the uh, it's the summary of economic projections that's that's causing all of, uh, all of the the hubbub right now because 50 was expected. but what was not was what was not expected was that terminal rate. So we are seeing terminal rates revise upward a little bit for the FED funds rate. uh, popping up to about 4.9 percent right now I Would also guess that probably five year break evens are going to slip down because when when the FED is more aggressive, we tend to see Break Even rates move down Breakeven rates moving down.

Oh yeah, oh wow. Okay, yeah yeah yeah yeah. Break Even rates are moving down really nicely. right now we're sitting at about and it's falling too we're sitting at and this is what the FED wants right here? Let me let me show you this a little bit more detailed.

So the the FED wants, uh, the terminal or the the Breakeven rates via like a five-year bond for example, to plummet right? So if we jump over here, what do you have, you have a low at the end of September and break evens. We've been trending down since about May We did have a recent Spike here uh, in break evens and we had a spike over here. and Jerome Powell's really had a goal of dropping these inflation expectations and it's very, very important that these inflation expectations come down. And that's what we're seeing is those inflation expectations come down.

So I'm happy to see that this is actually a very good thing. Unfortunately, that fed terminal rate now moving up a little bit is taking some of that that excitement away. Uh, because of this, the hawkishness in this report. Now this this report.

Could you know it's possible? Like the Hopium statement is that this report is just aggressive and then Jerome Powell talks this back, we're seeing. Uh, the 10-year yields take up a little bit. We're sitting at three, five, Five Four right now on the tenure. So, uh, you're definitely seeing a little bit of a move up on uh on yields.

Which is not a surprise that you would see Yields move up. You have, uh, after a hawkish move like this where we think rates will be higher for longer, you probably will also see the dollar rise on this I would expect you down. Uh, which is my short bet. Oh no, it's still.

It's actually the Dollar's not moving that much yet. Okay, good because I'm short the dollar. Uh so. and it's actually still green today.

The short dollar. Everything is moved down though. If you look at stocks, everything has moved down. look at this folks.

look at the spark lines. I Mean it's so nasty. Check here on the left. You see these spark lines right here.

Like the only thing that's not sparking down is this one right here which is basically at zero dollars. It's this small stock called Tattooed Chef Uh, it can't get any worse for them. So anyway, everything else, like the normal companies, are all spiking down. Tesla's about to hit a new like two-year low right here.

156 I Think we just did matterport's at like two bucks. Two dollars and seventy cents is insane. Video is actually holding up a little bit. Uh, better.

Certainly better than Tesla's at this point. Although it's it's had, it's had its little run of pain. So if I still holding up with about an almost six percent gain here, you do have embryer up. Interesting.

That's interesting. You've got the Delta up even though that that revised down on the forecast. Lulu Etsy Slightly green cloudflare? Really? Wow. Okay, interesting.

Uh. Lennar Moving down on this? Yeah, that makes sense. You would see the home builders move down when you think that rates are going to be higher for longer. Yeah, so this is a very macro shift right here of a more aggressiveness by the Federal Reserve being priced in and again.

I Think everything is coming down to the dots right here. The dots ruined it. Uh, drum Powell does speak in 19 minutes. so obviously we'll parse everything that's going on.

Uh, excited to see uh, how it goes. So all right, let's see here. Okay, so grabbing a little bit more data while we're at it, let's see here. Okay, so we got our 50 down.

Okay, so there is the possibility some folks are talking about maybe getting another 50 basis point hike in. February Remember, there's only one CPI report between now and the February meeting. so whereas between by the March meeting you actually have three CPI reports, That's a big deal, so consider that right here right here. Okay, so so this is done.

That's in the bag right here. You get one CPI and here for March you get three CPI reports. That's remarkable because for this one, you're gonna get Jan Feb and March In this one, you're only going to get January which is the release for December right? So it it's entirely possible that they say you know what? Let's get the 50 here and maybe we downshift to 25 here when we get multiple more reports confirming you know I it just I Just wouldn't put it past them at this point to say something like oh you know we used to say like they they used to say this old was one report does not make a trend. Oops, right? That's what they used to say in reference to like one low CPI report I Wouldn't be surprised if the new is two reports don't make a trend right and then they're like we want to see like five and that would be the two we had plus uh, the three to March that would be five reports in a five CPI reports in a row reiterating a downtrend: I I Bet you that's what it takes to get to the u-turn that makes you turn.

It's a bet. Uh, but uh, remember I said this since January I didn't listen as well to myself as I should have. but I said it since January usually the bottom is when the FED Act Actually u-turns not a pivot. You know, pivot's going from like 75 to 50.

uh U-turn is like oh my. God We need to cut rates usually. that's that's like historically when when you hit a bottom. So, uh, interesting.

Okay, you know markets may try to pre-price that in, but so far, that hasn't been the case. it's just been a bleed out. All right. What else do we have here? Interesting looking at median forecasts for economic growth and the joblessness rate.

Fed policymakers are basically predicting a recession. Really? Uh, a half percent gain for the GDP The fourth quarter of next year compared with the current quarter could easily incorporate two or three quarters of contraction. Yeah, okay, I see what they're saying? So there's there's this argument that this, right here actually spells recession because they previously thought that we might have GDP around one percent. And they've They've actually increased GDP in 2022, but substantially downgraded GDP in 2023.

That's a big slash. I Mean they went from yeah, JDP will be, you know, below. Trend But somewhere around you know, one or two percent or whatever. or, well, one point two percent.

They've downgraded that to half of a percent. and uh, that's that's definitely causing a little bit of fear here. That's fascinating. Okay, so hawkish revision? That's fine.

All right. What else? Let's take a listen over here. while we wait for John Powell and I get a little bit more info for you. Atomic Data thanks to our panel: John Bellows Mona Mahajan David Kelly They're just doing thank yous I Don't care about that treasury sell-off picking up uh, a terminal rate now sitting at 4.94 11 basis points higher.

Now let's listen here. Our analysis of the Central Bank decision continues with: they're being boring I Think they're gonna cut to Marshall Yeah, this is interesting it. You know it is almost like the hawkishness of this summary of economic projections undoes what we saw at the Brookings Institute Right when when Jerome was at the Brookings Institute it was like oh my gosh, he the fed's gone too far. They're admitting they've gone too far.

Rally rally rally that feels undone at this point, which is quite interesting. That's quite interesting now. we'll get a lot of of action from from when Jay Pal speaks so we'll pay attention to that. I Think that's going to be really entertaining? Uh, so we'll we'll pay attention Okay So hmm.

let's see what else we have. So yeah, and remember I think looking back to September is so interesting because September's report was deemed hawkish and one of the things I said in September was the FED has been wrong. Every single summary of economic projections that means every single summary of economic projections that they've done has has been revised to a more hawkish Direction Every single one. This is no exception.

So we got here. You know, a a uh uh. We went from 4.6 to 5.1 in today's report. It was all slightly more hawkish than what I had expected and I did not expect them I just wanted to try to highlight some of the differences here.

So oh, that's really funny. I predicted that they would revise GDP up to 0.5 and that's actually what they did. So that prediction was correct. one of few that was correct.

Uh, so this was correct. They did increase GDP for this year to 0.5 However, I thought they would stick with a slight down revision here and they actually went to 0.5 That's bad. so that was wrong. Now there's a leaf blower outside.

unemployment rate I Guess they would go slightly up to 4.5 percent. They ended up going to 4.6 percent. That's close, you know. I I'm gonna give myself that one.

Okay, what did I say for inflation? I said six percent in 2022, 2023, 3 and 2.3 for 24. I left that one. so I left 24. But they revised 24 up.

stayed at five Six and three One Five six three one. so they didn't go as high over here. That's a no, that's pretty close. that's close enough for the past.

Interesting. Uh, and then over here, this is where I was most off. which is unfortunate because it's actually the most important one, right? They ended up coming in with 5.1 I Thought they'd come in at 4-8 So they, even though J-powell was dovish in that last meeting, that dovishness did not translate to dovishness amongst the entire board. This is an aggressive number right here and we just got a five handle.

And you know, watch in in two months they come in and go. Whoa. If we had to redo it today, we'd go even higher. You know I mean that's that's what they did.

That's what they've done every single time. Uh, so so that's a little frustrating. Uh, that. But it's very interesting to pay attention to and remember Folks, the reason to make projections is not to like keep score of whether you're right or wrong.

It's to identify and align what your impression is versus what the fed's impression is right. So like I have to revise my impression of the FED slightly more hawkish because clearly they are. They've now put that on in writing, right. It's kind of like when you expect earnings growth at a company to be 20 and it comes in at 15.

You got to start going well. damn I'm Raw right. And it's It's not a matter of scoring how much you're right or wrong, it's a matter of getting aligned with reality. Uh, and and the easiest way to do that is by having your own projections and then comparing.

You know if if you were betting that the Fed was going to write six percent over here, Well now you have to look at reality and go. Well, That could still be true because they always revise up or it could be that you're too hawkish. Uh, too bearish in that case, right? So uh, another Miss obviously was these dots everybody. I would say the bulk was probably about a quarter a quarter to half percent higher than than where I was.

I would actually probably say about a half percent higher than than what I was expecting. which is quite interesting because I was pretty in line aligned with what the markets pricing in which is about four, eight, Four nine. And that's now you know. Four Nine Five.

probably gonna be knocking on the door of over five percent soon. So I think that's very interesting. Uh, that's you know what this is actually not a bad thesis. Okay, this is a this is a very, very interesting thesis.

Is it possible that the FED is a bluffing hawkish knowing that if they decide to you turn soft they can, right? But they don't want to un? They don't want to risk undoing the hard work they've done. That's interesting risk of undoing the hard work they've done. I Think one of the things you have to remember is the summary of Economic Projections doesn't have to be right. It's a messaging tool, right? It's a messaging tool.

and if the tool undoes they're the tightening that they've done, then that is either bad or it's a sign. The economy is just doing worse than expected. So it's possible that this summary of Economic Projections is just a manipulation to say we're gonna just stay strong until we're convinced everything's ruined. And when everything's ruined, then we'll then we'll start getting into buying stocks again.

And then we'll cut rates given seeing as though they sold all their stocks with the exception of funds. uh, you know, like broad ETFs or whatever they sold all their individual Holdings right before they started the fastest hiking cycle in 40 years. How convenient? Look, sorry going tin foil hat here I should? Uh, hard work is done by people losing their life savings, retirements, 401ks, Investments Home values, jobs and businesses. That is right.

It's never the political Elite My friend, it's terrible. They have literally done everything they said they would. Yes, uh, but I would actually say they've done a lot more than they said they've would. right? They get more and more aggressive consistently.

Uh, so if but if they've been on a trend of like getting more aggressive, yeah, um. oh. Market just rallied too hard leading up to the Fomc. So now the FED has to Wrangle it back in.

Maybe markets still need to take a big haircut, overvalued on a number of metrics at the end of Kevin's projections will turn out at the end, Kevin's projections will turn out to be right. Let's stay tuned. Well, I mean we'll see. you know I mean like, look I Would rather be long all the way along the way, but be right about where we end up which I think we're going right back to zero percent interest rates? uh like this is I I still believe and I know it sounds crazy and unpopular to say this, but honestly I think one of the reasons you come to my channel a channel is not to hear the same bull crap you hear everywhere else.

I try to provide opinions that I believe in even if they're different, you know and then some people like unsubscribe, you write a different opinion I still think we're gonna look back and go. You know, in 10 years from now I'm going to be teaching my you know then 17 year old. that's weird then 17 year old son because he's seven. Now about how inflation ended up being transitory you know and how painful it was seeing it not be transitory for so long.

but then when we zoomed out, it's like oh yeah, I mean come on, you printed a ton of money and then and then you had to get the you know, then you had inflation right after that I mean ah, like any idiot could have seen that I feel like that's what we're gonna look back on in 10 years we're gonna be like oh duh, look at how much money you guys printed. Of course you had inflation. You know everybody's gonna say that in 10 years. but now we're living it and we're like, but is it? You know it's it's tough.

Uh uh, so it's It's very interesting. Uh uh. let's see here. would this be a reason to see the markets touch new lows? It doesn't make sense to me, you know, because really, um, the FED is going to be driven by what inflation does and inflation is going in the right direction.

So you know, even with this, uh, you know, slightly more aggressive SCP here. Uh, I Think it's actually misplaced. You know. I Think the market should not be selling off I Think the market I mean the Market's going to sell off until drone Powell is done talking.

Probably right. Best case scenario: Jerome Powell finishes talking. We just have a slow move up because it's going to be. look, you know, hey, uh, maybe Jerome Powell says something like hey, we did the summary of economic projections yesterday.

We got the CPI report, but but we're just assuming that was an outlier to the low side and we're going with what we think is going to be more realistic. Which actually means if we stay the trend of low inflation, these these will end up being high. It'll be interesting if he says something like that. That's what we're going to be looking for.

Clothes on we're going to look for Clues on. You know, is he going to go to 25 in February or is he going to go to 50. dude, if he says 25, you know you potentially have rally mode. I think um I think there's going to be a lot of selling before Q4 Earnings I Think people are going to be shocked how bad Q4 earnings are I'm a little bit nervous about that I am nervous about Q4 Rings Uh, so you know, maybe it makes sense to pick up some cheap puts.

Uh, pick those up when volatility calms down by the way. So Jerome Powell speaks in four minutes I Want you to remember that um when it comes to volatility trading you you generally you want to be in a position where you can pick up uh bot calls when volatility uh in my opinion is is low, Bot calls or bought puts because then you could sell them high right? Just on ball. You're not even worried about pricing and when you're Vol trading. especially if you do straddles because then you're playing both sides, you're just playing ball.

Uh, that's actually something that we're doing in our trading challenge right now. We just started the trading challenge this morning. We're doing a sold and bought straddles where where we think historic volatility is is moving in a certain way. Uh, it's It's gonna be interesting.

You know we'll play around. uh and it's really, it's for educational purposes to really show people some uh, some cool things that you can do with options so we'll see uh, either way. Uh, that's with the stocks and site group linked down below. that coupon code is PP it officially expires tonight.

We did extend it a little bit to catch up on some Bonville request emails I was not expecting to be in New York until uh Monday So sorry about that. Anyway, Uh, Jerome Powell comes out and speaks in three minutes. Let's go ahead and briefly listen to CNBC here and see what they have to say for themselves. Without a doubt.

Kelly I Mean he can certainly acknowledge progress in various areas on inflation those that he laid out not too long ago in that speech that the market took hard in. Uh, so yes, I do think there is that opening I Think what the market is initially reacting to is not just the higher projected Fed Funds rate where it's going to get to next year, but also in combination with the economic and inflation forecast that the committee put together, right? So they're saying growth is going to be worse than we thought three months ago half percent GDP growth that's as close as the Fed's going to get to predicting recession and meanwhile, core inflation higher than we thought just three months ago. So that combination is unsettling. If they think inflation is going to be even higher while growth slows down, employment, unemployment has to go up into the mid fours is what they're saying.

And even with that, they're going to keep Fed funds above five percent. Now all that is subject to the markets disagreeing with it and deciding to take the other side. And you've been pointing out and I think it's in all investors heads that one year ago the market the Fed was very wide of The Mark with what the Outlook was going to be and what they were going to have to do. So at some point you know you can fight the FED if you feel as if their premises are not necessarily realistic.

But but you know Mike when you can fight the FED but you're not going to do it from a career long or a short perspective if you don't have more data right? I mean is there anything that would that? Is there anything that we're going to see between now and say, the early part of January February As we head into the next part of the interest rate cycle in there in the early part of next year that breaks the market out of any part of the range that we've already seen for the past two or three months. Well, I think what you can see Dom is first of all the Pce inflation numbers. As people are trying to put them together in advance, they're going to show decelerating core inflation so people are maybe going to be able to gain some comfort that inflation does have some downside momentum and therefore you know the FED may not have to go as far as they uh as they, thought or maybe growth can be more resilient. So I think that every data point is going to be filtered through.

You know this set of expectations that the FED committee has put out there And look, we've absorbed a lot. You know the stock market's in the same place it was when the FED funds rate was at 0.75 percent back in the spring. So it's not as if every tick and what the FED funds rate does uh immediately takes value out of the market. It's all about how we're getting there and how much longer we have to wait till the end and we've just got a couple seconds left.

What's the one thing you'd be watching for in the press conference? Mike uh I I would say uh, he's gonna say we're not done. He's going to talk about hire for longer and uh, he did say and see if he actually gives a nod to the CPI data we got yesterday and is willing to exclude the rent calculations from uh inflation expectations. In other words, to try and say maybe now Finally, it's time for a more nuanced view of inflation. whereas early this year he said, we can't do that.

Let's get a quick look at the market as we wait to hear from the Fed chair. the Nasdaq's down about eight tenths of a percent. As you can see right now, the Dow less than that. Interestingly down about four tenths of one percent and crude oil still hanging on to its gains of WTI up about two and a half percent.

We saw pop and Bond yields dumb as well. Uh, immediately after the decision came out up about three and a half basis points on the tenure and there we still are sitting right around those levels around 354. All right and what we have right now you can see right there on your screen: Fed Chair J Powell approaching the podium right now so we'll take you to his comments. Live right now.

Good afternoon. Before I go into the details of today's meeting. I'd like to underscore for the American people that we understand the hardship that high inflation is causing and that we are strongly committed to Bringing inflation back down to our two percent goal. Yep, over the course of the year we've taken forceful actions to tighten the stance of monetary policy.

We've covered a lot of ground and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do. Price stability is the responsibility of the Federal Reserve and serves as the Bedrock of our economy. Without price stability, the economy doesn't work for anyone in particular.

Without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. Today, the Fomc raised our policy interest rate by a half percentage point. We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two percent over time. In addition, we're continuing the process of significantly reducing the size of our balance sheet.

Restoring price stability will likely require maintaining a restrictive policy stance for some time. I'll have more to say about today's monetary policy actions. After briefly reviewing economic developments, the U.S economy has slowed significantly from last year's rapid pace. Although real GDP Rose at a pace of 2.9 percent last quarter, it is roughly unchanged through the first three quarters of this year.

Recent indicators point to modest growth of spending and production. This quarter growth in consumer spending has slowed from last year's rapid Pace in part reflecting lower real disposable income and Tighter Financial conditions. Activity in the housing sector has weakened significantly, largely reflecting higher mortgage rates, higher interest rates, and slower output growth also appear to be weighing on business fixed investment. As shown in our summary of economic projections, the median projection for Real GDP growth stands at just 0.5 this year, and next well below the median estimate of the longer run normal growth rate.

Despite the slowdown in growth, the labor market remains extremely tight with the unemployment rate near a 50-year low, job vacancies still very high, and wage growth elevated. Job gangs have been robust with employment Rising by an average of 272 000 jobs per month over the last three months. Although job vacancies have moved below their highs and the pace of job gains have slowed from earlier in the year, the labor market continues to be out of balance with demand substantially exceeding the supply of available workers. The labor force participation rate is little change since the beginning of the year.

Fomc participants expect supply and demand conditions in the labor market to come into better balance over time, easing upward pressures on wager wages and prices. The median projection in the SCP for the unemployment rate Rises to 4.6 percent at the end of next year. Inflation remains well above our longer run goal of two percent over the 12 months ending in October. Total Pce Prices rose six percent excluding the volatile food and energy categories.

Core Pce prices: Rose Five percent in November The 12-month change in the CPI was 7.1 percent and the change in the core CPI was six percent. The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases, but it will take substantially more evidence to give confidence that inflation is on a sustained downward path. Price pressures remain evident across a broad range of goods and services. Russia's war against Ukraine has boosted prices for energy and food and has contributed to Upward pressure on inflation.

The median projection in the SCP for total Pce inflation is 5.6 percent this year and Falls 3.1 percent next year 2.5 percent in 2024 and 2.1 percent in 2025.. participants continue to see risks to inflation as weighted to the upside. Despite elevated inflation, longer term inflation expectations appeared to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. But that is not grounds for complacency.

The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. 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 are highly attentive to the risks that high inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our two percent objective.

Um, at today's meeting, the committee raised the target range for the Federal Funds rate by a half percentage Point bringing the target range to four and a quarter to four and a half percent, and we are continuing the process of significantly reducing the size of our balance sheet. With today's action, we have raised interest rates by four and a quarter percentage points This year. we continue to anticipate that ongoing increases in the target range for the Federal Funds rate will be appropriate in order to to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two percent over time. Over the course of the Year Financial conditions have tightened significantly in response to our policy actions.

Financial Conditions fluctuate in the short term in response to many factors, but it is important that over time they reflect a policy restraint that we're putting in place to return inflation to two percent. We are seeing the effects on demand in the most interest-sensitive sectors of the economy, such as housing. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, the committee decided to raise interest rates by 50 basis points today, a step down from the 75 basis point Pace seen over the previous four meetings.

Of course, 50 basis points is still a historically large increase and we still have some ways to go. As shown in the SCP The median projection for the appropriate level of the Federal Funds rate is 5.1 percent at the end of next year, a half percentage Point higher than projected in September. The median projection is 4.1 percent at the end of 2024, and 3.1 percent at the end of 2025, still above the median estimate of its longer run value. Of course, these projections do not represent a committee, uh, decision or plan, and no one knows with any certainty where the economy will be a year or more from now.

Our decisions will depend on the totality of incoming data and their implications for the outlook for economic activity and inflation, and we will continue to make our decisions, meeting by meeting, and communicate our thinking as clearly as possible. We're taking forceful steps to moderate demand so that it comes into better alignment with Supply. Our overarching focus is using our tools to bring inflation back down to our two percent goal and to keep longer-term inflation expectations well anchored. Reducing inflation is likely to require a sustained period of below Trend growth and some softening of labor market conditions.

Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the long run. The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done. 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 Will look forward to your questions. This is the important part.

Questions Policeman uh CNBC thanks for taking my question Mr Chairman: You just talked about the importance of uh market conditions uh, reflecting the policy restraint you put in in place. Um, since the November meeting, the 10-year has declined by 60 basis points, Mortgage rates have come down, high yield, credit spreads have come in, the economy is accelerated, and uh, the stock market's up six percent. Um, is this loosening our financial conditions a problem for the FED in its effort and its fight against inflation. And if so, do you need to do something about that? And how would you do something about that? Thank you.

So as I mentioned, it is important that overall Financial conditions continue to reflect the policy restraint that we're putting in place to bring inflation down to two percent. Um, we think that Financial conditions have tightened significantly in the past year, but our policy actions work through financial conditions and those in turn affect affect economic activity, the labor market, and inflation. So what we control is our policy moves and the communications that we make. Financial conditions both anticipate and react to our actions.

I Would I would add that our our focus is not on short-term moves, but on on uh, persistent moves. Uh, and many, many things of course move Financial conditions over time. Um I Would say it's our judgment today that we're not at a sufficiently restrictive policy stance yet, which is why we say that we would expect uh, that ongoing hikes would be appropriate and I would point you to the SCP again for uh, our current assessment of what of what that peak level will be. Uh, As you as you will have seen, uh 19 people filled out the Uh the SCP this time and uh, uh, 17 of those 19 wrote down a peak rate of five percent or more in the fives.

So that's our best assessment today for what we think the peak rate will be. Uh, You will also know that at each subsequent SCP During the course of this year, we've actually increased our estimate of what that Peak rate will be. And today, uh, we're The Sap that we're published shows again that overwhelmingly Fomc participants believe that inflation risks are to the upside. So I Can't tell you confidently that we won't move up our estimate of the peak rate again at the next SCP I Don't know what we'll do, it will depend on future data.

What we're writing down today is our best estimate of what we think that that Peak rate will be based on what we know. Obviously if data if the inflation data come in worse, that could move up if they and it could move down if uh inflation data are are softer. It seems like he really just wants to stick to the SCP today. Gina smile like New York Times Thanks for taking our questions.

The SCP like you mentioned, suggests that the FED will be making another three-quarter percentage points worth of rate increases in 2023. I Wonder if you would foresee that being in 25 basis point increments 50 basis point increments. sort of how you see the Speed playing out going forward and then I wonder what you're looking at as you determine when to stop. Um, so so um, as I've been saying, um as we've gone through the course of this year, Uh, as we lift it off and got into the the course of the year and we saw the the how strong inflation wasn't how persistent it was very important to move quickly.

In fact, the speed, the pace with which we were moving was the most important thing. I Think now that we're coming to the end of this year, we've raised 425 basis points this year and uh, we're into restrictive territory. It's now not so important how fast we go, It's far more important to think what is the ultimate level and then at a certain point the question will become how long do we remain restrict if that will become the most important question. But I would say the most important question now is no longer the speed.

So and that that applies to February as well. So I think we'll make the February decision based on the incoming data and and where we see Financial conditions where we see the economy. Um, and that'll be the the key thing. but I mean but for that decision but ultimately, um, that question about how high to raise rates is going to be one that we make.

Looking at our progress on inflation, looking at where Financial conditions are, and uh and making an assessment of whether policy is restrictive enough I've told you today, we have an assessment that it that we're not as restrictive enough stance. Even with today's move and we've laid out our own our individual assessments of what we would need to do to get there. Um, at a certain point though, that we'll get to that point and and then the question will be how long do we stay there and there There are the uh, uh. The strong view on the committee is that we'll need to stay there.

You know, until we're really confident that inflation's coming down in a sustained way and we think that that will be some time now. Why do I say that if you look at, look at the you can break inflation down into into three sort of buckets. The first is Goods inflation and we see now as we've been expecting really for a year and a half that Supply conditions would get better and ultimately Supply chains get fixed and and demand settles down a little bit and maybe goes back to Services A little bit and we start to see good inflation coming down. We're now starting to see that uh in this report and the last one.

Um, then you go to Housing Services We know the story there is that Housing Services uh Inflation has been very very high and will continue to go up actually. um uh as as rents As as rents expire and have to be renewed, they're going to be renewed into a In into a market where rates are higher than they were when when the original leases were signed. But we see that the new leases that are that the rate for new leases is coming down. So once we work our way through that backlog that that inflation will come down sometime next year.

The third piece, which is something like 55 of the index Pce core Inflation index is non-housing related, uh, core services and that's really a function of the labor market largely at the biggest cost by far in that sector is labor. and we you know we do see a very, very strong labor market, One where we haven't seen much softening, where job growth is very high, where wages are very high, vacancies are are quite elevated, and really there's an imbalance in the labor market between supply and demand, so that part of it which is the biggest part is likely to take a substantial period to get down. The other the you know the goods. inflation has turned pretty quickly now after not turning at all for a year and a half now it seems to be turning.

but um there's an expectation really that the that the the services inflation will will not move down so quickly so that we'll have to stay at it so we may have to raise rates higher to get to where we want to go. And that's really why we are writing down those High rates and why we're expecting that they'll have to remain high for a Time Uh Howard Schneider with Reuters Thanks for taking the question. Uh, you described GDP growth in the Seps as uh, moderate or modest I believe? Um, yet it's really approaching stall speed. Half a percentage point is not much.

Uh, you described uh, labor market unemployment rate as representing some softening, but it's nearly a full percentage Point rise. and that's well in excess of what has historically been associated with recession. Uh, why wouldn't this be considered a recessionary? uh projection by the Fed Well, well, I I'll tell you what the projection is. I Don't think it would qualify as a recession though, because you've got Positive Growth The expectations in the SCP are basically.

as you said, which is, we've got growth at a modest level. which is to say, about a half a percentage. Point That's positive growth. It's slow growth.

It's well below Trend It's not going to feel like a boom. It's going to feel like very slow growth, right? Um, In that in that condition, labor market conditions are softening a bit. Unemployment does go up a bit. I Would say that many Uh analysts believe that the that the natural rate of unemployment is actually elevated at this moment.

so it's not clear that that that those forecasts of inflation are really much above the natural rate of unemployment. We can never identify its location with great Precision but that 4.7 percent is is still a strong labor market. If you look you know you've got. The reports we get from the field are that Uh companies are very reluctant to lay people off other than the tech companies which is a you know a story unto itself.

Generally companies want to hold on to the workers they have because it's been very, very hard to hire So and you've got all these vacancies out there far in excess of the number of employed people. That doesn't sound like a you know, a labor market where a lot of people will need to be put out of work so that we you know there are channels through which the labor market can come back into balance with with relatively modest Uh increases in unemployment. We believe none of that is guaranteed, but that uh, that is what their forecast reflects Nick Foreign The decision to step down the pace of rate increase rate Rises Uh appears to have been socialized at your last meeting largely before the past two CPI reports showed inflation decelerating in line with the committee's forecast. This year, you just now talked about making decisions, meeting by meeting, and being mindful of the lags of policy.

Does that mean all things equal? You would feel more comfortable probing where the terminal rate is by moving in 25 basis point increments including beginning at your next meeting. So I I Haven't made a judgment on what size rate hike to make at the last meeting, but you know what you said is broadly right, which is having moved so quickly and having now so much restraint that's still in the pipeline, we think that the appropriate thing to do now is to move to a slower pace and um, you know that will that will allow us to feel our way and uh uh, you know and get to that level we think and and better balance the risks that we face so that that's that's the idea. It makes makes a lot of sense it seems to me, particularly if you consider how far we've come. Um, I But again, I Can't tell you today what the what the actual size of that will be.

It will depend on on a variety of factors including the incoming data, in particular, state of the economy, the state of financial conditions. Can't hear this person? No, absolutely not. no uh. As a As a just a matter of practice, the SCP reflects any data that's that comes out during the meeting and participants know that they have the they know this, that they they can make changes to their SCP during the meeting but you know well in advance of the press conference so that we're not running around.

But that's not the case. It's never the case that that the Scps don't reflect an important piece of data that came in on the first day of the meeting. Rachel Hi Chair Powell Rachel Siegel From the Washington news, thank you for taking our questions. I'm wondering if we could talk about the projection for the unemployment rate.

Why has the FED raised its unemployment projection? Is it because the model suggests that a higher terminal rate would automatically cause a higher unemployment rate? Or are you seeing signs at the Labor market isn't quite as strong as we think it is Now it's not about this. Transit of Labor Market Labor market is is clearly very strong. It is more just that. Um, you know by now we had expected.

We've continually expected to make faster progress on inflation than than we have ultimately. and that's why the that's why the uh, the peak rate for this year goes up. Between this meeting and the September meeting, you see that you see the fact that we've made less progress and expected on inflation. So that's why that goes up.

and that's why unemployment goes up. because we're having to tighten policy more and so it didn't go up by much in in the media. I Don't think but but that's that's the idea. Is slower progress on inflation, tighter policy, probably higher rates probably held for longer just to just to get to where you the kind of uh restriction that you need to get inflation down to two percent in order to get to that number.

How much of that could be caused by layoffs versus vacancies trimming or changes to the labor force population rate? So it's very hard to say. um, you know there you can look at. you can look at history right in history. Would you know would say that uh, in a situation like this, the declines in unemployment would be more meaningful I think than than what you see written down there.

But why do we think that is the case? So I'll give you a few reasons first. just is that there there's this huge overhang of vacancies meaning that that vacancies can come down a fair amount. And we're hearing from many companies that they don't want to lay people off so that they'll keep people because it's been so hard. I mean I think we've It feels like we have a structural labor shortage out there.

Where they're you know, four million fewer people, a little more than four million who are in the workforce available to work. Then there's demand for Workforce So the fact that there's a strong labor market you know means that that, uh, that that companies will hold on to workers and it means that it may take longer. But it also means that that the costs in unemployment may be less. Again, that we're going to find out empirically.

But I Think that's a that's a reasonably possible out outcome. and you do hear you know many, many labor economists believe that it is. So we'll see though. Thank you.

Colby Smith With the financial Times, how should we interpret the higher core inflation forecast for 20? Uh 23 in the SCP Uh. Does that not then suggest that the policy rate currently forecasted for next year should actually be higher than the 5.1 medium estimate penciled in? Well I Think that's why one of the reasons it went up was that Core came in stronger this year came in stronger this year. Yeah, what? What you see is is our best estimate as of today Really as of today, For how high we need to to raise rates, to how much we need to tighten policy to create enough Uh, you know, restrictive policy to slow economic activity and slow soften the labor market and bring inflation down through those channels. That's that's all you that.

That's that is the estimate. Uh, best estimate we make today. and uh, as I mentioned, we'll make another estimate for the next SCP And we'll you know of course, between meetings we do the same thing, but we don't publish it. Um, Hi, Victoria Guido with Politico Um I Wanted to make sure I understand specifically um, what's going on in the SCP because you all expect rates to go higher.

but you're also more pessimistic about what inflation is going to look like next year and I was just wondering. You know, given that we have seen some Cooling in inflation, Uh, you know, is it is that primarily because of wage growth that you expect wage growth to be sort of a a headwind and we're going into next year with higher inflation than we had thought, right? So we're actually moving down to uh, the level that we're moving down to next year is still a very large drop in inflation from where inflation is running now. Well, more than a one percent change in inflation. But remember that the jump off point at the beginning of the year is higher.

So it you know we we're moving down still by a very large chunk. I Don't think it's heavy I Don't think the policies have anything less effect. It's just starting from a higher level at the end of 2022. So we're getting down I Believe the median is three and a half percent that would be.

That's a pretty significant drop in inflation. Um, and you know where is it coming from? It's coming from. It's coming from the good sector clearly. Um, by the middle of next year we should begin to see uh, lower inflation from the Uh, the Housing Services sector.

And then you know the The big question is when we how much will you see from the largest the 55 of the index which is the non-housing services uh, sector And you know that's that's where you need to see. We believe you need to see uh, a better balancing of supply and demand in the labor market so that you have it's. It's not that we don't want wage increases, We want strong wage increases. We we just want them to be at a level that's consistent with two percent inflation right now that if you, if you put into account if you factor in productivity estimates standard productivity estimates wages are running, you know well above what would be consistent with two percent inflation deal.

Thanks Hi Chapelle Uh, Neil Neil Irwin Taxios Uh, some of your colleagues have been pretty explicit that they can't imagine rate Cuts happening in 2023. Uh, that's certainly not implied by the SCP Uh, but Futures markets have priced in some easing in the back half of next year. Uh, what's what's your view of the likelihood of any kind of rate Cuts Next year, What circumstances might make that plausible? You know our Focus right now is is really on moving our policy stance to one that is restrictive enough to, uh, issue a return of insulation to our two percent uh, goal over time it's not on rate cuts. Um, and we think that we'll have to maintain a restrictive stance of policy for some time.

Historical experience: Caution: strongly against prematurely loosening policy I guess I I Would say it this way: I I Wouldn't see us considering rate Cuts until the committee is confident that inflation is moving down to two percent in a sustained way. So that's that's the that's the test. I would articulate and you're correct there. there are not rate cuts.

uh In in Uh in the SCP for 2023. Escape Steve Matthews with Bloomberg Let me ask you about China In the last few weeks, China has abandoned its uh, coveted policy and been reopening pretty strongly. I'm wondering if you see that as disinflationary because you're seeing Supply chains improve or inflationary because it obviously brings a lot more demand globally and improves the global outlook for growth and for commodities prices, right? So you're right, those two things will offset each other. We get weaker output in China We'll We'll push down on commodity prices, but it could interfere with Supply chains ultimately, and that could that could push inflation up in the west.

It's very hard to say you know how much, uh, how those two will offset each other, and it doesn't seem likely actually that the overall net effect would be material on us. But to your point, China faces a very challenging situation in in reopening and we you know we've seen uh, waves of Covid all around the world can interfere with economic activity. China A very critical Manufacturing A place for manufacturing and exporting their supply chains. Very important.

Um and Uh, China faces a reopening. They've You know they've backed away from their covert restriction policies. There could be very significant increases in Covid, and we'll just have to see it's a risky situation it. but again, it doesn't It doesn't seem like it's likely to have material overall effects on us.

Hi, Uh, Chris Ruger at Associated Press Thank you for taking my question. Um I wanted I Wondered if you could comment a bit more about yesterday's inflation report I Mean it showed inflation Cooling in all three of the categories that you laid out at: Brookings Are you starting to see? Are you confident that you're seeing real progress on getting inflation under control? Uh, Are you still worried it could be some kind of um, you know, upward spiral? Thank you, right? So the data that we've received so far for October and November We don't have the Uh. some of the we have some romanticated to get in November but they clearly do show a welcome reduction in the monthly pace of price increases. As I mentioned in my opening statement, it will take substantially more evidence to give confidence that inflation is on a sustained downward path.

So the way we think about this is this: This report is very much in line with what we've been expectin