All right, everyone, welcome back to another Fed meeting. Rates held steady. Here comes the FED decision. Let's listen into it and we'll review the notes and get to Drome Pal's presser.

Here we go. Meeting in a row, the FED has been on hold first time it's done so since early 2022. The FED however, is still quote determining the extent of additional policy firming, suggesting that there is still a hiking bias in the statement and among the committee members. the committee saying it remains highly attentive to the inflation risk language precisely from the prior uh uh uh' statement.

as well as saying that inflation remains elevated, the economy was upgraded just a bit. Uh, saying it's now it grew at a strong Pace in the third quarter compared to a solid Pace in the previous statement. Job gains were also upgraded just a bit, saying they moderated instead of slowed in the prior statement. The statement also now me mentions tighter financial and credit conditions.

Adding the word Financial uh likely will weigh on the economy. Uh, that perhaps is a mentioned for the Uh rise in the 10-year yield and other yields that have affected the economy. The decision was unanimous and now we have a question. by the way: Very, very similar statement.

Only a few words tweaked. Does the upgrade to the economy now perhaps put additional rate hikes on the table? Or is the idea that this statement is so similar to the other one one that led the FED to pause? Does it lead you again to think? Well, you know what they're teeing up? Another pause here. I Guess we may have to wait for the press conference to find out. All right, let's listen.

or let's go through the entire statement together. and then we're going to get our bingo card ready for when Jpow speaks. So what we have here is. first of all, it's fed.

Day November 1st House Hack expiration Uh uh. Fundraise expiration is today 11:59 P.m. Recent indicators suggest that economic activity expanded at a strong Pace in the third quarter. We're just looking for nominal word changes here.

Job gains have moderated since earlier in the year, but remain strong. Look, the big deal is this: Friday Let's just be very clear. it's the the FED days are just a reaction to the data that comes out. Uh.

so while today is important, remember what probably is more important and might come up in the pressure later. Let's write this down. Okay, the Jols report this morning came in at 9553. That's above expectations again.

remember Japow? He kind of gave up on this idea that we were going to get into a onetoone balance. Remember that when J Pound told us, oh yeah, don't worry, we're going to get to one to one. We're going to keep hiking all the way. Uh, until uh.

We're in balance with how many unemployed individuals there are and how many PE how many job openings there are. So if you've got about six million unemployed, you're still sitting at uh, somewhere around uh one and a half doing quick math from 6 to nine. right? Point is, we're probably not going to get to one to one. The only change? So J House kind of dropped that, but we'll see if he brings that up given that jobs data comes out in two days.

As far as a red line of like what's actually been changed in this statement I can underline for you exactly? Uh, what's different? So we're going to underline in red. The words that are different. Uh, the date was changed, Economic activity expanded. The word expanded Uh was changed.

This is from Uh has been expanding. Uh, so it's almost like they're kind of saying here: hey, look, uh, Economic activity did well in the third quarter. Remember that really high GDP Print We had 4.9% annualized. Keep in mind that's multiplied by four, right? So when they annualize a number, they take uh a GDP read for a quarter of about 1.22 and then they multiply it by four.

That's how you get a 4.9 GDP Read Okay, what else is different? We know that job gains have moderated. Uh, that is right here. Job gains have moderated since earlier in the year, but remain strong. The last statement was that job gains H Uh, So I'm going to write from have slowed in recent months.

Okay, this is a way of saying you've actually got a a stronger Jobs Market You're giving the FED more of a license to keep putting pressure on rates. Remember how the FED operates. They don't give a crap how expensive your restaurant food or your groc fre food has gotten. They don't care how your stock portfolio is doing or or or real estate portfolio.

They don't care about any of that. They only care about two things: stable prices which will probably end up being stable. high prices right and then Max employment. Well, the more we have a strong jobs Market the longer we get Jerome keeping the boot on our neck and that's the pain you're seeing exemplified in the stock market now.

Uh, so another thing that changed is tighter Finan Fincial. They added the word Financial right here. just like we heard on CNBC. Uh, and job gains have moderated.

That's it. That's the only change right here that was made. So, uh, underlined. I'll just make a little note here.

underlined equals changes. Otherwise, let's also pay attention to what they kept. Uh, they kept inflation remains elevated. Uh, they're probably going to keep this until 2% right? Uh.

or? or they actually come out with fake flexible average inflation targeting. which if we're going to put that on the bingo card, it should probably just be in a corner because they have not mentioned it at all this entire tightening cycle and they might not pull out fate until you actually start getting negative job prints. Think about that for a moment if you get Negative job prints, that's when I think they start cutting under the guys of Fate But until then, why? Why bring up Flexible Average Inflation targeting. It's actually uh, spelled like that.

fait flexible Average Inflation targeting. Uh, that's when they could argue that. Well, we'll cut rates to support the economy, but not, uh, you know, not think that inflation will run away again. So after this uh, pause here, which was widely expected, treasury yields didn't really move much.

The 10 years still down about eight bips, you've got the two years sitting down about eight as well. You've got an equilibrium there. So kind of keeping that inverted yield curve at about 20 bips inverted right now. Okay, so let's draw our bingo card here.

You're welcome to throw in suggestions in the CH in the chat for, uh, the bingo card. Uh, but what we'll do is we're going to write down things that we think the Federal Reserve uh might talk about in their presser. So let's draw it like this: I'm going to go throw uh, flexible Average Inflation targeting in the corner over here. Uh, because I Really don't think we're going to get that I think I drew way too too many lines here.

Bingo Card: Let's find out. Uh, Bingo card is 1 two 3, 4 One Two Three 4 1 two 3 4 one two3 four. Oh, I actually did it right. But how do you have a middle box I Guess this is the middle box right here.

Okay, so we need to put an easy one in the middle box right? So because that's usually the free one, right? Uh, how about this Jpow? Because I added more by I add an extra row today. Jpow is on time bro. That guy is like always on time. So okay, we we'll get a freebie right there, right? Uh, but what what else are we going to want to look for? We're going to want to hear disinflation would be nice I Wouldn't be surprised to hear them bring up multivariate core and this is that problem we had from the New York Fed where the New York Fed is telling us hey, we might actually end up seeing or or we're currently seeing multivariant core inflation rotate up a little bit.

If you didn't see that from my video this morning, I'll put it up on screen right now. It's this right here. This is going to be somewhat of an issue if, uh, if it continues, it is normal to have this sort of volatility, but that upswing of inflation right there? Not great. Now keep in mind, once housing disinflation continues to roll over, we think we'll see pressure on that.

To the downside given that housing accounts for half of a percentage Point here. So watch for that. See these bands right here: 0.24 and 328. That's the high and the low.

If you take off half of a percent, guess what? You're at 1.9 to 2.4 You're basically at a perfect uh, or or nearly perfect level in terms of where the FED wants to be. If you bring housing to zero, the problem is you still have Services popping off a little bit right? This is the one that's very, uh, wage sensitive and you could see that right here. Services X Housing accounted for 0.54% Okay, I don't think we're going to get any kind of talk about transitory. The FED really had egg on their face with with a claim to any kind of transitory inflation.

I Do personally think that inflation will prove to be transitory over many years, you know? I think we're going through a very volatile Nike Swoosh which I've always mentioned volatile except we didn't have the volatile part at the beginning of the year. Now we're getting it all at the same time, so it's a little painful. I Still think it'll end up looking like that over years? Uh, so you know people were making fun of me at the beginning of the year like it's not very volatile. Man, it's just straight up to the Moon I'm like, just wait it comes here.

It is. okay. So what else are we going to Right down here? So we've got flexible average inflation? Target We get disinflation. Well, we really want to hear.

uh, we'll going to hear about that housing disinflation. that's going to come up. uh I'm I'm almost confident that'll come up. Uh, Something that we want to see is what is the Fed's willingness to cut without jobs actually rolling over right? So let's put that in the corner over here.

Some comment about willingness to cut without jobs or without un employment going up because the economy just really isn't showing unemployment going up right now. You're seeing stress: smaller businesses, households, medium-sized businesses. but I don't think companies are willing to to, you know, uh, dive into this recession mindset of cut all the great Labor They just took effort to uh to try to find a you know, it's been very difficult for people to try to find uh workers. So uh, let's uh, let's see what other wage price spiral you know I don't Oh, does he bring out an iPad oh I like that one.

We'll put that one in. uh, you know, over here on the right I Like that. Is he going to be on the iPad again for a second time? Did he end up liking the iPad or not? We could do that. Data driven? Yeah, we're I Mean we're guaranteed G to hear that? So we'll go data driven.

Uh, that's going to be uh, you know what? what? o soft Landing I would like to hear that? Yeah, who wouldn't right? Uh, what about recession? Is he going to mention the word recession? What about just uh. deflation? Will that word come up? Probably not. So we'll put that on the end. Recession.

We'll put that here in the middle. Data driven. We know we're going to basically get that. So I mean this is really just a freebie? Uh, we'll just put it.

you know we'll put it right there. Uh, so are we done? Are we going to hear something about being done? I don't think so. Uh, I'm G to say we should put in the corner here? Uh, open to uh, further future rate hikes? Uh, if necessary, right? I Think that's much more likely. You know we're not trying to destroy our bingo card here.

We're making our own bingo card situation in the Middle East Oh, that's a good one. Yeah, Are we gonna. I mean I think we'll have questions about the Middle East I'd be nice to get his commentary on that. That's actually a good point.

Uh, you know they've they've Uh, he's had a presser since he had an interview where he touched on how disturbing it was. Janet Yellen Talked about it's too soon to tell. Uh, you know if the the situation in the Middle East will be uh, a a situation that is, uh, something that causes inflation depends on how long it lasts. Right now, it doesn't look like it's gonna be over anytime soon.

Uh, let's see that was Janet Yellen So stronger economy than anticipated. Oh I'd like to see some talk about GDP having to be below Trend right? So GDP below Trend Growth? That's GDP Or the economy below Trend Uh, it's uh, probably going to come up, but is he still going to require that? That's a question, right? Because what if inflation can get to Target without below Trend growth. Remember, there's there's a big difference between an economy growing and inflation. A capitalistic economy that grows should actually be deflating.

The only reason we have inflation is because we print money. This is a Fiat phenomenon. This is why Milton Friedman says inflation is a monetary phenomenon. It is not a capitalistic Market phenomenon.

Those are very different things and that sounds complicated Because the bottom line is complicated. It's like there's been so much inflation and things have been so great for businesses. So doesn't that mean things being good for businesses means inflation. And the answer to that is no.

Uh, All right. So utilizing our tools to get inflation lower our tools. You know it would be interesting to see if they mention anything about other tools. Uh, so I'll up with that other tool they frequently do refer to that.

Other tools are usually different forms of money. printing. Think for a moment about the banking crisis. You know a lot of people saw the banking crisis and said, oh, you know this is it.

We're we're screwed and what's so And and that some people still think the banking crisis is going to come up again. The problem is the Federal Reserve basically turned on the money printer and eliminated the potential for a banking crisis again. they said all of these upside down bonds that you have on your balance sheets. Basically all of them we will say are essentially worth 100% even though they're upside down will consider them and deem them to be worth 100% of their face value.

That's pretty weird. You know that is a form of money printing. uh core inflation? Okay yeah so like a Super Core comment. so comments about Super Core we we know what we what we don't want to see is I'll give it.

We'll put some easy ones here. Okay so we know we're going to have Goods disinflation. Continuing We know we're going to have housing disinflation. Uh continuing.

Uh, this is really starting. but what we really want to hear is uh, any kind of risk of like what is Jow seeing in Services disinflation. Uh, we would like to say that Services disinflation is starting. Okay, we do not want that, it's worsening so we want to see starting or continuing.

That's what we want to see. Uh we we really you know we session comment uh soft Landing Okay good hear these words from them. Sometimes we go press conferences without hearing those words. uh this is fed Bingo yeah Not leaving out the possibility for more rates.

Yep, we have that open to Future Hikes Good Martial law. What is this Man, Is this Is this Co uh ooh uh, what is is somebody going to ask a stupid question that crashes the market? Uh, that's a tough one to write down. Uh, that's yeah, that that would be interesting I Want to know I Really want to know about jobs? Like how much if I'm there? I'm asking J Palal Look man, are you really gonna keep raising rates until you destroy the jobs? Market Or are you willing to just sit here with essentially a strong labor market as long as inflation is trending down? Now, keep in mind the FED pays attention to ECI that's the Employment Cost index. That one actually just beat estimates for Q3.

So I'd like to see ECI comments Again, that is the Employment Cost index. Uh, it's a very important one. The Federal Reserve likes this. This one just came in at 1.1 versus 1% Uh, and that is for the uh core.

Uh, that is Q3 and that is not an annualized figure. So that is annualized. Going to put you at about 4.4% right? Because you multiply by four. Employment Cost Index: quarter over quarter? Uh, yep, there it is on the Bureau of Labor Statistics Compensation increased 1.1% for civilian workers seasonally adjusted June 23 to September 23 year-over-year compensation Rose 4.3% Wages and salaries Rose 4.6% So this is a little bit of a problem, right? Because you have this year-over-year uh change? That's actually not coming in line with what the balances.

the FED wants the FED wants this to be at 3% and we're running at about 4 to 4.4% right now. So to be 3% we would have to be 75 verse. uh, goal. So are we stagnating on those goals, right? Uh oh, that would be an interesting word.

Uh, hold on. let's see here. I Don't think we'll hear him say that stagnating here. What I would like to hear is maybe some comment about Eurozone stagnation.

The reason you might think Eurozone stagnation is because they just had a negative GDP print right? and and they're uh, Negative .1% They were expecting to be at flat. All right. Anything else. And let's see here.

let's see here: Consumer Strength Strength of the consumer Mentioning of Paul Vulker oo Paul Vulker Paul Vulker mentioned that would be very interesting. That would be also very scary. Uh, what we want is we want uh, a Paul Vulker or Aaron Aaron um was I think Burns right? Aaron Burns Burr Burr me see I always forget his last name Aaron Burr no I I'll I'll get it out. But anyway.

uh, in the mid1 1970s, the guy who basically lost control of inflation uh I can't remember this guy's name for some reason. But anyway, uh, any mention of of this Arthur burn. That's what it was. Oh gosh, Kevin Arthur Burns Hello.

Okay, there we go. Arthur Burns was at. Either of those mentions are bad, right? because Paul Vulker is like we go higher Arthur Burns is you don't cut too soon, right? So Arthur Burns equals don't cut too soon because you don't want to repeat the mistakes. and Paul Vulker is higher rates.

And then if you get a mention of uh Allen greenpan I'll put this in the corner Allen Green Span this is a good one. This is opportunistic disinflation. Okay, that would be Allan Greenspan So we'll we'll put that on our bingo card over here. Uh, then we have.

Let's see here. let's go to Geopolitical. Yeah, did we? Oh yeah. how are we going to put Israel in here? Did we put Israel in here? No, Not yet.

Well, Middle East Middle East Geopolitical. Israel We'll throw that in. We've got a few more words that we could throw in here and Jpow will be speaking shortly: Debt. Uh.

the debt ceiling. Yeah, you know, like Congress right? Fiscal and debt? Uh. Treasury issuance, Treasury issuance debt. Uh.

and Congress Which reminds me, uh, we should talk about um, uh oh. What about present yields, right? The surge in yields. Recent surge in yields? That'll be a good one. Uh, what else do we want to hear from them on? uh, let's see here.

Asking someone to repeat the question. oh boy, Some kind of reset? China Oh, those are good ones. Uh, let me see here what the suits are saying while we wait? uh be Bleckley Financial Well, that's a weird word for a financial group, but Bleakley Financial Group calls attention to one word from uh the statement which is tighter Financial conditions. Everything else remains.

Uh, pretty identical. Okay, two items that may pop up during the press conference: Labor agreements between auto companies and what that means. Well, we don't have that written down yet. The UAW I mean basically they've come to terms.

but is that going to mean wage inflation right? UAW Wage inflation I Like that one I'm now taking suggestions from the suits. Uh, let's see here. Okay, we read the tweaks to the policy statement as somewhat dovish. why, uh, emphasizing instead the moderation in job gains.

Careful to State the recent strength and and activity has already passed. Considering the various ways, officials could have crafted a more hawkish statement. like upside: surprises, it looks like they're inclined to extend their pause. You know I think we should write down pause honestly like that that I mean but that's open to Future hikes.

but I mean he might mention the word pause right? I think that's a that's a good line to have in there I think our Fed Bingo card is pretty ready here. Okay, uh, we are now eight minutes away from Jpow. Uh, keep in mind if you have, uh if you have questions about House Hack the fund raise ends today at 1159. you can ask questions here if you want.

I can briefly bring some of them up before uh, Japal comes out and Japal will be out in about uh, seven minutes here. But I'm going to keep looking at some of the things to are talking about here: Financial Conditions have indeed tightened over the past month. I'm going to pull up the Goldman Sachs Financial Conditions Index Financial Conditions index. The Financial Conditions Index is something that Japal looks at.

Uh, they want Financial conditions to be tighter and congratulations, they have gotten tighter Financial Conditions minimum investment right now is 5K for house heack? Yeah, we dropped that to 5K There were a lot of people who were really asking for that I Mean we were were getting it. felt like dozens of inquiries daily for that. Uh, okay, so uh, let's see here here. the Bloomberg Financial Conditions Index is right here and so you can see that here.

Delinquency rates. That's a good one. Um, but delinquency rates honestly are pretty stable. Uh, so I I Don't know that that one's necessary for our bingo card, but we'll see it, that could come up.

But anyway, this right here is the Financial Conditions Index. Uh, the Financial Conditions Index. As you can see in all of 2023, it's been coming down. The trend has been down in 2023 with the exception of really the last few weeks here.

Look at this when I draw sort of a trend line right? We draw a trend right here. Look at that decline in financial conditions from peak in 22, we're almost back to Peak. These are pretty serious. Like the Econ, the the actual Market is doing a lot of work for the Federal Reserve For them, let's go to the five-year break even as well.

Uh, we are now five minutes away from Jpow. Okay, fiveyear break even comes down to 2.34 and then, uh, let's look at the that's that's good. It's not as low as it was. We really want to see this keep coming down.

It was really low during the AI bubble period. Uh, I Still think chips are a deal in AI but I'm still equally just like I was back then. fearful about software? AI plays I Think the big concern that Jpow should have is the five-year forward. but I don't know how much Jpow thinks he can control the fiveyear forward.

This is the fiveyear forward inflation Break Even rate. It's basically the Market's inflation expectations five years out. Uh, for the next five years forward. And as you could see, I mean these inflation expectations have just been skyrocketing.

Uh, you know I mean just like trying to throw a messy trend line over here, no matter where you put it you, you could see what the trend is. The trend is clearly well up. Uh and uh. You know, if anything, I mean if I were to draw a more, you know, uh, supported line here, it' be something like this.

It it really goes to show that we've gone well above, uh, the trend that we had in 2022. We are way above that in terms of inflation expectations. But again, I don't know how much the FED actually thinks they can control that line. So I think the FED feels more comfortable in being able to control the current set of next fiveyear inflation expectations.

But even that one has gotten elevated. Remember, the FED didn't actually cut until this chart. the last time was down at like 1.6% It's at 2.34 right now. Crazy right? No, the limit for investing in House Hack will not be reduced.

Uh anymore. 5K K is the minimum. sorry about that, so no chance of that. Thanks for asking though.

Make sure you go to House Hack.com and you can read the offering circular there so you could be uh, fully informed with uh with the startup. So anyway, this is what we have right now for our Federal Reserve Uh, bingo card. We are now uh, three and a half minutes away from JP We are looking for more updates from the suits. Uh, it looks like uh, okay, yeah, the suit's now talking about the fiveyear break.

Even the fiveyear forward break even as well. Indeed, the market measure of long-term inflation expectation has quietly been creeping up. It's not at levels that will alarm fed officials, yet it's still worth monitoring though. It's almost like they're listening to my live stream anyway.

Uh, I could kid right? reporters in the room Just got the five minute warning. Okay, that was uh, you know, a minute and a half ago. So it looks like they expect to be on time. So we'll we'll get our little free one in the bingo card.

Looking at some more commentary here, Kpmj says that it looks right now. the concern is around May and June and where the FED will be then. Will each meeting be live as it is now, or we going to get a little bit more guidance. Richard Clarita Who's no longer at the FED does say that there's risk that inflation remains too stubborn.

Meat and Potatoes Today will likely be in the press conference. and this is really just talking about. like the the core, uh, problems In terms of why leave rates unchanged? it's probably going to be Financial conditions. Honestly, that's probably how they're going to try to defend this.

uh, this pause. The way they'll defend the pause is by saying oh well. Financial Conditions are tighter so some of our work was done for us. Maybe we should put that in the bingo card since we're so confident about that.

uh, why don't we move? uh, disinflation to the deflation thing right right here and then or or you know what? No, cuz those are different. Let's kill the iPad one. And let's say right here that um, oh well, here it is. Recent surgeon yields.

Recent surgeon yields done some work for us. There we go. Okay, so we're just adding a little bit of clarity in terms of what our expectations are right here. Okay, there we go.

So I mean this is I Think the market is pretty primed for what Jpow is planning on saying. uh, frequent Jerome Powell's pressors have led the market to go up after the pressers, but not the last two or three times. I mean since like July 19th, everything's just been a poopy doopy show. it's been a disaster.

So let's listen in over here for a moment and the same direction as a larger deficit. In fact, the treasury's got a fund, not just to the deficit, but effectively. Yes, you can invest via a retirement account, but you'd have to find a company that allows directed Investments So you would go to like a directed Ira If you go to the FAQs on House.com you, you'll see that there. Arena as an important topic discussion.

I Really do you know and I just I guess I'm trying to figure how would what would be the most elegant way for them to achieve their monetary policy goals at this point? doing more of it, doing less of it, More interest rate hikes, fewer hikes trying to get the curve through the balance sheet I Don't think they should be moving it around a whole lot I Think it having it not on automatic pallet but in the background is important. but I think they're doing a good job with it now because given the fact the marketplace has got this notion, we need to have a positive term premium in the curve. Uh, and that is tightening Financial conditions. then QT actually contributes to that and giving you a higher term premium.

Which means that an unchanged policy rate can give you tighter Financial conditions and QT is contributing to that so the FED doesn't have to Brute Force up Financial condition tightness with the policy rate that QT can do some of the work along with uh, the uh, the marketplace AB Absolutely bro, he better be on time. Man, that was supposed to be a freebie. Oh, here he is, he's coming chair pal. So while we interrup Paul great to be with you very much, here comes the chair.

Good afternoon, Everyone welcome my colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people he said ma understand the hardship that high inflation is causing and we remain strongly committed to Bringing inflation back down to our 2% goal. Price stability is the responsibility of the Federal Reserve Without price stability, the economy does not work for anyone in particular. Without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. Since early last year year, the Fomc has significantly tightened The Stance of monetary policy.

Yes, we have raised our policy interest rate by 5 and a quar percentage points continued to reduce our Securities Holdings at a Brisk Pace The Stance of policy is restrictive, meaning that tight policy is putting downward pressure on economic activity and inflation, and the full effects of our tightening have yet to be felt is restrictive. Today, we decided to leave our policy interest rate unchanged and to continue to reduce our security. Holdings Given how far we have come along with the uncertainties and risks we Face The committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive Based on the totality of the incoming data, the evolving Outlook, and the balance of risks.

I'll have more to say about monetary policy. After briefly reviewing economic developments, recent indicators suggest that Economic Activ AC Ity has been expanding at a strong pace and well above earlier expectations. In the third quarter, Real GDP is estimated to have risen an outsized annual rate of 4.9% boosted by a surge in consumer spending. After picking up somewhat over the summer, activity in the housing sector has flattened out and remains well below levels of a year ago, largely reflecting higher mortgage rates.

Higher interest rates also appear to be Weighing on business fixed investment. The labor market remains tight, but supply and demand conditions continue to come into better balance. Over the past three months, payroll job gains averaged 266,000 jobs per month, a strong Pace that is nevertheless below that seen earlier in the year. The unemployment rate remains low at 3.8% Strong Job creation has been accompanied by an increase in the supply of workers.

The labor force participation rate has moved up since late last year, particularly for individuals aged 25 to 54 years, and immigration has rebounded to pre-pandemic levels. Nominal wage growth has shown some signs of easing and job vacancies have declined so far this year. Although although the jobs to workers Gap has narrowed, labor demand still exceeds the supply of available workers, inflation remains well above our longer run goal of 2% Total Pce Prices rose 3.4% over the 12 months, ending in September. Excluding the volatile food and energy categories, Core Pce prices Rose 3.7% Inflation has moderated since the middle of last year, and readings over the summer were quite favorable.

But a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down, sustain, sustainably toward our goal. build confidence. The process of getting inflation sustainably down to 2% has a long way to go. Despite elevated inflation, 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 wait, especially for those least able to meet the higher costs of Essentials like food, housing, and transport. Got a teleprompter? 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 2% objective.

As I noted earlier, since early last year, we have raised our policy rate by 5 and a quarter percentage points and we have decreased our Securities Holdings by more than $1 trillion. A 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 five and a quarter to 5 and a half percent and to continue the process of significantly reducing our Securities Holdings. We are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation sustainably down to 2% over time, and to keeping Po policy restrictive until we are confident that inflation is on a path to that objective.

We are attentive to recent data showing the resilience of economic growth and demand for labor evidence of growth persistently above potential or that tightness in the labor market is no longer easing could put further progress on inflation at risk and could warrant further tightening of monetary policy. Financial Conditions have tightened significantly in recent months, driven by higher longer term bond yields. Among other factors you cause. Persistent changes in financial conditions can have implications for the path of monetary policy.

We monitor Financial developments closely in light of the uncertainties and risks and how far we have come. The committee is proceeding carefully. We will continue to make our decision, meeting by meeting based on the totality of the incoming data and their implications for the Outlook and for economic activity and inflation, as well as the balance of risks. in determining the extent of additional policy firming that may be appropriate to return inflation to 2% Over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

We remain committed to Bringing inflation back down to our 2% goal, and to keeping longer-term inflation expectations well anchored. Reducing inflation is likely to require a period of below potential 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 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 and I look forward to your I like him twice now, reiterating maximum employment. That's good.

That's really good that he twice reiterated that the market likes it so far for doing this. um to what you reference the the rise in long-term bond yields to what degree did that supplant action by the FED at this meeting? Just leave Dre Pal, walk away. thanks for your question. So um, I'll talk about bond yields.

but I want to take a second and just sort of set the broader context in which we're We're looking at that. So if if you look at the situation, let's look at the economy first. Inflation has been coming down, but it's still running well above our 2% Target The labor market has been rebalancing, but it's still very tight by many measures. GDP Growth has been strong, although many forecasters are forecasting and they have been forecasting that it will slow.

As for the committee, we are committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time. and we're not confident yet that we have achieved such a stance. So that is the broader context in into which this the strong economy and all the things I said. That's the context in which we're looking at this question.

uh, of rates. So um, obviously we're monitoring. We're attentive to the increase in longer term term yields and which have contributed to a tightening of broader Financial conditions since the summer. As I mentioned, persistent changes in broader Financial conditions can have implications for the path of monetary policy.

In this case, the title Financial conditions we're seeing from higher long-term rates but also from other sources like the stronger dollar and and lower Equity prices could matter for future rate decisions as long as two two conditions are satisfied. The first is that the tighter conditions would need to be persistent and uh, that is something that remains to be seen. Um, but that's critical. Where're you know things are fluctuating back and forth.

That's not what we're looking for with financial conditions, We're looking for persistent changes that are material. Second thing is that that that the the longer term rates that have moved up. they can't simply be a reflection of of expected policy moves from us that we would then that if we didn't follow through on them then then then the rates would come back down. So the and I would say on that.

It does not appear that an expectation of higher near-term policy rates is causing the increase in longer term rates. So um, in the meantime though, uh, perhaps the most important thing is that these higher treasury yields are showing through the higher borrowing costs for households and businesses and those higher costs are going to weigh on economic activity to the extent this tightening persists. And you know the the Mind's Eye goes to the 8% near 8% uh mortgage rate which which could have you know pretty significant effect on housing. So that's how I would answer question just as a quick follow.

And to be clear on this um in your opening statement and just now you seem to imply that you are not yet confident that Financial conditions are restrictive enough to to finish the fight. Is that true? Yes, that's exactly right. Um, darn it. You know to say a different way.

We haven't made any decisions about about future meetings. Um, we have not made the determination and we're not. I will say that we're not confident this time that we've reached such a stance. We're not confident that we haven't.

We're not confident that we have and that's that is is the way we're going to be going into these future meetings is to be. You know, just determining the extent of any additional further policy uh, tightening that that may be appropriate to return inflation at 2% over time. Rip Hi chair thank you so much for taking our questions I Wonder you know if you don't raise interest rates in December The presumption be that at that point that we should expect that rates are at their Peak or is there a possibility of restarting rate increases next year? And are there any cost to taking a more extended pause? So um, let me start by saying we haven't made a decision about September you're asking hypothetical there. but but December we're going into this summer meeting we'll get as you know, two more inflation readings, two more uh, labor market readings, some data on uh, on economic activity uh, and so we'll be taking and also the broader situation, the broader Financial condition situation, and the broader World situation.

We be looking at all those things as we make a decision in December we haven't made that decision I would say though, that that, uh, the idea that if you the idea that you wouldn't would be difficult to to raise again after stopping for a meeting or two is just not right. I mean the committee will always do what it what it thinks is appropriate at the time and again, we haven't made any decisions about at all about December We didn't even we didn't talk about making a decision in December today. Really, it was a decision for this meeting and and understanding broader things. Rip Nick Timrose of the Wall Street Journal Did the FED staff put a recession back into the Baseline forecast? Uh, in the materials for today's meeting? And how much does this tightening and financial conditions substitute for rate hikes? If the tightening is persistent, you had said it was worth maybe a quarter point when we had the bank failure in the spring.

What is it here? On something that's presumably more straightforward and more familiar to simulate. So I guess uh I Don't want to answer your question about the Um about the recession, but the answer is no I think I have to answer it since we since we did publicly say in the minutes you'll you'll know anyway in the minutes the staff did not put her our session back in. I Mean it would be hard to see how you would do that if you look at the Um, look at the activity we've seen recently which is really indicative of a recession in the near term. In terms of um, how to think about translation into raate hikes I think it's it's just too early to be doing that and the main reason is we just don't know how persistent this will be.

You can see how volatile it is. Different kinds of news will affect the level of rates I Think any kind of an estimate that was you know precise would hang out there and have a great chance of looking wrong very quickly. So I think what we can say is that fin of conditions have have clearly tightened and you can see that in the rates that that consumers and house and households and businesses are paying now and over time that will have an effect. We just don't know how persistent it's going to be and and it's tough to try to translate that in a way that I'd be comfortable communicating into.

how many rate hikes. That is what makes you confident that tighter Financial conditions will slow above Trend growth when 500 basis points, a rate hikes QT and a Min banking crisis have not thus far. Well, it's just that that's um, uh, you know the way our policy works is and sometimes it works with lags of course which can be long and variable. But Ultimately, if you if you raise the you know raise interest rates.

you do see uh, the those effects and you see those effects in the economy. Now you see what's happening in the housing market. You're seeing that now you You'll see. uh if you look at surveys of people, it's not a good time.

They think to buy durable goods of various kinds because rates are so high now. y I Mentioned again we're We're getting reports from housing that the effects of this of this could be quite significant. But you're right the this has been a resilient economy and it's I think been surprising in its resilience and there are there are a number of possible reasons why that may be. Um, our job is to is to is to achieve maximum employment and price stability And so we take the economy as it comes.

It has been resilient. Uh, so we just, uh, we take it as it is. did you hear line? We're getting reports? The effects of this High rates on housing could be quite significant coming ahead in terms of the thresholds that you've laid out. Um, warrant further tightening.

Um, the additional evidence of persistently above Trend growth or some kind of reversal in the recent easing of Labor Market tightness that seems to suggest something more powerful than just one more quarter point rate hike would be necessary. And I'm just curious if if that's how the the committee sees it. so we've identified those factors. Those those are not meant to be the only factors or a specific test that we're going to be applying with with some metrics behind it.

Really, we're going to be looking at the broader picture and you know what's happening with our progress to toward the 2% inflation goal. Is the labor market continuing to broadly cool off and achieve a better balance? We be looking at that. You know growth. We look at growth in so far as it as has implications for our two mandate goals.

We look at that and we look at broader Financial conditions. So we'll be looking at all of those things as we reach a judgment. Uh, you know whether we need to further tighten policy and if we do reach that judgment, then we will further tighten policy. Okay, and and just in terms of the tightening of financial conditions, If that is having some kind of offsetting um effect in terms of the need to potentially again raise rates, what then is the potential impact on the trajectory of of Rate Cuts Could we see those maybe pulled forward or have to see Um more than than what the September SCP indicated? So it's it's the fact is, the committee is not thinking about Rate Cuts right now at all.

We're not talking about rate Cuts We're still very focused on the first question. Which is, have we have we achieved a stance of monetary policy that's sufficiently restrictive to bring bring inflation down to 2% over time. Sustainably, that is the question We're focusing on the next question, as you know will be for how long will we remain restrictive? What policy remain restrictive and what we said there is that we'll keep policy restrictive until we're confident that inflation is is on a sustainable path down to 2% That'll be the next question. But honestly, right now we're really tightly focused on the first question.

The question of Rates Cuts just just doesn't come up because I Think it the first. It's so important to get that first question you know as as close to right as you can Steve Lean CNBC Mr Chairman I Guess I had assumed that there was a tightening bias in the committee. You say in the statement, you're looking to assess the appropriate stand of monetary policy. Uh, the extent to which uh, you may you may need to hike Additionally You You didn't say earlier that you were sufficiently restrictive.

There were forecasts for two rate hikes among most members of the committee, but then you just said that you know we're we don't We haven't made a determination. Would you say the bias right now is neutral, that there is no disposition to hike again, and that the committee largely has moved off of this forecast for two hikes for sorry, one addition, one addition? No, no. I wouldn't say that at all. I would say I mean the language you know looking at it here.

Uh, In determining the extent of additional policy firming that may be appropriate to return inflation 2% over time, that's the question we're asking. So is it right to think of that as a a hiking bias is still in the committee here. We haven't used that term, but it's fair to say that's the question we're asking is, should we hike more it's not. it's not, you know and that that is the question.

And you're right that in September we wrote down one additional raid hike. but you know we'll write down another forecast. As you know in December Chris H Thank you Chris Rugaber at Associated Press Um, Well, since the last meeting, the Auto Workers strike has finished. Uh, oil prices have leveled off.

Uh. And yet on the other hand, you have the outbreak of war between Uh Israel and Hamas. How do you see all those factors taken together affecting the economy going forward? How are you thinking about those? Um, so there There are significant issues out there. as you as you point out, um Global Uh, Geopolitical tensions are certainly elevated and that goes for the war in Ukraine it goes for the war between Israel and Hamas Uh, we're monitoring that our job is to monitor those things for their economic uh implications.

Um, so the UW strike out is is um appears to be coming to an end. Oil prices have flattened out, they hav't hav't gone down. but I guess they've G down a little bit from their earlier Peak Um, another one is the the possibility of government shutdown. We don't know about that one so there's plenty of of risk out there.

Um. but I I would go back to the you know the bigger picture for from our standpoint is is got a very strong economy, strong labor market, making progress on the labor market, making progress on inflation, and um, we're very focused on getting confident that we have achieved a stance of monetary policy that is sufficiently restrictive. That's really our Focus Great and just one quick thing you uh, last month had gone to York Pennsylvania where you talked to a lot of or yeah, last month where you talked to a lot of small business owners just curious, what sentiments did you hear from them or what did you picked up on and what would you? was there? anything that surprised you the most in terms of what they talked about y I wouldn't say I was terribly surprised I was I was very impressed by Uh York As a town where the real strategy and I would say it's it's very impressive what the people there uh have have put together uh in the face of you know some difficult longer run Trends about offshoring of manufacturing and that kind of thing they've they've done a great job as a as a city I think you know what you hear and it's is consistent there which is people are really suffering under high inflation. you were there.

We talked to some people who you know were feeling that in their businesses and other people who are feeling it in their home lives as well. You know it's it's painful for people, particularly people who you know who don't have a lot of extra Financial Resources who are spending most of their incoming uh you know, income on uh the essentials of life. So we know that that that wasn't new but that did come through very clearly. uh in in in the conversations we had in New York and you know I I walked away from that even you know I mean just thinking that that we really the the best thing we can do for the US is to restore price stability.

Uh, fully restore price stability and not fail in that task and do it as quickly as possible. but but also with the least damage we we can Rachel Hi Chair Pal Rachel Seagull from The Washington Post Thanks for taking our questions. You've spoken before about the pain that would likely be coming for the economy in order to get inflation down. but since the economy has not responded to rate hikes in ways that would normally be expected, have you changed your views on that at all on how necessary or inevitable that kind of pain would be say for the labor market or overall growth? Well, I think everyone has been very gratified to see that we've been able to achieve.

You know pretty significant progress on inflation without seeing the kind of increase in unemployment that has been very typical of rate hiking. Cycles Like this one, so that's that's a historically unusual and and very welcome result. And the same is true of growth. You know we've We've been saying that we need to see below.

Potential growth and growth has been strong, but yet we're still seeing this. I think I Still believe and my colleagues for the most part I Think still believe that it is likely to be true. It is still likely to be true, not a certainty, but likely that we will need to see some slower growth and some softening in the labor market in labor market conditions to get to. you know to to fully restore price stability.

Now what you? But it's a it's only a good thing that we haven't seen it. and I think we know why. You know since since we lift it off, we we have understood that there really two processes at work here. One of them, one of which is the unwinding of the distortions to both supply and demand from the pandemic and the response to the pandemic.

and the other is is, you know, restrictive monetary policy which is moderating demand and giving the supply side time to time to recover, time and space to recover. So you see those two forces now working together to bring down inflation. But it's that that first one can bring down inflation without the need for higher unemployment or slower growth. It's just it's Supply You know, supply side improvements like um, shortages in bottlenecks and that kind of thing going away.

It's getting you know, a significant increase in the size of the labor market, both from labor force participation and from immigration. That's a big supply side. You know, gain that is really help helping the economy. It's part of why part of why GDP is so high is because we're getting that that.

Supply So we welcome that. Um, but I think those things will run their course and we're probably still going to be left. we think and I think still be left with a with some ground to cover to get back to full price stability. And and that's where monetary policy and and what we do in with demand is is still going to be important against that back Trp if you've gotten any Clarity on lags.

If you have an economy that's been so resilient to high rate increases, does that suggest to you that there isn't necessarily this huge wave of tightening that's still coming through the pipeline and that it may have already come into effect, you know? I I Continue to think it's very hard to say so it's it's been one year at this meeting one year ago, this was the fourth of our 75 basis points hike hikes so that's a full year since then. I Think we are seeing the effects of of all the hiking we did last year and and this year we're seeing it. It's very hard to know exactly what that might be but can for example, an example of where where you wouldn't have felt this yet is is debt that had been termed out. uh, but it's going to come do and have to get rolled over next year or the year after.

So and there little things like that where the effects are just taking time to get into the economy. so I don't uh I I Think we have to make monetary policy under great uncertainty about how long the lags are I Think trying to make a clear, get a clear answer and say I'm just going to assume this is really not a good way to do it and this is one of the reasons why we have slowed the process down this year was to give monetary policy time to get into the economy and it takes time. We know that and you can't rush it. So doing slowing down is giving us I think a better sense of of how much more we need to do if we need to do more.

Michael Mcke from Bloomberg Television and Radio Um I'm trying to connect the dots here. Um, one quick clarification I wanted ask about um Rachel's question is you said you need slower growth You had always said before a period of lower uh than Trend growth? uh, has that changed And two, it sounds to me like uh, you're basically saying here that the kind of the dot plots out the window that every meeting is live with the possibility of a rate increase for right now doesn't matter about the turn of the Uh, the year, and that there's not an objective way to determine whether or not not you've got enough uh, tightening in the system. It's just going to be a sub subjective judgment meeting by meeting very good questions. Let's talk about the dotplot first.

So the dotplot is a is a a picture in time of what the people in the committee thinks is likely to be a appropriate monetary policy in light of their own personal economic forecast. In principle, when things change, it's not. That's not like plan that anybody's agreed to or that we will. That's a forecast that would change.

For example, I mean many things could change. That would cause people to say I wouldn't write down that dot. You know, six weeks later, think of the number of things that could change your mind on that. So I think I think the the efficacy of the Dot Plot probably decays over the three-month period between that meeting and the next meeting.

But nonetheless, it's out there and we don't. We do personally update our forecast, but we don't formally update the Dot Plot So right, you know. I I Think we try to be as transparent as we can about the way we're thinking about these things. We we're we're laying out there, our thinking, and you know as we approach the meeting, we'll we'll all be.

You know, my colleagues and I will be talking about how we're processing that data. In terms of so I we're not really changing the way in terms of uh, growth. Uh, what I said was below potential. So what? What you have here recently is growth? that is.

that is, um, temporarily. Potential growth is elevated for a year or two right now over its Trend level. So the right way to think about it is what's potential growth this year Tren People think Trend growth over a long period of time is a little bit less than 2% or I would say just around 2% But um, what we've had is with with the you know Improvement in the size of the labor force as I mentioned through both participation and uh, immigration and with the the you know the better functioning in the labor market and with with H, you know the unwinding of the supply chain and shortages in those kinds of things you're seeing actually elevated potential growth. There's catchup growth that can happen in potential and that means that if you're grow, you could be growing at 2% this year and still be glowing growing below the increase in the potential output of the economy that I hope that's clear.

that's really what's going on. that's that's why I would say it as potential. but if you about meeting by meeting we essentially now supposed to assume that it's a meeting by meeting, live meeting with a chance of a rate increase that will be decided on subjective uh, criteria rather than objective at each meeting. I yeah, I mean I don't know that I want to just accept anybody's characterization it I'll I'll tell you how we're doing this.

So we're going meeting by meeting. We're asking ourselves whether we've achieved a stance of policy that is sufficiently restrictive to bring inflation down to 2% over time. That's the question we're asking. We're looking at the full range of economic data including Financial conditions and all of those things that we look at and then we're we're You know we, we, we've We come very far with this raid hiking cycle.

Very far. And you saw the spread at at the September meeting of you know it's a relatively small spread of people think one or two additional hikes so you're close to the to the end of the cycle. That's that was an impression as of a belief as of September. It's not a promise or a plan of the future.

And so we're going into these meetings. one by one we're looking at the data. As I mentioned, we're also. You know we've we're being.

We're being careful. We're proceeding carefully because we can proceed carefully. At this time. monetary policy is restrictive.

We see its effects, particularly in in intensitive spending and other channels. So that's how I think about it. Wow. NE This is Huge.

This is good. Uh, hi, chair pal Neil Irwin With Axios Um, in light of the runup in long-term yields we've seen the last several weeks. Uh, have you given any consideration to the pace of your asset runoff program? Uh. and if there were a judgment that high, the higher term premium was endangering the Dual mandate goals, Would that be reason to think about slowing or suspending Qt? Or should we think of that as more of a technical question around reserves? So committee is not considering uh, changing the pace of balance sheet runoff.

It's not something we're talking about or considering. That's fine. Um. and I I Know there there are many candidate explanations for why rates have been going up uh and QT is certainly on that list.

It may be playing a relatively small effect. although I would say at $3.3 trillion in reserves, it's not I think I think it's hard to make a case that reserves are even close to scarce at this point. So that's not something that we're that we're looking at right now. Victoria Hi with Politico I Wanted to ask about the Bosel 3 Uh, endgame Capital Proposal Uh, you know you've gotten a lot of push back from people on different aspects of the proposal and you yourself expressed some reservations and I'm just curious.

Um, could you accept finalizing that proposal without significant changes? So that proposal is out for comment? and uh, we expect a lot of comment. We won't get those comments until the end of, uh, until well into next year. You know we've extended the deadline and we'll take them seriously. We'll read them.

I'll say what what I do expect is that we will. We will come to. We're a consensus driven organization, will come to a package that that has broad support on the board. So is support mean more support than the proposal had? It means broad support Janelle Marte with Bloomberg So um, in addition to persistence when you look at long-term treasury yields, what else? are you watching To evaluate how those tighter Financial conditions are hitting the economy and if it will lessen the need for further tightening.

Also, do you think that those higher yields could affect um, banking stress? Never heard of this person before, so what do we look at? We look at a very wide range of financial conditions. In fact, as you'll know, uh uh, different organizations publish different Financial conditions indexes which can have you know seven or eight variables or they can have a 100 variables remember how I showed you Goldman Sachs earlier environment and we we tend to look at a few of them. I'm not going to give you the names, but they're You know they few of the common ones that people look at and so they're looking at things like the level of the dollar, the level of equity prices, uh, the level of rates, the credit spreads sometimes, uh, they're they're pulling in credit availability and things like that. so it isn't any one thing we would never look at.

for example, long-term treasury rates in isolation. Uh, nor will we ignore them, but we would look at them ASO as part of a broader picture here. and they do play a role of course in in many uh of the major standard uh Financial condition indexes. Your second question was on the banking stress.

uh, banking stress. so it's something we're watching. As you know we we did have um, there were issues with interest rate risk uh and also um, you know, funding uninsured deposits. uh in in the March the things we went through in March and thereafter and so we've been working a lot with financial institutions to make sure that they have uh, good funding plans and good and uh and that they have a planned for how to deal with with um, you know the kind of portfolio unrealized losses that they have.

We do think the banking system is is quite resilient. we we had you know, a handful of bank failures, but uh, so that's that's what we're out there doing and um, we don't have any reason to think that this that these right Hecks uh are materially changing that picture which is one of a strong banking system and one where there's a a strong focus by Banks and by supervisors on liquidity on funding and those sorts of things. Scott Okay, thanks Mr Chairman Scott Horley From MPR Last week you and your colleagues put forward a proposal to lower the cap on debit card swipe fees for fo