>> it's wednesday, margin 6. and here are the top stories that we're following. powell takes the stage the federals reserve chairman -- anticipated. to lawmakers. and nikki haley's exit. the presidential hopeful is dropping out of the race. and a market on edge the s&p 500 now looking for directions since reaching new heights. >> welcome to "bloomberg

markets." expecting nikki haley in south carolina, jerome powell in washington, d.c. we have the s&p 500 up about one half of 1%. and the nasdaq 100 also seeing similar gains of stocks. the philadelphia semiconductor index on track to erase the losses from yesterday and we have the two-year yield just dropping down to 453 on the day. now, we're going to bring you the jolt state joined by michael mckee to join with us the details. michael: looks like shanoly, it is unchanged. the revised number was 8889.

not a drop there but it was a significant from over $9 million. no change there. sonali: as we wait for jerome powell to start his. , what is his expectation out of not just what he will say on the onset what types of questions he may get? michael: he's already given up his text. it's very short and he repeats the idea that they're high rate and they will cut rates. they hope some time this year. but they have to make sure that inflation is still on its way

down. so nothing new in that. the questioning will obviously revolve around timing because republicans want the fed to hold off until inflation is down because they don't want rate cuts to help joe biden and democrats want exactly the opposite. cut rates now to help the president and his campaign. so we'll get a lot of questions on that and we may get questions on the budget deficit. that's an issue for both parties up on the hill and the fed tries to stay out of that but j. powell on "60 minutes" did say that the u.s. was on a fiscally unsustainable path. sonali: nikki haley is expected to end her presidential campaign. we have our bloomberg reporter here. what is expected out of her speech today? >> she's going to be backing out of this campaign.

there's no path for her this was very likely and super tuesday just confirmed that. she would go into super tuesday. felt like she need to do that for her supporters. oh, here she is now. let's listen in to what gordon hayward has to say. [applause] >> when i began, i said the campaign was grounded in my love for our country. just last week, my never, a first generation immigrant got to vote for her daughter for president. only in america. i am filled with the gratitude of the outpouring of support we have received from all across the great country. but the time has now come to suspend my campaign. i said i wanted americans to

have their voices heard. i have done that. i have no regrets. and although i will no longer be a candidate, i will not stop using my voice for the things i believe in. our national debt will eventually crush our economy. a smaller federal government is not only necessary for our freedom, it is necessary for our survival. the road to socialism is the road to ruin for our country. it is filled with followers, not leaders. term limits for washington politicians are needed now more than ever. our world is on fire because of america's retreat. standing by our allies in crane, israel and taiwan is a moral imperative. but it's also more than that. if we retreat further, there will be more war, not less.

as important, while we stand strong for the cause of freedom, we must bind together as americans. we must turn away from the darkness of hatred and division. i will continue to promote all those values as is the right of every american. i sought the honor of being your president, but in our great country, being a private citizen is privilege enough in itself. and that's a privilege i very much look forward to enjoying. in all likelihood, donald trump will be the republican nominee when we meet in july. i congratulate him and wish him well. i wish anyone well who would be america's president. our country is too precious to let pour differences divide us. i have always been a conservative republican and always supported the republican nominee. but on this question, as she did

on so many others, margaret thatcher provided some good advice when she said, "never just follow the crowd. always make up your own mind." it is now up to donald trump to earn the votes of those in our party and beyond it who did not support him. and i hope he does that. at its best, politics is about bringing people into your cause, not turning them away. and our conservative cause badly needs more people. this is now his time for choosing. i end my campaign with the same words i began it, from the book of joshua. i direct them to all americans but especially to so many of the women and girls out there who put their faith in our campaign. be strong and courageous. do not be afraid. do not be discouraged. for god will be with you

wherever you go. in this campaign, i have seen our country's greatness. from the bottom of my heart, thank you, america. god bless you. [applause] >> we are still joined by ann marie. she said it is now up to donald trump to earn the votes and i hope he does that. how close is that to an endorsement? >> she didn't go outright enforcing him. -- endorsing him. she launched his campaign to suspending it. she has no regrets. what she's getting out there are her voters. when you look at a number of these states, some of them trump is only bringing in voters 60% and haley is at 40%. and what she is directing to the former president is he needs do

more work to to bring her part of the republican party in. a lot of people talk about the division within the republican party. it's very obvious. it's been obvious but at this moment, the issue for trump is this is the battle he needs to fight going into november. how does he encompass the entire party? sonali: thank you. it's a massive, massive moment in washington. for that reason and another one, we are still waiting for. from fed chair jerome powell on capitol hill can. mike, when we think about how chair powell is going to be addressing congress, we spoke about some of the issues already. what is he coming up against, especially as inflation is still top of mind? michael: well, he's going to come up against criticism of the fed for not moving quickly enough to bring down inflammation and the fed has admitted it was slow on the trigger there. but in his opening remarks, he

talks about how the fed is determined to bring in addition to 2% target. sonali: we are already seeing it met by a bid in the short term market here 2 year yield downs a little bit even just yesterday. liz: although like you'll see a lot to the research report nothing but he seemed hawkish enough. he didn't lean more hawkish than he had to me focused on the dual mandate which some show more balanced. saying we are not clear we have enough process to cut yet but he cuts some of the tail risk out of the market by saying again, rates are at their peak and some

time later, we'll cut rates. and that and some of the jolt state like mike laid out of the revision. but yeah, we're going to be watching as soon as he starts talking and all the back and forth with folks on capitol hill. we know so much it is more politically spun but we're going to look to see if he said something on the balance sheet on monetary policy, the bond traders will be watching. sonali: liz, is it worth taking note here that the long end of the curve here still has question marks around it? how do you think about longer term rate as we think about more sensitive markets? we financing markets for u.s. treasuries when we think about mortgage markets here. liz: yeah, looming in the background, although there are times where it seems like oh, nobody cares about the deficit but you're hearing that come up more that we still have a problem of big deficits. treasury's been getting people to buy their debt, no question about it but i think even though

it hasn't quite worked out yet, a lot of people are thinking the yield curve will steepen the longer rates will head back towards being higher than the shorter rates especially when the fed starts cutting. but i do think there's a backdrop. that's why i'm wondering into the question saying chairman powell, our deficit situation is not sustainable. he doesn't want to get into politics. but i think we're going to hear some questioning on that like what needs to be done to cut the deficit and interest costs on our debt have been rising as the fed raised rates over 500 basis points since margin of 2022. that's looming in the background. especially when cash is making over 5%. sonali: mike, the reality of this situation as well. these two days are a busy for the bond market you still have payrolls the end of the week as well. how do you think about that kind of capstoning all of this? michael: well, it tells me that

the people on bond trading desks won't get to the hamptons early on friday. but beyond that, we're looking for clues to when the fed might start cutting rates. now powell's. did nothing to futures pricing of red rate cuts. we're still looking at a july move before they get to a full rate cut priced in. so it's hard to see that he would say a lot that's going to move the markets today significantly. there is more volatility in bond markets on days when the fed has some sort of announcement or powell testifies. so we might see some of that. and over the course of the week, we're not going to get a lot out of this with the possible exception of any discussion on the balance sheet. everybody in bond land is waiting to find out when the fed is going to start tapering its "and if there is any plans to stop it any time sunshine but if

he does suggest, that's going to be an issue going forward, then you might see some reaction there. sonali: liz, on that qt front and if you're worried about your constituents here, how much do you drill down on the balance sheet here? do you think it's even a concern for lawmakers? liz: well, i think there's staff, sometimes i'm surprised that there's really great questions that come up sometimes going through the pace of the qt which is allowing their balance sheet to roll down. you know, broadly speaking, many politicians have long felt they don't like kind of optics of the fed having this big balance sheet. why are they having a heavy hand? so the feds trying to get the balance sheet down. they're just doing it in the background with rates, you know, setting policy their key one. but i do think there's some questions on that and what's the plan, what's the path? i don't think anyone, you know, on capitol hill are worry about mortgage rates and things like that. so they don't want the fed to do

anything that will cause issue. but it's a topic and the general consensus is that they will probably slow the pace of qt like mike mentioned and maybe they'll wrap up by the end of the year but that will still leave them with a pretty big balance sheet. sonali: mike, you're looking at an economy that is still largely running very strong, how do you explain to lawmakers at this point that is still thinking about jobs and wages that you may be worried about wage prices here in relation to inflation? i mean, how does he strike that balance? michael: just come at it that they're trying to do the best job that they can for the most people. we can look at this at different ways. a job and growth is really strong, the fed could worry about inflation taking off and raise interest rates to head it off and then the people on the committee who are worried about jobs and people losing their jobs and unemployment rising,

they'll get mad at the chairman for that. in terms of wages, it's a tough thing because the fed wants the wages to keep rising but not enough to touch off inflation. that would be three to three and a half percent but now they're in the 4 to 4.5%. that's going to upset some of the progressive who is think we should be paying people more and that companies need to do more for their employees. so he's in a no-win situation political little he has to say they're going to do the best thing that they can, getting inflation down is job one because that hurts everybody. and beyond that, they will try to manage the economy to provide the best outcome for the most people. sonali: what do we think about how he handles the question about housing and mortgages? because the reality was things were looking a little smoother at then of last year but we have seen rates stay roughly elevated this year so far, finally taking a breather here. but interest rates as it pertains to mortgages might still remain high, mike and when you think about how much

pressure there has been on the housing market, how frustrated might these lawmakers be walking into this conversation? michael: some of them may be very frustrated because it is an issue with consumers. the price of mortgage is not only something that raises what they have to pay each month but it also makes it harder to buy a house and that's all pretty much stopped at this point. sonali: mike, i may have to cut you off shortly here too because we're awaiting for the chair to start speaking shortly. we're going to go to capitol hill where fed chair j. powell is testifying. so let's take a listen in. >> other members of the committee. i appreciate the opportunity to present the federal reserve's monetary policy report the federal reserve remains squarely focused on our dual mandate to promote maximum employment and stable prices for the american people. the economy has made considerable progress toward these objectives over the past

year. while inflation remains above the objective of 2%, it has eased substantially. as the marker tightened and progress has continued, the risks to achieving our employment and inflation goals have been moving at a better balance. even so, the committee remains attentive to inflation risks and is acutely aware of it especially on those least able to meet the higher cost of essentials like food, housing and transportation. we are committed to returning inflation to 2% objective. restoring price stability is essential to achieve a sustained period of stronger labor marker conditions and benefit all. i will review the current economic situation before turning to monetary policy. economic activity expanded at a strong pace over the past year.

for 2023 as a whole, gross domestic product increased 1.3% bolstered by solid customer demand. activity in the housing sector was subdued over the past year, largely reflecting high morning rates high interest rates appear to be weighing on business fixed investments. the labor market remains relatively tight but demand conditions have continue to come into better balance. since the middle of last year, payroll job gains have averaged 239,000 jobs per month and unemployment rate has been low at 3.7%. strong job creation has been accompanied by an increase in the supply of workers among individuals aged 25-54 and it continued strong pace of immigration. job vacancies have declined and nominal wage growth has been easing although the jobs to workers gap has narrowed, labor

demand still exceeds the supply of available workers. the strong labor market over the past two years has also helped to narrow long-standing disparities in employment and earnings across demographic groups. inflation has eased notably over the past year but remains above the fomc's longer run goal of 2%. total personal kelsey plum expenditures prices rose 2.4% over the 12 months ending in january. excluding the volatile food and energy categories, core pce prices rose 2.8%, a notable slowing from 2022 that was widespread. long-term speculation expectations appear to have remained well anchored as reflected by a broad range of surveys of households, businesses and forecasters as well as measures from financial markets. and after tightening the stance of monetary policy since 2022,

that they remained 5.5% since last july. we've also continued to shrink our balance sheet. a restrictive stance of monetary policy is putting downward pressure on economic activity and inflation. we believe that our policy rate is likely at its peak for this tightening cycle. in if the economy evolves as expected, it will like i will be appropriate to beginning begin dialing back restraint at some point this year. with the economic outlook is uncertain and ongoing progress toward our 2% objective for inflation is not assured. reducing policy restraint too soon or too much could result in a reversal of progress we've seen in inflation and ultimately require even tighter policy to get inflation back to 2%. at the same time, reducing policy restraint too late or too little could unduly weaken

economic activity and unemployment. we will carefully assess the incoming data and the evolving outlook. the committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%. we remain committed to bringing inflation back down to tour 2% goal and keeping inflation expectations well anchored. restoring price stability is essential and stable price overs the longer run. to conclude, we understand that our actions fact families and businesses across the country. everything duo is in service to our public mission. we at the federal reserve will do everything we can to achieve our maximum employment and price stability goals. thank you. >> thank you, chair powell. i should have noted this but this is your 25th. before -- testimony.

and we thank you for your service and your commitment to congressional oversight very much appreciate it. i now recognize myself for five minutes for purposes of questions. let's begin with what's top of mind. two issues. regulatory policy with the bar proposal on capital and interest rates. what a political year. and the lens of a political year falls heavily on all government, all parts of government. there's a lot of debate about the past three years of high inflation impact on american families. and now that inflation is receding, there's been a great deal about when the fed would kaut rates. some say there's a lot of rate cutting this year. some say none. what say you? >> i say that it will depend on

the path of the economy. our focus is on maximum employment and price stability and the incoming data as it affects the outlook and those are the things that we'll be looking at. i can go further if you'd like. >> so what point will the fed be forced to cut rates? what does the data -- what kind of data would you point to and do you have any updates there? >> so what we've said is the committee would like to see more data that confirm and make us more confident that inflation is moving sustainably down to 2%. we have some confidence of that. inflation headline inflation has moved down more than 4% points to more than 2%. we want to see a little bit more data so that we can become confident and so that we can take that step of beginning to reduce policy rates. it's a very important step. we think because the strength in the economy and the progress we've made, we can approach that

step carefully and thoughtfully and with greater confidence and when we reach that confidence, the expectation is we will do so some time this year. we can begin dialing back that restriction on our policy. >> that's pivot to regulatory policy. chair powell, as you know, there's been serious concerns expressed on both sides of the aisle and across america and across the industries about the the endgame proposal that vice chair michael barr has proposed. the concern is on how the proposed rule was developed and analyzed the lack of economic justification for these actions and but also on the substance. the proposal goes much further than the basel 3 committee recommended on capital requirements putting us to a great disadvantage

internationally potentially. is the fed listening to these comments that have been nearly, you know, nearly unanimous in opposition to this rule and are they -- is the fed listening to these comments on impact it will have on everyday americans and what is the status on rulemaking and what is the plan moving forward? >> you're right. we've received voluminous comments and the impacts study that we put out. we got those responses in mid january and we're carefully analyzing them. we had asked for a very specific detailed databased comments and i'm happy say that we did get that. so we're now just now reaching the stage where we can begin to make decisions about how to proceed. we really haven't made any decisions yet but i can say a few things. first, we do hear the concerns and i do expect there will be broad and material changes to the proposal. i will add that the final

product will be one that does have broad support both at the fed and in the broader world. we're really not at the stage of making decisions about that. that's down the road at least a bit. the question is reproposal and i will say that we haven't made that decision but if when we get to that point, that turns out to be the appropriate thing, we won't hesitate to do it. >> you won't rule that out at this stage of the game? >> not at all. it's a very plausible option. it will depend on how things lie at the time when we reach that point. >> ok. and there's a lot of concern about the interplay between different parts of the rule and if you change one, what does the economic analysis look like for the new proposal if so, it's good hear that you'll be methodical and the fed will do its traditional role of building consensus around the subs sans

of changes and that is -- sub significance of changes and is your intention? >> yes, that will be a thought. deliberative process. it's more important that we get this right than we do it fast. we understand that. this is an important rulemaking and it's going to have potential implications for the economy and the people we serve. we're going to take our time and do it right. >> thank you, chair powell. the ranking member. ms. waters recognized for five minutes. >> chair powell, i want to talk to you about housing, but before i get there, let me address the issue of mergers. last week, i led a letter to you as well as d.o.j., occ and fdic expressing my strong concern about the lack of progress you have made in updating your bank merger review procedures. this is critical now that we just learned of another mega-merger involving capital one and discover which would

create the sixth largest u.s. commercial bank with a major role in the credit card market. before too long, expert have raised alarm there is a rubber-stamping process of bank mergers where virtually all applications are approved, all the while, unbridled market consolidation poses great risk to consumers and entrepreneurs. what is the status of your updates to the merger review process? and does the fed plan to convene public hearings on the capital one and discover merger? >> so i do, i believe we're in regular contact with the justice department on what's going on with their review of merger practices. we're looking at that and considering. i think on the potential merger with -- that you mentioned, we haven't received an application. so there's really not much to

say yet. when we do get that application though, we're going to evaluate that merger as always under the factors laid out under the law and that's our commitment. >> so you do believe that your bank merger procedures are ready to do the work that's necessary when you evaluate this possible merger? >> i do. >> and are you supportive of organizing community hearings on this merger? >> we haven't even -- i haven't talked about that with anybody. i will say this. we've done that in many large mergers but that's not a conversation we've had yet. we don't even are an application for the merger yet. >> thank you. we'll stay we will stay in touch you on that. turning to the national affordable housing and homelessness crisis. increases in home prices and

friend costs which are a symptom of the chronic under supply of affordable housing. indeed more renters and homeowners are now spending more of their income than ever on housing costs. as you know housing costs intended to be a primary driver of inflation. do you think the fed has sufficiently and for sized a role housing costs play in keeping us from the 2% inflation goal? do you think it is reasonable to believe monetary policy can accomplish this goal without a fiscal policy response and if you do how long will it take to get there? chr. powell: housing services inflation is one of the three components we look at that make up the core pce index and it has been coming down from a couple years back. it's part of the story. i think the overall story is goods price inflation has turned negative.

housing services inflation you can see from currently into leases that as they turn over the increases will be smaller so in our forecast housing services inflation comes down. >> is that methodology used to assess housing cost as an indicator of inflation is imperfect? namely because it considers cost they stop both new and old rent including for owner occupied housing or month-to-month basis. this results in stale data since housing costs typically do not change once their lease is up for renewal. to address these imperfections and housing cost indicators the bureau of labor statistics and cleveland fed created an improved methodology based on new lease risk which is referred to as tenant repeat rent index.

has the fed incorporated this new indicator into its economic assessment and if not, why not and what changes at hand on the housing inflation observed by the fed. chr. powell: we are well aware of that and we incorporate that into our thinking. that is the reason, the fact market rents are at a much slower pace is the reason why forecasts for housing services inflation of come down. that plays a role in our thinking. >> thank you and i yield back. >> the vice chair, mr. barr -- wrong vice chair. the vice chair of the full committee, mr. hill is recognized for five minutes. >> thank you chairman i want to welcome you and glad to have you back with your expertise. i want to pick up where chairman mchenry left off on this conversation for the endgame. he made a good point saying you

are not taking a whole concept of re-proposal off the table as you review the analytics. and you discuss the interactivity of that with other rules. so if you were to re-propose the basil three in -- basel three endgame, in other words would you agree that the agency should not finalize this long-term debt proposal for holding companies until banks have a better understanding of what their capital obligations might be? chr. powell: chr. powell: chr. powell: we haven't made that decision yet. that's a question we've been asking ourselves is what would be the implication for other rules? >> is the fed considering changes to the requirement for regional banks to issue long-term debt. right now it stated to be issued at 6% of risk weighted assets. in an abundance of caution in an

abundance of caution case there needs to be a resolution. but as i understand it it's being required at the holding company level and down into the bank level and that seems redundant to me. would you consider changing that in your discussions? chr. powell: the comment periods ended up a little while back and so once again we are in the process of evaluating the comments. there will be a thoughtful deliberative process around that. we welcome comments on these kind of things they have very important implications for the banks affected. we want to make sure we understand the effects correctly so we can evaluate what the final rule should look like. >> turning to the monetary policy outlook as the chairman noted consumer prices are 17% higher for american households since president biden was inaugurated in january of 21 and yet in spite of that, we'll

wages have actually fallen 2% so there's no doubt inflation is the biggest issue facing american households and in my view there's two principal or three principal causing's, supply disruptions. we have had unprecedented fiscal policy, you described it in a recent interview is unsustainable, but we also think that the federal reserve in my view and many people on this committee commented should have produced accommodation after the pandemic sooner. one of the things coincident with that which is what i want to talk to you about is the fomc announced august of 2020 a flexible average inflation target framework right in the middle of the pandemic which many of us did not understand why the fed would take that decision then but it would give you flexibility on the 2% saying the fed could allow inflation to rise above 2% and stay there

above that level for some time because the fed had such challenges of getting the price level to 2%. that was a major shift in the fed's approach. do you think in retrospect of what we minister -- witnessed that that was a mistake in hindsight to change that framework? chr. powell: we said we would do a review on a five-year basis. we will start that towards the end of this year. i do think that will be one of the questions we look at. the bigger question is that change in the approach was really based on the fact we had very low interest rates and inflation for a long period of time and there wasn't any firepower for central banks so it was a way to keep inflation expectations anchored at 2% not have them slide down. the pandemic really may have

change that in a sustained way. we don't know that yet. that's the big question we will be asking is the effect of lower bound to be thought of in a different way now and if it were that that would have ramifications for a framework. we haven't begun the review yet. it will begin at the end of this year. >> thank you. i yield back. >> gentleman yields back prayed we will go to the gentleman from new york for five minutes. >> thank you mr. chairman. thank you chairman powell for being here. 2019, 2020, of the entire world was under an unprecedented pandemic with covid is that correct? >> yes. >> and that changed a lot of things not just for the united states but for the entire world and the fact the economies of countries just about on the

planet is that also correct? >> yes. >> supply chains were disrupted. i can remember many americans, people around the world could not get toilet paper or paper towels and some of the basics so the prices because of supply and demand skyrocketed causing inflation. not only in the united states but basically all over the world. is that correct? >> yes. >> therefore the fed had to do certain things at that particular time we couldn't just go back and act like the pandemic wasn't there. we had to do something to try and make sure we were able to get through the pandemic is that not correct. >> now we are at that point were we are about to get through this pandemic and we can look at the rest of the world, what they did or did not do at that time but what we did at that time. as a result of that three years post the pandemic when you look around the world i think you

were correct with what you stated that by most accounts are economy is doing well. in fact i would say our economy is doing better than most of the other countries in the world. would you say that's correct? i would say then some of the other countries of the world maybe should've looked at the policies we put in place thereafter so that they could get out of it and have a labor market that is strong with an unemployment rate near a 50 year low. inflation is also now coming down faster than anyplace place else on the planet. >> i think that is right. >> you also recognized a mismatch between the strength of the economy and the feel. i think ranking member waters touched on one of those issues of housing which we are still trying to get that under control

and i think the ranking member has some ideas on how we can do that and that may be something you need to consider so we can further get down the inflation rate and the other would be the commodity markets because the cost of food is too high for people so that something we need to get control of. let me ask this. can you say there is a connection for example between conflicts in other areas of the world like russia's war against ukraine or the turmoil in the middle east, the economic pressures the united states feels does that not also get into the reason why the cost of commodities can still be higher and their connection therein? >> certainly the war in ukraine caused prices to move up sharply. >> what would the connection lead you to believe that there is an urgent need for us i would

think, were running out of time for us to do everything in our power in congress to support ukraine so that we can make sure that that another strategic partners that we can help the commodities market and that would help lower the cost of some of the commodities, bringing food prices down if we would just be able to pass certain things to help ukraine. is that correct? >> this is where it gets outside of our jurisdiction so we would not have an opinion on ukraine funding. >> but if we had more grain going through but wasn't blocked by russia, things of that nature that helps bring the cost down. the cost is higher because of the disruption in the black sea, that happened because of this war so that would help bring the cost down. that has not necessarily the policies in the united states, but that's the policy because of what's going on in russia and we

need to make sure we do something to prevent that. if we really are serious about bringing inflation down. is that not correct? >> a full supply of grain would help with commodity prices. >> instead of us playing politics with this and acting like it is your fault or anyone else's fault that we had to do what we did because of the unprecedented pandemic, what we did was save the economy then knowing we got some problems we have now and now we are recovering quicker and better than any other country on this planet as a result of your policies. >> the gentleman's time is expired. >> mr. lucas is now recognized for. >> thank you mr. chairman. chairman powell thank you for testifying today. when you are before this committee a year ago i cautioned against raising capital requirements on commodity revenues that energy producers

use to keep prices of food and power stable for consumers. at the time you said that was a very specific concern and you are not sure the proposal would even address. and in fairness that was before the proposal was officially published. unfortunately we now know that the proposal does impact commodity and in fact they are among the most penalized financial products that banks offer. i would note i very much appreciate your comments in response to chairman mchenry about the nature of the overall proposal. congress wanted end-users to be able to secure without posting margin. keep the revenue markets affordable. i've seen estimates that some of these types of transactions could face 10 times the capital requirement. chairman powell, make me feel a little better, ease my concerns here will you and the fed work

to fix this? chr. powell: let me start by saying i want to echo the fact our commodity markets and capital markets are a huge national asset and we need them to be functioning well with is the friction as possible. i now understand what you're referring to is the things done to increase capital requirements for various kinds of derivative activities and i will say that is an area where we are taking a very close look at. >> i appreciate that. i was a member of the dodd-frank conference committee where there was bipartisan support to not disadvantage end-users, farmers, ranchers, small businesses. this at broad bipartisan support then and still does today. unfortunately the fed -- i would like to enter a few letters into the record the discuss the detrimental impact to end-users. a joint agricultural trade

association letter from the american farm bureau, among seven others. next a joint energy trade association letter. and lastly, a letter from the american public power association and the national electric corporate association. >> without objection. >> thank you mr. chairman. chairman powell i would like to focus on how the proposal is set to significantly disincentivize banks from offering clearing services. in dodd-frank, they made central clearing is a way to reduce risk in the system. the number of banks that could clear derivatives for end-users has reduced over time making it harder for end-users to find a bank to fall for the service. there are some estimates of the fed's proposal will increase capital by 80%. i'm worried that this would make it even harder for end-users to find a bank to clear their hedges.

this also comes at a time when the sec, our friends of the securities and exchange commission has finalized a rule in december that increased clearing in cost and treasure markets. this will have a real impact on market access and liquidity. not just in commodities but the $26 trillion treasury market that plays a critical role in the world economy. will you work with the cftc to address this problem? chr. powell: again i will say we are aware of those concerns and prepared to work with other agencies and also to make sure that our capital proposal appropriately addresses them. >> the strength of central clearing is entirely dependent on banks willingness to participate and problems with the endgame warranty full reproposal. to give us time to appreciate the consequences and there are real consequences as you and i both know.

with that mr. chairman i yield back the balance of my time. >> the gentleman from texas is recognized for five minutes. >> thank you mr. chairman. welcome again mr. powell. it is an honor to have you before us today. i always enjoy hearing your commentary. as you know recession and inflation, these are buzzwords and they are used in some circumstances to cast a dim light on perhaps the fed and others who are working to end some of these troubling circumstances we are dealing with. are you now add a point where you believe there will not be a recession? there was much talk about recession and many people

worried that we would find ourselves having to negotiate our way out of a recession. what is your position currently on a recession? >> u.s. growth last year was in excess of 3%. what we are seeing is continued solid growth. my expectation of other forecasters is we will see continued growth at a solid pace. there's no evidence, no reason to think the u.s. economy is in some kind of short-term risk of falling into a recession. having said that there's always a possibility, meaningful possibility that the economy will fall under recession. i don't think that possibility is elevated to time? >> i appreciate you saying this because we want to it some point eliminate the great deal of fear

associated with the term recession. the next point, the december fomc projections showcase a slightly warm rate than next year's projection. a slightly higher gdp suggesting a soft landing remains likely. are you of the opinion we are headed to a soft landing? chr. powell: i will say what we've seen so far is an economy that's growing at a solid pace. we are seeing a labor market that is still tight and strong. wages are moving up but the labor market is coming into better balance between supply and demand. inflation is come down sharply since the middle of last year. those of the conditions we see. we are trying to use our policies to keep that growth

going and to that labor market strong while also achieving further progress on inflation. that's our goal. do i think there's a possibility we can achieve all of that while keeping market strong in the economy growing, yes i think there is a possibility. >> a soft landing can be difficult to identify. we could possibly have a soft landing and miss the point at which the landing took place. how do you define the soft landing such that a member of the public lay person would understand that we have indeed had a soft landing. >> we think about it in the terms i described which is we want to keep the economy growing. the labor market to remain strong. 3.7% unemployment is pretty near 50 year historic lows.

we want inflation to move down closer and closer to the 2% objective and we made good progress on that over the past year. so we want to continue those conditions and i don't want to put the label on it. i would just say we are using our tools to keep a strong labor market, strong growth while making further progress on getting inflation down for the public. i think that's it -- we are on a good path so far to be able to get there. >> i concur. i would ask this. will there be some announcement that we have had a soft landing? because we have people who are continually indicating that we are not having a soft landing there's the possibility of a recession. will there ever be some official statement that would give people

some comfort. >> i don't think by us. i think we will keep our heads down and do our jobs and try to deliver what the public is expecting from us. we wouldn't be declaring victory like that but -- >> the gentleman's time has expired. mr. sessions is now recognized. >> thank you very much braided chairman welcome back. i think we enjoy this. i hope you do as well. there is some bit of trepidation about all the things that are available to us for you to answer prayed i learned on the campaign trail every problem can be solved on the campaign. reality is a little bit different. welcome back despite all of that. welcome back -- i want to look at the monetary policy report. as i review this i would like to focus on the term i would say high prices are here to stay. because what i've heard you say

today in this report really go to is you've got every thing under control we will keep the high prices. i think the high prices really take a toll on the american people as your hearing from our colleagues whether they be republican or democrat. page seven of the report says while current services -- core service price inflation has been slowing but remains elevated, it does. labor costs as you know and energy costs are a driver to monetary policy. the question that i have is because you began referencing policy two weeks or so ago the president announced he would slow down the gifting of

opportunities in texas for natural gas to continue the exploration. this in texas is a trillion dollar answer problem to us because if we do not constantly go find through these new vines but also through the permitting process, we are in trouble. boy are also putting in trouble our contracts with germany and other countries. this is going to mean business in america continues to have price -- high prices. and now energy is high. there is no resiliency to continue this and see the american people win. you talk about policy so what is your advice to policy about energy? and what this administration has

from a policy perspective. chr. powell: we have brought significant important responsibilities but we are not responsible for energy policy and we try to avoid commenting on our destiny >> but it has a huge impact on hours just on this report. it arbitrarily means that business is not while they are making money, while households and peoples by that, it is diminishing their long-term advantages to make progress. you are just in a leave that alone? chr. powell: really not appropriate for us to comment on . if i'm commenting on energy policy i should comment on everything. the mandate which is maximum employment. we take decisions by the legislature and administrator -- administration. >> let's say we are not in a second guess them. i will.

i believe the energy policies that this president and the democratic party have supported our causing a huge boom in prices staying high, they will not come down. they boom in attacking the energy industry, jobs that are associated with it. our foreign policy as it relates to contracts that we have signed with foreign countries. giving up the natural gas market almost entirely to qatar it has a huge impact on whether we are going to keep prices high or control these prices. it has a huge impact on i think your monetary report about how many houses get built, how many jobs get built -- get filled. whether we continue to have more jobs available then workers that are there because overregulation

is having a lot to do with the nervousness not only on this panel would also buy the american people. it would be my hope that you would pass some sort of a memo and tell them you have no opinion but you want them to see what the impact is. thank you for being here and thank you mr. chairman. >> the gentleman from connecticut is recognized for five minutes. >> thank you for being with us today. i have a question but i want to start by acknowledging, not celebrating but acknowledging what has been a really remarkable soft landing. i'm not celebrating because the american people, consumers are still feeling the effects of high prices. but i think it would be fair to say that observers would never have predicted the conduct of this economy. you yourself said it in the final press conference of 2023 you set a very high proportion

of forecasters predicted weak growth. not only did that not happen. we had a very strong year. i want to acknowledge that and acknowledge your commitment to independent monetary policy because i'm still burdened with this idea the truth and facts matter. i want to point out especially listening to my good friend talk about the energy market. we are producing more oil and natural gas today than any other country on the planet. we are the world's number one energy producer. i could spend my five minutes pointing out facts. the one i want to point out out of the report is the premise that inflation is joe biden's fault, his fiscal policies fault is faulty because half the physical -- fiscal stimulus in the face of the pandemic happened under the previous president and it has faded and this report makes the case core goods prices have been declining

as supply bottlenecks ease and import price inflation falls. i don't want you to comment on that as it gets political i think it's important we keep some foot on the plane of facts. i want to ask you a question mr. chairman because i always worry about risks but we see and risks we do not see. i want to use the remainder of my time to talk about a risk you are conscious of which is the overhang in the commercial real estate market. the financial stability oversight council identified commercial real estate as perhaps the most salient risks of the financial system, 6 trillion roughly in loans. half of that on bank balance sheets. you characterize distress in the commercial real estate market is sizable but manageable. do you still feel like that risk is manageable?