you, david, on the economy strength? >> i think the economy will settle down to a 2% pace but the interesting thing is headline pce deflator could come close to 2% in the second quarter and that will put pressure on the fed to begin cutting that the june meeting. >> that's interesting. let's take a final look before we get the word at the markets. basically flat must of the day. no surprises expected as we get ready for the fed decision, the release of its statement and the decision and for that we go to steve liesman. >> the federal reserve leaving interest rates unchanged in a unanimous decision and the december meeting. the fed said growth has slowed from a strong third quarter pace saying inflation has eased over the past year but remains elevated and is the first time they said anything positive about inflation for a very long time in the statement and they backed off somewhat saying it's now determining the extent of any additional policy firming asserting any into the

statement for the first time. they lowered the 2024 fed funds outlook to 4.6% from 5.1% so have a point down. forecasting on average four fed official 80 basis points of rate cuts next year. it had forecast is 50 basis points from a higher level of course they got rid of the expectations for an additional forecast and rate hike this year. they lowered the inflation outlook for this year to 3.2 from 3.27 down by 50 basis points. they hit the 2% inflation target may be earlier toward 2025 by the end of 2025 and they say below trend growth next year. unemployment rates seen at 4.1% next year, 4/10 higher and job gains are moderated but remains strong. there is something i think is interesting pointing out. whether medium did come down from 5.1 to 4.6 there are five

that officials below that 4.6 number two see a full 100 basis points of rate cuts next year and there think 2025. the september forecast there had been one fed official above 6%. that is gone and the top of the dot plot next year is 5.40. i would say the federal reserve today took a step toward the market rather than the market taking a step toward the fed. i would not say it's an all clear on this, but the fed definitely backing off plans to hike additionally are making certain plans to hike and forecasting more in the way of rate cuts next year than they had in september. >> and we see the clearest market reaction we've seen to a meeting and some time with stocks shooting higher and the dow up about 150 points in the 10 year yield, almost 10 basis points. 4.07 is that.

let's get over to rick for reaction. >> 4.15 was where we are before the number came out and now at 4.06. obviously we have been down rather aggressively. the two-year note yields down to 4.53 level. they were around 4.67. about 13 or 14 basis point drop. what is noteworthy here is if you look at the ppi in particular today, there is very little doubt that we see inflation showing and the new game in town is to look at the current monthly rates and annualize them over three and six months. and if you pick the right inflation indicator, may be the fed's favorite pce, even play with the data and get it close to the pet objective. that's all fine and dandy and i think that will afford them the ability to come somewhere

between the market, 80 basis points are 110 basis points. this is an election year and it seems to be baked in the cake that the problem is as we look forward through the windshield with these annualized and specific inflation metrics, the real issue for main street america is the windshield looks optimistic because all the inflation is embedded in the rearview mirror pick we have compounded and solidified many of the price increases in the system. moving forward the rate of increase may move to zero and afford the fed the ability to slow it down. but i continue to think of things like the writers guild strike or the autoworkers of 25% over four years and vegas casino workers first year 11.3% increase. airline pilots. 34% to 40% increase. if we look at what's going on with u.p.s. $170,000 a year with benefits and pay increases the reason i mentioned this is those are in the rearview mirror but they

have set up a footing of pricing issues that will continue to hurt the market with regard to more workers -- and i'm not saying it's a bad thing -- but they will be ongoing pressure for many others to continue to boost pay and i think that cycle isn't going to go away as quickly come even though the fed will have the ability to lower rates in the future. >> what would you add as we look at the dow up 176 points right now? >> reporter: i think steve is right. the fed has moved toward the market and that is good news because the pain trade was down. we moved 10% on the s&p since the last fed meeting. it's moved on expectations that powell would acknowledge inflation and the effects of lower inflation at the pce estimates and those will come down and they would make some acknowledgment that progress on inflation pick look we have a fed statement talking about slowing economic activity from being strong. determining the

extent of any additional policy firming, that is a strong nod to the doves that are out there. and a nod with the pce estimates coming down. this is about what you could expect from anyone. the real concern right now for the markets is how far it's come but the stock market is overbought on these expectations for the fed is delivering what the market thinks. the concern for the markets is the inflation data does not come in line with expectations in the next couple of months. right now it's about as goldilocks as it gets. >> thank you. kristen, as you were speaking before the meeting i found myself thinking, well, hat you are saying sort of sounded to me like the market was expecting more than the fed has indicated is likely to do. but as steve pointed out, now it looks like the fed has come closer to what the market has

been expecting. >> that's exactly what i heard as well. the question going into this was will the fed meet the market with the market meet the fed? it looks like the fed has bridged the gap in terms of meeting the market at least three quarters of the way in terms of what was priced based on the dot plot. ome of the things we ill look for within the press conference -- these comments about inflation and the first nod to inflation coming down and recognizing that . we've seen that in the data. we know some of the lagging components. take out shelter and were at the 2% target and cpi. many people are looking at that underlying data. the fact the fed has acknowledged that does the interesting thing to look for within the press conference is given the comment made about how far the market has come, is chair powell going to give commentary about the loosening of financial conditions given the market rally in the movement we seen in rates,

which brings us full circle in terms of the timing of this first cut next year. >> john, let me turn to you. it appears in the forecast for the economy next year, the fed governs as a group and are coming to where you are. that is a slowing economy. 1.4%, which is lower than it's been this year. >> yeah. i think that's true on the inflation side where it sounds like they did down road the core pc forecast. i think it's mostly about inflation here. tightening or loosening of financial conditions may or may not be appropriate. as long as inflation is lower, that's what the fed will respond to. the bed is a bunch of economist and they have an inflation mandate and a focus on inflation and the news has been good and they are reflecting that here. should that continue to be the case, i think they would reflect that through lower rates overtime pickets right to focus on inflation. that is the take away today and that will be the take away going forward. the improvements on inflation

are significant and are reflected today and continue to be reflected should they continue to lower rates in the future. >> stocks are up about half a percent in the 10 year note around 410. someone made the point earlier that falling rates in these things help ease financial conditions where as previously rising rates were tightening them. my question is. now that the fed is made to where the market is, does the market keep moving further into pricing and yet more rate cuts or more loosening or more easing of financial conditions next year? >> that's just a bit of cable- television esp because that's exactly what i was going to talk about. my market, the fed moved to the market and the market moved away and further from the fed. i was looking at the probabilities for march which

have been around 40% probability for a cut and it's now 62%. in may it's 90 basis points and i hate to do this on ivo but there is the january 2025 contract which sees 4.05. about 135 basis points of rate cuts built into the futures. that's the problem. we may be back to where we were again where, okay, the fed will move toward the market. the fed will move towards the market and other fed may have to rain expectations back in again. we will have to watch the data. the inflation data will determine what happens here. there are good reasons to expect them to come in but the data needs to perform for the fed to do what the market wants it to do. >> david, your thoughts? >> we waited all year for the fed to pivot and they finally give us a pit it. i do believe the inflation numbers will be good. i am worried the most dangerous time for the economy is when a type fed begins to ease. those rate cuts aren't just sending a message to the

market. is sending a message to the economy. people think there will be lower rates next year. you want to borrow money now or wait a while? i hate when people wait a while because is better the economy. good news for the bond and stock market but i'm cautious on growth now that the fed has pivoted. >> that's an interesting point. it could have an inverse effect. when you cut rates that supposed to stimulate the economy but when you cut rates you may be causing people to put on hold their borrowing activity. they may wait because the figure mortgage rates will be lower a year from now than now or company may wait because they think yet they can get a better price on bonds or better interest rate on bonds a year from now than they do today. >> exactly. raising rates from very low rates doesn't slow the economy as we seen many times and cutting rates from high levels doesn't actually stimulate the economy. i think the economy is okay now

but i'm more nervous about it. confident in inflation coming down but i see slow down growth and a more concerned we could become more extreme as they are goes on and that may be why the market is pricing in more aggressive rate cuts next year. >> bob? >> sarah was speaking with janet yellen and yell and made a strong case with a soft landing. a very compelling argument saying one of the reasons i'm getting into the soft landing camp, she said, is because in the past inflation expectations were not well anchored like in the 1970s. expectations that inflation would be higher for much longer and she made the case saying that's not what is happening here and that's one of the reasons we don't feel the need that will have to be suddenly high unemployment. she made the case with a soft landing on the idea that inflation expectations were higher for longer and that would not be happening. she got a gift from the fed. pce cora 2.4% pickett was 2.6. fed funds 4.6? that's quite a

drop. 0.5% from prior expectations that the federal reserve has some expect haitians as well that inflation is not going to be a pertinent point of the landscape. yellen is quite happy with what she sees from them. >> rick, if you were to give a grade to the bed and its statements, what would it be? >> i think so far i would probably give it a b- or a c+ pick a problem i see is minus food or energy, not many of the guests are saying x shelter. x inflation. we have very little inflation. i think when you consider the idea that over the next couple of years we have a roll over a dead, the interest rate we paid to service the debt will take a big jump around the same time period. i think this is the big and of the world party the fed raising rate cycle is over. i don't have a problem with

that. but to think the market rates, especially in the long end, don't have a possibility to be moving up after we get through the election next year and have to reckon with some of the big issues we have servicing the debt in the budget, believe me, we should enjoy the fact that we are putting cushion in markets like the equities because there is going to be tougher sliding in about three quarters from today. >> i guess that leaves us with a question. what do you hope to hear a not hear from the fed chair when he begins speaking? >> i think we have to bring all of this together in terms of remembering that while he did have a nod and a statement to inflation, he also pointed to the strong labor market. we have to look at these two things and i will bring this back to the fact that the inflation data is going in the right direction, but there is the potential for the market to get ahead of itself in terms of

when we anticipate seeing those rate cuts. and i think most of what we heard today is this idea that we are not expecting a soft landing as possible. were not anticipating and inflation but we are expecting growth. that will show up in the data and particularly in unemployment and that will be the signal to the fed ultimately to start cutting rates. i will look to the signals overall in terms of the balance between the dual mandate of inflation going in the right direction but let's talk about the labor market, which should give us more signals as to what we should pricing for next year . >> thank you. thank you to our entire panel, everybody. we will be watching for the rest of the afternoon to see what the fed chair says and we will see steve. minutes away from jerome powell's press conference. we will take you there when it happens. but first we get more reaction to the fed's latest

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welcome back the breaking news is that that has left interest rates unchanged for the third consecutive time.

but signaling that several rate cuts may be in the offing next year. let's get reaction from dennis lockhart, he's been in the room where it happens. former atlanta fed president. good to have you with us. what do you take from the statement and from the action? >> action was no surprise. i don't think anyone really expected that they would raise rates at this meeting. no big surprise there. i expected a little bit more in the statement pick a little bit more of a nod to the disinflation we are seeking. it was a minimalist statement. it didn't say much at all and didn't change much from the last meeting. >> it did say inflation eased but is still positive. that's covering both sides of it, i guess, you would say politely. >> yeah. to my reading, quick reading, it basically repeated much of

what was said in the last meeting. it may be a signal that they really don't want to communicate a lot that will inform markets at this particular juncture. they want to wait until next year. >> they did inform the market, at least the market feels informed because the stocks have been moving up and yields on the 10 year went down. to the question of when or whether the fed and by how much the fed might cut rates next year, how do you interpret what they said today? i think the fed fund futures markets indicating a higher probability of cuts beginning sooner in the year. >> i looked at the summary of economic projection.plots pick the notorious.plots. and it struck me that there isn't a tight consensus on the number of cuts next year. the great majority of the

committee is projecting cuts but they range from two cuts to four cuts when you look at a median. a median is the middle point of that range. so, i don't think they are showing they have at this point at least, a real tight consensus around how many cuts next year. >> this may be a little unfair or blatant statement of the obvious but it seems that market have been in the driver seat and basically telling us this is what the fed will do. >> i tend to agree with that. and the markets have a tendency to get ahead of the policymakers. the markets and market practitioners work on a somewhat different logic, and that is to anticipate early. that's how you win. whereas the policymakers are probably more inclined to be cautious and to wait and to

make sure, in this case, they have inflation under control, which is a bias toward more in action in the near-term. so there could be a disconnect here between market anticipation of cuts and what the fed is really thinking. >> i wonder if the chair is going to -- do you know, does he see the market reaction before he goes out to give his remarks? he may look at this and go, wait a minute. i better dial this back. >> i'm sure he sees the market reaction, but i don't think he improvises a great deal. i think his responses to questions and his commentary at the beginning are pretty well prepared and scripted and he's not going to freelance when he's up there. it's hard to react to, at least initial market reaction, just on the spot. and i think his mind-set would be markets will be markets and initial reaction may not be how

it settles out later today or tomorrow. >> you say in your view a soft landing for the economy remains plausible. we had a guest on yesterday who made the case that we are probably in that soft landing right now. how do you react to that? >> i think that case can be made. we are seeing disinflation and disinflation that has exceeded expectations. we have a very strong labor market. very healthy labor market. and growth is slowing but still positive. that is the definition of a soft landing. that you don't do great damage to the employment picture. you keep growing but you get inflation down toward 2%. yes, we probably are in the beginning of what could be a soft landing. >> although do all soft landings look that way? are hard landings looking soft at first? >> yeah. you are raising an important point. this is jargon we use to try to summarize a picture that is

much more complex than simply one phrase pick >> and takes time to play out. we need to adjust in the meantime. thank you for joining us. >> thank you. >> former fed official dennis lockhart. minutes away from hearing from chairman powell. he will speak at half past the hour and we will bring that to you live when it happens. we are back after a quick break. giving traders even more ways to sharpen their skills with tailored education. get an expanding library filled with new online videos, webcasts, articles, courses, and more - all crafted just for traders. and with guided learning paths stacked with content curated to fit your unique goals, you can spend less time searching and more time learning. trade brilliantly with schwab. in the u.s. we see millions of cyber threats each year. that rate is increasing as more and more businesses

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welcome back. let's get final thoughts as we countdown to fed chair powells conference. let's get the market action. it was quiet earlier but not so quiet now. not a huge rally but a sharp one as the dow has jumped 200 points after the fed the move and interest rates have dropped. the 10 year by almost 10 basis points. what is the significance of that and do you expect the fed chair to push back on that at all? >> i think he will try to push back a little bit. if you look at the summary of economic projections, they say it could be between 4.5 and 4.75 by the end of next year.

that implies three rate cuts even if that's right, that could be june, september and december we have a full six months based on the sep before we have to think about cutting rates. i think he will try to push back and say right now were not sure what done with rate hikes and were not sure we were there and inflation it's too early to say. he will push back on this even though this was a relatively good statement and the markets are responding. >> do you think he's theoretically on board with the idea of cutting rates as inflation falls even if the economy has not slowed down substantially? >> in theory he is but the federal reserve is historically late in every move. it may find some excuse. everyone has a friend who's always late for an event and no matter how much they promised they will show up they will be late. that's like the fed. they promise they will respond to inflation but i think they will mostly be thinking about

inflation is getting better but what do we need to move yet? that will tend to delay them a bit. >> my wife and i are those guests. terminally late. i mentioned this every time. when we began this rate hiking cycle you said typically the bed is too slow to move and then they stayed to hide too long and they wait to cut to late. that is really what you're driving at here yet again and correctly, i think. >> yes. the economy is growing more slowly but what this economy has proved in 2023 is you can have strong growth and below 4% unemployment because we've been below for under 4% for two years, you can have that with inflation coming down. why mess with that by keeping rate this high? >> why does joe biden seem to get no credit and only blame for where inflation is and for the fact that inflation is come down? why does the administration seem to get no credit for low unemployment and relatively strong growth?

>> i think part of it may be the clarity of messaging, to be honest. i wonder if ronald reagan or barack obama, making these and had the same economy whether it might be more clear i don't want to get into the political judgment. the other thing is people are exhausted after the pandemic. people don't think about inflation, think about high prices. >> that's exactly right. it's not as though the price of groceries has come down dramatically, just the rate of growth in those prices has slowed him at which i suppose is a good sign. but it's not as though my $16 bottle of detergent has come back down to $12 a bottle. >> that's right. but when you look at financial markets what really matters -- >> let me interrupt you for chair powell. >> good afternoon. my

colleagues and i remain squarely focused on our dual mandate to promote maximum employment and stable prices for the american people. as we approach the end of the year, it's natural to look back on the progress that has been made toward our dual mandate objectives. inflation has eased from its highs and this has come without this inelegant increase in unemployment. that's very good news. but inflation is still too high . ongoing progress and bringing it down is not assured and the path forward is uncertain. as we look ahead to next year, i want to assure the american people that we are fully committed to returning inflation to our 2% goal, restoring price stability is essential to achieve a sustained period of strong labor market conditions that benefit all. since early last year, the fomc has taken the stance of monetary policy. we have raised our policy interest rate by 5.25% and have

continued to reduce securities holdings at a brisk pace. our actions have moved our policy rate well into restricted territory meaning tight policy is putting downward pressure on economic activity and inflation and the full effects of our tightening likely have not yet been felt. to date we decided to leave our policy interest rate unchanged and to continue to reduce our securities 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 any 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 will have more to say about monetary policy after briefly reviewing economic developments. recent indicators suggest that growth of economic activity has slowed substantially from the outsized pace seen in the third quarter. even so, gdp is on

track to expand around 2.5% for the year as a whole, bolstered by strong consumer demand, as well as improving supply conditions. after picking somewhat over the summer, activity in the housing sector has flattened out and remains well below the levels of a year ago, largely reflecting higher mortgage rate . higher interest rates also appear to be weighing on business fixed investment. in our summary of economic projections, committee participants revised up their assessments of gdp growth this year but expect growth to cool with the median projection falling to 1.4% next year. 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 204,000 jobs per month, a strong pace that is,

nevertheless, below that scene earlier in the year that the unemployment rate remains low at 3.7%. strong job creation has been accompanied by an increase in the supply of workers pick the labor force participation rate has moved up since last year, particularly for individuals aged 25 to 54, and immigration has returned to pre-pandemic levels. now when wage growth appears to be easing in job vacancies have declined. although the jobs to workers gap has narrowed, labor demand still exceeds the supply of available workers. fomc participants expect the rebalancing in the labor market to continue, easing pressures on inflation. the meeting unemployment rate projection in the sep rises somewhat from 3.8% at the end of this year to her .1% at the end of next year. inflation has eased over the past year but remains above our longer run goal of 2% based on the

consumer price index and other data we estimate the total pce prices rose 2.6% over the 12 months ending in november and that excluding the volatile food and energy categories, core pc prices rose 3.1%. the lower inflation readings over the past several months are welcome but we will need to see further evidence to build confidence that inflation is moving down sustainably toward our goal. longer-term inflation expectations appear to be well anchored as reflected in a broad range of surveys of households, businesses and forecasters, as well as measures from financial markets. as evident from the sep, we anticipate the process of getting inflation all the way to 2% will take some time but comedian projection is 2.8% this year falling 2.4% next year and reaches 2% in 2026.

the fed monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the american people. my colleagues and i are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher cost of essentials like food, housing, and transportation. we are highly attentive to the risks that high inflation poses to both sides of our mandate and we are strongly committed to returning inflation to our 2% objective. as i noted earlier, since early last year we have raised our policy rate by 5.25 percentage points and we have decreased our securities holdings by more than $1 trillion. our restrictive stance of monetary policy is putting downward pressure on economic activity and inflation. the committee decided that today's meeting will maintain the target range for the federal funds rate at 5.25 to 5.5% and to continue the process of significantly reducing our

securities holdings. while we believe our policy rate is likely at or near its peak for this tightening cycle, the economy has surprised forecasters in many ways since the pandemic and ongoing progress, sorry, ongoing progress toward the 2% inflation objective is not assured. we are prepared to tighten policy further if appropriate and committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation sustainably down to 2% over time and to keep policy restrictive until we are confident that inflation is on a path to that objective. in our sep, fomc participants worked on their individual assessments of an appropriate path for the federal funds rate based on what is participant judges to be the most likely scenario going forward. while participants do not view it is likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table. if the economy evolves

as projected, the meeting participant projects the appropriate level of the federal funds rate would be 4.6% at the end of 2024, 3.6% at the end of 2025 and 2.9% at the end of 2026, still above the meeting long-term rate. these projections are not a committee decision or plan if the economy does not evolve as projected the path of policy will adjust as appropriate to foster our maximum unemployment and price stability goals. in light of the uncertainties and risks and how far we have come, the committee is proceeding carefully and will continue to make our decisions meeting by meeting based on totality of the incoming data and implications for the outlook for economic activity and inflation, as well as the balance of risks. in determining the extent of any 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 legs which with monetary policy affects economic economy 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 expect haitians well anchored. restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. to conclude, we understand 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 questions. >> associated press. i wanted to ask, how should we interpret the addition of the word any before additional firming in the statement? does that mean that you are pretty much done with rate hikes in the committee has

shifted away from a more neutral stance? thank you. >> so, specifically on, any, we do say in determining the extent of any additional policy firming that may be appropriate for any additional policy firming, that sentence. we added the word any as an acknowledgment we believe that we are likely at or near the peak rate for this cycle. participant did not write down additional hikes that we believe are likely so that's what we wrote down. but participants also did not want to take the possibility of further hikes off the table so that's really what we were thinking. >> steve from trenton. happy holidays, mr. chairman fed governor chris waller said that if inflation continues to fall then the fed in the next several months could be cutting

interest rates. i wonder if you could comment on whether you agree with fed governor waller on that that the fed will become more restrictive if did not cut rates if inflation fell. thank you. >> of course i don't comment on any other officials, even those who work in the fed. but i will try to answer your question more broadly. the way we are looking at it is really this. when we started out we said the first question is how fast to move and we moved very fast. the second question is, really, how high to raise the policy rate? and that's the question we are still on here. we are very focused on that, as i mentioned people generally think that we are at or near that and think it's not likely that we will hike, although we hundred -- did not take the possibility off the table. when you get to that question and that's your answer, there is a natural -- naturally the next question is when it

becomes appropriate to begin dialing back the amount of college policy restrictions in place. at the next question and that's what people are thinking about and talking about. i would just say this. we are seeing strong growth that appears to be moderating. we are seeing a labor market that is coming back into balance by many measures and we see inflation making real progress. these are the things we have been wanting to see. we still have a ways to go. no one is declaring victory. that would be premature. we can't be guaranteed of this progress so we are moving carefully and making that assessment of whether we need to do more are not. and that's really the question we are on. but of course, the other question, the question of when will it become appropriate to begin dialing back the amount of policy restraint and place, that begins to come into view and is clearly a topic of discussion now to the world and a discussion for us at our

meeting today. >> the nature of that discussion today? >> it comes up in this way today. everybody wrote down and sep forecast so many people mentioned what their rate forecast was and there was no back and forth. no attempt to reach agreement. this is what it broke down and this is what i think. that kind of thing. her luminary discussion like that. not everybody did that but many people did. and i would say there is a general expectation that this will be a topic for us looking ahead. that's really what happened in today's meeting. i can't do a headcount for you in real time but that's generally what happened today. >> hello, rachel siegel from the washington post. thank you for taking her questions. at this point, can you confidently say the economy has avoided a recession and isn't

heading for one now? and if the answer is no, i'm curious about what you would still be looking for. >> i think you can say that there is little basis for thinking the economy is in a recession now. i would say that. i think there is always a probability that there will be a recession in the next year and it's a meaningful probability the matter what the economy is doing so it's always a real possibility. the question is, it's a possibility here i have always felt since the beginning that there was a possibility because of the unusual situation that the economy could cool off in a way that enabled inflation to calm down, without the large job losses that have often been associated with high inflation and tightening cycles. so far that's what we are seeing. that's what many forecasters on and off the committee are seeing. this result is not guaranteed.

it is far too early to declare victory. and there are certainly risks. it's certainly possible that the economy will behave in an unexpected way. it's done that repeatedly in the post-pandemic period. nonetheless, where we are is we see the things that i mentioned . >> i'm curious if you're looking back on the past year. he talked about navigating by the stars under cloudy skies. can you talk about the ways in which the economy surprised you most of this year we are thought it would behave in one way and had to pivot to respond? >> i think forecasters generally, you go back a year, were broadly forecasting a recession for this year, for 2023. not only did that not happen -- that includes fed forecasters and essentially all forecasters. a very high proportion of forecasters show week growth or a recession. not only did that not happen, we had a strong year and that

was a combination of strong demand, but also real gains on the supply side. this was the year when labor force per dissipation picked up an immigration picked up, where the distortions to supply and demand from the pandemic, the shortages and the bottlenecks, really began to unwind. we had significant supply-side gains with a strong demand and we got what looks like a 2.5% plus or more than that growth year, at a time where potential growth this year may have been higher than that just because of the healing on the supply side. that was a surprise to just about everybody. i think the inflation forecast is roughly what people wrote down a year ago, but in a different setting. and it was a the labor market because of stronger growth has also been significantly better. if you look back at the sep from a year ago there was significant increase in unemployment.

that really didn't happen. we're still at 3.7%. so we have seen strong growth, still a tight labor market, but one coming back into balance with support from the supply side. greater supply of labor. that's what we see and i think that combination was not anticipated broadly. >> thank you. howard schneider with reuters entity for taking the questions. i wonder if you could give more color or detail on what motivates the lower rates next year? whether it's a coincidence that the spread between pce and core inflation and the federal funds rate stays constant over the year? are you simply calibrating against the fallen prices and the price level and the rate of inflation you are ins -- expecting as opposed to supporting the economy? >> nothing quite that mechanical is happening. the sep is really a bottoms up, built from the bottom up. people are looking at what's

happening in the economy and if you look at the big difference from september in the sep, the expectations for inflation this year both headline and core, have come down significantly in three months. that's a big piece of this. at the same time, growth turned out to be very strong in the third quarter and a slowing as appropriate and we've had several labor market reports which suggest, again, significant progress toward greater balance across a broad range of indicators. you are seeing so many of the indicators coming back to normal. not all of them. i think that people look at that and they write down each individual writes down the forecast and a rate forecast that goes with that forecast. we tabulate them and publish it. so -- you asked about real rates . that is something we are very conscious of and aware of and monitor and it certainly a big part -- is a part of how we

think about things but broader financial conditions matter and as you know it's hard to know exactly what the real rate is or exactly how tight policy is at any given time. you could not follow that like it was a rule and think that you will get the right answer all the time. but it's something we are focused on and if you look at the projections, i think the expectation would be the real rate is declining as we move forward. >> it sounds like the discussion has already begun. i'm wondering related to steve's question how the tactics of this play out given the slowing of inflation and the fact the deeper you get into 2024, the closer you get to a presidential election. do you want to frontload this, and other words? >> we don't think about political events. we don't think about politics. i think about what is the right thing to do for the economy.

the minute we start thinking about those things, we just can't do that. we have to think what is the right thing. we do the things we think are right for the economy at the time when we think it's the right time. that's what we will always do. i mentioned we are moving carefully. one of the things moving carefully is the decision over the assessment over whether we've done enough. that's us thinking that we have done enough. but not feeling that really strongly, confidently, and not wanting to take the possibility of a rate hike off the table. in other words, it's not the base case as it was, you know, 60, 90 days ago. so that's how we're approaching things. and as i mentioned, we wrote down this s.e.p. and it talks about, people have individual assessments of when it will be appropriate to start to dial back on the type of policy we have in place. that's another assessment we're going to headache very carefully. so as time goes forward.

>> nick demeros, of the wall street journal. chair powell, you've argued over the last year that policy tightening lifted off. the market is now easing policy on your behalf, by anticipating a funds rate by next september, that is a full point below current level with cuts beginning in march. is this something you are broadly comfortable with? >> so this last year has been remarkable for the sort of seesaw thing. and what i would just say is that we focus on what we do to

achieve our rules. ask those are going to show up in market conditions. but we have to do what we think is right. and in the long run, it's important that financial conditions become aligned or are aligned with what we're trying to accomplish. and in the long run, they will be, of course. because we will do what it takes to get to our goals. and ultimately, that will mean that financial conditions will come along. but in the meantime, there can be backand forth. and i'm just focused on what is the right thing for us to do. and my colleagues are focused on that, too. >> the markets seem to think inflation is coming down incredibly. do you believe we're at the point where inflation is coming down incredibly? >> i welcome the progress. it's good to see the progress that we're making. i think if you look at the 12- month -- look at the six-month measure, you see very low measures. if you look at 12-month

measures, it's 3% through november pce. but that isn't to say, i'm not calling into question the progress. we just need to see more. we need to see continued further progress toward getting back to 2%. that's what we need to see. it's our job to restore price stability. and that is one of our two jobs, along with maximum employment and their equal. so we're very focused on doing that. as we mentioned, we're moving carefully at this point. we're pleased with progress. but we see the need for further progress. and i think it's fair to say, there is a lot of uncertainty about going forward. we've seep the economy move in surprising directions. we're just going to see the need for progress. >> gina with "new york times." thank you for taking our

questions. in the s.e.p. today, growth is beloy potential. if growth were to surprise us again like it has for years, being stronger than expected. would it be possible to cut rates? or would continued progress on inflation be sufficient? >> we'll look at the totality of the data. growth is one thing. so is inflation, so is labor market data. we look at the total -- as we make decisions about policy changes going forward, we're looking at all of those things. and particularly as it affects the outlook. it's all about the outlook and the balance of risks as well. so that's what we'd be looking for. if we have stronger growth, that will be good for people. that will be good for the labor market. it might actually mean it gets inflation down to 2%. but if we see stronger growth, we will set policy, according to what we actually see. and so that's how i would

answer. >> i guess the question i'm asking, if you don't mind a quick follow-up. i guess the question i'm asking, is above-trend growth still a problem? >> it's only a problem. it's not, itself a problem. it's only a problem insofar as it makes it difficult for us to achieve our goals. if you have growth that is ro bust, what that will mean is it will probably place the labor market strong. could place inflationary production. that could mean we need to keep rates higher for longer. it could even mean ultimately that we'll need a hike again. it's just the way our policy works. >> hi, chair powell. how do you think of the labor term? and you think of it coming into

better balance. what would you think in terms of reaching that balance? >> on the better balance side. it's just a lot of things. it's just -- you see job growth still strong, but moving back down to sustainable levels. things that are not quite -- let me go on with that list. claims are low. if you look at surveys of businesses, they're sort of the era of this frantic labor shortage, or behind us. and they seeing a shortage of labor is being significantly alleviated. if you look at shortage of workers, where's they thought job availability was the highest it had ever been. that's down to so many levels. participation, so many measures. job openings. quits, all of those things. so wages are still running a

bit above what would be consistent with 2% inflation over a long period of time. they have been gradually cooling off. but if wages are running around 4%. that's still a bit above, i would say. and i guess there are just a couple of other -- the unemployment rate is very, very low. and these are -- but i would just say, overall, the development of the labor market has been very positive. it's been a good time for workers to find jobs and get solid wage increases. >> claire? >> claire jones, financial times. i would say the mood seems to be cautious optimism, which is somewhat corroborated by your forecast, that we are all going to have a soft landing. but there's a lot of discord about economic.

what do you explain about this disconnect? and does it matter for policymakers? >> it may be -- a common theme is that while inflation is coming down, that's very good news. the price level is not coming down. prices of some goods and services are coming down. but overall, in the aggregate, the price level, people are still living with high prices. and that's -- that's not -- that is something that people don't like. and what will happen with that is wages are now -- real wages are now positive. so that wages are now moving up with inflation as inflation comes down. so that might improve the mood of people. the thing that we can do is to do our jobs, which is to use our tools to foster price stability.

which has such great benefits over long periods of time, which is the thing that enables us to work for and achieve extended periods of high benefit. which is so beneficial for families around the country. >> hi. victoria with politico. if things start to deteriorate rapidly. if we see unemployment levels rise, at sort of the inflation level now, how would you think of that in terms of rate cuts? would that be a sign that you've done your job demandwise? >> sorry. if? >> if the economy looks like it's starting to fall into recession. if the jobless rate starts to rise? >> that's not something we're hoping to see. obviously, we're hoping to see something very different, which is continuation of santa, which

is the labor market, coming into better balance without a significant increase in that employment. inflation coming down. and growth moderating without a significant increase. that's what we're trying very much to achieve. and not something we're looking to see. >> but would you take that as a signal that you should cut rates? >> obviously, what we'll do is look at the totality of the data, as i mentioned a couple of times. and certainly the labor that would be important in that. you can describe a situation like that, if it were the beginning of a recession or something like that, yes, that would certainly weigh heavily in that decision. >> michael mckie from bloomberg television radio. mr. chairman, you were, by your own admission, behind the kunk, and starting to raise rates to fight inflation. and you said earlier, again,