economic data points, and we don't exactly know what the fed will say in the commentary, but that is going to be very important as we listen to all of this, we think there is just going to be a hold pattern, but we will find out when we go to steve liesman, as he gets ready to tell us exactly what the fed is going to do. steve, what do you got? >> the federal reserve is leaving interest rates at five and a quarter to 5%. leaving in those rate cuts, 4.6%. i will get back to that in just a second. they see the economy expanding at a solid pace, same as they did in the last statement. inflation has eased but remains elevated, same as the last statement. here it is, not much change. only one change about job gains remaining strong, no longer saying that they have moderated, saying that inflation and employment goals are moving into better balance, and they said that they still do not expect it will be

appropriate to cut the target rate until it has greater confidence inflation is moving towards 2%, which is to say they don't have that confidence yet, so they are not projecting when those cut rates -- those rates might be cut. on the projections, pretty interesting here. a big boost to the 2024 gbp outlook to 2.1% from 1.4%. a tick lower on employment, down to 4%. this is the 2024 year end. two tics higher on core pce to 2.6%, and yet, more growth, more inflation, lower unemployment. they left those three cuts in place, 4.6% for year end. they did skew a little more hawkish, and i will get to that in a second. i will tell you they cut one big cut away from next year. they went to 39 from 2.39 from 3.6, and for 2026, to 3.1, and a tick higher, by the way, in

the long run rate. they say that they have left that up to inflation risk, and are ready to adjust policy as needed. i don't have a chart for this, let me just tell you. in the january of projections, there were five officials below that 4.6%, and now there is only one. a lot of people that were more dovish came up and are more in line with the committee, but it is an interesting question right now. the fed sees more inflation, higher growth, and yet they left those three rate cuts in place, at least, for this year, taking one away from next year. >> this was a unanimous decision, i take it? >> yes, sir. >> no dissent there, and there is a growing consensus among the members of the board around that 4.6 percent year and number. >> is a good way to put it, tyler. almost everybody except for one person is on board on 4.6 or higher. i will tell you, though, in terms of being above the median, there were nine officials in december, now there are eight officials above the median. it came down -- i'm sorry, it's

the other way around it eight officials last time, nine this time that were above the median, so did skew. remember, we needed two to get above the median, and there was only one more, but what happened was the bottom came up to the median, so as you suggested, the consensus around that median of 4.6 for the three rate cuts this year. >> steve, hang on, i'm sure we will come back to you in just a moment. let me turn back to you, david. any surprises at all? i guess not. >> well, no, by the skin of their teeth, i think they made the right decision. we could've lost two people moving that number up, we only lost one, so it stays at 4.6. if i was hearing steve right, it's good that they are moving up the long-term projection of what the neutral and federal funds rates will be. we've learned that the federal reserve can check rates up to 5 1/4 to 5.5 particularly slam the brakes on the economy in terms of monetary policy, and the economy can take it, and also, inflation can come down even if unemployment is below 4%.

that says, may be in the long run, this economy does not need as much monetary accommodation. maybe it's a pretty healthy economy on its own, in which case, you have such a low long term funds rate? it's a more logical production today than it was three months ago. >> how about that point, kristen, that the economy, not just the economy, but the markets seem to have adjusted to the idea of fewer rate cuts, and maybe a terminal interest rate that is a little higher than originally thought. >> i think, yeah. i took a couple things away from what steve was saying. i think the other thing to focus on is the fact that the focus on jobs market and employment, yes, the predictions, there was a slight uptick in terms of the unemployment rate, but overall the job gains remain strong, which mean -- means that the feds northstar, in terms of whether or not we will see the rate cut will be in this inflationary force is continuing. in terms of how the market has responded quite well, that oes back to normalization and fundamentals, so when we look at, why is the market where

it's at? it's a do to earnings. we are expecting around 7.5% earnings growth this year. 15% over two years. that is actually quite strong given all the tightening that has taken place. >> john, right now, if we look at the market reaction immediately, it is to the upside, ever so slightly so, of course, stronger to the upside before we knew the fed's decision, and all the details from the press conference. why is the market reacting as such? is it just because there are no surprises? steve said much of this was much as expected, there was not much change in the statement and wording itself. i think there are two reasons. i think the first is the consistency in keeping those rate cuts in the forecast, i think that's helpful. if the fed was skittish and got a month about inflation and adjusted the forecast, that would signal a little bit of unease on the feds part, and that would translate into investors being uneasy, so i think that is one. i think the second reason is

that two weeks ago, when powell last spoke, many people, and we were impressed by his consistency, the time for powell to really shut the market and change expectations, that is in the past. that was necessary when we had a big inflation problem when he really needed to do a lot of work to get that under control, but today, he can be more consistent. he can be more stable. he can be less surprising. i think that was the message two weeks ago. that would be the message today, and i think i will be the message over the course of the year, a more consistent, stable federal reserve, and i think that is actually helpful from the markets perspective, because it allows investors to set expectations and invest in things like kristen just mentioned, fundamentals, rather than trying to guess what the fed is going to do. >> rick, tell us how the bond market is reacting and what you've taken away from what we've heard from steve, so far? >> the equity markets, they are happy as long as rate cuts aren't taken off the table, so they are happy. the bond market, the bond market saw 4.262.

down about six basis points. tens, they traded down around 422. they are backup to 4 1/4, and both those rates are efinitely lower than they were several days ago, but they are higher than they were several weeks ago. in my opinion, the whole ball of wax, probably, liens on the unemployment rate, which i'm sure you will get to in the press conference. if you recall, it moved up to 3.9%, which means the last three months, 3.7, 3.7, 3.9. 3.9 happens to be a half a point about the low in january and april of 2023, which is 3.4%, and should we, at the next jobs report, i will guess what it is. my guess for the next unemployment rate is going to be 4.1%, because 4.1, 3.9, 3.7, the rolling average there is 3.9%. a half a percent above the 3.4. it's the sam rule. this has been brought up so

many times over the last 36 hours, which basically states, when the unemployment rate moves to a certain level, it seems to accelerate a bit. the fed is going to be playing -- paying close attention to that, i don't believe your lying eyes. steve said, inflation is higher, growth is higher, and there are still pretty much three uses built in. all the markets are happy, but i'm telling you, as sherlock holmes fans used to say, the game is afoot. fed is really threading the needle on guidance and public opinion, but in the end, can they really cut rates when growth and inflation are still this sticky? i'm not sure i believe they can. >> steve, do you want to react? >> yeah, what rick just pointed to is something that i am gathering a question on. i like the way that kelly put it, by the hair of our chinny chin chin, we escaped having that third cut go away. it is interesting here, higher growth, more inflation. i think when powell was asked

about this apparent inconsistency, the way he will respond is to say, well, we think we are tight enough here in order to handle some upside surprise, or less of a decline of inflation and more growth than we previously thought, and it's a measure of how much restraint we think we are putting on the conomy here, that we believe we don't have to change our forecast, or the average official does not have to change their forecast. i think that is how they will probably respond to that question, but i think it's coming out. i want to remind folks, there is another shoe to drop. an important issue. the federal reserve began discussion. the potential end to the reduction of the balance sheet, so we hope to get some information and details about when the fed might bring quantitative tightening to a close here, having brought the balance sheet down by 1,000,000,000,000 1/2, but if it keeps going at this pace for another year, it would even stop at 2 trillion above where it started this whole thing, back in 2020.

>> very interesting stuff. if i can go back to david kelly, when we are talking about the balance sheet, we don't have the details, as steve said. maybe we will get some in the press conference. what feels appropriate to you, knowing what -- where the fed stands right now? and, what can the market take? >> the federal reserve really doesn't know how far they can push down the balance sheet before they have a repeat of what happened in september of 2019, were short rates suddenly bounced up. they are using this ample reserves regime, they have all these reserves, so they are gradually draining reserves from the system, but they don't know how far they can go, and they are making guesses. i've seen some research coming out of the st. louis fed saying, if you get it down between 10 and 12% of gdp, that might be right. >> david? maybe you can answer question for me. if they have the standing repo facility, which is something that you can break glass in

case of a fire, in other words, if they don't have reserves, they can go to the fed for those reserves. what is the difference? i'm trying to figure out a reason to be concerned the fed could go too low on the balance sheet if this standing repo facility is something that really exists and will work. why should i be concerned? >> i agree with you. i don't think they should be so concerned, but i think they are worried that they will get blamed if they have a repeat of september 2019. they can mop up the mess very easily. that's exactly right. what's interesting is, if you use that measure, you are quite right. they were $4.1 trillion on the balance sheet before the pandemic. they could stop $2 trillion higher than that, but this will be interesting for the press conference, it's possible that chairman powell will indicate that they may begin tapering this year, and i think that would be a positive sign for the bond market, because it says there will be a lot of support, still, at the long end of the bond market at the federal reserve. >> kristen, wanted to react to the thoughts about the balance sheet, and where the

equilibrium value might be, and how far away are we from it? >> i absolutely agree with all the comments that have been made. where we were pre-pandemic, there is still a lot of room to go. we are at $7.5 trillion right now, but i think the market will react favorably to this. if we get commentary from chair powell, just the fact there is a discussion around quantitative tightening, and when we will see either the slowing of that or the ending of that -- remember, that is adding liquidity into the system, so i think a lot of the things we are receiving, whether it is the three cuts that are still priced in, a discussion around quantitative tightening, and i go back to what i said earlier in terms of the data points that he is paying attention to, because chair powell has shared, whether it was congressional testimony, some of the other conferences, he has shared the fact that he is anticipating rate cuts this year. that we don't have to break employment to actually get our first rate cut, and just to put all of this into perspective, we are talking about three rate cuts at 25 basis points. those 25 basis point cuts are far from accommodative, so we

also need to put it into the larger context as well. >> john bellows, a final thought. >> david highlighted the risk with regards to reserves. i think the other side of this was the point that was made. they bought a lot of bonds in 2020 and 2021. they expanded the balance sheet tremendously, and i think that's going to mean that their bias is going to be to continue the qt for a while and try to get that back down again. they bought a lot of bonds. there is a long ways to go to undo that, so i wouldn't be holding my breath for them to start buying bonds again. >> use liquidity as an excuse to stop. >> potentially. >> rick, what is the bond market -- what does it want to hear from powell when it comes to qt? obviously, they want to know there is a whole bowl of lollipops that are out there. >> they are already thinking about this. 10 year yields are lready moving higher. here is what they are thinking.

quantitative tightening is going to stop well shy of any number -- we are currently at what? 7.58 trillion. last time we got as high as the credit crisis, 4.5 trillion, we came down to 3 3/4 trillion. the spread of where we are going to stop is going to be wide, and is going to stop because of the notion that the reverse repo parking lot is getting emptied, and the bond market does not like if the balance sheet is much higher, in my opinion, then six or 6.5 trillion, which in and of itself, as you pointed out, is still 2 trillion higher than when they stopped after the credit crisis, and you know they want to use that balance sheet again, should any type of crisis develop in the future, and we all know the crisis counter seems to have a higher frequency than it used to. >> how did i know that rick would have an opinion on the balance sheet, guys? how did i know that? >> familiarity. familiarity. history. a long and glorious history. thanks, guys and ladies.

i appreciate it. coming up, we will get more reaction to the fed's decision, and we are minutes away from jerome powell's press conference. ent ll take you there live, wh ibegins at half past the hour, but first, a quick break. stick with us.

welcome back to power lunch for the fed is leaving interest rates unchanged, as expected, and sticking with an earlier forecast of three rate cuts by the end of the year. here for his reaction is dennis lockhart. good to have you back with us. i don't see much in the statement or the action, which is a nonaction, to suggest that the fed is becoming more hawkish. i would like to get your reaction to that, but i do sense they are just becoming more patient, which is not necessarily a bad thing. >> i think your conclusion is correct. i would say, however, if you look at the dots plots, you do see some movement in the dots.

there were, i think, four at four dots, four moves, and all but one have moved into the three category. the consensus is pretty tight around three moves this year, and i think that is a take away that the consensus has tightened. >> what about the big boost to the gdp forecast, 2.1% from 1.4%? what do you make of that, and is that sort of the fed setting themselves up for saying, look, the economy is getting stronger. that's why we have these three cuts planned. >> i think they are recognizing that the underlying demand in the economy, the underlying strength is pretty robust, and that is why i think they are sticking with three rate cuts, because they see that they have

that strength of the economy to deal with. >> take us inside the meeting. since the last meeting, we've had a couple of inflation numbers that have been, to some, a little bit worrisome. what is the discussion like about numbers, about numbers that were above what wall street and economists were forecasting? >> well, they are not dismissed, but they are looked at in the context of being just one report under two reports, so there is, generally, not an overreaction to that. i think,as jay powell has said frequently, there is no expectation that this inflation will be linear, and that this will come down in an even fashion month over month over month, so i think they reserve judgment, and i believe that the reports we have seen recently, to a small degree, reset the clock, because they

need to look at another two or three months of inflation reports to be sure that what they are seeing is just a bump, and not something that is signaling a real change of direction. >> that's what i was going to ask, how many reports you need to see in a row to consider it a pattern for inflation? for instance, obviously, inflation has been a sticking point, and how do you know what it's just a bump or it is a new trend that the fed should take appropriate action on? >> i think different members of the committee might have different answers to that. i would, personally, say, i would be looking for three to fully interpret what has gone on with the january and february reports, so it would be passed, in all likelihood, past the may meeting. >> is there an unemployment number? rick just mentioned the idea that unemployment is a half point higher than it was this time year ago. his prediction was that it may

go above 4% on the next number that comes out in about 10 days. is there an unemployment number that would cause the fed to begin to worry about that? full employment is part of its mandate. >> first, there are good and bad reasons why unemployment numbers rise. when you have people coming into the workforce and increasing participation, that's a good reason for the unemployment rate to rise. so, they would look within the numbers to see what the dynamic really is, but if you are seeing layoffs, you are seeing widespread downsizing of companies and so forth, beyond 4% would begin, i think, to get the attention of people on the committee. >> how you characterize the economy that you see? the atlanta fed has typically been one of the more buoyant

forecasters of economic growth. what you see around you? >> i see a solid economy that is slowing from a very, very strong third quarter of 2023. somewhat less strong, but still strong fourth quarter, and this quarter, if you believe gdp now, the atlanta fed's tracker, this is coming in more around 2%, so that is a slowing topline growth number. i see a very healthy labor market, and i see inflation going sideways at the moment. so, there is a bit more ambiguity around the total picture, particularly, the inflation picture, then we would've had two months ago, for example. >> mr. lockhart, always a pleasure to have you with us. thank you for dennis lockhart. we are just moments away from fed chair powell's press conference. we will take you there live as soon as it happens. power lunch is back in two. let'h

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david kelly, is still with us. it seems to me the risk is pretty low for the fed to hold these rates unchanged, which is we know, what they did. what is the risk of cutting, potentially, too early? is a bigger risk a chance of reigniting inflation? >> no, i don't think that the fed will reignite inflation by cutting rates at all. there is a lot of talk about the neutral rate of interest, but the truth is, interest rates have much more of an impact on inancial markets in the real economy. all of the tightening blaster didn't do anything to slow down the economy but what i'm interested to hear from fed chair powell, i would like to hear why they pushed out their estimate on growth this year, because it does seem like they are looking for a lot of employment growth powering this in an economy where the growth of the nativeborn population is pretty slow. is there an immigration component to this? are they thinking they will allow immigrants coming in, in a chaotic fashion, adding to the labor force? is that why they think this

economy is capable of going that strong without pushing up inflation? >> you mean two point 4%, the gdp marker? >> yes, because that's about their estimate of long-term economic growth, and why they think we can do that. i think they can, but i would be interested to know why they think we can do that, given their previous calculations on the issue. >> let's talk a little bit about quantitative tightening, and rick sort of gave the idea that wherever they stop, they are going to be higher than they began, in terms of the size of the balance sheet. >> yeah, i think they are, and that's because they've got such a complicated web in their ample reserves. they have all these regulations on the banks, they have the treasury department changing their behavior. a lot of individuals, in terms of holding currency but it's extremely complicated for them to figure out what s ample, so their view is, and chairman powell has said this, they want to stop before they reach ample, but since they don't know where ample is, they are likely to stop short, so that is good news for the bond market. that means there is a lot of

support from the federal reserve in holding down the long-term interest rates. it's good for the bond market. i don't get as much impact on the economy, overall, though. >> we are seeing a lot of the bank etfs jump. obviously, they do well in higher interest rate environments, but the fed is still holding steady on the idea of three potential rate cuts. why do you think the market is so excited, at least, in the financial bank sector, to see what we've heard, so far? >> because what we have is patience and predict ability to the beauty of three rate cuts is, june, december, you do it in one of these meetings where you release economic projections, and people can figure out what you're doing. if they go to two rate cuts, there is a lot of uncertainty. was that july? was that september? could this all vanish? as long as their patient and consistent with what they do, that helps financial markets, in general. >> do you see three cuts this year beginning in june? >> yeah, i do. i think they will have enough evidence in underlying core inflation coming down the remember, we are very tight,

and i think they can give us another rate cut in december, and we will see about 2025. i think they can keep going for a while, but they will just wait for the evidence. i think they have enough evidence in june to start this process. >> as you say, you're not concerned about a rate cut reigniting inflation? >> no, because this economy is actually pretty good growing at a solid pace without causing inflation. we've had inflation, the way down from 9.1 to 3.2 without economic growth slowing down the we've had 27 months with the unemployment rate at or below 4%, and yet, inflation is still being cut to a third of what it was back in june of 2022. this is a pretty impressive economy, and i think the fed can kind of let it do its thing, and that is good news for everybody. >> david kelly, thank you very much for your time today. we don't have chair powell yet, but let's take a look over the markets stand right now. the dow and the equity markets have basically gone from flat to what i would characterize as

a very modest gain of about 4/10 of a percent for the dow, a little more than that for the nasdaq, and a little less than that for the s&p 500. the 10 year bond yield at 4.29%, and then the -- dipping today, now back up to 4.297%, or thereabouts. here is chairman 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. the economy has made considerable progress toward our objectives. inflation has eased substantially, while the labor market has remained strong, and that is very good news. but, inflation is still too high. ongoing progress in bringing it down is not assured, and the path forward is uncertain. we are fully committed to returning inflation to our 2%

goal, restoring price stability is essential to achieve a sustainably strong labor market that benefits all. today, the fomc decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. our restrictive stance on monetary policy has been putting downward pressure on economic activity and inflation. as the labor market tightness has eased, and progress on inflation has continued, the risks to achieving employment and inflation goals are moving into better balance. i will have more to say about monetary policy after briefly reviewing economic developments. recent indicators suggest that economic activity has been expanding at a solid pace. gdp growth in the fourth quarter of last year came in at 3.2% for 2023 as a whole. gdp expanded 3.1%, bolstered by strong consumer demand, as well

as improving supply conditions. activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates. high interest rates also appear to avoid on business fixed investment. in our summary of economic projections, committee participants, generally, expect gdp growth to slow from last year's pace, with a median projection of 2.1% this year, and 2% over the next two years. participants, generally, revised up their growth projections since december, reflecting the strength of incoming data, including data on labor supply. the labor market remains relatively tight, but supply and demand conditions continue to come into better balance. over the past three months, payroll job gains averaged 265,000 jobs per month. the on employment rate has edged out but remains low at 3.9%. strong job creation has been accompanied by an increase in

the supply of workers, reflecting increases in participation among individuals aged 25 to 54 years, and a continued strong pace of immigration. nominal wage growth has been easing and job vacancies have declined. although, the jobs to workers gap has narrowed, labor demand still exceeds the supply of available workers. fomc participants expect the rebalancing in the labor market to continue, easing upward pressure on inflation. the median unemployment rate projection is 4.0% at the end of this year and 4.1% at the end of next year. inflation has eased notably over the past year, but remains above our longer run goal of 2%. estimates based on the consumer price index and other data indicate that total pce prices rose 2.5% over the 12 months ending in february, and that excluding the volatile food and energy categories, core pce

prices rose 2.8%. longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as from measures from financial markets. the median projection in the s&p for total pce inflation falls to 2.4% this year, 2.2% next year, and 2% in 2026. the fed's monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the american people. my colleagues and i are acutely aware that high inflation imposes significant hardship as if the roads purchasing power, especially for those least able to meet the higher cost of essentials, like food, housing, and transportation. we are strongly committed to returning inflation to the 2% objective.

the committee decided at today's meeting to maintain the target range for the federal funds rate at 5 1/4 to 5.5%, and to continue the process of significantly reducing our securities holdings. as labor market tightness has eased, and progress on inflation has continued, the risks to achieving employment and inflation goals are coming into better balance. we believe that our policy rate is likely at its peak for this tightening cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. the economic outlook is uncertain, however, and we remain highly attentive to inflation risks. we are prepared to maintain the current target range for the federal funds rate for longer, if appropriate. we know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation, and ultimately, require even tighter policy to

get inflation back to 2%. at the same time, reducing policy restraint too late or too little could unduly weaken economic activity in employment , and considering any adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risk. the committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably down toward 2%. of course, we are committed to both sides of the dual mandate, and unexpected weakening in the labor market could also warrant a policy response. we will continue to make our decisions meeting by meeting. in our smc, fomc participants wrote down their individual assessments of an appropriate path for the federal funds rate, based on what each participant judges to be the most likely scenario going forward. if the economy evolves as

projected, the median participant projects that the level will be 4.6% at the end of this year, 3.9% at the end of 2025, and 3.1% at the end of 2026. still above the median, longer- term funds rate. these projections are not a committee decision. our plan if the economy does not evolve as projected, the path for policy will adjust, as appropriate to foster maximum employment and price stability goals. turning to our balance sheet, our securities holdings have declined by nearly $1.5 trillion since the committee began reducing our portfolio. at this meeting, we discussed issues related to slowing the pace of decline in our securities holdings. while we did not make any decisions today, on this, the general sense of the committee is that it will be appropriate to slow the pace of runoff fairly soon, consistent with the plans we have previously issued. the decision to slow the pace of runoff does not mean hat

our balance sheet will ultimately shrink by less than it would otherwise, but rather, it allows us to approach that ultimate level more gradually. in particular, slowing the pace of runoff will help ensure a smooth transition, reducing the possibility that money markets experience stress, and thereby, facilitating the ongoing soap -- decline, consistent with reaching the appropriate level of ample reserves. we remain committed to bringing inflation back down to our 2% goal, and to keeping our longer- term inflation expectations well anchored. restoring price stability is essential to set the stage for achieving maximum employment and price stability over the long term. to conclude, we understand that our actions affect communities, families and businesses across the country. everything we do is in service to our public mission. we at the fed will do everything we can to achieve our maximum employment and price stability goals. thank you.

>> steve liesman, cnbc. mr. chairman, the projections show somewhat higher correlation . they also show somewhat stronger growth. what should we infer from this, on average? rates were kept the same this year, but inflation is higher and growth is higher. does it mean more tolerance for higher inflation and less of a willingness to slow the economy to achieve that target? >> well, no, it does not mean that. what it means is that we have seen incoming, as i pointed out in my opening remarks, we did markup our growth forecast, and so have many other forecasters, so the economy is performing well. and, the inflation data came in a little bit higher as a separate matter, and i think that caused people to write up there inflation, but nonetheless, we continue to

make good progress on bringing inflation down, and so -- >> --, just a follow-up, when you say that you're willing to either maintain the rate for longer, what is the tolerance of the federal reserve for inflation coming in above its 2% target? >> we are strongly committed to bringing inflation down to 2% over time. that is our goal, and we will achieve that goal. the markets believe we will achieve that goal, and they should believe that, because that is what will happen over time, but we stress, over time. i think we are making projections that do show that happening, and we are committed to that outcome and we will bring it about. >> hi, chair powell, rachel siegel from the washington post. thanks for taking our questions. you and others have been saying that relief on housing inflation is coming, but it still has not shown up meaningfully in the cpi or pce. does that challenge your assumption about when the shift

will finally break through, since it hasn't at that point? >> i think there is some confidence that the market, the lower market will show up in measures of housing services, inflation over time. there is a little bit of uncertainty about when that will happen, but there is real confidence they will show up, eventually, over time, but again, uncertainty about the exact timing of that. >> will you be able to get overall inflation down to target if housing does not break through quickly, and does that affect the timing for eventual cuts this year? >> we will get aggregate inflation down to 2% over time. we will. i assume that we will continue to see goods prices coming into a new equilibrium, where they are going down, perhaps, not as quickly as they had been earlier this year, warehousing services inflation will come back down as current market rents are suggesting, it will happen. and, where non-housing services will move.

some combination of those three things, it may be different from the combination we had before the pandemic. it will be achieved, and we will bring inflation back down to 2%, sustainably. >> kim russell, the wall street journal per during your congressional testimony this month, you said that your first test to making changes to interest rates does not require to be terribly comfortable when inflation is at 2%, because interest rates are well above neutral. at the same time, you said after the last meeting that the first cut is highly consequential. can you reconcile these views for me? if rates are well above neutral, why would the first cut be highly consequential? is that because you anticipate one cut would be followed by one or two more along the lines of the recalibration you made in 2019, which itself, was modeled on the midcycle adjustment of 1995? >> i would put it more in the context of what i said in my opening remarks, that the risks are really two cited here. we are in a situation where if

we ease too much or too soon, we could see inflation come back, and if we ease too late, we could do unnecessary harm to employment and people's working lives, so we do see the risks as two sided, so it's consequential. we want to be careful. unfortunately, with the economy growing, with the labor market strong, with inflation coming down, we can approach that question carefully and let the data speak on that. that's really what i was thinking pit -- >> how much of that do you chalk up to one off calendar adjustment effects following a period of high inflation, versus some change in the trend we sought in the second half of last year? >> i want to start by saying, i always try to be careful about dismissing data that we don't like, so you need to check yourself on that, and i will do that. i would say the january number, which was very-the january cpi and pce numbers were very high.

there is reason to think there could be seasonal effects there. but, nonetheless, we don't want to be completely dismissive of it. the february number was high, higher than expectations, but we have it, currently, well below 30 basis points, core pce, which is not terribly high, so it's not like a january number, what i think the two of them together, and i think they haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2%. i don't think that story has changed. i also don't think that those readings added to anyone's confidence, that were moving closer to that point, but the last thing i will say is, we didn't excessively celebrate the good inflation readings we got over the last seven months of last year. we didn't take too much signal out of that. what you heard us saying was that we needed to see more, that we wanted to be careful

about that decision, and we are not going to overreact, as well, to these two months of data, nor are we going to ignore them. >> chair powell, could you speak a little bit more about the timing? is there enough data between now and say, may, to be able to get the kind of confidence that you say you still need, or by june? is there enough data for you? just give us a sense of your thinking there. thank you. >> we make decisions meeting by meeting, and we did not make any decisions about future meetings today. those are going to depend on our ongoing assessment of the incoming data, the evolving outlook, and the balance of risk, so i really don't have anything for you on any specific meeting looking forward. >> is there even enough data? >> things can happen during an

intervening period, if you look back. unexpected things. i wouldn't want to dismiss anything. i would just say that the committee wants to see more data that gives us higher confidence that inflation is moving down sustainably towards 2%. i also mentioned, and we don't see this in the data right now, but if there were a significant weakening in the data, particularly, in the labor market, that could also be a reason for us to begin the process. again, there is nothing in the data pointing at that, but those are the things that we will be looking at upcoming meetings, and without trying to refer to any specific meeting. >> hi, chris reed, associated press. thank you. in the objections, there is an increase in the eutral rate, as you know, and higher rates,

projected in 2025 and 2026. can you speak about what might be behind that? is there a real sense that the economy has changed in some way, that higher rates will be needed in the future? thank you. >> you are right. they are pretty modest changes, but there was an uptake -- uptick in the longer run rate, and also a 25 basis point increase in 2025 and 2026. in terms of, are rates going to be higher in the long run? if that is really your question, i don't think we know that. i think -- we think that rates were generally low during the pre-pandemic post global financial crisis era for reasons that are mostly important, slow-moving, large things like demographics and productivity, and that sort of thing. things that don't move quickly, but i don't think we know. my instinct would be that rates will not go back down to the

very low levels that we saw, where all around the world, there were long run rates that were at or below zero in some cases. i don't see rates going back down to that level, but i think there is tremendous uncertainty around that. >> rate, and a quick follow on the projections, you also have to .6% core inflation for the end of this year. you mentioned it being 2.8% in february. that doesn't sound like much disinflation at all, so are you really still confident? at the last press conference, you sounded pretty optimistic you would get more confidence by the end of this year. is it right to say that this suggests you aren't seeing a lot of disinflation this year? compared to what we have seen? say the last part of your

question again. >> are you optimistic you will have the confidence you need? >> if you look at this, what it says is that it is still likely in most people's view that we will achieve that confidence and there will be rate cuts. that will really depend on the income data. it is. pretty lower readings. harder to make progress as you move the 12 month window forward nonetheless, we are looking for data that confirmed the kind of low readings that you had last year and give us a higher degree of confidence if what we saw sustainably down to 2%. >> thank you for taking care of questions for your comments that a weakening in the labor

market would lead to rate cuts or consideration of a rate cut, would continued strength in the labor market via raising to hold off on rate cuts? would the market hold off in 2024 the way it did in 2023, what would stronger hiring and growth mean for the past or what policy likes >> with what we are getting is a lot of supply and a lot of demand. the supply is actually feeding demand because workers are getting paid. what you would ave is potentially a kind of what you had last year which is a bigger economy. inflationary pressures are not increasing. in fact, they were to reason. you can have that if you have the continued supply-side act dividend last year. >> strong hiring in and of itself would not be a reason to hold off on rate cuts?

>> no, not by itself. no. we saw last year very strong hiring and inflation coming down quickly. now we have a better sense that part of that was supply-side healing particularly with growth in the labor force. in and of it self, strong job growth is not a reason for us to be concerned about inflation. >> hi, chair powell. how do you ask cestus date of financial conditions right now, particularly, do you view that easing of conditions since the fall as consistent and compatible with what you're trying to achieve and inflation? >> i think there are many different indicators. you can kind of, you know, see different answers to that question. ultimately, we do think that financial conditions are weighing in on economic activity and we think you see

that. a great place to see it is in the labor market where we see demand cooling off a little bit from the extremely high levels. that will point to job openings, quips, surveys of the hiring rate. things like that are in demand. there are also supply-side things happening but i think there are demand things happening. we did see progress on inflation last year. significant progress. sometimes being tighter, sometimes looser. >> mike with bloomberg radio and television. can you give us more color on how the committee is thinking about inflation dynamics right now? what was seen at the beginning of the year, there were one off and races that will fade or is there more of a secular turn with prices rising again and

service prices staying sticky. also housing prices have been part of this cycle. you keep expecting them to go down and they don't. how does the committee see this playing out forward since you have raised your inflation forecast? >> i see the committee looking at two months of data and asking the same question and just saying have to see what the data shows. as i mentioned, you can look at january which is a very high reading. many people did see the possibility of seasonal adjustment problems there. but again, you have to be careful about dismissing parts of the data that you do not like. february was not as high. it was higher. the question is what are we going to see? we tend to see it stronger. stronger inflation in the first half of the year. less strong later in the year.

we will let the data show. i don't think we really know whether this is a pump on the road or something more. we will have to find out. in the meantime, the economy is strong. the labor market is strong. inflation has come way down. this gives us the ability to approach this question carefully. and you know, feel more confident that inflation is moving down sustainably to 2% when we take that step to dial it back up. >> if duct about the desire to have confidence that inflation is continually moving down. have the recent numbers we've got in for inflation data dented that confidence at all? >> it certainly has not improved our confidence. i would say that the story is really essentially the same. and that's with inflation coming down gradually towards 2% on a sometimes bumpy path, as i mentioned. i think that's where you still see. nine months of 2.5%.

we've had two months of kind of bumpy inflation. we were saying it's going to be a bumpy ride. we have consistently said that. now here are some bumps. the question is are they more than bumps? we cannot know that area is is where we are approaching this question carefully. it's very important for everyone that we serve that we do get inflation sustainably down and i think the historical record, every situation is different but the historical record is that you need to approach that question carefully and try to get it right the first time and not have to come back and raise rates again, perhaps if you cut inappropriately or prematurely. >> thank you, mr. chairman. i wanted to ask you, you received a letter from a federal reserve independent body. i'm understanding congress has oversight of that. you've received letters from

elizabeth warren and the white house calling on you to lower or cut interest rates because the potential that it may remain too high for too long has halted advances in employing renewable energy technologies and delaying significant climate benefits from these projects. has higher interest rates cause that? >> well, first of all, i respect in our system of government it is congress that has oversight over the responsibility of the fed. we place a tremendous amount of importance on our engagement with congress and always treat them with respect. in this case, i would say that our mandate is for maximum employment and price stability. the other things that we do. that's what we are trying to accomplish. we are trying to do this in a way that sustains the strong growth that we are seeing, the strong labor we are seeing that allows us to make further progress with inflation. that's how we can best serve the public and leave the other issues in which many cases are

in readily important. such as those mentioned. leave those to the people who have the responsibility to those. >> letters from two dozen lawmakers saying that these rates are squeezing the working people. how does this affect what you guys are doing? >> we have received these letters with respect and we write careful responses and address concerns. we listen, again, because we are talking to the people in the system of government to have oversight over our city. so at the end of the day, we have to make our judgments and take to maximum employment, price stability, supervising regulates banks. work on the payment system. things that we do. >> thank you. claire jones, financial times. thanks a lot for the opportunity to last a question. as chair of the fomc, would you want to see unanimity on the

committee or something close to it, meaning no more than one before you begin cutting rates? thank you. >> we are very consensus oriented. we do try to achieve consensus and ideally unanimity. people do dissent with something that happens. life goes on and it's not a problem. you respect thoughtful dissent very much. you may not agree with some arguments that you want to understand them, cma read a book that takes a position that you have long opposed just to understand the book. so i treat dissent with respect, as well.

>> with the economist. can you hear me? >> yes. >> great. obviously, inflation is someways away from target. on employment, though, if you look at the projection for the full year of 4.0% in february. we were already at 3.9%. quite close to the projection. are you concerned at all that notwithstanding the very strong jobs growth that this factor may be some cracks appearing in the employment market. talk about the labor market being a condition for easy rate. what would constitute that in your eyes? >> we monitor one of the goal variables is the labor market. we monitor very carefully. we follow all the possible stories that are out there about there being cracks. but the overall picture really is strong labor market. the next game in balance is that we saw in the early part of that pandemic. recovery had mostly