this is what i'm going to be listening to with powell, is how they phrase this. i don't think they do anything today. i would be worried if they did, because i think the economy is cooling, not collapsing. but i think it's more of a normalization of conditions, as opposed to a weakening. i still think it's a close call. >> we'll come back to you on that 50/50 proposition, but now to steve liesman for the fed's decision on interest rates. steve liesman. >> the federal reserve left rates unchanged, but changed its statement in a way that meay la the groundwork for future rate cuts. it doesn't necessarily guarantee it. the fed said the risk to its employment and inflation goals continue to move into better balance, rather than just have moved into better balance. and the committee says that it's attenda attentive to risks on both sides of the mandate, not just highly attentive to the inflation risks, which it had been saying for quite some time. they did continue to say that there won't be cuts or don't believe that there should be cuts until they have greater

confidence of inflation moving towards a 2% goal, but they did talk about jobs and inflation. they said job gains have moderated. that's a downgrade from remains strong in the prior statement. they noted the rise in the unemployment rate, but added that it remains low. they had previously just said that the unemployment rate remains know. the statement notes an improved outlook on inflation, saying it has eased, and remains somewhat evaluated, adding the word "somewhat." so they're less concerned, as you can see, with the inflation. there's been some progress towards the 2% target, not just modest further progress. guys, i'll leave it there with really, it's a change in the balance of risks, i would say, from one where they said -- where they clearly indicated that they had their keen eye and highly attentive to inflation. now they're watching both sides of the mandate. but i wouldn't say they would guarantee a rate cut in the next meeting. maybe just laid the groundwork for one if they feel it's necessary and the data cooperate between now and this september meeting. tyler? >> steve, thank you very much. stick around as we get back to

our panel for some reaction there. i think stephanie, steve has characterized it well. it feels to me like the language indicates that the fed is putting the ball on the tee and is going to whack it real soon. >> yeah, i think it's totally fair. and that's exactly, they have to talk about cutting before they actually do the cuts. this is a meeting where they're setting that up, and that's exactly what the statement has detailed for us. they're telling us the risks have changed, now it's about both sides of the mandate, they don't want see the unemployment side of their mandate really start to suffer. and given that the unemployment rate has legitimately started to rise, arguably, our opinion is it's more supply driven than demand driven. but it has started to rise. we're seeing the softening in the labor market, and the fed has to be cognizant of that. they're trying to land the plane. and in order to do so, it makes sense to be cutting at this point, with inflation now cutting back down very much below their 2.5% target on -- or the 2.5 level they've outlined, on most measures when you look

back on 1 and 12 months. >> david, what do you make of the market's reactions. large ly treading water -- wel unchanged going into the decision. >> i think it's more or less what's expected. i think there were quite a few comments or changes in the statement all of which were in the dovish direction. it's more than one or two gentle chimes indicating that rate cuts were cutting. they're banging awaying on gong quite a lot to let people know this rate cut was coming. i don't want them to talk about this in terms of a weakening economy. i think they're on the right track if they say, we're going to normalize rates because inflation is normalizing. if they can stick on that theme, it will be much less alarming than if they say, the unemployment rate is going up, and we're more worried about the other side of the mandate. as soon as the federal reserve expresses real worry about the state of economy, that doesn't speed the economy up, that as low as the economy down. they need to be careful not to do that. and just stick to the point that, look, inflation is coming down. that justifies us normalizing rates. >> jim, were there any surprises

in what you hear in the language that steve so ably summarized for us? and then i want to come pack to your idea that a september rate cut is no better than a 50/50 chance. do you still feel that way based on what the fed has just said? >> yes, i do. let me start there. look, the two things i heard in the statement and what i'm queueing off of is moving into better balance and focusing on both sides of the mandate. what that really means, we're not so worried about inflation anymore, we think it's moving in the right direction, right now, the key is employment, it's jobs growth. we'll get more data on friday, another payroll number before they move again. so we have this thing that we have a fear framework, which is a fed employment asset prices and interest rates. and essentially, what the interplay is between all of these is the employment situation is the absolute key. if employment as low as, doesn't collapse, but cools enough such

that wage inflation is coming down, that's the key ingredient that gives the fed confidence to start to cut interest rates. we got an eci data print today. everything seems to be moving in the right direction. but still, we have a few more data points ahead, so i wouldn't want to get too excited, like, you know, september to me is still 50/50. even if they go, i still think it's a close call. >> stephanie, what do you say to those who argue that those what want rate cuts are doing it out of self-interest for the markets, and not out of a concern for the slowing labor market? or it would be similarly damaging to americans to have a slowing labor market alongside what they already know is difficult inflation? >> yeah, i think this is the right thing to do from a policy perspective to be lowering rates. we're now seeing inflation back down, close to 2%. we're starting to see signs that the labor market is cooling a little bit, and it doesn't make sense that rates are 5.5%. doing a couple of the cuts in the near-term makes absolute sense. i would say, certainly, it doesn't appear to be political. the fed's in a tough spot. no matter what they do, they'll

be called political to some extent. they have to follow their data framework, and that's what we're seeing. the data is very consistent with that the fed should be cutting in december. if inflation proves not to be seasonal in q1, we wouldn't be talking about a rate cut right now. >> steve, david says that this statement is sort of chock-a block, heavily peppered with rate cut rhetoric. do you see it that way as qwell? >> there's something missing from the zpstatement and the conversation, but stephanie just got at that. what i think happened here is the fed moved to neutral. in terms of the balance of risks. the question is, where do you put -- where does the committee put the funds rate? is the funds rate highly restrictive such that with a neutral balance of risk they have to dial it back? if that's the case, and that's what stephanie got at it, then you can firmly read rate cuts into this, but you can't have the conversation about what this

statement says without an understanding, and hopefully we might get that from fed chair powell during the press conference, about how restrictive the fed feels it is right here. if the funds rate is seen as neutral, which i don't think it is, and the balance of risk is neutral, no need to change rates. but if it's highly restrictive and you can bring it down what neutral balance of risks, then there are cuts that are planned. >> anything you would add to that, david? >> i agree with that. but i think that the fed has said, and jay powell has said a few times, that he doesn't need to economy to be weakening in order to cut rates. he just needs to see inflation heads towards 2%. and the eci numbers today, other indicators, all of them suggest that the trend rate of inflation is heading towards 2%. and the thing is, the fed needs to cut because inflation is getting better. if they wait, they're not going to help the economy by doing that. so i would much rather they steadily normalize rates because

inflation is going better than doing in an emergency action later. that's why i think they ought to go ahead and probably will cut rates in september. >> jim, you get the last word here? >> look, i mean, i still think -- i'm going to stick with my 50/50. i think what steve is saying is correct, is that if they're moving towards a neutral stance right now, what they need to be confident about is that wage inflation is coming down, they need to see further softening in the labor market. their biggest fear is if inflation becomes unanchored, meaning that it comes down, but it starts to go back up, because the jobs market is still relatively strong, wage inflation is still there, and they're cutting into an economy that's normalizing. not necessarily slowing or collapsing to a bad level, in which case, starting the fourth quarter, you'll see the year over year comparables start to push inflation higher potentially. so they don't want to be in a position where they start to cut rates now, and all of a sudden in the fourth quarter, you see inflation start to just stall and start to maybe even tick up a little bit higher. i think that's what they're worried about, and they need a

little bit more data. so that's why i'm still at 50/50 on september. >> we'll have to leave it there. we appreciate your time today. >> zpox are holding steady following the decision. but will markets hear what they want to hear from chair powell? that's always the big question. bob pisani has more over at the new york stock exchange. bob? >> and the markets seem very happy with what they hear. unchanged is a little bit unusual for an fmoc meeting. the dow was 268 going into the meeting. now about 275. that's unchanged. that statistically insignificant move. z again, insignificant statistically. the russell 2000 is unchanged. that's been the big mover. and the s&p tech index, which has been down this month, an underperformer, that too is up one or two points. not statistic significant. the reason i think the markets is happy with this is remember,

there's a three-step process here, that the market has come to believe will happen. first is the fed sets the stage today for a potential rate cut, and they did that today. they lowered the jobs outlook a little bit. job gains have moderated rather than remain strong, and they had somewhat lower inflation outlook, where they said, inflation was somewhat evaluated, adding that word "somewhat. so lower inflation outlook and somewhat lower job outlook. that's, again, setting the stage for potential rate cuts. then, maybe, perhaps at jackson hole, they'll make some additional statements. that's the plan that the market believes will happen. that appears to be what is delivered right now. the two to three months going into the first rate cuts usually, historically, are pretty good for the market. so all of this is setting up very well. i think the big question is, what's the pain trade here. what would have the most people the most off-side. maybe we could get another series of aberrant inflation reports, but that seems kind of

unlikely. these numbers are starting to slowly come down and coalesce around very steady declines in inflation. maybe we could get a sudden economic deterioration, but that would only lead to more rate cuts or more rate cuts, not an increase in rates. the only thing that i could make up, kelly, besides some kind of aberrant inflation report that would rattle the market at this point is a little bit more of what we've got in july. nobody anticipated that cpi report would cause a sudden deterioration in interest rates, suddenly value stocks go up, small caps go up, a re-rating of technology stocks. that process is still going on. i don't think it's necessarily completed. we get this kind of easy data coming in the next couple of months. that's very likely to continue, kelly? >> it's an excellent point. it's hard to believe that the nasdaq 100 and the russell 2000s are neck and neck. gold is hitting a session high following the decision. let's go to chicago for more reaction in the bond pits.

rick? >> if you look at all maturities, we've seen more volatility in the short end, like a two-year versus the 30-year, but let's look at the intradays. a two-year was around 4.36, unchanged on the session, at top of 2:00 eastern. it popped up a few basis points up to 439. it's resting a little higher than where it started. a lot of volatility, though. and if you look at a 10, started at 4.10%, makes it up just shy of 14, hovering one basis point hotter. the longest maturity, the 30-year, started at 435, it's hovering one basis point higher. dollar index has improved, but still lightly down on the session. if you look at this in a clinic fashion and cut through all the words and the verbiage and the word smithing. what you have is you have an inflation rate most likely going to settle around 3.5 to 2% in the big picture, okay? the fed's target is 2%. that might not matter much, yes, prices are stable, but look all the noise they made when we were

slightly under 2% pre-covid. made a big deal. kept rates too low. and that really is the issue here. take a step back. look a the size of these refundings. $125 billion for 3s, 10s, and 30s. that is so much larger than it was just several years ago. and why were they allowed to create such huge deficits? because the fed kept rates too low, too long. they can't make the mistake again of being an enabler. we still have an administration that loves to overspend. they need to keep these rates higher for longer. one rate cut won't be a big deal, but they're going to trap themselves, the market says it's up, they're right in tune with the market. i hear people say 50/50. it certainly doesn't look 50/50 to me. but what is going to be a problem is how they set the stage after the fist rate cut, because give an inch, give up to the elbow, they'll want the whole thing. they'll want more rate cuts and the fed really needs to be cognizant of the fact that we are now potentially looking at a

minhski moment when it comes to supply. and they're at the epicenter of how we frame the equation for how much we can spend, how much we can borrow, and how much we can afford to service the debt. tyler, back to you. >> rick santelli, thank you very much. more and more experts joining in calls for a september rate cut, including a number of our mock fed panel. economist claudia sahm, creator of the sahm rule, recession, indicator, and the markets are pricing it in, too. so what should we expect to hear from fed chair powell? we'll ask her, we'll ask claudia when "power lunch" returns.

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conference. but right now stocks are holding on to their gains. nasdaq is up 2.5%, and nvidia is leading the way. still, it's down about 7% in july and a number of factors are leading to today's big gain. a rebound after yesterday's decline plus positive comments from morgan stanley, and amd reporting its results and slightly beating estimates for earnings and revenue, and showing continued growth in sales for ai chips. those shares are up 3%. >> and that is where microsoft comes in, even though the stock is trading lower after its results. the street loving the $19 billion of spending with almost all of it on ai. he says that all that microsoft -- all that microsoft money will benefit nvidia and amd, but broadcom, ariesta, and even intel. >> and oil prices are higher 4% today after concerns about fighting in the middle east

escalating. iran is accusing israel and iran's leader is threatening israel with severe punishment. israel has not commented on the assassination, but did say it killed a hezbollah official in beirut, who israel blames for the attack over the weekend that killed those 12 children. with all of that going on, pippa stevens joins us with more on finally a big move in oil. and you wonder if they are starting to get more concerned about what could happen next now. >> we are seeing a big move in oil prices today and that's because these two back-to-back assassinations are raising concerns that we could see broader fighting in the middle east, nakd direct iran/israel conflict. the assassination of the hamas political leader ismail haniyeh overnight in tehran moves this conflict appreciably up the escalatory ladder and edges the region closer to a wider war, adding the fact that it took place on iranian soil, which triggered a response from the iranian leadership.

for oil specifically, the move will largely be determined by how iran responds. richard bron told me that while iran and hezbollah will feel need to respond, the firm believes they still want to avoid a full-scale war. if their response is well-level graphed, like we saw back in april, when iran responded to the killing of a senior ircg commander, the geopolitical risk premium in oil could start to fade in a week or two. since the october 7th attack in oil, the market has traded sideways. but as cibc's private wealth rebecca baben said, the odds of a calculation mistake are rising here. >> they may not want a wider conflict, but one of the reports i heard earlier today was that the assassination of the hamas leader in tehran may have come as a result of a drone-fired missile that originated inside

of iran. so you've got the potential of an infiltration of iran's sovereign territory, and it would seem that they would have to respond to that kind of provocation. >> yeah, there are a lot of moving parts here, and i think that that's part of what analysts are saying, is that even if at the high level, both sides don't want this wide-scale war that would be very costly in terms of economics and the human toll, the more you have this escalation and all of these different parties and different countries involved, the more you could have a mistake or something that's unintended. and then it just raises the stakes for everyone involved. and so we really do have to see what iran does and the oil market is now pricing a little bit more geopolitical risk premium. but it's the fact that no supply has yet to be impacted. that's what's driving oil right here. >> this also sort of says to me, israel's war has two main objectives. one is to end hamas, destroy it. and two is to retrieve and repatriate hostages.

this tells me that the former objective is really the governing one right now. decapitate hamas. >> and you've seen the rhetoric from both sides rise as well. you had iran's supreme leader saying, you know, quote, our duty is to take revenge. and so, i mean, who's to say what's kbgoing to happen next. but i think from the oil market, you know, side of things, unless iranian oil infrastructure is targeted, again, they're exporting about 2 million barrels per day, even though they remain under u.s. sanctions, but we've largely turned a blind eye. so unless that actually happens, probably little impact on the oil market, but the human toll elsewhere much more severe. >> pippa, thanks very much. we are just moments away from fed chair jay powell's press conference. what will he signal to the markets that he hasn't signaled already, we'll getome alis sanys from economist claudia sahm when we return in two minutes.

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already have. let's bring in claudia sahm, chief economist -- oh, we have the same kind of wardrobe vibes, too. creator of the sahm rule, the recession indicator. she was among the three members of our mock fed panel who voted for a cut this month. i was just reading your latest missive, miss sahm, and it's quite clear, did you say, cut, cut, cut, cut, cut. what do you want to hear from the chair? >> an explanation of why they didn't cut, right? like, the case is there on the inflation data, both the data in hand, some of the forward-looking inflation data. right, we're at 2.5% pce inflation year over year, and to be calling this some further progress, like, what is it their looking for? i think the bar is getting set pretty high and that doesn't -- that really doesn't make a lot of sense. the fed needs to start that process back gradually to normal, which means gradually reducing interest rates. >> there are -- whenever -- as we've been debating the past

hour or so, there are viewers iin and americans who are concerned and this is all about appeasing wall street and they're liquidity junkies and they just want lower rates, and it's self-interested and it's not in the interest of the average person. what would you say to that? >> the fed's mandate, the one they're given by law from congress is low inflation and low unemployment. that's their focus and the tools they have, interest rates aren't necessarily the perfect tool, but that's what they're aimed at. and haas what they have to focus on. and how this affects market is important, but it is not the fed's duty. and for americans, having jobs and having stable prices, that's not appeasing wall street. that's like having, you know, putting us on a good growth path and the fed should be out of the way. they should not be beginning the discussions about what's long-term growth, what's, you know, the productivity. they're just trying to get us

out of what has been a very rough four years. and then step aside and let the real economy get going. >> if you were to ask chair powell the very sort of pungent question that i sense is -- what the hell are you waiting for, what do you think his answer would be? >> more data. >> mm. >> so i understand the fed -- they have a very tough, very tough decision to make. and the tools, the rules of thumb that we often use in thinking about monetary policy, thinking about the economy, they don't make a lot of sense, right? you think back just two years ago in the summer, that was powell's jackson hole speech, the, there will be pain, right? to get inflation down, it is likely there will be job losses and less growth. fast forward two years. this has been hard at times. there has been no recession. there has been no widespread pain. and inflation came down a lot. so what does that tell you, in terms of what does it take to

get that last mile. how important is it to pull back, start easing the interest rates. i get it, it's tough. but they've got to make a decision. >> in the minute we have before he's likely to come out, what if the economy isn't as weak as we think it is. having been bearish for the last two years, at some level, you have to acknowledge this immigration surge means that potentially, that's the reason the unemployment rate has been going up. you've seen this whole debate going back and forth about i. gdp just came in better than expected last quarter. jobless claims still look fine. job openings rebounded last month. maybe we can handle rates higher than we think. >> we didn't need a weak economy to get inflation down. we don't need a weak economy to get that last little bit of inflation. so that's where it's -- we've got a lot of this growth, the productivity, the labor supply, all of those places -- we do not have to be afraid of a good economy. if the inflation job is done or we're on that glide path, it's okay. the fed can start stepping aside. it's not about them.

>> so did you hear the fed really setting up a rate cut in september? >> yeah, i mean, this is about as good as the doves could want for a statement. there was a lot of red ink, and i can only imagine how many hours and hours of pain staik negotiation -- >> we'll have to break in there, claudia. thank you. jerome powell now, the chairman. >> good afternoon. my colleagues and i remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the american people. our economy has made considerable progress towards both goals over the past two years. the labor market has come into better balance and the unemployment rate remains low. inflation has eased substantially from a peak of 7% to 2.5%. we are strongly committed to returning inflation to our 2% goal in support of a strong economy that benefits everyone.

today, the fmoc decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. we are maintaining our strict stance of monetary policy in order to keep demand in line with supply and reduce pressures. we are attentive to risks on both sides of our dual mandate, and i'll havemore to say about monetary policy after briefly reviewing economic developments. recent indicators suggest that economic activity has continued to expand at a solid pace. gdp growth moderated to 2.5% in the first half of the year down from 3.1% last year. final domestic product purchases, which include government net exports and usually sends a clearer signal of underlying demand, grew at a 2.6% pace over that same period, the first half. growth of consumer spending has slowed from last year's robust

pace, but remains solid. investment in equipment and intangibles has picked up from its anemic pace last year. in the housing sector, in-depths stalled in the second quarter, after a strong rise in the first. improving supply conditions have supported resilient demand and the strong performance of the u.s. economy over the past year. in the labor market, supply and demand conditions have come into better balance. payroll job gains averaged 177,000 jobs per month in the second quarter, a solid pace, but below that seen in the first quarter. the unemployment rate has moved up, but remains low at 4.1%. strong job creation over the past couple of years has been accompanied by an increase in the supply of workers, reflecting increases in participation among individuals, aged 25 to 54 years, and a strong pace of immigration. nominal wage growth has eased

over the past year and the jobs-to-workers gap has narrowed. overall, a broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic, strong, but not overheated. inflation has eased notably over the past two years, but remains somewhat above our longer-run goal of 2%. total pce prices rose 2.5% over the 12 months ending in june, excluding the volatile food and energy categories, core pce prices rose 2.6%. longer-term inflation expectation appear to remain well-anchored, as reflected in a broad range of surveys of households and businesses and forecasters, as well as measures from financial markets. my colleagues and i are acutely aware that high inflation imposes significant hardship, as it erodes purchasing power, especially for those least able to meet the higher costs of essentials, like food, housing,

and transportation. our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the american people. in support of these goals, the committee decided at today's meeting to maintain the target range for the federal funds rate at 5.25 to 5.5%, and to continue reducing our securities holdings. as the labor market has cooled and inflation has declined, the risks to achieving our employment and inflation goals continue to move into better balance. indeed, we are attentive to the risks to both sides of our dual mandate. we've stated that we do not expect it will be a appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably towards 2%. the the second quarter's inflation readings have added to our confidence, and more good data would further strengthen that confidence. we would continue to make our decisions meeting by meeting. we know that reducing policy

restraint too soon or too much could result in a reversal of the progress we have seen on inflation, at the same time, reducing policy restraint too late or little could unduly weaken economic activity and employment. in considering any adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the plabalance of risks. as the economy evolves, monetary policy will adjust in order to best promote our maximum employment and price stability goals. if the economy remains solid and inflation persists, we can maintain the current target range for the federal funds rate as long as appropriate. if the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond. policy is well positioned to deal with the risks and uncertainties that we face, in pursuing both sides of our dual mandate. the fed has been assigned two goals for monetary policy,

maximum employment and stable prices. we remain committed to bringing inflation back down to our 2% goal, and to keeping longer-term inflation expectations well anchored. rerestoring price stability is essential to achieving maximum employment and stable prices over the longer run. our success in delivering on these goals matters to all americans. we understand that our actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. we at the fed will do everything we can to achieve our maximum employment and price stability goals. thank you. i look forward to your questions. >> gena? >> gena smiley from "the new york times." thanks for taking our questions. the market's pretty much entirely expect a rate cut in september at this stage. i wonder if you think that's a reasonable expectation and if so, why not just make the move today? >> thank you.

so, on september, let me say this. we have made no decisions about future meetings, and includes the september meeting. the broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. in that, we will be data dependent, but not data point independent, so it will not be a question of responding specifically to one or two data releases. the question will be whether the totality of the data, the ein einvolving outlook, and the balance of risk are consistent with rising confidence on inflation and maintaining a solid labor market. if that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in september. so you asked, why not today? and i would just say, again, that the broad sense of the committee is that we're getting closer to the point at which it will be appropriate to reduce our policy rate, but we're not quite at that point yet.

>> so, just to follow up on that a bit. in inflation behaves as you expect between now and september, would you regard a cut in september, as sort of the baseline scenario right now? >> so i guess i would think about it this way. i'll give an example of cases in which it would be appropriate to cut and maybe it wouldn't be appropriate to cut. so if we were to see, for example, inflation moving down quickly, or more or less in line with expectations, growth remains, let's say, reasonably strong and the labor market remains, you know, consistent with its current condition, then i would think that a rate cut could be on the table at the september meeting. if inflation were to prove, you know, stickier, and you were to see higher readings from inflation, disappointing readings, we would way that along with the other things. i think it's going to be not just any one thing, it's going

to be the inflation data, the employment data, it's going to be the plabalance of risks, as see it, the totality of all of that to help us make this decision. and specifically, in what ways right now, given all you've seen over the last few months, on shelter, on services, et cetera, in what ways are you not confident right now that inflation is on the way back 2%. >> i think it's just a question of seeing more good data. swe we have seen, the last few readings have added to confidence and we've seen progress across all three categories of core pce inflation, that's goods, non-housing services and housing services. so it's really just, you know, we had a quarter of poor inflation data at the beginning of the year, then we saw some more good inflation data. we had seven months at the end of last year, you know, we just want to see more. and gain confidence. and as i said, we have -- we did gain confidence. and more good data would cause us to gain more confidence.

>> thank you. kolbe smith with the "financial times." the mark sep pointed to three cuts in 2024 with core inflation at 2.6% and the unemployment rate at 4%. since we're now at that level in terms of inflation and already beyond what was projected for the labor market, i'm just wondering if that rate path is back to become the best guidepost for policy rather than the shallower one laid out in the june sep? >> i would just say, really, the path ahead is going to depend on the way the economy evolving. and i can't really give you any better forward guidance on it than that. we didn't, of course, do an sep at this meeting. we will do another one at the september meeting. i would just say, i can imagine the scenario in which there would be -- everywhere from zero cuts to several cuts, depending on the way the economy evolves. and i wouldn't want to lay out a base line path for you there

today. i've said what i can say about september and about today, tho though. >> nick timeros of the "wall street journal." chair powell, you've said before, that you wouldn't wait until inflation got to 2% to cut rates because of how inflation has lagged. does that apply for the labor market, too? if the labor market is back in equilibrium, why is restrictive policy and potentially very restrictive policy given the high real funds rate warranted right now? >> so this is the very reason that we're thinking about, you know, that we've said in our statement that we're going back to looking at both mandates, and what we think the risks are coming back into balance. we think what the data clearly shows in the labor market is an ongoing gradualization of labor market conditions. that's what we wanted to see. we've seen that over the period of a couple of years, and a move

from overheated conditions to more normal conditions. we are watching the labor market conditions quite closely, and that's what we're seeing. if we start to see something that looks to be more than that, then we're well-positioned to respond. that's part of what we're thinking. >> and when you talk about seeing something that's more than whatever softness or slowdown you expect, in the past, you've said that stronger growth wouldn't override better news on inflation. i wonder how that cuts the other way. if you're seeing more softness in the labor market than what you would expect, does that change the calculus on what you're looking for out of the inflation numbers to recalibrate policy. >> growth isn't one of our three -- we have two mandates, as you know. the labor market, maximum employment is one, stable prices is another. so we weigh -- iyou know, we weigh those two things equally under the law. when we were far away from our

inflation mandate, we had to focus on that. now we're back to a closer to even focus. we'll be looking at labor market conditions, and asking whether we're getting what we're seeing. and as i said, we're prepared to respond if we see it, that it's not what we wanted to see, which was a gradual normalization of conditions. if we see more than that. and it wouldn't be any one statistic, of course, the unemployment rate is generally thought to be you know, a good single statistic, but we would be looking at wages, we would be looking at participation, we would be looking at all of the things, surveys, quits, hires, all of those things to determine the overall status of the labor market. but we're looking at it now. i would say again, i think you're back to conditions that are close to 2019 conditions. and that was not an inflationary economy. broadly similar labor markets then. i think inflation was actually c -- core inflation was actually running below 2%. i don't think of the labor market in its current state as a likely source of inflationary

pressures. so i would not like to see material further cooling in the labor masrket. that's part of what's behind our thinking. the other part is we have made real progress on inflation. and we've got growing confidence there that we are not quite there yet, but we're getting more confident that we're on a sustainable path down to 2%. so those two things are working together and we're factoring those both into our policy. >> chris? >> chris, associated press, you mentioned not wanting to see any further cooling in the job market. why not -- or would you consider preemptive cuts to prevent, if you saw risks of an unexpected cooling. is that something you would cut ahead of time for. >> i wouldn't say that i wouldn't want to see any other cooling. it would be more material difference. if we would be looking at this and we see something that looks like a more significant

downturn, that would be something that we would have the intention of responding to. so in terms of -- i don't think of it that way. i think of it as, you know, we're actually in a good place here. we're balancing these two risks of, you know, go too soon, and you undermine progress on inflation. wait too long or don't go fast enough, and you put atis isrisk recovery. you have to balance those two things. that's the nature of having two mandates. and this is how we balance them. it's a rough balance, but you know, it does feel like, again, the labor market feels like it's in a place where it's just a process of ongoing normalization. 4.1% unemployment is still historically low. and you know, we'll just have to see what the data show us. >> to follow up quickly, i wanted to see what you thought of the recent jolts report, which shows growth hiring has come down below 2019 levels.

layoffs remainlow. it painted a picture of a very static labor market. is that sustainable in your view or something that is worrying? thank you. >> so i think all of the data points continue to point to kind of the direction we would want to see. that was taken as, you know, there was a decline in job openings, that was good. today's eci reading was a little softer than expected, so that's a good reading. it shows that wage increases are still at a strong level, but that level continues to come down to more sustainable levels over time. that's exactly the pattern that we want to be seeing. so i think the data we've been seeing in the labor market are broadly consistent with that normalization process. again, we're closely monitoring to see whether it start to show signs that it's more than that. >> steve liesman, cnbc. mr. chairman, back in march, you talked about cutting rates as a process and in june, you talked

about the idea while one rate cut wouldn't do anything. i wonder if you can sort of follow up on colby's question, talk about are you weighing the economy right now or is it just. or is it the thing that rates seem to be normalized right now. >> i can't really say that, honestly. we -- we're -- we've seen significant movement in the labor market, and you know, we're very mindful of this question of, is it just normalization or is it more? we think it's just normalization. but we want to be in a position to support the labor market. at the same time, we're seeing progress on police station. inflation. we actually got to this -- we raised rates a year ago at the july meeting, and if you look at the situation in the economy a year ago, unemployment -- sorry, inflation was over 4%.

it was a completely different economy. now we've made a lot of progress and the labor market as, i think, you know, unemployment was 2in the 3s, mid-3s. it was a different economy. it's coming to be time to adjust that so we support this continued process. the thing we're trying to do is, you know that we have -- we've had this really significant decline in inflation and unemployment has remained low. and this is a really unusual and historically unusual and such a welcome outcome for the people we serve. well what we're thinking about all of the time is how do we keep this going? and this is part of that. we think we don't need to be 100% focused on inflation, because of the progress we've made. 12-month headline at 2.5 or 2.6. you know, it's way down from where it was. the job is not done on inflation. but nonetheless, we can afford to begin to dial back the restriction in our policy rate.

and i think we're just this part of a process. in toeerms of what that looks like, i think most rate -- you know, you would think in a base case, that policy rates would move down from here, but i don't want to try to give specific you know, forward guidance about when that might be, because the pace at which it might happen. i think that's really going to depend on the economy and that's highly uncertain. >> rachel? >> hi, chair powell. it's rachel siegal from "the washington post." thanks for taking our questions. on inflation, do the past few months of good reports look like what we saw last year, where you really had a lot of momentum with a few bumps in between? would you characterize that kind of momentum as back on track at this point in the year? >> actually, what we're seeing now is a little better than what we saw last year. last year, as we pointed out late in the year, a whole lot of the progress we saw last year was from goods prices, which were going down at an unsustainable rate. this is a broader disinflation. this has goods prices coming down, but it's also -- we're

also now seeing progress in the other two big categories. non-housing services and housing services. so, you know, so the thing is, we've only -- you've got upone quarter of that. i would say the quality of this is higher, it's good, but far it's only a quarter. i think, you know, we need to see more to know that -- to have more confidence that we're on a good path down to 2%. as i mentioned our confidence is growing because we've been getting good data and things like the eci report and frankly, the softening in the labor market, conditions give you more confidence that the economy is not overheating. it doesn't look like an overheating economy, and it looks like an economy that's normal. >> and if we were to think about the first couple of months of the year, is there any sense now that there were these blips that could have actually allowed for earlier rate cuts versus the projections?

>> if what it is is seasonality and it could be very, very hard to do appropriate seasonal adjustments, if that's what it is, then that implies that other months were underreporting too low inflation. if you smoothed it out it's a zero-sum gain, and we look at 12 months and 12 months now are 2.5% headline and 2.6% core. this is so much better than where we were even a year ago. it's a lot better. the job is not done and we are committed to keep 2% and we need to take note of the prores and we need to rick for the inflation target more equally than what we did a year ago. >> michael mckie from bloomberg radio and television. i would like to ask you about the balance of risk as the american people see it. at this point is the risk greater to leave interest rates

where they are given the damage that higher interest rates do to the economy in slowing demand than raising prices or is more important for the american people that you keep rates where they are to bring inflation down? >> you know, i think that we've been given an assignment by congress. this is how we serve the american people is by achieving maximum employment and price stability, right? and so, in our, you know, quasi constitutional document with monetary policy strategy, we look at the two goals and if one of them is farther away than the other the two variables, inflation and employment, if one is farther away from its goal than the other and you concentrate on the one that's farther away and you take the time to reach the goal. so for the last couple of years, the best service we can do to the american people is to focus on inflation, but as inflation has come down, and i think the upside risks to inflation has

decreased as the labor market has cooled off and now the labor market has softened, you know, probably the inflation -- inflation is farther from its target than the employment and i think the downside risk to the employment mandate are real now. so we have to weigh all that, and if you think about where that takes is we have a restrictive policy rate and it's clearly restrictive and it's been the rate we've had in place for a full year and the time is coming as other central banks around the world are facing the same question. the time is coming which will begin to be important to dial back that level of restrictions so that we may address both mandates. >> you have event risk, basically with a jobs report on friday and another one before you meet again. are you certain that you won't fall behind the curve and lead to unnecessary unemployment if you wait until september.

>> certainty is not a word that we have in our business. so we get a lot of data between now and september and it's not going to be one data read or two. it will be the totality of the data and want just -- how is that affecting the outlook and how is that affecting the balance of risk and that is the assessment that we do. of course, we'll all look carefully at the employment report and so much data coming in and so much happening between now and the september meeting and we'll make a judgement. >> thank you, mr. chairman. everett lawrence, fox business. i want to dig deeper into what michael and nick are asking and there is a focus between inflation and jobs. looking at the jobs side we've seen data show sort of an abrupt slowing. we are hearings from earnings calls from companies like intel with layoffs and government jobs has been a leading creator. could the government jobs as a

sector have mass underlying weakness in the jobs report? >> we'll look at everything. we've seen some -- some tendency to have a narrowing base of job creation in some months going back and then we've had some months where job creation was broader and also, you know, the headline number of jobs has come down. so, you know, you look at the whole thing, and i think you do look at private demand extra carefully, to your point about government. so we'll just be looking at all those things. >> so as a follow, then, could the fed then be behind the curve because some of the reports, in the last meeting you said the reports could be noisy or overstated. was there a discussion? what kind of discussion was there today and could this be behind the curtain? >> yeah, so -- look, the objective is to balance the two risks, right? it's the risk of going too soon and the rick ofsk of going too .

we've had seven months of good inflation data at the end of last year. we said we wanted to see more and we pointed out that too much of this was coming from goods and sure enough, the first quarter wasn't great and now we have a quarter and it is good, and you know, we're balancing the rick of going too soon instead of going to late, very difficult judgment call, but this is how we're making it, but in terms of today, your question about today, we did have a -- we had a nice conversation about this issue today. the overall sense of the committee is that we're getting closer to the point in which we'll begin to dial back restriction and we're not quite at that point yet. we want to see more good data. the decision was unanimous, all 19 partis cipants supported it,

but there was a discussion back and forth of what the case would be for moving at this meeting. a strong majority supported not moving it, but it's a conversation that we had today, certainly. >> cortney brown from axios. thank you for taking our questions. when the fed was raising rates there was a lot of conversation about long and variable lags. i wonder if that applies on the way down, too. how are you and the committee thinking about that? >> yes, it does, and i think the lags have kind of showed up here in the last six months, by the way. you really do now see the restriction whereas even a few months ago people were questioning how restrictive policy was. look at the labor market now. you can see, and look at rate-sensitive, interest-sensitive spending. you really do see that policy is restrictive -- i wouldn't say it's extremely restrictive, but

it is certainly effectively restrictive. yes, it should take some time to get into the fuel economy for financial conditions and it will affect economic activity and ultimately inflation it's not instant aynious in anticipation. >> so are you worried that if monetary policy lags even when you're lowering interest rates it might be too late for the fed to help stave off any slowdown in the labor market or broader economy? >> we have to worry about that. >> just to make it clear, you know, it's a very difficult challenge in judgment. we don't want to go too soon and we don't want to go too late, but this is how we've made that judgment. i feel good about where we are. we are certainly very well positioned to respond to weakness with the policy rate at

5.3%. we certainly have a lot of room to respond if we were to see weakness. look at the first graph numbers for the first half. it's not signalling a weak economy and the unemployment market it raised 0.3, but wage increes at a high level. levels are very low, but xhishl game claims, they are historically was normalizing the laeb ar market and we're watching to see that that continues to be the case. >> hi. victoria guido with politico. i was wondering how worried are you all about unemployment rising and could that potentially affect how quickly

you cut rates? >> we -- so i would just say the question really is are we worried about a sharper downturn in the labor market and the answer is we're watching very carefully for that. we are aware of that role which is what i would call a statistical thing that has happened through history. the statistical regularity is what i would call it. it's not like an economic rule where it's telling you something must happen. so again, what do we see? what are our eyes telling us, we look at all of the things we're seeing and what exactly is a formalizing labor market and job cree and coming down gra gradually, but they're still