position indefinitely. >> what sectors are we watching closely? >> financials will jump off the interest rate expectations i think this may mark -- we've got treasuries rallying going into this. i think they could back off after this and it could be positive for financials. . >> fed decision dropping let's get to steve liesman in d.c. >> maintaining the existing funds rate to 2.5% it will be patient in determining its next move and giving up a hint of which way it will go here on the economy, however, the fed broadened the concerns over inflation being below its target it now sees core and headline inflation having declined and both running below its 2% target in the last statement the fed only made that comment about headline in -- core inflation. the labor market remains strong. economic activity rose at a solid rate job gains were solid on average.

and the inflation rate market base -- sorry. market based inflation remained low in recent months the survey based inflation was little change. household spending slowed in the quarter. that's the only negative the interest was cut on excess reserve by 5 basis points due to trouble the fed has been having in keeping the funds rate itself from going too high. one other thing the fed noted in a statement, that the taper was reducing the amount its reducing the balance sheet by begins tomorrow and goes treasuries, the cap goes down to 15 billion from 30 billion. no change in the funds rate, but a broader concern, perhaps, over inflation not hitting its 2% target >> steve j stay there as we get more reaction from the panel david kelley, alicia and paul. they acknowledge the headline inflation is lower

they tweaked the interest on excess reserves to try to keep everything where it needs to be. but you said going into this the market is wrong about pricing and a rate cut by the end of the year is the fed, do you think they're of the same point of view there? >> i think the drop in the interest on excess reserves is going to be taken as a sign that the fed is moving toward a rate cut. and i think that's a mistake the two are separate, but i think the market will take it as a positive sign that the rate cut it wants will be happening by the end of the year >> even though i think it's wrong to take it that way and i think if you look at what's priced into markets, the risk is on the other side. so the risk to your asset class is you may get inflation down the road and a rate hike that's what markets should be worried about. >> totally the banks, by the way, were coming into this the financials were having their best month in a couple years 8 % rally. the yield curve started to steepen. we'll see how it continues to react to all of this chair powell is coming up at

2:30 how does he need to describe the landscape for the fed? >> it's going to be a difficult press conference for him because the underlying reality is that inflation is below target in fact, i could have said that any time in the last ten years and so you reach your point where it's difficult to dance around that issue. i don't think he wants to signal they're going to cut because of it and he may, and this is just amusing, take about the strategic review the fed is conducting for the entirety of 2019 the fed's not unaware of this whatsoever and are doing a major strategic review so that provides his cover not to get deep into the weeds >> right >> go ahead. >> i think they made a mistake by not putting a flag in the ground on asset prices now he doesn't have a good defense. >> asset prices, they would talk about that if they felt like

they were getting frothy early part of january of last year we're crashing through thousand point intervals every ten days what makes you think this environment because we've recovered the losses of the fourth quarter falls into that >> i think if you look at the ratio of asset prices to gdp, it keeps rising it's been going on for many years. we also have now potential infrastructure, an infrastructure bill deficit going up we still have a lot of stimulus going into the economy i think the federal reserve needs to give a rationale for why the fed doesn't move rates now there's more pressure. you say there's no inflation, cut rates. if you keep cutting rates which are already very low by -- in real terms, you're going to cause as the prices rise cause more we don't want them to go up so fast that they crash that's what we worry about >> steve, do you think that will be a theme or question in that

press conference in 25 minutes >> i think so. i think as the prices are an issue. i think the fed has sort of said, and the economics community more broadly has said asset prices are not part of the inflation calculation. i can get into why that is, but they don't feel like that's an important component from that side of the monetary policy. what i think might be a little missed in this discussion is we've sort of checked a pretty important box on the way to cutting rates. i don't know how close the federal reserve is if you were to make a series of checklists there, about how -- what the fed might need to cut rates, you'd have to check the box of headline inflation being below 2% and then check the box of core inflation. that's the box we check today. i don't know how many boxes there are precisely. it would be a little hard to say the fed is going to cut rates amid the stronger growth and strong jobs growth one of the questions out there is does the fed think it needs some kind of insurance rate cut as it did in '95 or something

along those lines. it shouldn't be lost we've checked one of the boxes if you're wondering which way the fed is leaning if this core rate remains below 2%, it's going to nudge the fed more toward the rate cut than the rate hike idea >> how would the markets interpret a fed rate cut for insurance purposes as the vice chairman had indicated in the past few days? >> there's been a lot of attention to charlie's comment in the last few days you know, it would be positive for markets. it's seen as a dovish mood and adding more liquidity and markets would take it as a positive sign. it's not based on slowing growth fears. it's based on -- it's not -- it's cutting for the reason that markets can be comfortable with which is well, there's little inflation in the system but growth is pretty good. it's goldilocks and therefore, asset prices can move higher because we played with the d

discount rate. it would be positive for markets. >> you don't think it's going to happen >> we think the risk is on the other side >> not right now, but the pressure could grow if we get a slowdown in the second or third quarter in terms of economic growth and we still have low core inflation, and less defense. right now the chairman can say we're not going to cut rates because growth is over 3%. the growth came down to % or 2% later this year the pressure to cut rates would increase i think that's a mistake i think they should stick where they are all year. i think there will be more pressure it's insurance for markets in the long run, i don't think it's insurance for the economy. >> david, that's part of the political dynamic that's out there now. this chairman will face more political pressure than any other chairman of the past perhaps 30 years that if we do get weaker growth, and remember, it's the economics community's considered opinion for what it's worth. different people put different weight on that the potential growth rate of the

economy is 2 % that that context, it would not be unusual to get a 1% quarter as we did a 3% quarter if you want reversion of the mean when and if that happens, the pressure on the chairman will be i think like no other pressure a chairman's felt in three decades. >> to pick up on the point for one second, the assumption right now is that look, like you said, it's unusual to have headline and core inflation below 2 % that's where they are. if you take the move on oil and everything else, we could be back up toward 2 .5% and maybe higher on the headline by the end of the year. are we overly extrapolating one month's data point >> i don't think we're extrapolating one month data point. i forget the metrics i think it's the core pce has been falling since december. >> right >> and i don't think it would have worked its way into the statement in the way it did if not for several months of tracking data here on the core inflation number i think the fed has done well to

dismiss the vis cissitudes of t core line number core is at the core. when that runs meaningly below 2 two, it's something the fed has to see in the context of strong growth >> if they're going to get political pressure later this year, it's important to put a stake in the stand right now and say look, we don't have any intention of cutting rates later this year. we do want -- we're going to ignore the political pressure. i think it's important that in his press conference the chair makes it very clear -- >> i don't know. why put yourself in that box why not say it depends on the day? we can do whatever we want later on it depends on what we see. isn't that the maximum flexibility that insulates them from political pressure? saying we said that in may >> eventually you're going to make a stand it's important to sound tough at the start. >> i'm not sure that he needs to take a table pounding stand. i think he wants to get out of there without saying much of

anything and granted, you have the political pressures out there, but the political pressures aren't ill legitimate. i think that's an important thing even though we're talking wall street. they're not illlegitimate. the low inflation is for real, and the fed is to keep us from inflating inflation maary pressures. >> rick, do you think they're resisting doing the right thing because it happens to be the same thing the president wants them to do >> 3.2 3 .2 3 .2 you know what? every expert said it's an anomaly, it can't continue it's an outlier, we're going back to 2 % growth maybe they're right, but they weren't right on 3 .2.

inventory build. economists and analysts don't know what inventory is most of our viewers are trading the market, not the economy. in the economy has moderated a bit, but 3 .2 has excited the people that already been rewarded from thanksgiving forward on the market. now, there's a big category of people you can call them retail, call them whatever you want. on the floor we call them johnny come latelies. the johnny come latelies have been waiting patiently since san santa claus left the building to buy a dip. how many big dips have we had in goose egg. two-year note yields traded the lowest interday since the last day of march the entire curve has steepened a bit which means probably that the fed is doing the right thing. but at the end of the day, i think that jay powell isn't

really succumbing to huge pressures politically. that's a nice parlor game. he's doing the right thing i'll leave you with one thought. 3.2. >> noted >> i want to agree with that >> go ahead. >> i'm going to agree with rick on that. look, i disagree that 3.2 is the right number to look at, but some of the underlying growth, i want to compliment rick on his linguistic use right there using the word an ribborition. >> what do you make of the ten-year the yield has moved down the curve steepened. it's not helping the financials too much at least in this moment and then they made that cut to the interest on excess reserves that again might be helping

things certainly that two-year yield rally. >> the five basis points from 240 to 235 unfortunately is more technical based on where fed funds are trading with respect to the carved out range at 225 to 250 but it does bring us to the point that paying interest on reserves in an economy where we would like to create more opportunities, we could debate whether that's the right thing or the wrong thing, but it's the only thing now because those excess reserves are muddled into reverse repos and how they now implement monetary policy and environment at low rates the long end is low because nobody trusts the rest of the globe. other central banks most likely like new zealand and australia will probably be easy in the month of may, and i think there's a variety of reasons, but most are paying attention to the long end saying it means our growth is toast which means we're going to miss the bus called the stock market. >> rick, thank you for the stock

reaction let's get to bob pisani at the new york stock exchange. not much movement in the financials >> a little bit. fairly typical reaction here, actually the s&p will move five to ten points immediately after the fed announcement then often reverses. we're getting that close to that 29.46 we were going into the immediatin meeting. a slight reversal. banks lower as the rates were higher i can tell you down here the fed might say it's symmetrical that they could hike or cut, but down here they're all into the cut territory. and most of the people down here believe a price cut of some kind, a rate cut, excuse me, is the next move. i see 65% odds the feds will cut rates in fed futures at some point in 2019. i think that's baked into the stock market somewhere along the line the big question today and i'm sure steve will try to get mr. powell to talk about this,

whether there's any probability of a rate cut coming particularly when they acknowledge that they have below target inflation by the way, guys, the s&p has been down eight of the nine sessions eight of the nine fed meetings that mr. powell has been involved in. that's kind of an unusual statistic. right now we're trading to the up side. >> thank you, bob. the fed decision is in no change to interest rates is widely expected. the markets are waiting to hear what chairman powell will y sa about growth and inflation that's coming up in moments on "power lunch". the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow.

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welcome back to power lunch. we're moments away from jay powell's press conference. the fed said it is maintaining the policy of patience they're saying inflation has declined both headline and core are below 2 %. let's bring in former fed governor randy kroszner. welcome. >> good to be you. >> can they afford to be patient? do they need to cut rates given what they said about inflation >> well, the statement i think is pretty dovish, because they emphasize that inflation is now running below the target which is correct inflation is weakening despite continued strength in the labor market, and also they decided to rather than find the pony in the

pile of you know what, look in the opposite direction rather than emphasizing the 3.2 number. they emphasize that the consumption was slow and business fix investment was slow in the first quarter they could have said, well, the most recent reading on consumption was strong, but they decided to look at the weaker parts and emphasize the low inflation. so i think they're setting the foundation that their next move is down, not up. >> you think they're laying the groundwork now for a rate cut? i was going to ask if they were trying to jawbone the cut without doing it, but you think they're going to cut >> well, certainly the markets expect a cut before the end of the year i think this characterization shows that there's a lot of weariness about where the economy is going, and even more deep deeper weariness of where inflation is going i don't think they're poised to have a cut, but i think they're setting a foundation over the

next few meetings if they want to go there, they're on a path down rather than a path up >> should we care the fed appears or would appear to be political? i mean, they appear to be political when they pivoted to patience and if they set the ground for a rate cut, they will appear to be political once again? >> well, i think it's a little unfair, because if they assess the economy as not as strong as some people thought it was, and inflation clearly is lower than they had expected it to be, regardless of what the political pressures would be, that's where they were going to go. now, some people can interpret it as giving into political pressures, but i think with inflation running as -- that it's moving down rather than up, given that gdp growth is strong and the labor market continues to seem to produce a lot of jobs and have unemployment below 4%, i don't think it's unreasonable completely independent of politics to be wary of a path that's up.

>> but randy, what if this is the trough for inflation so in other words, let's dahl it call it 1.5% and round down. let's say it holds there for a couple months. then what? are people forecasting 1 .5%, that we continue to drop from there? how do you justify cutting rates instead of keeping them where they are >> in the current situation, they wouldn't cut. they're laying a foundation for if things start to move south either in terms of the economy or particularly in terms of inflation, that they've laid a foundation for saying well, there's some weakness even though the overall headline number looked good, inflation is moving down. we're a little concerned about that and i think the vice chairman has mentioned that a couple times they've done precautionary or insurance cuts even if they weren't concerned about an economic downturn. and so he's also laying a foundation for that, i think, in his speeches >> all right randy krrk thank you good to hear from you this

afternoon. wee have a news alert -- we have a news alert. >> in a sign of how close the u.s. and china are to a trade deal, i'm told by sources familiar with the matter that a deal could be announced next friday this as negotiations are going on in beijing this week with top u.s. officials there and next week the chinese vice premier returns to washington for negotiations beginning wednesday, and i'm told by two sources familiar with the matter it could portend a possible deal announcement friday, an announcement of a potential summit between president trump and president xi to follow >> kayla, are you getting a sense as to what issues have sort of been smoothed out? i mean, there were some indications that president trump was backing away from some of his demands regarding cyber hacking. cyber security >> well, i'm told that the cyber issue is part of the deal but there are some nuances included in the deal that may have seen some relaxation. i don't have a sign as to

whether president trump was the decider in the chain there or exactly what the substance of the change was we know that cyber is a major portion of the deal. it's unclear of the content on the deal of that section there are also reports that there has been a concession made by the u.s. to officially roll back the $200 billion tariffs. officials have told me since february that that is the likely outcome as a result of the deal. some sources today have expressed some skepticism about the u.s. potentially making that decision that soon before a summit between the leaders certainly we're in the escalation phase of the talks and some of these concessions might need to be made in order to get to the finish line. >> kayla, thank you. kayla with an update on the china trade talks. alicia, if there's a rollback of the tariffs, how does it change the calculus of the fed? >> it's good for markets and good for earnings.

so the markets, the path of least resistance will definitely be upward. the other thing to think about is we're seeing green chutes globally china looks better, asia looks better, europe doesn't look bad. if that's the case, it keeps commodities firmer it will work toward top line of the inflation number we're low now, but i've learned the markets have a way of making a fool of all of us at some point. when we're at 1 .5%, you have to ask where's the risk and that's why we think that this is probably the bottom. >> markets inflect the greatest pain on the greatest number of people >> that's right. you have to think well, how could you get higher and actually the way you could get higher on inflation is not implausible, and in fact, the building blocks are already there. and so the question is how strong will china's stimulus be ultimately what will the affect be globally on asia and in europe?

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jay powell is set to have a news conference at any moment we'll take you there let's get final thaukts from the panel as we count you down to powell paul, what do you think? >> i think it's going to be an interesting press conference it's now center stage. the phillips curve has broken. we are below target, and we've seen no reason to anticipate we're going to be above target any time soon. inflation is center. >> why why is it broken >> that's what they're studying. a lot of us have lots of opinions about it. but the fed needs to have a viewpoint. you can't be missing your target for ten years and not effectively have a plan b. >> it is a question you would have david for jay powell. >> are you comfortable asset prices doing up this fast? i think advertise mission is going to be try to make sure people are not expecting a near term rate cut. the fed cuts rates and people

say what are they scared about and you get into a pattern i've seen the fed cut rates in this kind of circumstance and help things. >> the late 90s. >> that was a very specific example with the asian debt crisis >> insurance cuts, those are not good examples? >> the insurance doesn't work. they're better holding fast all year i hope he can reestablish that >> david wants him to take a stand. what do you think, alicia? >> i think the phillip's curve problem and the natural unemployment problem, they explain each other and they're broken it makes it hard to the rest of us to put in pricing and expectations >> in terms of the markets is the risk to the downside coming out of the press conference today? >> this is a delicate press conference for jay powell. he has to keep the neutral stance and being open to anything while there's going to be a constant force of getting him to say the fed is going to cut. there will be a focus on the

interest paid on excess reserves as a result. that's something they thid dud cut. >> i wonder how he's -- if they say well, we have growth, you have markets you all have these things -- let's listen in. >> good afternoon. welcome. at the fomc meeting that concluded today we reviewed economic and financial developments in the united states and around the world. and decided to leave our policy interest rate unchanged. my colleagues and i have one overarching goal, to use our monetary policy tools to sustain the economic expansion with a strong job market and stable prices for the benefit of the american people. incoming data since our last meeting in march have been broadly in line with our expectations economic growth and job creation have both been a bit stronger than we anticipated while inflation has been weaker. overall the economy continues on a healthy path and the committee

believes the current stance of policy is appropriate. the economy also believes that solid underlying fundamentals are supporting the economy including high employment and job growth, rising wages, and strong consumer and business sentiment. job gains rebounded in march after a weak reading in february and averaged 180,000 per month in the first quarter, well above the pace needed to absorb new entrants to thelabor first first quarter gdp rose more than most expected growth in private consumption and fixed investment slowed it suggests the two components will bounce back supporting. the committee is strongly committed to our 2 % inflation objective. for much of this large expansion

inflation was below objective. last year with the unemployment rate at or below 2 % inflation moved up core inflation which excludes volatile food and energy components was at or very close to 2 % overall inflation flux wactuate from a with changes in energy prices as expected overall inflation fell at the start of the year as earlier oil price declines worked through the system. overall inflation for the 12 months ended in march was 1.5% core inflation unexpectedly fell as well, however and as of march stood at 1.6 % for the previous 12 months we suspect that some transitory factors may be at work our baseline remains that with strong job market and continued

growth, inflation will return to 2 % and be roughly symmetric over our longer term objective at the start of the year a number of cross currents presented risks to the outlook including weak global growth, particularly in china and europe the possibility of a disruptive brexit and uncertainty around unresolved trade negotiations. while concerns remain in all these areas, it appears that risks have moderated somewhat. global financial conditions have eased. supported in many places around the world by an accommodative shift in monetary policy and in some cases fiscal policy recent data from china and europe show some improvement and the pros tect of a disorderly brexit has been pushed for now there are talks between the united states and china. the committee views the developments along with the outlook for continued growth a strong job market and muted inflation pressures as

consistent with continued patience in assessing further adjustments in monetary policy over the past several months we've made a number of consequential decisions about our balance sheet. in january we continued monetary policy using our current policy regime which involves providing an ample supply of reserves. in march we decided to slow the pace of balance sheet runoffs starting this month and to cease runoff entirely in september these plans support our longer run dual mandate objectives and provide clarity about the path of our asset holdings. today we had a preliminary decision about the longer run maturity competition of the p t portfol portfolio. it was weighted toward shorter term debt of the federal work before the crisis. in the wake of crisis the fed bought longer term securities with the aim of lowering longer term interest rates and supporting the recovery.

because of the purchases our portfolio is weighted toward longer term securities as part of normalization, we'll have to decide what maturity should be in the longer term this choice raises many complex issues and has possible implications for the stance of policy today's preliminary decision laid the groundwork for more complete analysis and discussion and we plan to return to the discussion toward the end of the year there is no pressing need to resolve this matter, however, and any decisions we ultimately reach will be implemented with considerable advance notice and in a matter that allows for smooth adjustment. as we've often everyone sized, adjustments to the balance sheet normalization process may be needed as the process unfolds. we made a small technical adjustment in one of the tools the interest rate on excess reserves the change does not reflect any

shift in the intended stance of monetary policy. we use the ioer rate to help keep the federal funds rate in our target range as balance sheet normalization continues we have expected the funds rate would shift up over time relative to the ioer rate last year we lowered it after the federal funds rate moved toward the top of the range. it helps keep it within the target range and today we made one more such change the target range for the federal funds rate is our main indicator of the stance of policy and remains unchanged. thank you very much. i'll be glad to take your questions. >> thank you, mr. chair. as the statement noted, core inflation running below 2% been falling three straight months while you've been close, it's only been at 2% or above one

month since 2012 mr. chair, i guess i wonder is it time to address low inflation through policy, and can you give us a sense of your metric for when it would be time? at what level would it require a policy response from the committee? >> so first we're strongly committed to our 2 % inflation objective and to achieving it on a sustained and symmetric basis. as i mentioned, we think our policy stance is appropriate at the moment and we don't see a strong case for moving in either direction i would point out that inflation actually ran including core inflation, actually ran pretty close to 2 % for much of 2018. as you point out, both headline and core, though, did come in on the soft side in the first quarter. and that was not expected as it relates to core. so we say in our statement of longer run goals and monetary

policy strategy the committee would be concerned if inflation were consistently above or below 2 %. persistent is the sense of something that will sustain over a period of time in this case, as we look at this, at the readings in the first quarter for core, we do see good reasons to think that some or all of the expected decrease may wind up being transient. i point to things like portfolio management, service prices, apparel prices and other things in addition to trimmed mean measures of inflation did not go down to go back to your question, if we did see a persistent inflation running persistently below, that's something the committee would be concerned about and something we would take into account on setting policy >> reporter: let me carry on in

the same theme there's a lot of speculation about the prospects for a rate reduction this year. do you think markets have got ahead of themselves on this and what sort of economic conditions would you need to see to give serious consideration of a rate cut? the 1995 example, do you need a see a looming recession to cut rates or could an insurance cut be appropriate >> as i mentioned, we've just come through a two-day meeting and we've done a deep dive on economic and financial conditions in the united states and around the world and thought about our policy, and we think our policy stance is appropriate right now. we don't see a strong case for moving in either direction so we do, of course, though, as a routine matter, as you know, we look not only at our baseline but we also look at alternative simulations both better and worse. we ask ourselves what the appropriate policy response would be

but that's all we do, and i would just say that we're -- >> shifting gears, i wondered if you could flesh out, i know you're describing it as a small technical adjustment, but on the ioer federal funds spread, give us a sense of why it matters whether or not this breaches the upper limit a little bit is there any feed through to broader credit conditions and financial conditions that you worry about, is it simply a matter of the fed showing it can control what it says it's controlling? and i have a followup. >> so a small temporary deviation outside of the range would really carry no -- wouldn't be important as your question suggests. but we do think it's important that we be able to control the federal funds rate and generally

keep it within the range that's good monetary control so we think it's important, and we have the tools to do that, so we've used them again today. this is just a technical fix it has no impfully kagss for policy >> as a followup, it's demonstrating you control the market you want to control, and i guess the question is at what point would these steady declines in the ioer, widens of the spread if it continues essentially become the policy choice >> yeah. i mean, so generally speaking, the federal funds rate, we control only directly the federal funds rate in terms of the market rate, and the transmission of the federal funds rate into other short-term rates, money market rates has been good over a long period of time and that's important, because it's really broader financial conditions that matter, not so much precisely the federal funds rate i think the fee federal funds rate is actually important from that standpointit

i think we'll continue to control it and it will continue to transmit well under broader financial conditions >> i'm curious about the financial conditions that you see out there. the minutes in the march meeting tell us a few officials worried about financial stability risks. was there a broader discussion at this meeting? any consensus on whether such risks are growing as the markets hit new highs and we do see some instability and short-end trading? is it possible that rates are too low at this point? >> we actually have a financial stability briefing, and opportunity for comment every other meeting. so we had our quarterly briefing today, yesterday, as a matter of fact and had that discussion as well. and i think there haven't been a lot of changes since the last

meeting but i'll go through the way we think about it. first we've developed and -- put it out for comment and welcome any feedback that we get from the public and that enables us to focus our assessments regularly on the same thing so that we can be held accountable and be transparent. there are four aspects of it that i'll go through quickly but i'd say that the headline really is that while there is some concerns around nonfinancial corporate debt, really the finding is that overall vulnerability is in the financial stability vulnerabilities are moderate on balance. and in addition i would say that the financial system is quite resilient to shocks of various kinds with high capital and liquidity. the four things are asset prices for us for asset prices, some asset prices are elevated. i would not extremely so lerchg in the financial sector

i mentioned households are actually in good shape from a leverage standpoint. borrowing is relatively low. nonfinancial corporates is an area we focussed on for attention. there are concerns about that. not so much from a financial stability standpoint but having a highly leveraged corporate sector could be a downturn and the last two things are leverage in the financial system and funding risks. those are both very low by historic standards in the united states on balance in my view, vulnerabilities are moderate we do say that risks to the financial system are -- we say in our onger-run statement of goals and monetary policy strategy that risks to the

financial system that could prevent us from achieving our goals are something we do take into consideration i would say that really the tools for addressing those concerns are better capital liquidity, good supervision and good stress testing and things like that. those are better first order tools to deal with the issues than monetary policy >> chair powell, would the benefit of hindsight did last year's rate increases make it harder to affirm the 2% inflation target is not a ceiling. and if so, would it be appropriate to lower rates if core inflation remained persistently closer to 1.5% more than 2%. if not, do you worry about the recent softness in core inflation? >> so to your first question, if

you go back and think about the middle of last year, inflation was at 2%. and appeared to be staying there, and the economy was quite strong it was growing strong. the fiscal changes were hitting the economy in a positive way. and so i think the expectation was inflation would be remaining around 2 % the weak first quarter perform of core was not expected and is not related to anything we did in terms of raising rates. it appears to be we don't know this, but with perfect hindsight, some of it does appear to be idiosyncratic the second part of your question >> i mean, if it was an issue, would it be appropriate to lower rates if core inflation held closer to 1.5%

and if not, are you worried that there is unwanted tightening from real rates being where they are? >> yeah. i mean, so as i said earlier, we do address this in our sort of constitutional document. if inflation were to run persistently below or above 2% that's a concern for the committee and the committee would take that into account in making policy. i think it's important that inflation run close to and sustainably for a sustained period of time and symmetrically around 2 % if it doesn't, you run the risk inflation expectations if has been the case most of the misses are on the downside, inflation expectations over time could be pulled down. that could put downward pressure on inflation and make it harder for us to react to downturns and harder for us to support the economy in difficult times >> so as you just mentioned,

last year when you guys were kind of getting inflation coming in around 2%, you had this benefit of the tail wind of fiscal stimulus. you still have that to come extent we still have something in the pipeline from the spending cap increases. how do you think about inflation as that fiscal benefit wanes toward the end of this year? >> inflation first of all, month to month, quarter to quarter, is going to move around there will always be factors hitting it probably the biggest single factor driving it is the rate of underlying inflation or a closer related idea of where inflation expectations are anchored. the thought being that's where inflation will go in the long run if it's not being pushed by those other factors. so we also think that slack, you know, that the level of slack in the economy does play some small

role it's actually still a measurable role it's nothing like it was in the 60s when the phillips curve was steep. that's also something that plays a role and so we take all those things into account, and the part of it that we can control is the slack part, and again, we do expect that this reading will be trance yent and inflation will move up. if it runs persistently below 2 % for a sustained period, that's something we take into account in setting policy. >> chairman powell, pivoting a little bit about wages since 2010 women's real earnings have gone up about 3.9% compared to men's which is which has risen about 2.1. do you think the relative raise

in women's wages is a problem for the u.s. economy >> i think generally i'd have to see the data on that that sounds like you picked a particular time that's really the case you know, i think men and women some make the same for the same work, by and large, so -- >> but if -- if the data shows women's wages are rising higher is there damage to the male's economy if males wages are not climbing as fast as women's? >> that's something i'd rather avoid. it's not really my role to engage with potential nominees to the fed so i'm not going to go there i haven't seen this research either, so i don't really know thanks

>> viktor kra with politico. earlier last month, the fed wire system went down, and i was just wondering if you could talk about what happened there, how long it lasted, whether you know what happened, whether you're still looking into it, and whether it's something that could happen again >> sure. so that's right. i want to say it was april 1 it may have been april 2 the fed wire did go down for a few hours in a three or four-hour range. we were able to quickly identify the problem. it was an internal problem, and we were able to correct it and make changes so that that problem and other problems like it cannot repeat themselves. so we learned from these instances. they're fairly rare but we learned from them, and in this case, it was internal, and it's been corrected

>> steve matthews with bloomberg. next month we have the tenth anniversary of the end of the recession, and there are some countries that have had expansions for 15, 20, 25 years. do you think that's something that's practical for the u.s. that we could have that kind of lengthy expansion and for you, personally, if we had a recession during your tenure, would you consider that a failure? >> you know, i wouldn't want to speculate. there is always the example of australia that everyone is aware of where they are in year 28 of their expansion. so things are possible i think all i can see is we have an economy where the expansion is continuing. growth is at a healthy level the labor mark set strong. job creation wages moving up.

inflation is low which gives us the ability to be patient, and we do expect it to move up and want it to move up to 2% so i see us on a good path for this year. >> do you see the parallels with the 1990s when, for example, some people have pointed out in the longest expansion before this one, there was -- in 1995, rates went up and they came down and there was that kind of management do you see similarities in today's situation? >> similarities in the length. the situations remember quite different. this was before inflation was really under control but, you know, it's very interesting to look at the history. i find it quite interesting to look at different periods. but i think in our own cycle, we face a particular set of challenges that are really what's relevant for us now >> marty >> mr. chairman, marty with the

ap you have repeatedly said that the fed is going to conduct monetary policy without regard to outside political pressure. but it seems like the president is intent on increasing that political pressure yesterday he said you should cut rates a full percentage point and start quantitative easing. what do those comments do in terms of affecting how you pursue policy and how you convey your decisions to the public >> yeah, so -- as you know, we are a nonpolitical institution and that means we don't think about short-term political considerations we don't discuss them. and we don't consider them in making our decisions one way or the other. and what we're always solving for in our process, in our work, is to carry out our mission which is to extend the economic expansion, keep the labor market strong and get inflation around 2% to give you an idea of what our process is like, maybe as a way of putting all that in context

for the past maybe ten days, all 17 fomc members will have made extensive preparations catching up on the latest data, reading all the memos, talking to their colleagues and their staff. as you also are, i'm sure, aware, marty, talk to literally thousands of business people and market people and people in nonprofit sector and educational sector just to get a better sense of the economy we put all that together we come together for two days, the first day begins with an economic brief chicago is economic and financial developments in the united states and around the world. that takes up most of the first day, and we talk about this in great detail we go away, think about that and the next day we talk about monetary policy. in this particular case, we came to a unanimous decision after an extensive discussion that our monetary policy stance is appropriate where it is. and we think our monetary policy stance is in a good place and

we'll be patient as we consider adjustments. and we also see, by the way, the evolving risk picture as consistent with that outlook so we don't feel like the data is pushing us in either direction. of course, we'll not hesitate if we do feel the data justify a move in either direction that's our process that's how we think about things we don't let them into our decision make, and we don't discuss them >> paul from the news wires. in the last 23 years, core pce inflation has run above 2% only during a period that coincided with the housing bubble i'd like to know what you'd say to people that worry it will prove difficult for the fed to lift inflation without typically stoking another asset bubble of some sort. thank you. >> you're pointing to, really, the fact that in recent years,

inflation has moved down and down and really many major central banks have struggled to reach their inflation goals from below. and that includes us, although we've actually done -- we've come closer, i think, than most others and it's just -- it's just a question, i think, of demographic and other large and in some cases global forces that are making it -- that are disinflationary to some extent and it creates significant challenges one is, i would say it means interest rates will be lower clo and that's one of the reasons we're having a review of our monetary policy strategies, tools and communications this year is to think about that problem. you mentioned the connection to financial stability of lower for longer rates, and that is another challenge. as i mentioned earlier, we do

consider financial stability concerns to the extent they threaten achievement of our goals, but we also view, and i do take the view that macro and supervisory tools, things likevi right through the cycle. those are the best defenses so that the financial system is highly resilient to the kinds of financial shocks that can happen >> greg? >> thank you greg from market watch this morning the ism manufacturing index had its worst reading since october 2016 so isn't that a dark cloud on your outlook for strong growth for the rest of the year i mean, how much weight does it hold for you, and is it a sign

that monetary policy may be too tight? >> this is the ism reading from i guess this morning on manufacturing? yeah, i mean, we see that reading as -- it's still a positive reading and consistent with what we expect from the manufacturing sector, which is moderate or perhaps modest growth manufacturing has been weak all around the world services have been growing faster so it's -- yes, it's something that we are watching carefully but we do expect positive contribution to grow from the manufacturing sector >> edward? >> edward lawrence from fox business thank you, mr. chairman, for doing this talk about domestic growth a little bit with the economy. you mentioned the progress in the talks with china trade progress in talks with japanese trade. the usmca is moving or going to move through congress. you talk about the domestic growth that you're seeing going forward for the rest of the year, and could these trade

deals turn into trade winds for the economy? >> our outlook and my outlook is for -- is a positive one, a healthy one for the u.s. economy, for growth for the rest of this year and i would say that the basis for that really is consumer spending and business investment so if you look at consumer spend, you saw stronger retail sales, stronger motor vehicle sales in march and as i mentioned, the conditions, the broader economic fundamentals are strong in support of consumer spending that's more accommodative of high confidence readings, high levels of employment, wages going up, all those things are going to support consumer spending that's a significant part of the outlook this year. and business investment should also be positive in that sort of direction. in terms of the effect of trad