keep interest rates at a low level. >> you also see the fact that one of the key stability factors in the u.s. has been the consumer thus far, what we're seeing right now is on october 15th, we'll get higher tariffs, december 15th, even higher tariffs. >> we're going to have you pause there. let's go to washington with the fed decision >> lower by 1/4 point. the fed lowering the fed funds rate to 2% down 25 basis points. the fed said uncertainties about the outlook remain the vote 7-3 with three defects, but for different reasons. the same two that dissented last time, they didn't want to cut at all. but one jim bullard wanted to cut by 50 basis points the last time we had three

dissents was back in 2016 when there was a vote of no change, they wanted to hike. the projections show a very divided federal reserve. seven fomc members forecast a third cut this year. that is one more from where we are now. that would bring the rate down to 1.63% or the average rate. five members see no need for any cuts at all. they didn't even want the one today. if everybody had a vote. not all the members vote it would have been five dissents from today if they voted that way and five more forecast just the one cut this year. put it all together and do all the imagine. the median is at -- this is it in terms of cuts that's the median of the funds rate forecast for the federal reserve. that said, the plurality does see one more cut coming which is seven, does it include the chairman we don't know. that's going to be important

now, the fed also lowered the interest on excess reserves, and another administrative rate in order to atept to get ahold of the fed funds rate, which as we've been reporting has been trading outside of the funds rate target. let me go through quickly now, the assessment of the economy, and if you remember what we reported last time the fed had a statement, it's very much the same in fact, it's a pretty upbeat assessment, the labor market remains strong economic activity rising at a moderate rate. same stuff they said last time unemployment rate remained low, household spending, they upgraded that to say it's rising at a strong pace, having picked up from a year earlier the only thing they added in terms of weakness was the idea that exports have weakened along with business investment overall core inflation below 2%. market base measures same as last time. inflation running below 2% overall, pretty solid economy.

quarter point cut. adjustment to the administrative rates and a divided fed as to the outlook. >> would you say that because it's serven members, we see a third cut, no need for any more cuts it's really uncertain as to whether or not we get another one. maybe that's why the markets are at session lows right now? >> i think that's right. you put a statement like this together you know, i mean, where's the weakness that calls for additional cuts? the only thing is, that they have the outlook is uncertain. guess what, melissa, the outlook is always uncertain. the fed will act as appropriate is the only hit you get is another one is to come who are those seven people who want to cut that additional rate if it's the chairman it matters significantly more than if it's not the chairman in that setting. >> the takeaway from that was that the median rate projection did not come down?

>> i'm sorry, it came down give me a second i'll find my paperwork here it came down from what it was. 2.4 to 1.9, but we're there now is the point i was trying to make forgive me if i was not clear before that, we are now at the projected median for the year end, which is to say the median fed official is not forecasting additional cuts beyond the rate cut today. by the way, that's also true for 2020 1.9 is the median, and if you want to know they see them hiking 2.1% in 2021 and 2.4% in 2022. >> the median is this is it. a very divided fed, that's very important. i think we have it on our air. people say where is the big deal when is the weakness to cut. how can you not be cutting in

this global environment with the trade war risks and all the other stuff. they're making it around the table at the back. >> that's why the fed is so divided. >> i'm taken aback to where we were six weeks ago, when melissa correctly pointed out that the market choked on the phrase in the press conference that this was a mid cycle adjustment, not necessarily the beginning of a long rate cutting cycle. it sounds to me, based on what steve has just said, what this report is saying, that that is exactly the truth. >> i think the division when it comes to this forecast is between the overall fomc and the voting members 17 members overall 10 who get to vote those that don't are fed presidents the 10 voting members are in favor of cutting one or two more times this year, but they've -- the overall committee is not i

wish they were in the overall committee. i think they see it as an oversized adjustment this is the last cookie we're giving you here. we really mean it this time. every time they cut and they don't say, uncertainty out there. they're pricing another rate cut. >> what we're missing there is what i would have loved to have seen, we will be patient about further aid cuts that would take october off the table. >> everybody else wants it to go the other way. last time they said mid cycle adjustment and they cut rates again. >> i think the chart you had up on the screen tells the story, the market's disappointing the dollar strengthened and the way i look at the fed right now, they're successful if they can get the dollar a little weaker and they can get the curve a little steeper >> the dollar index has spiked right now. whenever you get a strong dollar, i look at things from a

global perspective equities are doing fine, i get it you add in global factors. you look at the trade war between u.s. and china, things going on with oil. i don't see that we're paying very much for insurance if we in fact -- >> that would tell me that the fed doesn't have much control over the dollar. because of these global forces, it doesn't matter how many times -- we've had two cuts and the dollar has gone higher >> the fed's dual mandate is not the dollar in the yield curve, so we get that and we understand those are the key points whenever the fed adjust policy, they look at it through the lens of financial conditions. what i'm saying is that the fed is starting to think about looking outside globally, but that is not within their reaction function. they have a hard time saying there are these other global factors out there that are a problem. >> for viewers or for anchors

who may not understand why the dollar would spike like that based on what the fed just did what is the explanation, the connection that the fed has made it clear we're not going to chase european rates, global rates down so our money becomes >> it's exactly it what i said earlier is that the ecb, whenever we look at interest rates and comparisons for currencies it's all about interest rate differentials. the ecb is willing to cut interest rates and to expand their balance sheet. the fed is still dithering over a 25 point basis cut >> what a smashing success >> no. absolutely not >> even if they're unanimous on it >> the dollar is getting stronger because of ecb. >> they're all implementing an ineffective monetary policy in order to play this krernscy war,

and the optimal solution is to have a little bit of intergovernmental conversation about this, let's not try to play this. let's try to set interest rates at an appropriate level for the long run >> i think the stronger dollar is somewhat inevitable we're best on the block, in a pretty poor block right now, growing at a decent pace europe, china, not so much i think treasuries, dollar, gold, you're going to see that continue for some time, because of this. >> real quickly. this is an early look, it's like looking at a painted room before it's quite ready an early look at the october fed funds futures market, i don't know if you're going to bring rick in. i'll tell you what it is right now, it's a 42% chance of a rate cut in october moving on, it's about -- it looks like there's a 60% chance. the market has dialed in another

rate cut by december which is getting to what david kelly was talking about, this idea that -- who the 7 are that are banking on that next cut matter a lot and it's probably members of the board of governors rather than the president, they come from the presidential ranks i'm not sure what we're looking at, that's the forecast that just came up, again, this differs from the market, which pretty much has one more built in, but it looks like there's a pause being contemplated more likely than not for october, rather than this rate cut now coming in december >> i'm on the president's twitter page just waiting. maybe he'll wait for the press conference, see how that goes. this is somebody who cares deeply about the strong dollar that you explained has no reason to weaken from here. >> president trump blamed the

fed for that, it's probably illogical reasoning at this point. we'll probably hear from president trump saying again, he wants more, he wants more, and that reasoning is, obviously a weaker dollar would help our exporters. >> how do we get a weaker dollar >> i think at this point we're growing at 2%, perhaps even more than 2% at one of these quarters, i don't think we need a weaker dollar. our exporters are doing fine the rest of the world, with the weaker currency with low rates, with negative rates can't seem toe catch a break. >> fixing the trade war would give us a weaker dollar. the trade war is hurting our trading partners more than us. we had more certainty around trade, the dollar would go down. it would hurt our notes. the idea that the more ammunition we spend at this point protectively, the less

relative ammunition in terms of interest rates we have if things really do go south >> i remember back in the late 1990s when greenspan cut interest rates 75 basis points and dealt with the issue out of the east asian financial crisis, but if you're already down at 0, does anybody -- >> we're not at 5% here, guys. >> you have to save ammunition for when you need it the analogy is apt here, you save the medicine for when you need it. we don't need it in a 2% economy. you have to have more capital spending, that will get you stronger growth not lower interest rates >> here's a note saying what tyler pointed out, the dot plot reinforces the idea this is a mid cycle adjustment, even if powell doesn't use that language again. is he going to have to come out

in a few minutes time and specifically push back against that if he doesn't want that narrative to set in? >> i think he is going to continue with a narrative. that seems to be -- you. >> think he's going to stick with that? >> i do. i think it's a consensus of a divided committee. i think it's a very divided committee. he has a very hard role to play here, when was the last time we had a committee so divided he has to bed diplomatic to everybody on the committee. the markets have already priced. yeah, that's great, the dots are interesting, that's fine we're expecting one more cut in december if that starts to get priced out, then i would expect financial conditions to start to tighten, equities and bonds that could then bring back that other rate cut >> if he comes out in the press conference and says mid cycle adjustment again, the markets

are going to sell off. >> the markets are hoping for one to two more this year and one to two more next year. i don't know if -- i think he'll have to be data dependent at this point if we get a resolution to trade by year end, will he need to cut again? probably not if we don't. one or two more are probably likely here. that will be critical going-forward. >> thank you very much thank you. >> you're going to stick around. in the meantime, let's go to bob posani at the stock exchange and see if things are happy? >> no, not really. but a really muted reaction. 8 points off. i consider that impressive, they didn't give the market what it wanted there are two ways you can do

that, lower your valuation of the u.s. economy they certainly didn't do that. job growth is solid, household spending, rising at a strong base they didn't do that, that's one thing they didn't give the market the other thing is the dot projections here, a substantial minority would indicate a third rate cut earlier this year the media is not projecting additional rate cuts the two things they could have sent, they really didn't do at this point fairly muted reaction, i would say, it's a little more right now. there's a lot of people who are very strongly against the idea of heading toward flat and negative interest rates. down here on the floor, a lot of people don't feel the need for that feel the u.s. is the best economy in the world and we should continue to stay on that path banks are flat right now utilities up fractionally.

>> let's start out with fed funds. i'm going to show a four-day of october. four days ago, is when interest rates were on their highs after the big drop in august you can see it was a little lower and it's prepped up as you look at an interday october. you can see the contract is up too. we need to let it settle, i don't like percentages, the point is, it's in the green today. the market stillen watts more. our guests had it right. look at the intraday chart it closed, unchanged as the reading came out at 2 eastern. right now it's up over a third of a cent. the rest of the curve you can see. they've had some volatility, 171 now, so we're up four basis points on 2s if you look at the 30 year, it's at the same place at 221, we see flattening, which continues to be the recipe, they'll always disappoint the market, we do get

a bit of flattening, i say you need to let the market settle out. the q & a today about plumbing can't wait to hear some of the questions on overnight funding >> rick santelli in chicago. coming up, we'll be joined with a former fed governor who disagrees on cutting rates >> we're awaiting that news conference rick just mentioned last time his comments made a -- caused a major selloff, so you will want to stick with us and watch what happens.

stocks are moving lower as the fed cuts rates by a quarter point. joining us now david kelly from jpmorgan funds we're having a lively conversation while we were on break, fred, as you just joined us, and you point to an unclarity. i don't know if that's a word, in the way the fed has been messaging what they are going to do and under what circumstances. >> it affects the decisions we're making in that we're in a situation where the growth is

solid, financial conditions have been it's appropriate given the information we've had, the key is, that in fact the federal reserve, we have a lot of theory about this, when you are in a low interest rate environment you do so aggressively, not to things that might happen, but to things that tell you should act. >> data? >> not just data, it could be information about what's happening in the geo political fund most of the uncertainty is what's going on in terms of the trade war. >> trade deal. >> we had an act of war against saudi arabia we don't know how this is going to play out. this is something trump would like to have happened. i think what the fed needs to do is to make clear how we react when data comes in in the future we have some central banks that

do this, and do it quite well, the fed has been extremely disappointing on this, one of the reasons it's so helpful, your markets will do your work for you. even before you act. if the data comes in in a certain way -- >> how do they communicate this without boxing themselves in >> this is something i've done a lot of research on >> you have to give scenarios and describe what you think you're going to do >> you can actually -- you don't want to have a rule that we're going to do something. but you have to explain it and say, at the very beginning of the financial crisis, the fed shifted the way it was doing policy starting september 2007 where we had a situation of strong growth, inflation rising the fed started to cut rates what would have been more helpful is if they indicated they were doing so because it could get worse.

if there was weakness out there indicating it would get worse, the markets created that for the fed. that provides the expectations you want to stimulate the economy at the wrong time. they will do so. so in a sense, the key here is you want ammunition to move because we are in a situation where interest rates are low we want to keep that ammunition there, but say we're going to act quickly once we have information that tells us we should that should calm the markets, they would know more it would increase the credibility of the fed, the markets are not happy with the way it's communicating some of the people are people who think about these kind of things the reason he would not want them to move now is because he wants the ammunition

then the fed should act quickly. remember that eric and i were among the biggest doves during the financial ricing you will almost never see dissent from members because it doesn't express confidence in the chair. >> the fed needs to be aggressive, just not yet >> yes, part of this is a strong tendency there are times when it's not the way to go, and particularly in an environment where you have less ammunition. you want to show that you're getting at the big guns and getting out the machine guns when the time is right >> that's right. and one of the problems is, you gradually cut interest rates and everyone waits for lower interest rates actually, it can react the --

that's why the fed can be powerful in a financial crisis they shift sentiment by making a move you want the ammunition to be able to do that. i realize they're getting a lot of incoming from the administration, if they think the right thing to do is to stop in october or stop now, they need to let us know that if the market looks like a tantrum, you have to deal with it >> there's been a school of thought they hiked too many types this year, and they need to undo that. >> there is an issue which in fact again is not emphasizing quite enough they're focusing on saying where the economy is we know that central banks can do, and really should be focusing on, how do we do two things when keeping inflation under control. had is one of the reasons why trump's saying they should go to zero interest rates is a disaster this is what was done in turkey.

strong man, erdogan successful in his early administration, then decides to get political gains, he's going to pressure the central bank to ease rates and guess what happens >> we have a -- i'm sorry, we have a tweet from the president, jay powell and the federal reserve fail again no guts. no sense, no vision, a terrible communicator fred, i'll go back to you. you said you had confidence in ben bernanke do you have confident in pou snell. >> i do. he's done one thing that's terrific, which is not the strength of the fed before him he's reached out to the politicians to give him information that includes not just democrats but republicans as well. >> i think he has no dissents from the governors >> it's very different

the bank president's always dissent. two reasons, one they like to get a lot of attention because this is what they do they're not quite the big part of the team. unless you are extremely -- i felt very strongly the fed was behind the curve >> what -- i talk to them and realize dissenting, not strongly, would be helpful to the federal reserve system it took ten days later, then he started to move quickly. you know, from that viewpoint how wrong was it to weight it. i think it was somewhat costly, because it happened after the stock marketcrashed. i have tremendous confidence in ben. and i think the committee has tremendous confidence in jay it's not the problem this communication is a serious issue for them

they need to make it clear they are not political, that trump is not going to have an effect on them at this point we don't know if he gets re-elects, god only knows what happened i never once in all the meetings i attended which was not only a period when i was a governor, i was the chief of federal reserve bank of new york, i never once felt the federal reserve is doing things for political reasons and it's not doing it now. it can make that clearer >> what is your point on inflation, you're saying they should be emphasizing that and not be we have inflation numbers running at year end highs. what should they be communicating. >> there's a problem here, but i think on another issue i've done recent research on the u.s. monetary policy, it's still

very much alive. you don't see it monetary controls in inflation you're not emphasizing that inflation is the main thing that you're supposed to do as a central bank, you can get in real trouble that's one of the reasons why the lower interest rates are negative these are just not helpful in terms of outcomes, and, of course, it can get a lot worse if we have a different chair that is appointed by donald trump. >> by the way, we're about 45 minutes away from the press conference that's going to be held by chairman jay -- 45 seconds, excuse me 2982 is our level for the s&p 500. what are the quitly mark equitys going to be listening for. >> this economy does not justify

multiple cuts here i think it's important he say that >> i think that he just have has to emphasize that the fed is doing its job, their view is they needed to cut rates because of what's going on with the economy. even though i may disagree with that and that again, has to say that the job at the central bank is not to do what the president wants, but to do what is right by the american people have asked the fed to do which is to stabilize both inflation -- >> here comes jay powell approaching the podium let's listen in. >> good afternoon, everyone, welcome. my colleagues at the federal reserve and i are dedicated to serving the american people. we do this by steadfastly executing the goals congress has given us we make the best decisions we can based on facts and objective

analysis today we decided to lower interest rates we took this step to help keep the u.s. economy strong in the face of some notable developments, and to provide insurance against on going risks. the u.s. economy has continued to perform well. we are into the 11th year of this economic expansion and the baseline outlook remains favorable. the economy grew at a 2 1/2% pace in the first half of the year household spending, supported by a strong job market, rising incomes and solid consumer confidence has been the key driver of growth in contrast, business investment and exports have weakened amid falling manufacturing output the main reasons appear to be slower growth abroad and trade. since themiddle of last year, the global growth outlook has

weakened, notely in europe and china. a number of risks, including brexit remain unresolved uncertainty is weighing on u.s. investment and exports our business contacts around the country have been telling us that uncertainty around trade policy has discouraged them from their businesses even so, with household spending remaining on a solid fooding and the support of financial conditions, we expect the economy to continue to expand at a moderate rate. as seen from fmoc participants, the median expectation for real gdp growth remains near 2% this year and next, before edging down toward its estimated longer run value. the job market remains strong. the unemployment rate has been near half century lows for a year and a half. and job gains have remained solid in recent months

the pace of job gains has eased this year. we had expected some slowing after last year's strong pace. participation in the labor force by people in their prime working years has been increasing. wages have been rising, particularly for lower paying jobs people who live and work in low and middle income communities tell us that many who have struggled to find work are getting opportunities to add new and better chapters to their lives. this underscores for us, the importance of sustaining the expansion so that the strong job market reaches more of those left behind. we expect the job market to remain strong. the median of participants remains below 4% over the next several years. inflation continues to run below our 2% objective total pce inflation was 1.4% and core inflation which

resolves volatile food is 1.7% inflation pressures clearly remain muted and indicators of longer term expectations are at the longer end of their historical ranges. we're mindful that continued low target inflation could lead to a downward slide overall, as we say in our post meeting statement. we continue to see sustained expansi expansion. while this has been our outlook for quite some time, our views about the path of interest rates that will best achieve these outcomes have changed significantly over the past year weakness in global growth has weighed on the economy and posed on going risks

these factors in conjunction with muted inflation pressures have led us to shift our reviews about appropriate monday tearing policy toward a lower path for the federal funds rate and this shift has supported the outlook. this is the role of the policy to keep inflation near our 2% objective. today's decision to lower the federal funds rate target by a quarter% to 1.75% is appropriate in light of the global developments i mentioned since our last meeting, we've seen additional signs of disruption abroad. if the fed has no role in the formulation of trade policy, we do take into account anything that could affect the economy the future course of monetary policy, will depend on how the

economy evolves, and what developments apply for the economic outlook and risks to the outlook. the baseline economic outlook remains positive the participants generally anticipate only modest changes in a federal funds rate over the next couple of years those views are merely forecast andas always will evolve with the arrival of new information funding pressures in money markets were elevated this week, and the effective federal funds rate rose above the target range yesterday. while these issues are important. they have no implications for the economy or the stance of monetary policy. this upward pressure emerged as funds flowed from the treasury

to settle purchases of treasury securities to counter these pressures, we conducted overnight repurchase operations yesterday and again today. these temporary operations were effective in relieving funding pressures, and we expect the federal funds rate to move back into the target range. in addition, as we've done in the past, we made a technical adjustment required on reserve balances, setting it 20 basis points below the top of the target range in a related action, we adjusted the rate on the overnight repurchase if a sill to five basis points below the bottom of the target range we will continue to monitor market developments and conduct operations as necessary, to foster trading in the federal funds market and rates within the target range consistent with our decision earlier this year, to continue to implement monetary policy we will over time provide a sufficient supply of reserves so

future operations are not required we're fully committed to our goals. the committee contemplates the future path for the federal funds rate, it will continue to monday tire implications for the economic outlook and act as appropriate to sustain the expansion. with a strong labor market inflation near its 2% objective. thanks, i'll be happy to take your questions >> mr. chairman, when you cut rates in july, you characterized it as a mid cycle adjustment is that still your view of what's happening >> as you can see from our policy statement we see a favorite outlook by the way, that view is consistent with many other forecasters.

as you can see, fomc thinks this will be adjusted with the federate as examples of an approach was successful in both of those instances. as our statement highlights, there are risks to this positive outlook due to weak global growth and trade developments. then a more extensive set of rate cuts could be appropriate we would follow that path if it became appropriate as we say in our statement we will continue to monitor these developments close ly >> rich miller with bloomberg.

taking the statement your opening remarks and -- i'm wondering what kind of message we should take from this does this have an easing bias or not? >> bias is something that was a long time practice, and we don't have that practice any more. i can't adopt it right here. none the less, i'll explain your question we made one decision today, and that was to lower the federal funds rate by a quarter of a point. we believe that was appropriate. we're going to be highly data dependent. and i would also say as we often do, we're not on a preset course that's how we're going to look at it. we're going to be carefully looking at economic data, sometimes the path ahead is

clear and sometimes less so. we're going to be looking carefully meeting by meeting, at the full range of information, and we're going to assess the appropriate stance of policy as we go in, as i said, we will act as appropriate top sustain expansion. >> you also said that the favorable outlook is predicated on financial conditions. and the financial conditions are in turn predicated on an outlook for fed policy won the that suggest that you should be inclined to -- if you want those financial conditions and that favorable outlook to come about you should be inclined to cut? >> what we do going-forward is going to depend on the flow of data and information if you look at the things we're monitoring, particularly global growth and trade developments. it's continued to weaken

it's wakened since our last meeting. trade developments have been down and up and then back down we see those risks as actually more heightened now, we're going to be watching that carefully, we're going to be watching the u.s. data quite carefully, we'll have to make an assessment as we go >> thank you, mr. chairman i know you're trying to speak for the committee when you do these press conferences, the committee is clearly divided right now, at least about the outlook and the appropriate policy path. some people think you need to wait and see the labor market before acting more aggressively, and some people think that by the time that happens, you'll need to do more aggressive action to arrest the downturn.

where do you stand on this >> on the general point of diverse perspectives you're right, sometimes -- and there have been many of those times now. many times on the direction -- relatively easy to reach anonymity. as you can see, disparate perspectives that's nothing but healthy, so i see a benefit in having those diverse perspectives, really your question, though, is, the data is to some extent lagged. especially when you have the risks on the horizon these could materialize more -- i wonder, where are your own views about the tension between risk management, which implies some degree of data dependence and this idea of being data

dependent. >> i'll try to get at it this way, i think that the idea that you see trouble approaching on the horizon, you steer away from that if you can, that's a good idea in principle, i think history teaches us it's better to be proactive adjusting policy, if you can i think applying that in a particular situation is where the challenge comes. i told you where the committee -- the bulk of the committee is going meeting by meeting. i think the main takeaway is, this is a committee that's shifted its policy stance repeatedly through the course of the year to support economic activity as it is felt it is appropriate. the beginning of the year, we were looking at further rate increases and we were patient and we cut once and we cut again. and i think you've seen us being willing to move based on data, based on the evolving risk picture. i have no reason to think that

will change. it will continue to be data dependent and data includes the evolving risk picture. that's where i am and that's where i think the bulk of the committee is >> steve liesman cnbc. i wonder if you are concerned about how the federal reserve operated through the recent liquidity crunch in markets. we talked to many traders who said the tax payment was known well in advance, there were several reports for people pointing to september as a potential crunch time. you closed monday at the top end of the fed funds rate. tuesday came along and there wasn't an operation until 9:00, and no announcement of an announcement until 4:00 in the afternoon, was the fed listening to markets well ahead of time, going back a year when there were blowouts in the overnight rate at year end and the turn of

the year >> are you concerned about how -- for example, the new fed operated to this >> so i would say i doubt that anyone is closer to and has more invested in in carefully following the behavior of these markets. we were well aware of the tax payments and also of the settlement of the large bond purchases. and, you know, we were very much wait willing for that, but we didn't expect the response to that -- it was stronger than we expected our sense is, it surprised market participants a lot too. people were writing about this and publicerishing stories about it weeks ago it was a stronger response than we expected. no, i'm not concerned about that to answer your question. i can go on a little bit about how we're looking at that. why don't i do that.

we don't see this as having implications for our broader market they had a bigger event than most folks anticipated we took appropriate actions to address those pressures. if we experience another set of pressures, we have the tools to adjust for those pressures earlier in the year as you all recall, after careful study over a period of years, the committee has been operating in that regime for a full decade, we think it works well. the main hallmark of that regime is that we use adjustments to

keep the fed funds in the target range. it's designed specifically so we do not react to market developments going-forward, we're going to be assessing the question of when it will be appropriate to resume your balance sheet we'll be revisiting that question during this intervening period and certainly during our next meeting >> we've always said the level is uncertain that's something we try to be very clear about as you know, we've invested lots of time talking to the large holders. what they say is their demand for reserve. we try to assess what that is. we put it out so the public can

react to it. there's real uncertainty and it's possible we'll need to grow the balance sheet earlier than we thought we'll be looking at this carefully and taking it up at the next meeting >> brendan grew with the financial times. earlier this year, or actually in september the governor's board put out research to quantify growth. how much confidence do you have in the fed's ability of trade uncertainty. and if you have confidence in that paper it would suggest a more aggressively dovish path. >> to provide a little context fed economists do research all the time it's high quality.

their research it's just -- they put it out for public review that you can see their metrics. their whole work is profession it's a great tradition that we have and, you know, what this particular piece of work did is it went after measuring trade policy uncertainty through a couple of channels, including concerning tariffs, concerning the threat of more tariffs it looked deeply at the data to assessthe output while i would say directly answering your question, there's real uncertainty around these. this piece of research found significant effects and that's, frankly, consistent with a number of other research projects that economists have

uppedtaken it's also consistent with what we've been hearing in the banl book take a step back from that we do feel that trade uncertainty is having an effect. you see in weak business investment, weak exports, hard to quantify it precisely, thoug though. >> hi. howard schneider with reuters. i was struck by the anchored median federal funds rate through 2020 and that, in comparison to the fact that you have sort of three very discreet groups of opinions around where the fed funds rate is heading is it fair to say that those opinions have become sort of firmer in their conviction, and that it's going to take some sort of real material change in the outlook now for that to move in either direction? >> you're asking specifically about 2020 >> the fact that the feds fund rate is seen as not moving

through 2020, suggesting these opinions are pretty well accurate right now. >> you know, honestly, i think it's hard to have hardened expectations about where rate policy is going to be a year from now i think if you -- the closer you get to the current day, the more confidence you can have. even then, knowing what the data will say and the way geopolitical events and other events will evolve in the next 90 days and implications of that, i would say there's a lot of uncertainty around that >> fair enough. >> if you look at 2020, the use of this is individual participants write down their forecasts. it should give you a sense of how people are nimpging about the likely path of the economy and the appropriate path for monetary policy in that individual person's thinking that's a good thing to know. i would be very reluctant to look at it as hardened views or a prediction really.

>> just to follow -- there are a number of arguments in july around the reason for kting rates. have any of those gotten substantially weaker or changed around the table >> no. i think if you look at the u.s. economy, the u.s. economy is generally performed roughly as expected roughly. the consumer is spending at a healthy clip i would say business fixed investment and exports have weakened further and manufacturing pmi suggests more weakness ahead the labor market is still strong generally that's the same. if you look at global economy, i eu in china and i think her in trade policy developments have been a big mover of markets and of sentiment during that intervening period i think that's what's happened over the intervening period and different people around the table have different perspectives as you obviously

kno know. >> i'm just curious on your balance sheet point, you talk about the committee, thinking about resuming organic growth over time. i guess the question is, if you have shrunk your balance sheet a little bit too small to the point that reserves are too scarce to get through these unusual periods, is organic growth in the balance sheet enough to get back to the point of ample reserves that can get us through those tough times or would you need to see something a little bit above that? is that a possibility that the committee would consider >> you know what i thiching it's hard to deal with every hypothetical possibility. i think for the foreseeable future we're going to be looking at if needed, doing the sorts of things that we did the last two days, temporary open market operations that will be the tool that we use. and the question will be as we

go through quarter end, as we learn more, you know, what really -- how much of this really has to do with the level of reserves? and i thiching we'll learn quite a lot in the next six weeks. >> another money market question you know, banks have been pointing to liquidity rules as having contributed to some of the volatility that we've seen and potentially some capital rules as well. are you all looking at whether some tweaks in the liquidity ratio might help also what is the status of the next stable ratio rule are you planning on putting that out soon >> i think if we concluded that we needed to raise the level of required reserves for banks to meet the lcr, we probably would raise the level of raise the

reserves than lower the lcr. we probably won't come to the view that lcr is calibrate tood high on the other hand it might be more reserves are needed in which case we are in a position to supply them in terms of the net stable funding ratio, i believe we put it out for comment and got comments and i believe we're looking at finalizing that in the relatively near future. >> also there's talk about giving them room for liquidity bumpers. >> i think we want banks to use electric which hadity buffers in times of stress rather than pull back from markets and serving clients as a general rule. >> so about a month ago --

edward lawrence from fox business network thank you, mr. chairman. about a month ago, you said there's no precedent in trade monetary policy. have you tried to figure out this level of trade uncertainty into monetary policy going forward? we talked about uncertainty many times today. >> my point was to start that trade policy is not the business of the fed but business of congress and the administration, but so why are we talking about it because anything that affects the achievement of our goals, in principle, could be something that monetary policy should take into consideration and it is something that's weighing on the outlook. the thing we can't address really is settled road map for international trade.

we don't have that tool. we have a very powerful tool which can counteract weakness by supporting demand through monetary policy. consumer purchase of durables, other sensitive items by creating broadly more accommodating, business and boo boosting confidence. i don't want to be heard to say that our tools don't have an effect they do. there's a piece of this that we really can't address i think, yeah, it's a challenge of the there's no simple answer where i can say yes shall i've got it for you here. had an it amounts to is this what you see is probably the volatility that's typical of an

important complex ongoing negotiation. what we need to do is to try to look through the volatility and react to the underlying forces, the underlying things that are happening that are relevant to our mandate. we have nothing to do with setting trade policy or negotiate i negotiati negotiating trade agreements we're supposed to be looking through what is a pretty volatile situation that means not overreacting quickly, not underreacting, too. that's what we're really trying to do. and, you know, i would say the outlook is positive. in the face of these i think we're shifting to a more accommodating stance is one of the reasons why the outlook has remained favorable

>> the michael mcgee from bloomberg radio and television since the statement was released i think it shows that investors think another rate cut is coming this year. on their behalf, let me ask, what is going to guide fed culture? should they watch going forward, what's the fed's reaction now? through the data, all the events going on around the world, evolving geopolitical events, dploebl growth, trade policy uncertainty, mos