another cookie or glass of milk, until you say, no more they will be patient before they make any further adjustment to policy >> patient, balance, whatever. >> patient means they're not going to move rates in december. i want them to say that. >> we have to get to the fed decision let's go to steve liesman now for that awaited decision. >> one quarter point cut, the federal reserve cutting interest rates by one quarter point for the third rate cut this year the fed removing the phrase that it will act as appropriate instead, the committee now says we'll assess the appropriate path of the federal funds rate rosen grant and george who wanted to hold rates steady, bullard who was at the last meeting who wanted the 50 basis point cut, now is voting with the majority fed says it will cut -- today's cuts were motivated by global developments and muted inflationary pressures the assessment of the economy,

certainly the same as it had been in the past the labor market remains strong. economic activity is rising as a moderate rate, these are the same phrases used in the prior statement in september job gains, unemployment rate has remained low business investment and exports both have weakened the fed says. inflation remains below the 2% target the fed says a sustained expansion, stronger labor market and inflation near the target are the most likely outcomes uncertainties about this outlook remain one more time, let me go over the phrasing that the fred changed here before the fed said it would monitor the implications of incoming information for the economic outlook and act as appropriate to stay in the expansion. now the fed is saying it will monitor the implications for the economic outlook as it assesses the appropriate path of the funds rate, guys, back to you. >> why is that an important distinction, steve >> i think one has been used

it's been taken by the market to mean a rate cut is coming. act as appropriate is a phrase that powell implanted in a speech and then was picked up in the statement later on they've now backed off that's been taken by the market to mean another rate cut is on the way. now when it says it's going to assess the appropriate path, means it's not sure. they could go either way act as appropriate, that act was seen as a cut. now, assess the appropriate path they're saying, could be a cut, may not be a cut we'll see. >> this takes a bit of scholarship, doesn't it? >> i mean, look, i think this is a slightly orchestrated statement. they changed the wording from the last three statements. they think three rate cuts may be enough for a mid cycle adjustment as i said, i'd like to see them say they'll be patient to take december off the table they haven't quite done that they've gene half the way. >> we're going to have the press conference in a few minutes, that will be another opportunity

for powell to clarify that and then we're all going to go into fed speech watching mode to see if other fed members reiterate that view, that we're on hold for now. >> what if he hardens the statement with the notion that a cut in december is off the table? how do the markets react >> right now, a december cut, while partially priced, it's a small probability. i don't think we're talking about taper tantrum market reaction to that >> showing some of the treasury yields here, moving higher, john bellows, for you the inversion of the yield curve was a big argument forethe fed cutting rates, what do you think rates are telling us now >> a lot of that has come out as the fed has cut rates down to the forwards, they've provided the accommodation, the market thought they should. you know, the interesting question is, where do we go from here, modifyingthe word acted is a tad hawkish i note they are still monitoring developments, still focused on the isks, i don't think this i

that big of a change i think the fed going-forward is going to be focused on that big picture we were talking about earlier. slowing growth and below target inflation. not only is that an environment where you have to be hawkish, but the risks continue to be to the down side yields in that environment. >> the stock market doesn't seem to be jolted by any of this, at least not until right now. remember, melissa in the summer, when you jumped appropriately on the idea, when he said mid cycle adjustment, not the beginning of a major rate cutting cycle mid cycle adjustment now, we and the markets seem very comfortable with the id idea -- more than on that day, that what this is is a mid cycle adjustment have i got that wrong or right >> no, i think you have that absolutely right >> the economy, to your point earlier, we slowed to 2% it's not that we've gone into sub potential growth territory here, for the fed to pause here and wait to see all this easing feed through, and see how much

it feeds through, that makes sense. we have to remember in aggregate, forget the fed, all the global bank easing we've had this year, is the greatest we've seen since '08, '09. which is amazing >> it also -- remember that the problems that are hitting, affecting the global economy are not about high interest rates, it's trade confusion bad zdemographics, these are things we can address. >> i hear the voice of steve liesman trying to get in >> i guess that's good i think there's a difference with this change here. and we'll see if this kind of calm in the market remains as we hope for this change but the fed made this change with the market very prepared for it i don't think when they heard mid cycle adjustment was ready for that phrase. i think the fed kind of has signaled pretty well that, you know, we were going to do this

mid cycle adjustment, and he kind of stuck to it, this idea of a pause, it's really baked into the market. the fed today in this statement in this change maybe did it in a way that the market didn't expect but didn't really tell the market anything it wasn't anticipating in the sense, the market has given the fed the leave to do what it did today. we'll see if this remains through the press conference this is an expected change that was really fully priced in to the curve of -- or the outlook of the term structure of the fed funds rate >> we have the shorter end, the two years, the five years, those are popping more obviously after this, so in other words, the curve is flattening a little bit. you can say not the sign you want, the steeper curve is usually the better sign, we finally goat to that place does this unwind that at all and if so, in a meaningful way >> i don't think this is going to be a detriment to sentiment if that's what you mean. people worried about a curve as

a sign i don't think it matters that much right now you have this sentiment shift coming from taking some of the tail risks off the table in terms of brexit, we'll see what happens with trade, it's not happening in santiago any more, the worst case scenario has become a smaller probability and when we look at some of the soft economic data, the cen imt data, it's gone from constantly deteriorating to stumbling along a path so without getting too wonky, the second derivative is improving. i think that sentiment tilt is going to keep a balance in terms of what the fed's doing today and signaling. >> john bellows, what were you going to say >> i'm going to agree with steve. the backup in yields, recently largely foreshadowed this, and the market is pretty aligned with what the fed said i want to go back to an earlier point. it's true it's been significant. the imf suggested they contributed a percentage point

to growth. growth around the world is as low as it's been this year and inflation is below target. i think that really says something about the challenge here central banks are providing accommodation, but they're not doing enough to support growth, they're not doing enough to get inflation up to their mandates, that's really kind of the situation we find ourselves in >> i think that's why the fed has -- didn't do what david kelly wanted them to do. david wanted patience. and patience would have been a period in the sentence of, is the fed going to cut again >> the way i think the fed did it, it looked for a halfway house between not saying it's going to cut, not saying it's not going to cut, it's like a we'll see kind of thing, he didn't go back to that patient mode >> this was a true goldie locks statement. if you were to craft a statement that would please all sides. this would be it the fed towed the line in saying to the markets, we will -- just as appropriate, we will assess the path as appropriate.

leaving that door open without completely shutting. it's completely different from that mid cycle adjustment we had. >> leaving the door open, actually, i think hurts the global economy what you've done is two things, there's uncertainty about fed policy the reason these low rates aren't helping, you can cause accommodation, it is not stimulus you're cutting income -- we never get to this part of the discussion, it doesn't stimulate anything, if you leave the door open for it, now you have the uncertainty, what is the fed scared about >> exactly what you're saying, the cause of the slowdown. the trade war, it's manufactured, what about the inverted yield curve i'm sorry to keep coming back to this you know it's got to be a big part of the market and the fed's logic all the year was to borery about that signal, i'm talking about the flee month tenure, but to worry about that signal, look at history, and precedent and say, if we need to unwind this, we will unwind it. >> if you want to do the

inversion yield curve, sell the bonds and buy the bills and it's -- it's a barometer, it's not something that's impacting the economy really, it's something that tells you something about the economy. >> guys, just real quick >> the barometer was telling us, monetary conditions were too tight. i think the fed responding to that barometer is the right thing for them to do they took appropriate action one thing i would say is, i don't think this is towing the line, we have to step back and acknowledge the fed's cut three times this year, they cut again this week. that's a pretty strong statement from the fed, it's a strong statement about their desire to provide more ago dwaccommodation higher i think writing this off is nothing -- it understates the significance here. what is the fed doing, they're cutting rates, and i think that's a strong statement. >> steve >> we're getting beyond the

point where we have that initial kind of bounce to markets where we don't know what the market thinks about this, so let me tell you where we are now. this december fed futures is now down it had been up near 28, maybe 30%. it's now down below 20%. the market increasingly baking out the possibility of december. and also it looks like january is down as well. i'm trying to find out when i get. you need to go to april to find the market pricing greater than 50% probability of another cut the market taking this as near term hawkish, but ultimately still baking in the possibility of additional easing sometime next year. >> how if at all does the political cycle influence what the fed might do in 2020 >> very little to nothing. if you go back over time, you see fire hikes right ahead of the presidential election. but i truly do believe the fed is trying to be as independent

as absolutely possible and they're going to watch the data and do what they think makes sense. getting back, though, to some of the points made earlier, is this the right course of action inflation, expectations are low, we don't want to see japan -- what's going to help the economy here the consumer doing great, they're going to spend a little more with lower rates, refinance their home, but this isn't helping capex. the rate being down a little bit doesn't change anything. >> no, because business spending is not being stunted because rates are too high i mean, that's not the problem >> and the consumer does drive our economy, so helping the consumer is definitely good. it definitely reduces recession risk but at this point what we really need, if we want the s&p at real highs, we need policy certainty. to me, going into 2020 even if we have a phase one trade deal with an election, with the candidates we have, i

don't think policy certainty is something we're going to see any time soon. it might get worse >> you're skeptical we build on highs we see this week >> brexit risk pushed back, trade risk pushed back, a little maybe. and you are seeing some bottoming out in the sentiment surveys, maybe that will continue for a while we'll see that reflected in asset prices, with 2020 growth slowing in the u.s., fiscal stimulus wears off uncertainty. because of the politics, china structurally continuing to slow. i don't see the catalyst that gives us a big lift off. no german fiscal stimulus. >> these 75 basis points have taken us from positive real cash rates to negative real cash rates. >> to that extent it supports both the stock market and bond market i don't think it supports the economy. >> real quickly, we'll come right back to you, but the fact that james bullard is not

dissenting is an interesting signal he's someone that worried about recession risks and wanted a bigger move. does that mean people can start pricing out that recession scenario here. would you take that from him not dissenting this time >> i think it is true the fed cutting this year, should make you a little more opt mystic about the recovery whatever your probability on recessions were, should be a little lower, because the fed is taking preemptive action it's a pretty bold statement for the fed to be cutting in this environment. i think that does help with the margin if i can just say, i think the discussion about what's causing the slow down is beside the point. the fed needs to play the hand its dealt. it's dealt a hand of slowing growth and below target inflation. the response, that's pretty straightforward. i don't think we need to overthink that it's missing the point

>> as you said, john we have all of that, you describe, plus the market at all time highs that's an important variable too. steve, i was going to let you get your last word in here as well >> one of our fixed income wizards on the panel can back me up on this i don't remember the last time the fed fundses rate was actually below most of the rest of the term structure. we're now -- i don't know, call it even or a little below the 2, below the 10, and so i don't know if the fed was actually trying to engineer the yield curve. but relative to the orates, it should be lower to have a really steep yield curve. this is the first time in a while we've been below the 2 and 10 on the policy rate side >> it feels a little more normal, i think, is the way people would describe it we'll leave it there for now, thanks, everybody. thanks john, anyway. we appreciate it today david and rebecca are sticking

around >> john didn't say anything wrong there. we're not dismissing him because he said something wrong. we're delighted to have you, you did wonderfully. bob pisani is at the new york stock exchange. >> we've had three rate cuts now, and what the market cares about is, is the back stop still in place does the market believe that if things fall apart, the federal reserve is going to step in. judging by the market reaction so far, the answer is yes, i know they remove that phrase appropriate for the expansion. everyone seems to be happy with assessing the appropriate path of future cuts there you see the market, the s&p was down about 4 points, you see it's turned into positive tashtry. bank stocks which often move here is essentially flat, it was down fractionally as we're going into that meeting. let's call that unchanged here, the market is acting like the

fed has reduced global risk. this mid cycle correction or whatever they wanted to call it has been successful, if you look at what we've been doing this month, yields have gone up, the yield curve has increased, banks have notably outperformed the rest of the market, tech stocks, another cyclical group has outperformed the defensive stocks they were the market leaders, they are not any more, so a lot of people are very happy with what the fed has been doing. trade optimism is helping as well there everybody needs to believe the cyclical story they need more meat on the bones. the fed convincing themselves that that back stop is still there. next up, the jobs report back to you. >> thank you, bob pisani rick santelli tracking the reaction in the bond pits. rick >> well, melissa, the reactions aren't huge, but they're very important. the dollar index is up about a dime since the statement was up three.

it's up about 12 or 13 now 164 is where we settled yesterday, we went into this at 161. we're at 163, you can see we popped a couple basis points the short end. twos, threes, fives, they firmed up you go to the long end, the lows are 179 that hasn't changed. we're 180 going into it, 30 year bonds are a basis point lower than when the fed statement was read they're down five basis points the curve has flattened, i'll tell you what, the fed's out of tricks, giving all their treats away, there's very little doubt in my mind you're going to see a hawkish q & a that's just my opinion. the bond market dropped down, but never went into the negative territory. you want to pay attention to, should the fed have deng it, shouldn't they steve said they should have done something, sure, that's a wonderful reason >> rick santelli, thank you very

much the fed deciding to cut interest rates by a quarter of a point. does he think more rates are coming we're about ten minutes away from this market moving press event. ♪ ♪ ♪ ♪ ♪ ♪ ♪

stocks are holding steady, maybe even moving a little higher after the federal reserve rate cuts. joining us now is the federal

reserve governor and let's bring back david and kelly. are you surprised at all by what happened or what was said? >> no, i think this is be what the markets expected it's not a change of information since the last meeting, and they indicated they were likely to cut, and they did so no real surprises in terms of the data coming in, and no real surprises in terms of what the fed said it was going to do, and then it's what it did. >> if you had been in the room as they were debating, where would you have come down on it >> i would have been with the dissenters >> really? >> yes i think that the -- when you look at where the situation is, we're really in a situation where the economy is still growing, where record low unemployment rates there is an issue about what they think is going to be happening to inflation

i don't think they really emphasized that enough that the reason for actually cutting rates would be, if they don't see inflation coming back up to 2% very quickly. and i think then the -- there will be much more justification for doing this, on the other hand, in terms of growth, there are these things that we worry about, particularly what's happening in trade, which is affecting exports and capex. i think trump has tremendous incentives to make a deal with china. not one that is going to be a good deal, but one that will take away some of that uncertainty. >> you have another dissenter to my right >> i would, very much the same reasons, we're going to -- i know we should perhaps take trade policy the problem is, if we -- if the fed cuts and that's seen as a reason to be more aggressive, that would hurt -- it doesn't work very well either. i think it's right, would they have taken down rates 75 basis

points the economy is growing at the correct pace inflation is a little low, but unemployment is low too. that x's out monetary policy should be unchanged. >> the only thing i disagree with you is, you're right that there's a game the fed can play with the administration on this, but that's not really the remit of thefed. so even if from one viewpoint you think they could be encouraging the president to be tougher on trade because they're easing, the feds' agreement is to be completely nonpolitical. i don't think that's not an argument for them not to cut >> it's a tough situation for them the other side should not be political. >> in many ways, we're in a tremendously changed environment here we have a president who's made -- is trying to politicize the fed, the fed is trying to make sure that they are not indicating that's the case, however there are kills that can be interpreted by people as giving in a little bit to the president. it's just a very very

complicated environment. not a particularly good one by the way, and a lot of theory and also what's happened in the world indicates this kind of situation with the president doing these kind of attacks is not good for not only the central bank, but not good for the economy either it's very unfortunate, but that's life. >> you mentioned the -- we talk about the market reaction, they did pretty well in terms of the statement. do you think they're dreading the press conference a little bit. this has been the event the last couple times around, where the initial reaction was stable and wrong turn of phrase or indication from the fed chair, intentional or otherwise can send things belly up >> it's really tough to do these press conferences. people are -- we're at every single word. i can tell you one of the things that's remarkable, how much time gets spent on one word now, i'm not subtle enough, that's not something i felt my english skills are such, i can write well, it's straight.

i never got those nuances in english class when i was in 9th grade. >> it's going to be over a few words this time. >> do you think that really signals something different? >> sure, in the sense that the fed is no longer saying they're going to cut rates at the next meeting. and that was completely appropriate. >> we're not saying they're not going to >> no, actually. i think the bottom line is, and this is one of the things i've been not completely happy about, in terms of the feds discussion of policy. they should be more up front about how policy changed given scenarios as to what could happen we don the know what could happen we get a little data >> that's what you should ask them if you were in the press conference >> maybe i'm not in that position, it's good to be a professor, i like doing exactly what i'm doing right now. >> if the fed telegraphed. in this situation, we do this, and this situation we do that. don't they lose a little bit of the element of surprise they have, on those announcements to

the degree they want to shape market sentiment >> no, king had this wonderful phrase, what the central bank should be, is as neutral as possible >> i know we have to finish this, but if europe hadn't had whatever it takes, that bazooka, would we have gotten the same positive reaction in europe they needed to have a recovery? i don't agree with that fully. >> whatever it takes was an indication of what they would be doing in the future. so in fact, i think the ecb's problem is, they were always behind the curve, this is one of the reasons why they had to make this bold statement. indeed, if the ecb had made it much clearer earlier, that they were going to do whatever it takes, it could have been a softer statement, and actually, things would have been better. i've been very happy with the european central bank's monetary

policy, they've always been behind the curve that's become a very dramatic institution which never worries enough about inflation being too low. >> i think those dramatic statements work breast when you have a financial crisis. and you change with regard to confidence you're talking about trying to steady as it goes on the economy. i agree with you, being boring is probably -- >> in fact, let me give you an example of what could have helped, there are a lot of reasons it didn't happen also the committee wasn't unified at that point. early stages of the financial crisis, it would have been helpful if the fed indicated that the world has changed we now have a final disruption unlike what we have seen before. and that means if in fact the financial disruption gets worse, we're going to act aggressively. that would have worked to get the markets to understand what the fed is doing the markets would do some of the work for the fed once they see a bad number, they know the fed's going to come in, that would stabilize the

situation. >> it's true you have to be very up front and also, the circumstances change, you are going to get exciting when i lived through that, it was the world -- it was like wylie coyote goes off, you realize something's very different. that's the case of where the situation changed dramatically, and then you need a dramatic statement. >> one thing that is changing dramatically, central banks appear to be running out of bullets. japan is figuring out how to do with their yield curve one i think debate around this fed cut that we had today is okay, the fed's cutting with growth of two percent, what happens when it really slows down, what's left? and my impression is, the fed seems to think forward guidance is adequate. do you think it's adequate >> under 30 second warning, by the way. >> they are very worried about

this, as are all economists who study monetary policy. one of the really big problems of being in an environment where -- of the type we have now. >> we are watching fed chair jay powell step to the podium. let's listen in. >> good afternoon, and welcome my colleagues at the federal reserve and i are dedicated to serving the american people. we do this by steadfastly pursuing the goals that congress has given us maximum employment and stable prices we're committed to making the best decisions we can, based on facts and objective analysis today we decided to lower the interest rates for the third time this year we took this step to help keep the u.s. economy strong in the face of global developments and to provide some insurance against on going risks as i will explain shortly, the policy adjustments we've made since last year are providing, and will continue to provide meaningful support to the economy.

we believe that monetary policy is in a good place the u.s. economy is in its 11th year of expansion. and the baseline outlook remains favorable. the overall economy is growing at a moderate rate household spending continues to be strong, supported by a healthy job market, rising incomes and solid consumer confidence in contrast, business investment and exports remain weak, and manufacturing output has declined over the past year. sluggish growth abroad and trade developments have been weighing on those sectors looking ahead, we expect the economy to expand at a moderate rate, reflecting solid household spending and financial conditions the job market remains strong. the unemployment rate has been near half century lows for a year and a half. the pace of job gains has eased this year, but has remained solid. we expected some slowing after last year's strong pace.

participation in the labor force by people in their prime working years has been increasing. and waging 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 nose left behind. inflation continues to run below our 2% objective total pce inflation was 1.4% and core inflation was 1.8%. inflation pressures remain muted and indicators of longer term inflation expectations are at the lower end of their historic ranges we're mindful that continued below market inflation could lead to a downwashed slide

however, against the backdrop of a supportive economy, we expect inflation will rise to 2%. overall, we continue to see sustained expansion of economic activity, a strong labor market and inflation near our 2% objective as most likely 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 as i mentioned, weakness in global growth and trade developments have weighed on the economy and pose on going risks. these factors in conjunction with muted inflation pressures have caused us to lower the federal funds rate over the past year in both july and september, we reduced the target rate for the federal funds rate by one quarter percentage point and we did so again today bringing the range to 1 1/2 to

1 3/4% the adjustments we made today will continue to support the economy. the full effects of these adjustments on economic growth, the job market and inflation will be realized over time we see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook. of moderate economic growth, a strong labor market and inflation near our symmetric 2% objective. we believe pong terry policy is in a good place to achieve these outcomes looking ahead, we'll be monitoring our policy actions along with other information bearing on the outlook, as we assess the appropriate path for the fed funds rate of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. policy is not on a preset

course let me end with a few words about our technical monetary policy operations. in january, we made the key decision to continue to implement monetary policy. in that operating framework, we control the federal funds rate by setting our ministered rates. not through frequent -- in the transition to the efficient and effective level of reserves in this regime, we slowed the gradual decline in our balance sheet in march, and we stopped it in july in response funding pressures. it would be appropriate to remain at or above the level that prevailed in early september of this year to achieve this ample level, we announced on october 11th, we would purchase treasury bills at least into the second quarter of next year, as well as continue

temporary open market operations at least through jiang these actions are purely technical measures to support the effective implementation of monetary policy as we continue to learn about the appropriate level of reserves. they do not represent a change in a stance of monetary policy in particular, our treasury bill purchases should not be confused with the large scale asset purchase programs that we deployed after the financial crisis in those programs, we purchased longer term securities to put downward pressure on longer term interest rates and ease broader financial conditions in contrast, increasing the supply of reserves only alters the mix of short term assets held by the public and should not materially affect demand and supply for longer term securities or financial conditions more broadly. thank you, i will be happy to take your questions. >> i guess the question is, is

this it? do you consider rates to be accommodative enough to achieve your goal of sustaining the expansion and as far as global wall street's primary question, what kind of change in the economy would cause you to reassess some sort of significant deterioration in what >> what we've said to repeat, is that we see the current stance of policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook. and we say that really because both the performance of the economy and the stance of policy the performance of the economy has been particularly the household sector has been strong, resilient with low unemployment, attractive levels of job creation, labor force participation moving up, household confidence and solid gains in many measures of consumer spending. the manufacturing sector

particularly manufacturing and also investment in exports have been weaker. we've seen moderate growth we see the outlook for more of the same we see the risks of the outlook as perhaps moved in a positive direction. although some things remain to be seen. that's the economy turning to policy. we've moved the policy over the course of the year to a more accommodative stance and after cuts at the last three meetings, the federal funds rate is now between 1 1/2 and 1 3/4%. we feel that policy is well positioned to ascertain the outlook i described. we're going to be watching all factors. and if developments emerge that cause material reassessment of our outlook, we would respond accordingly. that's what it would take, material reassessment of our outlook. >> if i could follow-up, do

markets decide -- >> we'll be looking at a full range of data about the economy and about the risks to the -- the risks to the outlook, and i've given you a sense of what our outlook is, it's for moderate growth, strong labor market and inflation near our 2% objective, if something happens to cause us to materially reassess that outlook, that's what would cause us to change our views on the appropriate stance of policy >>. >> heather >> heather long. you said therisks to the outlook are moving in a positive direction. i'm wondering if you could spes 235 phi, is that on trade or other matters. we had two quarters of contracting business investment, which would seem to be moving the outlook in the other direction. >> in terms of risks, what i was referring to there

the principle risks we've been monitoring have been slowing global growth and trade policy developments i was really referring there to trade developments we have that phase one potential agreement with china which if signed and put into effect could have the effect of reducing trade tensions and producing uncertainty in that would bode well for business confidence and activity over time that has the potential for being an improvement in the full picture. brexit, a no deal brexit seems to have materially declined, i think on both situations, there's plenty of risk left, but i'd have to say that the risks seem to have subsided. >> you ask about business investment and that's right

business investment has been weakened, today's reading was weak as well and it was broad across equipment and other parts of the -- all parts of business fixed investment were weak, that's consistent with what we've seen, that's the economy we've had this year, what we've had is an economy where the consumer is really driving growth and personal consumption expenditures were almost 3% in this quarter overall, we see the economy as having been resilient to the winds that have been blowing this year. >> can i follow up quickly there's this concern that i sometimes hear that with businesses that have cut investment, and are they going to turn around and cut employment >> that's a risk we've been monitoring

we don't see it yet, we don't see rising initial claims or layoffs or anything like that. the risk you mention, parts of the economy getting into the consumer site, we really don't see that, what we continue to see is good job creation, unemployment has declined again in the household survey is now at a 50 year low, has been at swre close to 50 year lows close to 18 months now it's very positive that the consumer facing companies we talk to in our vast network of contacts report that consumers are doing well and focused on the good job market and rising incomes. that's their principal focus that's what's pushing the economy forward. it doesn't seem to be affected by weakness in the other areas >> gina, thank you for taking

our questions. you've previously compared this rate cutting cycle to insurance cuts in the '90s, in both of those instances, the fed took those cuts back after a while. they raised rates fairly quickly. i'm curious to what the onus is for doing that in this cycle what would make you guys to decide it's appropriate to raise interest rates again >> so the reason why we raised interest rates is because generally -- we see inflation as moving up or in danger of moving up significantly we really don't see that now, inflation moved down in the first quarter of this year, we thought that was due to some extent of idiosyncratic factors that turn out to be the case it's moved back up it seems to be settling in below 2%, we really don't see that risk and inflation expectations have also kind of moved down and

sideways both surveys and market based over the course of this -- of recent months. and, you know, we think that inflation expectations are very important in driving actual inflation, and we're strongly committed to achieving our 2% inflation objective on a symmetric basis. we think it's essential we do that we're not thinking about raising rates right now, there will be times in the future where that will be appropriate. what we're thinking now, is -- that our current stance of policy is appropriate, and will remain so, as long as the outlook is broadly in keeping with our expectations. >> steve liesman mr. chairman, not to make light of it, but i'm a little bit -- i wonder if you can help me out with the appropriate understanding of the word appropriate here so the statement says that the committee's going to monitor the implications of incoming information as it assesses the

appropriate path of the target range. that tells me you could go either way you came in and you used the word appropriate that the current rate is likely to remain appropriate, which means you're on hold. so how do i walk away from this, and what should we walk away from thisbelieving what appropriate means. are you on hold and need to be proved wrong that you should remain on hold or is it really you could go either way here? thank you. >> we think the current stance of policy is likely to remain appropriate. likely to remain appropriate as long as incoming information about the economy is broadly consistent with our outlook. which is a positive one of moderate economic growth, strong labor market and inflation moving close to 2% that's what we say about that, if developments emerge that cause the material reassessment of that outlook, we would respond accordingly, that's what we're thinking about it. i can't point to one data point or one thing that would change our minds. it would be a reassessment of --

material reassessment of our overall outlook, which is what i described. >> why isn't the phrase likely to remain appropriate in the statement, if that's the sense of the committee. >> well, there's a -- there's a lot of practice in science and history, in terms of how much you put in the actual post meeting statement, as opposed to what we say in the press conference statement it's a judgment call i'm saying it now, so -- >> thank you, nick with the wall street journal you describe to the recent slide an inning nation check taking as unwelcome. you said that inflation expectations are very important. what if anything would the committee be prepared to do to address this slide in inflation expectations if it continued >> so as i mentioned, we do think that inflation expectations are, they're quite essential, quite central in our framework. we need them to be anchored in a

level that's consistent with our symmetric 2% inflation goal. and we think that we need to conduct policy in a way that supports that outcome. that's what we're doing now. we're also as part of our review, looking at potential innovations, changes to the way we think about things, changes to the framework, that would lead us -- that would be more supportive of achieving inflation on a 2%, on a symmetric 2% basis over time that's at the heart of what we're doing in the review. it's too hard to be announcing decisions, we're in the middle of thinking about ways we can make that 2% objective more credible by achieving 2% inflation. it comes down to using your policy tools to achieve 2% inflation. and that is the thing that must happen for credibility in this

area we're committed to doing that. >> you think that review may be announced to the public? >> we're in the middle of it now, and my thinking is still that it will run into the middle of next year these are -- these changes to monetary policy frameworks happen, they don't happen quickly. let's say, inning nation targeting took many years to evolve, i don't think we'll take many years here, we'll wrap it up around the middle of next year would be my guess i have some confidence in that >> edward lawrence with fox business, thank you for taking this how big of a change then to monetary policy would there be if you get some of that uncertainty cleared up, specifically that phase one china trade deal finished and usmca ratified, how big of a change could that be and could we see rate cuts next year or rate hikes next year? >> rate hikes for next year?

>> yeah. i've heard the argument that uncertainty is keeping the prices low i've heard that argument from fid president from one of the districts. you remove that uncertainty. prices would naturally rise. could there be a point -- or how -- i guess my question is, how big of an impact on monetart uncertainty be >> i would say that if we were to have a sustained reduction in trade tensions, broad reduction in trade tensions and a resolution of these uncertainties. that would bode well for business sentiment which is trade uncertain the has been weighing on business sentiment in our judgment and the judgment of many analysts. and ultimately it could affect activity i wouldn't expect the effects on activity would be immediate or would there be immediate effects in economic activity, i think it would take some time after the recent things, but i think it would be quite positive over

time you come back to the questiono raising rates, that's really about inflation. we haven't yet -- we just touched 2% core inflation to pick one measure just touched it for a few months and we've fallen back, so i think we would need to see a really significant move up in inflation that's persistent before we would consider raising rates to address inflation concerns >> brendan greeley, financial times. the other thing you talk about in this review is the gains that a super high pressure labor market have, particularly for the communities you talk about you mentioned it just now when you were talking if that's something that you're identifying and the fed is learning more about this year, why not continue to push those gains, particularly for people who are re-entering the labor force? >> well, i think we're doing that i mean, i think we're keeping --

i think we've made very substantial adjustments to policy over the course of this year think about it we entered the year expecting some further rate increases. now we've done three rate cuts it's a very substantial shift. and theesques of it will be felt over time. we feel like those shifts are appropriate to support exactly the outcomes you're talking about, which are a continuing strong labor market, continuing strong job creation. >> you would describe the shifts you made thus far it wasn't just about trade uncertainty but specifically these kind of high pressure labor gains you talked about? >> we said it was about three things it's been about the slowing global economy you have a sink ronnized slowdown in economic activity around the globe it's been building for just about 18 months now. that's having an effect on u.s. activity that's part of the weakness in manufacturing, export and business investment. we've had trade policy uncertainty, which we think has

also been weighing on activity and investment and sentiment and we've had inflation, which we've called out the risk of inflation running persistently below 2% as a risk that we needed to address. we've needed to address all of those things i would say the gains in the labor market have been great to see. it's particularly the fact that people at the lower end of wages have been getting most of the benefit of most of the wage gains in the last couple of years. that's a great thing you know from our fed listens events that we've been hearing from people who live and work in lower to moderate income communities that this is the best labor market they've seen in their lifetime, things like that and, by the way, that there's still so many people who are, you know, still not in the labor market yet and that there's just a lot more good that can be done there. at the same time, we have to think about the whole economy. but, yes, those gains are very positive we do call them out. they are a reason for us to want

to expand the extension. that's something we're committed to do iing. >> victoria? >> the fed's balance sheet, you all recently resumed purchases of treasury bills. i was just wondering, how long do you expect that to continue and given the fact that the operations, it seems like the fed is having to increase the amount of temporary liquidity that it's injecting into the system do you still feel like it's just -- that there is not enough reserves in the system do you feel like you have a good sense of what's going on there >> on how long, what we said is that we expect bill purchases to continue at least into the second quarter of next year. we've said that temporary market operations we expect to continue, i think, at least until the end of january, i believe. yeah, through the end of january. in terms of the causes -- so

there's a lot of forensic work going on by us and by market participants and all kinds of analysts and, you know, one thing is that we think we need reserves to be back up to the level -- the minimum level of reserves we can have during the various fluctuations that you see with reserves is something like 1.45 trillion or a little higher. and that's the level in early september. we'll be adding reserves to get back to that place that's one thing there are also -- one thing that was surprising about the episode was that liquidity didn't seem to flow as one might have expected we had surveyed the banks carefully about what was their lowest comfortable level of reserves and many banks that were well above that level did not take that excess cash and invest it in the repo market at much higher rates they didn't do that.

so the question is, why? and are there things that we can do that would -- adjustments that we can make that would allow liquidity to flow more easily in the system without in any way sacrificing safety and soundness or financial stability? so we're looking at those. those are not things that can happen -- that can really address the situation in the short term but those are a range of things that we're looking at as well. >> howard? >> howard schneider with reuters. thanks for the questions i wonder if you could give us more texture on what the strongest case is that you feel you've taken out adequate insurance. is it the response you're seeing in housing and other parts of the conomy, arguably, to the cuts made so far is it the fact that the risk environment out there globally has shifted a bit and abated a bit, or is it something different, you know, in the financial markets, the fact that the yield curve has righted i

itself, et cetera? >> there's not really one factor it's the range of economic data and also what we see as our stance of policy, which we believe is the appropriate stance it's really both those things. if you look at the performance of the economy through this, the consumer sector has been quite resilient. witness today's gep report again all the things i went through earlier suggest that this sector continues to be strong we know that the manufacturing investment, trade/export sector has been weak. that continues nevertheless overall we have an economy that's showing moderate growth and we think we're at 1.5 to 1.75%. we believe that's an accommodative level that will support the outlook we have. >> this is kind of a one-legged recovery, that unless you get

some impetus from some other things, export, that it's going to weaken further at some point? >> we don't see any evidence of that what we see is the consumer sector continues strong. low initial claims we monitor a very broad range of data we also see now, i think, more clearly, the effects of more accommodative monetary policy on various kinds of consumer activity you're seeing strong durable goods sales. you're seeing housing now contributing to growth for the first time in a while. two-tenths, i think, this quarter. and you're seeing retail sales number in today's release was 2.9% i think that's good. more broadly, monetary policy is also supporting household spending and home buying by

keeping the labor market strong, keeping labor's incomes rising and keeping consumer confidence at high levels, where it currently is. >> thank you, mr. chairman you were talking about how the lower rates have affected consumer behavior. is there a concern that there's less potency on the business investment side, that you're, in effect, pushing on a string? >> well, i think monetary policy works through the channels that we understand. i think the effects are clear in what we think of as the interest rate, sensitive sectors, some of the ones that i mentioned. i think interest rates are a factor in business investment, but i don't believe they're the main factor and main driver. and i think, you know, what one would like to see to support greater manufacturing activity, business investment and exports would be a global recovery

and, you know, there's a lot of monetary policy accommodation and some fiscal accommodation maybe in the global economy now. not here but perhaps elsewhere and the that should support growth in the global economy and again resolution of our trade issues would contribute to that over time as well. >> thank you chris rubager at associated press. you mentioned that the fed listens a couple of times and what you heard from people how it's benefited disadvantaged or lower-income worker, has the fed thought about nugsizing something and taking in some of this input from people that you don't always hear from, on businesses has there been thought of bringing in folks, say, from community groups more regularly? >> we think that fed listens has been a great success for us.

and i'm sure we will repeat it in fact, i would imagine that this entire monetary policy review will become institutionalized and be done every few years. i would say this in the beige book, we talked to educational institutions, health care institutions, community groups, labor groups it's not just businesses by the way, all those groups are also represented on the boards of our regional banks. we also meet quite regularly at the board with representatives from low and moderate income communities. we're very conscious that we represent all americans and need to hear all their perspectives we talk about how low the unemployment rate is the aggregate. we also talk about groups that haven't experienced that yet we try to remind ourselves that we serve everybody. >> steve m