in all the tax in their whole life in the long run it makes us poorer we end up paying for retirement of foreign investors so i do think we should do something about it >> we'll take a pause right here we're seconds away from the fed decisions so let's go to steve liesman in washington. >> reporter: no change in the federal reserve leaving the fund rates at 1.5 to 1.75% in a unanimous decision that included new voters they replaced the four outgoing presidents on the federal committee. monetary policy was appropriate to support the expansion labor market growth and inflation returning to the 2% target rather than nearer the 2% target more ambitious on hitting that inflation target fed watched global developments

and inflaetionary process. economic activity has been rising at a moderate rate. job gains were solid on average in recent months unemployment rate has remained low. all the exact same as the prior statement. household spending was downgraded hit been called strong now it's called moderate or rising at a moderate space business exports wage and inflation running below the fed's 2% target. not much more to report here pretty much the same economic assessment, pretty much the same risk and pretty much the same policy as it had in the prior month. >> what do you interpret from any of the statement that we're on a steady as she goes pace for months presumably? >> reporter: i think that's the way it is. our survey as predicting really not much change for the least november when you get to a 50% rate in recent days it's worth pointing out the probability of a rate cut has ratcheted up as

the ten year has dropped amid concerns of the coronavirus. what i thought and i don't know this for sure but the fed said it's watching global developments in prior surveys that was really a reference to trade who knows? now it could be referenced to the coronavirus, something that's almost surely watched for the potential developments and certainly the market has seen the virus or potential of the flu there to create downward pressure >> no explicit mention of coronavirus in this? >> reporter: no. no only abstract global developments >> would any of you on the panel here have expected them to mention the coronavirus? >> not in the statement but in the press conference i'm sure j. powell will be asked about it. they know that that's their opportunity to comment on it. that is so fast-moving and none of them are not epidemeologists. he'll obliquely talk about it.

>> would you have expected to hear from the fed any mention of the deficit? >> you know i don't think expressly again the statement. i wouldn't be surprised if powell gets a question on it on the coronavirus it's a asia phenomenon we had great consumer confidence yesterday. great housing numbers. we're seeing that die could at the my between the consumer -- >> we're hearing drivers of the u.s. economy the hit they are taking due to the coronavirus. >> think about starbucks this morning. but apple is able to just drive right through it >> so far. >> the other thing the economic language was downgraded. household spending has been weaker cap x remains a drag that's an important thing to point out. we're at this moment where there's optimism we got a phase one deal. that's not in the numbers yet. the numbers are down beat and we're at this fragile moment

a lot of optimism not yet supported by the data. >> the economy is going to grow more slowly but because the sly side is getting hurt here. half the job growth last year came from people over the age of 65 immigration is at a 30 year low. this economy can only grow slower you have less demand and supply. doesn't mean that monetary policy is too tight. >> i want steve to jump in here. >> reporter: i was going to echo the words of the previous guest there. when you look at the risks that are out there mentioned in this statement, they all point to a risk of down side risk there's no real upside risk here that inflation is running below the 2% target as the guest pointed out business fixed investment is weak exports remain weak. slight downgrade instead of growing at a strong pace, household spending all of that is on the down side. it's why odds on the bet of the

next move even though it's several months out is for a cut. there really is no play for a hike here. >> i'll pick up on that thought of down side risk and obviously right now the economy is growing as the fed characterizes as a moderate pace. household spending has moderate -- is moderate not strong the way it was. if the economy goes into a bit of a stall phase, a little bit of a stall, are there tools at hand now on the fiscal side and on the monetary side to get the thing going again? doesn't the deficit make that a lot harder does, do interest rates at their current levels make that more difficult? >> i think the answer is yes you know, the answer is it is more difficult when you're closer to zero lower down. we've seen that in spades in europe they've struggled to find ways to support their economy if you're worried about

coronavirus have an impact on trade, europe is more close to that than we are the answer is yes that the proximity lower bound does make this harder, does make people more cautious and it really highlights what jerome powell is trying to do, let's keep growth and inflation positive let's take out some accommoda accommodative policy it's harder and increases the urgency to stay out of recession right now. >> these tools wouldn't work if you cut interest rates it won't speed up the economy think about what's dragging the economy. trade rhetoric the dollar that's too high immigration which is too low there are lots of things you can do to increase business certainty, increase global trade, increase confidence by simply being a less erratic in term of our tradeened, more welcoming in terms o immigrants plenty of things you can do but not traditional. >> do you think asset prices are driving the economy rather than the economy driving asset

prices >> you know i think broadly speaking -- asset prices are a function of what's happening, underlying economic growth but when you have enough liquidity in the system, when you have rates this low there is this push towards risk assets. you have to go out the risk spectrum whether it's equities, higher yielding debt, em equity, the tina effect is still very much in effect when rates are 1.60, 1.75 levels. >> i agree but these are in two different paths. asset prices -- this is a rapid market all the way through the last 11 years boomed forward a tortoise of an economy this is still going on >> reporter: one of the things that will be discussed in this press conference i imagine the extent to which the fed's turn about and its balance sheet last year is responsible for this boom in asset prices and we know there's concern of the fed if it keeps going the way it's going,

it's going to fuel the bubble you guys were talking about and there's concern on the other side if it withdraws and does so precipitously the asset prices would fall off quickly and how to manage a real turn around we were down to three six and now up to 4.1 trillion of the balance sheet headed back, i don't know exactly where >> let me take a quick break because we're seeing a little bit of move in the markets let's get to seema modi at the new york stock exchange. >> reporter: you're right. stocks building on their gains even though the fed capped rates on hold. that was widely expected following those three rate cuts last year. now the market will closely analyze jerome powell's commentary on the balance sheet. the market has moved in the past traders want to see how the federal reserve addresses balance sheet normization, a rather complicated task for the federal reserve. already seen its asset portfolio

expand from 3.8 trillion in september to around 4.1 trillion that will be top of mind that's important for the financials the take a look at the big banks, goldman sachs, jpmorgan, they are still higher on the day. rate incentive sectors, home builders are trading lower utilities also on the move to the down side right now. but the commentary from fed chair jerome powell on coronavirus those global developments we know it will have an impact on china's gdp outlook what does it mean for the u.s. economy the dow up 171 points. >> let's get to rick santelli for a look how bonds are reacting rick >> reporter: whether you look at two year, ten year $index there really hasn't been a lot of movement as well as these interest rates remain rather steady lower on the session. but that doesn't mean there isn't big news these traders are

concentrating on for their future trades that may move in rates. first of all the interest on excess reserves moved from 1.55 to 1.60. why is that a big deal it's a big deal because the effective funds rate -- remember we have a range of 1.50 to 1.75. the effective rate trades in the middle they would like it to trade exactly in the middle. but the problem is it has been trading towards the lower bounds just barely above 1.50 by raising the interest on excess reserves they are hoping to make the effective rate move a little bit higher. the other issue is in the news every where we look. trade deficits listen every thursday afternoon we learn that the fed's balance sheet, we see all the flows, so we get a glimpse of the important information. last couple of weeks, 1.417 trillion, so biffle a bit under 1.42 trillion the balance sheet has been holding steady. this is a huge deal. many believe the liquidity

provided by buying bills is keeping stocks afor the. major deficits in the country. many think the balance sheet of the fed won't make this better if your goal is to see it come down any time soon most likely you'll be disappointed >> rick santelli, thank you very much let's talk about trade if we might for just a moment here the president signed the usmca this morning a couple of weeks ago he did the phase one deal with china. how much have trade tensions been taken off the table as an economic head wind this year >> you know i think our general view is right now we're in a slightly more stable operating environment from a trade perspective. yes, tariffs are elevated but perhaps we won get further escalation from here assuming there's no breach of the phase one deal from either side. the real question is whether or not this matters for businesses. will they increase spending, increase their confidence levels that's still a little bit tbd.

but i think we're on a better path >> hard to disagree. better now that we got detente >> is it worth a point, a half point? >> last year in 2019 we saw global trade volumes contract. it was first time in the last 20 year outside of a recession that we've seen lower trade volumes year-over-year the important point here is that's not just u.s. and china trading less that's actually china importing less from europe, importing less from other asian countries there's a global slow down in trade. now the reason that's important is that is unlikely to turn around on a dime because we signed a phase one deal. there's a bigger issue going on here big are issue about slowing demand, about reconfiguring supply chains and i don't think that will turn on a dime >> global san diego. >> glob-- global san diego? >> globalization

>> globalization is a part of that >> we've seen a tide of protectism but not in globalization. lower tariffs all around are a good the thing and that would help business. right now people still are very nervous. i hear a lot of nerves on both sides about what could happen in the 2020 elections and what does the that mean for trade. there's a lot of uncertainty and uncertainty kills business >> you're getting ready for the news conference. >> reporter: i want to point out that to what david was saying, there's an uncertainty that's eased a little bit but the tariffs remain in place. what we've seen economists do is they've taken he some of the decline in gdp off this year because the trade deal is in place but they leave the decline or the sub tracks in gdp because tariffs remain in place. that's important you look at the recent business spending numbers for durable goods report and they were pretty awful all the way through december and we'll be watching closely in january to see if we

do get anything of a rebound from a return of confidence. >> interesting because we had jpmorgan lowering the forecast for the fourth quarter real gdp -- >> on the trade. >> from 1.7 to 1.4 because of trade now. it's not just the china trade but also we're hearing continuing rhetoric surrounding now trade with south america, trade with europe, and the ways that might continue to impact different companies. >> that's right. the great fear is that after november maybe we move towards a more peaceful existence with china on trade but how do we don't end up with a new trade war in europe. we're pick picking a fight with our trading partners is just good politics. >> reporter: that's the biggest asset -- one of the biggest pluses i read about usmca today is that it means that nafta is not going to be scrapped and means worse is not to come on tariffs. >> steve, i know you have to get

moving to get to the press conference which should be very interesting. i'm sure we'll have lots of questions on the balance sheet, on the coronavirus and its global effects so we'll let you go our thank as well to john bellows and mona david kelly gets to stick around nothing you said david just gets to stick around this time. we'll draw straws next time. >> coming up we're 15 minutes away from fed chair j. powell's news conference. first we're looking at the banks. what the fed's current stance means for them and especially these regional banks right now the kre is down slightly special fed decision day "power lunch" will be right back. what's important to you.se w saving for ava's college. being able to retire on our terms. taking care of dad. why ameriprise financial? my advisor cares about my personal goals. he gives us comprehensive advice.

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welcome back to "power lunch" the federal reserve leaving rates unchanged in a decision just moments ago bank stocks a bit of a mixed bag. they've been under pressure as rates have fallen this past week on fears of the coronavirus spreading and the global economy slowing. jpmorgan chase positive. goldman sachs negative our next guest is looking to

banks for growth great to see you today, anton. why it is the regionals hold such attraction for you as opposed to the big banks >> if you go back decades of time there were many more banks and the top banks, david is obviously at up with of them, isn't going to consolidate they are done buying so last year 5% of every bank in the country actually sold. so we're expecting similar things this year there's in urgency for them to get-together one is interest rate margins the other is cutting costs low growth is tepid. however with the fed's policy it cuts both ways margins is down but credit quality is terrific. if you can get-together and cut costs not only can you create more earnings you can have a bigger budget, less branches out there, a lot more banking services are delivered through

technology jpmorgan and bank of america have taken all the consumer business, but the real bread and butter of the regional banking community is small business and middle size business and they are major players in a lot of small communities around the country. >> how big do you have to be to be persistently successful >> that's a good question. if you want to compete with the big four you have to be a lot bigger you can be something like a truist which combined suntrust and bb and t and created a $500 billion company. there are 100 company that are between 10 bloil and 100 billion. i expect a rapid pick up there they are trying to compete up and they need more products, more technology, and you know i really like to focus in some of the fastest growing parts of this country there's some real differentiation in those parts >> i want to hear what part of the country you think is growing really fast but also how closely you're paying attention to politics and elections this year

and the way that affects they fast growing parts of the country. >> sure. absolutely you're spot on certainly state tax policy is a big deal and i'll start with that versus going to federal tax policy. if you think about places like tennessee and texas and florida, they got huge immigration of people and businesses. if you're in nashville, tennessee, you know, good luck trying to find commercial space. it's growing so fast it's hard for businesses to find enough space. a lot of people are moving there. if you then take that to the fed policy and talk about salt that's true. you can have some less attractiveness to getting out of some of the higher tax states if they bring back deductibility of property taxes but that growth obviously in those southern states is very, very real, and, you know, has made those companies very attractive >> there's also, i mean, it is

challenging for small banks and in general because we got a slow growing economy. we got the lowest birth rate in 30 years that affects things like housing demand we won get back to 1.4, 2 million housing starts even employment growth, yes there are fast growing states as you mentioned, obviously florida, texas, tennessee but overall u.s. population growth is percentage wise at its slowest in a century when you think about bread and butter banking it is a tough environment. >> doesn't technology make it easier, though, for those smaller banks? you don't have to invest so heavily in labor where technology is take over. >> technology makes it easier, regulation makes it harder you have to have a big staff of lawyers these days >> look, i'm sorry to interrupt but jpmorgan in its consumer business let people go today and that's because of technology not because j.p. morgan isn't doing great. >> i suppose there will be many

fewer branches, teen big guys will have fewer branches because they don't need them i use my chase app all the time to deposit checks. i don't go to banks. i go to auto tellers if i need to if the trend is bigger is better, i suppose, why is it then that i always see new banks popping up on street corners here in northern new jersey? names i never hear before. they are not big >> well, you know, i think deposits have always been very valuable maybe less so with the internet but a lot of people with great internet strategies to gather deposits you're seeing big banks add strategic branches in markets like atlanta, in markets like charlotte sway very heeavily market and more rural plays of the country where the big banks have basically effectively, you know, either sold or shut down and

left town, you got these small banks that are really very part of the daily lives of these people also a social place for them to gather so you have an ability for the big to thrive and ability for the very small to thrive and everybody in the middle has to figure out a strategy to get bigger and stronger. >> you have to go to the banks for the locllipops. in our next hour david solomon fresh off goldman's first-ever investor day >> we're just minutes away from fed chair j. powell's news conference that's coming up on "power lunch" after we take a quick break. a new brokerage account, your cash is automatically invested at a great rate. that's why fidelity leads the industry in value while our competition continues to talk. ♪ talk, talk gimme two minutes.mpetition eligible for medicare.. and i'll tell you

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welcome back. the federal reserve leaving rates unchanged. the market has one less hurdle to deal with trade president trump signed the u.sm.ca agreement into law earlier today and kayla tausche is live at the white house with more for us. >> reporter: it was the result of more than three years of negotiations, one of the most specific campaign promises that president trump made to undo the old nafta and replace with it something much better. today the president signed that deal, the u.s.-mexico-canada

agreement. canada still has to ratify it through its legislature but that process is ongoing you mentioned the removal of uncertainty. that's where the economists see growth coming from this deal president trump said there would be additional gdp of 1.2% from this deal. we're still waiting on more clarity exactly what the source of that is his administration previously said about half of 1% of gdp and nonpartisan studies said that would be about a third of percent of gdp and large portion of that upside would come from the removal of this uncertainty. that study said about 176,000 jobs would be created by this deal about $68 billion in added benefit to the economy there are industries who will see material changes to the way that they do business in north america as a result of this change the manufacturing sector, the pharmaceutical sector and energy sector just among those. >> let's get some final thoughts as we count down to hearing from

fed chair powell david kelly is still with us what do you expect him to say today and what would you like him to say >> the most important thing he'll say is we need to still see a material change in the outlook for the fed to move policy that's code for we're not doing anything to 2020 election. what i want them to say is pay attention to asset prices. whenever there's a correction in the market they won run scurry to provide mormon tear ease. the market needs to be balanced. that's what leads to asset bubbles. >> isn't that where we are hasn't the appetite for cheap money become so ravenous that any attempt is met with anger.

>> markets should not be based on the idea that we have monetary and fiscal stimulus when the economy has a hiccup. asset prices keep going up and up and that epidemics badly. >> swaps are coming in a few -- here we go >> jay powell. let's listen >> good afternoon, everyone. thanks for being here. at today's meeting my colleagues and i decided to leave our policy rate unchanged. as always we base our decisions on our judgment of how best to achieve the goals congress has given us, maximum employment and price stability. we believe monetary policy is well positioned to serve the american people by supporting continued economic growth, a strong job market and a return to inflation to our symmetric

goal of 2% with a healthy job market rising incomes and upbeat consumer confidence the fundamental supporting household spending are solid. 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 activity in these sectors however, some of the uncertainties around trade have diminished recently and there are some signs that global growth may be stabilizing after declining since mid-2018 nonetheless uncertainty is about the outlook remain including those posed by the n new coronavirus. overall with monetary and financial conditions we conneext economic continue to grow. the pace of job gains remains

solid. participation in the labor force by people in their prime working years, ages 25 to 54 is at its highest level in more than a decade wages have been rising particularly for lower paying jobs people who live and work in middle income community and low-income community tell us many who have struggled to find work are now finding new opportunities. employment gains have been broad based across all racial and ethnic groups and all levels of education. these developments underscore for us the importance ever sustaining the expansion so strong job market reaches more of those left behind inflation continues to run below our he our objective. plague was 1.5% and core inflation was 1.6% available data suggests similar inflation readings for december

that we expect politician to move closer to 2% over the next few months as unusually low readings dropped the calculation. while low and stable inflation is certainly a good thing, inflation that runs persistently below our objective can lead to longer term inflation to drift down pulling inflation even lower. in turn interest rates would be lower as well closer to their effective lower bound. as a result we would have less room to reduce interest rates to support the economy in a future downturn to the detriment of american families and businesses we have seen this dynamic play out in other economies around the world and we're determined to avoid it here in the united states in particular, we believe the current stance of monetary policy is appropriate to support sustained economic growth, a strong labor market, and inflation returning to our 2% objective. as long as incoming information about the economy remains

broadly consistent with this outlook the current stance of monetary policy likely will remain appropriate we will be monitoring the effects of the policy actions we took last year along with other information bearing on the outlook as we assess the appropriate path of the target bench for the federal fund rates. if developments emerge that cause a material reassessment of our outlook we will respond accordingly. policies not on a preset course. i'll conclude with a brief overview of our current plans for our technical operations to implement monetary policy. the plan the fomc announced back in october to purchase treasury bills and continue ripo operations has worked smoothly and has provide an ample supply of reserve in light of the resulting stability in the federal funds rate and money market conditions we decided to make a small technical upward adjustment to administer rates to ensure

federal fund rates trades well within the target range. this action reverses the small downward adjustment made in september when money markets were volatile. as our bill purchases continue to build reserves, the role played by active operations will naturally recede over the first half of this year we intend toed a just the size and pricing of repo operations as we transition away from their active use of reserves this process will take place gradually and as indicated in today's fomc directive to the desk we expect to continue to offer repos through april to ensure an ample supply of reserves based on current projections we expect underlying level of reserves will durably reach ample levels sometime in the second quarter of this year. as we get close to that point we intend to slow face was purchases and transition to a program of smaller reserve

management purchase that maintains an ample level of reserves at that point as in the pre-crisis period our balance sheet will be expanding gradually over time reflecting the trend growth and demand for currency and other federal reserve liabilities. all of these technical measures are designed to support the efficient implementation of monetary policy and not intended to represent a change in the stance of monetary policy. we're committed to completing the transition to our longer run ample reserves regime smoothly and predictability we'll closely monitor markets anded a just these plans as conditions warrant thank you and i'll be happy to take your questions. >> thank you mr. chairman, i would like to comment in a little bit more depth one small change i noted in the statement

it notes that policy will be appropriate to bring, the committee believes, inflation back to the committee's 2% sym.metric that was a change from the last time i would put this also in the context of a comment you made at the last preconference where you drew attention to the fact that a number of policymakers had projected inflation overshoots two and three years out under appropriate monetary policy. should we take all of this together to mean simply that the committee is more confident that 2% outcome for inflation is already baked in the cake or that this is a signal that the committee has stronger resolution to bring inflation at least to the 2% objective and

bring into play an informal makeup strategy for inflation? >> so, in making that change our goal was really -- that was changing nearer to returning to possible misinterpretation you may remember in the december minutes we noteed a few committee members suggested the language that stated the monetary policy would support inflation near 2% could be misinterpreted as suggesting policymakers were comfortable with inflation running below that level we thought about that in the enduring period and thought it would be appropriate to adjust that saying we're not comfortable with inflation running persistently below our 2% objective yes there's something in that. it's just that we wanted to underscore our commitment to 2% not being a ceiling to inflation running around 2% and that we're

not satisfied with inflation running below 2%, particularly at a time such as now where we're a long way into an expansion and a long way into a per of very low unemployment when in theory inflation should be moving up >> thank you i want to ask about the balance sheet. how many reserves are ample? how many reserves does the fed now think it will need to conduct policy in its current framework and can you walk me through how you and your colleagues are rifrg at that answer >> sure. thanks for that question why don't i say a few things about repo since i know that will be of interest. after last december's brief the turmoil we took prompt and decisive action and money markets have been operating smoothly since then.

treasury bill purchase of at least in the second quarterer and turned overnight repo through april. i'll get to your specific question the purpose of the adjustments has been to assure our policy is transmitted smoothly to the federal funds rate which requires well functioning money markets. doesn't mean we're trying to eliminate all volatility in repo markets. some volatility is normal and expected in well functioning markets. as i mentioned these adjustments have been successful in supplying ample quantity of reserves, money markets operate smoothly right through year end and funds rate has remain our target range we will know when these adjustments have run their course when reserves are at a level that enable us to control the federal funds rates. interests on reserves and reverse repo without the need for frequent use of open market operations. based on current projections it will bring the underlining

reserves to ample level sometime in the second quarter. when we've reached that level we'll gradually reduce our asset purchases to the level of the underlying trend growth for our liabilities. as our bill purchases bring the underlying level up to an ample level the necessary quantity of overnight will gradually decline. we've begun the gradual reduction and will continue to reduce those offering amounts gradually as conditions permit at some point we'll also raise the minimum bid rate even after we reach an ample level of reserves it's possible repo operations may play a role as a backstop. and we'll continue to discuss that issue coming to your question, in terms of the actually desired reserve level we know reserves will continue to move up and down over the course of the calendar year in a wide range. depending on volatility in nonreserve liabilities particularly the treasury

account. in particular, reserve levels will need to be at a level high enough to remain ample even when the tga peaks during the april tax season effectively what that means is we need reserves at all times to be no lower than they were in early september and i would say around 1.5 trillion. subject to learning more reserves will move in a broad range as i mentioned and we want to be clear that will be the bottom end of the range. we want 1.5 trillion or thereabouts to be the bottom end of the range most of the time reserves will be moving in a range substantially higher than that but not going below 1.5 trillion not something we're aiming at all the time we know reserves will fluctuate and be substantiately higher most of the time we want ecb sees on reserves and fed fund rate well within the fomc target range. last point, we're committed to

making this adjustment process a smooth one we'll provide more details as we go and we expect to learn as we go as we always have and prepared to adjust the detail of the plan as necessary to foster efficient and effective monetary policy implementation. >> steve liesman, cnbc following up on nick's question, i know you said it's not qe but it's $390 billion over five months which is a lot to expand the balance sheet. i guess i would ask one more time on nib's question is there a number you have in mind? secondly a lot of people in the market are sort of concerned it looks like qe and trading that way. are you concerned that the market is embracing this qe program and rise in the stock market is linked to it and you may then experience something of a temper tantrum the way chairman bernanke did when he tried to roll it off >> i'll repeat that we think that the -- we think we need to

continue purchases until reserves are at a level in which they will not go below 1.5 trillion roughly during the course of the calendar year. we know that the tga will move up and down. it will be much higher but that's the number and we think we'll reach that sometime in the second quarter. that's our estimate. but we'll know when we get there. wheel know it because we can control the federal funds rate without active use, ongoing use of open market operations. you know, our intention of these, for these adjustments is just to raise the level of reserves and to allow us to conduct monetary policy in an efficient and effective manner and that's our sole intention. i pointed out on other occasions more than once the differences that -- the specific differences between this and the large scale purchase programs. in term of what affects markets

i think many things affect markets. very hard the to say with any precision at any time what is affects markets. what i can tell you is you know what our intention is. return restories of an ample level. we expect that to happen in the second quarter as those purchases get to that level we believe we can gradually reduce them and gradually reduce repo as we reach an ample level as we're satisfying demand now more from underlying reserves from bill purchases rather than from repo and, again, last thing i'll say is we're prepared to adjust the details of this plan as we show ourselves willing to do depending on conditions. >> hi, jay powell. i was hoping you could talk a little bit about the labor market we've reeply seen wages moderating a little bit by some measures maybe declining a little bit by others

as you mentioned at the lower end of the sort of talent pool it seems we're seeing those wages climb up a little bit. but it doesn't seem to be consistent across the entire sort of average. i was wondering if you would talk a little bit about whether you guys are noticing any cracks or worried about that or how you're thinking about it >> labor market continues to perform well labor market continues to be strong we see strong job creation we see low unemployment. very importantly we see labor force participation continuing to move up really against expectations if you go back a few years you'll not find a lot of forecasts suggests we could have been at 63.2% with the levels of employment to pop laying that we're seeing so i think we've learned quite a lot of good things about the labor market, good things suggesting there's been more room to run. the performance of wages i think has to be seen in that context

if you go back four or five years, that four or five major wage statistics that we track running around 2%. now running around 3%. which is theoretically where they might be at full employment inflation plus productivity growth it's a bit surprising that with sustained levels of historically low employment we haven't seen wages move up like we have seen before you ask what can be explained. one thing can be that the natural rate of unemployment is still lower than we think, that the labor market is not as tight as it would appear just from the 3.5% number and the other is i think as i mentioned the sort of supply side shock or surprise that we're receiving from higher labor force participation.

people are coming in to the labor market and providing more labor supply and that's a great thing. that's a very healthy thing. we're a country that has low labor force participation compared to essentially all of our advanced economy peers and it's a very good thing, positive thing. nonetheless it represents more labor supply and may be holding down wages in terms of the framework review and little bit on chris' question earlier, there is a general feeling now in the markets and among analysts that you're basically setting us up for some form of inflation target averaging where you let the inflation rate run above the 2% target for some time to makeup for the time that it has spent below that is that a fair, reasonable assessment of where you think you're is going to end up? what would you, chairman powell,

think of that idea personally and as long as i'm asking, do you have any more details on when we could expect the results of the review? >> thanks. i'll just say that we undertook the review because we felt and i felt that it was time to incorporate the realities of what we could call the new normal into our policy framework. and some aspects of that new normal would include ongoing powerful global disinflationary trend. low level of sensitivity to resourr utilization. so that's challenging to deliver on our goals of maximum employment and stable prices

although i would say under our existing framework we've been able to succeed or get close to succeeding for most of the time lately to achieve those goals although we do struggle as other central banks do although we do struggle as other central banks do with the inflation goal this is about reviewing our strategy tools and communications to ensure that they're the best we can do to achieve those goals in this environment on a sustained basis. and we continued our discussions at this meeting. i'm very pleased at the process so far it's included today 14 events around the country as which we've engaged with a full range of people and groups across america and society that was a very, very positive experience and i think we learned a lot we've now had a series -- a number of meetings in which we've reviewed what we've learned and also dived deeply into strategy tools and communications i expect that we will conclude the review and announce our conclusions around the middle of the year

right now we are just at the point of coming together to put all of that together so i think i'm not the person who should be telling you my personal preferences right now i'm trying to -- and we're trying to come together as a group around a set of answers. i feel very positive that we're going to come up with some good results and i'm just going to have to wait until we get to that point to announce them. >> going back to your outlook for global growth, we've seen significant headwinds with the partial u.s.-china trade deal. now that there's some new concern following the outbreak of the coronavirus that it might shape global growth, we're seeing reports from ford and toyota they're planning to shut down their assembly plants, apple is shutting down your trains are you worried at all about

what the impact would be on the u.s. economy and do you see that as a significant risk to the outlook at this point? >> let me talk about the coronavirus specifically and then i'll turn more to global growth more generally. first, it's a very serious issue and i want to start by acknowledging the significant and considerable human suffering that the virus is already causing. there is likely to be some disruption to activity in china and possibly globally based on the spread of the virus to date and the travel restrictions and business closures that have already been imposed of course the situation is really in its early stages and it's very uncertain about how far it will spread and what the macro economic effects will be in china and its immediate trading partners and neighbors around the world and so light of that uncertainty, i'm not going to speculate about it at this point. i will just tell you that of course we are very carefully monitoring the situation and, you know, as you suggested, our framework ultimately is what are

the potential ramifications for the u.s. economy more boodly though, if i can talk about the global economy, if you look at the backdrop, if you go back to 2017, that was the year of synchronized growth that lasted into the middle of 2018 and then you saw a slowing in growth which lasted right now the end of last year, the fourth quarter growth globally was quite weak and a number of factors played into that. it wasn't any one factor there was trade policy uncertainty, absolutely, but also there was the decision by the chinese authorities to try to leverage financially and there was a downturn in global auto production and idiosyncratic strings in some countries like argentina, turkey and later hong kong, you had social unrest. so all of those things were

playing into the cycle of weakening growth over the course of 2019 and the last half of '18. i would say now there are grounds for what i would call cautious optimism about the outlook now for the global economy. many analysts are predicting a pickup in growth this year, although still relatively modest growth rates and people are pointing to -- we would point to supportive financial conditions, the easing of trade tensions, the lower odds of a hard brexit, the high-tech manufacturing industry does appear to be rebounding well in asia, including in china the latest indicators, manufacturing pmis, for example, suggest that manufacturing may have bottomed out and they're still below 50, but they have moved up off of their lows i would just say none of this is assured. as i mentioned, we saw the fourth quarter of last year came in weaker than expected. we are not at all assured of a global rebound but there are signs and reasons to expect it

and then comes the coronavirus, which again it's too early to say what the effects will be of course as i mentioned, we're monitoring it carefully. there will clearly be implications at least in the near term for chinese output and i would guess for some of their close neighbors. we'll just have to see what the effect is globally >> financial times as recently as 2018, interest on excess reserves was at the top of the band, sort of dragging the fed funds rate up. over the course of the adjustments since last year, it's moved steadily down, closer to the bottom of the band. so if you're moving it back up, how high do you want to get it are we looking to get the reserves at the top of the band again as the fed funds rate moves to the middle of the band, and should we see movements as an indicator that we're

approaching ample? >> so our stated goal is to keep ioer and the fell ral funds rate well within the range. that's it, well within the range. and clearly 5 basis points from the bottom or top isn't that so that's why we moved back up last year we saw some tightness as the reserves were derange out of the system, we saw them gradually moving up. and in hindsight we know what was happening. with ample reserves we see that it's possible to bring the interest on reserves rate up to 10 basis points. now we are well within the range, i would say >> so you don't think that as fed funds go back, it might end up at the top? >> we want it to be well within the range. i think we'll continue to adjust it to the extent it's appropriate. ultimately we're trying to deliver a federal funds rate that's within the range.

ioer is a tool to do that. if we need to make changes, we'll do that. the things that matters for the economy is that we keep the federal funds rate, which is the rate that, of course, transmits into other money market rates which ultimately transmit into all kinds of financial conditions, that's what we care about. so ultimately we will use that tool to keep it well within the range. >> just to sort of close the loop on one thing, where do the discussions stand on standing repo facility? because what you've said so far sort of implies that there won't be one or it will be a very limited one. so if you could just let us know where that discussion stands sorry about that did you get the question did you hear the question okay >> i did i'm not sure your colleagues did. >> where do the discussions stand on repo, and the other

thing is on the standing repo facility and on the purchases, the treasury bill purchases, as you enter this new regime later in the second quarter or later in the year, will that be preannounced, will that be preset amounts, or will that just be something that people will to to figure out as you go along? >> i'll go in reverse order. when we make decisions about the steps we're going to be taking in that adjustment process that i described at some length, we'll be making them as early as we can and transparently but we're not at that stage. it's january and we're several months away. in terms of the standing repo facility, as i mentioned i guess in my answer to an earlier question, there may well be a role for repo in this system, even after we're at an ample reserves level now, we haven't decided what that role is we have not decided -- we haven't at all made a decision

on the standing repo facility. we've had a couple of discussions about it as you know back in i guess june and october, and there's a change of views. we're going to return i would say fairly soon to this question and i think it was wise to wait, because we're still getting the better sense of what that world looks like and, you know, it's really going to be a question of how useful will it be, what will be the costs and benefits and my thinking is we will return to that fairly soon and i wouldn't assume a decision one way or the other really we haven't made one because we haven't had to. and you get more information by waiting, it's good to wait we don't have any urgency in making that decision because we're still trying to find that sort of stable e quiquilibrium. >> i'm wondering, do you think that there is a financial stability risk from climate

change you've spoken several times that you think severe weather events are happening more often and that the fed is monitoring that that could physically do to a bank or financial institution. but that's sort of one institution. do you think there's a system-wide risk that could develop from climate change? >> so that's an interesting question the question is, is there a system-wide stability risk i would say over the longer term it's certainly possible. and i would say that sort of feeds into the way we're thinking about climate change as an institution so as i've mentioned, climate change is an important issue, very important issue, but it's essentially a sign to many other agencies in the federal government and state governments for leadership on that and importantly, soc's