of washington on fiscal policy. >> john bellos. >> gdp forecasts are coming down, we are in a slow patch i think the fed needs to not overdo it with their tapering and their hawkishness. >> we will wait and see as we watch and hear from steve liesman in just a few seconds on what the fed will be. >> a great way to break the linkage to break the link between rates and taper would be to move the dots out steve? >> rates were unchanged in the statement here, but the fed said that if economic progress continues, reducing asset purchases may soon be warranted. i will give you the impact language on that in just a second the sectors affected by the pandemic, the federal reserve said, have improved in recent months but the rise of covid cases have slowed the recovery david kelly was right, they

lowered the gdp for 2021 they are calling for a rate hike in 2022. nine rate hikes are called for in 2022. the funds rate seen hitting 1.8% in 2024. quite a bit of work to do. unemployment rate is slightly higher 4.8% instead of 4.5. i want to talk about inflation they pulled up from 4.2 to 3.4 it remains above 2%, interestingly, through 2024. this is our first look at 2024 gdp was indeed pulled down 5.9% from 7% so they took 1.1% off the gdp forecast for this year and next year, actually, they put a little bit back, about half a point, 3.8% we are still seeing above trend growth through 2023. so i don't know what you want to call this. the prewarning of a taper is the

way you would want to put it they kind of put it in there the exact language i will give you here let me offer what they exactly said there on tapering it was "if progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted" so maybe it's time to think about putting on your seat belt eventually for when the fed eventually announces sometime in the future that it will taper, kelly. >> steve, stay there, we will bring our panel back, bob pisani will also comment in a moment. the markets are relatively unchanged from a few moments ago. as we know, the first move is often the wrong one and it is often right 24 hours later and things change 28 times in between. liz, our point, is the taper which could happening over the next six weeks, is that a tightening or not?

the point is, everything is getting tighter. their talking about the taper. moving the first rate hike into 2022 that's all pretty consistent with -- i don't want to use the word hawkish because it's priced in but the idea that the evolution is happening, the pandemic framework is going away, they are getting us back to something more normal >> yeah, the evolution is happening. but it's happening very, very slowly i think steve said this earlier today on a different program, that even if they taper at the speed that we are expecting, they are still buying a lot of bonds through the first half of 2022 so it's not as if suddenly the liquidity is going to leave the system or leave the picture. there is still a lot of liquidity they are putting in. >> nothing out of the -- >> as for the market action, i think before we got the announcement it was interesting to see that the ten-year yield had fallen and equities were up strongly broad brush, you could assume that the market was 79 expecting a dovish statement if you pulled back the cover a

little bit and looked at what sectors were actually driving, it was cycles, materials, energy, financials, industrials. so what would suggest is the market is actually ready for a little bit of a liftoff in the ten-year of rise in rates. i think that's what we are going to see in a gradual way. >> rick santelli let me turn to you. steve, correct me if i'm wrong here but did you say in a the median forecast for inflation now in the short-term is above 4% no, no, no it's 4.2% this year. >> 2.4, i see. >> i will give you the exact numbers. 4.2% for 2021. and it's above 2%, which is their target, that's what i found interesting, through thuy. >> that was my point there i misunderstood, obviously i thought they were wokking 4% inflation, which would have been a wild number based on what it's been running rick santelli, your reactions?

>> well, you know, the main driver of late has been flattening yield curves. i think we have some charts ready f. you look at 30s minus 5s that's at a 13 month flat, the flattest since august of 2020. if you look at 30s to 10s, the knob spread, often a predictor of the general direction of somewhere rates. it has been collapsing it's at the flattest it has been in 18 months, going back to march of 2020. it's approaching 50. what this tells me, to now see we are now below 1.30 in the ten-year note, below 1.84 in the 30 year bond but the short turrets are holding firm it is not about steepening it's about flattening. it is not the type of flattening that i think we can draw big conclusions about what you were discussing, tyler. the long end is crowded in fog there is no way to get any kind of a snag about how it is going the eventually deal with

inflation. one thing we know, the dot plots firmed up short maturities what is going to end up happening, two-year, five-year and ten-year yields will be slowing firming up for 2023 and 2024 rates will move up but the inflation information, as hot as it may be, cpi now 5.3 year over year is not making out out of the fog in the long end demand by overseas investors, buying demands and falling shares ultimately in auction is going to keep the long end firm. i am not making a statement about inflation. i am making a statement about market logistics that the surprise move sometime in the next 18 months is that if the markets wake up from this stupor of flatness they are going to have a reassessment so knee jerk, so break-neck quickly that we are not going to have much time to readjust and all that will happen on the long

end. but that's way down the road. >> the market claimed 423. not at session high force the day but higher than we were going in up by 1.25 bob pisani has more observations on the market' reaction here we are up just a little bit. i would say four or five points from the initial report that came out there is remarkably little here. i can tell you what the people wanted to know down here, has inflation met that big benchmark that they had, the substantial problem? they still don't seem concerned about this inflation is elevated, largely reflecting transitory factors. everybody down here asks me what's the criteria for tapering, bob, are they going to tell us? i don't know they certainly haven't told us mere in the press release. maybe we will get more in the press conference but i doubt that the other thing everybody wanted to know is how many more are in favor of a 2022 rate hike. now it is 9 out of 22 people

that was seven before. that's a little bit higher but i don't think dramatically i think more importantly in the press conference they are going to get questions from people who want to know, are they going to stick to inflation and jobs as their only criteria or are they going to deal with other things? does the fed pay attention for example, to the debt ceiling at all? do they pay attention to what's going on with evergrande and other china issues and other global issues? there is still the statement in here that says the fomc will take into account a wide range of information including financial and international developments so everybody says they are just going to stick to those two core issues is probably not right i would like to hear what powell has to say about international issues and the debt ceiling. from a stock trader's point of view, historically, the single biggest killer of all bull market rallies has been the federal reserve suddenly hiking rates or suddenly moving to an aggressive hawkish rate stance

they are not doing that right now. and i think that's one of the reasons, main reasons, we are still seeing very benign reactions in the markets. >> david kelly, let me turn to you and get your overall reactions here maybe particularly to what rick said, and that is that maybe at some point there will be an abrupt change that will surprise the market but -- but let me ask you this question if you were in the room as a voting member here, or an advising member of the fed board of governors, the open market committee, what would you be urging the group to do >> at this point, i would do what they actually did they did -- i think it was interesting that they basically signalled that they are still on track to taper by adding that phrase about reducing asset purchases may be warranted, i think that's an echo of what chairman powell has said a number of times before about how they will give us plenty of notice that's a first official warning

thattin at thattering is coming. i think it is coming in december i think they will announce a schedule in november and they will start cutting purchases in december so i think from here this is what -- you know, i wouldn't do much different from what they are doing. i think they need to -- during 2022 they need to certainly start raising interest rates at the end of the year, maybe sooner, and they need to bring them back to more normal because it is distorting everything in global capital markets the economy getting healthy again, they need to get back to normal. >> john bellos, what would you say about financials breaking out to session highs here? >> first, i would like to pick up on something david just said, on the flatness of the yield curve, which rick mentioned earlier. i think part of that is this growth slowdown we are in. we have seen a material downgrade in u.s. growth obviously, there is a global growth concern emanating from china. that's not just stnl stability

concerns, there is broader growth slowdown going on there as well. that's a big deal for the fed because a big part of their outlook into 2022 and beyond is kind of robust global growth so if you are in a period of slower global growth i think it has implications for your rate hikes, certainly has implication force the right level of yields on the back end. >> that's exactly why i asked the question because if what you are describing is true, then why would financials be breaking out to session highs here? if they are seeing slower global economy and a flatter yield curve, there shouldn't be acting like this? >> i think this kind of feeds into the fed reaction function in the following sense the federal is going to proceed very carefully with their removal of accommodation so the fed does not want to upset the recovery here. they don't want to be the case of a further flattening. i think they are going to proceed cautiously i think you are having a little bit of a rebound on perhaps the evergrande in china and maybe financials are doing well on that but i think the big picture here is that slower global growth may

actually be a good thing insofar as it slows down the fed a little bit it takes a little bit of the heat out of the maybe inflation picture and puts us on a little bit slower but maybe a little bit more sustainable course. >> so -- >> again, i think it causes the fed to be cautious i am not sure it is a bad thing. i think slower global growth could be the foundation of a more lasting recovery here. >> maybe, if i could rephrase what you are saying, if people looked at the activity in the bank stocks this afternoon you would say it is not because of this sort of hawkish move on bringing the dots, the rate hikes into 2022. you would say it's actually a dovish interpretation of what the fed has just done, even though they are signaling the taper, even though they pulled that rate hike forward, because if you look at the financials, the way bitcoin is behaving, the way the dollar is they are actually thinking this is maybe a more accommodative fed >> i think the fed is in this phase of of mooing accommodation as expected. i think they are aiming for neither hawkish nor dovish, just do as expected

i think people were worried about a hawkish surprise today that doesn't appear to materialize. we will hear what he says in the press conference but i think the fed is doing what's kpapted neither hawkish nor dovish i think slower global growth takes the heat off and that could be a good thing. >> getting back to normal, steve. what is your thought what have that means in the context of what we have been talking about? >> good question i want to come back to that, tyler. but i want to get to the issue -- when i am looking at the two-year, the shortened of the curve, i am seeing these markets remarkably well behaved. there is a little bit of flattening but i think maybe the answer to kelly's question is, not as much as you would have expected i still have the two-year at 22 basis points, where it was going in the market is giving the federal reserve enormous room here to do what it wants to do, which is to taper without increasing yields. this is a very big development

this is something that has been -- i want to call it -- six, eight months in the making, where powell has been trying to get to this point. he said i am going to taper but he doesn't want the see that reaction in the bond market. i am looking at fed probabilities for december i am seeing a 48% chance of a rate hike, which is kind of like where it was, evena little bit lower, depending upon which service you use. so i think -- whatcaly said is very important it this could all change an hour from now or two hours. the immediate reaction here is a fixed income market that is remarkably well behaved and not freaking out as to what's normal, you know, you can go to the fed's own projections and say, well, 2.5% is a normal funds rate because that's their long run. something like that. which by the way is just barely a positive number. hard to for example tyler, we have been living for a very long time with extremely large fed balance sheets and a lot of zero

interest rate policy >> rick do you want to jump in here >> yeah. i don't know you are going to expect you are going to get any tantrums until we actually taper. i know it is hard for many to grasp. but traders aren't going to put their money at risk betting on the horses of interestrates to gallop higher when the fed has a lock on the corral when the corral lock comes off, you are going to see some tantrum. i don't see any way around it. it is how that tantrum interacts with all the global buying and shortages of good quality, long maturity product >> rick -- rick, i would just say that if you take the number -- i was talking about this on another show f. the fed starts to taper in december at $15 billion a month, it's going to buy an additional $660 billion of bonds how much is that that's q.e. ii plus $60 billion, rick

they may be opening the corral, but it is a little sliver, and maybe only the little foals can get out. maybe it is time to bet a cheeseburger on a tantrum. >> we could have a fall bet on the tantrum. we will talk about it later. >> cheeseburger. >> liz, we began with you. we will give you the last word >> thank you so i think another thing to keep in mind is if we get an announcement of a taper in november they are also going to release a new financial stability report in november that could be something if there is good news in the financial stability report that could be something that contains the tantrum that rick is talking about. lastly, i would say on my wish list from the fed i want definitions of what maximum employment means so we can set expectations there i want to know what their division of some time is, they keep talking about inflation staying above 2 fundraise for some time. i think the market wants to be able to set those expectations so we can move forward without a big tantrum. >> can we show everybody in

boxes? do we think the consense success a november taper or december who thinks november. >> can i say something quick on that >> go ahead, john. >> they use the word soon. to me that's more consistent with november. they could have said it would be appropriate this year. that's just december but by putting the word soon in there as steve said i think that's suggesting november >> david. >> i think they are going to announce on november 3rd a schedule which starts the taper in december. >> thank you, folks, for all of your analysis. for more analysis on the fed's decision, stay with us we will be back with more. we will speak with robert heller about the strategy and what it means for the economy and your investments. and a countdown to fed chair powell's news conference is under way here we have got about 12 minutes to go keep it right here we will talk more fed and the we will talk more fed and the markets after this

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the dow is up about 500 points after the release of the feds's decision or non-decision. the fed says if economic progress continues that tapering of bond purchases may soon be warranted. let's bring in bob heller, former federal reserve governor. bob welcome. what does "soon" mean to you in

there was some discussion of how soon is soon >> well, i would expect it is probably in november, maybe december it's a nebulous concept. they should have said in a few weeks or in a month or two >> yeah. let's talk about inflation, which is clearly running hotter, double the -- more than double the target and the members of the board seem to be thinking it is going to come back down raur dramatically, that most of it is so-called transitory 2.2% prediction for next year. that's still a little bit above the 2% threshold what if it stays higher longer doesn't that put the fed in a about it of a -- a box >> i fully agree with you. inflation -- there is more to come there is more in the pipeline. we have had exchange rate change especially towards key suppliers such as china.

we cannot get enough supplies into the country so inflation will be with us for a while and may well increase. wages are going up now we have important wage negotiations going on. and that will set a floor under future inflation inflation, in contrast to what the federal reserve is saying, i think will not be temporary, but will be with us for quite a while. >> could that -- might that then accelerate the point at which the fed begins to raise interest rates or accelerate the pace of tapering of bond purchases >> well, i think they will be probably cutting the purchases in half, roughly so that tapering process will continue at a modest pace. it's still an enormous stimulus, the purchase -- they purchase $60 billion a month. that is still a lot of

additional liquidity coming into the system every single month. but i think it will -- if inflation persists, which i think it will, it will move forward the point at which the fed is forced to raise interest rates. and sooner or later, they have got to do that. >> bob, what do you think would force the fed to raise rates when they are already projecting inflation above forth and indicating it is not going to make them in any hurry what would force them? would it be -- like most things, usually, would it be the market? >> well, it may be the market. but also, i mean, just rational thinking will do it. after all, inflation rates, even the fed's prefer personal consumption expense inflation of gdp is more than double the rate at which they want to have it run. congress told them to have stable prices. well, we are far away from stable prices.

so i would lining to see congressmen really asking the fed chairman, what do you consider stable prices over 4% inflation is price stability. sooner or later, you have got to increase interest rates to reflect these price pressures. >> what you point to is very interesting, bob that is -- two things. one, wage hikes and the prospect of more as wage contracts get renegotiated that's number one. and ften, it is the pace of wage growth that drives inflation. and also, the seemingly intransgent supply chain issues involving china, involving factories in europe. you can't find cars on the lot everything is backed up. and that sounds like a long term issue to resolve, not something that's going to go away quickly. we have to move quickly here, bob. quick thought? >> absolutely. in addition, people cannot hire enough help. and that will put also

additional price pressure out in the pipeline >> mr. heller, always good to see you. it has been a quhil. glad to have you back with us. bob heller, we appreciate it. >> good to see you, tyler. we are now waiting to hear from the fed chair himself jay powell will speak about the state of the economy, about the fed's latest decision and about all of those concerns that mr. heller was just outlining. after the break we will look at veofstocks with the biggest mos f of this decision and the dow itself is up over 400 points back in a moment we cut to downtown, your sales rep lisa has to send some files, like asap! so basically i can pick the right plan for each employee... yeah i should've just led with that... with at&t business, you can pick the best plan for each employee and get the best deals on every smartphone.

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welcome back, everyone we will hear from the fed chair himself in just about two minutes' time. let's get to mike santoli in the meantime for reaction. now, mike, we have a huge move in markets this seems to be a really dovish reaction we have equities up, commodities up, bitcoin up, the dollar down. >> i mean, that's absolutely the initial reflex takeaway, kelly there was a way, probably, to read this statement in a more hawkish manner, basically more projected hikes added by the committee members in 2022 and beyond and obviously, putting that timetable out there, at least a loose one around tapering. you have to take -- qualify the market response a little bit by saying we started super oversold this morning, rallied into the

announcement, and are not yet back to where we closed on friday all that set aside, i think you could almost say what chairman powell's job in the press conference was -- maybe he has already accomplished, which is you are disconnecting the tapering schedule from an eventual tightening. trying to get away from a inflation surge which is transitory and financially, nothing is set in stone and we are going to be contingent on some measure of full employment by their interpretation before we get higher rates i wonder if there is any further upside in terms of investor response that might be available to the chairman in this press conference. >> to put it differently, can he only spoil the mood, mike? >> potentially i don't know exactly how at this rate i mean, i do think you have to consider the initial starting point this market rally before you say that everybody is just

sort of by acclimation saying this is a perfect statement. i do think, though, it definitely tells you the market is not afraid of the tapering process. it recognizes that when we think the partient is healthy, we dont need the placebo anymore removing it is not going hurt the patient from this point on. >> eventually, as bob heller just said, eventually, if inflation stays where it -- is he coming in now i'm sorry, we will hold that question here's chair powell. >> goals congress has given us, maximum employment and price stability. today the federal open market committee kept interest rates near zero and maintained our current base of asset purchases. these measures along with strong guidance on interest rates and on our balance sheet will ensure that monetary policy will continue to support the economy until the recovery is complete

progress on vaccinations and unprecedented fiscal policy actions are also providing strong support to the recovery indicators of economic activity and employment have continued to strengthen real gdp rose at a robust 6.4% pace in the first half of the year and growth is widely expected to continue at a strong pace in the second half. the sectors most adversely affected by the pandemic have improved in recent months but the rise in covid-19 cases slowed their recovery. household spending rose at an especially rapid pace over the first half of the year but flattened out in july and august as spending softened in covid-sensitive sectors such as travel and restaurants additionally, in some industries, near-term supply constraints are restraining activity these constraints are particularly acute in the motor vehicle industry, where the worldwide shortage of semiconductors has sharply

curtailed production partly reflecting the effects of the virus and supply constraints forecasts have been revised somewhat lower since our june summary of economic projections. but participants still foresee rapid growth as with overall economic activity, conditions in the labor market have continued to improve. demand for labor is very strong. and job gains averaged 750,000 per month over the past three months in august, however, job gains slowed markedly, with the slowdown concentrated in sectors most sensitive to the pandemic, kluge leisure and hospitality. the unemployment rate was 5.2% in august. and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the lower rates that have prevailed for most of the past year. factors related to the pandemic, such as care giving needs, and

ongoing fears of the virus, appear to be weighing on employment growth. these factors should diminish with progress on containing the virus, leading to more rapid gains in employment. looking ahead, fomc participants project the labor market to continue to improve, with the median prongtion for the unemployment rate standing at 4.8% at the ends of this year, and 3.5% in 2023 and 2024. the economic downturn has not fallen equally on all americans. and those least able to shoulder the burden have been hardest hit. in particular, despite progress, joblessness continues to fall disproportionately on lower wage workers in the service sector and on african-americans and hispanics. inflation is elevated and will likely remain so in coming months before moderating as the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly because supply bottlenecks in some

sectors have limited how quickly production can respond in the near term. these bottleneck effects have been larger and longer lasting than anticipated, leading to upward revisions to part participants's inflation projections for this year. while these supply effects are prominent for now, they will abait. as they do, inflation is expected to drop back towards our longer run goal. the median inflation projection from fomc calls from 4.2% this year to 2.2% next year the process of reopening the economy remains unprecedented. as was the shotdown at the beginning of the pandemic. bottlenecks, hiring difficulties, and hires restraints could be longer than anticipated posing upside revvings to inflation. our framework for monetary policy emphasizes the importance of having well-anchored inflation expectations both to

foster price stability and to enhance our ability to promote our broad based and inclusive maximum employment goal. if sustained higher inflation were to become a serious concern, we would certainly respond and use our tools to assure that inflation runs at levels that are consistent with our goal the path of the economy continues to depend on the course of the virus. and risks to the economic outlook remain the delta variant has led to significant increases in covid-19 cases, resulting in significant hardship and loss, and slowing the economic recovery continued progress on vaccinations would help contain the virus and support a return to more normal economic conditions the fed's policy actions have been guided by our mandate to promote maximum employment and stable price force the american people along with our responsibilities to promote the

stability of the financial system our asset purchases have been a critical tool. they helped preserve financial stability and market funking early in the pandemic and since then have helped foster act dative conditions to support the economy. at our meeting that concluded earlier today, the committee continued to discuss the progress made toward our goals since the committee adopted its asset purchase guidance last december since then, the economy has made progress toward these goals f. progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted. we also discuss the appropriate pace of tapering purchases once the criterion laid out has been satisfied. while no decision was made the participants agree that so long as the recovery remains on track a gradual recovering process

that concludes at the middle of next year is likely appropriate. our holdings of longer term securities will continue to support accommodative financial conditions the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test we continue to expect it will be appropriate to maintain the current 0.0 to .25% range until levels consistent with maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time half of fomc participants forecast these favorable conditions will be fulfilled by the end of next year as a result the median projection for the appropriate level of the funds rate lies slightly ahead of the lower

bound in 2022. subject a pace of policy firming that would lead below estimates of its longer run level through 2024 of course these projections do not represent a committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. policy will remain accommodative until we have achieved our maximum employment and price stability goals. to conclude, we understand that our actions affect communities, families, and businesses across the country. everything we do is in service to our public mission. we at the fed will do everything we can to support the economy for as long as it takes to complete the recovery. thank you. i look forward to your questions. >> thank you we'll go first to rachel siegel. >> thank you, chair powell, for taking our questions when it comes to the taper and eventually to any rate increases i am wondering if you can walk us through what substantial

further progress looks like given the latest batch of projections that have pce coming in higher than the june, unemployment rate higher than june as well as the change to gdp lower than june? if you could help us make sense of all those things as you sort through what the substantial progress looks like. that would be great. >> sure. the test for beginning our taper is that we have achieve substantial further progress toward our goals of maximum employment for inflation, we appear to have achieved more than significant progress, substantial further progress that part of the test is achieved in my view, and in the view of many others. so the question is really on the maximum employment test. so if you lock at a good number of indicators, you will see that since last december when we articulated the test and the readings today, in many cases more than half of the distance, for example, between the

unemployment rate -- unemployment rate in december of 2020 and typical estimates of a natural rate, 50 or 60% of that road has been traveled so that's -- that could be substantial further progress many on the committee feel that the substantial further progress test for employment has been met. others feel that it's close, but they want to see a little more progress there's a range of perspectives. i guess my own view would be that the test -- the substantial further progress test for unemployment is all but met. once we have met those two tests. once the committee all agrees they have been met that could come as soon as the next meeting that's the purpose of putting that statement out, it could some as soon as the next meeting, the committee will then make a decision at that time weather to taper >> thank you

we will go to howard schneider. >> thanks chair powell looking at the steps we are basically four years of inflation above target, and policy never gets to the long run rate i am wondering if you could address that from two perspectives one win the new framework that the fed adopted last year. and second from the perspective of the average household that's now being asked to pay higher prices, and increasingly higher price force four years running when for some this year our real wages have actually gone down. >> sure. so, as you can see, the inflation forecasts have moved up a bit in the outyears that's really, i think, a reflection -- and moved up signature tant kantdsly for this year that's i think a reflection of the -- and moved up significantly this year. that's a reflection that the bottlenecks and shortages we are seeing in the economy have not

yet begun to abate in a significant way. those seem they are going to be with us the next few months and into next year that suggests inflation is going to be higher the remainder of this year and affects the inflation rates for next year and 2023 were also marked up, but just by a couple of tenths why? those are modest overshoots. you are looking at 2.2, and 2.1, two years and three years out. these are very, very -- i don't think that households are going to, you know, notice a couple ofof tenths of an overshoot that just happens to be people's forecasts. we want to foster a strong labor market and foster inflation averaging over 2% over time. i think we are very much on track to achieve those thing n. terms of the framework, i see this as very consistent with the framework. we want inflation expectations to be anchored at around 2%.

we want -- that's really the ultimate test of whether we are getting this done under the framework. and, you know, we do want inflation to run moderately above 2% i wouldn't put too much on a couple of tenths over 2% in 2023 and 2024 one-tenth in 2024. but you are right, those are the numbers. >> thank you let's go to colby sets >> chair powell -- thank you, michelle, chair powell, you mentioned yun going discussions about the tapering tombline, i'm wondering what the contours of that debate have been. is it about maintaining 2022 rate height risk or supply

constraints. let me say there is very broad support on the committee for this plan both as to the timing and as to the pace of the taper. this was a unanimous vote today, and i would say quite broad support for this approach. you are correct that there are some who would prefer to have gone sooner. they have made their arguments publicly for some of them, it is a financial stability concern. for others, it's other concerns. they can make their own arguments. this is an approach that the committee will broadly support and it will put us having completed our taper sometime around the middle of next year, which seems appropriate. you know, asset purchases as i mentioned were very, very important in the early stages of the crisis they were tensessential in restg market function in the treasury and other markets. then as the recovery got going, any supporteding a grat demand, as they will do. and now we are in a situation where they still have a use, but

it's time to taper them again. their usefulness is much less as a tool than it was at the very beginning. of course this leaves the whole question of rate increases ahead, which is really where the framework -- the framework is all about how we deal with rate increases, and that sort of thing. so we think this is the appropriate way to go. again, broad support on the committee. >> thank you we'll go to nick timers. >> hi, nick timers from the "wall street journal." you said the test for liftoff is more strin jept than the test for tapering if the near term projections today are credible, more of your colleagues seem to think that rate liftoff and not just a taper may be closer on hand. does the committee have a different opinion than you do about the threshold for liftoff that you have articulated? or do you believe that either inflation or economic growth

will necessitate a rate increase sooner than you do >> so, again, substantial further progress toward our goals is the test for beginning the tapering the taper takes some months in everyone's figuring. so you are going to be well away from seainatisfying the liftofft when we begin the taper. so in terms of the liftoff test, though, it is -- what we adopted last september, it is labor market conditions consistent with maximum employment. while we have interesting signs that in many ways the labor market is very tight we also have lots of slack in the labo market and we think that those imbalances will sort themselves out. inflation at 2%, and on track to achieve moderately higher inflation over 2%. you know, that really depends on the path of inflation. if inflation remains higher during the course of 2022, then we may already have met that test by the time we reach

liftoff. i just think -- if you look at what people are writing down for year-end 2022 numbers, some people are writing down very low unemployment rates that's only one indicator, but it suggests a very strong labor market and i think they are writing down in good faith what they see as meeting the test. there is a range of perspectives about where the economy will be. by the way, all but one participants have us lifting off during 2023. it is not really an unusually wide array of views about this >> thank you >> we will go to gina smihalik >> chair powell, thank you for taking our questions prior to recent media reports were you aware of the kind of security buying and selling that president kaplan and rosen grenell were participating in last year?

and i wonder if you thought those were appropriate >> so, no, i was not aware of the specifics of what they were doing. so let me just say a couple things about this subject. we understand very well that the trust of the american people is essential for us to effectively carry out our mission. and that's why i directed the fed to begin a comprehensive review of the ethics rules around permissible financial holdings and activity by fed officials. so those rules are in many respects the same as those for government agencies, plus a number of things that apply specifically to us because of our business one of those is -- sort of three things i would point to in terms of specific restrictures one is ownership of certain assets is not allowed. bank securities and other things secondly, there are times when we are not allowed to trade at all or to buy and sell financial assets that's the period immediately

before, during and after an fomc meeting. and third, the requirement of disclosure everyone's activities are all disclosed on an annual base. i would have had to go back and read people's financial disclosures to know what their activities have been this has been our framework for a long ime i guess you would say it served us well. the other thing that you would say, it is now clearly seen as not adequate to the task of really sustaining the public's trust in us. we need to make changes. and we are going to do that as a consequence of this. this will be a thorough going and a comprehensive review we are going to gather all the facts and look at ways to further tighten our rules and standards. >> great thank you. we'll go to steve liesman. >> thank you

thank you mr. chairman, i want to follow up on jean's question. the issue of ownership of these stocks and trades, do you think it is appropriate for federal reserve officials to be owning the same assets that the federal reserve is buying? is that one of the modifications that you are looking piece, yo yourself they're clearly not seen as appropriate. in that defense code of conduct says fed officials should avoid even the appearance of conflict. do those trades in fact at holdings violate the fed's code of conduct finally, do you have a time line as to when you might be done with your review thank you, sir >> don't have a time line yet. we can start with that so -- well, let me address the muni question since that's in there. i personally own municipal securities for many, many years. and in 2019 i froze that -- i'm

holding all those securities, my wife and i, to maturity. and munis were always thought to be a pretty safe person for a fed person to invest because the fed would never buy municipal securities so it was not an uncommon thing. so then comes the covid crisis and i reversed that policy, and i did it without hesitating. and the reason was that the financial markets, including the municipal financial markets were very much on the verge of collapse, and it was time to go, and we did but we also checked with the office of government ethics who looked carefully at it and said that i didn't have a conflict. so that's one answer that i wanted to share with you secondly, you're right, though we're going to be looking at all those things i don't want to get ahead of the process here and speculate about particular outcomes. but this, again, comprehensive and delivered process, we're going to make changes. i want to be able to look back

on this years from now and know that we rose to meet this challenge and handled the situation well, and that what we did was made a lot of sense and protected the public's interest and the institution that we're all a part of. >> i'm sorry i just want to follow up you said right about the federal reserve should not own the same assets they're buying? >> i think that's a reasonable thing. and for the most part we don't it was a real coincidence i happened to preown these munis it just was an unforeseen event and i couldn't sell those. i just checked with the ethics people and went ahead. as a general principle, yeah, that makes a lot of sense. >> thank you >> thank you we'll go to chris. >> thank you thank you, chair powell.

i had a question about jobs and the fed's schedule, the fed's policy framework that you laid out here you and other fed officials have often talked about expecting a job market pick-up in september as more children attend school, freeing up parents to go to work ko the unemployment benefits expiring there's realtime data suggesting that we may not be seeing much of a return of labor supply. so, do you still expect to see that in the next couple of jobs reports? and how would a relatively weak jobs report in september affect your plans thank you. >> so you're right we have a really i'll call it a unique situation where by many measures the labor market is tight. 11 million job openings, very widespread reports from employers all over the economy saying it's quite difficult to

hire people, wages moving up it's quite a tight labor market. so, our view, i think widespread view a few months ago, was that several things were coming together in the fall including kids back to school, which would lighten caregiving duties including the expiration of unemployment -- extra unemployment benefits, and other things would come together to provide an increase in labor supply and so we'd get out of this strange world where there are lots of unemployed people but a labor shortage so what happened was delta happened and you have this very sharp spike in delta cases so that affects, for example, when schools are open 60% of the time or when they're always at a threat of being closed because of delta, the delta variant, you might want to wait and rather than going ahead and taking a job and starting work only to

have to quit it three weeks later, you're going to wait until you're confident of that so some of that may not have happened also people didn't, as you know, hiring and spending in these face-to-face service industries, travel and leisure, it just kind of stopped during those months so really the big shortfall in jobs was largely in travel and leisure. and that's because of -- clearly because of delta so that all happened i think there is still -- it may just be that it's going to take more time, but it still seems that inexorably people -- these are people who were largely working back in february of 2020 they'll get back to work when it's time to do that it just may take longer time it didn't happen with any force in september, and a lot of that was delta. in terms of the u.s. also about the test for november. i think if the economy continues

to progress broadly in line with expectations, then i think, and also the overall situation is appropriate for this, then i think we could easily move ahead at the next meeting. or not, depending on whether we feel like those tests are met. >> just a quick, if i can just quickly follow up. how much of that will depend on what kind of jobs report we get for september? are you in a data-dependent phase here where you need to see certain numbers going ahead? or are we at a point where you've accumulated enough progress >> it's accumulated progress for me it wouldn't take a knockout super strong employment report it would take a reasonably good employment report for me to feel like that test is met. and others on the committee, many on the committee feel that the test is already met. others want to see more

progress and we'll work it out as we go but i would say that in my own thinking the test is all but met so i don't personally need to see a very strong employment report, but i'd like to see a decent employment report i mean, it's not -- again, it's not to be confused with the test for liftoff, which is so much higher >> thank you >> we'll go to victoria guida. >> hi, chair powell. so, i wanted to ask about the vice-chair of supervision position i was wondering if you could speak about how you view that role and the extent to which you defer to that person on regulatory policy. and then just sort of a related question as you know, rannedy corals' vice-chairmanship ends next month. and i was wondering if he's going to retain the supervisory portfolio until he's replaced. >> dodd frank created this

position vice-chair for supervision. it's actually a specific assignment effectively, what it means is that the vice-chair for supervision is charged with setting the regulatory agenda. it's a specific grant of authority. in the ten years almost that i've been at the fed, that person has really done that. dan terula certainly did it, and vice-chair corals did it i respect that authority, i respect that that's the person who will set the regulatory agenda going forward and i would accept that. and furthermore, it's fully appropriate to look at, for a new person to come in and look at the current state of regulation and supervision and suggest appropriate changes, and i welcome that in terms of vice-chair corals' term, i actually don't have any updates for you on that today.

we'll keep you posted on that. >> thank you we'll go to steve matthews at bloomberg. >> thank you chair powell, i wanted to ask about the inclusive monetary policy framework in particular bloomberg surveyed economists and we found that they predict liftoff will happen when the u.s. unemployment rate is 3.8%, but the black unemployment rate is 6.1%. i'm wondering if a 6.1% unemployment rate for african-americans is consistent with full employment or whether it would need to be lower as part of your inclusive growth strategy >> so the point of the broad and inclusive goal was not to target a particular unemployment rate for any particular group really we look at a broad range

of -- a very broad range of metrics when we think about what maximum employment is. and one of the things we look at is unemployment rates and participation rates and wages for different demographic and age groups and that kind of thing. so we will do all of that. i think if you look back, what were we really thinking? so we all saw the benefits of a strong labor market. if you look at the last two or three years of before the pandemic hit, you saw after a lot of long progress, you saw really strong labor market and you saw wages at the low end moving up faster than everywhere else, something that's great to see. we also saw the lowest unemployment rates for minorities, for african-americans, for example, and also participation rates we saw really, really healthy set of dynamics. and by the way, there was no reason why it couldn't continue. there were no imbalances in the