the move. >> the teernl, 1.57% before the meeting. it had sunk all the way down to almost 1.5% earlier this week. the strong jobs information turning that around early this morning. let's get to steve liesman with the fed decision today what can you tell us >> the federal reserve leaving rates unchanged but announcing it will begin tapering or reducing its asset purchases of $120 billion this month. it will do so by $15 billion, $10 billion of treasuries, $5 billion of mortgage-backed securities it begins this month the fed will taper again in december it's athounsing the decision for next month and expects to do so in the following months. however, the fed says it will adjust the taper amount if warranted by changes in the economic outlook on the economy, it says it continues to strengthen, helped by vaccines and vaccinations but

the covid resurgence from the summer the fed says slowed the recovery there the fed taking note of lower jobs reports as well as lower gdp. inflation, the fed stays, is elevated a little bit of change in the language here reflecting, quote, factors that are expected to be transitory, rather than just saying reflecting factors that are transitory they are expected to be transitory the fed saying skpla, demand imbalances contributed to price increases. it kpts increases in displays to reduce inflation it expects an accommodative stance on monetary policy. i have now read the statement a couple of times as quickly as i could, i don't see any comment at all on rate hikes or rates at all except to say the fed expects to maintain an accommodative monetary policy or stance until its goals are achieved

finally, the decision was unanimous. >> bob pisani, rick santelli also joins us. rick, let's start with you how do you see the bond market reacting >> rates are moving up a smidge. and it's not necessarily in the longdated. a two-year yield is virtually unchanged, to 47 f five-year an uptick. ten-years have hardly moved, as you see on that chart. 30 years haven't regained being unchanged in being higher in yelled or lower on the price in the session. the reaction has been on the dollar index, it trended lower but nothing in a huge way. i think the markets were perfect lee positioned, especially, at this letter, after some of the buying eased up. some of the short positions and the higher rates, especially in the short maturities yesterday and part of today. the big news is going to be the question-and-answer. when it gets into the notion of actual increases in interest rates. the market certainly seems to have the taper and the

information that was forthcoming, steve, demonstrated to us with regard to when it starts, and how much they seem to have that pretty much accurately assessed >> rick, thank you very much let's turn to bob pisani now, bob, where dovish taper is already the reaction i am seeing here. >>y yeah the s&p moved briefly into positive territory we are essentially flat now. but that's a move up slightly in the s&p. just put that up there you can see the move there essentially flat right now we are down seven, eight, nine points there just a while ago. moving back down a little bit here i think the key is the market is continuing to believe there is not going to be any kind of aggressive rate hike not tapering rate hikes that's what they care about. will be at the smh semiconductors were on fire the last weeks it is at another historic high growth stocks like semis would not be having this aggressive move in the last weeks if they believed some kind of rate hike

was coming sooner than expected. these stocks, microsoft, apple, nvidia, some of the big semiconductor names have been on fire along with microsoft in the last two weeks again, none of this would be happening if it market believes that aggressive rate hikes or unexpected rate hikes were coming soon. same thing with the banks. kbe another high today a new high of course we are seeing good news there, the banks are still making money on the interest rate carry kbe also hitting a new high today. this comment, expected to be transsorry, from the fed, this is what corporate america is essentially saying the message from the earnings picture for corporate america so far is, yes, inflation is a little stickier than we had thought. but with the exception of labor costs that might be more permanent, most of corporate america is saying they are getting their hands around the supply chain issues. they expect commodity costs to be lower in the following quarters

of course that would be good news for the overall revenue picture. obviously more revenues will occur because demand will be much higher at that point. >> bob pisani thank you very much steve do you have more to add. >> real quick, i didn't see the commentary out there that it is a dovish taper i am not willing to go there yet. first we have to hear with a powell has to say about interest rates. something that's hawkish that i think is worth thoeting the mfoc took the time to make a decision now about december already it didn't have to do that. they meet in december. it could decide what to do about thein at thatter they have done three things. announcing now for november, preannouncing december and adding it will be tapering in future months. there is a hawkish aspect to the taper. whether there is one about -- hawkish. i wonder, when bob talks about aggressive rate hikes. i don't know, are one or two

hikes next year already priced in is the market already chill with that when i look at the fed fund's futures market i still see something like a 93% chance of that first hike in december and i see a 70% chance of a second hike in december i think that's baked into markets, baked into equities we will wait to see what powell says about all of that. >> steve, do you mean june for the hike >> june would be the 50% probability for the first hike i am saying very aggressively priced already, locked i essentially for december. >> got it. >> yeah, june would be the earliest where the market has it priced in. up in the nants for december. >> let's turn back to our panel. michael, your reaction in. >> i think the comments so far have been spot on. the federal divorced rate policy from tapering. tapering needs to get done the hawks on the fomc have been

correct asking for a faster tape he they have got it preannounced december, get it over with, get it done, give us a chance to do something you this better not talking about rate hikes that will be discussed in december that he will have a new dot plot then that's when we will see more clarity. >> bob pisani touched on the smh hitting a record high today. the fact that the fed funds rate did not change at all seemingly getting a good reaction from growth investors the nasdaq up about a quarter of a percent since the announcement and dow has been fluctuating pretty wildly. what do you think it means for growth stocks and the mega cap tech names >> i don't think anybody expected rates to move today too much but i think the important part here to remember is that the market really got a lot more hawkish in the last couple of weeks. i think the market got ahead of itself, and expecting a june hike is really aggressive. i would be really surprised if that actually happened

maybe now pairing that back, moving that expectation forward i would say september is more likely for the first hike mostly because they want to leave space between tapering and tightening, not just because they keep saying it, but because they want to see if tapering controls some of the inflationary pressures in the market enough, and then they don't have to be in a rush to hike rates, which obviously is what tech is most sensitive to >> david kelly, what are your thoughts here? >> well, i do think it is a little bit hawkish because they could always have said look we are going to start the tapering in december but they wanted to rush in an extra $15 billion offin thor by putting in half of november as a tapering month that means they are down to zero by june, or the end of june. i want to think -- i don't expect a rate hike in july or september. i think they are trying to create space because they have always said these are two

distinct thing and all the supply chain issues that will push prices up now will end up pushing prices down two or one year out. so they are not going to be looking at skyrocketing inflation in terms of the headline numbers and i think by next summer they are still going to be trying figure out how much of this is permanent and how much is transitory now that some of the supply chain issues cleared up that means they are going to wait until the last meeting of 2022 just like they did in the last decade, the lastity meeting of the year to put in rate hikes. >> watching the ten-year note to see if it punches through 1.6. is it possible that they don't want to start tapering in december because that's a light volume, a thinly traded month usually? >> no. because the announcement is what should affect the market right now. so they will be tapering more in december the question, they want to get going now.

then you have got sort of 30 billion of continuering cumulatively next month, or $15 billion. that logic would say they should hold off until january i think they are aggressive. a little bit aggressive. usually they are dovish. but i think it is because the inflation numbers are relatively high and i think they want to see how it plays out by next summer and that's why i think when they are done tapering they will sit on their hands and figure out where they are. >> we are seeing headlines out of the fomc, one, data is showing the economy is continuing to strengthen, other that inflation is elevated on transitory factors the t word coming back up. what's your take >> i think the fed has lot riding on that i want to get back to something david talked about, which is because inflation might be lower a year from now the fed might delay rate hikes he may be right that that's the way the fed is thinking. i am not sure that's the right way to think about it. it is hard for me to justify,

give where aggregate demand is now, relative to where it was before the pandemic, given the idea that the economy should be improving from here, what's the justification for zero rates all the way well into 2022 i think there is not a lot of justification for the taper. i forget, somebody else on this panel or maybe last hour said they should have begun this long ago. there is little justification for continuing these asset purchases. i think there is even less justification for a zero funds rate well into 2022. i think the market has an idea that the fed could turn around and say u know what? we did emergency rate cuts in the beginning of the pandemic. we should take them back at least somewhat quickly and get right onto the business of hiking rates to at least normalize rates in an economy where aggregate demand is no longer suffering >> i completely agree that that's what they should do. >> i thought you might. >> but they have proven over and over again to be dovish.

the job of central bank governor is basically a govish job. i think they will wait until december although i think they agree they should be raising rates now. the economy the take night the ten-year 1.59, knocking on the 1.6 door what's your take on this how to the bond market reacting to what we have heard from the fed so far ahead of jay powell's press conference >> let's start with long maturities and work backyards, the two touched 2% tens, basically flirting with.16. much higher yields than we had before the announcement. as you go down the curve we are seeing less aggressive action on fives, threes and fz it's exactly the opposite of what the market has been doing the last month or so, meaning it has been flattening because it has been nervous that the fed is behind the curve on actually raising rates. well, the fed is not talking about that

so what is happening here makes perfect sense. it is the inflation risk that's going play out more now in long maturities so we should actually see some steepening of the curve as the notion of the taper becomes the big subject even though the markets prior to today wanted the big topic to be rate increases. >> as we watch bond yields move, liz, what would you say to people who ask why we would see the ten-year spike for instance after the decision today >> i think there wasn't enough of a move in the ten-year ahead of the decision. the other thing i want to point out here is that i do think the ten-year moves up incrementally as we move through the end of the year but there are offsetting forces here the treasury is not issuing as many bonds ates starting to taper off its issuing. as the fed stops buying so much there is also less issuing there is also offsetting forces that are not a direct reaction of a tapering program. so you shouldn't expect a huge

spike in the ten-year. but there are also intricate things going on in the i think lower end of the curve of the 20s and 30s where you expect volatility over the long term. i also think that december dot plot is going to be important to watch. when we get into 2022 i think the fed is going the exercise its option to tapary little bit faster some of that is going to be more difficult for the yield curve to digest than the news we heard today. >> michael, 90% chance now of a rate hike by july? >> i think that's -- >> no, no, no. >> -- still too high. >> no, no, no, that's not what i said. >> not what you said, steve. that's what's out there on the wire what are your numbers? i know you can run through them quickly. >> i can run through them quickly. i want to hear the answer you asked the gentleman there.

81 for november, 86 for november, and 93 for the december that's the number i was talking about that was in the 90s there? we won't get carried away. there is a few different ways to slice this we like yourself best. michael curb ma, what would you say about the possible time line, even if it is more in the 60% likely chance now. those percentages clearly have moved up on the back of this decision does that make sense to you? >> i think it does in the sense that the fed -- the market is thinking about the fed alongside the trend which has occurred outside the united states. if you look at central banks outside the united states they are moving aggressively. new zealand, norway, the bank of england, uk, canada, australia backtracked on their policy. everyone is moving to become more hawkish and running a lez easy monetary policy the risk that the fed will have to move sonar than expected i think that risk is there the market has already moved relative to what happened three

months ago, as has been discussed. however, unless they taper faster and finishin at thattering faster i think they still want separation between tapering ending and rate increases. so if they taper in march and go really, really fast, maybe june and july is possible i still think they want to move slowly at that point in time because inflation will be falling significantly. it may be from too high a level but it will be falling growth has been weak in q3 for specific supply side reasons supply side -- relaxation of supply side constraints could further reduce inflation pressures down the road in the spring and summer of next year i think they want the leave their options open. >> we will leave the panel, thank you for joining us with instant reaction and analysis to the fed decision bob pisani, rick santelli, steve liesman, david kelly, liz young and michael carb ma. still to come, michael heller will give us his analysis

on the taper and reaction from the presser. jerome powell takes the podium in just a few minutes. we will bring it to you as soon as it begins keep it right here i promise to serve, not sell. i promise our relationship will be one of partnership and trust. i am a fiduciary, not just some of the time, but all of the time. charles schwab is proud to support the independent financial advisors who are passionately dedicated to helping people achieve their financial goals. visit findyourindependentadvisor.com

welcome back, everybody. we are watching the ten-year yield poking up towards 176% after the fed's decision on tapering asset purchases let's bring in former fed governor robert heller with thoughts on what we just heard

dovish taper is the shorthand so far. what do you make of it >> yes, kelly, i think the federal reserve is behind the curve. they are starting to reduce the taper a little bit there unt shb any purchases of mortgage-backed securities in this -- shouldn't be any purchases of mortgage-backed securities in this booming housing market the federal government really doesn't need support either. the fed is behind the curve. i am glad they finally did what they do. >> you forecasted the fed might reduce their bond purchases by half going from $120 billion to $60 billion. but you questioned was that enough to slow down inflation. in your opinion, with the fed still buying those mortgage-backed securities, is that enough to slow down inflation? >> no. because the fed is still system lative overall interest rates are near zero in the short-term and purchases are continuing so the federal reserve still has its foot on the accelerator.

and that's not needed in this booming economy. >> robert, what do you make of the fact -- this might be nitty-gritty but we love to spec speculate. they announced they would taper now. they are basically tapering now. they are not waiting until december to begin that would you read that as sort of a slightly hawkish, that they are kind in a hurry to start this and kind of get that clock started to wine things down. and then in the long run move the rate hikes >> they are so far from willing a hawk it is a dove that's finally trying to lift its wings a little bit but i would not call this federal reserve hawkish by any stretch of the imagination >> sure. i guess i just mean in terms of -- i am sure they wouldn't call themselves that either. does it speak for itself that they are starting on this right away >> you are so correct. they are finally starting. and it is long overdue >> where then do you think -- if

you, robert heller were in charge of the fed right now, what would you do with the policy rate and the asset purchases? >> i would reduce the asset purchases very quickly, within two months or something like that, have it down to zero and the policy rate, i would start to lift right at the beginning -- beginning of the year to get it back to a normal policy stance that is no longer further stimulating the economy. >> you know, robert, the fed funds futures imply 90% chance of the fed raising rates by july 2022 our steve liesman says that's not like me in june 2022 he has a longer horizon for rates to be rising -- at least the probability s. next summer a good time to raise rates >> the fed is very, very slow, very deliberate. i don't want to use the word political, but powell wants to

be reappointed and the elections we saw today -- we saw elections. more elections are coming up next year, important elections towards the end of the year. so they don't want to rock the boat at all. so they are boxed in and it would take a very strong character at the helm of the fed, shb like paul volker to really get monetary policy back on an even keel and an anti-inflationary stance that provides for true price stability arizona is requested by congress. >> i am beginning to see more and more talk about where is paul volker these days, resident clearly, the grassroots are looking for something a little bit more hawkish we will leave it there thanks for your time we appreciate it robert heller joining us today with reaction to the fed's decision. just minutes away from fed chair jerome powell's press conference we expect he will be asked about

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welcome back, everybody. we are going to hear from fed chair powell in a couple of

minutes time let's get a check on markets before that. the dow off session lows it was down 140. it is only down 30 right now the s&p has turned positive now by seven points. and the nasdaq is up 62, or .4%. it remains the outperformer. over in bond yields we are seeing strong reactions as well. the ten-year almost hitting 1.60 at 1.58. two-i don't remember yield, let's get a check as well as we start to talk more and more about possible rate hikes coming that's sitting must under .5 penalties are on the move. the regional bank etf just hit an all-time high fed chair powell's news conference starts in just a minute before that let's get to mike santoli at the nyse. is this the reaction they wanted where would you say the risks are going into the fed chair speaking himself. >> i think the modest tension release upon the announcement ahead of the press conference is

probably fitting with what the fed is expecting here. an attempt to drain the drama. it came in more hawkish given the aggressive moves globally in the rate market globally last tapering probably on target in terms of the consensus, therefore, not more aggressive all of it fits together. in terms of the timing of the first rate hike, it is interesting how the market adjusted to one or two next year but it is not a riddle there is not an answer to there are clues. there are -- too much data between now and then, too much can happen i think it is everybody trying to look at the shadows and figure out whether the fed can get lucky in saying whether they expect the inflationary forces to prove transitory. >> the dow has risen from its lows, 90 points higher than its

lows immediately after the announcement and the s&p and the nasdaq franksally higher after the announcement was made. if they were clenched up, this what they were expecting >> yeah. >> go or sometimes -- go ahead. >> i think they were a little bit tensed up ahead of this. we are talking about very narrow moves, very much an as-expected statement. i don't know necessarily we are going to see some dramatic swings now the pattern has been the market has actually softened up during and after a press conference by jay powell it doesn't mean that's always going to be the case i think you have to keep that in mind keep in mind, too, the s&p is up 8% in 30 days. anything at all could be an excuse for to it cool off just a little bit here. i don't think anything said in the statement so far was cause for alarm or disturbed the basic view here of a relatively orderly process of reducing the asset purchase program. >> am i imagining things, mike, or has it become quieter in terms of the chatter about

replacing him lately >> right it does. i don't know exactly if it seems the biden administration doesn't see the benefit in doing so right now or exactly what you would get in terms of incremental dovishness relative to what chair powell has already delivered. >> exactly michael we will leave it there thank you so much. we appreciate it mike santoli with the setup. again we are looking at 1.595 period on the ten-year, frank. so the markets have moved higher, bond yields have moved higher, and any second now we will hear from the fed chair himself. >> at the federal reserve we are strongly committed to achieving the monetary policy goals that congress has given us, maximum employment, and price stability. today the fomc kept interest rates near zero. in light of the progress the which he has made toward our goals decided to begin reducing the pace of asset purchases. with these actions, monetary policy will continue to provide strong support to the economic recovery given the unprecedented nature of the disruptions related to

the pandemic and the reopening of the economy, we remain attentive to risks and will ensure that our policy is well positioned to address the full range of plausible economic outcomes i will say more about our monetary policy decisions after reviewing recent economic developments economic activity expanded at a 6.5% pace in the first half of the year reflecting progress on vaccinations, the reopening of the economy, and strong policy support. in the third quarter, real gdp growth slowed rapidly. the summer surge in covid cases from the delta variant held back recovery in the sectors most adversely affected by the pandemic, including travel and leisure. activity has also been restrained by supply constraints and bottles necks notably in the motor vehicle industry

as a result, household spending and business spending flattened out last quarter nevertheless, aggregate demand has been strong, you intoeyed by fiscal and monetary support and the healthy financial positions of households and businesses with covid case counts receding further and progress on vaccinations, economic growth should pick up this quarter, resulting in strong growth for the year as a whole. conditions in the labor market have continued to improve, and demands for workers remains very strong as with overall economic activity, the pace of improvement slowed with the rise in covid cases in august and september, job gains averaged 280,000 per month, down from an average of about 1 million jobs per month in june in july. the slowdown has created in sectors most sensitive to the pandemic including leisure and hospitality and education. the unemployment rate was 4.8%

in september this figure understates the shortfall in employment, particularly as participation in the labor market remains subdued. some the softness in participation likely reflects the aiming in the population and retirements. but participation for prime aged individuals also remains well below prepandemic levels in part reflecting factors related to the pandemic, such as care giving needs and ongoing concerns about the virus as a result, employers are having difficulties filling job openings these impediment to labor supply should diminish with further progress on containing the virus, supporting gains in employment and economic activity the economic downturn has not fallen equally on all americans, and those least able to shoulder the burden have been hardest hit. despite progress, joblessness continues the fall

disproportionately on african-americans and hispanics. the supply and demand imbalances related to the pandemic and reopening of the economy contributed to sizable price increases in some sectors. in particular, bottlenecks and supply chain disruptions are limiting how quickly production can respond to the rebound in demand in the near term. as a result, overall inflation is running well above our 2% longer run goal. supply constraints have been larger and longer lasting than anticipated. nonetheless, it remains the case that the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic specifically, the effects on supply and demand from the shutdown, the uneven reopening, and the ongoing effects of the virus itself we understand the difficulties that high inflation poses for individuals and families, particularly those with limited means to absorb higher prices for essentials such as food and

transportation our tools cannot ease supply constraints. like most forecasters, we continue to believe that our dynamic economy will adjust to the supply and demand imbalances and that as it does, inflation will decline to levels much closer to our 2% longer run goal of course it is very difficult to predict persistence of supply constraints or their effects on inflation. global supply chains are complex. they will return to normal function, but the timing of that is highly uncertain. we are committed the our longer run goal of 2% inflation to having longer term inflation expectations well anchored at this goal. if we were to see signs that the path of inflation or longer early the inflation expectations was moving materially or persistently beyond levels consistent with our goal we would use our tools to preserve price stable we will be watching carefully to see whether the economy is evolving in line with

expectations the fed's policy actions have been guided by our mandate to promote maximum employment and stable prices for 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 early in the pandemic and since then have helped foster smooth market functioning and accommodative financial conditions to support the economy. last september -- sorry, december, the committee stated its intention to continue asset president trumps at a pace of at least $120 billion per month until substantial further progress has been made towards our mack mum employment and price stability goals. at today's meeting the committee judged the economy has met this test and decided to reduce the pace of asset purchases. beginning this month we will reduce the net pace of our asset purchases by $10 billion

fortressy strurt asks $5 billion for agency mortgage backed securities we also announced another reduction of this size in the monthly purchase pace starting in mid december, since that month's purchase schedule will be released by the federal reserve bank of new york prior the our des fomc meeting if the economy evolves broadly as expected we judge that similar reductions in the pace of net asset purchases will likely be appropriate each month, implying that increases in our securityings holdings would cease by the middle of next year. that said we are prepared to adjust the pace of repurchases if warranted even after our balance sheet stops expanding our holdings of securities will continue to support accommodative financial conditions our decision today to begin tapering our asset purchases does not imply any direct signal regarding our interest rate policy we continue to articulate a different and more stringent test for the economic conditions

that would need to be met before raising the federal funds rate 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 complete the recovery in employment and achieve our price stability goal thank you. i look forward to your questions. >> thank you we'll go to nick at the "wall street journal." >> hi. chair powell, the markets anticipate you will raise rates once or twice next year. are they wrong >> so, i would say it this way we try to focus on what we can control. and that is how to communicate as clearly as possible in this highly uncertain world how we are thinking about the economic outlook and the balance of risks, and how policy will

evolve in that case, and also in the cases which are frequent where the economy evolves in unexpected ways. so the focus at this meeting is on tapering asset purchases not on raising rates it is time to taper, we think, because the economy has achieved substantial further progress forward our goals measured from last december. we don't think it is time yet to raise interest rates there is still ground to cover to reach maximum employment both in terms of employment and in terms of participation getting to your question, our baseline expectation is that supply bottlenecks and shortage also persist well into next year, and elevated inflation as well and that as the pandemic sub sides, supply chain bottles necks will abate and job growth will move back up. as that happens, inflation will decline from today's elevated levels of course the timing of that is highly uncertain certainly we should see inflation moving down by the second or third quarter. the time for lifting rates and

beginning to move accommodation will depend on the path of the economy. we think we can be patient if a response is called for, we will not be -- we will not hesitate so what i will tell you is we will be watching carefully to see whether the economy evolves in line with our expectations and policy will adapt appropriately. that's what i would say. >> based on -- if i could follow up, based on your current outlook for the labor market, do you think it is possible or likely, even, that maximum employment could be achieved by the second half of next year >> so, if you look at the progress that we have made over the course of the last year, if that pace were to continue, then the answer would be yes, i do think that that is possible. of course we measure maximum employment based on a wide range of figures but it's certainly within the realm of possibility >> thank you >> thank you

next we'll go to gina. at the "new york times." >> hi, chair powell. i was wondering if you could detail a little bit how you are thinking about waging at this moment obviously we are seeing strong wage growth, particularly for people in sort of lower income fields i wonder if you see that as a positive thing or as a potential start to a wage price spiral sort of how you delineate those two things >> wages have been moving up strongly, very strongly. in particular, i would point to the employment compensation index reading that we got last friday now, in real terms, they have been -- they had been running a little bit below inflation so real wages were not really increasing i think with the eci reading it becomes close to maybe not increasing but close to back to stroh in terms of the real increase so wages moving up, of course, is how standard of living increases over the years for

generation upon generation it's very important. it's generally a good thing. you know, the concern is a somewhat unusual case, where if wages were to be rising persistently and materially above inflation and productivity gains, that could put upward pressure on -- on -- or downward pressure on margins, and cause companies to, their employers, really, to raise prices as a result and you can see yourself, find yourself in what we used to call a wage/price spiral. we don't have evidence of that yet. productivity has been very high. the eci reading is just one reading. again, if you look back, we -- so we will be watching this carefully. but i would say that at this point we don't see troubling increases in wages and we don't expect those to emerge but we will be watching carefully.

>> next we will go to steve liesman from cnbc. >> thank you, mr. chairman i wonder if you could perhaps give us your thinking about the trade-offs between inflation and unemployment you talked about the shortfall in unemployment -- or employment relative to before the pandemic and yet you have inflation, which is affecting everybody are we at our close to a point where the risk of inflation is greater than the benefit that -- from recovering these lost jobs that now from a risk management stand point it makes sense to move more aggressively on rate hikes? and kind of a related question the statement today says you will keep policy accommodative when you hit the 2% inflation target you are looking for 5% this year, 3.5% next year it seems like you are on track to exceed that 2% target.

>> i am not sure i totally got your first question. but i would say -- in fact, could you just quickly say your first question again. >> sure. the idea that the trade-off between inflation and unemployment that you would keep the policy accommodative to put this 5 million folks -- find the 5 million americans jobs again at the same time, all of the americans will be suffering from inflation inflated prices. is it a trade-off where you should look at controlling the inflation rather than filling the jobs. >> the inflation we are seeing is not due to a tight labor markets. it is due to bottlenecks, shortages, due to very strong demand meeting those so i think it is not the classical situation where you have that precise trade-off. but i -- you knknow, in this

situation we do have a provision in our statement of longer run goals as you know that says when those two things are in tension, what we do is we take into account the employment short falls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the mandate. we used to call that the balanced approach paragraph. we have to think about the amount of the deviation. we have to think about the time it will take and we have to make policy in a world where the two goals are in tension. it's very difficult. what it boils down to is something that's common sense. that is risk management. we have to be aware of the risks that we are -- particularly now, the risk of significantly higher inflation. we see shortages, and bottlenecksry persisting well into next year we see higher inflation persisting we have to be in position to

address that risk should it become really a threat -- should it create a threat of more persistent longer term inflation. that's what we think our policy is doing now, putting us in a position to be able to address the range of plausible outcomes. >> thank you next we will go to colby smith at the financial times >> thank you chair powell, what are the economic conditions that would perhaps warrant a faster pace of tapering i am wondering how you would also characterize the risk has the fed may actually need to accelerate that process eventually thank you. >> i guess, as i said in my opening remarks, assuming the economy performs broadly as expected the committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month. and we are prepared to deviate from that path if warranted by changes in the economic outlook.

i am not going to give you a lot more detail on what that might be of course if we do see something like that happening, if it becomes a question, then we will communicate very transparentally and openly about that. but i am going to leave it at the words that were in the statement. was there a second part? >> just on characterizing the risks that you might have to do so later on. >> i would leave with you the words we have here we are prepared to speed up or slow down the pace of reductions in asset purchases if it's warranted by changes in the economic outlook again, if we feel like something like that is happening, then we will be very transparent about it we wouldn't want to surprise markets. we will say, in light of this factor or these factors, we are considering doing this then we would either do it or not do it but i am not going to make up example was what that might be today thanks >> thank you

>> next we will go to rachel siegel at the "washington post." >> hi, chair powell. thanks very much for taking our questions. you mentioned at the beginning that the fed understands the difficulties that high inflation poses for individuals and families, especially those with limited means. what does your message to those families or consumers that are struggling with higher prices right now? and do you feel that our expectations around transitory inflation is -- that message is reaching them? thank you. >> yeah. so, first of all, we -- it is our job to -- and we accept responsibility and accountability for inflation in the medium term. it is -- you know, we are accountable to congress and to the american people for maximum employment and price stability the level of inflation we have right now is not at all consistent with price stability. by the way, we are also not at mamt mum employment.

as i mentioned i would want to ensure people that we will use our tools as appropriate to get inflation under control. we don't think it's a good time to raise interest rates, though, because we want to see the labor market heal further. we have very good reason to think that that will happen as the delta variant declines, which it is doing now. as i mention -- transitory is a word that people have had different understandings of. for some, it carries a sense of short-lived. there is a time component, measured in months, let's say. for us, transitory has meant that if something is transitory it will not leave behind a permanently or very persistent will he higher inflation we said expected to be transitory first of all to show uncertainty about that

we always said that in other context, just hadn't done it in a statement. but also to acknowledge that it means different things to different people then we added some language to really explain more of what we are talking about in paragraph 2 and paragraph 3. we said the reopening of the economy have contributed to sizable price increases, and we said progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation. we're trying to explain what we mean and also acknowledge more uncertainty about transitory i mean, it's become a world that's attracted a lot of attention that maybe is distracting from our message which we want to be as clear as possible ultimately, the only other thing i would say is, look, we understand completely that it's particularly people who are living paycheck to paycheck who are seeing higher grocery costs, higher gasoline costs, when the winter comes, higher heating

costs for their homes. we understand completely what they're going through, and you know, we will use our tools over time to make sure that that doesn't become a permanent feature of life. really, that's one of our principle jobs along with achieving maximum employment that's our commitment. >> thank you we'll go to chris at the associated press >> great thank you, michelle. thank you, chair powell. i wondered if you could update us, you talked about getting back to full employment. and could you update how you define that? i mean, you have -- a few months ago, yourself and other fed officials talked about getting back to the pre-covid labor market there was even hints you might try to do something better than that now we hear talk of, as you mentioned, people retiring, and there's talk of not being able to get back all the jobs back because of that and other

trends you did mention the prime age folks. can you give us some examples of things you're looking at specifically to measure full employment will you be looking at prime age employment population ratio, for example, and if so, do you need to see it get back to pre-covid levels to achieve maximum employment, or is there something short of that that would work thank you. >> thanks. so maximum employment is a broad -- we say a broad-based and inclusive goal that's not directly measurable and changes over time due to various factors. you can't specify specific goals. so it's taking into account quite a broad range of things. of course, employment levels of employment participation are part of that but in addition, there are other measures of what's going on in the labor market, like wages is a key measure of how tight the labor market is. the level of quits, the amount of job openings, the flows in

and out of various states. so we look at so many different things you make an overall judgment now, the temptation at the beginning of the recovery was to look at the data in february of 2020 and say, well, that's the goal because we didn't know -- that's what we knew. we knew that was achievable in a context of low inflation i think we're learning that we have to be humble about what we know about this economy, which is still very covid affected, by the way. a lot of what we're seeing in the last 90 days is because of delta. we were on a path to a very different place. delta put us on a different path and we see these things. so i think we're going to have to ideally, we would see further development of the labor market in a context where there isn't another covid spike. and then we would be able to see, i think, a lot. we would see whether, how does participation react in that world, in that sort of post-covid world right now, people are staying out of the labor market because

of caretaking, because of fear of covid in significant extent you know, we thought that schools reopening and the elapsing unemployment benefits would produce some sort of additional labor supply. that doesn't seem to have been the case, interestingly. i think there's room for a whole lot of humility here, as we try to think about what maximum employment would be. we're going have to see some time post-covid so we know -- or post-delta anyway, to see what is possible. i think the learning, for those of us who lived through the last cycle, is over time, you can get to places that didn't look possible now, what we also have now, though, is we have high inflation. so we have a completely different situation now where we have high inflation, and we have to balance that with what's going on in the employment market so it's a complicated situation, and i would say we will -- we hope to achieve significantly greater clarity about where this

economy is going and what the characteristics of the post-pandemic economy are over the first half of next year. >> thanks. we'll go to howard schneider at reuters. >> thanks. thanks for doing this. given that answer about employment, i would like to get back to steve's question a little bit on a headline basis, just as it's evolved this year, do you feel that the two tests on inflation have been met? >> sorry, the two tests? >> the two tests in the statement, the guidance. has the economy cleared that >> that's a decision for the committee. i would put it to you this way when we reach maximum employment, when we reach a state where labor market conditions are at maximum employment in the committee's judgment, it's very possible that the inflation tests will already be met we're aware that that language sounds a little out of touch with what's going on, but you

know, we're not at maximum employment when that is the case, we'll look to see whether the inflation test is met, and there's a good chance that it will be, if you look at how in inflation has evolved in the last year and a half >> to follow up, you're not willing to commit that the current levels of inflation and their persistence have met moderately for some time, so given that, how should we render what moderately means? >> what i'm really saying is that question is not before us right now. we're -- we had the question on when to taper. we have now answered that question and the speed of it and all that we have not focused on whether we need a lift-off test because we're not at maximum employment. what i'm saying is given where inflation is and where it's projected to be, let's say we meet the maximum employment test, then the question for the committee at that time will be

has the inflation test been met? i don't want to get ahead of the committee on that, but the answer may very well be yes, it's been met. but we're not asking that question today because we're not running a lift-off test. we're not evaluating the lift-off test. we didn't have that discussion at today's meeting we did talk about the economy and the development of the economy, but we didn't ask ourselves whether the lift-off test is met because it's not meo the unemployment side. >> thank you >> thank you let's go to matthew boseler at bloomberg. >> hi, chair powell. matthew with bloomberg so when you're looking at this question of assessing whether or not the u.s. economy is at maximum employment, do you have a framework for making that judgment that is independent of what inflation is doing? and if not, does it kind of complicate that assessment given all of the uncertainty about inflation right now and the inclination to believe that the

high inflation we're seeing is not related to capacity utilization in the labor market? thank you. >> so we don't actually define maximum employment as -- we define it in terms of inflation, but of course, there is a connection there maximum employment has to be a level that is consistent with stable prices. but that's not really how we think about it we think about maximum employment as looking at a broad range of things. you can't just look at, unlike inflation, where you can have a number, but with maximum employment, you could be in situation hypothetically where the unemployment rate is low but there are many people who are out of the labor force, and will come back in and so you wouldn't really be at maximum employment because there's this group that isn't counted as unemployed. so we look at a range of things. and so the thing is, by many measures, we are at a very tight

labor market i mentioned quits and job openings and wages many are signaling a tight labor market, but the issue is how persistent is that, because you have people who are held out of the labor market, you know, of their own -- they're holding themselves out of the labor market because of caretaking needs or because of fear of covid or for whatever reason, they're staying out, and it's clear that there are, you know, tremendous demand for workers and wages moving up. it does seem like we're set up to go back to a higher job creation so that would suggest you're not at maximum employment. at the end of the day, it is a judgment thing, but of course, at the end of the day, it also has to be a level of employment that's consistent with price stability. >> if i could just follow up briefly, you talked a little bit about this possibility that the two goals might be in tension and how you might have to balance those two things could you talk a little bit about what the fed's process for

balancing those two goals would be in the event that, say, come next year you decide there's a serious risk of persistent inflationary pressures despite ongoing employment shortfalls? >> yeah, i mean, again, it's a risk management thing. i can't reduce it to an equation, but ultimately, it's about risk management. so you want to be in a position to act, to cover the full range of plausible outcomes, not just the base case. in this case, the risk is skewed for now, it appears to be skewed toward higher inflation. so we need to be in a position to act in case it becomes necessary to do so, or appropriate to do so, and we think we will be so that's how we're thinking about it and i think, though, that judgmentally, too, it's appropriate to be patient. it's appropriate for us to see what the labor market and what the economy look like when they heal further we know that we were on a path to a different place