the start of the year hurting housing. this economy will slow and inflation will come down anyway and to restore the credibility, they'll be able to push back, and you have to hike, hike, hike to deal with inflation now and they'll take a long term view and inflation will come down anyway the goal here is to avoid pushing us into recession. >> i think that's a very interesting point. i want to come back to it. you're basically saying they'll get it wrong again meantime, let's go to steve liesman with the fed decision. >> 75 basis point, the federal reserve open market committee raising the funds rate by 75 basis points to a new target range of 1.5% to 1.75% first time they've had a rate increase since 1994. it plans to continue its plans to reduce the balance sheet as laid out in the prior month and anticipates additional increases in the funds rate. to wit, the new forecast from the federal market committee show that they see the rate outlook for 2022 at 3.4% that's up from 1.9, pretty much

meets where the market is. for 2023, it's boosted its own rate outlook the median official to .8% to 2.8%, that's a full percentage point increase and again, pretty much meets where the market was at maybe where the fed was at we don't know which way it worked and it's one of the most dramatic increases in the near-term outlook for sure of the funds rate that we have since we've been publishing this since 2011 the fed repeating that inflation remains elevated and it sees the ukraine war putting pressure on inflation and says the china covid situation are worsening supply chain problems and economic points are picked up in the second quarter from weakness in the first, obviously, and it cut, however, its 2022 and 2023 growth forecasts pretty sharply for 2022 by 1.1 percentage points boosting the unemployment rate of 3.7%, but when you go out they raised it by a half a

point at 24. boosted the core inflation outlook just a bit to 4.3% for this year and otherwise sees core inflation to 2.3% of 2024 finally, esther george, the kansas city fed president dissented, wanting a 50 basis point increase which is interesting in and of itself there you go, guys a 75-basis point rate increase and additional increases in the funds rate would be appropriate. back to you. >> steve, stick around the market pretty much taking this in stride with stocks roughly at levels they were before the decision hit. same could be said of interest rates at this very early hour. let's bring our panel back at mark santoli, and rick, a knee-jerk reaction here is what do you say >> knee-jerk is a lot of volatility, but as the dust settles, we're right around unchanged meaning we were right about where we started 339, 340

in the ten-year and the two-year note yields are a smidge higher and they dropped aggressively to two year before they came all the way back and that made sense. many believe, including myself that the shorter maturities might be a little ahead of the game considering that we have to do this on a meeting to meeting basis and that's why things like three-month bills compared to two-year note yields are so interesting to watch the issue i see is clear is that the fed has an inflation gauge and it's up 4.9% and everybody watching has a different form of inflation gauge they prefer. it's called the aaa national average gas price which today is $5.01. there in lies the problem and tyler talked about trying to get the reputation back and i can give you five numbers why it will be difficult, 18.9% and export prices at an all-time record and down 20% in the s&p

and down 30% in the nasdaq and university of michigan at 1978 low of 50.2. that pretty much summarizes the hurdles the fed needs to overcome to get in the popular graces. >> mike santoli to you, the fed is signaling from current levels which we've doubled. we will double again, all officials projected rates rising to 3% by year end. is the market already pricing that in? >> largely, kelly, and i would say tentatively at this point because really, it's all about whether the bond market conveys the idea that the bond market is in tune with the new apparent pass of the fed because that's the premise for whether stocks can stabilize and we're down 10% in four days and the s&p 500 it's oversold and also on very slippery footing because of the instability in bonds -- two-way fed mistake risk is perceived

out there, either overtightening because all they're really doing is trying to attack gasoline prices which they can't do they talked about fedex inflation expectations and that was the prod to go 75 this time. inflation expectations with the university of michigan sentiment survey is going after gasoline prices and they may not be able to effect. financial conditions have tightened a lot. jay powell in the press conference could choose to emphasize that and he might also be able to say, you talk about the credible and there have been a lot of words in the last six months and look at what's going on with mortgage rates and high-yield debt spreads and valuations we've got this a lot of books already and you can see around the hill to where it's almost over >> david kelley, there are a couple of hints of dovishness and this decision. esther george dissented in favor of a smaller increase. we tend to think of her as someone more of the hawkish side

and she wanted a half-point hike and the median fed official sees the rate of 8.3% at the end of next year and you can argue the market has gone higher than that >> a little bit, but the markets move very fast in the last few days even as fed officials are putting their forecast i think it was a given that the market was going to be a little higher than the fed today, but i think it's really interesting that esther george who has a reputation, a long-lived reputation of being a hook recognizes that the federal reserve is about to make its typical mistake of waiting too long and doing too much. when it comes to credibility, it's really important they don't overdo this here because i think by the end of the year they'll have to be seeinging a significantly different tune and i would rather not see that, to be honest. >> john, let me ask you to respond to what david said waiting too long and doing too much john says there are signs of a

dramatically slowing economy baked into the cake, and this is going to be the cherry on top, i suppose. and not in a good way. >> yeah. you know, i think that's the risk the fed is clearly responding to last week's cpi print. that was higher than expectations and prior to that the guidance had been 50 basis points and now they're doing 75. the risk is cpi, at least parts of it tend to be backward looking and the shelter components in particular reflect rental prices that happened months ago i think what we all know is what's happening in the housing market right now is substantially different than what was happening in the beginning of the year. mortgage rates are higher and every indicator of housing activity is turning and you saw that in the national homebuilders survey this morning and home sales, home starts. we're going to see a pretty sharp turn here and so the risk is that they're responding to a backward looking indicator and i think that generally is the risk that they face

so i just want to echo, i find esther george's dissent interesting and i hope she'll explain that in the subsequent piece and that's unexpected and i am very much with david and they're responding with the backward indicators. >> the fed sees inflation at the end of this year and something about 2.6% at the end of 2023. do you think you can get that? >> our colleagues highlighted and it comes down to inflation and the inflation expectations and the fed is reflecting where it was this past friday where cpi came up ahead of expectation and interesting me, core inflation excluding food and energy was lower 6% in the cpi print, trending downwards, and i think that's reflected, as well. they do get 2.7% next year keep in mind, the fed's actions

do impact core and two trends we've been seeing and one john highlighted and the potentially cooling labor market we've started to hear technology companies having layoffs over time that will impact not only the potential wage growth that we've been seeing. as the fed has been indicating and as we've been saying here, generally by the end of the year we should see moderating inflation and that will really be this cycle's fed put. the fed can go a more graj gradl pace and it can grow in a more meaningful way. >> we saw stocks give up most of their gainses. we were up about a hundred going into the meeting and we briefly dipped negative and the nasdaq still up 1%. this now -- any comment on why we might be fluctuating more to the down side just in the last

couple of minutes here >> yeah. i really do think as this sets in, we are going to continue to see interest rates be the antagonist in this whole play again against the equity markets so yes, as the dust settles we are slowly beginning to climb back and there's more flattening going on and steepening with regard to the yield curve since the 2:00 decision was announced and i do believe that the fed may be right into projections of inflation and there in lies the problem. once again, what we have here is a failure to communicate, even if the fed gets these inflation numbers down to two, 2.5% to the end of next year that just means they stop going up and i'm sorry, but ithink many viewers as they look at prices whether they pay for milk, eggs or houses or gasoline, the fact that they've stopped moving up is definitely a positive, but it's about

moving down that they're most interested in and i don't see thaton the horizon any time soon >> failure to communicate, i would say, steve, failure to prognosticate. let's look back to march when the fed said 1.9% fed funds rate at the end of this year. now they are saying 3.4%, and as you pointed out not five minutes ago when you broke the news, 2023, 3.8% on the fed funds rate up from 2.8% those are significant changes in terms of the predictions >> yeah. i think we started printing these seps back in 2011. i think you would be hard pressed to find a percentage point change. >> right. >> in the outlook for the funds rate from one to the other, but tyler, maybe there's some good news in this and i don't want rick to have a coronary on this, but the market has been higher than the fed for several weeks now. maybe we're finally getting to

some place where we can agree on what the next several months of fed approximately see looks like i will just say the market has pushed ahead the futures curve for the funds rate a little today and the market was at four now the fed is at 33.8 and the fed is at four it is much lower the only thing that matters from an investment standpoint is do you feel that four is enough to get the job done to take control of inflation if we're at a place now where the market has correctly priced where the fed is going and by the grace of god, the fed has unbelievably or uncharacteristically priced where it's going, and this is where the market is, it's not the worst of all outcomes here if we digested a potential 4% funds rate >> that's an interesting, and i think for a dumb-ass like me an

esoteric point [ laughter ] >> why not just say the truth here, come on. >> i will disassociate myself from that remark i don't believe that to be true. >> in a sense, what does it mean that the market and the fed may be actually approaching one another? what does it mean to me? >> it means you don't have to come in every morning and have the market swinging because they believe the fed will do another 50 basis points next week or next month it means if you can get to a place where there's some agreement on the outlook and what the task is at hand we can take some of the volatility out of this market and it means that if you're a bond trader you come in in the morning and you're not guaranteed to lose your shirt at the end of the day wouldn't that be nice? >> mike santoli, do you want to give us a parting comment here >> i would say it's certainly helpful if the market's current projection of where the fed will end up is in line with where the

fed itself is right now. i do think what will be key to listen for from chair powell is what cost is the committee willing to accept for inflation and you have the consensus projection of unemployment ticking up higher modestly and he's never been very strident about insisting that the soft landing was the scenario they still, as part of the plan, you have to say maybe you'll get lucky and maybe the numbers will work in our favor and we're moving in the right direction on rates and we consider the 2023 projections just some academic exercise unless we learn the actual facts >> the market looks similar to what it looks like before this decision hit the dow is up ten years at 341 thank you so much. john bellows and steve and rick and mike, we appreciate it in a few more minutes' time we'll hear from jay powell himself at half past the hour. he will answer questions about

the battle and the tradeoff and the future path of rate hikes. before that, we have more analysis from former fed governor randy kroszner. keep it right here on "power lunch. you have to make magic, and you're figuring out how to do that. what you don't have to figure out is where to shop. because while you're getting creative, walmart is doing what we always do. keeping prices low for you every day. so you can save money and live better. ♪ if you wake up thinking about the market and want to make the right moves fast... get decision tech. for insights on when to buy and sell. and proactive alerts on market events. that's decision tech. only from fidelity. at adp, we use data-driven insights to design hr solutions to provide flexible pay options

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welcome back to "power lunch. stocks giving up some of their gains as we look there at the podium at which the fed chair will speak in just about 13 minutes' time. the news of the hour is that the federal reserve for the first time since 1994 has raised

interest rates by a full 0.75% there you see the industrials right before where they were before we went into this it's been a wild ride as you can see on the chart if we had one there. let's bring in randy kroszner, deputy dean at the university of chicago's school of business and a former federal reserve governor randy, welcome take me inside the meeting that just happened and tell me what just happened. >> so i think they got very focused on the increase in the expected inflation those numbers that came in last week i don't think they put that much emphasis on the inflation numbers that came out on friday. one was the cpi which they don't focus on as much as the other index they use that comes with the gdp report the pce, but the thing that they're most worried about is inflation expectation. so far, the inflation

expectations have been in the same rage as they have been over the last few years and i think that pushed them to 75 and that's what they focused on that's most important. >> is this fed then being data dependent? >> it's not just the data. it's being forward looking it's being where the expectations are going so as i said, i think it's not just the inflation print from last week which i don't think was that far out of line a lot of people focused on this being so high and it was pretty much in line with the fed forecasts, but the increase in inflation expectations, that wasn't what they were expecting and that's what drove them to move more, and i think you'll hear a very hawkish discussion at the press conference from chairman powell. >> let me ask perhaps an impolite question and ask it as politely as i can and they'll ask for future indications of inflation, why should i believe they're better today than they

were last year when -- when the buzz word was transitory >> so i think that's right and that put a lot of the credibility on the line and some of that was lost they didn't lose too much credibility because the longer term inflation expectations haven't become an anchor and they're starting to and that's why they need to move now and that's why i think they're focusing on forward-looking measures and where are inflation expectations going and even if inflation starts to come down a little bit and where inflation expectations are because that's what's going to be embedded into wage demands and that's what's going to be embedded into inflation going forward? >> why didn't they just adjust the pace of quantitative tightening which is starting at a small clip and i think it started literally today and was there an option to lean more heavily on balance sheet tightening instead and if so, why didn't they pursue that? >> they could have done that and they're worried about market liquidity and there's been discussion that you guys had

about how markets are bouncing around a lot or are quite volatile and they're worried about taking away too much liquidity too quickly and also a lot of uncertainty about how balance sheet reduction translates into basis points in the fed fundsrate. estimates are that a trillion dollars w dollars would be on the quarter-point cut, and increasing the pace wouldn't have as much an effect going from 50 to 75 and having a strong and stern outlook that you'll hear from jay will be much more effective. >> do we avoid a recession >> well, if you look at the projections, this is awfully softish, let's say the employment rate moves up, say it doesn't move to 4%. i find that very hard to believe that we don't have a significant increase in the unemployment rate and a much more significant decrease in economic activity

been. >> does that mean back-to-back quarters of protraction? the numbers don't add up and they say they want to go one and a half points where they think neutral is and that will drive the unemployment rate to 3.9% and that doesn't seem to square for me >> randy, thank you very much. as always, you make a hard thing easy to understand >> randy kroszner at the school of chicago >> he's like tums. the fed chair's press conference is about eight minutes away. these markets look a lot like they did before the trajectory the real volatility typically kicks off as he attends the podium our coverage of the fed decision continues after this quick break.

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welcome back, everybody. before we get to jerome powell's press conference in about five minutes. let's bring in bill lee, chief economist at the milken institute. bill, what's your reaction to this biggest rate hike in about 30 years that we've seen >> kelly, i am so relieved chair powell did the right thing as opposed to doing the conservative thing that most people would have thought. the fomc never likes to think

that the markets are in control and the markets are in the driver's seat and chair powell was able to convince them that it's time to let the markets tell us that we can and should take up the slack that they've given us and take the whole 75 basis points fantastic move >> let's talk about quantitative tightening would you have liked to have seen something more in that area and back to what randy kroszner just said, if you take -- i forget what he said the number was, a trillion numbers out, you are probably the equivalent of a half, quarter-point increase in rates. >> as you know, every time i come on the show i've always been advocating we should do more with the balance sheet, and i know people are so afraid of liqu liquidity events and they have learned from the past. they can ensure the adequate amount of liquidity. yes, they had to do more they had to take charge of the narrative. the fed is in control in terms of stamping out inflation and

they can do it now look at the ecb. they have the morass because they can do it slowly. >> what would you like to hear them say as this press conference gets under way bill. >> the last thing i'd like to hear them say, next time we may go back to 50 depending on where the economy is going i think right now he's got to show the markets that he will not stop short if the economy starts to slow down. gdp now forecasting in the fed is showing near zero growth in the second quarter we are right on the edge of a recession. it's not terrible right now given 3.5% unemployment and the excess employment in the labor markets and they have a little bit of unemployment. chair powell needs to channel his inner volcker? >> inner volcker and inner draghi

if expectations get under way, we're in trouble >> what's expected out of the fed, they meet again in november and december is the last meeting. >> it is unlikely the inflation rate will die down very quickly especially the total number with the food and energy, but the fed should not be distracted by that and they should say we will continue to press until we start to see inflation ease off upon that's what chair powell has said all along and just stay with that program. >> but does he need to spell out explicitly what progress is and looks like he wants clear and convincing evidence that inflation is falling. an investor told us she believes that inflation gauge is rising only a tenth or two each month does he need to get exblessity of what progress looks like, even if it's market break evens that he's looking at how are we supposed to know otherwise if they think that this is working? >> powell will never give you the explicit guidance that the

president mester did these are the numbers that he'll have to emphasize and say we're keeping an eye on how they react to not just the data itself. >> i don't want to lapse into opinion here, but there seems to be a credibility issue how do they restore it >> by sticking to this course of getting rid of inflation no matter what it takes and no matter what it takes is allowing the unemployment rate to drift up and growth to slow down and go negative. that's credibility. >> bill, does he also need to explain their thinking a lot of americans think this is only because of oil and that has nothing to do with the fed does he need to explain better why monetary policy is here? >> all he mes is one sentence was to go to wage price controls

and we, aggregate supply and a freg at demand and we need to bring down to where supply is. >> do you say to people can't we just increase the supply instead? >>he can easily fluff that off to someone else. supply side is something he has no control over. the demand side is where he has absolute control and that's where he will use to nail inflation. >> not that he wants to get into a nominal gdp discussion, but it would be refreshing to hear him say an economy that grew nominally 10%. quick check on markets the dow hanging on to a 12-point gain here as fed chair powell takes the podium let's listen in. >> we, at the fed, understand the hardship that high inflation is causing we are strongly committed to bringing inflation back down and we're moving expeditiously to do so we have both the tools we need

and the resolve it will take to restore price stability on behalf of american families and businesses the economy and the country have been through a lot over the past two and a half years and have proved resilient it is essential that we bring inflation down if we are to have a sustained period of labor market conditions that benefit all. >> from the standpoint of our congressional mandate to get maximum and price stability, the plain picture is hard to see it is extremely tight and inflation is much too high against this backdrop, today the federal open market committee raised the interest rate by three-quarters of a percentage point and anticipates that ongoing increases in that rate will be appropriate. in addition, we are continuing the process of significantly reducing the size of our balance sheet. i'll have more to say about today's monetary approximately s policy actions after briefly

reviewing economic benefits. economically it edged down in the first quarter as unusually sharp swings in inventories and exports more than offset continued strong, underlying demand recent indicators suggest that real gdp growths has picked up this quarter with consumption spending remaining strong. in contrast, growth in business fixed investment appears to be slowing, and activity in the housing sector looks to be softening, in part reflecting higher mortgage rates. the tightening and financial con terrell that we've een in recent months should temper growth and help bring demand into better balance with supply. as shown in our summary of economic projections and they've, maed down projections of economic dp for real low pressure down 2% since 2024. the labor market has remaineder

in a 50-ier low and wage growth elevated over the past three month it is, employment rose by an average of 408,000 jobs per month, down from the average pace seen earlier in the year, but still robust improvement in labor market conditions have been widespread including for workers at the low-wage distribution as well as african-americans and hispanics. labor demand is very strong. while labor supply remains subdued with the labor force participation rate, little changed since january. fomc participants expect supply and demand conditions in the labor market to come into better balance, easing the upward pressures on wages and prices. the median projection in the sep for the unemployment rate rises somewhat over the next few years, moving from 3.7% in the end of this year to 2024 levels

noticeably above the march projections. >> inflation remains well above our longer run goal of 2% over the 12 months ending in april. total pce prices rose 6.3% excluding the volatile food and energy categories. core categories rose at 2.9% the consumer-price index came in at 8.6% and the change in the core cpi was 6%. aggregate demand is strong supply constraints have been strong and longer lasting than anticipated and price pressures have expanded to a broad range of goods and services. the surge in prices of crude oil and commodities that resulted of russia's invasion of ukraine is boosting prices for gasoline and food and is creating additional upward pressure on inflation and covid-related lockdowns in china are likely to exacerbate the supply chain disruptions fomc participants have revised up their projections for

inflation next year particularly for total pce inflation given developments and food if and energy prices. immediate projection is 5.2 pertz and falls to 2.6% next year and 2.8% in 2024. participants continue to see ricks to inflation as weight on the outside. they are providing maximum employment and stable prices for the american people. my league it is not able to meet the higher cost of essentials like food, housing and transportation we are highly attentive to the risks high inflation poses to both sides of the mandate and we are strongly committed to returning inflation to the 2% objective. against the backdrop of the rapidly evolving economic environment, our policy has been adapting and it will continue to

do so. at today's meeting the committee raised the target range for the federal funds rate by three-are the kwaers of a percentage point resulting in a 1.5% increase in the target range so far this year the committee reiterated that it anticipates that ongoing increases in the target range will be appropriate and we are continuing the process of significantly reducing the size of our balance sheet which plays an important role in firming the stance of monetary policy. >> coming outside of our last meeting in may, was there a broad sense on the committee that a half percentage point increase should be $ed in the meeting if economic conditions fall in heine for expectations >> we are highly attentive to the incoming tata revofrling outlook. >> unnation has surprised to the outside impeach some for

inflation this year have been revise up notably. in in response to the development a larger increase was warranted at today's meeting. this continues our approach of expeditiously moving our policy rate up to more normal levels, and it will help ensure that longer term inflation expectation remain well anchored at 2%. as shown in the sep, the median projection for the appropriate level of the federal funds rate is 3.4% at the end of this year. a percentage point and a half higher than projected in march and 0.9% of the longer run value. the median projection rises furg t further at 3.8% and declines in still above the median-run value. these do not represent a committee plan or decision and no one knows with any certainty where the economy will be a year or more from now

over coming months we'll be looking for compelling evidence that inflation is moving down, consist went inflation returning to 2%. we anticipate that ongoing rate increases will be appropriate. the pace of those changes will continue to depend on incoming data and the outlook for the economy. clearly, today's 75 basis point increase is an unusually large one, and i do not expect moves of this size to be calming from the perspective of today, either a 50 basis point or a 75-basis-point increase seems likely at our next meeting we will, however, make our decisions meeting by meeting and we will continue to communicate our thinking as clearly as we can. our overarching focus is to bring inflation down to the 2% goal and to keep inflation expectation well anchored. making appropriate monetary policy in this uncertain environment requires a recognition that the economy often evolves in unexpected

ways inflation has obviously surprised to the upside over the past year and further surprises could be in store. we, therefore, will need to be nimble in responding to incoming data and the evolving outlook and we will strive to avoid adding uncertainty to what is already an extraordinary challenging and uncertain time we were highly attentive to inflation risks and determined to take the measures necessary to restore price stability the american economy is very strong, and well positioned to handle tighter monetary policy 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 achieve our maximum employment and price stability goals. thank you, and i look forward to your questions >> thank you

howard schneider with reuters. two related questions, chair powell do you feel you boxed yourself in with the language you used at the last press conference at 50 bases points hikes in june and july and would you please give us in best detail as you can of what role you played in reshaping market expectations so quickly on monday? >> so, as you know, we always aim to provide as much clarity we can about our policy intentions subject to the inherent uncertainty and the economic outlook because we think it is more effective when market participants will understand our reaction function and in the current highly unusual circumstances with inflation well above our goal we think it's helpful to provide even more clarity than usual, again, some uncertainty in the outlook. and i think over the course --

over the course of this year, financial markets have responded and have generally shown that they understand the path that we're laying out of course, it remains data dependent and so that's why we generally think about guidance and why we offer it. when i offered that guidance at the last meeting i did say that it was subject to the economy performing about in line with expectations i also said that if the economy -- if it came in worse than expected then we would consider moving even more aggressively so we got the cpi data and some data on inflation expectations late last week, and we thought for a while and we thought this was the appropriate thing to do. so then the question is what do you do and do you wait six weeks to do it at the next meeting

i think the answer is that's not where we are with this and we decided to go ahead and so we did. that's really how we made the decision >> thanks for taking our question gina smythe with "the new york times. >> you -- i guess we wonder if you can describe how aggressive you need to be obviously, 75 today. what did 75 achieve that 50 would aren't have and why not go for a full percentage point at some point >> sure. if you take a step back, what we look for is compelling evidence that inflation is moving back down and we'd like to see that in the form of a series of declining monthly inflation readings and that's what we're looking for. by this point, we had been expecting to see clear signs of inflation flattening out and ideally beginning to decline we said that we'd be data dependent and focused on

inflation risks and the things that i mentioned to howard moments ago. so contrary to expectations, inflation again, surprised to the upside some indicators of inflation expectations have risen and projections of this year have moved up notably so we thought strong action was warranted at this meeting and today we delivered that in the form of a 75 basis point rate hike, as i mentioned the point of it really is this we've been moving rates up expeditiously to our normal levels and over the course of the seven months since we pivoted and began moving in this direction, we've seen financial conditions tighten and appropriately so, but the federal funds rate even after this move is at 1.6% so, again, the committee is moving expeditiously to more normal levels and we came to the

view that we'd like to do more front end loading after that the sep will give levels that we think are appropriate at any given time and this is the speed at which you would get there as i mentioned, 75 basis points today. i said the next meeting could well be about a decision between 50 and 75. that would put us at the end of the july meeting, you know, in that range -- in that more normal range and that's a desirable place to be because you begin to have more optionality there about the speed with which you would proceed going forward. just talking about the sep for a second what it really says is that committee participants widely would like to see policy at a modestly restrictive level at the end of this year and that's six months from now. so much data and so much can happen so remember how highly uncertain this is, but so that is generally a range of 3% to 3.5% and that's where people are and that's what they want to see, knowing what they know now and

understanding that we need to show resolve and also be flexible to incoming data and w don't need to do that much and we do that much or possibly more in any case, it would be data dependent and people see more -- a bit more tightening in the range of 3.5% and that's generally what people see as the appropriate path for getting inflation under control and starting back down and then getting back down to 2%. so 75 basis points seem like the right thing to do at this meeting and -- and that's what we did >>. >> steve liesman, cnbc thank you for taking my question, mr. chairman >> you have not used the phrase for a long time, monetary approximately see is the phrase you use often. now that the committee is projecting 4% on -- or 3.8% next

year interms of the funds rate which is similar to where the market is now and the market next year, do you think that's a level that is going to be sufficiently high enough to deal with and bring down the inflation problem and just as a follow-up, could you break that apart for me how much of that is restrictive? and how much of that is a normal, positive rate that ought to be embedded or not in your opinion in the funds rate? >> thank you >> sure. >> so the question really is how high does the rate really need to go? the estimates on the committee are in that range of 3.5% to 4% and how do you think about that? you can compare it to that and we think that's in the mid-twos. you can look at broader financial conditions and you can look at asset prices and the effect they're having on the economy, rates, asset prices, credit spreads and all of those things go into that. you can also look at the yield

curve and ask all alonged yield curve where is the policy rate so much of the yield curve now real rates are positive. that's not true at the short end of the yield curve in the early years, you don't have negative rates still. that is one data point and one part of the financial condition. >> i have to look at it this way. we move the policy rate. that affects financial conditions and that affects the economy. we have rigorous ways to think about it, and ultimately we think do we think financial conditions are in a place where they're having the desired effect on the economy? that desired effect is we'd like to see demand moderating demand is very hot still in the economy. we'd like to see the labor market getting better in balance between supply and demand and that can happen both from supply and demand right now there's -- demand is substantially higher than

available supply though. so we feel that there's a role for us in moderating demand and we can affect that with the policy tools and there are many things we can effect and those would be the things that the commodity price issues that we're having around the world due to the war in ukraine and the fallout from that and just all of the supply side things that are still pushing upward on inflation. so that's really how i think i would think about it >> 3.8% and 3.4% would get it done >> i think it certainly is in the range ofplausible numbers. i think we'll know when we get there, really. honestly, that would be -- you would have positive real rates and inflation coming down and you'd have positive real rates across the curve i think the neutral rate is pretty low these days. so i would think it would, but you know what? we will find that out empirically. we're not going to be completely

model driven about this. we'll be looking at this, keeping our eyes open and reacting on data both on financial conditions and what's happening on the economy >> thanks. nick timrose of "the wall street journal. chair powell, you said you'd like it to work through upon any expectations and it's quite different from what you and your colleagues set for your expectation. i know you said what changed was the data and the inflation expectations data, but i'm wondering on the inflation expectations data was there something you saw that was unsettling enough to risk eroding the credibility of your verbal guidance by doing something so different from what you had socialized before? >> so if you look at -- we look at a broad range of inflation expectation. so you've got the public you've got surveys of the public

and experts and you've also got market based, and if you look at the broad range of data, what you see is that expectations are still in the place very much in the place where short term inflation is going to be high, but comes down sharply over the next the nex couple of years. that's really where inflation expectations are and also as you get away from this episode they get back down to close to 2% this is really very important to us that that remain the case i think if you look for most measures most of the time that's what you see if we even see a couple of indicators that bring that into question, we take that very seriously. we do not take this for granted. we take it very seriously. the preliminary michigan reading is a preliminary reading it might be revised. nonetheless it was quite eye catching and we noticed that we also noticed that the index of common inflation expectations at the board has moved up after being pretty flat for a long

time, so we're watching that and we're thinking this is something we need to take seriously, and that is one of the factors as i mentioned, one of the factors in our deciding to move ahead with 75 basis points today was what we saw in inflation expectations we're absolutely determined to keep them anchored at 2% that was one of the reasons. the other was just the cpi rating >> so if you saw movement like that again, another tick up in inflation expectations, would that put a 75 or even 100 basis point increase in play at your next meeting >> you know, we're going to -- i'll just say we're going to react to the incoming data appropriately, i think i wouldn't want to put a number on what that might be. the main thing is to get rates up and then pretty soon we'll be in an area where -- you get closer to the end of the year, you're in a range where you have restrictive policy, which is

appropriate. 40-year highs in inflation we think the policy will need to be restrictive and we don't know how restrictive. i think that's how we'll take it >> from axios, thanks for taking our questions. the late-breaking kind of decision to go to 75 basis points, do you worry that will make policy guidance a less effective tool in the future, and should we think of that as a symmetrical reaction if we start to get soft readings on inflation or the labor market starts to roll over? >> to take your second question first, yes i think, again, we're going -- we're resolved to take this on, but we're going to be flexible in the implementation of it. and your question was guidance again, the overall exercise we try to be -- provide as much clarity about our policy intentions as we can because we think that makes monetary policy work better. there's always a tradeoff.

you have to live with that guidance and so you do it and it helps a lot of the time. i frankly think this year has been a demonstration of how well it can work. with us having really just done very little in the way of raising interest rates, financial conditions have tightened quite significantly through the expectations channel as we've made it clear what our plans are. i think that's been a very healthy thing to be happening. and i would hope that it's always going to be -- any guidance we give is always going to be subject to things working out about as we expect and in this particular situation we're looking for something specific, and that is progress on inflation inflation can't go down until it flattens out and that's what we're looking to see. and if we don't see that, then that's the kind of thing -- even if we don't see progress for a longer period, that could cause

us to react, but we will -- soon enough we will be seeing some progress at some point and we'll react appropriate to that, too. i would like to think, though, our guidance is still credible but it's always going to be conditional on what happens. this is an unusual situation to get some data late during blackout, very close to our meeting. very unusual one that would actually change the outcome. i've only seen in my ten years plus here at the fed i've only seen something like that even close to that one or two times i don't think it's something that will come up a great deal >> thank you so much for taking our questions. kolby smith with "the financial times. on the clear and convincing threshold for the inflation trajectory, what is the level of realized inflation that meets that criteria, and how is the committee thinking about the

potential tradeoff of much higher unemployment than even what's forecast if inflation is not moderating at this acceptable pace? >> the second part i didn't get. >> what the potential tradeoff with higher unemployment than even what's forecasted in the sep, if inflation is not moderating at an acceptable pace >> right so what we want to see is a series of declining monthly readings for inflation, and we like to see inflation headed down so -- but -- and right now our policy rate is well below neutral, right so soon enough we'll have our policy rate -- let's assume the world works like the sep says the policy rate is up where we think it should be and the question would be do you slow down does it make you -- that you will be making these judgments about is it appropriate to slow down from 50 to 25 let's say or

speed up so that's the kind of thinking we'll be doing and, again, we're looking ultimately we're not going to declare victory until we see a series of these, really see convincing evidence, compelling evidence, that inflation is coming down and that's what i mean by that's what it would take for us to say, okay, we think this job is done because we saw -- and, frankly, we saw last year inflation came down over the course of the summer and then turned around and went back up i think we're going to be careful about declaring victory. but, again, the implementation of our policy will be flexible and sensitive to incoming data >> are you more concerned now to bring down inflation it will require more than just some pain at this point? >> again, i think that -- i do think that their objective, and

this is what is reflective in the sep, it is to bring inflation down to 2% while the labor market remains strong. i think what's becoming more clear is that many factors we don't control are going to play a very significant role in deciding whether that's possible or not, and there i'm thinking, of course, of commodity prices, the war in ukraine, supply chain, things like that, where we really can't -- the monetary policy stance doesn't affect those things but having said that there is -- there's a path -- there's a path for us to get there. it's not getting easier. it's getting more challenging because of these external forces, and that path is to move demand down, and you have a lot of surplus demand. take, for example, in the labor

market so you have two job vacancies essentially for every person active seeking a job, and that has led to a real imbalance in wage negotiating you could get to a place where that ratio was at a more normal level, and you would expect to see those wage pressures move back down to level where people are still getting healthy wage increases, real wage increases, but at a level that's consistent with 2% inflation. so that's a possibility and you could say the same thing about some of the product markets where there's excess capacity and really where the strong demand has gone into -- sorry, where they're capacity constrained. effectively what we think of as a vertical supply curve or close to it. so demand comes in and it's very strong and it shows up in higher prices not higher quantities, not more cars, because they can't make the cars because they don't have the semiconductors. in principle that could work in reverse when demand comes down

you could see, and it's not guaranteed, but you could see prices coming down more than the typical economic relationships that you see in the textbooks would suggest because of the unusual situation we're in on the supply side. so there's a pathway there it is not going to be easy and, again, it's our objective, but, as i mentioned, it's going to depend on factors we don't control. >> hi, chair powell. thank you for taking our questions. rachel siegel from "the washington post. so the new projections show the unemployment rate ticking up through 2024 is a higher unemployment rate necessary in order to combat inflation, and what is lost if the unemployment rate has to go up and people lose their jobs in order to control inflation thank you. so, you're right in the sep we have unemployment going up to -- the median is

4.1% there are a range of actual forecasts. and i would characterize that if you were to get inflation down to, you know, on its way down to 2% and the unemployment went up to 4.1%, that's still historically low level we hadn't seen -- we hadn't seen rates, unemployment rates below 4% until a couple of years ago for like one year in the last 50 so the idea 3.6% is historically low in the last century. a 4.1% unemployment rate with inflation well on its way to 2%, i think that would be -- i would think that would be a successful outcome. we're not looking to have a higher unemployment rate, but i would certainly look at that as a successful outcome [ inaudible ]