broader economy and how much of a recession most likely does that cause and how deep will that recession actually be, and i'm in the camp that it might be a little more on the mild side, even if we have one. >> right well are in a complicated time, both in terms of the economy and in terms of geopolitics and the rest we've got about ten seconds now until we can go to steve liesman for the news, and let's do that right now. >> reporter: the federal reserve raising interest rates by three-quarters of a percentage point to a new range of 3.15%, the highest rate since 2008. ongoing increases will likely be appropriate in the funds rate and they say inflation remains elevated it's sharply raised. the median forecast of a federal reserve visual sharply raising the outlook for the funds rates for this year to 4.4% from 3.4%, so a full percentage point by the way, that is a little higher than the market was going into this meeting here for 2023, the median forecast is

for 4.6% funds rate, again, a bit higher on the peak rate than where the market was and that was from 3/8 the median forecast is 3.9 from 3.4. step members do see a number below the 3.1 level so if you want to think about the federal reserve cutting rates, that looks like it will happen sometime in 2024 getting back down to the new number we have of 2025 and that is 3.9% a sharply lower gdp outlook, 0.2% forecast for this year, down from 1.7, 1.2% for 2023 down from 1.2 and then gradually the fed sees the economy, economic growth getting back towards the trend of 1.8%. a big but not tremendous increase on the unemployment outlook. 4.4 for 2023 from 3.9 so almost a percentage point or more higher than the low rate of 3.5, about a percentage point inflation nearest the target of

2.3 not is 2024 and hits target of 2% in 2025. going back to the statement, very much a cookie cutter statement from the july wording saying that modest growth and spending said it was soft anything and now modest growth, continue to see robust job gains and elevated supply/demand and higher food and energy costs the decision was unanimous with i believe the first time we've had 19 members of the federal reserve for many almost a decade tyler, back to you. >> steve, thanks to you. let bring in the panel, bob pisani from the new york stock exchange, rick santelli also joining us, and, rick, let's start with you, and the movers seeing in the bond market and stocks which are reversing early gains. the s&p 500 now trading in negative territory, a 75-basis point rate hike. >> yes, you know i'm watching all the different maturities on the yield curve.

one thing i can tell you is right before the fed announcement rates were virtually unchanged. we're now up 13, 14 basis points on the session on a two-year the high yield on a two-year now, 4.11. 4.11, like when we used to call information, and on the ten-year, the high yield thus far on this move, 3.62%. fed fund futures, there's so many contracts i'm looking at the january it dropped like a rock down towards 9566 when its prices go down the fed presence goes up but it's bouncing a little bit and you're seeing yields very volatile, and i described the way they move, but they are easing back just a bit. of course, waiting for q&a ultimately another dynamic was prevalent right before the announcement 30-year and ten-year yields were on top of each other t.actually inverted briefly that's a very unusual inversion because 30s to 10s known as the

nob spread since 2006 have had two sessions, and they were both this year when they closed inverted want to pay attention there. last but certainly not least, the dollar index, certainly the beneficiary of the path the fed has taken. >> rick santelli, thank you very much let's check in now with bob pisani we had basically there a 200-point swing from where the dow was, i'm talking about, bob, right on the precipice of the announcement to where we are now which is down 168. we were up about 160 and now we're down 160, that's 320 points actually. >> yeah. i watched the s&p. we were at 3880 or so, and we've dropped about 40 points or so since then it's very obviously why. this is what the market didn't want, the higher for longer scenario here, so we have a higher fed funds projected rate for 2022, a higher fed funds projected rate for 2023. no reductions until 2024 not quite priced into the market

so very understandably why the market has moved down here we know why powell has been so aggressive here. the stock market has rallied the labor market is strong and inflation stayed higher longer, and even if it is peaking, it's still higher for longer. the two issues, i polled traders this morning and the two issues i got was, number one, they want to know how high the fed fund rate is going to be, the terminal rate. obviously higher than people thought earlier and when the concerns over tightening really start to kick in that's what they want to hear at the presser. so i think the problem for the presser now is powell is going to maintain maximum flexibility. he's going to not give any hints about the next rate hike obviously there's implications that it will be potentially 75 basis points and will push back against any pivot next year. for the market here, remember, we're about 5% where we were at the market lows on june 16th, 3666 or so, and is there anything at the press conference that might sound a little less

hawkish? i think he would acknowledge somehow that they still want to see some kind of effects from the rate cuts they already have, some indication that they are aware at least of the slowdown remember, powell is winning on a lot of fronts here housing is definitely softening. we saw that this morning with the data commodities are softening and wages are not, so it's a very tough picture. any of the bottom line from the precious, anything they indicate, still data dependent or they will see what impact the rate hikes v.that might ameliorate some of this, but this initial projections for fed funds future for 2022 and 2023, that's the negative for the market. >> let's open up the discussion with our panelists david, i want to go with you, the fed reiterating that inflation remains elevated, burks again, sharply raising the projections for the fed funds rate from 3.4 to 4.4%. what does that tell you about how the fed sees inflation leveling off, if it will level off in the early months? >> i think they just want to

sound hawkish. i mean, i'm trying to figure out what i'm supposed to be so scared about here. if you look at the projections, they think that inflation will come steadily down now, it might take a little while to get to 2%, but honestly as is there any life change between 2% and 3%, 9% is absolutely intolerable, but those days are already behind us, and meanwhile what i think is really interesting in this is if you look at the clause that built in -- obviously this meeting, 75 in november and 50 in december, probably 25 early next year, so they are getting up to 4 to 4.5% of the funds rate, i don't think the economy can take it. the dollar is up 20% year over year think about what that is doing to our exports, a whole swath of potential home buyers are being knocked out of the market by 6% mortgage rate, fiscal drag going off. i mean, this economic is real -- it's got one foot in the grave i mean, it really looks like it

could get pushed into recession and i just don't see the reap why. if inflation is coming down slowly, let it come down slowly. >> that met affair is certainly a frightening one. certainly what will bob said is that the market is reacting to the idea that rates will stay higher for longer. are you concerned like david is about what sounds like a rather more serious recession in the u.s. >> well, i guess i would echo one of the comments from are a prior guest who said that the recession may be milder than past recessions because we have more buffers built in. there's more resilience, and we've talked on and on about corporate balance sheets, household balance sheets so i'm not asser is vows about a deep reinvestigation, but i do think that this latest summery of economic projections points to a fed going a lot further than perhaps they need to go, given the inflation outlook and that they are doing so at a time when

the economy is quite vulnerable to a slowdown. it's not just the u.s. economy it's the global economy, and this may be just a bit of a bridge too far. >> jim, what type of clarity do you hope to hear from chair jerome powell in the press conference do you expect him to maintain a hawkish disposition similar to what we saw at jackson hole in. >> so the things that i'm listening to, you know, from powell is going to be how he links the labor market to the current fed policy right now what the fed is saying they can control inflights without doing too much damage to the labor market and that's something the markets don't really believe it's more mann than likely that the unemployment rate has to go up more than the fed is saying what shouldn't be lost on snib this is a significant market to market from the june to the september one we just got, 100 basis points in marking to

market for policy rates in 2022 and 100 basis points higher for 2023 this is going to play, wreak havoc on assets from a discount rate perspective in terms of how we look at future cash flows and how we need to start to think about valuations the faster this fed goes and i would like to hear from powell as well, this might be good in the short term in terms of it might fight inflation, the reinvestigation risks do start to increase dramatically when you see a significant move higher in fed policy forecasts, and i think that's something that we have to reconcile. >> you know, steve liesman, i want to bring you in to get your wrapper on this whole package of moves here one of the things things that did stand out is under this regime you don't get close to 2% or close to it until 2025. >> yeah. i mean, it kind of -- they are doing what i think david kelly

wants them to do but maybe not slow enough in that they are saying we'll let this be above target for up to three more years. i think the story here, tyler, as i get it is the fed outhawked the hawks here and i like the phrase marking to mark they went to the market and they went further than the market has gone so right now i'm looking at the fed funds future, the peak rate still being in that april 2023 at 4.62 so now the market and the fed are in line with basically where the peak rate is and where we're going to go. what i think is also as the last guest suggested, a little bit difficult to understand or to equate is someone still modest rise in our unemployment rate. the idea that the only pain that you're going to get, we were down at 3.5 was the low. >> yeah. >> and you're going to go to 4.4, less than a percentage point increase in the unemployment rate while you have a huge increase in the funds rate that attempts to slow the

economy, i think that's lacking a little credibility here. i will just say this final point here this forecast is almost certainly going to be wrong and the challenge for investors at this point is to figure out how you. >> that's what investors are trying to figure out i'm trying to draw attention to the two-year note which is sensitive to monetary policy rick santelli, now about 4% at 4.1. >> yeah. you know, i think that pretty much i agree with david on most issues i think the two-year note yields are blinding to many investors they shouldn't be blinded by that they should move down the curve. you're getting a much better picture of reality in 10s and 0s which by the way have inverted 3.55 in 30s, 3.39 in 10s this is a tough love chapter of a central bank that didn't do a very good job of trying to tone down some of the covid stimulus in enough time not to cede

inflation. they were probably blind-sided by the war in ukraine and here we are, but the tough love phase, it's going to disappear at some point because there is a period out there, as david kelly has pointed out, where we're going to see everything cross. their inflation dots are going to keep going up and the marks on inflation will go down and that reality, investors can almost smell it. it's just a question when will it occur, in mid-'23 or late '23? let's talk about the dollar. you heard karen just say the strong dollar now at a 20-year high against a basket of currencies going to crush our exporters. talk to me about that. >> you know, if we were china, if we were japan, if we why germany i'd worry about it a whole lot more we do have an export economy and consumption will improve with a strong dollar because imports.

>> we'll get keeper. >> variety of imports are cheaper. i would be fret willing for the central from bankers who caused this mess. >> david, stronger dollar, higher rates how does that change the calculus for stocks in we've certainly seen earnings estimates come down in the recent weeks. >> yes, it's going to be a tough career ahead for earnings, no doubt about it, but one of the reasons that i don't like the fed being too aggressive right now is i want them to get to positive real rates and stay there. what i think they are setting up is a situation that they put the economy into rehaegs they'll vently reverse course and a low interest rate environment which i think would be god for equity markets. for long-term investors there is

an opportunity here because the fed will eventually have to turn course because it they have that today in that's going play out today. >> katie, i'll give you the last final, time, you will final word harkening to something that rick said, the economy is not as exposed to exports but the s&p 500 certainly is, so i think investors will pivot from worrying about the investment impact but the earnings impact, not just through the currency channel but the slower economic growth channel as well we have another transitional set of worries to think about as we get into 2023. >> i'm dying to ask steve what he's going to ask the chairman but i'll let that be our big surprise panelists, thanks so much. appreciate your time as always, all of you, thank you for joining us coming up, former freshly is

going to be on the right track or are we making a policy mistake? at the bottom of the hour we'll hear from fed chair jerome powell, about the risk of inflation, the whole thing more power two in two minutes. at ameriprise financial, our advice is personalized. based on your goals, whatever they may be. all that planning has paid off. looks like you can make this work. we can make this work. and the feeling of confidence that comes from our advice? i can make this work. that seems to be universal. i can make this work. i can make this work. no wonder more than 9 out of 10 clients are likely to recommend us. because advice worth listening to is advice worth talking about. ameriprise financial.

all right. stocks are falling just a bit, more than a bit right now, 272

point on the dow as you see there after we've heard from the fed a decision to raise interest rates by three-quarters of a point. yields have been spiking the two-year yield at it highest level since 2007 it's above 4% as you see there really close to 4.1% the decision sounded a little more hawkish as steve liesman put it he outhawked the hawks. long-term rates -- rates above 4.25% by year end. with us now frederic mishkin, former federal reserve governor. welcome. good to see you. >> good to be here. >> you believe we got here because of policy mistakes made by the federal reserve and the fact that they had to play catchup. are they playing catchup too hard right now or are they doing the right thing? >> you know, i've been very critical of the fed for well over a year on cnbc. >> yes, have you. >> because it needed to do much

more and had an op-ed in "the financial times" saying their policy framework was flawed but i had a recent op-ed and the fed has turned the ship around and is doing exactly what they need to be doing. they have to be tough, that their rhetoric is now exactly where it needs to be the good news is that inflation expectations have responded to the fed's toughness and actually have receded somewhat which is very good news the problem here is that there's going -- that the likelihood of a recession is very high soft landings are just not possible or very, very unlikely in situations like this where you've made some mistakes, you've gotten behind the curve and now you've got to do catchup. what that means is that the fed has got to keep on being tough and recession is very likely to occur and there's going to be a lot of pressure on the fed to ease off in fact, the markets have been thinking once the economy starts to slow down a lot, recession

occurs, that the fed will back off. that would be a huge mistake, and i just had an op-ed in "the financial times" about a week ago saying people don't remember that volker, the tough guy clinked and we had an extremely severe recession and if the fed blinks and is not doing what it's doing and convincing markets that they mean business, then the problem is they will have to raise rates by more and more severe results will ensue i'm not positive about what they are doing, but they can't succumb to pressure. >> forgive me for one more thought there, or you get what happened deese those voelker

years. >> i think it the issue why they had a double-dip recession is because they blinked, yes, and the fed had raised rate to very high levels, actually to over 15%. the recession was actually sharper than they expected they then blinked and brought the interest rates down by over 7 up basis points. the result was inflation expectations didn't drop at all. the markets were not cop vinced the fed was serious and then voelker took out the baseball bats and rose to over 20 and clobbered the economy and we had the second recession that's the danger right now. the fed is talking the right way. they say that even if there's a recession they have to do what they have to do, but we haven't seen the real pressure yet when people are at odds they can't make the kind of mistakes made in the past, and i think that they -- that they hope they won't, and i don't think they will, but you never know. >> powell did say in jackson hole that households should

expect some level of pain as rates move higher. do you think pole will elaborate in the press conference just what that pain would look like for americans as they look at their waltz and 401(k)s and fear of losing money? >> i don't know. because, you know, it's always tough to give people bad news and you don't want to dwell on the bad news it was very good that he said what he said, and i think the reality is that he's -- he's made it clear and other members of participants of the fomc have also made it clear that the fed -- actually its main job right now is to get inflation under control and if it doesn't do that it will be much worse later. so that's the kind of thing that he need to express, and i think he needs to go in and say, you know what, you'll have a lot of pain and we're going to raise rates. that's not the strategy that i would use. i would just say we've got to do what we've got to do and it's -- it's the right thing to do and that i think is what he's going to communicate.

>> and you think he will have -- i don't know how to say this, the kind of rhetorical discipline to do what you are urging him to do, and that is to not blink rhetorically in a press conference. >> yeah. >> because sometimes that happens, you know. you say something. >> sure. >> you do something and then you kind of nuance it a little bit. >> yeah. you know, it worries me a little bit. jay has not been great on the communication front. it's one of the things that people in wall street, you know, the wall street economists have not been completely happy about in the past. i think -- i hope he's learned his lesson there he's to the been transparent enough here i think he's actually been very clear lately in a very positive way. >> right and he needs to stick to that. i think he'll be able to do that. >> that was issued in the july meeting, right he said generally he'll moderate the pace at which rates rise and stocks rip and nasdaq was up 2% during the july meeting. here we have a very different story with stocks down across

the board. >> the bottom line is the stock market will go down. you know, that's not the end of the world. that's just life. >> fred rib mishkin, thank you very much for your clarity always a pleasure to have you with us. >> my pleasure, too. >> we look forward to it. we are a few minutes away from fed chairman jerome powell's news conference where investors will be looking for more details on the fed's projections for short-term rates. "power lunch," we're back in two. ♪ (vo) with their verizon private 5g network, associated british ports can now precisely orchestrate nearly 600,000 vehicles passing through their uk port every year. don't just connect your business. (dock worker) right on time. (vo) make it even smarter. we call this enterprise intelligence.

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we are minutes away from fed chair jerome powell's news conference let's get to the new york stock exchange where mike santoli is watching the market reaction mike, we saw stocks drop as soon as we got the 75-basis point rate hike decision and the fed fund projections which suggests we have two more meetings left for this year, another 125 basis points expected before the end of the year, right >> absolutely, sela. so it's not too far out of the zone of what the markets seem to be in position for but where it did deviate it was slightly more hawkish in terms of moderate front loading rate hikes by the end of the year and next year and painting the picture for subpar growth for a few years and still inflation nagging at the edges of our consciousness

and stocks trying to figure out what happens to the economy and earnings along the way now, in terms of the reflection reflex, never a final word on what the fed did or said or what's going to be, you know, the outlook for the next few weeks because we have to wait for the press conference because the s&p 500 essentially just pulled back and tested the low for the day on each of the past three days the low for today is basically the same as it was over the past three sessions, so it's kind of crouching in place and waiting to see what powell might have to say that informs beyond what the projections are in the summery of economic projections. >> so do you think that -- that stocks will revalue in light of this, or is a lot of that revaluation already in the soup? >> i think a fair bit of it is done, at least for the median stock out there from a lot of sectors that have actually adjusted we've had a valuation reset. it's all about whether the economy can actually stay. look, nominal gdp growth is projecting 4% for the next four years. that's not awful and we'll see how corporate earnings can fare

in an environment if that's something like what we get out there. i think there's something that we don't want the markets to get too comfortable and right now tax succeeding. >> definitely succeeding and not letting the markets get too comfortable. i want to ask you to stick around for just a second as we watch the clock here counting down to 2:30 he's usually pretty close to time take a note of where the dow industrials stand right now, down 188 points. just for references sake as you watch sort of the ekg of the market over the next 45 minutes or an hour, and here comes chair powell >> >> good afternoon, everyone my colleagues and i are strongly committed to bringing inflation back down to our 2% goal we have both the tools we need and the resolve that it will take to restore price stability on behalf of american families

and businesses ies from stability is the responsibility of the federal reserve and serves as the bedrock of our economy without price stability, the economy does not work for anyone in particular without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. today, the fomc raised its policy interest rate by three-quarters of a percentage point, and we anticipate that ongoing increases will be appropriate. we are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%. in addition, we're continuing the process of significantly reducing the size of our balance sheet. i will have more to say about today's monetary policy actions after briefly reviewing economic developments the u.s. economy has slowed from the historically high growth rates of 2021 which reflected

the reopening of the economy following the pandemic recession. recent indicators point to modest growth of spending and production growth and consumer spending has slowed from last year's rapid pace in part reflecting lower real disposable income and tighter financial conditions activity in the housing sector has weakened significantly in large part reflecting higher mortgage rates higher interest rates and slower output growth also appear to be weighing on business fixed investment while weaker economic growth abroad is restraining exports. as shown in our summery of economic projections since june, fomc participants have marked down their projections for economic activity with the median projection for real gdp growth standing at just 0.2% this year and 1.2% next year, well below the median estimate of the longer run normal growth rate despite the slowdown in growth, the labor market has remained

extremely tight with the unemployment rate near a 50-year low, job vacancies near historical highs and wage growth elevated job gains have been robust with employee employment rising with an average of 378,000 jobs per month over the last three months the labor market continues to be out of balance with demand for workers substantially exceeding the supply of available workers. the labor force participation rate showed a welcome uptick in august but is little changed since the beginning of the year. fomc participants expect supply and demand conditions in the labor market to come into better balance easing upward pressure on wages and prices. the median projection in the sep raises to 4.1%, a half percent higher than the june projections. over the next three years, the median unemployment rate runs above the median estimate of its longer run normal level.

inflation remains well above our 2% longer run goal over the 12 months ending in july, total pce prices rose 6.3%, excluding the volatile food and energy categories, core pce prices rose 4.6% in august, the 12-month change in consumer -- in the consumer price index was 8.3% and the change in the core cpi was 6.3%. price pressures remain evident across a broad range of goods and services although gas line prices have turned down in recent months, they remain well above year earlier levels in part reflecting russia's war against ukraine which has boosted prices for energy and food and has created additional upward pressure on inflation. the median projection in the sep for total inflation is 5.4 this year and falls to 2.8% next year, 2.3% in 2024 and 2% in

2025 participants continue to see risks in inflation as weighted to the upside. despite elevated inflation, longer term inflation expectations appear to remain well-anchored as reflected in a broader range of surveys of households, business services and forecasters as well as measures from financial markets, but that is not grounds for complacency. the longer the current bout of high inflation continues, the greater the chance of expectations of higher inflation will become entrenched the fed's monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the american people. my colleagues and i are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing and transportation we are highly attentive to the risks that high inflation poses

to both sides of our mandate, and we're strongly committed to returning inflation to our 2% objective. at today's meeting the committee raised the target range for the federal funds rate by three-quarters of a percentage point bringing the target range to 3.25, and we're continuing the process of significantly reduce the size of our balance sheet which plays an important role in firming the stance of monetary policy. over coming months we'll be looking for compelling evidence that inflation is moving down consistent with inflation returning to 2%. we anticipate that ongoing increases in the target range for the federal funds rate will be appropriate the pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy. with today's action we have raised interest rates by three percentage points this year. at some point as the stance of monetary policy tightens further, it will become appropriate to slow the pace of increases while we assess how

our cumulative policy adjustments are affecting the economy and inflation. we will continue to make our decisions meeting by meeting and communicate our thinking as clearly as possible. restoring price stability will require maintaining a strict policy stance for some time. historical records cautious against prematurely decrease our measures the federal funds rate is projected 59 hadn't 41 this year, one percentage point higher than in june. the median projection rises to 4.6% at the end of next year and declines to 2.9% by the end of 2025, still above the median estimate of its longer run value. of course, these projections do not represent a committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now. we are taking forceful and rapid steps to moderate demand so that

it comes into better alignment with supply. our overarching focus is using our tools to bring inflation back down to our 2% goal and to keep longer-term inflation expectations well anchored reducing inflation is likely to require a sustained period of below trend growth, and it will very likely be some softening of labor market conditions. restoring price stability is essential to set the stage for achieving maximum employment and stable prize over the longer run. we will keep at it until we're confident the job is done. 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 >> hi, chair powell.

thank you for taking our question i wonder if you could give us a little detail about how you'll know when to slow down these rate increases and how you'll eventually know when to stop >> so, i will answer -- i will answer your question directly, but i want to start here by saying that my main message has not changed at all since jackson hole the fomc is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done. so the way we're thinking about this is the overarching focus of the committee is getting inflation back down to 2%. to being a publish that we think we'll need to do two things in particular, to achieve a period of growth below trend and also some softening in labor market conditions to foster a better balance between demand and supply in the labor market, so on the first committee's forecast and most of those outside forecasters do show

growth running below its longer run potential this year and next year on the second, so far there's only modest evidence that the labor market is cooling off. job openings are down a bit, as you know quits are off their all-time highs and some signs that some wage measures may be flightning out and payroll gains are moderate and not much, and in light of the high inflation we're seeing, we think we'll need to and in light of what i just said, we think that we'll need to bring our funds rate to a restrictive level and to keep it there for some time, so what will we be looking at i guess is your question, so we'll be looking at a first things. first, we'll want to see growth continuing to run below trend and we want to see movements in the labor market showing a return to a better balance between supply and demand and ultimately we'll want to see clear evidence that inflation is moving back down to 2% so that's what we'll be looking

for. in terms of reducing rate, i think we would want to be very confident that inflation is moving back down to 2% before we would consider that. >> thank you, mr. chairman steve liesman, cnbc. can you talk about how you factor in the variable lags on inflation and the extent to which the outlook for rates should be seen as linear in the sense that you keepration rates, or can you envision a time when there's a pause to kind of look at what has been wrought in the economy from the rate increases. >> sure. so, of course, monetary policy does famously work with longer variable lags. the way i think of it is our policy decisions affect financial conditions immediately. in fact, financial conditions have usually been affected well before we actually announce our

decisions. then changes in financial conditions begin to affect economic activity fairly quickly within a few months, but it's likely to take some time to see the full effects of changing financial conditions on inflation, so we are -- we are very much mindful for that, and that's why i note it in my opening remarks that at some point as policy tight tense will necessary to slow the rate hikes while we assess how it's affecting our economy and inflation. that's how we think about it your second question, sorry, was? >> is there a time when you see it linear -- oh, i'm sorry i should know better than to not talk with the microphone >> i should know better than to answer your second question. >> there you go. is it linear do you keep raising rates, or is there a pausyou kind of figure t what has happened to the economy

and get time to catch up in the real economy >> thank you i think it's very hard to say with a precise certainty the way that this is going to unfold as i mentioned, what we think we need to do and should do is to move hour policy rate to a restrictive level that's restrictive enough to bring inflation down to 2%, where we have confidence of that, and what you see in the sep numbers is people's views as of -- as of today, as of this meeting, as to the kind of levels that will be appropriate. now, those will evolve over time, and i think we'll -- we'll just have to see how that goes there is a possibility certainly that we would go to a certain level that we were confident in and stay there for a time, but we're not at that level. clearly today we're, you know, we're just -- we've just moved i think probably into the very lowest level of what might be restrictive and certainly in my view and in view of the committee there's a ways to go

>> hi, chair powell. rachel seigle from "the washington post. thanks for taking our question projections show the unemployment rate rising to 4.4% next year and that kind of rise in the rate would bring a recession with it should we interpret that to mean no soft landing, sand that necessary to get inflation down? >> you're right. in -- in the sep there's what i would characterize as a relatively modest increase in the unemployment rate from an historical perspective given the expected decline in inflation. why isthat so really it is -- that is what we generally expect because we see the current situation as outside of historical experience in a number of ways, and i'll mention a couple of those. first, you know this, first, job openings are incredibly high relative to the number of people

looking for work it's applause il, i'll say, that job openings could come down significantly. i mean, they need to, without as much of an increase in unemployment as has happened in earlier historical episodes, so that's one thing in addition, in this cycle, longer run inflation expectations are -- have generally been fairly well-anchored, and i -- as i've said, there's no basis for complacency there, but to the extent that continues to be the case, that should make it easier to restore price stability, and i guess the third thing that i would point to that's different this time is that part of this inflation is caused by this series of supply shocks that we've had beginning with the pandemic and really with the opening of the economy and more recently amplified attitude by russia's invasion to ukraine have all contributed to the sharp increase in inflation, so these are the kinds of events that are not really seen in prior business cycles, and in principle, if those things start to get better, and we do see

some evidence of the beginnings of that, it's not much more than that, but it's good to see that, for example, commodity prices will look like they will have peaked and supply disruptions are continuing to resolve. those if sustained could help ease pressures on inflation. let me just say how much these factors will turn out to really matter in this sequence of events, it remains to be seen. we've always understood that restoring price stability while achieving a relatively modest decline or rather increase in unemployment and a soft landing would be very challenging, and we don't know. no one knows whether this process will lead to arecessio or if so how significant that recession would be that's going to depend on how quickly wage and price inflation pressures come down, whether expectations remain anchored and whether, you know, also do we get more labor supply which would help as well in addition, the chances of a soft landing are likely to diminish to the extent that

policy needs to be more restrictive or restrictive for longer nonetheless, we're committed to getting inflation back down to 2% because we think that a failure to restore price stability would mean far greater pain later on. >> are vacancies still at the top of your list and understanding the labor market and how much room there is >> vacancies are almost 2-1 ratio to unemployment people that's -- that and quits are really very good ways to look at how tight the labor market is and how different it is from other cycles where generally the unemployment rate is the single best indicator we think those things for quite a time have really added value in understanding where the labor market is. >> you said not too long ago in describing the policy

destination there's still a way to go, but i -- i imagine you have to have some idea about how you're thinking about your destination, whether it's a stopping point or a pausing point, and so i was wondering if you could discuss how you are thinking about as the data come in where that destination is and how it's moving up if inflation doesn't perform as you expect. do you want to have a policy rate that's above the underlying inflation rate, for example, and do you have an estimate for where you think the underlying inflation rate might be in the economy right now? >> well, so, again, we -- we believe that we need to raise our policy stance overall to a level that is restrictive, and by that i mean is meaningfully -- putting meaningful downward pressure on inflation. that's what we need to see in the stance of policy we also know that there are long

and variable lengths particularly it is a relates to inflation, so it's a challenging assessment, so what do you look at you look at broader financial conditions as you know, you look at where rates are, real and nom familiar in some cases. you look at credit spreads and you look at financial condition indexes. we also, i would think, and you see this -- this is something that we talked about today in the meeting and talked about in all of our meetings, and i think you see that in the forecast you want to be at place where real rates are positive across the entire yield curve, and i think that would be the case if you look at the numbers that we're writing down and think about -- measure those against some sort of forward look assessment of inflation, inflation expectations i think you would say -- at that time you would see positive real rates across -- across the yield curves, and that is also an important consideration. >> hi. howard schneider with reuters.

thanks for the opportunity i just want to be clear on this. you say it's meeting by meeting, but it sure looks like we're going 75, 50, 25 is 75 next month the baseline? >> so, we we make one decision per meeting, and the meeting -- the decision we made was to raise the federal funds rate by 75 median for the year end suggests another 125 basis points in rate increases, but there's also there's, you know, another fairly large group that saw 100 basis points in addition to where we are today so that would be 25 basis points less we're going to make that decision at the meeting. we didn't make that decision today, we didn't vote on that. i would say that we're committed to getting to a restrictive level of -- for the federal

funds rate, and getting there pretty quick ly just as a follow-up, even there's some discussion now of -- what's the incentive to continue frontloading right now is it lack of progress on inflation seen in the cpi reports, or is it a motivation to get as much done while the job market is still strong >> what we have seen is -- our expectation is we would begin to see inflation come down, largely blauf supply-side healing. we would have thought we would have gone seen some of that, but inflation has not really come down core pce inflation, a good measure of where inflation is running, a 3, 6 and 12-month trailing annualized basis, it's at 4.8%, 4.5% and 4.8%

that's a pretty good summary that's not where we expected or wanted to be that tells us we need to continuened and can keep -- and we did today, do another large increase as we approach the level we think we need to get to. we're still discovering what that left is people are writing that down in their s.e.p. >> reporter: chair powell, how should we interpret the fact that core inflation is still not forecast in the s.e.p. to be back to target in 2025, yet the dot plot suggests cuts as early as 2024. does that mean there's a level of inflation above the 2% target that the fed is going to tolerate

>> so, i guess, core is at 2.1 in 2025, and the median, and headline is at 2.0 that's pretty close. i mean, we write down our forecasts, and we figure out what the median is, and we publish it it's not -- i would say that if, you know, if actually if the economy followed this path, this would be a pretty good outcome, but you're right, it's a tenth higher than 2%. >> reporter: if the concern is underlying inflation is becoming more entrenched perhaps each month, why forgo the 100 basis point increase today, and does that risk having to do more later on >> so, as we said at the last press conference and in between, we said we would make our decision based on the overall data coming in we had a surprisingly low reading in july, and

surprisingly high reading for august you never want to overreact to any one data point if you look at them together, as i mentioned, 3.6, in 12-month trailing, inflation is running too high, 4.5% or above. you don't need to more than that that's the one thing you know, that this committee is committed to getting a reasonably predicted stance and staying there until we feel confident that inflation is coming down. that's how we think about it >> reporter: i wanted to ask about the balance sheet. you have left open the possibility you may sell mortgage-backed securities i'm just wondering whether conditions there might affect your plans for how quickly you

have the runoff on the mbs side. >> what we had is we would consider that once balance sheet runoff is well underway. i would say it's not something we considering now, and not something i expect to be considering in the near term it's something i think we will turn to, but the time for turning to it has not come and is not close. >> reporter: and will conditions in the housing market affect that decision? >> i think a number of things may affect that decision the main thing is we're not considering that decision and i don't expect to anytime soon >> reporter: a number of commentators have come to the view, including over at the world bank that simultaneous global tightening around the world creates a risk of global recession that's worse than necessary to bring inflation down how do you see that risk and is there much risk of overdoing it on a global level

>> so my colleagues and i just got back from one of our frequent trips to basel, switz switzerland. we are in pretty regular contact, and of course, we all serve a domestic mandates, in our case, the dual mandate, but we regularly discuss what we're seeing in terms of our own economy, international spillovers it's a very ongoing constant kind of process. so, we are very aware of what's going on in other economies around the world, what that means for us and vice versa. the forecasts that we put together -- that our staff put together and we put together on our own, always try to take all of that into account we don't do it perfectly, but it's not as if we don't any

about the policy decisions that are taking place in major economies. that's very much baked into our own forecast, our own understanding of, you know, of the u.s. economy, as best we can. it won't be perfect. so, you know, i don't see -- hard to talk about collaboration in a world where people have very different levels of interest rates if you remember, there were coordinated cuts and raises, things like that at at various times. we are in different situations, but our contact is more or less ongoing, and it's not coordination, but there's a lot of information sharing we all, i think, are informed by what other important economies -- and economies important to the united states are doing. >> reporter: chair powell, you talked about some ways the higher interest rates are

affecting the economy, but we have seen a resilient labor market, with durable consumption, strong corporate profits. i'm wondering what your story is on the resilience of the economy. after all, you and your colleague said, well, we started tightening in march when we were talking about interest investigates in the future, and indeed treasury rates moved up, so we should have had a lot of tightening effect. why is the economy, in your view, so resilient, and does it means we might need a possibly higher terminal rate you're right, of course. the labor market in particular has been very strong, but there are -- you know, the sectors of the economy that's more interest rate-sensitive are certainly showing the effects of our tightening, and of course the obvious example is housing, where you see declining activity involving different kinds and price increases moving down.

we're having an effect on intra-sensitive spending i think through the exchange rates, we're having an effect on exports and imports. i think -- so all of that is happening, but you're right. we've said this. this is a strong, robust economy. people have savings on their balance sheet from the period when they couldn't spend and where they were getting government transfers there's still significant savings out there, though not as much at the lower end of the income spectrum. but some savings to support growth the states are very flush with cash, so there's good reason to think this will continue to be a reasonably strong economy. the data sort of are showing that growth will be below trend here we're forecasting growth well

below that most forecasters are, but you're right, there's certainly a possibility that growth can be stronger than that you know, that's a good thing, because that means the economy will be more resistant to, you know, to a significant downturn. but, of course, we are focused on the thing i started with, which is getting inflation back down to 2% we can't fail to do that i mean, that's -- if we were to fail to do that, that would be the thing that would be most painful for the people we serve. for now, that has to be our over-arching focus you see that, i think, in the s.e.p., in the levels of rates that we'll be moving to reasonably quickly, assuming things turn out roughly in line with the s.e.p., so that's how we think about it.