that needle, he'll try to say yes, we may go at a slower pause, but that doesn't mean there's a pause ahead. for that pause to happen, we would need to hear about inflation rolling over, forward looking indicators of inflation rolling over >> yeah, the language could be clear or very, very subtle let's get to kayla with the fed decision >> a 75 point increase bringing the target range to three and three quarters to 4% the decision for a fourth consecutive 75 basis point increase was unanimous but the statement does add a new flexibility on the pace of future rate increases. the fed says it must pursue policy that is sufficiently restrictive to return inflation to its 2% target over time the fed says in determining the future path, it will consider what it calls the cumulative

tightening of monetary policy and also the lags and their impact on inflation and overall economic activity. acknowledging there is a lag between the actions it's taken to date and the impact they've had on the economy so far, raisirais new questions about when the fed could evaluate those actions and at what point they'll be fully baked in >> thanks very much. appreciate that. >> let's bring in our panel as we see stock averages pare the losses s&p is up 15 points. dow just jumped 270 points nasdaq and nasdaq 100 have turned positive. we're seeing yields come off ten-year is hanging on to 4% just barely. let's bring in our panel back in. let's also add steve liesman, bob pisani and rick santelli

steve, let's start with you and the change in language that kayla laid out >> she highlighted the most important part and it looks like there's two pieces to it the first one here in determining the pace of future increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the lags with which affects activity and developments. so the first part, the part i didn't read, is they want to make sure it's sufficiently restrictive to return policy that tells you maybe they have more work to do but the idea they're taking account lags may mean they're going slower here i don't think i would mistake this for saying the fed is ready to pause it's something you might say the fed is aware that it's done an awful lot and doesn't feel it has to do as much as it had done in the past. i'm going to take a quick look what's happened to fed fund futures. they've come down a little bit we'll see if it holds, but the

may contract was trading at 503. now it's at 496 so not much of a change, but a little bit coming off there. the market is reading this at least in the initial minutes after the statement came out as believing the fed has still considerable work that it will be doing so maybe a slower pace but i'm not seeing necessarily a lower peak >> yeah. and yet it seems to be a slightly different story where equities are concerned now, bob pisani you've got the dow jumping to a 1% gain now. the s&p up three quarters of a percent. the nasdaq also moved markedly higher when you look at the equity market, was it just spring loaded for any teeny, tiny sign, for any hope that anything could be more dovish than previously >> this is more dovish than i think most were expecting. when i called and said is the fed going to indicate any kind

of pivot not in a statement, maybe in the press release, that was the consensus. look here. steve's right. it's not a pivot, but the committee will take into account the cumulative tightening of monetary policy. that's good enough for the bulls. we just moved 40, 50 points in the s&p 500. 300 points in the dow easily on that and that's close enough. now, on the press release in the p press conference, excuse me, maybe he'll talk more clearly coded words. he'll say two sided risks or risks of slowing growth, but this is a fairly nice bone to throw to the bulls right now i think the problem right now for the market is the job market's not cooperating these jolts report, the adp's stronger and people are afraid the friday jobs report is going to be stronger than expected but look how far we've come here, guys 3900 on the s&p 500. we were at 3550 just a couple of weeks ago. dollar's a little bit lower.

two-year yields have flattened out a little bit so it's understandable why the market has rallied. it's been really impressive. the problem for the market now is what else are they going to really say to get the market notably higher we're already trading nearly 17 times forward earnings with no change of about $230 for next year this is a lot of expectations already built into the market but right now, this is about as much of a bone you're going to throw to the bulls as anyone would have expected. >> rick santelli, do you see it the same way what is the bond market telling you about this language in the fed statement? >> well, i'll tell you what. we knew it was going to either be a pause, pivot, or continue to punish. the three ps but i think they weaseled in a little bit and threw the markets a small bone granted, it's maybe the size of a wish bone, but i'm wrong i didn't think they'd throw any bone the wording as it was put forth

and what i heard from kayla and steve, to me, sounds like they gave it a little wiggle room and the markets smelled it right i'm always a big believer in market whispering and if you look at a two-year yield, it started to creep down. if you look at the euro and dollar index, the euro started to creep up and the dollar started to creep down. those are signs we're going to be a little less hawkish than many anticipated i think when it comes to what the fed's going to do, anybody who discusses data dependent, i just don't agree with. i think the fed, just based on how their statement reads, they are looking at a spot down the road and they change what that area may be but truly data dependent just didn't seem to add up at this time and one further point i'd like to make is that if you continue to monitor how much movement we get

that is tossing some of the numbers into the next fed meeting, whether it's fed fund features, which the moves are small, or the moves in the current treasury complex where yields are moving down, it's certainly a different response to this meeting than the last several three quarter point increases. >> mona, i want to bring you back and get your reaction to this not only this increase, but this change in language in determining the pace of future increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic and financial developments just to say it again because it goes back to the conversation and the point rick just brought up about data dependsy and the fact you're seeing the fed approach it at least in terms of this statement

what does it mean? what do you think it tees us up for with that press conference just less than 25 minutes? >> it's interesting, morgan. i think they brought up two important points that we haven't seen draddressed from the fed i the past the first is the cumulative part they started near the zero w bound. we're now close to 4%. so they've tightened close to 400 basis points in a given year, that's pretty unprecedented. the second part of the statement that i think again perhaps a nod to the bulls or at least those that are rooting for a slower pace of rate hikes, they're acknowledging the impact in reality, the fed funds rate, there's about a two to four quarter lag from when it hits and hits the economy we are seeing housing, perhaps the most interest rate sensitive part of the market already showing signs of softening, weakening, perhaps even rolling

over rental prices, shelter and rent components of cpi has been sticky, but the underlying fundamentals are telling us a different story. so it's interesting to hear it's tightened, that there's a lag impact perhaps the next part we may here is they may want to wait, see, and assess. do we see a softer economy wage gains start to moderate and inflation rolling over in a more meaningful way that's probably even, whether they acknowledge it or not, probably what tlephey want to wt and see. it's a good sign they are thinking about things in a more holistic way and thinking about moving more moderately zpl jim, i want to get your reaction to this sort of strikes at the question everybody's been asking ahead of this decision, which is under what conditions would a step down to 50 basis points be appropriate. it's worth noting that the september dot plots, they

actually indicates a 75 basis point hike for this meeting today and a step down to 50 and actually i've seen that in the last two meetings. so how much has actually changed here potentially >> i think a lot has changed i actually think this is pretty huge one of the things the fed said is they want to get to levels that are sufficiently above neutral. what they're communicating right now, and i think this is the big news here, is that they want to get to a point where they stop hiking rates there are many forecasters out there who would have fed funds forecasters going up to five, five and a half, six what the fed just told us is that they're willing to get to a level that's sufficiently above neutral and keep rates there then wait for inflation start to come down. what that signals to me is this is the start of the end game meaning that yes, the next move

in december might be 50 basis points then another 50 and a 25 and maybe they end at 5% but then they stop at that level for a period of time and they wait for inflation to come down because sufficiently above neutral is the key how much of a policy rate is considered to be sufficiently above neutral? 5% the neutral rate is 2.5% so at 5%, you're 250 basis points above neutral that might be sufficient and from a cost benefit perspective, it doesn't do as much damage to the asset markets and to the broader economy by just mortgage market housing and things like that by just hiking rates and hiking rates in order to achieve your inflation goal. what they want to do is let these high rates marinate as mona was saying. these long and variable lags are going to come into effect and that the necessity to continue to hike rates is not necessarily there. once they get to their terminal, which i think it's 5%. i think that's the message the markets need now and it's one of

the reasons i'd be bullish on this, too. >> david, do you see it as jim does as the market does is this the first move of the fed to prepare the public and the markets for the moment i'm thinking in terms of a big 18 wheeler, the air brakes are releasing some of the air. >> yes, i think this is very significant because they've gone from data dependent to forecast dependence, which is of course what they should have done all along. the reason it's so significant is if you look at leading indicators of inflation, it's almost back to normal levels there are no ships lined up outside the port of los angeles anymore. we've seen gasoline prices come down we've seen used prices come down auto i auto inventories go up this suggests it's on a downward track and if the fed has the patience to let that happen, that means they don't have do get as high. so it's a big positive for the

bond market and markets are correct in reacting to positively to this this afternoon. >> steve, want to bring you back in here. as somebody who watches the fed and these meetings so closely, the significance from your standpoint and let's start there. >> i'm having a hard time seeing much change here it is true that the fed did put in to the statement that which i believe the market had already precisely priced already i'm not seeing a big change, for example, in the odds for a 50 or 75 basis point hike in december. it's about 60/40 55/45. i'm seeing the terminal or peak rate still around 495. one of the prior guests laid out was precisely the way the market has it priced already is that they do 75, maybe 50

morgan, you were talking about this they bring it to five and wait for a while. our guest yesterday said precisely that said they stay there for ten months and i guess i go into this and wonder, all right, has my risk changed at all maybe it's a little bit less to the upside on the funds rate than it was previously but that's all dependent on the data cooperating and inflation coming down. if it comes down, yeah, then i can start to spin a more dovish scenario for the federal reserve. if it doesn't, i have to spin a tougher one. so i think the fed has an appointment with 4.5 i don't think that changed i think that appointment is sometime in the spring in their calendars. 4.5 to 5, that is. i don't think much about this statement changes that they are going to do what they say to be sufficiently restrictive. more hikes are on the way. then it's a wait and see and a pause which i think was what was priced in. i think the significance here is now it's in the statement. now it's part of policy. but it was already in the

market >> rick santelli, give us some thoughts on the 30-year. i know you're watching that one closely. >> the 30-year was at 407 prior to the announcement. the ten-year was at 402. two years were at 452 plus right now, the 30 year bond is the only maturity that's popped up that screams we're all done with the move until the press conference so viewers, if you're a technician, you should put a red dot on all the low yields because if we start to take those out during the press conference, that will be technically significant. >> very interesting. jim, let me come back to you if i might and ask you do you see it as steve does, which is perhaps the fed is going to reach its terminal point sometime in the spring >> i do.

i do think what steve said is correct. that' what's been priced in the market ss that the fed gets to their rate of 5% i think that's exactly correct what's different as steve also pointed out is that they put it in a statement so i think what that does for us is in the markets in terms of thinking about probability of outcomes, i can now start to trim the tail that probability distribution tail, that is, that rates go materially higher than that whereas before this statement was made, somebody could have said hey, they might have to go to 5.5% in order to bring the employment rate up to bring down inflation. what i'm hearing today from the fed is that they may not be as willing to do that and that that getting to that 5% level even though that was in the price but the fact that they're acknowledging it, tells me that tail, fed policy rates continue to move higher is not going to

be as highly valued in the markets anymore and that's a good thing for risky assets and b bonds. >> since the fed went into its blackout period ahead of this meeting, we've seen the s&p rally something like 5, 6% obviously we're seeing these gains right now on the heels of this statement and the change to language any reason to believe just based on history, even recent history, going back to jackson hole, that chair powell is not going to come out and break the market? i can't imagine that fed officials have shifted, like implicit policy here and would be thrilled to be seeing equities move so much higher in midst of this conversation around inflation and what it means in financial markets >> yeah, i think we were worried if conditions eased too much, powell could come back and try to take that hawkish tone.

i think we'll see in the statement today alleviated some of those concerns because we're starting to hear more about forward thinking, about the lags that talks to a fed that may be thinking about as we've all said, moving at a more moderate pace doesn't imply a fed pause, but to jim's point, you know, as you think about heading towards a peak in the fed funds rate and perhaps now we can start thinking about modeling there in a more realistic manner. when you welcome historically through fed cycles, when we are at the point of that terminal rate hike, the 12 months after that, in particular for ekuquit markets, are quite strong. after the fed peak is up about 16% on the s&p notably the bond market also of course acts very well when we're headed towards a peak. not only in fed funds rate, but in the ten-year treasury yield we may be getting that as well alongside or ahead of a peak in

fed funds rate interesting time for bond markets for the first time in a long time have become more and more attractive across the curve. now i think the longer duration parts of the market are starting to make a little bit more sense as well. not only bonds, but equities, too. it can start the become a very attractive time if we're heading towards the beginning of the end here i think that's the process markets have to go through >> bob, it seems the fed is saying we've still got work toond we're going to do it but there's a cumulative affect of what we've done and we haven't seen them, and we are cognizant of the fact there are lagging effects that will ensue after we take a couple more steps here. so it's a very nuanced picture but what isn't, there's the

dollar index i've been looking at a lot of financials they're reacting very positively here >> right here's the key point everything you said is right, but why is the market reacting so well to this? you know, my old motto is don't yell at the stock market don't say the stock market doesn't understand something look why it's going up and try to understand why it's rallying. why it's rallying is there has been a fear for the long time the fed is going to be far more aggressive than the market anticipated. what it's saying here is we're a little relieved by what we're seeing here. we're less fearful so the lonl cal first question for powell, does this lag with which monetary policy affects economic activity and inflation you cited in your press release, does this mean forget 75 basis points, 50 is likely? and how much time do you need to let high rates marinate? jim said marinate. i love that word it's terrific.

before you essentially decide to start going in the other direction. they've opened the door to that question and that's why the market is rallying much less anxiety about the fed outpacing everybody else and essentially raising must faster than anybody anticipate. >> bob and our panel, david, mona, and jim, as well as steve and rick, thank you all very much let's bring in former federal reserve board governor, also cnbc contributor, professor, a lot of things. frederic, welcome. in my notes, it says given this, you say, it is premature for any talk of slowing the pace of rate hikes because that will weaken the fed's credibility that it will do what is necessary to contain inflation. you've listened to a lot of discussion you've read and seen what the fed has said have they fallen into the trap you outlined in your note? >> not yet, but i do worry that

it's premature we're still at relatively low interest rates compared to inflation. that's the key and also that the fed got behind the curve up until recently. i have to tell you, i think they handled it extremely well in terms of really turning 180 degrees. made very major mistakes, which i've been talking about for almost a year and a half, but they have now got their act together the problem here is that when you look historically and you look at cases where inflation gets out of control, you've got to raise rates to levels which are at least 2, 3% and sometimes you have to hit the economy much harder with the baseball bat, which is what volcker had to do. so we're in a situation where any projections about inflation is certainly above 3%.

maybe we'll get lucky and so this is telling us that the fed needs to get at least to five and i think even higher than that and indeed because they got behind the curve, they've got to show they're really serious about getting inflation under control and if they don't do it, they'll have to raise rates by even more. >> let me go back to what notes, what you said. it would be wrong to make quote, any talk of slowing the pace of interest rate rises. it seems like you're saying that they didn't fall into that trap. so what is it they did say in saying we are cognizant of the fact that there are cumulative effects of what we've done and lagging effects from what we will be doing? >> this is what you should always do. i do worry a bit there are some voices and you sometimes hear them from the fed about concerns about whether they could go too

far. i just think it's premature to do that now. should they worry about this absolutely but we've seen no evidence that inflation is particularly inflation which is taking out some of these volatile elements like food and energy, is contained and moved back to 2% no evidence of that. and the fed did get behind the curve. i think actually they're very striking and extraordinary moves. these are the largest rate increases we've seen since the debt started targeting the federal funds rate there were larger increases during the volcker era, but that was not a period where the fed said they had a target for the funds rate that's extraordinary, but they have to keep on doing it to make sure the people realize that no matter what, they're not going to neglect inflation because if they do, they'll have the mistake volcker made in 1980 when the fed backed off and then it took a lot more than. they had to really kill the

markets. they backed off. low lowered interest rates then had to raise them another ten percentage points in order to get where they were and that really killed the economy. that was the worst recession i don't think we're going to be there. i think the fed is cognizant of this, but mistakes could be made to be honest, i'd rather have a mistake be made that the economy ends up a little softer than otherwise rather than easing up then really having to clobber the economy later. it's a balance of risks. not an easy business to do this. the fed has made some mistakes, got some bad breaks. the ukraine war is a nightmare for deciding on what to do policy wise. it's a bad, bad shock and of course, it's a disasterfor the ukrainians so it's a tough position, but i think which way they have to lean and particularly in their rhetoric is to indicate to people they're not going to make the mistake of easing up too quickly as has been done in the

past >> i'm still wrapping my head around 1,000 basis points because we haven't seen that really in my lifetime. >> i had a mortgage during that period and boy, the rates were close to 20% >> it's incredible so given the points you're making, given the fact that labor data has continued to be robust, the key data that the fed watches most closely has continued to be very sticky here what would you expect from chair powell when he takes the podium in four minutes given the fact it's been the most transparent fed historically we've seen given the fact he does all of these pressers after all of these meetings >> i don't know if i agree with that the fed started the press conferences a while ago and i think they're a big plus

i've actually faulted jay for not being transparent enough it was not done transparently and as a result, actually weakened the what looked like a commitment of the fed to a 2% goal so i disagree quite strongly on that but it's true that the fed is much more transparent than it used to be there's a title of the book, not a very good book, but it's called secrets of the temple where the fed was not up front and greenspan was not a big fan of transparency. there was a case where a senator said to him you've been very clear and he said, i must have made a mistake there's been tremendous movement in that regard, but i actually think that we can't say that jay has done a better job in terms of communicating a more transparent than the previous two chairman or chair people >> okay. thank you for joining us always great to get those

insights from a former insider we just have a few minutes left before fed chair powell's news conference let's get over to mike santoli at the new york stock exchange for the reaction we're seeing on the floor there and stocks more broadly. >> yeah, morgan, mild relief i think the market probably has it correct this was not in the statement. any kind of a real game changer. not a statement of intent to go a lot easier, but emerging flexibility in how the fed goes. wouldn't be surprising to see powell point us to the fact that this new statement is pretty consistent with the september fomc consensus outlook for where the fed funds rate would end up next year, averaging 4.4, so slowing the pace a little bit. seems like it's not that big a break from where we were about six weeks ago. that's probably number one i do think that it shows you the fed is not at this point as a sense of urgency or dogmatism

about where rates need to go, but anything they do in the way of slowing down is premised upon inflation cooperating and we have yet to see that, so in that sense, we're data dependent even if they're not saying we are >> so, yeah, it does feel that way. it feels like they're saying we're going to, recognize, acknowledge the need to watch and see what the effects of our moves have been. which is then just one sort of half step away from saying we're cognizant of the fact that we may have to take our foot off the brake a little bit at some point before we get to that point of 2% inflation. >> yeah. that's right and look, we know what's gone on with housing we know they've described their campaign as front loading the tightening process and if they're front loading it and g etting to 4% seems like that's a

good job of front loading. so that's pretty consistent with what they've been for a while. i think we got used to a fed that was sometimes looking for a plausible excuse to go easier. that's not this fed. they can't operate that way. can't afford to wheninflation' running at three to four times their target >> all right let's keep talking while we wait for chair powell who's probably going to come out in just a couple of seconds because we're at 2:30 and he's very prompt i don't want to bring you into another question and answer because i'll probably have to break you off. the dow is up 1.19% or 382 points here. michael, since i got you, financials have really done very well in reaction here. >> absolutely. they started to respond to the higher general yield levels. >> just when i asked you, here

comes the chair. >> good afternoon. my colleagues and i are strongly committed to bringing inflation back down to our 2% goal we have both the tools that we need and resolve it will take to restore price stability on behalf of american families and businesses price stability is the responsibility as 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 our policy interest rate by 75 basis points and we continue to 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. restoring price stability will strictive stance of policy for some time. i will have more to say about today's monetary policy actions after briefly reviewing economic developments the u.s. economy has slowed significantly from last year's rapid pace real gdp rose at a pace of 2.6% last quarter, but is unchanged so far this year recent indicators point to modest growth of spending and production this quarter. growth in consumer spending has slowed from last year's rapid pace, in part reflecting lower, real disposable income and tighter financial conditions activity in housing sector has weakened significantly largely reflecting higher mortgage rates higher interest rates and slower output growth also appear to be weighing on business fixed investment despite the slowdown in growth,

the labor market remains tight with the unemployment rate at a 50-year low, job vacancies high and wage growth elevated job gains have been robust with employment rising by an average of 289,000 jobs per month over august and september although job vacancies have moved below their highs and the pace of job gains has slowed from earlier in the year, the labor market continues to be out of the balance with demand substantially exceeding the supply of available workers. the labor force participation rate is little changed since the beginning of the year. inflation remains well above our longer run goal of 2%. over the 12 months ending in september, total pce prices rose 6.2% excluding the volatile food an energy categories core pce prices rose 5.1%. the recent inflation data again have come in higher than

expected price pressures remain evident across a broad range of goods and services russia's war against ukraine has boosted prices for energy and food and has created additional upward pressure on inflation despite elevated inflation, longer term inflation expectations appear to remain well anchored as reflected in a broad range of surveys of households, businesses, 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 that 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 meet, the committee raised the range by 75 basis points 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. with today's action, we've raised interest rates by three and three quarters percentage points this year we anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a monetary policy that is sufficiently restrictive to return inflation to 2% over time financial conditions have tightened significantly and we are seeing the effects on demand in the most interest rate sensitive sectors of the economy, such as housing it will take time, however, for

the full effects to be realized, especially on inflation. that's why we say in our statement that determining the pace of future increases in the target range, we will take into account the cumulative tightening of monetary policy and the lags which with it affects activity and inflation at some point as i've said in the last two press conferences, it will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive. there is uncertainty around that level of interest rates. even so, we still have some ways to go and incoming da ita since our last meeting suggests the ultimate level of interest rates will be higher than previously expected our decisions will depend on the totality of incoming data and their implications for the outlook for economic activity and inflation. we will continue to make our decisions and communicate our thinking as clearly as possible.

we're taking forceful steps to moderate demand so 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 some softening of labor market conditions restoring price stability is essential to set the stage to set the stage for achieving maximum employment and prices in the long run the historical record cautions strongly against prematurely loosening policy we will stay the course until 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

>> thank you on the need to slow the pace of rate increases at some point, is a down shift contingent on a string of better inflation data specifically between now and say the december meeting or is that something that the fed could potentially proceed with indeperndindeend enter of ? >> we need to see inflation coming down decisively and good evidence of that would be a series of down monthly readings. of course that's what we'd all love to see, but that's, i've never thought of is that as the appropriate test for slowing the pace of increases or for identifying the appropriate restrictive level we're aiming for. we need to bring our policy stance down to a level that's sufficiently restrictive to bring inflation down to our 2% objective over the median term how will we know when we reach the level? we'll take into account the full range of data that bear on the

question guided by our assessment of how much financial conditions have tightened. the affects it's having on the real economy and inflation taking into consideration lags, as i mentioned we will be looking at real rates, for example, all across the yield curve and all other financial conditions as we make that assessment. >> howard schneider with reuters. i'm sure there's going to be tons of confusion about whether this means you're going to slow in december. would you say the bias is not for another 75 basis point increase >> so, what i want to do is put that question of pace in the context of our broader tightening program, if i may and talk about the statement language aloalong the way. i think you can think about our tightening program as addressing three questions. the first of which and has been how fast to go

the second is how high to raise our policy rate and the third will be eventually how long to remain at a restrictive level. on the first question, how fast to tighten policy, it's been very important that we move expeditiously and we've clearly done so. we've moved three and three quarters percent since march from a base of zero. it's a historically fast pace and that's certainly appropriate. given the persistence and strength in inflation and the low level from which we started. now we come to the second question, which is how high to raise our policy rate and we're seeing we've raised the rate to a level that's sufficiently restrictive to bring inflation to our 2% target over time and we've put that into our post meeting statement because that really does become the important question we think now is how far to go and i'll talk more about that we think there's some ground to cover, but before we meet that test and that's why we say ongoing rate increases will be

appropriate and as i mentioned incoming data between the meetings, both the strong labor report but particularly the cpi report, do suggest to me that we may ultimately move to higher levels than we thought at the time of the september meeting. that level is very uncertain though and i would say you know, we're going to find it over time of course, with the lags between policy and economic activity, there's a lot of uncertainty so we note that in determining the pace of future increases, we'll take into account the cumulative tightening of monetary policy as well as the lags when it affects economic activity and inflation. as we come closer to that level, move more into restrictive territory, the question of speed becomes less important than the second and third questions and that's why i've said at some point, it will be important to slow the paces of increases. so that time iscoming and it may come as soon as the next meeting or the one after that. no decision has been made. it is likely we'll have a

discussion about this at the next meeting a discussion to be clear, let me say again, the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restricted, which really will be our principle focus. >> if i could follow up on that. to what degree was there an importance or weight given to a need to signal this possibility now given all the concerns really around the globe about fed policy sort of driving ahead and everybody else, you know, dealing with their own stress as a result >> well, i think i'm pleased that we have moved as fast as we have i don't think we've overtightened. i think there's very difficult to make a case that our current level is too tight given that inflation still runs well above the federal funds rate so i think that at this meeting,

the last two meetings as i've mentioned, i've said there would come a point, and this was a meeting where we had a discussion about what that might mean and we did discuss this and we'll discuss it again in december i don't have any sense that we've overtightened or moved too fast i think it's been a good and successful program that we've gotten this far this fast. remember though that we still think there's a need for ongoing rate increases and we have some ground left to cover here. and cover it, we will. >> nick with "the wall street journal. chair powell, core pce inflation on a three or six month annualized basis and on a 12 month basis have been running in the high fours, close to 5%. is there any reason to think you won't have to raise rates at least above that level to be

confident that you are imparting enough restraint to bring inflation down >> so, this is the question of does the policy rate need to get above the inflation rate i would say there are a range of views on it. that's the classic principle view i'd think you look more at a forward looking measure of inflation to look at that. i think the answer is we'll want to get the policy rate to a level where it is, where the real interest rate is positive we will want to do that. i do not think of it as the single and only touch stone. i think you put some weight on that also on rates across the curve very few people borrow at the federal funds rate, for example, so households and businesses, if they're very meaningfully positive interest rates across the curve for them, credit spreads are larger so borrowing

rates are significantly higher i think financial conditions have tightened quite a bit so i would look at that as an important feature. i'd put some weight on it, but wouldn't say it's something that's the single dominant thing to look at >> if i could follow up. what is your best assessment or the staff's best assessment now of the current rate of underlying inflation >> i don't have a specific number for you there there are many, many models that look at that and one way to look at it is that it's a pretty stationary object and that when inflation runs above that level for sure, substantially above for some time, you'll see it move up, but the movement will be gradual so i think that's what the principle models would tend so to say there are many different as you know, people who publish an assessment of underlying inflation. >> thank you >> hi, chair powell. thank you for taking our

questions. gina from the new york new york city do you see any evidence at this stage that inflation is at risk of becoming entrenched >> is inflation becoming entrenched so i guess i would start by pointing to expectations so if we saw longer term expectations moving up, that would be troubling, and they were the early part of this year and they've moved back down. that's one piece of data shorter term expectations moved up between the last meeting and this meeting and we don't think those are as indicative, but they may be important in the wage setting process so that's very concerning. the other thing i would say, we're not 18 months into this episode of high inflation and we don't have you know, a clearly identified, scientific way of understanding at what point

inflation becomes entrenched so you know, the thing we need to do from a risk management standpoint is to use our tools forcefully but thoughtfully and get inflation under control, down to 2% get it behind us that's what we really need to do and what we're strongly committed to doing >> hi, chair powell. thank you for taking our questions. rachel siegel from "the washington post. the statement points to lag times. i'm wondering if you can walk us through how you judge those? what that timeline looks like over the coming months or a year and where you would expect it to show up in different parts of the economy. >> so, the way i would think about that is, you know, it's a commonly, for a long time thought that monetary policy works with long and variable lags and that it works first on financial conditions and then on economic activity and perhaps later than that even on

inflation. so that's been the thinking for a long time. there was an old literature that made those lags out to be fairly long there's newer literature that says they're shorter the truth is, we don't have a lot of data of inflation this high in the modern economy one big difference now is that it used to be that you would raise the federal funds rate, financial conditions would react then that would affect economic activity and inflation now, financial conditions react well before in expectation of monetary policy. that's the way it has moved for a quarter of a century in the way of financial conditions then monetary policy. because the markets are thinking what is the central bank going to do. and you know, there are plenty of economists that also think that once financial conditions change that the effects on the economy are faster than they would have been before we don't know that i guess the thing i would say,

it's highly uncertain. highly uncertain so from a risk management standpoint, it would be irresponsible not to, to ignore them you want to consider them, but not take them literally. it's a very difficult place to be, but i would tend to be, want to be in the middle looking carefully at what's actually happening with the economy and trying to make good decisions from a risk management standpoint remembering, of course, that if we were to overtighten, we could then use our tools strongly to support the economy whereas if we don't get inflation under control because we don't tighten enough, now we're in a situation where inflation will become entrenched and the employment costs in particular will be much higher potentially so from a risk management standpoint, we want to be sure that we don't make the mistake of either failing to tighten enough or loosening policy too soon. >> if i could follow up. should we interpret the addition to the statement to mean that

more weight is put into those lag effects than after previous rate hike s? >> as we move now into restrictive territory, as we make these ongoing rate hikes and policy becomes more restrictive, it will be appropriate now to think the lags are just sort of a basic part of monetary policy, but we will be thinking about them, but we won't be, you know, i think we'll be considering them, but because it's appropriate to do so let me say this, it's -- it is very premature to be thinking about pausing, so people when they hear lags they think about a pause. it's very premature in my view to think about or be talking about pausing our rate hike. we have a ways to go our policy we need ongoing rate hikes to get to that level of sufficiently restrictive and of course we don't really know exactly where that is. we have a sense and we'll write down in september -- sorry, in the december meeting a new

summary of the economic projections which updates that i would expect us to continue to update it based on what we're seeing with incoming data. >> thank you, chair powell, neil irwin of "axios. as you look around the economy, the clear impact has been on fousing, venture funded tech companies, it's been relatively narrow in terms of labor market, consumer demand, a lot of s sectors you don't see a ton of effect is the pathway changing? is it narrower than it used to be on housing in particular are you at all worried that you're crimping housing supply in ways that might cause problems down the road. >> i don't know if the channels through which policy works have changed that much. the labor market is very, very strong, very strong, and households, of course, have strong balance sheets, and so we go into this with a strong labor market and excess demand in the labor market, as you can see

through many different things, and also with households who have strong spending power built up, so it may take time. it may take resolve. it may take patience it's likely to get inflation down i think you see from our forecasts and others that it will take some time for inflation to come down it will take time, we think. so sorry, was that getting to your question there? housing, the housing part of it. so we look at housing, of course, housing is significantly affected by these higher rates, which are really back where they were before the global financial crisis they're not historically high, but they're much higher than they've been, and you're seeing housing activity decline you're seeing housing prices growing at a faster rate and in some parts of the country declining. you know, i would say housing was -- the housing market was very overheated for the couple of years after the pandemic as demand increased and rates were low, we all know the stories of

how joefr heatoverheated the hog market was, prices going up, many bidders, that kind of thing. the housing market needs to get back into a balance between supply and demand. we're well aware of what's going on there from a financial stability standpoint, we didn't see the poor credit underwriting that we saw before the global financial crisis houses credit was much more carefully managed. it doesn't appear to present financial stability issues we do understand that's where a very big effect of our policy is. >> i wanted to ask about the labor market you mentioned early on again that job openings are very high compared to available workers, and i'm just curious to what

extent you do and don't draw a signal from that, so, for example, if wage growth is slowing and if maybe the unemployment rate starts to tick up, will that make you sort of decrease your focus on job openings what do you see -- are wages what's really important? how are you thinking about the labor market as it relates to inflation? >> we talk a lot about vacancies and the vacancy to unemployed rate it's just one, just another data series it's been unusually important in this cycle because it's been so out of line, but so has wages. we look at a very wide range of data on the unllabor market let's start with unemployment, which is typically the single statistic you would look to at a 50 year low, 3.5%. we're getting really nothing in la labor supply now e we had a very small increase this year. most analysts thought we would get some labor supply coming in. you mentioned wages, so i guess

i would characterize that as sort of a mixed picture. it's true with average hourly earnings you see, so i would call it a flattening out at a level that's well above the level that would be consistent over time with 2% inflation, you know, assuming a reasonable productivity with the eci reading this week, a mixed picture. the headline number was a disappointment let's just say it was high it didn't show a decline there's some rays of light inside, you know, that if you look at private sector workers, that did come down compensation did come down, but overall, though, the broader picture is of an overheated labor market where demand substantially exceeds supply job creation still exceeds, you know, the sort of level that would hold the market where it

is you know, not by as much as we thought because -- and you know, the data series is volatile. we never take any one reading. we always look at two or three, so it's a mixed picture. i don't see the case for real softening just yet, but we look at as i just showed you a very broad range of data. >> to you see wage increases being a significant driver of inflation? >> i think wages have an effect on inflation, and inflation has an effect on wages i think that's always been the case there's always going back and forth, the question is that really elevated right now? i don't think so i don't think wages are the principal story of why prices

are going up i don't think that i also don't think that we see a wage price spiral, but again, it's not something you can, you know, once you see it, you're in trouble, so we don't want to see it we want wages to go up we just want them to go up at a level that's sustainable and consistent with 2% inflation and you know, we think we can -- we do think given the data that we have that this labor market can soften without having to soften as much as history would indicate through the unemployment channel it can soften through job openings declining we think there is room for that, but you know, we won't know that that will be discovered empirically. >> thank you so much kayla tausche from cnbc. earlier last month, the united nations warned there could be a global recession if central banks didn't change course the new uk prime minister warned

of a profound economic crisis there, and i'm wondering how the fed is weighing international developments in light of a very strong economy here in the u.s. that would seem to be bucking those trends >> so of course we keep close tabs on economic developments and also geopolitical developments that are relevant to the economy abroad. we're in very frequent contact with our foreign counterparts both, you know, through the imf meet and the regular meetings with central banks that we have, and i have one this weekend with many, many central bankers so we're in touch with all of that so i guess what -- it's clearly a time, it's a difficult time in the global economy, we're seeing -- we're seeing very high inflation in europe significantly because of high energy prices related to the war in ukraine, and you know, we're

seeing china's having issues with the zero covid policy, and you know, much slower growth than we're used to seeing. so we're seeing -- we see those difficulties, the strong dollar is a challenge for some countries, but you know, we take all of that into account in our models we think about the spillovers and that sort of thing here in the united states we have a strong economy, and we have an economy where inflation is running at 5%. core pce inflation, which is a really good indicator of what's going on for us is the way we see it is running at 5.#1% on a 12-month basis and similar to that we know we need to use our tools g to get inflation under control that's a task we need to do. price stability in the united states is a good thing for the global economy over a long period of time price stability is the kind of thing that pays dividends for

our economy for decades hopefully, even though it may be difficult to get it back, getting it back is something that provides value to the people we serve for the long run. >> if i could just follow up on that thank you. the fed has acknowledged in the past that the tools that you have don't affect things like energy and food prices that stem from some of those conflicts overseas, and they're some of the biggest pain points for consumers. so as you pursue the current path that you've outlined, is there a risk that some of those prices simply don't come down. >> so we don't directly affect, for the most part food and energy prices, but the demand channel does effect them just at the margin the thing about the united states is that we also have strong -- in many other jurisdiction jurisdiction s the principal problem is energy. we've got an imbalance between demand and supply, which you