it's a matter of the tone in the press conference which i don't think is going to be very hawkish. >> it doesn't sound like there's too much suspense hanging in the air right now. i guess the suspense is whether the dow finishes another day in the green. let's get to steve liesman with the results of the decision. steve? >> reporter: the federal reserve raising interest rates by one quarter of a percentage point in a unanimous vote bringing the rage to 5.5% the highest feds fund rate in 22 years and continues to signal the possibility of future rate hikes. it says it's going to look at quote the extent of additional policy forming that may be appropriate. that's the language it used in june that told us july was on the table. it said as doing so it would take account of the cumulative and lag effects of hikes they're saying it was moderate

economic growth compared to modest i guess modest upgrade you could call it. job gains were bust, unemployment rate remains low and ininflation remains elevated concerns remain in the statement about tighter credit conditions. but those effects were seen as uncertain. very much a carbon copy of the prior statement. the only difference is they took out holding to raising and raised by .25. and now they're back in the mode of determining additional policy that may be appropriate. so there's your guidance line have at it tyler? >> on extent, it's clear they did not say whether additional policy firming is warranted. >> i think we're going to see that in chairman powell's press conference too last time around he talked about further rate hikes the committee was in favor of further rate hikes, plural i think that's still the question

that could be one or two but still leaving it out there, they 'trying to sound hawkish. as you know, steve didn't mention anything about them saying we made progress on inflation. i'd like to hear that from them. >> i heard an important word and that's unfortunately i think we're going to hear the same thing. why do you think that's unfortunate? >> because they're playing this game of monetary jenga where we don't know what's going to knock the economy into recession but 3% inflation, what's the big deal we're 8% inflation or run away, that's fine. we need to deal with it. if it's 3% falling down to 2, it's not worth threatening the economy with recession and to be honest, we don't know what moving from 0% rates to 5.5% rates over period of time we don't know what that will do to financial assets, the whole economy after 15 years of zero rates or close to zero rates so i think they're playing with fire and they don't need to. that's why it's unfortunate.

>> what's surprising is we really haven't seen too much of an impact so far, at least when you measure by the stock market in asset prices, right the fact we haven't seen those lag effects. >> yes because we had a great recession in 2008. if we have a recession, it's going to be a baby recession looking at baby recession if we have one and also, low inflation eventually and we could end up with lower inflation down the road. so i think the stock market is able to look past this business cycle. i don't think we need a business cycle to get there. >> our panel is still with us. bob pisani and rick santelli also join us rick to you here, not much reaction in the rates but what's your reaction to the statement >> no, not much reaction to rates. with respect to the statement, i don't feel i walk away any smarter. to me the issue is hot or hold guns hot or hold do they skip do they go passive do they let the markets work,

more active approach i think the latter is the approach they take everybody is bringing up data. i like to look at the percentages. nonfarm jobs from the first half of this year to last half of last year, down 29%. we're talking about cpi earlier, 9.1 down to 3. that means 67% drop. if you look at core, a 27% drop. these are real numbers and it's hard to argue with -- i agree with david, we have no idea for sure where inflation goes but it certainly seems as though it is going to continue to come down and when we look at some of the year over year numbers, i understand there's some nervousness there but i also see a definite move in the month over month numbers especially on the inflation side people point to confidence as one of the strengths i understand that. but that's skewed. confidence always seems to follow the stock market. so that's what we're left with

the stock market, why are investors fighting the fed are they if they were it makes it easier to fight it now because they're in the seventh, eighth, ninth inning and makes it easier for investors to think money markets look good but are they going to continue to look good? have we missed the boat? fomo with regard to missing a stock march up higher. could be the 13th day today. i think that the central bank is buying itself time and whether they actually start hiking again next year, i can't tell you. but i'll put another bet out there. i lost because they hiked this time but i say they're done for the rest of the year >> bob pisani, as they used to say on the exams in college, react and discuss. >> what's interesting here is we're not getting any knee jerk reaction normally we move, 10 on 15 points on the s&p 500, we were down 11 when we start. down 8, 9 essentially the same

i think the important thing is everybody understands powell is not going to close the door on rate hikes but i'm not sure one rate hike in november or any time is going to make a difference i think what happens is r keeping inflation moving in the right direction. and stephanie as always has her eye on the right thing, the pc on friday. we have the headline on friday of 3%. if you get a 2 print on there, that is going to get a lot of press. if you, on the core it's 4.2% is the estimate if we hit in the three, anything with a three in front of it, that's going to get a lot of news so moving in the right direction. i think the risk at the press conference is powell does not endorse the market's viewpoint the market's viewpoint is the soft landing and rate hikes are near ending. if he pushes back against that scenario that could be a problem. look at what the market is doing, coming in hot on stocks, a record run on the dow, valuations are high, entering a kwaek time of the year

it's a problem for the stock market so the risk here for the market on the press conference is to the down side. there's a whole school evolving down here that's arguing that disinflation in the third quarter is going to be the biggest problem for the stock market companies are already saying they're having problems raise prices and cutting costs to deal with the fact their p margins are getting squeezed a little bit. that's a disinflation story and that's a potential headwind for stocks there it's sort of the opposite of the worry we had a couple months ago. >> maybe they're having a hard time raising prices because they already raised them so much. >> thank you >> $17 for a jug of detergent at the grocery store. >> yep. >> that's pretty high inflation, folks. jim karen, let me turn to you. david mentioned the idea if there's a recession, it's going to be a baby one i'm thinking of inventing the anna dell have you story, did it hurt your baby feelings? are we having a baby recession

or not what do you say jim? >> i'm in the camp if we have a recession, it's a smaller recession. and look, i'd like to see the recession come quicker i'd like to see it start in the fourth quarter the sooner we have a recession, the more mild it's going to be the longer it takes to have one, the more excesses built up and it could be more devastating i think it's a more mild recession. but we have to think about how the fed is looking at this if we have an inflation problem, that's the view we're in now, the that's the baseline. okay you cut rates and resurge with inflation. then i look at the yield curve and say it's very, very inverted right now. do we have to restore and rebuild term premium with that and we start to steepen the curve? so i'm not sure the back end of the market might be hearing the soft landing scenario. the back end of the market still seems priced more for a harder landing. i think there's disconnect in the markets.

>> steve liesman, back to you. we are not too long away from the fed's press conference at this point what's your number one question? >> before i get there, i want to make a comment about the idea that a quarter point doesn't matter i think people need to be aware of the kind of fine tune engineering that powell is trying to do here. go back and look at what's happened to the two year since june remember the fed held in june, did not raise i rates, the two year lifted higher today, the two year is down a couple, bips maybe not at all the chairman is trying to tweak or fine tune the funds rate without the two-year space being a huge decline in rates stimulative to the economy that's why the other 25s or additional 25s in the possibilities, that's why it matters. i think it's like a balloon. you get up there and you put the

burner on for a little bit, you maintain your altitude, that's what he's trying to do, he's not had as much success in the stock market which is my question, how much concern does the chairman have about the loosening of conditions in the run of the stock market but at least when it comes to the area that he directly or more directly controls which is the short end of the yield curve i think he's trying to keep the yields high backing off and not letting the market begin to cut the rates in, that could create stimulus. >> the two year yield has gone up 40 basis points since the june meeting. >> yep >> stephanie link, how do you think that factors into the fed's thinking in a way, markets are telling us the worst is behind us and the things are on. you know, the risk has been to the upside for the markets the pain trade has been to the upside for much of this year people didn't want to believe

that things were going to be a soft landing we were going to have a soft landing and now everybody is coming around to that thought so how does that set us up for the back half given the possibility that the fed could be on the sideline for the rest of the year? we'll see if they're on the sideline but they're at the latter stages in terms of hiking rates. but that said they're not going to ease any time soon. they did not work this hard to turn around and pivot. we're not talking about that between now and the end of the year the reason is market is going up is because earnings have stayed pretty good, not great but pretty good, they haven't collapsed. that's the call from many people that the earnings would co collapse that's because there's underlying momentum from the economy. we just had the infrastructure bill go through. so that's offsetting what the fed is doing to some degree. in the press conference i'm going to be interested to hear

what he says about where we are with financial conditions. that will be interesting to see how he answers that. overall i think the statement was in line, the economy is doing fine at 2.4% in gdp, jobs strong, wages and inflation still too elevated we'll have to see what they say. but i you this they stated the obvious in the press release. >> rick santelli, let's come back to you, if you other there, with reaction. you have an inverted yield curve some concerns about a slowing economy. wrap it up for us. >> i think we are not up 40 basis points since the june meeting, up half that, 20. basically at 469 we're at 489. i think if i had to wrap this up, the inverted yield curve is sticky i agree we need to steepen it. deinvert it. but my feeling is the deinversion is going to be by short rates moving lower consider this, we move 20 basis points roughly since last

meeting, about 10 basis points in tens. but the stock market has zoomed since then and if you look at how much the stock market has moved really since the june meeting and compare that to money market rates. it looks as though you have a tough choice to remain on the money market side. having said that there's a risk that stocks may move lower but all things considered, i think the fed, the fed models and the relationship with the labor market are most likely a b bit distorted and i will continue to say the first half of this year looks different than the last half of last year by the important metrics of the fed from labor market to inflation. >> what would your question to the fed be bob >> i ask the same question on the stock market you brought up a great point, you're a great market watcher. the pain trade all year has been market goes higher because people bet against the soft landing. now this is all starting to change

the pain trade is to drop markets to go up the logical question here is, what issues does he see that concerns him right now he has to say the stock market in some way because to him that's a wealth indicator and that, of course, pushes upper acc -- up perceptions that everything is okay he wants a soft landing he has said that. but he said that he's willing to go through pain to make sure the inflation is down to the 2% target i can't imagine a streak on the dow, 20 times earnings valuations in expansion range for the economy helps the idea that the market is going to slow down i would agree the question is about the stock market. >> thank you very much for an informative panel we appreciate your time today. coming up, now we are waiting to hear from the fed chairman himself about the rate

decision we'll talk to the former vice fed chair himself. we have a huge list of executives on "power lunch" over the next two days. tomorrow we speak to the ceos of crocks and friday the ceo of valley bank, union square hospitality group and that's not the half of it same for the exchange, royal cari caribbean, frost bank, golden corral ceos and more back after this.

welcome back to "power lunch," everybody. the fed raising rates by 25 basis points or a quarter of one percentage point interest rates at the highest level in 22 years. let's get reaction from richard clarida. richard, welcome it's good to have you with us as always i think in the statement, the key word here or phrase maybe is that the chair and the committee referred to the extent of policy firming that may be indicated not whether more policy firming is indicated. >> exactly that language was introduced in the june statement and i think at the time was maybe a touch dovish and in the june meeting we had the skip but the more hawkish elevation of the dots no dots today. but looking at the statements there's a decision to leave wording unchanged and i think i take that as the chair wants to leave all of his options open

for the rest of the year and i'm sure we'll hear something on that in the press conference. >> one of our panelists a few moments ago referred to the idea that the fed was sort of behind the curve. do you agree with that or not or have they gotten out from that >> the fed is not behind the curve. they have moved rates at a very brisk pace in the last 15 months into what they and we think is a restrictive territory. they've pushed back on the idea that they're on the verge of cutting. i think the fed is close to where they're going to need to be to put inflation on a path down towards 2%. but again, the chair i think will leave his options open to go with the september meeting to skip the september meeting to go later in the year. >> in the statement, rich, the fed repeated the tighter credit is likely to weigh on activity we haven't seen too much of that

between the last meeting and today. and i'm wondering in terms of the long and variable lag effects what you think the number one concern, number one effect is in your mind is it tighter credit and is that from the banking crisis or is it the rate hikes? >> i think it's a combination. i think tighter credit, historically there's a lag you are seeing data that the number of loan applications being turned down has moved up loan growth has basically stalled. i would expect some of the additional regulatory measures that the fed is going to put in place after svb are going to tighten credit conditions. if you look at other measures, including the loan officers survey, that's also showing it these things do take time but i think we will start to see additional slow down in the economy from these conditions. >> knowing that the fed is in the fdic will meet on thursday

to vote for an initial round on the bank regulations, do you think that is in mind when the fed is going to -- you know, when jerome powell takes that podium and talks to reporters and the world about what the intentions are, will that factor in knowing there are the capital requirements to come and there will be an additional tightening on credit? >> here i would distinguish between two related but distinct measures the so-called basle three measures they will be talking about and those would be phased in and there would be a comment period i think more front and center this calendar year will be after the svb and related disruption in the spring. we heard commentary from vice chair bar and other fed officials that they're going to take an additional look at capital and liquid standards for banks in the 100 billion plus category and they can do that without an extensive comment period as they can with basle three.

they can do it under existing statutory authority. we would expect that to happen as well. >> where would you expect inflation and specifically core inflation to be let's say a year from now >> well, here i am going to say what i expect and what i hope. i think a year from now the fed's preferred measure, core pce inflation will be in the twos i think there's uncertainty about the path there we hear at pimco are optimistic we're going to see improvements because in particular housing and rental inflation has slowed down there's good reason to believe that we will have core inflation, you know, in july of next year somewhere in the twos. probably north of 2.5 i would imagine. somewhere between 2.5 and 3. and, of course, the fed, in its june projections did have core inflation falling to 2.6% by the

end of next year i think that's in line with their assessment as well >> you've been inside the room, rich does it you recollect the fed that the stock market has been rallying all year? >> i don't know that i'd use the word you recollect the chair has been asked, perhaps by steve liesman his answer is look the market may be assessing a different probability than the fed does of economic slow down and the like. within range, look i think they correctly certainly when i was there focused on broader financial conditions lending standards how much does it take to take out a car loan and the like and those have clearly tightened. so i don't think they're going to get too caught up in the stock market here. >> rich, thank you >> thank you >> rich clairida >> we'll take you to jay

ll's press conference when he starts.

welcome back we're just moments away now from fed chair powell's press conference let's get final thoughts from

david kelly. higher for longer, is this a market that has accepted that, do you think, or does it need the messaging from the fed >> i don't think the fed can give that messaging with any certainty. people talk about the soft landing but the economy never lands there's always another quarter. winter is coming we don't know when winter is going to arrive but it will arrive eventually we'll have a recession, a month or two where payroll gains are negative. >> at that point the fed is going to have to cut rates we think get through 2023 but sometime in 2024 that could happen and then when the fed has to cut, the first cut will do nothing to help the situation. we've seen when the fed raises rates it's like going up an escalator when they cut rates it's going down an elevator. their own projections say they can bring rates down to their neutral rate slowly. never happened the market may be looking at that realize the fed is aggressive right now but won't be forever

because landing won't stay soft forever. >> as you look at where stocks are today and where they've come, as melissa points out, 5% is higher than at the last meeting. what do you think the path for stocks is over the next six months to a year >> i look at valuations a lot, and i do worry about the megacap stocks that have led the charge. but overall it could be good because the key point is, eventually inflation is going to get back down to where we were in the last decade, back down to 2% eventually the fed is going to have to react to a recession and cut rates again. so you get back to a slow growth environment. in which companies are good with margins. that's what we've seen this month, they're doing a great job maintaining margins. i think the stock market is taking comfort for that. >> do you want to be in the parts of the market that did not participate in the first half of

the year that have just showed signs of life recently >> yes if you run into a bump, the thing with air under them falls the most so i want to look and at some point we're going to have turbulence and i wouldn't want to be in the overpriced stocks. >> but the large tech stocks were viewed as good. that's not the case now? >> this time the worry is recession rather than inflation. i still worry about valuations because if you have a market correction, a significant market correction they'll look at valuations so keep an eye oval n valuations both here and abroad. >> so the choice from where you sit is >> i'd be a little overweight international. industrials can do well here i like financials if you get through the cycle. right now, prolonged downward

curve is not good for for financials >> do treasuries fracture? seems like the risk reward is better >> i wouldn't put it that way. talking about still less than 4%, not a great return in the long run i will say for right now, high quality fixed income looks better priced than it has been for many, many years this is the one year i probably wouldn't be underweight bonds. >> very, very interesting. so what do you think about the economy? forgive me if you answered this -- here's jay powell right now. we'll get to you next time. >> sounds good good afternoon my colleagues and i remain squarely focused on our dual mandate to promote maximum employment and stable prices if for the american people. we understand the hardship that

high inflation is causing and remain strongly committed to bringing inflation back down to our 2% goal. price stability is the responsibility of the federal reserve. without price stability, the economy doesn't work for anyone, in particular without price stability we will not achieve a sustained period of strong labor market positions that benefit all. since early last year, the fomc has tightened the stance of monetary policy. today we took another step by raising our policy interest rate a quarter percentage point and we are continuing to reduce our securities holdings at a brisk pace we've covered a lot of ground and the full effects of our tightening have yet to be felt looking ahead we will continue to take a data-dependent approach in determining the extent of additional policy firming that may be appropriate. i'll have more to say about monetary policy after briefly

reviewing economic activity. recent indicators say that economic activity is at a moderate space growth may have slowed housing has picked up somewhat but it remains well below the levels of a year ago higher interest rates and slowerout putt growth appear to be weighing on business fixed investment the labor market remains very tight over the past three months job gains averaged 244,000 jobs per month. a pace below that seen earlier in the year but still a strong pace the unemployment rate remains low at 3.6%. there are some continuing signs that supply and demand in the labor market are coming into better balance the labor force participation rate has moved up since last year, particularly for individuals aged 25 to 54 years. nominal wage growth has shown

some signs of easing and job vacancies have declined so far this year. while the jobs to workers gap has narrowed, labor demand still exceeds the supply of available workers. inflation remains well above our longer run goal of 2%. over the 12 months ending in may, total pce prices rose 3.8% excludeing the volatile sections core rose 3.6% in june the change in the cpi came in at 0.3% and the change in the core cpi was 4.8% inflation has moderated somewhat since the middle of last year. nonetheless, the process of getting inflation baa back down to 2% has a long way to go 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 and measures from financial markets. fed's monetary policy actions are guided by the mandate to promote maximum employment and stable prizes for the american people my colleagues and i are aware that high inflation poses significant hardship as it erodes purchasing power especially for those least able to meet the higher cost of essentials, like food, housing and transportation we're highly attentive to the risk that high inflation poses to both sides of our mandate and committed to returning inflation to our 2% objective. at today's meeting the committee raised the target range for the federal funds rate by a quarter percentage point bringing the range to 5.25 to 5.5%. we're also continuing the process of reducing our securityings holdings. with today's actions we've raised our policy rate by 5.25

per sen tenant points since early last year. we've been see the effects on demand in the most interest rate sectors of the economy, particularly housing and investment it will take time however for the full effects of our ongoing monetary restraint to be realized especially on inflation. in addition, the economy is facing headwinds from tighter credit conditions for households and biusinesses. which are likely to weigh on economic hiring and inflation. in determining the extent of additional policy that made the decision to return inflation to 2% over time the committee will take into effect the tightening of monetary policy, the lags with which monetary policy is affected and economic financial developments we'll continue to make our decisions meeting by meeting based on the totality of the incoming data and the outlook for economic activity and inflation as well as the balance of risks we remain committed to bringing

inflation back to our 2% goal and to keeping longer term inflation expectations well anchored reducing inflation is likely to require a period of below trend growth and some softening of labor market conditions. restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. 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 >> mr. chairman, thank you you have, i think a couple times in in your opening remarks talked about this language in determining the extent of additional policy affirming that may be appropriate should we take that to mean additional hikes are likely on

the way and believe all future meetings, september and november are live >> we haven't made a decision to go to every other meeting. we're going meeting by meeting as we go into each meeting we're going to be asking ourselves the same questions so we haven't made any decisions about any future meetings including the pace at which we consider hiking. but we'll be assessing the need for further tightening that may be appropriate you read the language, to turn the inflation to 2% over time. i would say the data came in broadly in line with expectations, economic activity remained resilient job creation remained strong while cooling a bit and the june cpi report came in better than expectations for a change. and the june cpi report was welcome but it's only one report, one month's data we hope inflation will follow a lower path as would be consistent with the cpi reading. but we don't know that and we'll

need to see more data. what are we looking at really the whole broader picture. and starting with we're looking for moderate growth. looking for supply and demand through the economy coming into better balance i think including in particular in the labor market. we'll be looking at inflation, asking yourselves, does this whole collection of data, do we suggest it as suggesting we need to raise rates further if we make that conclusion we'll raise rates. that's how we're thinking about the next meeting and, you know, how we're thinking about meetings going forward potentially. we're mainly thinking about the next meeting i will also say since we're talking about it between now and the september meeting we get two more job reports, two more cpi reports, i think we have an eci report later this week, employment compensation index, and lots of data on economic activity. all of that information is going to inform our decision as we go into the meeting i would say it's possible we

would raise funds again at the september meeting if the data warranted and it's possible we would choose to hold steady at that meeting we'll make careful asesessments as i said meeting by meeting we've raised the rate by 525 basis points since march 2022. monetary policy we believe is restrictive and putting pressure on downward activity and inflation. >> if i could follow-up on something you said this there. you said the data in the intervening period broadly came in line with expectations. does that mean there's likely to be a change of the committee that two more hikes are necessary? >> i'm going to go back to what i said that's the question we have eight weeks now until the september meeting and all that data i recited we're going to look at that and make the assessment then we had the one good reading and, of course, we welcome that, but it's just one reading as everybody knows. we've seen this before in the data many forecasts call for rates

for inflation to remain low but we don't know that until we see the data so we'll be focussing on that. >> thanks for taking my questions chair powell obviously you upgraded the language around growth in the statement today. we've seen the barbie movie numbers, seen everyone going to taylor swift concerts, it seems the american consumer is in good shape and growth is picking up a bit or at least doing well i wonder from your perspective if that continues. if we see growth not just stabilizing but performing well this summer. is that a problem because it's inflationary or good news because it suggests a soft landing is more likely how are you thinking of that sort of trajectory >> yeah, so i would say it this way. the overall resilience of the economy. the fact that we've been able to achieve disinflation so far without any meaningful negative

impact on the labor market the strength of the economy overall that's a good thing. good to see that also you see consumer confidence coming up and things like that that will support activity going forward. but you're right at the margin stronger growth could lead over time to higher inflation and that would require an appropriate response for monetary policy. so we'll be watching that carefully and seeing how it evolves over time. >> thanks chair powell so as you referenced earlier in the intermediate period, soft cpi, jobs report, still strong but moderating, so if you're data dependent, why not pause again, stay on hold, take another meeting off when the data was cutting in the direction you wanted to see? >> if you go back to what we're trying to do here, we're trying to achieve a policy that's

restrictive to bring inflation down to 2% at the last meeting we wrote down our individual estimates of what that would take, and the meeting of that was an additional two rate hikes. so i would say we looked at the intervening data and as i mentioned, broadly incident, not perfectly consistent but broadly consistent with expectations and as a result we went ahead and took another step. that's a labor market that continues to be strong but gradually slowing. i mentioned that the inflation report was actually a little better than expected but we're going to be careful about taking too much signal from a single reading. and, you know, growth came in stronger than expected that's how we look at it, so we did take that step today >> chair powell, markets widely believe the medium fop

participants inflation forecast from june for the fourth quarter of the year will be too high given autos and shelter and by september that may warrant a downward revision of 20 to 30 basis points would that type of inflation progress be enough to hold rates steady from here or do you need to see below trend growth and decelerating labor income growth to be convinced that you've done enough >> it's hard to pick the pieces apart and say how much of this and how much of that we'll be looking at everything we'll -- of course, we'll look to see whether the signal from june cpi is replicated or the opposite of replicated or somewhere in the middle. we'll look at the growth data, the labor market data, of course, and making a judgment of that it's the totality of the data with a particular focus on making progress on inflation >> if i can follow-up. last month you said there were benefits to moderating the pace of increases because it would

give you information to make decisions. would another cpi like the one we had in june allow you to maintain the slower pace and defer until the fall any decision on whether you need that second rate hike? >> i'm going to tell you again, what we're going to do, in september we'll look at two additional job reports, cpi reports, lots of activity data and that's what we're going to look at and make that decision then that decision could mean another hike in september or it could mean that we decide to maintain at that level. and again the question we'll be asking ourselves is the overall signal one that we need to do more, we need to tighten further. if we get that signal whenever we get it, that's the collective judgment of the committee, we will move ahead. if we don't, we'll have the options of maintaining policy at that level but it's really dependent so much on the data and we don't have it yet. >> so, consumer confidence in

the economy is rising likely in large part because of the declines in headline inflation you also see wages are also rising faster than prices now, after trailing them for a long time how much are americans truly harmed by inflation at its current headline level of 3% with that in mind when do you put weight back on the employment side of the dual mandate? >> so i guess i'd say it this way. it is a good thing that headline inflation has come down so much because that's really what the public experience is i would say having headline inflation move down that much it will strengthen the broad sense that the public has that inflation is coming down, which will inturn, we hope, help inflation continue to move down. so you are really -- sorry, your question was >> you talked for many press conferences now about the harm from inflation how much of that are we seeing

with inflation now down at three? >> i put it this way, i guess, we -- i'd say it this way. it's really a question of how do you balance the two risks, the risks of doing too much or too little i would say that, you know, we're coming to a place where there really are risks on both sides. hard to say exactly if they're in balance or not. but as our stances become more restrictive and inflation moderates we do increasingly face that risk but, you know, we need to see that inflation is durably down that far as you know, we think, and most economists think, that core inflation is a better signal of where headline inflation is going. because headline inflation is affected greatly by volatile energy and food prices so we would want core inflation to be coming down because core is signaling where headline is going to go in the future. and core inflation is still pretty elevated. reason to think it can come down

now but it's still quite elevated so we think we need to stay on task and we think we'll need to hold -- certainly hold policy at a restricted level for some time and we need to be prepared to raise further if we think that's appropriate. >> and then, if inflation were to -- just a quick follow. if it stays at three or drops more, how much of an increase in unemployment do you think is acceptable to getthat last bit of inflation people are talking about the potential difficulty, the last -- so-called last mile of inflation. so how much -- again, how much unemployment do you think is justified to get down that last -- >> it is -- it is a very positive thing actually, the unemployment rate is the same as it was when we lifted off in march of 2022. so that's a blessing we've been able to achieve some disininflation we don't seek to -- it's not that weer're aiming to raise

unemployment but we have to be honest about the record, when central banks go in and slow the economy to bring down inflation, the result tends to be softening in labor market conditions so that's still the likely outcome here and, you know, we hope that's as little as possible but we have to be honest, that's the likely outcome the worst outcome for everyone, of course, would be not to deal with inflation now not get it done. whatever the short term social cost of getting inflation under control, the longer term social costs of failing to do so are greater. the historical record is very, very clear on that if you go through a period where expectations are not anchored, it interferes with people's lives, economic activity and that's the thing we really need to avoid and will avoid. >> at this point you say the policy is restrictive, but all

yearlong we have seen growth surprise to the upside, unemployment to the down side and inflation lately to the down side i'm wondering by definition should you be restrictive enough right now under these conditions do you think you might need to do more? i'm curious about what you see as inflation dynamics now as the economy is still moving in a direction where it creates more inflation? people talk about base effects and higher energy costs and now we have some large labor sediments. settlements or is the economy disinflating and you're able to go back to the old fed policy of disinflation. >> i would say a broader picture of what we want to see, easing of supply constraints and normalization of pandemic related distortions to demand and supply we want to see growth running at modest levels. we want to see continued restoration of supply and demand

balance, particularly in the labor market and all of that should lead to declining inflationary pressures. we see those pieces of the puzzle coming together and seeing evidence of that. i would say what our eyes are telling us is policy has not been restrictive enough for long enough to have its full desired effects. so we intend, again, to keep policy restrictive until we're confident inflation is coming down sustainably to our 2% target, and we're prepared to further tight fen en if that's appropriate. it still has a long way to go. >> do you think under current conditions you are restrictive enough unless something changes? >> well, i think we think today's rate hike was appropriate and we're going to be looking at the incoming data to inform our decision at the next meeting about is the incoming data telling us we need to do more, and if it does tell us that collectively if that's our view, we will do more.

>> thank you kolby smith at "the financial times. if september is, in fact, a live meeting, how does that square with the need for a more gradual tightening pace that you spoke of last month in explaining the rationale for holding the funds rate steady at the june meeting? >> a more gradual pace doesn't go immediately to every other meeting. it could be two out of three meetings it just means if you're slowing down -- the point really was to slow down the decision cycle as we get closer and closer to we think our destination. i wouldn't want to go automatically to every other meeting, because i just don't think that -- i think it's not an environment where we want to provide a lot of forward guidance there's a lot of uncertainty out there. we just want to keep moving at what we think is the right pace. i do think it makes all the sense in the world to slow down as we now make these finely

judged decisions that's what we did i think it's possible, i mentioned before, it's possible we would move to consecutive meetings or we might not it depends on what the data tells us that's the best we can do. >> we shouldn't assume every other meeting is the lowest tightening frequency, it could be longer intervals in between as well? >> i think -- look, i think we're going to make a decision about the next meeting, and then we'll make the decision about the one after that, and i think it will sort itself out. >> thanks, howard snyder with reuters. so among your colleagues, there have been people who said they feel very little transmission has taken place so far for monetary policy into the economy, and there are those who feel they say it's happened very fast this time and it's kind of up to date where are you on that continuum? >> so there's a long-running debate about the lags between

changes in financial conditions and the response to those changes from economic activity and inflation, right we know that in the modern era financial conditions move in anticipation of our decisions, and that has clearly been the case in this cycle in a sense, the clock starts earlier than it used to. but that doesn't necessarily change the process from that point on, and it's not clear that it has. we also -- i'll tell what you we know and what we don't know. we know that financial conditions affect economic activity and inflation with a lag that can be long and variable or lags, plural, can be long and variable. a lot of uncertainty around the length of the lags and, by the way, that's just one component of the broader uncertainty that we face. so i'll tell you how i think about this first thing we're determined to bring inflation down to 2% over time, and we will use our tools to do that no one should doubt that i would look at it this way, though the real federal funds rate is now in a meaningfully positive territory. if you take a nominal federal funds rate, subtract an estimate

of near term expectations a real federal funds rate well above estimates of a longer term rate. i would say monetary policy is restrictive, more so after today's decision, meaning that it is putting downward pressure on economic activity and inflation. we'll keep monetary policy restrictive until we think it's not appropriate to do so so that's how i think about it if i sum it up, i would say we've come a long way. we are resolutely committed to our 2% goal over time. inflation has proved repeatedly has proved stronger than we in other forecasters have expected, and at some point that may change we have to be ready to follow the data and given how far we've come, we can afford to be a little patient as well as resolute as we let this unfold >> on the credit side, i'm wondering if you saw anything in the latest that make you think you're getting a quantum of what

you would expect, bank lending data, the growth rates edging down towards -- heading below zero, which is usually a recession indicator. >> i guess the sluice will come out early next week and consistent with what you would expect you have lending conditions tight and getting tighter. you have weak demand and it gives a picture of a pretty tight credit conditions in the economy. i think it's really hard to tease out how much of that is from this source or that source. i think what matters is the overall picture is of tight and tightening lending conditions. and that's what it will say. >> hi, chair powell. thank you for taking our questions. could you break down why inflation is falling and what share of that credit you would give to factors that don't stem from rate hikes or in your

control like easing supply chains and a drop in energy prices over the past year. >> let me start by saying the surge from elevated demand followed from the unprecedented features of the pandemic and we've always expected the disinflationary process would stem both from normalization of those broad pandemic-related conditions and from restrictive monetary policy. which would return the balance by restraining demand. that's what we're seeing to break it down farther, headline inflation has come down sharply as energy and food prices have come down due to reversal of the effects from the war in ukraine and that's a good thing and the public experiences

that for core inflation, there has been a role for most -- for both factors that i mentioned clearly for goods, normalization of supply conditions is playing an important role as is the reversal, the beginning of the reversal for spending back into services and away from goods and take on the combination of an increase in sales and inventories while vehicle inflation has decelerated points to a role for supply, but there's a role for demand as the loans and things like that are more expensive they're both working there housing services inflation starts to move down, clearly higher rates have slowed the housing market i would say monetary policy is working about as we expect and we think it will play an important role going forward in particular in nonhousing services where really we think that's where the labor market will come in as a very important

factor we think both of those sources of disinflation are playing an important role >> and just to follow up, do you think that of those two sources that core will rely more heavily on seeing an impact from rate hikes, or is there an even split there, too >> monetary policy will be important going forward because we're sort of reaping now the benefits of the reversal of some of the very specific pandemic things we're seeing that with goods in particular through supply chains and shortages moving and we're seeing -- so i think going forward monetary policy will be important particularly in the sector, in the noun n-housing services sector. >> thank you, chair powell first, let me compliment your tie, the choice of tie so thanks for taking our question the beige book said input cost pressures remain elevated for services firms, but eased notably for manufacturing sector is that an indication there's a

wage inflation pressure? and how do you target and pressure on the wage inflation without pushing the economy into recession? >> i think as it relates to goods, it's really an indication that supply chains and shortages are easing and so what was the first part of it? >> wage inflation, how do you target wage inflation without pushing an economy into a recession? >> i don't think we're targeting wage inflation i think what we're looking for is a broad cooling in the conditions wages have actually been gradually moving down. they're still at levels that would be consistent over a long period of time with 2% inflation. nonetheless we're making progress there and by so many indicators, labor demand is cooling. you can look at surveys by workers and businesses who see that you can look at the quits rate normalizing, job openings coming down, job creation in the

establishment survey is still at a high level, but it was really an extraordinarily high level for most of the last two years you see cooling in the private sector in the last report. i think we see that and it's happening at a gradual pace. a labor market, very strong demand for labor, which is really the engine of the economy. people are getting hired, many people going back to work, getting wages, spending money, and that's what's driving the economy but it's gradually slowing, it's gradually cooling. that's a good prescription for getting where we want to get >> still we see a push to raise minimum wage, a lot of unions go on strike or threaten strike, and they come out with agreements like big pay agreements like u.p.s. and the autoworkers coming up. are you concerned about a trend of series of big unions, these contracts pushing wage inflation? >> not for us to comment o