still say one more hike this year. the messaging will still be cautiously hawkish. they should be done. they probably are done because i see some softening of the economy. >> so you think they are done but they will sound leave open the possibility of a move up later. we are ready to go for the fed decision.>> the federal reserve maintaining his interest rate at 5 1/4 to 5 1/2%. the committee continues trying to determine the extent of additional policy affirming that may be appropriate. there is this bias in the statement suggesting there is still looking to raise rates. and indeed the average fed forecast does continue to look for one more hike this year with an average forecast of 5.6%. importantly i will come back to that. there are two fewer cuts 25 base point cuts built in for next year on the economy -- to solid from moderate. job growth was said to have slowed remain strong.

inflation remains elevated and the committee reputed his commitment to a 2% inflation target. the average forecast let's get to the forecast for next year. now sees a five-point 1% funds rate next year. that is up from 4.6. there's the higher for longer we have been talking about. all morning here. just if you want to do the math with their inflation rate it is not only a half-point of cuts built in compared to a full percentage point next year. the real rate actually goes higher next year. so the fed average fed forecast sees itself getting tighter relative to the inflation rate which remains the same at 2 1/2. they have a real rate of 2.6 next year versus 2.3 this year. the funds rate is above neutral by the way. all the way into 2026. our first look at 2026 they have a 2.9% funds rate versus their neutral rate of 2 1/2%. the fed more than doubled the gdp forecast for this year. 2 point one from 1 poinsett --

to 1 1/2% next year from one .1%. for the unemployed rate for the next several years by about 3/10. he doesn't see as much unemployment as it previously forecasted. it continues to mention the bank system. but not do very much with it. tighter conditions credit conditions for households could weigh on economic activity. but the extent is uncertain. it is all unanimous.>> thank you very much. stick around as we bring back our panel. we are also joined by bob and rick. let me turn to you bob what is the market reaction here seconds after the fed releases its report? >> the effects of higher for longer and a little more hawkish. so yields up smp just turned negative. we were up modestly on the day here. i think everybody wants some confirmation. core inflation is turning lower. what you see here is more

hawkish comments on the economy. the economy is going stronger than they thought. the gdp revised it was 1%. the estimate now it is 2.1% unemployment was 4 point one and now 3.8. the economy is growing stronger than they thought. that is a little more aggressive and we are seeing yields spiking up here. i think the fourth quarter is going to be very hard to read. everybody was asking about what are they going to say. oil has been up you'll seven up. dollars have been up. resumption student loan debt. that is what people are talking about. it is going to be hard to figure out how to call what is going to happen in the fourth quarter because people are expecting the economy to slow down. you sure did not see it here from the comments from the fed over all. let's go out to rick. what is your spent? >> it certainly looks to me like the higher for longer i would sort of modify a bit. i would say holding here for longer. and that really describes it.

i think the reason they need to hold here for longer is because like many of us including the market has seen some very sticky inflation out there. and i disagree a bit that this is hawkish. okay i understand that you had 12 officials let's see one more rate hike. but i also see headlines here that job gains slowed. if there was one thing to say that would be meaningful coming from the fed it would be job gains slowed. if you follow nonfarm payrolls or you follow the unemployment rate it certainly seems as though that is the case. and when it comes to the markets look at what the two year note yield has done. it jumped back up to 514. but what tends have done back to 436. why is this important? many were aking solace in the fact rates were down a bit today. i don't it all look at it that way. i look at it that the market has been tight. it has been orderly and it has been rising. and yesterday as i said on many refrains and choruses today new

psycho high-yield closes two stories fives tends even sevens. except for 7th don't go all the way to 07 because they weren't around in 07. we want to continue to see what the markets are saying. and why are the markets out of phase with the fed now when prior to this when they were starting to raise rates and fed funds were more in the threes and 4% area. market rates are moving down. because they really thought inflation would mostly vanish. but the stickiness of certain pockets of inflation and you could say food and energy. but those pockets are glaring. and they bring a lot of eyeballs to the federal reserve. you could strip it out but you can't ignore it. >> let me ask you about the politics of the fed here. in other words. what they are saying about next year is very hawkish. dave said only one or two cuts instead of three or four. their median rate forecast is now five-point one instead of

4.6. they are afraid of letting the market get too far ahead of itself getting excited about rate cuts. do you think they still are going to do is many rate cuts as they previously thought was likely less maximum you have to discounted projection for what they want to do more than a few months. >> they have no idea what they're going to do. i would say part of this i'm going to guess might have been internal fed politics. that the handful of members out there who have been talking about they would like to go one more time because they don't want to take chances. maybe the way you modify them and get the unanimous vote -- got was when i want to raise rates now but we are going to tell people we are not going to cut them as much. when i look at the projections you see an economy and this is how he reconciles the very strong growth very strong labor market that doesn't seem to be responding -- he says okay, we think economy is going to be stronger than we think. we think unemployment will be lower than we think. that creates more pressure on

inflation. how do we respond? we extend the period of monetary restraint for longer. this is essentially the trade- off. we don't need to go higher but we need to keep our foot at least press on the break for longer to keep the economy from running ahead of its potential. >> the last three months we are talking about an economy with 2.4% core pce inflation adding 100 some thousand jobs a month. that feels to me like a very different picture than the one from 3 to 6 months ago that they might still be responding to. >> you could tell two stories. look at the unemployment rate going up as many of us do and say that is economy that is starting to potential. you can look at the gdp numbers well above potential. by the way we will get new revisions on friday maybe the story look different. but i think that if you are the fed what you say is even if the inflation numbers do what they are supposed to do. coming towards 2%.

all of our models all of our muscle memory says that good news cannot endure. if the economy continues to run ahead of capacity. and therefore we are not going to take a chance on that. and so we don't feel like push the economy to recession. but this is an economy that given the head of steam and the resistance thus far to tightening -- says we need to basically maintain again the degree of restraint for longer than folks thought. by the way i think wall street might have been slow about this. but the bond market yields moving up for some time. in some sense that was for shadowing with the fed just told us. >> does this feel to you like a fed that is close to done with this cycle? >> yes i do. first and foremost i'm glad they pause. not a surprise. they have risen rates 11 times. they are doing qt. they will continue to do qt which doesn't get enough press in my opinion. so now we wait and we see how we are now all data dependent. the dates to keep in mind our october 11th -- and october 12.

of course we get the jobs number on the six. we are all going to wait to see on that. i also thought it was interesting that they did revise gdp higher. it is because we are doing better as an economy much better than most people expected. a lot of people at the beginning of the year expected us to be in a recession by now. we are far from it with the atlanta fed tracker. that number will come down. at least we are above trend. finally again reiteration of the 2% inflation target. he said it a lot at jackson and the recommitting to it again. and i'm not on there not want to come off of that 2% inflation target. we have a ways to go. in terms of core pce. >> dave kelly hawkish sounds that you expected to hear out of the fed? >> yes they are. i think we should be careful about this forecast. i agree with greg they don't know what they are going to do with rates next year. this is not so much is self landing forecast.

it is a self landing scenario. if we have a self landing then they will only cut rates twice next year. i think that is a reasonable forecast. but i take very seriously the drags gathering here. student loan repayments. think higher energy prices higher gasoline prices drag on the u.s. economy. i think the uaw strike is troublesome. the possibility of a government shutdown is troublesome. i was interest rates on the banking system on landing all of these things are building pressure on the economy. so even though the 3rd quarter is want to look spectacular in terms of gdp growth it is going to slow sequentially after that. i think the fed is not out of the woods in terms of having a recession in 2024 even though this forecast which suggests no recession. >> the fun point i want to make as we will hear from powell on the press conference begins. he will often sometimes push in the opposite direction of the sentiment you get from the statement and projections. but i'm going to listen for

carefully is how does he talk about those out your projections for the federal funds rate? when he wants to drive the point home and he thinks that s&p the projections are helping and that he will align himself he will cite the projections. when he actually wants to subtract from that he will often say that is not necessarily a problem is it is just a bunch of people putting numbers down. does he align himself with that more hawkish out year forecasts or does he play it down? >> john bellows your reaction to what has taken place. >> a lot of our conversation has been about growth and it does seem like the fed has responded merrily to the better- than-expected growth. but i would not want to over extrapolate the good growth we have had. a lot of that has been for very pandemic proposed pandemic specific reasons. it has been a -- on top of that. those are not things you can extrapolate forward. as he tried to put your forward thinking on i think you need to take into account the lags and molins monetary policy. and so i wouldn't want to over extrapolate growth.

when i look at this forecast both for growth and for interest rates i'm a little bit concerned they are over extrapolating on the good growth we have had and if growth slows which i think there's a reasonable chance that it will i think the outcome could be quite different than what they have written down. >> steve >> just a little afraid people might be missing a story here. the way to think about the fed is in the context of the real rate and what they are forecasting. that real rate shows they are tightening next year. i think this is a recipe for the fed to be blowing the possibility of a soft landing. greg is right they don't know what they're going to do. they don't know what the economic outcomes want to be. dave kelly could be rightly since a lot of these things could create softness. the interesting thing to me is the intention of the board at this point. to maintain such a high rate while they did not change their inflation outlook. so they are looking at a real rate that is more restrictive next year and it is this year. i don't know if that speaks to their lack of confidence in

their ability to bring down inflation. or what that speaks to. we may have a chance to ask the chair powell about that. the idea of the real rate going up in not going down even a little bit like it was previously forecast to me is worrisome and something that needs to be watched. >> the real rate being the difference between what they are expected rate of the federal funds will be next year versus the -- smith versus core inflation. and that not because they expect inflation to go down very much. it is because they expect rates to stay high. >> they do expect inflation to go down. they're not lowering your rates as much. i'm curious to know what is behind that. but there is certainly in the forecast a turn towards hawkishness in those forecast for the outlook for next year. >> very interesting. next our panel. we appreciate it. we are of course moments away

from hearing from fed chair jay powell. we wilgemol t re reaction to the decision from former fed vice chair. after a short break. we will be right back. ernet. they have business grade internet, nationwide. (vo) make the switch. it's your business. it's your verizon. welcome to ameriprise. i'm sam morrison. my brother max recommended you. so my best friend sophie says you've been a huge help. at ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. our neighbors, the garcias, love working with you. because the advice we give is personalized, hey, john reese, jr. how's your father doing? to help reach your goals with confidence. my sister has told me so much about you. that's why it's more than advice worth listening to. it's advice worth talking about. ameriprise financial.

welcome back. the fed holding interest rates steady as expected. pointing to raise staying higher for longer as we wait fed chair powell's news conference let's get reaction from the former fed vice chairman and global economic advisor. thank you for staying around. good to have you with us.

you were looking for a so- called hawkish hold is that what we have here? >> that is certainly what we have here. i expected them probably to take out one hike from next year. they took out two. they did not really change the inflation outlook that much. and also they really do have a soft landing. they had the unemployment rate kicking at their estimate of maximum employment. this is a fed that sees a soft landing but it wants to buy some insurance against that. with a pretty hawkish pause right here. >> steve pointed out one thing that he i expect is going to asked to cheer about. that is the idea that real interest rates the difference between the rate and the inflation rate, is actually going to rise next year. what would you say the message is in that? >> i think the message is that this is a committee that is probably happy with where they

are and where they are projecting. but they do not want to repeat the mistakes of the past of premature mission accomplished as we saw in the 60s and 70s. i think the balance here is reducing rates less rapidly than inflation to keep stands a relatively restrictive zone with what is a very very hot labor market and growth projection on the other side. >> how much of a comp locating factor is the fiscal spending that emily wilkins highlighted just a day there dispersing another 200+ million dollars from the chips act? >> that is right. i think our expert team here does think the chips act and the other legislation will introduce the and economy over time. it is not necessarily a big impact and 24. let's be honest fiscal policy has been a big surprise. we've had a big increase in the deficit this year. there is still a cumulative saving from past programs.

fiscal policy upping to the fed is a wildcard here. i think they need to factor that in. >> talk to us a little bit about employment and jobs and what they said today about what the numbers seem to indicate for 2024 and beyond. >> that is really what i took note of. the traditional view and i will confess i have been in that camp is that some of the adjustment to distant plate and get inflation down reliably to talk it is going to require some softening in the labor market. not a great extent some softening. until today that was the fed's view. they had the unemployment rate rising about a point to 4 to happen today's projections the unemployment rate goes up. that is a great outcome. that really is a soft landing disinflation. and that is that is a change from what they were thinking has been. >> i want to come back to a point that steve made and get riches feedback.

the fed now seeing the real rate somewhat higher over the medium- term. in 2025 you have the federal funds rate near 4%. even though you have inflation to the 2% target. have economy growing at trent and the unemployment rate near natural rate. given all of that i almost want to say that 3.9 to 4% funds rate is their view of the long run funds rate. that is what you should be. but if you look at the same document they say their view of the long run funds rate still only to have which has been for years. by the way that number is starting to look really stale. if you look at the long dated forward curve on the market they think the neutral rate is more like 3 to 3 1/2. what he thinks is going on here. if the committee is little bit behind the times in terms of thinking where the neutral rate is. this has huge implications about where long-term yields are everything in the financial markets. >> greg has applications for

the basic question is policy restrictive. it is only restrictive if it is above some estimate of neutral. you are absolutely right. i would suspect we will find out in a couple minutes. i would suspect if the chair is pressed on that we may hear him as we move further into the future to 2025 and 2026 probably downplay the dots in a precise way. we could be surprised maybe the message today is as you suggest. my own thinking is at least at the front end of the curve when the fed succeeds in getting inflation down to 2% in the short-term funds rate consistent with those objectives is going to be more or less what we saw before. but obviously we have to get there first. part of i think what we are seeing from the fed and markets is a bit of i'm from missouri you have to show me. and i think that is part of the risk management tabulation here as well. >> although of course either implies the need to be cutting

rates by another point and a half to bring it to what they think is neutral or they will be running very restrictive or like you said greg they are behind the times. rich you have a view on what is going on with the long-term interest rates and which side of the street you would be on? >> so i think what we need to do is to establish between the very front end of the curve the federal funds rate in the longer end of the curve a 10 year treasury bond. historically there was a positive term premium and the yield curve. investors get a higher yield and return by taking on interest rate risk. that term premium was essentially squeezed out of markets in the prior decade. and certainly my thinking is looking ahead especially given all the government debt that has been issued in the last dozen years is that we will see a higher term premium and possibly a steeper yield curve. the way that balances out between the long and the front end we will find out. that's the way it looks to me right now. >> does this all spell soft landing to you rich? >> well it certainly does make

the links the baseline is a soft landing. i continue to be in the camp that thinks we are probably going to need to see additional softening in the labor market beyond what they are showing. this has been a very surprising cycle. the pandemic to reopening the recovery the surge in inflation and now the rapid disinflation. i guess the real lesson to take from the last three years is be prepared to be surprised. >> what are the fourth-quarter potholes that you have your eye on? >> well you know the economy has gotten a lot of support from the ability of households to draw down that $2.5 trillion of excess savings. the aggregate. we had a period where no disposable income was contracting for a year and a half. households kept spending. i think that the ability to keep chugging along in some sense is more limited than we saw. also oil prices are a wildcard.

we've been focused on so many other things in the last several months. we've had a big move up in oil on supply. decisions. the u.s. economy is different from in the past. it is less exposed to higher oil prices. again high oil prices push up headline inflation and that is obviously a wildcard as well. >> thank you so much as always. it is great to see you. thank you. i don't know greg if you are staying or going. you are welcome to stay as long as you want.>> you better stick around. you were talking to each other. >> we just about six minutes away from hearing from the fed chair himself. the press conference begins at 2:30. weilta wl ke you there live as soon as it starts. the fed decision after the break.

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as we wait for fed chair powell let's get thaws from greg of the wall street journal. i'm going to pick up where we left off in washington. how much does make potentially a part of why people think interest rates might be higher than they used to be? >> a very very big factor. economics says if you twice as much government debt you have

to pay it. we should not be shocked the real rates are reflecting that. it is noticeable this latest run-up in real rates begin with the announcement of the treasury quarterly refunding much larger than people expected. is it a disaster --? doesn't mean we will be -- no. none of that. the idea that long-term interest rates will be 2 1/2% that the real short-term interest rate will be 0 to 0.5 as it was five years ago. i don't think that comports with reality of where we are going with inflation. >> why the not that it was in before it is very sensitive to headlines of japan's developments. any market that has a lot of government debt already it seems like that is really moving the needle for investors. >> stephanie mentioned underplaying qt. i agree. for a lot of the last two years with the biggest buyers of government bonds? central banks. they are selling. so in addition to all the new supply coming out of governments we have all that other stuff rolling off the

balance sheets. that is a lot of debt for the private sector to absorb. >> that means higher interest rates. >> that is how the market clears.>> you have to pay more. >> you sound like you are from the tea party. this is the argument for shutting down the government. >> i am not making a judgment. we borrow money before because we have certain priorities. but you can't deny that arithmetic economic reality that if we are going to be structurally -- borrowing more in the future all else equal real rates have to be higher. >> some people say it won't be different this time.>> they will come down in a recession. we hit the zero lower balance which is a fancy way of saying zero interest rate and stayed there for 7 years? i really doubt it. >> i think that was a generational matter. i think it was a once in a generation. >> i think it was a post- financial crisis matter. the kenneth -- about debts. they always told us that we've been through these crises before.

they take seven years. to basically work their way through. it has been actually about 10 to 12 years. a lot of the low rates we have been through in the pre- pandemic period we are really just working through all of the leveraging post crisis. it is all gone now. >> what are you going to be listening to from powell? >> i will be looking for where does he put the inflection on whether where he is with respect to risk? inflation was better than the last time. the growth numbers are stronger. which does he worry about more? my gut sense is he is going to basically ratify the view that unless the numbers go in a very adverse direction they are done. secondly i want to see whether he associates himself with that very hawkish view.>> our dual mandate to promote maximum employment and stable prices for the american people. we understand the hardship that high inflation is causing and we remain strongly committed to bringing inflation back down to our 2% goal.

price stability of the responsibility of the federal reserve. without price stability the economy does not work for anyone. and particularly without price stability will not achieve a sustained period of strong labor market conditions that benefit all. since early last year the -- has significantly tightened the stance of monetary policy. we've raised our policy interest rate by 5 1/4 percentage points. and have been seen to reduce our securities holdings at a brisk pace. we've covered a lot of ground in the full effects of our tightening have yet to be felt. today we decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. looking ahead we are in a position to proceed carefully in determining the extent of additional policy firming that may be appropriate. our decisions will be based on

our ongoing assessments of the incoming data and the evolving outlook and risks. i will have more to say about monetary policy after briefly reviewing economic developments. reasons indicators suggest economic activity has been expanding at a solid place. and so far this year growth in real gdp has come in above expectations. recent ratings on consumers vending have been particularly robust. activity in the housing sector has picked up somewhat. though it remains well below levels of a year ago largely reflecting higher mortgage rates. higher interest rates also appear to be weighing on business fixed investment. in our summary of economic projections or sep committee participants revised up their assessments of real gdp growth. with the median for this year now at 2.1%. participants expect growth to cool with the median projection falling to 1.5% next year. the labor market remains tight

but supply and demand conditions continue to come into better balance. over the past three months payroll job gains averaged 150,000 jobs per month. a strong pace that is nevertheless well below that seen earlier in the year. the unemployment rate ticked up in august but remains low at 3.8%. the labor force participation rate has moved up since late 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. although the jobs to workers gap has narrowed labor demand still exceeds the supply available workers. participants expect to rebalancing in the labor market to continue. easing upward pressures on inflation. the median unemployment rate projection and the sep rises

from 3.8% at the end of this year to 4.1% over the next two years. inflation remains well above our longer run goal of 2%. based on the consumer price index or cpi and other data we estimate total pce prices rose 3 pro 4% of the 12 months ending in august. and that excluding the volatile food and energy categories core pce prices rose 3.9%. inflation has moderated somewhat since the middle of last year. and longer-term inflation expectations appear to remain well anchored. as reflected in a broad range of surveys of households dismisses and forecasters. as well as measures from financial markets. nevertheless, the progress the process of getting inflation sustainably down to 2% has a long way to go. the median projection and the sep for total pce inflation is 3.3% this year faucets 1/2%

next year and reaches 2% in 2026. 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 cost of essentials like food housing and transportation. we are highly attentive to the risks high inflation poses to both sides of our mandate. and we are strongly committed to returning inflation to our 2% objective. as i noted earlier since early last year we raised our policy rate by 5 1/4 percentage points. we see the current stance of monetary policy as restrictive putting downward pressure on economic activity hiring and inflation. in addition the economy is facing headwinds from tighter credit conditions for households and businesses.

in light of how far we have come in tightening policy the committee decided at today's meeting to maintain the target range for the federal funds rate at 5 1/4 to 5 1/2%. and to continue the process of significantly reducing our securities holdings. we are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to our 2% goal over time. in our sep -- their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely. sorry the most likely scenario going forward. if the economy evolves as projected the median participant projects the appropriate level of the federal funds rate will be 5 process percent at the end of this year. 5 part 1% at the end of 2024. and 3.9% at the end of 25.

compared with our june summary of economic projections the median projection is unrevised by the end of this year but has moved up by a half percentage point at the end of the next two years. these projections of course are not a committees decision or plan if the economy does not evolve as projected the path of policy will adjust as appropriate to foster our maximum employment and price stability goals. we will continue to make our decisions meeting by meeting. based on the totality of incoming data and their implications for the outlook for economic activity and inflation as well as the balance of risks. given how far we have come we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks. real interest rates now are well above mainstream estimates of the neutral policy rate. but we are mindful of the inherent uncertainties and precisely gauging the stance of policy. we are prepared to raise rates further if appropriate.

and we intend to hold policy at a restrictive level until we are confident that inflation is moving down sustainably toward our objective. in determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. we remain committed to bringing inflation back down 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. >> thank you. coby smith with the financial times. what makes the committee inclined to think the fed funds rate at this level is not yet sufficiently restrictive especially when officials are forecasting a slightly more benign inflation outlook this year? there is noted uncertainty about policy lags. headwinds have emerged from the looming government shutdown. the end of federal childcare funding resumption of student debt payments. things of that nature.>> like i said would characterize the situation differently.

so we decided to maintain the target range for the federal funds rate where it is at 5 1/4 and 5 1/2% while continuing to reduce our securities holdings. we are committed to achieving and sustaining a stance of monetary policy that this initiative to bring down inflation to 2% over time. but the fact we decided to maintain the policy rate at this meeting does not mean we have decided that we have or have not at this time reached that stance of monetary policy that we are seeking. if you look at the sep as you honestly will have done you will see the majority of participants believe it is more likely than not that we -- appropriate for us to raise rates one more time. in the two remaining meetings this year. others believe that we have already reached that. it is something we are not making a decision by deciding to about that question by deciding to just maintain the rate and await further data. >> right now it is still an open question we are not saying

today we have reached this level? >> clearly we are just what we decided to maintain the policy rate and await further data. want to see convincing evidence that we have reached the appropriate level. we've seen progress and we welcome that. but we need to see more progress before we would be willing to reach that conclusion. >> just on the 2024 projections what is behind that shallower path for interest rate cuts and the need for real rates to be 50 basis points higher? >> let's say it this way. first of all interest rates real interest rates are positive now. they are meaningfully positive. that is a good thing. we need policy to be restrictive so we can get inflation down to target. and we need we are going to need that to remain to be the case for some time. so i think remember that of course the sep is not a plan

that is negotiated or discussed a really as a plan. it is a cumulation really. what you see are the meeting medians. what you are seeing are the medians. i would not want to bestow upon it the idea that it is really a plan. what it reflects though is that economic activity has been stronger than we expected. stronger than i think everyone expected. what you are seeing is this is what people believe as of now. will be appropriate to achieve what we are looking to achieve which is progress toward our inflation goal as you see in the sep. >> rachel siegel from the washington post. how would you characterize the debate around another hike or holding steady? is a discussion around lack times fear of too much or too little slowing? walk us through what this disagreement was about at the meeting. >> the proposal at the meeting

is was to maintain our current policy stance. i think obviously unanimous support for that. this of course is an sep meeting. people write down what they think. you have some you so i think seven put down no hike at this meeting. or between now and the end of the year. i think at 12 put down another single hike in one of the next two meetings. that we have between -- it wasn't like we were arguing over that. people were just dating their positions. really what people are saying is let's see how the data comes in. we want to see that this these good inflation readings that we have been seeing the last three months we want to see it is more than three months. we want to see the labor market report that we received last one we received was a good example of what we do want to see. a combination of a broad range

of indicators continuing rebalancing of the labor market. those of the two things those that are to mandate variables. that is the progress we want to see. i think people they want to be convinced. they want to be careful to not to jump to a conclusion really one way or the other. but just be convinced the data support that conclusion. and that is why given how far we've come and how quickly we have, we are actually in a position to be able to proceed carefully as we assess the incoming data and the evolving outlooks and risks and make these decisions. >> in your view what would i know nothing has been decided. what would one more hike at the end of the year due to inflation and on the other side what would no hike --? >> you connect the argument one hike one way or the other won't matter. for us obviously as a group it is a pretty tight cluster of where we think that policy stance might be. we are always going to be learning from data.

we learned all through the course of the last year that actually we needed to go further than we had thought. go back a year and what we thought -- it has gotten higher and higher. we don't really know until and that is why again we are in a position to proceed carefully at this point. a year ago we proceeded pretty quickly to get rates up. now we are fairly close we think to where we need to get. it is just a question of reaching the right stance. i would not attribute huge importance to one hike. in macro economic terms. nonetheless we need to get to a place where we are confident that we have a stance that will bring inflation down to 2% over time. that is what we need to get to. we have been moving toward it as we have gotten closer to it. we've slowed the pace at which we have mood. i think that was appropriate. now that we are getting closer we have the ability to proceed carefully.>> i want to return

to colby's question. what is it saying about the committee's view of the inflation dynamic in the economy that you achieved the same forecast inflation rate for next year but need another half a point of the funds rate? does it tell us the committee believes inflation will be more persistent requires more medicine effectively? related question is if you're going to project a funds rate above the longer run rate for four years in a row at what point do we start to think maybe the longer rate or the neutral rate is actually higher? >> so, i guess i would point more to rather than pointing to a sense of inflation may become more persistent. that judgment we've seen inflation be more persistent over the course of the past year.

i would not say that is something that has appeared in the recent data. it is more about stronger economic activity i would say. if i had to attribute one thing. again we are picking a medians here and trying to attribute one explanation. but i think broadly stronger economic activity means rates we have to do more with rates. that is what that meeting is telling you. in terms of what the neutral rate can be. we know it by its works. we only know it by its works. the models and that we use you ultimately you only know when you get there. and by the way the economy reacts. that is another reason why we are moving carefully now. because there are lags here. it may of course be that the neutral rate has risen. you see people you don't see the median moving. but you do see people raising their estimates of the neutral rate.

it is certain plausibly that it neutral rate is higher than the longer run rate. what we write down and the sep is the longer run rate. it is certainly possible that the neutral rate at this moment is higher than that. and that is part of the explanation for why the economy has been more resilient than expected. >> howard with reuters. so you said several times the economy needed a period of below trend growth to get inflation consistently back to 2%. you kind of get that in 2020 for a little bit. number 1.5% is a touch below what is the estimate of potential. the fact you're getting so much done as so much less cost does that represent a change in how you think inflation works or how the economy works, a change in the mix of supply healing versus demand necessary to achieve this? >> of course.

it is a good thing that we've seen now meaningful rebalancing in the labor market without an increase in unemployment. that is because we are seeing that rebalancing and other places. for example job openings. and in the jobs worker gap. we also see supply side. so that is happening. i would say though we still i still think and i think broadly people still think that we will have to be some softening in the labor market that can come through more supply is we've seen as well. also remember the natural rate we think is coming down which is a supply-side thing. so that the gap between any given unemployment rate lower than that in the natural rate comes down. that is a way for the labor market to achieve a better balance. all of those things are happening. you are right in the median forecast we don't see a big increase. in unemployment. we do see an increase. but that really is just playing

forward the trends that we have been seen. it is not guaranteed. there may come a time when unemployment goes up more than that. that is what we have been seeing his progress without higher unemployment. >> we've gone from a very narrow path to a that there was a path to a soft landing. i said that since we lifted off. it's possible that the path has narrowed and it has widened ultimately. this may be decided by factors that are outside of our control at the end of the day. i do think it is possible.

i think that this is why we are in a position to move carefully again. we will restore price stability. we know it depends on us doing that. we have to do it so that we can achieve the labor market that we want to achieve in an extended period of labor market conditions. we know that. the fact that we have come this far lets us proceed carefully as i keep saying. that is the end we are trying to achieve. i would not want to handicap the likelihood, it is not up for me to do that. >> chair power, both you and vice chair williams have indicated that the restrictor will be judged on the nominal

basis and some scope for the rate hikes next year providing further evidence. will continue to subside. the f moc focused on the targeting of real level policy restriction and what would constitute this to normalize the stance while keeping real policies to the and restrictive. >> yes, we understand it is a real rate that will matter. it needs to be restrictive. again, it is only sufficiently restrictive when you see it. not something you can arrive with confidence and a model. what are we saying? through a combination of the unwinding of the pandemic supply and demand and the policies working to suppress demand or alleviate high demand. the combination of those two

things is working. we are seeing inflation coming down. goods and housing services. the effects of it and non- housing services as well. you think that we are working. as we have said, we want to reach something we are confident that gets to this level. enter to win enough data. we can decide to decide this. the question is, how long do we stay at that level? that is another set of questions. for now, the question is, trying to find that level where we can stay there. we have not gone to the point of confidence about that yet. that is the stage we are at.

the core inflation projection for this year, that inflation could be lower than the median of 3.7%. the case to raise rates still. the same rate here. the decline in the ablation is better than what you currently anticipate. >> the decision we make at each meeting and the last two meetings this year, it depends on the totality of all the data. the inflation data, labor market data, growth data and the balance of risks and what else is happening out there. we take that into account. i cannot write this article about one piece of that. trying to reach a judgment about the rate hike overall and if that will increase our confidence. yes. this is an appropriate move and

it will help us be more confident that we have gone to the level that we need to go to. >> following up on the next question actually, the new york had president obviously, has said things to the effect of next year, as we see inflation coming down, we will need to reduce interest rate so that we are not squeezing harder and harder over time. is that the logic that you apply? is that how you think about it? in the last press conference, something to the effect that it is a full year out. some people anticipated that you did not see a possibility of the rate cut in the first half of next year. is that what you meant by that? is that how you're thinking about that timing? >> the hypotheticals about

cutting, i never wanted to send the signal about timing. i would not want to be taken that way. as we go into next year, that is the question we are asking. taking into account the lag and the economy and everything we know about monetary policy. the time will come at some point. i'm not saying when. that it is appropriate to cut. real rates are rising. part of it may be that it will be all the factors that we see in the economy. that will, at some point. what you see, is us writing one year ahead. so much uncertainty around that. we will do what we think makes sense. hey, we made a plan. these are estimates made a year in advance. that is how it is.

>> thank you so much, chair powell. the strong gdp growth that we have seen is from the supply side factors from the labor force growth. and if it keeps coming in hot in the absence of inflation resurgence, it would that be something to consider? >> on your first question, we are working very carefully to try and understand the direction of it. what is driving it. it is a lot of consumer spending. it is very robust in the spending. that is how we are looking at it. your second question? >> if the adp stays hot with inflation? >> gdp is not a mandate.

the maximum price stability for the mandates. the question is, gdp, the heat that we the, is it really a threat to our ability to get back to 2% inflation? that is the question, not the question of the gdp on its own, you are expecting to see this improvement to continue rebalancing the labor market and inflation will move back into 2%. we have confidence in that. it threatens one or both of those. >> there are multiple external factors that are playing out right now. rising oil prices. autoworkers are striking. the possibility of a government shutdown. for each of those things, can

you talk about how you are thinking about the course for the fed and the economy? >> there is a long list, you hit some of them. the strike, government shutdown. government loan payments. there are a lot of things that you can look at. what we try and do is assess all of them and handicap all of them. so much uncertainty around these things. we do not comment on the strike, we have no view on the strike one way or another, we do have to make an assessment of the economic effects to do our jobs. it is so uncertain. economic effects. look back at history and it will affect the economic output, inflation, and it depends on how broad it is and how long it is disdain for. how quickly production can make up for lost production.

none of those things are known right now. you just have to leave that uncertain. we will be learning over the course of the next meeting period much more about that. the same is true for the others. i do not know if you mentioned shutdown. we do not comment on that. it is much more of a macroeconomic effect. energy prices being high, that is a significant thing. energy prices being up can affect spending over time. the sustained period of higher energy prices can affect consumer expectations about inflation. we look at the short form volatility. the question is how long are the higher prices sustained? we have to take those into account as well. i do not know if i hit them all. coming into this with the economy that has