ten basis points below this to three hours ago. so we'll keep an eye on that. >> we go back to not knowing what's going on. >> no no no i liked that. >> i liked it better. ignorance is ignorance is bliss. the first data point we're getting is not tomorrow. >> we get the ppi. >> we get producer. >> prices and we will see. make sure you join us for that. right now it's time for squawk on the street. >> good wednesday morning. >> welcome to squawk on the street. >> i'm carl quintanilla. >> with sara. >> eisen and mike. >> santoli at post. >> nine of the new. >> york stock exchange. >> cramer and. >> faber have the morning off. >> futures do. >> fall out of. >> bed here as january cpi. comes in hotter than expected. >> up. >> 5/10. >> the biggest. >> monthly jump since 22 year. >> on year. core ticks up. >> to. >> 3.3. >> and the ten year yields now 4.62. >> that's almost. >> a one. >> month high. >> a roadmap. >> begins with elon. >> musk defending. >> doge in the oval yesterday. >> making the case for the group's. >> aggressive actions. >> in this new administration. >> speaking of musk. >> shares of tesla trying to avoid. >> their sixth.

>> straight day of losses. stock already down 15% in. february on growing concerns over musk's focus on the company and rising competition. and we will take you down to miami for a cnbc exclusive with bank of america chairman and ceo brian moynihan. his reaction to this morning's cpi print, the trump administration and powell on the hill again this morning. >> let's begin with market. >> reaction to cpi ahead. of the chair's second. >> day of testimony. on the. >> house. side today. a lot of discussion about. >> whether this number was a front. >> loading tariffs or. >> whether there were some wildfire effects. >> but year on year. >> headline, mike, since. >> august 2nd 4262729. >> and now. >> three zero. >> yes. and the market also was leaning in the direction of this being a little bit of an unfriendly, sticky hot print, but then it actually was even hotter than that, probably as the bond market is suggesting right now. there's also kind of the immediate search for the one offs, as you mentioned. so whether it is wildfire effects, obviously bird flu, but the

other and a tariff pull forward, but also just this annual tradition now of hot january numbers, seasonal effect. so all that being said, you can't explain it away fully. we basically said, you know, we've been sideways at best on inflation for a while, well above the fed's target. it does sort of reinforce the idea that they should just be in wait and see mode. the stock and bond markets interestingly, are kind of just testing recent ranges. so it's not as if it's sort of a okay, the entire game has changed, but it's going to be a lot more suspense around every data point and around every interaction with with jay powell from here. >> i mean. >> there were a lot of. >> ugly, hotter numbers. >> in this report, for instance. i mean, pick ups, even at food. for food, food away from home and food at home, in the grocery store and in the restaurant both perked up on the month. we're talking about a 0.5% increase for food away from home. it was 0.3 the monthly number before, so you don't want to see those kind of numbers going in in different directions. auto insurance continues to be a

problem. some of these insurance numbers, which have been hot airfares, hotels, they all contributed. airfares gained 1.2% on the month. hotels increased 1.7%. i mean. >> this was. >> a number that suggests that the fed is not making as much progress as it has hoped, or it is thinking on inflation. does it. >> mean that. >> last year's 100 basis point cuts were a mistake? i mean that that debate is going to be out there. we've been having that for a long time, but it also means that they are not going to be able to do much in terms of cutting from here. so now the market yesterday was pricing in the first cut in september. we've gone out to december of this year for. >> the first cut. >> so a complete rethink of when the fed is going to be. able to cut. if the fed is going. >> to be able to cut. >> and remember yesterday i said day two powell testimony should be more interesting because of this. hopefully he'll address. >> it right. >> and that's why we could get some news this time because he didn't say anything new yesterday. >> the questioning. >> yesterday was a. >> lot. >> about deregulation. >> and banking cfpb.

>> that was the whole testimony. and he couldn't. >> answer a. >> single thing about it. >> so hopefully we get to some discussion of. >> rates though. >> but sarah's. >> right on food. eggs i know. >> eggs are sort. >> of. >> this weird. >> football. but 1,515%. >> month on month. >> you. >> got to. >> go back a decade. >> and some people are also even pointing to things like the hotels and car rental, as you know, you had these massive spikes because of the people vacated because of the wildfires, things like that. so you don't want to explain it away because it obviously is a challenge in terms of getting fed policy back toward what they think of as neutral, even if it's higher than where they thought before. it's only a real problem if it paralyzes the fed and leaves them unable to respond to a slower economy. >> here. here's the other problem. the other problem is we have a president who is now pursuing a very pro-growth agenda, inflationary and a tariff agenda, potentially inflationary as well. so i think that you have that combined with the fact that we're already starting to get prices perking up here. i'll just add one more

number at you, which i think would be very disappointing for fed chair jay powell, which is super core. he put super core on our radar at the beginning of this cycle. it's services inflation taking out housing right. which has been a factor. it rose a whopping 0.76% on the month. that was the highest in a year. >> and it. >> it definitely kind of raises the question of about whether it is a seasonality issue, mike. or there's something deeper going. >> on here, by the way. >> which they have. >> to assume. >> yeah. >> also three. >> month annualized 3.85. and this is. coming on a morning where the president does post on truth. social quote. interest rates should be lowered, something. >> which would. >> go hand in hand with upcoming tariffs. >> let's rock and. >> roll america. >> yeah, it comes. >> about a week. >> after treasury. >> secretary besson. >> said the president was not calling for rates. >> to. >> be lowered. >> right. >> not fed rates, but interest rates in the market to be lowered. >> which isn't. >> happening this. morning because the gut instinct here is sell bonds, yields go up. dollar

strengthens. i mean it's everything that the trump trade started as that was giving back in the last few weeks. interestingly, there's been this big rally in. >> bonds since like the end of november that that has unwound a fair degree. that's absolutely true. yeah, i think it's true that the intent is to is to run a growth friendly agenda. it's not clear that in the short term, tariffs qualify as growth friendly. it's not clear in the short term that less fiscal spending is growth friendly. even though, you know, everyone would say sure, get more efficient. so i think it's a little bit of a push pull on those fronts. and, you know, i don't know that the that what the president is suggesting here about, you know, rates should go down is going to carry a lot of sway. we know that's his orientation. if you look back actually at the history of president trump's comments on this, he actually seems to think about high interest rates as a form of inflation. right. because because if you're a debtor, you're paying more and it seems like your cost goes up. and so he sometimes is characterized it that way.

>> well, elon musk yesterday in the. oval when he was talking about. what doge was doing, trying to be really transparent about the intent and trying to relate it to average americans, was saying, okay, we're going to cut government spending so that the government doesn't have to borrow as much. so interest rates will come down, and that will mean you will be able to afford more on your mortgage payment at the grocery, because for. borrowing costs being very high, people can relate to that. and i think that was. >> what the numbers are, right. the civilian federal workforce is not where the major swing factor in how much the government has to borrow is. obviously, it helps if you spend less, but it's just it's just funny that it's being treated as an emergency and people in the market would be like, i don't see an emergency on that particular part of the government spending. >> well, the government workforce relative to the population has has stayed pretty steady over. >> the years. >> speaking of that, state and local. >> that's where. >> the bloat is. >> yeah. >> speaking of that oval address. >> let's move. >> to the president's eo. >> given elon musk's doge. >> more. >> power to find ways to cut government spending. yesterday.

>> the president. with musk defended doj's efforts. >> and our eamon. >> javers has the latest on eamon. >> the optics. of that. >> presser. >> the ap getting locked. >> out and of. >> course the. >> coverage today. >> from multiple outlets on. >> how musk. is literally. >> deregulating himself. >> yeah that's right carl. the ap was locked out because they their style guide, does not acknowledge the name change for the gulf of mexico to the gulf of america. so that is a spat between the news agency and the white house. but what we saw yesterday was an impromptu press conference in the oval office with elon musk and his young son, x, standing just to the side of donald trump at the resolute desk, musk took on some of his critics, who have blasted his doge efforts as a hostile takeover of government by painting those efforts as just an innocuous fact finding mission designed to cut wasteful spending. he highlighted a couple of items he's found so far, including that the treasury department's software system sometimes don't include fields describing the nature of the

payments, and that the federal government's employee retirement system is still largely paper based and therefore inefficient. but he also conceded that some of the things that he has said so far are just not true, including the widely repeated claim that the united states was sending millions of dollars in condoms to gaza, where they were used by hamas. in fact, the condom effort was in mozambique, and it's helping prevent the spread of aids. >> some of the. >> things that i say. >> will be incorrect. >> and should. >> be corrected. >> so nobody's. >> going. >> to bat a. >> thousand, i mean, any. >> you know. >> we will make mistakes, but we'll act quickly to. >> correct any. >> mistakes. >> and although. >> musk has resisted basic disclosures about doge, such as the names and duties of the people who work there, he said his efforts will be maximally transparent. >> you can see everything that's. >> going on. >> and you can. >> see, am i. >> doing something that benefits one of my companies. >> or not? it's totally. >> obvious, musk said. all of

doj's efforts will be posted to the website so that the public can judge for themselves whether he has any conflicts of interest. back over to you guys. >> okay. >> so what's his what are his next targets? i mean, he's been really focused on the us aid office, the cfpb, as we've heard. >> from. >> some of the fed, the fed reports and expect more commentary today from. >> the house. >> financial services on that. >> where where. >> else is he targeting as far as these. federal workers and cuts? >> well, what's interesting, sara, is this, you know, the whole ideological project here has been really focused on areas of government spending that republicans generally disagree with. foreign aid is a big one. we'll see what the president and elon musk said is that they're going to target the pentagon next. we'll see how aggressive they go after wasteful spending in the military industrial complex. that's been an area where, you know, republicans have been reluctant to poke around too aggressively over the years. but we're also seeing and i want to bring up a graphic here that we've that we prepared just a couple of examples of

some of the real world consequences that we're already seeing in terms of the cuts to federal spending around the world at usaid. so we're seeing funding delays, according to the la times, funding delays to head start programs nationwide. according to the new york times, at least 40,000 health care workers in kenya are going to lose their jobs as a result of usaid cuts. also, according to the new york times, medical trials are halted in mozambique, bangladesh and malawi on different diseases that usaid was working on stamping out in those countries. so those are some of the real world impacts of these cuts that have happened so far. and the debate here is sort of both a moral and a practical one. morally, it's a debate for the american voter. what kind of country do we want to be? do we want to be a country that provides that kind of help or not? and elon musk was arguing yesterday that debate was decided at the polling place back in november. and then the other question is practically, what does that impact have on american soft

power around the world in terms of creating an opportunity for china or others to step into the void as the us pulls back from all these countries and say, hey, wait a second, china is actually the strong, wealthy country that can help you out. the americans are weak and declining. you should you should turn toward us foreign policy analysts and sort of the big geostrategic game will say this creates a big opening for the chinese as well. >> yeah. >> either. >> the chinese. or alliances. zaman that are just ex us. >> whether that's canada. >> and other partners. >> big piece in the journal today about shane baum's popularity. >> in mexico. >> i do have a question for. >> you about. >> some of these. >> court challenges. >> which are now. >> making their way to the appeals level, and this notion of what happens if the executive branch simply continues to defy a court order. >> and where. >> that leaves. >> economic certainty, business certainty, and all the rest. >> well, i mean, it's a fundamental question of rule of law. and what was interesting about that presser yesterday, carl, is that both trump and

musk seem to dial back some of their criticism of the courts. we saw, you know, jd vance very aggressively going after these lower court judges. we saw elon musk saying, you know, these judges are simply anti-democratic, blocking what we're trying to do. they should get out of the way. we should ignore them. that kind of argument in the oval, though, what trump said is i've always abided by the courts and will continue to abide by the courts and will appeal that. i think there's two basic things going on here. one is, i think the white house realizes that, you know, ignoring courts is sort of not a popularly defensible thing, even among republicans broadly. and two is that they, you know, they largely control the supreme court ideologically. and so if they appeal all these things up to the supreme court, they have a very good chance of winning there. so i think what's going to happen is a lot of these fights are going to get expedited up to the supreme court, and trump's going to win a lot. >> eamonn, appreciate that. >> cpi of course. >> the main story here. >> although we'll. >> talk tariffs later. >> this morning with peter navarro. and yesterday.

>> we. >> had multiple uses of the word chaos. >> whether that. >> was the ford cfo. >> or ken griffin. >> sarah who you. >> know quite. >> well saying that. >> the tariff quote chaos. >> is an impediment. >> to growth. >> no, this has been. >> consistent from griffin. and yes, he's a conservative. i mean, he probably agrees with a lot of what trump is doing and saying, but not on the tariff front. he says. from my vantage point, the bombastic rhetoric, the damage has already been done. it's a huge mistake to resort to this form of rhetoric when you're trying to drive a bargain. because it tears into the minds of ceos, policy makers that we can't depend on america as our trading partner. it makes it difficult for multinationals, in particular, to think about how to plan for the next five, ten, 15, 20 years, particularly when it comes to long lead time capital investments that could be adversarily adversely impacted by a degradation of the current terms of engagement as amongst the leading western countries when it comes to terms of trade. basically, that it's bad for. growth. that companies and ceos cannot plan and leaders cannot depend on america, that

the tariff strategy is different than some of the other pro growth strategy in terms of harmful for growth, potentially, when it comes to ceo confidence as well, which has been going strong lately. but that doesn't seem to have stopped trump. i mean, we could be getting reciprocal tariffs as soon as today. >> yeah. >> we're going to be on the lookout for that as well. >> when. >> we come back. >> softbank is a big story today a. >> surprise loss. amid amazon's. >> big push to invest. in ai. >> and that does of course include the stargate initiative. we'll talk about that after the break. meantime futures. >> got a bunch. >> of movers to whether. >> that's smci, biogen. qsr tesla is a story. tesla is a story. >> once agai i can't believe you corporate types are still at it. just stop calling each other rock stars. and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models.

oh, that's so rock roll. it is, right. he gets it. yeah. (grandpa) i'm the richest guy in the world. (man 1) i have time to give. (man 2) i have people i can count on. (grandma) and a million stories to share. (vo) the key to being rich is knowing what counts. 20 pounds with lifemd. >> i've always wanted to lose weight, but i never. >> figured out the right way. >> to do it. >> i asked a couple buddies. >> i said, how do i lose. >> this weight? >> and the guy goes, lifemd got on the. computer immediately and. >> probably the easiest thing i've ever done. >> the medication. comes in the mail and it's very easy to use. i've been able. to live my normal. >> lifestyle and i've. >> lost 20 pounds already. >> i now. >> spend time. >> with my kids and i've. >> never felt better. >> changed my life. >> get started today and see your eligibility. >> for a copay as low as. >> $0 at lifemd.com/tv. >> i'm howie. >> mandel. >> the newest ambassador of skechers. funny story how i became an ambassador. i went.

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now from your structured settlement call now. >> softbank reporting a surprise. >> quarterly loss. >> of $2.4 billion. >> this comes, of course, just. >> weeks after ceo masa son appeared with president trump to announce the company's investment in the stargate ai project. deirdre bosa. >> joins us with more. and we did learn more about how. >> they're going to fund that. deirdre. we did. i'm going to

get to that. but that loss you mentioned merely a blip in masayoshi son's next grand ai vision, because really, what's a $2.4 billion loss compared to that half $1 trillion. project stargate, which softbank is spearheading now? i was able to find out a few more financing details. from a source familiar with softbank plans to put in 15 to $20 billion initially of the expected 500 500 billion over the next four years. now the rest will come from a combination of equity from founding partners. so that's openai, oracle, mgm, as well as co-investors, as well as project and debt financing. now, the ambition, of course, is to develop, is to develop next gen ai infrastructure described in this earnings presentation slide overnight as amazon's vision about helping people's lives and solving difficult issues that would otherwise remain unsolved with the power of ai. and then this next slide lays out his even grander vision of reaching artificial superintelligence. that's ai that surpasses human intelligence in all aspects,

including creativity and problem solving. four pillars identified here softbank points to chips, data centers, robots and energy, which will all come together for asi. now, also on softbank's. earnings call. and in its slides, which are always so distinct, softbank touts masa's new powerful relationships. you mentioned one of them at the top. he mentioned he showed this photo of him with president trump, sam altman and larry ellison at the white house just a few weeks ago. and then another photo of masa and altman on stage in tokyo just last week. so what we are really seeing, guys, is a return of the late 20 tens. masayoshi son, when that $100 billion vision fund and that spray and pray strategy single handedly changed the venture capital and startup ecosystem. this time, of course, planting his flag in ai. even more ambitious, which is hard to wrap your head around. guys, masayoshi son has just had so many different lives. he's been, you know, every tech cycle since the internet, with some with a spotty track record, but you

know, enough wins to keep going. >> for sure. and, you know, maybe one of the benefits from his perspective of this particular initiative is how long it's going to take to not just get this all money raised, money deployed, the actual facilities built, and then to see what the models do off of it. you know, we're not going to have a test of whether this is all getting a payoff for some time. >> no. and i mean, there's where a lot of the risk lies as well. right? this is going to take time to build out. and meanwhile you have the hyperscalers amazon, microsoft, aws. they're expanding spending billions and billions of dollars in their own capex for next generation ai and data centers. so it's a very, very big bet here. and, you know, he's really betting on open ai at a time when open ai's moat is facing some questions. i mean, this puts open ai. there's also the investment right into open ai itself, puts openai in the best position to keep pushing the frontier. but there's this other force at work which we keep talking about, which is distillation, the idea

of making big models into smaller ones and taking all the information from it. that's really changing the landscape as well. we don't actually know who the winner is going to be a few years from now. >> yeah. and what's. >> interesting is a lot of the. >> coverage this morning is about, as the atlantic puts it, the false ai energy crisis. the journal piece. on how. the number. >> of summit attendees in paris. >> who don't really see the value. >> in ai. >> agents, at least at the moment. >> we'll talk about it later. >> today, i hope. deirdre bosa up early. >> out west. take a look. >> at. >> the pre. >> market here. as we do get. >> this response to that hotter. >> than expected. cpi number. futures down about 400. >> on the dow. >> don't go away. >> it's not if the markets will turn. >> it's win. >> at howard capital management. our proprietary family of funds actively navigates. >> complex market. landscapes while. >> seeking to. >> safeguard your tomorrow. >> we aim to empower. >> investors, delivering. >> opportunities with a tactical. >> mathematical approach.

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>> tesla shares. >> now down. >> more than. 18% so far this year. >> elon musk's. >> focus on. >> politics and. >> openai unnerving some investors. it is a reminder. >> of what happened years. >> ago, when tesla shares fell sharply after he disclosed his stake. >> in twitter. >> and that. >> did fuel concerns. >> it was a distraction. >> from him running tesla. >> we continue to point out. >> the split between byd and. tesla year to date. >> going in opposite directions. >> there was some ward's numbers yesterday as well on. on sales. >> down 13%. >> in north america. >> in january. >> so we're going. >> to. >> track all of that. >> for sure. i mean, it's in like a 30% drawdown. looks like it's going to try to bounce this morning. it's just an amazing stock. the way it runs in streaks. and the streaks seem to be dictated by the degree to which, you know, investors are captivated by just sort of the long term vision, or they want to sort of reset the focus on the here and now. earnings estimates for this year a year ago were 433. now they're two 293. so it just keeps chasing the estimates down. and we're

declining to 100 times current year earnings. >> that's why i don't buy that. it's about. >> that he's not focusing on. >> tesla or that he's in the oval office because. >> he's been focused on. >> that for a while. >> during the entire run up to i mean. >> the fundamentals. >> are changing. >> and the announcement yesterday about byd making this driver assistance. >> technology available. >> in all of its models. >> including models that are under $10,000 a car. >> that's the. >> competition. and that's the market share game in china. and potentially why the stock has been lower. i mean, they offer a car for $9,600, and now they're going to have all this self-driving technology in it that's hard to compete with. >> at the. >> big board. >> today. it's. >> cosmopolitan magazine celebrating its. >> new love issue. with macaulay culkin on the. >> cover at the nasdaq. >> jetblue airways. celebrating its 25th anniversary. we see. brett filling in. >> fairly read here, mike. a lot of discussion yesterday. about staples outperforming consumer.

discretionary and whether that ratio. >> continues to. >> change and. >> what that means for the consumer and markets. >> there's been a subtle defensive turn, although i would say that's mostly based on the market cap weighted consumer discretionary, which tesla has really been, you know, doing a job on. so if you look at an equal weighted, it's a little bit less worrisome. on the other hand, i do think the market is in this kind of frozen spot of not really being able to price in and even an acceleration in the economy, but also not seeing the idea that we have cracks. we're benefiting from a very strong starting point in terms of economic conditions and where rates are and things like that. i do find it interesting. you know, the reflex move higher in treasury yields to the hot cpi number, put the two year yield above the effective fed funds rate right back above the effective fed funds, which is like 4.33. that just essentially means, you know, we're wait and see for the indefinite future. on whether fed funds moves and can we can we digest that. i mean that's one of the been one

of the big questions. i don't know how much lower you think rates should be on four and a half, 460 on the long end when inflation is where it is, growth is where it is. you want to have a steep yield curve, not a flat one. and, you know, it can't really give you that much help. >> although that does. bring you. >> know, that raises. >> the discussion. >> of you look at how tariffs are getting priced. >> there is some inversion. >> they think it will be a shock. and then so does that lead you to a curve inversion over time. >> and would that be good. >> or bad. we're not far from it i guess. yeah. i mean look, sarah and i have talked about this. i don't think of tariffs as being like real rocket fuel for actual inflation, self-sustaining inflation. it's much more just like this frictional force out there. it's going to create a lot of switching around short term noise in the data. you know, that kind of stuff as opposed to it being somehow accelerant to it. >> but even if it's inflationary, it's the hard kind for the fed to fight because it's not demand led inflation, which i kept saying. but look, if you were hoping for rate cuts this year, those hopes are diminishing this morning. >> with this hotter. >> cpi number. across the board.

and you mentioned. consumer discretionary. you know, in. >> that report. >> the one place. >> that is not. >> seeing inflation is. >> apparel, which actually. >> saw a negative number month over month by more than 1%. so a real dip there. and that does not bode. well for the consumer discretionary sector that. sells clothing. right. if you're seeing disinflation there, it means that they're not you know, it's not as in demand. and that's not where people are spending as opposed to, say, airfares and hotels, which is continuing to see these monthly jumps in inflation and people are spending their. jeffries put out a note about how, you know, after a strong few years here for consumer discretionary, one of the best retail environments they say they have ever seen, it changes. now there's more uncertainty. we're going to see tougher comps, a less robust consumer combined with increasing inventories and peaking margins. trouble for the sector in 2025. they like defensive growth stocks here. what they see as better fundamentals and little downside. they like tko. they

like p and t for example on that. >> but just. >> potentially adjusting to this different kind of environment for retail. and i think today's cpi gives you a little bit of a glimpsentoow. >> tough i mean, core goods has not been where the inflation has been. and so that's obviously sort of yesterday's story to a fair degree. did what i was going to mention. supermicro it was such a story yesterday. it's a mover this morning. people have been waiting for this business update. you know, they have not yet filed their required filings. they say they're going to do that within a couple of weeks. i guess the guidance was sort of near consensus, a little bit muted, but it was enough to suggest that they continue to say they won't have to restate their financials. stock up 6%. remember what a moonshot this was for a few months when it caught the kind of nvidia gpu installation train. s&p 500 installed the stock as a component right near the highs. it just chased it up there. i noted yesterday it replaced whirlpool and it's radically underperformed whirlpool since

that time. >> a lot of this was the. reassurance that delisting. >> is not. >> in their future. right. >> they say they're on track to have their audited financials by february 25th, which would forestall any delisting move from the nasdaq. >> yeah. >> a lot of rate sensitive names obviously leading. the losers list. you see masco and lowe's. we talked. about the homebuilders a bit yesterday. >> but any. stocks that. >> were were. >> being bought on the promise of. >> lower rates getting a. >> setback today. >> and you know there's this camp out there that's very focused on the impaired housing sector as a drag on overall growth. if you look at how construction job openings that were really weak last year. so all this undertow of a stuck residential housing market getting exacerbated if there isn't a lasting uptick in rates. and again, whether that feeds into a little bit of a check on consumer and economic demand or general demand, and then we have a slowdown or a growth scare and what happens there? i mean,

construction. >> job openings are at. >> like a. >> seven year low. >> yes, yes. >> you got to go back to 2017. >> yeah. >> and so, you. >> know, we've been doing without that for a while. i mean obviously it's not been a real engine for, for a little bit. but you know, i mean sorry, i'm sure you look at like neel dutta's work where he's really on growth scare watch here. yes. he just thinks it's kind of waning momentum in the fundamental growth drivers of the economy. and the fed is maybe distracted by where inflation is and the prospect for tariffs. >> we just haven't seen it in the job market. that's right. and so the fed. hasn't hasn't reacted to it. >> but exactly. >> that will be tricky if we do start to see sort of unemployment rate move higher. layoffs pick up because fed chair powell has said that he will react to. >> that and they. >> could lower interest rates. but you. >> can't do. >> that if inflation is perking back up. so that's something. >> you can always you can always build your case using what you can in terms of the data. but yes. >> how about kraft heinz, which is a loser today. off results i guess profitability is the one thing that was better. but if

you look below in terms of the sales trends, it's not pretty. organic sales declined 3.1%, a 4.1% volume mix decline. they're just they're struggling. you know, all these consumer staples did well in the last few years coming out of covid because they had pricing power and people were eating more at home. and we're just giving that back. and if you don't have strong brands like a kraft heinz, then you see how ugly it can be right now. the guidance. >> was was. >> lower organic sales in the range of down -2.5% to flat pricing flat to. slightly positive. so again, it speaks to their kind of. >> the poster child for. >> the struggling consumer packaged goods company where you just don't have the volume recovery because either prices got too high or brands aren't in vogue. and that's what's happening here. on top of all the other added layers like glp one and rfk jr, potentially as hhs secretary, and what that might mean for food companies stocks getting punished. again, it's been an ugly looking long term chart as you can.

>> see the difference. i think really. >> if you compare, say, a kraft. >> and a proctor. proctor is. >> they never. >> say we're we're losing to trade downs. private label. >> is an issue. >> you do get. >> that. >> sense from khc. and that's. >> why a. >> big part of the bearish thesis is that they'll. >> have to invest. >> either in marketing or in revamping some actual product to. >> stem those. >> losses to private label. >> i mean, it's been a radical split between food and non-food consumer staples. that's i mean, packaged food has just, you know, accepting beverages has just been, you know, kind of the worst of the worst. kraft heinz, i mean, in terms of how this company is being valued as if it's kind of in permanent shrink mode right now, it's at like nine times earnings. >> isn't there? >> there's a berkshire element here too, right? they've owned it a chunk for a while. >> i mean there's been chatter. about what would an impairment look like if they. >> had to. go that way. >> yeah. >> remember when. >> they split from. >> mondelez and berkshire with kraft and that. and irene rosenfeld went to mondelez because everyone everyone was hopeful for kraft because that was the north. american business and the global business was more

uncertain. turns out snacks was a much better place to be in some of those brands. >> because it. >> has outperformed. >> i would also. >> just note coke is up again. >> today after a strong. >> quarter, and it shows you the divergence here between which brands are winning and more resilient and showing growth. and folks showed volume, growth, pricing and sales growth because of it. something in stark contrast to, say, what kellogg reported yesterday and what kraft heinz even worse reported today. >> yeah, i mean, berkshire still owns 27% of kraft heinz. and the thing about it is it's a small piece of the berkshire portfolio, because the company is obviously, you know, valuation has gone down so much. >> i mean. >> every sector. >> now is lower, which i guess isn't surprising when you see bond yields jump like we're seeing the dollar strong, like we're seeing i guess reaction to the cpi report, which does come. as a surprise. and yes, food prices were elevated in both grocery and away from home. and yes, eggs had an outsized impact. and everybody buys eggs and everybody feels that. but

but you did see it kind of across. >> the board. >> so i will be interested to see if fed chair jay powell addresses that today, why it's happening, whether it makes him think differently about interest rate cuts and the trajectory, whether there's a seasonality impact in january, it's hard to know all of these things, but it is new information that would be great to get him to respond. >> to it is. >> i don't really trust. >> any of the members of congress to do that after yesterday's questions. we're just totally off base and irrelevant. >> i have a. >> feeling it's going to be a lot of questions about, you know, from one side or the other on the shouldn't the government spend more or less on this or that and get his endorsement, which he's not going to give on any of those questions? but i share that hope. i'm also interested to see just if the market preserves this ability to kind of just get through these rough patches with rotation and not really let it fall out of the range. so far we're doing that. you know, you're still above, you know, kind of last week's low i would say in the you know which came on monday of last week in the s&p 500 market trying to sort of keep it. the

cpi move in perspective because yields are also still below their highs even though they've had this big pop right. >> lift is. >> a. >> big story. >> especially now that we've gotten the uber print last week. it was an ebitda beat a little buyback. >> of 500 million. >> but the bookings guidance for q1. was a miss. and that's going to be a 9% drop. it's going to take you back to. >> say. >> october, mid-october of last year. >> but that continues. >> ridesharing continues to be a mix of the future and. >> an autonomous. >> versus the current. >> real day demand for, say. >> travel and mobility. >> yeah, it's really hard to know, you know, what the real path is for lyft in particular, it's like 1/30 the market cap of uber at this point. it's kind of just a stub in the business because it is so purely focused on that one part. >> and they don't have the food delivery, which is doing well. i mean, did you see doordash last night? i mean, uber eats had. >> a good quarter. >> also. >> doordash had. >> a really good. >> quarter as well. >> as we go to. >> break deep banking was one of the big issues brought.

>> up. >> during yesterday's. >> capitol hill appearance by the fed chair. and who better to hear from then b. >> of a. >> chief, brian moynihan. the various topics. on tap, including. >> the president's. >> message to the banking community about. >> debanking last. month in davos. first. >> though, watch treasuries. >> of course, as. we're on day two of powell. >> we'll. >> get bostic at 12. waller will be. >> interesting at 5. >> p.m. and then. >> of course. >> a ten year note auction at one. stay with us. >> the bond report is brought to >> the bond report is brought to you by pimco, a ♪ (vo) weight loss. for so long, i felt stuck. i tried, and tried again. lost weight, gained it back. but zepbound means change. zepbound is for adults with obesity, to help lose weight and keep it off. activating 2 naturally occurring hormone receptors in my body, zepbound works differently. it's changing what i believe is possible

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equity. learn more today. >> at think equity. com. >> experience the power of cnbc pro. track your portfolio from every angle on one optimized platform. become a smarter investor with the power of cnbc pro. go to cnbc.com slash get pro now. >> welcome back. >> bank of america hosting its financial services conference in miami. >> this morning. >> our leslie picker is there with a special guest. good morning leslie. hey, sarah. good morning. i am here with brian moynihan, the chairman and ceo of bank of america. brian, thank you very much for being here from your financial services conference. rates in focus this morning. chair powell is on the hill. we got the cpi number this morning. how does that change your assessment of where rates go from here and what that means for everything from loan demand to investment banking activity. >> so let's let's. >> talk about a couple of

different things. one is our research team. candace browning is very strong. research team was the reason why we're here. >> they had. >> taken all. rate cuts. >> off the. >> table in their research. >> the market. >> had. >> one still left in. they had zero. >> and it. >> was. >> because they thought that the dynamics of the. >> inflationary effect and the potential. >> inflationary effect. >> would cause the fed. >> to hold back. >> and those rates. are restrictive. >> but there. >> was not. >> enough sort of inflation. progress can be made, and inflation was going to stay in the high twos through 25 and 26. and ultimately they would start cutting rates. then and bring it to. >> maybe. >> three and a. >> half four. so that. >> was. >> their basic. >> the other. >> thing is, if you look at. >> the consumer activity as you came through the fall summer, in the fall, it had slowed down. it kicked back up. >> once the fed. >> started cutting rates. and now for the first 40 days. >> of the year. >> our consumers are sending about 6% more money into the economy than they did. >> last. >> year for the first 40 days. >> and so if you think about that, that's a little faster than it was. >> for the. >> fourth quarter, sort of four and a half. >> five, six, which the money is moving, which means the

enthusiasm for everything going on in the. >> stock market being. >> up and people taking trips and stuff that's going out in the economy. and so i think that's helped drive, you know. >> that's. >> driving price firmness, demand firmness. >> you know, that's a lot of money. >> it's a $4 trillion a year goes through our customer accounts. so you're seeing that activity that says. that we're probably in a period where rates are going to stay kind of where they are for a while until this settles in. >> because one of the big reasons why everyone's been so excited about bank stocks. and we're here, of course, at the financial services conference, as your analyst put it, rates was a key component. rates, regulation and resumption of client activity. does this kind of pour cold water on the whole bank's thesis and the upside on bank stocks. >> yeah. >> remember the projections. >> we gave. >> at our earnings. >> call. when a few weeks ago. >> was to be up 6 to 7% in net interest income, 25 versus 24 that had one rate. >> cut in. >> it, because. >> that's what the market was. >> so the idea of one less rate. >> cut will actually. >> when you have a bunch of zero interest accounts, they make a little bit more money. the question is what's the constraint on activity? and if you look across the activity

level, the consumer. >> spending. >> we had good loan demand. >> when rates. >> were where. >> they were in the fourth quarter. >> year over year. >> loans were 3% up. commercial loans. zachry business. >> which, you know, commercial real estate. >> which has been going down was up 6 or 7% year. >> over year. >> consumer is up 1%. >> but you saw areas were stronger. so we saw good loan growth and you know that that's good. and so the amount of activity. >> the profit. >> margins are strong. it can withstand this higher rate. >> it has. >> the question is how long can it withstand it. and that's going to be down to some of the policies and tariffs and all that stuff and how people assess them. the real impact of rates. >> though. >> is in small, medium sized. >> borrowers because. >> they borrow on lines of credit. and so their basis was 50 basis points. >> so for back. >> then now. >> you know. >> 4%. that's 350 basis points more. they're paying for a line usage. and so their line usage is still muted. and so until those rates come down there'll be less enthusiasm there. the mortgage market is obviously slow. you know car buying will bounce around because. >> the. >> rate structure passes through there. so the impact on the economy is much more complex by

types of customers. but everything we see and for banks was the activity consistent with the fed funds rate where it. is going on. and so that will happen on the market side. spreads are tight. >> you know the capital. >> markets are open. the ipo market really is a question. >> and will. >> people feel confident enough to drive through? ipos are a lot more than the general market last year year to date they're up a lot more. but the question is that's driven by a narrow set of ipos versus a broad base. and we expect that to come. the pipelines are full and i think that's a stability question. it's not going to be sensitive to 25 basis points or not on fed funds rate. it's really not. >> and that. >> speaks to. >> your earlier point. >> about just. >> corporate confidence. and a few weeks ago in davos, you asked president trump what his executive orders meant for growth. he said they would be great for growth. i'm curious if you're hearing the same thing from clients, because there's been a lot of reporting. when i talked to sources as well, that a lot of the uncertainty has kind of created a chilling effect in that a lot of c-suite executives want to pause and see

how everything filters out before engaging in big transactions. >> i'd say especially for multinational companies, because for every reaction is equal and opposite reaction. and they're trying to figure that out because. >> you know, if. >> you're bringing materials. >> in and they come with. tariffs and how. >> do you pass that through. so that's going to cause now. we're 39 days in here or whatever the math is for the new administration. so they're putting a lot of things out. they're trying to hit the ground running. so i think it'll just take a little while. but in the grand scheme of, you know, four years in the grand scheme of these companies, it's a little uncertainty until they see the settlement, it is causing people to say, wait. a second, how will this affect me, especially people who deal across. >> borders and stuff like that. >> for the local us economy, the deregulation is high. hope interest rates being higher, there's been a countervail. the ability to get employees is now surfaced by our customer data. that question is probably nothing really happening, but their fear that they may. >> lose employees. >> to immigration policy or employee capacity, immigration policy, and not be able to make it up by efficiencies fast

enough so businesses. >> are paid. >> to worry about. >> the future. that's what. >> we, the ceos of all size businesses. it's there, you know, even the entrepreneurs. it's their money. they're worried about it. so they'll worry about this. but i think as you see the things move from the thoughts of policy to actual policy, that stability. >> would be very helpful. >> and i think lessons learned is you make. >> a. >> lot of change fast. people stand back. it's okay as long as you follow through and get stability and we'll see what happens. >> and speaking of davos, you participated in a roundtable. you were able to ask that question of president trump. and then at the end of his answer he told you that i hope, quote, i hope you start opening your bank to conservatives, adding, quote, what you're doing is wrong. what was going through your mind at that moment? >> well, what was going through my mind is we banked 70 million american consumers to our bank is open to everybody. and so the question he was really after is overregulation and surround this question of bsa, aml. and, you know, the end of the day we have rules that haven't been changed in 50 plus years. so the currency transaction report

level in the united states is $10,000. when it was put in, somebody said to congress the other day you could buy a fully loaded cadillac for $10,000. i think now you can't buy a new car of. >> any sort. >> for $10,000. so we have an index these things. so it's causing a lot of activity and the overregulation of that in the, in the mildly polar industries in by compliance with that, you know, the regulators will come in. there's no upside. so what happened is if you go back to caribbean countries, which have been a talk of years of banking caribbean countries, it was because we had to know their customers, customer. if it came back to other activities, we're responsible not only for our customer, but for what goes on in their business, which is different than most industries. so this idea of getting this regulation straight, we're fully in favor of and we're trying to help do that. and so the question was he was talking about banking and regulation. and if you heard the rest of the response, it was, you know, look, the last administration we agree with, we have to get this back in balance. >> have you spoken. >> with him since then because he didn't respond in the moment. i'm curious if you've spoken

with the president since davos. >> i have not i have not spoken to him. i've spoken to parts of administration. we continue in congress to continue to provide input for the industry. this is an industry wide problem that we've got to fix. >> all right. well, brian moynihan, really appreciate your time today. thank you very much for joining us from your financial services conference. >> thank you for being here. and hopefully the team's treating you well. >> appreciate it. i'll send it back to you guys. >> lesley. thanks. great stuff. leslie picker joining us from that financial services conference. meantime market getting nibbled at a little bit. we're off of the opening lows. dow's down 345. still holding six k at 6033. and the vix really not moving around a lot. pretty much. unchanged from pretty much. unchanged from prior day levels just above 16. top line? this is a quality, comprehensive exam. come again? you asked me to topline it for you. okay. bottom line? well, the bottom line is this is an amazing value. what? get two pairs of progressives and an eye exam starting at just $159.95 at america's best. i had the worst dream last night. you were in a car crash and the kids and i were on our own. that's

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good wednesday morning again. welcome to another hour of squawk on the street. i'm sara eisen with carl quintanilla and mike santoli. today we are live from post nine of the new york stock exchange. day two of fed chair powell semiannual monetary. policy report. he's going to be testifying today before. >> the house financial. >> services committee. we'll take you to the q and a when it begins, will he address today's cpi inflation report? that is the question. the market is certainly reacting to it. big disappointment. and you can see that. >> in the stock. >> declines down 6/10 on the s&p. we have. >> come back a little bit. >> from the lows. but you've got every sector lower right now. and some are getting punished more than others, especially the rate sensitive. >> ones like. >> real estate utilities materials industrials. also under a lot of pressure. >> tech is holding up. >> a little bit better. the nasdaq is down half a percent amazon microsoft nvidia micron weighing on tech sector. but you do have gains today in tesla palantir intel doordash off better earnings. >> helping offset that. >> treasurys big move. >> lower in bonds pushing. >> yields higher. >> we're looking at 4.65 on the

ten year yield on the two year 4.36% as those hopes fade of a fed rate cut as soon as this fall. it's now getting pushed out to december in terms of. pricing with this hotter inflationary number. and guys that's where. >> we're. >> going to start the conversation today. >> we're back to. >> 3% inflation. that's not what the fed wants to see. it's not what investors want to see. we were making a lot of progress. does it throw off completely off the trend line. not necessarily. as mike noted earlier there is some seasonality to pay attention to. we usually get hotter numbers toward the beginning of the year. and this is the january report. we've seen this in the last 3 or 4 years. but if you go beneath the surface, you know, core cpi comes in firmer super core, which is services taking out housing comes in a lot firmer, food is higher. we know people feel that. >> yes. >> egg prices jumped 15% on this. you know crazy supply demand issue. >> with. >> the avian flu. but it. was kind of. >> across the board. >> and that raises questions, mike, about the market's

assumption that the fed is in cutting rates mode. also with the outlook that we could potentially get more tariffs and a pro-growth agenda. and both of those could be a little bit inflationary. >> that's the way the markets are definitely treating it. although i will say the markets attempting to take a little more of a measured response here. you mentioned that buying the dip in the in the indexes, you know, the ten year back to 465. it's basically a three week high. we were here in late january. the two year note yield i mentioned back to 436. it sort of freezes expectations for where fed rates are going to be for a while down the road. shelter is just not cooperating. by the way, a lot of prognosticators thought that it would. right. and you know, people thought it lags. it lags. so it's not giving its full benefit of disinflation. so you know, it's not. also, we have to keep in mind that the fed's targets based on pce inflation not cpi. so pce is not running fully at three headline at this point okay. >> so here's where the inflation was this month.

>> what contributed. >> the most in terms of monthly jumps. oil prices. we know they've. >> been firmer. >> used cars. >> and trucks a 2.2% jump in that in prices there. >> transportation services. >> i'll just. >> throw in some other ones where we saw medical was up. >> airfares gained one point. >> two hotels. >> almost 2% monthly jump where the inflation. >> is not. though apparel. >> was down 1.4%. that was mostly women's apparel. actually medical. care services, new vehicles and electricity. >> all flat. and then for. those saying that it was. >> you know, all food. was was the egg prices, there were some. >> sort of hotter pockets. >> inside the inflationary. >> report about. >> on on food prices. i mean, it's not universal like it was in 2022, but there are spots like chewing gum and candy and meat, whole chickens. i mean, they really break it. >> down. which is great. >> cocoa prices are driving chocolate, you know, way up. >> cocoa prices, coffee prices. i mean, we've had some some interesting stories. >> here on the supply. >> side, keeping food costs

high. >> how do you think? >> i mean. at least the doves of late, like waller respond to this kind of number. he'll speak tonight. >> maybe that it's. >> their seasonality. one month is not a trend make. >> we're still a. >> long way. >> from the. >> i don't know, eight 9% of inflation. where we were post covid. >> but can you keep can you keep a forecast for cuts this year? >> i don't know if you can keep his. >> first half cuts. >> remember he was on with. >> us a few weeks. >> ago saying. >> i'm still thinking first half. not sure you can keep that with these inflationary numbers. but then again you also have to look at pce as mike said, which is the fed's preferred. we'll get ppi tomorrow. the wholesale inflation number that feeds more into pce. so that will. >> be. >> a. >> good tell. >> but the other way you could do it is. essentially say there's probably some weather and wildfire. you want to see this spread out over more months. but you know you can't do that perpetually. >> the other thing is, you know, we haven't really seen a deterioration in the overall economic data. we're seeing. confidence. high economy is better. all of that bodes. well for demand, right?

>> i mean. >> it does. but you know, we were in we were in immaculate disinflation mode, you know, a few months ago where you just didn't think you needed any softening up of labor conditions further or for demand to really wane. >> but i know, i just wonder how much. >> of that was. supply supply side. >> no, no inflation. >> coming down. >> there's also this tariff issue. >> president trump's trade. >> advisers reportedly finalizing. >> plans today. for reciprocal. >> tariffs that. >> trump said he would impose on any country that charges duties. >> on u.s. imports. >> let's get the latest from peter. >> navarro. >> white house senior counselor. >> for trade. >> and manufacturing. >> joins. >> us live from washington. >> peter, it's great to see you. welcome. >> great to be back. >> i'm just wondering. >> is cramer. >> going to spend like a week in the big easy celebrating the eagles i mean. >> what the deal probably. >> come on. >> yeah he gets. >> a vacation. he can get one vacation but. >> he is probably. >> in celebration. it's also his birthday week peter what can you tell us. >> about what. can you tell us about. >> the reciprocal tariffs? >> where are. >> you. >> on that? >> i can. >> tell you why. the president

might act. i can't tell you when. that's not my. my job to break. >> that. >> kind of news here. but the reciprocal issue really goes back to the first term. the president had the reciprocal trade act up in front of congress. he's been talking about how governments and nations around the world, like, stick it to this country. >> the central. >> idea here is that you have the us with the lowest tariffs in the world, and. >> importantly. >> the lowest non-tariff barriers. what the president likes to call nonmonetary barriers. >> and that's. >> not fair. and the notion here is that if in the first term was that if they won't lower their tariffs to ours and their and non-tariff barriers, we're. >> going to. >> raise ours to theirs or vice versa. it's the most common sense thing in the world. and if you just go around the world, you have india, india, i, the

maharaja of terrorists. they have some of the highest tariffs in the world. the eu particularly has a vat tax, a value added tax. and it's not well understood that that acts. it's like a two punch when. >> when they're. >> sending us stuff, it's it acts as an export subsidy when we're sending them our stuff, it acts as a tariff. and the net result is we don't sell any. cars there. and then, of course, you got the problems with. >> all the. >> other countries around the world. so reciprocity, president trump has embraced that. going back to the first term is his his his philosophy. >> i get i. >> get the issue. >> of. >> fairness, especially on on places that haven't been. >> fair to us. >> on trade. peter, the. >> question is. >> though, if it if. >> it's going to have. >> a damaging effect on business, business confidence, business spending, business planning. >> because you know that that. >> they've been doing business this way for a long time. and

now there's great uncertainty about. higher costs, potentially, of imports that they would have to pay, changing their cost. structure and also potential. more reciprocal or retaliatory tariffs. once we do this. >> i think you have to step back and look at the broader structural readjustment we're having with the whole global environment here, the birth of the external revenue service is going to take us back to a future that looked a lot like. mckinley and jefferson and hamilton, where this country prior to 1913 relied almost exclusively on tariff revenues. and we. prospered and our nation was secure. and what the president, president donald john trump wants to do is get to that kind of world. and it's going to be a great world. if you look just micro at what happened this week in the steel and aluminum tariffs, we've seen billions of

dollars added to the market. cap of companies collectively. nucor cleveland-cliffs us steel century aluminum. and we expect not only those. companies to. prosper as they did back in the first term, but we're also going to see a lot of investment come both domestically and from abroad, to come inside the perimeter of the united states to be able to produce. so this is a it's. >> a the. steel companies may have. >> rallied peter. >> but the. >> auto companies. are warning about it and they are not rallying. and this could be a huge headache and a huge expense for them, not to mention other companies. i mean, just we were talking to coke yesterday. aluminum costs are going to go up. cans are going to go up. i mean, there. >> are there are others affected by this. >> sir, here's the beauty of this. if i were sitting here, as i did back in 2018, you would say the same things based on the

things that those industries were saying. the problem they have and now i can share with you is. >> none of that happened. we didn't. >> have inflation. we didn't have any problem. everybody prospered in the trump economy. and so crying the inflation wolf this. time around. and i can walk you through the reasons why we don't observe inflation when we have tariffs, despite seeing the seeming logic of it. and the first thing that happens when we put a tariff. on is that these export dependent economies, the producers, lower their prices significantly. so they're not they. >> don't lose. >> market share. the next thing that happens is the currency adjustment. both the governments do manipulation. and it just because we have a lower trade deficit. supply chains adjust. and then as we get more investment in the industries we get higher productivity. real

wages go up. >> and i remind. >> you here that one of the proudest things i think, that we have for the first term was real wages. real inflation adjusted wages went up significantly in the trump term and down significantly in the biden term. so this whole inflation thing, i mean, cpi comes out today. i mean this dog bites, man. it's joe biden bites the american people. it's a combination of a mismanagement of our supply chains by biden and dramatic, dramatic overspending. i mean, it's like rick santelli's worst nightmare to watch joe biden for four years, add. >> trillions and trillions. >> and. trillions to the deficit. and look. >> help's on the way. >> we're going to have drill, baby, drill that's going to take care of a lot of what happened today in the cpi with things like fuel oil. >> costs. >> we're going to have deregulation plus the plus being the doge effort. and that's a

positive supply shock. so that's going to come on down. we're going to have a lot of investment here. tax cuts which are going to be paid. >> for in. >> large part. >> by the tariff revenues. and folks, this is the time to be bullish in the trump economy. i know the day traders are. >> having. >> a little fun today, but the future looks bright. what did they say? i need shades, right? peter, how do all these things fit together if the tariffs are not inflationary because they're absorbed by the exporters in the currency, and it kind of comes out in the wash, that doesn't create an incentive for domestic production because there's no price signal effect. there's no opportunity for market share on the. and then on the other hand, if you're relying on a across the board tariff on last year, $3.3 trillion in goods imports, i mean, to even become a material bit of revenue for the federal government, you're going to have to keep that level of imports up and put tariffs across the board, and there's going to be no demand impact on it. i mean, not everything can

actually come out favorably from from imposing tariffs on the revenue side, on the inflation side and on the domestic production side. yeah. mike, you know, i've always loved the way you think. going back to the columns you used to write and everything. it's like the macro way of everything fits together. and so let's let's like talk about how some of these adjustments are going to take place. i mean, again, history is on my side on this. during the first term, our objective was to get the capacity utilization rates and the steel and aluminum industry up to 80%, which is above that threshold. that's where you have profitability and investment. write down now. and we got there. but then biden came along, gave up all his country exemptions, product exclusions, didn't let the customs and border protection like look at things. and they slid back to near 70% in steel.

and it's astonishing mike. it's 52% in aluminum. and meanwhile australia is at 90% capacity utilization dumping stuff in what this policy does, mike, is. protect these industries from dumping the bigger problem in steel and aluminum. massive, massive global overcapacity propagated by massive. government subsidies and predictable dumping. and so what the steel and aluminum tariffs do, it's not just that we have the tariffs at 25%, raising aluminum from 10 to 25. it's that we eliminate all country exemptions and eliminate all product exclusions. and importantly this wasn't noticed very much. we expand significantly the amount of downstream products that are covered because as you know, what countries do when you put tariffs on slab is then they turn. >> some slab into.

>> something else and they send it. >> over. >> here and they're non tariffs. but i'll tell you i mean brazil's dumping slab at the low end. japan's dumping high value added stuff at the high end. >> china's going. >> to mexico. micro here on these couple of import categories i get it. you know we kind of worked it most of the terrorists. but we're not talking about across the board. you know first of all trying to counter european value added taxes which kind of aren't really a tariff with tariffs of our own. it just feels as if you can understand why businesses are like it seems like the rules are moving around, and we're not really sure how this actually plays to our benefit. i mean, are we going to be making t shirts and towels in north carolina again? what's the ultimate goal here in terms of reworking our own economy? well, okay, the ultimate goal is rising real wages for blue collar americans, a thriving middle class. we have a strong

defense industrial base and manufacturing base for our economic security and our. national security. and when we are in times of crisis, mike, we aren't dangerously vulnerable to foreign nations for medicines or metals or anything in between. and the trillion dollar trade deficit. this said every year is warren buffett, of all folks, has pointed out correctly, that's a transfer of assets to foreigners of $1 trillion every year that turns into purchases of land and things like that. we've got to stop draining that problem. and so the end state is a much more robust and secure american economy. and i think a better world because this these

imbalances aren't good for anybody. >> peter, on the better world thing. i mean, mitch mcconnell has an op ed out today sort of warning about the isolationism and how we have to protect american interests and tighten our friendships and be a reliable, reliable partner. do you think about the broader implications here of the geopolitical sphere at a time where we need our allies imposing tariffs, surprise tariffs, getting them all upset about this, having them too? it makes us an unreliable partner. do you worry about that? >> not at all. not when i hear it from mitch mcconnell. i mean, come on, come on, come on. mitch mcconnell, paul ryan, the wall street journal. these are the folks for the last 30 years that have encouraged our jobs to move offshore and our open borders to welcome illegal immigrant labor, to drive down wages for the

benefit of a small portion of america. and all that has done following the pied piper of the mitch mcconnell's of this world is decimate our economy and export our factories and jobs. >> but their security. >> it's time for mitch. it's time for mitch. >> i think he channels something other investors. >> into this. good night. because. because he, of all people, has been responsible for a lot of delays in, in, up on the hill in terms of getting good policies done. so i'm not like mitch. mitch doesn't have a lot of credibility. he should look at some of the metals industries and energy industries in the state of kentucky that are going to boom from president donald, john trump. >> peter navarro, thank you very much for coming on to talk through the motivation here. good to talk to you from the white house. >> meantime, we're keeping an eye on powell's testimony in a moment before house financial services and waiting for the q&a to begin. joining us this morning, former kansas city fed

president tom hoenig is with us. tom, one big question is whether or not we think the fed chair is going to address some of the seasonality issues that we tend to see in the first half, and particularly in january. what do you think? >> well, i think he's going to i mean, the cpi numbers came out this morning pretty strong. the cpi is up 3% overall and core is 3.3. this is in the wrong direction. he's been arguing for some time that inflation is going to come down gradually. the monetary policies modestly restrictive at least. and therefore this today's report is going to, i think, give him a lot of questions about what he's going to do. speculation on, well, are they not going to lower rates this year. are they going to actually raise them. so that will be a big part of the discussion i think in the q and a that follows his testimony. >> right. how do you think the committee is going to be viewing tariffs? we've had a few discussions with some members. goolsbee is a good example where they're going to have to find a

way to determine what they filter through. and judge in, in trying to decide what is demand driven right now. >> well, they're going to have a hard time because they have, as i've already said, monetary policy is, in my view, modestly eased. so you're going to have that inflationary pressure. tariffs certainly will have a one time, at least a one time effect on prices. and how they react to that will determine whether that continues on. so if they see that as a cause of inflation and they raise rates, so that will slow it down. but if they say no, we're going to continue to stay on our path to maybe lower rates that could actually continue inflation higher. so they're going to have to sort that data out. and i my own view is that powell will keep his card very close to his chest. part of the reason being he doesn't know the answer to those questions yet. but and he will say more than once, we're going to be data dependent and

we're going to follow this carefully. but he's not going to play any hands right now. >> did they make a mistake cutting too much last year? i mean, they went out of the gate with the 50, which was kind of a head scratcher and then did two more 25. that felt sort of even hard to justify at the time when the economy was doing so well, even though there was a lot of progress on inflation, it wasn't clear that it was going down to 2%. >> well, i think there was a little i think they were too aggressive. i cannot i mean, where they were, they lowered it 100 basis points. they probably could have lowered it 50 basis points and still been restricted. but by lowering it 100 basis point the first time, as you said, 50 basis points they've actually bring they brought actually brought real interest rates down below 2%. so their their policy rate is four and a quarter. inflation is now 3%. so they are you know did i say i said five and a quarter. anyway they're real rates are now below 2%. and that's

modestly easy. and so they're going to have to they're going to have to justify that or they're going to see inflation continue to rise. and then they will be in a hard place. if they have to raise rates, it will really, really shake up the markets. there's no question about that. and i don't see them doing that anywhere in the first half of this year. and it will depend on where the inflation numbers come out in the next 2 to 3 months. >> the fed chair i think. >> the answer to your question. >> why they didn't do too much. yeah. >> fed chair is wrapping up his prepared remarks. we're going to take q&a in just a moment. tom. he did say yesterday that he would not answer any questions about what the president has said about rates or the fed. i assume he'll get asked again. the president did post this morning saying interest rates should be lowered immediately. how do you characterize the fed's reaction function when it comes to outside pressure, especially from the oval? >> well, he's got like i said, he's going to keep his cards close to the vest. he's not

going to say anything. but he said yesterday he's going to repeat today because he he can't commit to any further rate cuts right now with inflation going the wrong way. and i think even the committee knows that. and so they're going to be fairly quiet until they see the data can now come out more through the first half of this year. and there's so much uncertainty. you know what is going to happen to tariffs. what are they going to do with. is he going to stay with them or not. what is going to happen to labor costs. these are things that that no one can answer at the moment. and therefore he shouldn't try. and i think what they need to do is be more cautious in the sense of their forward guidance. they should when they have a meeting, they should announce their action and stop their. this forward guidance only makes matters, i think, more confusing. >> yes, that does. >> bring and get rid of the dots, right tom? i think the dots are confusing. >> i'm not in favor of the dot plots at all. they're all over the board and they they're everyone's. guess they're not really a good indication of what's going to happen in the future. it's a dart board.

>> that is an age old debate. tom, appreciate you helping us raise the curtain on today's hearing. talk soon. thanks. >> yeah. thank you, mike, for having me on. take care. >> you too. let's get to bob pisani now. more on what's moving ahead of that q and a all sectors lower. we're down on the overall indexes bob on that disappointing cpi report. what are you watching. >> well look here you can see obviously defensive sectors doing a little better. so health care consumer staples holding up better energy. >> interest rate sensitive stuff. no surprise down. so real estate is down. banks are down. techs weak but not that weak. if you look at what's going on here this is really quite remarkable. we're right near the highs for the day. we're making a comeback. there's a little bit of a fight here going on between the bulls and the bears. because this is a very difficult moment. we have two problems. we now we have tariff uncertainty and now we have fed policy uncertainty here. and yet you look at the stock market here today, we are 1.8% off of an historic high. that's virtually a rounding

error at this point. so the market seems to be trying to price out fed rate cuts this year. and they seem to not want to believe that there's going to be really serious tariffs, because we're still looking at 14% earnings growth for 2025. if you believe there's going to be tariffs of these kinds of magnitudes that's not going to be 14%. that number is going to be maybe the high single digits. so the market's obviously believing some kind of deal with tariffs is going to be made. they may be wrong on that. so today the game here is watch powell. if powell leans dovish that's going to bring the markets. you may even go positive on that i'm not i'm not sure. but that's going to be the game to see whether powell leans in that way. and if he does i think the market's going to recover even more here. so it's kind of a jump ball. on how we end the day. on the earnings front. these numbers we've been getting are just fantastic. and by and large we're not seeing a serious drop in 2025 estimates the 20 the final 2024 numbers are way above expectations. the

beats are above expectations that we're beating by 7 or 8%. that's way above the historic norm. but the numbers on 2025 are not dropping dramatically right now. even though we have been hearing about tariff uncertainty, nobody's been putting a number on it. nobody's been coming out and saying our numbers are going to be clearly lower. the companies doing that are very, very small right now. so i, i put the main risk right now on the tariff uncertainty and we'll keep an eye on that. but let's watch powell and see what happens here. >> yeah i guess bob we should definitely see if he does address it with any directness. but i wonder if the if the market is really dying for an ultra dovish message or just if wait and see is good enough. right now there's only one cut priced for the rest of eternity at this point, but i guess we have to get into the q&a right now. >> the past two and a half years, the outgoing vice chair for supervision has pushed new regulations that would move the united states towards a one size fits all approach to prudential

regulation that disregards the congressional mandate that's been quite clearly established for regulators to tailor bank regulation based on an institution's size, complexity and risk profile. earlier this year, the fed board announced that michael barr would be stepping down from his position as vice chair on february 28th, 2025 or earlier. should a successor be confirmed. significantly, the board also announced at that time that it does not intend to take up any major rulemakings until a vice chair for supervision successor is confirmed. i've discussed this with you. i've got concerns about that. you're not abdicating your supervisory response while we wait around for a vice chair for supervision. do you agree that it's the board of governors that has the responsibility for bank supervision policy? i do, and. >> i would also agree that we need to carry on with our regulatory and supervisory duties. we can't take a holiday and we will proceed with the

things that we should be proceeding with. >> you testified in the senate yesterday, and i know you enjoyed time with the senators, and you talked a little bit about basel three endgame. and again, in my opening statement, i talked about that the intent was to harmonize those rules. true for the largest institutions in the world, but also do that in a way that's capital neutral. and many of us here in congress, on both sides of the aisle, felt like vice chairman barr's approach was gold plating already high standards for american banks? you testified yesterday that you think bank capital levels are about right for those large institutions. would you tell the committee today that it's your intent to re propose a basel three endgame approach? just speaking on behalf of the fed, only not the other supervisors, and that it be taken into account the comments and that it be generally capital neutral. >> we do intend to repropose basel three endgame and we intend to do that just as soon

as we can get together with the new leadership at the two other banking agencies. and as i mentioned, i think we can do that pretty promptly once that once those people are in place, i look forward to doing that. my long held view, as i've said in many of these hearings, is that capital in the banking system for the largest banks is at about. right. and that would be my starting point on going into these discussions. but i do want to defer. i do want to, you know, leave it for my upcoming, you know, new leadership at those agencies to have their own views on that. >> i think that's important. i think it needs to be coordinated and harmonized among our supervisory agencies. and i do want you to take into account how basel three endgame proposal interacts with other pending rules, whether they're on liquidity or the other things like operating risk in the companies. i think there was a lot of centrality of the comments that we saw on your barr proposal. turning to monetary policy, looking back at 2020 and 2021, i was looking at

all the principal monetary policy rules that you report in your semiannual report. and had you followed any of the monetary policy rules that you track, they would have had you tighten sooner in the cycle rather than waiting. and i think that could have reflected maybe not seen as have a 40 year high in inflation. using the benefit of hindsight, do you think you should have looked at those rules more closely in the open market operations and tightened sooner? >> i will say, and i've said before, that hindsight suggests, that it would have been good if we had tightened earlier. i don't know how much difference that would have made, but i'd be very careful with those rules, those rules, those rules in the middle of last year suggested that our policy rate was a couple of hundred basis points too high, you know, so we need to there a starting point, not an ending point. right.

>> but we've had this conversation before. the point is that they do offer a roadmap. and you do mention them in writing in your monetary policy reports, except for one time during the pandemic. and i think, though, that you're adding that to your reference point in your guide forward guidance and in your communications, i think would be important. can you tell us about the review of the inflation targeting and when you expect to complete that. >> expect to complete it by the late in the summer this year. we're just beginning it now. and, you know, we're going to look at all the decisions that we made, why we made them back in 2020. we're going to ask ourselves what's changed. we're going to be open to criticism and good ways of thinking about it. and we'll make i think we'll make appropriate, discreet adjustments. >> i thank you for being with us today. and i turn to the ranking member of the full committee, mrs. waters, for five minutes for your questions. >> thank you very much, mr. chairman. it is no secret that president trump what he wants to

do, that he wants to do away with the federal reserve altogether. he said he knows interest rates much better than you do. i want you to know that some of us here have been fighting to make sure that everybody understands the importance of the central bank. every country dealing with crypto, the central bank is involved. but of course, trump and the opposite side of the aisle fought us. and that's one of the reasons we were not able to come together with a bipartisan agreement on stablecoins. you previously said that you would not resign if trump asked you to do that. do you stand by that commitment? >> i have no no changes to that. >> i can't hear you. >> yes. >> thank you. please let the record record that adequately. i appreciate that because you have a right to your position not to

be interfered with by law, i believe, or even constitution. when musk comes knocking at the fed's door. are you going to let him in? >> i don't have anything for you on that. >> would you like to tell us today that you won't let doge into the federal reserve, or have access to the systems and the data? >> so we don't i don't have any. we've had no no contact and i don't really have i have nothing for you to report today on that. >> well, you know what happened to treasury and you know what happened over at the cfpb. and the people of this country are being violated because all of our privacy is being taken up by elon musk and trump. and we don't know what all they have on us, our bank accounts, everything in our lives. so i want to protect it in the fed. mr. powell, the last time you testified before this committee, you said, and i quote, really successful institutions in the

united states generally are those that do a really good job on diversity and get the best out of people and attract a broad, diverse range of talents to the table. that is why we that is the way we feel about it and at the fed. what? and that is what we've been doing and will continue to do. chair powell, how will you ensure that the fed continues to attract the best and most diverse employees? >> you know, we're institutions like ours, private and public are in a constant contest to hire the best talent in the country. and we've all learned, i think, and certainly we have, that we will go anywhere to find that talent and including places that we didn't go 25 years ago. and we'll just continue to do that. you know, we're recruiting, as you know, at many, many, many universities and colleges, including historically black universities and colleges and others. and that's that's what we find. and, and that's that's our practice.

we think that's the best way to go about it. >> thank you very much. and that's what i've always felt about the fed, no matter what they call it. you only attracted and hired the best qualified people in your operation, no matter what. they refer to it as what they call it, whatever way they define it. is that right? >> yes. >> thank you very much, chair powell, are you willing to provide my staff with an immediate briefing from your agency on the status of your armies and equal employment offices? >> yes. >> thank you. i believe that you know, that the armies were created with the dodd-frank reforms. it's in law. and as i understand it, any attempt to dismantle armies would have to come before the congress of the united states of america. is that your understanding? >> well, yes. section 342 of dodd-frank, which is the army

section, is the law. >> thank you. chair powell, to what extent have you consulted with other board members in determining how your agency is complying with section 342 of dodd-frank and as well as any other federal anti-discrimination law? >> i think we've consulted with senior staff and board members quite a bit. >> chair powell, days after his inauguration, president trump issued an executive order on digital assets, which includes a prohibition on central bank digital currencies, or cbdcs. the executive order banned any form of digital money or monetary value denominated in denominated in the national unit of account, that is, a direct liability of central bank. end quote. i'm concerned that this extremely broad definition could go far beyond cbdcs. well, thank

you very much. my time is up. but i appreciate your presence here today, and i appreciate your willingness to stand up for your rights. gentleman's time. >> has expired, but. >> i now yield back. >> thank you. but i do invite the chairman to respond to the gentleman's question on cbdcs in writing. and now we turn to the vice chair of the full committee, bill huizenga, the gentleman from michigan. >> thank you, mr. chairman and chair powell, good to see you again. you had talked a little bit about your review. i'm going to start there. obviously a lot has changed in the last five years. the pandemic, inflation, higher interest rates to name a few. however, i believe your your dual mandate of maximum employment and stable prices should remain the ultimate objective. i assume you agree with that. let the record reflect. slight head nod on that. i guess this committee is going to be very focused on monetary policy. and with my good friend from oklahoma, mr.

lucas, chairing a task force that i'm happy to be a part of, we're going to be addressing some of those issues. chair hill touched on some of the rules that have been discussed. i, for one, have always been particular to taylor rule, but there's a number of rules. i know you go through those. at one point i suggested that we could call it the yellen rule with chair yellen that, but there needed to be some sort of public declaration of what to benchmark against. and i still feel that that is of some some importance. the you outlined your timeline on this particular review, but i'm curious, do you believe that the last policy framework limited the fed's response to raising inflation, something that you and i have talked about over the years? >> no, i'll tell you why we didn't raise rates. we thought the inflation was transitory. i can show you forecasts from the end of 2021 by us, by staff, by the blue chip. everybody thought it was going to be transitory.

that's why we didn't raise rates. >> and i also distinctly remember a hearing where you and secretary yellen at the time were sitting next to each other. and it looked like you visibly scooted away when i asked you both whether it was still transitory. and you had, for the first time ever, a separate answer. her answer was yes. it still was transitory. you gave a very fed, fed speak answer of we no longer believe the data shows that. so no. and we to kind of go to chair hill's point. we think that might have been a little late on that. the on back to the to the review, i'm curious what sort of input are you looking for from the public and from congress as you go into that review? >> so from the public, we do. we'll do a series of fed listens events which were very successful the last time, and it involves us sitting down and meeting with people, some of whom know a lot about what the fed does, some of whom just tell you what's going on in their

communities. it was really it was a very successful part of our outreach last time in terms of congress. you know, we will we'll keep you informed of our progress. we welcome anything you may offer, but, you know, it's a public we're open to the public on this. it's a public review as distinct from what we were doing before. and so we're welcoming views from all over. >> and not to get ahead of the chairman. but i look forward to us having more conversations about that with the with the working group. i want to switch topics and focus a bit back to the bank supervision. michael barr has stepped down from his position as vice chair for supervision, effective at the end of the month. and whether, frankly, president trump fills that position is entirely up to him. but in the absence of a vice chair for supervision, you're still working. i think on it. i think your quote to the chairman was, there's no time for a holiday now, this this vice chair of supervision is a fed governor that has frankly, extraordinary powers and

responsibilities. and ultimately, my question to you is, does the fed really need a separate vice chair to complete its work now? i can't i got here in after the 2010 election, 2011, shortly after dodd-frank was passed. i know this vice chair position was created by dodd-frank. i've just been dealing with the echo effects now for the last going on 15 years of dodd-frank. do we really need to have a separate vice chair of supervision? >> so for many years, as you know, we did our business without a vice chair for supervision. what that means is everything goes through the full board. >> and it was effective. >> i think it was. and also it was there was less volatility. >> explain that. why was there less volatility. >> well because you've got a group of seven people on the board and there will be some as as appointments change there'll be there'll be some changes in the approach to regulation. but putting it all in a single person, admittedly just to

recommend to the board can lead to it can lead to some volatility in these things, which which is really. >> larger swings and. >> larger swings in the kind of things. and that's, you know, that's not great for the institutions that we want to regulate. we want to have a good set of regulation that doesn't, you know, doesn't swing back and forth very much. the question of whether it's a good thing to have in the law is really, really one for you. but i will tell you, we are we will. once vice chair barr completes his term in a few weeks, we will continue on until there's a new vice chair for supervision, and we can very much get our work done. >> or if there is one. so with that, mr. chairman, my time has expired. >> i thank the vice chairman, mr. high yield is back. recognize the gentleman from california, mr. sherman, for five minutes of questions. >> chairman powell, you are the only bipartisan. >> person or thing left in washington. you were appointed by obama. trump gave you a promotion. biden reappointed you, and you were the only biden appointee not to hear the words,

you're fired from our president. so i hope we listen to what you have to say, because you're the only person or thing that that i can identify in washington that has support on both sides of the aisle. mr. huizenga mentions the importance of your dual mandate project 2025 calls for abolishing the dual mandate and eliminating a mandate that you focus on employment. if we were to give you just one mandate, dealing with price stability and take away the mandate on employment over the next ten years, would our gdp be higher or lower? >> i wouldn't be possible for me to me to say. >> does the fact that you focus on employment as one of your tool mandates lead to lower unemployment, higher employment in our country?

>> it may do so. we do balance those things to some extent. that may be right. >> chair hill spoke about how important it is that you maintain your independence. i noticed that in light of the hiring freeze, the fed has removed all its job postings. i'm hoping that your personnel policy will be as independent as everything else at the fed, but i'm more concerned with the president's statement at 758 this morning where he said interest rates should be lowered. he said it. will that influence what the fed actually does? >> i as a practice, never comment on anything the president says. but i think people can can be confident that we'll continue to keep our heads down, do our work, make our decisions based on what's happening in the economy. the outlook. >> the statements by elected officials are not among the things that cause you to act one way or the other. >> that's correct. >> thank you. and he went on to

say, he said interest rates should be lowered, something which would go hand in hand with upcoming tariffs. let's rock roll america. i certainly agree with the rock n roll america, but. the peterson institute says that the policies that the president ran on will raise the cpi by between 4 and 7 and a half points. and i think the biggest element of that is the proposed tariffs. if we have higher tariffs across the board, say 10 to 25%, would that increase the cost of living and would an increase in the cpi or related indexes of the cost of living lead to higher interest rates? >> you know, there are many organizations, public and private, whose role is to speculate publicly about what this might be. what we're doing is we're reserving judgment until we actually know what the

policies are. >> but if we if we have a higher cost of living, does that lead to higher interest rates? the cpi goes up or cpi. excuse me? >> well, if with if inflation goes up in general, forget about tariffs in general. of course we will use our tools which is the interest rate to bring it back down to 2% over time. >> okay. yesterday you told the senate we're going to release the stress test scenarios before we implement them. will you take a holistic look at large bank capital requirements, including the risk based capital ratios like basel three, endgame stress testing to make sure that you don't have a contraction in the ability of credit to main street businesses? >> yes. >> great. there's a proposal in project 2025 that we abolish fannie and freddie. if there was no explicit or implicit federal guarantee for those who invest in mortgages, would that lead to

higher mortgage interest rates? >> since you're no longer be borrowing on the credit of the united states? in other words. so fannie and freddie would be privately funded. it could lead to that. i think there are privatizing freddie and fannie might have other virtues, too, though, as you has been considered many times by this committee, and others. >> might have some virtues, but it would lead to higher mortgage rates. >> it could. >> the cfpb has been put on ice, but all the regulations remain in force. so if you're a bank that wants to comply with those regulations, there's nobody that can give you any clarification. so you don't know. and if you're a bank that doesn't want to comply, the next presidential election may put into practice a cfpb that enforces all the regulations that the trump administration has tried to eliminate. does that cause confusion for banks? >> i. you're you're you're speculating about what the

situation might be. i would say that it could yeah. >> i yield back. gentleman yields back. i now recognize myself for five minutes. chair powell. >> let's talk about the balance sheet. as we've discussed several times before, the consistent and massive growth of the federal debt creates long run challenges for both the united states and saddles future generations with an onerous burden. but it also creates a challenging environment for the markets. as the treasury market expands in kind, as the fed engages in quantitative tightening, allowing the treasuries to roll off. the fed is careful to ensure that there are ample reserves for the balance sheet. could you briefly discuss the conditions that determine the ideal level of reserves? >> sure. so let me say that we intend to slow and we have slowed, but then stop the process of shrinking our balance sheet at a time when we think that reserves are somewhat above the level that we judge to be consistent with our ample reserves framework. so what that

means is we want reserves to be ample meaning. meaning we don't want them to suddenly appear to be short shortages of reserves. so we're going to think of where those where those shortages might appear. and we're going to put a buffer on top of that, because nothing good happens when there aren't there's not enough liquidity. so that that's our overall framework. and right now we feel like we're all the evidence suggests that reserves are still abundant, which is more than ample. >> as you know, in early 2021, the fed stated that it would invite comments on the supplemental leverage ratio. that has not happened yet. i've made the point that the growth of the us treasury market, paired with a decreased willingness of banks to act as intermediaries, is a major issue on the horizon. when former treasury secretary yellen was before this committee last year, i asked her about the resiliency of the treasury market, specifically about the wisdom of permanently modifying the slr, she said. it's something that the banking regulators should

consider. does the fed plan to finally look at the slr? yes. >> i believe we will. i have for a long time, like others, been somewhat concerned about the levels of liquidity in the treasury market. the amount of treasuries has grown much faster than the intermediation capacity has grown. and one obvious thing to do is to lower is to is to reduce the effective supplemental leverage ratio that the bindingness of it. so that's something i do expect we will return to and work on with our with our new colleagues at the other agencies and get done. >> because i think my colleagues are aware that over the course of recent times, literally we have eight times as much debt to process, but only half as many major market makers. the federal reserve is not immune to politics. you, like every fed governor, go through a lengthy confirmation process in the senate. and of course, you're required to answer to congress in hearings like this, i can

trace a major political turning point at the fed to the passage of dodd-frank, which greatly expanded the fed's regulation and supervision authority. chairman powell, do you worry that the independence of the federal reserve's monetary policy function is in any way hindered by its role as a bank regulator? can you do both? well. >> we can and we do, and we'll continue to do that. clearly, the regulatory and supervisory side is more contentious in political circles, but we will continue to carry it out as best we can and to do so in a nonpolitical way as best we can. >> and clearly that will be a major discussion topic in the task force in my remaining time. could you discuss the fed's five year review of monetary policy? what are the categories of issues you think that will be helpful to receive feedback on? >> so a good part of it will be looking at the changes we made in 2020, which were made in an

environment where we had been stuck at the effective lower bound at zero for seven years, and the highest we got our rate really was sustainably was 1.5%, and that was the highest of any advanced economy central bank. so the concern was that at the slightest downturn, we'd be back at the zero lower bound and we'd be stuck. so we were looking for ways to make up for that. so then the question is we got this inflation out of the pandemic and the events related to it. are we in a different place now? and i think the chances are pretty good that we that maybe that the effective lower bound is still a concern, but it's not the base case anymore. so we need to look at that and, and decide how that what are the implications of that for our framework. >> thank you chairman, and i look forward to several more discussions on these topics. and with that, i yield back the balance of my time. and i recognize the gentleman from new york, mr. meeks, for five minutes. >> thank you, mr. chairman. chair powell, thank you for

being here today. and you've indicated in past hearings that geopolitical tensions pose important risks to global economic activity. in fact, around this time last year, when you appeared before the committee, you and i discussed how conflicts around the world, specifically the war in ukraine, had impacted the cost of things like groceries in the united states of america. at that time, you indicated that the war had caused commodity prices to move sharply back home. does that sound correct to you, found familiar to you? >> yes it does. >> so just to reiterate, in this interconnected world that we live in, would it be safe to say that economic instability in other countries has the potential to impact economic factors here in the united states? >> sometimes, yes.

>> and so, given that fact, would it seem like a smart move for the united states government to remove one of our most effective strategic tools that, by mandate, assist u.s. commercial interests by supporting developing countries economic growth and building countries, building countries capacity to participate in the world trade. would you agree with that? >> it's not for me to be the judge or to say on that. >> well, we do know that a number of like usaid, they buy a lot of their agricultural products, etc, from american farmers. and in fact, it helps

the us economy. when you look at the volume of agricultural products that are being bought so that we can continue to be a part of the rest of the world, would that be correct? >> as far as i know, yes. >> so, you know, today we find ourselves facing a situation where the president and his dodge buddy, elon musk, seem hell bent on dismantling usaid no matter the consequences, even if they are dire to me, the assault on this congressionally authorized body represents an attack on the rule of law and should outrage every member of this body, every member, democrats and republicans alike. you now and i know that your

interest is squarely within your dual mandate and not foreign policy. i sit on both committees. i'm here, but i'm also the ranking member on the foreign policy committee. and so i can't sit here today and pretend that what we're doing won't impact employment and economic stability right here in the united states of america, weakening usaid will fuel global crises, endanger american security, embolden other nations like china and russia, and leave us here in the trump administration solely responsible for the fallout. so i have to take this opportunity to urge my colleagues on the other side of the aisle to also stand up for usaid. anytime we

travel, we go visit what they do. we go visit the good that they do. we go visit what they are and how their economies improve so that they can be part of the global economy. so. if not, because people just care about the rest of the world, then because we care about our country and recognize that instability elsewhere threatens our stability right here, it is extremely important in an interconnected world because the economy is interconnected around the world. we cannot isolate ourselves from the rest of the world. i thank you, mr. chairman, and i yield back the balance of my time. >> the gentleman yields back. the chair recognizes the

gentleman from texas, mr. sessions, for five minutes. >> mr. chairman, thank you very much, chairman powell, welcome. we're delighted to be here. and i hope that this comes with greetings from every single member that we appreciate and respect you taking the time, even though you're respected here. we think you show up and we admire you. mr. chairman, you and i both know that way back when, and we assumed 21 that there was a decision made by the fed that gets close to quantitative easing and then the term tapering. and we know that it was sold as a monetary stimulus to help the country. and i get that there was about, in my opinion, $2.33 trillion that were taken out in loans and chairman. just spoke a minute ago about the term debt versus growth, debt versus growth, about this amount of money that

sits out there on the debt side. could you please take a minute and discuss this issue and how we should be looking at it? thank you. >> sorry, mr. sessions, are we talking about asset purchases that we made during. >> we are we're talking about when the fed went and sold treasuries. >> no, we bought treasuries. >> i bought treasuries. >> yeah we bought treasuries. so you know, it was a situation i'll tell you why we did it. you know, we were just out of the worst part of the pandemic and we didn't know how, frankly, how good things were going to be, how strong the economy. we were very concerned. covid is still raging. and it actually, you know, had a very strong wave right into 2022. but we wanted to just we didn't want to stop buying treasuries too soon because that has a stimulative effect on the economy, because we didn't want to provoke an unwanted tightening in financial conditions at a time when we thought the economy was still

vulnerable. you look back in hindsight, we probably could have have have done that earlier and halted purchases earlier. in any case, we turned right around and started shrinking the balance sheet, and we. >> you moved it from about 120 a month to 110. >> but we're down now. we're now we're we've been tapering for two years now and we're down more than $2 trillion. so and we're still going, we're still going. so that's why we did what we did. >> tell me what that looks like in the longer term aggregate versus with what the chairman said. debt versus growth. because we believe the debt remains and the growth is not equaling that ability to pay it back. >> so what happens is you we borrow money to cover the spending that congress has done. we our purchases don't affect that. we're basically issuing reserves, which is cash and we're reducing we're retiring treasury securities. and the effect of that