Live Fed Announcement

Pow!

Let's see what he's got to say today.

Today, the Federal Open Market Committee kept interest rates near zero and maintained our current pace of asset purchases.

Okay.

These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to support the economy until the recovery is complete.

Mm. It's all transitory recovery.

Unprecedented fiscal policy actions are also providing strong support to the recovery.

So they're going to keep everything the same.

Economic activity and employment have continued to strengthen. Real GDP rose at a robust 6.4% pace in the first half of the year.

Not according to the Atlanta Fed. It was only 3.3% in the Atlanta Fed, I believe.

in recent months, but the rise in COVID-19 cases has slowed their recovery. Household spending rose at an especially rapid pace over the first half of the year but flattened out in July and August as spending softened in COVID-sensitive sectors such as travel and restaurants. Additionally, in some industries, near-term supply constraints are restraining activity. These constraints are particularly acute in the motor vehicle industry. where the worldwide shortage of semiconductors has sharply curtailed production.

Yes.

Partly reflecting the effects of the virus and supply constraints, forecasts from FOMC participants for economic growth this year have been revised somewhat lower since our June Summary of Economic Projections, but participants still foresee rapid growth. As with overall economic activity, conditions in the labor market have continued to improve. Demand for labor is very strong, and job gains averaged 750,000 per month over the past 3 months. In August, however, job gains slowed markedly, with the slowdown concentrated in sectors most sensitive to the pandemic, including leisure and hospitality. The unemployment rate was 5.2% in August, and this figure understates the shortfall in employment. Particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year.

So rates are going to stay low. They're going to keep everything the same.

Caregiving needs and ongoing fears of the virus appear to be weighing on employment growth. These factors should diminish with progress on containing the virus, leading to more rapid gains in employment. Looking ahead, FOMC participants project the labor market to continue to improve. With the median projection for the unemployment rate standing at 4.8% at the end of this year and 3.5% in 2023 and '24. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on lower-wage workers in the service sector And on African Americans and Hispanics. Inflation is elevated and will likely remain so in coming months before moderating.

As the economy continues to— okay, let's hear it—

and spending rebounds, we are seeing upward pressure on prices, particularly because supply bottlenecks in some sectors have limited how quickly production can respond in the near term.

So not because of inflation, just supply.

Leading to upward revisions to participants' inflation projections for this year.

Jay Powell's a good-looking dude, man. If I can look like that when I'm like 65, 70—

inflation is expected to drop back toward our longer-run goal. The median inflation projection from FOMC participants falls from 4.2% this year to 2.2% next year.

Wow, I don't believe that one bit, but there we go.

As the reopening continues, bottlenecks, hiring difficulties, and other constraints could again prove to be greater and longer lasting than anticipated, posing upside risks to inflation. Our framework for monetary policy emphasizes the importance of having well-anchored inflation expectations, both to foster price stability And to enhance our ability to promote our broad-based and inclusive maximum.

Whatever they say it is. So if they say it's three percent, it's three percent, right? They control the world. So yeah, two inflation's always been two percent, right?

Serious concern. We would certainly respond and use our tools to assure that inflation runs at levels that are consistent with our goal. The path of the economy.

Thank you.

The pace of economic activity continues to depend on the course of the virus, and risks to the economic outlook remain. The Delta variant has led to significant increases in COVID-19 cases, resulting in significant hardship and loss and slowing the economic recovery. Continued progress on vaccinations would help contain the virus and support a return to more normal economic conditions. The Fed's policy actions have been guided by our mandate to promote maximum employment and stable prices for the American people. People, along with our responsibilities to promote the stability of the financial system. Our asset purchases have been a critical tool.

Here we go. To preserve financial stability and market functioning, $8.5 billion— trillion, excuse me— is the Fed's balance sheet.

At our meeting that concluded earlier today, the committee continued to discuss the progress made toward our goals since the committee adopted its asset purchase guidance Last December. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted. We also discussed—

so they're going to slow down asset purchases. They're still going to buy them, but they're going to slow down.

Economic conditions satisfy the criteria laid out in the committee's guidance. While no decisions were made, participants generally viewed that So long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate. Okay, so start tapering after our balance sheet stops expanding. Our elevated holdings of longer-term securities will continue to support accommodative financial conditions.

So finish tapering by middle of next year.

Will not be intended to carry a direct signal. Regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test. We continue to expect that it will be appropriate to maintain the current zero to one quarter percent target range for the federal funds rate until labor market conditions have reached levels consistent with the committee's assessment of next.

So interest rates are staying at zero.

And inflation has risen to two percent and is on track to moderately exceed two percent for some time.

Hmm.

Half of FOMC participants forecast that these favorable economic—

they want to exceed 2% for a long time.

As a result, the median projection for the appropriate level of the federal funds rate lies slightly above the effective lower bound in 2022. Participants generally expect a gradual pace of policy firming that would leave the level of the federal funds rate below estimates of its longer-run level through 2024. Of course, these projections do not represent a committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now.

That's for dang straight.

The fact that policy will remain accommodative until we have achieved our maximum employment and price stability goals.

To conclude, we understand that more money for everybody.

In service to our public mission, we at the Fed will do everything we can to support the economy for as long as it takes to complete the recovery. Thank you. I look forward to your questions.

All right, there we go. So Fed interest rates at zero still.

Um, we are—

yeah, uh, they're gonna keep things the same. Middle of 2020, next year, 2022, plan to taper and stop growing the balance sheet.

walk us through what substantial further progress looks like, given the latest batch of projections that have PCE inflation coming in a little higher than the June projection, the unemployment rate also being higher than June, as well as the change to GDP lower than June. If you could help us make sense of all those things as you—

Yeah, things are different than their last projections. That would be great.

So the test for beginning our taper is that we've achieved substantial further progress. Substantial further progress toward our goals of inflation and maximum employment. And for inflation, we appear to have achieved more than significant progress.

We have blown the inflation out of the water.

So the question is really on the maximum employment test. So if you look at a good number of indicators, you will see that—

Inflation is good. We have done the inflation thing.

In the readings today. In many cases, more than half of the distance, for example, between the unemployment rate— unemployment rate in December of 2020 and typical estimates of the natural rate, 50 or 60% of that road has been traveled. So that's— that could be substantial further progress. And many on the Committee feel that the substantial further progress test for employment has been met. Others feel that it's—

See, don't we have a labor shortage? I thought we had a labor shortage. Like we have a labor shortage. But we can't get people to work because they're too rich at home. They're on the couch. They don't want to go back to work. They're on unemployment. Yet we don't have enough workers to do a lot of jobs. Every business owner I talk to has a, they can't find workers. Yet we have too much high employment. It's because those people are enabled to stay at home For whatever reason, right? That's a good question, Rachel.

Thank you. We'll go to Howard Schneider. Thanks, Chair Powell. Thanks, Michelle. So looking at the steps, we have now basically 4 years of inflation above target, and policy never gets to the long-run rate. I'm wondering if you could address that from 2 perspectives. One, within the new framework that had been adopted last year, and second, from the perspective of the average household that's now being asked to pay higher prices and increasingly higher prices for 4 years running.

Great question.

With some of this year, real wages have actually gone down.

Great question.

Sure. So as you can see, the inflation forecasts have moved up a bit in the out years. And that's really, I think, a reflection of— and they've moved up significantly for this year. And that's, I think, a reflection of the fact that the bottlenecks and shortages that are being— that we're seeing in the economy have really not begun to abate in a meaningful way yet. So those seem to be going to be with us at least for a few more months and perhaps into next year. So that suggests that inflation is going to be higher this year and A number— there were, I guess, the inflation rates for next year and 2023 were also marked up, but just by a couple of tenths. Why? Those are very modest overshoots. You're looking at 2.2 and 2.1, you know, 2 years and 3 years out. These are very, very— I don't think that households are going to, you know, notice a couple of tenths of an overshoot. That just happens to be people's forecasts.

When real inflation is actually like 10% right now, they're telling you it's 3% or 4%. Usually it's double, at least when I talk to economists and stuff, they're like, well, half the economists say yes, this is correct. Half say it's usually about double what the Fed says. If the Fed says 4%, it's actually about 8% inflation for the year, and it's year over year, right? Yeah.

Anyways, The ultimate test of whether we're getting this done.

But for people in the comments too, if I was in his, I would probably say the same thing. You're the US, you're the Fed. And so you can just say inflation is— it's like a self-fulfilling prophecy. If they came out and said inflation's 10%, all companies would up their prices 14%. If they come out and say it's 3%, then companies up their prices 3% or 4%, right? Now there is real inflation that happens, but I think some of it happens when they announce inflation. Inflation happens because a big company sees it.

And I'm wondering what the contours of that debate have been for those that want to move a bit more quickly. Is it about maintaining optionality for a 2022 interest rate increase, or is it about financial stability risks or concerns?

They're not raising the rates, man. I'm sorry, Colby Smith, but they are not going to raise rates. I, I don't see them raising rates in the next— let's see.

There's very broad support on the committee for this plan, both as to the timing and as to the pace of the taper. So this was a unanimous vote today, and I'd say quite, quite broad support for this approach. Uh, you're correct that, that there, there are some who would prefer to have gone sooner, uh, and they've made their arguments publicly. Some— for some of them, it's a financial stability concern. And for others, it's other concerns. They can make their own arguments. This is an approach that the committee will broadly support, and it will put us having completed our taper sometime around the middle of next year, which seems appropriate.

Unless there's another variant, unless there's something else, which there's going to be something else. The rates are staying at zero for a long time. I don't think they're going to stop tapering or they're going to slow down. Money printer go brrr. It's still going, bro. Let's look at the— let's look at, um, let's look at the, uh, yeah, one day. I mean, it's already done well this morning with this announcement. Um, you know, still doing well. Um, I mean, price is doing, uh, doing very well here, so One day. I mean, you see a jump even right now, right? What's happening? People feeling confident about this. So let's talk about Evergrande or the debt ceiling.

Hi, Nick Timmermans of the Wall Street Journal. Chair Powell, you have said the test for liftoff is more stringent than the test for tapering. But if the near-term projections to This guy's got big eyeballs, man.

Holy cow! Am I the only one? It looks like he's just shot up cocaine or something. Is it just me? I don't know. Maybe it's just me, but he.

So again, substantial further progress toward our. Goals is is the test for beginning the taper. The taper takes some months, and everyone's figuring.

Yeah, the taper is gonna come. It's it's only if we hit these certain metrics, then we'll start tapering. We're not gonna hit those metrics.

And in terms of the liftoff test, though, you know, it is it's what we adopted last September. It's it's labor market conditions consistent with maximum employment. And while we While we have interesting signs that in many ways the labor market's very tight, we also have lots of slack in the labor market. And we think exactly that those imbalances will sort themselves out.

People just don't want to work. There's plenty of jobs to achieve laterally high. Look at look at everyone on here. We're on YouTube at the middle of the day right now. Nobody's working. We're all watching YouTube or Facebook or whatever.

Then we may already have met that test by the time we reach liftoff. So I just think if you look at— if you look at what people are writing down for year-end 2022 numbers, some people are writing down very low unemployment rates. And that's only one indicator, but it suggests a very strong labor market. And I think they're writing down in good faith what they see as meeting the test. There's a range of perspectives about where the economy will be. But by the way, All but one participants have us lifting off during 2023. So it's not—it's not really an unusually wide array of views about this. Hmm.

Well, all right. Let's see this next question. We might—we might flip it off here. Let's see what else they got.

Go to Gina Smeholik. Hey, Chair Powell.

Thank you for taking our questions.

Prior to recent media reports, were you aware of the kind of security buying and selling that Presidents Kaplan and Rosengren were participating in last year?

Oh, let's go! So Fed members were buying and selling significant amounts.

Specifics of what they were doing. So let me just say a couple things about this subject. We understand. Very well that the trust of the American people is essential for us to effectively carry out our mission. And that's why I directed the Fed to begin a comprehensive review of the ethics rules around permissible financial holdings and activity by Fed officials. So those rules are in many respects the same as those for government agencies, plus a number of things that apply specifically to us because of our business. One of those is sort of 3 things I would point to in terms of specific restrictions. One is ownership of certain assets is not allowed, and that's bank securities and other things. Secondly, there are times when we're not allowed to trade at all or to, you know, buy and sell financial assets, and that's the period immediately before and during an FOMC meeting. And third, there's regular disclosure. So all of these— everyone's, you know, ownership and activities are all disclosed on an annual basis. So, you know, I would have had to go back and read people's financial disclosures to know what their activities have been. This has been a framework for—

So for some of you guys that don't know, a couple of Fed members were buying and selling large amounts of securities, and it seemed to be very profitable for them. It's kind of been this bombshell story that's come out, similar to Nancy Pelosi. She's trading a lot. They can still do it, but they just have to disclose it in the right way. So Is anybody on the chat? I don't if you guys have signals or calls on Fed members and what they're trading. That'd be pretty cool to look at, see what they're buying and selling. Why on the chat? Why work? Because the Fed's printing money. It's a great point. That's a great point.

Thank you. Thank you, Mr. Chairman. I would want to follow up on Gene. The issue of ownership of these stocks and trades, do you think it's appropriate for Federal Reserve officials to be owning the same assets that the Federal Reserve is buying? Is that one of the modifications that you're looking at? And in that, these— you said yourself that you don't clearly not see it as appropriate in that the Fed's code of conduct says Fed officials should avoid even the appearance of conflict. Do those trades in fact and holdings violate the Fed's code of conduct? Finally, do you have a timeline as to when you might get done with your review? Thank you, sir. Don't have a timeline yet. We can start with that. So, well, let me, let me address the muni question since that's, that's, that's in there. You know, I personally own municipal securities for many, many years. And in 2019, I froze that, meaning I'm holding all those securities, my wife and I, to maturity. And munis were always thought to be a pretty safe place for a Fed person to invest because, as you know, the lore was that the Fed would never buy municipal securities. So it was not an uncommon thing. And so then comes the COVID crisis.

Until the Fed started buying everything.

And I did it without hesitating. And the reason was that the financial markets, including the municipal financial market, were very much on the verge of collapse. And it was time to go. And we did. But we also checked with the Office of Government Ethics, who looked carefully at it and said that I didn't have a conflict. So that's one answer that I wanted to share with you. Secondly, yes, you're right, though. We're going to be looking at all—

The Fed said he's okay because he controls the Fed, so he can do it because the Fed makes their own rules, just like Congress makes their own rules on how they should trade, so they got the check that it's okay. Yeah.

Years from now, and know that we rose to meet this challenge and handled the situation well, and what we did made a lot of sense and protected the public's interest and the institution that we're all part of. I'm sorry, Chair Powell. I just want to follow up. You said I was right when you said right about. That the Fed should not own— the Federal Reserve should not own the same assets they're buying? I think that's a reasonable thing. And of course, for the most part, we don't. I mean, it was a real coincidence. I happened to pre-own these munis. They were, they were bought many years ago, actually. And so we started buying munis as part of the Municipal Liquidity Facility. So it was really not a— it just was an unforeseen event and I couldn't sell them. So, so what I did was I just held them, checked with the ethics people and went ahead.

So checked with his own ethics people to make sure that they were okay, though, right? Yeah. The Fed's buying everything, dude. They're buying— oh, here we go. Let's see what he's got.

Thank you. Thank you. Thank you, Chair Powell. Well, I had a question about jobs and the Fed's schedule, the Fed's policy framework that you've laid out here. You and other Fed officials have often talked about expecting a job market pickup in September as more children return to school, freeing up more parents to work. COVID abating, you mentioned in the past the extra unemployment benefits expiring. There's some real-time data suggesting that we may not be seeing much of a return of labor supply. So do you still expect to see that in the next couple of jobs?

Because everyone's on YouTube. Here we are. I love the comments. Hey, at least you're not watching TikTok, right? You're on YouTube. Learn. And I hate— I I'm here too, so you know we're all trying to learn from the Fed.

Really, I call it a unique situation where by many measures the labor market is tight and eleven million job openings, very widespread reports from yeah, the labor market's not tight; it's a lot of lazy people hire people wages moving up and that kind. So quite a tight tight labor market. So our view, I think widespread view. A few months ago was that several things were coming together in the fall, including kids back to school, which would lighten caregiving duties, including the expiration of unemployment— extra unemployment benefits, and other things would come together to provide an increase in labor supply. And so we get out of this strange world where there are lots of unemployed people and a high unemployment rate, but— A labor shortage. Lots of jobs. Yeah, you have this, um, don't blame it on Delta.

It's not Delta cases. And I think so that affects— it's how the government responded to Delta. That's what I think.

60% of the time, or when they're always at a threat of being closed because of Delta, the Delta variant, you know, you might want to wait rather than going ahead and taking a job and starting work only to have to quit it 3 weeks later. You're going to wait until you're confident of it. So some of that may not have happened.

I don't think so. I think as people are at home, they have found side hustles, side gigs, other things, or they're getting paid by the government to start those things, which is— I think I actually, I love entrepreneurship.

During those months. So really the big shortfall in labor, in jobs, was largely in travel and leisure. And that's because of, clearly because of Delta. So that all happened. And so what will we—

Well, so anyways, if you guys are joining on, Fed's keeping interest rates at zero. They plan mid-next year to begin tapering efforts, meaning the Fed right now is still buying. I believe last month, or last week, they bought $90 billion. They added to their balance sheet. Balance sheet currently is $8.45 trillion on their balance sheet. To put that in perspective, I might be off on these numbers. I believe it was before 2007, 2008, the Fed balance sheet was around $2 trillion. And it went to $4 trillion. And everyone was like, oh, this is crazy. And they said, no, we're going to taper. We're going to bring it back down to $2 trillion. Today, we're at $8 trillion. So it's like you got a cocaine addict, and you're saying, hey, we're going to taper off, but if things go bad at all, we'll just go now, we'll do even more and go up to $18 trillion or $20 trillion. I don't even know what will happen the next cycle of this. They're still taking the drug. They're still buying. Hopefully, they're projecting by middle of next year, they're to zero. They're going to stop buying, maybe even starting selling some of their assets. But I don't think they're going to do that. I don't see a situation where they can start to shrink their balance sheet, especially with zero interest rates. I don't see a situation where they can raise interest rates right now. They have— you have too many governments around the world that are competing for dollars and, uh, you know, who's got the cheapest money. And so we're gonna go here. Let's see what he's talking about here.

Lenders want to see more, more progress, and, you know, we'll work it out, uh, as we go. But I, I would say that in my own thinking, the test is all but met. So I don't, I don't personally need to see a very strong employment report, but I'd like to see a good, decent employment report. I mean, it's not— it's again, it's not to be confused with the test for liftoff, which is so much higher. Great. Thank you.

All right. So they're saying their metrics are they want to see a strong jobs report and unemployment report and things like that earlier.

So I wanted to ask about the vice chair of supervision position and just— I was wondering if you could speak about how you view that role and the extent to which you defer to that person.

We don't need to listen to this one. So anyways, Um, so anyways, we'll, we'll let them talk for a few more minutes. But yeah, for you guys hopping on, that's kind of the result right now. We'll see. It sounds like the Fed is, uh, is not gonna do much to, to change things, um, you know, going forward. And, uh, I mean, uh, if you look— I mean, let's look, let's look back at stock prices right now. I mean, I'm just on Google, so nothing crazy, but, um, I mean, things are since the call, right, gone up and oh man, back down quite a bit. Look at that. Um, I wish I maybe I could pull up a trading— on this computer I can't pull it all up. I probably should do that pull. Oh, sorry, you guys can't even see this. Let me zoom out. Um, we'll go like this. Boom. Um, S&P doing decently well since the call. I mean, actually fallen quite a bit though. If you look at, uh, let's look at just the Dow, just main indexes. Bam, like actually fallen quite a bit. Um, Here, so anyways, we'll see. I mean, up on the day though, it looks like people are excited about about Evergrande things that are clearing up there. I mean, there's a lot of a lot of strong support in the markets right now. Feel like China stepped in eighteen billion dollars they infused into their banking system. Still a small amount, relatively small amount for the three hundred five billion dollar default. You know that we're looming. They they voiced that they are gonna figure out a plan to meet things. It's still a big problem. I think markets are pretty optimistic right now, and I would argue it's a little too optimistic for me. But anyways, who knows, man? The whole game is rigged. And by the way, if I was running the Fed, I would probably do the exact same thing right now. Let's keep interest rates at zero. Let's keep expanding the Fed's balance sheet. Let's keep everyone rich. All the money just keeps— everything, everyone keeps getting richer. Let's tell everybody inflation is Low three, maybe two and a half, three, four percent will be just fine. And governments keep taking our dollars. I'm curious if they'll bring up the the debt ceiling that Congress is voting on right now. It's I my personal opinion is Congress will pass it. I think they're they're trying to do a lot of politics of back and forth of what's included exactly in that bill and who votes on it. We still have I think a month until they have to decide on that. Yeah, pretty I don't know pretty interesting there though. Let's see. We'll go back here for a minute or two. See what's going on.

And one of the things we look at is unemployment rates and participation rates and wages for different demographic and age groups and that kind of thing. So we will do all of that. So I think if you if you look back, what were we really what were we really thinking? So we all saw the benefits of a strong labor market. If you look at the last two or three years of before the pandemic hit, you saw. After a lot of long progress, you saw a really strong labor market and you saw wages at the low end moving up faster than everywhere else, something that's great to see. We also saw the lowest unemployment rates for minority and minorities of various, you know, for African Americans, for example, and, and also participation rates. We saw, we saw a really, really healthy set of dynamics. And by the way, we also— there was no reason why it couldn't continue. There were no imbalances in the economy, and, and then along came the pandemic. Pandemic. We were not— there was nothing in the economy that looked like a buildup of, of imbalances that could cause a recession. So I was very much thinking that the country would really benefit from a few more years of this. It would have been great. So, so we're all quite eager to get—

Yeah, anyways, um, we'll, uh, we'll turn these guys down for a second. So, um, Yeah, pretty, uh, pretty interesting. Pretty much the same going forward. So, um, do what you want with that information. Um, anyways, kind of fun. Let's see some questions here. Um, sorry about the mic volume. We didn't have— we, we last time we did different. We had— anyways, audio I know was messed up, so sorry about that. Hopefully you heard a little bit though what was coming through. Um, yeah, I think, you know, some people on here talking about like everyone's ready to jump. Um, everyone knows that it feels like a top. It feels overheated. Is it overheated? I think volatility is, and we've seen that right now. They call it a kangaroo market. I mean, it's massive right now, and I think it's even getting more, right? More every day. So every wind of news makes it go way up or way down. Interesting time to be in the game. The Fed is playing Monopoly. Wait, haven't they always? Yeah, it's awesome. All right, everybody. Well, fun stream today. You know, nothing too crazy. Announcing they are announcing tapering measures, and you know things are things are moving that way. So we'll see what the Fed does. I it's my opinion though they're just gonna keep this thing going. They're gonna keep kicking the can. You know next quarter they're gonna say oh our projections are now end of 2022, and then they're gonna say oh no now it's 2023, and they're just gonna keep kicking the can and keep this going. And we'll see we'll see what happens. I think they're trying to play chicken with a lot of other governments around the world. I know it feels like a drug dealer. They can't get off the drugs of free money and just free money for everybody. And you've seen this throughout history, number of countries that— and the US probably has the longest rope they can possibly have on this, but there's a point where debts become due. And at this point, I believe our US dollar is, all it's backed by is the strength of the US military. I mean, that's really what it's backed by. And if governments Like a China or some Russia challenges the U.S. military soon, and I don't know. Well, anyways, we'll see. We'll see what happens if if that weakens that and and you know overall if if we can't sustain what's going forward. So all right, you guys, thank you so much. Should be have a good day. Thank you all. Bye, guys.