Will the Fed Finally Cut? Live Reaction from a Fund Manager

All right, people, we've got wartime. Federal Reserve meeting here. Not really wartime, but I wore my vest just for fun. So we're going to break down. We have Jerome Supreme Leader Jerome Powell speaking to us in about 30 minutes. They just dropped the PDF though from the Federal Reserve. So actually, if you share my screen, let's actually dive into that right now. So on the website, if you didn't know, we'll be live here in just a few minutes with Supreme Leader Powell. They just launched a PDF though. So let's open that up. I think you can see that, right? Okay, here we go. I'm going to zoom in for you. So we can read it here. This just dropped a minute ago. Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed and unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated. The committee seeks to achieve maximum employment, inflation at the rate of 2% over the long run. Uncertainty about economic outlook remains elevated. The committee is attentive to the risks to both sides of its dual mandate. And judges that downside risk to employment have risen. In support of its goals and in light of the shift in the balance of risk, the committee decided to lower the target rate for the federal funds rates by a 4th percentage point to 4 to 4.25%. In consideration, so we're getting a, you know, 25 basis point cut, which was anticipated here. But this is what's going to be interesting about today's meeting is what does this now mean for the rest of the year? Are we getting more cuts? Let's see if they have any other clues in here. In considering additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and balance of risks. The committee will continue reducing its holding of Treasury securities and agency debt and agency mortgage-backed securities. Okay, so we're going to continue reducing its holdings. The committee is strongly committed to supporting the maximum employment and returning inflation to 2% objective. In assessing the appropriate stance of monetary policy, the committee will continue to monitor. Great, great, great. Voting. Here we go. So voting against this act. So this was a big commentary was will there be dissenting votes? Last meeting there was two dissenting votes. I believe that was the first time in thirty years we had had a dissenting vote. Maybe the second time out. We'll get the data in just a second here. But right here, Stephen I. Mirren, who was just appointed this week. And is actually Trump's economic advisor, looks like he preferred to lower the target range for federal funds rate by a half percentage point at this meeting. So, and I'm reading that correctly, right? Very interesting. So if you look at, and again, we'll have Drone Powell here live in 27 minutes for people to join on. Welcome in. Type a yes, type a hello in the chat if y'all are there. Welcome on, we're doing this as a livestream today. So this is, I thought this article was pretty good by Nick. He'll actually, I think he's gonna be there. He's usually in the room and asking questions from the Wall Street Journal. He's done a good job there. So this is pretty interesting, what went down this weekend. We're gonna look at a few economic data points. We'll look at how they actually— let's check the market real quick if there's any initial response here. Kind of choppy this morning. Looks like the Dow's now risen. They kind of— all indexes were chopping down. Looks like things might be— I mean, it was as anticipated. I don't think any shock, but if you refresh here, yeah, we're now trending positive here. Off that news. So we'll see how this trades over the next few minutes. We'll come and we'll keep checking on this. Even we can check— we'll check the crypto markets here. I'll refresh. Um, today's been a little choppy. You can see just kind of right in the middle of 24 hours, so nothing crazy. But we'll see if these, uh, these bounce or move here in the next minute. Um, back to here though from Nick, and I think he said this spot on in this article in the Wall Street Journal talking about what is going on in the Federal Reserve. This is one of the shaping to be one of the strangest in years. The Fed expects to cut rates Monday, which they just did by Chair Jerome Powell. The weirdness even began when the meeting started. So on Monday night, Fed Governor Lisa Cook secured a ruling from federal appeals court in a split 2-1 decision. So Trump, President Trump had been trying to push Lisa Cook out because of alleged mortgage misrepresentations. Apparently, she had listed on a mortgage application that she had 2 personal residences, 2 homes. And you get— when you do that, you get better mortgage rates when it's a personal residence. And this is years ago, and they said, well, that's mortgage fraud and she shouldn't be a Fed governor. That's what they're using to try to get her out. Obviously, Trump, President Trump, has not been happy with the Federal Reserve, been trying to push out Jerome Powell, get him to lower rates faster, put in more economic— well, and we'll read down below because he just appointed this guy this week, Stephen Mirren, to serve on the Fed Governors Board, which he was a dissenting vote today. which is somewhat rare to have a dissenting vote from the Federal Reserve. We'll look at that in a second. Jerome Powell is up for change in May. They have 11 candidates apparently that they're interviewing right now to succeed Powell in May. This is quite a turbulent time for the Federal Reserve. You saw an interview that was pretty interesting with Jerome Powell and Trump talking about the renovations on the Federal Reserve building. Do you remember that? They're all wearing hats that turned into a meme. It was pretty funny. Jerome Powell is looking at the numbers And Trump was kind of giving him a hard time. It was pretty— maybe we'll pull it up here in a second. It was pretty fun. So you can see down here. Now, what was interesting about— I think it's up here. He was confirmed, I believe, on Monday. Congress voted, confirmed him right before this Fed meeting. And he was not confirmed or appointed through Jerome Powell. They did it through a judge, and I think that's written down here. It was pretty interesting to not do it through Jerome Powell, kind of another show of force or sign of like the undermining of Jerome Powell a little bit. And I would say in some cases rightfully so. I mean, the Fed, I believe, missed COVID pretty hard. They— and some would argue it's for political reasons.

They—

and the Fed is supposed to be independent. And I think the honest truth is the Fed is not independent. They have been There's been multiple times throughout history they've been swayed by whoever is in power at the time. I mean, take— look no further than last year. There was this push for rate cuts this time last year, right before the election. They decided to lower rates once. And in a— maybe in a push to help Kamala and the Biden administration stay in power because they— he knew Trump was really not liking Jerome Powell. Now Trump's in office. He's pushing Jerome Powell out. Fed is surprisingly usually cuts rates in political election years and presidential election years. Very interesting of how it just lines up. If you scroll down though, this was an interesting chart of dissenting votes in the FOMC meeting. So that what we have right now. So you can see here, these are dissenting votes all the way. Now there used to be a lot of dissenting votes here. You can kind of see this is 0, 1, 2, or 3. Since, you know, the 2000s, we've had just one instance, one instance, and here we had 2 governors. Last meeting, this is the first time in about 30 years you've had two governors. You had one dissenting vote here and one dissenting vote here, and then this meeting will have another dissenting vote. Again, not very common to have that in the Federal Reserve. So we'll see what Jerome Powell's thoughts are. Nick will be in the room probably asking questions. I thought it was a good read from here. Now let's look. We'll check in on some economic data here. Let's just go. We'll go around the horn here. My live show, and I got my. This is a weighted vest I'm wearing, by the way. So I'm gonna hopefully I don't start sweating too bad. I've got.

We are in.

We are in wartime conditions, just, and well, let me back up. Not actually wartime conditions, at least in the United States. We do have, the world is heating up and we feel like, I feel like we have been living from crisis to crisis for the last little bit. We have short memories, but just a few months ago, we had the Iran bombing from all those B-2 bombers. Remember that? And we were about to go to World War III with Iran and Israel and Trump came in and solved that. And then the 2 months before that, we had the tariff war and we had this huge V down and the whole world was imploding. People were all talking about tariffs are gonna ruin everything and we've kind of recovered from that. Last year, we had the yen carry trade with Japan, the single largest single-day spike in the VIX. That was, I believe, October 5th, 2024. And remember, the world was ending. We had the election last year. That was a crazy time. I mean, we've lived through a lot just in the last 12 months and I'm missing a ton of stuff. And then you go back even further. We had the regional banking crash. We had Silicon Valley Bank and First Republic Bank go down and get swallowed up by other conglomerates. We had the FTX thing blow up. We've had, I mean, we've had a lot of stuff happen, but it feels like we just keep plugging along. We have short memories and we, there's a great, an economist who wrote a book and I haven't read the book yet, but I love the title. You ever had a book where you just, the title just hits you? The title was about, it was called Permacrisis. And I actually met the author, he gave us a whole speech around it. I didn't read the book 'cause his speech was pretty great, but maybe I should go read it now. We have been living in a permacrisis type of period. The Trump plan obviously is they believe they can get, with tariff revenue in, they can balance our deficit, number one, and even pay down debt here in the future. maybe lower taxes and increase GDP rate at the same time. So they want to increase GDP. And it's interesting, Cathie Wood just last week mentioned, she's like, I don't think we're prepared for a 7%, 8%, 9% GDP print that could be coming in 2027, 2028 from all the stuff that's being built right now because the efficiencies that are happening in AI, blockchain, robotics, 3D printing, I mean, you name it, these emerging technologies coming out so much. So, I mean, the bull case is pretty good. Can we really enter the golden age of America? Now let's look at some actual economic data here. So I'm gonna pull my screen a little bigger and we'll have Jerome Powell be live in about 20 minutes. So stay tuned for that. He'll be live in a few minutes and actually we're gonna chime right into the Q&A at the Federal Reserve and then we'll get direct commentary. So if you look at this, this is the CPI, Consumer Price Index. Obviously people watch this pretty closely and you can look at where things actually— I wanted to pop over. Where are we at? Let's go to Well, we'll just kind of pop through this, give you a sense of where things are at. Personal consumption expenditures. What they— a lot of economists keep going back to is we have a strong consumer. I mean, look at the steadiness of this line. This is personal consumption expenditures in billions of dollars here. If you go to the max here, we have a strong consumer. Consumers will keep buying stuff. So let's take that and now look at the amount of debt they're using to buy that with or lack of debt they're buying that with. Let's go. Let's bounce over to— okay, these are consumer loans, credit card, and all other revolving plans. Okay. In billions of dollars. So again, same on this kind of steady line. We had COVID drop a lot of things and there was misreporting during COVID but we've come right back to that trend line. So consumption is on the trend line. Um, I'll go to a max trend line here. You can kind of see these big jumps, the, the GFC and then COVID here. But back to that same trend line, we're seeing, um, uh, this all comes back to M2 money supply. So M2, they had M1, they came out with M2 to really think through better with monetary supply. This is the amount of dollars in circulation. They're trying to figure that out. This is one way to look at it. Is M2. You can kind of read down here on what M2 is. Um, we'll come back to in a second. But look at this. So this is the amount of dollars. Obviously a big conversation is inflation and the amount of money printing. If you go back to the last 10 years, we saw a huge step up here with COVID but then a kind of a— kind of not fully, but kind of a reverse back to the mean here. But still, this mean trend line has really started to, to fluctuate up here really since the Fed has stepped in, especially in the Great Financial Crash, you see this increase of spending. It doesn't matter Republican, Democrat president, they're all spending a lot. And then we saw a big jump here and a little bit revert back to the mean, but still a lot of spending. Right. And that was whether it was Biden, Trump, Obama, you name it. I mean, there's been just a lot of government spending and M2 tracks that. So what happens when you have a lot of government spending or just creation of dollars? Asset prices tend to rise in nominal terms. Not in real terms, but in nominal terms. You see this with wage growth. Here's average hourly earnings of all employees. We'll go back to a max. It goes to 2006, but you see here, in 2006, if you took every employee, the average hourly earning was $20 an hour. Come to '22, and this is not, I'm not talking minimum wage. I'm talking all workers in the economy. You're talking high-end lawyers, doctors. I mean, you're talking everything here. We're up to about $36 now, so it follows that trend line. You see the same thing if we go to a stock market, right? They're all following this big trend line of how many dollars are in circulation. Now we're looking at this, look at this chop up here. What time was that? 2:05, right as it came out. So we had a big run up as that data came out, and now it's come kinda back down to the daily rate. Let's look at the 5-day chart here. We had a big spike and a little bit of a sell-off here. So we'll see. On the day though, we're up, we're just at break-even. So we're gonna kinda see here. But if we go back to, I was mentioning all time here, we see a similar trend line. So let's look at a couple things though. Is the economy gonna tip? Now if you look at times, let's look at the Fed federal funds rate. There we go. Generally speaking, the Fed cuts rates when we're going into a recession. There's only been a few times in recent history where they have cut and we've not been in a recession. I'm going to go back to— let's go back to like 1985. Okay, so you see these cuts and I wish— and I don't have it in front of me, but you can overlay stocks. Let's look at here. We had the dot-com bubble. We cut— we were cutting into the dot-com bubble, not, not after, into the dot-com bubble here, because that was more 2001. We were cutting all in 2000. You see the cuts here because, again, you usually cut when the economy is bad. We then had Fed funds as you rise in a good economy. And then we had cuts here in September of 2007 when we started to see cracks. I think actually it looks like it's August here. And then we had obviously the great financial crash. They cut rates almost to zero. To help recover, and they left them pretty cheap. And this is where you saw M2 money supply take off. We then raised rates a little bit here, but not crazy. I mean, 2.4 isn't crazy. And then COVID hit. They were cutting rates, by the way, before COVID December 2019, if I believe right. Look at this. Oh yeah, sorry, August and then December. And then COVID hit and they put them to zero. Interesting. They were cutting before, and right now we're here. They cut rates. Now we have raised rates at one of the fastest paces in history, and there can be some precedent. Okay, we should come back to a better mean. We saw a little bit of a cut down here, and we saw today another little cut. So now we're down to right here. Okay, or let's see. Oh, this might already be baked in August. No, it's not baked in. Should cut down to about four here. Be on this line. So are we gonna roll?

Maybe.

Now, one period where we cut rates but didn't see a recession was right in here. And if you see— excuse me. My wife tells me I have dad sneezes now. I got 2 kids at home and I do these big loud— you know the dad sneeze where it shakes the whole house? It's like, achoo! And the whole house shakes. I apparently do that now. At my house, so I don't know. My wife's like, "Stop doing those dad sneezes." And my anyways, it's kind of I'm kind of leaning into it being a dad. I got two kids now. It's awesome. So if we look at August though, so look at the 1990s. Now we had quite an economic boom through the '90s with the advent of the internet, and you saw here also with Bill Clinton. There's there's a ton of similar ties from Bill Clinton to Donald Trump's policies with. Foreign policy with tariff income. That was the last time that we had a surplus in our country was under Bill Clinton. Right now, the Trump administration is pushing heavily to try to have a surplus and not be in a deficit, and their plan is through tariff revenue. But this is interesting. During that time period, you saw some chop of rates, which we've kind of seen in the last, you know, little bit. A down bit of rate, and then they came up a little bit, and then down, and this actually spurred on Incredible economic growth in the United States. So can Scott Bessenit, Jerome Powell, Donald Trump pull off potentially a 1990s scenario here, lowering rates in moderation while having vast economic growth with an emerging technology? Maybe. Obviously, AI is the big conversation, but if you mix in AI with quantum computing, robotics, blockchain altogether, We have quite something that's unprecedented. We don't just have one emerging technology. We have 4, 6, maybe even, I read one book that labeled out 10 emerging technologies that are all hitting at the same time right now. Pretty interesting. We'll see if they can thread the needle on this, but in some, do you see these gray bars are recessions here? In recent history, most of the time when they're cutting rates, it does cause a recession. Now, we did have a recession in here, but the Biden administration said it's not a recession, if you recall. Am I the only one with a short memory? We, you know, sorry, a longer memory. We had 2 quarters of negative GDP growth, and then the White House came out and just said, no, that doesn't count. It's not a recession. Well, then what is a recession? That's the technical definition of recession is 2 quarters of negative GDP growth. And it's funny enough, we do. It is not showing up on this chart as a recession. We did have 2 quarters of negative GDP growth right in here with Biden, but the White House just waved their magic wand and said, we don't. It's not. It's not a recession. We're good. So I don't know, but we'll we'll see. Maybe that caused it. And it was, and then it was it was transitory to their credit. It did come back, and we have had good GDP prints. We had a great GDP print last quarter. We'll see if we have another good one this quarter as well. It seemingly so far. The Trump plan is working, at least in my context. We are seeing record tariff inflows. We saw an over 3-handle GDP print year over year, and I, you know, every company that I'm talking to, we have, I think it's around $11 trillion of foreign investment that is now committed to the United States, and there's a lot of optimism from especially the tech community on what's being built right now. Let's juxtapose that against, and here we are, we're 10 minutes away from Jerome Powell. He'll be live in 10 minutes here. We'll be back and we'll go here, but let's juxtapose that data against a few other places in the economy. A big place that's been hurt by this, obviously tech has done well. Real estate has been hammered. I mean, we have, you can see here, so this is actually looking at delinquency rates. on single-family residential mortgages. So obviously, we saw the great financial— the real estate crash here, '08, '09, '10, huge delinquency rates. That's over 10%. This is one of the telling factors. If you watched The Big Short with Michael Burry, he was looking at delinquency rates on— because that's— if someone can't pay their mortgage, like people, you know, they'll miss a car payment sometimes, they'll miss other payments. But if you start missing your mortgage payments, that's a lot of times the last thing you start missing before there's a big crack. So since then, people have watched this pretty directly. So far, delinquency rates, at least according to this data, haven't spiked. And again, this is looking at single-family residential mortgages, haven't spiked. Okay. Now, with high rates, though, the actual transaction of real estate has decreased massively. Let's look at— at least that's the rhetoric. Let's look actually at the median sales price of houses sold in the United States. So let's go. You can see kind of this trend line. Let's go last 10 years. So we saw the median price here, $329,000. You can see after, after COVID with essentially free money, I got a mortgage in COVID for 2.6%. Today, you know, you get a mortgage for 6.5%, right? Maybe, maybe 6% today after today's cut. That's a big difference. That's triple the mortgage I got for the same house. So you saw— but during this period, you saw house prices spike quite a bit. Even with that, home prices really haven't fallen that much. I mean, look at this. We're median price $410,000. With how hard it is to buy a home. One, I had an economist on my show recently and he mentioned this. He actually shared. Now, I'll give you rough data. You can fact-check me. I'll give you, but I'm just telling you it's rough data. So I'll use rough numbers because I don't remember exactly the data. He gave me the exact numbers. But he said roughly, 45% of homes in America are paid off, which is kind of cool. So they don't— they aren't affected by this. And if you have a paid-off home, you're probably not going to move and get a 6.25% mortgage, 6% mortgage right now. So you're not trading. Furthermore, he mentioned another 30% was his— 30% to 35%. And don't— you can fact-check me, but let's call it 30%. We'll take the lower number, 30%. Had mortgage rental rates below 3.5%. If you have a mortgage rate right now below 3.5%, it's an asset and you probably don't want to sell or trade that. And so what happens is that only leaves about 25% of the market that will actually trade hands. And we still have a housing shortage in most cities in the United States. And so when you look back at this chart, that's when things start to make sense. The affordability of a house has been— some would call it, I mean, a lot of economists said about double. If you look at just mortgage rates, it's doubled since COVID But we haven't seen a drop in housing prices because there's so few houses are even trading hands. And when you have very few houses trading hands, all the industry around real estate gets nipped. Currently, about 14% of our GDP is around real estate. That's construction people. That's real estate agents, that's mortgage brokers, that's mortgage companies. All have had a major, major slowdown because of this. And Donald Trump knows this, I believe, because he's in the real estate market and people that have boots on the ground, to use that term, see this directly. I mean, we have seen quite a recession here in the real estate space just due to what the Federal Reserve has done with spiking rates. And so today's move and we'll see in just a few minutes where their dot plot comes out. and they're going to tell us a little bit more, might be a huge breath of relief for people that are in the real estate market. Furthermore, one thing that I'll mention that is not included in these, and maybe this is, I'm going to give you anecdotal information. I don't want to share private data because, anyways, I don't want to share private data. We put out on LinkedIn though, if you pull up my LinkedIn, we put out a job on our recruiter, so LinkedIn recruiter. We wanted to hire someone and I don't want to share their name, so I won't pull it up here. We got in about a week, this is for an AI engineer, we're building out Funnel Launch AI, you can see on my chest here, we got over 1,000 applications in one week for this job. And I was like, that can't be right. You know, and it wasn't that, like the salary range wasn't crazy, like it was pretty on par, 1,000 applications. And I said, well, maybe these are AI bots. Maybe these are people that aren't, you know, like, you know, are they real people? We started to message and call. These are real people. These are real humans. Unless they have, I don't know, some crazy AI thing, but these are real humans I was talking to. And they're like, yeah, it's been tough. There's been mass, a lot of tech companies have had lots of layoffs. And they're like, it's a tough job market. We just recently put out to hire a CTO. So we started to call around. I spent the last, I probably have spent, 40 to 50 hours in the last 2 weeks trying to, I've been on back-to-back interviews for days and hours after hours meeting with great people, headhunting, trying to find someone who can be a really good CTO for Funnel Launch. We're moving into more of a tech brand here. It was so interesting. I was messaging and DMing, I live in Silicon Slopes in Utah, it's like this kind of somewhat of a tech hub, not quite as big as Silicon Valley or other places, but there's a good tech hub in Utah and I'm messaging Top talent at these big billion-dollar companies nearby my office right here. You would be shocked how many of them, number one, responded right away. Oh yeah, I'd love to hop on a call. Number two, I hop on and, how's your company doing?

Oh man.

Yeah, we're not going to make it to our Series B. Yeah, we're going down. And so I'm trying to find another job before things go. Yeah, we raised a seed, but yeah, Series A is not going to happen. You know, we have a product out there, but we're not quite finding product-market fit. Furthermore, we're not hiring anymore 'cause AI has replaced a lot of junior engineers and we can just hire senior engineers for the same price as junior engineers now, so we don't need junior engineers. And these guys have a 125-person engineering org and they're like, yeah, we only hire senior devs now 'cause they're the same cost as a junior dev. One guy told me on the phone, he's like, and he had worked at all these big companies, hired hundreds of people, he's like, A senior dev used to be $300,000, $400,000. They're now going for about $150,000. Like, it's corrected hard for senior devs. We had a guy apply to work with us. Amazon, a few years ago, was paying him around $800,000 a year, which is just crazy. He's like, they were shoving it on me. And he told us, yeah, I don't expect that money. And we said, hey, we're coming at, you know, one option would be at around a $200,000 salary range. Is that— in the ballpark? He's like, oh, 100%. This is a guy that made, for years, $800,000+ at Amazon, was totally fine taking $200,000 a year salary, plus some upside and some perks and stuff, and pretty interesting. So, I think in certain categories of the economy, we're seeing, obviously, let's go back to our market, we're seeing all-time highs in a lot of sectors, productivity, efficiency gains, but we're also seeing a mass displacement and disruption from—

Displacement.

AI in certain categories. And so something that I've done currently, I run 2 funds. I run a blockchain crypto investment fund and I run a GP stakes fund. Combined aggregate portfolio AUM is around $280 million. Those 2 funds have raised about $51 million of equity. So I currently actively run those funds. And it's interesting to see all this economic data come from a lot of different sources because we help a lot of people run funds. And what's so interesting is certain areas of the economy are booming and certain areas are being drastically left behind. And rate cuts is a— we just talked about real estate and/or engineering is massive. The last thing I'll mention, we have Jerome Powell coming live in 2 minutes. You can even share that screen if you want. It's just a pending. They'll be live here in about 2 minutes. Something interesting as well that we saw is a lot of, which is this is out now on the pro side. A lot of these, let's call them junior devs, young devs that are coming out of college, very sharp individuals. But big companies like Meta or Tesla, whoever the company is, aren't really hiring junior devs anymore because AI and Claude Code and Perplexity and those other ones have replaced their jobs. And to a degree, they're saying, well, screw it, I'm going to go start my own business. And so we've seen a number of call them junior or young engineers saying, I can go vibe code up an idea, a prototype. I can actually go raise a seed round because venture has a lot of dollars on the sideline they want to deploy and we actually can spin up businesses. So, back to the bull case, to Cathie Wood thinking we're going to have an 8% or 9% GDP growth in a couple of years. You are seeing a full renaissance of young, hungry entrepreneurs that are a lot of times technical co-founders saying, well, no one's hiring me. I might as well use these tech tools, AI tools to go build my own business. And the amount of entrepreneurship growth right now, I think is massive, which is so cool. So that's kind of the bull case. You have a negative case. So again, some sectors are getting blown up, traditional jobs, whatever. But you're seeing like engineers, for example, are pivoting and saying, well, let's just start our own business. Real estate professionals, hopefully some rate cuts this year will help them a lot. Now let's tune in here if you wanna, Just you can actually just load the screen. It'll play like a waiting screen, and then we'll all go quiet here once Jerome Powell comes live. Oh, here we are! And then once he's up there, we'll kind of give some commentary on what's going on today. And anyway, should be fun. So type in the chat hello if you guys are there. Say what's up? What's up? Was that all right? A little bit economic, you know, thirty-minute intro, and then we'll have Jerome Powell here talking. We'll see. So today they're going to release the dot plot. They do this every other FOMC. This is their economic projections of where they think the Fed funds rates will land. All right. Here's Jerome Powell. We'll, we'll chime in here. Let's make sure the audio is working. Let us know if things aren't working.

Good afternoon. My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. While the unemployment rate remains low, it has edged up. Job gains have slowed, and downside risks to employment have risen. At the same time, inflation has risen recently and remains somewhat elevated. In support of our goals and in light of the shift in the balance of risks, today the Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point. We also decided to continue to reduce our securities holdings. I'll have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that growth of economic activity has moderated. GDP growth— GDP rose at a pace of around 1½% in the first half of the year, down from 2.5% last year. The moderation in growth largely reflects a slowdown in consumer spending. In contrast, business investment in equipment and intangibles has picked up from last year's pace. Activity in the housing sector remains weak. In our Summary of Economic Projections, the median participant projects GDP to rise 1.6% this year and 1.8% next year, a touch stronger than projected In June, in the labor market, the unemployment rate edged up to 4.3% in August, but remains little changed over the past year at a relatively low level. Payroll job gains have slowed significantly to a pace of just 29,000 per month over the past three months. A good part of the slowing likely reflects a decline in the growth of the labor force due to lower immigration. And lower labor force participation. Even so, labor demand has softened, and the recent pace of job creation appears to be running below the breakeven rate needed to hold the unemployment rate constant. In addition, wage growth has continued to moderate while still outpacing inflation. Overall, the marked slowing in both the supply of and demand for workers is unusual. In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen. In our SEP, the median projection for the unemployment rate is 4.5% at the end of this year and edges down thereafter. Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2% longer-run goal. Estimates— estimates based on the Consumer Price Index and other data indicate that total PCE prices rose 2.7% over the 12 months ending in August and that, excluding the volatile food and energy categories, core PCE prices rose 2.9%. These readings are higher than earlier in the year as inflation for goods has picked up. In contrast, Disinflation appears to be continuing for services. Near-term measures of inflation expectations have moved up on balance over the course of this year on news about tariffs, as reflected in both market- and survey-based measures. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2% inflation goal. The median projection in the SEP for total PCE inflation is 3.0% this year and falls to 2.6% in 2026 and to 2.1% in 2027. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today's meeting, the Committee decided to lower the target range for the federal funds rate by a quarter percentage point to 4 to to 4¼% and to continue reducing the size of our balance sheet. Changes to government policies continue to evolve, and their effects on the economy remain uncertain. Higher tariffs have begun to push up prices in some categories of goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation will be relatively short-lived. A one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed. Our obligation is to ensure that a one-time increase in the price level does not become an ongoing inflation problem. In the near term, risks to inflation are tilted to the upside and risks to employment to the downside. A challenging situation. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate. With downside risks to employment having increased, the balance of risks has shifted. Accordingly, we judged it appropriate at this meeting to take another step toward more— a more neutral policy stance. With today's decision, we remain well positioned to respond in a timely way to potential economic developments. We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks. In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario.

So it's all the way down to maybe 3 by the end of the year.

The median participant projects that the appropriate level of the The federal funds rate will be 3.6% at the end of this year, 3.4% at the end of 2026, and 3.1% at the end of 2027. This path is 1/4 percentage point lower than projected in June. As is always the case, these individual forecasts are subject to uncertainty, and they're not a Committee plan or decision. Policy is not on a preset course. The Fed has been assigned 2 goals for monetary policy: maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2% goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission, and we at the Fed will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to our discussion. There we go.

Pause for a second. So we'll take questions now. Just 2 things that you caught in there. They're calling on— we are seeing a weakening labor market. That's why we're cutting. They have to have a reason to cut. If you cut just to cut, that means like, what data do they know? It might crash the stock market and like, Because why are they cutting so heavily? If they cut a full percentage point today, for example, and said everything's great, we're just going to cut a percentage point, I think as an institutional investor would say, oh shoot, they know something we don't, we should sell as well. So they're trying to thread a needle here. Like I mentioned, in 1995 through 2000, they kind of thread this needle of cutting, but it looks like more cuts to come this year. I'm sure the first question will be around what's the plan for next cuts. But anyways, we'll go back to the dot plot in a minute. Let's hit this first question.

We're strongly committed to maintaining our independence, and beyond that, I really don't have anything to share.

Oh, it came back to live.

You're good.

Keep it going then.

Just a quick follow-up.

I'm sorry.

Can you—

you and other Fed officials have spoken extensively about the impact of tariffs on inflation, although perhaps with many companies appearing to eat the tariffs, tariffs may be impacting the labor market and other parts of the economy instead. Do you see that as a possible outcome here, the reason we're seeing some slowing, particularly in the labor market rather than in inflation? They've been blaming tariffs for months and months.

You know, it's certainly possible. You know, we were— we're beginning to see— we have begun to see goods prices showing through into higher inflation. And actually, the increase in goods prices accounts for most of the increase in inflation or perhaps all of the increase in inflation over the course of this year. Those are not very large effects at this point.

Wait, did he say—

and we do expect them— did he say all to continue to—

all inflation this year has been from tariffs of the rest of the year? That's kind of a crazy comment.

And, you know, it's also possible and that there may be effects on unemployment, but that I would say if you're looking at why employment is doing what it's doing, that's much more about the change in immigration. So the supply of workers has obviously come way down. There's very little growth, if any, in the supply of workers. And at the same time, demand for workers has also come down quite sharply, and to the point where we see what I've called a curious balance. Typically, when we say things are in balance, that sounds good. But in this case, the balance is because both supply and demand have come down quite sharply. Now, demand coming down a little more sharply because we now see the unemployment rate edging up.

So, yeah, immigration is down. That's very interesting. But to blame all of inflation on not the money spending that they're still doing is kind of crazy on tariffs. Chair Powell, do economic conditions and the balance of risks no longer warrant a restrictive policy setting?

So I don't think we can say that. But what we can say is this, that over the course of this year, we've kept our policy at a restrictive level. And people have different views, but a clearly restrictive level, I would say. So, and we were able to do that over the course of this year because the labor market was in very solid condition with strong job creation and all those things. I think if you start— go back to April and now look at the revised job creation numbers for May, June, July, and August, you can kind of— I can go along and say—

What he's talking about, they went and revised down all of the policies for job creation over the last couple of years, which is kind of crazy. Like there was a huge revision down and they were like, oh shoot, people actually didn't have jobs. They were putting out job data, they like, it was like 7 out of the last 9 jobs reports all got revised down, which means whoever's doing the jobs reports probably isn't doing a good job, 'cause they all are revised down. It's not like some should be revised up, some are down, all of them are overstated and then revised down later, which is kinda crazy. And so they're saying, we saw that, we go crap, we should probably pivot And cut rates, and I'm sure the next follow-up question will be: Why don't you cut more now? Anyways, they're trying to put a balance here. We've seen a huge weakening labor market, like we just talked about in the tech sector specifically. Anyways, I'm curious what he says here if you want to keep going.

Basis point cut today. You know, I think we've done we've done very large rate hikes and very large rate cuts in the last five years, and you tend to those at a time when we feel that policy is. A place and needs to move quickly. New place. That's not at all.

So he's saying that's not not at all what we're seeing right now is this in place. Is it buffering on their side too? We'll hit refresh here. Let's make sure it's good coming through.

Place. I guess I'm just you know trying to be in place. I guess I'm just. You know, trying to square the shift in the rate forecasts in the SEP towards more cuts than just three months ago with the fact that the forecast for unemployment didn't change.

Yeah, I think you could think of this in a way as a risk management cut because if you look at the SEP, hmm.

Yeah, it seems like our internet's good here. It might be on the actual Federal Reserve site. I don't know if too many people are logged in or something.

I guess I'm just trying to square the shift in the rate forecasts in the SEP towards more cuts than just—

You see the revisions and we see the new numbers. And I didn't— I don't want to put too much emphasis on payroll job creation.

So the question was, why change?

Just that the labor market—

nothing hasn't changed much.

And that tells you that it's time to take that into account in our know, in our policy.

So just looking at the SEP once again, the median participant has inflation higher than previously expected by the end of next year and the Fed not getting back to the 2% target until 2028. So I guess I'm just wondering how you characterize the risk to price pressures of kicking off a series of cuts at this point.

Yeah. So I would look at it this way. We, we fully understand and appreciate that we need to remain fully committed to restoring 2% inflation on a sustained basis. And we will do that. At the same time, we've got to weigh the risks to the 2 goals. And I would say since— really since April, to me, the risks of higher and more persistent inflation have probably become a little less. And that's partly because the labor market has softened. GDP growth has slowed. And so I would just say that, that, that the risks there have been less than one might think. And in terms of the labor market, what we're seeing is unemployment is still low, still a relatively low rate, but we're seeing downside risks.

He mentioned earlier that they're saving their bullets a little bit, but we'll see.

Michael McKee from Bloomberg Radio and Television.

This guy's pretty sharp.

I like him. I'm a little confused by your explanation of, well, the Fed cutting rates because of unemployment. If you think that most of what's happening in the employment area is related to immigration, which your rate cuts would address—

Great question.

How do you see that as more important than inflation, which has remained almost a full percentage point above your target? Well, I was saying that what's happening in the labor market has more to do with immigration than it has to do with tariffs. That was the point.

But we've stopped immigration, so that should help the labor market.

I didn't say that all of what's happening in the labor market is due to tariffs. I mean, you clearly have a slowing in— due to immigration. You clearly have a slowing in demand, which is now perhaps more than that in supply. And we know that because the unemployment rate has ticked up. So that's how— that's what I meant by that.

And this comes back to maybe a political Fed.

Every year since 2015, the SEP has forecast that you would hit your target 2 years later. And this year, this SEP says you're going to hit—

See the guy on the left of him just smiling?

2% does not seem to be in sight. Does that suggest—

What a great question. Yeah, 2% has not been hit.

Really achievable.

It's always 2 years later.

And any credibility problems? For you in telling people that that's what you're going to do if you can never reach it?

Big question.

I mean, you're right. It does say we're going to get to 2% inflation in 2028 at the end of '28. But that's, you know, that's literally how you put the projections together. You're writing down a rate path which is designed to create over the course of the next, you know, timeframe, 2% inflation and maximum employment, too. So that's—

but 2% is the target. You should be below it sometimes, above it sometimes.

Where the economy will be in 3 years. But the nature of the exercise is to write down policy that you believe would return to the 2% goal over the— at least, at least by the end of the exercise.

That was a crazy question, man. That guy's brave.

Thanks so much. Elizabeth Schulze with ABC News. The latest inflation report shows that prices are still going up across key categories for many households, including groceries. What will the Fed do if prices pick up more?

So our expectation— and you can see this consistently through the year— has been that inflation will move up this year, but that the, the effect— basically because of the effects on goods prices from tariffs— but that those will turn out to be a one-time price increase as opposed to creating an inflationary process. That's been our forecast pretty much every— all the individual forecasts say that. We can't just assume that, though, right? We have to— our job is literally to make sure that that is what happens. And we will do that job. Right now, the situation we're in is that we see inflation— we continue to expect it to move up, maybe not as high as we would have expected it to move up a few months ago. The pass-through into— of the tariffs into inflation has been slower and smaller. The labor market has softened. So the case for there being a persistent inflation outbreak is less. And so that's why we think it's time for us really to acknowledge that the risks to the other mandate have grown and that we should move in the direction of neutral.

So it's funny how much they keep bringing in to do.

But we have 2 mandates and we try to balance them.

And for immigration, 2 policy changes that are really affecting them.

For a long time, our framework says, when our 2 goals are in tension— this is quite an unusual situation— how do we decide what to do? Because our tools can't do 2 things at once. What we do is we ask, which is farther from— how far is each from the goal and how long is it expected to get to the goal? So, and then that's— we think about those things and we see, as I mentioned, we have been— Our policy had been really skewed toward inflation for a long time, really. Now we see that that there's downside risk clearly in the labor market, and so we're moving in the direction of more neutral policy.

How concerned are you about the slowdown in the jobs market for households at home, especially younger Americans struggling to land a job?

So it's it's an interesting labor market, and obviously we we think it's appropriate that that we reduce our rates so that we become more neutral, which will be. Which presumably will be better for the labor market, you see people who are sort of more at the margins— so kids coming out of college and younger people, minorities— are having a hard time finding jobs. The overall job-finding rate is very, very low. However, the layoff rate is also very low. So you've got a low firing, low hiring. Environment. And the concern is that if you start to see layoffs, the people who are laid off won't— there won't be a lot of hiring going on. So that could very quickly flow into, uh, into higher unemployment. In a, in a healthier economy, healthier labor market, there would be jobs for those people. But now the hiring rate is very, very low. So that's been a growing concern over the last, last few months. And it's one of the reasons why we think it's appropriate that we begin to, begin to shift our Steve.

I love this guy, too. He's always fun.

Steve Liesman, CNBC.

Mr.

Chair, in the past, during rate cuts, you used the word recalibration. And I wonder if you pointedly did not use it this time. And, in fact, when you said policy is not on a preset course, did you mean that as sort of the opposite of recalibration? Are we meeting to meeting, data point by data point? Are we in the process here of getting back to neutral? Thank you. So I think we are— we're in a meeting-by-meeting situation. We're going to be looking at the data. You know what, let me— let me say a word about the SEP, really, here. So we often point this out. The— the— what the SEP is, it's— it's an accumulation— an accumulation of the individual projections of 19 people. Showing what they believe at a particular moment in time to be the most likely path for the economy, and thus the appropriate path for monetary policy as well. And as you know, we don't we don't debate or try to agree on what that is. We just write them down and accumulate them. We do sometimes discuss them, and so we always say we're not on a preset path, and we really mean that. The actual decisions we make are going to be based on the incoming data.

Can you pause for a second? Something um. Chamath Palihapitiya has been pointing to heavily, and actually Howard Ludnick, Secretary of the Commerce Department, has been putting all data now on the blockchain. It is seemingly like the economic data that they are receiving is very inaccurate and/or delayed by months, if not years. This is best noticed on the labor jobs report that was revised down, I think, President Trump has called to fire this person and reorg this whole way we collect data. And just last month, Secretary Ludnick said, let's put it on the blockchain and actually make it accessible because one criticism of the Fed is they're making, you know, he mentioned 19 governors are just, they are all putting a dot plot. We don't really discuss it beforehand. We all just put out what the right course and path should be. And then we put it together in a dot plot so you get a more independent view, not just one think tank view. But a lot of times the economic data that they are citing is wrong. And we just got that shown with the major revisions down in the labor and jobs market, which he's been citing a lot today as the reason they're cutting rates. And so a big question is, can they even trust the data they're getting? We all know how inefficient government— governments are. And then the data they're collecting in has now been proven that's been very inefficient for years and not accurate. And so can we increase the accuracy of data so that a Fed can move faster and make cuts and decisions more quickly? Like you mentioned, we're going to take in incoming data and we'll make the decision at the appropriate time, but almost an upgrade to how data is collected and/or decision-making processes made is another major discussion that I hope they would talk about here. It doesn't sound like they are going to talk about, Well, it's one of the biggest flaws, I think, and why they were— they missed the COVID cuts and increases by a drastic margin. For a long time, they said it was transitory, everything is fine. Then they said, oh shoot, inflation's here. Now we got to jack rates at the highest rate in history. And then— and now we've cut a little bit and then we're cutting some more. But we have very inaccurate job data, which is one of their— a part of their dual mandate. And so I wonder, hopefully maybe someone will ask a question on this. We can keep going though. Let's keep going here.

And this one isn't happening. So that's that's what I would say. Thank you for getting to my follow-up question, which was: Is the dispersion in the outlook a sign of uncertainty of policy in the in the in the meetings to come? Thank you. You know, it's it is such an unusual situation. Ordinarily, when the labor market is weak, inflation is low.

So what he's referencing before we pause for a second. The dot plot is very spread out. They have a— and we'll pull it up here again in just a minute, but the projection you just mentioned, they have quite a, you could call it a category of governors that don't quite agree. Typically, those dot plots are much tighter. We are seeing a broad range of swing. If you actually, maybe can you share my screen real quick? You'll see on here, this is what they published today. Let me scroll back up. You'll see economic projections. I mean, this is quite a big range. Yeah. Of dots. This is appropriate, you know, midpoint target range. You can kind of see here, it's quite a spread. Typically, these dots are much more centralized around a specific spot. So he's now going to answer that question of why it's so spread. And again, you see here core inflation, PCE, unemployment rate, they all are looking somewhat good. They're not projecting any big, big problems or big things. We see maybe GDP slowing a little bit. But we'll see. They've been quite wrong in the past on GDP rate. It'd be fun to superimpose this on previous projections to see how close or inaccurate they were. But my understanding is they've been— they've actually missed these quite a bit. Back to the data question. So let's, let's hear his answer to this. Why the dot spread is so spread out. You see these— look at this big outlier here, these outliers down below. So I'd love to hear his answer.

Really strong. That's when you've got to be careful about inflation. So We have a situation where we have two-sided risk, and that means there's no risk-free path. And so it's quite a difficult situation for policymakers. And it's, it's not at all surprising to me that you have a range of views. It's not so much about having different views for the path of the economy, but it's partly that. But it's also partly about what's the right thing to do in light of this, of the tension between the two goals. How do you weight them? How worried are you about one versus the other? And so it's it's it's natural. I think it would actually be surprising if you didn't have a pretty wide range of views based, you know, in this kind of highly unusual situation, and we do. So, but you know, we we we get together, we discuss, we have a great discussion, and then we decide what to do and we act. But you're right there that it is it's a wide dispersion of of views, and I think that's. I think that's understandable and natural in the current situation. Hi. Victoria Guida with Politico. You've talked a lot about Fed independence and the importance of it over the years.

But as markets have questions about what exactly President Trump's intentions are with the Fed, what would you point to as the things they should be watching to determine that the Fed is still making decisions based on, you know, the economic outlook rather than political considerations? Good question.

Look, it's deeply in our culture to do— he's not going to do our work based on the incoming data.

And we'll just look at incoming data. He's not going to answer that question, but it's a good question.

Everybody who is at the Fed really feels strongly about that way. So, you know, you'll know it by the way we talk about what we're doing, by the speeches that people give, by the decisions that we make. You'll know that we're And we don't— we don't frame these questions at all or see them in terms of political outcomes. I think when you get to another part of Washington, everything is seen through the lens of, does it help or hurt this political party, this politician? You know, that's the framework. And I think people find it hard to believe that that's just— that is not at all the way we think about things at the Fed.

I do find it hard to believe.

We're taking a longer perspective.

I'm one of those.

We're trying to be as neutral as possible. You know, serve the American people as best we can.

So I'll preface that statement. I think they are generally speaking trying to be neutral, but I think they get swayed by by policy.

You know, I would say they're swaying. We're doing our work exactly as we always have now, and people are they're making their their arguments, and and we're having a really a great discussion around these challenging issues.

So do you see the court case around Lisa Cook as being related to questions of Fed independence?

You know, I see it as a court case that it would be inappropriate for me to to comment on.

Yeah, no answer.

Yep.

Let's pause for a second. We'll look at the markets here. Can you share my screen? So this is if you see here, look at a one-day chart. You're seeing Bitcoin, ETH, Tesla. I just picked a few here. We can go actually. Let's go back. Quite a spike. Let me just come to S&P 500. So a little bit of movement here, but overall, I mean, nothing crazy. You know, we haven't seen a little bit of movement here, but as this— as his speech has gone on, we've seen markets selling off, come back a little bit. Let's look at, uh, one other index here. Take the Dow Jones. Um, so look at a 5— here's a 5-day chart. You can kind of see some moves here. We saw a little rally into the, into the meeting, and then now a chop back down in during the conversation we're having right now on, on how he's talking about the economy. So With that, let's keep going. Thanks, Mr. Chairman. Edward Lawrence from Fox Business. So we saw the preliminary benchmark revisions down 911,000. Yeah, I'm talking about the jobs revisions were the first negative revisions we've seen since December of 2020. You know, how can the Fed base important decisions on rate and what to do with the interest rates on data that seems to be, as you've called it in the past, noisy? Great question.

So on the QCEW, The revision that we saw was almost exactly what we expected. It was amazing how close the expectation was. So, and the reason for that is, for the last bunch of quarters, there's been almost a predictable overcount. And I think the you know the Bureau of Labor Statistics really does understand this, and they're working hard to fix it. It's got to do, of course, it has something to do with low response rates, but it's also got to do with what's called the birth. Death model, because a good amount of job creation happens around new companies and how many go out of business, how many are founded. And it's just really hard. You can't survey for that. You've got to have a model that predicts that. And it's quite difficult to do, especially when the economy is undergoing big changes. So— and they've been working on that and are making progress on it. But, you know, the data we get is still, well, good enough for us to do our work.

So they knew it was going to get cut. They just knew.

We have issues around data right now. Exactly what they predicted. It's about low response rates. That's happened all over, all over, really. Response rates are just lower to surveys now, both in and out of the government. And it's no great secret, you know, we want higher response rates and we need those to have, you know, less volatile data. And the way to get that is to make sure that the agencies that collect the data have sufficient resources to drive Higher response rates. It's not a complicated problem, but that's what it takes. It's not a mystery. That's what it takes. The other thing I'll say, Edward, is in the case of the jobs, job creation, the first, the response rate is quite low for the first month or lower for the first month. By the time you get to the second or third month, you're still collecting responses for that last month, for that prior month, and you get to the place where the data are much more reliable by the second and third month. Certainly the 3rd month. So it's not that we don't get the data; it's just that we get it a little later. But if—

well, for the benchmarks, if that holds, if 51% of the jobs that we thought were there weren't really there, it shows a weaker market— job market coming into this year. If you had had that information, would it have changed your mind related to where the interest rates should be? Great question. Call on his bluff a little bit about him not knowing the data.

You know, we have to look through the windshield rather than the rearview mirror, as you know. And all I can tell you is we see where we are now and we take appropriate action. And we took that appropriate action today.

Can you pause for a second? So this is my same question. And he just said, yeah, we knew that it was going to be revised down. And maybe they did. I think it's interesting in 2025 that we're just doing— we're just calling people. That's what he said. We just need to call more people. They need more. We need more resources so we can just call more people and survey more responses. I don't know the last time you responded to a government survey. I like, I don't know, and have been surveyed. It's pretty rare to trust just, I'm going to go survey people. And the people who respond to survey gives us a bias because certain people respond to surveys, certain people don't, to determine one of the most important data points that goes into making Central policy bank or central bank policy here is pretty interesting. I back to Howard Ludnick with maybe a blockchain. Maybe all companies have to maybe let's take all public companies have to publish their data. It gets put on a blockchain. We have a model that goes and looks at jobs and reporting. We have to file like I'm a business owner. We have about 76 employees through Fund Launch W-2 and 1099. They the government knows we have to file taxes and withholding and other things like they know. But you're just gonna pick up the phone and call people? That's your method of collecting data? It seems very archaic. I, man, I just, I would hope that they would want to spend, they have a lot of money. I mean, they create the money for the world reserve currency. I think you have the resources to go and say let's, and they have about, I think there's about 300 PhD economists that work for the Fed. And there's a funny— I heard another economist say that it's like a retirement home for PhD economists. But anyways, because that's just the only job they can get is just go work for the Fed. There's no one else that's hiring them. But why isn't there a better way to collect data? I looked on just on asking chat here. They'll ask about 600— excuse me, 60,000 US households each month. They just call them and/or send out email surveys. That's how they do it. Man, is there not a better way with all the data we use, the public reporting, all these public companies have to publicly report, even me as a private company, I have to report and file withholding taxes on all the stuff with W-2 employees, like they, I don't think it would be that hard, it just takes a little bit of, you know, some Silicon Valley to make that thing happen, so it's frustrating that they're making decisions on bad data. Huge jobs reports got revised down. Yeah, we knew they were gonna be revised down, maybe they did. But man, it seems, seems pretty archaic. All right, let's keep going here.

Thanks.

Howard Schneider with Reuters. So as you mentioned a minute ago, some margins of the job market would suggest that the slide's already happening. The Black unemployment rate in August was above 7%. Declining workweek, difficulty among college graduates finding work, rising youth unemployment. Why do you think a quarter percentage point now is going to arrest that?

Good question.

Well, I hadn't said that I thought a quarter point would make a huge difference to the economy, but you've got to look at the whole path of rates. Right. And markets already has already been baking in expectations. I mean, our market works through expectations.

Right.

So I think our policy path really does matter. And I think it's important that we use our tools to support the labor market when we do see Signs like that. I did mention that, you know, you see minorities' unemployment going up. You see younger people, people who are more vulnerable economically, more susceptible to economic cycles. That's one of the reasons, in addition to just overall lower payroll job creation, that shows you that at the margin the labor market is weakening. I would also point to labor force participation. Some part of the significant decline in labor force participation participation over the last year has probably been cyclical in nature rather than just the usual aging process. So we put all those together and we see that, that the labor market is softening and we don't need it to soften anymore, don't want it to. So we use our tools and, you know, we— it starts with a 25 basis point rate cut. But, you know, the market's also pricing in a rate path. I'm not blessing what the market's doing at all. I'm just saying it's not just one action. As a follow-up to that, the growth mix right now seems very concentrated in investment and on the consumer spending side in the higher-income groups. Do you feel that that's an unsustainable mix for the economy moving forward? I wouldn't say that. I mean, you're right, those are two— we're on We're getting unusually large amounts of economic activity through the AI buildout and corporate investment. I don't know how long that will go on. No one does. In terms of spending, you saw that the spend— the consumer spending numbers were well above expectations, and that may well be skewed toward higher-earning consumers. There's a lot of anecdotal evidence to suggest that nonetheless. It's spending. So, I mean, I think the economy is, is, you know, it's moving along. Economic growth is going to be 1.5% or better this year, maybe a little better. Forecasts have been coming up, as you can see. So labor market is— unemployment is low, but, you know, downside risks. But it's still a low unemployment rate. So That's how we see it.

Hi, Stephanie Rule, MSNBC. Treasury Secretary Scott Bessent has said that the Federal Reserve suffers from mission creep and institutional bloat. He's now calling for an independent review. Would you support an independent review, or are you open to any sort of reform in any areas of the Fed?

Boom! Great question. He's not going to answer it, but that was a great question.

Well, of course, I'm not going to comment on anything the Secretary says or, really, any other officer says. So, in terms of reform at the Fed, you know, we just— we just went through a lengthy and, I think, very successful process of updating our monetary policy framework. I would say there's a lot of work going on behind the scenes around the assets we have in the Federal Reserve Banks. We're looking at the size of the Federal Reserve System and at the Board. Are they the right size? We're actually going through a 10% headcount reduction through the whole Fed, including the Board and all the Reserve Banks. The employment at the Fed at the end of that will be basically at the same level it was more than 10 years ago. So we will have had zero job growth for more than a decade.

That's interesting.

When we're finished with that. We'll probably do more than that. So I think we're, we're certainly open to constructive criticism and, and ways to do our jobs better.

But not an independent review?

We're certainly open to, you know, to always trying to do better.

Yeah, Scott's been pushing on him hard. Mr. Chairman, Neil Irwin with Axios. There's been some debate lately on whether AI is already starting to affect the labor market in terms of lower labor demand. You've talked about the role of demand, higher productivity, by contrast. Do you buy that? And if that is true, does that have implications for the monetary policy setting?

So there's great uncertainty around that. I think my view, which is also a bit of a guess but widely shared, I think, is that you are seeing some effects, but it's not the main— not the main thing driving it. And so particular focus on young people coming out of college. And yeah, there may be something there. It may be that companies or other institutions that have been hiring younger people right out of college are able to use AI more than they had in the past. That may be part of the story.

If you missed earlier, you can pop— maybe pause it for a sec. Just anecdotally, it is a very hard labor market. Just Fund Launch, we had 1,000 applicants for an AI engineer. Many are junior dev. Like, no one is hiring junior devs. Not no one, but very few people are hiring junior devs. Because senior devs are in such abundance. It's so interesting that the first job displaced by AI is engineers. That's the craziest thing that is happening right now. Furthermore though, we're seeing hopefully a lot of, and I love talking entrepreneurship on our channel, is a lot of these young, well-trained from a university, you know, software engineer saying, let's go spin up our own company. I'm a big proponent of entrepreneurship. I think more companies is better. More capitalism is better. They're going to find inefficiencies and market problems that others won't find. And so I actually think this is going to— this will create some incredible companies that you're going to hear about in 5 or 6 or 8 years that started out of 2024, 2025. We couldn't get a job out of college, so we went and spun up this new startup that's now worth all this, these billions of dollars. So, but I agree wholeheartedly, just anecdotally, it is, it is a tough labor market. I think, I think much tougher than they are even putting out. They, you know, cutting rates based on labor market, I think is spot on. I don't think it's because of immigration. If anything, a tighter immigration on the southern border, I don't think is affecting, you know, Silicon Valley or other jobs. But maybe it is. They, maybe they, they know more than me. But when you tighten immigration, actually should have more jobs available for less workers. Your unemployment rate should go down. But he was saying earlier, he's like, well, we've also seen is less demand for jobs and immigration. So I think, and also I think immigration has been, we have an employee right now immigrating from Canada. It's not that hard to immigrate if you just follow the rules and have a visa to get workers. I don't think it's that hard to get employees. It was more illegal immigration they're stopping. But it's funny that they keep blaming immigration on this. But furthermore, what I anticipate, I think the labor market is much worse than the reports put out. I think, I anecdotally know quite a few people who are Borderlined unemployed. Now, if you call them up and surveyed them, they'd say, well, I have a— I Uber on the weekend. They have the gig economy. They have side hustles or they're part-time employed or they do something on Fiverr or they have a little something going on. But are they fully employed to a full income? No, not at all. And I think we have seen a big shift from full-time employment to more of this gig economy. And those are still counted as jobs, part-time or full-time. And so when you look at full-time working jobs, it's actually way lower than I think that they're anticipating here. And so further rate cuts and maybe they don't want to say that outright because then they would cause a crash in the market because people would be very scared. But I personally think that's the case. I think rate cuts are going to help throughout, especially the real estate part of the economy and/or small businesses borrowing money. Just across the board, rate cuts help spur on that. But I think the problems are bigger here. Now, they don't want to say that. And also, we've seen all-time highs in other parts of the economy. So we're seeing this. dispersion of, you could call it a wealth gap, but an economy gap of, and he mentioned this earlier, we're seeing wealthy consumers consume, and we're seeing low-end consumers probably not consume as much, but he goes, he just said it, he said, well, consumption is consumption. We're still seeing a strong consumer, even though it's probably just high-income consumer, high-income earners consuming a lot more, but he goes, yeah, consumption is consumption, but I think we're seeing this, you could call it a wealth gap, this divide happening even further, and— high rates is not helping that at all. And so you can look at economic projections here, but potentially going to lower rates here will help, I think, a lot of people in the economy across the board. Let's keep going here.

Though, that, you know, job creation more broadly has slowed down, the economy has slowed down. And so it's probably a number of things. But yeah, it's, it's probably a factor. Hard to say how big it is.

Thanks, Mr. Chairman. What evidence—

what evidence do you see of tariffs showing up in inflation? Well, if you— you can take goods, just sort of the broad goods category. And last year, goods inflation was negative. If you go back 25 years, that was the typical thing, was that goods inflation was negative. Goods prices generally went down, even adjusting for quality. So that was not the case during the pandemic. Of course, goods inflation went very high, but we had essentially returned to zero or slightly negative inflation. Now, I think goods inflation over the course of the past year is 1.2%, which doesn't sound like a lot, but it's a big change. So we think—I mean, analysts have different views—but we think it's contributing, you know. 0.3 or 0.4 or something like that to the current core PCE inflation reading, which is 2.9%. So it's contributing. What seems to be happening is that, you know, the tariffs are not— mostly not being paid by exporters, mostly being paid by really the companies that sit between the exporter and the consumer. So if you buy something and you sell it through retail or you use it to make a product, you're probably taking those— a lot of those costs on and not able to pass it fully along to the consumer yet. That appears to be what we're seeing. All of the companies—

So essentially saying it hasn't hit the consumer as much as they thought.

Companies in the middle, they'll tell you that they have every intention of passing that through in time, but they're not doing that now. To the consumer, the pass-through has been— Been pretty small. It's been slower and later, slower and smaller.

Because earlier this year, it's funny, if you pause for a second, Jerome Powell just was saying over and over again tariffs on this in this meeting tariffs are going to cause huge inflation. We can't cut rates because of all the tariff effects that they're going to be passed on consumers. And now he's kind of eating his own words saying, "Yeah, they aren't being passed on consumers. Businesses are just eating them one side or the other, and they're working quite well." It's kind of interesting. stance here from 6 months ago. Their rhetoric was this is going to cause mass inflation. We have to keep rates high because of what President Trump is doing. And it's proven to not be true so far. He just said in his own words, you can keep going.

The evidence is it's very clear that there's some pass-through. I also wanted to ask if you could share with us the conditions under which you might consider leaving the Fed in, in, in May. Well, I have nothing new on that for you today.

Big question. You could say he was just awkward asking that question too. You just saw it just choke out of his throat.

Hi, Katherine Sariva with Bloomberg News. I just wanted to follow up on, you know, one of your answers just a couple minutes ago. You know, we've often heard you talk about how you and your colleagues, you know, do not think about politics. This does not enter the room. But one of your new colleagues—

Is in the cabinet of Trump.

Right, where everything is seen through this framework of politics and of what party is being helped. And that person is still employed by the White House. How can markets and the public interpret, you know, some of his speeches, for example, and then some of, you know, the forecasts that we see today? I mean, the median for this year was moved because of the introduction of his forecast. I'm talking about the number of rate cuts seen this year. What do you— you know, what do you say to markets and the public that are trying to interpret—

So this Monday, a new economic adviser, Trump's economic adviser, got put into the Fed Governors Board.

There are 12— 19 participants, of whom 12 vote, as you know, on a rotating basis. So no one voter, you know, I think the only way that you can really— the only way for any voter to really move things around is to be incredibly persuasive. And the only way to do that in the context in which we work is to make really strong arguments based on the data and one's understanding of the economy. That's really all that matters. And that's how it's going to work. And I think that is the way the institution— that's in the DNA of the institution.

And then I wanted to ask about a Gallup poll that showed that Americans now have more confidence in the President than the Federal Reserve when it comes to doing what's right for the economy. Why do you think that is, and what's your response? What's your message to the public?

Our response is, we're going to do everything we can to use our tools to achieve the goals that Congress has given us.

That's a cutting question that he's not going to answer.

And we're not going to get distracted by anything. I think that's—

I see something crazy, actually. Maybe hit pause. He's not gonna answer this question. Um, show my screen here if you can. This is a screenshot. If people can see this, we got, um, uh, you know, clearance rate here from— this is from JPMorgan Chase. This is their yield, 3.8%. Uh, it's lower than the Fed's, meaning— I mean, you can mean a lot of things from here. One, one analysis would be The market believes it is safer to borrow money from JPMorgan Chase and be backed by the balance sheet of JPMorgan Chase than it is to be backed by the balance sheet of the Federal Reserve. That's what that number is telling us, which is pretty significant. And back to that, she mentioned a Gallup poll where a lot of people have more confidence in the president than they do in the Federal Reserve on economic policy. And I would, I mean, so far, to give back to that data, so far the Fed has been wrong and the president has been correct. Now we'll see how that plays out, but everyone criticized the tariff war. It was horrible, it was terrible, it was going to end the world. We have record tariff inflows. It seems to be working very well. Markets are at all-time highs despite a Federal Reserve that's not been cooperating, that didn't lower rates. When maybe they should have. And now they're seeing the effects of a labor market and maybe we'll dip into a recession or a silent recession, not an actual recession, but a silent recession in job and labor market. Maybe we already are in that. I've just seen that anecdotally. I see a lot of people without jobs. I think our— I think their labor statistics are way off, which we just talked about 3 times in this session so far and how they collect data. And there is a case to be made that the Federal Reserve have been too late and too slow to lower rates because they've been so politically motivated to be anti-Trump. And to be against, and to some point, you know, you want to keep the Federal Reserve independent. So if Trump pushes hard on something, you have to almost push against it and do the opposite of what he says to show that you're an independent Fed, which I totally agree with. And so I think Trump actually made a poor move being so public about his disdain against Jerome Powell. I think Powell would have lowered rates earlier if Trump wouldn't have tweeted all those things. And if you remember this, Multiple times this year, Trump has said, you know, too late, Powell. He should cut rates. He should cut rates earlier. And what that does to Powell is make— he has to now anchor his heels in and say, well, we're an independent Fed. So we actually can't cut rates because Trump is asking us to cut rates because it would look bad for the rest of the world. And I think Trump made actually a poor decision doing that. I think we would have lower rates today if Trump's ultimate goal was to lower rates. He should have used a little How to Win Friends and Influence People. Kept it private, even praised Jerome Powell and met with him privately and said, Jerome, we got to cut rates. And they did. Finally, they had a private meeting, but it was after these public tweets had gone out. And then everyone started questioning the independence of the Fed. And Trump tried to kick out Powell. He said, I'm going to replace the guy. I'm going to kick him out. I'm going to— And what that does is make Powell dig his heels in. And so I think Trump made a poor decision. I think the tariffs were really good. I think he's done really good things besides the rhetoric to Jerome Powell because it's made him dig his heels in. It's made rates stay up longer and it ultimately did not get the goal of what President Trump wanted was him to capitulate and to lower rates. And so I think it was just a poor, I think it was poor people management from a How to Win Friends and Influence People perspective, which phenomenal book by the way. I live my life, I try to at least live my life by that book. I've read that book probably 12 to 15 times. I read it almost once a year, 'cause I forget all the stuff inside of there and I have to relearn it. That book has changed my life more than anything and I think, man, it comes back to, I believe a lot of the moves this year have been very politically motivated one way or the other, which is unfortunate because I think we could be in a much better place economically if there wasn't so much headbutting from them. So, with that, let's keep going here. Clare Jones, Financial Times. Given the range of views expressed prior to the meeting, I think there was a lot less dissent today than a lot of people expected. It'd be good to know just what you think the drivers were of coming to that very strong consensus in the meeting, and also on the flip side, to just explain why the Dot plots are really so scattered between, you know, someone even expecting rates to end up higher by the end of the year. So we had 2 dissenting votes last, and then we had 1 dissenting vote this meeting, which is very unusual. We haven't had 2 in about 30 years. So much support for a cut today. And on the flip side, why there's so much divergence about what comes next. And then, yeah, the dot plots are quite a wide react—

a wide assessment that the situation has changed with I think that's a fair assessment with respect to the labor market, whereas we could still say, and did say in July, at the time of the July meeting, that the labor market was in solid condition, and we could point to 150,000 jobs per month and many other—

Yeah, but the data was wrong, and you knew it was wrong, apparently.

Well, I think that the new data that we've had— and it's not just payrolls, it's other things as well— suggests that there really is meaningful downside risk. Downside risk then. But I think that that downside risk is now a reality.

Okay, pause. Hold on. This is— he just said a moment ago, we anticipated the jobs to be changed. And now he's saying, ah, we thought that we were in a good labor market in July, and now we're seeing it was a bad labor market. He's not going to answer the question on the divergence because what you're seeing is a very— a Fed who's fighting internally. And I believe it comes back to Jerome Powell trying to play hardball against Trump's long tweets. And I think we'd avoid this whole situation if Trump wouldn't have pushed Jerome Powell so hard earlier this year. And, uh, because on the opposite, if Jerome Powell would have just followed what Trump said and stepped into line, then the commentary would be, well, is the Fed politically controlled by Trump? And do we even have a central bank, uh, independent Fed, or is it just another conglomerate of Washington? And Scott Bessinet came out against Trump and said, no, we got to have an independent Fed. That's a bad thing to have a— and cooled Trump down. But I think Trump made a huge mistake doing that because it pushed him into a corner where he only can act in a certain way. But what you're seeing is the Fed governors who don't have their head on the line and probably are posing to take his job. They have 11 people they're interviewing right now, apparently, from Scott Bessinet. I'm sure half of those governors are on that list. And so you see a scattered dot plot because they're trying to anchor to the Trump administration, hey, nominate me because I will fall in line, I will help do this, and I'm gonna show my dissent against what Jerome Powell is doing. And so you see a pretty scattered dot plot. Now, he's not gonna answer this question because how could he? But a very interesting question that she just asked. You can keep going.

Clearly more downside risk. So I think that was— I think that's broadly accepted. And so that meant different things for different people. Some, you know, some wrote down— almost everyone wrote down supported this cut, and some supported more cuts and some didn't, as you will see from the dot plot. So it's just the way— that's just the way it is. I mean, people have— it's— you have people who take this work very seriously, think about it all the time, do their work, discuss it with our colleagues. You know, we endlessly discuss this in— between ourselves, and then we have a meeting where we put it all out on the table, and this is what you get. And you're right, there is a— there's a range of views in the dots. And, and I think that's, like I said, very unsurprising given the quite unusual, historically unusual nature of the challenges that we face. But let's, let's remember, though, the unemployment rate's 4.3%. The economy is growing at 1.5%. So it's not a bad economy or anything like that. We've seen much more challenging economic times. But from a policy standpoint, the standpoint of what we're trying to accomplish, it's challenging to know what to do. There are, as I mentioned earlier, there are no risk-free paths now. It's not incredibly obvious what to do. So we have to keep our eye on inflation. At the same time, we cannot ignore— We must keep our eye on maximum employment, which is— those are our 2 equal goals. And you will see that there are just a range of views on what to do. Nonetheless, we came together today at the meeting and acted with a high degree of unity.

Markets are coming— if you share my screen real quick— markets rising now through the midpoint of the speech, which is interesting. It's always fun. I think it's always fun to watch the markets. You can see there. Let's go back to the S&P here. You saw a big kind of movement, I guess, during the speech, but now come right back up to where we were before. And if you look at a 5-day, looking right here to breaking again all-time highs here soon. So I think the market's responding positively to this speech he's given. Let's keep going. You mentioned earlier that job creation was running below your guess at its breakeven rate. I'd be curious to hear a bit more about that and where you think the breakeven rate is.

You know, so there are many different ways to calculate it, and none of them is perfect. But you know, it's clearly come way down. There you could you could say it's somewhere between zero and fifty thousand, and you'd be right or wrong. I mean, there's just many different ways to do it. So whatever wherever it was, one hundred and fifty thousand, two hundred thousand a few months ago, it's come down quite significantly. And that's because a very lower amount of people are joining the labor force. The labor force is really not growing much at this point. And that's a lot of where the supply of labor was coming from over the last 2 or 3 years. So we're not getting that now. We're also— we've got much lower demand. You know, it's interesting—

That's the harder part is demand.

Supply and demand have really come down together.

The supply is shrinking.

Except now we do have inflation. I think it's a good story, unemployment ticking up outside— just 1 tick outside of the range where it's been for a year. 4.3% is still a low level, but, you know, I think this level of— this speedy decline in both supply and demand has certainly gotten everyone's attention.

If I may, you mentioned the downside risk to employment a fair amount, but it's striking that measures of kind of activity quarter, those that we have seem pretty strong. The Atlanta Fed's GDPNow is very strong. You mentioned strong PCE numbers as well. How do you square those things? Is there— is there a chance actually could be upside risks to the labor market if those activity measures are right?

Well, that would be great. We'd love that to happen. So I don't know that you see a big tension there, but it's gratifying to see that economic activity is holding in. And it's, you know, so it's— it's a good— a good bit from consumption. It looks like consumption was stronger than expected. What we got earlier this, this week, I guess. But, and also we're getting, you know, a fairly narrow sector is, is producing a lot of economic activity, which is the, the AI buildout and, you know, business investment. So I, you know, we watch all of it. And I would say we, you know, we did move up the median for growth for this year, actually moved up. in the SEP between the June and September SEPs. So, and really—

I think they've asked most questions. We'll see if maybe we'll take one more here. But by the way, if you guys like this video or this style, please like this on YouTube if you can. Maybe we'll do more of these. Let us know and type in the comments if this has been good so far. But yeah, we're seeing the dot plot here. Let's do— well, we looked at dot plot, we looked at economic projections. He just mentioned are a little bit higher, so things are looking better even though you had a a pretty negative Fed on the Trump administration, and maybe a little bit why Trump was so mad at them. But labor market weakening, why they're cutting rates, looks like maybe another cut or 2 by end of the year. Dot plot is spread out though, so we'll see. I mean, we'll see what happens here. More, little more easing though for, for the economy here with the rate cut today. Pretty good. Thanks you guys for joining in today. Let's take, well, let's take 1 or 2 more questions. Hit the like button though if it's good, and then we'll, we'll probably wrap up here.

And labor market didn't change much. It's really the risks that we're seeing to the labor market that, that, that were the focus of today's decision.

Hi, Nicole Goodkind with Barron's. Thank you for taking my question. Given the cumulative impact of high interest rates on the housing sector, I'm wondering how concerned you are that current rate levels are exacerbating housing affordability issues Do you think that this is potentially hindering household formation and wealth accumulation for a segment of the population?

You know, housing is an interest-sensitive activity. So it's at the very center of monetary policy. When the pandemic hit and we cut rates to zero, the housing companies were incredibly grateful. Kept them going was that we, we cut so aggressively and provided credit and things like that. And they were able to finance because, because we did that. The other side of that is when inflation gets high and we raise rates and it— you're right, it does burden the housing industry. And so rates have come down a bit. And as that happens, we don't set the— we don't set mortgage rates, but our policy rate changes do tend to affect mortgage rates. And that has been happening. And that'll, that'll, of course, Raise demand. Lower borrowing rates for for builders will help, you know, get builders well supply. And so some of that should happen. I think most analysts think that it would have to be pretty big changes for it to matter a lot for the big changes in rates for the to matter a lot for the housing sector. And the you know the other thing is by you know by achieving maximum employment and price stability, that's a Yeah, I think that's a good thing. I think a strong economy, that's a good economy for housing. And then the last thing I'll say is, you know, there's a deeper problem here that is not a cyclical problem that the Fed can address, and that just is a pretty much nationwide housing shortage. Or, a lot of places in the country just don't have enough housing for people. And, you know, all of the areas around metropolitan areas like Washington, for example, are very built up, and so you're having to build farther and farther out.

And just a quick follow-up. During the last SEP, or the press conference following the last SEP, you seemed to indicate that policymakers lacked conviction about their projections, and I'm wondering if you still feel that way.

You know, forecasts— forecasting is very difficult even in placid times. And, as I've mentioned before, forecasters are a humble lot with much to be humble about. So I think right now is a particularly challenging time, even more uncertain than usual. And so I don't know any forecaster anywhere, really, ask any of the forecasters whether they have great confidence in the future.

Okay, we'll hit pause. Thank you guys for coming on today. You can catch the rest of it there. Usually, they start just asking the same questions over and over again. There's not much answers by this point. Some good questions today, though. I loved— we talked about economic data, how we're getting that, where we're going. If you like this video, hit like, subscribe to this channel. We talk all things economics, funds, how funds are built. If you want to learn how to build a fund, I actually put a free training. You'll see it in the chat there. fundlaunch.com/training. So I break down how funds are built, about 42 minutes. You can put it on 2x speed if you want. Breaks down how we build funds, how I run 2 funds right now, how fund managers get paid, why it's one of the best vehicles on earth to get, you know, make money. So y'all are amazing. Let's wrap up today. Please share this with your friends if this is useful. You can go back and watch this recording on YouTube if you'd like. Some good moments today, some funny things. And we'll see you in the next one. Bye-bye.