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tv   Bloomberg Markets Americas  Bloomberg  November 30, 2021 10:00am-11:00am EST

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markets with alix steel and guy johnson. alix: moderna's ceo warning omicron could evade existing vaccines. s&p lower on this risk off day. jp morgan says the new variant will not derail the global equity rally. we will talk to the rbc capital markets to get her view and the rate hikes chorus. bank of america joining goldman in predicting 3% hikes in 2022. we will bring you day one of powell and janet yellen's testimony to congress. my cohost is in london, guy johnson. i have to wonder, this is the last trading day of november. then we enter the shortened december. how much of that is playing into the price action? guy: part of it is something you want to think about. what is happening with
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volatility, that will have a meaningful impact on risk-benefit. clearly there's a huge debate about what that rate hike story will look like. there is clearly a pain a trade right now that everybody is trying to work out. a lot of people are being squeezed, especially what is happening at the front end of the curve. keeping and i on brent, opec will be a story to keep an eye on. alix: buying and the belly of the curve could indicate the 2023 hikes might be more off the table. 2022 we will see the hikes, but then we stopped a little bit, which i thought was quite interesting. guy: consumer confidence now, this is data for november. this is before we started to see a meaningful pickup in the delta variant and before we started talking about omicron. nevertheless, the data coming through, lifting a little bit in terms of the headline number, 109.5. -- the survey for this time around was 110.
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that is the headline number. the present situation, 142 down from 147, revised down lower, one 45. expectations dropped sharply versus the un-revise number. that has been revised to 89. expectations wide 87 point six. consumers are starting to get nervous. this could be what is happening with the virus, but it may also be because of inflation and what is happening with wages and the whole inflation and income squeeze. alix: you think november, maybe that was about inflation. maybe december's consumer read will be more what is happening with the virus. moderna said in an op-ed that the vaccine to fight the omicron variant could be ready by early 2022. if required the country -- the company's top executives reiterated that a new vaccine will be needed. >> i definitely think that this is something we haven't seen
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before. the number of variations, mutations on this virus are surprising. they are not theoretically impossible, but extremely rare. we have to take it for the serious threat that it poses. alix: the bloomberg managing editor for global business. wise the market taking this point so negatively when we knew that we could have this? >> i think that's right. there is a glass half empty, glass half-full thing going on with the vaccine makers. we also have comments from astrazeneca this afternoon saying there is no evidence at this point that our vaccine won't work against the new variant. that was interpreted a slightly different way from moderna, where it is more negative. the executives there have said all along we've known that it some point a variant might come along that could defeat these. we don't know at this point. all of the vaccine makers say it will take a couple of weeks to
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find this out. we will have more information. in that vacuum you will have a lot of speculation. guy: as that is happening, we are seeing a significant pickup in the delta variant numbers in the united states and in europe. europe seems to be the epicenter of that story. what can you tell us about what governments are doing to deal with the immediate threat? eric: there are some things happening that would have been seen as extraordinary a few weeks or months ago. you have some pretty strict mandates. they started in austria with the vaccine mandates they proposed. greece proposed fining people over $100 per month if they do not get a vaccine. in germany, there is talk of stricter measures. we are seeing this in a few places. governments are running out of patience with people who have not gotten the vaccine. whether it is threats or action,
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the steps are starting to be pretty strong. alix: i think that greece is finding people -- finding people over $100. each week, i think. the return to office narrative, getting back to normal, is that 100% on the table for the winter? eric: in the short term you would have to expect there would be some hiccups. what happens with the vaccines, it will be hard to to. i think at the moment people have been committed to the flexible model anyway. you can see people working from home or the office, depending on the day, and you have to think that will continue. in london we already had some pretty good numbers over the last few weeks of offices being pretty full, but that has not been reflected everywhere. guy: i would say trains the last couple of days have been a little quieter. that could be due to the weather. thank you. greatly appreciated.
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boris johnson will speak alongside his health secretary today on what is happening in the u.k. a little later, 11:00 eastern, 4:00 p.m. in the u.k.. concerned about the efficacy of existing vaccines against omicron, investors are debating whether it is time or we should wait to buy the dip. >> this economy and the stock market have weathered all kinds of turbulence over the years, and essentially every material downturn in the market was a good buying opportunity. i suspect this will be the same. >> along with those underlying fundamentals of the job market, personal income, corporate earnings and corporate profit margins are headed in the right direction, the tide is coming in and we would be a buyer of any dips. >> the strength of any court -- the strength of the correction
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on friday is an indication of how weak the conviction is in a stronger economy. people feel they have to be invested in the market. >> retail investors are aggressively buying the dip. i see that continuing for a while. guy: let's bring in another voice into the conversation come the head of u.s. equities strategy. it is great to see you. we are seeing a lot of volatility, but ultimately does it end up in the same place, the market buys the dip? >> i think so. it is a question of how low it goes from here. does it go lower from here? i wouldn't be surprised if friday turns out to be below. one of the guests that you quoted mentioned retail investors. i don't know that they have stepped in to buy the market in a big way. you look at the survey from last week, they had taken a bearish step before the news came out. that is one positive underpinning that is yet to come. when we look at institutional investors they are taking a wait
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and see approach. we did a survey yesterday afternoon after biden spoke and we found most people are not doing anything with their portfolios. i think sentiment is precarious, but we will end up in the same place buying the dip. i think it is the near-term. alix: i found your survey interesting, but the question becomes what do they do? what do they buy? if they are not going to buy the dip yet, when they do, what will it be? lori: if you look at friday versus yesterday's price action you saw two different markets. things like health care. yesterday we saw the secular growth in technology do quite well and we are seeing that in early trading today. while we are in the information vacuum trying to figure out exactly where the variant is headed, investors will not go back into defensive. they will go back and what they were buying yesterday and this
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morning, stick with tech. we saw really interesting tidbits of this in our survey, among those actually doing something with their portfolios, the minority, it was split between those who are buying secular growth and quality, 20% of the survey. then there was another bunch of a similar percent buying circular. they are split whether they are buying aggressively or cautiously. my money is on cautious buying for at least the next two weeks. guy: we will hear from the fed chair on capitol hill. do you think he has the markets back? lori: i think investors are confused where the fed is going. that is something we probed in our survey to figure out what the market is pricing in. half think there will be no impact on the taper. in terms of hikes there is a minority, 20% or so, that thinks hikes are pushed back. a similar number said that it wouldn't. alix: we will get deeper into
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that in a moment. i wonder, you mentioned what they will buy on the dip, but over the next four weeks we will have rebalancing. the santa claus rally. what do you think of the next four weeks, what will they bring? lori: i think we will see people grow back into the longer term structural winners, the tech stocks, internet stocks, the big secular growth oriented discretionary names. we have seen areas like energy and financials have quite a good year. i don't necessarily think you will see people trying to buy some of those trades on recent weakness. people will be focused on the longer-term stocks and look for safety and those kinds of names. i don't know if we will see that leaders-laggards tray that we usually see. guy: financials? lori: financials are held hostage to bond yields. that's all you need to know how the sector will trade relative to the broad market.
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i wish i could give you better color than that. they are super cheap and look great outside the bond yield issue. i think some value trade gets going and it will be a fantastic place to be, but it could be challenged in the short term. one thing that we've seen historically as value doesn't work when covid cases are rising. alix: what about oil? lori: loyal i think is more challenged in the short term -- oil i think is more challenged in the short term then financials. regular investors are willing to make financials, but energy is caught up in the macro trade. when you are scared on the macro, that is an easy place to pool. -- to pull. alix: we have the senate banking committee chairman currently giving the opening statements. we will bring you the testimony of the senate banking committee later in the hour. this is bloomberg. ♪ >> earlier this month i was
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pleased to see the fed announced a long overdue taper. quantitative easing should be used in emergencies only and we are well past the need for such support.
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>> including providing free preschool, paid leave, child care to name a few. democrats are attempting to hide the unprecedented enormity through budget committees. alix: that was the senate banking committee ranking member speaking right now. we are waiting for -- awaiting janet yellen. we want to bring in the bloomberg correspondent michael mckee. what stood out and what are you
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looking for? michael: not a lot stands out because the treasury and fed chair are trying to be as circumspect as possible, because as you repeated over and over in the immortal words of william goldman, no one knows anything about the new variant yet. how hard does jay powell push back the idea that the fed will taper faster, or does he pushback at all? you look at his statement and you see this, poses risks, increased uncertainty, could reduce, would slow. a lot of conditionals as the fed chair tries to keep his options open. here is why. the fed does not have to make a move every day. their next meeting is december 15. you can probably expect jay powell to talk about the u.s. economy has performed better during each successive wave of the coronavirus. if that is going to be the case
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the fed is not going to be as concerned with what happens. you can see -- i understand the treasury secretary is cutting me off. alix: almost. we are looking at janet yellen delivering her testimony to the senate banking committee. >> the largest infrastructure package in american history. november 5, it turned out, was a particularly consequential day. earlier that morning we received a very favorable jobs report. 531,000 jobs added. it is never wise to make too much of one piece of economic data. in this case, it was in addition to a mounting body of evidence that points to a clear conclusion, our economic recovery is on track. we are averaging half a million new jobs per month since
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january. gdp now exceeds its pre-pandemic levels. our unemployment rate is at its lowest level since the start of the pandemic, and our economy is on pace to reach full employment two years faster than the congressional budget office estimated. of course, the progress of our economy, of our economic recovery can't be separated from our progress against the pandemic, and i know that we are all following the news about the omicron variant. as the president said yesterday, we are still waiting for more data, but what remains true is that our best protection against the virus is the vaccine. people should get vaccinated and boosted. at this point, i am confident that our recovery remains strong and is even quite remarkable when put in context. we should not forget that last
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winter it was a risk that our economy was going to slip into a prolonged recession. there is an alternative reality we are right now millions more people cannot find a job, losing the roofs over their heads. it is clear what has separated us from that counterfactual is the bold release measures congress has enacted during the crisis, the cares act, the consolidated appropriations act, and the american rescue plan act. it is not just the passage of these laws that has made the difference, but they are effective implementation. treasury, as you know, was cast with administering a large portion of the relief funds provided by congress under those bills. during our last quarterly hearing i spoke extensively about the state and local relief
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program, but i wanted to update you on some other measures. first, the american rescue plan's expanded child tax credit has been sent out every month since july, putting $77 billion in the pockets of families with more than 61 million children. families are using these funds for essential needs like food. in fact, according to the census bureau, food insecurity amongst families with children dropped 24% after the july payments, which is a profound economic and moral victory for the country. meanwhile, the emergency rental assistance program has significantly expanded, providing much-needed assistance to over 2 million households. this assistance has helped keep eviction rates below pre-pandemic levels.
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this month, we also released guidelines for the $10 billion state's small business credit initiative program which will provide targeted investments that will help small businesses grow and create well-paying jobs. as consequential as november was, december promises to be more so. there are two decisions facing congress that could send our economy in very different directions. the first is the debt limit. i cannot overstate how critical it is that congress addressed this issue. america must pay its bills on time and in full. if we do not we will eviscerate our current recovery. in a matter of days the majority of americans would suffer financial pain as critical payments like social security checks and military paychecks would not reach their bank
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accounts, and that would likely be followed by a deep recession. the second action involves the build back better agenda. i applaud the house for passing the bill and am hopeful that the senate will soon follow. build back better is the right economic decision for many reasons. it will, for example, end the childcare crisis in this country letting parents returned to work. these investments, we expect, to lead to a gdp increase over the long-term without increasing the national debt or deficit by $1. the offsets in these bills mean they reduce annual deficits over time. thanks to your work we have ensured that america will recover from this pandemic. with these bills we have the chance to ensure that america thrives in a post-pandemic world. with that, i am happy to take your questions.
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>> thank you. you are recognized, thank you for joining us. >> thank you, chairman brown, ranking member toomy. the economy has continued to strengthen. the rise in delta variant cases temporarily slowed progress this summer restraining previous rapid growth in household and business spending, intensifying supply chain disruptions, and in some cases keeping people from returning to work or looking for job. fiscal and monetary policy and healthy financial positions of households and businesses continue to support aggregate demand. recent data suggests that the post-september decline in cases corresponded to a pickup in economic growth. gdp appears on track to grow about 5% in 2021, the fastest pace in many years. as with overall economic activity, conditions in the labor market have continued to
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improve. the delta variant contributed to slower job growth this summer as factors related to the pandemic, such as caregiving needs and fear of the virus, cap to some people out of the labor force come despite strong demand for workers. october saw job growth below 531 thousand and the unemployment rate fell to 4.6% indicating a rebound in the pace of labor market improvement. there is still ground to cover to reach maximum unemployment for employment and neighbor force and we expect the progress to continue. -- joblessness continues to fall disproportionately on african-americans and hispanics. pandemic-related supply and demand imbalances have contributed to notable price increases in some areas. supply chain problems made it difficult for producers to meet strong demand, particularly for
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goods. increases in energy prices and rent is pushing inflation upwards, as a result overall inflation is running well above our 2% longer run goal with the price index up 5% over the 12 months ending in october. most forecasters, including at the fed, continue to expect inflation will move down significantly over the next year as supply and demand imbalances abates. it now appears that factors pushing inflation upward will linger well into next year. in addition, with the rapid improvement in the labor market, slack is diminishing and wages are rising at a brisk pace. we understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation. we are committed to our price stability goal and will use our tools both to support the
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economy and a strong labor market and prevent stronger inflation from becoming entrenched. the recent rise in covid-19 cases and emergence of the omicron variant pose downside risks to the employment and economic activity and increased uncertainty for inflation. greater concerns about the virus could reduce people's willingness to work in person, which was slow progress in the labor market and intensify supply chain disruptions. to conclude, we understand our actions affect communities and businesses across the country and everything we do is in service to our public mission. the fed will do everything we can to support a full recovery in employment and achieve our price stability goal. >> thank you. secretary yellen thank you for your comments. on the debt ceiling we have a few more weeks and we know failing to get this done will hurt families, small businesses,
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and our economy. the wall street journal reported two weeks ago that two thirds of the largest companies have larger profit margins than 2019. in 20 20 top ceos made 351 times the income that a typical worker made, even during an ongoing pandemic with increased supply and demand issues they refused to cut their own profits and raised prices on people and complained about having to pay workers more, never mind the fact they have been giving themselves raises for years without it impacting their prices. the cost of housing and medical care and almost everything else for most workers has been rising for years. you said the bipartisan infrastructure bill and build back better will bring the cost down for most americans. can you explain that? >> yes. the build back better plan contains support for households
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to help address some of the most burdensome and rapidly rising costs that they face. for example, the cost of childcare, which is virtually unaffordable for many american families. there is subsidies for quality childcare that will bring down the cost for the great majority of american families. universal pre-k for three-year-olds and four-year-olds. and child tax credit. all of that will bring down the cost of childcare and for families that are facing crushing burdens, for example very high rental costs in many areas. the additional money that they get through the child tax credit
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will help them keep a roof over their family's heads. as i indicated in my opening remarks, it is already helping them put food on the table. with respect to the costs of caring for the elderly, build back better contains support for those who are disabled and the elderly to get care in their homes. there are subsidies and increases in the pell grant and money for education and workforce training that will make them more affordable. and reduction in the costs of prescription drugs. these are some of the most burdensome items in the family budgets that have risen more rapidly than the general level
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of prices over time. the bill will help families meet those burdensome expenditures. >> thank you. chair powell, is it still your belief that higher prices in certain sectors are chiefly caused by the upheaval we are experiencing as a result of the pandemic, and as the pandemic eases so too should inflationary pressure? >> i would say this way. generally the higher prices that we are seeing are related to the supply and demand imbalances that can be traced directly back to the pandemic and reopening of the economy. it is also the case that price increases have spread more broadly in the recent few months across the economy. the risk of higher inflation has increased. >> thank you. this is a question for both of you.
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the dollar is controlled by the american people and -- we have seen tech firms put costs ahead of the public interest with our elections, our privacy, with competition in our markets. is it risky to let control over our money fall into the hands of these companies? sec. yellen: i believe stable coins can result in some greater efficiencies in the payment system. it could contribute to easier and more efficient payments, but only if they are adequately regulated and the president's working group that i cheered recently issued a report indicating that there are significant risks associated with these currencies, risks to
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the payment systems risks related to the concentration of economic power, and we have called upon congress to put in place stable coins, a regulatory framework that would make them safe and protect consumers, and put them on a level playing field with other providers of similar services, which is banks. >> do you agree? chair powell: i do. >> it is important to look at historical perspective will to both of you explained to me in other conversations, in the late 1990's and early 2000's, over-the-counter derivatives and sub prime mortgages were billed as financial innovations. regulators put -- pushed a weakened safeguard saying a
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cloud of uncertainty hung over the markets and their words could discourage innovation, growth, and drive transactions offshore. the banking lobby argued that regulating so prime mortgages would decrease borrower choice and reduce access to capital financial crisis. citing derivatives and subprime mortgages as keep factors in the crisis -- key factors in the crisis. the financial industry uses these same arguments in stable coins and decentralized finance platforms. all of us in both party should be concerned about that, should understand the historical parallels, and should listen to this bipartisan panel. the secretary of the treasury and the chairman of the federal reserve. >> since the topic of the debt ceiling came up, let us remind all of us something we
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know well. our democratic colleagues can raise the debt limit by themselves anytime they want. there is nothing republicans could do to stop them. the tools have been available all year long. republicans have offered to expedite the process. there's only one reason our democratic colleagues refused to use reconciliation. that is because they would have to specify the amount of debt they want to inflict on the american economy and avoid accountability for this terrible spending spree they are engaged in by office skating and not specifying a dollar amount. we should be very clear about what is going on. under the new inflation targeting the inflation target remains at 2% but is now on an average over an unspecified timeframe. the fed's preferred inflation method is running above 2% over the past five years. nearly 3% over the past two years, and four point 1% over
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the past year. it is above target and has been above target and is accelerating. the fed has maintained an extraordinary emergency monetary policy stance. it looks like this framework appears to be a weakening of the fed's commitment to stable prices. you believe this is transitory, but everything is transitory. life is transitory. how long does inflation have to run above your target before the fed decides maybe it is not so transitory? chair powell: well, first of all the test we have articulated has clearly been met. you are right, inflation has run well above 2% for long enough that if you look back a few years inflation averaged 2%. i think we can say -- it was not the case going into this episode and it had been many years since we had inflation at 2%. the word transitory has
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different meanings to different people. to many it carries a sense of short-lived. we attend to use it to mean -- we tend to use it to mean it won't leave a permanent mark in higher inflation. it is a good time to retire that word and explain more clearly what we mean. >> it is still striking me as extraordinary that the economy has gone past recovery and we are in a full-blown expansion. we have record high asset prices and housing is leading the way to wear in many markets housing is unaffordable to many people, yet the fed will purchase 35 million dollars in mortgage-backed security in december alone and it is scheduled to continue purchasing mortgage-backed securities for months on end. i would strongly urge you to reconsider the pace of the tapering. secretary yellen, i want to
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follow up on the discussion of stable payment points. payment stable points were defined, and the definition is "those stable coins to maintain stable value relative to fiat currency and have the potential to be used as a widespread means of payment." that covers every major stable coin that exists. what strikes me is the president's working group recommendation is all such stable coins be required to be issued by depository institutions only. the mechanism by which the value of the stable coin is maintained relative to fiat currency very significantly -- vary significantly. others look more like money market accounts and others look like something wholly new. why suggest that they all must
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be regulated the same way and treated as depository institutions? sec. yellen: they all have the potential to be used as a means of payment, regardless of how they are used at the outset when they are introduced. the structure they -- they x bows and adhere to that they have a stable value relative to a fiat currency is what the positive or institutions guarantee. >> i would suggest we think this through. the fundamentally different designs suggest there might be different regulatory approaches. mr. chairman, i want to note that pillar one of the biden administration's agreement will be the most significant international tax change and 100
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years. every one of our bilateral tax treaties would need to be modified.there is no historical precedent for bypassing the senate treaty. process to implement pillar one secretary yellen, during a recent finance committee briefing asked you to acknowledge the administration would need to come to the senate for treaty approval to implement pillar one. he responded the treasury has yet to determine if a treasury will be needed or not. my view, and that of many of my colleagues, implementing pillar one would require modifications to our existing bilateral tax treaties and those must be approved by two thirds of the senate. the executive branch cannot ignore the senate on a matter that is clearly our constitutional responsibility. >> senator reid is recognized from rhode island. >> let me thank secretary yellen for being our guest speaker at the providence chamber of commerce last week.
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i learned something. i always do when i am with the secretary. she is the only person that has been president of the council of advisors, chairman of the federal reserve, and secretary of the treasury. thank you for your work. chairman powell, let me extend my congratulations for your reappointment to the federal reserve. chairman powell, we have seen steady job growth. what is troubling is the labor participation rate remains depressed. until we get that participation rate higher we are going to have the complaints that we received, an inability to get workers, etc. how do we get that, and what do you think are the causes of the falloff in participation rate? chair powell: i did not catch the end? >> the causes of the
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participation rate and how do we rectify the causes? chair powell: since june the unemployment rate has dropped 6.5% and inflation has moved sideways, which was surprising when unemployment insurance ran off and schools reopened, and with vaccinations we thought that there would be a significant increase in labor supply and it hasn't happened. why? there is tremendous uncertainty to big part is linked to the ongoing pandemic. people answered surveys that they were reluctant to go back to work. they were reluctant to leave their caregiving responsibilities and go back to work because they feel like schools would be closing again, things like that. it is an issue. what i'm taking on board as it will take longer to get labor force participation back. we are not going back to the same economy. really, it will take -- often
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labor force participation follows improvements in the employment rate and we are probably on track to have that happen will stop that means to get back to the great labor market that we had before the pandemic. we will have to have a long extension. we will need price stability. the risk of high inflation is a risk too to getting back to such a labor market. >> madam secretary, let me thank you for your maximizing the flexibility in the emergency rental assistance program. steps like utility payments have been helpful to rhode islanders trying to get these returns. one area is difficult, the homeless population. can you look at and try to
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develop the ra guidelines that emphasize how funds can be appropriately used for homelessness? sec. yellen: that is an extremely important area. we are focused on it and will be happy to work with you on it. the e.r.a. funds can be used to provide so-called housing stability services, a range of services to the homeless to help them find stable shelter. something the treasury did, a kind of flexibility that we built into our guidelines, is e.r.a. statute requires that to be eligible for assistance a household has to have a
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so-called rental obligation. recognizing something like that would be challenging for families experiencing homelessness. we created an opportunity for e.r.a. grantees to provide individuals with a letter of intent to pay your rental obligation. with this letter of intent that would make it easier for the homeless to be able to secure housing. those are two forms of flexibility we think will help, and we would be glad to work with you to see if we can find more. >> thank you. communicating those provisions to local authorities would be helpful. with the homeowners assistance fund, i know that you are looking at the state plans. if you could accelerate that to get the money out -- because, as you well know a lot of these
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moratoriums on evictions are either going or gone and it would be helpful to get the money out. >> the senator is recognized. >> thank you. some appear to believe that you have announced that unless the debt limit increase or suspension occurs before december 15 at the treasury faces imminent default. that is not how i have read your comments. it would be helpful to clarify what your current projection is for when the treasury would run out of headroom and run dangerously low of operating cash. i also request that the treasury provide details of its latest debt and cash projections to the finance committee and i look forward to receiving those projections. sec. yellen: yes. let me clarify what i said. what i indicated in my recent
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letter to congress is that i have a high degree of confidence the treasury will be able to finance the u.s. government through december 15, but there would be scenarios in which treasury would not have sufficient funds to continue to finance the operations of the u.s. government beyond that date . i would note on december 15 treasury will invest funds from the infrastructure bill, and that will use up $118 billion worth of capacity when those funds from the highway trust fund are invested in government securities. i did not say that there was no
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way that we can make it past december 15. there is a range. there is uncertainty about whether cash to -- what cash balance will be or our resources. now there is uncertainty about where we will be december 15, and there are scenarios in which we can see it would not be possible to finance the government. that doesn't mean that there are not also scenarios in which we can. we think that it's important for congress to recognize that we may not be able to, and therefore to raise the debt ceiling expeditiously. >> thank you for the clarification. chair powell, inflation hit 6.2 percent last month, the highest in more than three decades step still, the administration is
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pushing for support of a nearly $2 trillion social spending package. that number even accepts the budget gimmick that hides real costs that could mean several trillion more in spending over the next 10 years will set most of that spending does nothing to ameliorate the problems of rising inflation and will in fact add fuel to the inflation fire. i'm concerned the administration is not taking inflation threat seriously and is, in the case of energy prices, enacting regulatory policies that are themselves threats. you agree that inflation is a serious threat to the economy, and how do you intend to address inflation? chair powell: i do think that the threat of persistently higher inflation has grown. i think my baseline expectation is still, as i mentioned, inflation will move down over the course of next year kosher
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-- next year closer to our target. clearly the expectation has risen and you have seen the policy adapt and you will see it continue to adapt. we will use our tools to make sure higher inflation does not become entrenched. >> i noted in your opening statement you indicated inflation pressures will linger into next year. you stand by that? chair powell: i think we can now see, certainly through the middle of next year, the expectation. forecasting is not a perfect art, as you may have noticed, but yes, into the middle of next year. that is our expectation, but what has happened is that date has been pushed out repeatedly as supply chain problems have not improved. >> if congress were to pass an additional $2 trillion in
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spending mixed with a number of increases in taxes, would that add to inflationary pressures? chair powell: i'm sorry. i will just know that we have a long-standing policy of not commenting on active legislation , as you probably are not surprised to hear. >> i expected that. you indicated that there would be a report by the fed on its discussion paper related to digital currencies, and that has been delayed several times. when can we expect the fed's report and are there reasons for the delay? chair powell: i would think very soon, in the coming weeks. the reasons are just trying to get it right and find the time to get it right. it has been a very busy time, as you all know. >> senator warner of virginia is recognized. sen. warner: congratulations chair powell on your
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reappointment. chair powell, i think that the fed's activities, specifically during the pandemic which included using 13 facilities and aggressive bond purchases actually help to stave off what would have been a complete economic meltdown. while we did not spend an excess of $5 trillion, mostly all, in an extraordinarily bipartisan way under president trump and president biden on recovery from covid, i think history will treat that as certain areas excessive, but from a historical perspective it will be real regarded or the american and world economy. i think as you have indicated, chair powell, we are seeing our economy come back. we will differ on the bipartisan infrastructure plan, but that is
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part of our job. since the november meeting, the fed signaled a shift, announcing moving back to some of the very aggressive means you've used and announcing a tapering on the pace of bond purchases month by month as the economy continues to strengthen. which factors most influence the decision for a gradual change, and how long you think it will take the fed to gradually wind down these purchases? chair powell: we have not made a decision, but the most recent data, particularly since the november f1 see meeting show inflation pressures and arachnid improvement in indicators without labor supply. and strong spending that the signifies significant
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growth. at this point the economy is strong and inflationary pressures are there and considering wrapping of the tapering we announced at the november meeting a few months sooner. i suspect we will discuss that in our upcoming meeting. between now and then we will see another labor market report and inflation report and get a better sense of the new covid variant before we make that decision. >> let's drill down a little bit. clearly, i was surprised come you said you were surprised, most of us were surprised coming back in september that we did not see more folks reenter the labor force. i believe tapering and frankly accelerating it can serve as an insurance policy if we do not
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see this return and we see the potential overheating of the economy. i do hope you will move more aggressively on the tapering. i would like to touch -- you mentioned some of the new variants with covid. what factors, you have to move quickly and we obviously moved very quickly under president trump at the outset of covid. hopefully we won't have to come back to those kinds of actions, but with the new variants coming on board, what are the markers that you will look at to determine how that might influence fed activity? chair powell: at this point i think we are all looking at the same thing and listening to the experts. i am not one of those, but i talked to those people and it is about transmissibility and the ability of the existing vaccines
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to address any new variant and the severity of the disease once it is contracted. i think we will know -- what i'm told by experts --quite a bit about the variants within a month, quite a bit in a week to 10 days, and only then can we make an assessment of the impact on the economy. for now, it is a risk. it is a risk to the baseline, not baked into our forecast. >> i am down to my last when he five seconds and i won't let it get away without raising an issue that i always raise with secretary yellen and will with you as well, and that is the smart action under president trump on investment advice and minority deposit institutions. i want to thank chairman brown and so many others that we made that investment and you are now implementing that. we have seen a great take-up
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rate in terms of tier one capital investment into these that hit low and moderate income individuals. with this demand exceeding, what else can we do to shore up these institutions? i would love to press both of you. maybe you can take this for the record since i have gone over. how to look at securitization so we can look at increased institutions. sec. yellen: we would be glad to work with you to discuss possibilities. i think the inclusion of funds into cdf eyes and mdi's is historic and it will make a tremendous difference to their ability to support businesses, particularly in minority areas.
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we have seen huge take-up of funds that have been provided. $4 billion. we are working through applications and will try to make decisions on investments shortly. it certainly shows that it is a program that has the potential to make an enormous difference. this lending, we would be happy to work with you to find ways to make it yet more effective. >> i am way over time. you can say yes, i will work with you to, and that would be great. chair powell: yes, i will work with you, too. >> mr. chairman, chairman powell, congratulations on your renomination. i look forward to supporting your nomination. i think you have provided stability during a challenging time. secretary yellen, it is good to
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see you once again and i thank you for your service to our country. in september before this committee i asked you when you would say enough is enough when it comes to our debt and deficit . you acknowledged that debt becomes an issue when it exceeds 100% of gdp, a level that we have hit, as you know. since the cost of servicing our debt has been negative due to a long stretch of negative rates, our debt has been less burdensome. because of skyrocketing inflation, i think that it's a matter of time before we exit this low interest rate environment. do you think, secretary yellen, it is time to start sounding some alarm bells with regard to the financing of our national debt? sec. yellen: i would not want to sound alarm bells. i think that we are in a sustainable debt path. resident biden was very clear --
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president biden was very clear when he proposed to build back better plan that it should be fully financed, as the infrastructure bill was. that is what cbo found. the fiscal plans that the biden administration has put forth in infrastructure and build back better will not worsen the debt or deficit path. indeed, by the end of the 10-year horizon, build back better lowers deficits and yields very great benefits beyond the 10-year horizon. particularly from the investment in the irs to enhance its ability to close the tax gap and collect revenues that are due under our tax.
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it is a fiscally responsible plan that makes matters better rather than worse. >> the reason for my question is , it is not just a matter of if we have a half trillion dollars or so that will have to be financed or more during a 10 year time period as the money comes back paying for programs that are four to five years in duration. rather, we have $29 trillion plus that will not only be refinanced during a time period, but may be refinanced at a higher rate. in fact, treasuries have run anywhere from 1.54 to 4.2%. they will trend upwards. there are some people who suggest treasuries may well hit 3.5% over the next 18 months. do you think that that would be a reasonable expectation? sec. yellen: the forecasts were
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included most recently in the midsession review. it assumes interest rates would move up over time over the 10 year horizon in line with the forecasts of blue-chip and other private-sector forecasters. even then, given the expectation that real interest rates are likely to remain low, below levels that prevailed for much of the postwar period for important structural reasons that we've seen plentiful savings at the global level and weak investment demand. even with interest rates moving up the interest burden of the debt remains quite manageable most of of course, there are
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