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tv   Making Money With Charles Payne  FOX Business  September 21, 2022 2:00pm-3:00pm EDT

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i have a strong line up. today's theme is john steinbeck classic "of mice and men." p.o.w. not only powerful person making news today. vladmir putin taking sabre-rattling to a whole new level and president guide speaking at the u.n. it's a huge day. i want to go to straight to edward lawrence live at federal reserve. reporter: so the federal reserve raised interest rates 3/4 of a percentage point this will be the third time in a row that happened from the federal reserve from a fed chairman likes to go 25 basis points at a time. the supply and demand imbalance lanes receipted to the pandemic higher food prices, broader pandemic pressures. the invasion of ukraine putting upward pressure according to federal reserve but did not messenger the chinese lockdowns. they downgrade the projections
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across board. the big one, the fed sees federal funds rate at 4.4% by end of this year. the fed sees one more rate hike in 2023 and possibly and rate cuts in 2024 and 2025. this year with two meetings left the federal reserve is indicating those hikes could be 75, 50 basis point combination of those two to get to the 4.4% federal funds rate at end of this year. cuts in 2024 they have to go back, go going back to the 25 basis point moves which the fed chairman does like to do, four rate hikes, rate cuts in 2024 and another four rate cuts in 2025 if they use that 25 basis point americament. gdp goes down to .2% of all of 2022. only growing by 1.2% in 2023 and 1.7% in 2024 and 1.8% in 2025. all under 2% growth for the foreseeable future.
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the fed believes the unemployment rate rises slightly from where it is to 3.8% by the end of this year. they have the unemployment rate going to 4.4% end of next year, staying there. the fed sees pce inflation, they have upgraded that projection to 5.4% by the end of this year, then going back to 2.8% at the end of next year, reaching their 2% tash get goal by the end of 2025, according to the federal reserve. they see core cpe inflation rising at 4.5%. this year the fed also saying they will continue the balance sheet run-off at current place they have outlined for that runoff. charles: edward, that is a whole lot, my friend. of course the market today will listen a taken tiffly to jay powell who has history of extreme responses to the fomc press conferences. his very first one was the shortest on record. you remember the s&p 500 stumbled over 5% from the high that session to the close that
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friday. now of course the last time out powell sounded too dovish. he sent the market higher but that prompted nonstop hawkish jawboning from his fellow fomc members, preceded infamous jack hon sole speech where he restored fed's credibility on wall street, at least that was the attempt. that want be fleeting. there is no way to please everyone with an condition on policy. this remind me of the book "of mice and men." our limitations despite best intentions ultimately everybody wants to know how we get back to normal which is 2% inflation? there is a growing camp says we will not get there for many, many years. joining me to just yardeni research president ed yardeni. ed, in your vast library, you have a copy of poem to a mouse by robert burns that inspired mice and men there is a important part. providing foresight may be vain. the best laid schemes "of mice
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and men" to oaf array. i leave us nothing but grief and pain for promised joy. the fed's task, when i look at this i think about the fed's task, in some ways isn't it almost impossible and from time to time aren't they going to lose control of the narrative? >> i think they do occasionally, maybe very often lose control of the narrative then they have to catch up which is exactly what they're doing now. certainly with the benefit of hindsight we can say the fed was way behind the inflation curve tightening too little too late. now it is being forced to kind of gun it. as a result we're getting big increases per meeting and now we'll see what powell does or doesn't telegraph at his press conference but he could very well indicate there is another similar increase coming at the next meeting. charles: right. >> so it's a lot of catching up to do. charles: speaking to that point, i know you were in the camp that
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said the fed should have gone 100 basis points today. >> should have, yeah. charles: we know the terminal rate is, 4 1/2, something like that. by the way i agree with you and it bothers me when i hear market participants folks who know this very well, saying the fed shouldn't go that high because it will spook the conundrum. at that because if he channeling inner volcker does that mean he has to stop pleasing wall street. >> he has to start channeling inner volcker past several months every now and then speeches, testimonies, recognition that volcker had to raise interest rates quite a bit because the priority was to bring inflation down and i think he is signaling he is in the same position where inflation is the top priority. the risk he has of course he will err this time the side of being too tight but that is kind of box he put himself in. charles: so i read your note yesterday and one of the things that just jumped right out at me you're saying there is plenty of
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liquidity. there will not be a credit crisis. >> yeah. charles: why would that be different this time? that seems to be one of the central concerns? >> correct. well, this whole environment has been different this time since the pandemic. everything has been kind of thrown up in the air and coming down into the very mixed fashion so it is hard to recognize current events to compare them to previous events but in the current situation the treasury provided a tremendous amount of liquidity through the rescue checks that a lot of people received and as a result personal savings actually piled up quite a bit. there is at least one trillion dollars in excess savings in the consumer sector. corporations refinanced their debt at record low interest rates, about $2 trillion have been refinanced. we have got money pouring in from overseas. i think these three things are providing a tremendous amount of liquidity which increases odds in my mind turns out to be what i call a rolling recession as
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owe poised to an outright recession. charles: with that in mind i understand you see a narrow trading range. put it up for folks at home. you're at 36,666, that ominous number. is this range that we'll trade in the rest of the year? >> yeah. i think the market hit its low on june 16 at 3666. i think it made its high for this trading range back on august 16thth. so sort of a two-month period. it was 4305. i think we'll trade in this range for a while here. i think earnings go sideways i don't think they go straight down. they go straight down in a rolling recession. all the volatility will be from the forward p-e as we continue to struggle what the fed is doing, what they will do next, when it will be over. charles: ed, thank you so much, my friend t was a pleasure and honor to have you kick the day
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off. i want to bring in economist nomi prins. there is also a line from "of mice and men," i can still tend the rabbit abouts, george, i didn't mean no harm. everyone remembers the sad part in the book and of course the movie. look at the excessive accommodation, transitory situation with respect to inflation. let's be honest they never lived up to the hype when they were being sold about recession, they would stop recessions. we still have these crazy cycles. is it time for us to rethink the federal reserve, all the powers, increasing roles they have in in society? >> absolutely, charles, that is such a poignant moment in "of mice and men" and relevant to this specific time because federal reserve chairman jerome powell has so much power. the fed increased the power since the financial crisis. the size of its book right now is the size of the u.s. debt in 2007, still just under nine trillion dollars. there is such an immense amount of power there. they sort of overdid all of that
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in the wake of the pandemic doubling down in terms of their procedures since the financial crisis. now we're in a situation where they even projected the economy is slowing down. they're still not using recession. we had two negative gdp quarters. we're about to have another negative and florida to negative one. that is the reality. the other reality we have very high energy prices food prices, rent prices and that will stay as well. inflation will wait it out. they went way too far inflating on monetary side. that will cause more than just pain that will really wreck some peoples lives. charles: it is ironic, i don't know if you had a chance to listen to ed yardeni, talks about excess savings. that terms blows mee away. he got it pegged $1.9 trillion, corporate doing well. isn't that part of conundrum, people keep spending inflation
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will not go down, toss in another trillion for inflation reduction act and student loan forgiveness, so you have jay powell and the fed has an impossible task against all the gusher money in their way? how do they navigate that? >> that is exactly true, i did see the segment with yardeni. i absolutely love his work. it is phenomenal. the reality yes there is a lot of debt out there. we're $31 trillion almost in the united states. global debt is 3 to 1. three dollars of debt to substantiate a dollar of economic growth. there is so much debt. a lot is a as a result of federal reserve and central bank policies over these years. people are having to pay money they have for higher priced goods because those goods are priced higher because of supply and other types of factors happening on the other side. people have the money. they don't have the choice. what that ultimately means is tightening their budgets, and that's where we start to see the economic recession come into play. charles: the worst of both
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worlds inflation and slowing economy at the same time. you brought up some of the parts of the inflation picture but i want to ask you about some of the structural things that now people are saying can't be changed. services ex energy, the sticky prices keep going up levels we have not seen in over 40 years. take out food and fuel. core was huge in the cpi. there is a growing camp that says we won't get back to 2% for many, many years. there is nothing the fed can do about it. your thoughts? >> i absolutely agree with that, here's why. even if we take out food and fuel, food and energy, reality energy still impacts all the other services in the other part of the cpi. health services, watching childrens services all the services we basically pay for require someone to get from point a to point b, or goods to get from point a to point b or factories to be powered. even if you take out the numbers, reality is the external
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factors squeezed up since the pandemic, winter coming up in terms of energy prices we'll see those factors continue to tighten inflation on the side that will impact ex food and inflation because food and fuel are a part of the rest of inflation. question have a situation we'll not get down to under 2% because we are not structurally set up to do that no matter what the fed says or tries to do. charles: we're in one hell of a predictment. thank you very much. appreciate it. meanwhile, folks the market seen sigh of relief rallies. think about it last four rate meetings, 25 basis-point hike up 2%, 50 basis point up 3%. 75 basis points, no problem, up 1 1/2%. july, up 2.6%. another 75 basis-point hike. right now that is not happening. these moves were premature. i want to bring in phil blancato. phil, the market is celebrating rate hikes as if it was mission accomplished.
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i don't know why we're going the other way. maybe it got its mind right. what is your assessment. marks competent has a sigh of relief hoping and thinking this is it? >> we had relief rally in july and august. people thought we were closer to the end than the beginning. in fairness, inflation is down, not just as fast where they want it to be. this time is a little different. the comments made at the end ever august and september made everyone pause thinking the fed has much further to go. from what they said today that is the case. the market is not recovering the way it has in the past because we're simply not there yet. charles: for all of the talk about this level of inflation one thing i wanted to share with the audience is that inflation is never really mattered right? it is the direction of inflation. so when inflation is going up the market on an annual basis usually goes up about 5 1/2%. when it's coming down no matter where it is coming down from that is a 15% move.
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knowing that if inflation has peaked and starts to come down doesn't that mean the market itself could go higher? >> exactly and that is the camp that i've been in, if you bought dividends this year were paid to wait around now is your opportunity to buy stocks, history is on your side. stocks are cheaper finely. specifically in every single market inflation cools market rallies look at this way, in the recent years, 1hikes we dealt with every single one of those years the stock market was positive. i know we're down a lot. this is your chance for a market desperately looking for the opportunity to get higher once the fed goes on pause. that is what matters here. even their expectations are only 1 1/2% away from the end of the hiking cycle. maybe two or three more rate hikes. this to me still represents an entry point. mid-october, is the turn around month that is the next fed meeting. we'll see how aggressive they are at that meeting because today you're watching commodities markets come down significantly which should
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filter through in lower and lower inflation as we go forward. charles: phil, let me ask you, i have the fed new economic projections. gdp they see now .2 of a percent from 1.7%. that is dramatic drop from this year. unemployment rate they see going up 4.4%. next year they thought it would be 3.9% before. there is nothing in here that says recession. and isn't that one of the hallmarks, isn't that one of the sort of markers we need to see, even if it is shallow, to suggest okay this work is done? maybe they're too optimistic this time, that is why the market is down? >> the reason we don't get recession, you have full unemployment. even 4.4% that -- you don't recess when consumer is this strong. ed yardeni said cash savings are filtering their way through the economy. what they're dealing with a new conundrum, lower, smaller workforce, much more jobs needed not pushing pressure on the consumer which is the driver of
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our economy. you're trying to create demand destruction. so far that hasn't really worked f the supply chain fully gets healed, commodities market, there is oil back to 150 which i don't think is the case especially what is happening around the world here they might get what they want. by hiking rates they will slow down demand the rest of market will help them catch up. the problem housing an rents that's a problem. charles: i have a minute to go. general mills, lifting all staples. you urged all viewers to have exposure to the sector as a place to hide out. i admit i've been skeptical historically they're so expensive but it is working s that a area you stay the course, staples, core names, we know they keep buying cereal? >> every time you get market volatility i receive a dividend i'm buying shares cheaper. i want to spend money where the consumer has got to send especially if which get a little bit weaker. dividends is great to wait and
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you. soothes the hurt of portfolio adding more stocks with the price of dividend. keep duration floating, short duration on the bonds, general mills, companies like that, people have to buy, pay a nice dividend soothes the problems you're facing. it will help you get recovery we'll get at the end of this year. charles: own what you eat. i'm a cheerios fanatic. i don't own general mills. you told me to buy it. thank you very much, my friend. appreciate you helping us navigate this. folks in a 24-hour period we will have heard messages from the most powerful people on the planet directly from their mouth. overnight vladmir putin today, president biden at the union of course the u.n., jerome jay powell, their words can potentially change lives and change history. joining me senator bill hagerty from tennessee. i want to begin with the speech from vladmir putin took sabre-rattling to a whole new
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level, it was unnerving to the russian population itself, one of the popular travel sites saw people looking for the way to get the hell out of that country. donetsk, reason in ukraine, soviet, closer to russia, they will have a vote becoming part of russia tomorrow, no, friday. russia sinning in 300,000 additional troops. i mean it feels like the chances of america getting involved in this war are much deeper are there. are we going to do more than just write checks if that happens? >> we need to have a plan, we need to have an idea what the endgame is. the biden administration needs to articulate what it wants the world to look like as this evolves. we don't know what the biden administration strategy is. go back to the beginning of this, vladmir putin has dug himself into a deep hole. he made some serious assumptions, two main assumptions. one his military was competent. indeed it has not been shown to be competent. and two, he thought ukraine would roll, 44 million people
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would capitulate. joe biden in day two offered to fly zelenskyy home to get him away from ukraine and bring him out. there are serious miscalculations from both sides on the outset. we've seen failure upon failure on behalf of the russian military. now he is bringing in 300,000 reservists i say they're not confident. i'm not concerned that the vladmir putin raised the threat of nuclear weapons. that has real serious impact, needs to be taken seriously by our administration. charles: it really does, but let's say on friday this vote goes through, this area, region of ukraine says we're part of russia now. invariably there will be exchange of fire. technically that would be ukraine has fired on russia. does that mean russia goes beyond these scrubs they have had in there, bring in more elite forces? i'm worried where it goes. you mentioned the endgame. should we be prepared for maybe
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the worst-case scenario. >> we certainly should be charles, you're right on the money there. we need to prepare for every scenario including the worst case. if vladmir putin decides to take a turn towards nuclear weapons. we have to take that very seriously. russia has the largest nuclear arsenal in the world. we need to understand the fact that vladmir putin is actually using words that are extremely threatening not only to ukraine but destablizing to the entirety of europe. charles: earlier today president biden did take that on at the united nations. i thought it was a pretty good speech that he gave but you know also made some overtures to what is happening in this country. he has gone real hard on so-called maga republicans. essentially he hate to say this talking about regular folks wearing red hats, equating them to people that wore white sheets in the day. i think that is despicable and dangerous. i keep hearing he will not stop. are you worried about the fabric of our nation is being ripped apart right now. >> it is extremely destructive.
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think about biden's inauguration speech in 2020, this is the biggest bait and switch we have ever seen. the speech in philadelphia is the most divisive speech i every seen. he is attacking half of america. demoralizing the country. we need to be uniting. facing its overseas. we need a strong america instead of waging war on half of the population. the rhetoric must change from the very top joe biden. >> irony, a poll out this week, harvard "harris poll" that americans are far more concerned about the socialist left than maga republicans. i hope someone communicates that to his team. before you go it is fed day. few moments jerome powell will speak. i'm shocked how much power the federal reserve has. when he opens his mouth today, trillions of dollars will be erased or gained artificially just like that yet the fed is taking on more and more power.
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what happened to congress? why does congress allow -- this fed is omnipotent. it is in every part of our lives. now people are being placed there to change the political philosophy? >> yes, we have oversight here and the challenge is the fact that democrats control the banking committee. the process is one where 50 votes plus one get as person on to the federal reserve board. the philosophy needs to come back to the true foundations. we need to stay in line focused on economy, not sure suing a social agenda. at the same time i wish the fed had acted sooner this is not a social comment. what we've known this inflation is not transitory. jay powell and i had the conversation since the spring of 2021. i wish we would act sooner. i'm glad to see things moving forward. the fed is taking on responsibility that i wish it had begun to undertake earlier so the situation wouldn't be where it is today. right now we're looking at 13.2% inflation since joe biden took office. there has been a lot of concerns because fiscal policy has
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created a lot of this. think about the march 2021 inflationary package passed on wholly partisan basis, almost two trillion dollars dumped into the economy. the some of that money is still not spend yet. so there is more inflation baked into the pipeline, charles a very challenging environment fed finds itself dealing with. charles: i wish they have one mandate like every other central bank in the world, to focus on inflation. all the other jobs they're taking on is too much. senator hagerty, thank you very much. >> good to be with you. charles: we've an up most of the morning. we tumbled since the announcement. which is ironic after the last four meetings it was exactly the opposite. we have two of the best, quill intelligence danielle dimartino booth, ubs private wealth managing director ali mccartney. ladies thank you for coming on the show. let me start with you, ali. we got 75 basis points. what is the initial reaction with the market pulling back like this? was they're something in the summary of economic projections
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perhaps? >> there sure was. 75 was much baked in in with tiny capacity for 100. basically the numbers went up, projections how high we were going went up, the timing went up and this is really based on three things, how high are we going, when are we going to get there and what's going to make you pivot? all the answers we've gotten so far, hopefully we get more in the commentary and questions were more hawkish than even the hawks were expecting. charles: it is interesting, we were talking in the green room, one thing, powell has got to bother him, how the market was higher. >> come again. charles: this keeps happening right? the market rallies, news come us it goes down. market rallies, cpi goes down. market still doesn't believe. we rallied into the jackson hole thing. every it feels like the coast is clear this market is saying we don't believe you, jay powell. >> i think it will take more than what we've seen in the dot-plot to break investors
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mentality, that the fed will back them up to stop losses. what is fascinating 0.2 projection for this year's gdp the fed announced to us we're operating under the assumption the united states economy is in recession. we'll keep going. 0.2%, that is a rounding error. >> atlanta fed 0.3, 2.6 not long ago. will there be any debate, 3/4ers in a a row? it is academic to have recession debate. ali, we come down, ironically wall street rao rooting for recession you killed inflation seems that is the better part of valor at this point? >> i would say before last week, before the last cpi print got embedded in the market there was hope for a soft landing. that was the narrative. what can the fed do, can we get there before channeling volcker? after the cpi print we've changed the narrative in the
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market from the soft landing how bad a recession, how we protect the dollar. how we make this work? i think what is happening now you're really having a conversation how all these things play together, how it will affect everything and what will it look like? the answer we all know nobody knows so the issue around credibility and fed credibility, when they put a 4.6 number out there can we respect that 4.6 number? and the problem is they are trying to manage the unemployment rate and inflation at the same time and they seem to be going in opposite directions. charles: you actually said their greatest challenge is combating the criticism that will come along with this. 0.2, higher unemployment. i mean it is easy, to go 75 now. it will be a lot harder if inflation is persistent to stay, channel his inner volcker and the type of criticism powell is going to face because it felt like after 2018 that last rate hike, something happened or ghost of christmas past or
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christmas future came to visit him. powell 2.0 went completely the opposite direction. >> it did and seeing the number 5% way out, they're trying to tell us they are going to maintain really tight monetary policy for longer than anybody in this entire generation of investors is accustomed to and the question will they be able to withstand the criticism? ing interestingly enough last week mostly in the liberal media you saw narrative change, can this guy slay inflation, wait a minute the damage he will inflict on the united states the rest of the world. no matter how he comes out of it he is the bad guy. volcker dealt with that. he went through it. but can powell? charles: volcker had the cigar, a different kind of swaggerer. you're right he gave a press conference i'm not quitting and keeping the pedal to the metal. charles: i don't see jay powell messily doing that. >> we'll find out. charles: our note, our equity
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strategists disagree own the next direction of 10%. so the equity strategist sees low equity earns returns but the technical strategist sees trading opportunities on upside? >> this is investment bank, not within wealth management. charles: okay. >> i think that highlights how much uncertainty and how crazy and unique and historic this is, right? so there is volatility. there will be more volatility. a lot has to do, the strategists evidence that a tale of two time frames. i can tell you exactly what you need to do to get through the next six, nine, 12 months and i can tell you it will be better in one to three years but what you do in the next short term is very different than the next long term because as we just discussed, there are some things that need to be worked through the economy and we're not in isolation, right? we have a swiss bank did a raise of 1% this morning. >> right. >> so we're talking about a
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jigsaw puzzle that is so intricate and where most professionals and most investors have never had a situation like this. let me give you one specific there. then i will stop. 2% of the time in rolling 12 month periods stocks and bonds are down together. so we're in a 2%. the 98% will come but how do you invest in the 2%. charles: which explains the 60/40 portfolio has been unmitigated disaster. we have the strong dollar. all the money is coming here, people are buying up our treasurys. the rest of the world also has to grapple with this you also wrote somewhere, you said only nimble traders should even try to play this game, this sort of powell pivot. powell, when we talk pivot right now, if he hints maybe even going less on the next rate hike, that might be enough for this market to try to take off. >> it might be because we've already got 74 basis points, another 3/4 of a percentage
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point six days before the election. in that november meeting. you've got already one baked into the cake for 2023 at this point. by the way 50 basis points right before christmas which is his nemesis. we remember that 2018 christmas eve bloodbath in the stock market. the question is, is he going to push on through until he sees the whites of the eyes of that 2% inflation target that he says he is going -- i'm going to keep going? we'll have lots of quotes after today he says he will do it until the job is done. charles: i got less than a minute. do you think he will stick to the script? never mind he is coming out now. will he stick to the script. >> we'll find out. charles: let's find out. >> good afternoon. my colleagues and i are strongly committed to bringing inflation back down to our 2% goal. we have both the tools we need and the resolve that it will
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take to restore price stability on behalf of american families and businesses. price stability is the responsibility of the federal reserve and serves as the bedrock of our economy. without price stability the economy does not work for anyone in particular without price stability we will not achieve a sustained period of strong labor market conditions that benefit all. today the fomc raised its policy interest rate by 3/4 of a percentage point and we anticipate that ongoing increases will be appropriate. we are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%. in addition we are continuing the process of significantly reducing the size of our balance sheet. i will have more to say about today's monetary policy actions after briefly reviewing economic developments. the u.s. economy has slowed from the historically high growth
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rates of 2021 which reflected the reopening of the economy following the pandemic recession. recent indicators point to modest growth of spending and production. growth in consumer spending has slowed from last year's rapid pace in part reflecting lower real disposable income and tighter financial conditions. activity in the housing sector has weakened significantly in large part reflecting higher mortgage rates. higher interest rates and slower output growth also appear to be weighing on business fixed investment while weaker economic growth abroad is restraining exports. as shown in our summary of economic projections since june fomc participants have marked down their projections for economic activity, with the median projection for real gdp growth standing at 0.2% this year and 1.2% next year, well below the median estimate of the longer run normal growth rate.
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despite the slowdown in growth the labor market has remained extremely tight with the unemployment rate near a 50-year low, job vacancies near historical highs, and wage growth elevated. job gains have been robust with employee, employment rising by an average of 378,000 jobs per month over the last three months. the labor market continues to be out of balance with demand for workers substantially exceeding the supply of available workers. the labor force participation rate showed a welcome uptick in august but is little changed since the beginning of the year. fomc participants expect supply and demand conditions in the labor market to come into better balance over time, easing the upward pressure on wages and prices. the median projection in the sep for unemployment rate rises to 4.4% next year, half a point higher than the june projections. over the next three years the median unemployment rate runs
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above the median estimate of its longer run normal level. inflation remains well above our 2% longer run goal. over the 12 months ending in july total pce prizes rose 6.3% excluding the volatile food and energy categories, core pce prices rose 4.6%. in all the 12 month change in consumer, in the consumer price index was 8.3%. the change in the core cpi was 6.3%. price pressures remain evident across a broad range of goods and services. although gasoline prices have turned down in recent months, they remain well above year earlier levels, in part reflecting russia's war against ukraine which has boosted prices for energy and food and has created additional upward pressure on inflation. the median projection in the sep for total pce inflation is 5.4% this year and falls to 2.8% next
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year, 2.3% in 2024 and 2% in 2025. participants continue to see risks to inflation as weighted to the upside. despite elevated inflation longer-term inflation expectations appear to remain well-anchored as reflected in a broad range of surveys of households, businesses and forecasters as well as measures from financial markets. but that is not grounds for complacency. the longer the current bout of high inflation continues the greater chance of expectations of higher inflation will become entrenched. the fed's monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the american people. my colleagues and i are acutely aware that high inflation imposes significant hardship as it erodes purchasing power especially for those least able to meet the higher costs of essentials like food, housing and transportation. question are highly attentive to
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the risks that high inflation poses to both sides of our mandate and we are strongly committed to returning inflation to our 2% objective. at today's meeting the committee raised the target range for the federal funds rate by 3/4 of a percentage point bringing the target range to 3.57%. and we're continuing a process of significantly reducing the size of our balance sheet which plays an important role in affirming the stance of monetary policy. over coming months we'll look for compelling evidence that inflation is moving down consistent with inflation returning to 2%. we anticipate that ongoing increases in the target range for the federal funds rate will be appropriate. the pace of those increases will continue to depend on the incoming data and the evolving outlong for the economy. with today's action we have raised interest rates by 3 percentage points this year. at some point as the stance of monetary policy tightens further, it will become appropriate to slow the pace of
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increases while we assess how our cumulative policy adjustments are affecting the economy and inflation. we will continue to make our decisions meeting by meeting and communicate our thinking as clearly as possible. restoring price stability will likely require maintaining restrictive policy stance for some time. the historical record cautions strongly against prematurely loosening policy. as shown in the s.e.p. the immediate projection for the appropriate level of the fed funds rate is 4.4% at the end of this year, one percentage point higher than projected in june. the median projection rises to 4.6% at the end of next year and declines to 2.9% by the end of 2025, still above the median estimate of its longer run value. of course these proex-projections to do the represent a committee precision and plan and no one knows any certainty where the economy will be a year or more from now. we are taking forceful and rapid
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steps to moderate demand so that it comes into better alignment with supply. our overarching focus is using our tools to bring inflation back down to our 2% goal and to keep longer-term inflation expectations well-anchored. reducing inflation is likely to require a sustained period of below trend growth and it will very likely be some softening of labor market conditions. restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. we will keep at it until we're confident that the job is done. to conclude, we understand that our actions affect communities, families and businesses ray cross the country. everything we do is in service to our public mission. we at the fed will do everything we can to achieve our maximum employment and price stability goals. thank you, i look forward to your questions.
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reporter: hi chair powell, thank you for taking our questions. gina smiley from the "new york times." i wonder if you could give us a little detail how you will know when to slow down the rate increases and how you will know eventually when to stop? >> so i will answer, i will answer your question directly start here today my main message has not changed at all since jackson hole. the fomc is strongly resolved to bring inflation down to 2% and we will keep at it until the job is done. so, the way we're thinking about this is, the overarching focus of the committee is getting inflation back down to 2%. to accomplish that we think we'll need to do things in particular to achieve a period of growth below trend and fostering labor market conditions to better balance and demand between supply in the
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labor market. most outside forecasters do show growth running below the longer run potential this year and next year. on second part there is only modest evidence that the labor market is cooling off. job openings are down a bit. as you know quits are off their all-time highs. there are some signs some wage measures may be flattening out but not moving up. payroll gains have moderated but not much. in light of the high inflation we're seeing we think we'll need to, in light of what i just said we think that we'll need to bring our funds rate to a restrictive level and to keep it there for sometime. so, what will we be looking at i guess is your question? we'll be looking at a few things. first we'll want to see growth continuing to run below trend. we want to see movements in the labor market to a better balance between supply and demand and ultimately we want to see clear evidence that inflation is moving back down to 2% so that
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is what we'll be looking for. in terms of reducing rates we would want to be very confident that inflation is moving back down to 2% before we would consider that. >> steve. reporter: thank you, mr. chairman. steve liesman, cnbc. can you talk about how you factor in the variable lags own inflation and the extent to which the outlook for rates should be seen as linear in the sense that you keep raising rates or can you envision a time when there is a pause to kind of look at what has been wrought in the economy from the rate increases? thank you. >> sure. so of course monetary policy does famously work with long and variable lags. the way i think of it our policy decisions affect financial
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conditions immediately. in fact financial conditions have usually been affected long before we announce our decisions. changes in financial conditions begin to affect economic activity fairly quickly within a few months. it is likely to take some time to see the full effect much changing financial conditions on inflation. we are very much mindful for that. that is why i noted in my opening remarks that at some point as the stance of policy tightens further it will become appropriate to slow the pace of rate hikes while we assess how our cumulative policy adjustments are affecting the economy and inflation. that is how we think about that. your second question, sorry, was? reporter: is there a point in time you could see pausing? is it it linear, i should know better not to talk without my microphone. >> should know better than to answer your second question. reporter: [laughter]. there you go. is it linear. or is there a pause you can envision where you kind of
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figure out what has happened to the economy and give time to catch up in the real economy, the rate increase time to catch up with the real economy? thank you. >> i think it is very hard to say with precise certainty the way this is going to unfold. as i mentioned what we think we need to do, and should do is move our policy rate to a restrictive level that is restrictive enough to bring inflation down to 2%, where we have confidence of that. and what you see in the s.e.p. numbers peoples views as of today, as of this meeting as to the kind of levels that will be appropriate. now those will, those will evolve over time. and i think we'll just have to see how that goes. there is a possibility certainly that we would go to a certain level that we are confident in and stay there for a time. but, we're not at that level. clearly today we're you know, we're just we just moved i think probably into the very lowest level of what might be restrictive and certainly in my
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view, the view of the committee, there is a ways to go. >> rachel. reporter: hi, chair powell, rachel siegel from "the washington post." thank you for taking our questions. the projections show the unemployment rate rising to 4.4% next year and historically that kind of rise in the unemployment rate would typically bring a recession with it. should we interpret that to mean no soft landing and is that kind of rise necessary to get inflation down? >> right. so you're right, in the s.e.p. there is a, what i would characterize as a relatively modest increase in the unemployment rate from a historical perspective expected decline in inflation. why is that? really it is, that is what we generally expect because we see the current situation as outside of historical experience in a number of ways and i will mention a couple of those. first, you know these, job
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openings are incredibly high to the relative number of people looking for work. it is plausible i will say job openings could come down significantly and they need to without as much of an increase in unemployment that happened in earlier historical episodes. that is one thing. in addition in this cycle, longer run inflation expectations have menially been fairly well-anchored. as i have said there is no basis for complacency there but to the extent that continues to be case that should make it easier to restore price stability. i guess the third thing i would point to that is different this time is that part of this inflation is caused by the series of supply shocks beginning with the pandemic and really with the reopening of the economy, more recently amplified, added to by russia's invasion of ukraine have all contributed to the sharp increase in inflation. these are the kind of events not really seen in prior business cycles and, in principle, if
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those things start to get better, we see evidence of beginnings of that, not much more than but good to see that, for example, commodity prices look like they have peaked for now, supply disruptions seem to have resolved. if those sustain could help ease the pressures on inflation. let me say how much these factors will turn out to really matter in this, in this sequence of events it remains to be seen. we've always understood that restoring price stability while achieving a relatively modest decline, rather increase in unemployment and a soft landing would be very challenging we don't know, no one of knows whether this process will lead to recession or how significant that recession will be. that will depend on how quickly wage and price inflation pressures come down, whether expectations remain anchored and whether also do we get more labor supply which would help as well. in addition the chances after
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soft landing are likely to diminish to the extent policy needs to be more restrictive or restrictive for longer. nonetheless we're committed to getting inflation back down to 2% because we think that a failure to restore price stability would mean far greater pain later on. >> [inaudible]. are vacancies still at top of list in understanding the labor market and how much room is there? >> vacancies are almost two to one ratio to unemployed people. that and quits are really very good ways to look how tight the labor market is and how different it is from other cycles which where generally the unemployment rate itself is single best indicator. we think those things have quite a time now, really added value in terms of understanding where the labor market is. >> nick. reporter: nick timiraos of "the wall street journal." you said not too long ago in
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describing the policy destination there's still a way to go but, i imagine you have to have some idea about how you're thinking about your destination, whether it is a stopping point or a us paing point. and so i was wondering if you could discuss how you are thinking about as the data come in where that destination is, how it is moving up, if inflation doesn't perform as you expect, do you want to have a policy rate that's positive the underlying inflation rate, for example, and do you have an estimate where you think the underlying inflation rate might be in the economy right now? >> well, so, again, we, we believe -- charles: folks we want to jump in here right now, some of the questions are beginning to be somewhat redundant a lot of news been made. still on set quill intelligence danielle dimartino booth, along with ubs private wealth managing director ali mccartney. let me start with you.
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here is an interesting thing. we were down seven minutes into powell speaking. the market takes off. then he gets in there we'll keep at it, make sure the job is done. he wants to reiterate i don't want to send the wrong message. the market goes down again. as he answers some of these questions, particularly about you know, it's a pause, all these things, we took off again. we're going back and forth based on all of these answers, what is coming through mostly for you? >> look if i were to do a word cloud what i heard, i heard restrictive, i heard tighten, i heard compelling, i heard cumulative. that is all get the job done. i'm not scared to be a hawk. i'm not scared to get in there. on the other side, meeting to meeting, data dependency, we'll see, not prescribed which is also what the market wanted to hear. seems to be the market is terp owe lating it back and forth. you have exogenous factors. september is end of quarter a
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lot of selling goes on, maybe that keeps up basically he said himself his position and the open market committee position is not changed. they will still be data dependent. price stability, interaction with labor and they will need to do what needs to be done. one thing did change, he started to talk about what happens in 2025, he used number two, he used a two handle. that means, we're not going back to zero interest rates. ubiquitous money. even what is ahead is not what is behind. charles: we were up 50 points on the s&p. he started grappling with the question of a soft landing. we kind of gave some of that. i don't know how many people really, truly believe there would be a soft landing. i thought a minority of folks danielle. >> i do too he agreed with you. most compelling me, jackson hole -- charles: let's not get it confused. in case i get is loosey-goosey
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later on let's make it clear right now. >> but he also said we're just at the beginning of where he thinks policy is restrictive. we're just getting there. wait a minute. we're well past 2 1/2% which was your ceiling last time you attempted this with quantitative tightening going on in the background. now he is saying we're at the beginning. to reiterate ali's point, zero interest rate policy is dead and two is the new zero. this is change in narrative. charles: what does that mean for markets? >> that means they will have operate operate differently, not overabundance of liquidity and overabundance of free mon you can speculate. if push comes to shove they will take us down to the zero bound. charles: the fact he talked about they hiked rates three percentage points, he said appropriate at some point, maybe soon, would be appropriate to slow you know the rate hikes. >> yeah. charles: is that the equivalent of pausing? every one agrees, arthur burns, even paul volcker made the mistake of pausing.
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he tried very hard to say he will not make those mistakes but isn't it tough if you see cppi coming down, guess we need to slow down in terms of rate hikes or you keep the pedal to the metal even as cpi numbers come down? >> look i think part of the problem is, there is a lot of sort of capitulation language to some of these questions i think, the problem we're talking about data that looks backward and policy decisions that look forward. charles: right. >> so he said that cumulative policy. we'll have to stop and look what cumulative interest rate -- charles: these rate hikes we've seen so far have not truly hit the economy yet. >> they have certainly hit housing but i was actually paying attention to a nuance there. he said once we get rates where they need to be then we'll stop and assess which means to me, once we get to 5%, in short order then we'll stop and see what that affect is. again to me that is a shift in the way they're behaving. he is trying to say we'll not be reactive institution. charles: sure. by the way we should point out how the market reacts during
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this period after the fomc is typically. everyone goes home. they sleep on it. we may get a completely different reaction tomorrow. let's listen back in. >> headline is at 2.0 so that is pretty close. we write down our forecasts and we figure out what the median is and we publish it. so it is not done. i would say actually if the economy followed this path this would be a pretty good outcome. you're right it's a 10th higher than 2%. reporter: as a quick follow up if concern is underlying inflation is becoming more entrenched perhaps each month then why forego the more aggressive 100 basis point increase today, and does that risk having to do more later on? >> yes. as we said, at the last press conference and in 2009 that one and this one we said that we would make our decision based on the overall data coming in so if you remember we got a surprisingly low reading in july and then a surprising high
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reading for august. so i think you have to, you can't really, you never want to overreact too much to any one data point, if you look at them together, as i mentioned if you look this year's inflation, 3, 6, 12 month trailing inflation is running too high. running 4.5% or above. you don't need to know much more than that. if that is the one thing you know this committee is committed to getting to a meaningfully restrictive stance of policy and staying there until we feel confident that inflation is coming down. that is how >> hi, victoria with lit koa. i wanted to ask al about the balance sheet and left occupy the possibility of selling mortgage backed securities and slowing in the housing market and mortgages have gone up
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significantly and wondering if conditions affect your plan for runoffs on the mbs side. >> what we said is that, you know, we would consider that once balance sheet runoff is well underway. i would say it's not something we're considering right now and not expecting to be considering in the near term. it's just something i think we will turn to but that time, the time for turning to it is not close. >> will decisions in the housing market affect that decision? >> a number of things will. we're not considering a decision and i don't expect that we will any time soon. >> neil irwin with axios. a number of common at a timers have come to the view and world banker that simultaneous tightening around the bank is necessary to bring inflation down. how do you see that risk and how do you think of coordination
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with your fellow central bankers, and is there much risk of overdoing it on the global level? >> we actually my colleagues and i, number of my fomc colleagues got back from one of our frequent trims to switzerland to meet with other senior central bank officials arnold the world. we -- around the world. we're in pretty regular contact and we all serve a domestic objective and mandate and the dual price stability and we regularly discuss what we're seeing in terms of our own economy and international spillovers and an ongoing constant kind of process. so we are very aware of what's going on in other economies around the world and what that means for us and vice versa. the forecast that we put together, that our staff puts together and we put together on our own try to take all that into account and i can't say we do it perfectly but not that we
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don't think of the policy decisions and monetary policies and economic developments and taking place in the major economy and taking effect on the economy and that's very much specific into our own forecast and understanding of the u.s. economy as best we can, but it won't be perfect. it's hard to talk about collaboration in a world where people have very different levels of interest rates. if you remember -- charles: jay powell struggling with a question brought up and, danielle, ewe made this point. the global economy and we're connected and you've seen other central banks with less inflation, particularly core inflation go 100 basis points and seems like to me, he's reluctant to go as strong as we he would and trying to channel the inner vulker. >> he is. the criticism will increase.
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charles: shouldn't he have gone 100 basis points today based on their own assumption of the economy. >> as former fed insider, you never surprise the markets. charles: but i thought it was a new day and age where the markets -- we don't care about the markets. i thought the federal reserve only cared about inflation and mainstream. i'm shocked to hear wall street is their primary concern. allie, what would you do as an investor? >> stick with long-term plan and on the short term, stay value, quality, dividend focused. be u.s. versus the rest of the world and watch the dollar. charles: the dollar, real quick. is that a function of being the greatest economy in the world? >> it is. right now it is. but you're watching europe and japan act like emerging markets economies because of what's happening with the dollar. it's extraordinary. charles: japan is the country to watch. they've gone all the way and essentially buying stocks
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through etfs and cutting rates. they're going completely opposite. if we're to watch anything as a model for where people thought the fed could go, would that be it, allie? >> it's tough. we have a very different system and different economic history, so it's hard to sort of -- it's a bit apples to oranges but what i would say is you cannot understate the effect of u.s. companies with a 20% rise of the dollar in fx index and that's a lot of momentos and i have a lot of cs clients and it's a lot of feedback we have to watch. charles: it'll rear its ugly head in earnings. >> yeah, it's already being seen in preannouncements. charles: investors, in your mind, it is a new day. >> it is a new day but allie said the most important word and that's dividends and i would say cash flow. make sure the companies you're investing in have teflon balance sheets. charles: start with the balance sheet and cash flow and maybe
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the income sheet. ladies, thank you so much. it's a historic day and important stuff and great answers. jay powell still speaking and i'll hand over to liz claman and she'll take you through the next hour. liz: thank you, charles. the fed raises interest rates by 75 basis points and jay powell bluntly stated no grounds for kansas city chiefs play makers san seizure disorders for inflation and -- complacency and markets took off when a pause in the upper trajectory is taking points and let's go back to the federal reserve. >> if woe were to fail to do that, that would be the thing that would be most painful for the people that we serve so for now, that has to be our overarching focus and you see that in the sep and level of rates we'll be moving to recently quickly assuming things turn out roughly in line with the sep. that's how we think about it


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