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tv   Making Money With Charles Payne  FOX Business  December 14, 2022 2:00pm-3:00pm EST

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jay powell pushed back on the notion of pausing ever pausing. after the october crushing there was a bear market rally. will jay powell lay it on thick. will he crush the enthusiasm again? or will he acknowledge a slowing economy, slowing inflation, even the risk of a a fed mistake? a powerful line-up, phil blancato, nancy tengler, keith fitz-gerald. will shore up your portfolio. we have the man himself at 2:30. danielle dimartino booth and what they expect to hear and what they expect from the market. sam bankman-fried in notoriously overcrowded bahamas jail. they are wasting no time prosecuting bitcoin players. let's go to d.c. and grady trimble. reporter: charles, the fed is raising the fed funds rate 50 basis point's expected to a
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15-year high. they say inflation remains elevated. they anticipate more increases in the new year to hit the 2% inflation target over time. this was a unanimous decision by all of the committees voting members. the get's economic projections that we just got show very modest growth next year. it expects just half a percent increase in gdp in 2023. that's a big drop from september's prediction of 1.2%. the fed also expects unemployment for 2023 to be higher than projected in september. 4.6% is the expectation in 2023 compared to the current employment unemployment rate of 3.%. it also sees inflation declining at a slower rate than it projected in september. in terms of the fed's feelings for the future and rate hikes that we'll see going forward, based on the famed dot plot it expects to end the year with a fed funds rate of between five and 5.25%. that is at least 3 rate hikes
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next year. rates are coming back down according to the.plot in 2024, below current levels. one final note, charles, in the fed's release, a small wording change. it says russia's war in ukraine is contributing to upward pressure on inflation. it had previously said in the last release that it was creating additional upward pressure. it's a small change, charles, but something to pay attention to as we head into the press conference with jerome powell. charles: grady, what is what we look for the small changes could mean everything. thank you very much, my friend. fomc decision is out, they just hiked another 50 basis points. we're 4.25, 4.50. we'll wait for jay powell and the question and answer period in 30 minutes. last time the street was thrilled when the initial report came out we were thrilled because they talked about the lag effect. they sort of hinted at maybe them not overdoing it.
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well turns out that was more of duty of the fed chair. he has to sort of give everyone's perspective who is involved, all the voting members but when it came time to voice his own ideas jay powell laid it on thick. we learned later from james bullard in fact the goal that day was to curb the enthusiasm of the markets, boy, oh, boy, did it work big time. the biggest post-fomc decline we've ever seen. look how we're responding to the market. first fed hike this year was 25 basis points. we went up, 50 basis point we went up. we even went up higher 75 basis points three times in a row. everyone knew, everyone understood the fed is late to the game. s last two times it has gotten very severe. the key whether we get a repeat of this or this market can catch a bid. this is the thing we're looking at folks, this is pivotal moment with respect to the market. s&p 500 right here. we hit the 4100 number
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yesterday, bam, came down. if we clear 4100, close above it i think we're looking 4300, 4350 pretty easy in fact. this of course as we continue to wait, for the federal reserve for jay powell to step up to the podium. meanwhile for the stock market everyone is looking to 2023. we're starting to get top picks from major firms. this is interesting, they are trying to pick the bottom seems to me. these names have been crushed, maybe not tractor supply and they're going back into high beta stuff. meta, everyone gave up on meta. goldman sachs and citibank favorite stock. netflix is free fall. cowen says, morgan stanley and cowen loves nvidia. virginia, the market will turn around, eventually it will go higher but the question now will there be a santa claus rally? joining me to discuss, laffer
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tengler ceo, nancy tengler and keith fitz-gerald. what you expect to hear from jay powell in a half hour and what do you think the market is going to do? >> that is so unfair, charles. charles: that's why you're here. [laughter] >> i think couple things. we're hearing exactly what we're want to be hearing. inflation is coming down. we're who having in the right direction. this should be opportunity to separate in. the short term is driven by algorithms. you will get the swings widely. he will continue to sound somewhat bearish, hawkish, which is bearish for the market. i think the cat is out of the bag. we've seen two month and annualized three month cpi which is what the fed looks at, averaging around 3 to 4% below the fed funds rate if you go forward. the backward looking number doesn't really matter. >> sure.
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>> i'm actually quite constructive here. i think you want to continue to add risk in. charles: keith, we're already seeing the angst sight. we were up into the print. everything we thought it was to nancy's point. already the s&p rolling over. what do you think jay powell will say later? >> i think jay powell has no choice but to remain firm and say that he is resolute, that he will be tough on inflation. everybody knows the emperor has no clothes but there is not a lot we can do about that. so to nancy's point you have to be constructive, you have to hunt for those stocks that can take it. to your point, if the market can catch a bid the path of least resistance is far higher. charles: to that point, let me bring this up. we keep talking seasonality. right now seasonality would be late december, not only year-end rally, folks, look at this, we could actually get some great momentum not just santa claus, keith. let me go back to you, you talked about this, if we catch a bid how much of a rally do you think we can have? >> that is a tough point to pin down. i think 3, 4, 5% is not
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unimaginable, fairly quickly at that there is a lot of money wants to go to work. just waiting for everything else to get out of the way. charles: nancy, the contrarian here, the contrarian goes with the chart, seasonality chart which is obviously sort of a blueprint because it feels like almost everyone is bracing for a short bump, then more volatility and a lot of pressure to the downside. how do you see it? >> yeah. i mean i am with the consensus on this, let's not forget powell wrecked a santa claus rally in 2018 when he got very hawkish, talked rates up and then the market basically went into a bear market until christmas eve. so i think you want to remain vigilant and focused on the long term. i'm expecting a rally. i'm hoping for a rally. but, you know, we don't know that. charles: sure. so let me ask you then, talk specifics then. i read you're adding to rtx. what else do you like for 2023? >> got a couple of good ones for you, charles.
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xlum a water treatment company shows up on active, passive list, it's a great company. moving to digital, embracing our theme, old economy companies embracing digital. it is growing that business very quickly. 1 1/2 times for more profitable than the old economy business. the other name i have is broadcom. a well-executed company. they have been managing the backlog making sure that their customers are not you know, stocking up on names, on chips. it pays you 3 1/2% dividend. they have grown it very -- charles: coming back pretty nicely. i'm down 18% in it. i'm looking at it. it is coming back good. before i go to keith, nancy, couple weeks ago we talked about the fund that likes meta. how shocked are you goldman sachs, citibank says this is one of the stocks you need to own for 2023?
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i don't see a lot of downside? >> i think you're right, charles. i don't like the governance that to me is a real problem. i think you can make money from here for sure. we're out. we found better places to be. it's a value stock. by the way so is tesla. charles: it is on the list as well. market coming down real hard. keith i give you the lags word, what are you looking at, what is the special play going into 2023. >> i got two. keep it on the fairway, big names only, best in class. pfizer, mrna vaccine based treatments are substantial, customizable medicine. crowdstrike, more than half of fortune 500 use it. in an era everything protected is digital. i want to get on for the ride. charles: sounds great, nancys keith, thank you very much. i want to look to the message of the bond market. remember volatility yesterday? major indices came down. they were still positive. the bonds stayed the same. they sort of drifted and drifted. to me the bond market gives
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credence maybe the fed pauses early next year. joining me phil blancato advisor group chief advisor. phil, go back to november, everyone of these different yields over 4% except the one-month, every single one. we're seeing a few under 4%. you talked about this last time you were on the show. you said you expected this to happen. how far down does this go, more importantly what is the message of this. >> it is very clear that the federal reserve is getting exactly what they wanted. the bond market may see a soft recession, not a deep one. i think the bond market may represent the best opportunity in decades to go long fixed income. you can see returns of 4 to 8% on investment grade credit. you're seeing shorter maturities weaken and break back down that is bull steepenner. if we see the long hang in there, short end come down, recession will not happen. in two-ways next year as yields come down you get price
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appreciation but you also win on duration which is amount of time you get paid. charles: the way you're looking at this right now there is still a chance at least from the bond market of even skirting a recession. >> absolutely. you see it clearly. look where you were and where you have gone to. you come back to here, 3.65, 3.89, coming way back down again. that clearly tells you the bond market is notly as nervous. say you recess, take other side where do you want to be in recessionary environment? own fixed income. if you own it today rather than six months from now you win on not only yield play but price play. charles: canary in the coal mine is pretty cool. talk about jay powell. the markets are pulling back a little bit the initial reaction might be a good omen. last time they went into the question an answer period. what are you looking for this time? >> you have something secretly on your side here. all the tax law harvesting will end next week 10 days a lot of money will pile into the market. what i heard we're getting a soft landing went from 75 to 50.
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saw cpi coming back down. the chairman may be a little bit hawkish but certainly markets are signaling things are better. chance to buy stocks at end of the year, 4400, maybe 4450. charles: here's the reaction. we started the year. we're okay. we know the fed is behind we expected them to hike. we were able to deal with this big time. more recently the market saying please, please stop. what you do like going into 2023? everyone has the top picks. i don't know if you have a year-end target just yet. what are you looking for? >> 8 to 10% on the s&p 500. should end 4750 on s&p. charles: that is huge. that is bigger than any of the other large firms i know of at this moment. >> stocks are trading valuation that matchings their five and 10-year average and they're discounted the last 12 to 18 months. to me you have a chance to buy stocks. i have a value bias. if you want good names i think jpmorgan is a great name. a little expensive. huge up side on the banks. i like being in a place doing really welcoming out of
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recession name mentioned crowdstrike. a name every corporation in america needs to be involved in. it is really fabulous name. risky name, airbnb up a little bit. i think as consumer play, a great place to play the market which is still inexpensive. charles: yesterday jetblue rest of them were hammered, crushed. jed blue down 8%. you like consumer, travel, fomo, you only live once theme, could that be running out of juice? >> not when the consumer is gainfully employed. fed wants a higher labor market june employment number. >> i don't think it is happens. you have to eliminate 7 million jobs from the jolts side, jobs open. you have to get rid of 1 to 2 million jobs. you have to get rid of 8, 9 million jobs. not going to happen. they will let balance sheet weaken than lay people off. earnings contraction. i don't think a nasty recession. consumers still spend. i want to do stuff trade. charles: soft landing shallow
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recession, stay in the market, bottom line. >> happy holidays. charles: thanks a lot, phil. as we await jay powell, let's visit the hottest story in the country. the sam bankman-fried debacle. it looks like it will be one of the worst financial crimes in american history. ironically fried was arrested one day after the 14th anniversary of bernie madoff's arrest. the cases are different. madoff was a mastermind. he worked sole hoe to create this facade eventually took a life on its own. he enthralled wall street. bankman-fried is more creation in my mind of wall street and silicon valley. you know, the thing that is really happening right now that is starting to come out somehow for me at least the system has been robbing the public in some ways particularly through the ipo system but i think they became overconfident. i think they became careless. ended upbeating them to a degree. make no mistakes, fat cats are not the victims here. yesterday after a rollicking affair at house financial
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services committee a lot of different things emerged except what i wanted to hear. i want to bring in congressman warren davidson. congressman, sbf didn't show up. he was arrested the day before. many are frustrated, that he would have yielded great information, maybe perjured himself even more, what happened actually at the hearing yesterday, just the notion just by coincidence he didn't show up because he was arrested. >> yeah. thanks. i mean we were looking forward to having question an answer with him. frankly he was likely to say more incriminating things. he has spoken pretty freely since the company was going into bankruptcy. i think people thought that would happen again. i think there is a lot of speculation as to why now and you know, my own take on that is gensler and the sec didn't want you know, members of congress to have sam bankman-fried's take on why were you meeting with gary gensler? what were you talking about the with the sec and other
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regulators one-sided perspective free range for sbf i think that is probably why he was in custody. we had a pretty lively hearing yesterday. john ray was the witness. he says even enron wasn't this bad. charles: no. it was lively but it was frustrating. listening to questions from colleagues across the aisle used this whole event to prosecute all of crypto. ironically most admitted they don't understand it. every question started like this, i don't know what this thing is, i don't like it, it shouldn't exist, let's get rid of it. these are lawmakers. these are your colleagues. they want to get rid of something they don't understand. what's going on? >> i spoken with more than one why don't we just ban all this stuff? i'm like were you ready to get rid of the whole s&p 500 because bernie madoff had a s&p 500 fund? just logic of this is horrible. charles: let me jump in, sir, here's the thing, i want to jump
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in, what are they protecting? seems more to me they don't need to understand this opposed to there is a class, system itself which pours a lot of money into campaigns, maybe they're trying to protect something rather than prevent something here? >> yeah. i mean obviously one of the charges was campaign finance violations. tens of millions of dollars donated from whether, sbf himself or ftx employees to direct to campaigns into other campaign funds, pacs and other things. so that is one of the charges out of eight billion dollars of missing funds that is a small fraction. still a really big deal. i think once john ray gets the structure in place to say where should these funds be sent back to i hope all my colleagues benefited from that, send the funds back to them. charles: seems would be great, as soon as news broke, set up a funding is, donated all the money until they find out where it goes, hearing some say it
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will wait, pisses me off. there is a part of this story also i want to shine a light on, the financial world itself. to me it's a conveyor belt. they find the companies. they incubate them. everyone gets a bite of the apple. starts with zero valuation, build them up 30, 40, 50 billion. worth only fraction and go up to $100 billion and the game goes on. i think ftx is part of that conveyor belt. my question how far are you and your colleagues willing to drill down into this, not just superficial stuff? sbf was a lunatic, crypto was bad. i want to get to the core what is going on here? >> yeah, look, gary gensler will have to come before the committee. how did the sec miss this? a lot of my colleagues say we have to protect retail investors. you protected retail investors by not even providing clarity so they can participate in this
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market space. some of the most sophisticated investors just last january were part of the series c funding for ftx. so how do you miss this? did you really do underwriting? what kind of tools could we put in place to make sure if there was fraud it can be detected better? charles: yeah. >> clearly we have to not lose sight of the fact, this was a plain fraud as john ray said. just old-fashioned embezzlement. you have to follow the trail on that as well. there weren't same tools in place on crypto there in stocks. charles: by the way you don't protect the public offering them stocks so egregiously overvalued the only people that make money on it are venture capitalists and wall street. it happens over and over again. last year 1033 ipos around spaces, 90% in the garbage. if they want to protect investors, really protect this facade. it has to crack now. it is a great opportunity. you have bills in play. you've been a champ on all of
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this. thanks for coming on. >> thanks. charles: thank you representative davidson. we have carl szabo. this sbf saga, elites run amok, billionaire fund es, ivy league professors all their connections. written overall this stuff. congress right in the middle. regulators nowhere to be found. what are your thoughts on this thing? the public can't believe something like this was allowed to grow and fester? >> yeah. as you were extolling just a moment ago. this is not about the need for new law. this is a need for new regulations this is fraud. this is something we prosecuted for 200 years. they're using internet and crypto the newfangled thing to make this fraud possible but the question for me is where was the oversight? where were law enforcers? all we're hearing we need new laws. we need to shut down crypto. we need law enforcement to step up to do its job.
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it is easy to write new laws. it is hard to do law enforcement. the only reason ftx fell apart a website connected the dots two months ago. i don't know if sbf would be in handcuffs the fact somebody, not government, not law enforcement identified the emperor had no clothes on. that was the reason, we need law enforcement to do its job when it is happening not when the money is gone. charles: over a year ago, i saw tweets, very smart people were saying this thing is a fraud for a long time. talk about the sec going after social media influencers. big news out today. if they're guilty it would be low-hanging fruit. it gets back to the question, stopping bigger abuses, wall street abuses, large institutional abuses. when we do see them, occasionally come to light every 10 or 20 years, a few smacks on the wrist, some fines are paid but never individual accountability, carl. >> this is a small case
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comparativelily, compared to $8 billion but what you have here are a bunch of twitter users and people on discord basically doing a classic pump and dump scenario, buy stock, hold it, followers, must-buy, pump up value and dump it, leave followers holding bag. this is classic crime we're finally prosecuting. i will disagree a little. we should go after the big buys, go after the big problems, go after the small guys as well. we need law enforcement across the board whether financial sector and everywhere else. when you commit a crime, you will go to jail, that should happen in both these cases. charles: i'm with you 1000%. this was in the back pocket. the news comes out today. less than a minute to go. your champion of the social media space, right? whole name came up whole twitter situation. a poll out by pew today on
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yesterday, fascinating of all the countries in the world america is number one saying social media as a good thing. how do we protect that? >> look, we need the institutions to do their job like the trade commission i used to work and elsewhere. simultaneously what we need are is the free market to be able to operate without government oversight. twitter files made clear that government coercion is what undermines the ability of businesses to provide what's best for their users and their customers. we need the government to get the hell out of trying to control speech online. that is how you regain trust in the system. how we bring our virtues, free enterprise i've been fighting 20 years through the rest of the world. we do it through the social media platforms we developed here in the u.s. charles: carl, thank you very much, i appreciate it. folks back to the moment of truth so to speak a few minutes away from jay powell's press conference. we know it will be ex-explosive. obviously it will have
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ramifications not just for the markets now but into next year. i'm joined by two of the best fed-watchers quill intelligence danielle dimartino booth, ubs managing director alli mccartney. i want to start with the growing dilemma for the fed. m2 the growth has come down dramatically. history says the cpi lags. we have a chart of that. yellow is the cpi look where m2 is. if inflation is a monetary phenomena, money evaporates you know, danielle where, should the fed be paying attention to this? >> well the fed -- charles: how much should the fed pay attention? >> the fed says they do not pay attention to it and yet they have a weekly report that shows what liquidity is in the banking system for some reason even though they don't necessarily call it m2 anymore. we've seen a year-over-year negative print on biggest measure of money supply six weeks in a row, longest time in
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u.s. history. they will have to pay attention because of effect it will have on the financial markets in my view. charles: i think it is, powell said lag effect. he didn't want to say it. he is chairman. everyone's voice has to be heard to a degree e agree. ali, markets paying attention to it. >> we're just hitting 4,000 on the s&p. the question do we go below. looking for three ps, ppp, price of money, what is terminate rate, looking for when we pause and do we pivot? those are three things the market is consistently wanting more clarity in before they give some sort of a level for the market but, you you were talking about credit is constrained. credit is really constrained. the fed toll us that. we're hearing that from 75% of credit lenders in the fed report. charles: right. >> we went from a 9% savings rate. we're down in the twos now. average is eight. that is what has been fueling
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consumption through this cycle. so we need to understand where interest rates are going, what the fed is looking at and how all of that, the money supply and the consumer savings is going to feed into earnings and commerce going forward. charles: well this gets back to the notion of overdoing it, right? the pause and pivot. the fed wants unemployment rate to go up. we have a wonderful chart we'll share with the audience now that shows historically where the fed thought unemployment was going to go where it actually went. oops, oops. >> yeah. charles: this is what happens, why they have to make those abrupt shifts from rate hiking cycles to rate cutting cycles. i'm tired of that roller coaster. >> look, the nfib, national federation of independent business they came out and said our members are borrowing at 7.9%. their short-term paper that will roll over in 2023, it will put lots of mom-and-pops out of business. you've seen 119 business closures in the first 13 days of december, charles.
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there is carnage happening. what fed policymakers need to do, i said this for years, follow real-time data. don't follow indices that can be seasonally adjusted over the past century. charles: right. or a jobs report has birth death ratio, adds extra 100,000 between the numbers. >> 2.7 between -- charles: 2.7 million, crazy. >> since the fed started hiking rates. >> it has got to be, we agree, whether economist or statistician it has to be a little bit of art and science. the data is getting staler and staler as the world we continue to look at is more real time. charles: right. let me ask you then, i don't know if this is true, i read somewhere the fed funds rate has never gone above core pce. >> yeah. charles: we're close, one is going down, one is going up. does that suggest the fed may overdo it? is that something the fed will look at and pay attention to?
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>> that is the right question. the fed says they're looking at the inflation and labor market. that is what they're telling us but the way they communicate with us, intention of building a relationship that is mutually trustworthy is clearly part of this and this cycle. and so i think that the fed is looking at lots of things, especially to the point you made earlier where you said bullard admitted afterwards he was trying to put something out there in the markets. there is this push pull. my guess is that last time the two of us sat here we saw the exact same thing the numbers came out, three specific statements, the market went one way. the press conference, they watched what the reaction was. they then tailored the message that we got. markets move the other way. fast forward to the next day we then saw a pivot in the market reaction as well. there is not a lot of commitment either to the way that people trade on the day the fed comes out or i don't think this month
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will stop given everybody is down, everybody is tax law harvesting, the santa claus rally probably came early as everything came early this year. we're just waiting for that magic bell reset on p and ls and world views own january 3rd. charles: some things have changed inflation has come down since the last time? >> it has. >> i haven't heard the same degree of sabre-rattling from all the different fed members. a couple months ago, every single day a half a dozen stepping up to the podium. anecdotal. maybe i'm reaching here danielle. >> wait until tomorrow. because the unknown is that all 17 had to put their final dots in by last friday close of business before they saw that inflation print come out. charles: they can adjust it after that. >> nope. you have to make the commitment by close of business on friday. that means they didn't know they would get a second consecutive month of jay powell core pci
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ex-shelter. charles: i don't know what it means anyway. it is like a rorschach test. one time i was looking at it upside down. no it is this way. just. >> their own summary of economic projections, if you look at the end of 2024, fed funds rate will be 4.1% that their core pc e3 .5%. didn't you ask in history that never happened? charles: right. >> yet that is their own projection. charles: they never project recession. >> correctly, sorry. charles: there is no -- >> this is as close we've ever seen to them projecting recession. charles: no recession. >> 0.5% growth is rounding error. charles: this is soft landing, to a degree. it is not recession. jay powell can't have it both ways. on one hand he wants to be volcker 2.0, maybe greater than volcker shoafing his reself and resolute. he will crush and tame inflation no matter what the cost, on the other hand sort of be old
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jay powell 1.0 who really did care about the negative harsh actions, harsh reaction and main street from fed policy. >> he has a really hard job, right? a lot of people that you just referred to didn't have social media in their face. they didn't have all the immediate data. they doesn't have algorithms trading. 80% of selling yesterday happened in the first half hour of the day. that is a tough mountain to move even if the data is working with you and if you have antiquated policy you get data on friday it is not included, there is so, so much happening here i think -- charles: here's the man. >> before i go into the details of today's meeting i would like to underscore for the american people that we understand the hardship that high inflation is causing and that we are strongly committed to bringing inflation back down to our 2% goal over the course of the year we've taken forceful actions to tighten the stance of monetary policy. we've covered a lot of ground
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and the full effects of our rapid tightening so far are yet to be felt even so we have more work to do. price stability is the responsibility of the federal reserve and serves as the bedrock of our economy. without price stability the economy doesn't 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 our policy interest rate by a half percentage point. we continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time. in addition we're continuing the process of significantly reducing the size of our balance sheet. restoring price stability will likely require maintaining restrictive policy stance for some time. i will have more to say about today's monetary policy actions
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after briefly reviewing economic developments. the u.s. economy has slowed significantly from last year's rapid pace. although real gdp rose at a pace of 2.9% last quarter it is roughly unchanged through the first 3/4 of this year. recent indicators point to modest growth of spending and production this quarter. 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, largely reflecting higher mortgage rates. higher interest rates and slower output growth also appear to be weighing on business fixed investment. as shown in our summary of economic projections the median projection for real gdp growth stands at just 0.5% this year and next, well below the median estimate of the longer-run
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normal growth rate. despite the slowdown in growth the labor market remains extremely tight with the unemployment rate near a 50-year low. job vacancies still very high and wage growth elevated. job gains have been robust with employment rise by an average 272,000 jobs per month over the last three months. although job vacancies moved below their highs and the pace of job gains have slowed from earlier in the year the labor market continues to be out of balance with demand substantially exceeding the supply of available workers. the labor force participation rate 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 upward pressures on wages and prices. the median projection in the sep for the unemployment rate rises to 4.6% at the end of next year.
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inflation remains well above our longer-run goal of 2%. over the 12 months ending in october total pce prices rose 6% excluding the volatile food and energy categories, core pce prices rose 5%. in november the 12 month change in the cpi was 7.1% and the change in the core cpi was 6%. the inflation data received so far for october and november show a welcome reduction in the monthly pace of price increases but it will take substantially more evidence to give confidence that inflation is on a sustained downward path. price pressure remain evident across a broad range of goods and services. russia's war against ukraine has boosted prices for energy and food and has contributed to upward pressure on inflation. the median projection in the s.e.p. for total pce inflation
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is 5.6% this year and falls 3.1% next year. 2.5% in 2024 and 2.1% 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 a greater chance 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
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especially for those least able to meet the higher costs of essentials like food, housing and transportation. we are highly attentive to the risks high inflation poses to both sides of our mandate and we're 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 half a percentage point bringing the target range to 4.25, to 4.5%. we're continuing the process of significantly reducing the size of our balance sheet. with today's action we have raised interest rates by 4.25 percentage points this year. we continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time. over the course of the year financial conditions have tightened significantly in response to our policy actions. financial conditions fluctuate
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in the short term in response to many factors but it is important that over time they reflect, a policy restraint we're putting in place to return inflation to 2%. we are seeing the effects on demand in the most interest sensitive sectors of the economy such as housing. it will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. in light of the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation the committee decided to raise interest rates by 50 points today, a step down from the 735 basis points seen over the last four meetings. 50 basis points is still historically large increase and we still have some ways to go. as shown in the s.e.p. the median projection for the appropriate level of the fed funds rate is 5.1% at the end of next year, a half percentage
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point higher than projected in september. the median projection is 4.1% at the end of 2024 around 3.1% at the end of 2025, still above the median estimate of its longer-run value. of course these projections do not represent a committee decision or plan and no one knows with any certainty where the economy will be a year or more from now. our decisions will depend on the totality of incoming data and their implications for the outlook for economic activity and inflation. and we will continue to make our decisions meeting by meeting and communicate our thinking as clearly as possible. we're taking forceful steps to moderate demand so it cops into better alignment with supply. our overarching focus is using our tools to bring inflation dak down to our 2% goal and keep longer-term inflation expectations well-anchored. reducing inflation is likely to require a sustained period of below trend growth and some
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softening of labor market conditions. restoring price is essential to set the stage of achieving maximum employment and stable prices over the long run. the historical record cautions strongly against prematurely loosening policy. we will stay the course until the job is done. to conclude we understand that our actions affect communities, families and businesses across 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 will look forward to your questions. reporter: steve liesman, cnbc, thanks for taking my question, mr. chairman. you talked about the importance of market conditions reflecting the policy restraint you put in place. since the november meeting the 10-year has declined by 60 basis points.
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mortgage rates have come down, high yield credit spreads have come in, the economy has accelerated and the stock market is up 6%. is this loosening of financial conditions a problem for the fed in its effort and its fight against inflation? and if so, do you need to do something about that and how would you do something about that? thank you. >> as i mentioned it is important that overall financial conditions continue to reflect the policy restraint that we're putting in place to bring inflation down to 2%. we think the financial conditions have tighten significantly in the past year but our policy actions work through financial conditions and those in turn affect economic activity, labor market and inflation. so what we control is our policy moves and the communications we make. financial conditions both anticipate and react to our actions. i would add that our focus is not on short-term moves but on persistent moves and many, many things of course move financial conditions over time.
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i would say it's our judgment today we're not at a sufficiently restrictive policy stance yet, which is why we would say ongoing hikes would be important. i would point you to the s.e.p. again for our current estimate of what that peak level will be. as you will have seen, 19 people filled out the s.e.p. this time and 17 of those 19 wrote down a peak rate of 5% or more in the fives. so that is our best assessment today what we think the peak rate will be. you will also know that at each subsequent s.e.p. during the course of this year we actually increased our estimate of what that peak rate will be and today, the s.e.p. we're publishing shows again overwhelmingly fomc participants believe that inflation risks are to the upside. so i can't tell you confidentially that we won't move up our estimate of the peak rate again at the next s.e.p.
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i don't know what we'll do. it will depend on future data. what we're writing down today what our best estimate what we think the peak rate will be based on what we know. obviously if inflation data come in worse that could move up and it could move down if inflation data are softer. >> reporter: gina smiley, "new york times." thanks for taking our questions. the s.e.p. like you mentioned suggests that the fed will be making another 3/4 point worth of rate increases in 2023. i wonder if you would foresee that seeing 25 basis point increments, 50 basis point increments? how you see the speed playing outgoing forward and i wonder what you're looking at as you determine when to stop? >> so, so, as i've been saying as we've gone through the course
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of this year, as we lifted off and got into the course of the year and we saw the, how strong inflation was, how persistent it was very important to move quickly. in fact the speed, pace which we're move sergeant most important thing. i think now we're coming into the end of this year we've raised 425 basis points this year and, we're into restrictive territory. it is now not so important how fast we go. it is far more important to think, what is the ultimate level. then at a certain point the question will become how long do we remain restrictive. that will become the most important question. i would say the most important question now is no longer the speed and that applies to february as well. i think we'll make the february decision based on the incoming data and where we see financial conditions, where we see the economy. that will be the key thing. but i mean for that decision, but, ultimately, that question about how high to raise rates will be one that we make looking at our progress on inflation,
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looking where financial conditions are. and, making assessment whether policy is restrictive enough. i told you today we have an assessment that we're not in restrictive enough stance even with today's move. we laid out our individual assessments what we need to do to get there. at a certain point though, we'll get to that point and then the question will be, how long do we stay there? there are the strong view on the committee is that we'll need to stay there until we're really confident that inflation is coming down in a sustained way. we think that will be sometime. why do i say that? if you look at, you can break inflation down into three sort of buckets. the first is, goods inflation and we see now as we've been expecting really for a year-and-a-half that supply conditions would get better and ultimately supply chains get fixed and demand settles down a little bit and maybe goes back to services a little bit and we start to see goods inflation
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coming down. we're now starting to see that in this report and the last one. you go to housing services. we know the story there housing services inflation has been very, very high, it will continue to go up actually as rate, as rents, as rents expire and have to be renewed, they're going to be renewed into a market where rates are higher than they were when the original leases were signed. but we see the new leases that the rate for new leases is coming down. once we work our way through the backlog, that inflation will come down sometime next year. the third piece, something like 55% of the index, pce, core inflation index, is non-housing-related core services. that's really a function of the labor market largely. the biggest cost by far in that sector is labor. we do see a very strong labor market. one where we have not seen much softening job growth is very high, wages are very high, vacancies are quite elevated,
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there is imbalance in the labor market between supply and demand. that part, which is the biggest part is likely to take a substantial period to get down. the goods inflation has turned pretty quickly now after not turning at all for a year-and-a-half. now it seems to be turning but, there is an expectation really that the, services inflation will not move down so quickly, so we'll have to stay at it, we may have to raise rates higher to get to where we want to two. go. that is why we're raising higher rates and why we have to remain high for some time. >> reporter: howard snyder from reuters, thanks for taking the question. you described gdp growth in the as moderate or modest. it is approaching stall speed. half a percentage point is not much. you described labor market, unemployment rate representing some softening. nearly a full percentage point rise. that is well in excess
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historically associated with recession. why wouldn't this be considered a recessionary projection by the fed? >> well, i tell you what the projection is. i don't think it would qualify as a recession though. because you have got positive growth. the s.e.p., what you said we have growth at a modest level, half a percentage point. that is positive growth. it is slow growth. it is well below trend. it will not feel like a boom. it will feel like very slow growth, right? in that condition, labor market conditions are softening a bit unemployment does go up a bit. i would say many analysts believe that the natural rate of unemployment is actually elevated at this moment. so it is not clear that those forecasts of inflation are really much above the natural rate of unemployment. we can never identify its location with great precision but that 4.7% is still a strong labor market. you have got, the reports we get
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from the field are that companies are very reluctant to lay people off. other than the tech companies which is, you know a story unto itself, generally companies want to hold on to workers they have because it has been very, very hard to hire. so you've got all the vacancies out there far in excess of number of employed people. that doesn't sound like a labor market where a lot of people will need to be put out of work. so you know, there are channels through which the labor market can come back into balance with relatively modest increases in unemployment we believe. none of that guaranteed. that is their forecast reflects. >> reporter: thanks, nick timiraos of "the wall street journal." chair powell, i want to follow up on gina's question. the decision to step down the rate of rate rises appears to be socialized at your last meeting largely before the past two cpi
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reports showed inflation decelerating in line with the committee forecast this year. you talked about making decisions meeting by meeting and being mindful of the lags of policy. does that mean all things equal you would feel more comfortable probing where the terminal rate is by moving in 25 basis point increments including beginning at your next meeting? >> so i haven't made a judgment on what size rate hike to make at the last meeting but you know, what you said is broadly right which is, having moved so quickly, having now so much restraint that is still in the pipeline we think that the appropriate thing to do now is to move to a slower pace. and, you know, that will, that will allow us to feel our way and, you know, get to that level we think and better balance the risks that we face. so that's the idea
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