Fed Meeting Rate Cut📈Jerome Powell

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
We are going to be covering, of course, the FOMC
meeting with Shair Pale. He'll do a whole run up.
Welcome back into the show. If you have not subscribed
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(00:21):
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so very easy to do, all right, let's get into
it today. We will be going live with Chare Pal here.

(01:03):
Around two thirty is when he sometimes he comes in
a littlety, but around two thirty we'll get into it.
And the way it works is he comes out and
we'll get the notification here in a minute on whether
we get a rate cut or not.

Speaker 2 (01:18):
Yeah, is it in? Okay? So we got all right?

Speaker 1 (01:21):
So anticipated the twenty five basis points are in on
the rate cut. So we know that what happens after
this Board of Governors meets is the final addressing to
the reporter gaggle. Now, the reporter gaggle is where we
get a lot of Q and A from Chair Pal. Now,
this is typically where he starts to reveal the forward

(01:45):
looking statements, the potential for quantitative easing, and maybe even
what could be occurring in the next FOMC meeting, which
is in December. So now we've got two quarter point
basis point cuts this year. The anticipation, of course, is
that three, and it most likely will be the case.
The real question is, now, with all these jobs numbers

(02:07):
that are playing into this, could this shift his narrative.
So Nestley plus seven more companies have announced massive job
cuts just in the last ten months, and this gets
into a whole slew. Nestley is a big company in
the AG space and in the large food space, both
on retail and also on the food service sector, so

(02:29):
that really starts to get into a big cut if
we're starting to see layoffs in this area. Sixteen thousand,
and I can't imagine that this company is in a
position where they can start to integrate AI. I think
this is because they themselves are in a little bit
more of a struggle within that. You had Amazon coming
in fifteen percent of their job roles in departments including

(02:51):
human resources, tech team, consumer business, among others. That's fourteen
thousand I think it was fourteen thousand jobs.

Speaker 2 (02:59):
Google is coming up on.

Speaker 1 (03:00):
They laid off some of their early roles, and then
Accenture also laying off another eleven thousand. I mean, these
numbers are crazy. Four thousand coming in from Salesforce, Microsoft
even coming in at two thousand, and this is a
fifteen thousand employees, and then around two thousand more staff
that were under performers, so seventeen thousand basically that are out.

(03:21):
So this gets into a real effect on the economy.
And this is what I think the FED has to
be concerned with more so than anything, is to.

Speaker 2 (03:32):
Lose the grasp on jobs.

Speaker 1 (03:34):
They have two mandates, of course, and one of course
is understanding inflation and maintaining it. The other is making
sure that the job narrative stays positive in the United States,
because if we get into both rising inflation and the
loss of jobs, we have stagflation going.

Speaker 2 (03:51):
Forward to all of that.

Speaker 1 (03:52):
If you look at trueflation over here, it's holding it
about two point four to four percent. Notice this right here,
guysnment data blackout twenty eight days, thirteen hours and fifty
seven minutes and counting. Look at the Challenger job cut
data down thirty seven percent, US government domestic product down

(04:14):
twenty eight percent, and then new residential home sales starting
to climb up. So maybe there's something brewing here. When
you look at trueflation, if you look at the indexes themselves,
just to give you a quick view, the stabilization around
two to two and a half is there. However, if
you go to this dip right here, which was August third,

(04:35):
that was the lowest we had seen here at least
in the recent months, at one point sixty one percent.
It has been climbing since then. So this is the
concern that the FED has. Do we have a control
on inflation?

Speaker 3 (04:48):
Now?

Speaker 2 (04:48):
One thing that you have to remember with the FED is.

Speaker 1 (04:51):
That they have reposited their idea of where inflation neutral is.
In the past, it's always been two percent the FED,
and even share Pal said this in the last FED meeting,
which was huge, and that is that we could be
recommending a three percent or closer to a three percent inflation.

(05:11):
That would be absolutely destructive for the American economy, I believe,
because that does start to raise prices across the board
on almost every asset and everything out there. As I said,
if you just joined, make sure and hit the like
button on this video and subscribe to the show. We
will be doing a live airing of the FOMC Press conference. That,

(05:33):
of course, is where Chair Pale will address his forward
looking statements how we look into the next FOMC. I
think more importantly is how he's looking at both the
situation with President Trump and Gigiping. We have some stuff
on that and whether or not we're gonna get a
trade deal. But the bigger part, I think is how

(05:53):
stable is the job market and will they be able
to get it under control, because if we do see
more of this playing in and then we got a
problem ahead of us. So I put this out the
twenty five basis coin almost certain that's now happened. If
you didn't hear FED has already announced a point qure
point basis cut on this the second one of the year.

(06:15):
And now, even though I still think we're extremely high
on overall interest rates, rates dropping to three point seventy
five to the four range on the medium range and
then more liquidity could be Bitcoin getting a little bit
of flight here, But there's some problems and I've kind
of you know, referred to those.

Speaker 2 (06:32):
Labor market is.

Speaker 1 (06:33):
A big one, and I think this is maybe bigger
than we think because all this data is still hidden
because of this shutdown. So just remember inflation still about
two percent, and then sell the news volatility could happen
all of this. One hidden indicator from Powell could change
everything for crypto. And the hidden indicator could be the
labor market. And also what could be coming in from

(06:56):
what I think is going to be GDP, and I
think that is factor that we got to look forward
to in terms of data coming back in. Here was
a poll we put out today over on x By
the way, if you're not following us on the network account,
it's Paul baron TV and you can kind.

Speaker 2 (07:14):
Of see it right there.

Speaker 1 (07:14):
But the poll is the bigger bull catalyst for today's
FMC meeting are priced end quarter. Nobody was going there
only twenty seven. I agree everybody anticipated end of QT.
This is the anticipation that would be very bullish for
the market in general. Now it's negative in the sense
that we've lost control of possibly jobs, but for quantitative

(07:37):
tightening to end, this would be a huge step in
the right direction. So good stuff going in that. We
will get into the live stream here shortly. We're going
to be taking some questions today as well. If we
get a chance before the live stream, I'll take a
few of those. If the guys have it open, we'll
make sure that it's available and we'll if you have

(07:58):
some questions, we'll try to get to the as we can,
so drop them down in the side. A couple of
points I want to hit on right here. If you
guys remember bitcoin dropped six to eight percent. This is
on the last three FOMC meetings, and it made a
new all time high before the next FMC, so we
could see a retlacement and then December could be the
blow off top. Many people look at this fourth quarter.

(08:20):
If you agree with some analyst out there still looking
at that four year cycle, they say, this.

Speaker 2 (08:26):
Is the quarter that all this happens. In that quarter.

Speaker 1 (08:29):
We are right there in the middle of it as
we record this at the end of October. If you're
catching this in early twenty twenty six thinking about what's
going on in the crypto markets, other things that you
got to consider is how does the situation play out
with China. You got Trump, of course, in Jijipang meeting.
This was a statement that came out with the President

(08:51):
saying satisfactory, very satisfactory. Now I'm not sure what that means.
Trump is a interesting deal maker. He kind of throws
things out there and almost manifest certain things, and then
you get reaction from the markets. Then you also get
reaction from the people he's negotiating with. Now, what was

(09:12):
interesting to me was this that Gigiping.

Speaker 2 (09:16):
I love that. I love these guys.

Speaker 1 (09:19):
These memes are just I mean, come on, we got
to show that that's just too good. China purchases one
hundred and eighty thousand tons of US soybeans in their
first order in months. So this is showing a good
faith move ahead of tomorrow's meeting between Trump and President g.
Isn't a master stroke by g to try to get

(09:40):
his way or.

Speaker 2 (09:44):
Does he know something?

Speaker 1 (09:45):
Does Ggping know something and say, hey, I feel like
we might have an angle here. There could be some
things here that really start to bring us to neutral
against the United States and maybe we can start to
work together.

Speaker 2 (09:58):
With the United States.

Speaker 1 (09:59):
If Ping is thinking that way, I guarantee you Trump
is ready to make a deal. And if that happens,
this will be a global monumentous move because it is
going to put pressure on DC to get the government
back open. It's going to put pressure on capital market,
it's going to put pressure on investors, and best of all,
it's going to put pressure on some of these bad

(10:21):
deals that are out there that will get restructured here
around the United States, which means that Trump's going to
have kind of a new angle for negotiation. If he
pulls this off with China, that will be one of
the biggest deals he's done yet. Doesn't mean that he will,
but it means that we could see it the SNP
five hundred close hired today. This broke sixty nine hundred

(10:43):
first time in history. Guys, we are watching history. Three
hundred and ninety eight components in the SNP close red.

Speaker 2 (10:50):
Though.

Speaker 1 (10:50):
This is a problem because now you're talking about eighty
percent of the S and P five hundred companies close red.
Yet the end is still going up. So it only
tells you one thing, and that is big tech is everything.
We've got breaking news, I think. All right, so we've
got an announcement from the Fed that tightening is over.

Speaker 2 (11:16):
Okay, we can end the show now, all.

Speaker 1 (11:19):
Right, December one, we are going to get easing into
a FED balance sheet that is quite different than it
looked quite some time ago. Remember that was around nine
trillion had backed off to around six point six. If
we get another two point two off of that, easing
will start to loosen up, and you know what that means,
guys money into the market, and this.

Speaker 4 (11:41):
Will be huge for the markets.

Speaker 1 (11:44):
I'm just going to go to the chart real quick
just to see how bitcoin and the markets are responding
to that announcement, because it may not even be.

Speaker 2 (11:52):
Out there just yet. We're on the day.

Speaker 1 (11:54):
Let me drop into the into the ten minute. We'll
go to the ten minute, fifteen minute right there, all right,
so not much movement right now. Bitcoin starting to retrace
around one to eleven. I think this is a bullish
move guy, So we may see how he represents this well.
I'm sure he's going to address it heavily in the
press conference, so stick around for that. This could get

(12:17):
huge around some of the statements that he's talking about.
If you look at ethereum right now up a little
wildly on this move so interesting there could we see
bitcoin dominance starting to move? Let me look at dominance
real quick, still ticking down over the last twenty four hours. Yeah,
last twenty four hours. We're here on the fifteen minute

(12:38):
on bitcoin dominance slipping under fifty nine percent. I think
this deal needs to jump back down to round fifty
four for us to see some movement into some of
these all coins and the rotation. Salana gets a nice
little pump here on some of the news. Going back
to one ninety six. Let's take a look further in

(12:58):
XRP goes up slightly on the news, it appears, and
then of course Eth going in there.

Speaker 2 (13:04):
Doze, Let's see what's going on in Yeah.

Speaker 1 (13:07):
Yeah, so Marcus seems to respond slightly good for it,
at least in the last thirty minutes or so. Let's
get into some other things, because I think the notice
that we've got to look at around what to prepare
for in the markets are really going to boil down
to a few points. And not only are we looking
at the situation with the S and P with trade,

(13:28):
but also what we're going to be dealing with is
how does the economy play into this.

Speaker 5 (13:33):
Now.

Speaker 1 (13:33):
I want to go to a clip, because this is
a strange economy right now. You've got the haves and
the have nots. And I think you guys know what
I'm talking about. When we have an all time high
on gold, you've got all time highs in the stock market,
you've got bitcoin well over one hundred k ethereum flirting
with four k. I mean, times are good for an investor,
times are good for an asset owner.

Speaker 2 (13:56):
But take a look at this clip.

Speaker 6 (13:59):
First of all, it's a strange economy right now. We're
talking about that GDP is quite strong, with the labor
market is soft, and we're waiting to see how that
will evolve. But the soft labor market is what's getting
the FED to cut and just history shows when the
FED is easing and the economy is holding up and
earnings are strong, that's some of the best returns that

(14:19):
you get inequities. And so I think it's kind of
keep it simple. This is a good environment for stocks.

Speaker 7 (14:25):
Evan.

Speaker 8 (14:25):
When does the unemployed what level does the unemployment rate
become a problematic for the markets? Forget about the FED
because they're focused on it.

Speaker 6 (14:32):
Yeah, I don't know that it's a particular level the speed, right,
and you know, we still have a pretty low overall
level of unemployment four point three percent, we think, because
we're not getting the data at this point. But if
we start seeing the speed pick up, if we start
seeing initial job as claims spike and we are at
least getting the state level data there and it doesn't

(14:53):
look too concerning, then I think we're in okay shape.

Speaker 9 (14:57):
Evan.

Speaker 10 (14:57):
Today was a day when in terms of acid allocation,
and you know, you had equal way to do nothing,
in fact, be down. Most of the S and P
was down today, and.

Speaker 3 (15:04):
So we're out of place.

Speaker 10 (15:05):
Just kind of curious how you're kind of advising across
this this you know, this big umbrella that you see
and that you have to advise into. Is it to
lean heavier into the stuff that's working.

Speaker 6 (15:15):
I think for the most part, we're leaning into to
what's working. I mean, I think there are some sectors
that where you're seeing the earnings and are not being
rewarded to the same extent, Like financials. We're overweight there,
and we think we're going to get going again. But
with the momentum that we're seeing in tech, I don't
think you want to.

Speaker 1 (15:32):
Fight that, all right, So a couple of things to
compare their momentum in tech. He's talking about a five
trillion dollar in Nvidia. We're talking about those eight companies
kind of you know, wagging the dog right now when
it comes to the market. And then you have to
look at crypto. I think the underserved market right now
is risk risk assets, and you guys know that. Just

(15:55):
as a reminder, and I think this is the factor
that they're looking at going forward. Here, just as a reminder,
quantitative tightening right there ends on December first. This is
the first time we've seen this in some time. Man,
this will be an unbelievable news cycle over the next
few days. You guys want to stick around for this
because this could have major impetus on the market and

(16:17):
how it starts to play out. A lot of factors
that we'll get into this, especially around macroro economics, both
on a global perspective, but also even with other countries.
So you could see the American dollar might actually end
up pushing further down on this. So that gets into
the Dixie layout, which goes into risk assets. You guys
understand that, then of course you're talking about even precious

(16:39):
metals that we'll play into this goal. Most likely we'll
probably see it rise as well. If you're brand new
to the live stream today, we have two good news
pieces for you. One is a quarter basis point another
cut that's our second cut for the year. Expect another
one coming in December. I think the real question is
how much do we get the fifty base point. We'll

(17:00):
go to the poly market in a minute to take
a look at that. And then of course the other
news I just announced if you just joined, is quantitative
tightening is over.

Speaker 4 (17:09):
That is the big news.

Speaker 1 (17:10):
I think we probably need to make a T shirt
on that one. Let's go over to another clip real quick.
This is CNBC's talking about the market being divided.

Speaker 2 (17:21):
Take a look.

Speaker 8 (17:22):
I think you look at this in many ways is
things are going well, but we're in this many.

Speaker 3 (17:28):
People called this K shaped economy.

Speaker 8 (17:30):
Right, we've got one leg going up.

Speaker 3 (17:33):
When has that not been true?

Speaker 8 (17:34):
That hot there's the high end consumer in the low
wage in case it's always been true.

Speaker 3 (17:38):
I just thine worse.

Speaker 8 (17:39):
I just think it's bigger and more divided today than
it has been in a very long time. Between people
that are doing well and have enormous amount of disposable
income and are willing to spend money no matter what's
going on in the economy, and then there's those as
Becky and you were just talking about, those that literally
work for the government today who are probably standing in

(18:00):
line potentially food banks to be able to put food
on their tables. The the dichotomy between the two of
those is as wise as has ever been. As you
point out, you know, if you look at overall corporate earnings,
they continue to be very strong. But when you look
at how corporates are getting there, it's also interesting. You know,
we've seen probably more layoffs in this round of corporate

(18:22):
earnings than we've seen in a long period of time.

Speaker 1 (18:25):
Okay, so you can hear the narrative here, and I
know that many of you probably are out there thinking,
we've got people out there in food lines. Now, we've
got people out there that are losing their jobs. What
I'm going to say is this is that when you
look at the market the way it is, and I
think this is going to be something that we're going
to see more of quickly because of the acceleration into

(18:48):
this job loss, It's going to get worse.

Speaker 2 (18:51):
Guys we are talking about.

Speaker 1 (18:53):
I think the gig economy needs to do a complete
flip into building a digital asset economy. And what do
I mean by that, hear me out is think of
crypto as a business, all right, just like you're if
you're an uber driver or you're a gig worker, think
of it as a business. Just start dropping small amounts
into the top ten assets out there, easy enough. Even

(19:15):
if you want to look at some of the things
that are happening in the S and P. Investing in
assets is the only way you beat this system. It's
the only way you're not going to beat it by
earning money. Earning money is the segue into getting into
digital assets or other assets. That you can start to
beat and that's when you don't have the problem of
dealing with job loss, you don't have the problem of

(19:37):
dealing with you know, food lines, all those kind of things,
because it doesn't make sense for an American in today's
world to be dealing with this, especially with the available
information and the tools at are disposable. I don't get
why we're going in that direction. And from what I hear,
you know, we do a webinar and a seminar every
couple of weeks. It's getting younger and younger in terms

(20:01):
of the business owners that I'm talking to, and they're
all saying the same thing. We are going to go
around the US dollar. We're going to start looking at
assets and building businesses and going into assets, and that
could be everything from gold, real estate, and obviously digital assets, bitcoin, ethereum, Salona, XRP,
you name it. Everybody's looking at that as the hedge

(20:23):
for beating out the system. And it's the only way
it works, guys. It's the only way it works because
what's happening right now. Actually, before we go to that,
I want to go to the poll. Before we go
into short sellers, we'll get into that. Let's go over
to the pole. How all October crypto market end ooh
split pole we have We've got a rally at forty neutral,

(20:44):
I'm going to give neutral and I have no clue
in the middle, and then a final crash seventeen percent.
So it looks like the rally guys are trying to
win this one. With almost five thousand votes coming in,
lots of good questions coming in. Thank you for those guys.
We'll try to get to handful of those before we
get rolling. As I said, if you're not subscribed to
the channel, make sure and do that if you're brand

(21:05):
new to the live stream. Right now, we will be
airing chair Pal's announcement at two thirty. In nine minutes,
we will be going to chair Pal. He will give
us the reasons why he gave us a quarter basis point.
He will give us the reasons of why he is
going into quantitative easoning, and he will give the reason
why the economy is in deep shit, hopefully, because I

(21:29):
think that's where we are right now. And if you
look at this right here, this is interesting because it
gets into the trading mentality of what's happening out there.
Short sellers are on track for their worst YearIn is
twenty twenty, and they're blaming retail investors for acting irrationally.
They're acting irrationally. You guys are acting irrationally out there.
You're actually taking advantage of the market because finally you

(21:52):
get to beat the man. And that's the beautiful thing
about crypto is you get to beat the man. And
I totally agree with that. Sometimes I think I'm a
literarian because I am all for the people who beat
the man. In Vidia, of course officially the first five
trillion dollar company. I know that's the rich getting richer,
but this may put more pressure on the economy than anything.

(22:16):
And what I mean by that is when you have
a company that is leading the S and P five
hundred at the scale in which in Vidia is leading it,
which is unheralded before this. Only this narrative only points
in one direction, and that is a direction, and I
think it's already starting to play out in the early
times of where I showed you guys in the first

(22:36):
of the show is these job losses. This narrative I
think plays out much greater in these jobs losses that
are coming twenty twenty six, could be a very bloody
year for jobs and possibly a bloody year for earnings
on a lot of companies that are going to be
looking for answers because retail may not necessarily come back
into that. The only way again to beat this is

(22:58):
to get into digital assets, any kind of asset that
can go up versus the value of your dollar going down.
That's the problem that we're dealing with right now, and
with AI all being played into almost every walk of life,
and it's accelerating, guys, it's accelerating so fast that you
need to pay attention to what's happening out there. I

(23:18):
don't know if you caught our X four O two
video this week. It's the big Red Thumb on our
YouTube channel.

Speaker 2 (23:25):
Go back and watch that.

Speaker 1 (23:26):
We had the Coinbase team, one of the three developers
that basically took a technology that was created during the
era in which I was an engineer at Microsoft nineteen
ninety six, and it was a technology that was built
on the infrastructure of HCTP and the very backbone of

(23:46):
the Internet that is now going to create payment architecture
for agentic payment infrastructure. I want you to think about
that for a second.

Speaker 2 (23:56):
Go watch that video.

Speaker 1 (23:57):
Because it's good you'll understand what I'm talking about in
terms of where this is going and why this really
shifts a lot of narratives going forward. Speaking of my
old boss, mister Bill Gates, he said that the commitment
phase of the AI revolution is here.

Speaker 2 (24:15):
Take a look.

Speaker 11 (24:16):
You look at all the investments that are being made
today by some of the big tech companies. Some companies
we're not making money on AI yet, but are making
massive commitments to chip makers and data centers, and say,
this math makes sense.

Speaker 12 (24:30):
The AI is the biggest technical things ever in my lifetime.
I mean, it is so profound and therefore its influence
is hard to overstate. And the economic value this is
basically intelligence. You know where you can get medical advice,
so you can get a tutor, or you can get

(24:50):
somebody to help you to sign drugs. So the value
is extremely high, just like creating the Internet ended up
being int very, very valuable. But you have a frenzy
and you know some of these companies will be glad
they spent all this money. Some of them, you know,
they'll commit to data centers whose electricities is too expensive.

(25:13):
You know that it could be done overseas or they'll
buy a generation of chips and you know they won't
have captured all their value before the next one comes along.

Speaker 2 (25:26):
All right, So Gates is on it.

Speaker 1 (25:27):
I mean, you know, listen, the old dog still has
a few tricks. I think he understands the impact that's
going to play out here, and I think, you know,
he missed I don't know if you guys know this story,
but Gates missed the Internet. He was our CEO at
the time at Microsoft, and we were in a position
where we were controlling the market. The Internet came along.

(25:48):
Netscape was pretty much kicking our you know what. We
came in and played dirty Pool, put Explorer into everything,
and you know, the rest is history. But the point
being is is that Microsoft was not on the front
line of the Internet. And I think a lot of
companies are going to be looking at AI the same way.
They don't want to be caught with their you know,
shorts down in the sense of they weren't ready. And

(26:10):
that's I think going to affect a lot more companies
than just tech companies. This is going to affect companies
like we just showed there in the beginning of the show,
Nasty Amazon, you know, Target all these different retail integrations
that are going to play into this. The gig economy,
I think is going to eventually be cannibalized dramatically. Obviously
we'll see that playing out. I think with self driving

(26:31):
that will probably attack Uber in a big way, but
it's also going to attack the gig work economy. And
that again goes back to my whole thesis is investing
is the only that's your new gig job. Guys, that's
your crypto is a business. You should treat it that
way and look at it that way. Do the research,
get out there like a side hustle, and get going.
Bitcoin ping ponging price action could happen. The question is

(26:55):
whether or not this will wrap up around one last
key piece on the and that is US versus China.
So when you look at the gambit that is being
played right now, which is being played right now, this
could be one of the biggest chess moves that really
do put the United States in a good position, possibly

(27:17):
into a parody. I won't say that the China is
at a parody, but when you look at the global economy,
these two are the titans that I think are going
to either one control and you have to look at China.

Speaker 2 (27:29):
China has gone the route of.

Speaker 4 (27:30):
Gold, possibly as a reserve.

Speaker 1 (27:33):
The US is going the route of stable coins, possibly
as a reserve against the treasuries. When you compare that
in the two global economies, this is where everything starts
to come together, and that's why digital assets will continue.

Speaker 2 (27:46):
To be a big factor here.

Speaker 1 (27:48):
Bitcoin, of course, will lead the way thirteen percent, rising
thirteen percent since its historic liquidation event, which was, as
we all know, some nefarious situations there, but that would
happened October tenth. Charts now indicate that the day that
closes above one sixteen are needed to lock this bull
reversal in. And I want to know, do you, guys

(28:09):
think we are in a bull reversal or do you
think bitcoin dominance could have topped out here? That is
the real question, because this could mean a rotation into
all coins. I know everybody's saying that the elusive all
coin season. Is it going to happen?

Speaker 2 (28:22):
Paul? Is it going to happen? I get that out
there so much.

Speaker 1 (28:26):
I think the question is how does the narrative come
in from Wall Street?

Speaker 2 (28:30):
Because that's the narrative.

Speaker 1 (28:31):
Unfortunately, guys that we're playing with and you got to
watch the things that are happening on Wall Street. One
of them is Nate Garossi kind of hitting on it
right here. Bitwise's spot ETF for Salona post the highest
one day trading of eight hundred and fifty ETF launches
this year, So who could have saw that coming? So
there you go, And we still have spot XRP ETFs

(28:53):
that will likely see a similar reception, if not greater,
according to Garassi.

Speaker 2 (28:58):
So what is I tell you guys?

Speaker 1 (29:00):
If you have that kind of appetite for alt coins
and secondary ascid and when I set a secondary ascid's
outside of Bitcoin, outside of ethereum, you've got XRP, Solana
and really just a handful of others. And that's what
we're dealing with right now. And congrats to a lot
of the ETFs like coin went live this week, Hadera
went live, So hbar community. I know you guys are

(29:22):
out there, a lot of good things. We will get
to some questions. Looks like they're starting to queue up
for chair Pal as he gets into this. Well, let's
not leave ethereum out of the conversation today, because bitmine
and the eath tarted have decided to go back in
and buy more.

Speaker 4 (29:42):
Here is chair pal, Let's go to the to the lot.

Speaker 3 (29:47):
Good afternoon.

Speaker 13 (29:50):
My colleagues and I remain squarely focused on our achieving
our dual mandate goals of maximum employment and stable prices
for the benefit of the American people. Although some important
federal government data have been delayed due to the shutdown,
the public and private sector data that have remained available
suggests that the outlook for employment and inflation has not

(30:11):
changed much since our meeting in September. Conditions in the
labor market appeared to be gradually cooling, and inflation remains
somewhat elevated. In support of our goals and in light
of the balance of risks to employment and inflation, today
the Federal Open Market Committee decided to lower our policy
interest rate by a quarter percentage point. We also decided

(30:34):
to conclude the reduction of our aggregate securities holdings. As
of December one. I will have more to say about
monetary policy. After briefly reviewing economic developments. Available indicators suggest
that economic activity has been expanding at a moderate pace.
A GDP rose at a one point six percent pace
in the first half of the year, down from two

(30:56):
point four percent last year. Data available prior to the
shutdown show that growth and economic activity may be on
a somewhat firmer trajectory than expected, primarily reflecting stronger consumer spending.
Business investment in equipment and intangibles has continued to expand,
while activity in the housing sector remains weak. The shutdown

(31:19):
of the federal government will weigh on economic activity while
it persists, but these effects should reverse after the shutdown ends.
In the labour market, the unemployment rate remained relatively low
through August. Job gains have slowed significantly since early or
in the year. A good part of the slowing likely
reflects a decline in the growth of the labor force

(31:41):
due to lower immigration and labour force participation, though labor
demand has clearly softened as well. Although official employment data
for September are delayed, available evidence suggests that both layoffs
and hiring remain low, and that both households perceptions of
job availability and firm's perceptions of hiring difficulty continue to

(32:03):
decline in this less dynamic and somewhat softer labor market.
The downside risks to employment appear to have risen in
recent months. Inflation has eased significantly from its highs in
mid twenty twenty two, but remains somewhat elevated relative to
our two percent longer run goal. Estimates based on the

(32:24):
Consumer Price Index suggest that total PCE prices rose two
point eight percent over the twelve months ending in September,
and that excluding the volatile food and energy categories, core
PCE prices rose two point eight percent as well. These
readings are higher than earlier in the year, as inflation
for goods has picked up. In contrast, disinflation appears to

(32:48):
be continuing for services. Near term measures of inflation expectations
have moved up on balance over the course of this
year on news about tariffs, as reflected in both market
and survey based measures. Beyond the next year or two
or so, however, most measures of longer term expectations remain
consistent with our two percent inflation goal. Our monetary policy

(33:12):
actions are guided by our dual mandate to promote maximum
employment and stable prices for the American people. At today's meeting,
the Committee decided to lower the target range for the
federal funds rate by a quarter percentage point to three
and three quarters to four percent. Higher tariffs are pushing
up prices in some categories of goods, resulting in higher

(33:34):
overall inflation. A reasonable base case is that the effects
on inflation will be relatively short lived a one time
shift in the.

Speaker 3 (33:42):
Price level, but it.

Speaker 13 (33:44):
Is also possible that the inflationary effects could instead be
more persistent, and that is a risk to be assessed
and managed. Our obligation is to ensure that a one
time increase in the price level does not become an
ongoing inflation problem. In the near term, risks to inflation
are tilted to the upside and risks to employment to

(34:05):
the downside, a challenging situation. There is no risk free
path for policy as we navigate this tension between our
employment and inflation goals. Our framework calls for us to
take a balanced approach in promoting both sides of our
dual mandate. With downside risks to employment having increased in
recent months, the balance of risks has shifted accordingly, we

(34:28):
judged it appropriate at this meeting to take another step
toward a more neutral policy stance. With today's decision, we
remain well positioned to respond in a timely way to
potential economic developments. We will continue to determine the appropriate
stance of monetary policy based on the incoming data, the
evolving outlook, and the balance of risks. We continue to

(34:51):
face two sided risks. In the committee's discussions at this meeting,
there were strongly differing views about how to proceed in December.
A further reduction in the policy rate at the December
meeting is not a foregone conclusion. Far from it. Policy
is not on a preset course. At today's meeting, the

(35:14):
Committee also decided to conclude the reduction of our aggregate
securities holdings as of December one. Our long stated plan
has been to stop runoff when reserves are somewhat above
the level we judge consistent with ample reserve conditions. Signs
have clearly emerged that we have reached that standard. In
money markets, repot rates have moved up relative to our

(35:36):
administered rates, and we have seen more notable pressures on
selected dates, along with more use of our standing repo facility.
In addition, the effective federal funds rate has begun to
move up relative to the rate of interest on reserve balances.
These developments are what we expected to see as the
size of our balance sheet declined and warrant today's decision

(35:57):
to cease runoff. Over the three and a half years
that we've been shrinking our balance sheet, our securities holdings
have declined by two point two trillion dollars. As a
share of nominal GDP, our balance sheet has fallen from
thirty five percent to about twenty one percent. In December,
we'll enter the next phase of our normalization plans by
holding the size of our balance sheet steady for a

(36:19):
time while reserve balances continue to move gradually lower as
other non reserve liabilities, such as currency, keep growing. We
will continue to allow agency securities to run off our
balance sheet and will reinvest the proceeds from those securities
in treasury bills, furthering progress toward a portfolio consisting primarily
of treasury securities. This reinvestment strategy will also help move

(36:43):
the weighted average maturity of our portfolio closer to that
of the outstanding stock of treasury securities, thus furthering the
normalization of the composition of our balance sheet. The FED
has been assigned two goals for monetary policy, maximum employment
and state prices. We remain committed to supporting our maximum employment,

(37:04):
bringing our inflation sustainably to our two percent goal and
keeping longer term inflation expectations well angered. Our success in
delivering on these goals matters to all Americans. We understand
that our actions affect communities, families, and businesses across the country.
Everything we do is in service to our public mission.

Speaker 3 (37:23):
We get the FED.

Speaker 13 (37:24):
We'll do everything we can to achieve our maximum employment
and price stability goals.

Speaker 3 (37:28):
Thank you. I look forward to your questions.

Speaker 14 (37:37):
Nick tim Rose to the Wall Street Journal. Sure, Cowell,
are you uncomfortable with how market pricing has assumed? A
rate cut is a foregone conclusion in your next meeting?

Speaker 13 (37:47):
Well, as I just mentioned, a further reduction to policy
rate of December meeting is not a foregone conclusion as
I've just said, so I would say that that needs
to be taken on board. We had, you know, just
say this, nineteen participants on the committee. Everyone works very
hard at this and takes their obligations to serve the

(38:07):
American people very seriously. And at a time when we
have tension between our two goals, we have, you know,
strong views across the committee, and as I mentioned, there
were strongly different views today and the takeaway from that
is that we haven't made a decision about December, and
you know we're going to be looking at the data
that we have how that affects the outlook and the

(38:29):
balance of risks.

Speaker 3 (38:29):
And I'll just say that you.

Speaker 14 (38:32):
And some of your colleagues have framed last month, maybe
today I won't. We're tinking about there's a risk management exercise.
At what point do you conclude that you've taken out
enough insurance? Are you looking for some kind of improvement
in the outlook, or could this unfold along the lines
of last year where you made a sequence of adjustments

(38:54):
and you waited to gather more information.

Speaker 13 (38:58):
So the way we have been thinking, way I've been
thinking about it is the risks to the two goals.
For a very long time, the risk was clearly of
higher inflation, and then that has changed now And as
we saw the particularly after we saw after the July meeting,
we saw downward provisions and job creation. We saw a

(39:19):
very different picture of the labor market and suggested that
there were higher downside risks to the labor market than
we had thought. And that suggested that policy which we
had been holding. I would say modestly. Others people would
say moderately restrictive level needed to move more in the
direction over time of neutral. If the two goals are

(39:39):
sort of equally at risk, then you ought to be
at neutral because one of them's calling for you to
hike and one of them is calling for you to cut.
So if if that got back into balance, then you'd
want to be roughly at neutral. So in that sense,
it was a risk management and I would say the
same about today, sort of the same logic, but as
I mentioned, going forward is a different thing.

Speaker 5 (40:01):
Clear.

Speaker 15 (40:05):
I'm Claire Jones Financial Times. Thank you for taking this question.
You know, we've we've we've just heard from you that
the discussion in December and the conclusion of the discussion
is not a foregone conclusion. I'd like to just dig
into that a little bit more about what sort of
arguments were brought up. Was there any consideration, for instance,

(40:27):
of the investment we're seeing in AI and some of
the generation of household world through rises in stock prices
related to the AI boom.

Speaker 3 (40:38):
Thank you.

Speaker 13 (40:39):
You know, I wouldn't say that's a that's that's a
factor in everyone's assessment of the economy. I wouldn't say
it's a driving factor I don't think for anybody you know,
I guess I would say it this way once again.

Speaker 1 (40:50):
All right, guys, we're going to continue this coverage. Make
sure and get the poll. We want to get your
feedback on that, and hit the like on the video
if you.

Speaker 2 (40:56):
Have not already. Do you like these f o MC meetings,
Let me know.

Speaker 13 (40:59):
What those You can't address both those at once. You've
got a very different situation. So you have some people.
People have different forecasts, right.

Speaker 3 (41:06):
So they'll they'll they'll they'll feel.

Speaker 13 (41:08):
They'll forecast faster or slower progress on one or the other.
And they also have different levels of risk aversion. And
you know people some will be more averse to inflation
overruns and some will be more averse to underruns of employment.
And so you put that together, and as you can
see from the SEP and from the public discussion that

(41:28):
goes on between the meetings, when you know more participants
go out and talk, they are very disparate views and
they were reflected in strongly different views in today's meetings.

Speaker 3 (41:38):
As I pointed out in my remarks.

Speaker 13 (41:40):
And that's what leads me to say that you know
that we haven't made a decision about about December.

Speaker 3 (41:46):
You know, I always say that it's a fact.

Speaker 13 (41:48):
That we don't make decisions in advance, but this is
I'm saying something in addition here is that it's not
it's not to be seen as a foregone conclusion.

Speaker 3 (41:55):
In fact, far from it.

Speaker 15 (41:58):
Can I just that's a quick follow up on QT.
How much of the fund impressions we've seen in money
markets are related to the US Treasury issue a more
short term debt.

Speaker 3 (42:09):
That could be one of the factors.

Speaker 13 (42:10):
But the reality is we've seen, you know, the things
that we've seen higher repo rates and federal funds rate
moving up. These are the very things that we've see
that we that we look for. We actually have a
framework for looking at. You know, the place we're trying
to reach. What we said for a long time now
is that when we feel like we're a little bit

(42:31):
or a bit above what we consider a level that's ample,
that we would freeze the size of the balance sheet.
Of course, reserves will continue to decline from that point
forward as non reserve liabilities grow.

Speaker 3 (42:43):
So this happened some of it.

Speaker 13 (42:46):
Some things have been happening for some time now, showing
a gradual tightening and money market conditions. Really in the
last call it three weeks or so, you've seen more
significant tightening, and I think a clear assessment that we're
at that place. The other thing is, you know, we're
the balance sheet to shrinking at a very very slow pace.

Speaker 3 (43:04):
Now we've reduced it.

Speaker 13 (43:06):
By half twice, and so there's not a lot of
benefit to be you know, to be holding on to
get the last few dollars because you know, again the
balance sheets, the reserves are going to continue to shrink
as non reserves grow. So you know, there was support
on the committee as we thought about it to go
ahead with this and announce effective December one that we

(43:28):
will be you know, freezing the size of the balance sheet.
And the December one date gives the markets a little
bit of time to adapt.

Speaker 3 (43:36):
Colby, Thank you.

Speaker 5 (43:40):
Coby Smith of the New York Times. So much of
the rationale for cutting into strates even as inflation moves
away from the two percent target, seems to be, you
know that there are these mounting downside risks to the
labor market. But if those don't materialize, and the labor
market either stabilizes around current employment levels or even starts
to strengthen somewhat. How would that change your of how

(44:00):
much interest rates need to fall from here? Would you
then be a bit more concerned about underlying inflation and
the possibility of second round effects from Teriff's.

Speaker 13 (44:10):
Yeah, I mean, in principle, if you were to see
data that suggested that the labor market strengthening or even
that it's stabilizing, you know, that would certainly play into
our decisions going forward.

Speaker 3 (44:19):
So and we do have you know, we get some data.

Speaker 13 (44:21):
The labor market is a place where we get, for example,
we get the state level data on initial claims, which
which are sending a sort of a signal of more
of the same. We also get job openings, and we'll
get lots of survey data. We'll get the bag book
and things like that, so we'll have a we'll have
a picture of what's going on in the labor market.
And you know the fact that we're not seeing an

(44:43):
uptick in claims or a downtick really in openings suggests
that you're seeing maybe maybe continued very gradual cooling, but
nothing more than that.

Speaker 3 (44:52):
So that does give you some comfort.

Speaker 5 (44:55):
But if this shutdown lasts a while longer and you
don't have that data, in hand. I'm just one ing
how that hinders the committee's ability to assess the state
of the labor market and make the right policy decisions.
And and also how much is that factoring into the
debate about December.

Speaker 13 (45:11):
Yeah, so you know, we'll we get we get, like
I mentioned, what we get in the labor area, we
get some data in the inflation, some data in economic activity,
and we'll get we'll have a picture of what's going on.
We also will have the Beaige Book. Again, h I
would say we're not going to be able to have
the you know, the detailed feel of things. But I

(45:34):
think if there were a significant or material change in
the economy one way or another, I think we'd I
think we'd pick that up through this. So in terms
of how it might affect December, it's really hard to say.
December's uh, you know, just the meetings, I guess six
weeks away, we just don't.

Speaker 3 (45:50):
Know what we're going to get.

Speaker 13 (45:52):
If if there is a very high level of uncertainty,
then you know, that could be an argument in favor
of caution about moving.

Speaker 3 (46:00):
But we'll have to see how it unfolds.

Speaker 9 (46:03):
See steep lee'spen CNBC miss Sherman. Can you characterize the
meeting in terms of you said, strongly differing views? Was
this a close call this cut or was it a
close call maybe the other way because you had dissents
on both sides.

Speaker 13 (46:20):
Thanks, So I was referring to the discussion about to
the extent it related to December. You saw we had
we had two descents, one for fifty and one for
no cut. So you know, that was a strong solid
vote in favor of this cut. The strongly differing views
were really about the future what does that look like?

(46:43):
And I think people are saying, you know, they're noticing
stronger economic activity. You know, forecasters generally broadly have raised
their economic growth forecast for this year and next year,
in some cases quite materially. In the meantime, we see,
you know, a labor market that's kind of I don't
want to say stable, but it's.

Speaker 3 (47:04):
Not clearly in motion.

Speaker 13 (47:05):
It's not clearly declining quickly in any case, it may
be just continuing to gradually cool. And again, people have
different they have different forecasts and expectations about the economy
and different different risk tolerance is and so there's a
you know, you read the SEP. You read the speeches.
You know there are different views on the committee and
to the point where I said what.

Speaker 9 (47:25):
I said, just to follow up on the balance sheet,
if you stop at the runoff, now, does that mean
you have to go back to actually adding assets sometime
next year so that the balance sheet doesn't shrink as
a percent of GDP and become a tightening factor.

Speaker 3 (47:42):
So you're right.

Speaker 13 (47:43):
The place will be on December one is that the
size of the balance sheet is frozen, and as mortgage
backed security is mature, will reinvest those in treasury builds,
which will foster both a more treasury balance sheet and
also as shorter duration. So that's what In the meantime,
if you freeze the size of the balance sheet, the
non reserve liabilities currency for example, they're going to continue

(48:05):
to grow organically, and because of the size of the
balance sheet is frozen, you have further shrinkage in reserves.
And reserves is the thing that we're that we're managing.
That has to be ample. So that'll happen for a time,
but not not a tremendously long time. We don't know
exactly how long, but at a certain point you'll want
to start grow. You want to start reserves to start
gradually growing to keep up with, you know, the size

(48:28):
of the banking system and the size of the economy.
So we'll be adding reserves at a certain point and
that's the that's the last point. Even then will be
will be. We didn't make decisions about this today, but
we did talk today about the composition of the balance sheet.
And there's a desire that the that the balance sheet
be right now where it's it's got a lot more

(48:50):
duration than the outstanding universe of treasury securities, and we
want to move to a place where we're closer to
that duration.

Speaker 3 (48:57):
That will take some time.

Speaker 13 (48:57):
We haven't made a decision about the ultimate endpoint, but
we all agree that we want to move more in
the direction of a balance sheet that more closely reflects
the outstanding treasuries, and that means a shorter duration balance sheet. Now,
this is something that's going to be take a long
time and move very, very gradually. I don't think you'll
notice it in market conditions, but that's the direction of things.

Speaker 9 (49:22):
John L.

Speaker 7 (49:26):
Janell Marte with Bloomberg. How are officials interpreting the latest
CPI report? So some components came in lower than expected,
but or inflation was still at three percent. So at
this moment are what are you learning about the drivers
and also what do you view that the risks are
greater that the Fed makes a mistake on employment or inflation.

Speaker 13 (49:50):
So okay, so the September CPI report, we didn't get
PPI after that, which is which is important for translation
into what we look at, which is PCE inflation. But
we can still make a pretty good assessment of what
that will be when we get PPI.

Speaker 3 (50:06):
There might be some adjustments, so.

Speaker 13 (50:08):
Directionally, you know, it was a little softer than expected,
and we always break it down into the three components.
So basically, you've seen goods prices increasing and that's really
due to tariffs, and that's due that's compared to a
longer run trend of very very mild deflation and goods
So that's moving inflation up. On the other side of that,

(50:31):
good news that housing services inflation has been coming down
as expected to continue to come down. So if you
remember a year a couple of years ago, that's the
one that just we kept expecting it to do that.
Now it's been doing that for some time and we
expect to continue that. That leaves the biggest category is
services other than housing services, and that's kind of been

(50:52):
moving sideways over the last few months, but a significant
part of that is non market service and we don't
take a lot of signal about the titaness of the
economy from that. So if you add all that up,
a couple of things to say. One is that inflation
away from tariffs is actually not so far from our

(51:12):
two percent goal. We estimate that people have different estimates
of what that is, but it might be you know,
five or six tense, and so that you know, if
it's two point eight, then you know, core PCE not
including tariffs might be two point three or two point
four in that range something like that.

Speaker 3 (51:31):
So that's not so far from your goal. So that
we look at that.

Speaker 13 (51:36):
And the thing about tariff inflation is the base case
is that it will come and it probably will increase further,
but it is that it will be a one time increase,
and you know, we've been very focused for all of
this year at making sure that that's the case and
thinking carefully about what are the what are the pathways

(51:57):
through which it could become something else troublesome inflation. One
of those would be you know, a really tight labor market.
We don't see that. I know, there could be inflation
expectations moving, we don't see that. So I think, you know,
we we're watching this very carefully. I think it's it's
not the case that we're just assuming that it's going
to be one time inflation. We understand fully that this
is a risk we have to monitor and ultimately manage.

Speaker 7 (52:20):
With the stubborn in services inflation, what are some of
the things that the fact could do to address that,
and especially when we're seeing potentially labor supply.

Speaker 3 (52:30):
Challenges, sorry say the.

Speaker 7 (52:32):
First the stubborn services inflation, they use service inflation.

Speaker 13 (52:37):
Well, again, the part of services inflation that is that
that isn't coming down as we would like it to
is the non market part of non housing services. And
you know overall that that's just something that we expect
will come down. The non housing, the non market part
of it should come down. It largely reflects higher stock prices,

(53:00):
and I mean financial services that are acuted rather.

Speaker 3 (53:04):
Than actually paid is a big part of that.

Speaker 13 (53:07):
But also just you know, we think policy is still
modestly restrictive in my telling, and so that's the kind
of thing that should lead to a gradually cooling economy.
That's one of the reasons you see a gradually cooling
labor market is because you know, the FED policy is
modestly restrictive, so that that should also help get that.
I want to say, though, we're absolutely committed to returning

(53:29):
inflation to two percent. If you look at longer term
surveys or market pricing, you will see that that that's
a credible commitment and there should be no question that
that that's where we're going.

Speaker 16 (53:42):
Chris, Great, thank you, Chris rhegaber As sas heated press.
So there's a big investment boom in AI infrastructure right now,
as you know, and wondering if the existence of section
of boom what indicate that rates are not that restrictive
after all, and could further rate cuts at this point
perhaps fuel an excess level of investment there or market bubbles.

(54:08):
How is the FED thinking about that?

Speaker 3 (54:11):
So I don't I don't think that the.

Speaker 13 (54:16):
You're right, there's a there's a lot of data centers
being built and other investments being made around the country
and around the world, and big US companies are just
investing a lot of resources in thinking about how AI,
which will be based on those data centers. Run through

(54:37):
the data centers is going to affect their businesses, so
it's a big deal. I don't think that the spending
that happens to build data centers all over the country
is especially intra sensitive. It's based on longer run it's
you know, longer run assessments that this is an area
where there's going to be a lot of investment and

(54:57):
that's going to drive higher productivity, and that sorts of
things don't I don't know how those investments will work out,
but I don't think they're particularly interest sensitive compared to
some of the other sectors.

Speaker 16 (55:07):
And then just a quick follow up, could you you
mentioned that you do have data that you're looking at
for inflation and growth in the absence of government data.
Could you give us a sense I think we know
a lot about the jobs data that's out there. Can
you give us a sense of what you're looking at
to track inflation in the absence of government data. Thank you.

Speaker 13 (55:23):
So it's a lot of things, and it doesn't replace
government data, but you know, you know all of these
it's you know, it's I'll just mention some of the
many many names, price stats, Adobe, and others, and for
wage inflation, there's a DP data.

Speaker 3 (55:42):
On spending.

Speaker 13 (55:43):
You're going to ask about spending at some point, you know,
there are lots of other things that we look at,
but it's again it's it's many, many different sources, and
again including what we get out of the of the
Beige Book, which will be sort of come out of
mid cycle as always, and it doesn't does doesn't replace
the government data, but it gives us a picture. Again,

(56:04):
I think if something material were happening, if there were
material developments, I think we would pick that up. I
don't think we'll be able to have the very granual
understanding of the economy while well, this data is not available.

Speaker 9 (56:17):
Howard Howard Sneider with our routers, thank you.

Speaker 17 (56:26):
I just want you to elaborate a little bit on
once you said a moment ago about the lack a
continued shutdown making it more difficult to make a move
in December, and that may make you more cautious to
the degree you are relying on private data that isn't
the gold standard, or that you're relying on your own
surveys of the Beige Book, do you worry at some
point you're going to have to start making policy by anecdote.

Speaker 3 (56:49):
You know, this is a temporary state of affairs, and
you know, we're going to do our jobs.

Speaker 13 (56:54):
We're going to collect every scrap of data we can find,
evaluated and think carefully about it.

Speaker 3 (56:59):
And that's that's our jobs. That's what we're going to do.

Speaker 13 (57:03):
If you ask me, could could it affect the the
you know, the December meeting, I'm not saying it's going
to but yeah, you could imagine that that. You know,
what do you do if what do you do and
if you're driving in the fog you slow down?

Speaker 3 (57:14):
So that that could or could not. I don't.

Speaker 13 (57:17):
I don't know how that's going to play into things.
We may get the data may come back, but there's
a there's a possibility that it would make sense to
be more cautious about moving.

Speaker 3 (57:27):
I'm not I'm not committing to that.

Speaker 13 (57:28):
I'm just saying it's certainly a possibility that you would say,
we really can't see, so let's let's slow down.

Speaker 17 (57:36):
As a follow up in the debate on this meeting,
we saw recently some pretty big layoff announcements coming from
from Amazon and others. UH, wondering if that figured into
the discussion at all, that you're starting to see the
turn this tension between growth and employment starting to be resolved,
you know, to the detriment of employment.

Speaker 7 (57:54):
Uh.

Speaker 17 (57:55):
And secondly, some of the stresses starting to appear in
the bottoms or the K as they call it, household
health premiums that are going to be possibly be going
up quite substantially, things like that. Has that started to
become a factor in your policy discussion.

Speaker 13 (58:10):
So those are those are both things you know that
we're watching very very very carefully. To start with the layoffs,
you're right, you see a significant number of companies either
announcing that they are not going to be doing much
hiring or actually doing layoffs.

Speaker 12 (58:26):
And.

Speaker 13 (58:28):
Much of the time they're talking about AI and what
it can do. So we're watching that very carefully, and
you know, yes, it could absolutely have implications for job creation.

Speaker 3 (58:40):
We don't really see it.

Speaker 13 (58:41):
In the in the initial claims data yet. Now it's
not a surprise that we don't. It takes some time
for it to get in there.

Speaker 3 (58:49):
But we're watching that that really carefully.

Speaker 13 (58:52):
But again, don't don't see it yet in the in
the in the in the initial claims data on the
K shaped economy thing, I would say the same thing
or a similar thing. We are if you listen to
the earnings calls or the reports of you know, big
public consumer facing companies, many many of them are are

(59:14):
saying that there's a bifer cadd economy there and that
consumers at the lower end are struggling and buying less
and shifting to lower cost products, but that at the
top people are spending at the higher incommon wealth and
they're so so much much anecdotal data on that, and
so we think there's something there.

Speaker 18 (59:37):
So Edward, thank you, Edward Lawrence with Fox Business. So,
mister Sherman, I wanted to take another crack at the
at the further reduction of rates is not a foregone conclusion,
so in December you said far from it. So if
a cut might not be on the table for December

(59:57):
because of lack of data, what is the other concerns
then stem from? So if it's not lack of data
as the reason December is not a foregone conclusion, what
other things could be the concern then?

Speaker 13 (01:00:09):
Well, perspectives of people on the committee that you know,
we've now moved one hundred and fifty basis points, and
that we're down into you know, you're into that range
between three and four where most estimates of many estimates
of the neutral rate live in that three to four percent. Here,
you're there. Now, you're above the median number for the committee.

(01:00:33):
But I think there are people on the committee who
have higher estimates of the neutral rate. And that's you know,
you can argue these positions since it can't be directly
observed to neutral rates. So you know, I think for
for some part of the committee, you know, it's time
to maybe take a step back and and see whether

(01:00:53):
there really are downside risk to the labor market or
see whether in fact the growth that the stronger growth
that we're seeing is real. Ordinarily the labor market is
a better indicator of the momentum of the economy than
the spending data. That's the lore in this case, that

(01:01:13):
gives a more downbeat read. So people just have you know,
there again, we've cut fifty more basis points in the
last two meetings, and there's a sense like let's from
some let's pause here kind of thing, and a sense
from others wanting to go ahead. But that's why I
say differing views, strongly differing views, and.

Speaker 18 (01:01:35):
So on that division, then you're talking about going forward.
So what's more important in this division? Is it inflation risks,
is it employment risk? Or is there a deeper philosophy
division among the board.

Speaker 13 (01:01:48):
I look, everybody on the committee is deeply committed to
doing the right thing to achieve our goals maximum employment
and stable prices. You have differences on how to do that,
and as I mentioned, and some of that is different forecasts,
but a lot of it is also different risk aversions
to the different to do different variables, which is common

(01:02:08):
through you know, through all federal reserves there did people
just have different risk tolerances, let's say. So that leads
you to people with disparate views. You will know that
from the speeches you've been listening to from my colleagues.
And so we're at a place now where we have,
in fact cut two more times, and you know, we're
now we're one hundred and fifty basis points closer to

(01:02:30):
neutral wherever that may be, than we were a year ago.
And so there's there's a growing chorus now of feeling
like maybe this is where we should at least way
to cycle something like that.

Speaker 3 (01:02:40):
That's what it is. It's just what you think it
would be.

Speaker 13 (01:02:43):
It's and again you've seen it in the September Summer
of economic projections. You've seen this in the public remarks
of f HOMC participants. And now I'm telling you that's
what that's what you can expect that in the minutes
and I'm just telling you that's what happened in the meeting.

Speaker 19 (01:03:00):
Elizabeth, Thank you so much. Less Scholzie with ABC News.
What is your explanation for why the job market is
weakening right now and what will this ratecut do to
improve the job market?

Speaker 13 (01:03:14):
So the I think the there are two things affecting
the job market, and one of them is just a
dramatic reduction in the supply of new workers.

Speaker 3 (01:03:25):
So, and that's two things.

Speaker 13 (01:03:27):
That's declining labor force participation, which is a cyclical thing,
and then there's declining immigration, which is just a big
policy change that actually began in the last administration and
has been accelerated now. So a big part of the
whole story is that that supply side story. Okay, In addition,
labor demand has declined, and you know, so the labor

(01:03:49):
of the unemployment rate has gone down, meaning that demand
for workers is going down a little more than supply.
So that's that's what's going on. But it is most
a supply functions. You know, it's mostly a function of
the change in supply, I think, and many people think.
So the question then is what does what does the

(01:04:10):
you know, our tool do which supports demand? And you
know so, and I would just say, when you're when
you're in a situation where job job creation, if you
adjust for likely overcounting in the way that b LS
does its work, is pretty close to zero. So maximum
employment doesn't on a sustainable basis, doesn't if it's if

(01:04:34):
you're making creating zero jobs, if it's in equilibrium, if
it's if it's in balance, it's a pretty as as
I said before, a pretty curious balance.

Speaker 3 (01:04:43):
So you know, I thought, in any of my.

Speaker 13 (01:04:46):
Colleagues, So in fact, you've seen the last two meetings
that it was appropriate for us to react by supporting
demand with our with our rates.

Speaker 3 (01:04:55):
And we've done that. We've reduced so that rates are looser.

Speaker 13 (01:04:58):
I wouldn't say that they're commodative right now, but they're
meaningfully less tight than they were and that should help
so that at least the labor market doesn't get worse,
though It's a complicated situation, and some people argue that
this is supply and we really can't affect it much
with our tools. But others argue, as I do, that

(01:05:19):
there is an effect from demand and that we should
use our tools to support the labor market when we
see this happening.

Speaker 19 (01:05:25):
You also talked about tariff causing a one time price increase.
Should American household consumers expect that inflation will continue to
go up this year because of those tariffs.

Speaker 13 (01:05:34):
So the basic expectation is that there will be some
additional increase inflation because it takes a while for tariffs
to work their way through the through the production chain
and finally get to consumers. And we see this now
from the tariffs that were put in place now many
months ago.

Speaker 3 (01:05:54):
We see those effects.

Speaker 13 (01:05:55):
But if you put tariffs in effect that they've been
coming into effect consist in you know, February, March, April, May,
and that's all happening. So that'll continue to happen for
some time, probably into the spring. These are not big
increases though these are a tenth or so on inflation.
They may be big increases on a particular product that's
been tariffed, but overall, these are fairly modest.

Speaker 3 (01:06:17):
I think.

Speaker 13 (01:06:17):
You know, some projections call where two point eight percent inflation.
You might get two or three more tenths or four
more tents maybe, But then as as all the teriffs
are in they stop generating inflation. You've had a one
time pricing increase, as long as you're not at least,
this is the theory. This is how we believe and
hope that it will work out. Once the last tariff

(01:06:39):
is put on something. At that point it becomes a
higher price level, but it stops going up. If you will,
prices stop going up, they'll just be at that level,
and then measured inflation will come back down to non
tariff inflation. As I mentioned, non tariff inflation is not
so far from two percent.

Speaker 3 (01:06:57):
Now.

Speaker 13 (01:06:57):
Now, consumers don't interested in that story. Their prices are
higher more than that. The reason they're so unhappy. But
ben inflation is the inflation that we had in twenty
twenty one, two and three.

Speaker 3 (01:07:10):
Because you know, you.

Speaker 13 (01:07:11):
Can say that prices aren't going up as much, but
that doesn't mean people aren't feeling those higher prices from
the inflation.

Speaker 3 (01:07:18):
We had two or three years ago.

Speaker 13 (01:07:20):
They are, and that's I think a large part of
why the public, few sample people, inflation is still very
much making people quite unhappy even you know, and it's
nice that you know that prices are not going up
as fast as they were, but they're still much higher
than they were, and it'll take some time for that
effect to wear off. As real incomes rise, it will

(01:07:41):
feel better over.

Speaker 3 (01:07:42):
Time, but that's going to take time.

Speaker 20 (01:07:45):
Right, Michael Lakeete from Bloomberg Television Radio, Do you have
any concerns that equity markets are or are close to
being overvalued at this point?

Speaker 13 (01:07:59):
You know, we don't look at any one asset price
and say, hey, that's wrong.

Speaker 3 (01:08:05):
You know, it's not our job to do that.

Speaker 13 (01:08:07):
We look at the overall financial system and we ask
whether it's stable, whether it could withstand shocks.

Speaker 3 (01:08:14):
Right, So, you know, banks.

Speaker 13 (01:08:16):
Are well capitalized, while some households are clearly under stress.
In the aggregate, you know, households are in good shape
financially relatively, you know, relatively madile levels of debt at
the lower income spectrum. You are seeing rising defaults, particularly
around subprime auto, but nonetheless in the aggregate pretty good.

(01:08:38):
And you don't see so you don't see from too
much leverage in the banking system or the financial system.

Speaker 3 (01:08:43):
It's a mixed picture, but it's not an overly troubling picture.
And again I'm not.

Speaker 13 (01:08:49):
It's not appropriate. You know, we don't set asset prices.

Speaker 3 (01:08:53):
Markets do that, well are you.

Speaker 20 (01:08:55):
You must be well aware by lowering interest rates, you're
contributing to additional asset price increases. And I wonder how
you balance the idea that lowering rates would help the
labor market with the reality that it seems more likely
to be stimulating increased investment in AI, which is the
rationale for thousands of job cuts that have been announced

(01:09:17):
in the last few weeks.

Speaker 3 (01:09:18):
Yeah, I don't.

Speaker 13 (01:09:19):
I don't think interest rates are an important part of
the AI of the data center story. I think, you know,
people think they're great economics in building these data centers,
and they're making a lot of money building them, and
they I think they have very high present value and
all that sort of thing. It's not really about it's
not a it's not you know about twenty five basis points.

Speaker 3 (01:09:40):
Here or there.

Speaker 13 (01:09:42):
You know, we use our tools to support the labor
market and to create price stability.

Speaker 3 (01:09:47):
That's what we do.

Speaker 13 (01:09:48):
That's our two jobs, right, so we're here to buy
by lowering rates at the margin, that will support demand
and that will support more hiring.

Speaker 3 (01:09:57):
And that's why we do it.

Speaker 13 (01:09:59):
Now, No twenty five basis point or even fifty basis
point hike is going to be a this positive thing.
But ultimately, you know, lower rates will support more demand
and that'll support hiring over time. Now, of course, we
also have to be careful about this, which is what
we've been doing, because we know where inflation is and
we know that.

Speaker 3 (01:10:18):
You know, I've told you the story.

Speaker 13 (01:10:19):
It's a complicated story, but this is the best assessment
that we can make. And but you know, because there's
uncertainty around around inflation and the path the head for inflation,
that's why we're going. That's why we the pace we're
going has been a careful one.

Speaker 21 (01:10:36):
Victorian Hi Victoria Weed from Politico on AI. I'm just wondering,
you know, it seems like a lot of the economic
growth that we've been seeing is fed by investments in AI.
So how worried are you about what a sudden contraction
in tech investment would mean for the overall economy. Is
there enough strength in other sectors and specifically, are there

(01:11:01):
are there any lessons that you take from the nineteen
nineties in how you might approach what's happening right now.

Speaker 13 (01:11:06):
Yeah, this is this is different in the sense that
these companies, the companies that are so highly valued, actually
have earnings and stuff like that. So if you go
back to the nineties in the dot com they were
these are ideas rather than companies, and you know, we're
so there's a clear bubble there whereas the you know,
the I won'ld go into particular names, but they actually

(01:11:27):
have earnings, and you know, it looks like they have
business models and and profits and that kind of thing.

Speaker 3 (01:11:33):
So it's it's really a different thing. You know.

Speaker 13 (01:11:38):
It's the investment we're getting in equipment and all those
things that go into creating data centers and feeding the
a It's clearly one of the big sources of growth
in the economy. Consumer spending also, though, has been you know,
is much bigger than that and has been growing and
has defied a lot of you know, negative forecasts, continuing

(01:12:01):
to do so this year. Consumers are still spending now
it is it may it may be mostly higher end
consumers or maybe skewed that way, but the consumer is spending.
And that's a big, big chunk of what's going on
in the economy, bigger than substantially, bigger than.

Speaker 3 (01:12:15):
AI you could point to to growth.

Speaker 13 (01:12:17):
I mean, actually maybe growth as opposed to level, but
consumer spending is a much bigger part.

Speaker 3 (01:12:23):
Of the economy.

Speaker 21 (01:12:25):
And why do you think that the labor market is
slowing so much even though consumer spending is strong.

Speaker 3 (01:12:30):
Why is it slowed so much?

Speaker 13 (01:12:31):
Well, what's happened is is that the supply of workers
has dropped very, very sharply due to mainly immigration, but
also lower labor force participation. So and that means there's
less need for new jobs because there's there's there isn't
this flow into the into the pool of labor that

(01:12:53):
you know where people need jobs, because there aren't those
people now, So there's not a supply of workers showing
up for jobs. In addition, demand has also gone down,
and so has labor force participation, is to claim, which
is more of a sign in this case of demand
as well as trend. So I think you're seeing some softening.

(01:13:14):
You know, the economy is growing at a slower rate
than it was two point four percent last year. We
think around one point six percent this year, it could
have been a couple of tenths higher if not for
the shutdown, and of course that will reverse. But you know,
you still got the economy growing at a moderate pace.

Speaker 22 (01:13:33):
Andrew Andrew Ackerman with with The Washington Post. I wanted
to ask if you could elaborate on how you think
about policy in the context of the data drought. Does
it make you inclined to stick with your plans as
set out in September in the absence of the data
that might change your mind, or does it make you

(01:13:53):
inclined to proceed with added caution because of uncertainty?

Speaker 3 (01:13:57):
Yeah, well, well when.

Speaker 13 (01:14:00):
We face that question, If we face that question, I
you know, it'll probably be argued both ways.

Speaker 3 (01:14:05):
Right, But I've said a.

Speaker 13 (01:14:06):
Couple of times here that you know, if you if
you really aren't getting information, you really don't know, and
the economy looks like it's solid and stable and hasn't really.

Speaker 3 (01:14:16):
Changed, you know, there will be an argument.

Speaker 13 (01:14:18):
I don't know how persuasive it will be, but there
will be an argument that you know, you slow down
in a in an when you can't.

Speaker 3 (01:14:25):
See as far ahead.

Speaker 13 (01:14:28):
Others may argue, I mean, I'm not sure where this
argumentill come. But you're perfectly right that you could also
argue what things haven't really changed, but you might not
know that, you know.

Speaker 3 (01:14:38):
So I don't know whether we'll face this or not.
I hope we don't.

Speaker 13 (01:14:41):
I hope by the time of the December meeting we're getting,
you know, a better flow of data.

Speaker 3 (01:14:46):
But if we we're going to have to do our
jobs one way or the other.

Speaker 16 (01:14:49):
Okay.

Speaker 22 (01:14:49):
I also just wanted to ask a Finray question. I
think several years ago you said the overall amount of
capital system was about right. As the FED moves forward
with a revised Basle proposal, potentially changes to the chief
of surcharge, has that changed at all? And or are
you planning to significantly reduce the amount of capital in
the system.

Speaker 13 (01:15:08):
Thanks, So there's the discussions going on, I think among
the agencies, and I don't want to get ahead of
those discussions. I continue to think that the level of
capital when I said that in twenty twenty was about right,
and of course there's been much capital added since then
through various mechanisms. But you know, I look forward to

(01:15:32):
to I know those discussions are really just getting going.
They haven't come to the point where they're you know,
where they're got a whole plan and that kind of thing.
So I really don't have much to say on that, right.

Speaker 5 (01:15:47):
I termed Powell Brian Trump with NBC News is the
weakness in the jobs marketing?

Speaker 1 (01:15:52):
All right, guys, it looks like we're going to wrap
on this because Palell normally does he for about thirty minutes.
He seems to just be moving on for they're on
Q and A. But really what it boils down to
is tightening has stopped.

Speaker 2 (01:16:05):
That was the big narrative for today.

Speaker 1 (01:16:07):
This will beget or we'll start on will stop on
December first. And the question is is does easing start
to play into this? Remember how the Fed goes into
quantitative easing typically to correct market uncertainty, which may play
into this toward the end of the year. And again
a lot of this could be coming in from these
job losses. Again, data is still not in front of

(01:16:29):
Chair Pale in the Fed Governor's one note that is
interesting right here. Let me go to a couple of points,
because it is a growing divide at the FED right now,
and in terms of the next potential FMC one of
course dissented. We had one governor descent for no cut,
now that would did not happen, and then one dissented

(01:16:51):
for a favor of fifty basis points in.

Speaker 4 (01:16:53):
Terms of cuts, So clearly a divide.

Speaker 1 (01:16:57):
And if you look at polymarket right now, the position
is still holding around sixty nine percent with a twenty
eight percent up considerably for no change in December. All
this gets very intriguing on how this plays out between
now and December. So let me know in the comments.
Do you like these live streams. If you do, let

(01:17:18):
us know, give us some comments down there. And of course,
if you're not subscribed, come on, guys, get in there,
subscribe to the channel.

Speaker 2 (01:17:24):
Hit that little bell. You'll get notified.

Speaker 1 (01:17:26):
When we do these live streams like this, we'll do
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Get in on the Diamond Circle. It's our own private
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Speaker 2 (01:17:40):
Take care

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