charles: thanks a lot, team, good afternoon, everyone, i'm charles payne. this is "making money." this is the most anticipated fomc gathering in a very long time in part because there is serious confusion out there and honest debate over the direction of our economy. there is no debate. uptick in pace of inflation, that is real. moreover inflation expectations they have also turned higher. so what we're doing here we hope to learn, you know, that maybe the fed's going to make adjustments and if not how will the market brace itself? remember the fomc potential moves we could see, they may talk more about rate cuts. i'm not sure they will mention rate hikes although that will be brought up at some point. i can't argue higher for longer and not admit maybe it will take more rate hikes. the bottom line there will have to be some major adjustments made by the federal reserve. everyone's on pins and needles. you saw what happened to the market yesterday. we're so anxious. tell you what, let's go right now to edward lawrence live at the federal reserve.

edward. >> reporter: federal reserve has left rates unchanged. this is the sixth pause in a row for this. now with the first line of the statement has a word that's been added to it. it says the economic activity continued to expand at a solid pace. now the statement says that the fed sees job gains remaining strong. the fed also sees inflation easing over the past year but remaining elevated. the committee also changed the statement to say that employment and inflation goals have moved into better balance over the past year. the fed leaves one sentence in. it's a very key sentence, saying it needs to gain greater confidence that inflation will move sustainably to 2%. again a very key phrase in the statement. one big announcement of the fed statement is going to make, the fed is reducing runoff of the balance sheet. starting in june the fed will go from $60 billion of runoff in treasurys, rolling off $25 billion. going down to 25 billion in treasurys, rolling off starting

in june, amount of mortgage-backed securities will remain the same for the roleoff at 35 billion for the time-being. any principle payments above that would be rolled into and reinvested into treasurys. again this is a unanimous decision. so the fed saying that they're going to remain, pause on the rates for the sixth time in a row but they want greater confidence still that inflation is moving sustainably to their 2% target. charles? charles: there is a lot there. edward, thanks so much my friend. in 1956, a new gameday beaud on television. it was called to tell the truth. it had a heck of a run. one or five or six shows one episode in the last six decades. on today's show we decided we'll have a concept of that because we wanted the truth. what is the view state of the economy and what jay powell and company do? can they accept whatever the truth is. there have been a lot of assumptions made and a lot of

things with respect, these higher rates have had a major impact social, economically. i want to bring in first and foremost with the economy, i want to bring in yardeni research president, ed yardeni. ed, yesterday we get the eci report. it put the market in a tailspin. i looked under the hood and the private sector part of this, it came down a lot. the private sector part was really, came down tremendously so. we saw in march, from this year from last year compensation was 4.1 percent from 4.8%. wages 4.3% from 5.1%. benefits, benefits came down from 4.3 to 3.6%. so that part of the eci worked out pretty well and so i'm just, i'm just wondering because, it feels like this one wild card to all of this is government, right? it's the government. we saw it in the jolts report today. we saw it in the eci report. so what is the state of the economy particularly when you

have the federal government printing and pumping in money at breakneck speed? >> well, the economy continues to do remarkably well in the fails of lots of government meddling as you point out. we've had all sorts of regulations put on business. we've had certainly a lot more spending on infrastructure and the like which probably also helped the economy actually in terms of economic growth but the economy is always surprises me how well it does despite washington, that is kind of the my spin on it. and on the inflation front i tend to focus on year-over-year percent changes and i don't get too deep into the weeds. you can always find some problem not weeds. the reality can't control things how much is costs to repair a car or motor vehicle insurance. it has to focus on the overall number and the overall number

continues to, to disinflate. so i think moderation is still very much the trend in inflation, certainly in goods and i think soon we'll see increasingly in rents. charles: let's talk about manufacturing for a moment because we've had a whole bunch of regional manufacturing numbers. so far they have been disappointing, dallas has been disappointing for the last two years. what is the intriguing thing, manufacturing pmi. it was down. wall street thought it would be up. now we're contracting. if you look at the overall economy, we are growing slowly the last 48 months and we're contracting in manufacturing. this is what worries me, as manufacturing contracts, pricing flowedded, erupted. for four months moving higher. isn't this the exact opposite what we're looking for, stronger manufacturing with lower prices? >> absolutely, that's what we

want and look the reality is on a short-term basis we have seen energy prices going up, particularly oil prices, gasoline prices and i think that's what the purchasing managers survey reflected. so i'm not particularly concerned about that, especially now we've seen not withstanding the insane geopolitical problems in the middle east, we're still seeing the price of oil actually moderate of late. so global demand remains relatively weak, the supply is still there, not withstanding the geopolitical situation. charles: right. >> on the economic front, manufacturing has been in sort of a growth recession for a while here and looks like that's still the case. charles: ed, before i let you go, the odds have gone from 2% at the beginning of may, april, rather, to now 27% chance, no rate cuts this year. could the rally, could the stock market rally be sustained without any rate cuts? >> i think so. i think the two-year is probably

going up to 5.25%. we're around 5% right now. i think it will do that in the next few weeks. once that's the case i think the market that will be a signal the market has basically given up on any rate cuts over the next 12 months. i think as long as the outlook is that rates are going to stay here, and by the way they're normal, they have been normalized. i think the economy can live with it. the stock market can live with it as well. i see a pause in the market. resumption of the rally going into the late summer, early fall. >> all right. ed yardeni, thank you so much, folks. you heard from ed, here to stay, that's the theme. one thing for sure inflation has been stubborn and it has been defiant. it means everything as far as the fed is concerned there will have to be some reassessment. bring in qi research, of course the chief strategist there danielle dimartino booth. danielle, this, this new paradigm and it's focused on the supercore, right? so important to the federal reserve, the pendulum has swung.

ed talked about the things the fed can't control. things contributing to supercore, health care, financial services, insurance, transportation, these things have not gone in the other direction. is this a new reality in life? they will not come down on their own, are they? >> not so much they will not come down on their own. what's pertinent to the members of the fomc is whether or not they can effect change in these elements. 50% of the increase in the supercore last month, 50%, came from the, cost to repair a car and auto insurance. these things two years in the making to get through the regulatory entities to push hikes through in the case of insurance. the fed has no control over them. charles: i'm saying they can't control it. the average car is 14 years old. >> the average car is 14 years old but we're seeing prices coming down. the car insurance, those rates are sticky on the way down. the fed cannot control this.

but they're staying higher for longer which will hurt discretionary extending more than otherwise it would, that is what the fed can affect, discretionary inflation. charles: the april meeting, rachel siegel, jay powell, talked about navigating by the stars. >> we needed a mood. charles: his answer was vigorously defending the fed, saying all economists blew it. take a listen to that for the audience to remind them. >> i think forecasters generally, if you go back a year were very broadly forecasting a recession for this year, for 2023, the very high proportion of forecasters, very weak growth or recession. not only did that not happen, we actually had a very strong year. charles: in other words we weren't the only ones, everyone got it wrong. you know, when i hear that from the chairman of the fed, 400 phds, everyone got it wrong but this not supposed to get it

wrong this consistently. i'm worried about the credibility of the powell fed? i know you defended jay powell but -- >> not a matter of defending jay powell. it is a matter of defending those who are creating the data. we now know they were not wrong. there was a loss of 192,000 jobs in the third quarter and september 30th, 2023. i -- charles: this stuff was revised months later. >> of course that was revised but that does not erase the reality where we were last year with job losses as of september the 30th. charles: how do we get around that? on friday, if he put out this is the jobs report, it is not real, ignore it, six months from now it may be 1000% different? >> that is not how market react. markets always pin on the initial print and you will see jay powell at the podium doing the same. he will talk about the initial print on the economy that appeared to be so robust. give it a little bit of time. he is talking about a false reality. charles: of these things which will be more prominent, fed rate cuts push them out, keep them in

play. >> defend the rate cuts as the unemployment rate continue to do tick up after every meeting. he has two employment reports before the fed meets if june. charles: do you want to see any adjustments, major or minor? >> we had a major adjustment to quantitative tightening. we did get that. he should be very careful in his verbage. charles: the fed will start buying some more treasurys? >> they are starting roll off fewer treasuries. charles: role off fewer treasurys. >> and allow mortgaged backed securities to continue roll off at its pace. that is really critical. they're maintaining tightening in the certain sector of the economy. people should pay heed for that. charles: danielle, stick around. i will need you a little later, to decipher what the heck jay powell is saying. >> i will be here. charles: the stock market finally hit a speed bump last month. we know there will be periods when the market goes up and down. admit it we -- this tweet from

bespoke says it all. only time the s&p 500 was 10% year to date in the first quarter, fell 3% in april. how spoiled are we? last time it happened was 1936! they say look at the bright side, since then the market is up average 11%, may, 5%, for the rest of the year 25%. let's hope they're right. mellon head of investment advisory solutions. lisa, if we get one more title we can't even do the show. i know, let's start with this whole thing. i know you were pretty optimistic relatively bullish. this makes me feel a little better. history is on our side. >> usually april is a very positive month. not this year. charles: right. >> but it is following the election, the election year which tends to being strong out of the gate, weak in the next few months. then you finish the year strong and so we still think fundamentally you know the economy is strong enough, the

unemployment rate is good. as long as the fed doesn't pivot from the pivot, meaning the pivot was in december towards cutting, cutting. as long they don't say we're hiking then i think the market is fine. charles: how do they acknowledge higher inflation, like, okay, january it was because it got cold. always cone fuses me. economists don't know it gets cold in january. february was some other excuse. i think easter came early, whatever. three or four months in row you can't keep excusing it or looking the other way. how do you acknowledge higher inflation but don't bring up hiking because someone will ask during the q&a. >> someone will ask what the threshold is. what is your threshold for a hike? the answer here is to really thread the needle on the way down that last mile is sticky. this is consistent with sticky. it doesn't mean it is reversing. and there is a difference between those two things. ultimately part of the problem on inflation is that oil prices moved higher. that is feeding into producer

prices and feeding into some goods prices as well. that is the sticky area that the fed can't role. charles: your firm was three, now you're at one rate cut. you were 30% chance of recession. 15% chance of recession. sounds like you're in still a soft landing camp? >> we're still in soft landing camp. we're not saying higher, we don't think the fed will hike from here it will slowly squeeze parts of economy credit. commercial real estate, using credit to spend. you will see further pain there. on the corporate side smaller companies that have to borrow to grow will be in for a long time. they're 25% below their all-time high, the russell. charles: mastercard said the first few days in the month of april, 28 days were sort of slowing down. before we go then, areas to be invested in the stock market. mag-7 still? despite the volatility? >> so, fast growth but they win

in either scenario. they win in a high rate scenario and they win in a low rate scenario. they have moats. they have free cash flow. you have to invest in flow cash flowing companies. charles: companies that have the cash, don't need to go to market. >> or borrow. charles: reshoring? >> we love reshoring. there is industrial policy, you have to go where the money is going, it is going towards manufacturing and the chip sector. we think reshoring, the largest trading partner for the u.s. is mex cuoco. it is not china. depending who is elected the trend will continue. this is decade long trend that we think investors should be exposed to. charles: small caps have struggled, they have struggled. >> they have struggled. i would say for small caps they are 25% below the low. you don't want to sell at the low. may want to start nibbling in case we're wrong about inflation being sticky. because the market's now pricing in sticky inflation and barry one cut this year. charles: right. >> if it goes the other way

small caps will rally. charles: great to see you, lisa, appreciate it. when we come back, inflation take aig bite out of regular folks. alicia talked about it. not just alicia, mcdonald's, coke, starbucks, they are all saying what you've been saying for a long time and now we've got even more proof. we'll be rightfi back. ♪. that you and your family need. i promise to put your long-term financial well-being above any short term transaction. everyone has a big picture. my job is to help you invest in yours. [announcer] charles schwab is proud to support the independent financial advisors who are passionately dedicated to helping people achieve their financial goals. visit findyourindependentadvisor.com

charles: all right, folks, let's face it real people are in real trouble. when i was growing up in harlem,

max max was a periodic treat. for low income households it is becoming that way again. federal reserve doesn't know about it, maybe though don't really care. economists use aggragated data, they put everybody in a pot, we're too strong. stands to reason if mickey d's is hurting, starbucks is hurting maybe we're in a lot of trouble. take a look at starbucks. this is what is intriguing for me. same-store sales down 7%. transactions down 3%. they raised prices but it was not enough. this is the a problem, if you did go there barely making it stuff costs more. remember yesterday the consumer confidence number all of this feeds into this. i have to bring this up again, this is the expectations. it is falling off a cliff. look how far back you have to go. we haven't felt this worried in a whole long time let's bring in heritage economist peter st. onge. there are two americas, right?

the one is getting pounded while the other one is getting richer. why doesn't the fed factor that into its decision making? >> you're absolutely right. they work with aggregated numbers. looking at the economy overall. this is the essence of central planning and once you dig into the numbers that is always where the tragedies are. so as you mentioned the poor are cutting back on coke and mcdonald's. moulson coors, they came out said things are going great. they have a lot of growth in price ier beers as consumers help themselves. you have a k-shaped economy. people at taupe have tons of money. tiktok videos, people sitting on the beach in bali enjoying it. then you have a lot of pain for the rest of the people struggling just to keep up with inflation, really. charles: it is ironic because these folks who have the money, in part because they have assets that make more money at higher rates are spending it. that adds to the inflation

equation. yeah, hotels are doing phenomenal, casinos are doing phenomenal. we know that. >> yeah. charles: how did you get inflation down, when inflation reared its ugly head initially everyone said it cures itself. higher prices was the cure for inflation. that was four or five years ago. at least three years ago. >> yeah it has been a long transitory inflation, it has been a couple years. in fact it looks like it is reaccelerating. that is a bit concerning. we had stagflationary read a few weeks ago. we have slower economy, inflation taking off again. the problem there the way that inflation enters the economy the fed does not have helicopters that it dumps money out of. the way it brings money into the economy is pumping into the financial markets. they hope it trickles down. that takes a long time. the people who first get the month any, stocks soar, corporate valuations soar, housing soarses of course. then years later, right.

>> you had some numbers on wages finally starting to catch up. years later it trickles down to everybody else. meantime they have been dealing with the inflation. charles: right. >> so really the way to fix this, the way to fix a lot of problems in our economy right now, is to get down the government spending. biden is proposing 7.3 trillion now, that would be almost three trillion up prowhat putting out there pre-covid. that is three trillion in what, about five years there? not only is that bringing in all these new taxes. we're talking about 45% rate on capital gains. they're floating this unrealized capital-gains tax which would be absolutely insane. beyond that, that is what is keeping the inflation going. that is putting the fed in a no-win situation with inflation accelerating ion as you mentioned consumer spending is topping off. charles: peter before you go i want to make the point with you and the audience because you made the point before, because

of so much government spending they're pushing out the private sector. in the jolts report only thing that feigned jobs are the government -- gained jobs. in eci, see how much workers for the government are getting paid. we have construction spending, private construction how much are they pushing out. single family homes down, private homes down, office down, only thing up was amusement parks. folks if the government is sucking all the oxygen in the room there is nothing he left for the private sector. pete, thank you very much. charles: my next guest, my next guest is uniquely qualified to answer the tougher questions that i have. she is fdic former chair, volcker alliance founding director, sheila bair. sheila, first i want to talk about this piece, higher for longer, a good thing? this is pretty intriguing stuff here. the era of zero interest policy was characterized by sluggish

growth and yawning wealth inequality. how do you convince wall street this statement is correct? >> yeah. well, i think, main street knows it. wall street loves it. low interest rates primary prop up financial markets which is why you had increased wealth and income inequality during the protracted period of low interest rates. there is no empirical evidence that low interest rates boost economic growth. we had a deep resession after the great financial crisis. it took main street about 10 years to pull out of it notwithstanding zero interest rates and it has a lot of bad sued effects, wealth inequality is one. capital allocation, productivity. it is hard to get out of it, it is like a drug, once you get into it it is hard to withdraw but we are withdrawing. i think that is one of the reasons why the economy is doing better. not to say we don't have problem. you mentioned earlier our

deficits are crowding out private capital investment and their own distortions, it is better to have higher interest rates. charles: do you think a epiphany will go off, wall street is cheering for lower the rates the better? >> they are. it inflates, you saw what happened late has year when mr. powell and the fomc were making very dovish signals. the markets boomed because everybody thought interest rates will go down. yaw, take down interest rates on safe assets, move into higher risk assets the bread and butter of wall street, they would like to see all the money taken out of the safe government money market funds and put them in the stock market, crypto, whatever crazy thing. i'm describing, i'm not judging. charles: sure. >> that's what's going on. that's the dynamic. yeah, the right monetary policy, accommodative monetary policy is much more beneficial to wall street than it is to main

street. charles: everyone is licking their chops where that six trillion dollars is going to go. we know jay powell is his own man over the last couple years he has been compared to arthur burns, been compared to paul volcker, been compared to alan greenspan and been compared to ben bern knee. which persona might work best as inflation is sticky and stubborn? if you had to use one of these playbooks which one would it be? >> he still needs to be paul volcker. we have not licked inflation and inflation hits everybody. as you were saying earlier you raise interest rates it hits borrowers and certain segments of borrowers, they're subject to variable rates. inflation hits everybody. main street is hurting. they need to stay focused on taming it. i hope he can reequates himself to paul volcker side of his personality. charles: i hope so too. sheila, you're fantastic. thank you very much appreciate it. >> thanks for having me. charles: we're only minutes away from the jay powell presser.

i want to bring back danielle dimartino booth and introduce main street asset management erin gibbs. erin, get your comment on sheila bair's comments. if we allow rates to go higher, forget about zero interest rates stuff, it would be better for society. would wall street go nuts with the notion of no free money? >> i think we're finally coming to grips with that. there is still a lot of projections say the risk-free rate, the normal rate should be 2 1/2, 2.7, fed is for 5.25 to 5.5. i think getting to the idea maybe the long-term risk rate should be 4%, something much higher will take quite a while for wall street to really fully digest. this is going to be much higher for a very long period of time, not just one year, not just two years, but it could be potentially for the next decade. charles: you like certain small caps here over large caps at

this point? >> i think we have gotten to the point, and, to the prior guest's point about reshoring, looking at companies within the u.s. that can really take advantage. some of the small caps are really oversold. we're talking some companies trading in like single-digit forward p-es, really, really cheap. i like small cap industrials. that has a lot to do with reshoring. goe group is global security. considering increased global conflict. charles: i saw small cap semis -- >> that is big thing, we didn't know we had them locally. based on the east coast, eco instruments. forgive me if i mispronounce it. charles: bco. >> they do materials for semis. that is lot about reshoring. charles: gallium was supposed to be a major replacement for silicon. i used to play the stock 20

years ago. that's why i remember it. bring danielle into the conversation. green on the screen. what ask the market reacting to? >> there was a nod, verb tense change in the statement. employment and nation goals, it used say are moving into better balance. now it says have moved toward better balance over the past year. you cannot get nearly 800 phds to ignore a big revision out of the bureau of labor statistics that put that negative print in front of non-farm payrolls in the third quarter. they all like each other. they make models together. that acknowledgement is dovish. they're acknowledging the past. this is over the past year. market friendly. charles: you brought this up at the beginning of the show. in reality we lost a lot of jobses recently. >> they had originally been reported positive 640,000 in the third quarter for all three months and q3, 2023 that was

revised down to a negative 192,000. charles: right. >> we know job losses ensued at some point in the third quarter of 2023. again phds cannot ignore this. it means rate hikes are not on the table. >> jay powell stepping to the ped jump in about a minute, erin. what do you expect him to say, what do you want him to say if that is different? >> i think they should be more clear. they have been very hawkish. i think they should be clearer on the possibility of no cuts this year. we talk about possibility much rate hikes. charles: how -- [coughing] >> their language, basically every fed official has been saying this, it is more and more likely. charles: they have been moving in that direction, yeah. >> i think we should even start, hearing the words no cuts, zero. charles: we get back to the credibility question because they said three rate cuts. again, maybe i'm being too hard on jay powell, but this, he has to live with the transitory

thing and i think the soft landing, immaculate landing whatever they were calling it makes that something a footnote in his tenor at the fed. >> charles, several meetings ago you may recall he synthetically created a new dot plot even though there was no dot plot announced at the meeting. he basically said at the podium, had we released a dot plot this time it would be more hawkish. he can certainly do the same thing this time and move the markets in doing so. charles: folks here he comes. federal reserve jay powell. >> good afternoon. my colleagues and i remain squarely focused on our dual mandate to promote maximum employment and stable prices for the american people. the economy has made considerable progress toward our dual mandate objectives. inflation has eased substantially over the past year while the labor market has

remained strong. and that's very good news. but inflation is still too high. further progress in bringing it down is not assured and the path forward is uncertain. we are fully committed to returning inflation to our 2% goal. restoring price stability is essential to achieve a sustainably strong labor market that benefits all. today the fomc decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings though at a slower pace. our restrictive stance of monetary policy has been putting downward pressure on economic activity and inflation and the risks to achieving our employment and inflation goals have moved toward better balance over the past year. however, in recent months inflation has shown a lack of further progress toward our 2% objective and we remain highly at taken tiff to inflation risks. i will have more to say about monetary policy after briefly

reviewing economic developments. recent indicators suggest that economic activity has continue towed expand at a solid pace although gdp growth moderated from 3.4% in the fourth quarter of last year to 1.6% in the first quarter, private domestic final purchases which excludes inventory investment, government spending, net exports, usually sends a clearer signal on underlying demand was 3.1% in the first quarter. at strong as the second half of 2023. consumer spending has been robust over the past several quarters even as high interest rates have weighed on housing and equipment investment. improving supply conditions have supported resilient demand and the strong performance of the u.s. economy over the past year. the labor market remains relatively tight but supply and demand conditions have come into better balance. payroll job gains averaged

276,000 jobs per month in the first quarter while the unemployment rate remains low at 3.8%. strong job creation over the past year has been accompanied by an increase in the supply of workers reflecting increases in participation among individuals aged 25 to 54 years and a continued strong pace of immigration. nominal wage growth has eased over the past year and the jobs to workers gap has narrowed but labor demand still exceeds the supply of available workers. inflation has eased notably over the past year but remains above our longer run goal of 2%. total pce prices rose 2.7% over the 12 months ending in march excluding the volatile food and energy categories, core pce prices rose 2.8%. the inflation data received so far this year have been higher than expected although some measures of short-term inflation expectations have increased in

recent months 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. the fed's monetary policy actions 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 he specially for those least able to meet the higher costs of essentials like food, housing and transportation. we are strongly committed to returning inflation to our 2% objective. the committee decided at today's meeting to maintain the target range for the federal funds rate at 5.25 to 5 1/2% and to continue the process significantly reducing our securities holdings though at a slower pace. over the past year as labor market tightness has eased and

inflation has declined the risks to achieving our employment and inflation goals have moved toward better balance. the economic outlook is uncertain however and we remain highly attentive to inflation risks. we've stated that we do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%. so far this year the data have not given us that greater confidence. in particular and as i noted earlier reads on inflation have come in above expectations. it is likely gaining such greater confidence will take longer than previously expected. we are prepared to maintain the current target range for the federal funds rate for as long as appropriate. we're also prepared to respond to an unexpected weakening in the labor market. we know that reducing policy restraint too soon or too much could result in a reversal of the progress we've seen on

inflation. at the same time reducing policy restraint or too late or too little could unduly weaken economic activity and employment. in considering any adjustments to the target range for the federal funds rate the committee will carefully assess incoming data, the evolving outlook and the balance of risks. policy is well-positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate. we will continue to make decisions meeting by meeting. turning to our balance sheet, the committee decided at today's meeting to slow the pace of decline in our securities holdings consistent with the plans we released previously. specifically the cap on treasury redemptions will be lower flowed the current 60 billion per month to 25 billion per month as of june 1. consistent with the committee's intention to hold primarily live treasury securities in the longer run, we're leaving the cap on agency securities unchanged per month. we will reinvest any proceeds in

excess of this cap in treasury securities. with principle payments on agency securities currently running $15 billion per month, total portfolio runoff will amount to roughly 40 billion per month. the decision to slow the pace of runoff does not mean that our balance sheet will ultimately shrink by less than it would otherwise but rather allows us to approach its ultimate level more gradually. in particularly slowing the pace of runoff will insure a smooth transition, reducing money markets experience stress and facilitate the ongoing decline in our security the holdings that are consistent reaching the appropriate level of ample reserves. we remain commit stood bringing inflation back back down to our% goal and keeping longer-term inflation expectations well-anchored. restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer

run. to conclude, we understand that our actions a affects 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 look forward to your questions. >> reporter: howard snyder with reuters. question follow up, do you consider the current policy rate still, are you confident it is sufficiently restrictive to get inflation back to 2%? >> so i do think the evidence shows pretty clearly that policy is restrictive and is weighing on demand and there are a few places i would point to for that. you can start with the labor market. so demand is still strong, the demand side of the labor market in particular but it's cooled from extremely high level couple years ago. you saw that with more evidence

in the jolts report as you know. it is still higher than pre-pandemic but it has been coming down in the indeed report and the jolts report. that is demand cooling. the same is true of quits and hiring rates which have essentially normalized. i also look at the, we look at surveys of workers, pardon my, surveys of workers and businesses, and ask workers are jobs plenty full, and ask businesses are workers plentiful, is it easy to find workers? you see the answers to those have come back down to pre-pandemic levels. you also see in interest sensitive spending like housing an investment, you also see higher interest rates are weighing on those activities. so i do think it's clear that policy is restrictive. >> reporter: sufficiently restrictive i guess? >> i would say that we believe it is restrictive and we believe overtime it will be sufficiently restrictive that will be a question that the data will have to answer. >> reporter: sew as a follow up, if inflation continues running

roughly sideways as it has been, the job market stays reasonably strong, unemployment low and expectations are anchored and maintained, would you disrupt that for -- >> expectations are not anchored? >> reporter: are anchored. stable, roughly, would you disrupt that for the last half point on pce? >> i don't want to get into complicated hypotheticals but i would say that you know we're committed to retaining our current restrictive stance of policy for as long as is appropriate and we'll do that. >> gina. >> reporter: thanks for taking our questions, chair powell. i wonder, you know obviously, michelle bowman has been saying risk of rates increasing. do you see that as a risk as well. if so what change in conditions would consider meriting raising rates at this price? >> i think it's unlikely the

next policy rate move will be a hike. i say it's unlikely. you know our policy focus is really what i just mentioned, how long to keep policy restrictive. you asked what would it take? i think we would need to see persuasive evidence that our policy stance is not sufficiently restrictive to bring inflation down to 2% over time. that is not what i think we're seeing as i mentioned. something like that is what it would take. we would look at the totality of the data to answer that question. that would include inflation, inflation expectations and all the other data too. >> reporter: [inaudible]. >> well i think, again the test, what i'm saying is, if we were to come to that conclusion that policy weren't tight enough to achieve that. so it would be the totality of all the things we would be looking at t could be expectations, it could be a combination of things but if we reach that conclusion and we don't see evidence supporting that conclusion, that's what it

would take i think for us to take that step. >> chris. >> reporter: thank you, chris at associated press. you didn't mention the idea that rates are at a peak for the cycle and didn't mention the idea that it might be appropriate to cut-rates later this year as you have at previous press conferences. so has the fed sort of dropped its easing bias? where are you standing on that? >> so, one, let me address cuts. so obviously our decisions that we make on our policy rate are going to depend on the incoming data, how the outlook is evolving and the balance of risks as always and we'll look at the totality of the data. i think we think policy is well to address different paths economy might take and we said we don't think it would be appropriate to dial back our restrictive policy stance until we achieved greater confidence that inflation is moving down sustainably toward 2%. so for example, let me take a

path. if we did have a path where inflation proves more persistent than expected and where the labor market remains strong but inflation is moving sideways and we're not gaining greater confidence, well that would be a case in which it could be appropriate to hold off on rate cuts. i think there are also other paths the economy could take which would cause us to want to consider rate cuts and those would be two of those paths would be that we do gain greater confidence as we've said that inflation is moving sustainably down to 2% and another path could be you know, an unexpected weakening in the labor market for example. so those are paths in which, in which you could see us cutting rates. so i think, it really will depend on the data. in terms of, in terms of peak rate you know i think really it is a the same question. the data will have to answer that question for us. >> reporter: could you follow, on the path where you might not

cut, is that, you mentioned there would be inflation persistent. is inflation would that be the key data making that decision or could you expand a bit more on that? thank you. >> again, it's, we've set ourselves a test, for us to begin to reduce policy restriction we would want to be confident that inflation is, you know, moving sustainably down to 2% and for sure one of the things we would be looking at is the performance of inflation. we would be looking at inflation expectations, looking at the whole story but clearly incoming, incoming inflation data would be at the very heart of that decision. >> reporter: nick timiraos of "the wall street journal." chair powell, to what extent has the easing it in financial conditions since november contributed to the reacceleration in growth and do you now expect a period of sustained tighter financial

conditions will be needed to resume a sort of disinflation the economy saw last year? >> so i think it's hard to know that. we'll be able to look back from down the road and look back and understand it better. you know if you look at, let's look at growth, really, what we've seen so far this year in the first quarter is growth coming in about consistent with where it was last year. i know gdp came in grow are but you don't see an acceleration in gregg. the thought would bal conditions loosened in september. that caused an uptick in activity and that caused inflation or tightening in the labor market. you don't really see that happening. what you see economic activity at a level roughly the same as last year. what is causing this inflation will have a better sense of that over time. i don't know there is an obvious connection there with easing of financial conditions. in terms of tightening, you're right, rates are certainly

higher now and have been for sometime than they were before the december meeting and they're higher, and that is tighter financial conditions and that's appropriate given what inflation has done in the first quarter. >> reporter: you have said in the past stronger growth wouldn't necessarily preclude rate cuts. i wonder would continued strength in the labor market change your view of the appropriate stance of policy in it was accompanied by signs that wage growth was reaccelerating? >> i want to be careful we don't target wage growth other the labor market. remember what we saw last year, very strong growth, a very tight labor market, and his tomorrowally fast decline in inflation. that's because we know there are two forces at work here. the unwinding of the pandemic supply side distortions and demand side distortions and there is also monetary policy. you know, restrictive monetary policy. so i wouldn't rule out something like that can't continue. i wouldn't give up at this point

on further things happening on the supply side, either because we do see that companies still report that there are supply side issues that they're facing and also even when the supply side issues are solved it should take sometime for that affect economic activity and ultimately inflation. so there is still those things. i don't like to say either strong, either growth or a strong labor market in and of itself would automatically create problems on inflation. of course it didn't do that last year. you asked about wages, we also don't, we don't target wages. we target price inflation. it is one of the inputs. the point with wages is of course we like everyone else like to see high wages but we also want to see them not eaten up by high inflation. that's really what we're trying to do is to, is to cool the economy and work with what's happening on the supply side to bring, to bring the economy back to 2% inflation.

part of that will probably be, having wage increases move down incrementally towards levels that are more sustainable. >> rachel. >> reporter: hi, chair powell, rachel siegel from "the washington post." thank you for taking our questions. you talked about needing time to gain more confidence that inflation is moving sustainably back down to 2%. it is may now. do you have time this year to cut three times given the calendar? >> i'm not really thinking of it that way. you know, what we've said is that we need, we would be more confident and we've said, my colleagues and day today said we didn't see progress in the officers, in the first quarter and i've said that it appears then that it's going to take longer for to us reach that point of conference. so i don't know how long it will take. i can just say, that when we get that confidence, then rate cuts will be, will be in scope and, i

don't know exactly when that will be. >> reporter: with hindsight are there any signs that you look back on now looking at reports for january, february, march, something more worrying than expected bumpiness? >> you know, not really. what, so i thought it was appropriate to reserve judgment until we had the full quarter's data, until we saw the march data. take a step back. what do we now see in the first quarter? we see strong economic activity. we see a strong labor market and we see inflation. we see three inflation reads and so i think you're at a point where you should take some signal. we don't like to react to one or two month's data but this is a full quarter and i think it is appropriate to take signal and we are taking signal and the signal we're taking it will likely take longer for us to gain confidence we're on a sustainable path down to 2%

inflation. that's the signal that we're taking. >> steve. >> reporter: mr. chairman, steve liesman, cnbc. if i could follow up on that. what particular areas were sort of temporary or -- charles: folks still with me danielle dimartino booth, erin gibbs. i asked them to stay because the marketing makes all kinds of crazy moves during the q&a session. we're gaining traction, more and more traction. let me start with you, erin, a lot of things were said, i saw you scribbling on your notepad, when he started talking about government. i started off showing how much government spending swayed this economy, to a large degree maybe hurt the private sector? >> absolutely. most economists estimate that the additional fiscal stimulus we're doing right now is adding about half a percent to inflation. if we took the half% off we would be way closer to 2% target. so i think the fact he was focusing on growth ex-government spending and making those

comments about where the gdp growth is coming from and really trying to avoid the commentary on how much the government is contributing is interesting. again we know the fed is fighting this fiscal stimulus. they have their work cut out for them. i think he is playing politics. charles: speaking of playing politics, a question was asked, are, can you still achieve three rate cuts? a we're not even looking at that. >> when he says he is not paying attention to the calendar, it has to do with the damage that biden did to powell by making him sit out in the wind for six months in between being renominated, actually being confirmed by the senate. leaving the fed is no chair. he have will not lean in either potential candidate's direction. that being said, for him to say that, means every meeting is live regardless how close it is or not to the lex. he mentioned the conference board this time, and the fact that peoples per session being more jobs out there lower since

2011. he mentioned indeed.com. he went out of his way to mention alternative sources on labor market, unexpected weakening in the labor market keeps cuts alive. what is unexpected? in the december meeting, target was 4.1%. that dropped to 4.0% in the march dot plot. meaning we don't have much longer to get there until it is unexpectedly weak in the job market. charles: that means on friday if we get, two jobs reports ago we had two basis-point move. we're at 3.8%. i can't imagine going to 4.1, but if we saw a sharp, another two basis-point move -- >> all you have to see 11 basis point. rounds up to 4.0%. that's it. it is a teeny little move that the fed rounds up to 4%. charles: they are paying attention the market would be off to the races? >> that technically launches a rate cutting mode. charles: one point where this sort of budding really started

to stall, we'll go back to the fed chairman one second, i have to ask you guys, on this, on this unexpected weakening, on one side he kind of gave us a hint, looks like the labor side looks like what they're looking for to trigger these rate cuts, but the other part inflation staying where it is. >> i think it is interesting all the hawkish comments are inflation lack of further progress. every single comment we're not making progress, inflation is stickier than we want it to, then all the dovish comments are on the unemployment side. really stressing that they have to balance the two. >> yeah. >> it is playing politics, staying open. being able to do those cuts, whatever excuse they can come up with. >> charles,ingal interestingly he threw alan greenspan's favorite inflation metric to the curb employment cost index. we're targeting price inflation. >> i love that. every jobs report i'm looking at jobs, wages, those wages are too high to the fed. says don't worry about it. >> says don't worry about it.

looking state and local, union salaries much higher than remainder of the private workforce. talking about holistically, forget the eci, i'm paying attention to the cpi and pce. charles: go back to d.c. and the fed practical reserve chair. >> very >> hard to predict the path and there's paths to not cutting and there's paths to cutting and really going to depend on the data. in terms of the employment mandate, to your point, if you go back a couple of years, our sort of frame work document says that when you look at two mandate goals and if one of them is further away from goal than the other, you focus on that one. it actually is the time to get back there times the, you know, times how far it is from the goal. that was clearly inflation. so our focus was very much on inflation as and this is referred to in the statement.

we're now focusing the other employment goal now comes back in to focus and so that's how we think about that. >> thanks for the opportunity to ask the question. before we go back to the previous answer, seems to suggest you think the likeliest path ovinflation is one that's going to allow you to have a situation where is that a correct reading and the g1 gdp is ling some to start with the

term flag fellation with respect to the u.s. economy. do you or anyone else on fomc think this is now a risk? thank you. >> yeah, i'm not dealing really in likely hoods and i don't have great confidence in which of those paths and i think my personal forecast is that we will begin to see further progress and i don't know florida be sufficient, i don't know that it won't. we'll have data lead us on that and in terms of second question with stagflation. i would say i was around for stagflation and it was 10% unemployment and high single digits inflation and right now we have, and very slow growth. so right now we have 3% growth, which is pretty solid growth i would say, by any measure.

we have inflation running under 3%. i don't understand where that's coming from and in addition i would say most forecasters including ours at that level would be be sustained and come down and that's a healthy level of growth and inflation, we'll return inflation to 2% and that won't be -- i don't see the stagger of the inflation actually. >> blockburg intelligent radio -- bloomburg radio. he's willing to consider the idea that potential growth has moved up and he's mr. potential

growth star. do you share that view and would that imply that maybe policy isn't tight enough? >> i would take that question this way, we saw a year of very high productivity growth in 2023 and negative growth in 2022. it's hard to draw from the data. the question is will it run consistently longer above the trend and in terms of output, that's a separate question and we've had what appointments to a significant infrees of potential and productivity and having more labor and booked in 2023 and participation and stuff for immigration and we're very much like other forecasters and

economists getting our arms around for what it means for the potential outs put for this year and next year and last year for that matter. in that case, you have a significant increase in potential output, but you've got more supply, but the people come in and they work and have jobs and spend. you've got demand and there may be it may be inflationary or deflation natural rights approach over a longer period. >> you're not really considering rate increases if growth is higher and you're not considering rate increases and are you more worried about causing the economy to slow too much than you are about inflation taking off again? >> no, i think we believe our policy stands in a good place and is appropriate to the current situation.