tv Federal Reserve Chair Holds Press Conference CSPAN September 19, 2019 6:05am-7:00am EDT
9:00 a.m., the confirmation hearing for eugene scalia, son of the supreme court justice antonin scalia appeared he has nominated to serve as the next labor secretary. >> c-span it back in des moines, iowa this saturday for life campaign 2020 comverge for the annual steak fry. presidential candidates will take the stage for speeches. watch the iowa steak fry live on c-span, c-span.org, or listen on the c-span radio app. the chair of the federal reserve, jerome powell announced a one quarter point reduction in the fed's target interest rate range. he spoke following the meeting of the federal open market committee. he says the cut would above the economy to avoid contraction. this is 50 minutes.
other economic policies. his is almost an hour. mr. powell: good afternoon veryone and welcome. my colleagues at the federal reserve and i are dedicated to serving the american people. we do this by steadfastly pursuing the goals that congress has given us, stable employment and we are committed to making the best decisions we can based on facts and objective analysis. today, we decided to lower interest rates. we will keep the u.s. economy
strong in the face of notable developments and provide assurance against ongoing rifpks. the u.s. economy has continued to perform well. we are into the 11th year of this expansion and the outlook remains stable. 2.5%. nomy grew at household spending supported by a job market and consumer confidence has been the key driver of growth. in contrast, business investment and exports have weakened and falling manufacturing output. the main reasons appear to be slower growth abroad, two sources of uncertainty we have been monitoring. since the middle of last year, the global deproth has weakend in europe and china. a number of geo political risks including brexit remain un
resolved and this is weighing on u.s. investment and exports. our business contacts have been telling us that the uncertainty has discouraged them. and in the second quarter and recent indicators point to continued softness. with household spending and supportive financial conditions we expect the economy to expand at a moderate rate. as seen from participants' most recent expectations, the real g.d.p. deproth is 2% this year and next before edging down to its value. the job market remains strong. the unemployment rate is at its low and job gains have remained solid. the pace of job gains has eased this year but we expected some
slowing after last year's strong pass pace. participation in the labor force has been increasing. and wages have been rising for lower-paying jobs. people who live and work in low and middle-income communities those who struggled to find work are adding chapters to their lives this underscores the importance of expanding the expansion so the job market reaches those left behind. we expect the job market to remain strong. the median for the scrun employment rate remains below 4%. inflation continues to run below our 2% objective over the 123 months through july, it was 1.4% and core inflation was 1.6%. we still expect inflation to
have led us to shift our views on appropriate monetary policy over time toward a lower path for the federal funds rate. this has supported the outlook. this is the role of monetary policy, to adjust interest rates to maintain strong labor market and keep inflation near the 2% objective. today's decision to lowered the 2% isl funds rate to appropriate in light of the global developments i mentioned as well as muted inflation measures. we have seen additional signs of weakness of god and a resurgence resurgenceabroad in of trade policies. the fed has no role in the formulation of trade policy. we take into account anything can affect the economy. monetarye course of policy will depend on how the economy evolves.
we have often said policy is not on a preset course. that is the case today. as i have noted, a baseline economic outlook remains positive. the projections of appropriate policy shows that participants generally anticipate only modest changes in the federal funds rate over the next couple years. those fears are merely forecast and will evolve with the arrival of new information. let me say a few words about armand dasher monetary policy operations. -- about our monetary policy operations. roset federal funds rate above the top of the federal funds rate. while these are important for market functioning and market participants, they've no implications for the economy are the stance of monetary policy. this upper pressure emerged as funds flowed from the private sector to the treasury to meet corporate tax payments. to counter these pressures, we
conducted overnight repurchase operations. were temporary operations effective in relieving funding pressures. we expect the federal funds rate to move back into the target range. as we have done and of the past, we made a technical adjustment to the interest rate, setting it 20 basis points below the top of the target range for the federal funds rate. we also adjusted the rate on the overnight repurchase facility to five basis points will of the target of the bottom range. that's the bottom of the target range. -- bottom of the target range. decisiont with our earlier this year to continue to implement monetary policy, we time, provide a sufficient supply of reserves to that frequent operations are not required. to summarize, we are fully
committed to pursuing our goals of maximum employment and stable prices. as the committee contemplates the future path, it will continue to monitor implications of incoming information for the economic outlook and will act as appropriate to sustain the extension. -- the expansion. thanks. i'll be happy to take your questions. marty with the associated press. mr. chairman, we you cut -- when you cut rates in july, you characterized it as a midcycle adjustment. is that still your view? ours you can see from policy statement, we see a favorable economic outlook with continued moderate growth and inflation near our 2% objective. that view is consistent with those of many other forecasters. as you can see, fomc
participants generally think these positive economic outcomes will be achieved with modest adjustments to the federal funds rate. at the last press conference, i andted two episodes in 1995 1998 as examples of when such an approach was successful in those instances. as our statement also highlights, there are risks to the positive outlook due to weak global growth. if the economy does turn down, a more extensive sequence of rate cuts could be appropriate. that is not what we expect. we would follow that path if it became appropriate. as we say in our statement, we will be thing to monitor development closely we act as appropriate to ensure the expansion remains on track. it remains on track. reporter: taking the statement, your opening remarks, i'm
wondering what kind of message we should take from this. is it safe to say there is an easing bias or not? mr. powell: the idea of a bias is something that was a long time practice and we don't have that practice anymore. so i can't adopt it anymore. i'll explain your question. so we made one decision today and that decision was to lower the federal funds rate by a quarter. and we believe that is appropriate to promote our objectives and highly data-dependent and the implications of decisions on the outlook and i would say we are not on a pre-set course. that's how we are going to look at it. and look at economic data. the path ahead is clear and sometimes less so. we will be looking at
meeting-by-meeting and assess the appropriate stance and policy as we go. and as i said, we will act appropriately. reporter: just to follow up, you said the favorable outlook is predicated on financial conditions and the financial conditions are presented cailted on outlook for fed policy. wouldn't that suggest that if you want those financial conditions and favorable outlook to come about, you should be inclined to cut? mr. powell: what we are doing going forward depends on the flow of data and information. if you look at the things that we are monitoring, global growth and trade developments, global growth has continued to weaken. and it has weakend. and trade developments have been
up and down and then up. they have been quite volatile. we have seen those risks more heightened and we will be watching it carefully and watching the u.s. data and have o make an assessment as we go. reporter: "wall street journal." i know you are trying to speak for the committee when you do these press conferences but the committee is divided at least about the outlook and the appropriate policy path. some people think you need to wait and see the consumer market before acting more aggressively and some people think by the time that happens, you will need to do more aggressive action to arrest the downturn. where do you stand on this? mr. powell: well, let me screws
say on the general point of diverse perspectives, you are right. and in my eight years with the fed and the direction is relatively clear. this is a difficult time of ifficult job and disparate perspectives. and i think that is nothing but healthy. and so i see a benefit of having the diverse perspective. your question though is -- reporter: the data is lagged especially when you have the risks on the horizons and the markets think they couldn't materialize more than what you and your colleagues are projecting. what are your own views about the tension between risk management and the idea of being data dependent?
the bulk of the committee is going meeting by meeting. the main take away is that this is the committee that has shifted its policy stance consistently through the course of the year to support economic activity as it has felt appropriate. the beginning of the year, we were looking at further rate increases. we cut once. we cut again. you have seen as being willing to move raised on data and the evolving risk data. it will continue to be data dependent and data includes evolving risk picture.
that is where i think bulk of the committee is. >> i will -- are you concerned about how the federal reserve occupied -- operated through the recent liquidity crunch. we talked to many traders who said the tax payment was known well in advance. there were several reports with people pointing to september as a potential crunch time. you closed monday at the top end of the fed funds rate. tuesday came along and there was nine operation until 9:00. no announcement until 4:00 in the afternoon. was the fed listening to markets ahead of time going back a year when there were blowouts in the overnight rate at year end and the turn of the year? are you concerned about how the
new york fed operated? i would say -- >> i would say i doubt anyone has more invested in carefully following the behavior of these markets. we were well aware of the tax payments and also the settlement of the large bond purchases. we were very much waiting for that. we did not expect -- the response was stronger than we expected. it surprised market participants a lot. people were writing about this and publishing stories weeks ago. it was a stronger response than we expected. that to concerned about answer your question. i can go on a little bit about how we are looking at it. as i mentioned, we do not see this as having any implications for the rotor economy where the economic outlook or for our ability to control rates.
the strains in the muck -- in the money markets that -- strong demand for cash to purchase treasuries. we took appropriate actions. to address those pressures, to keep the fed funds rate within the target range. if we experienced another episode, we have the tools to address those pressures. we will not hesitate to use them. since we are talking about this, let me say this. earlier in the year as you recall after careful study over announced the decision. we've been operating in that regime for a full decade. we think it works well to implement our rate decision. the main hallmark is that we use adjustments in our administered rates. it is designed so we do not expect to be conducting frequent open market operations for that
purpose. going forward, we are going to be closely monitoring market developments in assessing the implications for the appropriate level of reserves. we are going to be assessing the question of when it will be appropriate to resume our balance sheet we will be revisiting that question during this interim meeting time. think you have underestimated the amount of reserves essay for the baking system? >> we have always said the level is uncertain. that is something we have tried to be very clear about. as you know, we have invested lots of time talking to the large holders of reserves to assess what they say there demand is for reserves. we have tried to assess what that is. we have put it out. there is real uncertainty. it is possible we will need to
resume the organic growth of the balance sheet earlier than we thought. that has always been a possibility. it certainly is now. we will look at this carefully and take it at the next meeting. n and taking it up in the next meeting. how much confidence do you have to estimate the real effects of trade uncertainty and if you have confidence in that paper it uld seem to suggest -- mr. powell: to provide a little context, economists do research all the time and high quality and their research and not a finding of the federal reserve
board. it's -- by the way, they put it out for public review and see all of it. their whole work is exposed to critique by the whole profession. it's a great tradition and what this particular piece of work did, it went after measuring trade policy through a couple of channels concerning tariffs. it looked deeply at the data to assess the effects on output. and answering your question, there is real uncertainty about these effects. $22 trillion economy to try to isolate the effects. but we do the best we can. and this piece of research found significant effects and that is consistent with a number of research projects that economists have undertaken and what we have been hearing in the
>> it is hard to have hardened expectations about where rate policy is going to be a year from now. the closer you get to the current day, -- even then, knowing what the data will say and the way geopolitical events and other events going to evolve in the next 90 days, i would say there's a lot of uncertainty around them. use oflook at 2020, the this is that individual participants write down their forecasts. they should give you a sense of the likely path of the economy and the appropriate path for monetary policy in the individual person's thinking. that is a good thing to know. i would be very luck -- very reluctant to look at hardened views or a production. >> there were a number of arguments in july's around --
>> you talked about it growing and maybe you have rupping your balance sheet too small to the fact the revs are too small to get through the organic period. are they enough in the balance sheets to get to ample reserves to get us through the tough times or do you need to see more above that and is that a possibility the committee would consider?
>> the question will be as we learn more, how much of this really has to do with the level of reserves. and i think we'll learn quite a lot in the next six weeks. >> they're pointing to liquidity rules and what we've seen in capital rules as well. are we all looking at whether some tweaks in the liquidity coverage ratio might help and also, what is the status of the net stable funding ratio rule? are you still planning on putting it out soon? jerome: i think we concluded that we needed to raise the level of requires reserves for banks to meet the l.c.r., we'd probably raise the level of reserves rather than lower the l.c.r. it's not impossible it would
come to a view l.c. is calibrated too high but not something we think right now. it might be more reserves are needed. in that position we are there to supply them. in terms of the net funding ratio, i believe we put it up for comment and got comments and i believe we're looking at finalizing that in the relatively near future. l.c.r., there is talk about giving >> there has been talk of giving banks room in times of stress to dip into their liquidity buffers. jerome: we want banks to look their liquidity buffers rather than pull back from serving their clients as a general rule. reporter: edward lawrence from fox >> edward lawrence from fox business network.
you said there's no precedent for trade uncertainty in a monetary policy. in the last few weeks have you figured out how to incorporate the level of trade uncertainty into monetary policy going forward? you talked about uncertainty many times today. mr. powell: my point was that trade policy is not the business of fed but congress and the administration. so what are we talking about? anything that affects the achievement of our goals can in principle can be something that monetary principle should be taken into consideration. and trade policy is something that is weighinging on the outlook. i pointed out in recent remarks that the thing committee can't address really is what businesses would like, which is a settled road map for international trade. we can't do that. we don't have that tool. but we have a powerful tool that
can counteract weakness. and we think our policy tools support economic activity through fairly well understood hannels by homes and other interest-sensitive items by creating more financial conditions which supports spending. and also by boosting household and business confidence. i don't want to say our tools don't have an effect, they do. there is a piece of this that we can't really address. [inaudible question] mr. powell: there is a challenge. there is no simple answer. what it amounts to is this. what you's is probably the kind of volatility that is typical of an important complex, ongoing negotiation and i think what we need to do is try to look
through volatility and react to the underlying forces, the underlying things that are happening that are relative to our mandate. we have nothing to do with setting trade policy or negotiating trade agreements. we are supposed to be reacting on behalf of the american economy to support stable prices. we need to look through what is a volatile situation. that means not overreacting or underreacting. that is what we are trying to do. the outlook is positive in the face of these crosswinds we felt. so to some extent, i believe we are shifting on our stance and why the outlook has remained favorable. reporter: bloomberg radio and
television. fed fund trading shows that investors still think another rate cut is coming this year rment. on their behalf, what is going to guide fed policy to either pull them towards where the gut plot suggests no more mofts this year or keep them in place, are you reacting to data or reacting to what trade tweets might mean? ould they watch for powell's speeches? what is the federal's reaction? >> what we are looking for through all of the data, all of the events that are going on around the world, we will be trading - evolving events and looking at the forms of the u.s. economy.
and things that are affecting the outlook. particularly the outlook. so all of those things in principle can affect the achievement of our goals. unusual situation because the u.s. economy itself, the largest part of it is nrl strong shape. the manufacturing part, less so. but overall, you see an economy that i think generally forecasts show growth coming in at 2% which is a good solid year. so the difference here is we have significant really risks to that outlook from not just the geo political events but slowing global trade growth.
something that we look at during the financial crisis and chose not to do this. we chose to do a lot of aggressive forward guidance and also large scale asset approach. those were the two policy tools we used. we feel they worked fairly well and did not use negative rates and i think if we were to find
rselves at some future date, again something we aren't expecting, we would look at asset purchases. and i don't think we would be using negative rates. by the way, we are in the middle of a monetary policy where we are looking through these questions and the strategy tools and communications and we expect that to be completed sometime round the middle of next year. >> "l.a. times." ow much can you talk about the mechanism which the two rate cuts will affect the economy and to what extent will it offset the negative affects of trade
uncertainty? mr. powell: in terms of how our rate cuts will affect the real economy. monetary policy works with long and variable lags. the real effects will be felt over time. but, you know, we think that lower interest rates will reduce interest burdens for borrowers and housing and durable goods and other things like cars, supports purchases of those. and higher asset prices, that's the models and the data shows that is another powerful channel. and there is a confidence channel. you see household and business confidence turn up when financial conditions become more acome dative. it isn't precisely the right tool for every single possible negative thing that can happen
to the economy. but nonetheless, it broadly works and we are going to use the tool we have. and that's how we think it works and how we think it's working. reporter: you said that the low interest rates are adding to or could create a bubble of consumer and corporate debt that could make it difficult for consumers to recover from the next recession or survive the next recession. mr. powell: if you look at
households, households are in very good shape. they got more income and they are in very good shape, much better shape they were in. e household sector as an aggregate matter is in very good shape. doesn't mean that e is in good shape, but overall. the business sector, we have talked about a lot and studied a lot. and the situation there is that he level of debt relative to g.d.p. in the business sector is at a high level. however so is the size of the business sector. the business sector itself is not materially higher. there are a lot of hire leveraged companies and that happens when there aren't
downturns in our 11th year, you do get that phenomenon. that is something we are monitoring and our view is still is that is a real issue but what it represents a potential amply .ire of a macroeconomic and itself create a shock. it is more of an amply fire. we take it seriously, though. and monitoring care tlly and actually looking substantial stable board is conducting a product to see where they are around the world. and we are trying to keep on top of it. reporter: i'm from marketwatch.
you are saying the economy is doing well. but there is a sense with people that the economy is actually starting to slow now and people are more and more, there is talk about recession. and even the fed thinks the downside risks are on the horizon. is the economy between now and the end of next year, do you think g.d.p. is going to hold steady and the unemployment rate. how do you see the economy evolving over the next year? mr. powell: we think the most likely case is for continued moderate deproth and continued strong labor market and 2% and that is widely shared among forecasters. the issue is more the risks to that. you have downside risks. global effect will have but still, there is a sector of our
economy ta is exposed to that. trade policy uncertainty has an effect. so and you can see some weakness in the u.s. economy because of all that. the job monetary policy is to adjust to ensure against the scroun side risks and support the economy in light of the existing weakness that we do see. we are not -- we don't see a recession or forecasting a recession but adjusting monetary policy to support what is the favorable outlook.
>> just to talk about the current situation. you saw a long-term rate move down a whole lot and retraced two-thirds of that move in the space of two days. when there are changes material changes that are sustained for a period of time. low? are long-term rates there can be a signal about expectations about growth but there can be long-term premiums. it can be just that there is a large quapt of negative yielding and very low yielding debt
around the yield and that is exerting pressure without having an independent signal. that is a signal of weak global growth and that would affect us. global capital markets are quite integrated. we aren't going to be dismissive about the yield curve. on the committee there is a range of views. some are focused on the yield curve, others not so much. t watch it carefully and ask yourself a lot of questions as to why that is and how long it s sustained. reporter: dow jones news wires. you mentioned trade policy being a complex ongoing discussion. what is your rule for stopping
as far as interest rate cuts go? you referred to this in the mid-cycle adjustment, the median dot suggests no more rate cuts, but if we get back and forth between the you as and china and trade policies remain heightend, under what circumstances do you say, we stop now? and secondly, as leader of this institution, have you felt the need to take any steps to boost like employee morale at a time that the president is constantly criticizing the fed? >> i mr. powell: it's really going to be when we think we have done enough and our eyes are open. we cut rates twice and moved through the course of this year
as i discussed and we see ourselves as taking actions to sustain the expansion and thereby achieve our goals. if you look at sort of the things that are happening in the economy. i personally see high value in sustaining the expansion because we are reaching this positive economy is reaching economies that haven't been reached. there would be a great benefit to have that last as long as possible. i think we are watching carefully and there will be a time when we have done enough and there will come a time when the economy worsens. we don't know. the incoming data and evolving situation and that's what is going to guide us on that path. in terms of the morality of the institution, it's very high. we are unified and doing the best job we can serving the
american people. reporter: i'm from the american banker. there is an investigation of bank of america. i wonder if the fed is investigating this and given the pending order against wells fargoo that these banks are too big to manage? >> i saw the headline this morning. i don't have anything for you on that. i will say about wells fargo, there were quite wide breakdowns in risk management that resulted in mistreatment of consumers that was quite harmful to the consumers and to the image of the institution. i have no idea what's happened t bank of america.
the central bank has been exploring the far reaches of what's possible for monetary policy, even going so far as to make rates negative in some cases with mixed results. meanwhile, fiscal and regulatory and trade policy are pursuing their open separate courses. as you and your colleagues do this monetary policy framework review, do you ever consider the imitations of monetary policy? should you be more explicit of what monetary policy can and cannot do in this environment? mr. powell: we try to be clear about that. t really, i think our job is
to use our tools as best we can to do the jobs that congress has asigned us, which is to achieve maximum employment and fiscal authorities who are the ones that created us, advice to do their job. we keep that at a high level. and at a high level, yes, i would say and i said before that it's really fiscal policy that is more powerful and has much more to do with fiscal policy can do those things that will increase the longer growth rate of the united states by improving productivity and labor force participation and the skills and aptitudes of workers. that comes from the private sectors and things that can be done with fiscal policy. over the long run, we can't
really effect the potential deproth rate of the united states. it's not a function of monetary policy but other things sm i try to be clear about that. and so, but ultimately, fiscal authorities will do what they deem appropriate. [inaudible] reporter: bbc news. mr. trum has been a vocal critic of your colleagues and calling you boneheads and called you a terrible communicator. how do you respond to these? mr. powell: i don't. i'm not going to change my practice here today of not responding to addressing comments made by elected officials. i will just say i continue to
believe that the independence of the federal reserve has served the public real over time and my colleagues will conduct monetary policy without regard to political considerations. we will base it on facts and objective analysis in pursuing our goals and that's all i have o say on it. reports reporter: falling yields up until the beginning of this month and the liquidity crunch that we saw. doe the fed have concerns over the impact of u.s. debt in is that a conversation you have with secretary treasury mnuchin to address the challenges down the road with that type of heavy interest globally?
>> that is treasury's job and congress' job. how much to spend and how to finance it and none of that calls for advice from the fed. we take fiscal policy to our work. that doesn't stop from saying that we think it's important that the u.s. fiscal picture return to a sustainable footing and right now it's not and that has been the case for a long time and something we will have to address and good time to do it is when the economy is strong. we limit ourselves to high-level statements like that. reporter: "washington post." mr. chairman, in your view, is there any risk to the united states having much higher interest rates than europe and japan and other parts of the world?
is there any risk to the global economy? mr. powell: i guess i would say it this way, global capital markets are highly integrated and our rates are long rates are definitely pulled down by the very, very low rates that are abroad. and the way i would characterize it is this. the low rates abroad are assign expectation. low growth and you know, just kind of a lack of policy space to move against or ideas about how to break out of that. there are implications for us. in a world where economies and financial marget are integrated, that matters. that is going to pull down u.s. rates and u.s. financial conditions can tighten because of that. i think we put all of that and
goes into our thinking and modes and we do understand how the international sector interfaces and we take that into account in setting our u.s. policy. thank you very much. [captions copyright national cable satellite corp. 2019] captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org >> president trump and melania trump will host a second dinner of his administration as he welcomes scott morrison and his wife jenny. watch guest arrivals and dinner toasts. beginning friday at 6:30 p.m. eastern on c-span, online at
c-span.org or listen on the free c-span radio app. >> coming up live thursday, the house returns at 10:00 a.m. eastern for general speeches on c-span. and at noon members are expected to take up a short-term spending bill to fund the government past september 30. on c-span 2 at 8:00 a.m., the environmental protection agency will hold a news conference announcing they'll revoke a waiver to allow california to set its own fuel standards. when the senate returns at 10:00 a.m., more work on executive nominations including brian mcgwire's nomination to be deputy undersecretary of the treasury. on c-span 3 at 9:00 a.m., the confirmation hearing for eugene scalia, son of the late supreme court justice anton scalia who has been nominated to serve as the next labor secretary. . >> coming up in an hour, house judiciary committee member john mcclintock talks about the committee's latest investigations of president