tv Making Money With Charles Payne FOX Business May 1, 2019 2:00pm-3:00pm EDT
report. democratic lawmakers are grilling him why special counsel mueller told the ag that his original summary caused confusion. go to edward lawrence with the federal reserve board of directors. reporter: charles, i can tell you the federal reserve keeping rates the same. federal reserve remaining patient on this the range of the federal funds rate is 2.25 to 2.50. the federal reserve is watching the global economy and financial developments as well as muted inflation as possible headwind. in the fed statement the fed said it could be patient with the muted inflation. the upgrade or federal reserve upbraids the assessment of the economy. the federal reserve characterized economic growth as solid, a change from march when it said economic growth had slowed. consumer, business spending slowed in the first quarter. inflation playing a big part of changes in the federal reserve statement. noting that it declined. board members acknowledged
excluding foot and energy it is running below 2%. core pce we know is 1.6%. on the balance sheet side the federal reserve says it will begin shrinkage of the tapering. it will roll off instead of 50 billion a month, it will roll off $35 billion a month. that ends the roleoff in october. fed chairman jerome powell says the it will be around 3 1/2 trillion dollars. federal reserve lowered rate it pays for bank reserves. that is done to keep the target federal funds rate within the range of 2.25 and 2.50% t was in upper range so they lowered that. this statement was unanimous, charles. wait and see. still the word of the day. patience for the federal reserve. charles: edward, thank you very much to appreciate it. here to help break it down, former fed advisor danielle dimartino booth, lindsey piegza,
hal lambert joins us as well as money map press their chief technical strategist dr barton. lindsey, let me start with you, so far anything you heard jumping out at you? >> statement was pretty much as expected. the rate remains unchanged. justifying their position along the sideline. they maintained that relatively optimistic view of the economy. what is really of importance as we watch the press conference. we'll look for the chairman's assessment of this seemingly solid growth against the backdrop of this disinflationary environment and what that means for rates going forward. that really is going to be the highlight, waiting for the chairman's assessment what the most recent data means for rates going forward. charles: hal, the data is somewhat mixed. a great first quarter gdp report. as edward lawrence says the fed acknowledges that going to solid
from slowed with respect to the economy but there is still pockets of weakness. housing is still extraordinarily weak and worrisome. today we were reminded manufacture something extraordinarily weak and getting worse. maybe the u.s. economic moat won't fend off global weakness. how does the fed juxtapose those things? >> charles i started saying last summer that the fed should put a pause button raising rates. they shouldn't have raised in september. and gdp there were couple anomalies. inventory number was much better or higher than expected and trade was different. gdp number was a little higher than what would be expected for this next quarter. the big question i have, charles, for powell, what should be asked to the next nominee of the fed, what do you think potential long term gdp growth should be. he is saying low 2%. 2.2, 2.3% is potential gdp. that is a problem.
we need gdp over 3 1/2% 4% as president trump said that will help the debt number. that will help the debt-to-gdp number we're talking about. we can do it without inflation. we're seeing it now without inflation. charles: hal, i know where you're going. i have four reasons or theories why people say we should have rate cuts. you're alluding to one. get danielle's initial read what you heard so far? >> i was expecting goldilocks and we have goldilocks in the house. they upgraded their assessment of economy. by the same token they acknowledged global trade is not improving. they continued to broke that out. inflation according to their very broken metric, core cpe, that is below the fed's 2% target. what they're trying to say we have got wiggle room. what we're looking in the press conference from jay powell, whether he will bring up
preemptive, insurance rate cut. charles: why your hashtag, insurance rate cut. without getting into the weeds are you say the way they measure core cpe overstates it or understates it. >> it understates it. health care is one of the biggest expenses but they base health care and own medicare, medicaid rates reimbursement for the government. guess what? you pay a lot more. i pay a lot more. that excuse it downward what the rest of planet earth lives by the headline. charles: i guess until you can hear from jay powell himself. nevertheless this number is decision markets are looking at particularly as the dow is on a cusp of making an all-time high? >> yeah. i think you've nail it there, charles. we're up 3 points. i just plans -- glanced down, up
3 s&p 500 points. that is a little muted with them coming out with solid, solid adverb, adjective everyone has been talking about. i was expecting a little bit better pop if they talked postively about this. what we'll see if the fed chair, if he is going to put in some dovish language. i know ubs had some leanings that would be coming out this afternoon. if that happens, i think we can push this thing a goodly bit higher even this afternoon. charles: so there is a lot of theories out there why the fed should cut rates. one theory is that there is no inflation. they have got room to do it. another theory there's a liquidity issue. maybe why they took the action they did do with the bank reserves. there is another theory, hal was
leaning toward this. hey why not make the count economy stronger. there is always a fifth one the economy is getting weak. lindsey, any of these legitimate issues in your mind for the fold to look lowering rates? >> i think number one and number five are very legitimate. the fed as it said in the statement, acknowledged early signs of weakness. there not concerned what growth was in the rear view mirror but they're concerned about declining trend among consumption and investment. the two key components of the economy as we move further to the end of the year. that is one key argument i think the fed is making and i expect to hear that from the chairman. the second is the we don't have inflation. the inflation is well below the fed's 2% objective. to further stimulate price growth and economy on track or the recovery on track there is plenty of room for the fed to offer the first rate cut in the cycle. i think there will be a lot of arguments made although no fed
official at this point is talking about rate cuts i think they will open that door further to the conversation of the first rate cut at the upcoming press conference. >> i will jump in here. rich clarida himself, actually the vice chairman of the federal reserve board he has become a very big personality. his influence is growing stronger and he has indeed smoking of past times in fed history they come out and put out an insurance rate cut. so the discussions definitely is occurring around the table right now. we have to remember back in 2001 when there was a shock for the markets obviously greenspan came out with 50 basis point rate hike. clearly the president and his haves source are studying fed history. they're saying we don't, even if we do have an insurance rate cut, it doesn't have to be a quarter of a percentage point. it can be a half percentage point. charles: so that point, folks, we have the ism number out today and it was extraordinarily weak t miss the wall street's
consensus. we're still in expansion but we're dropping precipitously. new orders weakest since december of last year. production the lowest since 2016. employment the lowest since february. two categories dipped into contraction, export orders and imports. so, hal, how do we reconcile something like this on one hand by the, on the other hand we're saying this is extraordinarily strong economy? >> well globally we're not strong, you saw, why china has done stimulus. japan is trying to do stimulus. that is a big part of this. the fed came out and said, globally we've slowed way down. the u.s. will be a part of that. u.s. does a lot of exports if globally we're weak the u.s. should slow down as well. this goes back to what i said earlier. i think potential gdp should be viewed much higher than it is. productivity is way under stated in the economy. that is a big thing they're missing. we ought to look at 3 1/2, 4% gdp.
why shouldn't we be? many years in the '90s we had over 4% gdp growth. we've averaged 3.2% gdp growth since the '50s. we averaged over 4% in the '50s and 60's. no reason we couldn't do that with the technology we have today and productivity increases with very going on. the fed could easily cut rates, maybe 25 or 50 basis points if we slowdown happening over. there jobs look great. that's great. we need increases in wages. s that hasn't caused inflation. we're starting to see that but inflation's not there. charles: right. earlier this year when powell suggested or he reminded folks at least he told them that wage inflation is different than price inflation. that is when this market took off. i thought the fed was signaling to the world hey, we're not going by the old playbook. as soon as wages increase by 3% on main street we'll take away the punchbowl. i think that is fantastic for
main street but what about the notion we can do even more? president trump's tweet said china is adding stimulus to the economy while at the same time keeping interest rates low. our federal reserve consistently lifted interest rates even though inflation is low and introduced a big quantitative tightening which will be 35 billion through the most of the rest of the world. we have the potential to go, go lower. maybe not a whole percentage point but what would that do for the market if that were the circumstances, dr? >> anymore come date tiff stance will do a lot for the market. we'll see when fed chair powell comes and talks if he gives us some of that, if he gives some signaling that is going to be happening. we won't even have to have hard things. we won't even have to have him give numbers and dots and he would just have to have some more dovish language. we would see it reflected here.
that is what the market really knows that with that, with that extra, with that extra dom mowdation, that that is about all accommodation all we need with the rest of the world. the u.s. stock market is the risk asset place to play. that is going to be, that is going to be a big boost to anything we hear. charles: that would be significantly more than your insurance rates. >> oh, absolutely it would be but look, charles, i wish we had gary on set with us, he would be howling, would be screaming, saying look debt growing four times the rate of gdp since the 1960s. is this the american way? is this how we grow our way to prosperity? are we supposed to follow in china's footsteps to put out record levels of stimulus first three months of the year? they took their foot off the accelerator took the month of april, we've seen their stock market tick back down 7% and it had led everybody. charles: maybe these central banks put them in a position. >> in a corner.
>> everyone crossed the rubicon. >> exactly. charles: maybe, you, gary, everyone else that hates the fed is doing it is antiquated way of thinking and he can't go back without crushing this thing. >> it's a race to the bottom. charles. that is how you have to look at it. charles: if rates stay low, theoretically can the fed be more accommodative? can our debt levels go higher? can we sustain that, if powell is right. if we had 4% gdp in part because the fed was cooperating would that be enough to mitigate dangers of higher debt? >> it could be. it might be. but the things we're seeing in two sectors that lead the economy. we've seen one headline after another today with weak car sales. retail sales, retail car sales, what you an me buy in the dealer lot, down 1% in 2018. they have been down every single month this year. and we've seen that a 10 basis point increase in mortgage rates has been enough to slam the housing market into reverse. charles: right. >> these are not two sectors you want to sea weakens despite the
fact interest rates are -- charles: we may have been at peak auto for three years. housing i'm with you 100%. folks hold on one second. the market is edging a little bit higher, trying to get a little bit of traction. the fed announcing they will keep rates unchanged. go down to the floor of new york stock exchange. gerri willis is there, get her read what the buzz down there, gerri? reporter: charles, this is fascinating because i went all over the floor here for you talking to all kinds of traders about interest rates, about the fed, what they had to say today. they like the fact that the fed said inflation will decline. it will remain patient. that is all good news to people here but i have to tell you what they really liked is that the fed is saying that the economy is in a solid place, it is growing, that means with inflation at 1.6% they can afford to let the economy run a little hot. the last thing these people want to see down here is any kind of rate hike. the assumption in the marketplace we would get a rate cut by the end of the year.
that question is up in the air with some of the recent economic performance we've had. for right now people feel like we're in a good place with the fed. they like what they heard. will talk to you briefly about apple as well. this is fascinating because this wasn't an eps report that people were excited about necessarily. more like a sigh of relief. some of the analysts saying that obviously people don't want iphones this cycle. if you can imagine that, being said two or three or four quarters ago it, would be a complete disaster for the stock. look at it right here. it is trading higher. $214.50. that means it's a trillion dollar stock. so that is good news for holders of apple. google i want to hit this quickly. this stock trading on the fact that ad revenue is down. that is what we've seen. we have brokers cutting price targets on google as well. a lot going on down here. people sort of feeling like maybe, you know, we don't have to worry that much about the fed. you know as well as i do, that
could change in a heartbeat charles. back to you. charles: everyone will listen intently to the press conference for sure. thanks a lot, gerri. jerome powell is set to hold the press conference from now. our panel weighs in on that next. more to the reaction, to the federal reserve and where we are as a nation when it comes to the federal reserve. stay with us. ♪ ience with usaa has been excellent. they really appreciate the military family and it really shows. with all that usaa offers why go with anybody else? we know their rates are good, we know that they're always going to take care of us. it was an instant savings and i should have changed a long time ago. it was funny because when we would call another insurance company, hey would say "oh we can't beat usaa" we're the webber family. we're the tenney's we're the hayles, and we're usaa members for life. ♪ get your usaa auto insurance quote today. 2,000 fence posts. 900 acres.
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charles: welcome back. stocks are higher after the fed announced it would remain patient and the economy is in pretty good shape. we'll have more in a moment. first our other top story today, attorney general william barr defending his handling of mueller report. mueller sent a letter to the justice department objecting the way barr was portraying its findings and had miss gives the way the media is reporting it as well. hillary vaughn is on capitol hill. hillary? reporter: barr called controversy over his four page letter before he made the 400 page report available to the public mine bendingly bizarre. blumenthal told barr, he has become the fall guy for the mueller report. in a searing reply barr defended
digs to issue four page letter before the point came out. saying the point of mueller's investigation was not to prove that the president did not commit a crime. >> we're not in the business of exoneration. we're not in the proofing of they din violate the law. i didn't exonerate. i said we did not believe there was sufficient evidence to establish an obstruction shun offense which is the job of the justice department. and the job of the justice department is now over. that determines whether or not there is a crime. the report is now in the hands of the american people. everyone can decide for themselves. there is an election in 18 months. that is very democratic process but we're out of it. we have to stop using the criminal justice process as a political weapon. reporter: attorney general barr saying he was surprised mueller did not reach a decision on obstruction. >> i think that if he felt that
he shouldn't go down the path of making a traditional prosecutetive decision, then he shouldn't have investigated. that was the time to pull up. reporter: barr says he is looking into leaks that came out during the special counsel investigation from the doj and the fbi. he is also looking into the alleged spying that occurred on trump officials during the trump campaign in 2016. charles? charles: hillary, thank you, very, very much. the fed reit rag its plans to be patient, job market, solid economic gains over all and they're holding out that weak inflation will begin to edge maybe a little bit higher. of course right now the markets are pretty happy with this but we're awaiting fed chair jerome powell. i want to bring back our panel. danielle dimartino booth stayed with us. joining us rob luna and fox
business's very own kristina partsinevelos. thanks a lot for joining the panel. here is a theory i have, i want to share with you, ceo of a big silicon valley company said yesterday that the fed is created the tools that we will never see recession again but we'll also never see a booming economy again. these tools are quantitative easing, right? we had zero interest rate policy, operation twist. we had qe3 times. those are the things they discovered in created during the great recession. do you think that's possibly true and by the way it wasn't said in a good way, it is good to have recessions from time to time? >> i was impressed he walked that back, this is not a good thing i'm saying. if you look at the number of zombie companies in the united states that would have otherwise gone out of business totally had it not been for the fed rushing in with qe, ripping back open
the junk bond market to be on weak life-support. we would be in better place. charles: creative destruction thing may be painful but necessary for further growth. >> because you come out of it with a stronger trajectory to grow stronger to get to the three and 4% rates but if you keep that dead wood inside the economy it acts as a drag over time. that is exactly what we've seen over the past recovery until the last few quarters. charles: kristina, there will be fireworks today. there are a lot of questions jay powell will have to answer? >> you think it will be fireworks? charles: exactly. >> core inflation has been dropping since december. that is major issue and a point he cannot ignore. if you look at growth in the economy, first quarter coming in 3.2% i think the market is going to like any type of rate cut that would be influenced by inflation not the economy and i don't think we'll hear anything like that. i think -- charles: he will be asked about that. >> he will be asked. the other thing we should raise awareness to, he cut rates on
excess reserves this is commercial banks to encourage them to loan. the market could take that as a signal maybe he will be cutting rates. if you look at fed fund futures rate, 65% in terms of cutting rates. charles: jpmorgan said we're fast approaching a point where banks will run out of liquidity. asking for a 50 basis point cut at all. some on banking side may not think jay powell went far enough there. here is the point. i think there will be fireworks, rob, people will leave dissatisfied because you have so many camps now, including this growing camp in the donald trump era, why can't the fed, why can't the fed help the economy? why can't the fed, particularly if december was a mistake, at least cut rates 50 basis points. >> i don't think that is going to happen, charles. earlier in the segment you hit on something that is extremely important and that is market psychology. what i mean by that the fed, you said before looking rising wages right now, look at today's adp
number reiterated on friday they could have easily come out and totally changed the tone. they could have scared the markets off. they learned a lesson in december that was extremely important that they're backpedaling on that of the i don't think you will see, talking about recessions. we'll have recessions again. but at the end of the day the fed has the market's back. the market feels that way. why we're continuing to tick back up. >> there is a total 360 or i should say 180 from december. the fed changed its intentions but didn't change the balance sheet, din change rates but we're seeing growth. you bring up a point, labor costs, input costs overall. that is eating into march begins. we have a graph to be made, s&p 500, over the last, every single quarter right now we're starting to see margins shrink. even the latest margin. you compare it to margins starting to decline. that is concern for companies going forward. can we maintain the rally. charles: good news the fed will
not stop, do policy changes based on wage the without any evidence it is influencing prices which is not something people believed a year ago in the last year. this is certainly a change. where else do you see the powell fed changing from some of his predecessors? it feels like he is putting his own stamp on the federal reserve? >> he certainly is in terms of flip-flopping. unlike any fed chair who preceded him. charles: do you think he is swayed by the market or by main street or by president trump? >> founded the industrials group when he was at carlisle. he spokes to all the ceos. he understand what is a margin squeeze is how very quickly that can bring the economy to a screeching halt. he listens to his friends in private equity, in the hedge fund arena. he understands credit market functionality. he understands there is a dollar, there is not enough dollars running around in the world right now and the fed has to get control by lowering the rate of interest paid on
everynight excess reserves. so he has a great grasp of the financial markets. he understands but he also has been a study. he is sitting around the table at fomc since 2012. he understands economic policy he understands the way the fed operates but by the same token he understands markets the way ceos and cfos think. charles: for the market, rob, maybe most market observers don't have to get news so nuanced. so long as the fed doesn't raise rates is that good enough, the bottom line for the market? >> i think so. talking about rates, the 10-year is back down to 2.74%, charles. we're talking about 3 1/2. people were talking about 4% 10-year that is what sank markets. now back at 2.4. 17 times next year's earnings on s&p. all we need is the fed on the sideline. charles: if you're running money, one of these managers, 44% were in cash most of this rally this year you have got to
make a move. the market essentially might only be the place you can catch up? >> risk is a more of a melt-up. i see new clients, sitting in cash because they got scared out in december. talking about auto sales, auto sales declining. i work with high net worth people who can afford a new car. when they saw the statements in december, what happened in q4 they pulled back in the first quarter. i think that will kind of reverse itself. charles: we're interested in this report because the fed cited first quarter gdp number, at the end of that quarter we saw the consumer come back. that was reflected again in consumer spending number that was up huge, most recent retail sales number. the consumer might be stronger than the fed is calculating right now. >> remember all that spending came out of the savings rate. income did not move. >> good point. 235 billion in spending. 11 billion in income. >> debt levels, how are consumers paying for it.
charles: visa and master car, people are using debit more than credit. >> look at charge i don't have rates going up? a lot of mixed signals. >> he is speaking. the. charles: man, the here is jay powell. >> we reviewed the financial, economic developments around the united states and the world and decided to leave our policy interest rate unchanged. my colleagues and i have one overarching goal, to use our monetary policy tools to sustain the economic expansion with a strong job market and stable prices for the benefit of the american people. incoming data since our last meeting in march have been broadly in line with our expectations. economic growth and job creation have both been stronger than we anticipated while inflation has been somewhat weaker. overall the economy continues on a healthy path and the committee believes the current stance of
policy appropriate. the committee also believes that solid underlying fundamentals are supporting the economy including accommodative financial conditions, high employment and job growth, rising wages, and strong consumer and business sentiment. job gains rebounded in march after a weak reading in february and averaged 180,000 per month in the first quarter, well above the pace needed to absorb new entrants to the labor force. although first quarter gdp rose more than most forecasters than expected growth in private consumption and business fixed investment slowed. recent data suggests these two components will bounce back, supporting our expectation of healthy gdp growth over the rest of the year. the committee is strongly committed to our symmetric 2% inflation objective. for much of this long expansion inflation ran a bit below our 2% objective alongside considerable slack in resource utilization. but last year with the
unemployment rate at or below 4% inflation moved up. from march through december, core inflation, which excludes volatile rand food and energy components was at or very colors to 2%. overall inflation fluctuated from a few tenths of above 2% to a few tenths below over this period with the moves mostly due to changes in energy prices. as expected overall inflation fell at start of this year as earlier oil price declines worked through the system. overall inflation for the 12 months ended in march was 1.5%. core inflation unexpectedly fell as well however, and as of march stood at 1.6% for the previous 12 months. we suspect that some transitory factors may be at work, thus our baseline view remains with a strong job market and continued growth inflation will return to 2% overtime and then be roughly symmetric around our longer term
objective. at the start of the year a number of crosscurrents presented risks to the outlook including weak global growth, particularly in china and europe, the possibility of a disruptive brexit, and uncertainty around unresolved trade negotiations. while concerns remain in all of these areas it appears risks have moderated somewhat. global financial conditions have eased, supported supported in ms around the world by accommodative shift in monetary policy and in some cases fiscal policy recent data from china and europe show some improvement and the prospect after disorderly brexit has been pushed off for now. further there are reports of progress in the trade talks between the united states and china. the committee views these developments along with the outlook for continued growth, a strong job market and muted inflation pressures as consistent with continued patience in assessing further
adjustments in monetary policy. over the past several months we've made a number of consequential decisions about our balance sheet. in january we decided to continue implementing monetary policy using our current policy regime which involves providing an ample supply of reserves. in march we decided to slow the pace of balance sheet runoffs starting this month and to cease runoff entirely in september. these plans support our longer run dual mandate objectives and also provide clarity about the path of our asset holdings. today we had a preliminary discussion with the longer-run maturity composition of the portfolio. before the financial crisis our portfolio was weighted towards shorter term debt of the federal government. in the wake of the crisis the fed bought a large amount of longer-term securities with the aim of lowering longer term interest rates and thus supporting the recovery. because of these purchases our portfolio is now weighted toward
longer term securities. as part of normalization we will have to decide what maturity structure should be, what theme a maturity structure should be in the longer term this choice races many complex issues and has possible implications for expansive policy. today's preliminary discussion laid the ground work for more complete analysis and decision and we plan to return toward the maturity composition question toward the end of the year. there is no pressing need to resolve this matter, however, and any decisions we ultimately reach will be advanced notice and a manner that allows for a smooth adjustment. as we often emphasized adjustments to the balance sheet normalization process may well be needed as the process unfolds. finally we made a small technical adjustment in one of our tools for implementing monetary policy. oer rate. the change does not reflect any shift in intended stance of
monetary policy. we use ioer rate to help keep the federal funds rate in our target range as balance sheet normalization continues we expected federal funds rate would shift up over time relative to the rate. last year we twice lowered the oioer rate after the federal funds rate moved towards the top of the range. she is actions helped keep the effective federal funds rate well within the target range. we made one more change. the rate is our standard rate of policy and it remains unchanged. thank you very much, i will be glad to take your questions. >> thank you, mr. chair. steve liesman, cnbc. as the statement noted core inflation running below 2%. it has been falling for three straight months and while you've been close its only been at 2% or above one month since 2012.
mr. chair, i guess i wonder, is it time to address low inflation through policy? can you give us some sense of your metric when it would be time? at what level would it require a policy response from the committee? >> so first we are strongly committed to our 2% inflation objective and to achieving it on a sustained and symmetric basis. as we mentioned we think our policy stance is appropriate at the moment and we don't see strong case for moving in any direction. i would point out inflation actually ran, including core inflation,well rein close to 2% for much of 2018. as you point out, both headline and core though did come in on the soft side in the first quarter and that was not expected as it relates to core. so we say in our statement of longer run goals and monetary policy strategy that the committee would be concerned if inflation was running
persistently running above or below 2%. something that is not transient, something that will sustain over a period of time. in this case as we look at the reads in the first quarter for core we do see good reasons to think some or all of the unexpected decrease may wind up being transient. i point to things like portfolio management service prices apparel prices and other things. in addition to trimmed mean measures of inflation did not go down. as much indeed dallas trim mean is at 2%. but to go back to your question if we did see a persistent inflation, running persistently below, that is something the committee would be concerned about, something we would take into account in setting policy. >> sam. >> thanks very much. "the financial times." let me carry on the same theme. there is obviously a lot of speculation in the markets about the prospects for rate reduction
this year. do you think markets have effectively gotten ahead of themselves on this and what sort of economic conditions would you need to see to give serious consideration of a rate cut? discussion of for example, about the 1995 example, do you actually need to see a looming recession to cut rates or could insurance cut appropriate? >> as i mentioned we've just come through a two-day meeting and we've done a deep dive on economic and financial conditions in the united states and around the world and thought about our policy. and we do think our policy stance is appropriate right now. we don't see a strong case for moving in either direction. so we do of course, though as routine matter, as you will know, we look not only at our baseline but we also look at alternative simulations both better and worse. we ask ourselves what you know what the appropriate policy response would be. that is always we do. and i would just say we're comfortable, the committee is
comfortable with our current policy stance. >> hi. howard schneider with reuters. shifting gears a little bit, i wonder if you could flesh out, you're describing it as small technical adjustment, ioer spread, give us a sense why it matters whether or not it reaches the upper limit a little bit? is there any feed-through to broader credit conditions and financial conditions you worry about? or is it simply a matter of the fed showing that it can control what it says it is controlling? i do have a follow-up. >> so a small temporary deviation outside of the range would really carry no, wouldn't be important as your question suggests but we do think it is important that we be able to you know, control the federal funds rate in general, keep it within the range. that is just good monetary
policy, monetary control. so we think it's important. we have the tools to do that. so we used them again today. this is just a technical fix. it has really no implications for policy. >> follow-up on this, it is demonstrating that the you control the market, you want to control. i guess the question is, at what point would these steady declines in the ioer, steady widening of this spread continues, essentially become the policy choice? >> so generally speaking the federal funds rate, we control only directly the federal funds rate in terms of the market rate. the transmission of the federal funds rate into other short-term rates, money market rates has been very good over a long period of time. that is important that broader financial conditions that matter, not precisely the federal funds rate. the fed controlling the federal funds rate is actually important from that standpoint. i don't see us not controlling it. so i think, we'll continue to
broader financial conditions. >> michael mckee with bloomberg. i'm curious about the financial conditions that you see out there. minutes of the march meeting tell us a few officials worry about financial stability risks. was there broader discussion at this meeting? any consensus whether such risks are growing when the markets hit new highs. we see instability in short end trading. is it possible that rates are too low at this point? >> we actually have a financial stability briefing and opportunity for comment every other meeting. so we had our quarterly briefing today, yesterday as a matter of fact and had that discussion as well. and i think there haven't been a lot of changes since the last meeting but i will go through
and about how we think about it. put out for comment and welcome any feedback we get from the public and that enables us to focus our assessments, you know, regularly on the same thing so that we can be held accountable and transparent. there are four aspects of it i will go through quickly. i would say the headline really is while there is some concerns around non-financial corporate debt really the finding is that overall vulnerabilities in the financial, financial stability vulnerabilities are moderate, on balance. and in addition i would say that the financial system is quite resilient to shocks of various kinds with high capital and liquidity, four things we look at, first asset prices. for asset prices some asset prices are somewhat elevated but i would say not extremely so. financial leverage are, households are in good shape from leverage standpoint.
default rates are low. borrow something relatively low. non-financial corporates is area we spotlighted, focused on for attention. there are concerns about that, not so much from a financial stability standpoint but from the standpoint that having a highly levered corporate sector could be amplifier for a downturn. then the last two, the last two things are really about the leverage in the financial system and funding risks. those are both very, very low by historic standards in the united states. on balance in my view, vulnerabilities are moderate. >> could i follow up on that? curious whether level of asset prices is not really wide you might not be interested in cutting rates? >> we do say that risks to the financial system are, we say in our longer run statement of goals and monetary policy strategy that risks to the financial system that could prevent us from achieving our goals, something we do take into
consideration. i would say that though, that really the tools for addressing those concerns are, are better, you know, capital liquidity, good supervision, good stress testing and things like that. those are better first order tools to deal with these kinds of issues than monetary policy. >> nick tiheros of "wall street journal." chairman powell with the benefit of hindsight did last year's rate increases make it harder for the fed to credibly affirm 2% semitic target is not in fact a ceiling? if so would it be appropriate to lower rates if core inflation remained persistently closer to 1 1/2% instead of 2% if not, do you worry about unwelcome tightening in real rates, given soften in core inflation? >> to your first question, if you go back and think about the middle of last year, inflation
was at 2%. appeared to be staying there and economy was quite strong. was growing strong. the fiscal changes were hitting the economy in a very positive way and so you know i think the expectation was that inflation would remain up around 2%. the weak first quarter performance was not expected. of core was not expected and i don't think is related to anything we did in terms of raising rates. it appears to be more, we don't know this but you never know until, with hindsight with perfect hindsight but some of it does appear to be transient or idiosyncratic. second part of your question, sorry? >> i mean if, if it was, if it was an issue, would it be appropriate to lower, to lower rates if core inflation held closer to 1 1/2%? if not, are you worried that there is unwanted tightening from real rates being where they
are? >> yeah i mean, as i said earlier, we, we do address this in our, in our sort of constitutional document. a, if inflation were to run persistently below 2% or persistently above 2% that would be a concern for the committee and the committee would take that into account in making policy. i do think it is important that inflation run close to and sustainably for a sustained period of time and semiticly around 2%. because if it -- inflation expectations over time could be pulled down and that could put downward pressure on inflation and make it harder for to us react to downturns and harder for us to support the economy in difficult times. >> gina. >> gina, "new york times." so as
you just mentioned last year when you guys were kind of getting inflation coming in around 2% you had this benefit of the tailwind of fiscal stimulus. and you still have that to some extent although the tax cuts mostly needed through we have something in the pipeline of spending cap increases. how do you think about inflation as the fiscal benefit wanes towards the end of this year? >> i'm, inflation first of all, month to month, quarter to quarter is going to move around, there will always be factors hitting it. probably the biggest single factor driving it is the rate of underlying inflation or closely related idea of where inflation expectations are anchored. the thought being that's where inflation will go in the long run if it is not being pushed by those other factors. so we also think that slack, you know, that the level of slack in the economy does play some small role. it is, you can, it is actually still a measurable role. nothing like it was in the 1960s
when the phillips curve was quite steep. so that's also something that plays a role. and so we take all those things into account and, you know, the part of it that we can control is the slack part and we do expect this reading will be transient and inflation will move back up and if it isn't, if it runs persistently below 2% for a sustained period then that's something we take into account in setting policy. >> donna. >> chairman powell, donna, with cnn. pivoting a little bit about wages since 2010 women's real earnings have gone up about 3.9% compared to men's which risen excuse me, about 2.1. do you think the relative increase in women's wages is a problem for the u.s. economy? >> you know i think generally, i
would have to see the data on that. that sounds like you picked particular time frame. i wonder over time if that is the case. i think men and women should make the same for the same work by and large. so -- >> just to push a little bit on this, but if the data shows that women's wages are rising higher, is there any, is there a damage to the u.s. economy if males wages are declining or not growing as fast as women? >> so i think we're getting in here to commenting on a nominee of the fed indirectly, that is something i would rather avoid. it is not my role to engage with potential nominees to the fed. so i'm really not going it, not going to go there. i haven't seen this research either. so i don't really know. thanks.
>> victoria with "politico." i wanted to ask early last month i believe it was april 2nd the fed wire system went down and i was just wondering if you could talk about what happened there, how long it lasted. whether, whether you know what happened. whether you're still looking into it. and whether it is something that could happen again? >> sure. so that's right. i want to say it was april 1. it may have been april 2. in any case the fed wire did go down for a few hours in the three or four hour range. we were able to quickly identify the problem. it was an internal problem and we were able to correct it and make changes. so that problem and other problems like it cannot repeat themselves. so, you know, we learned from these instances. they're fairly rare. we learned from them. in this case, it was internal and it has been corrected.
>> steve matthews with bloomberg. next month we have the 10th anniversary of the end of the recession. there are some countries that have had expansions for 15, 20, 25 years. do you think that is something that is practical for the u.s. that we could have that kind of lengthy expansion? and for you personally, if we had a recession during your tenure, would you consider that a failure? >> you know, i wouldn't want to speculate. there is, there is always the example of australia that everyone i think is aware of they're in year 28 of their expansion. so things are possible. i think, all i can see is that we have an economy where the expansion is continuing, growth is at a healthy level. labor market is strong. we see wages moving up. inflation is low, which gives us the ability to be patient. we do expect it to move up.
we want it to move up to 2%. i see us on a good path for this year. >> do you see parallels with the 1990s when for example, some people pointed out in the u.s. the the longest expansion before this one, there was rate cut in 1995. rates went up. they went down. there was that kind of management. do you see similarities in today's situation? >> similarities in the length. the situations were quite different then. this was before inflation was really under control but, you know, very interesting to look at the history. i find quite interesting to look at different periods. but i think, in our own, in our own cycle we face a particular set of challenges that are really what is relevant right now. >> marti. then we'll go to paul. >> mr. chairman, marty with the ap. you repeatedly said the fed will
conduct monetary policy without regard to outside political pressure but seems like the president is intent on increasing that political pressure. yesterday he said you should cut rates a full percentage point and start quantitative easing. what do those comments do in terms of affecting how you pursue policy and how you convey your decisions to the public? >> yeah. so as you know we are a non-political institution. that means we don't think about short-term political considerations. we don't discuss them. we don't consider them in making our decisions one way or the other. and what we're, what we're always solving for in our process in our work is to carry out our mission to extend the economic expansion, keep the labor market strong and get inflation around 2%. to give an idea of what our process is like to put all that in context, for the past 10 days
all 17 fomc members will have made extensive preparations. catching up on the latest data. reading all the memos. talking to their colleagues and their staff. as you also i'm sure awares, marty, we talk to literally thousands of business people and market people and people in non-profit sector, educational sector, just to get a better sense of the economy. we put all of that together. we come together for two days. the first day begins with an economic briefing which is sort of economic and financial developments in the united states and around the world. that takes most of the first day. we talk about this in great detail. we go away, think about that. next day we talk about monetary policy. in this particular case we came to a unanimous decision after an extensive discussion that our monetary policy stance is appropriate where it is. and we think our monetary policy stance is in a good place and we'll be patient as we consider
adjustments. we see evolving risk picture as very consistent with that outlook. we don't feel like the data is pushing us in either direction. of course we'll not hesitate to, if we do feel the data justify move in either direction. that is our process. that is how they which about things. we don't think about other factors. we don't let them into our decision making, we don't discuss them. snoop paul from "dow jones newswires," thanks for the question. last 23 years core pce inflation ran above 2% only during a period coinciding with the housing bubble. what do you say to people it will prove different cut for the fed to lift inflation without potentially stoking another asset bubble of some sort? thank you. >> so, you're pointing to the really the fact that in recent years inflation has moved down and down and really, many major
central banks have struggled to reach their inflation goals from below. that includes us although we've actually done, we've come closer i think than most others and it is just a question i think of demographic and other large and in some cases global forces making, disinflationary to some extent. and it creates significant challenges. one i would say, interest rates will be lower, closer to the effective lower bound morse of the time because that means lower interest rates one of reasons we're having review of monetary policy, strategies communication this is year to think about that problem. you mentioned financial
stability concerns, to the extent they threaten cleavement of our goals. i also view, i do take the view that, macro prudential and supervisory tools, regulatory tools, things like the stress tests that we can do right through the cycle, those are really the best defense against financial instability. so that, financial sys resilienl system is highly resilient to financial shocks that can happen. >> greg. >> thank you, greg from market watch. this morning ism manufacturing index, had worst reading since october of 2016. so isn't that a dark cloud on your outlook on strong growth for the rest of the year? how much weight does it hold for you? is it a sign monetary policy might be too tight? >> this is the ism reading now,
i guess from this morning on manufacturing. yeah, we, we see that >> edward lawrence from fox business. thank you mr. chairman for doing this. talk aboutmestic growth a little bit with the economy. you talked about progress in the talks with china trade. talk a little bit about the domestic growth you are seeing going forward for the rest of the year. could these trade deals turn into tail winds for the economy?
>> our outlook and my outlook is for -- is a positive one, a healthy one for the u.s. economy, for growth for the rest of this year. and i would say that the basis for that really is consumer spending and business investment, so if you look at consumer spending, you saw stronger retail sales, stronger motor vehicle sales in march. as i mentioned, the conditions, the broader economic fundamentals are strong in support of consumer spending, financial conditions, high confidence readings, high levels of employment, wages going up, all those things are going to support consumer spending. so that's a significant part of the outlook this year. and business investment should also be positive in that sort of direction. in terms of the effect of trade deals, i think one thing would be