Jerome Powell Fed Press Conference Transcript: Federal Reserve Cuts Rates for First Time in 11 Years
Happy Scribe's Favorites

[00:00:06.07]
Good afternoon and welcome. We decided today to lower the target for the federal funds rate by a quarter of a percentage point to a range of 2 percent to two and a quarter percent. The outlook for the U.S. economy remains favorable and this action is designed to support that outlook. It is intended to insure against downside risks from weak global growth and trade policy uncertainty to help offset the effects these factors are currently having on the economy and to promote a faster return of inflation to our symmetric 2 percent objective.

[00:00:45.02]
All of these objectives will support achievement of our overarching goal to sustain the expansion with a strong job market and inflation close to our objective for the benefit of the American people. We also decided to conclude the runoff of our securities portfolio in August rather than in September as previously planned. And I'll discuss the thinking behind today's interest rate reduction and then turn to the path forward. As the year began, both the economy and monetary policy were in a good place.

[00:01:15.08]
The unemployment rate was below 4 percent and inflation had been running near our 2 percent objective for 9 months. Our interest rate target was at the low end of estimates of neutral over the first half of the year. The economy grew at a healthy pace and job gains pushed unemployment to near a half century low. Wages have been rising, particularly for lower paying jobs. People who live and work in low and middle income communities tell us that many who have struggled to find work are now getting opportunities to add new and better chapters to their lives.

[00:01:49.09]
This underscores for us the importance of sustaining the expansion so that the strong job market reaches more of those left behind. Through the course of the year, weak global growth, trade policy uncertainty and muted inflation have prompted the FOMC to adjust its assessment of the appropriate path of interest rates. The committee moved from expecting rate increases this year to a patient's stance about any changes and then to today's action. The median committee participants assessments of the neutral rate of interest in the longer run normal rate of unemployment have also declined this year, reinforcing the case for a somewhat lower path for our policy rate.

[00:02:29.02]
These changes in the anticipated path of interest rates have eased financial conditions and have supported the economy. At our June meeting, many committee participants saw that the case for lowering the federal funds rate had strengthened. But the committee wanted to get a better sense of the overall direction of events.

[00:02:47.08]
Since then, we've seen both positive and negative developments. Job growth was strong in June and looking through month to month fluctuations. The data point to continued strength. We expect job growth to be slower than last year, but above what we believe is required to hold the unemployment rate steady. GDP growth in the second quarter came in close to expectations. Consumption supported by rising incomes and high household confidence is the main engine driving the economy forward. But manufacturing output has declined for two consecutive quarters and business fixed investment fell in the second quarter.

[00:03:25.04]
Foreign growth has disappointed, particularly in manufacturing and notably in the euro area and China. In response to this weakness, many central banks around the world are increasing policy accommodation or contemplating doing so. After simmering early in the year, trade policy policy tensions nearly boiled over in May and June, but now appear to have returned to a simmer.

[00:03:49.00]
Looking through this variability, our business contacts tell us that the ongoing uncertainty is making some companies more cautious about their capital spending. The domestic inflation shortfall has continued. Core inflation, which excludes food and energy prices and is a better gauge of future developments than is total inflation has run at 1.6 percent over the past twelve months. We continue to expect that inflation will return over time to 2 percent. But domestic inflation pressures remain muted and global disinflation inflationary pressures persist.

[00:04:24.04]
Wages are rising, but not at a pace that would put much upward pressure on inflation. We're mindful that inflation's return to 2 percent may be further delayed and that continued below target inflation could lead to a worrisome and difficult to reverse downward slide in longer term expectations. So taking all of that on board, the committee still sees a favorable baseline outlook. Over the year, however, incoming information on global growth, trade policy uncertainty and muted inflation have led the committee to gradually lower its assessments of the path of policy interest rate that would best support that outlook.

[00:05:02.09]
Today, we judged that those factors warrant the policy adjustment I described. As the committee contemplates the future path of the target range for the federal funds rate. It will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion with a strong labor market and inflation near its symmetric 2 percent objective. Thank you. I'm happy to take your questions.

[00:05:31.03]
Sherpao Gina smiled, like with The New York Times. Prior's deep statement here. I guess the question is, is there any reason to believe that a 25 basis point cut is going to be sufficient to expediently return inflation to your 2 percent target? And if not, what are you going to be looking at to convince you that you need to cut rates again? What is their hurdle right there?

[00:05:55.08]
So I think you have to look at not just a 25 basis point cut, but look at the committee's actions over the course of the year. As I noted in my opening statement, we started off expecting some rate increases. We moved to a patient setting for a few months and now we've moved here. I think what you've seen over the course of the year is as we've moved to a more accommodative policy, the the economy has actually performed just about as expected with that gradually increasing support.

[00:06:23.01]
And I think I wouldn't take credit for all of that. But I do think that increasing policy board has has kept the economy on track and kept the outlook favorable. In terms of the rest of your question. The committee is really thinking of this as as a way of adjusting policy to a somewhat more accommodative stance to further the three objectives that I mentioned to insure against downside risks, to to provide support to the economy, that those factors are where factors are pushing or pushing down on economic growth and then to support inflation.

[00:07:01.02]
So we do think it will serve all of those goals. But again, we're thinking of it as essentially in the nature of a mid-cycle adjustment to policy. Michael McKee from Bloomberg Television and Radio. There's a perception out there that perhaps in this case the Fed is something of a hammer in search of a nail, because the latest consumer spending reports, as you suggested, don't seem to show any kind of demand problem in the US.

[00:07:32.01]
And when you look at mortgage rates, auto lending rates, they've all come down. And so wondering exactly what problem. Lower capital costs will solve.

[00:07:45.04]
So you're absolutely right. The performance of the economy has been reasonably good. The position of the economy is as close to our objectives as it's been in a long time. And the outlook is also good. What we've been monitoring since the beginning of the year is effectively downside risks to that outlook from weakening global growth. And we see that everywhere, weak manufacturing, weak global growth now, particularly in the European Union and China. In addition, we see trade policy developments, which at times have been disruptive and then have been less so.

[00:08:19.00]
And also inflation running below target. So we see those as threats to what is clearly a favorable outlook. And we see this action is designed to support them and keep that outlook favorable. And frankly, it is a continuation of what we've been doing all year to provide more support against those very same risks.

[00:08:41.01]
How do you how does cutting interest rates lower or how does cutting interest rates keep that going since the cost of capital doesn't seem to be the issue here?

[00:08:51.01]
You know, I really think it does. And I think the evidence of my eyes tells me that our policy does support. It supports confidence, it supports economic activity, household and business confidence and through channels that we understand. So it will lower borrowing costs. It will and it will work. And I think you'll see it since, you know, since we noted our vigilance about the situation in June, you saw financial conditions move up and you saw I won't take credit for it for the whole recovery.

[00:09:20.07]
But you saw financial conditions move up. You see confidence, which at troughed in June, you saw it move back up. You see economic activity on it on a healthy basis. It just it seems to work through confidence channels as well as the mechanical change channels that you are talking about. Hey, they're long from The Washington Post. And you always say that the Fed is data dependent and much of the data that we've seen since the June meeting has surprised to the upside or at least been in line with expectations.

[00:09:56.03]
Can you give us a sense of how that better than expected data impacted the FOMC is thinking and if we keep seeing these upside surprises, does that change and evolve any FOMC thinking going forward?

[00:10:10.05]
So, yes, I mean, I think we of course, you know, what we do at every meeting, as I noted, is, is we do a deep dive into U.S. economic activity and global activity and certainly carefully went through U.S. economic activity, which there has been some positive and some negative. But overall, the U.S. economy has shown resilience during the intervening period. But again, the issue is more the downside risks and and the shortfall in inflation.

[00:10:39.00]
And we're we're trying to address those. So in addition, going forward, I would say we're going to be monitoring those same things. We'll be monitoring the evolution of of trade, uncertainty of global growth and of low inflation. And we'll also, of course, be watching the performance of the U.S. economy. As I mentioned, it had shown some resilience here to those issues. And we'll be putting all of that together. And that's how we'll be thinking about a policy going forward.

[00:11:11.08]
CNBC. I just want to follow up on that. Would you say we're short of. You guys have gotten into a new regime here. This is sort of an insurance cut and not a data dependent cotton. Are we now more in the realm of watching headlines of trade talks than we are watching unemployment rate and inflation numbers or growth numbers? What? How do we know what you're going to do next and why now in this new regime?

[00:11:40.08]
So I gave three reasons for what we did, and that is to insure against downside risks to the outlook from weak global growth and trade tensions. So that is in a sense, that is a risk management point and that is a bit of insurance. But we also feel like weak global growth and trade tensions are having an effect on the US economy. You see it now in second quarter. You see weak investment, you see weak manufacturing. So support demand for there.

[00:12:06.05]
And also to support a return of inflation, 2 percent.

[00:12:08.06]
So but there is definitely an insurance aspect of it.

[00:12:12.04]
Trade is unusual. We don't you know, the thing is, there isn't a lot of experience in responding to global trade tensions.

[00:12:19.07]
So it is a it's something that we haven't faced before and that we're learning by doing. And it is not it's not exactly the same as watching global growth, where you see growth weakening U.S. central banks and governments responding with fiscal policy and you see growth strengthening. You see a business cycle. Yet with with trade tensions, which do seem to be having a significant effect on financial market conditions and on the economy, they evolve in a in a different way and we have to follow them.

[00:12:49.04]
And by the way, I want to be clear here, we play no role whatsoever in assessing or or evaluating trade policies other than as as as trade policy. Uncertainty has an effect on the U.S. economy. And in the in the short and medium term, we're not we're not in any way criticizing trade policy. That's really not our job. Nick, thank you, Nick Timiraos of The Wall Street Journal. So, Sherpao, you and your colleagues have offered three reasons to cut rates, a lower neutral rate that may have made policy a little bit tighter than anticipated.

[00:13:24.05]
The global slowdown, the darker risk picture from the trade tensions and this desire to recenter inflation and inflation expectations. I wonder which of those factors, if any, it weighs most heavily on you. And more importantly, is a quarter point cut really going to address all of that, let alone any one of those? So I actually think different people have different four different weightings. It's been my experience on those things.

[00:13:51.06]
You mentioned lower our star trade slowdown. And I would actually I would actually add lower natural rate of unemployment to has moved down all of that, all of which kind of point to more accommodation.

[00:14:06.08]
So, again, I don't think asking about a quarter point is really the right question.

[00:14:11.01]
Yeah, I think you have to look back over the course of the year and see the committee moving away from rate increases to a neutral posture to now a rate cut. So I think we've been providing and that affects the forward rate path and it affects financial conditions and initiatives that affect the economy. You see an economy which is actually performing pretty well. Growth in the first half of this year is about the same as it was in all of 18 and actually a little better than our forecast for growth in 2019 at the end of 2019.

[00:14:43.05]
So I think in a way that's monetary policy working.

[00:14:48.05]
And again, I wouldn't just look at it at the 25 basis point cut is as the right question. It may, it may and may it seemed as if you were setting a higher bar to cut rates. There would need to be a deterioration in the outlook in June. You seem to suggest that if the outlook didn't improve, there might be a rate cut. Where is that bar right now? Because I think there's some confusion about how the committee's responding.

[00:15:14.05]
Yeah.

[00:15:15.04]
So we as we noted, we noted at the bottom of the statement that that language which really says how we're thinking about it. So it says, as we're contemplating the future path of the target range, the federal funds rate will continue to monitor the implications of incoming information and talks about that language. So I can't at all I can tell you as we'll be looking at weak global growth, we'll be looking very carefully to see how that's happening. I think you see you learn every every cycle you learn about these things.

[00:15:48.01]
So we will see whether growth is picking up, whether it's bottoming out. We'll see that picture. We'll also see on trade. We're gonna be seeing I think we're gonna be we've learned a lot on trade in this cycle. I think we'll continue to learn more.

[00:16:00.02]
And on inflation, we will. So in addition, the US economy itself is on the performance of the U.S. economy will enter into that. So I would love to be more precise. But with trade, it it is a factor that we have to assess in kind of a new way. Those are the things that we'll be looking at and making our decisions going forward. Edward Lawrence with Fox Business Network. So a rate hike last December was seen by some economists and the St.

[00:16:33.01]
Louis Fed president, James Bullard, as a step too far. Now the Fed's waited about seven months for a rate cut. You said today you were concerned about downside risks. So could some of the weakness on the business side with that fixed investment and the sluggish side on the business side? B, because the Fed waited so long. I want to get your thoughts on that and talk about why you feel that this nudge is the right level.

[00:16:55.04]
So we don't hear that from businesses. Some they don't come in and say we're not investing because, you know, the federal funds rate is too high. I haven't heard that from a business. What they what you hear is that demand is weak for their products. You see manufacturing being weak all over the world. Investment, business investment is weak. And I wouldn't lay all of that at the door of trade talks. I think there's a there's a global business cycle happening with manufacturing and investment.

[00:17:24.08]
And that's a that's that's been, you know, definitely a bigger factor than certainly we expected late last year. I think global global growth started to slow down in the middle of last year, but that has gone on to a greater extent. And by the way, trade policy and certainly has also been, I think, more elevated than we anticipated. In terms of is is this what we believe this is the right move for today, and we think it's we think it will serve the three ends that I that I mentioned.

[00:17:54.05]
And I've already I've already gone over how we're thinking about going forward. Reuters. You called it a mid-cycle adjustment to policy and I mean, what should we take this to mean? And what message do you mean to send with this move today about future rate moves? Well, the sense of that is. I mean, that refers back to other times when the FOMC has has cut rates in the middle of a cycle. I'm I'm contrasting it there with the beginning, for example, the beginning of a lengthy cutting cycle.

[00:18:37.09]
That is not that's not what we're seeing now. That's not our perspective now we're outlook. Hey there. Are there any circumstances under which you would decide to pause, pause at one interest rate cut, today's interest rate cut and not not not go ahead with with further monetary easing at this stage? Or are you predicting that, you know, once you've embarked on on this easing, you will have to at least move, move by one more notch going forward?

[00:19:17.09]
So our policy is will depend on the implications of incoming data for the economic outlook as well as evolving risks to that outlook.

[00:19:26.00]
And so we're going to be monitoring the implications of incoming information for the outlook, as I mentioned. And so that's really where I would leave you with that. Hi, Victoria. Guido with Politico on capital vice chairman Quarrels has said that the level of capital requirements that exist right now are such that it's basically like the cap countercyclical capital bubble buffer is already turned on and that he would like the ability be able to turn it down in a downturn. I was wondering if you agreed with that.

[00:20:05.00]
And then also just quickly on real time payments, larger banks have suggested that if the Fed built its own system, that would be a bait and switch because the Fed asked or called for a private sector system. Do you think that that is a fair assessment?

[00:20:21.06]
OK. So on the first, I would say that I view the level of capital requirements and level of capital in the system as being about right. I do agree with that. The idea that you're talking about is a is one that's you know, that the vice chair coral's has talked about it say it's one under consideration. The idea being, in a sense, we we've chosen in the United States to have high through the cycle capital requirements by doubling the SIFI surcharge.

[00:20:51.08]
Which is the surcharge that the largest banks have in their capital requirements. We've in effect already put in place substantial countercyclical buffers. And so conceptually you can think of. I'm not saying it's the same thing as countercyclical capital buffer. So that's that's really the point is that we we don't rely. Our system doesn't rely on our ability doesn't remain. We rely on our ability to identify the right time in the cycle to trigger a countercyclical tool. We rely on through the cycle always on high capital liquidity requirements.

[00:21:26.08]
And I think that's a good thing to do. The idea of putting it in place so you can cut it. That's something some other jurisdictions have done and it's worth considering. I think the United Kingdom in particular has a kind of signal capital buffer that's always on. But the one point of it is that you can cut when there is a downturn and there therefore give the banks more room. So this isn't something we've decided to do.

[00:21:49.04]
It's just that under consideration in terms of the real time payments system. Your second question. So this is something we the United States is far behind other countries in terms of having Real-Time Payments available to the general public. The Fed really they're coming out of the reserve system. The reserve banks and the board together convened all of the stakeholders around the table to talk about how we can move forward. This is consumer groups, technology companies, banks, card companies, pretty much all of the groups who would be interested and worked on a project for several years.

[00:22:25.06]
And one of the things that came out of that was a recommendation that the Fed should build a 24 by 7 by 365 Real-Time Settlement System to solve that problem, to address that problem. We put out a proposal in October of last year about, you know, should we do this? And we got quite a lot of comments. They were overwhelmingly favorable. And I would point out that in in our payments system, in many places, the Fed operates alongside private sector operators, for example, in wholesale payments in ACA and in check.

[00:22:56.03]
So it wouldn't be unusual or out of keeping with that with them how we've done things in the past. We have not made a decision on this. And but it's something we're looking at carefully and something I do expect we'll make a decision on soon. Doors from Bloomberg. I'm trying to pass what you're saying here. On the one hand, you say the policy tilt in this statement is ease financial conditions and that's helping the economy and that tilt market participants are interpreting this language will act as appropriate as still being in the statement.

[00:23:32.05]
And on the other hand, you say it's not the start of a of a of an easing cycle. So what are you saying? Does that mean, you know, with one or two more cuts, you'll be done and this policy bias comes out of the statement or simply that this policy bias will come out of the statement sooner, then market participants think so. It is, as I mentioned, and so it's going to depend on the evolving data and the evolving risk picture.

[00:24:00.04]
But as we look at the situation now and the outlook now, what we see is that it's appropriate to make it make an adjustment in policy to a somewhat more accommodative stance. That's what we're seeing. And that's what we're going to be looking. We'll be looking at incoming data at all of the risks that I mentioned and the performance of the U.S. economy at low inflation. We'll be looking at that to make our decisions going forward. Thank you, Mr. Chairman, Scott HORSLEY for NPR.

[00:24:37.09]
You've talked to a number of times about the people who feel like they are just recently getting to the punch bowl 10 years into this expansion. Can you elaborate a little bit on how this rate cut is expected to help them?

[00:24:50.06]
I think the best thing for people who are who are feeling that and what we are getting lots of feedback from people who work and live in low and moderate income communities to the effect that they're now feeling the recovery. And in fact, they haven't felt a better labor market in anybody's memory. So this is great to hear.

[00:25:08.06]
And I guess my view is the best thing we can do for those people is to sustain the expansion, keep it going. And that's one of the overarching goals of of this move in all of our policy moves. There really is no reason why the why the expansion can't keep going. Inflation is not troublingly high. If you look at the U.S. economy right now, there's no sector that's booming and therefore might bust. You have a fairly well balanced in, in a sense, economy.

[00:25:38.03]
Now, the engine, though, is is really consumer economy, which is 70 percent of the economy, the manufacturing economy, the investment in manufacturing part of the economy is is more or less not it's not growing much. It's at a healthy level, but not growing much so. And we hope to help that with this rate cut. But I would say overall, we're trying to sustain the expansion and keep, you know, close to our statutory goals, which are maximum employment, stable prices.

[00:26:07.05]
Chairman Peladon Borick with CNN. The president has repeatedly called for this rate hike and for the Fed to end the run off of its balance sheet. What do you say to those that say that the Fed gave in to what the president wanted today? And could you also elaborate a little bit further on why the Fed decided to speed up its balance sheet, run off two months earlier today?

[00:26:29.00]
So I gave my my reasons for our reasons really forum for doing this.

[00:26:36.02]
And, you know, just to just to touch on that. Again, we're. This action is designed to insure against downside risks to bail from weak global growth and trade tensions offset the negative effect that those factors are already having and promote a faster return inflation, 2 percent.

[00:26:50.08]
That's what we've been talking about all year long. And we've gradually moved our policy in the direction of more accommodation. I think what you see is an economy that has reacted well to that.

[00:27:00.08]
So that's what we're doing and that's why we're doing it. We we never take into account political considerations. There's no place in our discussions for that. We also don't conduct monetary policy in order to prove our independence. We we conduct monetary policy in order to to move as close as possible to our statutory goals. And that's what we're always going to do. We're always going to use our tools that way. And then at the end, we'll, you know, we'll we'll live with the results in terms of the balance sheet.

[00:27:28.02]
That was really just a matter of simplicity and consistency, really nothing more to it than that. Thank you, Chairman Power. Greg Rabb from MarketWatch. I was wondering, we weren't in the room, but I think it's a fair assumption to know that the two dissenters probably spoke about financial stability concerns. So I was wondering if you could. Talk about what you what was your response to them when when those concerns were raised? I've collected a couple of things from the IMF and the Bank of International Settlements said that it's just when you have low rates, you just get more debt in the economy and that this is also this feeling that it makes it harder to raise rates.

[00:28:17.01]
So could you talk about that? Yes. So. So first, let me say I'll just speak for myself. But I understand those concerns very well. I do. I've you know, I've studied them. I've spoken about them, and I take them very seriously.

[00:28:30.09]
But as I look at it, today's situation, I don't see them as a reason not to take this action today. I just don't think that that would be my point.

[00:28:41.01]
And one of the reasons why I think that is if you look if you look so we have a financial stability framework now for the first time before the crisis, we didn't have this, but now we have it and we publish it. And we look at really four big things so that we know we can, you know, the public and hold us accountable and compare us meeting to meeting. And and, you know, and see whether we got this right.

[00:29:01.05]
So it's transparent now. But the four things we look at are valuation pressures, and we do see notable valuation pressures in some markets. But, you know, honestly, not at a highly troubling level in terms of household borrowing. Household and business borrowing is the second thing. Households are in a very good shape overall. I'll come back to business. Borrowing leverage in the financial system is low and funding risk is low. So overall, staff's view has been and my view has been that if you look overall, financial stability, vulnerabilities are moderate.

[00:29:32.09]
The place that gets all the attention right now, a lot of attention is business borrowing. And we look very carefully at that. What's happened with business borrowing is the loans have moved off the best balance sheets of the banks and into market based vehicles, which which tend to be stable if funded. But nonetheless, it's clear that a highly leveraged business sector could act as an amplifier to a downturn. So we're watching that very carefully.

[00:29:58.04]
But again, I think if you look overall at the U.S. financial system, what you see is a high level of resilience, much higher than it was before the crisis. And that's something to take comfort from. I think get all of that gives us the ability to use monetary policy for its purposes and rely on supervisory and regulatory tools to, you know, to keep the financial system resilient. So so you're not doing something today for help today. And then it's going to cause problems down the road.

[00:30:30.09]
You're not worried about that kind of dynamic. There are very few things that I don't worry about at all.

[00:30:37.04]
So of course, of course, we monitor we have every quarter we have an extensive briefing on financial stability. And we had that yesterday. So we look at this in an ongoing basis. We have a great team. We we liaise with central banks around the world. You know, one of my colleagues is the head of the Financial Stability Board globally. So we're we're very, very much monitoring these things all the time. And we worry about them all the time.

[00:31:04.03]
We're always looking at that. We're looking for that thing that that we may have missed a lot of the time. But the things we haven't missed, I think they painted a mixed picture. But but not one that should prevent us from taking monetary policy actions that we think are appropriate to support the economy.

[00:31:25.09]
Marty Hettinger, AP You've talked in this press conference about being data dependent going forward and that this is not the start of a series of rate cut, but the financial markets seem to think that this is the start of a series of rate cuts in predicting 3 4 cuts this year. Is this your effort to try to damp down that?

[00:31:47.01]
That let me be clear. What what I said was it's not it's not the beginning of a long series of rate cuts. I didn't I didn't say it's just one or anything like that. What I said is when you think about rate cutting cycles, they go on for a long time and the committee's not seeing that. They're not seeing us in that place. You would do that if you saw real economic weakness and you thought that the federal funds rate rate needed to be cut a lot.

[00:32:10.00]
That's not what we're seeing. That's not we're seeing what we're seeing is that it's appropriate to to adjust policy to a somewhat more accommodative stance over time. And and that's how we're looking at it. What I said was it's not a long cutting cycle. In other words, referring to what we do when there's a recession or a very severe downturn. That's what that's really what I was rolling out.

[00:32:33.09]
I think if you look back at other mid-cycle adjustments, you'll see, you know, I don't know that there'll be in the end comparable or not.

[00:32:42.02]
But you'll see examples of these Donnelley with the L.A. Times. You mentioned the difficulty of assessing trade tensions in the economic outlook. And could you say how much a factor the u.s.-china trade conflict was in the Fed's decision to cut rates and the current stalemate and the threat of more tariffs continue? What would that mean for future interest rates and possible cuts? So, you know, I wouldn't I wouldn't bring it down to any one trade thing or any one factor.

[00:33:23.00]
I think we look at a broad range of factors and trade uncertainty. Trade policy uncertainty is one of them. That certainly includes the discussions with China. But I wouldn't I wouldn't be able to tell you how much of it is due to that. And without knowing, you know, I think we with trade, we have to react to the developments and we don't know what they'll be. And so it's hard to exactly say. It's certainly we've seen, though, that when there's a sharp confrontation between two large economies, you can see effects on business confidence pretty quickly and on financial markets pretty quickly.

[00:33:55.05]
We saw that in June. But then we saw them unwind after that to some extent. You've seen it returning to to a much lower temperature. I think, again, with with it was with trade policy. We're just going to be watching and trying to assess the implications for the for the U.S. outlook.

[00:34:16.01]
You know, the mechanical effects of the tariffs are quite small. They're not large as it relates to the US economy. The real question is what are the effects on the economy through the through the Confidence Channel, Business Confidence Channel, and again, very, very hard to tease that out. I've seen some research which, you know, which says that they are meaningful, meaningful effects on on on output. That's to say not trivial. And I think that that sounds right, but it's quite hard to get in.

[00:34:47.00]
There is no way to get an accurate measure. You have to look at a range of estimates. And I think businesses will tell you that it's a factor, particularly businesses that have manufacturing, businesses that have supply chains that cross international borders. We'll all tell you that it's been a challenge. Many of them have made adjustments and they've gotten to a place where it's OK. But it's it's been a challenge. Paul and then John. Paul Kiruna from Dow Jones Newswires.

[00:35:17.08]
Thanks for the question, Chairman. As the press conferences there's this press conference, it's got underway. Markets have declined. The Dow is down as much as 400 points.

[00:35:31.01]
What I'm hearing is a reluctance to provide more guidance around the future path of rates. And I'm wondering if that reflects a greater lack of consensus on the committee. And you know, how much consensus do you want to see around these decisions and how split are people about this?

[00:35:53.07]
You know what? You're right. There is a there's a range of views on the committee. And but the committee is unified, completely unified on our dedication to making the best policy decisions we can make. And that means people have a responsibility to do their best thinking and present that thinking. And I wouldn't have it any other way in terms of the way forward. We will be monitoring the factors that I mentioned. And we laid that out in the, you know, in the post-meeting statement.

[00:36:22.04]
And that's the roadmap we're going to be following going forward. We're going to be data dependent.

[00:36:25.07]
We're going to be, as we always are, doing, what we need to do, what we believe we need to do to support the economic expansion. John Altman in the Nancy. John, helping with American banker. So it's been about 18 months since the Fed issued its enforcement action against Wells Fargo. And I was wondering if you could characterize the progress that the bank has made towards the shortcomings that it has and its risk management processes. And I'm also curious whether their lack of a permanent CEO has hampered progress in your eyes to the problems at Wells Fargo that arose at Wells Fargo around risk management and and consumer.

[00:37:19.05]
The way they dealt with a consumer were we're actually pretty deep.

[00:37:22.04]
And I think the company realizes that. And and they're not going to be fixed. They haven't been fixed quickly. And frankly, we didn't expect them to be fixed quickly. So they're there. You know, they they will be under the growth cap. Our enforcement action until the board votes to lift it. And that's not something we're considering doing right now. And the committee I mean, the company is working away to address these issues. But as I said, there are deep seated issues and it just takes time to address them.

[00:37:58.08]
I wouldn't comment on this on the CEO question. I. I don't really have anything for you on that. I just clarified. Are you pleased with the responsiveness you're getting from them? Do you feel like this is going the way that you kind of wanted? I'm not going to characterize it, you know. I mean, I have characterized it. We have it. We have a enforcement action in place. The company is working away at addressing it.

[00:38:19.04]
They take it seriously. I think they do see it as we do something that has to go deep and and will will lift the growth cap when we're satisfied. There with Marketplace, so when we have our next recession, the Fed will have less room. It will happen. The Fed will have less room to maneuver. Cutting interest rates since you're cutting now. How big of a problem will that be?

[00:38:48.01]
You know, the premise is not it? I will question your premise for a second. If you remember whether, again, that one of the purposes of our of our cut today is to support the expansion. And we don't know when and if it really works, if that works very well and the economy gets going again.

[00:39:12.02]
You know, you don't know where that where the where the funds in other cycles and I don't know whether this will happen or up in other cycles.

[00:39:19.03]
The Fed wound up raising rates again after after a mid-cycle adjustment. Again, I'm not predicting that, but I don't think that we know that we won't have it. We'll have less ammo because of these things. That's one thing. So. You won't be able to cut as much if rates are low and you you will have have less ammo in that sense.

[00:39:42.06]
Well, you're assuming that we would never raise rates again with that once we've cut these rates so they can never go back up again. Just in as a matter of principle, I don't think that's right. In other in other long, long cycles, long, long U.S. business cycles have sometimes involved this kind of event where the Fed will stop hiking. In fact, we'll cut and then we'll go back to hiking again. I don't know whether that will happen right here.

[00:40:06.04]
It doesn't seem it doesn't seem like something that's in particularly likely, frankly, but we don't know that.

[00:40:14.01]
And the other thing is, I think by extending the cycle, you you you do have a lot of benefits from that. And I think we we will use the tools that we have a couple of rate hikes, one where the other isn't going to matter so much if there is a downturn. You're right. There will eventually be one. We'll use all of our tools aggressively as we need to. When that time comes. Hygeine Young with Emini, can you give us an update on the ongoing reassessment of the inflation framework and have the discussions so far this year had any bearing on today's decision?

[00:40:57.03]
So the the monetary policy review is really for. It's really there to look at the way we make policy. And in the longer run and it's not something that enters directly into our discussions today. We've had so far we've had a series of meetings called Fed Listens at almost all the Reserve Bank. Soon it will be all the reserve banks. And we meet there with the constituencies that we serve. And they've been very, very successful. Hearing from people not just not just economists, but but people who are not economists, how how their lives interact with the Fed's work.

[00:41:33.02]
It's been it's been great. I got to say, it's been even better than I hoped it would be. We're just now beginning the process of incorporating all of that feedback. And we're going to be having a series of meetings beginning today and yesterday as we evaluate the questions that we're asking about our frameworks. It's very early to say where that's going. But, you know, we're setting the table now and looking at what our framework is and looking at how it's performed, looking at how all frameworks performed around the world during that global financial crisis.

[00:42:03.08]
I expect we'll be at this a while. I'm very excited about it. I think it's some I think it's been a good exercise. I think it's it's opened us up to to sunlight and perspectives that we might not have gotten otherwise. And I think it's a good time. You know, you have 10 years after the crisis. You're really living in a new normal for the economy and monetary policy. And it's a really good time to step back and ask whether there's some things that we can do to improve our our framework.

[00:42:32.03]
Courtney. Hi, Mr. Chairman. Courtney Brown from axios. Can you give us a sense of whether the committee feels constrained at all by the market's expectations for more cuts or other developments in financial markets?

[00:42:49.05]
So, one, I think this was this was well telegraphed. What we did today was, was it was very consistent with what we had said we were gonna do. I mentioned the reasons for it.

[00:43:03.06]
They've been they've been well telegraphed. And I think, you know, I think that they will achieve their goals. We do know that monetary policy works through communications and then actions that are consistent with those communications. And we think that the changes that we've made this year have really worked. Of course, we always retain the flexibility to adjust our communications and our actions, too, in light of incoming data in the evolving risk picture. But I'll leave it there.

[00:43:34.06]
Brian Chung with Yahoo! Finance. Just to expand on that point about communication. I mean, we saw that markets have been particularly sensitive with regards to New York Fed President John Williams remarks before the blackout period. So the Fed added language in the statement that says that the committee is contemplating the future path of target range for the federal funds rate as it monitors implications. I'm wondering now there's kind of this inflection point about whether or not the downside risks, because you've had to cut rates, outweighs the fact that you still see a positive outlook of the U.S.

[00:44:05.00]
economy at a baseline. So just warning, if you can kind of clarify all those things within the context of the challenges of communicating.

[00:44:12.03]
So, again, I see the U.S. outlook as being a positive one.

[00:44:16.02]
And we do we have had these global really risks to the outlook. There really, really is nothing in the U.S. economy that presents a, you know, a prominent near-term threat to the U.S. economy, as I mentioned. There's no there's no segment that's really or sector that's really boiling over and overheating. Nothing like that. It's within within the economy. It's it's it's healthy.

[00:44:40.08]
So I would say that downside risks are really coming from abroad. And of course, we are concerned about about low inflation. But. And by the way, those risks from abroad are affecting the manufacturing sector here. And business investment in fixed investment.

[00:44:55.05]
So thank you.