Latest / The Paul Barron Crypto Show / Fed Rate Meeting | Kevin Warsh FOMC Analysis

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Fed Rate Meeting | Kevin Warsh FOMC Analysis · The Paul Barron Crypto Show

0:00
Speaker 1: The FOMC meeting. And of course, the way we do these,
0:03
Speaker 1: so if you're brand new to the live streams, is
0:05
Speaker 1: we'll air Kevin Warsh's meeting minutes where he basically addresses
0:10
Speaker 1: the press. And this is kind of the way that
0:14
Speaker 1: people get a little bit of a signal from what
0:18
Speaker 1: Warsh says in terms of looking forward. And a lot
0:21
Speaker 1: of this is really pointing towards the December decision that,
0:24
Speaker 1: of course, will be coming after the midterms. That, of course,
0:28
Speaker 1: is next week, so we will be airing his live
0:30
Speaker 1: statements today from the FOMC press conference coming in. They
0:34
Speaker 1: usually start around 2.30. We've got a lot to talk
0:36
Speaker 1: about before we get there. Obviously, the big news today
0:39
Speaker 1: was no change just came in. It looks as though
0:44
Speaker 1: Polymark was right, or at least the indicators were right
0:47
Speaker 1: on this in terms of how this might lay out
0:49
Speaker 1: between now and December. Right now, December, though, is looking
0:53
Speaker 1: very high on the scale in terms of a quarter
0:55
Speaker 1: basis points hike. So we're going to get into all
0:58
Speaker 1: of that. I want to lead off with this right here,
1:01
Speaker 1: which is the market price, the 90% chance. So you
1:04
Speaker 1: can kind of see this is pretty much been on point.
1:08
Speaker 1: And I think if this starts to play into it
1:11
Speaker 1: for December, the real question will be, how does the
1:15
Speaker 1: rest of 2027 look for Fed rate hikes? or their
1:19
Speaker 1: overall strategy to try to get control of inflation. Now,
1:23
Speaker 1: one thing is that you kind of have to consider
1:26
Speaker 1: whether this is going to be bearish or, I should say,
1:30
Speaker 1: hawkish or dovish. And these are always based off of
1:34
Speaker 1: the statements that Warsh will give to the reporters. Many
1:38
Speaker 1: people read between the lines. You guys probably will as well.
1:42
Speaker 1: But I think he says sometimes he'll give indications that
1:47
Speaker 1: actually do give us a direction. even though he said
1:50
Speaker 1: that he doesn't really believe in that. So I want
1:51
Speaker 1: to play a clip for you around the hawkish hold.
1:55
Speaker 1: Take a look.
1:56
Speaker 2: So I think the message, the line.
2:02
Speaker 3: All right.
2:02
Speaker 1: So the message is that the hawkish hold was the plan.
2:08
Speaker 1: And of course, that has come out right now with
2:10
Speaker 1: what's going on. I want to jump over to another
2:13
Speaker 1: thing that could be happening. And of course, that is
2:16
Speaker 1: going to be how does Bitcoin react to all of this?
2:19
Speaker 1: There's two things that the market has shown many times over. One,
2:23
Speaker 1: of course, is where does it perform after a particular
2:27
Speaker 1: situation right here? So FOMC interest rate decision will happen tomorrow. Obviously,
2:32
Speaker 1: the last time that happened, Bitcoin bottomed the exact day
2:36
Speaker 1: and then pumped 16 in a week. Now, FOMC kind
2:39
Speaker 1: of indicates a little bit of move in the market.
2:42
Speaker 1: The real question will be, does it apply now? Because
2:45
Speaker 1: we have continued to see quite a bit of volatility
2:48
Speaker 1: that has circled around not only Bitcoin trading sub 80
2:52
Speaker 1: for just a slight amount, then seeing a correction. But
2:56
Speaker 1: hopefully this is getting all of that in terms of
2:59
Speaker 1: while this may play out for the next few weeks
3:02
Speaker 1: for Bitcoin's price. And I think that's the factor that
3:05
Speaker 1: everybody is looking at. Bitcoin kind of has led the
3:07
Speaker 1: way in terms of the crypto market. And how does
3:11
Speaker 1: this correlate to altcoins will be another factor. If you
3:14
Speaker 1: look at the overall situation that's happening in these elections. This,
3:19
Speaker 1: of course, was the prime minister of Israel after the
3:23
Speaker 1: next election, and it looks as though Netanyahu, this was
3:26
Speaker 1: the flip that happened literally overnight. Some people might say, well,
3:31
Speaker 1: you know, this means things are going to start continuing
3:35
Speaker 1: to be a problem in the Middle East. Some people
3:37
Speaker 1: are pointing at oil continuing to skyrocket here. We're seeing
3:41
Speaker 1: all sorts of indications now that this is actually flipped.
3:44
Speaker 1: It looks as though Netanyahu is going to win at 47%.
3:48
Speaker 1: If you look at what's going on in the midterms
3:50
Speaker 1: for the U.S., the Senate is the one to watch.
3:54
Speaker 1: It is holding a 67% likelihood right now of the
3:59
Speaker 1: Democrats taking the Senate. Now, if that were the case,
4:02
Speaker 1: this would be, I would think this will be a
4:05
Speaker 1: blue sweep, a Democrat sweep, and this includes the House, obviously.
4:09
Speaker 1: The real question, does Trump hold the Senate? This is
4:12
Speaker 1: a very critical time. Many people still believe that there
4:16
Speaker 1: is a chance for that to occur. The House may
4:19
Speaker 1: be out of range in terms of the ability. So
4:22
Speaker 1: a lot, I think, is going to happen between now
4:24
Speaker 1: and then. And I still have yet to see an
4:28
Speaker 1: October surprise. So things could still get a little bit
4:31
Speaker 1: heated there. I know you guys are probably going to
4:33
Speaker 1: drop in some comments. If some of you are brand
4:35
Speaker 1: new to the show and especially to the FOMC meetings,
4:40
Speaker 1: we will air Kevin Warsh's comments here in a minute.
4:43
Speaker 1: Usually goes on around 2.30, so we'll get into all that.
4:46
Speaker 1: And the way, as I said, in case you just joined,
4:50
Speaker 1: a lot of his statements will give us an indication
4:53
Speaker 1: on how this plays into the December meeting, which I
4:56
Speaker 1: think is the one that is most important because it
4:58
Speaker 1: could set the tone going into 2027. That's the factor
5:02
Speaker 1: that everybody's looking at. Now, the other things that you
5:05
Speaker 1: got to look at is how inflation is going to
5:06
Speaker 1: be affected. Well, military spending is always on the top
5:11
Speaker 1: of the hill. in terms of how inflation is affected.
5:15
Speaker 1: Pentagon tells Congress Iran military operation has cost America taxpayer
5:19
Speaker 1: 47 bill. I don't know that that's an accurate number
5:21
Speaker 1: because I think this, I just feel like this is,
5:23
Speaker 1: you'd have to spend so much more with all that's
5:26
Speaker 1: been going on as well as what's going on in
5:28
Speaker 1: the straight. So whether that is true, the key here
5:31
Speaker 1: is going to be if Netanyahu gets in, we're going
5:34
Speaker 1: to see more money heading over there. And that usually
5:37
Speaker 1: means more expenses for sure. All right, so let me
5:42
Speaker 1: go back to, let's play a couple of clips here.
5:46
Speaker 1: Let's go over to a new Fed chair incoming clip.
5:51
Speaker 1: And this one is, it's not saying that there is
5:53
Speaker 1: a potential, but well, you'll see the clip. It's kind
5:56
Speaker 1: of a little bit of a tongue in cheek. Take
5:57
Speaker 1: a look.
5:58
Speaker 4: We've had existential crisis come and go in this field
6:02
Speaker 4: and resilience continues to be the order of the day.
6:04
Speaker 5: There's this cleanup crowd that has to come in afterwards.
6:08
Speaker 5: And if I were at the Federal Reserve, This week,
6:12
Speaker 5: I'd be saying, look, if we have a deceleration, what
6:15
Speaker 5: does that mean for inflation, for growth in 2027, 2028?
6:19
Speaker 5: I think they're going to have a rate increase come December.
6:24
Speaker 1: But what do they do after that?
6:26
Speaker 5: And I am starting to think they're going to start
6:29
Speaker 5: to see a deceleration. And maybe they don't raise rates
6:32
Speaker 5: as much in 2027. And now, in terms of politics,
6:35
Speaker 5: we're going to have the midterms in a week. And
6:38
Speaker 5: then- Katie, bar the door, there's going to be 15
6:41
Speaker 5: or 20 people running for president for 28 that will
6:44
Speaker 5: all be announced by January or February of next year.
6:47
Speaker 1: Or by the Wednesday after the election. All right. I
6:53
Speaker 1: don't know about you guys, but he was talking a
6:55
Speaker 1: lot about the Fed. Is Gensler looking for a new
6:59
Speaker 1: job here? And when you think about this, he's pointing
7:03
Speaker 1: at pretty much what he thinks is going to be
7:06
Speaker 1: a major change across this administration. Does that mean that
7:11
Speaker 1: we start to see new assignments out there? Is Gary
7:13
Speaker 1: Gensler pulling his resume and brushing it off? Can you
7:17
Speaker 1: imagine Gensler being in the Fed chair position or even
7:20
Speaker 1: some other entity inside of government that could control finance
7:25
Speaker 1: or possibly policy going in, especially to the next few years?
7:29
Speaker 1: Because I think we're going to see so much growth
7:32
Speaker 1: around where these markets are heading And there's a lot
7:35
Speaker 1: of reasons why. Much of it has been RWA-led, real-world assets.
7:39
Speaker 1: Tokenized treasury is going to continue to skyrocket, even though
7:42
Speaker 1: we are seeing pushback on that. I think the opportunity
7:45
Speaker 1: right now for the markets, most people see this as
7:48
Speaker 1: still a very bullish market. I'd love to see it
7:52
Speaker 1: in your eyes, in the comments. We'll try to get
7:54
Speaker 1: to some of these. Do you feel like we are
7:57
Speaker 1: bullish right now post-midterms? Just let me know, bullish or
8:01
Speaker 1: bearish post-medterms. Now, Mike Wilson thinks that maybe this is
8:06
Speaker 1: the best buying opportunity available. Take a look.
8:09
Speaker 6: The three things that we're most focused on now, in
8:11
Speaker 6: no particular order, the obvious ones are the midterm elections,
8:14
Speaker 6: which is always a clearing event. I mean, historically, it's
8:17
Speaker 6: always a good time to be adding risk into that event. Now,
8:19
Speaker 6: sometimes it could linger another month or so, but over
8:22
Speaker 6: the next six to 12 months, 100% certainty, going back
8:25
Speaker 6: to 1952, you make positive returns, and usually double digits.
8:28
Speaker 6: Number two is I think it's around this idea around
8:31
Speaker 6: AI CapEx and the scarcity of capital. Okay, that one's
8:34
Speaker 6: pretty well understood too. And I think these companies are
8:36
Speaker 6: dealing with it properly, right? So they're doing the back
8:39
Speaker 6: and forth between equity issuance and debt issuance. There's going
8:41
Speaker 6: to be a separation between the weaker players and the
8:43
Speaker 6: stronger players.
8:44
Speaker 1: That's happened.
8:45
Speaker 6: And then the stronger players can actually issue equity. And
8:47
Speaker 6: then the one I think that's not as appreciated is
8:50
Speaker 6: the liquidity constraint. The Fed has tightened this year. Don't
8:53
Speaker 6: forget six or seven months ago, they were talking about,
8:56
Speaker 6: or the market was talking about them cutting rates. OK,
8:58
Speaker 6: so now they've slowed the balance sheet growth and they've
9:01
Speaker 6: raised rates 25 basis points and they've allowed two or
9:03
Speaker 6: three or four more hikes to get priced in. That
9:06
Speaker 6: has done the tightening for the Fed. Financial conditions are
9:09
Speaker 6: now as tight as they were in 2018, also midterm
9:12
Speaker 6: election year. And you kind of know how that year ended.
9:15
Speaker 1: All right. So timing is everything in the market. And
9:20
Speaker 1: I think the key here is going to be the
9:22
Speaker 1: issue around how Bitcoin starts to respond to what these
9:26
Speaker 1: situations play out. And one thing to consider here, I'll
9:30
Speaker 1: kind of zoom in on this, U.S. stocks tend to
9:32
Speaker 1: rally following the midterm elections. So the S & P 500,
9:35
Speaker 1: they returned 17% on average in the year following midterm elections.
9:40
Speaker 1: That goes all the way back since 1950. So that
9:43
Speaker 1: to me is an indicator. Now, sure, could there be
9:46
Speaker 1: some crazy event or some major scenario that plays out
9:51
Speaker 1: both during or prior to these elections that could change that?
9:55
Speaker 1: Or could there also be something else You know, when
9:58
Speaker 1: you look at all this, you know, fear mongering that's
10:00
Speaker 1: happening really around the world in terms of preppers that
10:05
Speaker 1: are dealing with this. So that in itself could still
10:07
Speaker 1: put some pressure on the market in general. But for
10:10
Speaker 1: the most part, the markets kind of respond based on
10:14
Speaker 1: the handshake of a new administration starting to play in D.C.
10:18
Speaker 1: And of course, that is the question. I'm a little
10:20
Speaker 1: bit more concerned that if this administration loses both the
10:24
Speaker 1: House and the Senate, most of the time is going
10:26
Speaker 1: to be spent in Congress dealing with a lot of
10:29
Speaker 1: hearings and all sorts of things around impeachment, you name it.
10:32
Speaker 1: It's going to suck up a lot of the air.
10:35
Speaker 1: I just don't know how much effect that is going
10:38
Speaker 1: to have other than possibly rulemaking that will go ahead
10:40
Speaker 1: with the SEC and the CFTC going into this. I've
10:44
Speaker 1: got a clip here that will get into how this
10:46
Speaker 1: set up. plays into this? Because there's still some real risks,
10:50
Speaker 1: but it's the setup that you need to watch. Take
10:53
Speaker 1: a look.
10:54
Speaker 7: I think the setup right now is positive, but with
10:57
Speaker 7: real risks. That is a healthy way to be. Whenever
11:00
Speaker 7: a market looks positive from every angle, it means you're
11:04
Speaker 7: probably missing something. And whenever you get too bearish, it's
11:07
Speaker 7: probably the time that you're actually missing the real positive
11:10
Speaker 7: coming in. And it is one of the the most
11:12
Speaker 7: common types of markets in terms of the stocks are
11:14
Speaker 7: an inflationary asset. So what are those real risks out there?
11:16
Speaker 7: Oil prices are right at the highs. And I just
11:19
Speaker 7: don't see how that risk gets resolved until we get
11:21
Speaker 7: clarity on what the U.S. action is on Iran post midterms.
11:25
Speaker 7: So I think that's with us for another week. And
11:27
Speaker 7: while SK Hynix was very reassuring results, the big ones,
11:30
Speaker 7: as you just discussed, are really ahead of us. Alphabet,
11:32
Speaker 7: Microsoft are much more important.
11:35
Speaker 8: All right.
11:36
Speaker 1: So what he's what he's getting at there is how
11:39
Speaker 1: important are these earnings to Some of those kind of
11:43
Speaker 1: play into what SK Hynix returned, which blew me away.
11:47
Speaker 1: And this is 75 billion of shareholders after record profit. Remember,
11:52
Speaker 1: SK Hynix, a Korean chip maker, the chip trade definitely
11:56
Speaker 1: not dead as with this kind of performance. I think
11:58
Speaker 1: you're going to continue to see those kind of numbers.
12:00
Speaker 1: If you look at the chart, there's SK Hynix right
12:03
Speaker 1: there exploding up to 163. This thing had dipped it
12:06
Speaker 1: down to around 130. This is on the daily. right there.
12:10
Speaker 1: And you can kind of see the overall since it's
12:12
Speaker 1: gone public, but a nice return for a chip maker
12:15
Speaker 1: moving into it. All right, the poll is in, and
12:19
Speaker 1: we've got percentage-wise about 500 votes here, bullish 53% post-med terms.
12:26
Speaker 1: We've got bearish 31% of you are bearish post-med terms
12:30
Speaker 1: and neutral 16%. So a bullish crowd today. I like that.
12:35
Speaker 1: In the sense of why this is going to happen,
12:37
Speaker 1: I think the key there is maybe We finally get
12:41
Speaker 1: off of kind of high center and we can start
12:44
Speaker 1: moving forward with some of these markets. And I think
12:46
Speaker 1: the question really boils down to two things. One, do
12:49
Speaker 1: the earnings continue to come through for 2027? Do we
12:53
Speaker 1: see some major impact on labor in 2027? Because usually
12:58
Speaker 1: first quarter is when you'll start to see adjustments in
13:00
Speaker 1: a lot of these major companies. And with the advancements
13:03
Speaker 1: of what's happening with AI, that could be a factor
13:06
Speaker 1: that going into 2027 around how the economy may support.
13:11
Speaker 1: And if you look at the only two of the
13:14
Speaker 1: Mag7 that are actually outperforming this year are Apple and Nvidia.
13:19
Speaker 1: So if you look at it, the rest of them,
13:22
Speaker 1: they rank one and two in free cash flow. So
13:25
Speaker 1: that is the key right there. Microsoft, Amazon, Google, Meta,
13:28
Speaker 1: even Tesla down almost 13%. So boiling down to performance,
13:35
Speaker 1: Free cash flow and, of course, the issue of earnings
13:39
Speaker 1: continues to be a major factor with all of this.
13:42
Speaker 1: And that, I think, is the next step because with
13:45
Speaker 1: what the Fed will do today, obviously pausing rates, going
13:49
Speaker 1: into December, maybe setting up 2027, if that's hawkish or
13:54
Speaker 1: dovish is the key here. And then you've got earnings
13:57
Speaker 1: that will potentially continue to perform, hopefully in Q1. And
14:02
Speaker 1: then the real question is, is how does the job
14:04
Speaker 1: market hold? If any of that starts to play, it's
14:07
Speaker 1: very possible we could start to see a ramp up
14:10
Speaker 1: into a major bull run going into 2027. I want
14:13
Speaker 1: to go to another clip because this will get into
14:17
Speaker 1: whether or not you should set this out. And there's
14:19
Speaker 1: a lot happening with the AI trade, but more importantly,
14:23
Speaker 1: how this is all going to eventually start to play
14:27
Speaker 1: into the market itself. Take a look.
14:29
Speaker 4: We've had existential crisis come and go in this field
14:32
Speaker 4: And resilience continues to be the order of the day.
14:35
Speaker 4: So I'd say we're not at the crossroads yet. We
14:37
Speaker 4: have the euphoria that will power us through this current
14:40
Speaker 4: anthropic offering. But I do believe once the election's over
14:44
Speaker 4: and some chips have fallen in that respect, we will
14:47
Speaker 4: have a reckoning at that stage.
14:48
Speaker 7: Should we sit this one out, look elsewhere, diversify our portfolios?
14:53
Speaker 7: And if so, where should that rotation take us?
14:58
Speaker 4: Unfortunately, I think the opportunity to sit this one out
15:00
Speaker 4: has definitely sailed in the respect there would be even
15:03
Speaker 4: career risk for any investor, certainly a professional investor, who
15:07
Speaker 4: is opting out of the AI trade at this point.
15:10
Speaker 4: It is so pervasive across every sector, every market in
15:14
Speaker 4: the globe. There is no sitting this out.
15:16
Speaker 1: All right, so you can kind of see there, guys,
15:19
Speaker 1: we are going to cut to Kevin Warsh, who should
15:22
Speaker 1: be coming on to the stage here. Let's see if
15:25
Speaker 1: we can pull that up on the live stream and
15:29
Speaker 1: get his comments going. And, of course, we do have
15:32
Speaker 1: a poll that's coming in right now. And when does
15:35
Speaker 1: the AI bubble pop? In 2026, Q1 of 27, or
15:41
Speaker 1: by 2028? Let me know what you guys think. Right now,
15:44
Speaker 1: the leading, we've got a couple hundred votes in, looks
15:48
Speaker 1: like by 2028 is the leader. So we'll see. Here's
15:52
Speaker 1: Kevin Warsh. We'll cut to him.
15:56
Speaker 9: Good day.
15:58
Speaker 8: This morning, the FOMC decided to maintain the target rate
16:02
Speaker 8: for the federal funds rate at three and three quarters
16:05
Speaker 8: to 4% in support of the Federal Reserve's dual mandate.
16:10
Speaker 8: Economic activity is expanding at a strong pace. While uncertainty remains,
16:16
Speaker 8: owing in part to geopolitical developments, domestic spending has been resilient.
16:22
Speaker 8: Productivity growth is strong and capital investment robust. Job gains
16:28
Speaker 8: have kept pace with the workforce and the unemployment rate
16:31
Speaker 8: has changed little, but inflation remains elevated. The committee believes
16:37
Speaker 8: that the accumulation of more information will help it determine
16:41
Speaker 8: the policy stance appropriate to ensure a timely return of
16:47
Speaker 8: inflation to the 2% goal. The committee will deliver price stability.
16:52
Speaker 8: At each policy meeting, my colleagues and I assess the
16:56
Speaker 8: economy By looking out the window, it's what we call
16:59
Speaker 8: interrogating reality. To gauge what's really going on, it is
17:04
Speaker 8: not a task that has grown easier. So what exactly
17:08
Speaker 8: do we observe? Economic growth has strengthened. The GDP increase
17:15
Speaker 8: in the first half of this year was revised up
17:19
Speaker 8: from an earlier estimate of 1.8% up to 2.4%. And
17:24
Speaker 8: the third quarter appears to have brought an even more
17:27
Speaker 8: rapid advance, led by healthy consumer spending, likely running above
17:32
Speaker 8: 3% growth, and business investment likely rising at about a
17:38
Speaker 8: double-digit pace. Capital expenditures are at a historically high share
17:44
Speaker 8: of GDP. High-tech investment is leading the acceleration. But there's
17:49
Speaker 8: also been a broadening in other categories, and these trends
17:53
Speaker 8: bear watching. What about the jobless rate? The jobless rate
17:57
Speaker 8: is lower than a year ago, and payroll growth is
18:01
Speaker 8: noticeably above last year's pace. The four-week moving average of
18:06
Speaker 8: unemployment insurance claims continues to run at the lowest level
18:11
Speaker 8: in generations. So on the employment side of the Fed's
18:14
Speaker 8: dual mandate, conditions are quite positive. And yet Americans, of course,
18:21
Speaker 8: are still dealing with inflation that has been running above
18:24
Speaker 8: the committee's objective for close to six years. It's our
18:29
Speaker 8: responsibility to get inflation down. That's the reason the FOMC's
18:34
Speaker 8: discussion over the last couple of days focused mainly on
18:38
Speaker 8: the price stability side of our remit. Since our policy
18:43
Speaker 8: action in September, we have started to see some changes
18:47
Speaker 8: in financial and credit conditions. They have tightened for some
18:51
Speaker 8: businesses and households, much as we would expect. Market participants
18:57
Speaker 8: are becoming somewhat more discerning in their capital allocations. And
19:01
Speaker 8: while overall financial conditions are tighter, I'm unwilling and unable
19:06
Speaker 8: to call them tight. But broadly, these developments go in
19:11
Speaker 8: the direction of achieving a longer, more durable period of
19:16
Speaker 8: economic growth and price stability. Over the last couple of days,
19:20
Speaker 8: the committee had a good discussion of the changes in
19:23
Speaker 8: the economic and financial landscape that marked this intermeeting period.
19:28
Speaker 8: We discussed geopolitical developments and fast-moving changes in technology. We observed,
19:35
Speaker 8: but were not surprised, that financial markets showed bouts of
19:39
Speaker 8: volatility and shifting correlations. So as we widen the frame
19:45
Speaker 8: to survey the broad economic and financial picture, real activity
19:50
Speaker 8: is clearly pointing in the right direction. That's good news.
19:54
Speaker 8: But inflation is too high. Energy and related prices have
19:58
Speaker 8: moved higher again in recent weeks. And our job is
20:02
Speaker 8: to ensure that relative price changes in some sectors do
20:06
Speaker 8: not broaden out across the economy. and that inflation expectations
20:11
Speaker 8: remain as they are anchored. While these uncertainties are real,
20:16
Speaker 8: there's no lack of clarity in our purpose at the Fed.
20:21
Speaker 8: Since becoming chairman just five months ago, I've been honored
20:25
Speaker 8: to work with FOMC policymakers who are unambiguous in their
20:29
Speaker 8: commitment to stable prices. We've made clear our readiness to
20:33
Speaker 8: act as circumstances require, and we have shown our willingness
20:37
Speaker 8: to act. The information we receive over the coming period
20:44
Speaker 8: will help us determine where we want policy to be.
20:47
Speaker 8: And at every turn, good or bad, our job is
20:51
Speaker 8: to get monetary policy right. And that's exactly what we're doing.
20:55
Speaker 10: Now, with this.
20:56
Speaker 8: Objective in mind, we've decided on a change in our
20:59
Speaker 8: FOMC schedule starting next fall. We believe eight meetings per
21:04
Speaker 8: year is the right number for the FOMC. But in 2027,
21:09
Speaker 8: one meeting will focus exclusively on broad monetary policy strategy,
21:14
Speaker 8: with neither a vote on the federal funds rate nor
21:17
Speaker 8: a policy statement anticipated. The rest will be regular FOMC
21:23
Speaker 8: policy setting meetings. And I expect that in 2028, we'll
21:27
Speaker 8: have two meetings dedicated to discussions of strategy and six
21:31
Speaker 8: for setting policy. Now, what's the reasoning behind this change?
21:36
Speaker 8: To me, it's quite straightforward. Getting policy right involves assessing
21:40
Speaker 8: near-term developments at timely, regular, and information-rich intervals. But it's
21:48
Speaker 8: equally important we reserve time and space as an intellectually
21:52
Speaker 8: diverse group for strategic deliberations, for thinking anew about big questions,
21:59
Speaker 8: looking out over longer time horizons, focusing, as I say,
22:03
Speaker 8: on the left side of the decimal point. I believe
22:06
Speaker 8: the setting of the meeting schedule and agenda is more
22:09
Speaker 8: than some administrative detail. It's an institutional choice affecting the
22:15
Speaker 8: nature and the quality of our deliberations and ultimately the
22:19
Speaker 8: wisdom of our decisions. It's yet another change to get
22:23
Speaker 8: the conduct of monetary policy on the right track. I
22:28
Speaker 8: appreciate your attention this afternoon. Now my time is yours
22:31
Speaker 8: and I welcome your questions.
22:36
Speaker 4: Thank you.
22:36
Speaker 11: Colby Smith with the New York Times. There's been essentially
22:39
Speaker 11: no progress toward the 2% inflation target. The labor market
22:43
Speaker 11: remains stable, as you suggested in your opening statement, and
22:47
Speaker 11: most of your colleagues seem to be on board with
22:49
Speaker 11: raising rates in December. So why not just raise rates today?
22:53
Speaker 8: So it's a good question. I will say I read
22:57
Speaker 8: your stories the last day or two, so I must
22:59
Speaker 8: admit I sort of saw that question coming. What I
23:03
Speaker 8: said in my prepared statement Was information coming in the
23:08
Speaker 8: coming period will help us tell us where we want
23:10
Speaker 8: to be But I suspect you want a little more
23:13
Speaker 8: than that. So let me let me give it a
23:14
Speaker 8: shot Ensuring price stability Colby Quashing inflation is not about
23:22
Speaker 8: some fixed individual date on a calendar Same way. It's
23:27
Speaker 8: not about some isolated data point if it were about
23:31
Speaker 8: those two things this job would be easier and And
23:34
Speaker 8: we wouldn't be suffering from nearly six years of inflation
23:37
Speaker 8: above target. So what's this about? It's about ensuring we
23:41
Speaker 8: have clear objectives. And it's about a monetary policy strategy,
23:46
Speaker 8: which might sound strange from the last several years. So
23:51
Speaker 8: let me step back. In the five months or so
23:54
Speaker 8: that I've been around, we've put in place what I
23:58
Speaker 8: describe as new monetary medicine. Well, what's been in that
24:02
Speaker 8: package of medicine? First thing we did when we showed
24:06
Speaker 8: up with my colleagues is we doubled down on the
24:09
Speaker 8: 2% inflation target. We said, we own it. We're taking
24:14
Speaker 8: responsibility for it. And if you think that we're tolerating
24:18
Speaker 8: some inflation target somewhere in the twos, let us disabuse
24:21
Speaker 8: you of it. That was the first part of this
24:23
Speaker 8: new monetary medicine. Second part is we took responsibility. No
24:27
Speaker 8: anguish of central banking here. No blaming others. It's the
24:31
Speaker 8: third thing that we've done. We laid out for you
24:34
Speaker 8: and the world our framework. I did it in Jackson Hole.
24:38
Speaker 8: It was part of the discussion the last couple of days.
24:40
Speaker 8: This is the framework that many of my colleagues skew
24:42
Speaker 8: to as well. This is how we think about how
24:45
Speaker 8: monetary policy should work. These are the transmission mechanisms, and
24:49
Speaker 8: this is how we're going to deliver. Then what do
24:51
Speaker 8: we do? We interrogate reality. We do that periodically. That's
24:55
Speaker 8: a very useful thing to do. But we don't just talk.
24:58
Speaker 12: We act.
25:00
Speaker 8: And so in September, when we last met, we acted.
25:03
Speaker 8: We removed a dose of accommodation. So what are the
25:07
Speaker 8: signposts about how this new strategy is going? Inflation compensation,
25:12
Speaker 8: as measured by swaps prices, many other measures, inflation compensation
25:15
Speaker 8: is going in the right way. Inflation expectations. The world
25:20
Speaker 8: is quite unsettled. If you'd say, absent the Fed, what
25:26
Speaker 8: would have happened to expectations, they might have gone the
25:28
Speaker 8: wrong way. They've gone the right way, too. So I
25:31
Speaker 8: feel good about those signposts. The period right in front
25:35
Speaker 8: of us is information rich. There is a lot that's
25:39
Speaker 8: happening in the world. My colleagues and I are keen
25:43
Speaker 8: to take notice of it. So in this coming period,
25:46
Speaker 8: what do I think we're going to be able to do?
25:48
Speaker 8: We're going to be able to figure out what's the
25:51
Speaker 8: appropriate protocol as part of this package that we started
25:54
Speaker 8: to deliver five months ago to deliver price stability. I'm
25:59
Speaker 8: encouraged by the progress we've made in a short period
26:01
Speaker 8: of time. But if the crux of your question is
26:04
Speaker 8: you haven't delivered yet, you haven't achieved price stability, you're
26:07
Speaker 8: right about that, but we're working on it.
26:16
Speaker 2: Thank you, Chair Warsh. So if I could, this statement
26:20
Speaker 2: says that the accumulation of more information will help the
26:22
Speaker 2: committee determine the policy stance appropriate to ensure a timely
26:25
Speaker 2: return of inflation to the 2 percent goal. Does that
26:29
Speaker 2: mean that the current level of the Fed funds rate
26:31
Speaker 2: might already be the right one?
26:35
Speaker 8: Well, we've got to determine the appropriate protocol. If you
26:43
Speaker 8: were listening next to me in that room the last
26:46
Speaker 8: couple of days, the overwhelming consensus, the overwhelming judgment is
26:51
Speaker 8: that what we've done in this monetary medicine, starting to
26:55
Speaker 8: work some, But there's no firm conclusions. If we had
26:59
Speaker 8: a firm conclusion about the conduct of monetary policy, we'd
27:03
Speaker 8: announce it to much fanfare today. What we decided to
27:07
Speaker 8: do was to Colby's question, take stock of where we are,
27:10
Speaker 8: evaluate what we're seeing out the window, ask ourselves whether
27:15
Speaker 8: the period right in front of us is likely to
27:18
Speaker 8: provide more clarity on the appropriate protocol. My judgment, the
27:21
Speaker 8: judgment of my overwhelming number of colleagues is that it would.
27:31
Speaker 12: Mr.
27:32
Speaker 9: Chairman, before-thanks for taking our questions-before the meeting, several members
27:38
Speaker 9: of the Board and the Committee went out and told
27:40
Speaker 9: us that it was going to take more time and
27:42
Speaker 9: that it had a profound effect on the outlook for
27:45
Speaker 9: the funds rate. Were you involved in discussing that message
27:50
Speaker 9: with them? And if you don't mind, I'm sorry, but
27:52
Speaker 9: a protocol question, what will be the disclosure public disclosure
27:56
Speaker 9: on the meetings where you're not going to have a statement.
27:58
Speaker 9: So two questions, I'm sorry.
27:59
Speaker 8: So two questions. Did you not hear the one question rule?
28:03
Speaker 9: I did, but I thought there was like a protocol
28:05
Speaker 9: thing I could do.
28:05
Speaker 8: I would, um, that was like a parliamentary procedure question
28:09
Speaker 8: you were asking that didn't count. Um, I hesitate to
28:12
Speaker 8: indulge the second question. I fear what it would do,
28:15
Speaker 8: but let's, let me see if I can do it
28:17
Speaker 8: and not have the slippery slope among us. Um, your
28:20
Speaker 8: first question was about my colleagues. Um, I've got 18
28:24
Speaker 8: quite independent colleagues. If you were inside that room the
28:27
Speaker 8: last couple of days, you would come to believe that
28:30
Speaker 8: to be true. One way to test the independence of
28:34
Speaker 8: my colleagues is, I don't know if you've heard, Steve,
28:36
Speaker 8: but I don't submit a dot. I don't plan on
28:39
Speaker 8: submitting a dot. But the 18 of them do to
28:42
Speaker 8: suggest somehow that I am some kind of all-knowing person
28:48
Speaker 8: sending messages out. That's not the committee of the FOMC
28:52
Speaker 8: that I know. these are serious, sober, responsible people. We
28:56
Speaker 8: had a serious, sober discussion. So that's the answer to that.
29:00
Speaker 8: On the parliamentary question, which doesn't count as a question,
29:03
Speaker 8: I'll just say this. We've made a decision that at
29:07
Speaker 8: that strategy meeting in 27 and the two strategy meetings
29:10
Speaker 8: in 28, I do not anticipate making any policy decision,
29:14
Speaker 8: putting out a policy statement. But what might we come
29:17
Speaker 8: out with? It's not obvious yet. There's more news to
29:20
Speaker 8: come on that. The decision on the new format for
29:24
Speaker 8: the meetings is relatively new. It was a robust discussion
29:29
Speaker 8: over a couple of meetings of how to handle that.
29:31
Speaker 8: As we get details of that, which are still now,
29:34
Speaker 8: not until next fall, we'll be prepared to share.
29:35
Speaker 3: Them with you.
29:37
Speaker 12: Nicole.
29:40
Speaker 7: Hi, Nicole.
29:41
Speaker 13: Good kind with Barron's. Thanks for taking my question. In September,
29:44
Speaker 13: you mentioned that the Fed has a role in sustaining
29:46
Speaker 13: the economic progress happening in America right now and in
29:49
Speaker 13: the rising opportunities that come with it. I'm wondering if
29:52
Speaker 13: you can expand on whether you see this as a
29:54
Speaker 13: mandate and how you intend to fulfill that mandate.
29:57
Speaker 8: So the mandate was given to us by Congress. The
30:00
Speaker 8: mandate was deliver stable prices and deliver full employment all
30:05
Speaker 8: in the context of financial stability. Now they gave us
30:08
Speaker 8: some other homework to do on supervision and regulation payments,
30:11
Speaker 8: but I presume you're talking about monetary policy. So what's
30:16
Speaker 8: the best thing we can do in this environment looking
30:19
Speaker 8: at our window to deliver on that remit? Ensure stable prices.
30:24
Speaker 8: I mentioned, I think, at a prior press conference, if
30:26
Speaker 8: you were trying to do the most harm to the
30:29
Speaker 8: least well-off among us, you would let the last six
30:32
Speaker 8: years of inflation above the Fed's target, usually well above
30:37
Speaker 8: the Fed's target, you'd let that continue. So that's the
30:39
Speaker 8: most important thing we can do as we look out
30:41
Speaker 8: the window, and that's what we plan to do. You
30:43
Speaker 8: probably heard me say this. We will deliver price stability.
30:47
Speaker 8: No ifs, ands, or buts, and that continues to be
30:48
Speaker 8: the case.
30:49
Speaker 14: Eleanor.
30:51
Speaker 3: Eleanor Wheeler with me.
30:55
Speaker 6: Eleanor Mueller with Semaphore.
30:56
Speaker 15: Wanted to ask you about the working groups, when we
30:58
Speaker 15: can expect the reports to come up, and if there
31:01
Speaker 15: is anything you can preview.
31:02
Speaker 1: For us, whether it's on AI or data or balance sheets.
31:06
Speaker 8: Sure. These five task forces are hard at work. I
31:13
Speaker 8: have scarcely seen anything that would constitute a final report,
31:17
Speaker 8: but I have done some periodic check-ins with them. And
31:21
Speaker 8: I am impressed by the rigor of the intellectual discussions,
31:25
Speaker 8: by the seriousness of the task that we've given them. Now,
31:28
Speaker 8: some of the questions that I asked to kick off
31:31
Speaker 8: the reports, they want to answer those and answer a
31:34
Speaker 8: whole range of other questions, which might go to other
31:36
Speaker 8: task forces. But I'm impressed by what they're doing. I
31:40
Speaker 8: gave them, like I told you, a year-end deadline. I
31:44
Speaker 8: think some but not all of the groups will probably
31:48
Speaker 8: hit their deadline and turn their homework in on time.
31:51
Speaker 8: But that just begins the process by which we're going
31:53
Speaker 8: to be consuming, which is intellectually serious work. That's a
31:57
Speaker 8: catalyst for us to think anew about productivity and jobs
32:01
Speaker 8: and an inflation framework, and what's the best data to
32:04
Speaker 8: help us do our job, how to think about the
32:07
Speaker 8: balance sheet task force. These are huge intellectual investments that
32:13
Speaker 8: I think are going to bear fruits in the next
32:15
Speaker 8: policy conjuncture. unlikely to find their way into this policy conjuncture,
32:21
Speaker 8: given the important role as consumers of these ideas that
32:24
Speaker 8: my colleagues have. But I will have one small announcement.
32:29
Speaker 8: I previewed this when I was at an IMF meeting,
32:32
Speaker 8: much to the chagrin of some of my colleagues around here.
32:35
Speaker 8: On November 16th, the Productivity and Jobs Task Force will
32:38
Speaker 8: be doing a field hearing, inviting a broad range of
32:42
Speaker 8: people who have strong views on What are the implications
32:45
Speaker 8: for jobs in the economy, near-term, medium-term, long-term? Is this
32:49
Speaker 8: a productivity miracle that's going to happen, or will it
32:53
Speaker 8: happen slowly? I know I, for one, am keenly interested
32:57
Speaker 8: in refining my own views on that question. But that
33:00
Speaker 8: task force decided that they wanted to hear from more
33:03
Speaker 8: people as part of their undertaking. I plan on attending.
33:07
Speaker 8: I might have a few words to say at the
33:09
Speaker 8: outset of that conference. I expect the conference will go three,
33:12
Speaker 8: four hours. It'll be pretty wonky stuff. I don't know
33:15
Speaker 8: how good the material will be for the likes of
33:17
Speaker 8: you and your colleagues, but it's a purpose to do
33:20
Speaker 8: a lot of listening for me to interrogate the reality
33:23
Speaker 8: in front of me. What do experts in their fields
33:27
Speaker 8: think about this? What are the implications for the dual
33:30
Speaker 8: mandate that I referenced to your colleague? Is this going
33:33
Speaker 8: to make it harder or easier for us to achieve
33:36
Speaker 8: price stability over the next several years? What are the
33:39
Speaker 8: implications for jobs, medium and long term, but near term too?
33:43
Speaker 8: So we're going to explore those largely in the public
33:46
Speaker 8: realm on November 16th. I look forward to seeing you there.
33:53
Speaker 16: Thank you so much. Thank you, Mr.
33:55
Speaker 5: Chairman.
33:55
Speaker 16: James Rosen with Newsmax. You spoke of interrogating reality. Since
33:59
Speaker 16: reality is a no-show here today, I'm going to satisfy
34:02
Speaker 16: myself with interrogating you. You spoke earlier in your remarks
34:05
Speaker 16: here today about how your colleagues are serious and sober
34:08
Speaker 16: people who are committed to price stability. In an event
34:12
Speaker 16: in the Oval Office on October 7 of this year,
34:14
Speaker 16: President Trump said, and I quote, Kevin is great, but
34:17
Speaker 16: Kevin's one vote out of a board with numerous people
34:21
Speaker 16: that were put on by Obama and Biden and a
34:23
Speaker 16: couple by me, so you have a board that would
34:25
Speaker 16: like to see the country do badly, in my opinion.
34:29
Speaker 5: Do you agree with those comments?
34:31
Speaker 8: So, James, I appreciate the question. I'm not going to
34:33
Speaker 8: be responding to quotes from public officials. What I can
34:39
Speaker 8: tell you is my experience in five months here, we
34:42
Speaker 8: just came out of a heck of a family fight,
34:45
Speaker 8: a serious, sober discussion. I think we came to the
34:50
Speaker 8: right policy decision for this moment, and I'm honored to
34:54
Speaker 8: be here and honored to be the chairman of this group.
35:01
Speaker 14: Chairman Walsh, Mariela Isacapurro with Bloomberg News. So the economy
35:05
Speaker 14: is strong. Inflation is well above 2%. You're saying inflation
35:09
Speaker 14: expectations are going the right way, but surveys show that
35:12
Speaker 14: households expect inflation to remain above the Fed's goal, and
35:16
Speaker 14: not just for the short term. Using a hike today,
35:19
Speaker 14: other than waiting for more data, I haven't really heard
35:23
Speaker 14: the clear arguments as to that decision. So Do you
35:26
Speaker 14: worry that with today's decision, households may not believe your
35:31
Speaker 14: pledge to bring down inflation clearly and at sufficient speed,
35:35
Speaker 14: and instead will read this decision of holding rates steady
35:39
Speaker 14: as a sign that the central bank has, in fact,
35:41
Speaker 14: a soft inflation target?
35:42
Speaker 8: Yeah, so what I can do is tell you there's
35:45
Speaker 8: no soft inflation target. There's no implicit inflation target. There's
35:50
Speaker 8: a target of price stability, and it's 2% as measured
35:52
Speaker 8: by PCE. It took six years for inflation to have
36:00
Speaker 8: the effect on consumers that you reference. But I would
36:04
Speaker 8: say this. When consumers interrogate reality, they look outside their window, too.
36:10
Speaker 8: They go to the gas station, too, and they see
36:13
Speaker 8: that prices are up. I am not going to be
36:16
Speaker 8: the guy who says that oil prices haven't gone up,
36:19
Speaker 8: and when they fill up their tank, they don't see it.
36:22
Speaker 8: And so inflation's gone up in expectations in the very
36:25
Speaker 8: near term because they're doing what we're doing, interrogating reality.
36:29
Speaker 8: But if you look out over the horizon, if you
36:32
Speaker 8: look at most, but not all, measures, what you see
36:36
Speaker 8: is households, businesses, financial markets, they have the confidence that
36:42
Speaker 8: they should have that this central bank will deliver price stability.
36:45
Speaker 9: Edward Barnes.
36:51
Speaker 10: Thank you, Mr.
36:52
Speaker 1: Chairman.
36:52
Speaker 8: Edward Lawrence, Fox Business. So do you see a direct
36:55
Speaker 8: line correlation between oil prices and the inflation we're seeing
36:59
Speaker 8: in the United States?
36:59
Speaker 5: And if so, how fast could inflation fall or react
37:02
Speaker 5: to falling oil prices?
37:04
Speaker 8: So I don't want to engage in hypotheticals, but I
37:06
Speaker 8: can look out our window and see what's happened. There's
37:11
Speaker 8: been a stable correlation between oil prices as they've moved
37:17
Speaker 8: up this year, generally, and interest rates. Not the interest
37:21
Speaker 8: rates that we control, but interest rates set in the market.
37:25
Speaker 8: That correlation has been quite strong until very recently. We've
37:30
Speaker 8: seen oil prices continue to move up, largely due to
37:34
Speaker 8: geopolitical events. We've seen crack spreads between oil and refined
37:39
Speaker 8: products continue to stay elevated. But what's happened? Interest rates
37:44
Speaker 8: have rolled over to the downside. I'm not a Wall
37:49
Speaker 8: Street newsletter. I'm just telling you when I look out
37:51
Speaker 8: the window over the last several months, that is what
37:54
Speaker 8: we've seen. To the extent that oil prices were to
37:59
Speaker 8: move lower, again, probably due to geopolitical events, that's something
38:04
Speaker 8: that we're going to have to interrogate. What are the
38:06
Speaker 8: effects on the Fed's dual mandate? What are the effects
38:10
Speaker 8: on financial market prices, and what are we going to
38:12
Speaker 8: do about it? But that's a hypothetical, and in fact—
38:16
Speaker 8: if we look at financial market prices, futures prices for oil,
38:22
Speaker 8: they've moved up over the course of the last several weeks.
38:25
Speaker 8: And I can't help but take note of that, too.
38:26
Speaker 12: Claire.
38:33
Speaker 8: Thank you.
38:33
Speaker 12: Claire Jones, Financial Times. Much of the growth that we're
38:37
Speaker 12: seeing in the U.S. economy now, and quite a bit
38:40
Speaker 12: of the inflation, too, is coming from the AI boom.
38:44
Speaker 12: There's quite a lively debate as to whether or not
38:48
Speaker 12: this is a part of the economy that's sensitive to
38:51
Speaker 12: interest rates in the same way as, say, housing. I'd
38:54
Speaker 12: love to get your sense of do rates need to
38:59
Speaker 12: rise more, given that so much of the US economy
39:01
Speaker 12: now is about AI than it otherwise would if, say,
39:05
Speaker 12: housing was a bigger part of the story. Thank you.
39:08
Speaker 8: Thank you, Claire. So there was a narrative. for quite
39:12
Speaker 8: a while, maybe even in this room over the course
39:15
Speaker 8: of the last several press conferences. Well, they're going to
39:19
Speaker 8: raise rates, they're talking about raising rates, but it's not
39:22
Speaker 8: going to have any effect on AI because the returns
39:25
Speaker 8: that investors are expecting are so different. I was skeptical
39:29
Speaker 8: of that. view. Interest rates get in the cracks. Interest
39:33
Speaker 8: rates affect directly or indirectly almost everything. And what have
39:40
Speaker 8: we seen? Since early September, what we've seen inside of
39:46
Speaker 8: the technology complex, Outside of the technology complex, whether you
39:54
Speaker 8: pronounce it AI or SI, Claire, is up to you.
39:58
Speaker 8: What have you seen? Interest rates have had an effect.
40:01
Speaker 8: You see market participants that are discriminating between the kinds
40:07
Speaker 8: of investments they want to make. You've seen credit spreads
40:10
Speaker 8: for certain assets widen out, gap out. For others, you've
40:14
Speaker 8: seen some tightening in financial conditions, but not significantly. So
40:18
Speaker 8: on the thrust of your question of with respect to
40:23
Speaker 8: the new technology and this investment surge, do interest rates matter?
40:27
Speaker 8: I believe they do. And I don't believe that they're
40:30
Speaker 8: somehow divorced from the rest of the economy. Secondly, I'll
40:33
Speaker 8: just say this. It is convenient to say that the
40:37
Speaker 8: strength of the economy is all about this new technology wave.
40:43
Speaker 8: In fact, if we look at the data, really including
40:46
Speaker 8: data from the last meeting till this, the CapEx story
40:50
Speaker 8: is not just robust, not just strong, but it is broadening.
40:55
Speaker 8: And so if you want to tell the story somehow
40:57
Speaker 8: that this is strength we're seeing only in narrow pockets,
41:02
Speaker 8: it's a much harder story to tell now than it
41:04
Speaker 8: would have been several quarters ago.
41:05
Speaker 2: Elizabeth, she'll sit on the back row.
41:11
Speaker 15: Thanks so much, Elizabeth Schulze with ABC News. As you know,
41:14
Speaker 15: the midterm elections are in six days. Did the midterms
41:17
Speaker 15: factor into the Fed's decision to stay on hold? And
41:20
Speaker 15: if not, how can you assure the American public that
41:22
Speaker 15: politics were not at play here?
41:25
Speaker 8: So politics played no role in the decision. I just
41:30
Speaker 8: spent two days with my colleagues upstairs. I didn't hear
41:34
Speaker 8: an utterance about politics. I didn't hear a reference to politics. Politics, elections,
41:42
Speaker 8: what's happening in the next week or so. I didn't
41:44
Speaker 8: hear anything about it. And I don't believe it had
41:48
Speaker 8: any role in the decision, not just for me, but
41:51
Speaker 8: my colleagues around the room. But I will say it's
41:54
Speaker 8: an information-rich interval in the coming period, having nothing to
41:59
Speaker 8: do with politics.
42:00
Speaker 13: Chris Rugeber.
42:06
Speaker 10: Hi, thank you.
42:07
Speaker 1: Chris Rugeber at Associated Press.
42:09
Speaker 17: I know you don't like the statement of economic projections,
42:11
Speaker 17: but last month your colleagues penciled in another rate hike
42:15
Speaker 17: for this year. And so could you give us your
42:17
Speaker 17: sense from this meeting whether you still see widespread support
42:22
Speaker 17: for another hike this year around the table?
42:24
Speaker 10: Thank you.
42:26
Speaker 8: So the blackout period for them ends, I think, on
42:28
Speaker 8: Friday or at some point over the weekend. So they
42:31
Speaker 8: might indulge you in that discussion. I don't believe in
42:36
Speaker 8: forward guidance. absent exigent circumstances, absent a crisis. I have
42:41
Speaker 8: to give that caveat because in the darkest days of
42:45
Speaker 8: the 2008 financial crisis, in part using some literature and
42:51
Speaker 8: thinking from a very recent Nobel Prize winner, that kind
42:55
Speaker 8: of forward guidance is actually quite helpful. But in normal,
42:58
Speaker 8: ordinary times, especially times where the underlying real economy is
43:02
Speaker 8: this strong, I don't believe in it. I don't favor it.
43:06
Speaker 8: I also don't believe in prejudging meetings. A lot of
43:10
Speaker 8: things can happen. So I'm not going to be able
43:13
Speaker 8: to share with you my musings about what happens when
43:17
Speaker 8: this group gets together six weeks from now. But my
43:21
Speaker 8: judgment is that we might learn a lot. And like
43:24
Speaker 8: in my response to Colby's question, we'll be, I think,
43:29
Speaker 8: better positioned to determine the right policy decision and the
43:34
Speaker 8: stance of policy.
43:37
Speaker 13: Sang Lee.
43:40
Speaker 18: Hi, my name is Sang Lee from the Korea Economic
43:42
Speaker 18: Daily newspaper. I got a question as a foreign press.
43:46
Speaker 18: You have spoken several times about the possibility of the
43:49
Speaker 18: Fed shrinking its balance sheet further. If that plan moves
43:54
Speaker 18: forward later, how would you avoid disrupting foreign official holders
43:58
Speaker 18: of treasuries or dollar funding markets abroad like South Korea
44:02
Speaker 18: and Japan?
44:04
Speaker 8: So thank you for your question. First off, I would
44:07
Speaker 8: say I pay probably more attention to the Korean economy
44:11
Speaker 8: than you might think, because when I'm looking at the
44:16
Speaker 8: feedstocks effectively for this new surge in technology, a lot
44:20
Speaker 8: of it's coming from Japan and Korea, some from Singapore.
44:24
Speaker 8: So I'm particularly interested in what's happening in the Korean economy,
44:28
Speaker 8: usually because it's telling me what's on planes and ships
44:31
Speaker 8: coming this way. Secondly, I should say that your new
44:36
Speaker 8: central bank governor is someone I've known for 20 years
44:38
Speaker 8: and is a very talented guy and a good friend.
44:42
Speaker 8: So I'm glad he's in that post. He and I
44:46
Speaker 8: met actually about 20 years ago amid the global financial crisis,
44:51
Speaker 8: as it would come to be known. And I remember
44:54
Speaker 8: this is a generation of discussions with him about the
44:57
Speaker 8: use of the balance sheet in exigent circumstances like we
45:00
Speaker 8: had then. At this point, the balance sheet is solely
45:06
Speaker 8: within the four walls of the balance sheet task force. Now,
45:09
Speaker 8: I have checked in with them, full disclosure. They're working
45:12
Speaker 8: away and comparing their best thoughts. And I think the
45:16
Speaker 8: conclusions they come to, the recommendations they come to, will
45:20
Speaker 8: be fed into the FOMC probably early in the first quarter.
45:24
Speaker 8: But don't hold me exactly to that timing. And if
45:29
Speaker 8: we decide to make changes in the balance sheet, It'll
45:33
Speaker 8: be after a serious consideration of their proposals and their recommendations.
45:38
Speaker 8: I think it is unlikely to have any material effect
45:41
Speaker 8: on this policy conjuncture, but it's a question we should
45:44
Speaker 8: get to the bottom to, and I look forward to
45:46
Speaker 8: doing it with the help of the outside task force.
45:54
Speaker 12: Nick.
45:54
Speaker 10: Nick Temerosa, The Wall Street Journal. Chairman Warsh, I want
45:58
Speaker 10: to follow up on your answer to Claire's question. As
46:00
Speaker 10: the AI investment boom becomes more dependent on external financing,
46:06
Speaker 10: does that make aggregate demand more sensitive to interest rates
46:11
Speaker 10: than it was before? And related to that, when you
46:14
Speaker 10: removed a dose of accommodation last month, did you see
46:18
Speaker 10: about what you bargained for?
46:20
Speaker 8: So you gave me two questions, and neither of them
46:23
Speaker 8: had any sort of parliamentary out. So you're giving me
46:25
Speaker 8: the opportunity to choose which of those. So I'll answer
46:33
Speaker 8: your second question. When we removed a dose of accommodation,
46:38
Speaker 8: I don't know, six weeks ago, we don't have perfect
46:43
Speaker 8: foresight on what financial markets are going to do with it.
46:45
Speaker 8: But broadly, I would say the effects on financial markets,
46:50
Speaker 8: on financial market conditions, broadly were consistent with my expectations.
46:55
Speaker 3: Howard Schneider.
47:01
Speaker 1: Howard Schneider with Reuters.
47:02
Speaker 3: Thank you, Chairman. I'm going to take Nick's first question then.
47:05
Speaker 7: Okay.
47:05
Speaker 8: Give it to me again. I don't remember.
47:07
Speaker 7: No.
47:07
Speaker 3: It's about aggregate demand and the components of inflation. A
47:11
Speaker 3: lot of your colleagues have said they felt the investment
47:13
Speaker 3: boom in AI was now adding a strong demand component
47:17
Speaker 3: to inflation? And this was a handoff from the supply side,
47:21
Speaker 3: concerns that might be expected to fade over time. How
47:24
Speaker 3: much do you think demand is adding to inflation right now,
47:28
Speaker 3: and how sensitive will that be to Fed control?
47:31
Speaker 9: CHAIR POWELL.
47:32
Speaker 8: Good, good, good, good, good pickup of that, good team effort.
47:38
Speaker 8: So I'd say this. The only things we really know
47:42
Speaker 8: in economics and supply and demand cross. Our measures of
47:46
Speaker 8: the size and the shape of the aggregate demand curve
47:50
Speaker 8: is imperfect. Broadly, what I heard in the room the
47:53
Speaker 8: last couple of days is consistent with my own views,
47:56
Speaker 8: which is the economy is strong. I didn't try to
47:59
Speaker 8: sugarcoat that in the first part of my statement. The
48:02
Speaker 8: economy has been marked up for the first three quarters.
48:05
Speaker 8: The economy is pointing in the right direction. Is the
48:08
Speaker 8: economy running too hot? Is the economy running too strong?
48:14
Speaker 8: That isn't the judgment of most of my colleagues. Part
48:18
Speaker 8: of it is we never know what potential growth really is, Howard.
48:22
Speaker 8: My judgment is we have seen an improvement in productivity.
48:27
Speaker 8: We can't measure it precisely. I think most of that
48:31
Speaker 8: change in productivity precedes everything we're talking about superintelligence. But
48:37
Speaker 8: productivity has been moving higher in the economy, however imperfectly measured,
48:42
Speaker 8: I think for a couple of years. And so economic
48:45
Speaker 8: growth is higher, but that doesn't tell me that economic
48:48
Speaker 8: growth is somehow causing inflation and making our job harder.
48:53
Speaker 8: But we'll be continuing to look at those issues. The goal,
48:57
Speaker 8: in my view, and you've heard me say this before,
49:00
Speaker 8: isn't to throw sand in the gears of the economy
49:02
Speaker 8: and throw people out of work. I don't think we
49:04
Speaker 8: have to do that. The dominant means in which this
49:07
Speaker 8: policy is going to be put into practice is we
49:10
Speaker 8: are tightening financial conditions. They've tightened a bit since we
49:14
Speaker 8: met last time. That isn't something that we're uncomfortable with.
49:18
Speaker 8: That tells me that policy is working, and I think
49:21
Speaker 8: we can do that and make the economy more durable,
49:25
Speaker 8: have it last longer, and still achieve stable prices.
49:28
Speaker 4: Okay, we'll go to Victoria for the last question.
49:34
Speaker 19: Hi, Chair Warsh. Victoria Guido with Politico. I wanted to ask,
49:38
Speaker 19: next week is... a hearing at the White House on
49:41
Speaker 19: Lisa Cook's future and allegations that have been made against her.
49:45
Speaker 19: Are you personally or the Fed as an institution going
49:47
Speaker 19: to be involved at all in those proceedings?
49:50
Speaker 8: Not to my knowledge. Thank you. Thank you, guys.
50:10
Speaker 1: All right guys so as you saw right there a
50:18
Speaker 1: lot happening with where he was going and of course
50:21
Speaker 1: this leans into what we had been anticipating and that
50:24
Speaker 1: is a quarter point hike coming in december bitcoin kind
50:29
Speaker 1: of holding its own right now still around 81k We
50:33
Speaker 1: did have some poll results that came in on this
50:36
Speaker 1: AI bubble pop. This one surprised me a little bit.
50:39
Speaker 1: Right now, we had four options of when the AI
50:43
Speaker 1: bubble would pop. 2026, 17% said 2026. 2027 in Q1
50:44
Speaker 1: was holding at 30%. By 2028, 27%. And then never
50:46
Speaker 1: was 27%. So you have over 50%. They think it's
51:00
Speaker 1: going to be 2028 or beyond. So not necessarily an issue,
51:05
Speaker 1: but the AI trade will have a major factor into 2027.
51:10
Speaker 1: And the other thing that came out of this meeting
51:12
Speaker 1: was an adjusted schedule for the meetings themselves, what they're
51:16
Speaker 1: going to look like. A lot more strategy meetings. I
51:18
Speaker 1: expect a lot of drama from those. Another thing is
51:21
Speaker 1: the lockup of the commissioners gets released this week, which
51:25
Speaker 1: means that The likelihood is those commissioners are going to
51:28
Speaker 1: start talking about what December is going to look like.
51:31
Speaker 1: So we could get a better indicator, even though it's
51:34
Speaker 1: still a very high percentage of a quarter basis points.
51:37
Speaker 1: I think the biggest concern I have right now would be,
51:41
Speaker 1: and this may be good for crypto, is that if
51:43
Speaker 1: we do start to see an accelerated pressure on interest rates,
51:48
Speaker 1: that could push things a little bit differently into the markets.
51:52
Speaker 1: I think the markets would react differently in Q1. And
51:55
Speaker 1: all of this is really hinging on a couple of
51:58
Speaker 1: key events. One, of course, is Anthropic. If Anthropic rolls
52:03
Speaker 1: out and we start to see a major pull or
52:05
Speaker 1: a black hole, much like we saw with SpaceX originally,
52:10
Speaker 1: that could cause some pressure, I think, in the markets
52:13
Speaker 1: in general. And it may ask the question for a
52:17
Speaker 1: lot of traders that are new to the AI trade,
52:21
Speaker 1: is it over? So that is going to be something
52:24
Speaker 1: that will be coming up very shortly. So with Anthropic
52:26
Speaker 1: going public. And I think the point behind this is
52:30
Speaker 1: how these chairs start to look at really this new
52:35
Speaker 1: administration going forward. Because the next time we have an
52:37
Speaker 1: FOMC meeting, we will have essentially either a new administration
52:42
Speaker 1: in the Senate and the House, or we will have
52:45
Speaker 1: a split administration most likely in the Senate and the House.
52:50
Speaker 1: which changes the dynamic, I think, politically for both what's
52:54
Speaker 1: happening at the Fed level, but more importantly, what could
52:57
Speaker 1: be happening from investors. So as you guys know, we
53:01
Speaker 1: do these live streams. We're going to try to get
53:02
Speaker 1: more to you. I hear your comments when you ask
53:05
Speaker 1: for that. We'll try to get more to you. Ask
53:08
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53:11
Speaker 1: do that because it will give you notifications when we
53:14
Speaker 1: do produce a live stream for you. So We will
53:17
Speaker 1: see you later this week. There's going to be some
53:19
Speaker 1: more big news dropping, I anticipate. If you like this video,
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