sonali: welcome to bloomberg markets. i'm sonali basak. traders are waiting for remarks from jerome powell. he is set to begin and a few minutes and we will bring you the comments live when they begin. the s&p 500's near session highs. it is past 5220 up about .3%. the nasdaq 100 up on the day about .4%. new york route at the highest levels since october last year up about .7% holding above the

$85 level and the u.s. dollar index taking a breather for a minute in conjunction with yields. we will look at that ahead of powell. the two-year year -- yield flat on the day about 469. we head for 73 earlier this morning. tremendous volatility. in one week 15 basis point move from peak to trough. more of the bond selloff further down the iteration card with a two basis point move nearly three basis point at the 30 year and a 10 year at 437 other day about two basis points higher. earlier today raphael bostic reiterated expectation for just one rate cut this year. look how dramatically the market has changed since january. when the expectation was more than six cuts. now it is moved to less than three. sitting on a coin toss for summer rate cuts in and of itself. the market is diverging from the

feds dot plot on how many we make it. as we await chair powell today that t. rowe price cio says the biggest risk for the fed is cutting interest rates too soon. >> putting for an economic perspective does not make sense right now. go back to what chair powell said early on. he was a student of the 70's. the mistake then was cut into early. if you map the cpi to the beginning of this cycle versus the last it follows a similar curve. if they cut now they are in danger of making the same mistakes. sonali: now we will bring in a roundtable. bloomberg's in the koran, nationwide -- enda curran, kathy bostjancic and omar aguilar. enda, expectations for what the

fed chair might say today? enda: the key question is will we get a new message? he has made clear they aren't in a rush to cut interest rates yet. they have to be more confident on inflation. he cited a strong jobs market giving him space to hold off. today it will be critical to see if you will say something new on inflation. will he give any thought to payroll due friday or any not to what they are doing on the balance use? will it be a repeat of its recent message or will he give markets something new? sonali: think about the market and all the things they are already chewing on, the threat every inflation, are you looking for the fed chair to say something different? omar: i will be surprised if the fed changes anything at least today. they have been very clear and disciplined about being

data-dependent. they have always tried to look at the gap between what the market says and expectations in the market and their dot plot. they have been academic about following the dot plot. in this case for the last six months it has been more the market getting closer to the fed as opposed to the fed going to the market. sonali: when you think about those week how you parse the data flying across the tape, particularly ending the week with another critical jobs report? kathy: going back to comments from chairman powell, while we have gotten a lot of data, i do not think we have anything that really moves the dial in terms of his message to the market. the big news is i think that the ism index on monday is moving into positive or above 50 in expansionary territory. payrolls will be very important friday. the labor market has been underpinning the consumer.

the consumer has been carrying the entire economy. domestic activity comes down to the consumer and consumer services. how payrolls play out that wages will be really critical here. sonali: as we have this influx of federal reserve speak across many different platforms, many presidents speaking today alone paired with data we are getting, is there any disconnect? enda: as kathy just said i think it is all about jobs at inflation. we will get jobs friday. another strong read, plus 200,000 jobs expected to be created. a lot of economists are saying that is given -- giving the fed room to hold off rate cuts until they are comfortable about inflation, but as soon as the job market starts to turn, you might see rate cut debates turn as well. a lot of focus on jobs growth this weekend other numbers fairly robust, consumer spending up like kathy said.

all eyes are on how jobs go this weekend that will feed into inflation one month after. sonali: think about how much rate cuts for expectations have changed over a couple months. do you think the bite of higher interest rates could take a further bite out of this economy that has been running quite hard? enda: we have expected that for quite some time already. the u.s. economy and u.s. consumer have already completely surprised most of us at least for the last year. i think the expectation changes have dramatically moved from six at the beginning of this year to three not too long ago to less than three now. as people have started to understand sticky inflation is something people continue to find. i would say that part of the inflation picture is critical. goods inflation is right where the fed wanted.

it has gone down at the pace the fed wanted to see. it is servers inflation that has not gone the way they have. i think that is related to what was discussed earlier. the labor market being very strong. the consumer continues spending. that has driven stickiness in inflation that the fed continues to struggle with and it will be critical to see how the labor market moves. in general think about how consumption continues to evolve. sonali: double down on the idea of service inflation. adm data this morning showed wages increasing. at what point do you worry about re-acceleration of inflation, particularly also that commodities are facing a grind higher? kathy: watching inflation data and wage data very closely and dissecting it, it is not our expectation that we get reacceleration. more concerning is this goods

deflation stalls and we don't get continued downward movement in core services. the services side has been the sticky part. we need to see that move measurably for further goods deflationary pressures. sonali: omar, the bond selloffs are pretty violent at some point looking at economic data flowing through with how much the market whipsaw's here. how do you think of fixed income as a play in an era where we don't necessarily go when interest rates go meaningfully lower? omar: there is great opportunity now for investors to rethink and reposition their fixed income strategies. we have not seen as many opportunities in fixed income the last 15 years. this continues to be the case based on what you described.

what is interesting so far this week is we see a little repetition of what we saw throughout 2023. that is, we saw an increase in bond yield inflation that basically ended up having an impact in the equity market. for the longest of the first quarter we saw volatility a little tame. the 10 year yield was hovering around four. it was not until we saw concern about potential pick up in the ism data earlier this week and other indications which suggested the fed would take longer that we saw that spike in yields on the 10 year. it will be something like that. but we work with our clients to say we know the destination. we know what the fed will do. it will just be a matter of time. we stay disciplined with the process on the portfolios. >> kathy -- sonali: kathy, this summer you have rate cuts at a coin toss looking at fed futures.

do you think more in the market or economy starts to face more pressure given the weight of higher interest rates? kathy: great question. i think that is key -- that is the case. even though many homeowners are not affected by higher mortgage rates, they are rate locked into 3% or lower, and maybe corporations have termed out there that, there is still marginal borrowing going on and variable rates there and higher for longer means a larger pitch on activities. it could be we are just seeing a slower impact of monetary policy and it is a bit delayed. but it is still potent. i don't think you can say that is not the case. sonali: there is also a question about how much the lack affect -- lagged effect will" -- impact markets. how will it affect the equity

and fixed income markets? omar: like you said these effects on the economy have a lag effect and markets try to extrapolate to look through what might happen on the other side. in the markets we talk about rolling recessions in 2022 and 2023. we seem to be in a rolling recovery section on the economy and market. we saw leadership on the equity side going from technology to a change in leadership force that first quarter of this year. that is great. we saw breadth of the equity market performance first quarter to be bigger than what we saw in 2023, not just the top seven or top four, but more expansionary, looking more like early recovery. when you see those pieces, yes, we expect more volatility in the next few months as economic data starts to settle in and investors start to think about what might happen with fed reaction functions.

overall, we are seeing cyclical leadership play a bigger role in equity markets and the same with quality and fixed income. sonali: we have to leave it there. we are getting headlines from jay powell. fed chair powell is speaking at stanford university. chair powell: over the last few years inflation came down significantly but is still running above the fomc to percent goal. in february headline inflation was 2.5%. over the past 12 months based on pce index and one year ago it was 5.2%. for inflation excluding food and energy components stood at 2.8% in february. one year ago it was 4.8%. this is very welcome progress. the job of sustainably restoring 2% inflation is not yet done. tight monetary policy continues to weigh on demand my particularly in interest sensitive spending categories.

nonetheless, growth and economic employment activity was strong in 2023 as real gdp expanded by more than 3% and 3 million jobs were created even as inflation fell substantially. this combination of outcomes reflects significant improvements in supply that offset, to some extent effects on demand of tighter financial conditions. healing of global supply chains help address pent-up demand for goods, particularly, in sectors that had faced considerable shortages like auto. labor supply increased significantly thanks to rising participation among 25-54-year-old workers in their prime working years as well as a strong pace of immigration. recent readings on both job gains and inflation have come in higher than expected. the economy added an average of 265,000 jobs per month and it is three years through february, a faster pace than we have seen

since last june. the higher inflation data over january and february were above low readings in the second half of last year. these recent data do not, however, materially change the overall picture that continues to be solid growth, the labor market moving down towards the 2% on a sometimes bumpy path. labor market rebalancing is evident in many parts of the data including quits, job openings, surveys of employers and workers, and the continue archewell decline -- the continued graduate applied and wage growth. with inflation it is too seem to say of recent readings represent more than about. we don't expect it will be appropriate to lower the policy rate until we have greater confidence inflation is moving sustainably down towards 2%. given the strength of the economy and progress on inflation so far we have time to let the incoming data guide

decisions on policy. young filled our policy rate at its current level since last july. as shown in the individual projections the fomc released two years -- two weeks ago my colleagues and i believe the policy rate is at its peak for this tightening cycle if the economy evolves broadly as we expect most fomc participants see it as likely to be appropriate to begin lowering the policy rate at some point this year. this outlook is still quite uncertain. we face risk on both sides. reducing rates too soon or too much could result in a reversal of progress we have seen on inflation and ultimately require even tighter policy to get inflation back into percent. easing policy too late or too little could unduly weaken economic activity and employment. as progress on inflation continues and labor market tightness eases the risks continue to move into better balance. as conditions evolve, monetary

policy is well-positioned to confront either of the risks. we are making decisions meeting by meeting and will do everything we can to achieve maximum employment and price stability goals. this brings me to my second topic. the fed has been assigned it goals for monetary policy, maximum employment and stable prices. our success on delivering on these matters a great deal to all americans. to the -- to support our pursuit of these goals congress granted the fed substantial independence in our conduct of monetary policy. fed policy makers serve long terms that aren't secret knives with election cycles. our decisions aren't subject to reversal by other parts of the government other than through legislation. this independence both enables and requires us to make our policy decisions without consideration of short-term political matters. such independence for our federal agency is, and should become a rare. in the case of the fed

independence is essential to our ability to serve the public. the record shows independent central banks deliver better economic outcomes. we need to continually earn this grant of independence and do so by carrying out our work with technical competence and objectivity in a transparent, accountable manner and by sticking to our knitting. by technical competence i mean fed policymakers use the most up-to-date information and research to deepen our understanding of the ever evolving economy and reliably deliver on our assigned goals. we are supported by a highly capable staff and are drawn to insights and experiences of a wide array of business, economic, community, and labor leaders as well as others engaged in the economy and by objective i mean that our analysis is free from any personal or political bias in service to the public. we will not always get it right. nobody does. but, our decisions will always reflect our painstaking assessment of what is best for

our economy in the medium and longer-term and nothing else. transparency and accountability are fundamental for any government agency in a democracy and especially for one granted policy independence. the fed has a special obligation to explain ourselves clearly, do -- to describe what we are doing and why. we strive to improve this communication and the job is never complete. but we have come along way. before 1994 the fomc did not even announce monetary policy decisions. today we announce the decisions and explained the thinking behind them in our post meeting statements and press conference. we published detailed deliberations in a summary of each fomc participants. we publish a monetary policy report twice a year. the chair appears before congress to present the report and answer any and all questions on the minds of our oversight committee members. in 2020 we completed a year-long

public review of our monetary policy framework and late this year we will begin another review. my colleagues and i explain our views on the economic outlook and monetary policy in speeches like this one and in visits to communities around the country. as part of an extensive outreach where we seek input from individuals and groups throughout society. transparency is a transformative proactive commitment to the cup -- to the public. to maintain public trust we also need to avoid mission creep. our nation faces many challenges. some of which directly or indirectly involve the economy. fed policymakers are often pressed to take an issue -- a position on issues arguably relevant to the economy but not within our mandate, in particular, tax and spending policies, immigration policies, and trade policy. climate change is another current example. policies to address climate

change are the business of elected officials and agencies they have charged with this responsibility. the fed has received no such charge. we do, however have a narrow role that relates to our responsibilities as a bank supervisor. the public will expand to the institutions we regulate and supervise will understand and be able to manage the material risks they face is that, over time, are likely to include climate related financial risks. we will remain alert to the risk that we will need to expand that role over time but we don't need to beep climate policymakers. doing our job well requires we respect the limits of our mandate. i will stop there. i look forward to our discussion. thank you. [applause] >> thank you very much, chair

powell, for those remarks and taking time to be with us and talk to us today. there is a lot of stuff going on in the world today. we have a lot of stuff to talk about. i will get right into it. before i also want to thank you, the audience, for sending questions over. i have tried to organize a conversation around two themes. one is the macro economy. then, you have been chair through a very tumultuous time over the last five years and i want to talk about the leadership challenges around that. let me dive into it and pick up talking about something you mentioned, inflation. two years ago we have at inflation readings close to 7%. we came down to 3% last friday. the pce inflation index, something the fed often speaks about came in at 2.8%. we have had a conversation about

this. so many factors have been in play in the economy over the last few years. can you spend time talking to us about what you think are the key factors that have brought inflation down over the last two years? chair powell: sure. i will start with where we think inflation came from. what is actually different this time? it is that this inflation was not strictly a question of demand overheating and the fed coming in to suppress demand, the more typical pattern on the back of a shock such as the oil price shock, that kind of thing. this episode actually also involved, as everyone will recall, the collapse of the supply in a lot of ways. supply chains stopped working. there was a sordid -- a shortage of critical things like semiconductor so you could not make cars. some of us might not have realized how many semiconductors go into a car. there was a major labor force shock.

we lost several million people from the labor market. it was a very severe labor shortage. it was a supply-side issue as well as overheated demand from the closing and reopening of the economy at a time when rates were low and fiscal policy was very supportive of demand. we had both those things. therefore, if those were the causes, we needed to see both the unwinding of pandemic related distortions pursued -- to supply and demand in the economy and the effects of tight monetary policy. today we think we are seeing as inflation has come down sharply over the past year those two factors working together. they do work together. we think tight monetary policy weighing on demand gives the supply-side a better chance to recover. 2023 was a year of significant supply-side recovery and expansion. >> what are the factors you are watching over the next few years?

maybe the next year or two that might play out in the inflation picture? chair powell: i should also mention inflation expectations which in our framework and the thinking of most monetary economist people think having the public expect to return to 2% despite it moving up that that is a very important factor in bringing inflation back down. in a sense, if people believe that price centers and wage centers in the economy that inflation will be 2% that will actually happen. as we look ahead, though, one question is, how much more juice is there to come out of supply-side recovery? we got a large increase in population last year. that may have helped with inflation. it certainly helped with output. it the potential output. at the same time the economy is growing 3.1% last year or around that. we had inflation coming down sharply. there might be more supply-side gains to be had.

surveys of businesses still show difficulties in hiring people, difficulties in getting the inputs -- they need for businesses. there is some more benefit there. we think monetary policy is tight. it is weighing on interest sensitive spending in the economy. for example, durable goods, surveys of consumers, it is a tough time to buy durable goods because rates are high. you see the labor market rebalancing. look at demand in the labor market as well as supply and you can see demand reflected in lower job openings, a very small increase in unemployment and wage is moving back down towards more sustainable levels. we think the two forces i mentioned is what we will be looking for. we will be looking at incoming data on inflation as those affected the outlook. the same thing about the labor market. what is happening is the labor market is continuing its progress. it has made substantial progress

to get back to a sustainable level of wage growth and balance between supply and demand. >> can i dig into the inflation expectations point? you mentioned an analogy that people drew a couple years ago. to the high inflation episode of the 70's where we had a high inflation period that ended up shifting expectations and through the wage price mechanism ended up leading to sustained high inflation. in the current situation, i guess, i have two questions. how concerned are you about maybe inflation getting stuck in the upper twos around 3%? with the last mile be hard because of expectations getting stuck? then, are there things you are looking at to signal to you this is or is not an issue? chair powell: as i mentioned inflation expectations we think

are an important part of driving actual inflation and we want them to be at levels consistent with 2% inflation over time. not 3%. 2%. not 2.5%. the good news is that is where they are now and 40 much have been for some time. we look at surveys of businesses, households, forecasters. we look at other measures of inflation expectations, model-based, things like that. we also look at the market. the market is always buying and selling inflation protection. from that you can get an expectation or assessment of what markets expect. those are pretty consistently saying the public does believe -- and it is good, because it is true -- that inflation will go back down to 2%. that is very assuring. it is partly because of the very strong action we took and also because of our ongoing commitment to actually return inflation to 2% over time.

that's our commitment. over time, we are, you know -- i would say it would be a concern if inflation expectations were not to be consistent with the outcome we seek. the good news is they are not. i think our commitment is understood and respected and believed by the public and that is as it should be. >> let me flip to the other side of the equation. we have had employment, economic activity remaining quite strong. the employment -- an implement rate has remained below 4% the last two years. this is during a time where you have took the funds rate from 0% to 5.3% in about as fast of a rate hike cycle as we have seen in history. one year ago many people were talking about the possibility of recession. that has not happened. you have made remarks about this. can you gorman -- can you go more into why this has not happened?

why have we achieved for looks like a soft landing, inflation coming down and unemployment remaining low? what are the factors that have played out? the related question. do we think this will continue over the next year or two? chair powell: i have always had the view went always said that because of the unusual origins of this inflation and its differences from other prior episodes, there was a path to getting inflation back down and restoring price stability sustainably to 2% without the large job losses and increases in unemployment which have been typical of prior tightening cycles. the reason was some part of this was independent of demand. if you have to get all the inflation reduction gains from suppressing demand, chances are, that will involve a weight on employment and economic activity significant leak. here we had the situation for,

again, semiconductors. you cannot buy a car at the time when people wanted cars because there were moving to the suburbs because they did not want to write on public transportation because of covid. supply of cars went down dramatically because of the shortage. prices went way up. that is how the marketeers in our economy. -- market clears in our economy. once the semiconductor supply comes back you should come right back down the curve. you can, in principle, get inflation down significantly just ignoring demand for a second. i always thought that was possible. something like that appears to be happening. then, your question is, how did that happen? more recently, 2000, we expect that to happen at the very beginning and that is what we thought inflation was transitory meaning of what goal way -- go

away quickly without much effort from us. that turned out to not be the case. that was in 2021. in 20 2010 we saw the supply side would recover more. it really didn't. we started to wonder whether that would happen. it really happened in 2023 right about the time we were ready to give up on supply-side recovery, had a significant increase in labor force participation accompanied by a significant move up in immigration. you also got the unwinding of the supply-side problem. when that happens potential output is going up significantly. you have to make productive capacity. you have a situation where productive capacity is going up even more than actual output. the economy is not becoming tighter, which ordinarily would, but coming a little looser and you see inflation come down. it's a very unusual situation. the pandemic has been a textbook

of unusual, unexpected developments and situations, but that is really the story. then the question is how much more we will get out of the supply-side recovery and how much we will fall demand. we don't know the answer. we won't prematurely assume on the supply-side. >> immigration. over the next year or two? chair powell don't comment on those that do have that assignment or the policies they make. we are calling balls and strikes on the economy as we see them. from that standpoint, we have been -- our economy has been short labor. probably still is.

if you come and we do, talk to a lot of business people, -- if you, and and we do, talk to a lf business people it is difficult to hire for many companies. if need more people. what happened last year was to a greater extent than had been thought immigration moved up quite a lot over the last two years. typically the censusthought immp quite a lot over the last two years. typically the census bureau does all of this estimating. the congressional budget office went and took a different path and talk to border -- talked to the border and that kind of thing getting a higher estimate. now it is higher. it explains what we have been asking ourselves. how did the economy grow over 3% in year were almost every outside economist forecasted recession? an overwhelming majority forecasted recession for 2023. not only did that not happen we

had better than 3% growth. it's a remarkable performance. some part of that is there are significant and more people working in the country. how does inflation come down? because, the potential capacity of the economy perhaps moved up more than output. it is a bigger economy, but not tighter. that is an unexpected, unusual thing. we don't make judgment calls, but that is what we are seeing. >> it is interesting in the discussion we have had about inflation and unemployment, we have talked about real factors. immigration, supply-chain healing that seems to have played out. we have not talked about interest rates per se, the primary tool of the federal reserve. it looks, from the outside, like the interest rate sensitivity of the economy in the cycle has been very muted and it different than in the past.

also it looks like there is differential impact across different parts of the economy, the housing market. people have long-term fixed-rate mortgages and interest rates through there is low. here in silicon valley we have early-stage growth businesses where the cost of capital is affected by higher rates. it looks like we have a bigger impact. i wonder if you can speak about the interest rate sensitivity of the cycle. a related question. differential impact across the economy. how do you think about balancing the impact of interest rate hikes on different sectors? asked -- chair powell: i do think monetary policy is working and working broadly as expected. you can point to sectors in the economy and you mentioned a couple. if you are a household with a low interest mortgage, you aren't feeling the effect of higher mortgage rates. many companies as well took the opportunity to term out there

debt before rates went up. you have a lot of companies with longer-term fixed-rate debt at low rates and aren't as affected by it. that's true. at the same time looking at interest sensitive spending either in housing or durable goods you are seeing significant effects. you see the economy rebalancing. i think it's not right, may be too soon to conclude there is a significant disconnect there in terms of monetary policy transmission. that leaves the question of how the economy could have grown over 3% during a year in which the federal funds rate is at a quarter-century high. why wouldn't grose have been lower? to me, the answer is supply-side recovery. people need to understand you have this force from outside. it is not just interest rates and demand. you have supply-side recovery creating new demand. and new supply.

that is why you get a number like 3.1% at the same time inflation is coming down. one of the reasons why. that is the story. it is not that the policy is not restrictive. it is not that the economy is not responsive to rates. it is that we have had an outside force temporarily affecting that. >> [speaking foreign language] --arvind: if i benchmark fed policy now we have rates at 5.3% with the fed under three the real cost of borrowing. compare this to pre-pandemic. we had real rates close to zero. maybe .5%. sometimes, negative. we have gone from a low rate environment to a high rate environment. policy looks tight now. another benchmark. i do not know if my colleague john taylor easier but the taylor rule is a typical

benchmark we use for, i think, thinking about central bank policy. by the taylor rule, policy rates now should be around four. policy does look now. risks are balanced. why continue to have tech policy in an environment -- tight policy in environment in which risks are balanced? chair powell: we think policy is restrictive and we think it is doing its job. i go back to what i set in my remarks to start. we think the risks are too cited -- two sided. there is a risk that if you cut too soon, the progress on inflation will stop. or, even reverse. we have seen that in some historical instances, particularly the 70's. we don't think that is happening here at all, but it is a risk we have to manage. the other risk is -- is if we

wait too long or move too slowly once you do move you have weakening in the labor market and economic outputs. so, we are trying to steer between those two risks. we are trying to be in the middle and get the timing right. it is very challenging. there is no risk-free path. i think we are in a position to address the economy moving in either of those directions. the risk of moving too soon is really that the economy does -- deflation does move up and that would be quite disruptive if we had to come back and we will do what we have to do to get inflation to 2%, but it is about balancing risk. it is never the case you can confidently look at the baseline and say it is what we will do. it's always about having a baseline understanding, then, knowing the risks and having the committee be in a position to address those should they materialize. i think we are very much in that position now.

arvind: i will ask a question. is there a single data point you are paying particular attention to over the next year? if you had a crystal ball that you knew could perfectly answer one question about the next 12 months, what question would you ask? what do you really want to know? chair powell: there is no one thing. you are asking me to be single-minded about her dual mandate. arvind: just a data point you think will guide you? chair powell: can't do that. i would say this. in our framework, the two goals, price stability and maximum implement are equal under the law. our framework says if you are very far from achieving one of the goals and the other is pretty much at goal or better than, focus on the one that is far from goal. that's obvious and that is what we did.

after inflation came up in march of 21. we had a tight focus. you heard us talking about that. getting inflation under control. as inflation has come down, two things are moving back into balance. we aren't a single mandate bank. the key thing i will end with is price stability is something that gives us the ability to achieve both goals. if we do not have price stability, we won't have long periods of tight labor markets that benefit anyone. for the last two or three years, people at the lower end of the income set spectrum -- spectrum were not getting to largest wage increases and use all caps between black and white unemployment go to historic lows. a tight labor market over a long time does enormously show so

good. and for that you need price stability. so the two are quite complementary. arvind: i will shift from near-term to long-term for the u.s. economy. we had a pretty big shift in growth expectations are longer and growth coming out from fed projections and economic forecaster projections. 15 years ago long-term growth forecast was 2.8%, 3%. pre-pandemic they have been below two. that is where your own forecasts have been. how and why do you think that is? why long-term growth at 2%? we are sitting in silicon valley. ai is all the buzz. we had high growth over the last few years. is to present a reasonable number? could we go back to 2.83% we had in the early 2000? chair powell: every bit of the

economy is difficult to forecast. there is not one more difficult to forecast and productivity, for example, one of the key elements of longer-term growth. that's very uncertain. basically, longer-term growth is a function of growth in hours worked and of output per hour. hours worked is a function of demographics. more than anything else. productivity output hour per hour is highly unpredictable. i think people lower their longer run growth expectations were around 1.8% as the median, something below 2% event what had been very low population growth and expectations that productivity might be 1.5% productivity growth in output per hour. that's pretty good place to be. we have had higher productivity than that recently. the question is, will it be sustained? will we enter into a new time of

higher productivity? that would be great. productivity growth lifts all boats generation upon generation. some people argue ai can have that effect. some people argue there were a lot of business starts at the beginning of the pandemic and during the pandemic as americans went out and started businesses at that time and also that you have seen a lot of change in the labor force, people moving, quitting, going to jobs better suited to their skills. all of those things could become a longer run productivity increase or not. those might just be the things we need to get 1.5% productivity. it's unknowable. particularly with ai the range of potential outcomes should increase productivity. everybody seems that, but it is not what we are seeing in the numbers now. it is too soon i think for ai to affect productivity numbers.

the logic is, it could increase productivity. then the question will be, what does it do to labor? will it replace labor or augment labor or both and if so in what proportions? it is hard to say about longer run growth. of course, it would be great if that were the case. arvind: do you feel like you need to take a stand on this in policymaking? chair powell: no. the things that are really important to the u.s. economy over time productivity, immigration, even trade policy, industrial, industrial policy is now a saint. those are important to longer run growth and economic well-being for americans. we try to move the economy towards stable prices and maximum employment and business cycle with monetary policy. we are also a crisis responder.

we are a very important crisis responder. we can get there quickly. we have great tools for that. that is key. we regulate and supervise banks. we look after financial stability. those are all important things, but not things that affect the long run potential output of the u.s.. honestly, the question of, what will be that you can librium interest rate, the neutral interest rate going forward it not really matter for policy today. once the pandemic is well and truly behind us and we are well into the ai investment boom and the effects of ar, what will that look like? it does not really matter that much for getting inflation down to 2% while keeping the economy growing on the labor market strong. arvind: can we talk about the challenges of leading the fed for the past five years? in our discussion and from looking at the world it is clear you have had many shocks.

the economy has behaved in many unusual ways over the last few years. we were appointed fed chair in 2018. pre-pandemic the dominant concern of the fed was low inflation, having inflation below the 2% target. covid happened and we are in a completely different direction. can you speak about the challenges of taking an organization that was focused on one thing to focusing on something completely different. chair powell: it has certainly been a turbulent time. there were a lot of things that were not expected. for 20 plus years around the world the economies suffered from lower interest rates, lower inflation, slow growth, low productivity, bad demographic. a lot of monetary economists were working on, how do you make your tools work at a time where

you will be bounded by zero and you won't be able to cut and support the economy? that was a big thing. then, the inflation came and arrived first quarter of 2021, a surprise to most people. again, the macroeconomists generally thought it would go away over time. not everyone. there were concerns expressed. ultimately it's coming down significant leap. we had to pivot -- significantly. we had to pivot on that and we did. in fall of 2021 it became clear through the labor market data, inflation data, and growth data, that economy -- the economy was not moving back towards price stability and we pivoted. when we pivoted, we really moved because it was the right thing to do. the good thing about monetary policy is it can move quickly.

the emergency tools we have our agile compared to other government policies and have a significant effect on the economy. so i think we have gotten to what is a pretty good place using our tools now to bring inflation down the rest of the way to 2% while keeping the economy strong and the labor market strong as well. arvind: the other side of this tumultuous time we have been through is external pressure from the fed, from outside, over, where to set interest rates. you have faced the pressure over the last six years concluding from the former president. how do you navigate the decision-making of the fed in the larger scheme of pressures coming in from the outside. chair powell: internally we have peace of mind on this. everybody that works at the fed knows we will do what we do for economic reasons and that is it. as i mentioned in my remarks. anybody can go back and read

there were verbatim transcripts of -- read the verbatim transcripts of what we discussed. we make decisions based on the analysis i described in my remarks. it is a communication issue. people need to understand that is what we do and it's always what we do. look at the modern historical record and you will see the fed has been prepared to move or not move and it do what it thinks is the right thing for the economy in the medium and longer-term without regard to outside considerations. it is important that people know that. that's why i brought it up. i don't have concerns that it will be a problem for us. because, we will do the right thing for the economy over time. my colleagues and i are tightly focused on that. arvind: can you say a little more about that? you are praised by many people

in your ability to build consensus. you have served in different white house administrations with different political ideologies. how do you do that in practice? you have any advice for all of us on that? chair powell: it boils down to two things. one, we have a specific mandate. we stick to that mandate and focus on the mandate. don't be dragged into partisan political fights. when i testify, people are always trying to get me and my colleagues to support their perspective on fiscal issues or immigration issues. they think of an economic hook. we don't do that. that's part of it. the other part of it is, i have spent a lot of time -- in our system of government, oversight comes through congress. in a parliamentary system it is through the elected government.

that is the same people in the parliament. for us, it's not the administration that has legal oversight responsibility. it is congress, the house and senate particularly, the two oversight committees, 100,001 in the senate. my colleagues and i spent a lot of time. we don't go up there to blast talking points at people. we want to hear what they are thinking. we want to listen carefully and respectfully and tell them what we are thinking. i think people appreciate that. that is the same internally. when you listen respectfully and understand what people are saying and or try to think of how to incorporate the sinking into what you are doing, for most people most of the time that will be enough. they can go along with things that they don't 100% support because they feel like they were heard, or, they won't, you know, maybe criticize quite as harshly as they waited because they realize you are doing this in good faith to the absolute best

of your ability based on the actual facts and what we know about the ever evolving economy. arvind: you are a person who has shifted between the public and private sector over the course of your career. you are a lawyer by training. you don't have a phd and you are running an organization with many phd economists. can you speak about how your ground has helped you navigate? chair powell: when i graduated from college i had no plan other the idea that i liked what i saw in the careers of people like george schultz or cyrus vance. the idea was, these are people with a mainly private sector or career that served in the government at intervals and were able to do public service. i grew up in washington dc and all my family was not involved

in any of this really this is what i observed and i thought i would like to do that. by some miracle that happened. it was not careful planning. i always wanted to do public service and i wound up doing that. i served as an aide on the hill. all these different things i have done. it is how that happened. arvind: one last question. do you have advice for the students in the room whose interests are to move between the public and private sector? chair powell: that's a great plan for people. people have different tolerance levels for volatility. i quit the and went to investment banking and quit investment banking and winter private equity and quit private equity and went into public service. if you are willing to tolerate volatility and steep learning curves if you are that person it is a great way to go. i found when i was a partner in a private equity firm i asked

that of the investment area, what you look for? it is about picking good ceos and good business models. the answer was, there is no one model. that's important. i have seen a very different people be successful in leadership roles, very different people. i don't know if it is in every person, but it is in a lot of people to find your one way to lead. you don't have to be one way or another. i can think of one person at the fed that had a way of being a very soft talker and by the end of the meeting everybody was leaving thinking how i do what she said? it's in everybody. you should have confidence. my experience when i first had to lead was a complete lack of self-confidence. oh my gosh, i'm not ready for this. that's common. i think people get more cogent

now. be confident in your own abilities to lead and take things along. take risks. if i could say something to my younger self i think that would be it. arvind: we are running out of time and there's lots more we could talk about. let me thank you on behalf of stanford for being here engaging us in the conversation. it has been very stimulating. i learned a lot and i hope we all did. thank you for your time. chair powell: thank you. matt: there you have it. live remarks and a candid conversation with jay powell, the fed chair making a bit of news with his prepared remarks on a q&a live on bloomberg radio and tv still with his eye on a 2% inflation target. he doesn't think inflation is reversing higher but also does not expect interest-rate cuts until there is more confidence

on inflation suggesting the fed has more time before it needs to make decisions on cuts. i'm joe mathieu in washington alongside kailey leinz. the wednesday edition of balance. interesting after fed speak the past couple days to hear the fed chair stretch out for the better part of an hour into this. >> some of what we heard today was reminiscent of what we heard from him friday that the fed is a study of fed history. decades ago when they were trying to fight inflation and decided to ease back on tighter policy too early it had ramifications. he warned about that again in these remarks. he said reversing rates too soon could risk reversal in progress loosening rob -- policy too late or too little could impact economic activity or employment. he said in the q&a there is no risk-free path for him and his colleagues. joe: interesting to hear him speaking about the causes of inflation as well. you made note in the newsroom

about his repeated references to the supply side. there is still an ongoing argument in washington about whether joe biden really stoked inflation, and donald trump, for that matter, by overspending. kailey: you hear that a lot especially from conservative wings in washington that fiscal policy contributed to the inflation. trillions of dollars poured into the economy in the aftermath of the pandemic. today chairman powell said inflation was not about demand overheating. he said it was about the supply side. he said he thinks there could be more gains on the supply side. he talked about it in terms of the labor market the other part of the fed door mandate, talking about supply and demand and the balance we are seeing now. but really putting emphasis on supply and i thought that was interesting and perked up years in washington. joe: i suspect enda curran the bloomberg economics reporter was listening and is with us now. it's nice of you to stop typing

for a moment and let us pull you away. what got your attention in terms of newsmaking headlines today from jay powell? enda: he is saying we are not totally sold inflation is back where it should be. he did not hand they will cut rates anytime soon. as kaylee was saying, he made the point that when you look back now a lot of inflation was because there was such a shortage of everything. you could not get semiconductors or workers. he is making the point that that is being unwound now and helping things. there is a political debate. a lot of people say the current administration is spending too much money. joe: you are that every day. enda: those concerns might resurface overtime. there is nothing new from rates on a homeowners listing but more expensive thinking about a broader economy. kailey: on the supply side he

was questions about whether the fed's monetary policy tool of using interest rates to influence the economy was working to the same extent considering the growth we have seen. he brought that baptism five. he said -- rot that back to supply trade he said monetary policy is broadly working but noting the economy has proven so resilient even in the face of tighter economy. enda: he was at pains to say i am not here to talk about immigration policy. but he said the numbers speak for themselves. the workers that have arrived are one of the reasons why growth is stronger than expected and have offset inflation while protecting wages. i think his comments on immigration are interesting from the political aspect. joe: he does not always have an opportunity to speak to the other mandate outside of a news conference at a fed meeting or maybe an opportunity like this on a fed