have danielle dimartino booth and. jim bianco called no landing a while ago. wall street now is climbing on the bandwagon. the big question, could the rally have another decrease in rate cut expectations. remember we started at six or seven. we're down to three. could the fed hike rates, hike rates this year? market legend jim grant on his unpopular call that has been correct thus far. will momentum lead the way. mike kantrowitz will do a deep dive. one question, should women's work including in the cpi? tweet me @cvpayne. i love to hear from you. right now the to washington, d.c. >> reporter: the federal reserve holds rates where they are. this is the fifth pause in a row. it is a unanimous decision. the federal reserve is still forecasting three rate cuts in the dot plot.

one voting member moved rate up, they're one vote away from two cuts. three cuts this year. three cuts in five 2025 and three cuts in 2026. the fed says it is not appropriate to reduce the target range until they have greater confidence moving up to the 2% target. they moved up the gdp growth 2.1%, falling back to 2% for the next two years. the fed sees unemployment rate moving up to 4%. it is 3.7%. the unemployment rate goes to 4.1% next year. over all the cpe the fed's favorite measure, they see it holding 4% this year. moves up core inflation, core inflation this year to 2.6%. that is the harder inflation to get rid of. the fed sees all of that falling to 2.2% next year and reaching the 2% target by 2026 for inflation. the statement says the economic outlook is uncertain being at taken tiff to inflation risk. the fed says seeing job gains

expanding al a solid face, upgrading the job picture from the last statement. the fed is still rolling off its balance sheet at the predetermined rate. so that's still happening but the discussions as we know have started in this meeting according to the federal reserve chairman. again the fifth pause in a row, charles, throw it back to you. charles: good. 3.9%, right, the unemployment rate now. edward i will come back to you a little later in the show. folks, five pauses in a row. this is a pivotal moment. what i want to do first, let's go back. let's see how we got here. this is rare. we had amazing string of rate hikes, rather, last one 25 basis points last july, feels like forever. here's the thing, remember we had a big string, this is record breaking string. we had 75 basis points meeting after meeting, after meeting. there is a lot of rate hikes, no doubt about it. let's show where we are now. that took rates essentially at zero to 5.25, 5.50.

this is where we are right about now. the question, the goal, all this time was for the fed to equal inflation. but you know, here is an interesting thing, they haven't been necessarily able to do that. in fact now there is more anxiety. take a look at this. this is the latest survey from bank of america. these are the global financed managers. fund managers. higher inflation rocketed up. there is maybe more anxiety. maybe, maybe they can't tame inflation. meantime wall street already begun to sort of temper its rate cuts, right? remember, back in october, back in december, six, seven rate cuts. everyone was excited. we're talking about 170 basis points in cuts. now we're less than 100 basis points in cuts and listening to what ed just said maybe, just maybe that number comes even lower. let's bring in bianco research president jim bianco. jim, let's start with this. i know there are a couple things you want to hear in the presser is and how far away are the rate

cuts they're thinking of quantitative tightening. what do you think of a hearing what you just heard the fed will say about those? >> sounds like the fed is trying to be dovish and hawkish at the same time and i'd like to see some clarification of that. now what do i mean? if you look at their preliminary expectations, their dots, they said, there will be more inflation this year and next year. there will be higher growth this year and next year but they're still committed to three rate cuts. there is only six meetings left this year. so how do you keep upgrading your target on inflation, upgrading your target on growth and still keep holding to three rate cuts? i would like to hear him explain that because he said he needed greater confidence that inflation was moving to 2%. they just upped their forecast and said they will get more than that on quantitative tightening, that is going to be a big issue for them to deal with for the balance of the year. they didn't make any announcement on it today but they said they were going to start to talk about it today. so hopefully he will provide

some guidance what they're thinking about doing. wall street expects them to end quantitative tightening probably this summer. jackie: charles: here is the interesting thing, maybe they do these things on purpose, all the contradictions. that's why this q&a will be important. you were in the no landing camp. urn talking no landing a few months ago when it wasn't cool. all of sudden the know landing camp which was 7%, 19%, 23% of fund managers are where you are. i wouldn't be surprised if this number keeps going higher and higher and this plays a part in your notion maybe if the fed is going to cut they have to cut sooner rather than later? >> yeah, i've been in the no landing camp, using airplane metaphor. it is not a boeing airplane. no parts are falling off my no landing. the economy will stay at trend or a little stronger than trend. the argument was if the economy could stay at trend growth, what you expect it to grow or better

we can handle these interest rates. we don't need to cut-rates. that seems to be where the fed was going. that seems to be the problem. more and more people are coming to that camp. hopefully he will start squaring away that contradiction as we move forward. charles: part of this is hopeful thinking right? no one wants to see the fed hike rates anymore or even, when it was higher for longer last summer the market started to fall apart. another thing you talked about is yields. you said yields go to 5%, maybe 5.5%. for the most part it held in there. we're starting to swing higher again, and it is not inconceivable you could be right here as well? >> remember the interest rates 10-year peaked at 5% in october. if the fed doesn't cut-rates which i ultimately think they will wiped up doing, they will hold the funds rate at five 1/2. so the 10-year yield will start to merge with the five 1/2 funds rate and that is how i get rates coming up above 5% before the

end of the year. again it is all because the economy is doing well, inflation is a little bit sticky. i understand the fed's dots said they will cut three times and we'll have to see how they square that. they have to get going on this if they are starting to cutting and have to explain it. they have the election coming up too. they typically don't do anything around the election. the july, september meetings might be nothing. you're left with four meetings and three rate cuts. the market doesn't expect them to do any rate cuts. there is contradiction that jay powell will have to square away. charles: jim let me ask you something. i have 30 seconds but i want to squeeze it in. people are watching worried about their portfolios and the impact there, one thing you've been pointing out, this is gasoline, it has rocketed much, much higher right? the fed won't talk much about food. they won't talk much about energy but everyone else lives it. does this play some sort of a role in their decision making? >> yes. first of all it doesn't play a role, they can't control the price of gasoline. so they're kind of at the whims

of opec and demand but if gasoline goes up and brings inflation up the fed's political. they can't cut-rates if gasoline is driving inflation up full stop. they just can't do it. they risk their reputation. so it matters but they can't really do anything about it. they can only react to it. charles: you have to acknowledge it, i think you have to acknowledge it. main street gets really angry when they say except for good and energy. jim, thank you. food and gasoline, they are tough, we have to live with them. actually there are members of the fed will actually pay attention to this, maybe that's why we see that three rate cuts may be edging to two. bring in now with me qi research ceo, chief strategist, danielle dimartino booth. we have energy moving higher. it is almost 8%. you have food which is stubborn at 13%. there are members of the fed you think this is starting to sway them a little bit? >> it is starting to sway them

and they're definitely paying attention to it but by the same token they're seeing the lag effect work through the economy. whether jetblue announcing today it will reduce the number of flights. that is the third major airline we've heard from. we've seen occupancy in hotels decline for 11 straight weeks. it is pretty apparent the inflation that the fed does not have control of, that is the essential inflation, they cannot sway which way it pose one way or the other. to jim's point just now, that means families are having to devote and more and more to the esessions. they will have a lot less fun. every day this is angrier and angrier populace. charles: it is. let's talk about the real challenge for them. okay, they always talk ex-food and energy especially with the powell fed we talk about the supercore. i'm looking at the supercore which by the way it has been moving up. it has been trending higher the supercore. look at some of the components. this is motor vehicle insurance.

that is not going to go down. >> no, it will not go down anytime soon. these are expenses households cannot avoid. >> right, right. recreational services when we run out of money. people like, they like going to restaurants, whatever else is included. >> they do. charles: we have to break that. >> we're seeing those sales fall, charles, that's what i'm trying to say. disry spending is -- charles: is inflation start to influence people? listen i'm running out of extra cash i had. maybe i do es less. does demand have to go down before inflationary effects -- >> i think rate cuts will be forced. revisions to non-farm payrolls, a, and b what is happening in essentials inflation neither of these can be controlled by the fed. neither of them is improving either. this is putting the fed in a very hard place. charles, that will not stop the lag effect and tighten from what they have done moving its way into the economy.

you have 227,000 layoffs announced since. charles: water, sewage, trash collection, i don't see any of those things going lower. that seems to me to make powell's job harder. you've been talking about the jobs layoffs and talk about wages this is from your most recent report. this speaks for itself the directional changes. when does this influence fed decisioning making. >> wages influence fed decision making more than any or the form of inflation. this up here, this up here people making hourly wages were commanding whatever they wanted. charles: the great resignation. right. >> great resignation, but lowest pate workers were getting biggest wage gains. that slipped under. same with atlanta fed wage tracker. charles: these are forward looking. >> exactly. charles: real time when we saw last weeks. >> these are individuals losing their jobs. hey i worked for google.

i got nine months of severance, good for me. all the thousands of stores closing, 60 to 90 days of severance. not very much so the fed's going to feel their pain much more quickly. that is going to force this cut. charles: all right. a lot of stuff here. do me a favor. want you to stay, q&a, ask you a few questions. >> of course. charles: thank you so much, danielle. >> thank you, charles. charles: my next guest says there are existential questions for the federal reserve. management life global chief economist as well as strategist frances donald. frances, thank you for being here. let me first get your initial thought what is we heard so far. you have the statement, you got the dot plot. what are you thinking? >> they're really trying to to this line everything will be just fine. we can ease a little bit, we're going to stick the landing. unemployment will not rise even though we're one tick off their year-end forecast. this to me is reading super goldilocks. what worries me the risks to

their forecast which seem very balanced really towards the economy slowing much more, problematically inflation may be remaining a little bit stickier. you already shown some starts where the sticky inflation will come from. this is not goldilocks, the risk we go back into the scary word from the last few words, stagflation that sticks inside of me. charles: explain to the audience what it means. people have lived through it, it sounds frightening, what does it mean in real life. >> there are words for that, when we refer to stagflation, he lower growth, numbers uncomfortly low and numbers of inflation uncomfortably high. that is me what the it will look leak the six months. jobs don't deteriorate calmly and smoothly. it is in non-linear motion. charles: it is quiet, uncomfortable position to be in. you made a freight point.

last jobs report unemployment rate went from 3.7 to 3.9. now they're looking for four. >> by year-end. charles: rest of the year will be flat? feels like it is starting to take off. feels like that lag effect, whatever danielle was talking about, something is trigger aing big movement in the labor force, that seems unrealistic. >> i completely agree with danielle, the story is the lag. what i say to my team, remember the average time from the first rate hike to full impact on economy. you know what two years is? two years is today since the first rate hike. there is talk recession didn't happen. therefore it is not coming. no the window is just starting to open right now. we need to be cognizant of those risks there are things that is different. government spending has been huge. we have less people available to work. it doesn't negate truths about economy. when economy costs more you borrow less.

when you don't have a job you spend less. no matter how much people say this time is different i can't shake how those things are true. charles: some of the things you're talking about, how big easing cycle will be. is the fed afraid of the you'd recession. down sound with that statement. inflation metrics the fed will be watching. they have always say they're data depend ant. we're not sure always what the data is. before we move on, recent economic developments that have you concerned. retail sales are soft. cpi, ppi elevated jobless claims have been revised. everyone says one month isn't a trend. of course with the cpi, people were saying two month isn't a trend. when do we become certained about it. when does it go from a yellow flag to a red flag? >> we're doing our forecasts right now. two negative quarters of gdp that is technical recession. those numbers are flirting slightly above, slightly below. what we see pushing them back

below zero, with the retail sales. the job market is okay. we're seeing rehiring activity come down. danielle has great charts on some of the wage trackers coming down. leading indicators the balance of risks that the labor market softens more. put differently you don't have to agree there is incree men al increase notice unemployment rate we have to agree the labor market will not get better going forward. the balance of risks is weaker economy, slightly higher inflation than we're comfortable with. charles: frances, stick around. i have need your help on on q aa around this. >> sure. charles: market reaction thus far, you see pretty good. almost as soon as the statement came out the market started to move up. of course what is really leading the market on the scream, mtm. mow messenger tum. not that momentum is rocking, the secret sauce behind it what is fueling it.

let's bring in piper sandler chief investment strategist michael kantrowitz. it has been too long since i've seen you in the studio. your thoughts on market reaction? >> yields are coming down, stocks go up. anything bringing down interest rates will be viewed for equities in the near term. charles: we both know there is a day the fed comes out with all of this stuff. the reaction feels like almost every time the exact opposite reaction. the knee-jerk reaction, i can't pinpoint. maybe it is goldilocks, 4% unemployment from now to the rest of the year? it feels maybe it is unrealistic. but to your point so far the market likes it. >> their forecast is immaculate soft landing as we ever seen in their for cast. charles: let's talk about the stocks that have been rocking and rolling. i read some of your work. momentum is everything. you talked about the free cash flow yield. talk about that a little bit, why that is the secret sauce? >> momentum has become a hot button issue because there has

been a subset of stocks performed pretty consistently and strongly the last 12 months. high momentum, people referring to that wasket of stocks, three months ago, high profitability and high quality stocks. momentum isn't really a thing. it is chasing stocks that worked for some other reason. we dissection what's in these baskets. >> the common denominator? >> companies with free cash flow yield, earnings growth, all forms of quality that we've been pushing for -- >> always talked about that. you were in meta when everyone gave up on it. it scored big, some of these other names as you were worried about the overall market. what i also like in your report worth sharing with the audience it is not just a handful of technology names. it is not just a.i. consumer services, discretionary staples, financials, industrials, utilities there is opportunities there? >> what is the common

denominator is generally companies with good fundamentals, improving earnings momentum, free cash flow, people think about 2000 how high valuations are. that is not where the market is today. we had a momentum bubble back then led by companies with zero earnings, negative earnings which is not all the case today. much more founded in current fundamentals. >> you would be comfortable having exposure to all of these sectors right now? >> it is not the sectors, it is the stocks within the sector. ironically we always get asked what is your favorite sector. charles: i'm asking stocks that are in these. >> yeah. charles: i'm not a sector guy. believe me, almost every time i have the meeting get me people with stock ideas because sectors are too broad. you would have a stock in the consumer sector financial play, some positioning there. >> my companies free cash flow, high roe, high earnings revision momentum. charles: something worked with the consumer discretionary part.

last year all three growth sectors of the s&p 500 killed it, right? >> yeah. charles: so far communications services and tech this year. discretionary so so, because it is so skewed with amazon and tesla. >> yeah. charles: if you were to go in there, apparently the amazon would be the idea maybe if you're buying anything that hasn't moved, sort of stalled over tesla right now. >> these are our favorite four factors, our favorite attributes of stocks to own. companies with high profitability, earnings growth and strong revisions and those are cheap. amazon and tesla are expensive on free cash flow yield. the big difference amazon has strong earnings mow minute testimony. better realizedder growth the last couple years and cash flow profitability. this is not amazon and tesla. this is common theme across equity markets, small mid, its. charles: most part you say full steam ahead for the market in general for the most part? >> parts of the market. >> right. >> if we get lower yields that

will help to broaden out equities for now but without yields coming down in any material way it will continue to -- charles: we stay north of 4.2 range? >> that will not do a whole lot f we get to 4.2 that incrementally help the risk trade, small caps, regional banks but that's it. that was the catalyst from november and december that didn't continue into this year. charles: i guess the moral of the story continue to be very selective? >> focus on fundamentals not trying to time where bond yields are going to go. charles: great stuff, man. miss you. come in more often. we'll give you tea, whatever you want. folks our real economic condition remains, kind of reminds me rather a famous poem by dylan thomas. you may know this one, do not go gentle into that good night. old age should and rage at close of day. rage, rage against the dying of the light. the wise men at the end no dark is right, because their words

had no forked no lightning, they do not go gentle into that good night. i was reminded of that poem when i was reading jim grant's work [laughter]. my next guest who has been so amazing did. >> careful, careful. charles: jim, here is the thing that the line really made me think of this you said inflation is burning like an underground coal fire. it won't go gentle into that good night even though wall street keeps dismissing it and saying it's over. >> it might be over, right? this is a world of probabilities but it seems to me that the more likely case is that inflation is persistent. why? well, because we all seem to want it. we vote for it. wall street roots for it and the government perpetrates it. so we have an election year, intel gets eight 1/2 billion or so to build a chip plant. charles: right. >> deficits going to be six and 8% of gdp when unemployment is less than 4%.

charles: right. >> so seems to me that inflation is on the agenda. in the '70s, these are not the '70s, make no mistake inflation surged like that proverbial underground coal fire, three separate breakouts. will it be the same? nope. but are we quite, are we quite sure that it's ending? charles: right. >> i'm not at all sure it is ending or over. paul volcker himself was a little from mature declared almost as much in the year 1971 when he was with the treasury department. charles: but it is an essential question. >> yes. charles: you make a great point. listen, we love inflation when the value of our homes inflate, when our paychecks inflate. we don't like it when milk inflates. we don't like it when gasoline inflates. hard to have one without the other when the government is the one cranking out the money whether the federal reserve or fiscal policy. >> correct. inflation is kind of ubiquitous.

we have it on wall street. that's the pleasant kind. charles: right. >>ed get apparently if i read the tea leaves, the fed is projecting three rate cuts. new tight spreads to junk bonds treasurys. meaning that speculative grade bond yields are the tightest they have been against treasurys since 2021 or something. charles: right. >> then bitcoin i think is up. charles: yeah, a little bit, a little bit. so it is sort of maddening right? because your work, you, from what i read you actually believe that maybe, maybe the fed, if anything, if they were textbook, without any other influence, instead of anything it would be a hike this year, not cuts but potentially a rate hike this year? >> you know what? the fed is, is i think has got a guilty conscience. a dozen years or so of zero percent interest rates have had consequences. what consequences?

levitttation in commercial real estate, excessive leverage in the private equity world. venture capital out over its skis. endowments at colleges and universities becoming more illiquid in the search for yield. so the consequences of these ultralow rates are making themselves felt. frances macdonald and danielle together made the point the effect of rising rates is not instantaneous, can be as long as two years from the inception which frances said is today. charles: i have only a minute to go. powell will be stepping up to the podium in a moment. your call on secular bear market has been right. >> bonds,. charles: i'm sorry, secular bond bear market. has been right. this is a relatively long-term chart and i think you know we needed one even longer than this because, i think folks don't think about that these long secular moves that bonds make, right? you had a 40 year move higher in yields. then you had a 40-year move

lower in yields and this could be just the beginning and i refer to your work all the time with folks particularly wall street experts who say hey keep loading up on bonds even though they're not working? >> there is such a thing in finance and investing must sell memory, sports too. 40 years of conditioning about falling interest rates i think are a pretty powerful influence on people. certainly there were in 1981 at the peak of yields. people could not remember when they were ever low. nor now can they ever remember when they were high. but they have been, a prediction, they will be again. charles: thank goodness we have you around to remind us. >> thank you, charles. charles: moments away from jay powell taking the podium. let's take a look where these markets are right now. so far, so food, i mean the fed has such a cheery outlook why wouldn't the market move higher but we know one thing, there is going to be a whole lot of volatility. jay powell has a lot to answer for right now. in addition to that you will get

what we always get on fed day the emotional moves, it is really money following money. it doesn't seem to have any rhyme or reason. we get a chance to sleep on it. a lot of times the next day is the exact opposite move. i have to tell you folks, that is when it gets really worrisome. here is the good news we'll bring back qi research, ceo, danielle dimartino booth, economist, strategist, frances donald. i will apologize for jim, i almost always call you mcdonald every time. >> if jim grant saying it no worry. charles: he can call me hey if he wants to. i'm good with that. >> me too. charles: this is point brought up a lot, danielle i will ask you, the veracity of the data fed uses to make decisions particularly government surveys. we have a table we'll share with the audience. no one is filling out the survey. so from the, even before if everyone filled it out there

would be questions but with 1/3, some of these surveys how do you make decisions on an entire population of people a handful of people filling out survey? i think a handful of people filling out is a red flag. >> in this cycle it is a massive red flag. last week the state of california came out and said bureau of labor statistics 320,000. actually it was 48,000, whoop sy. if you run through all 50 states plus washington, d.c., you just get more than a million jobs that were overstated through that same time frame but what's powell referring to in the statement? what's the only change? job gains. he is actually taking the focus away from the unemployment rate. charles: frances to that point, the markets move on the initial read. they never seem to bother with the revisions right? the revision cost be crazy revisions. you might as well-put them next to the obituaries, no one pays attention to it.

you wear two hats. you're an economist and strategist. it must drive you crazy. >> absolutely. we talk about the headline prints. most economists know this number will get revised. some of the work danielles does in her shop, we know how big the revisions are. periodically around recessions revisions get larger. they tend to accelerate. low survey responses, lots of recisions. what to do if you're making investment decisions? not the time to make big bets. stick with fundamentals. find good companies. you don't go all out on one employment number. you look at balance of risk. that is the best strategy. i wish our central bankers were doing, we have reduced visibility. that is the core here. that is what policymakers should be messaging to everybody. charles: i want to ask something to two working moms, woman household work added to the cpi, you like that idea? >> it is interesting. charles: i don't know how they

do it. >> i don't really trust a bureaucrat with a new toy. i just don't. bumbling bureaucrats. charles: frances. >> we have done a lot of work and that you could inflate country's gdp, if you include what is called household work. if you want to create jim grant style inflation add women's work in the household. you will see that will inflate a lot of prices. again you know what putting jokes aside we're trying to coming one new data that we don't necessarily understand and basing policies decisions off of it? let's be honest we have reduced visibility. think about the second order effects of that which is businesses and households have reduced visibility. that will impact how they move forward with how they're operating both at home and office place. charles: powell will be on any second. jim says he think this is guilt at this conscience fed. that is why the rosiness. frances, what do you think? >> oh i think this is a fed, i'm looking at sheets here, massive dispersion of forecasts. they don't tend to agree just

about anything here. this is a fed trying to to the middle line. i don't know they have a guilty conscience so much as they don't have enough data, understanding what they are trying to achieve and when it will arrive. charles: is that jay powell's fault? >> i think part of it is. he has his eye on regulation. he has his eye on shrinking the balance sheet. that means he is purposely going off the wrong data because he has other goals than safeguarding sanctity of u.s. economy. i know it is his main job, charles, but by the same token he is trying unwind 40 years of really bad policy, staying too low too long from his three predecessors. charles: the idea if they don't cut soon, let's listen to jay powell. we'll come back to you from time to time to help us understand exactly what he is saving and the implication. >> good afternoon. my colleagues and i remain squarely phoning discussed focused on dual mandate to promote stable prices for the american people. the economy has made

considerable progress toward our dual mandate objectives. inflation has eased substantially while the labor market has remained strong. that is very good news. but inflation is still too high, ongoing progress bringing it down is not assured and the path forward is uncertain. we are fully committed to returning inflation to our 2% goal. restoring price stability is essential to achieve a sustainably strong labor market that benefits all. today the fomc decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings. our restrictive stance of monetary policy has been putting downward pressure on economic activity and inflation. as labor market tateness has eased and progress on inflation has continued the risks to achieving our employment and inflation goals are moving into better balance. i will have more to say about monetary policy after briefly reviewing economic developments.

recent indicators suggest that economic activity has been expanding at a solid pace. gdp growth in the fourth quarter of last year came in at 3.2%. for 2023, as a whole, gdp expanded 3.1%, bolstered by strong consumer demand as well as improving supply conditions. activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates. high interest rates also appear to have weighed on business fixed investment. in our summary of economic projections committee participants generally expect gdp growth to slow from last year's pace with median projection of 2.1% this year and 2% over the next two years. participants generally revised up their growth projections since december reflecting the strength of incoming data including data on labor supply. the labor market remains

relatively tight but supply and demand conditions continue to come into better balance. over the past three months payroll job gains averaged 265,000 jobs per month. the unemployment rate has edged up but remains low at 3.9%. strong job creation has been accompanied by an increase in the supply of workers reflecting increases in participation among individuals aged 25 to 54 years, and a continued strong pace of immigration. nominal wage growth has been easing and job vacancies have declined, although the jobs to workers gap has narrowed, labor demand still exceeds the supply of available workers. fomc participants expect the rebalancing in the labor market to continue, easing upward pressure on inflation. the median unemployment rate projection in the s.e.p. is 4.0% at the end of this year and 4.1% at the end of next year.

inflation has eased notably over the past year but remains above our longer run goal of 2%. estimates based on the consumer price index and other data indicate that total pce prices rose 2.5% over the 12 months ending in february and that excluding the volatile food and energy categories, core pce prices rose 2.8%. longer-term inflation expectations appear to remain well-anchored as reflected in a broad range of surveys of households, businesses and forecasters as well as from measures from financial markets. the median projection in the s.e.p. for total pce inflation falls to 2.4% this year, 2.2% next year, and 2% in 2026. the fed's monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the american people.

my colleagues and i are acutely aware high inflation poses significant hardship as it erodes purchasing power especially for those least able to meet the higher costs of essentials like, food, housing and transportation. we're strongly committed to returning inflation to our 2% objective. the committee decided at today's meeting to maintain the target range for the federal funds rate at 5.25 to 5 1/2% and to continue the process of significantly reducing our securities holdings. as labor market tightness has eased, progress on inflation has continued the risks to achieving our employment and inflation goals are coming into better balance. we believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. the economic outlook is uncertain however and we remain

highly attentive to inflation risks. we are prepared to maintain the current target range for the federal funds rate for longer if appropriate. we know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2%. at the same time reducing policy restraint too late or too little could unduly weaken economic activity and employment. in considering any adjustments to the target range for the federal funds rate, the committee will carefully assess the evolving data, and evolving risk the. the committee does not expect to be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustain blip down towards 2%. we're committed to both sides of our dual mandate and unexpected weakening in the labor market could also warrant a policy

response. we will continue to make our decisions meeting by meeting. in our s.e.p., fomc participants wrote down therapy individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward. if the economy evolveses as projected the median participant projects the appropriate level of the federal funds rate will be 4.6% at the end of this year, 3.9% at the end of 2025 and 3.1% at the end of 2026. still above the median longer term funds rate. these projections are not a committee decision or plan if the economy does not evolve as projected, the path for policy will adjust as appropriate to foster our maximum employment and price stability goals. turning to our balance sheet, our securities holdings have declined by nearly $1.5 trillion since the committee began reducing our portfolio. at this meeting we discussed

issues related to slowing the pace of decline in our securities holdings. while we did not make any decisions today on this the general sense of the committee is that it will be appropriate to slow the pace of run-off fairly soon, consistent with the plans we have previously issued. the decision to slow the pace of run-off does not mean that our balance sheet will ultimately shrink by less than it would otherwise but rather allows us to approach that ultimate level more gradually. in particular, slowing the pace of run-off will help insure a smooth transition, reducing the possibility that money markets experience stress and thereby facilitating the ongoing decline in our securities holdings consistent with reaching the appropriate level of ample reserves. we remain committed to bringing inflation back down to our 2% goal and to keeping our longer-term inflation expectations well-anchored. restoring price stability is essential to set the stage for achieving maximum employment and price stability over the long

term. to conclude, we understand that our actions affect, communities, families and businesses across the country. everything we do is in service to our public mission. we at the fed will do everything we can to achieve our maximum employment and price stability goals. thank you. >> reporter: steve liesman, from cnbc. mr. chairman, the projections show somewhat higher core inflation. they also show somewhat stronger growth. what should we infer from this notion on average rates were kept the same this year but inflation is higher and growth is higher, does it mean more tolerance for higher inflation and less of a willingness to slow the economy to achieve that target? >> no, it doesn't mean that. what it means that you know, we have seen incoming -- as as i

pointed out in my opening remarks we did mark up our growth forecast, so did many other forecasters, so the economy is performing well and the inflation data came in higher as a separate matter. i think that caused people to write up their inflation but nonetheless we continue to make good progress on bringing inflation down and so. >> reporter: just to follow up, when you say that you're willing to either maintain the rate for longer what is the tolerance of the federal reserve for inflation coming in above its 2% target? >> we're strongly committed to bringing inflation down to 2% over time. that is our goal and we will achieve that goal. markets believe we will achieve that goal. they should believe that. that's what will happen over time but we stress over time. and so i think we're making projections that do show that happening and we're committed to that outcome and we will bring it about.

>> reporter: hi, chair powell, rachel siegel from "the washington post." thanks for taking our questions. you and others are saying relief on housing inflation is coming but it still hasn't shown up meaningfully in the pce. will that change your opinion on inflation since it hasn't to this point? >> i think there is some confident that the market rents, lower market rent increases will show up in measures of housing services inflation over time. there's a little bit of uncertainty about when that will happen but there is real confidence they will show up eventually over time but again uncertainty about the exact timing of that. >> reporter: and will you be able to get overall inflation down to target if housing doesn't break through quickly and does that affect the timing for eventual cut this is year? >> we will get aggregate inflation down to 2% over time, we will, and i will assume we

will continue to see, we'll see goods prices coming into a new equalibrium where they're going down perhaps not as quickly as they had been earlier this year. where housing services inflation will come back down as current market rents are suggesting will happen and where non-housing services will move back down. some combination of those three things and it may be different from the combination we had before the pandemic will be achieved and will bring inflation back down to 2% sustainably. >> nick. >> reporter: nick timiraos of the with. is. why. chair powell, during your congressional testimony this month you said your test for making the first change to interest rates does not remind you to be terribly comfortable that inflation is at 2% because interest rates are well above neutral. at the same time you said here after the last meeting that the first cut is highly consequential. can you reconcile these views for me? if rates are well above neutral why would the first cut be

highly consequential? is that because you anticipate one cut would be follow the by one or two more along the lines of recalibration you made in 2019 which itself was modeled after the mid-cycle adjustment of 1995? >> i put it more in the context what i said in my opening remarks. the risks are really two-sided here. we're in a situation where if we ease, if we ease too much or too soon we could see inflation come back and if we ease too late we could do unnecessary harm to employment and you know, people as working lives. we do see the risks as two-sided. so it is consequential. we want to be careful and fortunately with the economy growing, with the labor market strong, with inflation coming down we can approach that question carefully and let the data speak on that. that's really what i was thinking. >> reporter: how much that inflation we have seen so far this you chalk off to calendar

effects versus higher inflation versus change in the trend we saw last year? >> i want to start by saying i always try to be careful about dismissing data that we don't like. you need to check yourself you on that, i will do that, the january number was very high, cpi numbers and pce numbers were very high. it could be seasonal effect there is, nonetheless we don't want to be completely dismissive of it. the february number was high, higher than expectations but we have currently well below 30 basis points of core pce, not terribly high but not like the january number. i take the two of them together and i don't think they have really changed the overall story of that inflation moving down gradually an a sometimes bumpy road towards 2%. i don't think that story has changed. i also don't think that those reads added to anyone's confidence that we're moving closer to, to that point but,

you know, we didn't, last thing i will say, we didn't excessively celebrate the good inflation reads we got in the last seven months of last year. we didn't take too much signal out of that, what you heard us saying was we needed to see more that we could you know, we wanted to be careful about that decision and we're not going to overreact as well to these two months of data, nor are we going to ignore them? >> reporter: hi, chair powell. i, could you speak a little bit more about the timing? is there enough data between now and say may to be able to get the kind of confidence that you say that you know, you still need or by june, is there enough data for you? give us a sense of your thinking there, thank you. >> so we make decisions meeting

by meeting. we didn't make any decisions about future meetings today. those are going to depend on our ongoing assessment of the incoming data, evolving outlook, balance of risks. i don't have really anything for you on any specific meeting looking forward. >> reporter: just a question, is there enough data for you to be able -- sorry. >> we'll take, you know, things can happen during an intermeeting period if you look back unexpected things. so i don't want, i wouldn't want to dismiss anything. so i just would say that the committee wants to see moore data that giving us higher confidence that inflation is moving down sustainably towards 2%. i also mentioned, and we don't see this in the data right now, but if there were a significant weakening in the data, particularly in the labor market that could also be a reason for us to begin the process of reducing rates again. there is flog in the data pointing to that, but those are the things we'll look at coming

meetings. without trying to refer to any specific meeting. >> chris. >> reporter: chris, in the projections there sin crease in neutral rate as you know quarter point higher rates projected in 2025, 2026. can you speak about why -- charles: folks a lot to go through. we'll go back to the chair powell in a moment but there is some things that we have to address and bring to you because this is a, real time, there is a lot to understand here. danielle dimartino booth, frances donald still with me. frances, let me start with you, so we get these projections which, gdp goes from 1.4 to 2.1. gdp goes significantly higher. unemployment rate goes significantly lower. inflation goes higher but it goes back down for next year. i mean, so far from what you've heard from chair powell, does it

match, in the case from the fed? >> if you told 2019 me we were going to have 2.4% inflation, 2.1% gd and the fed would say we're going to cut-rates at some point this year, i would think i had been in a coma and woken up in an entirely different universe. those stories don't seem to match on the surface yet there is something that came up twice in powell's comments so far that i circled and underlined. that is that he said twice if there is an unexpected weakening of the labor market. so earlier in the show i said the key is not the forecast. it is the balance of risks and what i'm hearing from powell a lot more comments about the labor market and unexpected weakening. my sense when he says unexpected, it means situations we modeled that are your our base case but could potentially occur. the base case they described here, inconsistent with powell's comments. what he is speaking to is the risk scenario and my bet with huge dispersion of forecasts

with fed members he is little more concerns about the downside risk for enemployment. charles: you pointed out, if that's the bar then they lowered the bar? >> they lowered the bar. the biggest take, they have given themselves, to frances' point less latitude for that mistake. they used to have to pass 4.1% before it was above their target for 2024. they brought that down to .1 of one percentage point, 3.9% to 4.0%. boom you hit your target. they have made, they have made monetary policy a lot more sensitive to the unemployment rate which is at the cusp of their target. charles: but since the last unemployment number popped higher than anyone anticipated, if we had a similar move we would be at 4.1. we would leap over this hurdle at the next jobs report. that would instantaneously to the markets the fed will start cutting rates. >> it would. and they made that much easier. remember what i said earlier in the show, people in 2023 had six to nine months of severance. people will start applying for

unemployment benefits now their severance is running out from last year. charles: right. >> people losing their jobs in lower paid industries they don't get 60 to 90 days. you will see this rate go up. charles: the reason unemployment rate is stubborn, unemployment money people get is not enough. that is why the gig economy is going through the roof. that is something else. one thing is standing out to you that we heard so far? >> a bunch of things are coming here. i really think the unemployment rate at 4% is big deal. to danielle's point, we could be there. charles: keeps saying unexpected, based on that 4.0 number the anyone, momentum suggests be ready. >> he also just said quantitative tightening might not end. charles: he said it was slow but he pointed out it is not going to change, whatever the target is, we don't know what the target is, 2 trillion, 3 trillion, 4 trillion? >> it will arrive at the correct size at a more gradual rate. doesn't matter what it takes us

longer that is no not what the street is banking on. the street is banking on this puppy being pulled. charles: risks are inflation too late employment. frances are you buying that? >> that is a truism. charles: if you had to make a mistake one or the other which one would it be? >> they can cut quickly if they need to. they don't have to wait for a meeting in order to cut. we saw that in 2020 of course. there will be always the slight bias to waiting a little bit longer of the fed's problem i think it will have both those risks here. which is as unememployment really starts to weaken in the next couple of months, inflation is still going to stay high. charles: that is your stagflation theory. >> that is the theory and the fed is going to have to choose and my take when people start raising their hand saying i'm in trouble, it matters more than i have a job than i worry about some categories of inflation, we're talking all the time about political pressure, well there is a human pressure when it has a face to it, suddenly on the unemployment side, i think that

side will have to cave. i say the fed will cut a lot more than currently priced. it might take longer to get there. charles: markets edging up as jay powell speaks. let's go back to the fed chair. >> see different answers to that question but ultimately we do think financials conditions are weighing on economic activity. we think you see that, a great place to see you in the labor market where you see demand cooling a little bit from the extremely high levels. there i would point to job openings, quits, surveys. the hiring rate, things like that are really demand. there are also supply side things happening but i think those are demand side things happening. you know we saw, that's been a question for a while. we did see progress on inflation last year significant progress, despite you know, financial conditions sometimes being tight or being sometimes looser.

>> reporter: mike mcgee with bloomberg radio and television. can you give us more color on how the committee is thinking about inflation dynamics now? what we've seen at the beginning of the year, are they more one-off increases that will fade or is there more of a secular turn? with goods prices rising again and services prices staying sticky and also housing prices have been sort of the gadot of this cycle you keep expecting them to go down and they don't. how does the committee see this playing out forward since you raised your inflation forecasts? >> so i ethe committees looking at the two months of data and asking the same question you're asking, and saying we're just going to have to see what the data show. as i mentioned you can look at january, which is very high reading and you can, i think many people did see the possibility of seasonal adjustment problems there but again you don't want, you you he to to be careful about

dismissing parts of the data you don't like. february wasn't as high but it was higher. so the question what are we going to see? we, this is in the data little stronger inflation in the first half of the year, less strong in the latter half of the year. we'll let the data show. i don't think we really know this is bump on the road or something more. we'll have to find out. meantime the economy is strong, the labor market is strong, inflation has come way down and that gives us the ability to approach this question carefully and, you know, feel more confident that inflation is moving down sustainably at 2% when we take that step to begin dialing back our restrictive policy. >> reporter: you've talked about the desire to have confidence that inflation is continually moving down. has the recent numbers we've gotten for inflation data dented that confidence at all? >> it certainly hasn't improved our confidence. it hasn't raised anyone's

confidence but i would say that the story is really essentially the same and that is of inflation coming down gradually toward 2% on a sometimes bumpy path as i mentioned. i think that's what you still see. we've got nine months of 2 1/2% inflation now and we've had two months of kind of bumpy inflation. we were saying that it is going to be a bumpy ride. we consistently said that now here are some bumps and the question is are there till more bumps? we can't know that. we're questioning that carefully. it is very important for everyone that we serve that we do get inflation sustainably down and i think the historical record, you know, every situation is different but the historical record is that you need to approach that question carefully and try to get it right the first time and not have to come back and raise rates again perhaps if you cut

inappropriately. prematurely. >> go to edward. >> reporter: thank you, mr. chairman. edward lawrence, with fox business. i wanted to ask you, you received a letter from, well-fed ral reserve independent body understanding congress has oversight of that. you received letters from senators elizabeth warren and sheldon whitehouse that said calling on you to lower interest rates to cut interest rates because it says quote the potential that it may remain too high for two long has halted advances deploying renewable energy technologies and delayed significant climate and economic benefits from these projects. so has higher interest rates caused that? >> have they, well first of all i respect, in our system of government it is congress has oversight responsibility for the fed. we place a tremendous amount of importance on our engagements with congress and always treat them with great respect. in this case i would say those are, our mandate, our mandate is

for maximum employment and price stability and the other things that we do and and that's what we're trying to accomplish. we're trying to do that in a way that sustains the strong growth we're seeing, the strong labor market we're seeing but allows us to make further progress with inflation. that is how we best serve the public, leave many other issues, which other cases are incredibly important as those i mentioned leave that to those that you mentioned. >> reporter: lawmakers are saying higher rates are squeezing people. how do these letters affect what you do policywise? >> we resave letters with respect. we write careful responses and concerns. we listen talking to the people in our system of government have oversight of our activity but the at end of the dave we take that on board but we have to make our judgment and we have to stick to our knitting which is maximum employment, price stability, supervise, regulate

the banks, work on payment system, things that we do. >> reporter: claire jones, financial times. thanks a lot for the opportunity to ask a question. as chair of the fomc, would you want to see unanimity on the committee or something close to it meaning no more than one dissent before you begin cutting rates? thank you. >> i, we're very consensus oriented organization and we do try to achieve consensus and ideally unumty. people do dissent. that is something that happens. life goes on. it's not a problem. we have always had dissents but and so, you respect thoughtful dissents very much. it is like, you may not agree with some arguments but you

really want to understand them. so you made raid a book that takes a position that you have long opposed just to understand that book. i treat dissents with real respect as well. >> simon. >> reporter: simon, can you hear me? >> yes. >> reporter: great. obviously inflation is some ways away from target. unemployment though, if you look at the projection for the full year, 4.0%, in february, we are already at 3.9%. quite close so the median projection. are you concerned at all, notwithstanding the very strong jobs growth, that in fact there may be some cracks appearing in the employment market? you talked about a significant deterioration in the labor market being a condition for easing rates. what would liz: hi, everyone, you're watching the "claman countdown" on fox markets and the market is not spooked by anything happening at f