Jerome Powell: Interest rates remain unchanged, low inflation lingers

Channel: Fox Business
Published: 05/01/2019

Fed Chair Jerome Powell holds news conference on the FOMC's decision to leave interest rates unchanged and concern about low inflation persists. FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wall St...

Good afternoon and welcome at the fomc meeting that concluded today, we reviewed economic and financial developments in the united states and around the world and decided to leave our policy interest rate unchanged. My colleagues and i have one overarching goal to use our monetary policy tools to sustain the economic expansion with a strong job market and stable prices for the benefit of the ameri ...
an people. Incoming data, since our last meeting in march have been broadly in line with our expectations. Economic growth and job creation have both been a bit stronger than we anticipated while inflation has been somewhat weaker. Overall, the economy continues on a healthy path, and the committee believes that the current stanceof policy is appropriate. The committee also believes that solid underlying fundamentals are supporting the economy, including accommodative financial conditions, high employment and job growth, rising wages and strong consumer and business sentiment. Job gains rebounded in march after a weak reading in february and averaged 180 thousand per month in the first quarter, well above the pace needed to absorb new entrance to the labor force. Although first quarter gdp rose more than most forecasters had expected growth in private consumption and business fixed investment slowed. Recent data suggests that these two components will bounce back, supporting our expectation of healthy gdp growth over the rest of the year. The committee is strongly committed to our symmetric 2 % inflationobjective for much of this long expansion. Inflation ran a bit below our 2 percent objective, alongside considerable slack in resource utilization, but last year, with the unemployment rate at or below 4 %. Inflation moved up for march through december, core inflation, which excludes volatile food and energy components, was at or very close to 2 %.

Overall inflation fluctuated from a two-tenths from a few tenths above 2 % to a few tenths below over this period, with the moves, mostly due to changes in energy prices as expected. Overall, inflation fell at the start of this year, as earlier oil price declines worked through the system. Overall, inflation for the 12 months ended in march was 1. 5 percent. Core inflationunexpectedly fell as well, however, and, as of march stood at 1. 6 percent for the previous 12 months. We suspect that some transitory factors may be at work. Thus, our baseline view remains that with a strong job market and continued growth, inflation will return to 2 % over time and then be roughly symmetric around our longer-term objective at the start of the year. A number of crosscurrents presented risks to the outlook, including weak global growth, particularly in china and europe, the possibility of a disruptive brexit and uncertainty around unresolved trade negotiations. While concerns remain in all of these areas, it appears that risks have moderated somewhat global financial conditions. Have eased supported in many places around theworld by an accommodative shift in monetary policy and in some cases, fiscal policy? Recent data from china and europe shows some improvement and the prospect of a disorderly brexit has been pushed off for now. Further, there are reports of progress in the trade talks between the united states and china.

The committee views these developments, along with the outlook for continued growth, a strong job market and muted inflation pressures as consistent with continued patience in assessing further adjustments in monetary policy. Over the past several months, we've made a number of consequential decisions about our balance sheet. In january, we decided to continue implementing monetary policy using our current policy regime, which involves providing an ample supplyof reserves. In march, we decided to slow the pace of balance sheet runoff starting this month and to seize runoff entirely in september. These plans support our longer-run dual mandate objectives and also provide clarity about the path of our asset holdings. Today we had a preliminary discussion about the longer-run maturity composition of the portfolio before the financial crisis. Our portfolio was weighted toward shorter term debt of the federal government. In the wake of the crisis, the fed bought a large amount of longer-term securities with the aim of lowering longer-term interest rates and thus supporting the recovery. Because of these purchases, our portfolio is now weighted toward longer-term securities. As part of normalization, we will haveto decide what maturity structure should be. What theme of maturity structure should be in the longer term? This choice raises many complex issues and has possible implications for the stance of policy. Today'S preliminary discussion laid the groundwork for more complete analysis and discussion and we plan to return to the maturity composition question toward the end of the year.

There is no pressing need to resolve this matter, however, and any decisions we ultimately reach will be implemented with considerable advance notice and in a manner that allows for smooth adjustment, as we've often emphasized, adjustments to the balance sheet, normalization process may well be needed as the Process unfolds. Finally, we made a small technical adjustment inone of our tools for implementing monetary policy, the interest rate on excess reserves or ioe our rate. The change does not reflect any shift in the intended stance of monetary policy. We use the ioa our rate to help keep the federal funds rate in our target range. As balance sheet normalization continues, we have expected that the effective federal funds rate would shift up over time relative to the ioa. Our rate. Last year we twice lowered the ioa. Our rate by five basis, points relative to the top of the target range after the federal funds rate moved toward the top of the range. These actions helped keep the effect of federal funds rate well within thetarget range, and today we made one more such change. The target range for the federal funds rate is our main indicator of the stance of policy, and it remains unchanged. Thank you very much i'll be glad to take your questions. Thank you.

Mr. chair steve, liesman cnbc. As the statement noted, core inflation are running below 2 %. It'S been falling for three straight months and, while you've been close, it's only been at 2 % or above one month since 2012. Mr. , i guess, i wonder, is it time to address low inflation through policy? It could give us some sense of your metric, for when it would be time at what level would it require a policy responsefrom, the committee so one first, we are strongly committed to our 2 % inflation objective and to achieving it on a sustained and symmetric basis. As i mentioned, we think our policy stance is appropriate at the moment and we don't see a strong case for moving in either direction. I would point out that to inflation actually ran, including core inflation actually ran pretty close to 2 % for much of 2018. As you point out, both headline in core, though, did come in on the soft side in the first quarter, and that was not expected as it relates to core. So we say in our statement of longer-run goals and monetary policy strategy that the committee would beconcerned if inflation were running persistently above or below 2 %, so persistent carries the sense of something: that's not transient, something that will sustain over a period of time and in This case, as we look at this at these readings in the first quarter for core, we do see good reasons to think that some or all of the unexpected decrease may wind up being transient, and i point to things like portfolio management, service prices, apparel prices and Other things, in addition to trimmed mean measures of inflation, did not go down as much indeed dallas trimming is that 2 %, but to go back to your question. If we did see a persistent inflation running persistently below thenthat is something that committee would be concerned about and something that we would take into account in setting policy, i'm sam fleming for the financial times. Let me carry on on the same theme.

There'S obviously been a lot of speculation in the markets about the prospects for a rate reduction this year. Do you think markets have effectively got ahead of themselves on this and what sort of economic conditions would you need to see to give serious consideration of a rate cut discussion, for example, about the 1995 example? Do you actually need to see a looming recession to cut rates or couldn't insurance cut be appropriate? So, as i mentioned, we've just come through a two-daymeeting and we've done a deep dive on economic and financial conditions at the united states and around the world and a lot about our policy, and we do think our policy stance is appropriate right now. We don't. We don't see a strong case for moving in either direction, so we do of course, though, as a routine matter. As you will know, we look not only at our baseline, but we also look at alternative simulations, both better and worse, and we ask ourselves what you know what the appropriate policy response would be. But that's that's all we do and i would just say that we're comfortable the committee is comfortable with our current policy stance. Ihoward shifting gears a little bit. I wondered if you could flesh out, i know you're, describing it as a small technical adjustment, but on the the ioe, are federal funds spread. Give us a sense of why it matters whether or not this reaches the upper limit a little bit. Is there any feed through to broader credit conditions and financial conditions that you worry about, or is it? Is it simply a matter of the fed showing that it can control what it says it's controlling and i do have a follow-up, so a small temporary deviation outside of the range would would really carry no wouldn't be important as as your question suggests, but we do Thinkit'S important that we be able to you know, control the federal funds rate and generally keep it within the range. That'S just good monetary policy to monitor control. So you know we think it's important and we have the tools to do that.

So we've used them again. Today and again this is just a technical fix. It really has no implications for policy. It is demonstrating that you control the market, you you want to control and i guess the question is at what point would these steady declines in the ayah? We are in steady, widening of this spread if it continues essentially become the policy choice. Yeah i mean so generally speaking, the the federal fundsrate we control only directly the federal funds rate and in terms of the market rate and the transmission of the federal funds rate into other short-term rates. Money market rates has been very good over a long period of time and that's important because it's really broader financial conditions that matter not so much precisely the federal funds rate. So i think the fed controlling the federal funds rate is actually important from that standpoint, and you know i don't see us not controlling it, so i you know, i think, we'll we'll continue to control it and then we'll continue to transmit well under broader financial conditions. Michael mckee, with bloomberg, i'm curious about the financial conditions thatyou see out there. The minutes of the march meeting tell us a few officials worried about financial stability risks. Was there a broader discussion at this meeting any consensus on whether such risks are growing as the the markets hit new highs and we do see some instability in short end trading? Is it possible that that rates are too low? At this point, we actually have a financial stability briefing and and opportunity for comment every other meeting, so we had our quarterly briefing today yesterday. As a matter of fact, and had that discussion as well - and i think there haven't been a lot of changes since the last meeting but i'll just go through the waywe - think about it. First, we've developed and published our framework for assessing financial stability.

Vulnerabilities put it out for comment and welcome any feedback that we get from the public, and that enables us to focus our assessments. You know regularly on the same thing so that we can be held account and be transparent. So therefore, therefore aspects of it i'll go through quickly, but i'd say that the headline really is that, while, while there's there's some concerns around non-financial corporate debt, really the the finding is that overall vulnerabilities in the financial financial stability vulnerabilities are moderate, unbalanced and in addition, I would say that the financial system is quite resilient to shocks of various kindswith, high capital and liquidity, but the four things we look at our first asset prices and for as for asset prices. Some asset prices are somewhat elevated, but i would say not extremely so. Leverage in the financial sector i mentioned households are are actually in good shape from a leverage standpoint, default rates are low, borrowing is relatively low, non-financial corporates is an area that we've spotlighted and focused on for attention, and there are concerns about that. Not so much from a financial stability standpoint or from the standpoint that having a highly levered corporate sector could be an amplifier for for a downturn and then the last two or the last two things are really aboutthe leverage in the financial system and funding risk and Those are both very, very low by historic standards in the united states, so, on balance, in my view, vulnerabilities are moderate, so we do say that risks to the financial system - or we say in our longer-run statement of goals and monetary policy strategy that risks to the Financial system that could prevent us from achieving our goals or something that we keep we do take into consideration. I would say that, though, that really the tools for addressing those concerns are our better. You know: capital liquidity, good supervision, good stress, testing and things like that. Those are better first-order tools to deal with these kinds of issuesthan monetary policy. Nicht emarosa the wall street journal jura powell, would the benefit of hindsight did last year's rate increases, make it harder for the fed to credibly affirm its 2 %. Symmetric inflation target is not in fact a ceiling, and, if so, would it be appropriate to lower rates if core inflation remained persistently closer to one and a half percent instead of two percent, and if not, do you worry about any unwelcome tightening in real rates, given The recent softness and core inflation, so your first question: if you go back and think about the middle of last year, inflation was at 2 % and appeared to be staying there, and you know the economy was quitestrong was growing strong, that the fiscal changes were hitting The economy in a very positive way - and so you know, i think the expectation was that inflation would remain up around 2 %. The the weak first quarter performance was not expect of core was not expected.

I don't think is related to anything. We did in terms of raising rates the it appears to be more. I we don't know this, but you never know until only with hindsight with perfect hindsight, but we, some of it does appear to be transient or idiosyncratic now. The second part of your question: sorry, if, if it was, if it was a an issue, would it be appropriate to lower tolower rates if core inflation held closer to one-and-a-half percent? And if not, are you worried that there's unwanted tightening from real rates being where they are? I mean so i, as i said earlier, we we do address this in our in our sort of constitutional document a if inflation were to run persistently below 2 % are persistently above 2 %. That would be a concern for the committee, and the committee would put. Would take that into account in making policy? I do think it's important that inflation run close to and sustainably for a sustained period of time and symmetrically around 2 %, because if it doesn't, you run the risk that inflation expectations can, if has been thecase. Most of the misses are on the downside. Inflation expectations over time could be pulled down that could put downward pressure on inflation and make it harder for us to reacted to downturns and harder for us to. You know, support the economy in difficult times. Jeanna smile like new york times so, as you just mentioned last year, when you guys were kind of getting inflation coming in around 2 %. You had this benefit of the tailwind of fiscal stimulus, and you still have that to some extent, although the tax cuts have mostly faded through we've still got some something in the pipeline from the spending cap increases. So i guess, how do you think about inflationas that fiscal benefit wanes toward the end of this year? Yeah inflation, first of all, month-to-month quarter-to-quarter is going to move around i'll, always be factors hitting it.

So, probably the biggest you know the single factor driving it is. Is the rate of underlying flay shanor a closely related idea of where inflation expectations are anchored, the thought being? That'S where inflation will go in the long run if, if it's not being pushed by those by those other factors? So we also think that slack. You know that the level of slack in the economy does play some small role. It'S you know you. It'S actually still a measurable role, it's nothing like it was in the1960s, when the phillips curve was quite steep, so that that's also something that plays a role. And so we take all those things into account, and you know the part of it that we can control is, is the slack part and again we do expect that this this reading will be transient and inflation will move back up and if it isn't then - and If it runs persistently below 2 % for a sustained period, then that's something we'd take into account in setting policy chairman powell, donna borak with cnn pivoting a little bit about wages since 2010, women's real earnings have gone up about three point: nine percent compared to men's, Which is risen? Excuse me, abouttwo point one: do you think the relative increase in women's wages is a problem for the us economy? You know, i think, generally i'd have to see the data on that i mean. That'S that's. It sounds like you picked a particular time frame over time. I wouldn't really wonder that's whether that's the case, you know, i think men and women should make the same for the same work by and large, so just just to push a little bit on this. But if the data shows that women's wages are rising higher, is there any? Is there a damage to the us economy if males wages are declining or not growing as fast as women? Yes, ithink we're getting in here to commenting on a on a nominee to the fed indirectly and that's something i'd rather avoid. It'S really not my role to engage with potential nominees to the fed, so i'm really not gon na not gon na go there. I haven't seen this research either, so i don't really really know thanks victoria guido with politico.

I wanted to ask early last month. I believe it was april 2nd. The fed wire system went down, and i was just wondering if you could talk about what happened there, how long it lasted whether whether you know what happened, whether you're still looking into it and whether it's something that could happen again sure so that'sright. I i want to say it was april 1, but it may have been able to. In any case, the fed fedwire did go down for a few hours. In a 3 or 4 hour range. We were able to quickly identify the problem. It was an internal problem and we were able to correct it and you know make changes so that that problem and other problems like it cannot kind of repeat themselves. So we, you know, we learned from these instances there early rare, but we learned from limit. In this case it was internal and it's been corrected, steve matthews, with bloomberg. Next month we have the 10th anniversary of the end of the recessionand. There are some countries that have had expansions for 15, 20.

25 years. Do you think that's something that's practical for the us that we could have that kind of lengthy expansion and for you personally, if we had a recession during your tenure, would you consider that a failure i you know i wouldn't i wouldn't want to speculate you there. There is there's always the example of australia that everyone, i think, is aware of where i think there in a year 28 of their expansion, so things are possible. You know, i think all i can see is that we have an economy where we're where the expansion is continuing growth. This is a healthy levelthe. Labour market is strong. We see job creation, we see wages. Moving up, inflation is low, which gives us the ability to be patient, and we do expect it to move up and we wanted to move up to 2 %. So i see i see us on a on a good path for this year. The 1990s when, for example, some people have pointed out in the last the longest expansion before this one, there was a right cut in 1995 and the rates went up and then they came down and there was that kind of management. You see similarities and in today's situation, similarities in the length i mean the situations were quite different than this wasbefore inflation really was under control, but you know it's very interesting to look at the history. I find it quite interesting to look at different periods, but i think all right in our own.

In our own cycle, we face up a particular set of challenges that are really what's relevant for us now. Mr. chairman marty, crutsinger with the aap you've, repeatedly said that the fed to conduct monetary policy without regard to outside political pressure, but it seems, like the president, is intent on increasing that political pressure. Yesterday he said you should cut rates, a full percentage point and start a quantitative easing. How what do those comments do in terms of affecting how you pursuepolicy and how you convey your decisions to the public yeah? So, as you know, we are a non-political institution, and that means we don't think about short-term political considerations. We don't discuss them and we don't consider them in making our decisions one way or the other and what we're, what we're always solving for in our process. In our work is to carry out our mission, which is to extend the economic expansion, keep the labor markets strong and get inflation around 2 %. So to give you an idea of what our process is like, maybe as a way of putting all that in context. So for the past maybe 10 days, all 17 fomc members will havemade extensive extensive preparations catching up on the latest data reading all the memos talking to their colleagues and their staff. As you also i'm sure aware marty, we talked to literally thousands of businesspeople and market people and people in nonprofit sector in the educational sector and just to get a better sense of the economy. We put all that together, we come. We come together for two days.

The first day begins with an economic briefing which is sort of economic and financial developments, the united states and around the world that takes up most of the first day, and we talk about this in great detail. We go away, we think about that and we come backin the next day we talk about monetary policy and and in this particular case we came to a unanimous decision after an extensive discussion that our monetary policy stance is appropriate, where it is, and we think our Monetary policy stance is in a good place and we're going to be patient as we consider adjustments so, and we also see by the way, the evolving risk picture as very convinced consistent with that outlook. So we don't feel like the data is pushing us in either direction, of course, will not hesitate if, if we do feel the digit data justify move neither direction, but that's our process. That'S how we think about things. We don't thinkabout other factors, we don't let them into our decision-making. We don't discuss them newswires. Thanks for the question. In the last 23 years, core pce inflation has run above 2 % only during a period that coincided with a housing bubble. I'D like to know what you would say to people who worried that it will prove difficult for the fed to lift inflation without potentially stoking another asset bubble of some sort. Thank you yeah. So i mean you're pointing to the really the the fact that in recent years, inflation has moved down and down and really many major central banks have struggled to reach their inflation goals from below, and that includes us, although we've actually donewe've come closer, i think than Most others - and it's just it's just a question i think - of demographic and and other large and in some cases, global forces. That'S that are making that are, you know, disinflationary to some extent, and it creates significant challenges.

One, i would say, is it means that interest rates will be lower, will be, will be closer to the effective, lower bound more of the time, because that means lower interest rates and that's one of the reasons we're having a review of our monetary policy strategies, tools And communications this year is to think about that problem. You mentioned the connection to financial stability of lower for longer rates and that's thatis. Another challenge, as i mentioned earlier, we do consider financial stability concerns to the extent they threaten achievement of our of our goals, but we also view - and i i do take the view - that that macro prudential and supervisory tools - regulatory tools - things like the stress test - that We can do right through the cycle. Those are really the best defense against manageable instabilities that the financial system is highly resilient to the kinds of financial shocks that can happen. Thank you greg robb from marketwatch this morning. The is m manufacturing index, no dad it's worst reading since october 2016. So, isn't that a dark cloud on your outlook for strong growth for the rest of theyear, i mean how much weight does it hold for you, and is it a sign that monetary policy might be too tight? This is the is m reading. I guess from this morning on on manufacturing yeah i mean we, we see that reading as still a positive reading and consistent with what we expect from the manufacturing sector, which is moderate or perhaps modest, growth manufacturing has been weak. All around the world services have been growing faster, so it's yes, it's something that we that we watching carefully, but we do expect a positive contribution to growth from the manufacturing sector, edward lawrence from fox business. Thank you, mr. chairman, for doing this. Um, you mentioned talkabout domestic growth, a little bit with the economy.

You mentioned that the progress in the talks with china trade progress in talks with japanese trade, the u. s. mca is moving or going to move through congress. You talked about a little bit of domestic growth that you're seeing going forward for the rest year, and could these trade deals turn into tail winds for the economy? Um? How are look our out our outlook and my outlook is for as a positive one as a healthy one for for the us economy for growth for the rest of this year, and i would say that the basis for that really is consumer spending and business investment. So if youlook at consumer spending, you saw a stronger retail sales, stronger motor vehicle sales in march and as i mentioned, the conditions, the broader economic fundamentals are strong in support of consumer spending. That'S more accommodative financial conditions, high confidence, readings, high levels of employment, wages going up, all those things are going to support consumer spending. So that's a that's a significant part of the the outlook this year and business investment should also be positive in that in that sort of direction. In terms of in terms of the effect of trade deals, i think one thing would be that the the resolution of the uncertainty around these trade negotiations would, i would guess, be a positive forbusiness sentiment. We have been hearing from our business contacts really a lot since the beginning of the trade negotiations. That uncertainty is a concern, if you import metals or whatever for your product or export your product, then it's been a challenge for you, so that would be a positive and, of course, the most of the gains, though i would expect, if from even from a successful Trade negotiation would come in over time. You know they don't think they wouldn't be the kind of thing where you'd immediately feel big effects right away, but they could be quite important over over a longer period. So that's, i think that's would be my expectation and i don't knowthat.

I haven't seen none of us. At least i haven't seen the details of what's been negotiated, donnelly with the la times getting back to inflation. Can you talk more about the transitory factors holding down inflation, how significant they are and why you think those factors will pass sure? Well, i would just mention a couple. Let me say i don't mean to diminish concerns about about too low inflation it, but i think there's good reason to think that that these readings are particularly influenced by some transitory factors. One that i would mention is portfolio management services, which would tend to go down when asset prices go down with a lag, and so when asset priceswent back up, probably there'll, be a swing around there positive contribution, other ones that get mentioned are things like apparel and Apparel prices were very, very low. There was a change in the methodology and another one is, you know: air fares there. There are many little things, so we don't know until again until we see but there's reason to think that those would be transient and would turn around and another way to look at. It is they're they're models that look at inflation, that in different ways like well, not models, but measures like the the dallas trim mean, as i mentioned so trim mean at 8:00. It it it cuts off the the big movementson, the upside and the downside, and looks at just the mean movements and inflation of various product categories and service categories, and it didn't go down at all. It'S at 2 %. Or it's that i don't know whether it went down. It was above that, but it's a 2 % now so there's reason to think that these will be transient.

We, of course, will be watching very carefully to see that that is the case. I would point to the case of cell phone services. Many of you will remember. In march of 2017, there was a very low reading of for cell phone services, mobile phone services, and it was kind of a price war and it draggeddown core inflation for a full year. But it did not look like something that would be repeated and we kind of thought so and said so and then sure enough. In 2000 and 18 we had those months of 2 % inflation. So again, we'll have to see here we're gon na, be watching really i'd like to say we're going to be watching inflation carefully to see that these things are transient, and you know i'll say i'll end by saying we are. We are strongly committed at a 2 % inflation objective, nancy marshall cancer with marketplace you're saying if inflation does stay low and these low inflation rates are not transient. You said a couple times: you'll take thatinto account with monetary policy. How, specifically, will you take that into account yeah, it's hard to say because there's so many other variables. You know i mean we. Ultimately, there are many variables to be taken to account any given time, but that that's part of our mandate, stable prices, is half of our mandate and we've defined that as 2 %.

So we would we'd be concerned and we take it into account interest rates. Would i can't i can't really be any more specific then than what i've said if the fed funds rate keeps rising? Do you see room for another io, yaar adjustment and then can you speak to any other strategies or tools that mightbe useful for keeping a ceiling on short-term interest rates? There have been other ideas floated like the standing repo facility and targeting a different benchmark rate. We, you know if we need to and as needed, we will use our tools to to keep the federal funds rate. You know somewhere in the in the target range, will do that. Don'T expect to need to do it again, but we don't know. I mean we're with with the balance sheet, is now the size of it is going to be driven by demand for liabilities, principally, reserves, as i mentioned, and we're right at that point, where we're starting to learn more and more about what the real demandfor reserves is Over the next few months - and so i there is no template for this - there's no road - we just have to do it and that's why we're moving so very gradually. It'S why we tapered the the roll-off to only 15 billion in treasuries per month. We, you know effective, i guess today we're we're cutting the roll-off rate for treasuries in half just because we we want to take our time and move gradually here. So that's that, in terms of other tools, we are we're actually i'm sure at an upcoming meeting. We will be looking at the idea of a repo facility. I don't have any pre supposition that it's something we would dobut. We will we'll be taking a look at it as a possible addition to our toolbox.

Again, i wouldn't say it would just be in a way a way for us to do what we do, which is to do a deep dive on it. Think carefully about it. Look at the pros and cons look at the different possible ways to do it and then go away and think about it for a little while and then probably come back and make a decision. But that's something we'll do at an upcoming meeting. I would imagine [ music ], hey american banker on the regulatory side, the fed and other bank regulators are said to be weighing options. All optionsfor retooling, a proposal to revise the volcker rule. Can you give any indication how close the agencies are to coming to a solution and what that solution might look like whether it would be starting from scratch entirely or making changes to the original proposal? You know we put out a proposal on volcker some time ago and we got a lot of comments and we're reviewing them carefully. I really don't have a lot for you. I know they're making good progress. I don't really have a date, though, and in terms of what all it's going to be. I it's not it's not something i can say with any certainty yet there, brian chung, with yahoo financeso, i'm given what you've said about the expectations for consumption, also business, fixed investment, perhaps bouncing back in the next in the next gdp reading. I'M wondering if you think that continued growth and economic activity might show some sort of underlying fundamental that could flag another overheating, for example the median projection in the march meeting for gdp growth for 2019.

It was two point one, so i'm just kind of curious about what you see going forward. If we continue to see strong gdp numbers well, we don't see any evidence at all of overheating. For one thing, we see inflation below 2 %. Now, as i mentioned, pretty close to 2 % for most of last year, soreally no signs of overheating. You, if you look at the labor market there for a long time now there have been anecdotal reports of labor shortages and difficulty in finding skilled labor and that kind of thing. Nonetheless, you have very strong job creation and you have wages moving up at a at a rate that is appropriate, given inflation and given productivity, but not at all signaling any overheating at all. It'S not higher than that that rate that would incorporate both inflation and productivity. So really not seeing signs of overheating. At the moment our wage is never gon na get back above 4 % in this cycle. Can you kind of give us a read on? Can yougive us a read on how the committee views productivity growth if it's accelerating enough yeah in terms of wages getting over 4 %? We just said wages have moved up pretty steadily over the last five years and are now was wages and benefits are now between three and three and a half percent. Just for the last couple of years, the biggest part of the gains have come for people at the lowest end of compensation, education, which is which is kind of a welcome thing. You mentioned productivity, so productivity is really very difficult to predict.

No one has been able to predict it successfully, so i won't really try, but i will say this: productivity was veryvery low in the wake of the crisis for six or seven years last year we had 1. 9 percent productivity, which is much higher. I don't know if that level can be sustained, but we really you know it's driven to some extent by technological developments and and really the diffusion of technology through the economy and it's very hard to predict. So i think it's positive and in fact i'll mention we're talking about the supply side, labor force participation. Really there has been a significant positive supply-side development over the last year and a half between you know the uptick in labor force participation which goes back. You know several years, but also productivity, and that does suggestmore room to grow. It suggests that a less tight economy or less you know, maybe maybe part of the explanation for for lower inflation. Thanks very much [ music ].

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