Power Lunch - Powell signals the Fed is not ready to cut rates yet 7/30/25

Episode Date: July 30, 2025

The S&P 500 gave up its gains and turned lower after Federal Reserve Chair Jerome Powell signaled the central bank isn’t ready to cut rates, as it assesses the impact of President Trump’s higher tariff levels on the inflation picture. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, welcome to Fed Day, everybody. I am Brian Sullivan. Kelly is out on maternity leave, and you are just about five minutes away from the central bank's call on interest rates. And more importantly, where they see borrowing costs going in the months and years ahead, nobody, but nobody expects a change in interest rates today. But that doesn't take away the drama or the importance for your money. The keys are going to be what Powell says about rates ahead. His own future as the chair of the Federal Reserve with just nine months left in his term, who could be the next head of the Fed. And whether, We could have two members of the Federal Reserve's governor board reject Powell's views on rates. If, by the way, we get two dissents from a governor, it would be the first time that has happened since 1993. Wow. Ahead of all of that, let's see exactly where we stand right now. As you might imagine, markets kind of unhold. We're seeing the stock market up just a little bit, borrowing costs, remaining steady. Let's jump right in now to our panel and talk more about this.

Joining us, David Kelly, J.P. Morgan Ascent Management, Francis Donald, of R.B. see capital markets and Jim Karen and Morgan Stanley investment management all on set literally and figuratively around the table. Francis, what do you want to hear? What do you need to hear from the Federal Reserve today? Anything I want to hear, I'm not going to hear today because this is going to be... Why is you sound very, that's very disappointing. This is a chair, Powell, that is going to try to buy as much time as possible. This is a Fed that doesn't know how tariffs are going to impact the economy because no economist really knows how tariff is going to impact the economy. He needs to hold the line. What would be helpful is if I got a little more color on what data they need to actually cut down the road, what will

be their thresholds in unemployment and inflation that will allow them to begin this cutting cycle that they so clearly want to pursue. David Kelly, would you agree with that? Yes, but I don't think we're going to get here what we need to hear. The interesting thing is that's a lot of negativity around the table. The problem is it's all to come. We have seen the tip of the iceberg of how tariffs are going to affect inflation and to some extent growth. But right now the inflation threat looks to me short term to be stronger than the recession threat. Therefore, the Fed shouldn't be cutting. But it also means the Fed probably shouldn't be cutting in September.

And I think the interesting thing is that dissent that we'll probably get from two Fed governors here is really a prelude to a cut in September. So I think that's what's interesting here. The Fed may cut in September, even though really by the data they shouldn't. By the data they shouldn't. But they cut last year. Yeah, well, look. Sort of a big, bizarre cuts, that some people view that as political.

I don't know. What do you think? So look, I'm kind of in a strange position where I don't think the Fed needs to cut rates based on the data that I'm seeing right now. Ever? Well, for this year. However, will they cut rates this year? I do think that they will cut. I think that they're going to cut two times. The reason that I say that is I think that they're going to start to move the goalposts a little bit. They're going to start to think about flexible average inflation targeting. this could be something that comes up in Jackson Hole, maybe.

They're also going to start to look at the size of the balance sheet. The balance sheet, which is shrinking, all of a sudden makes it look like that they're a little bit tighter in terms of policy, and they could find some wiggle room in doing that. I think that's going to be the growing narrative going forward. If we're just looking at the inflation rate, inflation's going to be above 2%. In theory, they shouldn't cut. Job market looks okay. But they could find reasons to cut.

No disrespect to my very fine network. But if I go out to the world, Francis, and say, well, don't worry, the CPI is only up 2%. Your costs haven't risen. I'm going to get punched in the face. And you'll have a shoe. By the way, deservedly so, because our viewers know that auto insurance is up, electricity costs are up, car insurance up, medical bills are up.

There's nothing the Federal Reserve can do about that. What do you want to hear? Will Jerome Powell address that today? Well, he'll have to because low income and middle income Americans, they're the ones who most need that rate cut, but they're also the ones that are most exposed to higher inflation if that rate cut actually exacerbates it. So the Fed is stuck in a position where its dual mandate tension is most severe with low and middle income Americans.

And it's those rate hikes over the course after the pandemic that really institutionalized that inequality in the United States. But the Fed has one tool, interest rates going up or down plus the balance sheet. It can't solve what's really ailing America right now. Why don't they just? It's adjusting a thermostat when you have the front door that's wild. 20 seconds. So the Fed, David, why don't they just buy more mortgages like they did during COVID and bring down interest rates? They shouldn't.

That way. They shouldn't bring down interest rates, but they want to maintain their independence, and they may need to bend so they don't break to do that. How far, Jim, can they bend before they break? I think two cuts is okay for the rest of the year. I think that's, I think that's the bending. I think that's exactly it. Well, Jerome Powell, maybe we'll see what his legacy might want to be.

By the way, the decision right now was Steve. A somewhat divided Federal Reserve, leaving rates unchanged at the 4.5% to 4.5% range with two governors dissenting as expected, Governor Bowman and Governor Waller, who preferred a quarter point rate cut. It's the first time two governors have dissented since 1993. Nine votes were there to keep rates on change on hold, including the chair, three Fed governors, and five presidents. Let's just say the dissenters didn't really get too much additional support over the six weeks they've argued for this cut. Swings and exports, the statement says, continue to affect the data. Growth moderated in the first half of the year. They note,

which is from data we got this morning. And here's the line that didn't change that people thought might give a doveish signal. It does not. It simply says uncertainty about the economic outlook remains elevated. That's the same line they used last time. They actually removed a word where last time they said uncertainty has diminished but remains elevated.

They took out the diminished part. So they still see high uncertainty. That was an area where if there was a change that was going to maybe signal a doveish move or a doveish move ahead that that would have changed. It did not. The Fed said inflation remains somewhat elevated, same language as last time. Unemployment is low.

The labor market is solid, the statement says, and the committee is attended to risks on both sides of the mandate. So we'll wait to hear the press conference, Brian, but if there's a hint that the rate cut is coming imminently in September, that's not in the statement that I could read. Okay, so, Steve, go into this dissent for the first time since 1993. We got two Fed governors, Chris Waller and Michelle Bowman. dissenting they wanted to cut by one quarter of one percent. How, if at all, relevant is that to anything going forward? Well, you know, unfortunately there's not a really great track record. I have a little quip that I've used over the years, which is that dissenters can lead the way or lead you astray. I have seen both situations where the dissenters told us what was going to

happen next, but also places where they've been on the wrong side of where things are going. little hard to see what's happening. I think what I would look at, Brian, is the data. The Fed gets two months of data between now and the next meeting, two months of inflation data, that is, two months of employment data. And so that's going to tell us, if we have this continued low inflation, this idea that you have continued tariff inflation, but other parts of the economy are not showing it, such as the total number continues to be well-behaved, the Fed could cut. And again, if there is a serious move downward in the job market, I'd think the Fed would cut again. But right now, I think you have to wait for the data, and it's

really hard to front run all of this. I'll wait to see the percentages. When we're done here, I can look them up and see where we're at in terms of the probabilities. But they were around 65%, which is confident, but not overly so about a September rate cut in the market. Yeah, and we're going to look at that right now. The CME Fed tool, of course, you've got your own with the amazing Fed survey. Steve Leesman. We know you've got to get into the lockdown. You're going to get that question in. Really look forward to it, Steve. Great stuff. Thank you very much. Get back now to our panel on this. So we got what we expected, Francis. We got no cut. Okay, we got two dissents from Fed governors, first time since 1993.

Before you were born, even. Okay? I wish. This dissent happened. What is Jerome Powell going to do at the next few meetings? Because he's on his way out. And his legacy is, I don't want to say on the line, but what he does is kind of how we're going to remember him because that's how things work. I might take a step back and say there's so much. focus right now on Chair Powell, the individual, as if we remove Chair Powell that's suddenly going to change dramatically the path of the Federal Reserve ahead. I'm going to put forward that

actually it's the data that's going to determine dramatically where the Federal Reserve goes. As Steve just said. Exactly. And the issue is for Chair Powell is we may not have full clarity even by the end of Fed Chair Powell's term on what exactly is happening with tariffs in this economy. I do not think we're going to be able to see by September how tariffs are infiltrating inflation. it's probably a late 2025 story. And at the end of the day, this is going to come down to, is it a demand destruction story? Is the U.S. going to slow down materially?

Then you can have big rate cuts or is there a lot of inflation. And that is not related to who is Fed Chair. That's related to the economy and trade policy. Okay, Jim, I'm looking here at the CME Fed Tool, Chicago Mercantil Exchange. You can see it on my computer here. David, you're going to have to trust me on this one, all right? But it shows a 60% chance of a one-quarter percent rate cut at the September meeting

and a 38% chance of a 20% chance of a, cut by the October meeting? Do you agree with that? I think it's a fair assessment, right? So, but I think what we have to do is... It's just the markets aggregating data. It's the market's assessment, right? So the way I think about this is that we have been waiting for the impact of tariffs to hit the markets in terms of inflation, in terms of jobs, and we've been kicking the can down the road. We've got a couple of months to figure this thing out in every month that goes by that you don't have higher inflation, that you don't have a worsening labor market. It creates a diminishing

a fact that the tariffs are going to be as negative as people think. Now, there could be a cliff effect, but I don't think it's a cliff effect where all of a sudden you wake up. What's a cliff effect? Meaning like all of a sudden you wake up one day and you realize like, okay, inflation suddenly arrived here. It's usually a progression. This progression towards higher inflation may be happening right now, but the rate of change is going to matter a lot. How quickly is inflation moving higher and how quickly is the unemployment or the employment situation deteriorating? And I think the inflation numbers are going to get a good deal worse, but between now and the We have a meeting because we've got two reports.

What's happening is we haven't any historical experience of tariff increases of this magnitude. And by the way, by Friday, we think the aggregate average tariff rate is going to be close to 20%. So that's an enormous increase since the start of the year. What we know is the tariff revenue is coming in. So that tells, and we know that import prices aren't changing. So that tells you it's not being paid by foreign producers. So it's either going to hit corporate profits in the U.S. or it's going to hit consumers. My bet is eventually most of it's going to hit consumers.

And I think that's going to become clearer over the next few months, which makes it harder for the Fed to justify any rate cut in September. So you're pretty squarely in the tariffs are going to be inflationary in some way camp. Yeah, they will be inflationary. The problem is, and the thing that I think people aren't focusing on is, if you look at that big, you know, the OBVBA, that has got a lot of fiscal stimulus stuck into the first half of next year because of income tax refunds.

So you're going to get this big wave of sugar hitting the economy in the first half of next year. If you get higher inflation at the end of this year because of tariffs, that could be sustained into early next year because of the reconciliation bill. So why do you want to cut rates now? I mean, we're supposed to be trying to get to 2% inflation. I don't know, but I'm having a flashback to a couple years ago. We had this, something happened. We had this massive inflationary shock.

We had a bunch of stimulus thrown at the problem. I don't know if you remember that. A couple years ago, something happened. Yeah, and now we're talking about this great potential inflationary shock. and maybe actual stimulus, Josh Holly of Missouri, was actually floating the idea of direct checks to the American people. How do we know what's going to happen with inflation, Francis? Well, I think you've hit the nail on the head here, which is we're so... We're going to afford nails.

We're so focused on what is monetary policy doing when the elephant in the room is that fiscal policy is dominating this economic cycle. It used to be, what is the Fed going to do was going to determine, are you early, mid, or late cycle? Now it's government money, and that pandemic stimulus that you're talking about? Guess what? It's still in the system. government is substantially larger than it has been historically, and it is keeping a floor under how weak the economy can get, but it's also creating underlying inflation. So I don't even need tariffs in order to be worried about the inflationary path and knowing it's going to stay above 2%.

Tariffs are no tariffs, you're still having an inflation problem in the United States. Let's look longer term. If there is a one-time price change, it's just a price shock, does that become inflationary, or do we move into 2026 with business investment, accelerated depreciation and potentially higher productivity. And let's look at wage inflation. I think we need to look at wage inflation to see if this inflation is going to stick around. If I look at the tips market, if I look at break-evens, things look relatively stable, somewhere around 2.4 to 2.5% inflation.

That could be something that's in store for us, but it doesn't seem like the markets, the markets seem to be looking past this. But also in general, the other side of Washington is just piling sugar into the economy, and that means the Federal Reserve actually has to be a little bit more hawkish. if they have to be the tough ones because it's you know the deficit is going to go up next year it was already 6% of GDP in a full employment economy and we're going to push it up to seven so if we're going to do but they were the deaf leopard of the economy a couple years ago they were pouring sugar on everybody well they kept rates too low for too long stimulating and so inflating the balance

cheap buying mortgages and you know fed rate cuts lower rates will push up asset prices but they don't actually help the economy that much so we need stable inflation for that you're a good michigan state grad. You spent a lot of good time in Lansing. Let's talk to our friends in Michigan. There's a lot of people that are watching right now around the country that are saying, darn it's Sullivan, or as the Canadians may say, for Pete's sake, right? I don't care about the Fed. I want to buy a home and I'm waiting for mortgage rates to go down. I'm looking at the CME rate probability for one year from now. And it shows a strong likelihood will be one percent lower than we are now. Do you think, Jim, that in a year or is-ish,

We're going to see borrowing costs go down. Because a lot of our viewers and listeners, that's all they care. They want to buy a home. They want to buy a car. They want to have another kid. Nobody can afford anything. Yeah. So I'm going to push back against that.

I don't think that the long-term rate around the 10-year rate, which is going to matter more from mortgages and for car loans and things like that is going to really go down materially. I mean, we've even seen the 10-year yield has been around the same level for the past couple of years. Front-end rates may stay sticky lower. But the longer-term borrowing costs, I don't necessarily think are coming down. But I also don't think, you know, as David's talking about this, the sugar rush.

And thanks for the deaf leopard, you know, quick analogy there. Very well. Or some sugar on me. But the, but the, but. I don't think that that necessarily generates as much potential inflation as long as you get the productivity and wages and wage inflation stays relatively contained. But this is what we don't know. But also, we don't want to bring mortgage rates down too low because that's just going to push home prices up. The real problem is, as you mentioned, we kept rates way too low for way too long.

That caused an enormous bubble in home prices. The thing that's unusual today is not mortgage rates. Mortgage rates are actually lower than they've been 60% of the time over the last 50 years. The thing that's unusual is the extraordinary level of home prices caused by keeping rates too low for too long. We've got to get back to some normalization here. We can't just feed the economy of sugar. I know. I just think talking to so many of our viewers and listeners, there's so talk, it's tough for them to hear about the risk of inflation because we've lived through such an inflationary shock the last few years.

I mean, burgers that were 12 bucks are now 20, and we're talking about I'm going to 21 and nobody cares because they just wanted to go to 12. They're not. All right, Steve Leesman is back with us. As I understand, Steve, I thought you're going into the lockup. My apologies. What do you got for us? Well, I just want to be sure that we have the probabilities here, Brian. Thank you. Really echoing what you've already said, which is 68%, a touch higher for September on the probability. And 68% again, or 67.5 for December of, for December 10th of the meeting then.

And then looking down the road, you're right, Brian, they remain about 100 basis points coming off. But you can see about a third of the market is not on board with this idea of a September rate cut. But in general, over time, the Fed is seen getting there to that point where tariffs pass through the system is the general belief of most of the economists in our Fed survey. but the Fed is going to wait to see and have confidence that's happening before it begins cutting. So I just want to come in with those numbers a little bit changed, touch higher for September on the probability of the rate cut. But Steve, okay, great stuff. And I'll go back to you, Steve, and ask you to maybe editorialize just a little bit here because here's kind of the dirty secret is that the Fed can do whatever it wants to do. The question is whether the bond market listens.

I'm sure you talk to people all the time about this. even if today Jerome Powell gets on stage, takes a question from Steve Leasman, sounds very dovesh, does the bond market move on that? Because the bond market maybe has its own view on where things are going. That, sir, is an important and cogent question, if I might, and I'll tell you why. In our Fed surveys, Brian, we have 100 basis points of the average respondent coming off of the Fed funds rate, and only 13 basis points coming off of the 10-year.

So the 10-year is seen next year, on average, ending 2026 at 425. You have a whole lot of things going on in the long end of this market. The thinking is that there will be a tremendous steepening of the curve up to maybe 75 or 100 basis points, but that you do not get the relief that people are seeking on the long end, which, as the Wall Street Journal editorialized this morning, are the rates that matter for the economy. All right. Good stuff. Steve Leesman in Washington, D.C. Steve, we know you're going to go into the lockdown now. We're going to pivot in Washington, D.C., from the Federal Reserve to the White House and more data on trade, which also goes to the inflation story, Megan, sell it what he got.

Hey, Brian, so there's some counter programming going on here at the White House. It seems a trio of fact sheets just being released, saying the president has signed some executive orders on trade, formalizing some moves, some of which he had threatened. some of which are new. The first is the president says he's going to be revoking entirely the de minimis threshold for all packages coming in from abroad. It'll be taking effect at the end of August. Now, this is something that will affect companies like Sheehan and Teymu. Amazon could be exposed here. It takes away this loophole that allows small packages worth less than $800 to come into the U.S. duty-free. He says effective August 29th, all of those packages will have to face tariffs based on where they're coming from those country-specific tariffs.

will start to take effect. So that will be a big change, Brian, when that one takes effect. The second fact sheet says that the president now has formally signed that 50% copper tariff into law. That's something, or into executive order, I should say. That comes as a result of that national security investigation. He's been threatening it for a few weeks now, but we hadn't yet seen it formalized. Now he says it will be taking effect, and we can see an impact copper shares had been down. Yeah, I think now about 19% it looks like. So another big impact there. And then the third one, is that he also added a hefty new tariff on Brazil. Something else that we had seen threatened, hadn't been formalized yet.

He added 40% tariffs on top of the 10% Brazil tariffs that were already in place. He says he's declaring an economic emergency in order to do this and that that will take effect. Again, not a huge trading partner for the U.S., but there are some goods likely to see some big impact there, things like orange juice, coffee, some metals as well. So much more to come as we comb through all of these, but just coming out from the White House, Brian. Megan Gassela, thank you very much. We actually have a trade surplus with Brazil. And I guess if you wanted the price of electricity vis-a-vis copper or coffee to go higher,

you put a tariff on those things. I don't know. So we'll see what happens. Mega Gisela, thank you very much. We are just minutes away from Fed Chair Powell's press conference. Maybe get more answers on a lot of the big questions that we have been talking about here. We've got Mike Santoli coming up. Rick Santelli coming up.

And Kyle Bass, not just on the Fed. but on China tariffs. And oh, yeah, this Putin guy. That's coming up. All right, welcome back. Just joining us. You know the news, Federal Reserve, no change in interest rates. We knew that.

That was what's expected. We got the press conference coming up in a few minutes. Michael Santoli, the stock market not moving right now. But what's going to move the market? Yeah, Brian. I mean, obviously not finding much in the statement or the actual decision, which was expected to react to dramatically to right here. I think basically if Chair Powell in the press conference, first off seems particularly dogmatic about how stringent the tests are going to be for seeing whether inflationary effects result from some of these tariffs or if he's just going to remain sort of noncommittal open mind and wait and see, which I would expect the latter more than the former.

I think we're probably going to be able to just kind of get through this. What the market tells me, both in the behavior up to this point and in reaction to the decision and statement, is that this is that this is. not an economy that's really crying out for any great response from monetary policy. Sure, all of us being equal, maybe we're a little bit restrictive, probably want to look for a window to ease rates lower at some point. But it seems as if cyclical stocks have been leading, credit spreads have been very tight. Even inflation expectations market base have not really move very much implied recession odds in the market are low. So it's kind of like the market feels as if we can afford to wait at this point.

All right, Mike Santoli on stocks. Mike, thank you very much. Now let's go to Chicago, Rick Santelli. I know you're the bond guy. I know you're the bond guy, but can I ask you about the dollar? Because the dollar, shockingly, in a bad year, continues to get stronger. Well, you know, I'm not sure I would start out with saying it's a bad year. It's a different sort of year. But the dollar index right now is going for its fifth straight higher close.

It's on pace for the highest close going back two months, the 28th of May, to be precise. So the dollar is not looking bad, and I think that makes perfect sense. As a matter of fact, depending on how some of the data tomorrow goes, the dollar index is probably putting in a short-term low. If it can get a close above 100 for tomorrow, or excuse me, Friday to close out the week. Now, let's start at the beginning of curve real quick. Right now, short maturities, their yields have dropped the most as you see on that two-year. And if you open the chart up, and we're going to open each one up to the last meeting on June 17th. Why?

Why? Because the yields are very close to where they were then. It was at 395 then. It's at 387 now. Look at a 10-year. Ten-year yields have come down a little bit less. The further around the curve, the less to the downside you go. So they're still a little bit elevated. They're currently at 434. Last Fed meeting, day before the 17th, it closed at 439. 30-year bond is the most interesting. 30-year bond at 489 is exactly where it was on the meeting.

in June. Exactly. Yeah, 489. And what that means to me is that there's no surprise here. The curve's going to remain rather steep, as Steve Leesman pointed out, and the big moves aren't going to happen today, in my opinion.

They're going to happen after tomorrow's PCE comes out at 830 Eastern after listening to what the Fed says today and then drawing conclusions after the inflation data tomorrow. Back to you. Rick Santelli, always appreciate the passion and the views. Rick, thank you very much.

Let's get now an investor's take on today's decision, but also some other big things that are happening in the world outside of the Federal Reserve. Joining us, our friend Kyle Bass, founder and CIO of Hayman Capital Management, any hot take, Kyle on the Fed and Jerome Powell right now? You know, look, I think if you look at what's driving our economy and what has driven it in the past, it's really been consumption. It's been consumers and consumption. If you look at this most recent release today, consumption only grew 1%. this year so far, and last year it grew 3%. So I think you're seeing the two dissents that you see, the first two dissents that have happened since 1993,

and those dissents were both focused on the consumer consumption behavior and labor markets. So, Brian, with inflation running about two-four and short rates being 4.3% effective, the Fed is certainly too restrictive. I think rates have to come down. I think, you know, the dot plot has two cuts this year and one cut next year. I think that you're going to see more cuts than that, Brian.

All right, fair enough. I want to move on, though, Kyle, because I got you here and you're the global macro guy. Outside of the Federal Reserve, there seems to be a thawing in the relationship between Xi Jinping of China and President Trump. They're saying nice things. Trump is going to go, likely going to go to China. Maybe things have tamped down a little bit around Taiwan. If we could like a hug-it-out moment between Xi and Trump, does that add another bump to the stock market?

You know, Brian, in the end, you know where I come out on that. I think that both sides, if you look behind the scenes, both sides are preparing for war over Taiwan. We are gearing up our defense department, our war machine, to be an effective deterrent against China's militaristic belligerence over in the South China Sea and in the Taiwan. on straight. China continues to build its nuclear arsenal at record pace. It continues to build its invasion forces at record pace. And when you look at what we just did, we just enabled or allowed the Nvidia H20 chips to go to China unrestricted into their military apparatus. And in exchange, we got some rare earth magnets that run Ford's electronic vehicles. This was a hostage swap. as bad as the swap that we made with Russia, with Brittany Griner for the merchant of death.

It was just a, it wasn't a smart transaction. And cozying up to Xi and trying to get some deal, I understand that diplomacy should lead here. But in the end, we are every, every single concession we give to China enables them to build their war machine, modernize their combat forces, and focus on, again, we give them the ability to run inference with their AI models with these chips. Those are, that's exactly what the H20 chips are for, Brian. So when we talk about what's going on with China, President Trump, I believe, wants to make a deal. But I can tell you his deal makers behind the scenes are being as tough as they can possibly be on China and giving the data to the president to make the decision.

Speaking of war, speaking of Russia, President Trump making some more threats around Vladimir Putin, I think it's maybe the underreported story of the stock market right now. Basically, you've got 10 days to get some kind of a peace deal done with Ukraine. We're going to really, this time we mean it, enforce sanctions. Is that a hollow threat? I don't. You know, there are a lot of people that coined the term and like to bring about Taco, right? Trump always chickens out.

I would bring in the term the Fafo, FAAFO here, Brian. Look at what Trump means. Yeah, we all know. But when you look at what Trump did with Iran, he gave a deadline and he stuck to it. When you see what he's done with tariffs, he's told people, you need to make a deal with us. You don't need to escalate. We're trying to reset the trade relationship, given the U.S. being the largest deficit-producing trade trader in the world at about a trillion two in goods annually. So I think, and now he's focusing on Russia.

When President Trump draws a line, he is not going to move and he is not going to do. chicken out. When you look at what we can do to Russia, right now we have all the Russian banks, major banks, on sanctions, but there's still a handful of very large, call it correspondent banks of foreign entities that allow Russia to have access to the SWIFT system and move dollars around. So we can close those doors, Brian, and it will really be painful for Russia. So again, I would focus on the deadline, and I wouldn't bet against the president and Scott Besson on this one. You know, and it all comes kind of back to what I love to talk about, of course, Kyle, and that is energy because China has rejected calls to stop buying cheaper Russian oil.

We already have sanctions on Russia and Russian oil that kind of skirted them. They bought their own ghost fleet of ships that we have reported on. Their record sales, by the way, of liquefied natural gas to Europe. Is there an economic weapon? We don't want to revert to guns. Is there an economic weapon that we can use to really solve this somehow? There is, Brian, and we have to be willing to engage in secondary sanctions, right? When we engage in primary sanctions with the Treasury's Office of Foreign Asset Control, we do shut those entities down, however, meaning in trade with the U.S.,

but if those entities, if it's a Russian bank doing business with a Chinese bank and enabling the commerce of that, call it sanctioned oil or gas, we have to be willing to go to the next step. And the next step is sanctioning anyone that does business with a primary sanction entity. That's everybody, though. It's not, it doesn't get everyone. What it does is it actually puts teeth into those sanctions, Brian. And we have here to four, we have not been willing to sanction any major Chinese financial institutions.

In the end, that's what's going to happen. And so you have to remember, during the Cold War, number one, it didn't go hot because we had mutually assured destruction on the nuclear weapons. side. But the way that we won the Cold War is we, along with our allies, broke Russia. The Russians didn't wake up one day and say, you know what, democracy is a better idea. We're just going to go with democracy. It's because we took crude oil down into almost the single digits and 60% of Russian GDP is your house crude, and we broke them. Can we do it again? We can certainly do it again and cut them off from the rest of the world. And we can do the same with China. So I know no one wants to hear that, but I'd much rather have a financial weapon at the tip of the spear

than have 10,000, 5 to 10,000 of our men and women on a couple of carrier strike groups headed into the Taiwan Strait. Yeah, I think we all would prefer that. I don't know if you, and we'll wrap it up. And again, folks, we're waiting on Jerome Pally. May come out in two seconds, make them out in two minutes. We'd have to say goodbye, Kyle, so you'll forgive me for jumping in quickly. Do we know, do you think the Fed has any visibility on tariffs and inflation right now?

Look, I think it's obvious that we're going to end up. around 15% across the board. And, you know, China's going to be materially worse. And, and, you know, limiting that to minimis exemption, I can't tell you how important that is for the United States and actually to combat fentanyl being shipped from China to Mexico into the U.S. and directly into the U.S. So the answer is yes. I think that the Fed certainly has a handle on tariffs. If you look at the data to date, Brian, all of the chicken littles and Sayers saying that tariffs we're going to call it. We've got to Kyle Bass, thank you very much.

Hard to cut you off. Here is Jerome Powell. My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. Despite elevated uncertainty, the economy is in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment. inflation has been running somewhat above our 2% longer run objective. In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged.

We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments. I will have more to say about monetary policy after briefly reviewing economic developments. Recent indicators suggest that growth of economic activity has moderated. GDP rose at a 1.2 percent pace in the first half of this year, down from 2.5 percent last year. Although the increase in the second quarter was stronger at 3 percent, focusing on the first half of the year helps smooth through the volatility in the quarterly figures related to the unusual swings in net exports. The moderation in growth largely reflects a slowdown in consumer spending. In contrast, business investment in equipment and intangibles picked up from last year's pace.

Activity in the housing sector remains weak. In the labor market, conditions have remained solid. Payroll job gains averaged $150,000 per month over the past three months. The unemployment rate at 4.1 percent remains low and has stayed in a narrow range over the past year. wage growth has continued to moderate while still outpacing inflation. Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment. Inflation has eased significantly from its highs in mid-2020, but remains somewhat elevated relative to our 2% longer-run goal. Estimates based on the Consumer Price Index and other data indicate that total P.E.

PCE prices rose 2.5 percent over the 12 months ending in June, and that, excluding the volatile food and energy categories, core PCE prices rose 2.7 percent. These readings are little changed from the beginning of the year, although the underlying composition of price changes has shifted. Services inflation has continued to ease, while increased tariffs are pushing up prices in some categories of goods. Near-term measures of inflation expectations have moved up on balance, over the course of this year on news about tariffs, as reflected in both market-based and survey-based measures. Beyond the next year or so, however, most measures of longer-term expectations

remain consistent with our 2% inflation goal. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today's meeting, the committee decided to maintain the target range for the federal funds rate at 4.5 to 4.5% to 4.5% percent and to continue reducing the size of our balance sheet. We will continue to determine

the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks. Changes to government policies continue to evolve, and their effects on the economy remain uncertain. Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.

Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem. For the time being, we're well positioned to learn, more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance. We see our current policy stance as appropriate to guard against inflation risks. We're also attentive to risks on the employment side of our mandate. In coming months, we will receive a good amount of data that will help inform our assessment of the balance of

risks and the appropriate setting of the federal funds rate. At this meeting, the committee continued its discussions as part of our five-year review of our monetary policy framework. We focused on potential revisions to our statement on longer-run goals and monetary policy strategy and are on track to wrap up any modifications by late summer. The Fed has been assigned two goals for monetary policy, maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans. 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. I look forward to your questions. Thanks. Thanks, Chair Powell. There's a lot of lien in the markets, and not to mention out of the administration for a rate cut now in September. Is that expectation on realistic at this point. So as you know, today we decided to leave our policy rate where it's been, which where I would characterize as modestly restrictive. Inflation is running a bit above 2 percent, as I mentioned, even excluding tariff effects. The labor market's solid, historically low

unemployment. Financial conditions are accommodative and the economy is not, the economy is not performing as though restrictive policy we're holding it back inappropriately. So it's It seems to me and to almost the whole committee that the economy is not performing as a restrictive policy is holding it back inappropriately and modestly restrictive policy seems appropriate. All that said, there's also downside risk to the labor market. In coming months, we'll receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate. Just a follow up, by coming months, does that include the possibility?

You'll be getting essentially two rounds of jobs and inflation data between now and the September meeting. Is that potentially adequate to make a decision to lower rates at that point? So you're right. We do have – this is an intermeeting period when we'll get two full rounds of employment and inflation data before the time of the September meeting. We have made no decisions about September. We don't do that in advance. We'll be taking that information to consideration and all the other information we get as we make our decision at the September meeting. Thank you, Mr. Chairman. You took out the word or the notion that uncertainty has diminished from this statement. Does that mean uncertainty has increased? And I'm just wondering, the administration has struck several deals with large trading partners where it seems like we now know what the rate is going to be.

Does knowing that rate add to your certainty to change policy or do you need to wait to see the economic effects? So essentially the statement in our statement about uncertainty reflects what's gone on since the last meeting. So at the time of the last meeting, uncertainty had moved down a little bit. But it was more or less even this time. So we took out, you know, had diminished because it didn't diminish further. So there's not really much in that. And then your second question is, say again, there have been several deals. that have been struck and now we seem to have an idea what the tariff rates are going to be

with some of our large trading partners. Does that not add to the kind of certainty you might need or is it you're waiting for the economic effects to show themselves? No, I think we're still, so you're right, it's been a very dynamic time for these trade negotiations and lots and lots of events in the intermeeting period, but we're still, you know, ways away from seeing where things settle down. We are clearly getting more and more information And, you know, I think at this point, people's estimates, our estimates, outside estimates, of the likely, you know, effective level of tariffs is not moving around that much at this point. But at the same time, there are many uncertainties left to resolve.

So, yes, we are learning more and more. It doesn't feel like we're very close to the end of that process, and that's not for us to judge. But it feels like there's much more to come. you know, as well, looking ahead. Hi, Mr. Chairman, Neeler-Rone with Axios. This morning we got a GDP report in which final domestic private purchases decelerated, the slowest pay since 22. There was a weakness in the interest-sensitive sectors in residential investment, commercial structures.

Are those not signs that monetary policy is a little too restrictive right now, given current economic conditions? So the GDP and PDFP numbers came in pretty much right where we expected them to come in. You've got to look at the whole picture. So certainly, as I mentioned in my opening remarks, economic activity data, GDP, private domestic final purchases, which we think is a narrower but better signal for future, for where the economy is going, has come down to a little better than 1%, 1.2%, I think, in the case of GDP for the first half,

whereas it was 2.5 last year. So that has certainly come down. But if you look at the labor market, what you see is, by many, many statistics, the labor market is kind of still in balance. It's things like quits, you know, job openings, and let alone the unemployment rate. They're all very, by many measures, very similar to where they were a year ago. So you do not see weakening in the labor market. You do see a slowing in job creation, but also in a slowing in the supply of workers.

So you've got a labor market that's in balance, albeit partially because both demand and supply for workers, is coming down at the same pace. And that's why the unemployment rate has remained roughly stable, which is why I said we do see downside risk in the labor market. I mean, our two mandate variables, right, are inflation and maximum employment. Stable prices and maximum employment, not so much growth. So the labor market looks solid. Inflation is above target. And even if you look through the tariff effects, we think it's still a bit above target. And that's why our stance is where it is. But as I mentioned, you know, downside risks to the labor market are certainly apparent. So on labor, given the fluid labor supply situations, there are a number for this job before we get on

Friday that would look to you like equilibrium job growth? You know, the main number you have to look at now is the unemployment rate, because it's true that the, you know, demand for workers in the form of, let's call it, just say payroll jobs, that number has come down, but so has the break-even number, kind of in tandem. So, So, you know, as long as that puts the labor market in balance, the fact that it's getting into balance due to declines in both supply and demand, though, I think, does, it is suggestive of downside risk. So we, of course, we'll be watching that carefully. Thank you. Colby Smith with the New York Times. Two of your colleagues called for a quarter point cut today, and I'm wondering what aspects of their argument were most compelling to you and how you're weighing their views against those on the United States. the committee who, as of the June forecast, were in the camp of the Fed holding interest rate study for the remainder of the year. And just in terms of the June SEP in particular, is that still the best representation of where the court of the committee is?

So on the dissents, you know, what you want from everybody and also from a dissenter is a clear explanation of what you're thinking is and what are the arguments you're making. And that's, we had that today. So I think basically this, was this was quite a good meeting all around the table where people were, you know, thought carefully about this and put their positions out there. As I mentioned, you know, the sort of the majority of the committee was of the view that inflation is a bit above target, maximum employment is at target. That calls for modestly restrictive, in my way of thinking, modestly restrictive stance of policy for now. But we had two dissenters who, I think, you know, you want that clear

thinking and you know expression of your thinking and we certainly had that today i think all around the table in terms of um you ask about the june sEP you know i i wouldn't that you're right that that's what it that's what it says and that may that may well i i couldn't point to it six weeks later as as expressing people saw you really can't do that we don't run an sEP and i don't like to substitute in my own estimate of what the sEP might be we don't have one so So I'll just say that, you know, we haven't made any decisions that at September. We'll be monitoring all the incoming data and asking ourselves whether the federal funds rate is in the right place. And just on the point about policy being only modestly restrictive, does that mean that there's actually not much scope to reduce rates once the conditions for a cut are met, barring a significant weakening of the labor market?

So let me say my own estimate is modestly restrictive, and there are a range of views of what the neutral rate is at this moment, for our economy, and so others may say it's more restrictive or less restrictive even. You know, we're going to be, at some point, when we return to moving toward a more neutral stance, we'll be making that judgment as we go. I don't think we have a preset course. It's not so mechanical as saying, you know, we've derived with great confidence the neutral rate and that is our destination because really we understand that no one actually knows what the neutral rate is. we know it by its works, and that will be how the way the economy reacts over time to, you know, to slightly looser policy.

Nick Tameros, the Wall Street Journal. Chair Powell, my question is about what have you learned over the last few months about the inflation generating and price pass-through process? And just to drill down, the June CPI report showed evidence of tariff-induced goods inflation. Now, the tariff landscape is only starting to be settled with some of these more recent deals. Given the lags between when tariffs are announced and when they show up in goods prices, is two months a long enough horizon to evaluate the impact and be confident that tariffs aren't impacting the broader inflation process? I think you have to think of this as still quite early days.

And so I think what we're seeing now is substantial amounts of tariff revenue being collected on the order of $30 billion a month, which is substantially higher than, you know, than before. And the evidence seems to be mostly not paid, paid only to a small extent, through exporters lowering their price. And companies or retailers, sort of people who are upstream, institutions that are upstream from the consumer are paying most of this for now. Consumers are, it's starting to show up in consumer prices, as you know, in the June report. We expect to see more of that. And we know from surveys that companies feel that, that, they have every intention of putting this through to the consumer. But, you know, the truth is,

they may not be able to in many cases. So I think it's, we're just going to have to watch and learn empirically how much of this and over what period of time. I think we've learned that the process will probably be slower than expected at the beginning, but we never expected it to be fast. And we think we have a long way to go to really understand exactly how we'll be. So that's how we're thinking of it right now. So if I could follow up, is the reticence to look through core goods inflation being driven by the judgment that during the pandemic expectations proved more adaptive than anyone at the Fed expected? Is it being driven by uncertainty over how restrictive policy is? You could argue we are a bit looking through goods inflation by

not raising rates. You know, we haven't reacted to new inflation. But I mean, I wouldn't I wouldn't insist upon that, but I don't think, I think the base case, as I said, as I said, a reasonable base case is that these are one-time, one-time price effects. Of course, in the end, there will not be, this will not turn out to be inflation because we'll make sure that it's not. We will, through our tools, make sure that this does not move from being a one-time price increase to serious inflation. We want to do that efficiently, though, efficiently. And that means we want to do it if you move too soon, you wind up maybe not getting inflation all the way fixed and you have to come back. That's inefficient. If you move too late, you might do

unnecessary damage to the labor market. So there won't be in the end and a big inflationary problem. What we're trying to do is accomplish that in a way that is efficient. But in the end, there should be no doubt that we will do what we need to do to keep inflation under control. ideally we do it efficiently. Michael McKee from Bloomberg Television and Radio. The one big bill, leaving aside the adjectives, do you expect it to add stimulus to the economy in 2026, and would that be an argument for remaining on hold or cutting back on the number of rate cuts you would expect for next year? So, of course, let me just ritual disclaimer that we don't express any judgments or anything led on fiscal legislation or other legislation, for that matter.

But I would say when you think that, you know, the biggest part of the bill was making permanent existing law on taxes, I don't think we see it as particularly stimulative. There should be some stimulative effect, but it shouldn't be significant over the next couple of years. And to follow up, what do you – well, I don't want to put this in terms of you and the President. So let me ask it this way. Do you have concerns about the cost to the government of keeping rates elevated for longer in terms of interest rate charges? No, we have a mandate, and that's maximum employment and price stability, and it is not something we do to consider the cost to the government of our rate changes. We have to be able to look at the goal variables Congress has given us, use the tools they've given us to achieve those goals. And that's what we do.

We don't consider the fiscal needs of the federal government. No advanced economy central bank does that. And it wouldn't be good for, if we did do that, it would be good neither for our credibility nor for the credibility of U.S. fiscal policy. So it's just not something we take into consideration. Hi, Victoria Guido with Politico. When it comes to the renovations of the Federal Reserve's headquarters that the administration has been looking into, do you see their interest in that issue as being directly tied to the president's push to get you to lower interest rates? Not for me to say. I will say we had a nice visit with the president. It was an honor to host him.

It's not something that happens very often at the Federal Reserve to have the president come over, let alone to visit a building. But it was a good visit. Are there any aspects of the project that they've raised that you see is making you reconsider any aspects of the project? So, you know, we, this project was hatched and conceived almost a decade ago now, and we went through the very long process of clearing it through historic preservation at the National Capital Planning Commission, and a lot of back and forth there was very constructive. We started out to do the work, and we were very well along on that work.

And I was quite pleased to have the president say multiple times that what he really wanted to see was Was us getting this construction completed as soon as possible. That is our focus and that's what we're gonna do Thanks mr. chairman and Andrew Ackerman with the Washington Post What message you take from the fact that inflation hit 2.1% last September and has bounced higher since? Why do you think? If financial conditions are as strict and a neutral rate's below 4% when inflation has stopped falling for almost a year? So inflation, when you talk about these 12-month inflation measures, you're always battling residual seasonality.

So we'll have, for example, two months of high inflation, sometimes early in the year, and then inflation turns lower, and a lot of that may just be an artifact. So that's why we look at the 12-month numbers. Look, I think inflation is most of the way back to 2%. there are things like the catch-up inflation. So, for example, all the insurance costs that are now, they're only now going through inflation, but they actually reflect inflationary pressures from two, three years ago. So that's got to go through. In addition, now we have, you know, three or four-tenths of inflation in core inflation from tariffs. So, and we can't really separate that out. We're not going to have a separate, you know, kind of inflation that isn't the tariffs. We're always going to be dealing with the whole, all of inflation. But we, we, you know, we can't really separate that out. We're not going to be dealing with all of inflation. But we, we, we The composition, as I mentioned, has really changed. And, you know, if you go back to the last couple of years, it was all about services inflation, which was being very sticky.

Now services inflation is coming down nicely. Goods inflation was well-behaved before, and now goods inflation is going up. So the story has really changed. That's partially because of tariffs. It's also partially because we had restrictive policy in place, and we've seen that the result of that gradually work its way through the services economy. Okay. The other thing I wanted to ask is, are you comfortable that BLS can continue performing their mission effectively if they take an 8% reduction in head count and authorized spending as the administration's proposed? I'm not going to comment on the administration's proposal. I do think, as I've said, I think that we, you know, we're getting the data that we need to do our jobs.

And I think it's really important that good data helps not just the Fed, it helps the government, but it also helps the private sector. You know, people in the economy, they use this data a lot, too. So it's quite important for our economy and certainly for the Fed's work and other government agencies work, that we continue to get better at data. That's what we've been doing for 100 years. We've been getting better and better and better. It's very hard to accurately capture in real-time the output of a 20-plus trillion-dollar economy. And the United States has been a leader in that for 100 years, and we really need to continue that, in my view.

Thank you, Mr. Chairman. Edward Lawrence from Fox Business. How concerned are you with the data that we're showing coming in, showing no significant upward trend in inflation over the past six months, that the wait-and-see approach for inflation is actually giving companies cover to raise prices? How concerned am I that the say that again? The wait-and-see approach is getting-the-wait-and-see approach. What do you mean by that? For cutting rates. You're waiting to see if the tariffs will affect inflation. So it's a wait-and-see approach. Well, so that, you know, that would, that's, where policy is restrictive. When we start cutting, it'll go toward neutral. Okay. This delay, though, where you're saying is there one time price increase for tariffs,

which possibly could lead into bigger inflation or more inflation. Is that giving companies cover, though, to raise prices? Well, what may be giving, it's not our policy stance, what may be giving some companies will certainly be taking advantage of the fact of the tariffs and all the discussion of how they're going to, you know, There are people, you know, companies will raise prices when and as they can. And you saw it famously in the first administration of President Trump during those tariffs. Washing machines were tariffed, but dryers weren't.

But what do you know, the price of dryers went up, too, just like washing machines. So companies will often just take, you'll cross the street in a group, if you know what I mean. That'll happen. We don't see a lot of that. I mean, what we see now is basically the very beginnings of whatever the effects turn out to be on goods inflation. And, you know, I'll say again, they may be less than people estimate or more than people estimate. They're not going to be zero. Consumers will pay some of this.

Businesses will pay some of this. Retailers will pay some of this. But, you know, we're just going to have to see it through. Just a follow, if I could. Some additional tariffs have been in place since February. And things, you know, really haven't broken yet with the economy. So how do you justify to somebody who's looking for a house who's facing a 7% mortgage and maybe can't afford those rates?

How do you justify that? Well, so the housing is a special case, right? Our, we don't set mortgage rates at the Fed, right? We set an overnight rate. And the rates that go into mortgages are longer-term rates, like treasury rates. It might be 30-year rates. It might be shorter than that. It's not the overnight Fed's rate.

It's not that we don't have any effect. We do have an effect, but we're not the main effect. There are the things, though, going on in the housing sector, and one of those is just there's kind of a long-term housing shortage that we have. We haven't built enough housing. This is not something the Fed can help with, and that'll be the case even after things normalize. So I think the best thing that we can do for housing

is to have 2% inflation and maximum employment. And that's what we can contribute to housing. There are lots of other jobs to do for the private sector in Congress, but that's what we're trying to get to. I mean, we've made a lot of progress toward that. We have a very good labor market right now. Inflation, we were very close to 2 percent. We're seeing some goods inflation move us away, but so far not very far away. Hi, Chair Powell.

Thank you. Well, can you give us a little more about what kind of economic data does the Fed need to see before you'll be ready to cut? I mean, do you need inflation back nearly to target? Are there other things in the pricing that you look for? Do you need to see weakening in the job market? What kind of things are you looking for? I mean, ultimately, it could be any of those things, right? But, you know, if you saw that the risks to the two goals were moving into balance,

if they were fully in balance, that would imply that you should move toward a more neutral stance of policy. This is the special situation we're in, which is we have two-sided risk, risk to both of our goals. When we paused, inflation was above target and the labor market was pretty good. So, you know, that was a time when policy was restrictive when we paused. And to be restrictive is to be supporting a return to our inflation target, right? So as the two targets get back into balance, you would think you'd move in a way, closer to neutral. And that the next steps that we take are likely to be in that direction. What will it take? You know, it will just take, it will be the totality of the evidence.

As I mentioned, there's quite a lot of data coming in, which before the next meeting. Will it be dispositive of that? You know, it's really hard to say. We don't make those decisions right now. So we'll have to see. Well, I guess just in terms of inflation, though, for example, like will, you know, some people would point to if it remains only in goods and it doesn't bleed over to services, then maybe that's evidence that the tariff effect is going to be a temporary one-time thing. Is that kind of thing affect your thinking, or do you just need to see the number come down closer to two? We'll look at everything. You know, it's, as I mentioned, you know, a pretty reasonable base

case is that this will be a one-time price increase. And in the end, we'll make sure that that's the case. We're just trying to do that efficiently. We're, we're, and efficiently means getting the timing right. So we don't, again, if we go, if we cut rates too soon, maybe we didn't finish the job with inflation. There's history is dotted with examples of that. If you cut too late, then maybe you're doing unnecessary damage to the labor market.

So we're trying to get that timing right. And that's effectively what we're doing. Claire Jones, financial times. Just a question on the dollar. We've seen it declined quite heavily this year. I was wondering if there's been any discussion about that at the meetings and how, to what degree that may be complicating your attempts to get inflation back to target. So this goes back to the division of labor between the Fed and the Treasury, as you I'm sure know, and the Treasury only speaks to the dollar. It's not something that's been a topic of, you know, major discussion at all at the, at the,

at the Fed. I wouldn't say it doesn't come up. The transcripts when they come out in a few years, they'll probably reflect some mentions of the dollar, but it would never be a major focus. Just to follow on, if I made to Andrew's question, I think the amount of imputed data in CPI now is up to 35%. I mean, is there any discussion of that as well? Is there any consideration of looking at alternative measures, data scraping and so on in order to just ensure you've got a good read on what's happening to prices in the US economy? Thank you. You know, we're, so we're monitoring the situation.

We do, of course, I mean, as you know, during the pandemic, we looked at a whole lot of new kinds of data. People are looking at big data sets that you can get from all sorts of places, and we do all of that. But at the same, we really need, the government data really is the gold standard in data, and we need it to be, you know, to be good and be able to rely on it. And we're not going to be able to substitute for that. But we have to make do with what we have. But I certainly hope that we get what we need. Jay. Hi, Mr. Chairman, Jay O'Brien, ABC News.

President Trump has obviously invoked your name a lot. He has personally pressured you. Are you concerned the way that conduct might impact the Fed's independence going forward? I'll just say that so I think that having an issue. independent central bank has been an institutional arrangement that has served the public well. And as long as it serves the public well, it should continue and be respected. If it didn't serve the public well, then it wouldn't be something that we should just automatically defend. But what it gives us, and other central banks, what it gives you is the ability to make these very

challenging decisions that in ways that are focused on the data and the evolving outlook, the balance of risks and all the things we talk about and not political factors. And so governments all over the advanced economy world have chosen to put a little bit of distance between direct political control of those decisions and the decision makers. So if you were, if you were not to have that, it would be a great temptation, of course, to use interest rates to affect elections, for example. And that's something that we don't want to do. So I think that's pretty widely understood. Certainly it is in Congress. And I mean, I think it's very important. I'll just say that. Afternoon, Sir Powell. Maria Lois Akpurro from Bloomberg News. You mentioned a slowdown

in consumer spending, and I wanted to see if you could walk us through what was the discussion with the committee around that. We've seen delinquency rates rising for upper income households. How do you see that evolving in the next few months, and how much of a vulnerability that is for G economy going forward? Consumer spending had been very, very strong for the last couple of years and had repeatedly, forecasters, not just us,

had been forecasting it would slow down, and now maybe it finally has. So I would say if you talk to credit card companies, for example, they will tell you that the consumer is in solid shape and that spending is at a healthy level. It's not growing rapidly, but it's at a healthy level, and delinquencies are not a problem.

You mentioned high-end delinquencies. I don't know what to make of that. I read the same thing. But so generally, and if you look at the banks and when the banks talk about in their earnings calls, the performance of credit has been good. So essentially, you have a consumer that's in good shape and is spending, not at a rapid rate. But it's true. And it was, again, right in line with what we expected the GDP data that we got this week. So, and I think it's still a little bit difficult to interpret because you have these massive swings in net exports, which, which may also be affecting, you know, some of that can be affected by, can affect consumer spending as well.

Look, it's one of the data points that we pay most careful attention to. And there's no question that it's slowed. And, you know, we're watching it closely, but we also watch the labor market and the performance of inflation, those are two variables that were assigned to to maximize. And just to follow up on what my colleagues were asking about this sense, Governor Waller said that the labor market is on edge, and he was pointing to weaknesses on the private sector. I was wondering, you've said that the main number to look at is the unemployment number overall. But what was the discussion about the state of the private jobs market?

So I'm not going to talk about any individuals, you know, any individuals' comments. I wouldn't do that. But look, I think what we know is that private sector job creation, certainly in the last report, we'll see on Friday, but had come down a bit. And if you take the QCEW adjustment seriously, it may be even low, maybe close to zero. But the unemployment rate was still low. So what that's telling you is that, you know, demand for workers is slowing, but so is the supply. So that's about it. It's in balance, oddly enough.

You've got a very low unemployment rate, and it's kind of been there for a year as job creation has moved down. But also, we know that, you know, because of immigration policy, really, the flow into our labor forces is just a great deal slower. And those two things have slowed more or less in tandem. If you look at things like I mentioned quits, look at wages, wages are gradually cooling, look at vacancies to unemployment. Those things have been pretty stable for, they haven't really moved a lot in a full year. So I think if you take the totality of the labor market data, you've got a solid labor market. But I think you have to see that there are downside risks.

It's not, you don't see weakening in the labor market, but I think you've got downside. risks in a world where unemployment's being held down because both demand and supply are declining. I think that's, it's worth paying close attention to it, and we are. Hi, Chair Powell. Nancy Marshall Ginsburg with Marketplace. One more question on the lack of unanimity in today's decision, the two dissents. Was there talk during the meeting? I know you're not going to talk about exactly what individuals said, but in general, was there talk during the meeting of cutting rates and what was the case against that at the meeting? Sure. So, you know, we have an economic go-around where people talk about the economy, and then the next, and to that's yesterday, and then today we have a monetary policy going on all the way around the table. Everyone gives their views. So the discussion around policy was, the majority view was still what it has been, which is that inflation is running above target, maximum employment is right at target. That means policy should be a little bit restrictive, somewhat restrictive, because we want,

We want inflation to move all the way back to its target. So that's where people have been and still are. Two of our members felt that the time had come to cut and that they, for the reasons that they're going to express, I won't tell you the reasons they'll issue some kind of a thing in the next day or so. So, but that's the story. And I would say, you know, well argued, very thoughtfully argued all around the table, good arguments, and, you know, it's a situation where an unusual situation. The economy is in,

you know, good shape, but it's an unusual situation where you have risks to both your employment mandate and your inflation. That's the nature of a supply shock. And it's probably not surprising that there would be differences and different perspectives on that, as well as different views of where the neutral rate is, so different views of how tight policy is. So we have the, Those, I will say what you hope is that people, you know, explain their positions very thoughtfully and clearly, and we absolutely had that today all the way around the table. I would call it one of the better meetings I can recall from that standpoint. And you've said you're waiting to be confident inflation is heading toward your 2% target before you start cutting rates. When you do get that confidence, would you be in favor of lowering rates right away?

It's not quite the way I would put it. You know, I said that's why we think policy should be restrictive. It's because, you know, inflation is above target. When we have risks to both goals, one of them is farther away from gold than the other, and that's inflation. Maximum employment's at goal. So you have to, that means policy should be tight because tight policy is what brings inflation down. If you came to the view that the risks to the two were more in balance, that would imply that policy shouldn't be restrictive. It should be more neutral, more, you know, a neutral stance.

And that would be somewhat lower than where we are. Now no one knows exactly where that is. So that's the framework, I think, I'd be taking. And, you know, we'll just have to see. We're going to be, obviously, looking at a lot of data in the next cycle. It is one of the cycles where we have two employment and two inflation reports. and we'll see where that takes us. Jeff.

Thank you, Mr. Chairman, for taking the question. Jeff Cox from CNBC.com. A metric that you like to cite a lot as a final sales to private domestic purchasers, that was down to 1.2% gain in second quarter from 1.9% in Q1, suggesting that there's some softening and underlying demand. I just wonder if you look at that,

you combine that with some of the housing numbers, the weakness that you acknowledged at the top of your remarks that the housing market is in fact weak. And the inflation numbers from GDP today came down 2.1% for headline, 2.5% for core. I'm wondering how much more movement you would need to see from these data points before you would be comfortable with cutting in, say, September?

It's going to be the total, hard to answer that specifically. PDFP, I think, for the first half, product and domestic final purchases, or final sales, people call it, was 1.6 on the first half. GDP, I believe, was 1.2%. For that's the whole half, you mentioned the quarters. So those are slower, but, you know, GDP is bumpy quarter to quarter, half to half, and often gets revised, you know, after the fact. The labor market data, we still think, continue to think, is the best data we have on the economy. And that shows a 4.1 percent unemployment rate. It shows wages.

you know, still at a healthy level, but moving ever closer to what we would regard as long-run, sustainable, consistent with longer-run productivity and 2% inflation. So the labor market is actually still quite solid. Inflation is above target, even ignoring tariffs. It's a little bit above target, and tariffs. So we're watching all of that. And, again, trying to do the right thing in what is a challenging situation because you're being pulled in two directions. And you have to decide which of those it took to go in. And actually at some point, if they're if they're sort of equally at risk, then you really want to be at a neutral policy stance, which we're not right now.

So we're safe to say that if the data kind of stays in line with where it is right now, that you wouldn't be comfortable with cutting in September? I'm not going to, I'm not going to say that. No. I just think we're going to need to see the data. And it can go in many different directions. the inflation data and the employment data. And we'll just, we're going to make a judgment based on all of the data and based on that balance of risks analysis that I mentioned. Thank you. Thank you. Thank you, Chair Powell.

Greg Rob from MarketWatch. The Treasury Secretary has said recently that it would be confusing for the markets if you stayed on as a governor after your term on the, as chair ends. And I was wondering if you had any update for us on a decision. decision on that front. Sorry, I do not have any update for you. Thanks very much, everyone.