Fed Chair Jerome Powell testifies before Congress

the committee will come to order without objection the chair is authorized to declare a recess of the committee at any time this hearing is entitled monetary policy and the state of the economy I now recognize myself for four minutes to give an opening statement today this committee convenes for hearing on monetary policy and the state of the economy chairman Powell welcome back today I'd like to start by addressing the current elephant in the room when it comes to monetary policy and the Fed this president has made it clear that he has no understanding or respect for the independence of the Federal Reserve he has said the Fed quote doesn't have a clue quote unquote and called it the most difficult problem for the US according to media reports he has discussed firing chairman Powell just as he has fired others he does not agree with let's be clear it is a central that the Federal Reserve maintain its independence from the executive branch and so I urge chairman Powell and other Federal Reserve Board governors not to submit to the high-pressure tactics of this president who continues to push reckless and harmful economic and social policies another issue I hope chairman Powell will address today is Facebook's recently announced plan along with 27 other companies to develop a cryptocurrency and digital wallet I and other Democrats on the committee have raised concerns that Facebook's planned products may ultimately be intended to establish a parallel banking and monetary policy system to rival the dollar in a letter last week we asked Facebook to agree to a moratorium on any movement forward on its plans to create a cryptocurrency or digital wallet I believe that Facebook is planning what they're planning raises serious privacy Trading national security and monetary policy concerns or consumers investors the US economy and the global economy but Facebook's foray into this field should signal to all of us that our current system of regulation lacks adequate coordination safeguards and attention to crypto to our currency chairman Powell the Fed should be a leader on this issue and should not take a wait-and-see approach when it comes to examining a financial system involving 2.4 billion people so I look forward to hearing your views on Facebook's plans to create a crypto currency today another issue I would like to discuss his Bank deregulation I remain concerned about the Federal Reserve's actions to weaken safeguards that Congress and Chairman Powell's predecessors put in place following the financial crisis specifically it appears that the Fed may be following the Trump administration's deregulatory plan to weaken the capital and liquidity buffers of some of the largest banks as I've said before I believe this to be ill-advised particularly when many economists including economists at the Federal Reserve believe that current bank capital levels on the low end of what would be necessary to withstand another financial crisis I look forward to your testimony and to discuss in these matters with you today the chair now recognize the ranking member of the committee the gentleman from North Carolina mr. McHenry for four minutes for an opening statement well I think the chairwoman for yielding I'd like to as well welcome chairman Powell back to the committee chairman Powell's prioritize outreach to Congress and men and members of this body have benefited greatly from hearing his thoughts in February and in individual meetings since then so we thank you for your return I know the markets are interested in your testimony but we as policymakers - are interested in your testimony as I stated our hearing in February the economy over the last two and a half years is witnessed remarkable growth and unemployment has reached lows that many believed were impossible republican-led tax relief and regulatory reform have supported these trends with millions of Americans benefiting from our policies we're seeking this some wage growth we're seeing this in continued job growth and we are all Americans are benefiting from this these benefits continue to endure five months at Central last testimony and in the most recent FOMC statement the Fed concluded that the labor markets remain strong and then economic activity is rising job gains have been solid and the unemployment rate remains low but we cannot take our foot off the pedal in February we just discussed how the Fed was undertaking targeted rulemaking to provide regulatory relief that allows financial institutions to operate efficiently in the communities that they serve and compete globally as well I hope that you chairman Powell will continue to work to undertake these efforts with a sense of urgency especially in the rulemaking category I also encouraged chairman Pao to maintain his commitment to transparency and proactive communication with Capitol Hill especially when the Fed is considering changes to its policies and operations at our last hearing for instance the Chairman noted that the Fed continues to support its current inflation target but as we know there are numerous proposals that would affect how the Fed might pursue that target I hope that the Fed will approach such proposals with an appropriate level of prudence given the limitations of central bank's toolkits at this series this point in our economic cycle until we and also until we fully understand how those limitations have emerged and how they can reliably be overcome so finally let me reiterate my concerns concerns shared by the Fed Excel itself the global economic uncertainty could result in headwinds here at home prior to our February hearing the Fed made clear that Europe and China represent the risks that the Fed would continue to monitor and where appropriate work to mitigate I hope we can touch on those things today let me highlight China in particular when the Chairman last appeared before our committee he noted the Chinese economy of state runs but that Beijing has also attempted to make certain market-oriented reforms I'm concerned that these reforms may not be deep enough when the world's second largest economy is a one-party state without the rule of law without transparent decision-making where monetary policy and allocation of capital bends to politics and cronyism where 1 million citizens can be locked up in camps while another million take to the streets to defend their freedoms then we all need to focus on that country and its regime as you as a unique source of risk to the global stability and global growth so I would encourage the Chairman to work with his colleagues both here and abroad so we have a sufficient understanding of China and as well as a sufficient as a sufficient set of tools within central banks if something were to go wrong and again thank you chairman Pao for returning today thank you for your responsiveness your candor is welcomed and encouraged and we thank you for attempting to speak like a normal human being even amidst very complex financial markets and complex decision-making within our independent monetary policy group called the Federal Reserve thank you the chair now recognizes the subcommittee chair mr. cleaver for one minute thank you madam chair we're pleased to have you here again mr. chairman thank you for being here and I wanted to discussed the impact of this trade war over 500 days in his trade war but I I can't hardly move there because the number one concern I'm having is that this administration is very publicly trying to force financial markets and the Federal Reserve to lower interest rates to offset what I think to be an irrational trade war and poor fiscal policies and the the the the issue for me is that in in January I will have been on this committee for 15 years and I have never seen a president metal in the Federal Reserve as this president has and it is deeply disturbing and the problem is that it seems to be working because we're moving in the direction that he's been ordered and hopefully you can address some of this from let me get back into the question answer period thank you madam chair the chair now recognizes the subcommittee ranking member mr. Stivers for one minute thank you madam chair chair Pao welcome back to the committee because of the tax cut and regulatory reforms the US has seen unprecedented economic growth wage growth as well as record low unemployment and stable prices and since the last time you were here we've seen a mostly steady economy with unemployment at three point seven percent and consumer prices only edging up about 0.1 percent but I've heard anecdotal evidence of slowing investment and price increases I want to thank you for your steady hand on monetary policy that's an important part of our economic success and while acknowledging the recent success I know the Fmoc meetings have pointed to uncertainties in economic outlook meaning that your data may be telling you the same thing that I've been hearing I do agree with chair watters that I want to hear about your perspective on Facebook's cryptocurrency I think they are attempting to undermine the dollar as the world's currency I also am interested in hearing your views of where we are in the business cycle and what we can do to support you on fiscal and other policies I yield back the balance of my time thank you very much I want to welcome to the committee our distinguished witness Jerome Powell chairman of the board of governors of the Federal Reserve System he has served on the board of governors since 2012 and as its chair since 2017 mr. Powell has testified before this committee and I believe he does not need any further introduction without objection your written statement will be made part of the record mr. Powell you are now recognized to present your oral testimony good morning chairwoman waters ranking member McHenry and other members of the committee I'm pleased to present the Federal Reserve's semiannual monetary policy report to Congress let me start by saying that my colleagues and I strongly support the goals of maximum employment and price stability that Congress has set for us for monetary policy we are committed to providing clear explanations about our policies and activities Congress has given us an important degree of Independence so that we can effectively pursue our statutory goals based on objective analysis and data we appreciate that our independence brings with it an obligation for transparency so that you and the public can hold us accountable today I will review the current economic situation and outlook before turning to monetary policy I will also provide an update on our ongoing public review of our framework for setting monetary policy the economy performed reasonably well over the first half of 2019 and the current expansion is now in its 11th year however inflation has been running below the FOMC's symmetric two percent objective and crosscurrents such as trade tensions and concerns about global growth have been weighing on economic activity in the outlook the labor market remains healthy job gains averaged 170 mm per month from January through June this number is lower than the average of two hundred and twenty three thousand jobs per month last year but above the pace needed to provide jobs for new workers entering the labor force consequently the unemployment rate moved down from three point nine percent in December to three point seven percent in June close to its lowest level in 50 years job openings remained plain plentiful and employers are increasingly willing to hire workers with fewer skills and train them as a result the benefits of a strong job market have been more widely shared in recent years indeed wage gains have been higher for lower skilled workers that said individuals in some demographic groups and in certain parts of the country continue to face challenges for example unemployment rates for African Americans and Hispanics remain well above the rates or whites and Asian's likewise the share of the population with a job is higher in urban areas than in rural communities and this gap has widened over the past decade a box in the July monetary policy report provides a comparison of employment and wage gains over the current expansion or individuals with different levels of education GDP increased at an annual rate of 3.1 percent in the first quarter of 2019 similar to last year's pace this strong reading was driven largely by net exports and inventories components that are not generally reliable indicators of ongoing momentum the more reliable drivers of growth in the economy are consumer spending and business investment while growth in consumer spending was weak in the first quarter incoming data show that it has bounced back and is now running at a solid pace however growth and business investment seems to have slowed notably and overall growth in the second quarter appears to have moderated a slowdown in business fixed investment may reflect concerns about trade tensions and slower growth in the global economy in addition housing investment and manufacturing output declined in the first quarter and appear to have decreased again in the second quarter after running close to our 2 percent objective over much of last year overall consumer price inflation measured by the 12-month change in the price index for personal consumption expenditures or PCE inflation declined earlier this year and stood at 1.5 percent in May the 12 month change in core PCE inflation which excludes food and energy prices and tends to be a better indicator of future inflation has also come down this year and was 1.6 percent in May our baseline outlook is for economic growth to remain solid labor markets to stay strong an inflation to move back up over time to the committee's 2 percent objective however uncertainties about the outlook have increased in recent months in particular economic momentum appears to have slowed in some major foreign economies and that weakness could affect the US economy moreover a number of government policy issues have yet to be resolved including trade developments the federal debt ceiling and breaks it and there is a risk that weak inflation will be even more persistent than we currently anticipate we're carefully monitoring these developments and will continue to assess their implications or the US economic outlook and inflation the nation also continues to confront important longer-run challenges labor force participation by those in their prime working years is now lower in the United States and in most other nations with comparable economies as I mentioned there are troubling labor market disparities across demographic groups and different parts of the country a relative stagnation of middle and lower incomes and low levels of upward mobility for low and lower income families are also ongoing concerns in addition finding ways to boost productivity growth which leads to rising wages and living standards over the longer term should remain a high national priority and I remain concerned about the longer-term effects of high and rising federal debt which can restrain private investment and in turn reduced productivity and overall economic growth the longer-run vitality of the US economy would benefit from efforts to address these issues against this backdrop the FOMC maintained that the target range for the federal funds rate at two and a quarter to two and a half percent in the first half of this year at our January March and May meetings we stated that we would be patient as we determined what future adjustments to the federal funds rate might be appropriate to support our goals of maximum employment and price stability at the time of our May meeting we were mindful of the ongoing cross currents from global growth and trade but there was tentative evidence that these cross currents were moderating the latest data from China and Europe weren't encouraging and there were reports of progress in trade negotiations with China our continued patient stance seemed appropriate and the committee saw no strong case for adjusting our policy rate since our May meeting however these cross currents have reemerged creating greater uncertainty apparent progress on trade turned to greater uncertainty and our contacts in business and agriculture report heightened concerns over trade developments growth indicators from around the world have disappointed on net raising concerns that weakness in the global economy will continue to affect the US economy these concerns may have contributed to the drop in business confidence in some recent surveys and may have started to show through to incoming data and our June meeting we indicated that in light of increased uncertainties about the economic outlook and muted inflation pressures we would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion many FOMC participants saw that the case for a somewhat more accommodative monetary policy stance had strengthened since then based on incoming data and other developments it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook inflation pressures remain muted if she has made a number of important decisions this year about our framework for implementing monetary policy and our plans for completing the reduction of the Fed securities holdings and our January meeting we decided to continue to implement monetary policy using our current policy regime with ample reserves and emphasize that we are prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments at our March meeting we communicated our intention to slow starting in May the decline in the feds aggregate securities holdings and to end the reduction in these holdings in September the July monetary policy report provides details on these decisions the report also includes an update on monetary policy rules the FOMC routinely looks at monetary policy rules that recommend a level for the federal funds rate based on inflation and unemployment rates I continue to find these rules helpful although using these rules requires careful judgment we were conducting a public review of our monetary policy strategy tools and communications the first review of its kind for the FOMC our motivation is to consider ways to improve the committee's current policy framework and to best position the Fed to achieve maximum employment and price stability the review has started with outreach - and consultation with a broad range of people and groups through a series of Fed listens events the FOMC will consider questions related to the review at upcoming meetings and we will publicly report the outcome of our discussions thank you and I'll be happy to respond to your questions thank you very much chairman Powell I now recognize myself for five minutes for questions on June 18 Facebook announced its plans to launch Libra new global cryptocurrency as well as a new payment system calibra which will facilitate Libra transactions on June 24th the Federal Reserve's vice-chairman of supervision Randall Quarles quote a letter in his capacity as chairman of the Financial Stability Board to the g20 leaders noting a wider use of new types of cryptocurrency a crypto assets for retail payment purposes would warrant close scrutiny by authorities to ensure that they are subject to high standards of regulation in quote signaling that global regulatory coordination of Facebook will be a priority chairman Powell did the Federal Reserve speak with Facebook about their Libre currency and if so where any concerns raised does the Federal Reserve have any authority to supervise and regulate what could be the world's largest payment system that's the Federal Reserve have any concerns about monetary policy with regard to Libre thank you madam chair we did actually have a meeting with representatives of Facebook a couple of months before the announcement I think they they made fairly broad set of visits to authorities around the world but getting to your question some let me start by saying that that we do support responsible innovation in the financial services industry as long as the associated risks are appropriately identified and managed and as we'll discuss while the project sponsors hold out the possibility of public benefits including improved financial access for consumers Libre raises many serious concerns regarding privacy money-laundering consumer protection and financial stability these are concerns that should be thoroughly and publicly addressed or proceeding and that's why at the Fed we've set up a working group to focus on on this set of issues we are coordinating with our colleagues in the government in the United States the regulatory agencies in Treasury we're coordinating with central banks and governments around the world to look into this and I'll just add that the process of addressing these concerns we think should be a patient and careful one and not a sprint to implementation so are you speaking of a working group within epic well the Fed we have our own working group I believe F sock is already has already got a working group at the staff level or in effect has a working group at the staff level does have a cryptocurrency working group is epic or this working group reviewing the extensive policy questions and potential impact that Libra and calibra have do you know what they're doing I do believe they are I know there was a staff meeting there's a staff level meeting just last week to focus on Libra and Ed F suck so all the agencies were there so I think the answer to your question would be yes we need or is that considering designating the Libra association in calibra either as systemic financial market utilities are non-bank financial companies and subject them to enhance rate go to our oversight are you aware of that I I think it's early to say there hasn't been a principals meeting of F Sox since the Libra announcement and while there been conversations I think I think it's highly likely that F Suk will be taking this on in a serious way but that that is in the hands of the Treasury Secretary who chairs F Suk thank you very much mr. chairman if you got a call from the president today or tomorrow and he said I'm firing you pack up it's time to go what would you do well of course I would not do that I can't hear you my answer would be no and you would not pack up and you would not leave no ma'am because you think the president doesn't have the authority is that why you would not leave I have I've kind of said what I what I intended to say on the subject and what I've said is that the law clearly gives me a four-year term and I fully intend to serve it okay so I hope everybody heard that with that I will mr. McHenry so cheerin Powell in your testimony you said you'll use macroeconomic data to inform your decision on whether lower interest rates are required at the end of the month or not what specific data would likely lead to your recommending a change in rates between now and the end of the month there's there's data coming in on on so almost everything you'll have labor market data you'll have second quarter GDP you'll have retail sales you'll have a broad range of data coming over the next three weeks and we'll be looking at all of that I wouldn't point to any one data point or even any you know any period we try to look over longer periods of times and at time and assess what's really going on and a more fundamental level and that's what we'll do as we evaluate the incoming data and and there is a there is also an understanding of the market assumption of what the federal federal reserve open markets committee will do as well they're not there there is we so we we look at a broad range of financial conditions we don't focus on any one thing but we do we our policy works through financial conditions and so we'll look it at a broad range of things in the financial markets so a broad range of things macroeconomic data emotion emotion not on our part we'll try to be very rational and analytical and and transparent about how we're thinking about these things so along the lines of the transparency the the you know the velocity of the economy you speak to and the larger global macroeconomic issues that they're play here as well so along those lines is is a Federal Reserve does the Federal Reserve have the capacity to make independent monetary policy decisions under law yes we do is that impeded by its people saying negative things about you we we will that enhanced or or diminished based off people saying positive or negative things about you neither we we will always focus on doing the job you have assigned us and we will always do it to the best of our ability and based on objective analysis in fact so along those lines so we have a significant change to LIBOR policy and I wrote to vice Vice Chair Quarles along along those lines the Fed has spoken publicly about this as well that there's been a major progress made in terms of the swaps and derivatives contracts I remain concern about legacy retail contracts as well as a Fed undertaken analysis along those lines about legacy retail contracts and the use of liason indeed we have its and that's a very important part of the project going forward so we've we've reached out to representatives of retail users of LIBOR for some time now and our meeting with them regularly and developing plans to deal with that because as you know as you pointed out in your letter a significant quantity of the LIBOR contracts are in fact mortgages and the like so that's that's a really important area we did the derivative things first because they were close to hand in quite large but we're working hard on the retail side now so any is there any estimate on the number of loans that have to be renegotiated because this policy change I can't write have a number for you I so I also want to touch on Project Libre you you mentioned and answered a number of those questions it looked like you're quite prepared for that you mentioned financial stability as a concern why why is project clear a question of financial stability in your view well really due to the to the possibility of quite broad adoption Facebook has a couple billion plus users so you have I think for the first time the possibility of a very broad adoption and if there were problems there associated with money laundering terrorist financing any of the things that we're all focused on including the company they would immediately you know they would arise to systemically important levels just because of the mere size of the oven Facebook networking and a company companies has said so explicitly is it a problem that we don't have a regulatory regime that's permissive of these technologies to be developed here in the United States I don't know that that's a problem that's that's a question of whether we're impeding blockchain I don't I don't believe so but I don't know the answer but there's an opportunity here for financial inclusion benefits and innovation benefits if this worked well is there not there is that possibility and as I mentioned that is the been the main benefit the company is holding out and I also mentioned that we are open to financial innovation we just wanted to take place in a safe and sound way thank you the gentlewoman from New York mrs. Maloney is now recognized for five minutes thank you madam chair and ranking member and thank you for your service chairman chairman in June the Fed decided not to cut interest rates and to take a wait-and-see approach instead in your press conference you said this approach was justified because and I quote we will see a lot more on all of these issues in the very near term in quote last week we got the job numbers for June and they were very strong with the employers adding two hundred and twenty four thousand jobs so my question is did the June jobs report change your outlook for whether a reduction in interest rates is appropriate in the near term a straight answer your question is no but I will give you the context we look at a broad range of data so let's start with a broad where I think since the June meeting and for a period before that the data have continued to disappoint and that's very broad across Europe and and around Asia and and that continues to weigh in and by the way manufacturing trade and investment or weak all around the world we have a box that talks about that in the in the monetary policy report in the United States we did get a job job report that was positive and that's that's great news and we had some other reasonably good news I would say the US data came in about as expected and and I would also say that let's let's go to trade we've agreed to begin discussions again with China and that well that's that's a constructive step it doesn't remove the uncertainty that we see as as overall weighing on on the outlook so I would say that the bottom line for me is that the uncertainties around global growth and trade continue to weigh on the outlook in addition inflation continues to be muted and and those things are still in place okay mr. chairman some economists and many market participants believe that the Fed should cut interest by a full 50 basis points in July rather than a normal cut of 25 basis points personally I don't see the case for cutting rates by 50 basis points because the economy is quite strong right now what economic factors do you believe would justify taking the unusual step of cutting rates by a full 50 basis points and our meeting which is in three weeks will be looking at a full range of data and I would just take you through the the story I just told you that'll be what we're thinking about is the extent to which trade developments and concerns over global growth are weighing on the outlook and also the performance of inflation those are the factors that we've identified and all of that will go into our decision-making and also mr. chairman you have repeatedly stressed that uncertainty about trade policy is a major economic headwind is one of the factors that could lead the Fed to cut rates this month but as we've seen under the president's very unlikely that we'll ever get much certainty on trade policy you keep changing every day so my question is what kind of progress in trade negotiations do you need to see in order to put your mind at ease about trade developments not being a headwear headwind to use your term to economic growth I guess I ought to start by saying that no one should interpret what I'm saying about about trade headwinds is in any way a criticism of trade policy we do not play a role in assessing or criticizing trade policy it's not something that's assigned to us we react to anything that in principle anything that can affect our ability to achieve the dual mandate goals you've assigned us is something that could in principle call for a policy response right now that is global head went global weakness and trade developments are things that were widely thought to to have that effect that's also I wouldn't want to be I wouldn't want to try to prescribe a specific answer and again it wouldn't be ours to do in the first place well hopefully we'll have some answers on trade soon and thank you for your service and I yield back the gentlewoman from Missouri miss Wagner is now recognized for five minutes thank you madam chairwoman and Thank You chairman Powell for being here today to testify chairman Powell vice chairman Quarles just yesterday indicated the Federal Reserve would revise its stress capital buffer proposal in the near future vice chairman Quarles indicated one option would be to look at an average of stress test results over a number of years are you in agreement with vice chairman Quarles that this is something that needs to be considered and what factors might necessitate this change sir so there are we are in the process of evaluating I think in the late stages of evaluating how to put into effect the stress capital buffer which merges the results of the stress tests with the underlying overall capital framework it's a complicated exercise there are many moving pieces that's one of them I wouldn't want to single any single one out as important for our consideration but that's that's for the average taking an average of stress test results over a number of years is something that's under consideration but is it maybe a change that you're not necessitating just yet or we're very much in the process of evaluating all of those ideas and I'm I wouldn't want to single that one out as as if they're in or out just there are many pieces and but yes that it that is one of the pieces mr. chairman you said you're in the late stages but what's your time frame do you believe for coming up with an option in terms of the stress capital buffer hosel I have to come back to you with a date but it would be you know within you soon in the near future thank you jaren Poff at your January press conference you were asked whether a four trillion dollar balance sheet gave you sufficient firepower to handle a future recession and you answered yes however the Fed's balance sheet as a share of GDP is about where the Bank of Japan balance sheet was prior to the financial crisis today the Bank of Japan has ended up with a balance sheet as large as the Japanese economy with mixed results on inflation and limited room to handle another downturn has Japan's experience are affected your thinking on the appropriate size of the Fed's balance sheet I think there are a lot of lessons to be learned from the experience of Japan really over the last quarter century and and all of us have looked very careful at that and to the point if I may you know what why should we feel certain that the US could avoid a similar fate and perhaps you could elaborate what Japan has has found itself in a situation where inflation has gotten down close to zero for a very long time and they've tried many many things including as you mentioned extensive asset purchases and all sorts of forward guidance to move inflation back up and have not met with much success although they continue to struggle to do that so my main takeaway from that and by the way the European Central Bank is is fighting that battle well my main takeaway from that honestly is that that the Fed needs to stand here and and try to keep inflation symmetrically at 2% we don't want to get on that road of declining it extent inflation continues to decline in expectations decline that will show up in lower interest rates which will give the central bank even less firepower to react and we see that that road is hard to get off of so I think it's quite important that we that we we fight at 2% to keep inflation up to 2% and use our tools to to achieve that symmetrically and we're strongly committed to doing that the most recent monetary policy report stated and I quote consumer spending in the first quarter was lackluster but appears to have picked up and you talked a little bit about this in your opening statement mr. chairman can you please explain the possible variables behind lackluster consumer spending and and why the recent turnaround well I think the the consumer part of the economy is 70% of the economy and it's it's healthy its strong its job good job creation its rising wages workers surveys show that they think jobs are plentiful business survey show that they think workers are scarce so this is a this is a good place for the consumer part of the economy and you see that in survey as you see it in consumer spending and things like concerns about workforce development and and having enough able workforce is very key you're right they are in it but I think a tight labor force is lifting all sorts of communities into the labor force and it's it's it's good if the issue really is more now on the business side where we see business confidence and business investment weakening a bit I think you have run out of time I yield back to the chair thank you sir mr. clay the gentleman from Missouri is now recognized for five minutes thank you madam chair Thank You chairman Powell for your visit today in its blush'd just yesterday the st. Louis Federal Reserve noted that arise and uncertainty is widely believed to have detrimental effects on macroeconomic microeconomics and financial market outcomes and induce responses from monetary fiscal and regulatory policy makers they wrote theoretical models suggested rising uncertainty can affect economic activity and decision making in various ways the arthurs explained them particularly they noted firms may delay investment and hiring households may reduce spending by increasing their savings rate if they anticipate possible changes in their income or wealth financing cost rise of risk premiums increase and even in your own testimony submitted to this committee you know that the consumer spending has bounced back from a sluggish first quarter and is chugging along and this uncertainty is exacerbated for consumers in Missouri when the president is gloating about how great the economy is yet the Federal Reserve is considering a rate cut how do you account for these mixed messages well I haven't seen that blog post but I would strongly agree with with the sense of it we do think that uncertainty can cause businesses to hold back on investment in hiring in fact we've been hearing that in our FOMC based discussions with with businesses around the country household confidence has has remained high but over time uncertainty can cause households to hold back as well so I think that's a pretty standard finding what about the the factor of savings I mean how does that play into savings yeah is that good or bad sorry is is that good or bad for families to save well saving the savings rate has actually been fairly high lately and that is a good it's a good for people to save what they think they need to save and I think as a general thought as a general fact Americans need to save more for retirement than they have they're not over saving they're under saving as in the aggregate so it's a good thing couldn't he could they also be saving and in anticipation of a calamity of economic calamity occurring well yes I was gonna say that there's also there's it's good to save but at the same time if there's a shock to confidence you can see people pulling back from their regular consumption patterns and that will show up in demand and the economy will weaken okay as far as the decision making on the part are you relying on conventional economic data or being swayed by jawboning of the president we we see the economy as being in a good place and we're committed to using our tools to keep it there as we've discussed the the overall economy is is performing reasonably well but what we see what we called crosscurrents principally trade developments and concerns over global growth and we see those and significant many FOMC participants at the last meeting saw those as weighing on on the outlook and calling for possibly more accommodative policy thank you for that response and chairman pal despite data proving that diverse companies perform more successfully we still find that financial services industry is largely white and male at its highest level what more can you do as chair to incentivize diversity and equity within the Federal Reserve System I thank you for that question we we put a very high value on diversity I strongly believe that having diverse perspectives around the table leads you to better decisions and I believe in having a culture where people are free to speak and will be heard and that goes to all different dimensions of diversity so we've made I think a lot of progress at that at the Fed I think I would never say there isn't more to do there's a lot more we can do and I think we're very focused on that as an organization I would say in my most of my career was in the private sector I saw that really successful companies one of the things they do well is they do diversity well because that's how you get you get better results with with with diverse perspectives so we're strongly committed to that thank you and Mark James Arthur you bet mr. Stivers the gentleman from Ohio is now recognized for five minutes thank you madam chair and chair pala I really appreciate you being here I want to thank you for your transparency and accessibility as Fed chair and you've been available to all of us in our offices in your office and I appreciate that this this committee hearings about monetary policy in the state of the economy and I'll stay focused on those issues and leave the regulatory issues to when vice-chair Quarles is here and with regard to monetary policy when I was in your office I really appreciate you keeping the hundred million Venezuelan bolivars that gave you as you answer to your question to the question on Japan once inflation starts rolling it's really hard to get a control of as the Venezuelans have found and so the fact that you guys have a stable price target and are sticking to it I think makes a huge difference I know that there's a lot of potential shocks including tariffs and other things that can impact that but so far you guys have done a great job on monetary policy and in your question you know another question about unemployment you know and the tight labor markets I think you talked about the fact that wages are starting to go up it's starting to actually benefit people who've actually not benefited from this economic expansion over the last 10 years which is a good thing and I know some observers have been calling for a so-called hot monetary policy on the premise that further tightening of the labor market will benefit those demographics that have missed out on the expansion and drive up wages and make labor markets start tight and help those folks can you comment on whether the members of the Fmoc have talked about those views and what the potential risks and benefits associated with with a hot monetary policy might be you know I guess I would start by saying that we don't have any any basis pardon me or any any evidence for calling this a hot labor market we have on we have wages moving up at a little above 3% and that's good that that's it's good because it was more like 2% five years ago but 3% barely covers productivity it doesn't even really cover productivity increases in inflation and it certainly isn't a high-end enough wage to put any upward pressure on inflation and we haven't seen as this long cycle has gone on we haven't seen wages moving up as sharply as they have in the past I do think it's very gratifying that for the last two years the greater part of wage gains have gone to people at the lower end of the wage spectrum an education spectrum that's a very positive thing but I am you know three point seven percent is a low unemployment rate but to call something hot you need to see some heat and while we hear lots of reports of Labor of companies having a hard time finding qualified labor nonetheless we don't see wages really responding so I don't really see that as as a current issue great and you know if we want to see wages continue to grow we're gonna need economic growth and one of the things that this Congress has in front of it is the u.s. MCA I know a lot of the questions you're going to get are going to be about a trade war with China but can you comment about the importance of the u.s. MCA and the North American investment that a lot of companies have made in a North American supply chain right so I pardon me I wouldn't take a position on the details of the u.s. MCA though but I will say that having it passed would remove a real bit of the uncertainty that is weighing on the outlook and I think it will be quite a positive thing from that standpoint and I think that's what we all need to focus on is is fighting the uncertainty and there are things we can do with that and I think as policymakers we need to come together and do that the last question because I've only got a minute left is on Libra and Facebook if Facebook can't sufficiently answer your questions about anti money laundering and know your customer what would your message be to the banks that that provide banking to Facebook and and what would your advice to Facebook be well I don't think that that the project can go forward and I don't think I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering all of those things there number of concerns that I listed at the beginning data protection consumer privacy all of those things will need to be addressed very thoroughly and carefully and again in a deliberate process that will not be a sprint to implementation and I want to echo your comments that we all want innovation but we want innovation that protects data security and the know your customer anti-money laundering laws that are so important to our economy thank you I yield back the balance of my time mr. Scott the gentleman from Georgia is now recognized for five minutes thank you very much welcome chairman Paul good to see you again first thing I want to say to you is I want you to stay strong be courageous it is important for this nation and the economy of the world that the Fed Federal Reserve remains strongly independent the other thing I want to say too is have no fear the president can't fire you and we and Congress both Democrats and Republicans got your back now I want to go to what I think is and it's been mentioned a couple of times this Libre business is really disturbing and it's a serious problem and and let me tell you why first of all I think we all know Libra is the London interbank offered rate very critical it has and is the standard for the base rate for hundreds of trillions of dollars both overnight and term loans dead derivatives and it is the standard that has been used internationally and sensibly in the United States affecting individuals small businesses lured corporations so we got a big issue here but because of pervasive manipulation now it is apparent that libro is going to leave us of be removed within the next year or so so this creates a big problem and so I want to ask you because the most critical part of this is that parties to both sides of the financial contracts should be and must be concerned in the short term about the potential ramifications of the end of Libra specifically in contracts that do not have a fallback position and as you know without a fallback language or some appropriately established safe harbor until a new reference rate can be used significant legal problems and challenges are likely to occur so with this in mind as Libra schedule in nears and so far and so far is a secured overnight financing rate apparently will take its place tell us German what can we do what can be done to accommodate the numerous contacts that do not have fallback positions Thank You mr. Scott you I think you said it very well this is a I think there are 300 trillion plus in contracts referencing LIBOR and five different currencies and the you know the manipulation was revealed really almost a decade ago and I think the financial conduct authority which which supervises the LIBOR banks has said it will not compel the banks to submit LIBOR past the end of 2021 and live aware could then and so we've spent many years now looking at ways to make sure that contracts do have fall backs and we're working with we you know we've worked with the retail groups in particular now for mortgages and things like that to find a way so that if LIBOR is not published there will be a a rate that is the fallback ray and that has to be put into contracts in one way or another it's a it's a vast project it's one that many many people are working on and working hard to meet that deadline yeah and LIBOR will be gone am i right in mine calculations right within the next year or so it's actually the I think the end of 21 it won't necessarily be gone but the banks will no longer be required to submit their their estimates of the of their interbank borrowing rates and and so it may it may go away and I think we're requiring people to assume that it will so that they'll be ready if it does yeah when you say ready for the dust what are you ready if it does go away oh if it does go away so if it does go away what what will the situation be like well ideally this this is the situation we're aiming for is one in which people have either moved their obligations to Sofer as you mentioned secured overnight funding rate or some other rate or failing that they have a rate in their contract where if LIBOR is no longer published the other rate just seamlessly falls into place and and the two parties to the contract the consumer and the bank let's say they know they know what the rate is and they know then so those that's what we need to accomplish we're working hard on it yeah Thank You chairman thank you mrs. cuss top the gentleman from Tennessee is now recognized for five minutes thank you madam chairman and thank you for convening today's hearing and Thank You mr. chairman for appearing today if I could I'd like to follow up on a line of questioning that the congressman's divers had relating to the USMC a if you could could you we're gonna face the option of passing it or not passing it in this Congress what is the effect to our economy if we do in fact pass the u.s. MCA and conversely what is the effect to the economy if we fail to pass the u.s. MCA um I don't I don't actually have a precise evaluation for you of what the effects of passage would be overall it's pretty similar to to you know NAFTA so I would imagine that the longer-term differences the differences will show up over the longer term I think the effects of of not passing it would would really depend on what happens to NAFTA if nafta were then to be terminated there could be quite a lot of uncertainty and I think there is some uncertainty now about what's going to happen I think the passage of it would remove that uncertainty and that will be a good thing and would also be positive for our for our farmers and our AG communities if US MCA were passed yes I think it would you can opinion how the passage or the non passage of the u.s. MCA affects our leverage with China and negotiations and trade negotiations I I don't I don't I don't think it would be appropriate for me to comment on on those negotiations and I I don't I don't really have any answer for you on that in the next week next several weeks purportedly we're going to be voting on a proposal to wait to raise the minimum wage to $15 an hour there was a CBO report that came out in the last day or so that estimated that a raise in the minimum wage to $15 an hour could cut should cut 1.3 million jobs up to 3.7 million jobs what would the effect be to the economy if Congress were to pass a minimum wage bill of raising the minimum wage to $15 an hour p.m. the question of the minimum wage is really one for you I think the studies there a range of studies that have different outcomes but like the CBO study what they tend to show is that a number of people get higher wages and a number people lose their jobs and those numbers will change depending on what assumptions you make and it really is something that there's no consensus among economists economists are all over the place along this so it's really a question for you to to sort of look at look at a range of studies and not take any single one and and I would I would weigh that and say are the benefits worth the likely costs what is the effect to the economy if 1.3 million people lose their jobs or 3.7 million people lose their jobs as a result of the rise in minimum wage to $15 an hour well it would you know it would depend on again there would be costs and benefits we know that some people would get higher wages and they would presumably they'd be better off and they'd spend more so it's not a judgement that we make on on net it's a judgement that you you have to make that there'll be people who are made better off by it and those are all the people who have the higher minimum wage but there will be a number of people who lose their jobs because that's what'll happen I think empirically with the Federal Reserve be concerned at 1.3 million people to 3.7 million people lost their jobs because minimum wage was raised to $15 an hour again mr. Gustafson we don't we do not take a position we never have taken a position on on the minimum wage and we would take whatever decision you make as as the decision that that we would put into our models and we would we would just take it as a given we wouldn't express either support or or disapproval when I'm back home in West Tennessee what I hear generally from employers small/medium wal enlarge the economy's good we're making money we're making more money that we made in 20 or 30 years we can't find enough employees we can't find employees with soft skills we can't find employees who have the skills we need for the jobs we can't find employees who can pass a drug test specifically and you you've talked about this publicly the effect of the opioid crisis on the on the workforce what is what is your feeling with that and how does that how does the opioid crisis affect the world force an extraordinary number of of people are taking opioids one form or another and it weighs on labor force participation largely but not exclusively on younger males also younger women and it's a national national crisis really and I mean there's a humanitarian aspect of it is completely compelling but the economic the economic impact is also quite substantial Thank You mr. chairman thank you the gentleman from Colorado mr. Perlmutter is now recognized for five minutes chairman good to see you thanks for your testimony today let me just start with some questions that mr. Scott was asking on llibre given sort of the uncertainties and the ability to kind of manage this new currency if you will I mean our II would with the Federal Reserve would you support some postponement and they're implementing a Libra or any kind of a moratorium until we got to have a better understanding of the impact really on our economy and our ability to manage money you know I think that there are there deep important serious questions across a range of issues here that will need to be addressed and the process of doing that is going to have to be patient and thorough and not a sprint and that that's what I would say so I do think there's a lot of work going on at the Fed and at other agencies and I think in the in the government to understand these issues I think I think it's some it's something that that doesn't fit neatly or easily within our regulatory scheme it does have potentially it's a systemic scale and for all the reasons we've discussed it needs a careful look and so I strongly believe we we need to all be taking our time here I'm gonna take that as a yes thank you now I really I got a couple other questions and I don't know if you have your booklet in front of you but I always like the graphs that you folks prepare because they're very informative and especially graph two in my district in Colorado graph two is really the unemployment rate and the fact that for about nine ten years now there's been a steady decrease in unemployment in my district in Colorado we've enjoyed under three percent for about seven years running which is pretty remarkable so I want to thank you and I want to thank the Federal Reserve for the role you've been playing there but one of your answers really I think is important to to what we face as members of Congress is the fact that for most Americans their wages still they're struggling in a month to month year to year to get ahead to really be able to deal with the costs that we all see so in your predictions in what the Federal Reserve's doing do you see improvement in what everyday Americans are making and sort of catching up and getting ahead where they lost a through the recession in the years right after that what we're hearing we're hearing this quite a lot from people who work and live in low and moderate-income communities is that there really hasn't been a recovery for these people until recently but now they are feeling with this tight labor market they are feeling employers who are waving you know issues that might have prevented people from being in the workforce there they're willing to look past those they're recruiting people who have been outside the labor force in fact we've had people say to us that this is really the best field that they've had for many years if ever and all of that really in my thinking and our thinking just says how important it is for us to continue to sustain this expansion this has really come together just in the last you know we've had a long as you as you can see from that chart the labor market has improved steadily for ten years now but just in the last couple of years it started to reach communities at the edge of the workforce and it's just so important for us to to continue that process for a couple of years and that's why we're so committed to using our tools to sustain the expansion thank you my last question the only graph that I saw that really is kind of perplexing and problematic is on page 31 of your of the monetary policy report and that's the one on trade policy uncertainty and if there's a place that I think we as members of Congress are concerned and I think both Democrats and Republicans it is on trade policy and this graph if I read it correctly shows that it isn't just members of Congress that are concerned about the president's trade policy it's it's the people that you survey I mean can you tell me what that graph says well it shows trade policy as as quite elevated and I think we know that you know we in our beige book we report discussions from around the country from all kinds of business and community folks and I think trade policy has been elevated it's been particularly elevated since May by the way it had its it's spiked in in May with those developments and no question is elevated all right thank you for your testimony sir mr. Hollingsworth the gentleman from Indiana is now recognized for five minutes good afternoon I really appreciate you being here good morning rather I can tell time um does not bode well for my questions huh um so I wanted to talk a little bit about your use of the word throughout testimony in the written testimony symmetry symmetrical around two percent right and I think you in your opening statements referred to total PCE for the trailing 12 months at 1.5% core 1.6 percent what do you mean by symmetry around two percent what does symmetry mean to you you know in our longer-run statement of longer-run policy goals and monetary policy strategy we define symmetry to mean that the committee would be concerned if inflation were to run persistently above or below right 2% so it's it's really a symmetry of of concern or of intention as a nose to out compound right and so over the last 10 years right it's run persistently below 2% does that imply a willingness or acceptability for inflation to run for a period of time moderately or slightly above 2% given some of the disinflationary pressures from around the world so under our current framework all it says is that if inflation is above 2% or below 2% we would look at that symmetrically and we would use our tools to guide it back to 2 percent to 2 percent right and of course a central question we're asking as part of our our monetary policy review is whether that's the right way to think about it when in fact all of the all of the deviations from 2% have been below ground above right and so inflation has been averaging less than 2% we certainly I mean it's unmistakable when you look around the world right there's a lot of traps associated with very low inflation and how persistent that seems to be around the world I know that some concern that you've expressed is well on many occasion that we don't want to get mired in very low inflation we want to have stable prices but stable around that 2% as you think about where the economy is today think about where inflationary pressures are today is there a desire to ensure we don't fall into the same trap by pushing the economy faster being more accommodating in monetary policy to push that 2% as you said if it's symmetrical to push inflation to that 2% well through the indirect means that you have available to you I'm sorry yeah through the indirect means that you have available to you to manage inflation expectations going forward I think we I think we want inflation to be symmetrically at two percent and not at 1.7 or 1.8 percent because that will ultimately lower inflation will ultimately work its way into expectations and into short-term interest rate and that'll mean we have less and plus I so we we really do want to have inflation symmetrically at 2% right and so one of the things that you've talked about is people's expectations for future inflation which have been very much anchored by their recent history with inflation right that recent history over the past 10 years has been below 2% inflation and in order to move people's expectations going forward they need to experience slightly faster paces of inflation I think most research continues to indicate that recent experience informs expectations going forward so I just wanted to come back to and better understand what you were saying around that symmetrical like the goal is to push inflation up to 2% or how about willingness or tolerance up to 2% and if it should run above 2% to be able to bring it to back down to 2% is that what you mean by well we I'm gonna draw a distinction between our current framework when I describe for you where ever we would always be pushing back for 2% we're looking at at different ways - and that by the way that framework seems to have achieved errors on one side which are consistent with the framework correct and we're asking the question whether that's the right way to keep doing it or whether we should be looking at something which produces more symmetric outcomes we haven't made that decision right that's one of the fundamental things were look as part of this one of the dialogues I know that we've had in the past and I certainly want to continue especially publicly to encourage you to continue that research and then developing that framework I think it is really important given all the pressures that we see around the world and some of the other developed countries that have fallen into this very low persistent low inflation that we should really think about how we continue to manage what we're doing a monetary policy and reflecting those concerns and so I appreciate the work that you're doing one last question what have we learned over the past 10 years about the limits of monetary policy and how do those limits inform what you believe the next steps might be with regard to monetary policy if you can answer that broad question 12 seconds I will I I would say it's not a good thing to have monetary policy being the main game in town let alone the only game in town fiscal policy is very powerful and more powerful and it's there are there come times for example after the financial crisis where you need fiscal policy to really lift the economy right so it's not a good thing to have monetary policy be responsible exclusively for things and it shouldn't be you know well I think you for being here and thank you for your great work mr. Himes the gentleman from Connecticut is now recognized for five minutes Thank You chairwoman and Thank You mr. chairman for being here good morning thank you for your testimony I've got two questions one on monetary policy one on the broader regulatory environment around the banks let's start with just a couple of minutes though it's wake up the room with the discussion of interest paid on excess reserves you're the feds policy obviously changed pretty dramatically in 2008 if the numbers I'm reading are correct excess reserves today are in the neighborhood of 1.5 trillion dollars I have a couple of sort of intuitive at least concerns with that that obviously has a pretty dramatic effect on liquidity in the system it creates a business model for banks obviously who can essentially get risk-free money from the Fed in a way that is not available to to my constituents but I suppose what really concerns me in the context of monetary policy I'm sure you're aware of a report that was published by the Minneapolis Fed in which the individual who wrote it what and I'll just quote the report what potentially matters about high excess reserves is that they provide a means by which decisions made by banks not those made by the Monetary Authority could increase inflation inducing liquidity dramatically and quickly so my question is at a minimum if that is true that could be a significant impairment of the FOMC's ability to actually control monetary policy so my question is what is the future of the policy with respect to interest paid on on excess reserves I'm not familiar with that paper from the Reserve Bank of Minneapolis but as I'm sure you're aware during the financial crisis we bought a lot of assets and the offsetting liability the way we paid for this by issuing reserves at the same time we vastly increased the the required liquidity that largest financial institutions have to hold vastly increase that and many of them choose to hold reserve so demand or reserves even even after we've the balance sheet shrinks is so much higher and we're actually trying to find what that demand is and it might be somewhere a bit below that the current range that it's in sir the demand obviously is to some extent driven by the rate that is paid on those reserves you control the demand for reserves above and beyond required reserves to some extent we do though but banks choose to hold root they have to hold they have to hold a certain quantity they could also hold Treasuries but they like reserves because they're highly liquid and and it's not they pay the same as Treasuries by the way roughly the same so in terms of IO we are though the thing is in our framework and our chosen framework for conducting monetary policy IOR IOR is the critical rate it's how we manage its the administer rate that's how we manage monetary policy we've been doing that for really ten years from now and we've decided earlier this year that we would remain in that system getting to a system where you instead of using an administered rate you manage the quantity of reserves on the edge of scarcity and set the price that way which is what we did would be very very tough given that the level of demand for reserves so should we I mean there as you know there was a fairly dramatic policy shift in two an aide some have said that the amount of interest paid on excess reserves was well in excess of what Congress envisioned in the time and in the legislation of oh six is this now a status quo monetary policy tool that the Congress should anticipate works in conjunction with your control of other rates absolutely this is our principal tool for implementing monetary policy is interest on excess reserves okay let me up shift just cuz time is short to a broader regulatory question we have heard from CEOs of banks we've heard from the vice chairman and others that generally speaking the banking system is safe and sound well capitalized when the CEOs or the large banks were in front of this committee a couple of months ago they identified two things with some consistency as being of concern one was leveraged lending which is a bit odd because most leveraged loans get put into cielos which then get taken outside of the banking system but interestingly they also said shadow banking now by definition you don't have a lot of control over over shadow banking but given the consistency of that given the fact that an awful lot of the risk from leveraged lending which they identified as risky concerning I should say not risky concerning how are you thinking about potential risk bubbling up in the in the broader shadow banking system we well then particularly on leveraged lending we've called out the risk the risk is is not so much located in the banks it's located as you know in cielos mutual funds hedge funds insurance companies and all those things so and it's not it's not subject those vehicles are not subject to runs in the same way that pre-crisis banks were and really no longer are so the systemic risk risk question is not it is not a prominent one it's more macroeconomic questions so if if there are if if the corporate sector gets very highly levered then in the event of a downturn you will see companies that are that have to layoff workers and stop spending and that kind of thing so it could be an accurate a macroeconomic multiplier you know this is this is a project that the financial stability Oversight Council is working on now and also the Financial Stability Board globally is looking carefully at leverage lending and you know where we think it's a it's something that requires serious monitoring thank you thank you I'm out of time they could mr. chairman mr. Gonzalez the gentleman from Ohio is now recognized for five minutes thank you madam chair and thank you chairman Powell for being here today first I want to I want to thank you on your transparency and and all the data that you provide I think there's a sense that some of these decisions may be made behind closed doors but I think when you're transparent and open about what the data is that you're looking at I think that helps it certainly helps me to understand I want to kind of summarize two things that you've talked about with respect to all the data you're looking at currently an interest rate policy and if I think I'm understanding you correctly I'm hearing that trade uncertainty and persistent low inflation short of our 2% target are kind of the two biggest bogeys for you so to speak am i summarizing that correctly based on the current situation okay I think we did a nice job covering the importance of passing us MC ADA to help from a certainty standpoint you didn't weigh in on the deal itself but it certainly makes things more secure or more certain on the inflation side it seems to me that in a world where we're still short of our target and we have trade uncertainty and those are the two biggest factors you're considering that raising rates would certainly be irresponsible I would argue for lowering them but would it be fair to characterize based on what we're seeing on those two factors specifically that a strong case could be made for lowering and and not to commit you to that but is that sort of where things seem to be headed so yes as I mentioned we think that uncertainty around around trade policy and also global growth it's not it's not all down to trade policy there's there's something going on with growth around the world particularly around manufacturing an investment in trade and so that uncertainty is is we think weighing on the domestic economy it's starting to show up a little bit we think in business sentiment readings which have moved and also in weaker business fixed investment and then as you pointed out the other piece of it is inflation we we see the risk of a more prolonged shortfall of inflation from our target that's not something we desire it's something we want to avoid and would encourage a more accommodative policy and those things do many on the committee see those things as strengthening the case for a somewhat more accommodative policy thank you and then I want to shift to the balance sheet a little bit they weren't really talked about that so in January announced a major shift I thought it was a major shift in terms of how we were going to manage the rate going forward which is shift towards administered rates we're gonna pause the draw down of the balance sheet can you kind of walk me through the logic on that a little bit my concern here is are we going to still be prepared to handle another financial crisis if that sort of thing were to happen while we have an expanded balance sheet and in the long run do you see us moving more towards going back towards open market operations which historically has been how we did this so we actually since since the QE era began reserves have been super abundant and we haven't we haven't set monetary policy really by right we took monetary policy to zero and it couldn't go any lower and so we didn't we never so we didn't have to have scarce resources we only had to have scarce reserves when we lifted off in December of 2015 and we didn't so we used the administered rates which is IO er so we've been using them for a long time it wasn't really a change what was new you're right about this what was new is we after having thought about it really for years we said we decided after much deliberation that this would be our permanent framework we think it works well we think it has a lot of a lot of benefits in terms of room for further quantitative easing that is just as a you know we've what we'd be buying would be Treasury securities and manufacturers are busy as I understand it there's a there's plenty of them out there and it would be no shortage of them to buy there were questions about about the efficacy and there's a lot of research that's going on on how much quantitative easing effects first rates and thereby the economy but I don't see the size of our balance sheet as limiting our ability to buy more just as a practical matter okay thanks and then with my last sort of question when you look at Libra specifically I see it as three different things I see it as Libra which is a currency collie bro which is the wallet they seem to desire to be a bank and then the Liebherr Association itself as we're evaluating how to approach this one are those are the three buckets that we should be looking at into what gives you the biggest concern as you sort of said let's pause it broadly they may be I'm running out of time so we'll submit this and written questions but I read any feedback you have on that will be greatly appreciated by this committee thank you very old back thank you mr. Lawson the gentleman from Florida is now recognized for five minutes thank you items here it was a power working either took a committee could you elaborate and you might have a Howell that it taught 1% of us families own 40% of the wealth in this country how did how do we get to that particular point do you see any kind of banners coming in the future the top 1% on 40% of the wealth in America we say we have a very rich country compared to other countries but how do we get to the point way 1% on 40% of the wealth in this country what I what I have seen and what I mentioned in my testimony that's troubling is that a couple of things first median incomes and lower incomes have stagnated compared to those at the high end so there was a time not so long ago when you know there's always a disparity between the wealthiest and least but it was nowhere near this large so what's happened is those people in the middle and at the lower end of the wage and wealth spectrum have seen their their wealth and wages move up but much less than those at the top and that is that's troubling the other thing that's troubling is sort of a separate issue is lack of mobility so the chances of being born if you're born in the bottom 20% of wealth and or of anything you can calculate what are the chained chances empirically that you'll move into the middle quintile or the top quintile and they're actually lower in the United States than they are in in many other similar advanced economy democracies so these are these are troubling things I would personally put them down to a combination of technology globalization and an education really it comes down to the education system needs to produce people who can take advantage of advancing technology and globalization and what you've seen is a stagnation in educational attainment in the United States relative to other countries beginning about 40 years ago and that has been I think the an underlying force that's driving this this phenomenon okay another question is recently in June let's say in Ontario in Canada minimum wage went to around $13 and State 25 cents an hour and earlier you stated that our minimum wage at the federal level is around $7 in and maybe 25 percent have been changed since maybe 2009 as something that's nature mm-hmm and in your testimony you said that it's up that Congress to really make that happen and there'd been a lot of discussion on whether what gonna happen to businesses and so forth the reason why I say that is in 2020 in Ontario Canada there go to $15 plus per hour for the economy do you see and you talked to before a gradual increase in the minimum wage in this country it's gonna affect businesses to the point that he'll be closing because what you see mostly at the end of the year is a lot of these business have a very big sub plus to invest I'll pay taxes own and so what is it different in passing those increases to their employees instead of giving it back to the federal government doing it to giving the money to some charity how do you weigh in any own minimum wage increase if I as a stability of the economy we don't really take a position on minimum wage and the reason is you know that there's a lot of research and it shows costs and benefits it tends to costs and benefits depending on what you assume and how fast you move I think health how quickly they move up is an important indicator but when you raise the minimum wage some people lose their jobs and some people benefit they get a higher wages and so you you I think you can look at a range of studies and they'll come up with as many different economists as study this will have different answers and you can weigh that and that's a trade-off that you make we we have never taken a position on minimum wage it's the classic thing for a legislature to do and not for us to do all right one quick question do you never look at the way credit card companies increase their interest in finance charges compared to the way the economy is going credit card companies where they the way credit card companies sorry do what increase their finance charges in compared to the way the economy is going you know like the conference table right now but interest rate I know I got to close some of the credit card come to 28 29 percent and so forth I might have to send you some information on that I would be happy to follow up on that with you okay thank you Thank You mr. Lawson Thank You mr. rose the gentleman from Tennessee is now recognized for five minutes thank you for being with us today chairman Powell I am a vocal advocate for putting our federal government on a more sustainable fiscal path our federal debt now stands at 22 trillion more than twenty two trillion interest on that debt is a big federal spending item amounting to about 360 billion last year that was approximately eight percent of all federal spending interest on the debt is becoming the fastest rising element of our federal budget our net interest expense could increase substantially if and when interest rates eventually return to more historically typical levels it seems possible that we might even soon spend more on interest than on our national defense because we have to in order to service our debt the president's own budget from 2018 forecasted that net interest expense will exceed defense discretionary spending by 2026 it looks like the federal deficit this year will exceed 1 trillion as it will in the next several years after that based on current protection predictions it is hard to see how the federal government can issue that much new debt without further driving up interest rates one of your predecessors once said there is no question that as deficits go up it does affect long-term interest rates he continued a rise in the debt increases the amount of interest expenses which in turn increases the debt still further and there is an accelerating pattern after you reach a certain point of no return could you talk with us today a bit about some of the potential risk to financial stability posed by our current fiscal path and in particular current federal spending I think the United States federal budget is on an unsustainable path in the sense that spending is growing faster than the economy and and ultimately that becomes unsustainable at some point I think we're racking up greater and greater debt I start to say the debt is growing faster than the economy debt as a percentage of GDP is going up and that is unsustainable I meant to say it's it's something that we need to get back to and assess and it's not up to us to say how to do that what combination of spending and taxes that is of course totally the province of the legislature but it's something that that's important over the longer run and what will happen if we don't do it is that we'll wind up spending more and more on interest and less and less on the things that we really need to spend money on educating our grandchildren and all of the important things that we do you know for the benefit of the public with federal tax dollars what are your views about the veteran Federal Reserve's role in monitoring financial stability reading posed by the deficits we have a we do have a broad role in monitoring Financial Stability I would say you know the the four key pillars we look at our leverage in the financial system and leveraging the net away from the banks funding risk and asset prices we don't really think of of longer-run fiscal and sustainability as a financial stability risk it's more of a you know we're the world's reserve currency we keep being able to borrow my predecessor who predicted that more debt would lead to higher interest rates would be surprised to see that with the debt that we have we still borrow at very low interest rates because we are the world's reserve currency so we haven't seen higher rates but to the extent we we go on raising debt to GDP we will we'll just wind up spending more and more money on interest and less on the things we need if you will talk about the impact of higher interest rates if if in fact deficits lead to higher interest rates on the stability of the financial senate system in the aggregate well I think down the road at some point rates I mean ultimately there is a there's a price to pay here in higher rates it had there has to be that has to be true at some point although you know Japan has far higher debt to GDP than we do and pays even lower interest rates so it's it's hard to say but ultimately I think the debt that we're racking up is is really going for essentially current consumption and we're passing the bills on to future generations I think you know our generation is entitled to spend whatever money we think we need or ourselves during our lifetimes but we really have to pay for it we got to be paying for it rather than passing the bills along to the next generation and finally in three seconds is there a point of no return somewhere way out in the future there has to be I think in principle I yield back mr. Lieb the gentlewoman from Michigan is now recognized for five minutes thank you madam chairwoman Thank You chairman for coming before our committee as you know I represent Michigan which faces strong headwinds in the current you know climate right now in the auto industry is at a disadvantage with the current trade war with China in addition automakers have been laying off workers as they adopted products to fit their you know emerging technologies and market trends and really at the core is corporate greed but what we saw between I think in Wayne County in the Detroit area we saw unemployment rose between April 2018 in April two thousand nineteen from four point two percent to four point six percent given that Detroit area still hasn't fully recovered why should we believe that the Federal Reserve has the tools to prevent another deep downturn let me say we do understand that we when we talk about national level unemployment rights we completely understand that that is not true in all parts of the country in all regions of the country and all demographics of the country and we try to when we get when we do this at the FOMC we always have presentations that call out those disparities and ultimately if we were to face another your question really is do we have the tools to to address another severe downturn we don't expect a severe downturn if we if we had one we would use our tools as aggressively as we needed to to do that and that would include all the tools in our toolkit including interest rates forward guidance the balance sheet in various forms and and whatever else we can we could devise and I do think our tools would be adequate so if we had another recession and interest will be low or cut to zero and then we flounder you know and should we expect that it will take another ten years for unemployment to recover should the people in my district be expected to rake it for a decade for for a job I mean we we see this shift in certain parts not only in Detroit but even in the Wayne County community surrounding the city of Detroit I would think not so the the remember that the the Great Recession was the most severe in a very long time and we saw we saw an unemployment go to 10% we hadn't seen that since the early 80s and I don't you know you're starting now at three point seven percent you know you know if you take a typical recession a more typical recession not like the great resemble what's so I applied for a walk with my district so what what additional tools or authority do you need to prevent in another downturn I mean we talked about you talked about tools and so forth I mean what specifically and again you know direct us to what we can do to support making sure that our families are able to provide I think I think we have the tools we need I think what we would hope for is support from fiscal policy which is to say supportive fiscal policy that would you know support monetary policy in a downturn well in the last recession the feds stepped in to ensure that the corporations borrowing and the commercial paper market would get would still get credit when governments in places like Detroit or Puerto Rico cannot issue bonds at reasonable terms that has real consequences like the inability to provide safe water in my district for instance a lot of infrastructure issues if the Fed is responsible for ensuring that businesses have had access to credit through the commercial paper markets why isn't it equally important to ensure that state and local governments have access to credit you know we don't have authority I don't believe to lend to state and local governments I think we true that could be a tool I don't think we want that Authority I think we want I think that's something for Congress to do I think we don't want to be picking winners and losers we want to be helping the economy broadly to the maximum extent possible in the face in corporate but we do it for corporations why is there a different standard and this is a genuinely really curious I so what you had was you had credit markets for example that financed auto receivables and commercial paper and things like that that were that were failing and breaking down and and the economy was grinding to a halt and so we devised programs to support to reopen the capital markets in a way without regard to who the borrowers were or picking a particular kind to borrow or we just we had to do that and that's really what got the economy but we can do something similar into state and local governments um you know we could we can talk about this I know I look I come from a city first I think ever to file for bankruptcy the people that were actually would directly hurt and still continue hurt our pensioners we still haven't been able to really you know the 7.2 miles of downtown and some of these surrounding neighborhoods have been able to get investments but you still see a deterioration and it's directly tied to unemployment thank you madam Speaker Thank You mr. style the gentleman from Wisconsin is recognized for five minutes thank you very much chair watters and thank you for being here chairman Powell in your opening remarks you stated that you strongly support the maximum employment mandate and that overall the national labor markets healthy you noted the unemployment rate was three point nine percent in December has ticked down to three point seven percent in June it's actually 2.8 percent in my home state of Wisconsin you also noted that employers are hiring lower skilled workers and training them I view this as a quite positive step also in your opening marks you identified key risks that you're tracking including brexit trade instability and rising debt what I did not hear you bring up is a proposed $15 national minimum wage that some of my colleagues are advocating is you may know the CBO recently analyzed this proposal to increase the minimum wage the report found that a federal minimum wage increase to $15 an hour may cost 1.3 million Americans to lose their jobs and in a worst-case scenario 3.7 million Americans could lose their job that's even more than the entire civilian workforce in the state of Wisconsin which is 3.1 million workers how would the Fed respond to the impact of a $15 minimum wage both on inflation and real wages as well as the precipitous fall in employment outlined in that CBO report so we see the minimum the question of minimum wage is one that is squarely in your court and not ours there are many many studies of minimum wages and there on the economy they doesn't tend to be a consensus but they do all tend to show some degree some people will lose their jobs and other people will benefit and so I if I were sitting in your chair I'd be looking at 20 of these studies and I would try to get a sense of what the right trade-off is and whether you were willing to make it it's not a question for the Fed and you know I without knowing without we just don't take a position on that so and it's not something I imagined there would be it would be challenging to make an aggregate assessment without sort of taking a point estimate and what is a highly uncertain range of possibilities III appreciate that can you even comment if the discussion on the 15min dollar minimum wage would create the type of uncertainty that may slow hiring you know I'm just not going to it's really not for us to to to be a referee on the question of the federal minimum wage we have not done that and it's just not something we're gonna do fair enough fair enough let me let me shift gears chairman powell i'd like to ask you about an issue that's been a major focus for many members of this committee the international insurance capital standards in previous appearances you've assured us that the Fed wants to negotiate an international agreement that works with our regulatory system as you know we expect the final version of the ICS to be completed at an International Association of Insurance supervisors meetings this November what can you comment as to what instructions you're providing to your staff we're negotiating the ICS to ensure that the US regulatory approp approach is formula formally recognized um you know so we coordinate very heavily with the Office of Insurance over at Treasury and and and very much with the state insurance regulators which is where a lot of the regulation happens in our system really all the regulation and I think we're all resoundingly agreed that whatever capital standard is adopted has to work for the US system u.s. has a particular system of regulation for insurance companies based at the state level and anything that gets adopted internationally it simply has to work for the United States system or we can't adopt it is the Fed prepared to then oppose the ice yes if it was unsuccessful achieving formal equivalency for the US regulatory system I think we're we're clear that whatever is adopted has to work for our system I appreciate that I appreciate your time today and I yield back thank you thank you Miz asked me the gentlewoman from where she found it's now recognized for five minutes Thank You chairwoman and Thank You chairman Powell for being here and I am loud and proud about Iowa a great state that it is chairman you said that in February that income inequality would be our economy's biggest challenge for the next ten years and I couldn't agree with you more you also said that income decreased for people in the middle and bottom end of the income spectrum while growth of the top has been very strong and that's something I hear a lot when I'm talking to folks in Iowa and to make that disparity even more clear the Fed recently put out its distributional financial accounts showing that over the last thirty years the total wealth of the top 1% has increased by more than 21 trillion dollars while the total wealth at the bottom half of Americans has actually gone down my colleague mr. Lawson asked why this was happening I'd like to expand on that and ask you is that inequality something that should be considered when setting monetary policy we um we try to inform ourselves about what's really happening in the economy just just that's a lot of what we do and and so that's and this is an important factor we don't actually have the tools to directly address these issues I think they're there more around education and skills the the the principal way we can get at this issue though really is to take seriously Congress's order that we achieve maximum employment because as you can see I you can see in your communities that the expansion is now reaching groups that are at the marginal labor force and that's because we're pushing ahead and and you know having a very long expansion with quite low unemployment and that's really benefiting these people at the margins so you mentioned a couple of what I believe are possible solutions you said education and training I believe what can you expand on that a little bit or what other solutions do you see to help us with this inequality you know I think I'm I guess my my underlying model of the problem is that there's no shortage in the world of of good jobs we just we just have to produce qualified people qualified workers who can can live at the standard of a wealthy country and do the work they can do and that means better education it's easy to say it's very hard to do but we we need workers who can compete with the other advanced economies or for the good jobs for the it's manufacturing jobs it's a lot of service economy jobs and you know it's not easy to do fixing the educational system and improving it is a very challenging thing I spent no small amount of time on that earlier in my life but I think that's ultimately that is it at the end of the day the country is its educational system and the people who you know the people who are in the country they're a product of that system and we need to we need to get ours producing people who can compete in the global economy and and that's I think that's at the bottom of the pile that's the important driver I appreciate that let's pivot slightly to look at regional differences Iowa's per capita income is more than fifteen hundred dollars below the national average while New York's is almost 5 thousand dollars higher I'm concerned that too much of the discussion focuses strictly on the rural urban divide and I certainly know that my district has rural and urban in it but I'd also like to raise the issue of regional shifts within the economic growth moving to the coasts could you talk a little bit about how that income inequality that you've mentioned is one of our biggest challenges interacts with regional inequality yes we we actually had a box in February monetary policy report on disparities between rural and urban if that goes to your question and they've gotten worse over time since since the financial crisis and you know there are just these underlying drivers that were not at all sure there's no you know widely accepted accepted explanation but younger generation appears to want to live in cities and so they're moving into cities they're moving out of rural areas and it's leading to people in other words people who can move to cities do and and they get you know because that's where the jobs are and that's where the growth has been it's um it's a phenomenon that we've been seeing for some time and it's gotten worse in the last decade so do you have any particular solutions that we should be looking at I don't unfortunately okay well I'm fortunately I think we're up several of us from these rural areas are working on this so I'm hoping that we can make an impact there but I thank you one thing that you didn't quite get to you mentioned rural urban again but a little bit more about the regional shift so you know we've got a lot of opportunity in states that are in the Midwest but we don't have as much access to that opportunity that some of our coastal areas have what are your solutions there you know I don't know that we we have those tools I will say we have researchers who are doing a lot of good work in this area then we'd be happy to connect you with them I'd be happy to connect you with them appreciate that it will thank you the gentleman from Virginia mr. Rigell Minh is now recognized for thank you thank you madam chairwoman Thank You chairman Powell for appearing here today it's good to see you sir we were talking a little bit earlier about fiscal policy and one of the good things about going near the end as I get to hear a lot of good things talking about fiscal policy and trying to prevent a downturn I had a couple questions too talking about incentivizing investment you know sort of for the average American looking at policy just some thoughts about I don't you know looking at is it higher taxes lower taxes is it the u.s. MCA or something like Cecil you know that we've discussed before what are sort of some of what are some of the quick take on some of the policies that would help as far as as far as economic growth for the average American and there's just one to get you know some of your thoughts on that I think um II you know generally I think we need policies that will pardon me policies that will support labor force participation policies that will qualify people to hold jobs and progress through their careers that's a big thing that's a place where the United States lags other comparable economies and it's really something we need a national strategy to work on is how can we raise labor force participation it won't be any one thing it'll be a range of things the other the other piece of it is is productivity and productivity is really combination of a couple things one is incentives for investment in technology which drives productivity I think basic research by the government has actually been an underlying driver over long periods of time in addition its skills and aptitudes of the workforce which which we've been talking about it's you know more productive workers have more skills and more more training in that kind of thing so I mean you can break it down into labor force participation in productivity those are the two things that really determine that country's longer-run growth as course population growth as well assuming a level of population growth it's labor force participation productivity thank you I think I think we talked you said sixty two point eight percent of the people really probably support 100 percent of the population which I thought was a very interesting stat when we just when we discussed each other discuss that and also I also want to commend you and thank you and your colleagues of the Fed for the very substantial support guidance and collaboration you provided to the private sector in the area of Faster Payments and this successful public-private partnership has been critically important I think in making real-time payments a reality in the u.s. so thank you for that and I also want to commend the Fed for its proposal to facilitate private sector real-time payment solutions by providing additional liquidity services which I understand could be effectuated by extending the operating hours of the Fed wire fund service but I do have some concerns a mr. chairman regarding the other part of your proposal that envisions the Fed itself entering the market for faster payments as a direct competitor of the private sector and my understanding is that the Fed seeks to justify this potential action in part on perceived need for resiliency which I believe raises several important questions and I would say first it's the notion that having two systems would provide resiliency necessarily assumes that every bank in the country or at least an overwhelming majority of them would have to connect to two systems the private sector system and they yet-to-be-built government-run system and this is just based on my experience in Big Data when you're talking about what I've had to do in the military with electronic warfare and and looking at this and actually trying to interoperate systems and I think this would create enormous inefficiencies and impose needless costs on the American taxpayer in the private sector unless of course the Fed runs system would be fully interoperable with all the private sector alternatives so my question is if I'm a community banker in Virginia where I'm from I participate on the Fed system what guarantees can you give the community bank today and the two systems will be fully interoperable and if there are none then what is the purpose of having a second government-run system um so I think you know this this was based on a proposal from the Faster Payments tax task force which had very broad representation including the smaller banks who were quite supportive of this idea we asked for public comment on this we're reviewing that comment we got I don't know four hundred comment letters or a nine hundred or something a lot of comment letters and so we're in the middle of that decision-making process in terms of interoperability and again the COS the community banks who who strongly push the Fed to move forward with this in terms of interoperability it's it's a good it's a good issue a good good question and and we'll need to work to to to make that happen at least to the level that it's functional it may not be perfect but we'll certainly be if we move forward with this we'd be certainly looking at that as a characteristic to achieve thank you and I think it's how it goes back to resiliency for me and I know and I think it's a concern about resiliency that I had and we had our discussions and discussion here in committee is that if there are concerns about resiliency and it's just based on my experience in the in the private sector when it comes to big data couldn't you probably address those concerns through the regulatory and supervisory authority that already exists in your space and that's that's what that's what I was getting to here if we're talking about resiliency with the multiple data centers and redundant systems that actually could be a problem with interoperability do you think resiliency could be something that's a function of what you're doing right now and keeping with one sort of faster time payment system they come down continue the gentlewoman from message almost as Ms Presley is now recognized for five minutes thank you madam chairman and thank you chairman Powell for appearing before the committee today the Federal Reserve can do more to support the needs of hard-working American families as it stands working families wait days at a time just to have their checks clear and when you were living paycheck to paycheck and rent is due the first of the month there can be no room for error as a central bank in America the Federal Reserve has a responsibility to speed up the process of clearing payments I want to bring up a report that was issued two years ago the faster payments task force in that report the task force called for a payment system in the United States that is faster ubiquitous broadly inclusive safe highly secure and efficient by 2020 mr. chairman 2020 is less than six months away yes or no well we have a faster payment system by then no we're working on it but we're not going to be done by 2020 I would say but we're getting there the task force also concluded that broad access to settlement services will help level the playing field and enhance competition among providers of faster payment services yes or no do you agree that this is an issue of accessibility and equality I do agree that that's one of our principal motivating factors and so with the Fed like to see a world where all Americans have access to faster secure payments yes we would that's why we've been working on you you mentioned that report this is a project been going on for five years right if you can instantly clear payments between the accounts of commercial banks hell within the Fed why not consumers writ large what's the delay well it's not a it's a service that hasn't existed its existed for banks immediately available funds existed for banks we really we don't have plenary authority over the payment system as some other central banks do but we convened a group of people and institutions maybe five six years ago and we said let's work toward this and so that's the report you saw was was I think the last report that we issued and we're working to implement some of the recommendations yes pyramid is trying to better understand the delay in the implementations of this of this report have you received any pushback from any businesses particularly the credit card industry you know I think I think we're determined to do what the what we see the right thing as were we're not looking have you received any pushback specifically from the credit industry have not personally no I so a faster business is to advocate for their for their own well-being now sure do you agree that our country's continued lack of a real-time payment system is being exploited by credit card companies like MasterCard and Visa and also outside of that industry by Facebook to create a digital currency I wouldn't want to use those terms no I I think people operate in the environment that they have we're trying to create an environment that does have faster payments broadly available and we think that's a better environment for the reasons you articulated yeah I mean I really do see a faster payment system simply as a public good and the lack of action here creates a real void in the lives of consumers everywhere and these voids are increasingly being exploited by companies looking to operate as financial institutions without the guardrails Facebook's Lieber is being trotted as a solution to the unbanked however I struggle to see how sitting the functions of a central bank to a private company solves an issue of resources instead we should be using pre-existing infrastructure to ensure that all people have the ability to safely and securely and with no cost access and move their 24/7 365 days a year so again let's not lose sight of the plot mr. chairman and the plot is the American people and I hope to see your organization become more reflective of the lived experiences and the everyday needs of Americans thank you and I yield back thank you the gentleman from Wisconsin mr. Duffy is now recognized for five minutes thank you madam chair I mr. chairman up on a your left hand corner welcome one of my colleagues in their statements said that the president has implemented harmful economic policies in your assessment I think you said the economy is doing quite well is that correct yes I'd say the economy has performed I said reasonably well so far this year last quarter was 3.1 percent growth pretty pretty great isn't it you know that just if you take it through the middle of the year we'll have growth probably in the mid twos and yeah that's that's it that's a solid performance okay great where I come from obviously are we like our rural communities to grow as well as our urban communities but by and large the biggest complaint that I hear from my employers is that they don't have enough labor they can't get people in to their shops to fill the positions that are open and then there's some that'll come in and they don't actually want to work which leads me to immigration but I'm not gonna go there with you we had some problems in immigration but there's competition for labor and when there's competition for labor don't you see the salaries rise hourly wages rise when there's competition for labor yes am I wrong on that that's it's very interesting you know we have seen wages moving up and we do hear lots of reports like what you just said about you know labor shortages and can't find qualified people we would have expected to see wages move up more they are moving up at a healthy level you know on average a little more than 3% that's a good thing and yeah you would want a tight labor market to produce solid wages this is a fairly tight labor market it is by almost every measure I would say that weight doesn't really show the tightness through is the wages which could be higher in a tight labor market if I have a person who's making 12 bucks an hour but they're actually worth $15 an hour what do you think happens well the you know you know in economic theory they were they sure knew $15 now if their original product is $15 they'll leave one job and pay to go to someone else that'll pay 15 bucks an hour all right yeah because everyone's looking for labor but if a guy's making 15 bucks an hour but maybe only worth 11 what happens well they might get fired right you you yeah or he might automate so the markets actually work to pay people the value of the services that they provide the company and that especially happens in a tight labor market which I know you won't make the point on a $15 minimum wage but my concern is that if we increase that to high and we have people who aren't worth the value of $15 an hour they'll lose their jobs and and fall into deeper despair that's that's my concern with with regard to Mona switchgear Sonia in regard to trade I you're not commenting I know on the on the policies of the president with regard to trade but you you look at our long-term horizon you've mentioned debt and the problems we're gonna have with regard to trade if if we have countries that will steal our technology so you have a company that invests 500 million dollars in our new technology and someone steals it from you and just has to pay a hacker in a basement and the income tomorrow with the same product at zero cost is your 500 million how do we compete in the long run with that environment or we have a country that manipulates their currency to make sure we can't have some equilibrium with regard to our trade how how do you deal with countries like that but but for the policies the president has pushed those are entirely appropriate considerations for those who have responsibility for trade policy would it concern you for the long-term health of the American economy if people are steaming our technology are cheating us are manipulating their currency would that concern you I have to say we we are very unusual in democracy that we have this independence that we to do our jobs and I think that means we need to stay in our lane I try very hard not to get kind of doing things that were not they were not responsible for so I'm just gonna have to with so with regard to someone mentioned corporate greed we want to see companies and individuals behave responsibly and honorably but we also want them to make a profit right give it an objection to companies and individuals making a profit making money well we have we do have a market-based system and if they make too much is that a problem for you it's not if so how much is too much not not for us to judge okay so you do you support a market economy and it's a good thing I think a market economy has been market-based and I think that's sort of the public and probably the greatest economy that's existed on the face of the earth fair to say yeah okay yield back rizo Casio Cortez the gentlewoman from New York is recognized for five minutes thank you madam chair and thank you so much mr. Powell for coming in today the Federal Reserve's mandate one of their mandates is to maintain price stability and maximum employment is that fair to state to say yes and a lot of folks would interpret that as meaning to aim for the lowest unemployment rate possible without runaway inflation correct yes so I I kind of wanted to dig in today with you a little bit about this relationship between unemployment rates and inflation in early 2014 the Federal Reserve believed that the long-run unemployment rate was around 5.4 percent in early 2018 it was estimated this was now around lower around 4.5 percent now the estimate is around 4.2 percent what is the current unemployment rate today three point seven percent three point seven percent so what we had previously thought of perhaps as far back in 2014 as a long-run unemployment rate is around five point four percent well we're currently experiencing as three point seven lower lower than that estimate but unemployment has fallen about three full points since 2014 but inflation is no higher today than it was five years ago given these facts do you think it's possible that the feds estimates of the lowest sustainable unemployment rate may have been too high absolutely so we overshot in what our long-run unemployment rate is I think we've learned as you pointed out I think we've learned that you can't identify this is something you can't identify directly I think we've learned that it's lower than we thought substantially lower than we thought and I've been seeing lately that economists are increasingly worried that the idea of a Phillips curve that links unemployment and inflation is no longer describing what is happening in today's economy have you been considering on that what are your thoughts on that very much so we spend a great deal of time on that the connection between slack in the economy or the level of unemployment and inflation was very strong if you go back 50 years and it's gotten weaker and weaker and weaker to the point where it's it's it's a faint heartbeat that you can hear now it's still there you can see it at state level data and things like that but I think we really have learned though that the economy can sustain much lower unemployment than we thought without troubling levels of inflation and I think we I would look at today's level of unemployment as well within the range of potential estimates of plausible estimates of what the natural rate of unemployment is so why do we think that we're seeing this decoupling in a relationship that we had seen in the economy decades ago it's it's so one reason is just that inflation expectations are are so settled that and that's what we think drives inflation that for example when unemployment went way up you didn't see inflation go down right and you say you don't see you don't see inflation reacting to unemployment the way it has because inflation just seems to be very anchored do you think that that could have implications in terms of policymaking that there's perhaps a room for increased tolerance of policies that have historically been thought to drive inflation or increase inflation one of the arguments about minimum wage or or other policies that directly target middle-class Americans is that they could drive inflation do you think that that that decoupling is something that we should consider in modern policy considerations yeah I think we again I wouldn't want to get into the to the minimum wage discussion directly but I think we've learned that inflation that that really downward pressure on inflation around the globe and here is stronger than we had thought you see countries all over the world not getting you know being below their inflation targets whereas when I was young they were always above now they're always below and the United States has done better than other countries but we're still below our target and and they could I have one last question earlier you had suggested that in the event of a recession or a contraction we'd like to see more fiscal policy that supports monetary policy can you further articulate what some of those fiscal options and considerations should be in you know in in terms of specific options that we should consider that I was referring really to a severe or a significant downturn and if that were to happen then I think it would be important that fiscal policy come into play and that so their automatic stabilizer the stabilizers that happen but in addition things were done at the beginning of the financial crisis in terms of spending increases in tax cuts that helped to replace the demand that had been lost in the private sector and get us through a really rough patch something like that but those are those are things I would reserve for pretty severe downturns thank you very much thank you mr. bar the gentleman from Kentucky is now recognized for five minutes thank you madam chairwoman and chairman Pao welcome back to the committee and I mean first just say I appreciate my colleague from New York recognizing that the strong Trump economy has not produced inflation challenging the credibility of the Phillips curve let me also say without quibbling about the details I think that you're doing an outstanding job chairman Powell and I want to especially appreciate the much improved communications with Congress about the direction of monetary policy and so I do want to take up this issue of Fed independence because so much has been made in the media of President Trump's criticism of Fed policy in recent months and his reference to quantitative tightening his criticism of so-called quantitative tightening as you as you will recall many members of this committee especially on this side of the aisle criticized your predecessors for for overly accommodative monetary policy for an extended period of time so-called quantitative easing and so what I want to just say is that my view is that all of this feedback from both the executive branch and the legislative branch is a necessary and constructive part of oversight and is simply part of holding the Fed accountable and that it in no way compromises Fed independence since you and other governors are given 14-year terms with with a provision that makes you removable only for cause do you agree or disagree with that I would I would just say it this way that we're completely and totally focused on carrying out our jobs and nothing really will distract us from that our accountability in our system really does lie though with this committee and with with the other committee and on the Senate side so you have oversight over us and a lot of other systems it is the Finance Ministry but in our system of government it's Congress my only point is that criticism from Congress or the president does not in my view in any way compromise your independence mr. chairman I heard the economist Arthur Laffer say over the weekend that the Fed really doesn't set interest rates that it follows interest rates I thought this was an interesting comment especially in light of low long-term rates and the inverted yield curve has the case for lowering the Fed Funds rate strengthened because the Fed is actually following rates as opposed to setting them you know I wouldn't say that I didn't see that comment so I can't react to it but um I wouldn't say it quite that way our focus is is on real economy values in particular of maximum employment and stable prices so we we use our monetary policy tools to achieve that and we know that our policy works through financial conditions so we look at a broad range of financial conditions they do matter for us what really matters is if there are big changes in financial conditions and they're and they're sustained for a period of time where are we today in terms of the proximity of the feds fund fed funds rate to the neutral rate that's another one where we where we can only estimate the neutral rate as you well know and and it's interesting estimates of that have come down as well I would I would point out that we published the medians of the in our summary of economic projections every quarter we published the committee's the medians of the committee and that that number has come down by 50 basis points since September of last year so the median estimate is now two and a half percent nominal which will be about a half a percent real and whereas it was three percent back in September so we're learning we're always learning about about the natural rate of unemployment and about the the neutral rate of interest and right now understand that that it is estimated within fairly broad uncertainty bounds as you know I've been critical of previous Fed positions or policy that I would characterize is overly improvisational as you communicate and forecast where Fed policy is going and you you talk about in your testimony that the case for a more accommodating or accommodative policy that argument is strengthening I appreciate that because I think it's habituating the markets as opposed to surprises and I think that's very important for the stability of our financial system last question you obviously cite in your testimony uncertainties in trade developments is perhaps one of the reasons why the case for a more accommodative policy has strengthened in recent months what would passage by the Congress of US MCA an enactment of US MCA do in terms of the overall economic outlook and also the future trajectory of monetary policy yeah it would remove uncertainty about about our trade policy with Mexico and Canada to have that to have that pass and I think that would be a positive thing of course I wouldn't comment on the particular merits of it it wouldn't be appropriate but I would say the passage of it would would remove uncertainty and I think that would help in the current environment I do I do have actually one final question and that is you had responded to my question about the g-sib surcharge and you said that a proposal to simplify capital requirements for banking firms by integrating a banking firm supervisory test results into regulatory capital requirements where are we on that moving forward working on it working on it thank you I yield back as Wexton the gentlewoman from Virginia is now recognized for five minutes thank you madam chair and thank you to chairman Powell for joining us today chairman Powell do you think that the US should go back to the gold standard for our currency let me say I wouldn't this could easily be considered commenting on a particular nominee who has recommended that and of course I would not do that I will answer your question but I want to make sure that this is an interpret in that way so no I don't think that would be a good idea the idea would be Congress would have to pass a law and that law would say that our job with monetary policy is to is to manage the dot the level of the dollar stabilized the dollar price of gold and we would then not be looking at maximum employment or stable prices and there have been plenty of times in the fairly recent history where the price of gold has sent signals that would be quite negative for either of those goals so I don't think that's something that would be attractive no other country uses because it's much more volatile linking it to gold would be very it's really that it's not connected to our directive where you've assigned us the job of two direct real economy objectives maximum employment stable prices if you assigned us stabilize the dollar price of gold monetary policy could do that but the other things would fluctuate and and we wouldn't care we wouldn't care if unemployment went up or down that wouldn't be our job anymore so I much better much better mission for the Fed is what you're doing right well I you know this is why every country in the world abandoned the gold standard some decades ago well and that's that reluctance or that the desire not to go back to the role to the gold standard is something that you have in common with the CEOs of the seven seven of the worlds globally systemic important banks who were before us in April and said the same thing but it is worth noting that last week the president nominated Judy Shelton for a seat on the Fed and she is similar to two of his other would-be nominees and that she does favor a return to the gold standard so I assume from your tip from your earlier answers that you don't share that view I don't share that view but I would never comment comment on the views or any particular nominee would be we do not play a role in the nomination process it's totally up to the president and the Senate in that and we just are completely on the sidelines there my concerns about miss Shelton are not just her questionable views about mana monetary policy but she also seems to be by most accounts a political opportunist who thinks low rates are bad under Democratic presidents and good under Republican presidency and that I would I would caution concern when looking into the nomination and Confirmation of this candidate I do want to talk for a minute about debt there have been a lot of questions about it in particular the debt ceiling on Monday the Bipartisan Policy Center projected that the US Treasury could run out of money by early September if Congress doesn't raise the debt ceiling and that's actually because the government brought in far less in corporate tax revenues than last this year than was projected as a result of the tax cuts because you know spending is only one side of the ledger right we need to look at the revenues and there's a possibility that the US could default on its debts what would our what would Congress is failure to raise the debt ceiling what would that mean for the US economy I so I think it's um it's essential that Congress raise the debt ceiling in a timely way so that the United States continues to pay all of its bills when and as do I think any other outcome is unthinkable we've never failed to pay our bills when do and so I assume and believe that that the debt ceiling will be raised in a timely fashion what would it mean for the economy and for interest rates if we fail to do so I think it's it would be very uncertain territory if the United States were to stop paying its bills it would be I would entertain jebel negative outcomes from that the loss of confidence in our ability to run our fiscal house could be substantial it would be a lot of uncertainty and I just think it's beyond contemplating that well and yet we must contemplate it mr. chairman thank you and I agree and I want to encourage leadership on both sides of the aisle and both chambers of Congress to to not wait until the last minute to make sure we raise that ceiling thank you yield back Thank You mr. Gordon the gentleman from Texas is now recognized for five minutes thank you madam chair chairman Powell the board's done a great deal of work with regard to foreign banking organizations but I'm concerned there's a lack of harmonization across jurisdictions with respect to these foreign banking jurisdictions and I just want to make sure that you all are working to ensure that our US firms are not disadvantaged in the foreign market place and could have hear a little more about your plans for that so I think here we we want we want to give national treatment equal treatment to foreign institutions and we fully expect and anticipate that we will get that from foreign in foreign jurisdictions that's that's why we give it here it's you know plus we want we want foreign institutions to come in and do business here and lend capital to people and take part in the capital markets that only helps our economy we want our institutions to be able to take part in foreign economies many banks our work across national international lines now so it is essential that that there be air treatment for non-native banks all around the world thank you I appreciate that Stan's also in your written testimony you mentioned trade tensions and slowed global growth as potential threats to the US economy between these and the debt ceiling and the lack of consensus in Congress what would you say your biggest concerns out of those out of those I really I really think that the most important thing is the what we've been calling the cross currents which are really trade tensions and concerns over slowing growth global growth around the world that those are interrelated there's a box in our monetary policy report that I recommend to you about slowing global growth and manufacturing and investment which is which is something we're seeing not just the United States but around the old and you know that is the thing that weighs on our outlook we see it here we see weak manufacturing here we see confidence surveys among businesses and fortunately the consumer part of the economy is doing very well but that's that's where the weaknesses and that's where the concern the other things are concerns too but I would put those at the top of the list so along with along with low inflation you know that's that's a concern that's the other half of our mandate and you know we are concerned that inflation not run below 2% more persistently than we thought it would so putting all that together the current state of the economy where you see us going on a scale of one to ten how would you rate where we are with respect to an economy one being bad ten being great I don't think I'll give you an actual grade but I will say this we are in the 11th year of this expansion that's a first in since we began to keep records on this we're at three point seven percent unemployment that's a 50-year low 50 year loan we've been there for 15 months and there's no reason why that can't continue we are committed to using our tools to make sure that that it does continue and I just would again point out though that this expansion is now reaching groups that hadn't been reached in the first few years and there's a box on that as well in the monetary policy report all the more reason why it's so important we keep the expansion going to the maximum extent we can I agree with you and I thank you and I yield my time back thank you madam chair thank you for convening the hearing and mr. Powell thank you for being here for your thoughtful testimony and you and the rest of the Board of Governors have a very monumental task and you've made some good decisions and I'm also heartened to see that you're maintaining your independence and not allowing yourself to be bullied let me just put a couple of things on the record you know we've had a lot of discussion here about the CBO report and the minimum wage and I just want to add something else to the equation and that is that yes there's been some discussion about losses but I think we need to consider the fact that raising the wage will elevate 27 million low wage workers and we really need to be concerned about the fact that so many people are really living at the poverty level a lot of those folks live in my state of North Carolina so when we look at the fact that we're going to raise people up when we look at this $15 that we keep hearing about I've done the math on it and it's like a dollar and fifty five cents a year but anyway let me move on having said that to a question about the unemployment inequality terms of black unemployment the overall unemployment rate is about four percent the unemployment rate for African Americans was about almost seven percent in this recent Bureau of Labor Statistics report which which almost doubles the unemployment rate for whites which is about three point five percent in the same report let me and these unemployment rates have been steadily falling since 2011 so what if what if any analysis does the Federal Reserve do to evaluate the degree to which economic inequality affects the african-american unemployment rate affects the african-american unemployment well let me say as a feature of our of our labor markets african-american unemployment has often run at double so and so that means it comes down faster when when times are good and it goes up faster or twice as fast and so that's not it's not a good feature of our of our employment market thank you so what what more do you think can be done to ensure that unemployment among minority groups get says low is white unemployment and what role can the Federal Reserve play if any in reducing these disparities the tools that we have and actually there's a there's a box in the monetary policy report that talks about different it's it's not by african-americans it's by different levels of education which we can show you but it does talk about the disparate outcomes for people in terms of what we can do I think again it goes back to taking seriously the job you've given us which is maximum employment so we are seeing at this in these tight labor markets we are seeing communities including African American communities that are being reached by the jobs market in a way that they haven't felt really ever or it certainly you know a very long time ago when we had 3.7 percent unemployment it was that it was the late 60s which you and I can remember that's right I'm a child of the 60s I'm a baby boomer and I do remember that let me let me what is supposed to come out of the the monetary policy review that happened earlier last month were there any important takeaways and will there be changes to the way that you and the board conduct the monetary policy because of this review there may be changes we haven't decided that yet we're just into the phase of taking a close look and we're really looking at the question are there ways we can change our tool book box or our strategy or communications that will enable us to better serve the public and they're one of the key motivators for that is that rates are so much lower we're closer to zero that means we have less room to cut and are there ways we can and people have been thinking about this problem for more than twenty years so we want to we want to get the best thinking and and and come out of this with the best ways to serve the public with our toolkit we may make changes but that discussion lies ahead of us great and thank you very much for your service and again thank you for not allowing yourself to be bullied I think that's really important in terms of the job that you're doing and madam chair I yield back my time you you mr. Williams the gentleman from Texas has now recognized for five minutes you madam chairman and Thank You mr. chairman for being here today and just as the reminders you know I'm a small business owner Main Street America and and very much interested in what has happened at the Fed I wanted also to reiterate my past statements about interest rates even the slightest changes can have significant impacts on many parts of the economy we both remember a time when interest rates were 20% and the principal balance for these rates that compared to today was relatively low and when a new car cost six thousand dollars in 1970s now as the same vehicle can be sixty thousand dollars and with this principle so high just even a bit of slight increases to the interest rate can really crush businesses with high inventory costs and it results in lower sales and we discussed this before you and I but I wonder once again commend you or you have any good pulse on the economy and making the appropriate interest rate adjustments so before I begin my questions though I wanted to make sure nothing has changed since you last came before this committee are you still a capitalist or have you undergone a drastic change of thought and now believe socialism would be a better economic system for our country no drastic changing thank you so yesterday in Boston you stated if the stress tests do not evolve they risk becoming a compliance exercise breeding complacency from both supervisors and banks you continue to say that banks will need to be ready not just for expected risk but for unexpected ones you obviously understand the importance of these stress tests to ensure our financial system is resilient even so I heard some criticism if the Fed stress tests have been watered down where the past few years in order to let the biggest banks off easy so do you believe these stress tests have been made easier since you took over as chairman of the Federal Reserve and how do these simulated stress scenarios compare and scale relative to the 2008 financial crisis I don't believe we've made them easier we have no intention of making them easier we do have the intention of of having them evolved though I do think we're 10 years into this I think this we've done nine nine cycles now and I think there is a risk that if we don't continue to adapt to the markets and to the institutions into the state of the economy that they'll become stale and people will get complacent you come back in another ten years and they're not really a factor anymore they've been a very successful innovation in maybe the most successful regulatory innovation since the financial crisis and I think even the banks would would agree to that so we intend them to be continued to be to be strong going forward thank you in February when you were in front of this committee I ask you about the labor force participation rate even though there are over seven million job openings as an employer is hard to hire people right now you mentioned some factors keeping this number around 63% such as a skills gap for education in the opioid crisis office obviously the Fed has no control over any of these factors and we must deal with them here in Congress with that being said you have noticed have you noticed any of these factors improving and getting more people back into workforce since you were last year in February I think labor force participation the first participation rate has has held up pretty well and there's a declining trend due to aging in the population it's it's sixty two point nine percent now that's where it was in late 2000 2013 so that's a big gain against the trend it's a good thing more anecdotally we're hearing a lot from you know folks who live and work in low and moderate-income communities that that there are work opportunities and there are companies that are coming in and really want workers and and they're going to look through some of the problematic things people may have had in their lives and hire them anyway and so that's we think that's really healthy and in a tight labor market if you have a tight labor market that lasts for quite a long time that's what you're gonna get so we think it's we do think that that's a that's a relatively new development and a very positive one all right and according the most recent monetary policy report consumer spending was down at the beginning the first quarter which you touched on earlier this morning but appears to have picked up and I can tell you as a business person we've seen it pick up so what factors do you see as contributing to this turnaround I think it's a strong job creation its wages moving up its you know as you mentioned tight labor market it's it's workers who work we survey workers and they say the jobs are plentiful we survey businesses and they say we can't find workers so that's a world where that where the where the worker and the family is feeling people are quitting their jobs you know it's a worker it's a world where they're feeling good about the economy relatively well and when you have more more jobs and workers it has a tendency to drive up wages and we say we see that on Main Street America thank you for your service appreciate you being here today I yield my time back thanks sir thank you the gentlewoman from Pennsylvania Ms Dean is now recognized for five minutes Thank You chairwoman waters and Thank You chairman Powell for your expertise your service and for coming in and explaining things to us I learn a lot when I hear you speak and I thank you for that I wanted to examine a little more closely some of the things you talked about the consumer side looking strong the business side weakening and I want to compare that and ask you what are some of the triggers to the weakening on the business side as I look at the chart trade policy uncertainty you said it's no question uncertainty is elevated what would greater certainty look like what are some of the things creating the uncertainty what would greater certainty look like and then what would the impact be on the economy I we think that the the place where uncertainties showing up is in business investment businesses make investments and those have to work for a longer period of time when businesses has become uncertainty about the uncertain about the future and about future demand they may hold off they may decide to wait before they build something or buy something and they may they may just hold off so what we're seeing is business fixed investment which was quite strong business investment was very strong right through 17 and most of 18 it's really slowed down now in the middle of the year and we do connect that there's no there's no perfect way to identify these things but we do connect that to trade policy uncertainty and also uncertainty about global growth and weak weak manufacturing around the world what's specifically in trade policy do you think is connected to that pulling back on investment it's I think it's some it's just there have been Trading you know the people who are responsible for trade and that's not us we you know we don't criticize them for what they do or we have broad series of trade discussions going on if you if you're a manufacturing company in our economy of any size the chances are pretty good that your supply chain goes across national borders through Canada or Mexico or China or Vietnam or someplace and that supply chain is really part of the way you do business and you just assume that it's working and you can focus on your clients when the supply chain is called into question it and we hear this a lot from businesses by the way it's called into question you you pull back and you you know you don't you have less certainty about how this is gonna work you may have to change it many companies have changed their supply chain away from China now because it changed had changed it had moved to Mexico or Vietnam and now so I just think that that uncertainty is is something that we call out for the economy but again I wouldn't want to suggest that that in any way as a criticism of those who are conducting the policy we don't have a responsibility for evaluating that that's for them I understand and appreciate your independence there I'm hearing the same thing on the ground from my businesses in Montgomery and Berks County Pennsylvania the uncertainty the fickle trade policy the fickle tariff policy the punitive tariff policy is driving their conservatism in their own areas let me shift to something else that you talked about and I I care deeply about gun violence the opioid crisis and I'm wondering through your complex lens could you talk about the opioid crisis and or gun violence one of the recent reports on gun violence says that gun violence in this country costs our economy somewhere in the area of two hundred and thirty billion dollars a year and I know you you are not involved in gun policy or the opioid crisis policy but through your lens and through your the tools that you're using what are you seeing what could we in Congress learn about how we could minimize reduce that economic impact I can probably do a little better talk about opioids where there's been some great research including by the late labor economist Alan sadly passed away last year or maybe earlier this year about the effect of the opioid crisis so an extraordinary if you take the prime age men in certain age groups who are out of the labor force an extraordinary percentage of them I think the number was 44 percent are taking some kind of painkiller so it's a big number it's it's a big number of people that are on opioids and for the most part missing from the labor force we all want you know the US economy to grow faster and be larger and we want prosperity be broadly shared here are people who are in the prime working years who are on opioids and it's a national crisis and I know people are working on it but it's it's out there and it's it's it's just there's a human tragedy but there's also an economic motivation to get these people into the labor force where they can lead healthy lives I appreciate that in terms of direct cost to labor and also if you think about the numbers 72,000 people in a single year dying of overdose think of the lost economic or the impact economic impact obviously to the individual family but then to the communities to their children and elsewhere so I thank you very much for your work and I always learn something from you thank you I yield back thank you the gentleman from Oklahoma mr. Lucas is recognized for five minutes thank you madam chair and thank you for being here today again chairman pal you know and we've discussed many times the nature of my district its agriculture its energy its capital intensive so the actions that the Fed takes the actions the Treasury takes has a very direct impact on my constituency I'm very in particular sensitive about Fed actions because my part of the world suffered the most at the end of the 1920s and the 1930s before we became far more sophisticated in how we handle these policies you're the fourth Fed Chairman that has appeared before this committee in this capacity since I've been a member there's just a handful of us on the back row who go all the way back to mr. greenspan and i found you to be up front and as straightforward as anyone could be in your position and in some ways really quite impressive compared to the things in the past now that said I've also learned in my time to try and focus on things that matter to my people back home that would make a difference to them even if sometimes it appears to be down in the weeds I have a suspicion a very bright fella that you are you know where we're going with this next question but I have been raising the issue of inner affiliate initial margin for nearly five years now and while regulators have agreed that the inner affiliate initial margin requirements are an issue to be addressed we've not yet been given any indication of timing when in Congress can we expect some action chairman oh yeah I wish I could be here to give you perfect clarity on that but neither am i completely empty-handed so I do know that this is the subject of active interagency discussions at the moment and I am hopeful that those will be fruitful and you know Chairman like a bird dog on point that I would reiterate that the u.s. is the only g20 country to impose these initial margin requirements and this is created what I fear is an unlevel playing field for United States institutions and I believe it's time we come to focus so my second very respectful question last month the Basel Committee on Banking Supervision agreed to provide an offset for client cleared initial margin under the leverage ratio and the bipartisan CFTC Commissioners support this offset and I'm looking forward to the Fed the other Prudential regulators implementing this global revision and you give me a sense about timeline on that perhaps I'll have to come back to you on that one and you are following in those fine traditions dating back to mr. greenspan and I respect that and I say that respectfully so once again one final question and I want to again voice my concern about the Sacre proposal I'm worried that higher capital charges under Sacre will cause banks to pass those costs on the commercial end-users engaged in Oct Oct 10 to the power to Don this proposal I fear threatens to undermine congressional intent and would deter in users from engaging in risk management activities so I suspect you're aware of these concerns and I hope that we will see them addressed just noting from my perspective again as a member of Congress from the third District of Oklahoma the food we produce the energy we provide those resources need these kind of risk management tools because of the sheer capital intensive nature of the businesses so focus mr. chairman I know you will I appreciate you very much thank you I that last one I think you're probably aware is out for comment after a lot of work progress mr. chair I like that you back madam chair thank you the gentlewoman from Texas music Garcia is recognized for five minutes thank you madam chair and thank you chairman Powell for your endurance or almost looks like and I just wanted to focus a little bit on the whitening income inequality gap that we've been talking about and I wanted to follow up on your answers too mr. Lawson and miss Agni you've said that we've seen the gains of the past decade accruing to the upper income groups in passing the middle and lower income groups can you expand on the long-term systemic risks that such inequality would introduce in the economy of such skewing of benefits if it continues on the present course into the future so I think the tradition has been or the history has been that people have generally been able to progress and through time be economically better off than their and their predecessors and their parents and grandparents and that kind of thing and that I think that's that's how people think about the that have thought about about life in our system and I think the data show that that's less and less true it's still true for many it's true for fewer than it used to be and that's that's not good I mean we we want prosperity to be spread as broadly as it possibly can and we went there to be progress upward for lots of people and we want mobility and from the from the bottom to the top and and vice verse that we want that we want the outcomes to be fair so and if you don't have that yes what's the cost of it really I think the costs are big and and that would include you know kind of a loss of faith in our in our institutions to deliver that and in our society so I think it's a a very important problem to address and I also by the way I see I see lots of businesses and people coming around to that view that maybe weren't thinking that way five years ago you see you hear that a lot you're this a lot of discussion about this now in the business community and they see it in terms of good employees and things like that but also in terms of people to buy their products so I think this is a national problem and so what happens to the bottom I mean it's not as simple as housing have nots I mean if it's if it's shifting and the goal is always to move up if you will yeah what happens to the bottom do you all track and look at the poverty rates y'all looking track at the lower lower income levels researchers the people that are going is you know representative Presley said that our paycheck to paycheck so we do and lots of economists outside the feds I miss it I didn't see any data on poverty rates or what it's doing I mean your book talks about you know the inflation rate of coal of two percent the unemployment rate you know as low as possible but what is the bottom that we can reach in terms of a poverty rate I don't have a number for you we do we have all that data we don't put it in every monetary policy report you probably saw the the Box though that talked about disparate labor market outcomes for people with a lot of Education people with less education which where do you find it is unacceptable in terms of a poverty rate before it skews everything else your any positive number any positive number yeah we I think I mean I think our goal should be to not have poverty I mean if you you know what's an acceptable number there's in our country they shouldn't know no amount of poverty should be acceptable and I seems to me now I know we have a lot of poverty poverty but if you asked me that question I would say well there would be my goal to but for others it may not I don't know if you follow but the president wants to change the poverty line and how we index it to the CPI or the chained CPI and there's a proposed rule of change I mean some people would rather just pretend that there is no poverty or that they've done something to reduce poverty and changing the rules on how to how to calculate it doesn't get us anywhere I just wondered if you have looked at that proposal and whether you favorite or disfavor it have not looked at it wouldn't have an opinion on that you wouldn't well I'm glad that do you agree with me that the goal should be zero that's something that I've worked with my entire life and will continue to do that and I think that the minimum wage increase would be a step in that direction in a number of other initiatives that I hope that we'll be able to get through Congress appreciate your time thank you thank you you bet I'm sure you back thank you the gentleman from Minnesota mr. Phillips is recognized for five minutes thank you madam chair and welcome chairman Powell when you get to me you've reached the finish line my first question why why is the US dollar the world's reserve currency the US dollar is the world's reserve currency there tends to be one so if you take if you're the you're the country with the best institutions the largest economy the rule of law and relatively open to Commerce nasha trading nation you can be that now so what happens is there tends to be one reserve currency and it tends to be a stable equilibrium for a period of time but it's not infinite right the pound of course was the was the reserve currency for many many years but now the dollar has been for some time so what do you consider risks to at changing at some point in the future it's a very long run thing it's you know it's a it's a it's a fairly stable equilibrium there yet to think what what currency out there would would compete with the dollar and there really it you know would be the Euro or it just it's hard to see the dollar not being in the reserve currency for quite some time it doesn't mean that every train there can be there can be multiple reserve currencies so there could be an equilibrium where there are two or three and that would be fine but right now it really is the dollar and I don't see that under threat right now of course in the long run it'll it'll come down to fiscal sustainability it'll come down to maintaining our rule of law and democratic institutions and prosperity and and you know being a relatively open trading nation all those things are essential in your opening remarks you talked about concerns relative to our high and rising federal debt would that be a concern relative to the u.s. dollar maintain the long-run absolutely okay second question and when you contemplate rate changes how much weight do you give to the ongoing strength of current economic data versus the forward-looking weakness implied by the inverted yield curve you know we're I think it's monetary policy Elsie's always about the outlook you you have to understand and take into account the current position of the economy which in our case is very strong low unemployment and stable pilot of price stability but we're always about looking forward because monetary policy works with a with a lag you you ask about the the yield curve and that's that's something we do look at of course we because there's a message in there there are a couple of messages in there you have to think carefully about what they might be and it's not it's not a single thing that is a dominant financial condition there are many many things that we look at in financial markets and that's just one of them but it's certainly one okay and lastly do you believe that the Federal Reserve has the requisite tools to fulfill its mandate at the zlb without assistance of fiscal policy well as I mentioned earlier I first of all we we do have the tools that we have and we will use them aggressively and we believe they will be adequate as I mentioned though in in a severe downturn there comes a time when when when fiscal policy support is necessary and appropriate and one of those times was during the global financial crisis and in the Great Recession so fiscal policy is very powerful and I think you know is a is important to have I think for the most part the Fed can handle counter cyclical policy but in a steep downturn they'll always be a role important role for a fiscal policy okay so so is the authorization to buy a wider range of assets at the lower bound would that be helpful or important or not at this time I don't think we're seeking that we're really not looking at that we have will have we'll have plenty of Treasuries to buy if it comes to that if it comes to buying assets there will be no shortage of US Treasury securities and I don't think we're looking at you're referring to the fact that other central banks have the ability to buy equities exact all kinds of different things not it's not an authority we are seeking or or looking at or think that we need okay Thank You mr. chairman and I yield back thank you very much and so now we have the gentleman from California mr. Sherman we're trying to honor your one o'clock time that we agreed upon and we're just running a few minutes over but we only have two we have mr. Sherman and we have mr. Hecht so mr. Sherman would you both the chairwoman and the chairman for their indulgence it's been a couple of decades in this room I've watched Republicans come here and condemn the Fed for overly loose money and condemn you for quantitative easing I for one have been pushing in the other direction it's interesting to see how with Trump's I think one of our colleagues said a Republicans seem to be in favor of loose money only when there's a Republican president the fact is that you haven't hit your 2% inflation goal and as we've talked earlier it should be a two and a half percent inflation goal because we have and while unemployment is low we haven't had the big wage increases you've told us that wages have grown but basically by one percent over inflation which doesn't make up for 30 years of negative or stagnant wage growth in this country for those without a college degree on trade I've seen uh the reverse roles in another way Democrats voted against MFN for China against NAFTA CAFTA NAFTA but now that Trump is just flailing at the trade deficit I hear an occasional Democrat saying we should just ignore the trade deficit I don't think that flailing or ignoring is the right approach I know there's been a significant discussion here about crypto currencies this constitutes crypto currencies an attempt I hope unsuccessful to transfer power from the United States government to sanctions evaders terrorists tax evaders and drug dealers while reducing the importance as the chairman indicated of the United States dollar as the reserve and trade currency madam sure I know that we have an executive from Facebook coming to join us but ultimately it is time to bring Mark Zuckerberg here he is the one that has made billions of dollars out of us relies on the US government to protect his billions and now wants to undermine the system but I see his problem and that is he wants to invade the privacy of the average American and sell our data and in order to compensate for that he wants to provide privacy to drug dealers and terrorists thereby establishing how dedicated to privacy he is so I look forward to bringing him here because the Libre is an attempt to create a crypto currency that you could actually use to buy things right now we can kind of monitor the Bitcoin because to actually buy something you need to you need to convert it to the dollar i mr. chairman I want to shift to another issue we've talked last time you're here about wire fraud mr. cuss stuff and I got 40 of our members to write you and we just got the response today about the need for a name matching system so that when you wire money you wire money not just to an account number but to a name because especially in real estate transactions we've had a lot of people tricked into wiring money into an account because a hacking and spoofing and has caused them to do that the United Kingdom is moving to a safeguard system where when you wire the money you wire it not just to an account number but that you match it with a name your response indicated that there would be some difficulty in doing that here I know that we have state laws here that establish some rules but you certainly have the capacity to regulate the financial institutions you have regulations in this area you could adopt regulations that say if you're going to accept the wire transfer it has to be wired to a account name not just to an account number how do you plan on addressing this issue of where people are conned into wiring money into an account number thinking that's the owner of the property that they're trying to buy so we understand it's a serious issue and that it's something that they do very in a very organized crime kind of a way hacking into they get a list of the real estate transactions they try to hack into the players and they try to divert these payments it's you know it's organized crime you accurately obviously summarized the contents of that letter and I would say you know we we have concerns about the the matching name idea because we it can conflicts with some state laws we think that really the way to get after it is to get banks to have appropriate ID from customers but what I will propose though is let me get the people who are the experts in this to talk to you and your staff and try and and I would point out this is clearly in a state commerce this is clearly federal jurisdiction legal and we've granted you the power please use it thank you thank you very much the gentleman from Washington mr. heck is now recognized for five minutes thank you very much madam chair and mr. chair thank you so much for staying back I have a straightforward question five days ago the president of united states said we have a Fed that don't know what they're doing so for the record sir do you I would say let's take a look at the economy and let that be this you know the report card so again were the economy's into its 11th year of expansion the longest in modern history since we kept records which began I think in the mid 19th century unemployment is that a 50-year low and has been for 15 months and we expect that to continue so I you know I think inflation is below where we'd like it we as you know we're concerned about uncertainties and other factors that are weighing on the outlook and looking at changing our policy but overall I'd say that our economy is is on a solid footing so despite disagreements you and I have may have had in the past about the actions I think the Fed should have taken with respect to interest rate right raises that I want to State for the record I do think that you know what you're doing I thank you for being here I thank you for your willingness and courage to stay independent I thank you for your accessibility you're only the third Fed chair that I've had the privilege to work with but you're amazingly accessible and I thank you especially for your remarks earlier in conversations with various members notably mr. Stivers and mr. Perlmutter regarding wage growth and in particular not being tempted to characterize recent wage growth as adequate because it isn't adequate and as you know I've been asking since I came to this committee when does America get a raise and it's long overdue but it sets up a bit of a as it were a dilemma for me you have characterized here today that the crosscurrents confronting the American economy our trade in global growth I want to know why it is given that the Fed and you have accurately pointed to the fact that our economy is 70% consumer driven why hasn't the Fed called out more than a generation of lack of wage growth a threat to this economy if we want to have a healthy economy that is 70 percent consumer driven we've got to have some decent wage growth and we haven't we have to have a prosperous growing middle class and we haven't so why doesn't the Fed explicitly call out this lack of wage growth as a threat to the growth of this economy and the health of this economy well I think we do I mean I think we've we've been trying to promote you were asked and you said the crosscurrents our trade and global growth the other cross-current the other downward factor is the absence of wage growth is it not I think it's it's really if you look at the last go back to your point go back to the turn of the century what you saw was a decline in labor share so and that has not been reversed so we're focusing on the change in wages but really the level they're missing wages are missing ten years of growth so I think that's that's really the underlying problem we're getting reasonable wage growth but we missed all of those years beginning again at the beginning of this century so I think it's a very serious problem and we should do a better job of calling it out I look forward to doing just that Phillips curve there was a recent article in The Wall Street Journal said that in Japan the Phillips curve is dead and obviously the connection is was discussed here or alluded to here earlier has become more tenuous even in this country I would pause it and ask for your reaction that the fact is that if you measure the Phillips curve in terms of u3 the connections been more tenuous but if you do as you just now indicated in terms of percentage of especially 25 to 64 25 to 50 four-year-olds participating in the workforce then the Phillips curve isn't dead and that's in part why we're beginning to see some traction why would we continue to use u3 when it clearly isn't reflective of what has gone on especially in the aftermath of the Great Recession where people keep coming out of the woodwork to join this workforce and as a consequence that unemployment rate keeps going lower and lower but we keep adding hundreds of thousands of people to the to the workforce is it not have we repealed the law of supply and demand or can we if we continue to add people to the workforce expect continued wage growth I am so you three is just unnumbered to us it isn't the number we refer to it quite a bit but obviously we you know we look at a broad range of employment indicators I'm not sure I took your question though - well I think my point is that we haven't reached full employment as long as people keep coming out of the that's woodwork okay that's where I thought you yeah so you know I mean we've that's what we're learning you know we're learning this a lot of the margin where people where we've seen the improvement has been in labor force participation where other than unemployment and that's great people come in you know you could actually see and you have seen in some months you've seen labor force participation go enough go enough labor force participation increased that the unemployment rate actually ticks up that's a good thing so I'm way over and the chair indulged me to even allow me to ask questions today again for which I'm grateful two things we need more wage growth secondly I believe you know what you're doing sir and I thank you for it thank you thank you very much mr. Powell we have one more member the gentleman from Georgia mr. Loudermilk and then we will wrap it up thank you for indulgence madam chair chairman Powell thank you I will try to be quick and concise I do have just a few questions and so I won't make any statements the first one real-time payments you and I have had this discussion before when do you have any idea when you may announce the decision of whether to get into real-time payments or not you know we're we're in the middle of of I we haven't actually gotten to a you know a place where we're getting ready to make a decision but I think there's been a ton of work and so we're moving forward to try to meet regular session you know when it's ready to do okay what are the the factors you're you're weighing so this is you know this was a this was something that came out of the Faster Payments task force and that was a group of involved small banks large banks you know community activists technologists card companies all of that and there was broad support only among the smaller banks as I mentioned earlier or us to play a role of in final settlement that was a recommendation that came out of that so we put out a proposal last year and we asked for comment we got I think 400 comment letters and you know we're piling through those and working our way through assessing the issues you know we have to look at two things one is just the requirements under the monetary Control Act and its own there's also just a big policy question which is is is there a role here there are people who feel strongly that there is a role here for us and there others who feel not so we're having to make a decision on that and will will them we'll be doing that okay I appreciate if you keep us in the loop on that we have several parties especially in Georgia very interested in the direction you're going and so another issue regarding the tailoring of proposals are the the tailoring of very regulation for domestic and foreign banks now the comment period to close do you when do you expect final rules on that to be issued well the tailoring of regulations for domestic and foreign banks look okay so a comment period for domestic and I don't know I don't have a date for you I know we I think the comment period is recently closed I'm just wondering from understanding the comment period recently closed on that okay you have to come back to your office on I don't know what Thanks I mean I think Vice Chair Quarles said that we see most things being wrapped up by the end of the third quarter and darn near everything wrapped up okay you anticipate the domestic and foreign will be done together I don't know okay with the remaining time one other issue this is important especially back in Georgia small dollar lending when the FDIC chair McWilliams testified back in May I asked her if they plan to address a small dollar lending issue for for banks and she said that she was going to work with the other regulators to get this done is the Fed committed to working with the FDA see you know cc2 to come up with a plan for the small dollar lending I think we're doing that actually I think there's a interagency group that's it's carrying that forward right now okay with that I think we're all ready to end a very long morning so I appreciate that and madam chair thank you for your indulgence and I yield back

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Id: HoWM7KpkAmY

Length: 186min 7sec (11167 seconds)

Published: Wed Jul 10 2019