Fed Chair Jerome Powell testifies on Capitol Hill about policy and the economy — 3/7/23

I'm going to do my best to enforce 5 minutes, we have everyone here, this hearing will be ordered welcome Chairman Powell, thank you for doing your duty and trying to enjoy it when you come to our committee, thank you, you seem to enjoy today, we examine. the Federal Reserve's actions to combat inflation, whether these actions are really working, including how those actions affect American jobs and the prices of their paychecks remain too high in many parts of the

economy

, we know who feels more so when the cost of rent and food increases. It's not economic experts and politicians lecturing us about disciplinary instability, it's not corporate executives pretending they're making tough pricing decisions while reporting record profit increases quarter after quarter and conducting more and more stock buybacks, They are the people who work hourly to make ends meet, they are the seniors on fixed incomes and Social Security, they are everyone who gets their income from a paycheck each month, not an investment portfolio, they are those same Americans.

Those who are most at risk of losing from the Federal Reserve's actions to curb inflation are going too far, no matter what. bad in our

economy

a global pandemic a war in Eastern Europe climate disasters profits somehow always manage to increase workers have to pay the price as you have noted Chairman Powell the tools of the Federal Reserve are just one element in our fight against Inflation is a complex problem We know that interest rates are a blunt tool. Rising interest rates cannot rebuild our supply chains and correct demand imbalances caused by the pandemic. Raising interest rates will not end Russia's brutal invasion of Ukraine.

Raising interest rates will not prevent bird flu from devastating Ukraine. - a third of our egg supply or climate disasters caused by the destruction of key crops and rising interest rates certainly won't stop big corporations from exploiting all of these crises to raise prices far beyond the rise in its costs last year, corporate profits reached a record level. Public relations bosses claim that these companies just have to raise prices, their costs are rising, workers simply want to be paid too much, they have no choice, they still tell us when we look at their profits, their executive salaries and their employment plans. share buybacks, sure.

It does not appear that corporations have exhausted all available alternatives, which is why Brazen, including global bankers, called on the FED to identify this speculation as one of the biggest drivers of inflation. Paul Donovan, chief economist of global wealth management at UBS, wrote that the FED should make clear that increasing profit margins or stimulating inflation companies have passed on higher costs to consumers but have also taken advantage of circumstances to expand margins. profit margin widening inflation Beyond commodity prices there is more profit margin expansion than wage cost pressures, think about this from a UBS chief economist I'll say it again, they have taken advantage, these companies They have taken advantage of the circumstances to widen profit margins, widening inflation.

Beyond commodity prices, there is more profit margin expansion than wage cost pressures. Without quotes, the FED is understandable that the FED cannot force. corporations change their ways or rewrite Wall Street's business model on their own, but the FED can talk about it high interest rates falling wages rising unemployment are all hallmarks of failed policies that end up helping Wall Street the largest corporations in the country the richest people in the country because let's be clear what we're talking about when people use economic language that can Muddy this conversation cooling the economy means laying off workers reducing demand means workers get fewer raises, Of course, there are times when the FED must act, we cannot allow inflation to take hold.

We have seen encouraging trends: that is not happening and there are other ways to lower prices instead of lowering demand again. Impoverish people. Fire people. Deny raises to workers. We can speed them up. strengthen our supply chains we can bring critical manufacturing back to the US we can rebuild our infrastructure is what we are doing with the chip market with the inflation reduction act with a bipartisan infrastructure bill for the first time in decades we are finally recognizing the damage that many of my colleagues and I warned companies about corporate offshoring would do to our economy.

Look at Eastern Palestine. Ohio. About the community that Senator Vance and I have visited several times recently. America learned about this small town last month when a train derailed and dumped hazardous material in this community East Palestine is more than just a disaster headline Columbiana County was once the center of American ceramic manufacturing and in a At one time it produced 80 percent of the tableware ceramics in this country. One county produced 80 percent when I was there last week. I was talking to the sheriff from 1820 Candle Company. He was talking about how the last one closed just a few years ago, like so many industries, these jobs moved overseas and we know why the same reason the cuts at Norfolk Southern cost in the at the expense of safety, eliminating a third of its workforce in the last 10 years, so one is surprised by these derailments.

It's the same reason corporations now keep prices high even when the supply chain stabilizes. It's the Wall Street business model. Chairman Powell knows this. I know my Republican and Democratic colleagues know it's a Wall Street business model that, quarter after quarter, corporations are expected to cut costs at any cost, skimp on safety, move production overseas to countries where they can pay less. to workers because of trade deals that pressured Wall Street to post profit increases even in the midst of a global pandemic, that is the problem with our economies and higher interest rates will not only not solve it if they are exaggerated, but that will make it worse, we can't risk undermining one of the successes of our current economy for the first time in decades, workers are finally starting to have some power in this economy, unemployment is at a record low of 3, 4 percent, that's not just a number that means Americans have more opportunities, even more options. in places where that has been seen a lot in recent years means that people have the power to demand raises and retirement security and paid sick days and some control over their schedules means that more Americans have the dignity that comes with a good job than provides for your family we must listen make sure all Americans have the opportunity to have that dignity of work it is a critical time the consequences of missteps could be serious Mr.

President two more things that affect your work it is not just politics Monetary crisis that threatens American pocketbooks Some of my colleagues have threatened the full faith and credit of the nation by holding the debt ceiling hostage to partisan politics instead of paying our bills on time. They are threatening essentially all Americans. The ruling of the Fifth Circuit Consumer Financial Protection Bureau could also cause unimaginable instability and chaos for families for consumers but also as the president knows for a financial system the Fifth Circuit is Wall Street, without a doubt the Fifth Circuit is wall street's favorite court recently ruled that independent funding of the cfpb is unconstitutional if the supreme court upholds the 5th circuit ruling it will not only devastate cfpb but will threaten the independent funding of many other federal agencies, including the Federal Reserve.

I look forward to hearing today's hearing today on how the FED will balance its dual mandate and continue to promote an economy in which everyone who wants a good job can find an economy that works for everyone uh Senator Scott Senator Scott sorry sorry good morning jeravell sitting here looking at my repair my prepared remarks thinking hey there's a vacancy coming up VP Brainer is moving on I think it's very important for us to make sure that we have all the information we need to make a good decision about the next nomination in a timely manner, so I would really implore the president to make sure that happens, that every question, every questionnaire that is asked from the person that we receive, every member of this committee has their questions answered in a timely manner. and that the staff has their answers in a timely manner by listening to President Brown.

I thought to myself fascinating, really fascinating. I concluded that well, I know President Baum pretty well, I'm sure. He is sincere in his rant, but let me tell you that spending and printing trillions of dollars gives in to the radical left in this country as they see policies put forth and then implemented that led to the worst inflation in 40 years, seeing our inflation at 9.1 percent. cent, seeing American families. fight for the weight of government on their shoulders as they see the devastation from South Carolina to Ohio it is incredible that progressives in this country have caused 9.1 percent inflation and turn somewhere besides the mirror to see the devastation absolute caused by its runaway Spending is notable for stopping runaway inflation caused by runaway spending.

The FED intervenes to cool the economy. Well, the definition of cooling economy is necessary because we have seen the most radical approach to a problem that was in our The rearview mirror is used as a Trojan horse to achieve a level of socialism and spending that our nation has not seen in my lifetime. The facts are very simple when you get to 9.1 percent inflation in this nation when I was a child growing up in a single-parent household mired in poverty 40 percent today 100 percent just a year ago the increase in Gas prices devastate single mothers across the country for seniors on fixed incomes whose savings are being depleted with an average cost just last month of an increase of $433 due to inflation, which my friends on the other side of the hallway look anywhere other than a mirror, I find it surprising, the truth is that when food prices go up more than 20 percent, when electricity goes up more than 20 percent, you have to ask yourself where in the world cannot be in this universe, it must be an alternative universe where, in fact, it is okay for us to see prices skyrocket and our economy does not stumble, but rather falls into a ditch, why are we in the ditch? because progressives used the pandemic as a way to usher in a form of spending that takes money out of the pockets of ordinary Americans and puts it into government coffers.

There is a better way, the best way is to trust the American people and when you do. we don't have to have the FED come in and raise interest rates so high to quell the challenges in our economy so that today compared to 18 months ago the price of the same house for the mortgage payment is double, why because of the leak? expense of our friends across the aisle I'm sure I don't have time for my opening comments but I'll say it without question as I look around the country and wonder how devastating it is that it costs $433 more today than it did a year ago the answer is It is a crisis when the average family in our country just a couple of years ago did not have four hundred dollars in savings for an emergency and for prices to rise by this amount is devastating. having a conversation about rents across the country looking at the inflationary effect and the absolute devastation of a complicated supply chain that we have not seen in my lifetime led by my progressive friends is incredible, but communicating to Chairman Powell, one of the comments what you did, that's really important and one of the speeches you gave in January and I apologize for my rant.

I just wanted to make sure my rant was consistent with my friend's here. It is essential that you said that we stick to our statutory objectives and authorities and that we resist the temptation to expand our scope to address other important social issues of the day. Taking on new objectives, however valuable, without a clear statutory mandate would undermine the case for our independence. You also pointed it out and I quote withoutexplicit legislation from Congress, it would be inappropriate for us to use our monetary

policy

or supervisory tools to promote a greener economy or to achieve other climate-based goals.

We are not and will not be climate

policy

makers. Do you still stand by those comments? thank you finally, I know we're not on the question, I know I finally get it, yes, I knew the president would remove that from my time and I appreciate you doing so well, great humor, great humor, finally, several of my Republican colleagues me too. I sent you a letter discussing Vice President for Supervision Michael Barr's plan to conduct a holistic review of capital standards. I look forward to discussing those capital standards, uh, during my question and I will thank you for our recent conversation that we had. helped illuminate some of the necessary challenges we face as a nation and your responses thank you, thank you speaking of Enlighten, thank you Senator Scott, okay, thank you for allowing me to use it today, yes, today we will hear from Federal Reserve Chairman Jerome Powell on the monetary policy on the state of our economy and I don't expect Chairman Powell to weigh in on the mini debate we just had, but I think we all know that the increase in debt was much greater under President Trump and a Republican Senate of what has been since um Chairman Powell thank you for your service and your testimony today Chairman Brown uh Ranking Member Scott and other members of the committee I appreciate the opportunity to present the semiannual monetary policy report of the federal reserve my colleagues and I am very We are aware that high inflation is causing significant difficulties and we are firmly committed to returning inflation to our two per cent target over the past year.

We have taken strong steps to tighten the monetary policy stance. We have covered many years. The full effects of our adjustment have not yet been felt so far, yet we have more work to do. Our political actions are guided by our dual mandate to promote maximum employment and stable prices. Without price stability, the economy does not work for anyone. In particular, without price stability we will not achieve a sustained period of labor market conditions that benefit everyone. I will review the current economic situation before turning to monetary policy. January data on employment, consumer spending, manufacturing production and inflation have partly reversed the weakening trends we saw in data from just a month ago, with some of this reversal likely reflecting unusually warm weather. in January in much of the country, but the breadth of the reversal along with revisions from the previous quarter suggest that inflationary pressures are higher than expected.

At the time of our previous FOMC meeting, from a broader perspective, inflation has moderated somewhat since the middle of last year, but remains well above the FOMC's long-term target of two percent, the change over 12 months In total PCE inflation has slowed from its peak of seven percent. percent in June to 5.4 percent in January as energy prices have declined and supply chain bottlenecks are strong. This over the past 12 months core PCE inflation, which excludes volatile food and energy prices, was 4.7 percent as supply chain bottlenecks have eased and tightened a stricter policy. Demand inflation in the core goods sector has fallen and, although housing services inflation remains too high, the flattening of rents evident in recently signed leases points to a slowdown in this component of the economy. inflation over the next year, indicating that there is little sign of disinflation so far in the Basic Services category, excluding housing, a category that represents more than half of basic consumer expenditures, to restore price stability We will need to see lower inflation in this sector and most likely there will be some weakening in labor market conditions, although nominal wages earnings have slowed somewhat in recent months they remain above what is consistent with inflation of the two percent and current trends in productivity.

Strong wage growth is good for workers, but only if it is not eroded by inflation and turns into growth if the U.S. economy has slowed significantly in the past year. With real GDP rising at a below-trend pace of 0.9 percent, although consumer spending appears to be expanding at a solid pace this quarter, other recent indicators point to moderate growth in spending suspension and Productive activity in the real estate sector continues to weaken, largely reflecting an increase in mortgages. Higher interest rates and slower output growth also appear to be weighing on businesses' fixed investment. Despite the slowdown in growth, the labor market remains extremely tight.

The unemployment rate was 3.4 percent in January its lowest level since 1969. Job gains remained very strong in January while Labor supply has continued to lag at the end of December, there were 1.9 vacant positions for every unemployed individual, close to the historical peak recorded in last March, while unemployment insurance claims have remained near record lows, turning to monetary policy with inflation well. above our long-term target of two percent and with the labor market extremely tight, the FOMC has continued to tighten the monetary policy stance by raising interest rates by four and a half percentage points over the past year, we continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate to achieve a monetary policy stance that is restrictive enough to return inflation to two percent over time.

Additionally, we continue the process of significantly reducing the size of our balance sheet. We are seeing the effects of our political actions on demand in the sex or more interest-sensitive sectors of the economy, however, it will take time for the full effects of monetary restriction to materialize, especially on inflation, in light of the cumulative tightening of monetary policy and lags with respect to inflation. what monetary policy affects economic activity and inflation the committee slowed the pace of interest rate increases in its last two meetings we will continue to make our decisions meeting after meeting taking into account the totality of incoming data and its implications for the outlook of economic activity and inflation, although inflation has been moderating in recent months, the process to bring inflation back down to two percent has a long way to go and is likely to be bumpy, as I mentioned, the last few Economic data has been stronger than expected, suggesting that the final level of interest rates is likely to be higher than previously anticipated.

If the totality of the data indicated that faster tightening is warranted, we would be Prepared to increase the pace of rate increases and maintaining price stability would likely require us to maintain a restrictive stance on monetary policy for some time. Our general approach is to use our tools to reduce inflation back to our two percent target. and keep long-term inflation expectations well anchored. Restoring price stability is an essential way to lay the foundation for achieving maximum employment and stable long-term prices the historical record strongly warns against premature policy easing we will stay the course until the job is done to conclude we understand that our Actions affect communities, families and businesses across the country Everything we do is in service of our public mission At the Federal Reserve we will do everything we can to achieve our maximum employment and price stability goals.

Thank you. I look forward to your questions. Thank you. Mr. Chairman, there are 23 of us on this committee. Almost everyone will be here today. I ask each of us We should stay as close to the five minute mark as possible because we have votes at 11:30. So, thank you all for your cooperation, President Paul, thank you. Job growth is strong as unemployment remains historically low. You may not know it from the beginning. opening statements many inflation drivers corporate greed Rising inequality supply chain disruptions Russia's bestiality, so to speak, in Ukraine will not improve due to interest rate increases all signs point to this post-pandemic economy being different Should we be concerned, Mr.

Chairman, that the FED is treating this economic period as it has in the past rather than reacting differently, thank you, Mr. Chairman, so we have been aware from the beginning and we have said that we have discussed this publicly on so many occasions that this time there are some differences. We, in particular, have not seen the kind of supply-side collapse that we saw at the beginning of the inflation outbreak, nor the outbreak of a war that had significant effects on commodity prices a year ago, so that everything that is different also existed. Some similarities there is a mismatch between supply and demand.

You can see that in the good sector you can still see that housing prices have risen more than 40 percent since before the pandemic and you can see it in the labor market. where we have 1.9 vacant positions for every vacant position for every unemployed person, so we are very aware that this particular situation involves a combination of cycles of forces that not all of our tools can affect, but there is a job here to do to better align demand with supply, okay, I understand that you have limited tools to address inflation in our conversations, in the past to show my concern about continued rate increases that may not actually address the root cause of inflation , they harm the workers and me.

Just as many of us maintain that we can't follow the same old playbook, next question Last year, three banking regulators issued proposed updates to the Community Reinvestment Act to take into account changes to our banking system. My question is: Is the FED still committed to working with the FDIC and OCC will finalize the CRA rule and when will that rule likely be finalized? Yes, we remain committed and I think we are in broad agreement with the other two agencies on the rule revisions, so we are in the process now. to write all that down and that will take some time and then of course it will come to the board of governors for a vote and that will include briefings and discussions and I can't give you an exact date. but as quickly as possible, yes, but it will be a few months, thank you.

Banks are weathering the impact of Kova 19 closures, primarily due to the fiscal response provided by Congress. We now see an increase in loan delinquencies and an increase in overall risk. The banks are again investing billions, billions, like many other corporate leaders always defended by people on that side of the aisle, in stock buybacks, which worries me that there will be a slowdown in the economy. Banks could end up with very little capital, which is why I am concerned about any possible pullback. of safeguards or regulations, can you assure me that the FED will keep capital requirements strong and exercise a more long-term view than corporate CEOs who seem to focus on the short term?

I can assure you that the first party will maintain the capital. strong requirements I wasn't expecting you to comment on you, give me an opinion that you are looking more forward than companies that look at the short term benefits of share buybacks. Mr. President, the last time you testified I asked you about the risk you pose. cryptoassets stablecoin the Fed and other regulated possibilities How is the FED assessing the risks of cryptocurrency-related activities by its supervised institutions? So this is something that we have been, we have been quite active in this area and I will say that uh We believe that innovation is very important over time for the economy.

We don't want to stifle innovation. We don't want regulation to stifle innovation in a way that just favors incumbents and that sort of thing, but like everyone else, we. We're watching what's been happening in the crypto space and you know what we see: you know, there's a lot of turmoil, we see fraud, we see a lack of transparency, we see risk taking, many, many things like that, and whatwe have done. What we have been doing is making sure that the regulated financial institutions that we supervise and regulate are careful and very careful in how they interact with the entire crypto space and that they give us advance notice and we.

I have issued, along with the FDIC and the OCC, several of you, notice issuances to that effect. Thank you and I'll close with this. I have long pushed for the FED to prioritize workers and for FED leaders to reflect. the diversity of our country we have made progress but our work is not done we have a new vacancy understand that it is not your job to appoint the new member of the Fed we have it and we have a number of upcoming vacancies in the reserve banks. support for Senator Reed of Rhode Island Senator Menendez of New Jersey and other colleagues who are pushing for more diverse, diverse voices at the FED Senator Scott thank you president obviously the president and I have great passions about the challenges we face as a country One thing in the What I think we agree on is the importance of having strong capital markets when it comes to ensuring that Americans have the ability to continue to grow their businesses and solve their challenges, and frankly, I hope we get there by building on the That same comment that the president had her own capital standards is where I'm going to focus my thoughts today, but I think back over these past few years and it's hard not to recognize the extraordinary efforts that our financial institutions of all sizes frankly undertook to manage. a program like the PPP while halting the aging of our global economy.

I appreciate your thoughts, but from where I stand, our banking system was resilient, our financial institution stepped up and delivered aid to support families and businesses every day, that's why the vice president broadly bans comments about a holistic review of our capital. I believe we should focus on our economy and address the needs of ordinary Americans trying to afford a new future and help them open the door to opportunity, as you and I know capital and its quality must have. be continually scrutinized, but raising capital does not necessarily provide greater benefit and requiring banks to hold capital that is not risk-based and not appropriately tailored to the scope and activities of the bank's size may cause more harm than good in At a time of record inflation where daily necessities are more expensive, we should not take actions that are harmful, but rather we should support the engine of our economy, small businesses, although I remain very concerned about the vice presidents' comments.

I hope you will ensure that this review is appropriate by keeping the impacts on our banking system front and center we must promote and promote the growth of our economy and therefore our people, anything less should be unacceptable to that end . Proposals will be risk-based and tailored to the size and complexity of an institution's business and will not be a one-size-fits-all solution. Yes, I can easily commit to that. You know that we are very committed to adaptation and that will be what I can. Let's say that everything we do will reflect adaptation, which is an ingrained principle for us and now also a legal requirement.

Yes sir, thank you very much. Two weeks ago I sent a letter with Chairman McHenry to Chairman Ginsler regarding the SEC's climate disclosure. rule urging him to rescind his proposal and reminding him that the SEC is a market regulator, not a weather forecaster, just as Congress designed the SEC to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation, and not to promote progressive policies on climate change. Congress designed the Federal Reserve to promote price stability and maximum employment, not to play politics to that end, I think. The Fed's announcement of recent actions to consider climate-related scenarios, along with comments of the Vice President of Supervision as attempts to incorporate broader ESG policies into the financial services system.

Banks have had and continue to take into account climate-related risks and their risk management, but efforts to predict climate change in the distant future remain outside the scope of their Authority, and it is important to highlight that the The level of speculation required in these models should highlight their arbitrary and capricious nature at a time when our economy is suffering from historically high inflation. I hope that our core economy The Bank should focus its time and resources on reducing inflation, not on policies outside its mandate. In my keynote address I pointed to a recent speech you gave on the state of the Federal Reserve and how it should resist the temptation to expand its reach and to address social issues.

Do you agree that the Federal Reserve has no statutory authority or direction? to use its monetary policy or supervisory tools to delve into ESG or other climate policies? role that we have, I think we have it, but I would agree with your statement, Mr. President, I have 20 seconds left. I'm going to postpone it because my previous questions about the Albany statement, thank you, Senator Scott, Senator Menendez is close, but no. Still here, then, Senator, Senator, round, but hey, try anything, thank you, Mr. President, Mr. President, first of all, welcome, it's always good to have you at the head of our committee, as you know, both Core and general inflation have remained persistently high and above.

Over the past 12 months, the real median hourly wage fell 1.8 percent, about four percent since President Biden took office to make ends meet as prices rise, more Americans lean on credit cards by the end of 2022. Credit card debt hit a record $930.6 billion and 18.5 peak year-over-year and the average credit card balance rose to five one thousand eight hundred and five dollars during the past year. The Federal Reserve has acted aggressively to control inflation and yet we are still seeing price increases and as we have discussed several times. but I recognize that this has been an ongoing discussion, but I think this further proves that we have long been feeling the effects of policy-induced inflation resulting from administration decisions that primarily cut off the resources needed to improve. and increase national energy production.

I remain concerned that if you try to use the tools that are available right now to the FED, then I think we're going to have the challenge of not being able to specifically address the challenges raised. When you have a policy that promotes higher prices with respect to energy, instead of what you're trying to do, which is reduce the total cost, I just wanted to ask, I guess, and you're going to think. This is something we've heard before, but do you think you currently have the monetary policy tools to really reduce inflation? I just put it in this perspective in January 2021, the CPI was 1.4 percent when the Biden administration began in January 2022 and this is before the Russian invasion of Ukraine, the CPI was at seven and a half percent , seven point five percent, today in March 2022, the CPI is 8.5 percent, wouldn't it be fair to assess that much of the policy or inflation that what we have seen here may very well be due to political decisions of this administration Senator is not ours, it is not our place to point the finger our job is to use our tools you asked if we have the tools to do this job and we do Over time there are some things we cannot affect, but over time we can achieve two percent inflation and in other words, you have a limited number of tools available to you and the limited number of tools you have.

They are designed to simply impact lowering prices and so on, and yet if there are competing interests that are raising prices, you don't have the means to decide one tool or another based on whether it is policy-induced or whether it is a It is a question of shortage of supplies from abroad or whether it is related to the war. That's right, our tools essentially work on demand, moderating demand, and that's what we can do, if there were policies that would actually help reduce inflation, in other words. And with that I'm going to look at energy alone as a good example.

If there were policies that would actually allow energy prices to go down in the United States, then there would be less need to use such blunt tools. What you have right now regarding raising rates is that it's a fair statement, sir, in a sense, but I would just say that on energy, I'm not trying to get you into a political discussion about what you're doing. the president in his As far as his energy policy, I just want to make it clear that we have to respond to what's in front of us and it doesn't matter where the inflation is coming from or what's driving it, we're just trying to get it down to that two percent number with the only tools you really have, yes, but I will say that about energy, energy has tended over time to fluctuate up and down and is not primarily affected by our tools, so, um, the things that we look at.

What are really the things that are closely tied to demand in the US economy that we can affect and I think they've just been raising inflation or they've been raising interest rates and yet the inflation continues to rise would suggest the same? You just indicated that when you have high energy prices it is difficult to impact that part with the monetary policy that you have at your disposal, so we really focus on everything, but we also focus on the core. In particular, not including energy prices, what has happened is that core inflation has decreased, but not as fast as we expected and there is still a long way to go.

Thank you. One last question last June. Vice President of Oversight Michael Barr testified. before this committee that would advocate the use of the aggregation method as an alternative approach to insurance capital standards, the ICS proposed by the iais as a final compatibility criterion to be published later this year. Can you confirm that you share the vice president's opinion? I'll confirm that at this point, but I'll have to get back to you on the status of that. Okay, thank you, thank you, Mr. President. Thank you, and the entire Menendez Center of New Jersey recognizes, thank you, Mr.

President, Mr. President. I want to take this moment to remind my colleagues that there are more than 62 million Latinos who call the United States home. We are the largest minority group in the country. We represent almost 20 percent of the United States population. We contribute almost three trillion dollars to GDP. Yes. Latinos do not have representation in the leadership of the Federal Reserve. In the 109-year history of the Federal Reserve, there has never been a single member of the Board of Governors or president of the Regional Bank who has the lived experience of being Latino in the United States and in practice.

That means the voices of nearly a fifth of our country's population are repeatedly drowned out when the FED is making critical economic policy decisions that affect whether a Latino family can afford their first home find a job that pays a living wage send to your children to college save for a comfortable retirement or get a loan to expand your business right now the Biden Administration has a clear opportunity to make history with its next nomination to the board of governments has identified a series of highly qualified Latino candidates who will They have dedicated their careers to fields of economics that are committed to the dual mandate of the Federal Reserve that will preserve the independence of the Central Bank.

The Administration has successfully nominated and championed a number of diverse candidates with similar qualifications both at the Federal Reserve and elsewhere, but despite having five opportunities in the past two years to nominate a qualified Latino economist to serve on the Fed Federal, this administration has repeatedly chosen not to have representation or the lack thereof does not happen by accident, it is a choice and I hope the administration makes the right decision with this nomination Mr. President, could you say that it is a tourism that the US dollar Is it the favorite reserve in the world? Yes, I would say so and that brings us enormous benefits.

It is not like this? Yes, 12 years ago, a Republican house brought us. on the verge of defaulting on debt for the first time in this country's history, endangering our credit and the global economy. I have a feeling of deja vu because once again Republicans recklessly demand cutsdraconian spending on programs that American workers and families depend on in exchange for allowing the Treasury Department to pay for expenses that Congress, including most of them, has already voted to authorize. You want to talk about spending cuts, it seems to me that the budget is the time to do it, but not to put the Full faith and credit of the United States as president at risk Kapow, can you talk about the catastrophic damage that a debt default would inflict on the economy?

So I guess I'll start, if I can, by saying that these are really issues between the executive branch and Congress. We're not looking to play a role in these political issues, but at the end of the day there's only one solution to this problem and that's Congress, come on. What happens happens, but Congress really needs to raise the debt ceiling, that's the only way out in a timely manner that allows us to pay all of our bills when and as they come due and if we don't, I think the consequences are difficult. to estimate, but they could be extraordinarily adverse and could last a long time. -Okay, I think uh, that's a gentle statement of what would happen, uh, I understand.

I did not ask him to participate in the functions of the executive branch of Congress. I asked him about the abstract question of what happens if you default on your debt. Doesn't this constant struggle call into question the possibility that the United States will not fully honor its faith and credit will have consequences on the economy? At first you might think that markets tend and observers tend to look at this and tend to think it will work and it has worked in the past so it must work this time too. Now that I see your testimony before the committee, is it fair to say that you will do what is necessary to control inflation as we have?

Are we serving a dual mandate and will do everything we can to restore price stability while serving maximum employment and primarily that means additional rate increases? Wouldn't this be it? What other tool do you have? That's where we have the balance sheet contraction will continue, but it's mainly about rate increases, so the question is when that part of doing everything necessary to control employment, that is, control inflation, conflicts with his other Maximum Employment Mandate, eh, not now. uh when we have the lowest unemployment in 54 years and where we have, you know, a labor market that is extremely tight, uh extremely, but at that time it could come, but it's really not right now where we're very far away. of our uh uh of our price stability mandate and in fact the economy has exceeded most estimates of maximum employment thank you Senator Menendez um Senator Kennedy of Louisiana is recognized thank you Mr.

President uh President Powell thank you for being here thank you you for yourself and your team for helping save the economy during the pandemic crisis for what it's worth. Overall, I support the actions of the FED right now and I'm not going to ask that today to blame anyone, um, when Congress spends money, it stimulates the economy, it doesn't do it well, it would depend on whether it is financed by tax increases or not, but if there is spending that is not accompanied by taxes it would have a net stimulating effect at the margin and when Congress borrows money. spend even more that stimulates the economy even more, right at the margin?

Yes, okay, if Congress were to reduce the growth rate of its spending and reduce the growth rate of its debt accumulations, it would make its job of reducing inflation easier, right? I don't think fiscal policy right now is a major factor driving inflation right now, but it is absolutely essential that we slow down the pace of growth, particularly in the areas of good, let's try to unravel this, so I'm not trying to fool you are you? by raising interest rates you are raising interest rates to slow down the economy aren't you to cool down the economy? um and one of the ways to measure your success, besides the fluctuation in gross domestic product, is the unemployment rate.

No, yes, one of the measures is fine, so in effect I'm not being critical when you're slowing down the economy, you're trying to put people out of work, that's your job, isn't it? Aren't we really trying? to restore price stability no, you are trying, you are trying to increase your wages, you are trying to increase the unemployment rate, that I know you don't like the phrase, so let me say it, you are trying to increase unemployment. rate, isn't it now? We're not trying to increase it, we're trying to realign supply and demand, which could happen through various channels like, for example, you know, just job openings, let me put it in another white light, okay.

The economist did a They did a wonderful study that looked at 10 disinflationary periods in the United States going back to the 1950s. Disinflation is what you're trying to do. It is a slowdown in the inflation rate. I'm right? Yes, in other words, prices do not rise. down they just don't go up as fast deflation is when prices actually go down you are trying to achieve disinflation right? Yes, we are doing well according to history in the ten times we lowered inflation since the 1950s to reduce inflation. by two percent, unemployment had to increase by 3.6 percent, now that's history, isn't it?

I don't have the numbers in front of me, but yes, the standard has been that there have been recessions and crises when the Federal Reserve has tried to reduce right now the current inflation rate of 6.4 percent and the current unemployment rate is 3.4 percent now, if history is right, I'm not asking you to blame anyone again, but if history is right, unless you get help to bring inflation down from 6.4 percent to let's say 4 .4 percent and the unemployment rate will have to rise to seven percent according to history, that's what the records would say, okay, and to reduce inflation, unemployment would have to reach 10.6 percent, right?

It is not like this? No I would not. No, that's what the record shows, that's what history shows. Yeah, I don't think that's kind of a number at all. I mean, I know you're reluctant to admit it and you don't want to be in the middle of a political, uh, dispute, but I think it's undeniable, it's undeniable that the only way to reduce this sticky inflation is to attack it on the monetary side, which is is doing, and on the fiscal side, which means that Congress has to reduce the growth rate of spending and reduce the growth rate of the accumulation of deaths.

Now I understand that you don't want to be in the middle of that fight, but the more we help on the tax side, the less people you will have. Being out of work, isn't it a fact? Please respond good exercise sir, it could work that way yes sir thank you thank you sir Kenny Renowned Senator Reid of Rhode Island thank you very much sir president uh thank you president Paul for being here Today, we saw it in the wake of a significant supply chain disruption globalized and in some respects we are in the process of rebuilding a supply chain with an emphasis on sourcing in the United States, so to what extent did that disruptive supply chain contribute to inflation? and to what extent the new, if you imagined, the new supply chain located in the United States and other friendly countries will affect inflation, so the initial outbreak of inflation was due to spending on goods where people could not spend on services.

Good spending has increased considerably and many goods are imported into the global supply chain, the global supply chain has collapsed and that was the source of the original inflation. It has now been extended in the last two years to housing and also to the rest of the service sector. So to your question, we are looking at prices of goods. Goods inflation has been falling for some time. It's still too high, but it's going down. Housing services. Is there anything in the works? See the new leases being signed and what that says. you are that in the next six to 12 months we will see that go down, but this big services sector is everything else, financial services, medical services, travel and leisure, uh, all those things, that's where it really is, that's the source of the inflation we have. now, that had nothing to do with supply, it doesn't have much to do with supply chains, that's where the challenge is now and is there anything you can do to target that service area without affecting the other areas, really you do not know.

What are our monetary policy tools? They are notoriously powerful but forceful. A different topic than that. You're probably aware of the 5th Circuit ruling in a Community Financial Services Association ruling against the cfpb that the cfpb's funding mechanism is unconstitutional. Board of Governors The CFPB is an office of the Federal Reserve Both the Board of Governors and the CFPB depend on the same source of funds and draw on those funds in a virtually identical manner if the financing structure of the Board of Governors is declared unconstitutional. what would be the implications? it would be for the country and monetary policy, well it would be very important, but I have to say that we have important responsibilities, but I would be reluctant to comment on a case that is before the Supreme Court, but it is certainly something that we have looked at people for possible ramifications, yes, and you know that central banks tend to be self-financing because of the way they work and that is a key factor of our independence.

We've gone back and forth on the impact. of rate heights on workers and you have previously indicated that wages have not necessarily been spiraling and that inflation expectations are currently stable, but the impact on rising interest rates is generally felt most by people with low to moderate income. way you can get out of that dilemma, so where we are now, of course, is very low unemployment, wages have been moderating and they've been doing so without weakening in the labor market without really rising unemployment and that's something Well. So we don't really know this, the current situation is a combination of more typical supply and demand issues, but also things that we haven't seen before, like the war in Ukraine, like the supply chains that you mentioned.

We have a lot of unusual factors and I don't think anyone knows with confidence how this will play out. Thank you very much, Mr. President, thank you, Mr. Reed. Senator Brett Alabama is recognized, thank you, Mr. Chairman, Chairman Powell, it's great to have you. Here today, over the past two years, we have seen the highest inflation in my lifetime, which has increased costs for American families across the board. According to the US Department of Labor, the annual inflation rate in 2021 was 7 percent and in 2022 it was 6.5 percent, according to According to the US Department of Agriculture, the cost of food increased 10 in 2022.

And the real effects of this are that moms and dads across this country who are working to put food on their children's table for their babies had a harder time doing so. has devastated working Americans causing a kitchen table crisis in every corner of our country as the price of food, energy and housing have skyrocketed in response, the Federal Reserve has raised the funds rate of the Federal Reserve more than four percentage points, being far from temporary inflation. has remained persistently high and well above the Federal Reserve's long-term goal of staying below two percent next year.

What factors and indicators are you paying attention to as you and the Federal Open Market Committee decide whether to raise rates? So, I would say. a couple of things to that, first, let's look at inflation in the three sectors that I mentioned, the good sector, the real estate sector and then the broader services sector, and we need the inflation that is already underway in the good sector continue and that is really important in the housing sector, we just need time to pass for reported inflation to come down and be effectively underway, as long as new leases are signed at relatively small prices. increases, so we will be watching very, very carefully in the largest services sector, which represents 56 of consumer spending and more than what inflation is today, so that is something we will be watching very carefully, We also raised rates very quickly last year and we know that the policy of tightening monetary policy has delayed effects.

It takes a while for the full effects on economic activity and inflation to be seen, so we are watching closely to see if those effects come into play. so we are aware that we have not seen the full effect yet and we are taking that into account when we think about rate increases, so when you look at this, obviously it is not to be understood in a policy discussion, but if there was an increase in energy production in this country, do you think that would help reduce inflation well? I think with time, more energyIt would mean lower energy prices, but we were very focused on the issue. what we call core inflation because that's really what's driven by, you know, really demand and our tools are really demand driven, well understood, but I feel like the cost of energy is not just what you pay at the pump, but it ends. it is affecting every asset in this great nation, also I would like to ask you about the Labor turnout so when you look at the unemployment rate and we have heard my colleagues talk about the need to displace people so that we can get to inflation rate that we would like as a nation.

I would like to focus on the labor participation rate, so right now it is 62.4 percent. If there was an increase in the number of people returning to the workforce, would that be a positive factor in terms of bringing us down? at the two percent rate that you would want to achieve, I think that would mean, I mean, remembering those people who get jobs, that would be great because the economy clearly wants more people than are currently working, of course, those people then They would spend more. so it wouldn't be a zero sum game, but it would be great for the country and for them if they joined the workforce.

I think that will have a c

hill

ing effect on the economy and the availability of financial resources. and last week I joined many of my colleagues in sending you a letter expressing concern that if the Federal Reserve decides to undertake a holistic review of capital standards, as we heard Senator Scott talk about earlier, it would also The Federal Reserve is concerned that the impact on the economy of raising capital requirements for financial institutions at a time when inflation remains stubbornly high would cause a problem, so I think there's always a balance. We know that higher capital makes banks safer and stronger.

We also know that you will be on the margin providing less credit the more capital you have to have, but I think it is never exactly clear that you are a perfect balance and it is a fair question. I think in looking at that and knowing that I don't respect the president and trying to stay on my time, I'll just end by saying, "I heard what you said, obviously, as you said, the Federal Reserve is not and will not be a climate policymaker." "I just want to thank you for your public statement." That's where I agree with you that there is a difference between policymakers and financial regulators and I certainly look forward to working with you in the future thank you Senator Senator uh Warner from Virginia is recognized thank you Mr.

President President Pellets It's good to see you again Let me start by saying depending on who is asking questions or insisting on how quickly we are going to get inflation back to two percent or insisting on making sure that we don't push the economy into a recession and increase unemployment, I have to tell you now. you know, and these may not be the cheap seats, but I actually think you've done a pretty good job in terms of tightening the uprights and then starting to taper off a little bit. I think we were all worried about the January numbers coming out a little bit more um I wish Mr.

President had this hearing in two weeks because we're going to have a lot more data later this week and next week um but I want to get a net result um it's We still have a long way to go and the January numbers were worrying, but I think their tailored approach, we can all guess, but I think it's been the right approach. I'm going to congratulate you for that, I want to participate. To get two questions, one of the areas I'm very concerned about is business debt. I mean, here we have a Bloomberg story showing that we're going to hit a six trillion dollar wall this year on refinancing.

I am particularly concerned about the issue related to commercial real estate. You know, as we recover from covid, many things are returning to normal. Clearly, the transformation of where people work is going through a fundamental transition and I expect that people will return more to the office, but many people prefer to work elsewhere, which will fundamentally change the real estate market on the commercial side and I think we will potentially to hit a cliff here or a totally unexpected problem in terms of commercial real estate. Are you looking at that issue and recognizing that there are a lot of obstacles that arise covertly?

This one seems to be more unique in nature and how do you think about that topic? So the first one on Commercial Debt, corporate debt in general, has been moving. laterally as a percentage of GDP, so you don't see that you don't see a big increase or anything like that, um uh, however, of course, there are pockets of concern and in particular, you pointed out the peak of refinancing that has to happen and I've seen them come and go before the markets are generally able to absorb them, perhaps at a much higher rate this time, but it's something that we were very aware of and watched carefully in terms of growth.

I agree with you on the Office space occupancy in many major cities is remarkably low and one wonders how that can be now, over time some of that will be converted into condos and things like that since we know they don't It seems like we do. they have enough housing, um in some places, um, but the question is what is the risk to financial stability. It's not very good for larger institutions, they don't tend to have much direct exposure to that, some smaller banks actually do. Medium and small sized banks do. We monitor it carefully, we agree that it is an area that requires a lot of monitoring and, you know, I would say that we are on the case so well that that will transform me.

In my last question, something that we have talked about many of my colleagues have spoken with large institutions. Otherwise, I mean, I think even some of the biggest critics of Dodd-Frank, I think they would acknowledge that our banking system is hell. much stronger and then it was able to withstand um uh coveted in a very healthy way um but what we've also seen evolve is that a lot of financial institutions are moving beyond the regulatory perimeter, you know, the fact that we now have more than half of mortgage origination comes from non-financial institutions because a lot of the big entities have hedge funds, other funds that may be doing some of this commercial debt or some of the cre debt uh um I'd like you to speak generally. in the last Approximately 40 seconds after you know what you think about this regulatory perimeter.

I'm a big believer, I know some of my colleagues know that we should look less at Charter and consider equal risk, equal regulation, perhaps as a guiding principle and Senator Warren has been working on some work. I've been working on some work around cryptocurrencies in that area, but there's a lot of activity that's going on outside the regulatory perimeter, how should we think about that and how can we make sure that doesn't create the kind of crisis that occurred in 2008 on the unregulated side of the house. I think you articulated the principle very well: it's the same activity, the same regulation and that covers cryptocurrencies and all kinds of other activities that people are going to take on when they deal with something that looks like a money market fund that has the same regulations that a money market fund or a bank deposit and therefore stablecoins need some attention in that regard.

I just think that's the basics. principle and you're right, a lot of our brokerage has been moving away from regulated banks for a long period of time and we need to be vigilant so we can continue to look at that, thank you, Senator Vance. Sorry, Senator Hagerty of Tennessee, thank you Chairman Brown and, um, thank you very much, Ranking Member Scott, for holding this hearing. President, it's great to see you here again. I appreciate your presence and I appreciate the opportunity to speak with you about an issue that I'm particularly concerned about and that is the holistic review that Senator Britt just mentioned that Vice President Bauer is Kentucky right now, is creating a sense that there is higher capital requirements on the horizon for us and, when I think about that in the context of what I've endured, you think about the situation, in 2020 it was an acute real-life stress test, if you will, and I think that our financial system sailed so admirably last year, friend, you have told this committee that our financial system has proven to be resilient through 2020 and that the capital levels at that time and I would like to point out that those capital levels are at multi-year highs So I guess I would put it to you this way: in our system we have an oversight vice president who has statutory responsibilities and when a new vice president comes in of supervision, they will generally want to take a new position.

Look, that's what the first one did, the one you know, Vice President Quarles, and that's Dan Tirulo, who had the job informally and that's what he did, so it's only natural that someone would come in and give him a new look. and I think that's part of the process, that person's role is to make recommendations on regulatory oversight to the full board, the board's role is to consider them when they're made and this to me, this fits under that heading. since the review is underway and I appreciate that context, one aspect of it seems to us to be an apparent willingness to undo the accommodation requirements that were enacted as part of s2155 and I understand that nothing has been finalized regarding the regulations, uh , it's a worrying prospect if that's the case The Federal Reserve's general counsel alluded yesterday to undoing 2155 with a quote that reduces Basel requirements for banks that were intentionally given relief in that bill, as well I want to make it perfectly clear that the banking regulators themselves cannot simply ignore or selectively enforce the laws and again I realize that the details of the study have not been finalized and made public, but the proposal presented by the vice president of the bar association is overly aggressive or appears to contradict the spirit of s2155, could you do so? vote in favor.

I would have to do it. I can't answer that in the abstract, of course, but I would say that as an institution we are very committed to tailoring and, uh, anything we do will reflect, you know, the tailoring of the institutions according to at their risk and I want to say that it is a principle to which we will adhere. I think it's quite important again given the legislative intent here and the concerns that we maintain, versus what the attorney general said yesterday, I appreciate your perspective in terms of keeping that in place um I'd like to come with my next German my next question Sharon friend with uh start the question by underlining the importance of the independence of the Federal Reserve's monetary policy at this time the economic outlook is approximately As uncertain as you may remember, we have had large private sector companies that are planning layoffs and predicting a serious economic weakness in the coming quarters, but on the other hand, the current economic data seems to be solid, inflation showed some signs of weakening in the last few releases, so I just hope that Chairman Powell can briefly tell us how he summarizes this data apparently contradictory so that quickly, at the end of last year, we saw a couple of very promising modest increases, modest inflation readings in November and December, but at the beginning of this year, those were some of the things that improved.

Additionally, we got a very strong inflation reading in January, also a very strong employment reading and very strong retail sales, so as I noted in my testimony, we are seeing a reversal of what we thought we were seeing to some extent. a partial reversal, it is still true, we are still seeing progress in inflation, we are seeing that goods inflation has decreased significantly, there is an improvement in housing inflation. In process, not much improvement can be seen yet in the largest sector, which is non-housing services, so inflation is at the base level, inflation is at 4.7 percent in 12 months .

I don't think anything about the data suggests to me, the fact that we've adjusted too much, in fact, suggests to us that we still have work to do and then in that context of thinking about where the adjustment is going and when it might allow you to know where and when it might happen, where do you see the terminal federal funds rate landing in this cycle, so we last wrote our individual assessments set us in December and I think the midrange was basically people were grouped between five and five and half we are going to write Download them again uh as part of them we do it fourtimes a year, we will do it around the March meeting which is March 21 and 22 and as I indicated in my testimony, I think the data that we have seen is so far and we still have other data to see, we still have data important to see before the meeting suggests that the final rate we noted may well be higher than the one we noted in December.

I understood, thank you, Mr. President, thank you. thank you foreigner thank you Mr. President so the FED has raised interest rates eight times over the last year in what has been the most extreme rate cycle in 40 years the Fed's goal is to slow inflation and its tool to raise rates The interest rate is designed to slow down the economy and put people out of work so far it hasn't pushed the economy into recession, but it hasn't completely controlled inflation either and perhaps the reason for this is that other things are also keeping prices high. . Things that cannot be done. fix things like price gouging and supply chain problems and a war in Ukraine with high interest rates, but you're determined to keep raising interest rates, so I want to take a look at where you're headed .

In December, the FED released its projections on the state of the economy under its monetary policy plan. According to the Federal Reserve's own report, if it continues to raise interest rates as planned, unemployment will be 4.6 percent by the end. of the year, more than one point above what it is today, friend President. If you hit your projections, do you know how many people who are currently working and moving on with their lives will lose their jobs? No, I don't have that number in front of me. I will say that it is not just that it demands consequences, well, but it is and it is people who would lose their jobs people who are working right now making their mortgages so friend president, if you could talk directly to the 2 million working people who have decent jobs today and those you are planning to fire next year, what would you say to them?

How would you explain to them your opinion that they need to lose their jobs? I would explain to people in more general terms that this inflation is extremely high and is seriously harming the workers of this country, all of them, not just two. millions of them, but all of them are suffering from high inflation and we are taking the only measures we have to reduce inflation and well, workers will be better off if we just walk away from our jobs and inflation stays at five. six percent let me ask you what happens if you do this since the end of World War II there have been 12 occasions where the unemployment rate has increased by one percentage point in one year exactly what you're trying to do right now how?

Many of those times the U.S. economy avoided falling into a recession. You know, it's not as black and white as it varies. I wrote a book about this and there have been 12 times that we have seen an increase in the end point of the unemployed in the unemployment rate in one year, that is exactly what your federal report has presented as a projection and plan based on how they are going to continue to raise these interest rates, how many times has the economy failed to fall into a recession after doing so 12 times? I think the number is zero I think the number is zero that's exactly right so the question is: we have two million people out of work can you stop it at two million people?

History suggests that the FED has a terrible track record of containing modest increases in the unemployment rate once economies start shedding jobs it's like a runaway train it's really hard to stop in fact in 11 out of 12 times the unemployment rate increased by a full percentage point, within a year unemployment continued to increase another full percentage point on top of that, if that is what happens this time, we would be looking at at least three and a half million people who would lose their jobs, so Powell presides if he reaches his goal and two million people are laid off. by the end of this year and then, like 11 out of 12 times unemployment has increased by one point in a single year, it continues to increase and then we have two and a half million people out of work. three million people who are laid off, we have three and a half million people who are laid off, what is your plan?

Well, right now the unemployment rate is 3.4 percent, which is the lowest it's been in 54 years, and we don't really think we need to see a sharp or huge increase in unemployment to control inflation. I'm looking at your explanation that the two million families that are going to be out of work we're not going to target any of that again or but I would say that even four and a half percent unemployment is much better than most times over the last 75 years; In other words, you don't have a plan to stop a runaway train if it happens.

They are playing with people's lives and there is a ton of data showing that price gouging and supply chain issues and the war in Ukraine are driving up prices. You cling to the idea that there is only one solution: lay off millions of workers. We need a Federal Reserve that fights. for families and if you're not going to lead that charge we need someone at the FED to do it Anson Center Ohio thank you Mr. Chairman Chairman Powell thank you very much for being here I have a question that's a little far out, but how often do I have the opportunity to speak with the

chair

man of the Federal Reserve, so I might as well ask him to give a little context.

My family comes from Appalachia. In particular, my grandparents grew up in the coal country of southeastern Kentucky and then moved to southern Ohio, where I now have the honor of representing all of Ohio and you know one of the things you hear a lot when you study the regional history of the Appalachia is often described as having a resource curse, so there is a lot of coal in central Appalachia that allows for a certain amount of obviously consumption is good, people need food, medicine and other things, but there's also a pretty good argument that, for a number of reasons, it leads to poor investment in the region and, as a result, there's lower productivity growth, lower innovation in an economy that's much smaller.

Diversified and much less dynamic. I wonder when I hear about history, when I think and read about Appalachian history and the resource curse. I'm interested in the idea that you could make a similar argument about the reserve currency status of the United States dollar. Americans have enjoyed one of the greatest privileges of the international economy for the past almost eight decades: a strong dollar that acts naturally. As the world's reserve currency, you know this better than I do now, this has obviously been great for the purchasing power of Americans. We enjoy cheaper imports. Americans when traveling abroad benefit from lower costs, but I think it comes at a cost to American producers.

In some ways you can argue that reserve currency status is a massive subsidy on American consumers but a massive tax on American producers. Now I know that the strong dollar is something of a sacred cow of the Washington consensus, but when I look at the American economy and look at our massive consumption of mostly useless imports, on the one hand, and our hollowed-out industrial base, on the other. I wonder if reserve currency status also has some disadvantages and not just some advantages, and let me put one last point on this. and I'd love to hear your thoughts on Chairman Powell.

Of course, we are now the main supporter of a massive ground war in Europe between the Russians and the Ukrainians. I read it recently and I'm not going to comment. about how perfect or accurate these estimates are, but I recently read that the United States is trying to increase production from 14,000 artillery shells to 20,000 artillery shells a month, while the Russians fire 20,000 artillery shells in Ukraine a day and when I look at the American economy, we have a lot of financial engineers and a lot of various consultants, we don't have a lot of people doing things and I'm worried that the state of the reserve currency and the lack of control we have over our currency is maybe driving, I would love to get your comments on what are the advantages and disadvantages of the reserve currency, that's a great question, two minutes, Sherman Powell, so I have a lot of time, maybe I can't even start on that, so we are the reserve currency of the world , of course, and that's because of our democratic institutions, it's because of our control over inflation for many, many years, the public, the world trusts in the rule of law in the United States and those are the things, so Once the reserve currency of the World Reserve, it is used around the world in transactions and is where people want to be in times of stress.

It is in dollar-denominated assets. It is this way now? Of course, we benefit from being able to pay for our goods around the world pay for everything anywhere in the world, mostly with dollars, that's a plus. You know, there is some economic theory about it that also has charges of various kinds, but I can't remember everything. Mind, but you know, the other thing is that you know it's a very stable balance, but it's not perfect, it's not permanent, rather, there's no obvious candidate to replace the United States right now, where you can have free flow. of capital inside and outside the country where you can really trust the rule of law and democratic institutions and maintain, you know, maintain price stability, which you can hear, do you think it gives us less control over our own current currency the fact that it is to become the world's reserve currency control over our currency um I'm not sure so essentially what we try to control is price stability and no it doesn't it doesn't make it harder for us keep inflation under control, as the United States has done. a smaller external sector than most large economies, where there are only about 15, so what primarily affects inflation in the United States is domestic supply and demand.

Do you think this makes it more difficult for us to affect capacity and fight currency manipulation? control export and import flows in a way that well stabilizes our own manufacturing sector. I mean, what's important is really the level of the dollar and you know, when the dollar is stronger, obviously, our price, our, wears out, it's more expensive overseas and that kind of thing. of things, but we don't have an opinion about US, that's a matter of the level of the dollar, it really matters for the Treasury Department and the elected government, not for the FED, thank you, Chairman Bill, thank you in advance, yours truly Hall in.

Maryland is recognized, thank you Mr. Chairman, Chairman Powell, thank you for being here and for your service, I know the FED is experiencing many challenges these days. I have a couple of questions that I think are basic, yes or no, and then some. Longer questions. Would you agree that changes in the size of corporate profits can be one of the factors affecting the inflation rate? Yes, right now, we recently saw that the employment cost index, which, as you know, measures growth in wages and benefit costs, grew. by about four percent on an annualized basis in the fourth quarter of 2022.

Is that true? As I recall, yes, if corporate profits were to decline from the extremely high levels we saw recently, would it be possible to sustain the four percent growth rate in the Employment Cost Index for an extended period of time, even when we get the Inflation gets down to the 2 percent target, it depends on what you mean by prolonged period of time, so it wouldn't be achieved without a very, very large increase in productivity, which would be excellent, but that We don't expect that it won't happen. can sustain wage inflation of four percent in the long term, in the short term, although yes, in the short term that would not be a justification in itself for increasing rates.

Well in the short term, well, I think wages affect prices and prices affect wages. I think we do believe that some weakening will occur and labor market conditions will happen, as we try to control inflation and we will need to happen well, but that is more of a prediction about their efforts to fight inflation. Are you saying that? Are you saying that simply looking at the current four percent growth rate in the short term is an excuse to raise interest rates? I think not, what I would say is that, in general, all the data that we analyze in the labor market includes, not only that wage measure, but also wages, but also unemployment, participation, vacancies and job resignations and things like that, you put all of that into a Uh, picture and I think you see a labor market that is extremely tight and is probably contributing to inflation.I never said it was the main cause, right, I think the most important point here is based on your answer to the first question about growth. and profits are right is that corporations have a choice as to whether or not they are going to pocket more profits than they can or whether they will provide higher wages to their employees and if they really reduced their profit margins, they could sustain a higher wage increase. without violating two percent inflation, right?

Yeah, I mean, when I hear profit margins, what we're seeing in the economy is pretty much about shortages and, you know, supply chain blockages. and when there is not enough product, what happens is that there is a lot of demand, what you see is that prices go up as the supply chains are fixed and the shortage is alleviated, you will see that price inflation goes down, you will see that margins are going down and that will certainly help with inflation, but profits are the right margin, they are going up beyond what they were before, that means even with the increased cost due to supply chains, they are making more profits Which again, they can, they can do that, but my point is, as a contributor to inflation, as you indicated, in response to the first question, let me ask you about the tight labor market because one of the problems in the tight labor market.

They are parents with children, including many moms who would like to return to the market but cannot do so due to the lack of affordable child care. The other issue is immigration and I know they've gotten some recent data. about how some immigration numbers have actually softened the tightness of the labor market a little bit, can you talk generally about those two factors, affordable child care and immigration, more legal immigration and how they might affect labor force participation and, therefore also reduce inflationary pressures? In the first one, we don't make recommendations or evaluate fiscal policy, but I will say that there is research that shows that it helps keep women in the workforce when child care is available, which I think is kind of self-evidently, the I feel, the second was the impact of migratory aggression.

Yeah, what I talked to you about is actually as part of the January report from the Bureau of Labor Statistics that comes out, sorry, the January employment report that comes out in early February. section there about more people, the census department has increased its estimate of the labor force by something like 870,000 and a significant part of that has been immigration, so it has increased participation a little bit, but it may be part of Por what we're here, may be part of why we're hearing in the labor market that the really intense labor shortage pressures that we're hearing about in 2021 and '22 may be easing, so that would contribute to that. clearly more people clearly the economy is asking for more people with essentially two open positions for every unemployed and this can be a source of those people being right and that would reduce the rigidity of the labor market and reduce pressures on inflation, right?

I'm already doing it, thank you, Senator, Senator Kramer of North Dakota is recognized, thank you, Mr. President, thank you, Chairman Powell, for being here and I can't resist responding to some things that my friends on the left have said, For example, in his opening speech, President Brown had a long list of things that raising interest rates will not fix interest rates raising interest rates will not fill in the blank I'm going to fill in the blank with A couple of things, how about raising interest rates? won't stop Senate Democrats and President Biden from overtaxing excessive spending, borrowing, Regulatory Chairman Brown said we should rebuild our supply chain by curbing corporate offshoring overseas.

I agree you talked a lot about corporate greed contributing to inflation, okay, but what about regulatory greed contributing? to corporate greed, how are corporations expected to reinvest money if their ability to invest that money is overly regulated right here in the United States of America? Do you want to do some things in the country? How about energy policy? How about instead of looking to Venezuela or Iran for oil? supply or Russia or instead of looking to China for electric vehicles, chips and solar panels, how about we have a strategy that implements those things in the country by reducing regulation, reducing taxes and allowing those corporations to reinvest their profits instead of buy shares or or or?

This idea that somehow the Fed is supposed to keep inflation under control while half the government works against it is mind-boggling now. I know, Mr. President, that you don't like to comment on politics. You and I went round and round about this. He was eager to advise us to spend a lot of money during the pandemic. I don't think many people blame me for that. It would not respond to the Biden Administration's efforts after we are in a strong recovery. not spending as much money, okay, I can appreciate the change, but now we're in this debate between Republicans and Democrats, particularly between the speaker of the House and the president, about raising the debt ceiling, and you've made some comments quite strong about increasing the debt ceiling absent in structural reforms that would really help us return to reasonable growth, uh, so I warn you again if you are going to make political comments if you are going to advise us on policies consistent with this now I want to return to La greening of the Fed and I call this stressed so you can call them whatever we call them, but I'm concerned that now the Fed is starting to go down this path, maybe it's a little bit At first, on climate stress testing, I just want to ask you this if we're going to go down that path, if the Federal Reserve is now going to become part of the federal climate police, are we going to consider the ramifications of having entire communities and economies, factories and manufacturers, you know, energy entities, large servers, farms that leave them susceptible to a very unreliable and very expensive power source, is part of the stress test, no, those are considerations for the elected people, not for us, we have a we.

I have a very limited role to play here, but it's a real role and I can talk about it if you want. Well, yeah, I'd like you to because, again, if we're going to start doing stress tests for all six of us. largest financial institutions related to climate, which is actually more time than climate, then we are going to consider the effects of an unreliable energy source in various places in our country, so our only focus is the safety and soundness of these institutions and if they understand and can manage all the risks they run in their business model, that is our only objective, we are not, again we do not seek to be responsible for climate policies, climate policy is clearly going to have effects. in regions, in companies, in individuals, in countries, disparate effects and you know that this is not for unelected people like us, who have a limited mandate, but I think it does affect the climate and you have a right to worry because we, you knows that we.

We are on a slippery slope but honestly I think climate scenarios are something that banks are already doing themselves and climate guidance is something they are looking for, they want to know how we are thinking about this but we will try very hard not to. to go down a slippery slope and become climate policy makers, it's just not appropriate for an independent agency, that's fine and I completely agree and I hope they stick to that and I think so, can they? Ask banks to consider what the overreaction might be. Do you know what types of vulnerabilities could be exposed?

Just in regards to what Senator Warren was saying in her monologue. One thing about ideologues, they have the luxury of choosing binary options. job and you have one in mind one and a half maybe two two um missions um I think the first handles the second well, but it has to be difficult when the White House is working against you and you don't have anything to comment on thank you, thank you, Mr. President , Montana's test senator is recognized, Chairman Powell, thank you, thank you for being here today, and thank you for playing this critical role at this critical time.

I've spoken many times on this committee, uh and especially right now, I can't overstate the importance of the Fed's independence. I said it in the previous administration. I say it now. We cannot play politics with our economy and that is a fact from a climate point of view. I would just tell you that it is totally artificial at this point anyway, because if we look at the hundreds of billions of dollars that this country spends every year on disasters due to climate instability, we should ask our question: is that sustainable? ? because, frankly, it has to be done and I don't think it's sustainable, so we have to start looking for some solutions on the climate side.

Earlier than later. The reserve has a difficult job and I really appreciate how they have done it. It is reasonable to work together making difficult decisions. For the sake of the economy, we have to get this right, so the question is how much has inflation fallen since its peak, it depends on the measure, but significantly it is right at least a couple of percentage points and, as unemployment has decreased as inflation has decreased. unemployment has gone down, yes, it may now be a 54 year low, yes, so the question is and I always think about uh, in 1998, uh, I bought a property and the interest on that property was 10 in 1998 and By right, I thought I got a great deal, I thought it was just great, but the truth is that interest rates have been artificially low for the last 20 years, probably, um and and the question becomes when you look at the economy and how you try Determine whether inflation is caused by demand or supply.

Where does all that fall on you? Your decision making moves forward, are you referring to the level of interest rates? So, in theory, there is something called neutral. level of interest and we know it only by its functioning and neutral is the level that neither pushes the economy up nor down and changes over time. This is what happens with these important variables in economics, so what has happened so far was that the neutral level of interest went down and down to the point where many countries had zero interest rates and very low inflation. Now we have this series of shocks associated with the pandemic and we have rates at four and a half percent. our policy rate and we have the labor market very strong and inflation reacts a little bit, but it raises the question of where the neutral rate is, honestly, we don't know.

I think if we look at the current situation and see that there is not much evidence that it is not difficult to argue that we have tightened it too much, it means that we should continue to tighten it. I think we are aware of the delays with which our policy works. I don't think we need a significant increase in unemployment; We're certainly not targeting one, but we do believe that there will be some softening in labor market conditions to get to two percent inflation when you look at interest rates, uh, I know. We talked about energy prices here and the price of gasoline and then if you go to Europe it's much higher, are we comparable?

I'm just curious so we compare what your interest rates are here with for example Europe we are very close to where Canada is we are a little bit higher than where Europe is Europe traditionally had much lower inflation now they have inflation very high and they are still raising rates, but they are a little bit lower in terms of rates, so if we don't get inflation under control and as I said, I think the steps that you have taken have been reasonable and measured. If we don't control it, what is that really? What are the impacts of that?

Well, what is that? The costs of failure, uh, is one way to think about it, are very, very high, so if inflation were to continue at some point, it will become the psychology that people will come and businesses will expect high inflation and that will make it more self-perpetuating that will mean an up-and-down economy will mean um uh you know, it means something that looks more like what we've seen in periods of high inflation cap capital allocation is difficult in a world like that is not a good It's time for the economy, what we want to do is firmly restore price stability to 2 percent so that we can have the kind of strong labor market for a sustained period that we had before once again, thank you for your work, thank you for your Senator's Ball of Independence thank you, thank you Senator tester and they will give me Senator Cortez masto when I finish too, so, Mr.

President, it is good to have you here today, when I return to Montana, the number one issue thatI certainly listen. across the state is the high cost of gas, the high cost of groceries and generally how their paychecks are shrinking due to inflation, um, it's a crushing blow, it has real life impacts, is the biggest issue for Montanans, it is also important to consider the devastating impact it will have on our nation's economic future. In fact, in October of last year I sent a letter to the director of the Congressional Budget Office, Swagel, on the impact that high inflation and high interest rates would have on the cost of servicing the federal debt. he painted a lesser picture than Rosie, but then we got the CBO's updated 10-year baseline forecast in February and it confirmed the truly dire situation we are in due to interest payments on debt.

The CBO now projects cumulative deficits over the holding window and I recognize that the source of the deficits is irresponsible spending here in Washington, but the cumulative deficits over the 10-year period will exceed $20 trillion. The accumulated deficits do not speak of the debt because they will increase the total federal debt to more than 51 trillion dollars. by 2033. now 2033 used to seem very far away for 10 years 10 years go by very, very quickly within five years we are going to spend more on annual interest on the national debt than we spend on National Defense, do you think? which for a moment and these are coming out of the CBO, these absolutely shocking but frankly predictable projections go back to a debate that we had vigorously here in the banking community, remember when, uh, Lawrence Summers, of course, the former Treasury Secretary of the economic advisor to President Clinton.

President Obama warned us, he said and is practically warning my colleagues on the other side of the aisle that you cannot move forward with these purely partisan, you know, at that time of the $1.9 trillion spending extravaganza we had a trillion of dollars of covered money not spent in December. of 2020. and that passed on a purely partisan vote, we said it was going to start lighting the fire of inflation, so I certainly hope that the president's budget that we hope to see later this week proposes pro-growth policies that can get us out It's a disaster and I would say it's almost an existential crisis as we look at what awaits us here, of course, in the next 10 years with debt and servicing that debt, unfortunately, as the president said in the State of the State address. of the Union, the president said he's going to raise taxes it's a recipe for disaster it's going to crush productivity it's a good investment it's going to further stifle economic growth I want to move on now to my questions Chairman Powell, uh, you're raising rates interest to combat the inflation that we have seen in the economy over the last few years is that that is correct, yes, and although this is the domain of the Treasury, a higher federal funds rate will mean higher borrowing costs, it is that way right, yeah, everything else is the same, so I just want to connect the dots, year-round inflation broke out once.

One of the main reasons was massive spending here in Washington and now we are going to bury the challenges with increased debt service over the course of the next few years, where we can see that debt service exceeds defense spending, that is I mean, we see the threats from China's threats around the world. I think it's very worrying now, as a grandfather of four who will soon have five grandchildren, they are things that you think about more and more as you look forward. I want to switch here and talk about American energy when the Ukraine organ blew up. many feared Russia would cut off natural gas exports and cause energy inflation to rise.

Prices did not rise as much as expected due in large part to the fact that American companies stepped up late last year. The European Union now receives more liquefied natural gas from US producers than from Russian producers, it is good for the world to see more energy produced in the US. President Powell, do you think European and US inflation would have been manageable if not out by American energy producers? I certainly think that our natural gas ETS, in particular, has helped Europe make the transition, you have some idea of ​​how much worse the global energy picture would be if you imagined a world in which we are not producing or sending energy to other countries . hard to estimate, probably worse, yeah, I mean, I think it's been clearly that Europe has handled itself better than expected and one part of that story is that just the US energy experts also the winner wasn't as bad and the Germans made some good decisions, yes, we made some, we did some prayers that say we should pray for a warm winter for Europe and I think they got one that was useful.

I'm currently hearing you send this back to Senator Cortez Masto. thank you Chairman Powell, it's great to see you, thank you very much, I know it's been a long morning, I always appreciate you coming to speak with us here on the committee, um, I want to first align myself with the comments of Chairman Menendez, who supports a Latino . candidate for the vacant seat at the Federal Reserve, it's been over 100 years and a Latino has never served on the Federal Reserve board and I know there are many strong Latino economists and economic experts who could serve capably, so I want to post that. there, Chairman Powell, I'm also a Senate Finance member right across the street, we're talking about affordable housing, um and uh, I think for the purposes of many of us across the country, including Nevada, when we talk about affordable housing, it's also It's about workforce housing.

It's about ensuring that families who are working so hard have the opportunity to keep a roof over their heads right now in Nevada, if you make minimum wage you have to work 75 hours a week just to afford housing and that's why I want To talk to you about this, I was distressed to see in the report that activity in the real estate sector has contracted as a result of high mortgage rates and you have been talking about that. I often hear Nevadans say I don't know if I will ever own a home and many feel resigned to being stuck in a rental cycle, so President, how do economists and Federal Reserve leaders think about the balance between keeping interest rates low to stimulate affordable housing construction and housing construction? buy while we address inflation we have a double mandate from Congress, as you well know, what is the maximum of employment and price stability and that is really what we take into account, we do not and of course, insensitive spending is what that is the most supported when we lower rates and what is most affected when we raise rates and that means housing to a large extent, that is not a choice we make, that is how it works and we really only have one tool which is monetary policy so you know that no, we're not really trying to use our tools to affect broader housing policy, but really just to achieve our statutory objectives, unfortunately it's in place as you try to achieve your statutory objective.

Mind you, so I want you to have a chance to address the conversation that you had earlier with Senator Warner Warren about the tools that you have and the impact that it has on potentially causing more people to be unemployed and this obviously has an impact on your ability to pay for housing too, can you address that? I'd love to. I want to make it clear that we do not seek nor do we believe that we need to have a very significant decline in the labor market. And it's not just hope. I think if you look at the situation on the labor market, we have all these job offers and, in principle, you could reduce the job offers without seeing a really significant increase in unemployment.

Furthermore, we are starting from such a situation. a strong job market, it seems like you're a long way from anything resembling a recession, just looking at the job market alone, honestly, we don't know, we don't know, we don't know. We need them to do it, it's going to take a really significant recession. Other economic cycles had quite different backstories than this one, and we're going to have to find out whether that matters or not, but I think I've said all along, my colleagues and I, too, that we believe that we can, that there is a path to restore the economy. two percent inflation with less significant effects on the labor market than they typically have been. seen in recessions and for general public purposes, trucks that I know are struggling, we have one of the highest, we've talked about this and thank you for always being willing to talk to me, we have one of the highest unemployment rates.

In the country, our service sector was so affected that we are still above five percent just in southern Nevada, we have high gas prices, we have grocery prices, we have high housing prices, so one of the things you have mentioned. and you just did it again, but I know it was in your opening remarks and it's quoted here and let me say that our overreach, you say our general approach is to use our tools to reduce inflation to our two percent goal and keeping long-term inflation expectations well anchored for the general public for those working families of people why two percent why it's so important to get to two percent um so that's become the globally agreed upon target essentially. all major central banks Target two percent inflation one way or another um and uh how does that help my Nevada families?

How does that help people? I'll tell you how it works and it's um, I guess it's obviously not, uh, it's not obvious how that is, but what two percent inflation to have people. believing that inflation is going to go back to two percent actually anchors inflation there because you know the evidence is that way and the modern belief is that people's expectations about inflation actually have a real effect on inflation if they are expected to inflation rises five percent. percent, then you know if everyone expects that because that's what businesses and households will be expecting and it will happen because they expect it, so having a two percent inflation target that we had for many years de facto If we had it , we formally adopted it in 2012, but for years before that we were effectively targeting two percent inflation and what that meant is that inflation is one of the reasons inflation was low and predictable is to have a real target and don't get attached to it. change it, you know, at convenient times, so we think it's really important that we stick to a two percent inflation target and not consider changing it, we're not going to do that, it's just that people will be better off if if the the issue of high inflation is simply not part of their lives, that is the definition of price stability if people live their lives without having to think about inflation all the time.

Thank you. I realized that my time was up. Thank you very much Senator Senator Lamas thank you very much Madam Speaker and welcome President Powell, um, when you set these rates and make these decisions, uh, and you look for that magic number of two percent, are you considering the cost of borrowing for the United States, knowing that Congress has overborrowed and that we have overspent and that the national debt is now at least 97 percent of GDP and that we were going to face our own challenges. This is not about what the FED has done, this is what Congress has done, which must be taken into account.

In relation to your decisions, do you think about the borrowing costs for the United States itself? No, we don't and we won't, in other words, that would be fiscal dominance if we were constrained in our monetary policy. because of the budget situation in the United States and clearly we are not, the path we are following is not sustainable but the level of debt we have is not unsustainable it is not just not sustainable, put it that way then we do not think about the costs of interests when we make monetary policy we think about maximum employment and price stability.

In his opinion, the level of debt we have is sustainable. Yeah, I mean, clearly we could have the biggest economy. in the world we can pay this debt, that is not the problem, the problem is that we are on a path where the debt is growing substantially faster than the economy and that is, by definition, unsustainable in the long term and the way in which countries have achieved it has been solved, that is, with long-term programs that have bipartisan support and that address the real problem in the budget. That's really the formula. Thank you. I'm going to switch to stablecoins. a member of the president's task force on financial markets, the task force called for bank-like regulation for stablecoins by the end of 2021 and then on January 3This year, in a joint staff statement, the federal banking agency stated that even after the bank's Capital BSA.

AML and risk management uh, a bank issuing a stablecoin on an open or decentralized public listing network is very unlikely to be inconsistent with sound and secure banking practices. I'll say it again even after a bank's Capital BSA AML. and risk management a bank issuing a stablecoin on an open or decentralized public network is very likely to be inconsistent with sound and secure banking practices, so I'm a little confused about where we're headed with stablecoins, Does the January 3 statement mean? that the FED has decided that stablecoins on a permissionless distributed ledger have no place in banks, so I think there are real concerns about permissionless public blockchains and the reason is that they have been very susceptible to fraud, to money laundering and all that. things, so I think what you heard from the federal banking agencies in one of their reports was that they were there and would tend to view them as not consistent with the safety and soundness of happily regulated stablecoins.

Do you think they could have a place in our banking system. I certainly think that in a properly regulated world where the same activity that stablecoin activity receives the same regulation as comparable products in different places, then there certainly could be a place for stablecoins in our uh, among our financial systems. service sector thanks um the European Union United Kingdom Australia Switzerland Singapore and others have taken steps in recent years to create a legislative framework for digital assets. The European Union in particular is trying to return to being a standard setter as it was with its data protection.

The rule is that the United States is in danger of being a rule-taker, not a rule-maker when it comes to digital assets. I think it would be important for us to have a viable legal framework around digital activities. I think that's important and something about Congress. In principle we have to do it because we really can't do it, yes, thank you Senator Jilla Brandon. I agree with you in one area we've already looked at. It's in the Basel Committee on Banking Supervision. They propose prudential treatment for the cryptoasset framework. Banks Capital Standards for Digital Assets The Basel Committee framework does not impose a capital charge for the custody of digital assets, while the SEC Staff Accounting Bulletin 121 imposes a prohibitive capital charge through the back door and places to consumers at risk of bankruptcy.

Similarly, the Basel Committee framework allows banks. issue or hold digital assets on its balance sheet if the required capital is reserved, from January 3 to the 23rd, the Federal Reserve and other banking regulators have said that it is prohibited for a US bank to carry out these activities regardless of capital, so my question is what the rest of the world knows about digital asset regulation that we don't know, that the FED doesn't, as we mentioned, this is an SEC staff accounting bulletin and is not something that the FED has issued and I I would be reluctant to comment directly on this and what concerns me is that the Federal Reserve and other federal banking agencies are not following international standards on digital asset regulation, that is just my comment.

Thank you, Chairman Powell, for being here. I now recognize Senator Smith well. thank you and, Chairman Powell, it appears that Senator Britt and I are the last people present at this Committee hearing, thank you for, thank you for passing the gavel, 2, Senator Lamas, and I want to thank you for your service and for our recent conversation and before I get into my questions, I would like to know that there has been a good exchange among our committee, um, around some of the great economic challenges and opportunities that we face in this country, and I would like to point out that the programs and the spending that The ranking member and some of our colleagues have blamed inflation provided critical relief that kept working families and small businesses afloat during a global pandemic, and in fact, many of these policies were passed on a bipartisan basis and signed into law by the Republican and Democratic presidents and I also want to add that the laws that Democrats passed to reduce prescription drug and health care costs and to reduce energy costs for Americans are helping to reduce basic costs for the families, all of which, by the way, was paid in full, so I returned to you, Mr.

President, what you have said to me privately and to all of us in public, which is what we should seek, strive to find bipartisan solutions to find a path forward and in fact Senator Lemus and he was talking about this yesterday when it came to housing policy so I just want to make it clear when you and I spoke briefly yesterday we talked about the community reinvestment act and I know I appreciate the

chair

I'm proposing. I pointed this out earlier in the hearing, but I want to return to it briefly. I am very happy to see that it has been about a year since the Federal Reserve, the OCC, and the FDIC issued their proposed rule to modernize implementation of the community reinvestment law.

I don't think the proposal was perfect by any means, but it does make really important improvements to how, through CRA Financial Services, organizations can serve and meet the needs of communities that are full of assets but lack the resources to make it a reality. Wealthy communities can, so I think Chairman Powell indicated that he expects this new CRA rule to be finalized in the coming months. What you indicated is that yes, that is correct and can you just tell us with the departure of Dr. Brainerd, who will lead the CRA efforts, so I asked Vice President Barr to be responsible for moving the project forward, of course , it has to go to the full board and everyone can vote on it, but he will be He will push it, that's great, thank you, and I was happy to see disaster preparedness and climate resilience added to the definition of development activities community that would be eligible for the CRA credit and this is important, of course, because Low- and moderate-income people and the communities in which they live often face some of the worst impacts of climate change and extreme weather events.

This is not social engineering. It's about dealing with the real costs and challenges that people experience due to climate change. So he presides. Friend, can you talk a little bit about how you see that change and how it fits into the overall goals of the CRA? So I think it fits for the reasons you said. Honestly, I'm a week or more away from receiving any information on where the proposal stands, so I'm reluctant to bring it up, I mean, again, I'd rather wait until I'm fully informed on where that agreement came from after the council meeting. fomc, so thank you.

Well, I look forward to continuing this conversation with you and Mr. Barr and I just appreciate this. I think you know my take on this is that climate change and the economy are inextricably linked and the reality is that climate action or inaction has a direct financial impact on people and our economy. I was wondering if you would be willing to briefly brief us on some of the next steps the FED will consider as it assesses resilience. of financial institutions regarding climate risk, there is this pilot project that just started in January. I think it was from this year and I'm curious how you see the next steps there, so we're really doing two things.

One is we're doing a climate stress scenario that the banks are already doing with the big banks and the six that we're working with and that's really just to understand, to start the process of understanding the risks associated with this long term. term. Again, they're already doing it and then, and it's something that's being learned a lot from around the world, in fact, the other thing we're doing is providing guidance that banks want clear guidance, they actually want a set of rules worldwide. The banks you know do business all over the world and hope that they're not in a world where there are just different regulatory regimes everywhere they go, so we're working on that too.

Excellent, thank you very much, Mr. President, thank you, thank you, Senator Smith, Senator Tillerson, North Carolina is recognized, thank you, Mr. President, President, Powell, thank you for being here for your keynote address. I was here for that. I think it touched on some of the interest rate-sensitive components of GDP. and components of GDP not sensitive to interest rates. I think you said we have a concern in the latter group: inflation expectations, labor market tightening, etc. Interest rate sensitive readings and if the Fed what kind of Fed actions can be taken to avoid a zero landing, I'm sure you know that the real estate sector, of course, is intersensitive.

That's what they are very directly affected by. by our policies almost immediately and the example of this is housing, so we have seen mortgage rates now rise more than six percent and we have seen housing starts decrease. and housing has declined as people are reluctant to get out of their you know, low mortgages that they used to have low rate mortgages, so real estate activity is slowing down, on the other hand, housing prices are up collectively more than 40 percent since the start of the pandemic, so we may be seeing some price correction in that as well, so that's coming and housing inflation, which is a big part of the CPI, a slightly smaller part of the pce, the inflation measures we follow where I am confident that this will decrease due to the slowdown in the housing market.

I guess I would say the service sector probably has less positive interest than that and that's what restaurants, travel services, travel and leisure, healthcare are. Financial services Health care services all those services and that's a big part of our economy, this sector is 56, it's 50 54 I guess 56 percent of consumer spending on food and not energy, so it's very important. and it's you. I know it's about having a little bit softer demand and having some weakening in labor market conditions. We think our tools will work on that, but we expect that will take time. Thank you. I know.

The president mentioned in his opening remarks. uh I guess I don't want to misquote you, but I think we have very little capital in the banking sector, that may be true for a couple of banking institutions, but how do you feel about the current capital? They are regardless of where they are and their size, what concerns do they have about the capital that we already see out there? So I supported all the capital raising that we did. I joined the FED in 2012 and we were in the midst of implementing all those Dodd-Frank increases and I supported them all, after careful reflection and discussion with my colleagues, I think the new vice president is doing what the new ones do vice presidents, which is take a new perspective and ask the question um, while I think we all agreed that the capital is strong, certainly that vice president does, the question is is it at the right level and I think that's what It happens with a new vice president of supervision and we have no proposals yet, but at some point we will.

Yes, I'm meeting with Vice President Jared, we'll delve deeper into that, but I know I was on the finance committee, so I wasn't here, but I do know. several members, well, first of all, we know that the vice president of the bar is looking at a holistic review of capital requirements. I think it's a good idea, but I have to ask a question. Do you think the FED considers the previous bipartisan Senate Bill 2155? what is currently the law of the land superior to any of the Basel requirements, is any holistic review process, in other words, is the law of the land, how does that influence how these reviews are done, so 2155 was um, I think you're talking? on tailoring, so Dodd-Frank actually called for tailoring and, um, what 2155 did was say it changed May Taylor to Shell Taylor and it also changed the thresholds, but tailoring is an absolutely fundamental aspect of our regulatory system. banking and Everything we do will reflect what we believe is an appropriate fit between the different sizes and risks of the financial institutions we supervise and regulate.

What we were trying to achieve is part of that, I don't expect. to answer I know we are coming to the end of the hearing is that a holistic review of a financial services institution will reveal the fact that many of these financial institutions are very different depending onthe activities they carry out Most of the most involved and those types of holistic reviews may actually result in increased capital requirements for two banks that appear to be peers, but not for another because the inherent risk associated with their business approach makes that makes sense to your previous point through the law. the Dodd-Frank language and as amended actually requires that we take those things into consideration, so we certainly will, we will appreciate it, thank you, senator, senator, uh ornok is recognized by Georgia, thank you very much, Mr.

President, before we start with my questions, I know. This committee will soon consider a new candidate to serve on the Board of Governors of the Federal Reserve and, although historically this has not been the case, it seems to me that the board should reflect the diversity of our nation, that those things are connected to politics and representation. are connected and I hope that we will see sitting before this committee a candidate who brings us closer to our ideals of e pluribus unum among many um one and support for Senator Menéndez and others who have called for a diverse candidate, specifically the The fact that we have never had a Latino person on the Federal Reserve board I think it's a huge oversight and I hope we can move quickly in that direction that said my state of Georgia is in a housing crisis like much of the country.

The Federal Reserve Bank of Atlanta has declared that owning a home in Atlanta is unaffordable for the average buyer, but this is not just a problem for the city. Harris County, Georgia, with a population of less than 35,000 located on the Alabama border, is also classified as unaffordable in In the midst of this housing crisis, the Federal Reserve continues to raise interest rates, causing mortgages are much more expensive for families, especially for young families looking to buy a home. According to the National Association of Realtors, the proportion of first-time homebuyers is low. all-time low, while the average age of a buyer buyer is at an all-time high chair.

Powell, you've said there's been an imbalance in the housing market, but if you're a Georgia family, your parents are in their 30s. children and all you want is to be able to pay for your first house and place and build capital to one day pass that capital on to your children. What are the actions of the Federal Reserve like? Helping that family pay for a house. How come our mandate is to provide maximum employment? we use our tools to encourage maximum employment and price stability and we are actually using those tools now to restore price stability at a time of the highest inflation in 40 years.

I believe that the same people who have high mortgage costs if they have a floating rate mortgage are also experiencing high costs for all of life's basic needs and one of our most fundamental functions at the central bank is to maintain price stability, for so we have to prioritize that in what we do. Yes, I understand. than the tools and the Mandate, but my concern is that we can have a cure, uh, that's worse than the disease, it doesn't do families any good if we stabilize housing prices while mortgage rates continue to skyrocket, doesn't it? . I care why a house is unaffordable maybe the house is unaffordable maybe the mortgage is unaffordable unaffordable is unaffordable how does the Fed continue?

You can consider the total price the total price of home ownership, including the costs of mortgages and the enforcement of that mandate to maintain prices. stable, housing inflation is a very important component of several inflation indices and the way it is calculated is that economists look at rents and then, for people who own a house, they charge them a rent depending on the value of housing, so it actually does take into account and I would say that the um measures of uh new leases that are being signed and the prices of new homes show significant drops in inflation, not in price but in inflation. , and that will be reflected so that overall inflation exceeds The course of the next six months or a year will decrease if we see mortgage rates increase, yes or no, does this discourage people who can have a low interest mortgage rate to put your house on the market and then possibly pay? double the cost or mortgage on your new home certainly could and people who have a low mortgage a low rate fixed rate mortgage I guess a lot of them won't move yeah does raising the federal interest rate change the cost of Borrowing for a company hoping to develop new housing Yes, does it make it more expensive for suppliers to finance production expansion and meet supply needs?

Does it give companies less leeway to offer higher wages and attract skilled workers? In fact, yes, all of these actions have to be The Federal Reserve does not control the supply of housing, but its actions have a massive effect on the supply of housing and it seems to me that some of these supply effects will be felt for many years to come. beyond, when interest rate increases have slowed or rates have even decreased. It's down and I know it has a tough job and a tough situation, but I just hope the FED thinks more about their actions and how they affect housing supply even as they try to control housing demand.

Thank you, thank you sir. You're not Gus, last question, I think it's an interrogator, it's um Senator Cinema is a long way from Arizona, thank you, Mr. President and Chairman Powell, thank you for being here today to raise interest rates last month by 25 basis points. FOMC cited Russia's war against Ukraine as a key contributor to elevated global uncertainty, the war has serious implications for global energy and agricultural markets and, as you know, energy inflation in particular can appear in the form of higher prices of other goods and services, which is felt to be a substantial driver of inflation in general.

And in my opinion, you cannot fully understand the global economy without evaluating the range of possible outcomes in Ukraine, as we have also seen that the war created new problems in the supply chain overnight and caused abrupt changes pricing and select committees. How does the Fomc evaluate? the economic impact of the war and the range of potential outcomes to inform how monetary policy is set, so the principle, um, I guess there are two things to say, one is that the main way that the war has affected our economics is really through commodity prices. Grain prices and particularly energy prices, that's the main thing, I think really and they've both stabilized.

Global energy prices have stabilized and are at a higher level and food prices too to some extent, so the second thing. I would say it represents a significant risk, so the war in Ukraine, the outcome is uncertain, the events are uncertain and you have to think of it as a source of potential risk for the global economy and for our economy. We don't, and we look at alternative scenarios and things like that, we don't really do it from a geopolitical point of view, but we do, of course, model scenarios where commodity prices are higher and things that would look like what what could happen from Ukraine, thanks at home.

Arizona families are struggling to navigate this economy. Higher prices are making it harder to pay for groceries, gas, rent and airfare, but on the other hand, rising interest rates are capping investment and making it harder for homebuyers. for the first time. buying a home inflation has also slowed housing development in Arizona and as you know President housing is a major economic contributor in my state it is also clear that increased spending involves tradeoffs and that is why addressing inflation It has historically been so difficult. And yet, it is more important than ever that we get it under control.

There has been much debate about a soft landing in which we control inflation without negotiating a recession, versus a hard landing in which inflation falls but triggers a painful recession. "Send them," economists say these days. They don't see any landing right now, that growth is actually accelerating and that more aggressive actions will be needed to control inflation. If true, that would be problematic. What do you think about that evaluation? Well, as I mentioned before, I think if you look at the data that's been coming in since the beginning of this year we've seen stronger labor market conditions, higher inflation, higher consumer spending and we also saw that some of the readings of low inflation in the fourth quarter of last year were revised if all the ones that appear are taken.

All in all, they may be related to some extent to things like seasonal adjustments or a warm January, but either way they all point in the same direction and suggest that the possibility that we will ultimately have to raise rates more than expected Of course, we have two or three more very important data releases to analyze before the Fomc meeting. They're going to be very important in the assessment that we have of this relatively recent data, and we'll look at it closely and, and all of that will contribute to the decision that we haven't made, but it will inform the decision that we will make about what to do at the March meeting.

Well, thanks on February 23 that fueled the FDIC and OCC released another joint statement on Crypto Assets and the Liquidity Risks Posed by Banking Organizations it is clear that regulators see undue risk to banks in the current environment and are adopting a more conservative approach. Do you think these risks are inherent to cryptoassets and how do they behave in the face of some of the product risks? of the current regulatory and policy landscape for crypto assets in the US, so what we're seeing really in the last year, we've seen a remarkable set of events in the crypto space, we've seen a lot of companies collapse.

Massive fraud, we've seen all kinds of things. I think you know we have to be open to the idea that somewhere there is technology that can, uh, can be, the feature can be presented in a productive way. Innovation that improves people's lives, however, in the short term we see in crypto activity a lot of things that suggest that regulated financial institutions should be quite cautious and that is when doing things in the crypto space and that is what we have We have issued three or four statements to the banks along with the OCC and the FDIC that has the FED and they are essentially saying that you really have to be careful here, you have to be careful, it's the early days with cryptocurrencies, there is no proper regulation, we are learning a lot about the risks and they are many of the same risks that they run or run in other parts of the financial system but without adequate regulation thank you Senator Paul thank you thank you Senator Cinema we conclude the hearing The FED must ensure that workers and families are at the center of every decision it makes to strengthen our economy.

We've heard a lot today about the role that Wall Street plays in our economy as well, as you said, Mr. President, we know that. That higher capital requirements make banks safer and stronger, allow them to make investments in their workers, their communities and our economy, that's what they should be doing instead of spending billions on BuyBacks. I hope Jared Powell will work with you to strengthen our economy. For senators who wish to submit questions for the hearing record, these questions must be submitted within one week from today, Tuesday, March 14, to Chairman Powell. Please submit your answers to the questions for the record 45 days from the day you receive them.

I thank my colleagues for the very, very good attendance today only one member from each side was not here one for health reasons the other just because he is doing 12 different things so I appreciate all that and thank you for your testimony your public service Mr. President, thank you Mr. President, thank you