Transcripts For CNBC Squawk On The Street 20170712

Roll back begins with the fed. Chair janet yellen on the hill. Rate hikes, Balance Sheet, strength of economy. Speaking of yellen who might be the next fed chair . Carey co00s name getting another boost. And apple bringing down targets for iphone sales. Will it be a delayed launch for the 8. Futures up modestly after sell off sparked by donald trump jr. s release of email exchange. Yellen will testify before the house. She says gradual rate hikes will be needed to sustain economic expansion. Regarding Balance Sheet see says the committee anticipates reducing quantity to a level below recent levels. What got peoples attention is the idea that rates may not have to get as high as they were in prior cycles. I think what that is saying to people is we are going to take them up but you are not going to get inverted yield curve. There have been a lot of recession talk of late which i dont get. There is no recession on the rise from the companies. This does take that off the table. What it does put on the table. We have Bank Earnings on friday. If you take off two rate hike scenario and you see stocks trade down. This is not what those stocks want. I went back to when we had a twoyear high earlier this year. Causes the market to take a serious dip. Then we went up. Im not buying the theory that we should buy stocks when rates go down anymore. There are too many financials that need rates higher. This market cannot go up on amazon and boeing alone. Boeing, why do you throw boeing in there . Incredible. Up more than 30 . Its been a fantastic. The aircraft aero space market has been so on fire and that has become our industrial leader. People dont talk about it enough. I actually have not noted what a move boeing has had. Best component of the year. That is a giant u. S. Industry that produces a huge amount of jobs. You really want for banks to lead at the expense of everything. I want this 91, 92. I want the banks to have enough money to lend and return capital. I need jp morgan at 100. Really need to see that market leader. Huge number of people there. So whatever where are they out there. Im not with them. They are out there in the mountains. You want a wells, jp morgan city rally because that produces much more bountiful relth. I find a zero sum with technology. Buy facebook. It means you have to sell what is it excuse me which. Snap. We are going to get to snap. Trust me. Below 16 this morning. This is not enough. You get under the desk because that would be a good example. Put on a hard hat. You have to put on a hazmat suit. We will talk about those individual names. Gary co hen set to be top to replace janet yellen. Here is what he said to us when asked. I have a great job right now serving the president has been a dream come true. I come into work every day and very excited to be in the white house. Here is politico this morning. It is his job to decide if he wants it. He will probably want it by the time next february rolls around. The odds of trump tapping yellen again are close to zero. He would be worth maybe five percent in the s p. Im saying i would give him, he is worth i would spot them five. He is not an academic. Maybe consider the opposite of an academic. He did not spend a lot of time writing long memos. He is a practical guy. I think he is not a theoretical guy. I think he is a guy who understands the labor force better than any people i heard describe it. I dont know if you heard him talk about the economy and why wages arent going up he has a certain quality about him that makes me feel far more optimistic and far less gobly gookish. I know yellen is going to talk now for two days. She is ambean. You would rather hear him speak. He is a five hour energy drink. He would definitely be an interesting choice. We have been talking about this since day one. This notion of the economist saying we are going to appoint a nonlawyer to the supreme court. The guy has had his whole career in finance. I would love to have a fed sheet that understood finance in reality. The idea of an academic i said what would happen if you had someone like i remember how good rueuben was as treasury secretary. I think gary cohn. Do i know him from a previous life yes. He would be fabulous. Some of that previous life was at a firm that was concocting securities that were not, shall we say, of the greatest quality, some said betting against clients. Back to hearings in front of senator levin. Not fine moments. You can say he understood the root of the crisis. Donald jr. Would say there is a way to do it. Elizabeth warren would get on him. You would have goldman alums at treasury and the fed not to mention some playing the would he get the votes. Former democratic, who knows. Giant squid. I always hated that analysis. He admitted they did some things. Wasnt in denial. A long time ago now. I think this notion i think gary cohn is well respected on wall street. I think if you had an academic lets give someone not an academic a try. Wouldnt you love a guy who knows how to sell bonds . Got news regarding apple this morning. It expects a delayed launch for the iphone 8 cutting shipment estimates for september quarters. There is a quote sense of panic in the air at apple and that the company has been working to Fix Software Problems in the new iphone. Who knows who the source is. Tim cook is a real panicker. He is the guy you go to with two seconds left on the clock and no timeouts and at the 30. He has just become a football fan because he went to the super bowl. The idea is that this guy panicking, he is the coolest man in the room. Do they want the bugs worked out . Of course, they do. The easy good charge which we all really want. This is not a company that says if we dont get it out x day then we miss y quarter. Tim cook is not playing the analyst game. He is not buying the supercycle. Its not the way he thinks cht that is one reason why the stock has been the greatest of all time. What you are not saying is that it may not under perform in the near term or that there might be impact on asps. Someone will sell it. These are radekally different new parts of the phone. He wants to get them right. They dont put out product until they think it is right. Panic. Panic. Come on, guys. Its like i saw an article about facebook. Facebook ads are lagging. Facebook lagging these are faux dramas. We go through this before every single new launch with apple. Every time. Thank you. We are just getting the beginning. Im sure there will be more data points that people site. It is written several times. Its not panic. I will give you where they should be panicking, snap. Not apple. Come on. This is a company that is sitting there laughing at that article. They have no sense of panic. They want to get the product right. Thats what they do. They are a Consumer Product company that is the best in the world. I want to get a visit of the new headquarters. You would love it. Do we know anybody who has seen it firsthand . They are getting closer. To me when i saw it i thought it was the eighth wonder of the world. Im stuck in that business silo. I have seen the pyramids. How are they . Nasty. Thats a bad trip. Some guy shook me down for a lot of money to take it so i would hold my hand up. Another guy said you have to pay me too. The whole thing was a bad experience. They should be panicking at below 16. I told david i felt bad for these billionaires who have all the votes in the north korean stock structure. Today we had commentary literally people saying its going to get oversold after the 711 million shares come off of lockup. Maybe wait for the 700 million shares to come off lockup. That could be a prime opportunity. We saw twitter suffer that same fate. New cfo. Just like gary cohn. Stock moving up a lot on a lot of different chatter. You are stuck with the facts. It always bores me that shoot down things that are untrue. If you play the game it can get to 20. I let other people play that game. Twitter might see 19. He is from goldman. Better stock. When we come back as we said snap is trying to bounce back after falling below the ipo price. What can the Company Learn nasdaq up three days in a row at ree highest levels of july. Mo squawk on the street from post nine in a minute. If you could book a flight, then add a hotel, or car, or activity in one place and save, where would you go . Expedia gives you the world in your hand, so you can see more of it. Expedia. The future isnt silver suits anits right now. S, think about it. We can push buttons and make cars appear out of thin air. Find love anywhere. Hes cute. And buy things from, well, everywhere. How . Because our phones have evolved. So isnt it time our networks did too . Introducing americas largest, most reliable 4g lte combined with the most wifi hotspots. Its a new kind of network. Xfinity mobile. Shares of snap trying to bounce back this morning after falling. Blue apron around 7 well below ipo price. We looked back at how long it took facebook to recover. 14 months. They had something the other companies dont have, though. Fundamentals. I love our executive producer. I think he knows that the phillies have had three great days and won and two days they didnt play. That would be what we need for the other. That is the formula. They feel like the phillies to me. They dont feel like say houston. Im not kidding. The reason why facebook pivoted to mobile was a brilliant move. Snap has to pivot to something. I asked you yesterday what are they going to pivot to. We dont really know. I dont know, either. Yeah. Rice crispies . The note you guys covered yesterday, right massive competition from insta. You have a product that doesnt give measurement the way some ad buyers want. I used to write obituaries and had a lot of common things. It was just a devastating piece. To me that read like sell, sell, sell especially ahead of the we have to see what they need to do. I will give them a little lesson because we are pals. You can tell. I will snap to them. They have to say we are not we have canvassed all 700 million shares and no one is selling. There is going to be insider buying. They have to do the optics. They have these great short form videos and unveil them. You tell us that these people so and so that espn is advertising. Give me proctor gamble. All 700 million shares will not be sold. Thats how they do it. They have that structure. Would you rather buy snap or apron . If the gun at my head i say take the gun away from my head. That is not an answer. Didnt amazon give away blue aprons the last 15 minutes of prime . I saw 2 price target. It reminds me of like zynga. So too early. Blue apron is down how much . Five other guys trying to deliver to me. The portions are small is what someone told me yesterday. Speaking of amazon a few hours removed from the end of prime dame. The company says they are on track for the biggest sales day in history. We will get metrics. They will be happy to tell us how enormous it was. They sold the little guy. You think they will tell how many prime members there are it is amazon. They dont have to tell us anything. Its like china town. No answers. Dont have to. What does amazon do . Goes higher. He starts off by saying we have been wrong about the stock. Thats the kind of guy. Thats terrific. Those guys have had a hold on. It was time. Never too late. My dog you have been on fire with the dog photos this morning. How about chevron hoping for 10 30 inventories. Are nvidia says going to 200. I will give him ligaments. Dogs really like that. Doesnt smell great. He deserves it. He is going to 200. Artificial intelligence. People dont realize. The Engineering School commencement speech about Artificial Intelligence. We really will not be doing our job according to the speaker. It is just machines. Machines. We count down to the opening bell. More squawk on the street continues in a moment. Perhaps new theme song for gary cohn. We had him show up at one of our events for spring fling. We always got the third tier. I got stevie wonder. Really . Unbelievable. Pay pal. They said visa could kill it. No. They said mastercard can kill it. They said wells would kill it. They said jp morgan would kill it and google would kill it. All of those are partners with apple being the latest. The master of the deal. That is someone else. He is fantastic. He is the ceo. Now it is on apple and it is like you know apples apple pay. Pay pal turned out to be switzerland. Its neutral and it is brilliant and going higher. Going higher even from here. Many analysts were bears on it. A lot capitulated here and here. They didnt understand it because they didnt have kids. Venmo, pay pal. My kids dont know what mastercard and visa. American express, they leave home without the constant. A lot of people are venmow now. It is incredible. I said it was fine. Not something to worry about. I have to do all of dans pr work because he refuses to do any himself. I am telling you he is an unsung hero of this business which is payments process. I hear music which may mean we have to go. I would like to say we are going to sell bonds until quarter to 3 00. And we will have a lot more g t is moving this morning when weethe opening bell a few minutes from now. Your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Youre watching cnbcs squawk on the street live from the Financial Capital in the world. The opening bell in about one minute on this yellen day on the hill in front of the house. In front of the senate tomorrow. Repeated the view that some of the weakness in inflation is due to a few unusual reductions in certain categories of price in things like we can assume wireless services. These are actually permanent secular changes. We have tremendous competition. We have a lot of cord cutting. By the way, there is a tremendous decline in a lot of utility bills. But what i think people are missing is the shift economy that people who cannot take full time jobs anymore and dont make a lot of money. Lets understand the rate structure the country has changed. Opening bell on the s p at the bottom of your screen. Safety, income and growth focus on acquiring, managing and capitalizing. It is Diagnostics Company precipio doing the honors. Ten year back to just below 2. 31. Thats how close we are in the cards. Caterpillar supposed to be hitting a new high. Always been the opposite. Caterpillar is worth pointing out. Business is good. The paradigm of caterpillar going down when Interest Rates are going down is not happening. A lot of paradigms being broken. A lot of relationships being broken. Although your financials which of course you have been saying at the beginning of the broadcast you want to become the leaders because you feel like that would be a very healthy thing if i can paraphrase. You need bank of america. I dont want to overstate it. They are down a little bit. Bank of america has had incredible krebcredible asset b, tremendous. If you can get short term rates to go up, that would be the stock to break out. Not goldman or citi which had obviously really good. Jp morgan just say blah r, blah blah. Jp morgan in the red. Amazon reclaiming 1,000 for the first time this month. That was a given i think today may be a day when the analyst, i saw someone say come out and dont forget j. C. Penney. How high it can go and maybe its not just cheering. 40 goes to 53 cents. I question whether you want to buy j. C. Penney here. I know people will say it is time to start looking at the left for dead retailers now that this incredible extravaganza walmart is certainly far from being left for dead. Let me say that. It is up this morning. Do you buy that, as well yes. You do . Yes. Walmart is fine. There is nothing wrong with walmart. I think they will have a good quarter. I think that all of this price competition in food walmart is still a leader. I think betting against walmart when they just begun the process is a mistake. I wouldnt bet against walmart and wouldnt bet against netflix. Netflix being powered by the michael pacter. He has been so wrong for so long. He has been wrong since 2014. When the stock was lower. Now he has been very wrong. A man of his convictions for a long time. Using wrong analysis, discounted cash flow. He is not a house of cards fan. Citing three series cancelled. Thats not how you judge this stock. The stock is not judged like that for heavens sake. Ubs suggesting healthy subgrowth in q 2. They are describing it as very strong q 2 momentum. He didnt get that. He put out a sale at 63. 49. Its now 157. It is amazing what this company spends on content. I think it is 6 billion in amortized spending. Just to put in perspective, fox and cbs around 4 billion. Hbo is about 2. 5 billion. Amazon is number two. They will spend at least 5 billion. Speaking of amazon, they are giving us their press release on prime and it looks like they are saying the event grew by more than 60 compared to the same 30 hours last year although i believe last year was 24 hours. They added another six. And they are comparing 30 over those 30. And the most popular purchase was the echo dot. You couldnt go on there without seeing that every minute. That and that coleman stove. Coleman stove is an old brand. Amazon should go higher. That is revelatory. Probably sell on the news at a certain point not unlike singles day which was short term peak for alibaba. And then there are all sorts of weird things that sold the most. Statisticians put baseball statisticians to shame. Coming from countries all around the world. China, india, canada. Prime members purchased seven times more amazon echo devices. I have to admit it is substantially better than expected. Not just better than expected. It is substantially. Prime members purchase seven times more globally than prime day 2016. That is not unimportant because that install base that they will be able to achieve through the echo and the constant data that it is taking in as it listens to everything going on. Artificial intelligence there. Only helps power it and improve it over time. The more you get out of there the better it is going to be in terms of responding. There is that question what does your echo really know. That brings to mine the upgrade that we got earlier. They take their target to 177. They go to a buy. I love the line, acknowledging we are not early. That is better than just acknowledging you are wrong. The Artificial Intelligence component, just keep that note. People have to understand you dont need people which therefore it is cheaper and they can predict much better than we can. They are better. They dont make a lot of mistakes. We have nvidia behind. If you go it is not code writing. It is a particular software that they have. He has really used chips to a great advantage. That stock goes higher. Caterpillar breaking out. What a wacko market. About 30, 40 poins from a dow record. That record would be 215,5621,5 it was supposed to stop if we didnt get tax reform. Prospects for which are certainly dim for this year. Well see what happens in 2018. Guys, twitter is up a lot this morning, worth mentioning. Up over 3 appointment of a new cfo. Thats not well off. We are talking that stock was 14 not that long ago. Square is double. Square is a perfect company. Somebody will buy that. Somebody is going to buy square should. Only 9 billion. Great payments processor. He should step aside. Square is up and twitter. Im kind of in a break. He is what i call easy compares. You know what those easy compares are. Snap where they have to stay 711 million. They are not selling. We have short videos and colgate loves them and coke loves them. They have to do that now. I dont this can they are going to listen to you. Sorry. Of course they are not going to listen to me. They are billionaires who are cool and have great social lives and probably dont have to work until 3 00 a. M. And have to get up because i have commencement by particular executive. They just like having my life is a sham. You like to work. Lets just say that. You know what you want . Worked hard. Missed the rest of life. Worked hard. Im having a great day. Married to a supermodel. Im married to a superfabulous woman. Look at demographics. Aging demographics in the u. S. Effecting long term demand. When i went to my show room with one of the great guys in town. I brought down average age of customers. Its just kind of a demo. Motorcycle clubs are older. Great brand sfwrmpt which this will take you back to october of last year. It has been pointed out that channel checks havent been bullish for a while. I dont know what they can come up with. We are seeing a lot of breakouts. This is a day where you have oil skpup tech stocks really breaking out today. Ahead of earnings season. Got that up 0. 8 right now. That is a pretty big move. Up almost 16 for the year. Isnt that something . Who would have thought that tech would be its been bountiful. Verizon is also up. There is your two dow laggards. Now officially talking about not made clear what we all knew apparently asked in sun valley and simply said no. No. No. And i think we knew that that was no. It was pointed somewhere, rumor or whatever. Up two days in a row tells you it is an oil stock. Are you attributing todays move to yellen alone to the idea we get a Health Care Vote next week recess being delayed two weeks i think that started moving mark up against donald jr. Who did not watch this years house of cards. You know petrov is a man you dont want to deal with who happens to be putin. Good season. You get yellen out of the way. We have a little window of opportunities season. A lot of positive notes about big cap stocks. You have amazon finally over. A lot of talk about mergers again in the food business. You cant stop the merger. Well see how the year progresses. We have the frenchs mustard auction moving along. It is really yellow. Very yellow. Thats a significant sale process actually. Its going to be 3. 5 billion potentially. For frenchs mustard . People dont even use it. I happen to love frenchs mustard. It will change hands and it will be that much money how can the deal for its a huge multiple. This much shelf space. I can spend time on it because there is nothing else going on. Hot dogs. Hot dogs. It is just people cant try to put grey poupon. Many other things. I have very little time for watching tv. That is why he didnt watch netflix. That is why they are in the jam. Dow is up 128. Not far from the record. Lets get to bob pisani. Not far from record on s p. Great start. You can thank janet yellen and oil. Those are factors that are moving things. Look at sectors. Tech is moving nicely. Facebook is at a new high. A few other ones. Yellen talked about labor market. Transitory factors. She used that word again playing into what got everybody going is this particular line in the testimony because neutral rate is currently quite low. The federal funds rate would not have to rise that much further to get to a neutral policy stance. Neutral rate is the rate at which economy is at equilibrium. The plain english reading is we are not going to have to raise rates much more. How much more . We dont know. Maybe 100 basis points. We are not going to need to raise rates much more. That is really what got the market going. It speaks to a very dovish you throw in the fact that we had sort of casting doubt about a december rate hike. Everyone wants to reduce the Balance Sheet. That other rate hike seems to be in the balance right now. She gave additional credence to that particular idea. Bond yields went from 235 to 230. Twoyear went down, as well. Banks are a little bit weaker but not much. You take a look at regional banks like zion. Wells fargo, sun trust. Interest rate sensitive stocks immediately moved up. These have had problems. Consumer staples have been down since june as rates started to move to the upside. Which are also Interest Rate sensitive also moving up, as well. The other factor helping is oil up about two percent. We also saw saudi arabia cutting its crude shipments in august. That is helping. Not that this is a big move for any of these companies. Anadarko. Trans ocean probably 59 halliburton was 59. I dont know what trans ocean was. It was probably close to 15, 16. It is half of that now. Apache was a lot higher. These companies are down from where they were in the beginning of january. Its a little early for earnings season. We are not really there yet. Organic sales up almost 10 . This Company Makes fasteners, Construction Equipment very big in the construction industry. They had a very good number. The problem has been a tough pricing environment. This speaks to the underlying strength of the u. S. Construction industry overall. Europe is up. Germany is sitting at highs for the month. Nice move everything up 1 to 2 . Over in Europe Burberry surprised. Autos are up. The banks are up like bnp paribas. Overall good session in europe, as well. 2,453 as i recall was the old high on s p 500. That is 12 points away. As carl mentioned we are just shy of new highs Dow Jones Industrial average. Thank you very much. Bob pisani. Yields at some pretty critical levels. Lets get to rick santelli. Not only are yields at critical levels they turned at critical levels. Pretty darn big move. Look at one week you can see that it broke the range pattern that it started to establish. But here is the money ball chart. Many traders on this floor had it right. We did an exchange on it a week ago. 2. 41 was an area that traders were paying attention to for the resistance. It was high in may and significant high given the order of how we had big moves really since the election and all the extremes. You want to Pay Attention to that. The new area to Pay Attention to, some things never change. 2. 27. You want to pay close attention to thatthat. Pay close attention to the distance and yield separation because if there is ever a recalibration of the relative value trade that would be significant. Everybody is asking the same question. Was janet yellen dovish . Why was she dovish many blogs gave us clues. Playing with the rate has a different take in the global hierarchy of how the puzzle pieces are put together not the least of what might be emerging markets and effecting volatility in foreign exchange. The model has to be if you look at a one year chart of dollar index on top of with the notion that janet yellen and people are thinking if we tighten by reducing Balance Sheet more than raising rates it will be less disruptive to the dollar. Flat curves usually are associated with the dollar not getting volatile and strong. That chart somewhat bears it out. If youopethen chart to five years part of the chart i added seems to be inversely correlated. Things have changed before, during and after the crisis. Maybe because policy was so large and had such a big effect at masking true signals in the market. Will the strategy work who knows . It will not work in trading unless you understand what they are trying to do. Whether it works or not is where the money is. Back to you. Thank you very much, rick. Wti near highest levels since july 6. Good morning. Thats right. Crude prices are bouncing more than two percent. Session high was 46. 14. Fluencing the momentum inventories deck, the last few weeks these numbers have been important. The api setting us up with more than an 8 millionbarrel drawdown certainly a bullish factor here. But inside that report also look at u. S. Production total Petroleum Stocks and import sclsh export numbers. Later on in the session sometimes investors will digest these and influence prices saudi confirmed up based on what was selfreporting if it werent an inventory day, that might be influencing us to the downside theyre the linchpin to the opec Production Cut theyre boosting, which is not a good sign. Also libya and iraq. Back to you. Two weeks ago it was said another financial crisis was not likely in our lifetime, but Christine Lagarde begs to differ. I wouldnt exclude that there may one day be another crisis. Where it will come from, what form it takes, how international and broadbased it will be is to be seen. And typically the crisis never comes from where we expect it. So our duty and the message we give to the finance ministers, to the policy makers is be prepared make sure that your Financial Sector is under good supervision, that its well regulated, that the institutions are rock solid, and anticipate at home with enough buffers so that you can resist the potential crisis. Theres a good chance shell be asked about yellen will be asked about that as we see, the dow hit a record high. Yeah. The stocks that are moving are the ones that were held back, home depot being the primary i think people didnt want to buy retail until after the amazon primeday. Theyre going back in terms of their actual business, there was nothing i saw and i perused amazon primeday constantly that would hurt home depot. They had a great quarter my sources indicate theyre having a great quarter right now. My sources are pretty good. Were going to find out more in a few days, thats for sure dow is up 150, s p, 117. Also ahead the fed chair on the hill live coverage begins in just a few moments. Trading. Once this flash business from toshiba, the hobbled toshiba last night they got a win in San Francisco allowing a temporary restraining order so they could get access to some data, records from toshiba i have to tell you, this is going to be chilling for anybody else theyre trying to get it up. The fact that they got a temporary restraining order, theyre very hard to get people dont understand, theyre very, very hard to get others are going to say, whoa, i dont want to be a priority. Remember my reporting was about to get on a plane and do the deal, and that was when they brought that lawsuit they said, forget it its too strong. Theyre going to have to drop out. Any good lawyer going to say, hey, listen, we cant bid because Western Digital has this Court Strategy that will keep us out. I believe others will droep out. Its going to be very good. Whats on mad tonight one of my favorite companies, hernon chair, i love it. I usually sit at it. But i love the standing desk. Very nice. I just long those guys. Thanks. We got a lot done. When we come back, theres more to come. The fed chair on the hill followed by q a lawmakers. Best gain since april 25th [pony neighing] what . Hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. Or a little internet machine . [ phone ringing ] hi mom. It makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. [ laughing ] so all you pay for is data. See how much you can save. Choose by the gig or unlimited. Call or go to xfinitymobile. Com introducing Xfinity Mobile. A new kind of network designed to save you money. Top of the hour. Fed chair janet yellen getting ready to present the monetary report to congress well take yo live when the testimony begins you can see shes taking her seat now the market having the best day best gain for the dow since april. Best day for the s p since late june, and best day for the nasdaq since friday. Were going to watch all that as yields come in a little bit. Lets get straight to our elon mueller. Good morning. Good morning, carl. They say the fed sheet will start shrinking sometime thissee but she doesnt say exactly when theyll trike to sneak in another rate hike as well. According to the testimony, she says the ballot sheet will be closer in the long run than it is now but it h still likely be larger than it was before the financial crisis however, she emphasized the ballot sheet is not aing quote, active tool of Monetary Policy, that rule is still being played by the federal funds rate. She also weighed in on the great inflation debate she said the downrate isdue to quote, a few unusual reductions in certain categories of prices. Recently she identified wireless phones and drugs as a few of the culprits she did say the fed is carefully monitoring the situation, saying the fed is going to be looking at that data inflation going forward. Now, as far as the broader economy, that assessment has not changed much she still says the labor market is um proving. Economic growth is improving at a moderate pace and Consumer Spending are both shaking up, so those are both good signs. However, she points to a few places of uncertainty in economy. Inflation is one and fiscal policy is another area she highlights she also said there could be weak spots in the Global Economy that could have ramifications for the u. S. Economy as well they are watching that as always, she said, it all depends whether the feds forecast coming true and theyre not set on a monetary course back to you. Thank you you see the Committee Chair bringing the meeting to order. Lets bring in Steve Liesman whos had time to chew on that as well as the reaction. Steve . Thats the notion we dont have far to go when it comes to Interest Rates i think it calls into question whether they would pause in september and reduce the Balance Sheet and perhaps come back in december i see the possibility of the september rate hike down around 4 which is one of the lowest ive seen following the contract over the last several months it had been about 50 its about once every five years i pick a fight with david faber. Id point out, david, it was the academics who laid the groundwork for quantitative easing operating at zero bound well before there was any threat of it and it was the academics who identified it in the midst of the crisis. Im not saying gary cohen could not run it but many have acquitted themselves quite well. Actually, steve, i was not criticizing them earlier i was making it a distinction. Jim had made it more substantially between the academics and what mr. Cohen would represent if, in fact, he became the fed chair. My apologies. I was listening on the radio my apologieapologies. The question still out there how would a guy on wall street have operated differently . At one point he may be thing about this took them a little bit of time to begin acting, something bernanke eventually acknowledged you remember jims famous they know nothing, they know nothing, and it took a while, and they indeed took into gear. What was your take on the political story regarding cohen, that its virtually an uncertainty . I think its interesting. There were problems in the white house. There was the finding of people, getting them approved, and i think you have a person who has already been approve, a person who has been inside the white house, which is very significant. If you look at the past several fed chair, theyre in the white house for a period of time its kind of a safe time the trouble comes when you have gary cohen losing him could be something they might think twice about as well. Bringing the fire today, steve. Hopefully we dont have to wait 15 more years before you pick a fight with david. Any time, baby. We agree. I think they generally agree they acquitted themselves. Whether they might have been out of this sooner is another interesting question, that maybe a wall street guy might have done that. Who knows if well have that discussion later on. Thank you. Joining us as well art cashin is here at post 9 to watch yellen and the market data. How much is her . About 90 earlier you got a boost from oil which the api data inventory last night showed a drop in inventory. That got us up to 46,000 were right at the edge of real resistance here. Were at the top so that looks like it was getting ready to break out then at 8 30 if you do it minute by minute, youll see a strike when her text of her testimony was released i think with all due respect to steve, i think that markets read it as confirming lyle bren earth and youll hold off until december and then even then youre not sure. Last time i looked, september was down 20 , 25 . Now, the economys okay. Theyre not going to move you can see the financials are weak because youre not getting the higher Interest Rates the market could make money off. The idea was, maybe theyre going to look at the inflation target seems like today when theyre talking about the Balance Sheet reduction, market seems to think theres a wait and see so theyre not going to match it with fed rate hikes through Balance Sheet experiment as well, right . No. I think theres a con senn shus building on the Balance Sheet moving down. But thats nothing i imam a little troubled i dont think we know that yet. Now youre echoing what jamie dimon said earlier in week. Im there pretty good company to be in. Yeah. So we dont know yet whats going to happen. But maybe the takeaway is because we dont know yet, theyre probably going to be pretty resistant on, you know, having this idea of dogmatic rate hikes through that period do it, see if we have an um packet or n impact and go after it. There was the tell per tantrum. While that was a reaction rather than a mechanism problem, i think theyll do some small step and stand back to see if theres any reaction in the market. How much are you aware of the asset crisis would that do damage or not . I think it i dont think it would do substantial damage, but it might shake the market a little bit she has said things about sectors, for example a year or more ago. Yeah. I think shes very aware the feds been criticized for causing a Price Inflation aiding the wealthy, if you would and expanding these theoretical inequality that everybody sees over the last couple of years some of thats another area that the market will be nervous about. And next time, david, that you argue with liesman, point out we dont think its got to be a wall street tie. Its just got to be somebody with practical experience, better to have somebody with banking experience, real experience id like to go back to one who served for a long time as a fed chair but certainly not a phd. When this comes to pass, theyll look at in terms of experience for a number of years versus an academic you can make an argument whether there would have been a recogniti recognition, i think, of seriousness earlier by somebody who had real Market Experience well never know. Thats my strong belief we had members of fed, Richard Fisher among them, talking about people with insight. Art cashin. Lets bring in paul christopher. Gentlemen, good to have you back good morning. Thank you. Ethan, a viewer wrote in this morning and said yellen couldnt be hawkish if she tried. Could that sum it up morning. We had just gotten the third week core inflation meantime in a row. She sounded like she had about seen the data. And sounded positive today i thought big thing was theyll need some real data. Paul, are you on board with that yes there is some question about the inflation camp that should give the fed all the cover they need to continue to make rates we think december is the more likely time. Ethan, what do you think about the intraplay of the Balance Sheetd reduction and the rate hikes obviously theyre saying, we dont want you to think the balance is taking the place of rate hikes the market seems to feel you can call it normalization if youre draining off the Balance Sheet and maybe it gives you room in terms of future rate hikes how does that play out in the market i think the fed is hoping its a big event, that theyll totally ignore the Balance Sheet shrinkage. But its hard to believe there wont be something along the road right now the market is behaving as though they dont expect the market to follow through but as the fed shows, the path is going to occur and there are key moments where they have to up the amount of selling i think at that point were going to get some bumpiness in market i think theyre hoping for this Immaculate Conception here, but i dont think its going to be that easy. Were told were just a few moments from yellen beginning the reading of her testimony thats Committee Chair from texas. Ethan, paul, thank you, guys lets take you down to the hill and the House Financial Services committee. Five minutes to give an oral presentation of your testimony thank you for being here. Thank you chairman hinser ling, waterss and other members of the meeting, im pleased to submit the report o the congress. My remarks today i will briefly discuss the current Economic Situation and outlook before turning to Monetary Policy since my appearance before this committee in february, the labor market has continued to strengthen job gains have averaged 180,000 per month. So far this year, down only slightly from the average in 2016 and still well above the pace we estimate would be sufficient on average to provide jobs for new entrants to the labor force. Indeed the Unemployment Rate has fallen about one percentage point sense the start of the year at and 5. 4 in june is 5. 50 Percentage Points and modestly below the median from the assessment of its normal run level. Another indication of improving conditions in the jobs market given the demographically driven downward trend in this series. A broader measure of labor market slack that includes workers only attached to the labor force in those working parttime who would prefer fulltime work has fallen this year not nearly as low as it was before the recession its also encouraging that the jobless rates have continues to decline for most major demographic groups including for africanamericans and hispanics. However, as before the recession, Unemployment Rates for these minority groups remain higher than the nation overall meanwhile the economy appears to have grown at a moderate pace on average so far this year although the inflations Gross Domestic Product is to have increased at only 1. 5 in the first quarter, more indicators suggest growth rebounded in the Second Quarter in particular growth in Household Spending which was weak earlier in year has picked up in recent months and continues to be supported by job gains, rising Household Wealth and Consumer Sentiment in addition fixed investment has been turned up this year after being soft last year in the strengthening growth abroad its provided important support for u. S. Manufacturing production and exports the Housing Market has continued to gradually recover aided by the ongoing improvement in the labor market and Mortgage Rates that although up somewhat from a year ago remain at relatively low levels with regard to inflation, overall Consumer Prices as measured by the price index for personal consumption expenditures increased 1. 4 over the 12 months ending in may, up 1 from a year ago but a little lower than earlier in the year core inflation which influences energy and food prices was also down in recent months at 1. 4 in may, a couple of tenths below an earlier reading. It appears those are partly the roult of a few unusual reductions in certain category os prices. They will hold 12month inflation down all till they drop out of the calculation. Nevertheless with it continues to run below the committees 2 em objective, it plans to carefully monitor actual and expected progress toward our symmetric inflation goal looking ahead my colleagues on the fomc and i expect with the further gradual adjustments, economy will continue to expand at a moderate pace over the next couple of years with the job market increasing. Monetary policy remains accommodative. Ongoing job gains should continue to support growth of incomes and therefore increase spejd. It should support gains in exports coupled with the prospect of continued gains in domestic and foreign spending and the ongoing recoverry and drilling activity to continue to support this investment. These developments should increase resource utilization somewhat further, thereby, monitoring stronger pace of wage and price increases. Of course, uncertainty also affects the Economic Outlook theres a concern when and how much it will respond hospital and fiscal and other Government Policies here in the United States represent another source of uncertainty. In adetermination although the prospects for the Global Economy are to have improved somewhat this year, a number of our trading partners continue to confront economic challenges at present i see roughly equal lauds that the u. S. Economys performance will be stronger or less strong than we currently project. I h now turn to Monetary Policy. The fomc seeks to foster maximum employment and price stand arequired by lay over first half of 2017 they planned to reduce the amount spiskly the fomc raised the rate by. 25 of its target bringing the far get range to 1. 25 in doing so the committee recognized the considerable prong they have made and continued to make. The committee continues to expect that it h warrant gradual increases in the federal fun rates at a time to achieve and mainta maintained that is the level of the federal funds rate that is neither expansionary nor contractionary, and keeps the economy operating on an even keel. Because its quite low by historical standards, the fed rate would not have to rietz much but because we also anticipate the factors currently holding it down h diminish over time. It will be to sustain the economic expansion even so the committee refuses to anticipate that the longer run lunn is likely to be bea low levels Monetary Policy is not on a preset course. Fomc par it is pants the federal funds rate in response to their Economic Outlook and judgment of the associated risk by incoming data in this regard as we noted last moent. Its declined recently the committee will be monitoring inflation developments closely in the months ahead. The fomc routinely consulted it with variables associated with our mandated objectives. However, six prescriptions cannot be requireded many a mechanical way as well as the implications the many consideration these rules dot no take the dwoen. I would like to know their role in the federal reseens policy that occurs to our policy report. Let me turn to the Balance Sheet. Last month they authored the principles and plans by providing additional die taying we will follow the committee intended to gradually reduce the security holdi holdings specifically such payments will be reinvested only to the extent that they receive gradually rising caps. Initially these caps will be set at relativelily level ts the committee kurply effects provoided it evolves i it will likely implement the program this ian once we reduce investments, our Security Holdings will go down it will depend on a number of unknown as yet factors including the future demand for reserves and the fuel fehrs into accident most ee finishly and recent they are to reduce them o a van you thats lower han they wane. Finally, the changing target range for federal funds rate is a primary means of adjusting the stance of Monetary Policy. In other words we do not plan to use Balance Sheet in monetary times. However, the committee would be prepared to resume reinvestments if the Economic Outlook were to warrant a sizeable reduction in the federal funds rate more generally the kmiet kmit tee would be prepared to use its full range of tools including the size including altering the size and camomposition of i Balance Sheet if future Economic Conditions were to warrant an oi iowa accommodating policy. Thank you. Id be pleased to take your questions. Now, the chair now recognizes himself for five minutes for questions. Chair yellen, the first chair i have is for the geoinflation target that was adopted kwleers ago. I must admit that a back of the envelope math will double. Im trying to figure that out with price ability but that isnt my question. At a recent press conference some comments you made were that you were open to an increase in the inflation target are you pursuing an increase in the inflation target is that a matter for the fomc to increase the inflation target . It is not were very focused trying to achieve our 2 inflation target. It is not a subject for discussion. Thank you i will take no for an answer. Our main concerns about other members about a blur in lines, monetary and fiscal policy we feel ultimately this could impede upon the feds independence there was a constructive distinction between Monetary Policy he said, quote, Monetary Policy does not involve taking risk onto the federal policies. The power to borrow creditably against future taxes, between private bars and lendering to lend to did careted fed bars spend policy means acquiring nontreasury securities with proceeds with treasuries from the fed portfolio. I guess my question is, chair yellen, do you agree with this distinction, and if you dont, do you feel credit policy is commence rate with your congressional mandate . Well, the fomc and principles for normalization of Monetary Policy has clearly indicated that it intended to return over time to a primarily only 411 and thats in order not to influence the allegation of credit in themy economy. That said our Mortgage Backed skurltds took place. When the market was not working we and it believe it was appropriate. But we have endorsed the principal to return it to a fed chair principle. Do you or do you not believe its a useful distinction . I think it is a useful distinction. Its my understanding theion union can except it. That your understanding as well . Im not sure about student debt were able to purchase treasury in agencies securities. Has the fm cl f discussed the possibility f o of person debt or business debt not to the best of my knowledge. Final question. Am i led to believe your Balance Sheet reduction will allow you to return the fed funds rate as primary policy instrement instead of interest on reserves . Is that my understanding of your testimony . Were relight on from fed reserves as a key tool for setting the federal fund rate. That is the key industry what i said is we intend to rely on adjustments through interests on reserves to our fed funds rate target. My time is rapidly winding down perhaps not in a question but a question i was very heartened to see in your report a number of policy rules. I would say, though, in some respects your report says how the fomc differed from these policy wiles it did not say way i would simply even courage you to perhaps go further why the actual fomc policy differed from the policy rules i think that would be very encouraging if you would have a brief comment on that. Let me just say im very pleased you the found rules youthful and we look forward to working with you to provide further information that would be useful per committee. Thank you i recognize chair for five minutes. Thank you on longer run goals and monetary strategy, the committee states it would be concerned if inflation were running persistently above or below its 2ch r objective given that core inflation has been below the feds 2 target for more than five years and is lufrmtlyst a 1. 4 , whats the feds rationale for raising the rate at this time . Shouldnt the market be willing to allow flangs to be raiding closer tos 2 target before its able to justify rate increases . Let me just say were very committed to achieving our 2 inflation objective and are well aware that for a number of years, weve been running thaurnd and recognize that there there are dangerous that would be those things that consist tenltd and its a objective its a symmetric objective now, u would say with respect to the inflation outlook, although inflation has been running below 2 core inflation had reached 1. and had line inflation came close to 2 . We have seen an increase in the labor market and although there have been responses we believe over time that will put pressure on both wages and prices now, for several months running, weve seen unusually low inflation ratings. As i mentioned, there appeared to be some special factors that partly account for that. For example, quality adjusted, prices of cell phone plans, plunged several months ago and Prescription Drug prices also plunged. So some temporary factors appear to bed at work so the 12 month inflation rates will remain low. But i would say its premature to reach the judgment that were not on the path to 2 inflation over next couple of years. As we indicate in our statement, its something that were watching very closely considering our risks around the inflation outlook. To my mind, a prudent course is to make some judgment. Our forecast is were heading back to 2 Monetary Policy is not on a presays course were watching this very closely and standing ready to adjust our policy if it appear has the inflation underchute will be persistent. Thank you very much id luke to move on to ask you a question about deutsche brarng first id like to thank you for finding it for its failure to comply with antimoney laundering requirements. Id like to learn what you le n learned in the course of your investigation. Were you aware they had completed their own review of the rufgs scheme that took place in 215 throw 017 can you comment on the Due Diligence that the bank conducted on the account of place and their managers and the accounts. So wishes an enforcement action against Deutsche Bank for violations of bank secrecy act, antimoney laundering procedures in the United States, and that was based on our own investigati investigations the mirror trades you referred to occurred outside the United States recently the uk and fca took action for those trades. Those are ones were not involved in looking at and throughout the course of our investigations looked into individual transactions with the president. That was one of two reviews that was done at Deutsche Bank, the mirror trading and the high profile of politicians and elected officials review are you familiar with that im not familiar with the details. Its been on the safety and foundless of u. S. Thank you i yield back. The chairlady yields back thank you, mr. Chairman and miss chairwoman. We welcome back the process of reducing the size of its oversized portfolio, but in terms of the plan and in terms of Balance Sheet normalization kwhie do they roll it off at a facer pace than mortgage bonds so the differences are relative relatively slight. My expectations and though i kent represent wait would be that ultimately are caps on reinvestment or mortgagebacked securities will not be binding, thatly only come into play in exceptional circumstances. Once we face those end caps, i dont expect them to be binding. The market is deep liquid is a huge market. Our intention of gradually phasing up these caps is pormtd. Thank you for that. Let me move on quickly to the issue of and feds use of fed reserve as a Monetary Policy opportunity fed is paying banks 1 1 4 on their bat if they tlol through with their plans, theyll be paying higher Interest Rates sometime later this year. That provide banks with government subsidy to not lend out their reserve. Does the fed pass these on knowing theyre being passed on higher Interest Rates to customers and customer deposits . My question is on larger deposited, were beginning to see upward movement in rates available to customers but not on retail deposit accounts my expectation taegs is although there will be a lag that Competition Among banking organizations will begin to put some upward pressure on those rates and. And yet we looked at what some of the big banks pay on customer deposits one basis point for many of them, multiple institutions paying only one basis point on customer deposits and the fed is paying 125 basis points so it doesnt appear as though in of this pass through is happening to Customer Account and that might compel the fed to reconsider the merits of its policy wouldnt it be better for growth if banks were to deploy more capital in the economy instead of parking it at the fed in exchange for ioer . So i dont see banks parking it in my discussions with bankers and the information that we regularly collect suggests that banks are looking to make loans. There was a period of very slow loan growth at the beginning of the year, but our survey suggests that was more a matter of demand than supply. So remember our interest on reserves is at a very low level. If i could just interject i would just interject a comment. It would decrease the fed fund rate but normalization would also entail moving back to the conventional open Market Operations let me talk to you about the limits of Monetary Policy. Of course, we know weve been struggling overall with slow growth even though unemployment has come down and you talk a lotter produhhivety. As you know, were in the middle of this big debate on obamacare. Heres what Alan Greenspan who calls you a first rate economist say, you cant get growth where it is recently its eating up the investment of sources and growth you cant have it both ways. You cant fund all the entitlements everybody wants and expect to get a gdp out of that. Wouldnt you agree that the structure of our welfare programings would entail that from work. Brief answer, please. To my mind its an aging population thats putting downward pressure on the Labor Force Participation. There are other factors as well, but the slow growth that we have and anticipate reflects in part an aging population and slow productivity growth. The chair recognizes general lady from wisconsin on the Monetary Policy and trade subcommittee. Thank you so much, mr. Chairman let me sort of pursue the question, madam chair, that mr. Barr was raising with you with regard to peaing people not to work and he gave as an example medicaid i want to mention twothirds of the people who use medicaid are like in Nursing Homes and theyre unable to work i just want to point that out. Ial want to pursue with you something the chair was interested h, the rules policy that the fomc had put out there. I wanted to note a couple of weeks ago you were very critical of the taylor rule, one of the rules that seemed to be favored by the committee i wonder if you can spend a little bit of time talking about your reservations. Well, i dont believe the fomc should mechanically follow any single simple rule, but as we point out in the Monetary Policy report, policy rules do embody some principles of sound Monetary Policy that should inform our policy decisions, and we have for several decades now looked at the recommendations of the taylor rule and a number of other different rules in deciding on the appropriate stance of policy as we try to point out in the report, there are many different rules. Theres no clear way to decide which one is better than others. They lead to a range of recommendations so theres no single recommendation that comes out of a rulesbased approach, and they require judgment many order to implement about measuring things like the gdp or output gap and particularly the real level of Interest Rates, something we have been struggling with, as has the professional Economics Community now for many years thank you, chair. So the choice act is a bill that weve pushed out of this committee, and it proposes sorts of a rulesbased policy and want to know what your thoughts are specifically about that legislation. Ive said on many recommendations im opposed okay. What about such jekting the fed to appropriations . I would be very concerned about subjecting the fed to appropriations i want to say were operating in all that we do under congressional mandates and laws. We seek to be transparent, to be accountable to congress, and communicate as clearly as we can the basis for our actions and Monetary Policy and also in videotape vision but i do think our independence of setting thank you for that, madam chair. I just want to get back to the limitations that the fomc with regard to closing the disparity and gap in the recovery for africanamericans, lower income whites theres only so much you can do. Thats right. I was wondering if you would agree that some of the austerity measures that congress constantly places like, you know, saying were paying people not to work when actually people who receive food stamps, those are old people, disabled people, children, medicaid would you say Congress Needs to step up on the appropriations side, doing things for lower income people to subsidize wages, that that is a better tool than what the fed has to offer as far as those gapes . As you indicated in your opening statement, Monetary Policy is a blunt tool, and its not something that we can use to achieve distributional objectives, although, as we point out in the report, a strong labor market does benefit all groups and particularly minority groups, although, the experience is worse for them so, yes, i think its absolutely important for congress to assist the policy and how it might advance those objectives. Thank you so much my time has expired. The chair now recognizes the gentleman from new mexico, mr. Piers, chairman of our finance committee. I note in your comments today youre talking about the Labor Force Participation rate and in past you and i have had an opportunity to discuss that and it was something that did not affect it and whats become a bigger concentration for you now . Its important for us to try to determine how much slack there is in labor markets, how much potential there is. I understand that but there didnt seem to be any comments from you, in fact, in 2016 that it was just a number that didnt come readily to your mind when youre in front of the committee here i just wondering what has changed since january that you would now be concentrating on that. So, i mean, i think i was discussing this last year because it is the source of concern after a long and deep recession. We want to understand what the potential there is for people to come back. Okay. And as i mentioned in my testimony, Labor Force Participation rate i running out of time im going through the monitory policy report and going through your comment, and i almost dont see anything about that number on the screen behind you it is just constantly rolling through and it is adapt. And maybe it doesnt mean anything, and sort of maybe it does do yall ever talk about that in your committee do you ever contemplate that in your position . Well, ive discussed this previously with this committee i understand that but the report today is one of the driving factors and something we aught to be thinking about so how did it affect you all when illinois was downgraded, their bond rating was downgraded the first of the year, and they are paying what one analyst said is the highest differential in our history. Now that is the reason of having to pay more of the bonds being downgraded is because they cant afford to pay the bills. And if you hold their bonds, you may not get paid if you went back to detroit when it filed bankruptcy, bondholders only got 74 on the dollar so, i mean, it all feeds back to this number here and the fact that it doesnt even make the print. Not even the fine print that i can find maybe i missed it, but i did see the one sentence about illinois being downgraded and there was a brief discussion of puerto rico but the idea that we as a country are not discussing our ability to pay our bills is something that, i think theres a downside affect to the problem. But the fact that your report doesnt bring it up is a little concerning to me and the way that really played out was a couple weeks ago when Chicago Schools tried to the new bond issue and didnt get any bidders at all, none so they ended up driving the rate up to 7. 5 or 7. 75 or something. But it seems like the people in charge of the Financial Stability of the country and the value of our dollar, the value of our promise to pay, it just seems like it would have a little bit more importance in the document here. I would expect, frankly, maybe a whole chapter because there are estimates that we cant pay our bills in this country. So we continue to operate as if its not going to matter if our ratings are downgraded if our Interest Rate goes up, were already running deficits, which means we have to print money every year in which to operate. And it seems like the people in charge of the system would be talking about it and telling us, hey, this is kind of serious why dont we all Work Together and start figuring out what we can do to live within our means, to just make sure that were not paying triple and quadruple what other people are paying for debt i would love to hear your comments well, let me state in the strongest possible terms, i agree that what youre showing here represents and trend that given the current spending and taxation decisions is going to lead to an unsustainable debt situation with rising Interest Rates and declining investment in the United States that will further harm productivity growth and Living Standards i believe that congress should be taking into account and designing fiscal policy is the need to achieve sustainability of this debt path over time. This is something im not just seeing today, but ive been emphasizing for some time in my testimony. Thank you very much i yield back, mr. Chairman the time for the gentleman has expired. The chair will recognize the woman from new york, ms. Maloney. Chair yellen, as you mentioned, inflation is not moving as quickly as the fed had been expecting and given that the labor market has continued to tighten and inflation still hasnt increased to the feds target of 2 , do you think the feds should wait to see some improvement in the inflation outlook before it starts the process of Balance Sheet normalization and phasing out the feds reinvestment policy, or in other words, are your plans for the timing of Balance Sheet normalization unchanged . So weve been trying to very carefully lay out our plans to normalize the size of our Balance Sheet in a gradual and predictable way. And my colleagues made the judgment in june when we laid out the final details that if the economy continues to evolve in line with our expectations, that its something that we should begin to do this year and to my mind, i would say relatively soon. The exact timing of this, i dont think matters a great deal it is something weve long been preparing to undertake as i mentioned earlier, we are watching inflation very carefully. I do believe that part of the weaknesses in inflation represents transitory factors, but well recognize inflation has been running under our 2 or jackti objective, that there could be something more going on there, it is something well watch very carefully and will be a factor in our future decisions about rate increases. Thank you as you know, your term as fed chair ends in 2018, and there is a long history of president s renominating fed chairs, that their predecessors had originally named Ronald Reagan renamed paul boker, and president obama renominated ben bernanke so my question is, are you open to serving another four years as fed chair if President Trump decides that he wants to renominate you so what i previously said is that i absolutely intend to serve out my term. Im very focused on trying to achieve our congressionally mandated objectives and really havent had to give further thought at this point to this question when the fed does start the process of Balance Sheet normalization, are you less likely to raise Interest Rates at the same time or do you view these two actions as being on separate tracks . So the path for the federal funds rate is a decision for the committee that they have made no decision about whether or not both things could occur at the same time. I would note that in june at our most vent meeting, we produced the summary of Economic Projections that appear in the Economic Policy report most of my colleagues, or at least the median anticipated that one further increase in the federal funds rate would likely be appropriate this year, but as i say, we constantly watch the economy, the evolution of inflation in the labor market and will make decisions on the basis of our evaluation of that information. The fed has adjusted that the stock market is currently overvalued are there other markets that you consider or see as overvalued as well and do you think a correction in any of these markets would cause problems for Financial Stability . So in looking at asset prices and valuations, we try not to look at whether they are correct or not correct but on as you asked what the potential spillovers or impacts on Financial Stability could be of asset price evaluations, my assessment of that is that if the asset prices have moved up, we have not seen a substantial increase in borrowing based on those asset price movements. We have a Financial System of Banking System that is well capitalized and strong and i believe it is resilient. Time of the lady has expired. Now well look at the chairman of the Financial Institution subcommittee thank you, mr. Chairman and thank you, madam chair for being here today as chairman of the Financial Institution subcommittee, one of my jobs and greatest concerns is the Regulatory Oversight by the various Financial Services agencies when it comes to the feds supervisory role, i want to renew my call and the call of my colleagues that the fed take a more measured approach and with hold any new regulation until the nominee for the vice chairman has been confirmed by the senate i do appreciate your comments and the colleagues of yours, especially senator powell. These have a real impact on our economy and it is wise that the fed ease the associated burdens. You recall i sent you a letter, and while you understood my concern, the fed wasnt necessarily looking to curtail some of the stress testrelated activity now that the vice chair of super vising remains, i would ask for a response to these statements and concerns so we have a relatively light regulatory agenda at this point. Im pleased to see a nomination. Clearly we will look very carefully at the whole system and look forward to having the input from tha