The number that we got from the university of michigan was not a strong. As strong. That was for january. This is for february. 162. 4 in expectations component at 109. 7. A handful of economic reports we got this morning including durable goods that fell more than estimated. All of that to weigh as well. Changedcks little following yesterdays rally. Theyve been bouncing between gains and losses. 2006 p 500 going back to beforel about 3 to go we retain that record high. Retail is one of the areas of strength today. Macys with a rebound in its comparable sales. 11 straight quarters of declining comp sales, seeing an increase of 1. 4 . Dillards up 3 . A strong Holiday Season for these Department Stores which desperately needed it. Nordstroms and kohls also on the rise. A potential media takeover or media spoiler. Mark will get into sky in just a moment. Comcast has made a competing bid for the u. K. Media company. This could potentially spoil disneys quest for 21st century one which owns 30 of sky, of the reasons for bob iger looking to buy most of fox in the first place. A complicated situation. The u. S. Media companies are trading lower. We are 90 minutes away from the end of the monday session. Its all about jay powell, is in it . Stoxx 600 down. 2 . The gauge for the record has rebounded 3. 8 since falling to an almost sixmonth low on figure nine february 9. Sky is the big gainer, jumping as much as 22 , the biggest increase in 14 months, highest level since 2000 after comcast eached 12 pound. 50 pounds for share. 1337 is where we are investors anticipate a bidding war. Fox has been struggling to get regulatory approval. A counter offer well above comcast is now very likely according to jerry demings. The disney chief executive called sky a crown jewel among fox assets. Sky is a big gainer today. Standard chartered shares of earlier 4 . It restored its dividend after he to your suspension after a twoyear suspension. Bill winters is gaining ground in the bid to get this back on the road. They returned to profit last share, helping shares reach a 2. 5 year high. They were lower after midday today. The pace required to hit the modest return target as income from trading plunged. It is not just about jay powell today. President , the euro drifting lower after we had inflation data from germany, 1. 2 in february, the weakest level since february 2016. He says the ecbs guidance on rates is rather vague and could be strengthened at the end of the bond buying program. The Economic Situation is rather capacity is rising and we do expect price pressures to build up gradually. This will be reflected in our policies. Mark for the record, the ecb meets next thursday. Gainer, upnother big 7 right now. The biggest increase in 10 years. The homebuilder plans to double the size of its originally planned payout to investors. Additional interim dividends of 25 pence per share. Persimmon keeps the cash flowing. Vonnie its great to have you back. Lets get back to capitol hill. Jerome powell getting ready to begin the first of what will be two days of testimony this week before congress. Joins us from our washington bureau. Gradualismssage be continues . Michael that is the message that jay powell would like to send. He did mention in the top of his brief prepared remarks how he worked with janet yellen to provide policy continuity. That is the message from the fed today. Dont look at the fed to make a lot of changes. We are on a course here. We will watch the data and adjust if necessary. An upbeat view of how the economy is progressing. He says it sets the stage for possibly doing more. Vonnie monetary and fiscal policy may come into conflict this year. Does powell addressed this in the questionandanswer session today . Michael i think youve got both right he will address it today. He will say we will wait for the data. He said the fed will strike a balance between keeping the economy from overheating and pushing inflation up to 2 . They want things to loosen up as andployment keeps falling inflation keeps rising for their target. They dont want it to overheat. A lot of people think you will get a much faster pace of growth that will increase inflation. Going to be interesting to see how far powell wants to go. Pledge anyfor him to additional rate increases today. Vonnie hang on. Lets bring in marcus in our london studio. Is there anything that trips powell up today that will cause markets to react . Marcus i would highly doubt it. He is a constant professional. Thatconscious of the fact every time theres a handover of fed chair, the markets can get rattled. We had that first radel. Ratle. He will paint a picture that is consistent with a dot plot of three rate hikes this year. We will get one in march, probably another two. Hes going to do the middle ground because he wants to be nice in his hand over. Mark i will ask you this question. Question, ask him one what would that question be . Give me the answer you think he will give or should give. Tricky one . Mark very tricky. I want to know what hes going to do with the fed wind down of asset purchases why raise rates when you own 4 trillion worth of securities . Why would you hasten the pace while reducing the amount of stimulus in the system . Mark what would be his reply to that . He wouldnt give a definitive answer. I would hope that he would err on the side of reducing the amount of stimulus in the system. Mark michael, what about you . What would you ask . Michael i was asked this earlier. I suggested that maybe what you would want to know is how fast he thinks productivity will rise. If we are going to see the economy grow faster and inflation pick up, productivity is the offset. Will it rise quickly enough . Economists will tell you probably not. I thought about that answer. It also depends on where you are. If you are in congress, you probably want to know what he thinks about the budget deficit that is coming up and whether that will push market rates up. If you are on wall street, you want to know whether the fed is going to change its Monetary Policy regime and let inflation run faster in order to push Inflation Expectations higher. That will be key for people on wall street. What does he say about how far the fed is willing to tolerate that faster inflation . Vonnie how much would he want to telegraph that anyway . Is that something the fed would be happy to let the street know in advance . Michael im not sure. Hes only just taken over. Theres only three governors on the board now. You have a lot of Bank President s whove been there for a while. He doesnt have a lot of people on the governors side. Does he want to Start Talking about changing the policy regime . I dont think so. Vonnie what does he say about the recent financial volatility . Relaxeduld be very about this. It has bounced back 10 . He doesnt want to give the powell quote yet he will be very relaxed and say it doesnt affect the way the fed approaches things. I think hes right to have that view. Dalio voiced his concerns about centralbank policy in general. Ray the issues i dont think are pretty girly pressing now. Cameraere to roll the forward to two years from now and we are having a lot more stimulation particularly in the u. S. With the tax bill and because liquidity the Central Banks will have a problem getting it right. Vonnie what is the view in europe . Will the Central Banks have difficulty getting it right . I think the fed in particular has done a fabulous job this last year in communicating exactly what they want to do. Likewise, the ecb has done a fabulous job in recovering from a very difficult recession, a different type of recession. Their problem is a healthy one. They are trying to wind back the stimulus. As far as the ecb is concerned, it is steady as she goes. Mark given the economic turning point, the fomc is often divided, how does chair Powell Marshall a Communications Strategy to deal with that tricky issue . We may be seeing a lot of differing noises coming out of the committee. Michael he will go slowly. He will try to take the temperature of the committee. Hes been there for almost six years now. He knows everyone. He knows where they are coming from. Theres only three members of what is usually a sevenmember board. There are 12 inc. President s. Best Bank President s 12 Bank President s. The markets may look more toward the Bank President s for guidance. Janet yellen didnt speak very often ended and take strong positions on what monetary didntshould do and take strong positions on what Monetary Policy should do. We were at 2. 5 last week. We should be looking more closely at the 30 year yield. S. Read your piece 2. 4 , you said, was the key. The one to really watch is twoyear. Point, the key was the 30 year because it had risen closer to the inflection point. It is down 10 points or more from there. The three factors i highlighted, the bank of japan comments from the advisor to the bank of japan supply is out of the way now. Zones. Awe off the danger at the moment, it looks like 2. 25 is where the twoyear is settling. That keeps on rising to 2. 5 , the fed is getting ahead of itself. Vonnie we will be keeping an eye on the markets throughout the morning. We are expecting three hours of testimony and then the question and answer period. I want to thank Michael Mckee and marcus ashworth. Testimony get to the of jerome powell, testifying before the house. This is his first time doing so. Lets listen in. You are going to have to hit the microphone. Chairman powell thank you. Im pleased to present the federal reservess emmanuel Monetary Policy report to the Congress Semiannual policy report to the congress. Expressingegin by appreciation to janet yellen enter important contributions and her important conservations. Together, chair yellen and i have worked to ensure a smooth leadership transition and provide for continuity in Monetary Policy. I would like to express my appreciation for my colleagues on the federal open market committee. Finally, i want to affirm i continued support for the objectives assigned to us by congress, maximum employment and price stability and for transparency about the federal reserves policies and programs. Transparency is the foundation for our accountability and im committed to clearly explaining what we are doing and why we are doing it. I will briefly discuss the current Economic Situation and outlook before turning to Monetary Policy. The u. S. Economy grew at a solid pace over the second half of 2017 and into this year. Monthly job gains averaged 179,000 from july through december. Payrolls rose an additional 200,000 since jen right. Since january. This pushed unemployment down to 1. 4 . In addition, the Labor Force Participation rate remained roughly unchanged. That is a sign of job market strength, given that retiring baby boomers are putting downward pressure on the participation rate. Strong job gains in recent years have led to widespread reductions in unemployment across the income spectrum. For example, the Unemployment Rate for adults without a High School Education has fallen from 15 in 2009 to 5 this year. Unemployment rates for African Americans hispanics are now at or below rates seen since below the recession. Wages have continued to grow moderately with a modest acceleration in some measures. The extent of the pickup and wages has been damped by the week pace of productivity growth in recent years. Turning from the labor market to production, inflationadjusted gdp rose at an annual rate of 3 in the second half of 2017. In the secondh half was led by solid gains in consumer spending, supported by rising Household Incomes and will and upbeat sentiment. Wealth and upbeat sentiment. This should support higher productivity growth in time. The Housing Market has continued to improve slowly. Economic activity abroad has been solid in recent quarters and the associated strengthening in demand for u. S. Experts has provided considerable support for our manufacturing industry. Against this backdrop of solid growth and a strongly market, inflation has been low and stable. Inflation has continued to run below the 2 rate to be most consistent over the long run with our congressional mandate. Prices asonsumer eeasured by pc increased 1. 7 . Whichre pce price index, excludes the prices of energy and food items, rose 1. 5 over the same period, somewhat less than in the previous year. We viewed some of the shortfall as likely reflecting transitory influences that we do not expect will repeat. The monthly readings were a bit higher toward the end of the year than in earlier months. After substantially easing during 2017, financial conditions in the u. S. Have reversed some of that using over the last month. We dont see these developments as weighing heavily on the outlook for economic activity, the labor market or inflation. The Economic Outlook remains strong. A robust job market should continue to support growth in Household Incomes and consumer spending. This should lead to further gains in u. S. Exports and upbeat Business Sentiment will boost business investment. Moreover, fiscal policy has become more stimulative. In this environment, we anticipate that inflation on a 12 month basis will move up this year and stabilize around the committees to present objective over the mediumterm. Wages should increase at a faster pace as well. The Committee Views the nearterm risks as roughly balanced. We will continue to monitor inflation developments closely. Theing to Monetary Policy, congress has assigned us the goals of promoting maximum employment and stable prices. Over the second half of 2017, the fomc continued to gradually reduce Monetary Policy accommodation. We raised the target rate for the federal funds rate by. 25 , bringing the target to a range of 1. 25 to 1. 5 . We initiated a Balance SheetNormalization Program to reduce our Securities Holdings gradually. That program has proceeded quite smoothly. These actions reflect the that graduallyw reducing accommodation will sustain a stronger labor market while fostering a return of inflation to 2 . Engaging the appropriate path for Monetary Policy over the next few years, the fomc will continue to strike a balance between avoiding an overheated economy and bringing pce Price Inflation to 2 on a sustained basis. While many factors shape the Economic Outlook, some of the headwinds u. S. Economy faced in previous years have turned into tailwinds. In particular, fiscal policy has become more stimulative and foreign demand for u. S. Exports is on a firmer trajectory. Despite the recent volatility, financial conditions remain accommodative. Inflation remains below are 2 objective. Increasesadual will best promote attainment of our objectives. The pats of Monetary Policy will depend on the Economic Outlook as informed by incoming data. In evaluating the stance of Monetary Policy, the fomc routinely conducts Monetary Policy rules that connect prescriptions for the policy rate with variables suzy did with our objectives associated with our objectives. Requiredudgments are for the measurements of variables used in these rules. This Monetary Policy report provides further discussion of policy rules and their role in our policy process. Thank you very much. I look forward to taking your questions. Powell. You, chairman in your statement, used the term normalization. I would like to explore that for a moment, in particular with respect to interest on excess reserves. Is theit be that ioer new primary Monetary Policy tool, or will it instead be a fire ax to which are the fire extinguisher you break out in term times of emergency . Chairman powell interest on excess reserves is currently the principal policy tool we use to keep the federal funds rate in the range we designate. We have not made a decision in the longer run whether that will continue to be our framework or whether we will return to something more like we did before the crisis. Expect to be returning to that decision in the near term. Seems to beapproach working very well. The markets seem to understand it. It remains an open question. Chairman powell the longterm operating framework remains in question, yes. It still remains a concern. You would be hardpressed to find in the congressional Record Congress granted this power and it would be used to supplant openmarket operations in the fomc. I trust we will be having further discussions about that. With respect to normalization, you have said publicly that you expect a new normal to be 2. 53 trillion over four years. Chairman powell yes. I have not been able to see on the Public Record the expectation with respect to the composition of the Balance Sheet. Currently, you are carrying 2. 4 trillion in treasuries, 1. 8 of Mortgage Backed securities. Is it your intention to keep that same ratio of Mortgage Backed securities . Many of us are concerned about the possibility of the fed being involved in credit allocation decisions. Right now, i dont see a path to a tre