1 00:00:02,759 --> 00:00:05,840 Speaker 1: This is Bloomberg Daybreak today, your morning brief on the 2 00:00:05,840 --> 00:00:09,240 Speaker 1: stories making news from Wall Street to Washington and beyond. 3 00:00:09,680 --> 00:00:12,920 Speaker 1: Federal Reserve Chairman Jerome Powell says more rate hikes are 4 00:00:13,000 --> 00:00:15,520 Speaker 1: on the way. In an interview with David Rubinstein at 5 00:00:15,520 --> 00:00:18,560 Speaker 1: the Economic Club of Washington, the Fed chair explained the 6 00:00:18,600 --> 00:00:20,279 Speaker 1: need to push rates higher in the face of a 7 00:00:20,320 --> 00:00:23,479 Speaker 1: strong labor market. He also discussed some of the comments 8 00:00:23,480 --> 00:00:25,560 Speaker 1: he made after the most recent f O m C 9 00:00:25,760 --> 00:00:28,800 Speaker 1: meeting and the market reaction that followed. Let's listen into 10 00:00:28,800 --> 00:00:32,479 Speaker 1: that conversation now. So, Jay Um, thank you very much 11 00:00:32,479 --> 00:00:35,200 Speaker 1: for being here. Why don't we start with an easy question. 12 00:00:36,520 --> 00:00:39,879 Speaker 1: So you made a speech last week commenting on the 13 00:00:39,960 --> 00:00:42,040 Speaker 1: f O m c s decision to raise the Fed 14 00:00:42,080 --> 00:00:47,320 Speaker 1: discount rate by um a small amount relatively speaking, basis points. 15 00:00:47,320 --> 00:00:49,839 Speaker 1: Someone people would say that was small, UM, But at 16 00:00:49,840 --> 00:00:52,880 Speaker 1: the time it wasn't clear that the job's report would 17 00:00:52,920 --> 00:00:55,000 Speaker 1: be as strong as it turned out to be. Subsequently, 18 00:00:55,720 --> 00:00:58,440 Speaker 1: hadn't you known that the Job's report was going to 19 00:00:58,480 --> 00:01:03,120 Speaker 1: be as strong, would you have done twenty five basis 20 00:01:03,120 --> 00:01:08,240 Speaker 1: points or something different? David, Thank you for that question, 21 00:01:08,360 --> 00:01:11,800 Speaker 1: Thank you, thank you for inviting me here. Today. It's 22 00:01:11,800 --> 00:01:14,280 Speaker 1: great to be here, So we don't get to play 23 00:01:14,280 --> 00:01:17,520 Speaker 1: it that way. Unfortunately we have to, but I'll take 24 00:01:17,560 --> 00:01:20,520 Speaker 1: it this way. So the message we were sending at 25 00:01:20,600 --> 00:01:24,920 Speaker 1: the phone C meeting last Wednesday was really that the 26 00:01:25,000 --> 00:01:29,120 Speaker 1: disinflationary process, the process of getting inflation down, has begun, 27 00:01:29,160 --> 00:01:31,320 Speaker 1: and it's begun in the goods sector, which is about 28 00:01:31,319 --> 00:01:33,760 Speaker 1: a quarter of our economy, but it has a long 29 00:01:33,800 --> 00:01:37,600 Speaker 1: way to go. These are the very early stages of disinflation. 30 00:01:37,760 --> 00:01:41,840 Speaker 1: So the services sector really, except for housing services, pardon me, 31 00:01:42,560 --> 00:01:45,759 Speaker 1: is not really showing any any disinflation yet. So our 32 00:01:45,760 --> 00:01:48,600 Speaker 1: message really was this process is likely to take quite 33 00:01:48,600 --> 00:01:51,600 Speaker 1: a bit of time. It's not going to be we 34 00:01:51,640 --> 00:01:54,680 Speaker 1: don't think smooth. It's probably gonna be bumpy. And so 35 00:01:55,000 --> 00:01:57,720 Speaker 1: we think that we're gonna need to do further rate increases, 36 00:01:57,840 --> 00:01:59,760 Speaker 1: as we said, and we think that we'll need to 37 00:01:59,760 --> 00:02:02,840 Speaker 1: hold policy at a restrictive level for a period of time. 38 00:02:03,200 --> 00:02:07,720 Speaker 1: Then comes the the the labor market report for January, 39 00:02:08,520 --> 00:02:10,960 Speaker 1: and it's very strong. It's certainly stronger than anyone I 40 00:02:11,000 --> 00:02:14,480 Speaker 1: know expected and so but but I would say we 41 00:02:14,520 --> 00:02:16,160 Speaker 1: didn't expect it to be this strong. But I would 42 00:02:16,200 --> 00:02:20,680 Speaker 1: say it kind of shows you why we think that 43 00:02:20,760 --> 00:02:23,959 Speaker 1: this will be a process that takes a significant period 44 00:02:23,960 --> 00:02:28,079 Speaker 1: of time. The labor markets extraordinarily strong. And by the way, 45 00:02:28,080 --> 00:02:30,440 Speaker 1: it's good. It's a good thing that inflation has started 46 00:02:30,480 --> 00:02:33,240 Speaker 1: to come down without that has not happened at the 47 00:02:33,280 --> 00:02:35,800 Speaker 1: at the cost of a strong labor market. So and 48 00:02:35,840 --> 00:02:38,800 Speaker 1: of course since then, labor marketing, sorry, financial conditions have 49 00:02:38,919 --> 00:02:45,320 Speaker 1: tightened significantly since then, So let me ask it another way. UM. So, 50 00:02:45,600 --> 00:02:48,560 Speaker 1: by the way, when the numbers coming out, the job numbers, 51 00:02:48,600 --> 00:02:51,600 Speaker 1: five thousand jobs, does anybody call you up in the 52 00:02:51,639 --> 00:02:53,720 Speaker 1: government and give you a little heads up this is 53 00:02:53,720 --> 00:02:56,320 Speaker 1: gonna happen, or they never do that? So on. On 54 00:02:56,480 --> 00:03:00,519 Speaker 1: some um data, sometimes we get data just the night before, 55 00:03:00,520 --> 00:03:03,680 Speaker 1: and it's only me, only me and so, but not 56 00:03:03,720 --> 00:03:05,800 Speaker 1: on all pieces of data it's it's a it's a 57 00:03:05,919 --> 00:03:07,880 Speaker 1: it's a very small amount of data and we get 58 00:03:07,880 --> 00:03:10,320 Speaker 1: it just just the night before. For example, if we 59 00:03:10,400 --> 00:03:11,679 Speaker 1: if we were going to get a big piece of 60 00:03:11,760 --> 00:03:13,799 Speaker 1: data in the middle of an fm C meeting, as 61 00:03:13,840 --> 00:03:15,920 Speaker 1: often happens on the day of an f MC meeting, 62 00:03:16,120 --> 00:03:18,960 Speaker 1: it will help me to to know it the night before. Okay, 63 00:03:19,000 --> 00:03:21,959 Speaker 1: So the markets, um, after your speech from last week. 64 00:03:22,000 --> 00:03:25,040 Speaker 1: The markets assumed that therefore there would probably be another 65 00:03:25,639 --> 00:03:30,720 Speaker 1: basis point increase in your next f I MC meeting. Um, 66 00:03:31,000 --> 00:03:36,280 Speaker 1: was that a bad assumption by the markets. So what again, 67 00:03:36,320 --> 00:03:41,960 Speaker 1: what we said at the meeting was was that we 68 00:03:41,960 --> 00:03:44,760 Speaker 1: we believe that we anticipate is what we said, that 69 00:03:45,600 --> 00:03:49,240 Speaker 1: ongoing rate increases will be appropriate. Uh. And the reason 70 00:03:49,320 --> 00:03:51,800 Speaker 1: is we're trying to achieve a stance of policy that 71 00:03:51,920 --> 00:03:55,000 Speaker 1: is sufficiently restrictive to bring inflation down to two percent 72 00:03:55,120 --> 00:03:57,520 Speaker 1: over time, and we don't think we've achieved that yet, 73 00:03:58,000 --> 00:04:01,240 Speaker 1: so we said that. Uh. And and you know, now 74 00:04:01,320 --> 00:04:03,600 Speaker 1: you see the labor market report, and I think again 75 00:04:03,680 --> 00:04:06,280 Speaker 1: financial conditions are are are more well aligned with that 76 00:04:06,280 --> 00:04:09,200 Speaker 1: than they were before. So the assumption when you made 77 00:04:09,240 --> 00:04:12,400 Speaker 1: your speech was that probably they're fed might em and 78 00:04:12,480 --> 00:04:16,120 Speaker 1: consider uh decreasing rates by the end of this year, 79 00:04:16,120 --> 00:04:18,159 Speaker 1: and the markets no longer assume that you think the 80 00:04:18,160 --> 00:04:23,480 Speaker 1: markets are wrong. Well, so let me say these are 81 00:04:24,760 --> 00:04:27,080 Speaker 1: all of these numbers that we're throwing around here are 82 00:04:27,120 --> 00:04:30,800 Speaker 1: conditional on incoming data and what happens. So we never 83 00:04:30,839 --> 00:04:32,800 Speaker 1: say this is this is what we think will happen. 84 00:04:32,960 --> 00:04:34,800 Speaker 1: You know, we we make a tentative forecast and then 85 00:04:34,839 --> 00:04:37,560 Speaker 1: we let the data come in. For example, if the 86 00:04:37,640 --> 00:04:39,800 Speaker 1: data were to continue to come in stronger than we 87 00:04:39,839 --> 00:04:42,240 Speaker 1: expect and we were to conclude that we needed to 88 00:04:42,360 --> 00:04:45,000 Speaker 1: raise rates more than is priced into the markets, or 89 00:04:45,040 --> 00:04:47,080 Speaker 1: then we wrote down at our last four group of 90 00:04:47,120 --> 00:04:49,400 Speaker 1: forecasts in December, then we would certainly do that. We 91 00:04:49,440 --> 00:04:53,760 Speaker 1: would certainly raise rates more. Okay, So today, for people 92 00:04:53,760 --> 00:04:55,800 Speaker 1: who aren't familiar with the f O m C, who 93 00:04:55,920 --> 00:04:58,800 Speaker 1: is actually is on the f O m C. So 94 00:04:58,880 --> 00:05:02,360 Speaker 1: there the US Central Bank consists of a board of governors. 95 00:05:02,360 --> 00:05:05,680 Speaker 1: Here in Washington, they're seven governors. Those governors are nominated 96 00:05:05,760 --> 00:05:09,400 Speaker 1: by the President and confirmed by the Senate, and we 97 00:05:09,480 --> 00:05:12,040 Speaker 1: serve terms that are that are not syncd up with 98 00:05:12,440 --> 00:05:15,400 Speaker 1: the election cycle, so we're we're independent. They are also 99 00:05:15,480 --> 00:05:18,159 Speaker 1: twelve reserve banks around the country which have a degree 100 00:05:18,160 --> 00:05:21,880 Speaker 1: of independence, and they're so so each each reserve bank 101 00:05:21,960 --> 00:05:24,120 Speaker 1: is led by a president who works there full time. 102 00:05:24,400 --> 00:05:26,680 Speaker 1: All twelve of them sit on the FMC. So that's 103 00:05:27,080 --> 00:05:29,280 Speaker 1: nineteen people sit on the FMC, so it's quite a 104 00:05:29,360 --> 00:05:33,320 Speaker 1: large committee, of which twelve vote. In any given year. 105 00:05:33,600 --> 00:05:36,240 Speaker 1: The reserve bank presidents vote on a rotating basis, except 106 00:05:36,279 --> 00:05:38,480 Speaker 1: new York, which votes every year. So when you vote, 107 00:05:38,880 --> 00:05:40,560 Speaker 1: do you vote at the beginning of an f o 108 00:05:40,720 --> 00:05:43,640 Speaker 1: MC meeting and then just kind of have discussions afterwards, 109 00:05:43,720 --> 00:05:45,360 Speaker 1: or do you wait till the very end and then 110 00:05:45,400 --> 00:05:48,240 Speaker 1: you vote. Now we vote at the end, I mean 111 00:05:48,480 --> 00:05:50,800 Speaker 1: the whole the f MC meeting process takes, you know, 112 00:05:50,880 --> 00:05:53,120 Speaker 1: more than a full week. I'm talking to all of 113 00:05:53,160 --> 00:05:57,440 Speaker 1: the participants, all ninth eighteen other ones, and staff has 114 00:05:57,440 --> 00:05:59,720 Speaker 1: sent around memos and there's something called the Teal Book, 115 00:05:59,720 --> 00:06:02,719 Speaker 1: which is the staff's assessment of the you know, of 116 00:06:02,760 --> 00:06:06,200 Speaker 1: the economy and international economy and monetary policy and all that. 117 00:06:06,400 --> 00:06:09,480 Speaker 1: Then we have an extensive discussion on the morning of 118 00:06:09,520 --> 00:06:12,280 Speaker 1: the first day about the economy. Everybody talks about that. 119 00:06:12,560 --> 00:06:15,000 Speaker 1: On the second day we talk about monetary policy, and 120 00:06:15,000 --> 00:06:18,400 Speaker 1: then we vote on monetary policy around noon on the 121 00:06:18,440 --> 00:06:21,599 Speaker 1: second day. So there's the chairman of the Federal Reserve 122 00:06:21,680 --> 00:06:24,880 Speaker 1: Board speak first and say here's what I think, and 123 00:06:25,120 --> 00:06:27,039 Speaker 1: or does he wait until the end and say, well, 124 00:06:27,080 --> 00:06:28,560 Speaker 1: thanks for what you think, but let me tell you 125 00:06:28,560 --> 00:06:31,279 Speaker 1: what I think. What do you do? Different chairs have 126 00:06:31,360 --> 00:06:34,000 Speaker 1: done in different ways, and so I tend I've tended 127 00:06:34,040 --> 00:06:37,680 Speaker 1: to do what my precessor media precessor did I think, Well, 128 00:06:37,720 --> 00:06:40,359 Speaker 1: this is what I do. I speak last on the 129 00:06:40,480 --> 00:06:43,080 Speaker 1: sort of the economic go around. So everyone else talks 130 00:06:43,080 --> 00:06:46,240 Speaker 1: about what they think about the economy and in their district, 131 00:06:46,240 --> 00:06:48,880 Speaker 1: for example, if their reserve bank president. And I listened 132 00:06:48,880 --> 00:06:51,160 Speaker 1: to all that, and then I give my comments at 133 00:06:51,160 --> 00:06:52,679 Speaker 1: the end and I kind of sum up what people 134 00:06:52,680 --> 00:06:57,280 Speaker 1: have said, and then I speak first on monetary policy. Okay, 135 00:06:57,320 --> 00:07:02,400 Speaker 1: so you've said the inflation rate target is two percent um, 136 00:07:02,600 --> 00:07:05,240 Speaker 1: But why two percent and not three percent? Three percent? 137 00:07:05,400 --> 00:07:07,840 Speaker 1: You could be tolerable, really, I mean most for most 138 00:07:07,880 --> 00:07:10,920 Speaker 1: of organized history, three percent is considered. Okay, why do 139 00:07:10,960 --> 00:07:14,080 Speaker 1: you want two percent? Two percent is the global standard, 140 00:07:14,360 --> 00:07:17,040 Speaker 1: and that is our objective two percent piece as measured 141 00:07:17,080 --> 00:07:21,880 Speaker 1: by the PC index, and that's just that's not something 142 00:07:21,920 --> 00:07:23,880 Speaker 1: we're looking at changing. That isn't going to change. It's 143 00:07:23,960 --> 00:07:26,840 Speaker 1: that's not gonna change, not going to change now. But okay, 144 00:07:26,880 --> 00:07:28,800 Speaker 1: so you need to get the two percent, and your 145 00:07:29,160 --> 00:07:31,760 Speaker 1: goal to get there is by what period of time 146 00:07:32,000 --> 00:07:33,840 Speaker 1: would you like to get there? Well, we say, we 147 00:07:33,920 --> 00:07:36,080 Speaker 1: say that we're using our tools to get there over time. 148 00:07:36,120 --> 00:07:38,600 Speaker 1: If you look at our forecasts, we expect two thousand, 149 00:07:38,680 --> 00:07:41,800 Speaker 1: twenty three to be a year of significant declines in inflation, 150 00:07:41,840 --> 00:07:44,240 Speaker 1: and it's actually our job to make sure that that's 151 00:07:44,280 --> 00:07:47,400 Speaker 1: the case. But I would tell you that, uh, you know, 152 00:07:47,560 --> 00:07:52,360 Speaker 1: with inflation headline headline PC inflation is running about five percent. 153 00:07:52,640 --> 00:07:54,520 Speaker 1: This is on a twelve month basis. Core is running 154 00:07:54,560 --> 00:07:56,800 Speaker 1: at four point four. My guess is it will take 155 00:07:56,880 --> 00:08:00,400 Speaker 1: certainly into not just this year, but next year to 156 00:08:00,440 --> 00:08:03,800 Speaker 1: get down close to two. Okay, So two percent is 157 00:08:04,000 --> 00:08:08,600 Speaker 1: firm that you're not that yes, okay. So the theory 158 00:08:08,720 --> 00:08:12,880 Speaker 1: of raising interest rates, um is that it will decrease 159 00:08:12,920 --> 00:08:17,080 Speaker 1: economic activity and increase unemployment. But you've been increasing interest 160 00:08:17,160 --> 00:08:19,600 Speaker 1: rates for a while and unemployment is now a record mow. 161 00:08:19,720 --> 00:08:22,320 Speaker 1: So what's wrong with the theory. Why is unemployment not 162 00:08:22,400 --> 00:08:26,200 Speaker 1: going higher? Well, the labor market is strong, because the 163 00:08:26,240 --> 00:08:28,840 Speaker 1: economy is strong, and as I mentioned, it's a good 164 00:08:28,840 --> 00:08:30,760 Speaker 1: thing that we've been able to see the beginnings of 165 00:08:30,800 --> 00:08:35,840 Speaker 1: disinflation without seeing the labor market weekend. Um, it's just 166 00:08:35,960 --> 00:08:39,280 Speaker 1: that there's a lot of demand for workers. In fact, 167 00:08:40,040 --> 00:08:42,240 Speaker 1: if you if you look at the supply of workers 168 00:08:42,400 --> 00:08:46,480 Speaker 1: versus demand for workers, demand for for US workers is 169 00:08:46,520 --> 00:08:50,320 Speaker 1: now more than five million greater than the available supply, 170 00:08:50,400 --> 00:08:53,320 Speaker 1: and the available supply consists of people who were either 171 00:08:53,360 --> 00:08:55,959 Speaker 1: working or actively looking for a job. So this this 172 00:08:56,000 --> 00:08:58,440 Speaker 1: is this was not the case before the pandemic. The 173 00:08:58,480 --> 00:09:03,439 Speaker 1: pandemic really had a significant left a list lasting marks 174 00:09:03,520 --> 00:09:06,920 Speaker 1: so far on labor supply in the United States. Labor 175 00:09:06,920 --> 00:09:10,480 Speaker 1: force participation rate came down, and there now is a 176 00:09:10,559 --> 00:09:13,640 Speaker 1: shortage of workers and it it feels it almost feels 177 00:09:13,640 --> 00:09:16,200 Speaker 1: more structural than cyclical, so that that's a that's a 178 00:09:16,240 --> 00:09:19,440 Speaker 1: significant issue. Now you've resisted I think saying what unemployment 179 00:09:19,520 --> 00:09:23,160 Speaker 1: rate would be acceptable to you? I think, but is 180 00:09:23,160 --> 00:09:26,400 Speaker 1: there an unemployment rate that you think would moderate inflation 181 00:09:26,520 --> 00:09:29,920 Speaker 1: such that you would tolerate unemployment at four percent, five percent, 182 00:09:30,080 --> 00:09:34,000 Speaker 1: six percent? I guess I think about it this way. Um, 183 00:09:34,040 --> 00:09:37,400 Speaker 1: you know are we have two goals that Congress is 184 00:09:37,440 --> 00:09:41,120 Speaker 1: assigned us, maximum employment and price stability. Price stability, as 185 00:09:41,120 --> 00:09:45,760 Speaker 1: we've agreed, is two percent inflation. Maximum employment means if 186 00:09:45,800 --> 00:09:48,280 Speaker 1: you want a job, you can get one. So right 187 00:09:48,280 --> 00:09:51,079 Speaker 1: now the labor market is at least at maximum employment. 188 00:09:51,080 --> 00:09:52,840 Speaker 1: By many would say that it that it is out 189 00:09:52,840 --> 00:09:55,520 Speaker 1: of balance with more demand than there is supply. So 190 00:09:55,559 --> 00:09:58,400 Speaker 1: what we're trying to do is get inflation down we're 191 00:09:58,400 --> 00:10:02,040 Speaker 1: not We're not targeting, you know, a different unemployment rate. 192 00:10:02,240 --> 00:10:04,559 Speaker 1: We're trying. We're trying to use our tools to get 193 00:10:04,559 --> 00:10:07,720 Speaker 1: inflation to come down over time. In hindsight, would you 194 00:10:07,760 --> 00:10:10,679 Speaker 1: say that when COVID hit the economy and we chected 195 00:10:10,800 --> 00:10:14,880 Speaker 1: five trillion dollars of physical policy into the economy and 196 00:10:14,920 --> 00:10:18,080 Speaker 1: the Fed did quantity to be using and other related 197 00:10:18,080 --> 00:10:20,160 Speaker 1: things kept interest rates very low, would you say in 198 00:10:20,240 --> 00:10:23,040 Speaker 1: hindsight that was a mistake or was the right policy 199 00:10:23,040 --> 00:10:25,440 Speaker 1: at the time. So I think you have to go 200 00:10:25,480 --> 00:10:27,760 Speaker 1: back to the decisions that were made in real time, 201 00:10:27,960 --> 00:10:30,840 Speaker 1: and it was something nobody had ever seen. The global 202 00:10:30,840 --> 00:10:34,480 Speaker 1: economy came to a virtual stand still. People were talking 203 00:10:34,480 --> 00:10:37,679 Speaker 1: about depression. People were talking and we didn't think. We 204 00:10:37,760 --> 00:10:40,839 Speaker 1: had no idea when we would get vaccines that worked. 205 00:10:41,240 --> 00:10:43,600 Speaker 1: So Congress took very strong measures, and we took very 206 00:10:43,600 --> 00:10:46,559 Speaker 1: strong measures. And you see where the economy is. You've 207 00:10:46,559 --> 00:10:48,440 Speaker 1: got a very very strong labor market, but you have 208 00:10:48,520 --> 00:10:51,080 Speaker 1: high inflation. As I mentioned, we're at the beginning of 209 00:10:51,080 --> 00:10:53,400 Speaker 1: getting that down. If you look around the world though, 210 00:10:53,480 --> 00:10:57,439 Speaker 1: at other countries, they're also experiencing high inflation, including countries 211 00:10:57,480 --> 00:11:00,320 Speaker 1: that didn't that didn't do that as much as we did, 212 00:11:00,440 --> 00:11:02,800 Speaker 1: either from a fiscal or monetary standpoint. So that that 213 00:11:02,880 --> 00:11:05,319 Speaker 1: tells you though that a big part of this inflation 214 00:11:05,440 --> 00:11:09,960 Speaker 1: is actually related to the you know, the pandemic itself 215 00:11:10,000 --> 00:11:12,320 Speaker 1: to shut down and in the reopening. That's a big 216 00:11:12,360 --> 00:11:15,640 Speaker 1: part of it. The quantitative using program has increased the 217 00:11:15,640 --> 00:11:17,640 Speaker 1: balance sheet. I guess of the FED, and what is 218 00:11:17,679 --> 00:11:20,760 Speaker 1: your balance sheet now? I think it's eight point four 219 00:11:20,800 --> 00:11:25,400 Speaker 1: trillion dollars if you must sound like you know, found 220 00:11:25,679 --> 00:11:28,560 Speaker 1: eight point that was yesterday's not? Okay? Alright? Eight point 221 00:11:28,559 --> 00:11:31,880 Speaker 1: four trilla um? What would you like it to get 222 00:11:31,920 --> 00:11:34,200 Speaker 1: down to over the next year or two? Is there 223 00:11:34,280 --> 00:11:36,840 Speaker 1: some lower number? So we are in the process of 224 00:11:36,840 --> 00:11:41,040 Speaker 1: shrinking the balance sheet actively actually passively, is I should say? 225 00:11:41,080 --> 00:11:43,720 Speaker 1: So what happens is his treasury securities on our balance 226 00:11:43,760 --> 00:11:46,920 Speaker 1: sheet mature up to a cap, a monthly cap. We 227 00:11:47,280 --> 00:11:49,880 Speaker 1: we that the balance sheet shrinks in that amount. Same 228 00:11:49,880 --> 00:11:53,000 Speaker 1: thing with mortgage backed securities as they are prepaid, or 229 00:11:53,040 --> 00:11:56,440 Speaker 1: so we we the balance sheet is shrinking in terms 230 00:11:56,440 --> 00:11:58,280 Speaker 1: of the target level of it. We haven't put a 231 00:11:58,320 --> 00:12:01,120 Speaker 1: specific dollar number on it. The idea is we're in 232 00:12:01,120 --> 00:12:05,640 Speaker 1: a regime of ample reserves reserves are basically deposits at 233 00:12:05,679 --> 00:12:08,199 Speaker 1: the at the reserve banks. And when we get close 234 00:12:08,240 --> 00:12:11,840 Speaker 1: to that level where we feel that we're reserves are ample, 235 00:12:12,520 --> 00:12:15,040 Speaker 1: kind of where we were before the pandemic, then we'll 236 00:12:15,080 --> 00:12:17,360 Speaker 1: slow down and we'll sort of test where we are, 237 00:12:17,400 --> 00:12:19,280 Speaker 1: and but it'll be a couple of years, we think, 238 00:12:19,320 --> 00:12:21,280 Speaker 1: till we get to that level. The FED does not 239 00:12:21,880 --> 00:12:24,679 Speaker 1: sell securities. They wait for them to mature and then 240 00:12:24,679 --> 00:12:27,400 Speaker 1: you just uh cash them in. You don't. You're not 241 00:12:27,440 --> 00:12:30,200 Speaker 1: in the market selling securities that are not yet mature. 242 00:12:30,280 --> 00:12:33,000 Speaker 1: Is that correct? That is correct. It's also correct though 243 00:12:33,000 --> 00:12:35,880 Speaker 1: that we've said we would consider sales of mortgage backed securities. 244 00:12:35,920 --> 00:12:37,880 Speaker 1: But I will tell you that's that's not something that 245 00:12:38,040 --> 00:12:40,600 Speaker 1: is on the on the list of active things things 246 00:12:40,640 --> 00:12:43,280 Speaker 1: and being actively considered. So some people that are worried 247 00:12:43,280 --> 00:12:46,000 Speaker 1: about the federal debt limit and that we might not 248 00:12:46,840 --> 00:12:48,679 Speaker 1: we have an extended on time, we have thirty one 249 00:12:48,720 --> 00:12:51,440 Speaker 1: point four trillion dollars of debt? Are you a little 250 00:12:51,480 --> 00:12:55,160 Speaker 1: worried about the debt limit not getting extended? So the 251 00:12:55,200 --> 00:12:58,840 Speaker 1: debt limit is really something for the fiscal authorities to 252 00:12:59,200 --> 00:13:01,640 Speaker 1: deal with. The Our only role in this is that 253 00:13:01,679 --> 00:13:03,960 Speaker 1: we're that we're the fiscal agent of the Treasury Department. 254 00:13:04,000 --> 00:13:05,960 Speaker 1: We're not a policy maker on that. And I will 255 00:13:06,000 --> 00:13:08,959 Speaker 1: just say this, this can this really can only end 256 00:13:09,000 --> 00:13:11,079 Speaker 1: one way, and that is with Congress raising the debt 257 00:13:11,120 --> 00:13:14,040 Speaker 1: ceiling in a timely fashion so that the US can 258 00:13:14,040 --> 00:13:16,840 Speaker 1: pay all of its bills one and as do. That's 259 00:13:16,840 --> 00:13:19,640 Speaker 1: what has to happen. And if that doesn't happen, no 260 00:13:19,679 --> 00:13:22,320 Speaker 1: one should think that the FED has the ability to 261 00:13:22,400 --> 00:13:25,800 Speaker 1: shield the financial markets or the economy from the consequences 262 00:13:25,840 --> 00:13:28,840 Speaker 1: of moving too slow. So you don't have any program 263 00:13:29,000 --> 00:13:31,920 Speaker 1: in place ready to go if in fact that limit 264 00:13:31,960 --> 00:13:34,319 Speaker 1: isn't passed in time. This is something that Congress has 265 00:13:34,320 --> 00:13:37,040 Speaker 1: to deal with. And the same that the so called 266 00:13:37,160 --> 00:13:40,800 Speaker 1: trillion dollar gold coin solution is not one year in 267 00:13:40,840 --> 00:13:43,600 Speaker 1: favor of I guess, as I said, this ends in 268 00:13:43,679 --> 00:13:46,800 Speaker 1: only one way, and that way is Congress voting to 269 00:13:46,840 --> 00:13:48,840 Speaker 1: raise the debt ceiling so that the US can pay 270 00:13:48,880 --> 00:13:52,160 Speaker 1: all of our bills. Okay. In terms of consultation, um, 271 00:13:52,320 --> 00:13:55,480 Speaker 1: do you consult regularly with the Treasury Secretary or the 272 00:13:55,480 --> 00:13:57,880 Speaker 1: head of the National Economic Council or the President United States? 273 00:13:57,880 --> 00:14:01,040 Speaker 1: How do you kind of relate to the administration for 274 00:14:01,120 --> 00:14:03,679 Speaker 1: a long long time, you know, sixty or seventy years there. 275 00:14:03,800 --> 00:14:06,920 Speaker 1: I think there's been a weekly breakfast or lunch with 276 00:14:06,960 --> 00:14:09,400 Speaker 1: the Treasury Secretary and the FED Chair. And that's what 277 00:14:09,520 --> 00:14:13,040 Speaker 1: I've had with with treasure secretaries that I've had as 278 00:14:13,080 --> 00:14:17,120 Speaker 1: FED Chair. I've also had a regular article it called 279 00:14:17,200 --> 00:14:19,880 Speaker 1: irregular Lunches with the head of the NBC. We also 280 00:14:19,920 --> 00:14:24,040 Speaker 1: have regularly regularly scheduled lunches with the Council of Economic Advisors. 281 00:14:24,040 --> 00:14:26,920 Speaker 1: And that's that's really the that's the that's the institutional 282 00:14:27,000 --> 00:14:29,920 Speaker 1: structure of our of our contact with the administration. So 283 00:14:30,080 --> 00:14:32,200 Speaker 1: and the way the FED works today. If you could 284 00:14:32,320 --> 00:14:35,720 Speaker 1: reconstruct the operations of the FED, you know, would you 285 00:14:35,840 --> 00:14:38,920 Speaker 1: change the legislation anyway? Would you think the FED operates 286 00:14:38,920 --> 00:14:40,760 Speaker 1: in a in a way that's as efficient as you 287 00:14:40,800 --> 00:14:44,240 Speaker 1: can realistically operate. We're not looking for any changes to 288 00:14:44,280 --> 00:14:46,800 Speaker 1: the Fellow Reserve Act. I mean, I think it does work. 289 00:14:47,560 --> 00:14:50,000 Speaker 1: The structure that I discussed earlier, where you've got the 290 00:14:50,000 --> 00:14:54,680 Speaker 1: twelve Reserve Bank presidents coming in. What that assures really 291 00:14:54,920 --> 00:14:58,600 Speaker 1: it institutionalizes diversity of thought. So we get different people 292 00:14:58,600 --> 00:15:02,080 Speaker 1: coming in who've got different background, different careers, and they 293 00:15:02,120 --> 00:15:04,280 Speaker 1: and they think different ways, and I think that's enormously 294 00:15:04,320 --> 00:15:06,880 Speaker 1: beneficial to our decision making process. So there has been 295 00:15:06,920 --> 00:15:10,680 Speaker 1: discussion recently about the FED, some FED members, pread board 296 00:15:10,680 --> 00:15:14,720 Speaker 1: presidents selling their securities and maybe not doing everything they 297 00:15:14,760 --> 00:15:16,600 Speaker 1: were supposed to do in terms of disclosing it. What 298 00:15:16,720 --> 00:15:20,600 Speaker 1: have you done to fix that process? We put a 299 00:15:20,640 --> 00:15:22,640 Speaker 1: new system in a new set of rules in place, 300 00:15:23,040 --> 00:15:25,760 Speaker 1: which I think are best in class for a public 301 00:15:25,800 --> 00:15:28,800 Speaker 1: institution like the FED. And uh, you know, the the 302 00:15:28,840 --> 00:15:33,000 Speaker 1: innovations were that that if someone wants to sell something 303 00:15:33,000 --> 00:15:34,800 Speaker 1: that they own or buy something, they have to clear 304 00:15:34,840 --> 00:15:37,440 Speaker 1: them at advance with with staff at the Board of Governors, 305 00:15:37,480 --> 00:15:39,880 Speaker 1: and then you've got to wait forty five days for 306 00:15:40,040 --> 00:15:43,840 Speaker 1: that to execute. Also, you can't own individual stocks and 307 00:15:43,880 --> 00:15:45,960 Speaker 1: there there you can only do these you can only 308 00:15:46,000 --> 00:15:50,320 Speaker 1: authorize these transactions or execute them during specific times. Um. 309 00:15:50,440 --> 00:15:52,080 Speaker 1: And it's you know, it's it's a and we we 310 00:15:52,120 --> 00:15:55,280 Speaker 1: just of course all of these are disclosed. If you're 311 00:15:55,720 --> 00:15:58,600 Speaker 1: if your idea is to go to trade things, buy 312 00:15:58,640 --> 00:16:01,000 Speaker 1: and sell them because you think, you know, you think 313 00:16:01,040 --> 00:16:02,720 Speaker 1: this stock is cheaping that kind of thing, that's just 314 00:16:02,800 --> 00:16:05,400 Speaker 1: not something that will work. What is the salary of 315 00:16:05,400 --> 00:16:09,160 Speaker 1: the chairman of the Federal Reserve Board. It's um, it's 316 00:16:09,200 --> 00:16:12,200 Speaker 1: around a hundred and ninety dollars, I believe, okay, So 317 00:16:12,320 --> 00:16:14,400 Speaker 1: you're you live on the d dollars. If you need 318 00:16:14,440 --> 00:16:16,200 Speaker 1: to sell something, what do you do? You have to 319 00:16:16,240 --> 00:16:18,920 Speaker 1: clear it for forty five days? Or that's right. We 320 00:16:18,920 --> 00:16:20,920 Speaker 1: we've you know too, if we we have family expenses 321 00:16:20,920 --> 00:16:23,520 Speaker 1: that if we have them that exceed myself even we 322 00:16:23,520 --> 00:16:25,480 Speaker 1: have to sell and as I think that fair salary 323 00:16:25,520 --> 00:16:33,560 Speaker 1: for the job or I do yes, okay, So today, um, 324 00:16:33,600 --> 00:16:37,120 Speaker 1: how do you coordinate with central banks, let's say it 325 00:16:37,280 --> 00:16:40,840 Speaker 1: in England or Japan or China. Do you have regular 326 00:16:40,880 --> 00:16:44,000 Speaker 1: conversations with them about what they're doing? We do, you know, 327 00:16:44,160 --> 00:16:47,160 Speaker 1: And I meet six times a year in Switzerland with 328 00:16:47,240 --> 00:16:49,600 Speaker 1: the heads of all the many, many central banks, you know, 329 00:16:49,640 --> 00:16:51,720 Speaker 1: even the even the small and medium sized ones at 330 00:16:51,920 --> 00:16:55,000 Speaker 1: at in Bosil, at the Bank for International Settlements. In addition, 331 00:16:55,080 --> 00:16:58,840 Speaker 1: among the major central banks, I have regular dialogues going 332 00:16:58,880 --> 00:17:02,360 Speaker 1: with with most of them. And so we're talking though 333 00:17:02,400 --> 00:17:06,280 Speaker 1: about is really what's happening in the economy and how 334 00:17:06,280 --> 00:17:07,960 Speaker 1: are you thinking about policy and that kind of thing. 335 00:17:08,240 --> 00:17:11,720 Speaker 1: It's very important that we keep those discussions going because 336 00:17:12,119 --> 00:17:14,320 Speaker 1: particularly in a crisis, You're gonna need to know each other, 337 00:17:14,320 --> 00:17:15,720 Speaker 1: and you're gonna need to know you're gonna be able 338 00:17:15,720 --> 00:17:17,680 Speaker 1: to trust each other. And do you think the US 339 00:17:17,920 --> 00:17:20,920 Speaker 1: economy is pretty much in control of its own inflation rate? 340 00:17:21,080 --> 00:17:24,760 Speaker 1: Or there events outside the United States, like what China 341 00:17:24,840 --> 00:17:27,600 Speaker 1: is doing or the Ukraine War that are affecting inflation 342 00:17:27,800 --> 00:17:30,520 Speaker 1: and make you nervous about where inflation might be going. 343 00:17:31,520 --> 00:17:33,960 Speaker 1: We have the tools, the FED has the tools to 344 00:17:34,160 --> 00:17:39,200 Speaker 1: achieve our two percent goal over time. But uh, inflation 345 00:17:39,240 --> 00:17:41,760 Speaker 1: in the United States is of course very closely related 346 00:17:41,800 --> 00:17:44,200 Speaker 1: to things that happen here, including the balance between supply 347 00:17:44,200 --> 00:17:47,600 Speaker 1: and demand. It's also affected by, for example, commodity prices 348 00:17:47,640 --> 00:17:50,199 Speaker 1: that are really set on the global markets. You know, 349 00:17:50,280 --> 00:17:54,080 Speaker 1: oil and man agricultural commodities are priced globally, so that 350 00:17:54,160 --> 00:17:57,600 Speaker 1: there there are certainly it's an integrated global economy and 351 00:17:57,640 --> 00:18:00,280 Speaker 1: global markets, and we you know we are, or that 352 00:18:00,880 --> 00:18:03,560 Speaker 1: you get data from all the US government agencies, But 353 00:18:03,600 --> 00:18:05,679 Speaker 1: do you ever use anecdotal things like you go to 354 00:18:05,720 --> 00:18:08,080 Speaker 1: the supermarket and mices are high and you say this 355 00:18:08,200 --> 00:18:10,000 Speaker 1: price is high, or how do you get you ever 356 00:18:10,000 --> 00:18:12,080 Speaker 1: get anecdotal things? Or people ever call you up our 357 00:18:12,119 --> 00:18:14,000 Speaker 1: friends and say, by the way you should do this 358 00:18:14,119 --> 00:18:16,440 Speaker 1: or that. You ever get that kind of information is 359 00:18:16,440 --> 00:18:20,439 Speaker 1: you only get it from the government reports. I mostly 360 00:18:20,480 --> 00:18:25,119 Speaker 1: get data, but I will say the the I do 361 00:18:25,200 --> 00:18:28,320 Speaker 1: believe that actdotal information is very useful. And one of 362 00:18:28,320 --> 00:18:30,800 Speaker 1: the things the Reserve banks are great at is all 363 00:18:30,840 --> 00:18:33,679 Speaker 1: twelve of them have big operations where they talk to 364 00:18:33,840 --> 00:18:38,040 Speaker 1: businesses and nonprofits, universities in every sector of the of 365 00:18:38,080 --> 00:18:40,240 Speaker 1: the country and the economy, and they bring that back 366 00:18:40,760 --> 00:18:42,920 Speaker 1: to the FMC meetings and they talk about what they're 367 00:18:42,920 --> 00:18:47,720 Speaker 1: seeing because often, you know, but steering at data is great, 368 00:18:47,800 --> 00:18:50,240 Speaker 1: but you need to need to have a story, and 369 00:18:50,840 --> 00:18:54,200 Speaker 1: I think hearing the stories that people tell it does 370 00:18:54,280 --> 00:18:57,640 Speaker 1: help me to sort of, you know, assess what's going 371 00:18:57,680 --> 00:19:00,480 Speaker 1: on out there. So, as the chairman of the Federal 372 00:19:00,520 --> 00:19:03,680 Speaker 1: Reserve is obviously an important job, how do you reduce 373 00:19:03,840 --> 00:19:07,040 Speaker 1: the stress level you have? I mean, you can't be 374 00:19:07,560 --> 00:19:10,520 Speaker 1: watching economic numbers all the time. So what do you 375 00:19:10,560 --> 00:19:12,960 Speaker 1: do to relieve the stress? Other than interviews like this? 376 00:19:15,600 --> 00:19:19,119 Speaker 1: You know the usual things. I read pretty light fiction, 377 00:19:19,240 --> 00:19:22,120 Speaker 1: detective and spy fiction. I exercise as much as I can, 378 00:19:22,320 --> 00:19:24,879 Speaker 1: as you know, I'd like to ride my bike, I 379 00:19:25,000 --> 00:19:27,760 Speaker 1: play the guitar, play music. M say, is that safe 380 00:19:27,840 --> 00:19:31,680 Speaker 1: riding a bike? You know, dangerous and it's it's stayed. Sorry, 381 00:19:31,720 --> 00:19:34,600 Speaker 1: it's safe if you stay on the bike and they're 382 00:19:34,600 --> 00:19:36,240 Speaker 1: good at That's what I tried. And you still play 383 00:19:36,320 --> 00:19:39,199 Speaker 1: the guitar or I do? I do? Yeah? Bare hair 384 00:19:39,280 --> 00:19:41,800 Speaker 1: is awfully short for playing the guitar. Interest need longer hair, 385 00:19:42,840 --> 00:19:44,600 Speaker 1: your hair longer when you were younger and grey? Or 386 00:19:44,640 --> 00:19:47,000 Speaker 1: it's too great too, it's okay. So let me ask 387 00:19:47,040 --> 00:19:51,080 Speaker 1: you about, um, the the issue of what it's like 388 00:19:51,160 --> 00:19:54,080 Speaker 1: to be chairman of the FED. You you can't go 389 00:19:54,280 --> 00:19:57,880 Speaker 1: have you regular friendship kind of dinners or meetings. Can 390 00:19:58,080 --> 00:20:00,560 Speaker 1: people people treat you much differently, I assume than they 391 00:20:00,800 --> 00:20:03,200 Speaker 1: used to write. When you go to a restaurant, are 392 00:20:03,240 --> 00:20:05,920 Speaker 1: people listening to what you're saying or something like that. 393 00:20:07,040 --> 00:20:09,480 Speaker 1: I have always thought that my jokes were funny, David, 394 00:20:10,520 --> 00:20:15,119 Speaker 1: but no, so yes, it's um, I've never been a 395 00:20:15,119 --> 00:20:17,679 Speaker 1: public figure before like this, and it's very different. But 396 00:20:18,200 --> 00:20:21,160 Speaker 1: you know, it's it's a great honor to serve. But yeah, 397 00:20:21,160 --> 00:20:22,679 Speaker 1: if you when you go in public places, you have 398 00:20:22,720 --> 00:20:25,920 Speaker 1: to be very careful about and um, which is the 399 00:20:25,960 --> 00:20:28,360 Speaker 1: president Nited States ever call you with any advice or 400 00:20:28,400 --> 00:20:31,200 Speaker 1: you don't really say he doesn't the President Trump ever 401 00:20:31,240 --> 00:20:34,320 Speaker 1: call you or President but I never call you or well, 402 00:20:34,320 --> 00:20:37,080 Speaker 1: I think it's a matter of public record that President 403 00:20:37,080 --> 00:20:38,800 Speaker 1: Trump did used to call me from time to time. 404 00:20:40,160 --> 00:20:47,000 Speaker 1: What did he call you? Um, No, I haven't had 405 00:20:47,000 --> 00:20:49,240 Speaker 1: that kind of I haven't gotten any calls from from 406 00:20:49,240 --> 00:20:52,760 Speaker 1: President Biden. Okay. So the biggest challenge you have now 407 00:20:53,200 --> 00:20:55,280 Speaker 1: he is being able to keep a straight face, not 408 00:20:55,400 --> 00:20:58,080 Speaker 1: telling people what you're gonna do in the future, and 409 00:20:58,160 --> 00:20:59,879 Speaker 1: look at the data and then come up with the 410 00:21:00,080 --> 00:21:03,800 Speaker 1: right solution. Right, that's mostly it. I think the biggest 411 00:21:03,840 --> 00:21:07,600 Speaker 1: challenge we face at the FED is completing the process 412 00:21:07,880 --> 00:21:10,639 Speaker 1: of getting inflation down to two percent. And what what 413 00:21:10,680 --> 00:21:14,040 Speaker 1: I want to point out is that we're seeing disinflation 414 00:21:14,200 --> 00:21:17,480 Speaker 1: in the goods sector. We're going we expect to see 415 00:21:17,520 --> 00:21:20,680 Speaker 1: it in the housing services sector. And that's that's These 416 00:21:20,720 --> 00:21:22,880 Speaker 1: are the three parts of the of the core PC 417 00:21:23,440 --> 00:21:26,879 Speaker 1: inflation index that we look at. There's fifty six percent 418 00:21:26,920 --> 00:21:29,080 Speaker 1: of the economy, which is the rest of the services sector. 419 00:21:29,119 --> 00:21:32,000 Speaker 1: It's the biggest part obviously, and we're not seeing disinflation 420 00:21:32,040 --> 00:21:34,159 Speaker 1: there yet. And that's going to take some time, and 421 00:21:34,280 --> 00:21:36,919 Speaker 1: I just we we need to be patient, and we 422 00:21:36,960 --> 00:21:39,720 Speaker 1: think we're gonna need to keep rates at a restrictive 423 00:21:39,800 --> 00:21:41,800 Speaker 1: level for you know, for a period of time before 424 00:21:41,840 --> 00:21:43,840 Speaker 1: that comes down. So when you made your speech the 425 00:21:43,880 --> 00:21:45,880 Speaker 1: other day, when you talked about the FED discount rate, 426 00:21:45,920 --> 00:21:49,439 Speaker 1: you use the word disinflation eleven times, not that I'm counting, 427 00:21:49,640 --> 00:21:52,600 Speaker 1: but eleven times, so you were saying that disinflation is 428 00:21:52,680 --> 00:21:56,160 Speaker 1: beginning to appear. Would you use that word eleven times 429 00:21:56,200 --> 00:22:00,200 Speaker 1: again today after the jobs report or would less trying 430 00:22:00,240 --> 00:22:04,000 Speaker 1: to use that word so much? I might use the 431 00:22:04,000 --> 00:22:07,280 Speaker 1: the I might say, I would certainly use the word disinflation, yes, 432 00:22:07,280 --> 00:22:10,120 Speaker 1: which means declining inflation. And I would call it declining 433 00:22:10,119 --> 00:22:15,840 Speaker 1: inflation to for and today, what about the debt total 434 00:22:15,920 --> 00:22:19,119 Speaker 1: debt of the United States, which produces some inflation thirty 435 00:22:19,119 --> 00:22:21,360 Speaker 1: one point where you leaving aside the debt limit, Are 436 00:22:21,400 --> 00:22:24,159 Speaker 1: you worried about the total indebtiness the United States loosing 437 00:22:24,160 --> 00:22:26,760 Speaker 1: inflation or you don't think that's a big problem. Yeah, 438 00:22:26,760 --> 00:22:29,399 Speaker 1: it's not. The level of debt. I would say. The 439 00:22:29,440 --> 00:22:32,119 Speaker 1: thing say about the level of debt is really it's not. 440 00:22:32,160 --> 00:22:33,920 Speaker 1: First of all, it's not the fed's job. But I 441 00:22:33,960 --> 00:22:37,359 Speaker 1: would say that we we we're on an unsustainable fiscal 442 00:22:37,359 --> 00:22:40,040 Speaker 1: path at the federal government level. That has been the 443 00:22:40,040 --> 00:22:42,639 Speaker 1: case for some time, and it's something we will have 444 00:22:42,720 --> 00:22:45,760 Speaker 1: to deal with it. Better to deal with it sooner 445 00:22:45,960 --> 00:22:49,480 Speaker 1: rather than later. Now, many of your predecessors were economists, 446 00:22:49,520 --> 00:22:53,280 Speaker 1: your trained as a lawyer. Um so um. They spoken 447 00:22:53,320 --> 00:22:56,320 Speaker 1: what I call FED speak, which is to say incomprehensible 448 00:22:56,440 --> 00:22:59,959 Speaker 1: kind of economic language, which was done intentionally, I think 449 00:23:00,000 --> 00:23:02,600 Speaker 1: because sometimes they would say, so you tend to speak 450 00:23:02,600 --> 00:23:05,960 Speaker 1: in English. Ums. That have been a plus to saying 451 00:23:05,960 --> 00:23:07,959 Speaker 1: when you're dealing with members of Congress, they can understand 452 00:23:08,000 --> 00:23:09,919 Speaker 1: what you're saying. I like to think, so you know, 453 00:23:09,920 --> 00:23:13,359 Speaker 1: I've made it a real priority to to engage a 454 00:23:13,400 --> 00:23:16,119 Speaker 1: lot with Congress. In our system of government, unlike the 455 00:23:16,160 --> 00:23:19,680 Speaker 1: parliamentary system, our accountability is to the legislature. It's to 456 00:23:20,320 --> 00:23:22,480 Speaker 1: send it in the House, in particularly the two oversight 457 00:23:22,480 --> 00:23:26,480 Speaker 1: committee Senate Banking and House Financial Services. And I think 458 00:23:26,480 --> 00:23:29,320 Speaker 1: it's very important that we respect that and explain what 459 00:23:29,359 --> 00:23:31,720 Speaker 1: we're doing and listen to their concerns and and share 460 00:23:31,720 --> 00:23:34,120 Speaker 1: with them how we're thinking about things. And I think 461 00:23:34,119 --> 00:23:36,720 Speaker 1: they appreciate that and but that is, you know, we 462 00:23:36,800 --> 00:23:39,639 Speaker 1: have this precious independence. We can't be removed from office. 463 00:23:39,680 --> 00:23:42,000 Speaker 1: We serve these long terms. The other side of that 464 00:23:42,080 --> 00:23:44,639 Speaker 1: has to be accountability. And the way for us to 465 00:23:44,640 --> 00:23:47,919 Speaker 1: get accountability is to be as transparent as possible and 466 00:23:47,960 --> 00:23:49,680 Speaker 1: try to reach you know, the people of the United 467 00:23:49,720 --> 00:23:52,400 Speaker 1: States through their elected representatives. So this is a very 468 00:23:52,480 --> 00:23:54,919 Speaker 1: high priority and we're gonna keep doing so. When you 469 00:23:55,000 --> 00:23:57,280 Speaker 1: testify in front of Congress, how much time does it 470 00:23:57,320 --> 00:23:59,320 Speaker 1: take to prepare for that? Is that a one hour 471 00:23:59,400 --> 00:24:02,240 Speaker 1: preparation session or is it a one day session or 472 00:24:02,320 --> 00:24:05,560 Speaker 1: a one week session? You know, they're supposed to these 473 00:24:05,600 --> 00:24:08,000 Speaker 1: are supposed to be monetary policy hearing is under the 474 00:24:08,040 --> 00:24:11,920 Speaker 1: Humphrey Hawkins Act, and they're actually on any anything that's 475 00:24:12,000 --> 00:24:15,000 Speaker 1: any political issues. So it's it's quite extensive. You have 476 00:24:15,040 --> 00:24:18,040 Speaker 1: to prepare for everything that the FIT is involved in 477 00:24:18,040 --> 00:24:19,719 Speaker 1: and many things that the FIT is not involved in. 478 00:24:20,000 --> 00:24:22,880 Speaker 1: Uh So it's it's a lot of preparations. So when 479 00:24:22,880 --> 00:24:24,800 Speaker 1: you get questions from some members, you have to bite 480 00:24:24,840 --> 00:24:26,960 Speaker 1: your tongue and say, why are you asking a question 481 00:24:27,000 --> 00:24:29,600 Speaker 1: like that? Or you never have that problem? That never happens, 482 00:24:29,640 --> 00:24:34,240 Speaker 1: never happens, Okay, okay, all right, well good. UM, So today, 483 00:24:34,440 --> 00:24:37,560 Speaker 1: as you look at um, the country's economy, what is 484 00:24:37,600 --> 00:24:41,560 Speaker 1: the biggest worry you have about inflation? Is it just that, um, 485 00:24:41,880 --> 00:24:45,280 Speaker 1: the physical policy is not completely under control, we have 486 00:24:45,359 --> 00:24:49,640 Speaker 1: exogious events outside. What is your biggest worry about inflation today? Well, 487 00:24:49,800 --> 00:24:52,320 Speaker 1: it's it's kind of what I was saying earlier, which 488 00:24:52,359 --> 00:24:55,320 Speaker 1: is we're just at the beginning of this process, right, 489 00:24:55,520 --> 00:24:58,320 Speaker 1: goods inflation, so we need that process to continue. Goods 490 00:24:58,800 --> 00:25:02,480 Speaker 1: that the whole thing began. The inflation began with people 491 00:25:02,560 --> 00:25:04,960 Speaker 1: not being able to buy services instead buying goods, and 492 00:25:05,000 --> 00:25:08,480 Speaker 1: then global supply chains collapsing and so you couldn't get goods, 493 00:25:08,480 --> 00:25:10,520 Speaker 1: and prices of goods one up, and that's where it started. 494 00:25:10,600 --> 00:25:13,639 Speaker 1: But that is now starting to get better as supply 495 00:25:13,720 --> 00:25:17,440 Speaker 1: chains are improving and as people are rotating their purchases 496 00:25:17,480 --> 00:25:20,400 Speaker 1: back to services. You move on though we're not seeing 497 00:25:20,440 --> 00:25:23,000 Speaker 1: it yet in housing services, which is either rent or 498 00:25:23,320 --> 00:25:26,399 Speaker 1: or the ownership the imputed costs of house ownership. But 499 00:25:26,520 --> 00:25:28,440 Speaker 1: we expect to see that, so we need that to happen. 500 00:25:28,480 --> 00:25:30,680 Speaker 1: That's another big part of the economy. It's got to come. 501 00:25:30,720 --> 00:25:32,800 Speaker 1: It should come in the second half of this year. 502 00:25:33,320 --> 00:25:35,480 Speaker 1: Then the biggest piece of it, and what I worry 503 00:25:35,480 --> 00:25:37,280 Speaker 1: about the most is when are we going to see 504 00:25:37,320 --> 00:25:43,320 Speaker 1: disinfo disinflation or declining inflation in core services ex housing. 505 00:25:43,680 --> 00:25:45,760 Speaker 1: So that's what I worry about. The last thing I 506 00:25:45,800 --> 00:25:48,720 Speaker 1: worry about is just another exogenous event. It's a risky 507 00:25:48,760 --> 00:25:51,399 Speaker 1: world out there, uh, you know, with the war in 508 00:25:51,520 --> 00:25:53,679 Speaker 1: Ukraine and the reopening of China, and you know we 509 00:25:53,960 --> 00:25:56,760 Speaker 1: there there are those are things that can affect our 510 00:25:56,800 --> 00:25:59,640 Speaker 1: economy and the path of inflation. Right, So the balloon 511 00:25:59,720 --> 00:26:01,639 Speaker 1: was not You're worried though, you don't care about the balloon. 512 00:26:02,320 --> 00:26:06,280 Speaker 1: It's not not within our ambit. Okay, So today the 513 00:26:06,280 --> 00:26:09,920 Speaker 1: Federal Reserve gets data from all over the country. And 514 00:26:10,520 --> 00:26:12,679 Speaker 1: are you convinced that you get the best data, you 515 00:26:12,720 --> 00:26:15,920 Speaker 1: have the best data collection methods, or do you think 516 00:26:15,960 --> 00:26:20,600 Speaker 1: it's not as modern as what Wall Street gets? We 517 00:26:20,800 --> 00:26:22,879 Speaker 1: so most of the data that we get are just 518 00:26:22,960 --> 00:26:24,960 Speaker 1: the same. You know, we don't collect the data on 519 00:26:25,040 --> 00:26:27,840 Speaker 1: unemployment or inflation or most things. So and most of 520 00:26:27,840 --> 00:26:31,119 Speaker 1: that's just government data, and a lot of that's, for example, 521 00:26:31,200 --> 00:26:33,880 Speaker 1: very high quality. The labor market data is very high quality. 522 00:26:34,160 --> 00:26:36,040 Speaker 1: We what we get, which I think is better and 523 00:26:36,119 --> 00:26:38,840 Speaker 1: different from what everybody else gets. Is what I mentioned earlier, 524 00:26:38,840 --> 00:26:42,760 Speaker 1: and that is the reserve banks putting together that the 525 00:26:42,840 --> 00:26:46,679 Speaker 1: bitness and the beige not not the page book, the 526 00:26:46,680 --> 00:26:49,359 Speaker 1: page book, the page book, putting together the beige book, 527 00:26:49,920 --> 00:26:53,280 Speaker 1: and also coming in and you know, sharing the anecdotes 528 00:26:53,440 --> 00:26:55,920 Speaker 1: and you know what they're hearing. What's happening with each 529 00:26:55,960 --> 00:26:59,720 Speaker 1: district is different. You have agricultural districts, districts and energy districts, 530 00:26:59,720 --> 00:27:03,480 Speaker 1: and so that I think, I think our anecdotal but 531 00:27:03,560 --> 00:27:06,040 Speaker 1: its just the hall of information we get through that 532 00:27:06,400 --> 00:27:09,320 Speaker 1: through that network is I don't I don't think anybody 533 00:27:09,359 --> 00:27:11,960 Speaker 1: else has that. So do you consult regularly with some 534 00:27:12,040 --> 00:27:14,520 Speaker 1: of your predecessors, I mean obviously wanted Secretary of the 535 00:27:14,520 --> 00:27:18,240 Speaker 1: Treasury now but Ben Bernacky for example, or I do 536 00:27:18,400 --> 00:27:20,960 Speaker 1: I I talked to former Chamber of Bannaky, I talked 537 00:27:21,000 --> 00:27:25,000 Speaker 1: to you know, Secretary Yellen. I still talk to Alan 538 00:27:25,040 --> 00:27:29,159 Speaker 1: Greenspan now and again. And when you're dealing with this 539 00:27:29,440 --> 00:27:32,680 Speaker 1: with your colleagues on the FED board and you disagree 540 00:27:32,720 --> 00:27:34,320 Speaker 1: with them, do you say, look, I'm the chairman of 541 00:27:34,359 --> 00:27:36,560 Speaker 1: the FED. I am the person who has to make 542 00:27:36,600 --> 00:27:38,800 Speaker 1: the final decision and this is what we should do, 543 00:27:39,080 --> 00:27:42,320 Speaker 1: or you don't quite do it that way. It's a 544 00:27:42,480 --> 00:27:46,920 Speaker 1: it's a process of reaching agreement, and um, I hear 545 00:27:47,080 --> 00:27:49,359 Speaker 1: what people have to say, I tell them what I think, 546 00:27:50,080 --> 00:27:51,600 Speaker 1: and then I'm the one who has to bring a 547 00:27:51,640 --> 00:27:53,880 Speaker 1: proposal in front of the full committee, not just the board, 548 00:27:53,920 --> 00:27:56,359 Speaker 1: in front of the full Committee on Monetary Policy. And 549 00:27:56,400 --> 00:27:58,560 Speaker 1: it works. You know, we have to reach an agreement, 550 00:27:58,720 --> 00:28:01,600 Speaker 1: and uh, you know, we get to a place. I 551 00:28:01,600 --> 00:28:04,760 Speaker 1: think you can tell today we are blessed with the 552 00:28:04,840 --> 00:28:08,240 Speaker 1: diversity of perspectives on the FMC with nineteen people. Of 553 00:28:08,280 --> 00:28:11,399 Speaker 1: course we are. But you have one thing that unites 554 00:28:11,440 --> 00:28:13,400 Speaker 1: all of us, and that is a very strong commitment 555 00:28:13,440 --> 00:28:16,760 Speaker 1: to getting inflation down. So in some parts of Washington, 556 00:28:16,760 --> 00:28:19,480 Speaker 1: people say, if you give me this, I'll give you that. 557 00:28:20,040 --> 00:28:22,080 Speaker 1: I'll trade this for that. You never do that at 558 00:28:22,080 --> 00:28:24,359 Speaker 1: the FED when you're coming up with the decision. I'll 559 00:28:24,400 --> 00:28:26,160 Speaker 1: do what you want if you do what I want. 560 00:28:26,240 --> 00:28:29,439 Speaker 1: That doesn't happen ever, not really. Okay, it's like you 561 00:28:29,480 --> 00:28:32,440 Speaker 1: mean a better office or something like that. Well, just uh, 562 00:28:32,480 --> 00:28:34,320 Speaker 1: you know, I'll say what you want me to say 563 00:28:34,359 --> 00:28:35,960 Speaker 1: if you say what I want you to say or something. 564 00:28:36,000 --> 00:28:39,480 Speaker 1: And that never happens, right, No, it doesn't happen. I mean, 565 00:28:39,920 --> 00:28:42,120 Speaker 1: And when you want to talk to members of the 566 00:28:42,520 --> 00:28:44,640 Speaker 1: of the board of the federals Ave Board, do you 567 00:28:44,680 --> 00:28:47,040 Speaker 1: go to their office or they come to your office? 568 00:28:48,200 --> 00:28:50,360 Speaker 1: I like to do both. I mean, I really don't 569 00:28:50,400 --> 00:28:52,120 Speaker 1: like to sit in my office all day and and 570 00:28:52,160 --> 00:28:53,880 Speaker 1: have just have people come to see me. I like 571 00:28:53,920 --> 00:28:55,680 Speaker 1: to go barge in on people. And you know, I 572 00:28:55,680 --> 00:28:57,680 Speaker 1: think it's much better to get up and walk around 573 00:28:57,680 --> 00:29:00,320 Speaker 1: and see people. The FED has been pretty good at 574 00:29:00,800 --> 00:29:04,360 Speaker 1: avoiding leaks of its decisions. How do you do that? 575 00:29:04,360 --> 00:29:06,360 Speaker 1: Because most people in Washington are not so good at that? 576 00:29:06,760 --> 00:29:09,040 Speaker 1: How do you avoid leaks? We do have. You know, 577 00:29:09,040 --> 00:29:12,080 Speaker 1: we've got very strict rules around confidentiality, particularly around the 578 00:29:12,120 --> 00:29:14,560 Speaker 1: written materials that we have. You know, we we published 579 00:29:14,600 --> 00:29:17,720 Speaker 1: these things internally for for the FMC, meaning the memos 580 00:29:17,720 --> 00:29:20,520 Speaker 1: and the Teal book and all that um. But the 581 00:29:20,720 --> 00:29:23,240 Speaker 1: other thing to remember, though, is you know, we're not 582 00:29:23,320 --> 00:29:26,000 Speaker 1: trying to hide our decisions from the public. We actually, 583 00:29:26,080 --> 00:29:30,000 Speaker 1: in the modern modern monetary policy, we want the public 584 00:29:30,040 --> 00:29:33,320 Speaker 1: to understand how we think, how we're thinking. And and 585 00:29:33,520 --> 00:29:36,240 Speaker 1: you know, if markets really understand how you're thinking in 586 00:29:36,280 --> 00:29:38,000 Speaker 1: a new a new piece of data comes in, the 587 00:29:38,000 --> 00:29:39,560 Speaker 1: markets will go where they're going to do this, and 588 00:29:39,880 --> 00:29:42,960 Speaker 1: it sort of happens organically. And that happened all last year. 589 00:29:43,000 --> 00:29:45,480 Speaker 1: As we were, you know, talking about raising rates. The 590 00:29:45,480 --> 00:29:48,840 Speaker 1: market priced in rate increases long before we actually enacted them. 591 00:29:48,880 --> 00:29:51,120 Speaker 1: So it's not we want to be transparent. We're not 592 00:29:51,160 --> 00:29:54,120 Speaker 1: looking to surprise markets with these decisions. From the time 593 00:29:54,120 --> 00:29:56,080 Speaker 1: that you make your decision on the f O m C. 594 00:29:56,280 --> 00:29:59,200 Speaker 1: Whatever time it is during the day, as your press 595 00:29:59,200 --> 00:30:02,800 Speaker 1: conference at two o'clock or something like that, your decision 596 00:30:02,880 --> 00:30:05,440 Speaker 1: is made by two o'clock or whatever it is or 597 00:30:05,480 --> 00:30:07,600 Speaker 1: something like that. So you got a half hour, but 598 00:30:07,720 --> 00:30:09,760 Speaker 1: you have to avoid leaks during that half hour because 599 00:30:09,800 --> 00:30:12,360 Speaker 1: that's very market sensitive information. How do you make sure 600 00:30:12,480 --> 00:30:15,560 Speaker 1: nobody is calling their spouse and saying, guess what we're 601 00:30:15,560 --> 00:30:18,880 Speaker 1: gonna do? Well, we you know, we people take this 602 00:30:19,080 --> 00:30:21,600 Speaker 1: very seriously. None of that happens, you know, you mean, 603 00:30:21,640 --> 00:30:23,719 Speaker 1: you're you're taking your professional life in your hands if 604 00:30:23,760 --> 00:30:25,520 Speaker 1: you do something like that. I think people have a 605 00:30:25,560 --> 00:30:28,480 Speaker 1: sense of self preservation, so they're you know, people are 606 00:30:28,560 --> 00:30:31,720 Speaker 1: very careful about about this information. There is a period 607 00:30:31,720 --> 00:30:34,120 Speaker 1: of a couple of hours after the meeting and until 608 00:30:34,120 --> 00:30:36,680 Speaker 1: we announced the decision, but we actually announced the decision 609 00:30:36,720 --> 00:30:40,400 Speaker 1: at two the press conferences at two thirty. So I think, 610 00:30:40,480 --> 00:30:43,160 Speaker 1: you know, it's a fairly small group of senior staff 611 00:30:43,240 --> 00:30:46,640 Speaker 1: and policymakers that that kind of know what happened and 612 00:30:46,640 --> 00:30:48,680 Speaker 1: what we're going to say, and I just think everybody 613 00:30:48,760 --> 00:30:51,640 Speaker 1: understands that that you've just got to be really careful 614 00:30:51,680 --> 00:30:55,040 Speaker 1: with that. To go back to jobs discussion, if next 615 00:30:55,080 --> 00:31:00,640 Speaker 1: month you had another five nineteen thousand jobs created net jobs, 616 00:31:01,400 --> 00:31:03,480 Speaker 1: would that be good or bad from your point of view? 617 00:31:03,480 --> 00:31:05,840 Speaker 1: Have we got a lot of people working but maybe 618 00:31:06,000 --> 00:31:10,880 Speaker 1: producing more inflation? So we don't. We don't have the 619 00:31:10,960 --> 00:31:12,880 Speaker 1: luxury of thinking about good or bad. It just is 620 00:31:12,920 --> 00:31:15,400 Speaker 1: what it is. So but I would say again we 621 00:31:16,600 --> 00:31:20,520 Speaker 1: most most analysts, most economists would say that to get 622 00:31:20,560 --> 00:31:24,160 Speaker 1: inflation down from high levels that we've had, if you 623 00:31:24,160 --> 00:31:26,920 Speaker 1: look at history, there is some softening and labor market 624 00:31:26,960 --> 00:31:29,280 Speaker 1: conditions that goes along with that, and that is still 625 00:31:29,840 --> 00:31:32,959 Speaker 1: you know, very possible and indeed likely here some softing 626 00:31:32,960 --> 00:31:36,760 Speaker 1: and labor market conditions. However, this cycle is different from 627 00:31:36,800 --> 00:31:39,560 Speaker 1: other cycles because of where it came from, and it's 628 00:31:39,600 --> 00:31:42,760 Speaker 1: just confound at all all sorts of attempts to predict 629 00:31:42,800 --> 00:31:45,760 Speaker 1: what it would do. So it is good that we 630 00:31:45,840 --> 00:31:48,120 Speaker 1: have seen very strong labor market, but at the same 631 00:31:48,160 --> 00:31:51,040 Speaker 1: time we're seeing wages moderating. Wages are still very wage 632 00:31:51,120 --> 00:31:54,120 Speaker 1: increases are still very high, but wage increases have come 633 00:31:54,160 --> 00:31:56,600 Speaker 1: down to a level that is closer to what would 634 00:31:56,640 --> 00:31:58,840 Speaker 1: be sustainable, still well above what would be sustainable with 635 00:31:58,880 --> 00:32:02,800 Speaker 1: two percent inflation. And same thing with inflation. Inflation is 636 00:32:02,840 --> 00:32:05,080 Speaker 1: starting to come down in the labor market hasn't softened. 637 00:32:05,280 --> 00:32:09,040 Speaker 1: We do expect that it will soften um, but you 638 00:32:09,080 --> 00:32:10,720 Speaker 1: know it will do what it will do. Our job 639 00:32:11,040 --> 00:32:13,400 Speaker 1: is to get inflation down to two percent and preserve 640 00:32:13,600 --> 00:32:16,440 Speaker 1: maximum employment. So when the f o MC meets, as 641 00:32:16,480 --> 00:32:19,760 Speaker 1: it does regularly eight times a year, yes eight times, 642 00:32:20,160 --> 00:32:22,520 Speaker 1: you pretty much know how the decision is going to 643 00:32:22,600 --> 00:32:25,160 Speaker 1: come out before you actually get together, because you've been 644 00:32:25,200 --> 00:32:27,120 Speaker 1: talking to each other. Or does the meeting of the 645 00:32:27,200 --> 00:32:30,080 Speaker 1: FOMC change minds in ways that you might not have 646 00:32:30,120 --> 00:32:33,760 Speaker 1: expected before the meeting started. It depends on the meeting. 647 00:32:33,880 --> 00:32:36,719 Speaker 1: You know, I do. I talk to each of the 648 00:32:36,760 --> 00:32:41,200 Speaker 1: eighteen other participants at least once and we go through everything. 649 00:32:41,560 --> 00:32:44,080 Speaker 1: What you know, what's your analysis of the economy, well, 650 00:32:44,120 --> 00:32:46,840 Speaker 1: everything about montery policy, everything about the path forward and 651 00:32:46,880 --> 00:32:51,840 Speaker 1: all of that. So um, in some some meetings, I 652 00:32:51,840 --> 00:32:56,200 Speaker 1: will say, some of the time you get into a 653 00:32:56,200 --> 00:32:58,560 Speaker 1: discussion at the meeting which suggests that maybe you should 654 00:32:58,600 --> 00:33:01,160 Speaker 1: communicate differently, and then think about that. And we might 655 00:33:01,160 --> 00:33:03,480 Speaker 1: actually take a break in the middle of the meeting 656 00:33:03,560 --> 00:33:05,320 Speaker 1: and then go off with a smaller group and think 657 00:33:05,360 --> 00:33:08,080 Speaker 1: about that and come back and make changes. Sometimes though 658 00:33:08,600 --> 00:33:12,440 Speaker 1: everything plays out is expected, and when you're having these 659 00:33:12,520 --> 00:33:15,440 Speaker 1: FOMAC meetings, I assume somebody sweeps the room to make 660 00:33:15,440 --> 00:33:21,520 Speaker 1: sure there's no bugs and anything all that, so no leaks, okay, 661 00:33:21,800 --> 00:33:26,240 Speaker 1: And today, um, as you look forward, as we are 662 00:33:26,320 --> 00:33:29,200 Speaker 1: going forward for the next mainder of this year, your 663 00:33:29,240 --> 00:33:32,360 Speaker 1: basic view would be you'd be happy if the inflation 664 00:33:32,440 --> 00:33:33,880 Speaker 1: rate were to get down by the end of the 665 00:33:33,960 --> 00:33:37,680 Speaker 1: year to two percent. Maybe run realistic, but your core 666 00:33:37,720 --> 00:33:40,080 Speaker 1: inflation now or overall inflation, you think it's about four 667 00:33:40,120 --> 00:33:41,760 Speaker 1: or four and a half percent something like that, or 668 00:33:41,760 --> 00:33:43,960 Speaker 1: what when you're saying is it's it's in that range. 669 00:33:44,000 --> 00:33:46,640 Speaker 1: There are different measures. Yes, we we expect, you know, 670 00:33:46,680 --> 00:33:50,640 Speaker 1: significant progress on inflation this year. And again it's our 671 00:33:50,720 --> 00:33:52,880 Speaker 1: job to produce it, and I want to I want 672 00:33:52,880 --> 00:33:55,239 Speaker 1: to say again, you know, we put we throw these 673 00:33:55,320 --> 00:33:57,760 Speaker 1: numbers around, but the reality is we're going to react 674 00:33:57,800 --> 00:34:00,280 Speaker 1: to the data. So if we continue to get, for example, 675 00:34:00,280 --> 00:34:06,240 Speaker 1: strong labor market reports or higher higher inflation reports, it 676 00:34:06,320 --> 00:34:07,800 Speaker 1: may well be the case that we have to do 677 00:34:07,840 --> 00:34:10,520 Speaker 1: more in race likes more than its priced in. So 678 00:34:10,600 --> 00:34:12,400 Speaker 1: if I wanted to go get a mortgage on the 679 00:34:12,480 --> 00:34:15,120 Speaker 1: house I was going to buy, for example, uh, you 680 00:34:15,120 --> 00:34:16,960 Speaker 1: would say, I'm not going to be any better off 681 00:34:17,040 --> 00:34:20,960 Speaker 1: waiting till next year than now because rates aren't going 682 00:34:21,000 --> 00:34:22,839 Speaker 1: to come down that much at the beginning of next year, 683 00:34:22,880 --> 00:34:25,000 Speaker 1: so I might as well get the house now mortgage. 684 00:34:25,200 --> 00:34:28,480 Speaker 1: So to say, surprisingly enough, I get a lot of 685 00:34:28,560 --> 00:34:30,680 Speaker 1: requests for advice on those kind of things and you 686 00:34:30,719 --> 00:34:33,760 Speaker 1: don't give any and I but I really can't, Okay, 687 00:34:33,880 --> 00:34:37,920 Speaker 1: I can't. I really can't respond. So okay, So on 688 00:34:38,040 --> 00:34:41,760 Speaker 1: the whole, to summarize where you are, you're basically saying 689 00:34:41,880 --> 00:34:44,480 Speaker 1: that the job's data was that came out was a 690 00:34:44,480 --> 00:34:48,080 Speaker 1: little bit surprising, But in the end, you're taking you've 691 00:34:48,120 --> 00:34:50,960 Speaker 1: taken into account and you're pretty comfortable with the guidance 692 00:34:51,000 --> 00:34:53,359 Speaker 1: you gave last time, and you're not prepared to give 693 00:34:53,400 --> 00:34:58,520 Speaker 1: anything that's completely different guidance than you gave last week. Well, 694 00:34:58,560 --> 00:35:01,120 Speaker 1: I mean, this is a world and we've had the 695 00:35:01,120 --> 00:35:04,480 Speaker 1: the inflated sorry, then the labor market report, and I 696 00:35:04,480 --> 00:35:07,880 Speaker 1: think that does I think it underscores the message that 697 00:35:07,960 --> 00:35:11,719 Speaker 1: I was sending at the at the press conference and 698 00:35:11,719 --> 00:35:15,000 Speaker 1: in the meeting that we have a significant road ahead 699 00:35:15,400 --> 00:35:18,080 Speaker 1: to get inflation down to two percent. And I think 700 00:35:18,840 --> 00:35:20,840 Speaker 1: there's been an expectation that it will that will go 701 00:35:20,880 --> 00:35:24,200 Speaker 1: away quickly and painlessly, and I don't think that's at 702 00:35:24,200 --> 00:35:26,400 Speaker 1: all guaranteed. That's not the base case. The base cases 703 00:35:26,440 --> 00:35:28,000 Speaker 1: it will for me is that it will take some 704 00:35:28,120 --> 00:35:31,400 Speaker 1: time and we will have to do more rate increases, 705 00:35:31,400 --> 00:35:32,759 Speaker 1: and then we'll have to look around to see whether 706 00:35:32,760 --> 00:35:37,040 Speaker 1: we've done enough. Okay, And in two percent is the 707 00:35:37,280 --> 00:35:39,280 Speaker 1: we have for the last twenty five years before inflation 708 00:35:39,320 --> 00:35:42,600 Speaker 1: came along, But prior to that, for most of US history, 709 00:35:42,640 --> 00:35:44,960 Speaker 1: we were higher than two percent. Is that that two 710 00:35:44,960 --> 00:35:48,120 Speaker 1: percent is? We're now so used to two percent after 711 00:35:48,120 --> 00:35:51,120 Speaker 1: twenty years of it? Do you think that's the appropriate level? 712 00:35:51,320 --> 00:35:55,080 Speaker 1: So for we went through this long period where inflation 713 00:35:55,280 --> 00:35:59,439 Speaker 1: was really anchored around two percent, and we we think that. 714 00:36:00,160 --> 00:36:03,600 Speaker 1: You know, economists think that that's because people start to 715 00:36:03,640 --> 00:36:06,560 Speaker 1: expect two percent inflation and inflation it's in a way, 716 00:36:06,840 --> 00:36:08,960 Speaker 1: if people, if everyone expects that prices are going to 717 00:36:09,000 --> 00:36:10,400 Speaker 1: go up, prices and wages are going to go up 718 00:36:10,400 --> 00:36:13,319 Speaker 1: two percent per year, then plus productivity in the case 719 00:36:13,320 --> 00:36:17,320 Speaker 1: of wages, then it will That's what will happen. Having that, 720 00:36:17,640 --> 00:36:21,520 Speaker 1: having price stability, real price stability from extended period of 721 00:36:21,560 --> 00:36:25,920 Speaker 1: time is just enormously beneficial to the public because you 722 00:36:25,920 --> 00:36:27,840 Speaker 1: can then on the back of that, you can build 723 00:36:27,880 --> 00:36:30,040 Speaker 1: a very strong labor market as we had. We had 724 00:36:30,040 --> 00:36:32,680 Speaker 1: a labor market with really three and a half percent 725 00:36:32,760 --> 00:36:37,880 Speaker 1: unemployment in two thousand, uh eighteen and nineteen, and we 726 00:36:37,920 --> 00:36:40,920 Speaker 1: had inflation running, you know, just barely getting to two percent, 727 00:36:41,040 --> 00:36:43,160 Speaker 1: wages moving up the most for people at the lower 728 00:36:43,280 --> 00:36:45,600 Speaker 1: end of the of the spectrum, and so this was 729 00:36:45,800 --> 00:36:47,879 Speaker 1: we all want to get back to that place. But 730 00:36:48,320 --> 00:36:51,520 Speaker 1: the bedrock of the whole thing is to get inflation 731 00:36:51,600 --> 00:36:54,560 Speaker 1: under control. The unemployment rate hasn't come down as much 732 00:36:54,560 --> 00:36:56,359 Speaker 1: as people are going up as much as people thought. 733 00:36:56,400 --> 00:36:58,279 Speaker 1: In part, some people say because we don't have as 734 00:36:58,320 --> 00:37:01,040 Speaker 1: many immigrants coming in the country, legal immigrants coming in, 735 00:37:01,280 --> 00:37:03,320 Speaker 1: taking some of the jobs that otherwise would take. Do 736 00:37:03,400 --> 00:37:05,880 Speaker 1: you think immigration is an issue in terms of giving 737 00:37:05,920 --> 00:37:08,920 Speaker 1: us more labor workers or do you think that's not 738 00:37:09,000 --> 00:37:12,759 Speaker 1: a factor. So, just as a matter of arithmetic, it 739 00:37:12,880 --> 00:37:15,560 Speaker 1: was a factor because there was very little migration across 740 00:37:15,640 --> 00:37:19,440 Speaker 1: borders during the pandemic UH and that was part of 741 00:37:19,480 --> 00:37:22,440 Speaker 1: what was happening, particularly in certain sectors like the agricultural 742 00:37:22,480 --> 00:37:24,960 Speaker 1: sector and food service and things like that, where they're 743 00:37:25,000 --> 00:37:29,200 Speaker 1: just warrant the people. However, just just very recently here 744 00:37:29,320 --> 00:37:32,480 Speaker 1: the immigration data have turned up again, and so and 745 00:37:32,520 --> 00:37:36,040 Speaker 1: I think that maybe maybe maybe part of why people 746 00:37:36,040 --> 00:37:38,640 Speaker 1: are feeling somewhat less pressure in a labor market to 747 00:37:38,640 --> 00:37:41,040 Speaker 1: find workers. This is an issue not for the fetter. 748 00:37:41,120 --> 00:37:44,360 Speaker 1: This is immigration is obviously political issue. We do not 749 00:37:44,440 --> 00:37:46,960 Speaker 1: seek to be a player on this. But it's just 750 00:37:47,000 --> 00:37:49,480 Speaker 1: a fact though that that you know right now the 751 00:37:49,560 --> 00:37:53,359 Speaker 1: United States has has fewer available workers than it has 752 00:37:53,480 --> 00:37:56,799 Speaker 1: jobs plus job openings. And when you increase interest rates 753 00:37:56,840 --> 00:37:59,480 Speaker 1: and the criticial effectives to increase the value of the 754 00:37:59,560 --> 00:38:03,000 Speaker 1: dollar versus other currents. Do you have any concern about 755 00:38:03,160 --> 00:38:05,080 Speaker 1: the bague of the dollar going up too much or 756 00:38:05,120 --> 00:38:07,760 Speaker 1: that's not something you comment on, So that the actually 757 00:38:07,760 --> 00:38:11,320 Speaker 1: the responsibility for the for the exchange rate is really 758 00:38:11,520 --> 00:38:14,480 Speaker 1: rests with the Treasury Department and the administration, not with us. 759 00:38:14,840 --> 00:38:18,239 Speaker 1: Of course, that's another that's another financial variable that goes 760 00:38:18,239 --> 00:38:20,640 Speaker 1: into every economic model. But we don't we don't look 761 00:38:20,680 --> 00:38:23,239 Speaker 1: at it as something that we're working on. All right, Well, 762 00:38:23,280 --> 00:38:24,719 Speaker 1: I think I haven't been able to get you to 763 00:38:24,760 --> 00:38:28,600 Speaker 1: say anything you didn't want to say, so, um, you know, 764 00:38:28,600 --> 00:38:30,920 Speaker 1: I would say, Jay, I've known you a long time. 765 00:38:30,960 --> 00:38:34,080 Speaker 1: I think you've done a great job in a difficult situation. 766 00:38:34,160 --> 00:38:36,839 Speaker 1: I appreciate your service to the country. At an eighty 767 00:38:36,840 --> 00:38:39,520 Speaker 1: thousand dollars a year or whatever the salary is something 768 00:38:39,560 --> 00:38:41,719 Speaker 1: like that. So thanks very much for being here, and 769 00:38:41,760 --> 00:38:43,840 Speaker 1: thank you for your service. Thank you, David. Great to 770 00:38:43,840 --> 00:38:45,200 Speaker 1: see it. Thank you.