WEBVTT - BONUS EPISODE: Jay Powell Speaks with David Rubenstein 0:00:02.759 --> 0:00:05.840 This is Bloomberg Daybreak today, your morning brief on the 0:00:05.840 --> 0:00:09.240 stories making news from Wall Street to Washington and beyond. 0:00:09.680 --> 0:00:12.920 Federal Reserve Chairman Jerome Powell says more rate hikes are 0:00:13.000 --> 0:00:15.520 on the way. In an interview with David Rubinstein at 0:00:15.520 --> 0:00:18.560 the Economic Club of Washington, the Fed chair explained the 0:00:18.600 --> 0:00:20.279 need to push rates higher in the face of a 0:00:20.320 --> 0:00:23.479 strong labor market. He also discussed some of the comments 0:00:23.480 --> 0:00:25.560 he made after the most recent f O m C 0:00:25.760 --> 0:00:28.800 meeting and the market reaction that followed. Let's listen into 0:00:28.800 --> 0:00:32.479 that conversation now. So, Jay Um, thank you very much 0:00:32.479 --> 0:00:35.200 for being here. Why don't we start with an easy question. 0:00:36.520 --> 0:00:39.879 So you made a speech last week commenting on the 0:00:39.960 --> 0:00:42.040 f O m c s decision to raise the Fed 0:00:42.080 --> 0:00:47.320 discount rate by um a small amount relatively speaking, basis points. 0:00:47.320 --> 0:00:49.839 Someone people would say that was small, UM, But at 0:00:49.840 --> 0:00:52.880 the time it wasn't clear that the job's report would 0:00:52.920 --> 0:00:55.000 be as strong as it turned out to be. Subsequently, 0:00:55.720 --> 0:00:58.440 hadn't you known that the Job's report was going to 0:00:58.480 --> 0:01:03.120 be as strong, would you have done twenty five basis 0:01:03.120 --> 0:01:08.240 points or something different? David, Thank you for that question, 0:01:08.360 --> 0:01:11.800 Thank you, thank you for inviting me here. Today. It's 0:01:11.800 --> 0:01:14.280 great to be here, So we don't get to play 0:01:14.280 --> 0:01:17.520 it that way. Unfortunately we have to, but I'll take 0:01:17.560 --> 0:01:20.520 it this way. So the message we were sending at 0:01:20.600 --> 0:01:24.920 the phone C meeting last Wednesday was really that the 0:01:25.000 --> 0:01:29.120 disinflationary process, the process of getting inflation down, has begun, 0:01:29.160 --> 0:01:31.320 and it's begun in the goods sector, which is about 0:01:31.319 --> 0:01:33.760 a quarter of our economy, but it has a long 0:01:33.800 --> 0:01:37.600 way to go. These are the very early stages of disinflation. 0:01:37.760 --> 0:01:41.840 So the services sector really, except for housing services, pardon me, 0:01:42.560 --> 0:01:45.759 is not really showing any any disinflation yet. So our 0:01:45.760 --> 0:01:48.600 message really was this process is likely to take quite 0:01:48.600 --> 0:01:51.600 a bit of time. It's not going to be we 0:01:51.640 --> 0:01:54.680 don't think smooth. It's probably gonna be bumpy. And so 0:01:55.000 --> 0:01:57.720 we think that we're gonna need to do further rate increases, 0:01:57.840 --> 0:01:59.760 as we said, and we think that we'll need to 0:01:59.760 --> 0:02:02.840 hold policy at a restrictive level for a period of time. 0:02:03.200 --> 0:02:07.720 Then comes the the the labor market report for January, 0:02:08.520 --> 0:02:10.960 and it's very strong. It's certainly stronger than anyone I 0:02:11.000 --> 0:02:14.480 know expected and so but but I would say we 0:02:14.520 --> 0:02:16.160 didn't expect it to be this strong. But I would 0:02:16.200 --> 0:02:20.680 say it kind of shows you why we think that 0:02:20.760 --> 0:02:23.959 this will be a process that takes a significant period 0:02:23.960 --> 0:02:28.079 of time. The labor markets extraordinarily strong. And by the way, 0:02:28.080 --> 0:02:30.440 it's good. It's a good thing that inflation has started 0:02:30.480 --> 0:02:33.240 to come down without that has not happened at the 0:02:33.280 --> 0:02:35.800 at the cost of a strong labor market. So and 0:02:35.840 --> 0:02:38.800 of course since then, labor marketing, sorry, financial conditions have 0:02:38.919 --> 0:02:45.320 tightened significantly since then, So let me ask it another way. UM. So, 0:02:45.600 --> 0:02:48.560 by the way, when the numbers coming out, the job numbers, 0:02:48.600 --> 0:02:51.600 five thousand jobs, does anybody call you up in the 0:02:51.639 --> 0:02:53.720 government and give you a little heads up this is 0:02:53.720 --> 0:02:56.320 gonna happen, or they never do that? So on. On 0:02:56.480 --> 0:03:00.519 some um data, sometimes we get data just the night before, 0:03:00.520 --> 0:03:03.680 and it's only me, only me and so, but not 0:03:03.720 --> 0:03:05.800 on all pieces of data it's it's a it's a 0:03:05.919 --> 0:03:07.880 it's a very small amount of data and we get 0:03:07.880 --> 0:03:10.320 it just just the night before. For example, if we 0:03:10.400 --> 0:03:11.679 if we were going to get a big piece of 0:03:11.760 --> 0:03:13.799 data in the middle of an fm C meeting, as 0:03:13.840 --> 0:03:15.920 often happens on the day of an f MC meeting, 0:03:16.120 --> 0:03:18.960 it will help me to to know it the night before. Okay, 0:03:19.000 --> 0:03:21.959 So the markets, um, after your speech from last week. 0:03:22.000 --> 0:03:25.040 The markets assumed that therefore there would probably be another 0:03:25.639 --> 0:03:30.720 basis point increase in your next f I MC meeting. Um, 0:03:31.000 --> 0:03:36.280 was that a bad assumption by the markets. So what again, 0:03:36.320 --> 0:03:41.960 what we said at the meeting was was that we 0:03:41.960 --> 0:03:44.760 we believe that we anticipate is what we said, that 0:03:45.600 --> 0:03:49.240 ongoing rate increases will be appropriate. Uh. And the reason 0:03:49.320 --> 0:03:51.800 is we're trying to achieve a stance of policy that 0:03:51.920 --> 0:03:55.000 is sufficiently restrictive to bring inflation down to two percent 0:03:55.120 --> 0:03:57.520 over time, and we don't think we've achieved that yet, 0:03:58.000 --> 0:04:01.240 so we said that. Uh. And and you know, now 0:04:01.320 --> 0:04:03.600 you see the labor market report, and I think again 0:04:03.680 --> 0:04:06.280 financial conditions are are are more well aligned with that 0:04:06.280 --> 0:04:09.200 than they were before. So the assumption when you made 0:04:09.240 --> 0:04:12.400 your speech was that probably they're fed might em and 0:04:12.480 --> 0:04:16.120 consider uh decreasing rates by the end of this year, 0:04:16.120 --> 0:04:18.159 and the markets no longer assume that you think the 0:04:18.160 --> 0:04:23.480 markets are wrong. Well, so let me say these are 0:04:24.760 --> 0:04:27.080 all of these numbers that we're throwing around here are 0:04:27.120 --> 0:04:30.800 conditional on incoming data and what happens. So we never 0:04:30.839 --> 0:04:32.800 say this is this is what we think will happen. 0:04:32.960 --> 0:04:34.800 You know, we we make a tentative forecast and then 0:04:34.839 --> 0:04:37.560 we let the data come in. For example, if the 0:04:37.640 --> 0:04:39.800 data were to continue to come in stronger than we 0:04:39.839 --> 0:04:42.240 expect and we were to conclude that we needed to 0:04:42.360 --> 0:04:45.000 raise rates more than is priced into the markets, or 0:04:45.040 --> 0:04:47.080 then we wrote down at our last four group of 0:04:47.120 --> 0:04:49.400 forecasts in December, then we would certainly do that. We 0:04:49.440 --> 0:04:53.760 would certainly raise rates more. Okay, So today, for people 0:04:53.760 --> 0:04:55.800 who aren't familiar with the f O m C, who 0:04:55.920 --> 0:04:58.800 is actually is on the f O m C. So 0:04:58.880 --> 0:05:02.360 there the US Central Bank consists of a board of governors. 0:05:02.360 --> 0:05:05.680 Here in Washington, they're seven governors. Those governors are nominated 0:05:05.760 --> 0:05:09.400 by the President and confirmed by the Senate, and we 0:05:09.480 --> 0:05:12.040 serve terms that are that are not syncd up with 0:05:12.440 --> 0:05:15.400 the election cycle, so we're we're independent. They are also 0:05:15.480 --> 0:05:18.159 twelve reserve banks around the country which have a degree 0:05:18.160 --> 0:05:21.880 of independence, and they're so so each each reserve bank 0:05:21.960 --> 0:05:24.120 is led by a president who works there full time. 0:05:24.400 --> 0:05:26.680 All twelve of them sit on the FMC. So that's 0:05:27.080 --> 0:05:29.280 nineteen people sit on the FMC, so it's quite a 0:05:29.360 --> 0:05:33.320 large committee, of which twelve vote. In any given year. 0:05:33.600 --> 0:05:36.240 The reserve bank presidents vote on a rotating basis, except 0:05:36.279 --> 0:05:38.480 new York, which votes every year. So when you vote, 0:05:38.880 --> 0:05:40.560 do you vote at the beginning of an f o 0:05:40.720 --> 0:05:43.640 MC meeting and then just kind of have discussions afterwards, 0:05:43.720 --> 0:05:45.360 or do you wait till the very end and then 0:05:45.400 --> 0:05:48.240 you vote. Now we vote at the end, I mean 0:05:48.480 --> 0:05:50.800 the whole the f MC meeting process takes, you know, 0:05:50.880 --> 0:05:53.120 more than a full week. I'm talking to all of 0:05:53.160 --> 0:05:57.440 the participants, all ninth eighteen other ones, and staff has 0:05:57.440 --> 0:05:59.720 sent around memos and there's something called the Teal Book, 0:05:59.720 --> 0:06:02.719 which is the staff's assessment of the you know, of 0:06:02.760 --> 0:06:06.200 the economy and international economy and monetary policy and all that. 0:06:06.400 --> 0:06:09.480 Then we have an extensive discussion on the morning of 0:06:09.520 --> 0:06:12.280 the first day about the economy. Everybody talks about that. 0:06:12.560 --> 0:06:15.000 On the second day we talk about monetary policy, and 0:06:15.000 --> 0:06:18.400 then we vote on monetary policy around noon on the 0:06:18.440 --> 0:06:21.599 second day. So there's the chairman of the Federal Reserve 0:06:21.680 --> 0:06:24.880 Board speak first and say here's what I think, and 0:06:25.120 --> 0:06:27.039 or does he wait until the end and say, well, 0:06:27.080 --> 0:06:28.560 thanks for what you think, but let me tell you 0:06:28.560 --> 0:06:31.279 what I think. What do you do? Different chairs have 0:06:31.360 --> 0:06:34.000 done in different ways, and so I tend I've tended 0:06:34.040 --> 0:06:37.680 to do what my precessor media precessor did I think, Well, 0:06:37.720 --> 0:06:40.359 this is what I do. I speak last on the 0:06:40.480 --> 0:06:43.080 sort of the economic go around. So everyone else talks 0:06:43.080 --> 0:06:46.240 about what they think about the economy and in their district, 0:06:46.240 --> 0:06:48.880 for example, if their reserve bank president. And I listened 0:06:48.880 --> 0:06:51.160 to all that, and then I give my comments at 0:06:51.160 --> 0:06:52.679 the end and I kind of sum up what people 0:06:52.680 --> 0:06:57.280 have said, and then I speak first on monetary policy. Okay, 0:06:57.320 --> 0:07:02.400 so you've said the inflation rate target is two percent um, 0:07:02.600 --> 0:07:05.240 But why two percent and not three percent? Three percent? 0:07:05.400 --> 0:07:07.840 You could be tolerable, really, I mean most for most 0:07:07.880 --> 0:07:10.920 of organized history, three percent is considered. Okay, why do 0:07:10.960 --> 0:07:14.080 you want two percent? Two percent is the global standard, 0:07:14.360 --> 0:07:17.040 and that is our objective two percent piece as measured 0:07:17.080 --> 0:07:21.880 by the PC index, and that's just that's not something 0:07:21.920 --> 0:07:23.880 we're looking at changing. That isn't going to change. It's 0:07:23.960 --> 0:07:26.840 that's not gonna change, not going to change now. But okay, 0:07:26.880 --> 0:07:28.800 so you need to get the two percent, and your 0:07:29.160 --> 0:07:31.760 goal to get there is by what period of time 0:07:32.000 --> 0:07:33.840 would you like to get there? Well, we say, we 0:07:33.920 --> 0:07:36.080 say that we're using our tools to get there over time. 0:07:36.120 --> 0:07:38.600 If you look at our forecasts, we expect two thousand, 0:07:38.680 --> 0:07:41.800 twenty three to be a year of significant declines in inflation, 0:07:41.840 --> 0:07:44.240 and it's actually our job to make sure that that's 0:07:44.280 --> 0:07:47.400 the case. But I would tell you that, uh, you know, 0:07:47.560 --> 0:07:52.360 with inflation headline headline PC inflation is running about five percent. 0:07:52.640 --> 0:07:54.520 This is on a twelve month basis. Core is running 0:07:54.560 --> 0:07:56.800 at four point four. My guess is it will take 0:07:56.880 --> 0:08:00.400 certainly into not just this year, but next year to 0:08:00.440 --> 0:08:03.800 get down close to two. Okay, So two percent is 0:08:04.000 --> 0:08:08.600 firm that you're not that yes, okay. So the theory 0:08:08.720 --> 0:08:12.880 of raising interest rates, um is that it will decrease 0:08:12.920 --> 0:08:17.080 economic activity and increase unemployment. But you've been increasing interest 0:08:17.160 --> 0:08:19.600 rates for a while and unemployment is now a record mow. 0:08:19.720 --> 0:08:22.320 So what's wrong with the theory. Why is unemployment not 0:08:22.400 --> 0:08:26.200 going higher? Well, the labor market is strong, because the 0:08:26.240 --> 0:08:28.840 economy is strong, and as I mentioned, it's a good 0:08:28.840 --> 0:08:30.760 thing that we've been able to see the beginnings of 0:08:30.800 --> 0:08:35.840 disinflation without seeing the labor market weekend. Um, it's just 0:08:35.960 --> 0:08:39.280 that there's a lot of demand for workers. In fact, 0:08:40.040 --> 0:08:42.240 if you if you look at the supply of workers 0:08:42.400 --> 0:08:46.480 versus demand for workers, demand for for US workers is 0:08:46.520 --> 0:08:50.320 now more than five million greater than the available supply, 0:08:50.400 --> 0:08:53.320 and the available supply consists of people who were either 0:08:53.360 --> 0:08:55.959 working or actively looking for a job. So this this 0:08:56.000 --> 0:08:58.440 is this was not the case before the pandemic. The 0:08:58.480 --> 0:09:03.439 pandemic really had a significant left a list lasting marks 0:09:03.520 --> 0:09:06.920 so far on labor supply in the United States. Labor 0:09:06.920 --> 0:09:10.480 force participation rate came down, and there now is a 0:09:10.559 --> 0:09:13.640 shortage of workers and it it feels it almost feels 0:09:13.640 --> 0:09:16.200 more structural than cyclical, so that that's a that's a 0:09:16.240 --> 0:09:19.440 significant issue. Now you've resisted I think saying what unemployment 0:09:19.520 --> 0:09:23.160 rate would be acceptable to you? I think, but is 0:09:23.160 --> 0:09:26.400 there an unemployment rate that you think would moderate inflation 0:09:26.520 --> 0:09:29.920 such that you would tolerate unemployment at four percent, five percent, 0:09:30.080 --> 0:09:34.000 six percent? I guess I think about it this way. Um, 0:09:34.040 --> 0:09:37.400 you know are we have two goals that Congress is 0:09:37.440 --> 0:09:41.120 assigned us, maximum employment and price stability. Price stability, as 0:09:41.120 --> 0:09:45.760 we've agreed, is two percent inflation. Maximum employment means if 0:09:45.800 --> 0:09:48.280 you want a job, you can get one. So right 0:09:48.280 --> 0:09:51.079 now the labor market is at least at maximum employment. 0:09:51.080 --> 0:09:52.840 By many would say that it that it is out 0:09:52.840 --> 0:09:55.520 of balance with more demand than there is supply. So 0:09:55.559 --> 0:09:58.400 what we're trying to do is get inflation down we're 0:09:58.400 --> 0:10:02.040 not We're not targeting, you know, a different unemployment rate. 0:10:02.240 --> 0:10:04.559 We're trying. We're trying to use our tools to get 0:10:04.559 --> 0:10:07.720 inflation to come down over time. In hindsight, would you 0:10:07.760 --> 0:10:10.679 say that when COVID hit the economy and we chected 0:10:10.800 --> 0:10:14.880 five trillion dollars of physical policy into the economy and 0:10:14.920 --> 0:10:18.080 the Fed did quantity to be using and other related 0:10:18.080 --> 0:10:20.160 things kept interest rates very low, would you say in 0:10:20.240 --> 0:10:23.040 hindsight that was a mistake or was the right policy 0:10:23.040 --> 0:10:25.440 at the time. So I think you have to go 0:10:25.480 --> 0:10:27.760 back to the decisions that were made in real time, 0:10:27.960 --> 0:10:30.840 and it was something nobody had ever seen. The global 0:10:30.840 --> 0:10:34.480 economy came to a virtual stand still. People were talking 0:10:34.480 --> 0:10:37.679 about depression. People were talking and we didn't think. We 0:10:37.760 --> 0:10:40.839 had no idea when we would get vaccines that worked. 0:10:41.240 --> 0:10:43.600 So Congress took very strong measures, and we took very 0:10:43.600 --> 0:10:46.559 strong measures. And you see where the economy is. You've 0:10:46.559 --> 0:10:48.440 got a very very strong labor market, but you have 0:10:48.520 --> 0:10:51.080 high inflation. As I mentioned, we're at the beginning of 0:10:51.080 --> 0:10:53.400 getting that down. If you look around the world though, 0:10:53.480 --> 0:10:57.439 at other countries, they're also experiencing high inflation, including countries 0:10:57.480 --> 0:11:00.320 that didn't that didn't do that as much as we did, 0:11:00.440 --> 0:11:02.800 either from a fiscal or monetary standpoint. So that that 0:11:02.880 --> 0:11:05.319 tells you though that a big part of this inflation 0:11:05.440 --> 0:11:09.960 is actually related to the you know, the pandemic itself 0:11:10.000 --> 0:11:12.320 to shut down and in the reopening. That's a big 0:11:12.360 --> 0:11:15.640 part of it. The quantitative using program has increased the 0:11:15.640 --> 0:11:17.640 balance sheet. I guess of the FED, and what is 0:11:17.679 --> 0:11:20.760 your balance sheet now? I think it's eight point four 0:11:20.800 --> 0:11:25.400 trillion dollars if you must sound like you know, found 0:11:25.679 --> 0:11:28.560 eight point that was yesterday's not? Okay? Alright? Eight point 0:11:28.559 --> 0:11:31.880 four trilla um? What would you like it to get 0:11:31.920 --> 0:11:34.200 down to over the next year or two? Is there 0:11:34.280 --> 0:11:36.840 some lower number? So we are in the process of 0:11:36.840 --> 0:11:41.040 shrinking the balance sheet actively actually passively, is I should say? 0:11:41.080 --> 0:11:43.720 So what happens is his treasury securities on our balance 0:11:43.760 --> 0:11:46.920 sheet mature up to a cap, a monthly cap. We 0:11:47.280 --> 0:11:49.880 we that the balance sheet shrinks in that amount. Same 0:11:49.880 --> 0:11:53.000 thing with mortgage backed securities as they are prepaid, or 0:11:53.040 --> 0:11:56.440 so we we the balance sheet is shrinking in terms 0:11:56.440 --> 0:11:58.280 of the target level of it. We haven't put a 0:11:58.320 --> 0:12:01.120 specific dollar number on it. The idea is we're in 0:12:01.120 --> 0:12:05.640 a regime of ample reserves reserves are basically deposits at 0:12:05.679 --> 0:12:08.199 the at the reserve banks. And when we get close 0:12:08.240 --> 0:12:11.840 to that level where we feel that we're reserves are ample, 0:12:12.520 --> 0:12:15.040 kind of where we were before the pandemic, then we'll 0:12:15.080 --> 0:12:17.360 slow down and we'll sort of test where we are, 0:12:17.400 --> 0:12:19.280 and but it'll be a couple of years, we think, 0:12:19.320 --> 0:12:21.280 till we get to that level. The FED does not 0:12:21.880 --> 0:12:24.679 sell securities. They wait for them to mature and then 0:12:24.679 --> 0:12:27.400 you just uh cash them in. You don't. You're not 0:12:27.440 --> 0:12:30.200 in the market selling securities that are not yet mature. 0:12:30.280 --> 0:12:33.000 Is that correct? That is correct. It's also correct though 0:12:33.000 --> 0:12:35.880 that we've said we would consider sales of mortgage backed securities. 0:12:35.920 --> 0:12:37.880 But I will tell you that's that's not something that 0:12:38.040 --> 0:12:40.600 is on the on the list of active things things 0:12:40.640 --> 0:12:43.280 and being actively considered. So some people that are worried 0:12:43.280 --> 0:12:46.000 about the federal debt limit and that we might not 0:12:46.840 --> 0:12:48.679 we have an extended on time, we have thirty one 0:12:48.720 --> 0:12:51.440 point four trillion dollars of debt? Are you a little 0:12:51.480 --> 0:12:55.160 worried about the debt limit not getting extended? So the 0:12:55.200 --> 0:12:58.840 debt limit is really something for the fiscal authorities to 0:12:59.200 --> 0:13:01.640 deal with. The Our only role in this is that 0:13:01.679 --> 0:13:03.960 we're that we're the fiscal agent of the Treasury Department. 0:13:04.000 --> 0:13:05.960 We're not a policy maker on that. And I will 0:13:06.000 --> 0:13:08.959 just say this, this can this really can only end 0:13:09.000 --> 0:13:11.079 one way, and that is with Congress raising the debt 0:13:11.120 --> 0:13:14.040 ceiling in a timely fashion so that the US can 0:13:14.040 --> 0:13:16.840 pay all of its bills one and as do. That's 0:13:16.840 --> 0:13:19.640 what has to happen. And if that doesn't happen, no 0:13:19.679 --> 0:13:22.320 one should think that the FED has the ability to 0:13:22.400 --> 0:13:25.800 shield the financial markets or the economy from the consequences 0:13:25.840 --> 0:13:28.840 of moving too slow. So you don't have any program 0:13:29.000 --> 0:13:31.920 in place ready to go if in fact that limit 0:13:31.960 --> 0:13:34.319 isn't passed in time. This is something that Congress has 0:13:34.320 --> 0:13:37.040 to deal with. And the same that the so called 0:13:37.160 --> 0:13:40.800 trillion dollar gold coin solution is not one year in 0:13:40.840 --> 0:13:43.600 favor of I guess, as I said, this ends in 0:13:43.679 --> 0:13:46.800 only one way, and that way is Congress voting to 0:13:46.840 --> 0:13:48.840 raise the debt ceiling so that the US can pay 0:13:48.880 --> 0:13:52.160 all of our bills. Okay. In terms of consultation, um, 0:13:52.320 --> 0:13:55.480 do you consult regularly with the Treasury Secretary or the 0:13:55.480 --> 0:13:57.880 head of the National Economic Council or the President United States? 0:13:57.880 --> 0:14:01.040 How do you kind of relate to the administration for 0:14:01.120 --> 0:14:03.679 a long long time, you know, sixty or seventy years there. 0:14:03.800 --> 0:14:06.920 I think there's been a weekly breakfast or lunch with 0:14:06.960 --> 0:14:09.400 the Treasury Secretary and the FED Chair. And that's what 0:14:09.520 --> 0:14:13.040 I've had with with treasure secretaries that I've had as 0:14:13.080 --> 0:14:17.120 FED Chair. I've also had a regular article it called 0:14:17.200 --> 0:14:19.880 irregular Lunches with the head of the NBC. We also 0:14:19.920 --> 0:14:24.040 have regularly regularly scheduled lunches with the Council of Economic Advisors. 0:14:24.040 --> 0:14:26.920 And that's that's really the that's the that's the institutional 0:14:27.000 --> 0:14:29.920 structure of our of our contact with the administration. So 0:14:30.080 --> 0:14:32.200 and the way the FED works today. If you could 0:14:32.320 --> 0:14:35.720 reconstruct the operations of the FED, you know, would you 0:14:35.840 --> 0:14:38.920 change the legislation anyway? Would you think the FED operates 0:14:38.920 --> 0:14:40.760 in a in a way that's as efficient as you 0:14:40.800 --> 0:14:44.240 can realistically operate. We're not looking for any changes to 0:14:44.280 --> 0:14:46.800 the Fellow Reserve Act. I mean, I think it does work. 0:14:47.560 --> 0:14:50.000 The structure that I discussed earlier, where you've got the 0:14:50.000 --> 0:14:54.680 twelve Reserve Bank presidents coming in. What that assures really 0:14:54.920 --> 0:14:58.600 it institutionalizes diversity of thought. So we get different people 0:14:58.600 --> 0:15:02.080 coming in who've got different background, different careers, and they 0:15:02.120 --> 0:15:04.280 and they think different ways, and I think that's enormously 0:15:04.320 --> 0:15:06.880 beneficial to our decision making process. So there has been 0:15:06.920 --> 0:15:10.680 discussion recently about the FED, some FED members, pread board 0:15:10.680 --> 0:15:14.720 presidents selling their securities and maybe not doing everything they 0:15:14.760 --> 0:15:16.600 were supposed to do in terms of disclosing it. What 0:15:16.720 --> 0:15:20.600 have you done to fix that process? We put a 0:15:20.640 --> 0:15:22.640 new system in a new set of rules in place, 0:15:23.040 --> 0:15:25.760 which I think are best in class for a public 0:15:25.800 --> 0:15:28.800 institution like the FED. And uh, you know, the the 0:15:28.840 --> 0:15:33.000 innovations were that that if someone wants to sell something 0:15:33.000 --> 0:15:34.800 that they own or buy something, they have to clear 0:15:34.840 --> 0:15:37.440 them at advance with with staff at the Board of Governors, 0:15:37.480 --> 0:15:39.880 and then you've got to wait forty five days for 0:15:40.040 --> 0:15:43.840 that to execute. Also, you can't own individual stocks and 0:15:43.880 --> 0:15:45.960 there there you can only do these you can only 0:15:46.000 --> 0:15:50.320 authorize these transactions or execute them during specific times. Um. 0:15:50.440 --> 0:15:52.080 And it's you know, it's it's a and we we 0:15:52.120 --> 0:15:55.280 just of course all of these are disclosed. If you're 0:15:55.720 --> 0:15:58.600 if your idea is to go to trade things, buy 0:15:58.640 --> 0:16:01.000 and sell them because you think, you know, you think 0:16:01.040 --> 0:16:02.720 this stock is cheaping that kind of thing, that's just 0:16:02.800 --> 0:16:05.400 not something that will work. What is the salary of 0:16:05.400 --> 0:16:09.160 the chairman of the Federal Reserve Board. It's um, it's 0:16:09.200 --> 0:16:12.200 around a hundred and ninety dollars, I believe, okay, So 0:16:12.320 --> 0:16:14.400 you're you live on the d dollars. If you need 0:16:14.440 --> 0:16:16.200 to sell something, what do you do? You have to 0:16:16.240 --> 0:16:18.920 clear it for forty five days? Or that's right. We 0:16:18.920 --> 0:16:20.920 we've you know too, if we we have family expenses 0:16:20.920 --> 0:16:23.520 that if we have them that exceed myself even we 0:16:23.520 --> 0:16:25.480 have to sell and as I think that fair salary 0:16:25.520 --> 0:16:33.560 for the job or I do yes, okay, So today, um, 0:16:33.600 --> 0:16:37.120 how do you coordinate with central banks, let's say it 0:16:37.280 --> 0:16:40.840 in England or Japan or China. Do you have regular 0:16:40.880 --> 0:16:44.000 conversations with them about what they're doing? We do, you know, 0:16:44.160 --> 0:16:47.160 And I meet six times a year in Switzerland with 0:16:47.240 --> 0:16:49.600 the heads of all the many, many central banks, you know, 0:16:49.640 --> 0:16:51.720 even the even the small and medium sized ones at 0:16:51.920 --> 0:16:55.000 at in Bosil, at the Bank for International Settlements. In addition, 0:16:55.080 --> 0:16:58.840 among the major central banks, I have regular dialogues going 0:16:58.880 --> 0:17:02.360 with with most of them. And so we're talking though 0:17:02.400 --> 0:17:06.280 about is really what's happening in the economy and how 0:17:06.280 --> 0:17:07.960 are you thinking about policy and that kind of thing. 0:17:08.240 --> 0:17:11.720 It's very important that we keep those discussions going because 0:17:12.119 --> 0:17:14.320 particularly in a crisis, You're gonna need to know each other, 0:17:14.320 --> 0:17:15.720 and you're gonna need to know you're gonna be able 0:17:15.720 --> 0:17:17.680 to trust each other. And do you think the US 0:17:17.920 --> 0:17:20.920 economy is pretty much in control of its own inflation rate? 0:17:21.080 --> 0:17:24.760 Or there events outside the United States, like what China 0:17:24.840 --> 0:17:27.600 is doing or the Ukraine War that are affecting inflation 0:17:27.800 --> 0:17:30.520 and make you nervous about where inflation might be going. 0:17:31.520 --> 0:17:33.960 We have the tools, the FED has the tools to 0:17:34.160 --> 0:17:39.200 achieve our two percent goal over time. But uh, inflation 0:17:39.240 --> 0:17:41.760 in the United States is of course very closely related 0:17:41.800 --> 0:17:44.200 to things that happen here, including the balance between supply 0:17:44.200 --> 0:17:47.600 and demand. It's also affected by, for example, commodity prices 0:17:47.640 --> 0:17:50.199 that are really set on the global markets. You know, 0:17:50.280 --> 0:17:54.080 oil and man agricultural commodities are priced globally, so that 0:17:54.160 --> 0:17:57.600 there there are certainly it's an integrated global economy and 0:17:57.640 --> 0:18:00.280 global markets, and we you know we are, or that 0:18:00.880 --> 0:18:03.560 you get data from all the US government agencies, But 0:18:03.600 --> 0:18:05.679 do you ever use anecdotal things like you go to 0:18:05.720 --> 0:18:08.080 the supermarket and mices are high and you say this 0:18:08.200 --> 0:18:10.000 price is high, or how do you get you ever 0:18:10.000 --> 0:18:12.080 get anecdotal things? Or people ever call you up our 0:18:12.119 --> 0:18:14.000 friends and say, by the way you should do this 0:18:14.119 --> 0:18:16.440 or that. You ever get that kind of information is 0:18:16.440 --> 0:18:20.439 you only get it from the government reports. I mostly 0:18:20.480 --> 0:18:25.119 get data, but I will say the the I do 0:18:25.200 --> 0:18:28.320 believe that actdotal information is very useful. And one of 0:18:28.320 --> 0:18:30.800 the things the Reserve banks are great at is all 0:18:30.840 --> 0:18:33.679 twelve of them have big operations where they talk to 0:18:33.840 --> 0:18:38.040 businesses and nonprofits, universities in every sector of the of 0:18:38.080 --> 0:18:40.240 the country and the economy, and they bring that back 0:18:40.760 --> 0:18:42.920 to the FMC meetings and they talk about what they're 0:18:42.920 --> 0:18:47.720 seeing because often, you know, but steering at data is great, 0:18:47.800 --> 0:18:50.240 but you need to need to have a story, and 0:18:50.840 --> 0:18:54.200 I think hearing the stories that people tell it does 0:18:54.280 --> 0:18:57.640 help me to sort of, you know, assess what's going 0:18:57.680 --> 0:19:00.480 on out there. So, as the chairman of the Federal 0:19:00.520 --> 0:19:03.680 Reserve is obviously an important job, how do you reduce 0:19:03.840 --> 0:19:07.040 the stress level you have? I mean, you can't be 0:19:07.560 --> 0:19:10.520 watching economic numbers all the time. So what do you 0:19:10.560 --> 0:19:12.960 do to relieve the stress? Other than interviews like this? 0:19:15.600 --> 0:19:19.119 You know the usual things. I read pretty light fiction, 0:19:19.240 --> 0:19:22.120 detective and spy fiction. I exercise as much as I can, 0:19:22.320 --> 0:19:24.879 as you know, I'd like to ride my bike, I 0:19:25.000 --> 0:19:27.760 play the guitar, play music. M say, is that safe 0:19:27.840 --> 0:19:31.680 riding a bike? You know, dangerous and it's it's stayed. Sorry, 0:19:31.720 --> 0:19:34.600 it's safe if you stay on the bike and they're 0:19:34.600 --> 0:19:36.240 good at That's what I tried. And you still play 0:19:36.320 --> 0:19:39.199 the guitar or I do? I do? Yeah? Bare hair 0:19:39.280 --> 0:19:41.800 is awfully short for playing the guitar. Interest need longer hair, 0:19:42.840 --> 0:19:44.600 your hair longer when you were younger and grey? Or 0:19:44.640 --> 0:19:47.000 it's too great too, it's okay. So let me ask 0:19:47.040 --> 0:19:51.080 you about, um, the the issue of what it's like 0:19:51.160 --> 0:19:54.080 to be chairman of the FED. You you can't go 0:19:54.280 --> 0:19:57.880 have you regular friendship kind of dinners or meetings. Can 0:19:58.080 --> 0:20:00.560 people people treat you much differently, I assume than they 0:20:00.800 --> 0:20:03.200 used to write. When you go to a restaurant, are 0:20:03.240 --> 0:20:05.920 people listening to what you're saying or something like that. 0:20:07.040 --> 0:20:09.480 I have always thought that my jokes were funny, David, 0:20:10.520 --> 0:20:15.119 but no, so yes, it's um, I've never been a 0:20:15.119 --> 0:20:17.679 public figure before like this, and it's very different. But 0:20:18.200 --> 0:20:21.160 you know, it's it's a great honor to serve. But yeah, 0:20:21.160 --> 0:20:22.679 if you when you go in public places, you have 0:20:22.720 --> 0:20:25.920 to be very careful about and um, which is the 0:20:25.960 --> 0:20:28.360 president Nited States ever call you with any advice or 0:20:28.400 --> 0:20:31.200 you don't really say he doesn't the President Trump ever 0:20:31.240 --> 0:20:34.320