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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus Mobile Act and on your radio.

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Speaker 1: This is a Bloomberg Business flag from Bloomberg World Handquarters.

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Speaker 1: I'm Charlie Pellet. Stalks are hire rebounding from yesterday's drop

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Speaker 1: spawned by concerns tied her molitary policy from Europe to

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Speaker 1: the U S could derail economic growth. SMP five hundred,

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Speaker 1: Indecks up eleven to sixty one, up five tenths of

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Speaker 1: one percent. Naz stank is up thirty five points, up

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Speaker 1: seven tenths of one percent. Down. Industrial is up a

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Speaker 1: hundred and twenty five points, also up seven tenths of

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Speaker 1: one percent. Tenure down nine thirty seconds had yield one

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Speaker 1: point seven two percent. Gold up ten cents. A little

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Speaker 1: change there. At twelve sixty nine, the ounce crude oil

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Speaker 1: West Texas Intermediate closing in on fifty dollars of barrel

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Speaker 1: forty nine seventy five on w T I hired by

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Speaker 1: two point two percent. I'm Charlie Pellett. That's a Bloomberg

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Speaker 1: business flash. He's taking stock the FED in focus on

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Speaker 1: Bloomberg Radio on Calfe and Hayes along with pim focus

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Speaker 1: the FED, and focused the European Central Bank, and focus

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Speaker 1: the Bank of Japan and focus. It is a world

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Speaker 1: of central bank Angstome saying, well, someone who knows this

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Speaker 1: central bank angst himself, I think in a certain way.

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Speaker 1: As Mariana Cortula quota, he's a Bloomberg You columnist, he's

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Speaker 1: a former Minneapolis Fed president, he served there from two

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Speaker 1: thousand nine to fifteen, and he's joining us now to

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Speaker 1: talk about many of these issues and his latest Bloomberg

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Speaker 1: view piece. Uh Nariana, I'd like to start though, with

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Speaker 1: the numbers we've been getting. You know, we've got the

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Speaker 1: Services index from the I s M looking fairly strong.

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Speaker 1: And then you contrast that to the Atlanta Fed cutting

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Speaker 1: its GDP tracker for the third quarter to two point

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Speaker 1: two because of trade devis at Widen and you pile

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Speaker 1: on that there's a group of Fed bank presidents now

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Speaker 1: who think it's time to raise the key right now.

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Speaker 1: And I bet you don't reason. Is uh no that

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Speaker 1: that would be bet you would win. Kathleen, thanks a

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Speaker 1: lot for having me on. Uh it's a lot of

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Speaker 1: to join you. I um. In terms of the data,

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Speaker 1: I think that we're Uh, we're still in a situation

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Speaker 1: where we're seeing slow growth, we're seeing a inflationary pressure

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Speaker 1: is remaining subdued. Uh. When I look at my the

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Speaker 1: metrics high follow on inflation expectations, they remain low with

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Speaker 1: the five year five year forward Uh. Tips spreads remain low,

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Speaker 1: and also some of the surveys remain low. So I

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Speaker 1: I don't see it as a time to raise rates

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Speaker 1: just based on those considerations. But the overwhelming consideration is

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Speaker 1: really the FEDS a limited tool kit with which to

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Speaker 1: deal with downside risks of any kind. Uh. And you

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Speaker 1: want to keep the patient as healthy as possible if

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Speaker 1: you don't have have any treatments if it gets sick,

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Speaker 1: and so that that really argues against raising rates. Uh.

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Speaker 1: I think one of the most compelling argument against raising

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Speaker 1: race at this point. Professor Cutcota, you are the Lionel W. Mackenzie,

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Speaker 1: professor of economics at the University of Rochester, and Lionel

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Speaker 1: Mackenzie I guess was famous for his work on general

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Speaker 1: equilibrium theory, attempting to explain the behavior of supply and

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Speaker 1: demand and prices. Where do you see inequality this equilibrium

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Speaker 1: in global markets right now? Uh? Great? Question, and uh

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Speaker 1: a great citational linel Um. I think that, uh. My

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Speaker 1: my own concern remains that I think the interest rates,

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Speaker 1: and this was going to come surprisingly to so many

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Speaker 1: of your listeners, is I think interest rates actually remained

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Speaker 1: too high in much of the world. And I think

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Speaker 1: we see that when people talk about boy, there's too

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Speaker 1: much supply or too little demand, well that's really those

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Speaker 1: those words are really markers for the fact that interest

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Speaker 1: rates are too high. The interest rates were lower, um

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Speaker 1: than we'll be able to clear up the excess supply

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Speaker 1: on and um and uh to the fact that we

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Speaker 1: have have two little demand at the current point in

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Speaker 1: time because people would start to spend more as opposed

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Speaker 1: to saving, and that would soak up the supply that

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Speaker 1: we we have. So when people and I hear this

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Speaker 1: from many business business people in financial market participants, that

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Speaker 1: they see signs of excess supply and and uh in

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Speaker 1: sufficient demand out there. But those are all markers that

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Speaker 1: should be it makes you think, boy, interest rates, even

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Speaker 1: though they're historically unusually low, remain too high. So in

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Speaker 1: terms of what central banks should do again, the question

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Speaker 1: gets very interesting. The FETE is getting ready to high

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Speaker 1: grates and boiled boys, they don't do it in November.

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Speaker 1: It's sure looks like the majority is going to vote

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Speaker 1: for December. And at the same time, now there's these

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Speaker 1: stirrings from the bank in Japan and European central banks

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Speaker 1: saying it seems, you know, this quantity of vising really

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Speaker 1: isn't working, so they're gonna start cutting back. That's a

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Speaker 1: little less stimulus as well. I know you think the

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Speaker 1: central bank should be more stimulative perhaps, but do you

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Speaker 1: agree me to be though that that bond purchases have

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Speaker 1: run out of steam in terms of being able to

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Speaker 1: boost economies. I would interpret what's going on in the

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Speaker 1: boj a little bit differently, and it's actually they're reaching

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Speaker 1: a policy conclusion that that uh that I had been

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Speaker 1: reaching some of my own thinking a while back, which

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Speaker 1: is it might be better to be targeting prices of

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Speaker 1: bonds as opposed to trying to target target quantities. What

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Speaker 1: we really believe in the in the economic modeling that

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Speaker 1: we do is it's really prices that matter for economic

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Speaker 1: decision making, not so much quantities, and so buying a

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Speaker 1: certain amount of bonds every month is merely a very

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Speaker 1: indirect way to to get the influence you want, which

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Speaker 1: is on on prices and yields. So I actually took

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Speaker 1: their their statement uh that they made uh recently to

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Speaker 1: be much more. I thought it was a very healthy move,

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Speaker 1: which is to start to talk about we're gonna be

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Speaker 1: aiming to target UM a certain yield for the for

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Speaker 1: the ten year as opposed to UM buying buying buying assets.

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Speaker 1: We talked about buying assets. I'm wondering if you maybe

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Speaker 1: could reference, uh, the Obama administration's economic stimulus plan, because

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Speaker 1: you said at the time, I believe that the reason

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Speaker 1: you've decided you didn't vote against it was not that

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Speaker 1: you were necessarily opposed to it, but that economic stimulus

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Speaker 1: was not a settled question within the world of academia. Yeah. No,

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Speaker 1: one of the unfortunate I should say, one of the

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Speaker 1: fortunate features of an unfortunate event is that, uh, in

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Speaker 1: response to the downturn of of two thousand uh eight,

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Speaker 1: in two thousand nine, we've been able to do a

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Speaker 1: lot of studies to follow up studies to analyze the

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Speaker 1: effect of physical stimulus. UH. Those studies weren't available at

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Speaker 1: the time that I signed a petition you make reference to.

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Speaker 1: I think now is as usual. There's still more work

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Speaker 1: to be done and more clear to be to be

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Speaker 1: too found. But I think that it seems clear the

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Speaker 1: physical list when we're at the zero or bound interest

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Speaker 1: rates can be very effective as a way of boosting

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Speaker 1: overall output. Alright, just ten seconds. Is there any chance

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Speaker 1: of it? It doesn't raise a key rate by December? Noriana, Yes,

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Speaker 1: there is a chance, and that's the right thing to do,

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Speaker 1: not doing. They should they should not raise rates. All right,

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Speaker 1: now you're a quo Letkona. Thank you so much. We'd

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Speaker 1: like to get every drop of information and analysis we

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Speaker 1: can out of his former Federal Reserve Bank president in Minneapolis,

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Speaker 1: Noriyanna Coacha Lakota, also a Bloomberg View columnist. We're going

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Speaker 1: to continue our fed in focus here on taking stock.

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Speaker 1: I'm Kathleen Hayes along with Pim Fox, and this is Bloomberg.

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Speaker 1: Coming up on taking stock, will be speaking with Richard Grossman.

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Speaker 1: He's the head of Halsted Property. We're going to find

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Speaker 1: out about residential real estate values and whether low interest

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Speaker 1: rates will help the market. That's next