WEBVTT - Is the Fed Flying Blind?

0:00:02.680 --> 0:00:07.200
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:07.680 --> 0:00:11.960
<v Speaker 2>Good Afternoon on Wednesday, the Federal Open Market Committee voted

0:00:11.960 --> 0:00:14.720
<v Speaker 2>to lower interest rates by a quarter percentage point or

0:00:14.800 --> 0:00:16.080
<v Speaker 2>twenty five basis points.

0:00:16.360 --> 0:00:19.520
<v Speaker 3>My colleagues and I remained squarely focused on our achieving

0:00:19.560 --> 0:00:23.560
<v Speaker 3>hour dual mandate goals of maximum employment and stable prices

0:00:23.600 --> 0:00:25.240
<v Speaker 3>for the benefit of the American people.

0:00:26.560 --> 0:00:28.600
<v Speaker 2>This follows a cut of the same size at the

0:00:28.600 --> 0:00:31.720
<v Speaker 2>fed's September meeting, which was the first cut all year.

0:00:32.320 --> 0:00:35.440
<v Speaker 2>Policymakers also announced plans to stop shrinking the size of

0:00:35.479 --> 0:00:39.080
<v Speaker 2>the Central Bank's portfolio of securities starting on December first.

0:00:39.760 --> 0:00:42.120
<v Speaker 2>The Fed's decision was in reaction to signs of a

0:00:42.159 --> 0:00:46.040
<v Speaker 2>weakening labor market, even though stubborn inflation and declining consumer

0:00:46.120 --> 0:00:50.600
<v Speaker 2>confidence still concern policymakers. Federal Reserve chair Jerome Powell talked

0:00:50.600 --> 0:00:53.120
<v Speaker 2>about the rationale for the cut at a news conference

0:00:53.159 --> 0:00:54.200
<v Speaker 2>on Wednesday afternoon.

0:00:54.560 --> 0:00:57.320
<v Speaker 3>Conditions in the labor market appeared to be gradually cooling,

0:00:57.720 --> 0:01:00.000
<v Speaker 3>and inflation remains somewhat elevated.

0:01:00.680 --> 0:01:03.320
<v Speaker 2>The October meeting comes in the midst of an ongoing

0:01:03.360 --> 0:01:05.720
<v Speaker 2>White House push to pressure the Fed Reserve and its

0:01:05.800 --> 0:01:10.240
<v Speaker 2>chairman to cut rates more aggressively. The latest criticism came Tuesday,

0:01:10.480 --> 0:01:13.679
<v Speaker 2>during President Trump's trip to Asia. I call him too late.

0:01:13.800 --> 0:01:14.720
<v Speaker 4>He's always too late.

0:01:15.600 --> 0:01:20.600
<v Speaker 2>He's been too late, and uh, Jerome too late Powell.

0:01:21.160 --> 0:01:24.080
<v Speaker 2>The President also noted that Powell's term as chairman will

0:01:24.080 --> 0:01:25.839
<v Speaker 2>soon come to a close in May.

0:01:26.480 --> 0:01:28.440
<v Speaker 3>We got a bed fed guy, but he'll be out

0:01:28.440 --> 0:01:29.720
<v Speaker 3>of there a few months.

0:01:30.440 --> 0:01:33.080
<v Speaker 2>Powell was able to keep the committee largely in lockstep

0:01:33.160 --> 0:01:36.880
<v Speaker 2>this month. There were two descents. FED Governor Stephen Myron

0:01:37.000 --> 0:01:39.760
<v Speaker 2>wanted to see a larger cut of fifty basis points,

0:01:39.920 --> 0:01:42.360
<v Speaker 2>and Jeffrey Schmidt, who heads up the Kansas City FED,

0:01:42.800 --> 0:01:45.920
<v Speaker 2>was in favor of keeping rates steady. What happens at

0:01:45.920 --> 0:01:49.400
<v Speaker 2>the next meeting in December and beyond is quickly becoming

0:01:49.440 --> 0:01:50.520
<v Speaker 2>anyone's guess.

0:01:51.000 --> 0:01:54.520
<v Speaker 3>In the committee's discussions at this meeting, there were strongly

0:01:54.560 --> 0:01:58.920
<v Speaker 3>differing views about how to proceed in December. A further

0:01:58.960 --> 0:02:02.000
<v Speaker 3>reduction in the policy rate at the December meeting is

0:02:02.040 --> 0:02:06.640
<v Speaker 3>not a foregone conclusion. Far from it. Oolsey is not

0:02:06.920 --> 0:02:07.920
<v Speaker 3>on a preset course.

0:02:13.280 --> 0:02:15.040
<v Speaker 2>I'm David Gerra, and this is the big take from

0:02:15.040 --> 0:02:17.720
<v Speaker 2>Bloomberg News Today. On the show, I sit down with

0:02:17.760 --> 0:02:20.320
<v Speaker 2>Amera Amokway and end of Kourran. We've covered the Federal

0:02:20.360 --> 0:02:23.480
<v Speaker 2>Reserve for Bloomberg to break down the factors that influenced

0:02:23.520 --> 0:02:25.959
<v Speaker 2>the October rate cut and to talk about what they're

0:02:26.000 --> 0:02:28.720
<v Speaker 2>watching through the end of this year into twenty twenty six.

0:02:35.800 --> 0:02:38.600
<v Speaker 2>After Federal Reserve Chair Jerome Powell announced a cut of

0:02:38.639 --> 0:02:41.880
<v Speaker 2>twenty five basis points on Wednesday, I asked Bloomberg's end

0:02:41.880 --> 0:02:43.880
<v Speaker 2>of Current to break down what we know about the

0:02:43.880 --> 0:02:45.040
<v Speaker 2>committee's decision making.

0:02:45.880 --> 0:02:49.160
<v Speaker 1>Until around July part of this year, the feder thought

0:02:49.160 --> 0:02:51.320
<v Speaker 1>the jobs mark was doing well. They were more concerned

0:02:51.360 --> 0:02:54.400
<v Speaker 1>about inflation. But in recent months we've seen clear evidence

0:02:54.400 --> 0:02:58.520
<v Speaker 1>that companies are hiring at a slower rate, and of course,

0:02:58.840 --> 0:03:02.520
<v Speaker 1>at the same time during the cations, inflation is perhaps

0:03:02.919 --> 0:03:04.800
<v Speaker 1>headed in the right direction, not there yet, but headed

0:03:04.800 --> 0:03:06.560
<v Speaker 1>in the right direction, giving a window for the FED

0:03:06.639 --> 0:03:08.880
<v Speaker 1>could So that's why they went ahead with their move

0:03:08.960 --> 0:03:12.200
<v Speaker 1>today to lower rates for the second decision in a row,

0:03:12.400 --> 0:03:14.880
<v Speaker 1>reflecting their concerns now or more of but the job's

0:03:14.880 --> 0:03:15.840
<v Speaker 1>market done inflation.

0:03:16.280 --> 0:03:19.560
<v Speaker 2>Something else that's happened recently the government has shut down.

0:03:19.919 --> 0:03:23.359
<v Speaker 2>The FED is not funded through congressional appropriations, so its

0:03:23.440 --> 0:03:26.600
<v Speaker 2>staff are unaffected by the shutdown, but that doesn't mean

0:03:26.639 --> 0:03:30.600
<v Speaker 2>the Central Bank is completely insulated from its effects. The

0:03:30.639 --> 0:03:33.640
<v Speaker 2>FED relies on data produced by agencies like the Bureau

0:03:33.680 --> 0:03:36.760
<v Speaker 2>of Labor Statistics and the Bureau of Economic Analysis, whose

0:03:36.800 --> 0:03:40.200
<v Speaker 2>staff have been for a load. Bloomberg's amearra A. Mokway says,

0:03:40.240 --> 0:03:43.720
<v Speaker 2>that's meant that key economic gauges and reports have come

0:03:43.760 --> 0:03:45.800
<v Speaker 2>in late or not at all.

0:03:45.920 --> 0:03:49.200
<v Speaker 4>So I think FED policymakers would have preferred to have

0:03:49.720 --> 0:03:52.480
<v Speaker 4>more official government data. But what you heard a lot

0:03:52.520 --> 0:03:54.400
<v Speaker 4>of them saying in the intermting period is that the

0:03:54.520 --> 0:03:57.320
<v Speaker 4>data that they did have was still pointing in the

0:03:57.320 --> 0:04:01.160
<v Speaker 4>same direction, and that direction was in one of a

0:04:01.160 --> 0:04:04.560
<v Speaker 4>weaker labor market. And you didn't see Chair Power or

0:04:04.600 --> 0:04:09.120
<v Speaker 4>other policy makers pushing back against market expectations for a

0:04:09.200 --> 0:04:11.600
<v Speaker 4>quarter point cut at this meeting, and so that basically

0:04:11.640 --> 0:04:14.080
<v Speaker 4>signals to people headed into the meeting that the FED

0:04:14.240 --> 0:04:17.080
<v Speaker 4>was going to be comfortable cutting here. That the level

0:04:17.160 --> 0:04:19.520
<v Speaker 4>of concern about the labor market has continued to rise,

0:04:19.800 --> 0:04:23.480
<v Speaker 4>and you are seeing a group of policy makers expressing

0:04:23.600 --> 0:04:27.080
<v Speaker 4>a little bit more comfort with the inflation outlook because

0:04:27.160 --> 0:04:29.680
<v Speaker 4>some of the tariff passed through has been less than

0:04:29.680 --> 0:04:32.480
<v Speaker 4>initially feared, and because some do believe that sort of

0:04:32.520 --> 0:04:35.960
<v Speaker 4>the underlying trend in inflation when you strip out sort

0:04:35.960 --> 0:04:39.440
<v Speaker 4>of the tariff effects, is lower. And so you saw

0:04:39.520 --> 0:04:41.880
<v Speaker 4>FED policy makers take all of that and say, Okay,

0:04:41.920 --> 0:04:43.720
<v Speaker 4>we feel comfortable cutting again.

0:04:44.120 --> 0:04:46.040
<v Speaker 2>And the absence all of the data that the FED

0:04:46.040 --> 0:04:49.280
<v Speaker 2>would usually have, what have policymakers been doing? So you've

0:04:49.279 --> 0:04:53.160
<v Speaker 2>been listening to speeches and them in interviews. What are

0:04:53.160 --> 0:04:55.200
<v Speaker 2>they kind of leaning on? More so now that they

0:04:55.240 --> 0:04:58.719
<v Speaker 2>don't have the full panoply of economic data from the government.

0:04:59.000 --> 0:05:03.600
<v Speaker 1>So there are private sector gauges, gauges of consumer confidence,

0:05:04.240 --> 0:05:08.720
<v Speaker 1>gauges of industrial activity, gauges of where the jobs market

0:05:09.160 --> 0:05:12.240
<v Speaker 1>is at. There are those private sector indicators that the

0:05:12.240 --> 0:05:14.960
<v Speaker 1>Feder's lean on, which is useful. They did, of course,

0:05:15.080 --> 0:05:19.000
<v Speaker 1>get all important inflation data last week, which was in

0:05:19.080 --> 0:05:21.960
<v Speaker 1>one data release that the government effectively green lighted, but

0:05:22.080 --> 0:05:26.440
<v Speaker 1>they have been flying blind on the jobs market. I

0:05:26.480 --> 0:05:30.520
<v Speaker 1>guess today's decision reflects the fact that for now they've

0:05:30.600 --> 0:05:33.120
<v Speaker 1>concluded the market, the job's market is weakening, and that

0:05:33.160 --> 0:05:36.159
<v Speaker 1>they need to move in advance of a weakening any further.

0:05:36.400 --> 0:05:38.359
<v Speaker 1>But you have to say the longer this kind of

0:05:39.160 --> 0:05:42.440
<v Speaker 1>data avoid continues, that decision will get more complicated because

0:05:42.440 --> 0:05:44.920
<v Speaker 1>they simply won't know where the job's market is at.

0:05:46.120 --> 0:05:49.000
<v Speaker 2>Let's stick with those inflation data. So the BLS released

0:05:49.040 --> 0:05:52.200
<v Speaker 2>the September CPI report a few days later than it

0:05:52.240 --> 0:05:54.600
<v Speaker 2>was expecting to brought people back to go through the

0:05:54.640 --> 0:05:58.840
<v Speaker 2>data that've been collected. You look at CPI excluding food

0:05:58.839 --> 0:06:00.720
<v Speaker 2>and energy, which are known to be more or volatile,

0:06:01.040 --> 0:06:03.080
<v Speaker 2>and we saw the price of consumer goods an increase

0:06:03.160 --> 0:06:06.159
<v Speaker 2>point two percent from the month before, a softer read

0:06:06.200 --> 0:06:09.160
<v Speaker 2>than was expected by Wall Street and a lot of economists.

0:06:09.400 --> 0:06:10.760
<v Speaker 2>Sounds like we have a good sense of what that

0:06:10.839 --> 0:06:13.719
<v Speaker 2>means for this meeting, for the October meeting, looking ahead

0:06:13.720 --> 0:06:15.799
<v Speaker 2>to December. How did that kind of change the conversation

0:06:15.839 --> 0:06:17.760
<v Speaker 2>that's taking place about the Fed's path forward.

0:06:17.920 --> 0:06:20.200
<v Speaker 1>Well, so there's no doubt inflation came in a touch

0:06:20.400 --> 0:06:23.839
<v Speaker 1>on the soft side in September. That does encourage, of course,

0:06:23.880 --> 0:06:26.000
<v Speaker 1>policy makers that maybe are headed in the right direction.

0:06:26.520 --> 0:06:29.679
<v Speaker 1>But you know, economists say plenty of culture around that number, David,

0:06:29.880 --> 0:06:32.520
<v Speaker 1>And for example, the big decline in rents, for example,

0:06:32.640 --> 0:06:35.080
<v Speaker 1>is considered maybe to be one off, maybe some statistical

0:06:35.120 --> 0:06:38.680
<v Speaker 1>noise there, even though tariffs haven't passed through the way

0:06:38.720 --> 0:06:41.240
<v Speaker 1>we might have expected. There certainly is some tariff impact

0:06:41.320 --> 0:06:43.919
<v Speaker 1>in terms of tradable inflation. You look at furnishings, you

0:06:43.920 --> 0:06:46.160
<v Speaker 1>look at apparrel by the way, so those kind of

0:06:46.200 --> 0:06:48.359
<v Speaker 1>goods that are imported, showing some price pressure there. And

0:06:48.400 --> 0:06:51.440
<v Speaker 1>the point being that the end result is inflation remains

0:06:51.520 --> 0:06:54.760
<v Speaker 1>around three percent, well above the Fed's two percent target.

0:06:54.960 --> 0:06:57.160
<v Speaker 1>So yes, you can say, okay, inflation's not coming in

0:06:57.160 --> 0:06:59.719
<v Speaker 1>as bad as we might have expected, but it's nowhere

0:06:59.760 --> 0:07:01.680
<v Speaker 1>near where the central bank needs it to be or

0:07:01.720 --> 0:07:03.840
<v Speaker 1>wants it to be, and that's expected to be something

0:07:03.839 --> 0:07:06.480
<v Speaker 1>of a complicating theme in the months ahead, And of

0:07:06.480 --> 0:07:08.480
<v Speaker 1>course it will be driven by the labor market. If

0:07:08.480 --> 0:07:10.600
<v Speaker 1>there's a view, for argument's sake, the labor market has

0:07:10.640 --> 0:07:13.480
<v Speaker 1>stabilized if we reach that point, given that some people

0:07:13.520 --> 0:07:15.960
<v Speaker 1>blame it on the immigration crackdown anyway, So if you

0:07:16.000 --> 0:07:18.000
<v Speaker 1>reach that point, then you might say inflation comes back

0:07:18.000 --> 0:07:20.120
<v Speaker 1>into the story and the Fed goes in hold. But

0:07:20.200 --> 0:07:22.280
<v Speaker 1>of course we've had a point where the labor market

0:07:22.280 --> 0:07:25.760
<v Speaker 1>continues to weaken and people are losing their jobs, and

0:07:25.840 --> 0:07:28.320
<v Speaker 1>let's just say inflation is where it's not not getting

0:07:28.320 --> 0:07:30.360
<v Speaker 1>any worse, well, then at that point the FED will

0:07:30.360 --> 0:07:32.440
<v Speaker 1>probably feel much more pressure to keep cutting rates rather

0:07:32.520 --> 0:07:33.239
<v Speaker 1>than staying on hold.

0:07:33.360 --> 0:07:34.560
<v Speaker 2>I think I can speak for a mar when we

0:07:34.560 --> 0:07:36.520
<v Speaker 2>say we love hearing you say apparel and not a

0:07:36.520 --> 0:07:36.800
<v Speaker 2>pair of.

0:07:41.480 --> 0:07:41.800
<v Speaker 3>Alvera.

0:07:41.920 --> 0:07:43.880
<v Speaker 2>So, as I said, we had, we had workers come

0:07:43.920 --> 0:07:46.400
<v Speaker 2>back to get this release together to put it out there,

0:07:46.440 --> 0:07:49.120
<v Speaker 2>but we know from the White House there's no data

0:07:49.120 --> 0:07:51.840
<v Speaker 2>collection happening now. So tease out for a sort of

0:07:51.880 --> 0:07:55.000
<v Speaker 2>what that means, and we talk about flying blind the

0:07:55.040 --> 0:07:57.320
<v Speaker 2>prospect that there not being another CPI report on the

0:07:57.320 --> 0:07:58.920
<v Speaker 2>heels of this, and what does that mean for the Fed?

0:07:59.360 --> 0:08:01.880
<v Speaker 4>Yeah, that would be not great. And the White House

0:08:01.880 --> 0:08:03.520
<v Speaker 4>has already signaled that we aren't going to get a

0:08:03.520 --> 0:08:06.040
<v Speaker 4>repeat of that of the inflation release that we saw

0:08:06.120 --> 0:08:08.840
<v Speaker 4>last week. And you heard chaer Pal talk about this

0:08:09.080 --> 0:08:11.400
<v Speaker 4>earlier this month. He said, Okay, we're fine for now,

0:08:11.440 --> 0:08:14.520
<v Speaker 4>but if this goes on, then it becomes more challenging

0:08:15.040 --> 0:08:18.280
<v Speaker 4>for policy makers to make their decisions in the absence

0:08:18.280 --> 0:08:21.760
<v Speaker 4>of data. Right, they were already facing a very tricky

0:08:21.760 --> 0:08:25.560
<v Speaker 4>policy landscape. As we've been discussing. There is a group

0:08:25.560 --> 0:08:28.080
<v Speaker 4>of FED policy makers that does have this heightened concern

0:08:28.120 --> 0:08:30.520
<v Speaker 4>about the labor market, but there is another group that

0:08:30.640 --> 0:08:32.880
<v Speaker 4>is still like, wait a minute, inflation is still a

0:08:32.920 --> 0:08:36.640
<v Speaker 4>big problem. And without data to kind of inform them

0:08:36.640 --> 0:08:41.040
<v Speaker 4>about how these factors are developing and evolving, it makes

0:08:41.080 --> 0:08:44.920
<v Speaker 4>it very difficult for the FED to calibrate its policy

0:08:44.960 --> 0:08:49.000
<v Speaker 4>response correctly. And so if this goes on, the FED

0:08:49.000 --> 0:08:51.800
<v Speaker 4>could face a really challenging position at its December meeting.

0:08:52.200 --> 0:08:53.559
<v Speaker 4>And as we had into twenty twenty.

0:08:53.440 --> 0:08:57.720
<v Speaker 2>Six after the break, how the balance of power at

0:08:57.760 --> 0:09:01.040
<v Speaker 2>the FED could soon shift as jap Powell's term comes

0:09:01.080 --> 0:09:03.600
<v Speaker 2>to a close and who's on the short list to

0:09:03.679 --> 0:09:16.920
<v Speaker 2>replace him. The clock is ticking for Federal Reserve Chair

0:09:17.000 --> 0:09:20.200
<v Speaker 2>Jerome Powell. After this month's meeting, there are only four

0:09:20.200 --> 0:09:22.840
<v Speaker 2>more meetings left until he concludes his term as chair

0:09:23.080 --> 0:09:26.240
<v Speaker 2>in May of twenty twenty six. Bloomberg's and Merri Mokway

0:09:26.280 --> 0:09:28.840
<v Speaker 2>and end Occurrent say that looming above it all is

0:09:28.880 --> 0:09:32.200
<v Speaker 2>the reality that President Trump and Treasury Secretary Scott Bessont

0:09:32.440 --> 0:09:35.440
<v Speaker 2>intend to name Powell's successor before his term is up.

0:09:36.040 --> 0:09:39.000
<v Speaker 2>I ask them how that decision will affect Powell's ability

0:09:39.160 --> 0:09:40.960
<v Speaker 2>to lead the FED in the months ahead.

0:09:41.480 --> 0:09:43.959
<v Speaker 1>He has until May and of course, he could stay

0:09:44.000 --> 0:09:47.280
<v Speaker 1>on as a governor on the FED Board. I look

0:09:47.360 --> 0:09:49.600
<v Speaker 1>like any job like Annie Roll. At some point his

0:09:49.720 --> 0:09:52.240
<v Speaker 1>power will start to wane. He will become something of

0:09:52.320 --> 0:09:54.319
<v Speaker 1>alame duck. And you'd have to say the obvious moment

0:09:54.400 --> 0:09:58.120
<v Speaker 1>for that might be when his successor is announced, and

0:09:58.280 --> 0:10:01.720
<v Speaker 1>the indications from President Trump he might make that announcement

0:10:01.760 --> 0:10:03.679
<v Speaker 1>before the end of the year, and as soon as

0:10:03.679 --> 0:10:05.840
<v Speaker 1>that happens, a lot of folks let swing to that

0:10:05.960 --> 0:10:09.199
<v Speaker 1>person's public commentary, speeches, interviews and everything else in terms

0:10:09.200 --> 0:10:11.160
<v Speaker 1>of where the FED might be going forward in terms

0:10:11.200 --> 0:10:13.360
<v Speaker 1>of policy. But you know, right here, right now, Truman

0:10:13.400 --> 0:10:16.840
<v Speaker 1>Palace still remains pretty much in control. It's clearly a

0:10:16.920 --> 0:10:20.120
<v Speaker 1>vibrant debate going on on the Fed's policy board. You

0:10:20.120 --> 0:10:21.480
<v Speaker 1>can see that in the minutes and in the public

0:10:21.480 --> 0:10:24.040
<v Speaker 1>speeches and everything else. But he seems to be steering

0:10:24.080 --> 0:10:25.920
<v Speaker 1>it in the direction he wants. So i'd say, right here,

0:10:25.960 --> 0:10:29.880
<v Speaker 1>right now, David, He's influence remains intact. But as I say,

0:10:29.960 --> 0:10:32.280
<v Speaker 1>once his successor is appointed, you'll start to see someone

0:10:32.280 --> 0:10:32.960
<v Speaker 1>of that drain away.

0:10:34.760 --> 0:10:34.800
<v Speaker 4>Er.

0:10:34.960 --> 0:10:38.200
<v Speaker 2>Let's talk a bit about that process of picking a successor.

0:10:38.240 --> 0:10:40.840
<v Speaker 2>So we learned from Treasury sectory Scott Besson, who's overseeing

0:10:40.880 --> 0:10:44.040
<v Speaker 2>this search. There are five leading candidates here, So there's

0:10:44.080 --> 0:10:49.360
<v Speaker 2>Chris Waller, current governor, Michelle Bowman, Kevin Warsh, Kevin Hassett,

0:10:49.800 --> 0:10:52.480
<v Speaker 2>and Rick Reader who's at Black Rock. So you've got

0:10:52.480 --> 0:10:55.600
<v Speaker 2>some current Fed governor, as a former Fed governor, somebody

0:10:55.600 --> 0:10:58.800
<v Speaker 2>who's on Wall Street for good measure. What do you

0:10:58.800 --> 0:10:59.439
<v Speaker 2>make of the list?

0:10:59.679 --> 0:11:02.040
<v Speaker 4>I think it is actually a diverse set of candidates.

0:11:02.400 --> 0:11:05.199
<v Speaker 4>We have Kevin Hassett, who is the current chair of

0:11:05.280 --> 0:11:08.480
<v Speaker 4>the White House National Economic Council, which means he's one

0:11:08.520 --> 0:11:11.400
<v Speaker 4>of Trump's top economic advisors, one of Trump's top allies.

0:11:12.080 --> 0:11:14.200
<v Speaker 4>But you also have people like Chris Waller, who is

0:11:14.280 --> 0:11:17.640
<v Speaker 4>viewed as sort of a more independent person. So while

0:11:17.679 --> 0:11:20.160
<v Speaker 4>he was appointed to the FED Board by Trump, he

0:11:20.280 --> 0:11:24.000
<v Speaker 4>is viewed as someone who is not willing to necessarily

0:11:24.080 --> 0:11:26.800
<v Speaker 4>just go along with whatever Trump might want.

0:11:26.960 --> 0:11:27.080
<v Speaker 3>Right.

0:11:27.240 --> 0:11:29.560
<v Speaker 4>He has made a lot of credible calls on the

0:11:29.600 --> 0:11:32.400
<v Speaker 4>economy over the years, and he's viewed as someone who

0:11:32.960 --> 0:11:36.120
<v Speaker 4>would be inclined to continue to do that, but would

0:11:36.120 --> 0:11:38.600
<v Speaker 4>also perhaps be open to some of the kinds of

0:11:38.679 --> 0:11:41.040
<v Speaker 4>changes that you've heard President Trump and his allies talk

0:11:41.040 --> 0:11:43.680
<v Speaker 4>about wanting at the FED. Then you have Mickey Bowman,

0:11:43.720 --> 0:11:45.920
<v Speaker 4>who is kind of an untraditional candidate. She comes from

0:11:46.360 --> 0:11:50.160
<v Speaker 4>a banking background, also an appointee of Trump to the board,

0:11:50.559 --> 0:11:52.560
<v Speaker 4>and is really seen as someone who in some ways

0:11:52.600 --> 0:11:55.480
<v Speaker 4>is aligned with Trump, particularly on the regulatory front, and

0:11:55.559 --> 0:11:57.920
<v Speaker 4>this year she has been in favor of rage. She

0:11:58.000 --> 0:12:00.280
<v Speaker 4>was an earlier proponent of rates than many others on

0:12:00.320 --> 0:12:02.520
<v Speaker 4>the FED board, so she's kind of seen as aligned

0:12:02.520 --> 0:12:05.280
<v Speaker 4>with Trump, but also having sort of this unique view

0:12:05.320 --> 0:12:06.520
<v Speaker 4>and this unique background.

0:12:07.320 --> 0:12:10.160
<v Speaker 2>There's also Kevin Worsh, who was a leading contender for

0:12:10.200 --> 0:12:14.199
<v Speaker 2>the job back in twenty seventeen but lost out to Powell.

0:12:14.200 --> 0:12:17.880
<v Speaker 4>And in many ways Worsh has aligned with the Trump administration.

0:12:18.080 --> 0:12:20.559
<v Speaker 4>A lot of his critiques of the FED are pretty

0:12:20.600 --> 0:12:22.760
<v Speaker 4>much in lockstep with the critiques we've been hearing from

0:12:22.800 --> 0:12:26.280
<v Speaker 4>Treasury Secretary Bessant, and he is also a proponent of

0:12:26.360 --> 0:12:28.840
<v Speaker 4>lower rates, which is likely to appeal to the President.

0:12:29.320 --> 0:12:30.840
<v Speaker 4>And then Rick Great I think is a little bit

0:12:30.880 --> 0:12:32.559
<v Speaker 4>of of a dark Corse, kind of an unknown, a

0:12:32.600 --> 0:12:36.640
<v Speaker 4>Wall Street guy. So yes, like a really diverse slate

0:12:36.679 --> 0:12:39.359
<v Speaker 4>of candidates, each with I think different kinds of expertise

0:12:39.400 --> 0:12:40.679
<v Speaker 4>and backgrounds and.

0:12:40.760 --> 0:12:43.080
<v Speaker 2>What's the status of this process. So we have this list,

0:12:43.160 --> 0:12:45.319
<v Speaker 2>and I think we learned that Scott Best and the

0:12:45.320 --> 0:12:48.400
<v Speaker 2>Treasury sectory intends to give maybe a list of finalists

0:12:48.400 --> 0:12:51.320
<v Speaker 2>to the President around the Thanksgiving holiday. What do we

0:12:51.360 --> 0:12:53.880
<v Speaker 2>know about the president's level engagement with this process and

0:12:53.920 --> 0:12:56.040
<v Speaker 2>sort of what's going to be factoring to his thinking

0:12:56.160 --> 0:12:57.120
<v Speaker 2>as he makes the selection.

0:12:57.520 --> 0:12:59.600
<v Speaker 1>Yeah, so we know the timeline is pretty much as

0:12:59.600 --> 0:13:02.440
<v Speaker 1>you mentioned, David Is. Both the President and Treasures actually

0:13:02.480 --> 0:13:05.280
<v Speaker 1>said over the weekend that roughly speaking, the short list

0:13:05.320 --> 0:13:07.560
<v Speaker 1>will go to the President in around Thanksgiving and decision

0:13:07.600 --> 0:13:09.600
<v Speaker 1>will come at some point in the week's after. We

0:13:09.640 --> 0:13:11.280
<v Speaker 1>don't know too much in terms of what the President

0:13:11.360 --> 0:13:14.120
<v Speaker 1>is thinking about the individuals, but we certainly know he's

0:13:14.240 --> 0:13:16.520
<v Speaker 1>thinking a lot about the FED. He's been posting on

0:13:16.559 --> 0:13:19.280
<v Speaker 1>social media about it incessantly since he took office back

0:13:19.320 --> 0:13:22.760
<v Speaker 1>in January. He's clearly of the view that interest rates

0:13:22.800 --> 0:13:25.320
<v Speaker 1>need to be much lower. He's adamant that the FED

0:13:25.360 --> 0:13:27.839
<v Speaker 1>need to react and act on those views. He wants

0:13:27.840 --> 0:13:31.120
<v Speaker 1>the next FED chair to obviously share his worldview in

0:13:31.200 --> 0:13:34.520
<v Speaker 1>terms of the economy and monetary policy, but the trick

0:13:34.600 --> 0:13:38.000
<v Speaker 1>for the President will be to pull off appointing someone

0:13:38.080 --> 0:13:41.280
<v Speaker 1>who he can be confident shares, as I say, his worldview,

0:13:41.400 --> 0:13:43.199
<v Speaker 1>which is that there's a case for lower in gistrates

0:13:43.600 --> 0:13:46.840
<v Speaker 1>without really spooking the markets, because he will have to

0:13:46.920 --> 0:13:50.480
<v Speaker 1>know that credibility is still critical for the FED. And

0:13:50.520 --> 0:13:52.400
<v Speaker 1>of course we know President Trump is very cognizant of

0:13:52.480 --> 0:13:53.880
<v Speaker 1>the markets. So it's going to be I think it's

0:13:53.880 --> 0:13:56.560
<v Speaker 1>going to be a more tricky balancing act for him

0:13:56.600 --> 0:13:58.079
<v Speaker 1>to pull off than he might himself think.

0:13:58.080 --> 0:14:00.600
<v Speaker 2>Actually, Mary, you've been looking at all of these individuals,

0:14:00.640 --> 0:14:03.719
<v Speaker 2>but at Chris Waller in particular. You profiled him. Why

0:14:03.720 --> 0:14:05.840
<v Speaker 2>did you decide to kind of dig into his biography

0:14:05.880 --> 0:14:07.640
<v Speaker 2>and outlook and what did you learn about how he

0:14:07.720 --> 0:14:08.640
<v Speaker 2>might approach this job.

0:14:08.840 --> 0:14:11.000
<v Speaker 4>Yes, so we wanted to look at Chris Waller because

0:14:11.760 --> 0:14:16.640
<v Speaker 4>of this question. Right, if a person has an independent streak,

0:14:16.800 --> 0:14:20.960
<v Speaker 4>if they are a person who believes in conducting credible

0:14:21.080 --> 0:14:25.520
<v Speaker 4>economic analysis and making policy decisions based on what is

0:14:25.520 --> 0:14:27.920
<v Speaker 4>in the best interest of the economy and not necessarily

0:14:27.920 --> 0:14:31.240
<v Speaker 4>what the president says, how does someone like Chris Waller

0:14:31.760 --> 0:14:33.360
<v Speaker 4>get the job? Can he get the job?

0:14:33.400 --> 0:14:34.640
<v Speaker 2>How would he approach the job?

0:14:34.720 --> 0:14:37.880
<v Speaker 4>Right? Because he does have this reputation as being a

0:14:37.920 --> 0:14:40.600
<v Speaker 4>tried and true economist. And what we learned from talking

0:14:40.640 --> 0:14:43.240
<v Speaker 4>to his friends and associates is that, yes, right now

0:14:43.280 --> 0:14:45.040
<v Speaker 4>he is in the camp of lower rates, but the

0:14:45.080 --> 0:14:47.760
<v Speaker 4>way he got to that place was what they say

0:14:47.840 --> 0:14:50.480
<v Speaker 4>is a credible analysis of the data. He looked at

0:14:50.480 --> 0:14:53.280
<v Speaker 4>the labor market and he said, this is weakening. And

0:14:53.320 --> 0:14:55.640
<v Speaker 4>he was the first among the FED governors this year

0:14:55.680 --> 0:14:58.360
<v Speaker 4>to say we should resume cutting because the labor market

0:14:58.640 --> 0:15:02.320
<v Speaker 4>is showing these warning signs. And I think his associates, though,

0:15:02.440 --> 0:15:06.040
<v Speaker 4>also say that he is not necessarily someone who's going

0:15:06.080 --> 0:15:09.320
<v Speaker 4>to be committed to the status quo. And in reporting

0:15:09.320 --> 0:15:11.720
<v Speaker 4>the story, we learned that in his role on the

0:15:11.720 --> 0:15:15.200
<v Speaker 4>FED right now, he oversees the twelve regional FED banks

0:15:15.480 --> 0:15:18.600
<v Speaker 4>and he has really pushed for streamlining and cost cutting

0:15:18.600 --> 0:15:21.080
<v Speaker 4>and even some staff cuts. So it's not the case

0:15:21.160 --> 0:15:25.640
<v Speaker 4>that he would necessarily just continue to approach the FED

0:15:25.880 --> 0:15:28.280
<v Speaker 4>as it has been. He is open to some change,

0:15:28.520 --> 0:15:30.600
<v Speaker 4>but that doesn't mean that he's necessarily going to go

0:15:30.680 --> 0:15:32.440
<v Speaker 4>along with whatever President Trump says.

0:15:32.600 --> 0:15:35.240
<v Speaker 2>And then let me play this out. So, as you said,

0:15:35.240 --> 0:15:37.000
<v Speaker 2>there's going to be a point at which FED Chair

0:15:37.080 --> 0:15:39.240
<v Speaker 2>Jerome Powell's influence begins to wane as we get to

0:15:39.240 --> 0:15:41.560
<v Speaker 2>the end of his tenure. For a while, there's been

0:15:41.560 --> 0:15:44.240
<v Speaker 2>this idea floated if there being a kind of shadow chair,

0:15:44.400 --> 0:15:46.400
<v Speaker 2>that is, the President could pick somebody to be the

0:15:46.440 --> 0:15:50.600
<v Speaker 2>next FED chair, and that person, by opining on monetary

0:15:50.600 --> 0:15:53.080
<v Speaker 2>policy and the role of the FED, could kind of

0:15:53.120 --> 0:15:55.440
<v Speaker 2>confuse financial markets. Does it do something to kind of

0:15:55.440 --> 0:15:57.600
<v Speaker 2>blunt the fear about having a shadow FED chair? If

0:15:57.600 --> 0:15:59.240
<v Speaker 2>the President were to pick Chris Paller.

0:15:58.920 --> 0:16:02.880
<v Speaker 1>I mean, you know, or is central casting macroeconomists, if

0:16:02.880 --> 0:16:05.120
<v Speaker 1>he was to be appointed, it probably would be offered

0:16:05.160 --> 0:16:08.160
<v Speaker 1>something of a reassurance to investors who are nervous about

0:16:08.160 --> 0:16:10.760
<v Speaker 1>where the FED might be heading, because ultimately he's grounded

0:16:10.800 --> 0:16:13.440
<v Speaker 1>economics and that's what he is, and the signals he's

0:16:13.480 --> 0:16:16.560
<v Speaker 1>given is that he will be willing to stand up

0:16:16.600 --> 0:16:20.040
<v Speaker 1>to political pressure and be guided by data. If it's

0:16:20.080 --> 0:16:23.040
<v Speaker 1>not someone like Waller, for example, then I think there

0:16:23.040 --> 0:16:24.600
<v Speaker 1>would be a lot more scrutiny, a lot more focus

0:16:24.640 --> 0:16:26.440
<v Speaker 1>than what that person is saying, because if we get

0:16:26.440 --> 0:16:28.520
<v Speaker 1>to the turn of the year, you know, you're four

0:16:28.560 --> 0:16:31.640
<v Speaker 1>or five months out from German Pal's term ending, naturally,

0:16:31.760 --> 0:16:33.800
<v Speaker 1>a lot of the focus and interest will gravitate to

0:16:34.000 --> 0:16:35.760
<v Speaker 1>or whoever that next person coming in will be.

0:16:36.800 --> 0:16:39.600
<v Speaker 2>Where are we in this conversation about the sanctity of

0:16:39.720 --> 0:16:42.880
<v Speaker 2>FED independence, how safety experts think the kind of independence

0:16:42.880 --> 0:16:44.120
<v Speaker 2>of the FED is at this point in time.

0:16:44.560 --> 0:16:46.680
<v Speaker 4>There's a big thing that we haven't talked about, which

0:16:46.720 --> 0:16:49.800
<v Speaker 4>is the fact that President Trump is attempting to fire

0:16:49.880 --> 0:16:53.720
<v Speaker 4>FED Governor Lisa Cook, Right, And I think the outcome

0:16:53.760 --> 0:16:55.960
<v Speaker 4>of that case, which now sits at the Supreme Court,

0:16:56.160 --> 0:16:59.360
<v Speaker 4>is going to be ultimately the answer to that question

0:16:59.400 --> 0:17:02.960
<v Speaker 4>about FED and dependence. Right. So, the Supreme Court denied

0:17:02.960 --> 0:17:06.760
<v Speaker 4>the Trump administration's requests to be able to remove least

0:17:06.800 --> 0:17:10.480
<v Speaker 4>to Cook while this underlying case around an accusation of

0:17:10.480 --> 0:17:14.280
<v Speaker 4>mortgage fraud plays out, and they're going to have hearings

0:17:14.720 --> 0:17:16.640
<v Speaker 4>in January, so they kind of kick the can down

0:17:16.640 --> 0:17:17.960
<v Speaker 4>a road a little bit, so we have a little

0:17:18.000 --> 0:17:21.639
<v Speaker 4>bit of a reprieve. But ultimately, whatever the Supreme Court

0:17:21.760 --> 0:17:26.400
<v Speaker 4>says about this case is going to have huge implications

0:17:26.400 --> 0:17:29.399
<v Speaker 4>for the question of the Fed's independent because if the

0:17:29.440 --> 0:17:33.640
<v Speaker 4>President can remove a FED governor while there's an underlying

0:17:33.680 --> 0:17:36.879
<v Speaker 4>legal case playing out, that means that he has pretty

0:17:36.880 --> 0:17:40.880
<v Speaker 4>wide latitude to remove a FED governor and the inability

0:17:41.200 --> 0:17:44.160
<v Speaker 4>or the difficulty of removing a FED governor has long

0:17:44.200 --> 0:17:47.840
<v Speaker 4>been seen as the key protection for central bank independence,

0:17:48.200 --> 0:17:51.040
<v Speaker 4>and so if that is somehow watered down, then I

0:17:51.080 --> 0:17:54.240
<v Speaker 4>think it really does open the door for the president

0:17:54.280 --> 0:17:56.640
<v Speaker 4>to have much more influence over the central bank.

0:18:03.880 --> 0:18:06.280
<v Speaker 2>This is the Big Take from Bloomberg News. I'm David Gura.

0:18:06.560 --> 0:18:08.879
<v Speaker 2>To get more from The Big Take and unlimited access

0:18:08.920 --> 0:18:12.160
<v Speaker 2>to all of Bloomberg dot com, subscribe today at Bloomberg

0:18:12.160 --> 0:18:15.560
<v Speaker 2>dot com slash podcast offer. If you liked this episode,

0:18:15.720 --> 0:18:17.840
<v Speaker 2>make sure to follow and review The Big Take wherever

0:18:17.880 --> 0:18:20.280
<v Speaker 2>you listen to podcasts. It helps people find the show.

0:18:20.760 --> 0:18:22.600
<v Speaker 2>Thanks for listening. We'll be back tomorrow