WEBVTT - Federal Reserve Governor Christopher Waller Talks Labor Market, Fed Chair

0:00:02.520 --> 0:00:07.400
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:08.000 --> 0:00:10.680
<v Speaker 2>Making the case for a rake cut. FED Governor Chris

0:00:10.680 --> 0:00:13.360
<v Speaker 2>Waller sounding an audience here in New York, looking across

0:00:13.360 --> 0:00:15.520
<v Speaker 2>the selfton hot data, I get a picture of a

0:00:15.600 --> 0:00:18.200
<v Speaker 2>labor market on the edge joining us now here in

0:00:18.239 --> 0:00:21.000
<v Speaker 2>New York City, the Federals f Governor Chris Waller.

0:00:21.040 --> 0:00:23.919
<v Speaker 1>Governor Walla, good morning, Oh, good morning from Jonathan Lisa Henry.

0:00:24.079 --> 0:00:24.720
<v Speaker 1>Nice to be here.

0:00:24.720 --> 0:00:26.880
<v Speaker 2>It's good to see you, sir. Let's talk about why

0:00:26.880 --> 0:00:28.560
<v Speaker 2>we're losing the luxury of white sink.

0:00:28.880 --> 0:00:31.560
<v Speaker 1>Have we lost that already? No? I think we have.

0:00:31.760 --> 0:00:34.760
<v Speaker 3>Like I said last night, the headline numbers for the

0:00:34.840 --> 0:00:38.000
<v Speaker 3>lay remark what we're seeing are okay, but it's like

0:00:38.040 --> 0:00:40.280
<v Speaker 3>when you get underneath and start looking at the data,

0:00:40.479 --> 0:00:43.480
<v Speaker 3>the private sector is not doing as well as everybody thinks.

0:00:43.479 --> 0:00:46.479
<v Speaker 3>It is like most of the half of the employment

0:00:46.479 --> 0:00:49.000
<v Speaker 3>growth we saw last month was in the public sector,

0:00:49.560 --> 0:00:50.720
<v Speaker 3>and that means the private.

0:00:50.479 --> 0:00:52.240
<v Speaker 1>Sector is not doing particularly well.

0:00:52.360 --> 0:00:56.639
<v Speaker 3>So I was just joking that, you know, if you're

0:00:56.680 --> 0:00:59.040
<v Speaker 3>walking on a lake and the ice is frozen and

0:00:59.240 --> 0:01:02.280
<v Speaker 3>sound safe, but when you start hearing cracks, and that's

0:01:02.280 --> 0:01:04.720
<v Speaker 3>what I feel like, it's too late once you go

0:01:04.760 --> 0:01:07.000
<v Speaker 3>through the ice, so you've got to start prepping in

0:01:07.040 --> 0:01:09.200
<v Speaker 3>advance before you have that happen.

0:01:09.360 --> 0:01:11.000
<v Speaker 2>How do you scan that with what we've had from

0:01:11.040 --> 0:01:14.800
<v Speaker 2>Coporate America so far? What Coporate America has tolled Lisa

0:01:14.959 --> 0:01:17.680
<v Speaker 2>sitting down with Skull cub if United aadlines talking about

0:01:17.680 --> 0:01:20.360
<v Speaker 2>a rebound in the second half, what we've had from

0:01:20.360 --> 0:01:22.080
<v Speaker 2>the big banks so far this week? How do you

0:01:22.080 --> 0:01:24.640
<v Speaker 2>sclam what you're seeing the data with what way hearing

0:01:24.959 --> 0:01:25.680
<v Speaker 2>from CEOs?

0:01:26.000 --> 0:01:27.759
<v Speaker 3>Yeah, I mean when I talk to CEOs, I get

0:01:27.760 --> 0:01:30.959
<v Speaker 3>the same thing, wearing just hole pattern in terms of

0:01:30.959 --> 0:01:34.679
<v Speaker 3>certainly the labor market. They're not hiring, they're not firing,

0:01:34.720 --> 0:01:36.640
<v Speaker 3>they're just watching. And that's kind of what you see

0:01:36.640 --> 0:01:37.880
<v Speaker 3>in this underlying.

0:01:37.480 --> 0:01:38.360
<v Speaker 1>Private sector data.

0:01:38.440 --> 0:01:41.760
<v Speaker 3>There's not much happening, So it wouldn't take much sort

0:01:41.800 --> 0:01:42.199
<v Speaker 3>of tippet.

0:01:42.720 --> 0:01:44.480
<v Speaker 1>Now, could I be wrong? Absolutely?

0:01:44.640 --> 0:01:46.800
<v Speaker 3>I mean last year we got a couple of week

0:01:47.200 --> 0:01:49.600
<v Speaker 3>labor market reports allowed us to cut in September and

0:01:49.640 --> 0:01:52.160
<v Speaker 3>then everything kind of reversed went back up.

0:01:52.680 --> 0:01:55.919
<v Speaker 1>So I'm not saying that couldn't happen again.

0:01:56.400 --> 0:01:59.160
<v Speaker 3>But it's just we've constantly seen little bits of day

0:01:59.280 --> 0:02:03.000
<v Speaker 3>continually coming down the page book yesterday came out some

0:02:03.080 --> 0:02:03.600
<v Speaker 3>other stuff.

0:02:03.680 --> 0:02:05.760
<v Speaker 1>When you get out of the Joels quits rates.

0:02:05.560 --> 0:02:08.320
<v Speaker 3>Hiring rates, these things are not indicating our super healthy

0:02:08.360 --> 0:02:09.600
<v Speaker 3>private sector of labor market.

0:02:09.680 --> 0:02:12.640
<v Speaker 2>As you know, you're facing potentially and I stress, potentially

0:02:12.720 --> 0:02:15.720
<v Speaker 2>negative supply shelks on both sides of the mandate. I

0:02:15.760 --> 0:02:17.639
<v Speaker 2>want to say on the labor market, just for one

0:02:17.639 --> 0:02:21.040
<v Speaker 2>further note, immigration, how are you thinking about that when

0:02:21.080 --> 0:02:22.639
<v Speaker 2>you look at a labor market at the moment when

0:02:22.639 --> 0:02:25.000
<v Speaker 2>we have people coming on the program on Blimbeck Savanans

0:02:25.040 --> 0:02:27.920
<v Speaker 2>on Bloomback TV every single morning six till nine, coming

0:02:27.960 --> 0:02:30.919
<v Speaker 2>on here and saying, look at the data, unemployment could

0:02:30.919 --> 0:02:33.320
<v Speaker 2>stand these levels even with job gains of fifty to

0:02:33.360 --> 0:02:36.320
<v Speaker 2>one hundred thousand because of tighter immigration. How does that

0:02:36.360 --> 0:02:38.520
<v Speaker 2>factor into your thinking as you look at the US

0:02:38.600 --> 0:02:39.200
<v Speaker 2>labor market.

0:02:39.400 --> 0:02:41.760
<v Speaker 3>Well, yeah, the labor market doesn't necessarily have to be

0:02:41.960 --> 0:02:45.200
<v Speaker 3>affected by it because if workers flow in and they

0:02:45.240 --> 0:02:48.239
<v Speaker 3>get jobs at roughly the same rate as the existing workers,

0:02:48.240 --> 0:02:50.600
<v Speaker 3>the unmployment rate doesn't change even though the labor force

0:02:50.680 --> 0:02:52.800
<v Speaker 3>is higher. And when they go back out, the same

0:02:52.800 --> 0:02:55.560
<v Speaker 3>thing happens. If they leave the employment and leave the

0:02:55.600 --> 0:02:59.080
<v Speaker 3>labor force, you don't see a big change. The inflationing

0:02:59.280 --> 0:03:02.400
<v Speaker 3>now ken potentially affect the break even rate that you

0:03:02.400 --> 0:03:05.639
<v Speaker 3>would need to have the market going well. And that's

0:03:05.680 --> 0:03:07.560
<v Speaker 3>what we're still trying to kind of get a sense

0:03:07.600 --> 0:03:10.920
<v Speaker 3>of because you basically brought five years of immigration forward,

0:03:11.360 --> 0:03:14.320
<v Speaker 3>and you know, of that eight or nine million, most

0:03:14.360 --> 0:03:17.640
<v Speaker 3>of them haven't disappeared. So they're still here somewhere, whether

0:03:17.639 --> 0:03:19.440
<v Speaker 3>they're going to work, they're not going to work, but

0:03:19.160 --> 0:03:23.239
<v Speaker 3>they're still here. I don't where I think the immigration stuff.

0:03:23.240 --> 0:03:25.799
<v Speaker 3>If immigration was a big factory, you'd be seeing shortages,

0:03:25.880 --> 0:03:29.280
<v Speaker 3>and you might see some in you know, some industries.

0:03:29.880 --> 0:03:32.160
<v Speaker 3>But like I pointed out that if you look at

0:03:32.240 --> 0:03:37.400
<v Speaker 3>the new college graduate unemployment rate, it's seven percent. It's

0:03:37.640 --> 0:03:40.320
<v Speaker 3>much higher than it has These are not jobs are

0:03:40.320 --> 0:03:44.280
<v Speaker 3>being opened up because immigrants are not coming in.

0:03:45.360 --> 0:03:46.520
<v Speaker 1>It should be just the opposite.

0:03:46.520 --> 0:03:48.560
<v Speaker 3>If immigrants are leaving and these jobs are open and

0:03:48.640 --> 0:03:50.600
<v Speaker 3>then the unemployment right should go the other way. So

0:03:50.760 --> 0:03:53.680
<v Speaker 3>that unemployment rate, to me, is telling me immigration.

0:03:53.320 --> 0:03:54.640
<v Speaker 1>Is not the source of the problem.

0:03:54.920 --> 0:03:58.640
<v Speaker 3>Firms are just holding off on hiring decisions even if

0:03:58.680 --> 0:03:59.800
<v Speaker 3>their earnings are doing well.

0:04:00.000 --> 0:04:02.080
<v Speaker 1>That's that's just what I'm saying. They're doing on the

0:04:02.120 --> 0:04:02.560
<v Speaker 1>labor side.

0:04:02.560 --> 0:04:04.040
<v Speaker 2>I wanted to sign as a mutual friend of us.

0:04:04.040 --> 0:04:05.560
<v Speaker 2>That feels like he's missing out this morning, so I

0:04:05.600 --> 0:04:06.760
<v Speaker 2>wanted to cat show with you as well.

0:04:07.000 --> 0:04:09.520
<v Speaker 3>He's outing Victor idoh, always having a good time, isn't it.

0:04:09.640 --> 0:04:14.360
<v Speaker 1>My McKay joined us now. Good morning Mike, Good.

0:04:14.120 --> 0:04:16.280
<v Speaker 4>Morning John, and good morning Governor. While I would say

0:04:16.360 --> 0:04:18.200
<v Speaker 4>I'm sorry I'm not there with you, but I bet

0:04:18.240 --> 0:04:20.040
<v Speaker 4>you're sorry you're not here with me, I know.

0:04:20.000 --> 0:04:22.640
<v Speaker 1>You got it. I've been there before. It's a nice place.

0:04:25.440 --> 0:04:27.520
<v Speaker 4>You've made the case now a couple of times for

0:04:27.800 --> 0:04:29.120
<v Speaker 4>a July rate cut.

0:04:29.120 --> 0:04:31.000
<v Speaker 1>But how committed are you?

0:04:31.279 --> 0:04:33.840
<v Speaker 4>Are you willing to dissent at this meeting if the

0:04:33.880 --> 0:04:35.080
<v Speaker 4>majority votes the other way?

0:04:35.720 --> 0:04:38.279
<v Speaker 3>Well, I never want to commit to an action before

0:04:38.360 --> 0:04:41.080
<v Speaker 3>the meeting. That's otherwise. If everybody committed before, you don't

0:04:41.120 --> 0:04:43.440
<v Speaker 3>even need to have the meeting have a discussion. So

0:04:44.279 --> 0:04:46.680
<v Speaker 3>the goal is to always go to the meeting, sit down,

0:04:46.800 --> 0:04:47.839
<v Speaker 3>listen to all sides.

0:04:48.520 --> 0:04:50.200
<v Speaker 1>People will try to convince me of their view.

0:04:50.240 --> 0:04:52.720
<v Speaker 3>I'll try to convince some of my views, and then

0:04:52.760 --> 0:04:54.840
<v Speaker 3>the end of the day you make decisions on what

0:04:54.880 --> 0:04:58.320
<v Speaker 3>you think is the right outcome and the right data,

0:04:59.200 --> 0:05:01.560
<v Speaker 3>how the data is coming and right now. I laid

0:05:01.560 --> 0:05:03.320
<v Speaker 3>out my case last I don't think I could be

0:05:03.360 --> 0:05:06.520
<v Speaker 3>any more clear, I hope, as to what my position

0:05:06.680 --> 0:05:07.680
<v Speaker 3>is and why.

0:05:07.520 --> 0:05:08.640
<v Speaker 1>I think we need to do this.

0:05:08.839 --> 0:05:11.080
<v Speaker 3>It's just how I read the data and how I

0:05:11.120 --> 0:05:13.720
<v Speaker 3>think about going forward. How you respond to anything that

0:05:13.839 --> 0:05:14.760
<v Speaker 3>involves tariffs.

0:05:17.760 --> 0:05:20.560
<v Speaker 4>There's a lot of politics in this decision coming up,

0:05:21.880 --> 0:05:25.760
<v Speaker 4>more than usual, and I'm wondering. Governor Bowman has also

0:05:25.960 --> 0:05:29.360
<v Speaker 4>suggested she would prefer a rate cut in July. If

0:05:29.360 --> 0:05:32.280
<v Speaker 4>two of you vote for a rate cut, if two

0:05:32.360 --> 0:05:34.719
<v Speaker 4>of you were to descend, would you worry about the

0:05:34.760 --> 0:05:35.920
<v Speaker 4>market reaction to that?

0:05:37.080 --> 0:05:37.320
<v Speaker 1>You know.

0:05:37.400 --> 0:05:39.240
<v Speaker 3>One of the things that has always bothered me since

0:05:39.279 --> 0:05:41.599
<v Speaker 3>I took this job is the criticism.

0:05:41.040 --> 0:05:42.800
<v Speaker 1>That we are nothing but group think.

0:05:43.000 --> 0:05:46.360
<v Speaker 3>All the meanings are the same, nobody does sense, nobody

0:05:46.400 --> 0:05:47.440
<v Speaker 3>does anything.

0:05:47.839 --> 0:05:49.640
<v Speaker 1>And I think this is healthy.

0:05:49.760 --> 0:05:51.520
<v Speaker 3>I think this is a turning point in the way

0:05:51.520 --> 0:05:54.400
<v Speaker 3>we want to think about policy. Some people don't want

0:05:54.440 --> 0:05:57.080
<v Speaker 3>to cut, some do want to cut, but coming out

0:05:57.160 --> 0:06:01.520
<v Speaker 3>and making the case either side's good healthy debate. Otherwise,

0:06:01.560 --> 0:06:03.279
<v Speaker 3>if we're always going to do the same, the joke is,

0:06:03.279 --> 0:06:05.440
<v Speaker 3>why don't you just have one person set policy and

0:06:05.440 --> 0:06:07.600
<v Speaker 3>some of the other eighteen FMC members home.

0:06:08.160 --> 0:06:09.880
<v Speaker 1>So this is healthy. I think this is what you

0:06:09.920 --> 0:06:11.920
<v Speaker 1>want to see in a democracy. You want to see.

0:06:11.720 --> 0:06:15.800
<v Speaker 3>Policymakers have serious, open discussion about where policies should go.

0:06:15.960 --> 0:06:18.320
<v Speaker 3>It doesn't mean anything about politics or anything else. It's

0:06:18.640 --> 0:06:21.360
<v Speaker 3>make the economic argument and then see if you can

0:06:21.360 --> 0:06:22.760
<v Speaker 3>convince others to go along with you.

0:06:22.839 --> 0:06:23.920
<v Speaker 1>And that's all I'm trying to do.

0:06:24.200 --> 0:06:26.640
<v Speaker 2>We totally agree with you. For the record, we would

0:06:26.640 --> 0:06:28.279
<v Speaker 2>sack of the great thinking. It's good to have dissent,

0:06:28.520 --> 0:06:30.600
<v Speaker 2>you know, Mike essentially is asking if you will dissent

0:06:30.880 --> 0:06:32.480
<v Speaker 2>at the end of this month. Is the value and

0:06:32.520 --> 0:06:34.360
<v Speaker 2>dissentic on the f web site.

0:06:34.960 --> 0:06:39.000
<v Speaker 3>Well, I mean it's often the case that you dissent

0:06:39.160 --> 0:06:41.520
<v Speaker 3>if you make it very clear you think at this

0:06:41.600 --> 0:06:43.599
<v Speaker 3>moment in time, this is an important thing to do.

0:06:44.360 --> 0:06:46.240
<v Speaker 3>If you were to go in and do kind of

0:06:46.240 --> 0:06:49.000
<v Speaker 3>a jihadist I'm going to dissent at every single meeting

0:06:49.000 --> 0:06:51.320
<v Speaker 3>no matter what happens. Then you don't even have to

0:06:51.360 --> 0:06:53.880
<v Speaker 3>show up. Everybody knows what you're going to do. So

0:06:54.080 --> 0:06:58.080
<v Speaker 3>it is important to make sure that if you dissent,

0:06:58.240 --> 0:07:01.920
<v Speaker 3>you do it carefully and you have the right reasons,

0:07:02.200 --> 0:07:04.440
<v Speaker 3>and it's not going to turn into a serial dissenting

0:07:04.600 --> 0:07:07.280
<v Speaker 3>potential case. I mean, that's how I take my job

0:07:07.480 --> 0:07:10.880
<v Speaker 3>seriously and responsibly, so I only would think about doing this.

0:07:10.960 --> 0:07:13.360
<v Speaker 3>I dissented on the balance sheet slowed down earlier this

0:07:13.440 --> 0:07:17.520
<v Speaker 3>year because I felt like that was not needed. And

0:07:17.520 --> 0:07:18.920
<v Speaker 3>that's kind of the situation we're.

0:07:18.840 --> 0:07:23.800
<v Speaker 1>In now, Chris.

0:07:23.960 --> 0:07:27.800
<v Speaker 4>If you do cut, the markets will go one way.

0:07:27.840 --> 0:07:32.800
<v Speaker 4>If you don't, they'll go another. Perhaps, are how critical

0:07:32.920 --> 0:07:36.160
<v Speaker 4>is it to get to a rate cut fairly quickly?

0:07:36.200 --> 0:07:38.640
<v Speaker 4>You've mentioned the danger to the labor market, But if

0:07:38.680 --> 0:07:41.280
<v Speaker 4>you do wait till September, is that going to be

0:07:41.360 --> 0:07:41.800
<v Speaker 4>too late?

0:07:42.440 --> 0:07:45.560
<v Speaker 3>Well that's kind of the debate. What does it mean

0:07:45.680 --> 0:07:49.640
<v Speaker 3>to wait six weeks? Is it that critical? And the

0:07:49.760 --> 0:07:52.200
<v Speaker 3>answer is probably not. It could be, but it's also

0:07:52.240 --> 0:07:55.760
<v Speaker 3>the reverse. Why wait till September? If it's just six weeks,

0:07:56.400 --> 0:07:59.520
<v Speaker 3>that's exactly the thing. It doesn't kind of matter. Just

0:07:59.560 --> 0:08:01.520
<v Speaker 3>start the thinking about do I want to wait and

0:08:01.600 --> 0:08:02.600
<v Speaker 3>risk something happening.

0:08:02.600 --> 0:08:05.320
<v Speaker 1>This is what we saw last summer. By the way we.

0:08:05.240 --> 0:08:08.360
<v Speaker 3>Left July, we left rates and then boom, we got

0:08:08.360 --> 0:08:13.040
<v Speaker 3>a very weak, bad labor market reports and unemployment rate

0:08:13.160 --> 0:08:16.480
<v Speaker 3>jumped two tens, payrolls went way down from where they were,

0:08:16.680 --> 0:08:18.960
<v Speaker 3>and people were screaming at us last August, you guys

0:08:18.960 --> 0:08:22.280
<v Speaker 3>should have cut in July. So one month? Can it

0:08:22.720 --> 0:08:25.600
<v Speaker 3>always is one month? Just remember that it's just one month.

0:08:26.000 --> 0:08:27.520
<v Speaker 3>But we live in a world in which we have

0:08:27.560 --> 0:08:29.760
<v Speaker 3>to respond to real time data to kind of sense

0:08:29.760 --> 0:08:32.640
<v Speaker 3>of where the economy is going. And I've always said

0:08:32.679 --> 0:08:35.439
<v Speaker 3>if you worry about long and variable lags, which everybody

0:08:35.440 --> 0:08:37.600
<v Speaker 3>always talks about, the whole point of.

0:08:37.520 --> 0:08:39.440
<v Speaker 1>That is to get ahead of it, not wait for

0:08:39.520 --> 0:08:40.359
<v Speaker 1>it to happen.

0:08:40.120 --> 0:08:43.480
<v Speaker 3>And then hike a policy action that takes quarters or

0:08:43.559 --> 0:08:45.119
<v Speaker 3>months down the road to actually.

0:08:44.880 --> 0:08:45.640
<v Speaker 1>Have any impact.

0:08:45.800 --> 0:08:48.120
<v Speaker 2>The new Wiries tariffs, We've just had a six minute

0:08:48.120 --> 0:08:50.000
<v Speaker 2>conversation with you at that month, at your policy You've

0:08:50.000 --> 0:08:51.400
<v Speaker 2>built a case for a lot of interest rights, and

0:08:51.440 --> 0:08:54.400
<v Speaker 2>no one's talked about trite or inflation. Two assumptions in

0:08:54.440 --> 0:08:57.400
<v Speaker 2>your speech yesterday, and I think they're important assumptions. A

0:08:57.480 --> 0:09:00.200
<v Speaker 2>large share of tariff increases one bepostreets can see us

0:09:01.160 --> 0:09:03.720
<v Speaker 2>any increase would fight over the next YEARO cybe what

0:09:03.880 --> 0:09:05.839
<v Speaker 2>data underpins that conclusion?

0:09:06.400 --> 0:09:10.000
<v Speaker 3>Well, one, it's just first, it's just economic theory. So

0:09:10.280 --> 0:09:12.080
<v Speaker 3>you put on a tear cari iff as long as

0:09:12.160 --> 0:09:15.480
<v Speaker 3>it's a one time tariff, and that's it. That's a

0:09:15.520 --> 0:09:17.600
<v Speaker 3>one time price effect. I mean, this is economic theory.

0:09:17.600 --> 0:09:21.760
<v Speaker 3>You could not get in any serious economic model persistent

0:09:21.800 --> 0:09:24.480
<v Speaker 3>inflation from that. You would have to cook up some

0:09:24.720 --> 0:09:26.640
<v Speaker 3>other amplification mechanisms.

0:09:26.640 --> 0:09:28.640
<v Speaker 1>And that's what people talk about wages. They'll start going

0:09:28.720 --> 0:09:31.160
<v Speaker 1>up and everything will get out of control. You're not

0:09:31.200 --> 0:09:32.040
<v Speaker 1>seeing that at all.

0:09:32.160 --> 0:09:35.080
<v Speaker 3>This is just not those kind of amplification mechanism or

0:09:35.160 --> 0:09:41.160
<v Speaker 3>wage price spirals aren't happening. Tariffs are attacks, and in

0:09:41.240 --> 0:09:44.520
<v Speaker 3>public finance you learn that you may levy attacks on

0:09:44.559 --> 0:09:47.240
<v Speaker 3>a firm, but who bears the incidents of the burden

0:09:47.280 --> 0:09:49.760
<v Speaker 3>of that tax can be a group of people or

0:09:50.720 --> 0:09:52.600
<v Speaker 3>one person not of the firm.

0:09:52.720 --> 0:09:55.120
<v Speaker 1>So this is what I've heard from a lot of firms.

0:09:55.120 --> 0:09:59.200
<v Speaker 3>If there's a ten percent tax, they'll force their suppliers.

0:09:58.600 --> 0:09:59.760
<v Speaker 1>To eat some of that cost.

0:10:00.040 --> 0:10:02.520
<v Speaker 3>Workers meet some of that costs in terms of less

0:10:02.600 --> 0:10:03.840
<v Speaker 3>hiring and things like that.

0:10:04.320 --> 0:10:05.240
<v Speaker 1>The firm will take it.

0:10:05.200 --> 0:10:08.360
<v Speaker 3>Out of their profit margins, and then lastly some of

0:10:08.360 --> 0:10:11.000
<v Speaker 3>it will get passed on. And as I mentioned last night,

0:10:11.000 --> 0:10:13.440
<v Speaker 3>I've heard this for months now, like the rule is

0:10:13.480 --> 0:10:16.000
<v Speaker 3>ten percent, it's sorefully rule. If I'm as a third

0:10:16.000 --> 0:10:19.480
<v Speaker 3>to third a third suppliers of later to third firms

0:10:19.559 --> 0:10:21.280
<v Speaker 3>lead to third consumer is going to eat a third

0:10:21.280 --> 0:10:23.480
<v Speaker 3>of that tariff. So if you eat a third of

0:10:23.480 --> 0:10:25.880
<v Speaker 3>it and it's ten percent, like I've been arguing, this

0:10:25.960 --> 0:10:30.160
<v Speaker 3>is like three tenths of a three basic three tenths

0:10:30.160 --> 0:10:33.680
<v Speaker 3>on the inflation rate for a few months, and that's it,

0:10:34.520 --> 0:10:36.960
<v Speaker 3>and it'll persist. If you do twelve month over twelve month,

0:10:37.000 --> 0:10:39.280
<v Speaker 3>that base effect will not go away for a while

0:10:39.320 --> 0:10:41.640
<v Speaker 3>and then it'll just drop off a cliff. So that's

0:10:41.640 --> 0:10:43.040
<v Speaker 3>why I've been arguing, you want to look at like

0:10:43.120 --> 0:10:45.400
<v Speaker 3>three months and six months to see if these tariff

0:10:45.400 --> 0:10:48.880
<v Speaker 3>effects pop up and then go away. And so that's

0:10:48.880 --> 0:10:50.440
<v Speaker 3>more critical looking at twelve month.

0:10:51.480 --> 0:10:54.040
<v Speaker 4>Yes, but the way the President is putting these tariffs

0:10:54.080 --> 0:10:57.800
<v Speaker 4>on might not match up with theory. Chris, the smooth

0:10:57.800 --> 0:11:00.440
<v Speaker 4>hol attacks was passed and came into it on a

0:11:00.480 --> 0:11:04.640
<v Speaker 4>certain date. The President is not yet put on most

0:11:04.679 --> 0:11:07.000
<v Speaker 4>of these tafts they're in. Theory is still coming and

0:11:07.040 --> 0:11:08.720
<v Speaker 4>we still haven't seen the Section two.

0:11:08.559 --> 0:11:09.440
<v Speaker 1>Thirty two tariffs.

0:11:09.480 --> 0:11:11.800
<v Speaker 4>For the most part, the National Defense tariffs that he

0:11:11.840 --> 0:11:15.120
<v Speaker 4>wants to put on semiconductors and pharmaceuticals, et cetera. So

0:11:15.160 --> 0:11:18.520
<v Speaker 4>if the process is stretched out, consumers could be hit

0:11:18.679 --> 0:11:22.320
<v Speaker 4>by a series an ongoing series of tariff increases. And

0:11:22.360 --> 0:11:25.160
<v Speaker 4>given what they've just been through, isn't there danger that

0:11:25.280 --> 0:11:27.520
<v Speaker 4>inflation psychology starts to seep in?

0:11:28.120 --> 0:11:29.520
<v Speaker 1>Well, that's exactly the point.

0:11:30.120 --> 0:11:32.080
<v Speaker 3>All my example has been is if you put the

0:11:32.080 --> 0:11:34.680
<v Speaker 3>ten percent uniform tariff on and keep it roughly in

0:11:34.720 --> 0:11:38.319
<v Speaker 3>that range, than what I've described as will happen. If

0:11:38.320 --> 0:11:42.000
<v Speaker 3>there's constantly a sequence of higher and higher and higher tariffs,

0:11:42.040 --> 0:11:46.959
<v Speaker 3>then you are going at this rolling potential impact on prices.

0:11:46.240 --> 0:11:47.720
<v Speaker 1>That's true.

0:11:48.520 --> 0:11:51.640
<v Speaker 3>If it's still just a question of delaying it, that

0:11:51.679 --> 0:11:54.400
<v Speaker 3>doesn't change my argument. Whether you see the spike in

0:11:54.480 --> 0:11:58.199
<v Speaker 3>July or it happens in June, or Army, August or September.

0:11:58.760 --> 0:12:03.440
<v Speaker 3>When it happens, is there for the economics that's.

0:12:02.480 --> 0:12:04.080
<v Speaker 1>A non starter an argument.

0:12:04.880 --> 0:12:07.800
<v Speaker 3>Firms could also just spread it out in smaller increments

0:12:07.840 --> 0:12:10.880
<v Speaker 3>over several months. The total effects stillins of being the same.

0:12:10.920 --> 0:12:13.400
<v Speaker 3>They just get there in a later fashion and it'll

0:12:13.440 --> 0:12:16.160
<v Speaker 3>be smaller amounts. So the bigger thing is if we

0:12:16.280 --> 0:12:19.280
<v Speaker 3>just continually get another wave of tariffs, another wave of tariffs,

0:12:19.280 --> 0:12:22.440
<v Speaker 3>and another waves of tariffs. That's when things become more

0:12:22.520 --> 0:12:25.040
<v Speaker 3>problematic thinking about what's going to happen with inflation.

0:12:25.280 --> 0:12:27.200
<v Speaker 2>You don't think the feder was a should Wait, I

0:12:27.280 --> 0:12:29.040
<v Speaker 2>just want to talk about the experience of last year.

0:12:29.200 --> 0:12:31.280
<v Speaker 2>I think Lisa's done a fantastic job of covering this

0:12:31.360 --> 0:12:33.880
<v Speaker 2>over the last six seven eight months. The move we

0:12:33.880 --> 0:12:36.520
<v Speaker 2>saw last year one hundred basis point reduction in interest

0:12:36.600 --> 0:12:39.200
<v Speaker 2>rates on Fed funds, and then we saw a corresponding

0:12:39.200 --> 0:12:42.080
<v Speaker 2>move one hundred basis points higher at the long end

0:12:42.080 --> 0:12:45.600
<v Speaker 2>of the yield curve. Yields down did not happen. It

0:12:45.640 --> 0:12:48.040
<v Speaker 2>was yields up and mortgage costs up as well. How

0:12:48.040 --> 0:12:50.840
<v Speaker 2>do you think one informed the other and how might

0:12:50.880 --> 0:12:52.760
<v Speaker 2>that shape your approach to kind of interest rates this

0:12:52.800 --> 0:12:53.640
<v Speaker 2>time around?

0:12:53.840 --> 0:12:55.760
<v Speaker 3>Well, I think last September there was a lot of

0:12:55.840 --> 0:12:59.480
<v Speaker 3>rumor the long term rates were going down through Artist

0:12:59.559 --> 0:13:03.680
<v Speaker 3>and early September, and this was not any contradiction of

0:13:03.720 --> 0:13:06.720
<v Speaker 3>what we were doing. It's just after the September meeting

0:13:06.800 --> 0:13:09.320
<v Speaker 3>that data just came back and the opposite way growth

0:13:09.480 --> 0:13:13.240
<v Speaker 3>was productivity was employment suddenly took back off. And then

0:13:13.280 --> 0:13:17.040
<v Speaker 3>you have real growth expectations being much higher. We were

0:13:17.040 --> 0:13:19.760
<v Speaker 3>seeing productivity growth in GDP growth are close to three percent,

0:13:20.400 --> 0:13:22.960
<v Speaker 3>So in that case, long rates go up anyway, So

0:13:23.000 --> 0:13:25.840
<v Speaker 3>it's not necessarily there was some counter reaction to what

0:13:25.880 --> 0:13:29.240
<v Speaker 3>we were doing. I never saw inflation expectations adjust.

0:13:29.280 --> 0:13:29.959
<v Speaker 1>It caused all that.

0:13:30.080 --> 0:13:32.000
<v Speaker 2>You didn't think it was a market questioning. Youal commitments

0:13:32.000 --> 0:13:32.920
<v Speaker 2>to the inflation mandate.

0:13:33.200 --> 0:13:35.760
<v Speaker 3>If it would have been, you've seen it inflation expectations

0:13:35.800 --> 0:13:39.320
<v Speaker 3>in the market, not the Michigan thing, But we didn't

0:13:39.360 --> 0:13:42.880
<v Speaker 3>see it. I mean, inflation expectations stayed fairly anchored all

0:13:42.920 --> 0:13:45.520
<v Speaker 3>through this rise. So I think the increase of long

0:13:45.600 --> 0:13:47.440
<v Speaker 3>rate was just all the data was coming in for

0:13:47.480 --> 0:13:50.040
<v Speaker 3>a better, stronger economy. Then we thought it was going

0:13:50.080 --> 0:13:52.559
<v Speaker 3>to be in September. That's fine with me, you know.

0:13:52.760 --> 0:13:54.880
<v Speaker 3>I sometimes you're going to do these things taking a

0:13:54.920 --> 0:13:56.960
<v Speaker 3>shot that I want to make sure we don't have

0:13:57.000 --> 0:14:00.800
<v Speaker 3>a hard landing. And as I said, with any kind

0:14:00.800 --> 0:14:03.480
<v Speaker 3>of an insurance cut, sometimes you don't need the insurance.

0:14:03.800 --> 0:14:04.800
<v Speaker 1>It didn't work.

0:14:04.640 --> 0:14:06.360
<v Speaker 3>Out, but that doesn't mean you go back and say, oh,

0:14:06.400 --> 0:14:07.880
<v Speaker 3>that was a stupid decision.

0:14:07.480 --> 0:14:10.679
<v Speaker 2>To make market based expectations of inflation. Let's sit on this.

0:14:11.280 --> 0:14:13.559
<v Speaker 2>There are clear and obvious threats to the central banks

0:14:13.559 --> 0:14:17.120
<v Speaker 2>independence right now. Every single down this program, we're quoting

0:14:17.120 --> 0:14:19.840
<v Speaker 2>the President, quoting the chairman too late, and going after

0:14:19.920 --> 0:14:22.040
<v Speaker 2>lower interest rates. And I think a way that you

0:14:22.040 --> 0:14:25.120
<v Speaker 2>and I can have this conversation without addressing those those

0:14:25.160 --> 0:14:28.680
<v Speaker 2>cools directly is to think about what's happening with inflation expectations.

0:14:29.240 --> 0:14:33.880
<v Speaker 2>Did these threats threats into d anchor market based inflation expectations?

0:14:34.320 --> 0:14:36.320
<v Speaker 2>And it's not something you and the Committee might become

0:14:36.680 --> 0:14:38.560
<v Speaker 2>increasingly sensitive too in the months to come.

0:14:39.560 --> 0:14:40.280
<v Speaker 1>Well, Like I.

0:14:40.240 --> 0:14:42.920
<v Speaker 3>Said, I look at the after the tariffs coming on,

0:14:43.040 --> 0:14:46.360
<v Speaker 3>everybody was worried about the anchoring expectations, particularly after some

0:14:46.360 --> 0:14:49.320
<v Speaker 3>of these Michigan surveys came out. When I always look

0:14:49.360 --> 0:14:52.480
<v Speaker 3>at the market based expectation because money, people have money

0:14:52.480 --> 0:14:52.960
<v Speaker 3>in the game.

0:14:53.440 --> 0:14:54.400
<v Speaker 1>Firms are making.

0:14:54.200 --> 0:14:57.160
<v Speaker 3>Decisions or what they're cheap economists are saying, and if

0:14:57.200 --> 0:14:59.240
<v Speaker 3>those things are wrong, they're gonna lose a lot of money.

0:15:00.080 --> 0:15:01.040
<v Speaker 1>Always paid more attention.

0:15:01.320 --> 0:15:04.640
<v Speaker 3>I haven't seen much in the way of market expectations

0:15:04.640 --> 0:15:07.320
<v Speaker 3>being unanchored in any ways you want to measure them

0:15:07.400 --> 0:15:09.120
<v Speaker 3>any forwarder now in the near term.

0:15:09.160 --> 0:15:10.920
<v Speaker 1>Of course they might go on because you would.

0:15:10.800 --> 0:15:13.600
<v Speaker 3>See inflation in the short term, but in the longer

0:15:13.720 --> 0:15:17.400
<v Speaker 3>term ones I'm not seeing it. So either the market

0:15:17.480 --> 0:15:21.120
<v Speaker 3>is just dismissing all of this as chattering noise, or

0:15:21.160 --> 0:15:23.520
<v Speaker 3>at some point if something happens such that it becomes

0:15:23.600 --> 0:15:27.320
<v Speaker 3>much more serious than you might see a discrete jump, and.

0:15:27.240 --> 0:15:30.000
<v Speaker 1>Then you know that's that's gonna be a problem for everybody.

0:15:32.080 --> 0:15:35.040
<v Speaker 4>One of the questions that we get all the time, Chris,

0:15:35.280 --> 0:15:37.920
<v Speaker 4>from people on Wall Street is or one of the

0:15:38.440 --> 0:15:41.360
<v Speaker 4>posits they make is that all this criticism of the

0:15:41.400 --> 0:15:45.200
<v Speaker 4>FED is hurting FED credibility and that the next chairman

0:15:45.320 --> 0:15:47.080
<v Speaker 4>is going to have a tough job because there are

0:15:47.080 --> 0:15:51.160
<v Speaker 4>going to be expectations for the next chairman set by

0:15:51.200 --> 0:15:54.720
<v Speaker 4>the White House rather than by the economy. Do you

0:15:54.960 --> 0:15:57.240
<v Speaker 4>feel that inside the building.

0:15:58.040 --> 0:16:00.520
<v Speaker 1>Now, To be absolutely honest, we just do our job.

0:16:00.600 --> 0:16:04.320
<v Speaker 3>Every day I go in, I just focus on my

0:16:04.760 --> 0:16:07.400
<v Speaker 3>work on monetary policy, payments.

0:16:06.960 --> 0:16:09.560
<v Speaker 1>And oversight of the reserve banks. That's what I do.

0:16:09.800 --> 0:16:12.200
<v Speaker 3>I let this stuff go and then just try to

0:16:12.240 --> 0:16:15.040
<v Speaker 3>focus on my job. And I think that's how all

0:16:15.080 --> 0:16:17.800
<v Speaker 3>of us are proceeding with this. I mean, at the

0:16:17.880 --> 0:16:20.000
<v Speaker 3>end of the day, the president, when whoever they choose,

0:16:20.000 --> 0:16:21.920
<v Speaker 3>you're going to have to have somebody has credibility with

0:16:21.920 --> 0:16:24.720
<v Speaker 3>the markets, or you will see, as Jonathan is talking about,

0:16:24.800 --> 0:16:27.000
<v Speaker 3>you're going to see inflation expectations bike.

0:16:27.080 --> 0:16:29.240
<v Speaker 1>You will not get lower interest rates, you will get

0:16:29.320 --> 0:16:31.360
<v Speaker 1>higher interest rates. This is well known.

0:16:31.480 --> 0:16:34.280
<v Speaker 3>We've seen this everywhere around the world when this happens.

0:16:34.760 --> 0:16:38.080
<v Speaker 3>And I know Scott Deson knows this, So this is

0:16:38.200 --> 0:16:41.280
<v Speaker 3>not something that is lost on anybody.

0:16:41.600 --> 0:16:43.720
<v Speaker 2>You've been nominated by this president for the seat on

0:16:43.760 --> 0:16:46.400
<v Speaker 2>the board. Yes, you were a previously director of research

0:16:46.400 --> 0:16:49.000
<v Speaker 2>for Jim Pillot White back then is it a position

0:16:49.080 --> 0:16:51.560
<v Speaker 2>you would like? Is it something you would like to

0:16:51.600 --> 0:16:52.760
<v Speaker 2>do or in the future.

0:16:53.200 --> 0:16:55.800
<v Speaker 1>Look in twenty nineteen, the President contact me and say

0:16:55.840 --> 0:16:57.880
<v Speaker 1>would you serve? And I said yes. If the President

0:16:57.920 --> 0:16:59.560
<v Speaker 1>contacted me and so I want you to serve, I

0:16:59.600 --> 0:17:00.000
<v Speaker 1>would do it.

0:17:01.240 --> 0:17:06.160
<v Speaker 3>But he's not contact What say if he does, If

0:17:06.160 --> 0:17:07.880
<v Speaker 3>he says, Chris, I want you to do the job,

0:17:07.920 --> 0:17:08.760
<v Speaker 3>I'll say yes.

0:17:09.800 --> 0:17:10.879
<v Speaker 1>But he's not talking to me.

0:17:11.000 --> 0:17:16.600
<v Speaker 3>So that's it that much hypothetical that.

0:17:15.119 --> 0:17:17.320
<v Speaker 2>That might change. So it's good to see you. We

0:17:17.359 --> 0:17:19.840
<v Speaker 2>appreciate your time, all right, been very generous with it.

0:17:19.880 --> 0:17:23.080
<v Speaker 2>Thank you very much. The Federal Reserve governor there, Christopher Waller,

0:17:23.119 --> 0:17:24.880
<v Speaker 2>Mike McKay, thanks as well to you, sir,