Speaker 1: Bloomberg Audio Studios, podcasts, radio news joining us now Boston
Speaker 1: FRED President Susan Collins, who has been in this meeting
Speaker 1: and coming here for what twenty years? Twenty some odd years. Absolutely,
Speaker 1: this one feels different, doesn't it.
Speaker 2: Well, there's a lot going on with this meeting, I
Speaker 2: will say, and delighted to be here with you. The
Speaker 2: framework review, which we will hear more about. Very complicated
Speaker 2: context obviously, and I love to tell you a little
Speaker 2: bit about how I'm seeing economic conditions in the outlook.
Speaker 1: So let's get into that. There is this dual mandate
Speaker 1: that's in question, the idea of inflation versus labor. Where
Speaker 1: are you in the continuum of which you need to
Speaker 1: be most worried about?
Speaker 3: Well, you need to be.
Speaker 2: This is a time when you need to be looking
Speaker 2: at the balance. You need to be looking at all
Speaker 2: of it. And growth has been slowing recently, but at
Speaker 2: the same time, overall economic fundamentals are relatively solid, and
Speaker 2: that's a context in which it's not surprising to see
Speaker 2: the indicators being mixed. Some are stronger and some are
Speaker 2: a bit weaker. You got to look at the whole
Speaker 2: picture and not focus too much on any one or
Speaker 2: two specific indicators.
Speaker 3: There's a lot of people who are concerned that you
Speaker 3: might be late getting to the economy if you wait
Speaker 3: for unemployment to rise significantly. On the other hand, you
Speaker 3: might see inflation rise fast. What about the compromise that's
Speaker 3: been floated by some people that you cut rate once
Speaker 3: and then you wait.
Speaker 2: Well, so you do have to be thinking about all
Speaker 2: of it. We cannot wait until all of the uncertainty
Speaker 2: is behind us. You've got to make decisions in real time.
Speaker 2: So I think that part is true. It is a
Speaker 2: complex context for monetary policy because I see upside risks
Speaker 2: to inflation related to tariffs already starting to see some
Speaker 2: of that, and downside risks on the labor market side.
Speaker 2: And so it's about balancing those features. And I don't
Speaker 2: get ahead of a decision that we're going to make
Speaker 2: four weeks from now. We're going to see data in
Speaker 2: between and then, but it's going to be about balancing
Speaker 2: those to really offset our risks and focus on both
Speaker 2: sides of that mandate.
Speaker 3: Well, I know data is important, but it's also backward looking.
Speaker 3: So what are companies in your district telling you about
Speaker 3: their plans for both employment and prices?
Speaker 2: Yeah, absolutely, because I do think that complementing all of
Speaker 2: the statistical analysis that we are always you know, I'm
Speaker 2: a total dated geek, right, you got to be in
Speaker 2: this role with what we're hearing is really important, and
Speaker 2: what I'm hearing is pretty consistent with what I'm seeing
Speaker 2: in the data actually, and so on the labor market side,
Speaker 2: while the job growth has certainly slowed, it's somewhat more concentrated.
Speaker 2: At the same time, a number of those indicators are
Speaker 2: quite healthy, and so on that side of it, they're
Speaker 2: you know, I think that their arguments for taking a
Speaker 2: bit more time, but I'm very focused on how those
Speaker 2: upside those downside risks are evolving. And then on the
Speaker 2: inflation side, what I'm hearing is that early days in
Speaker 2: terms of the impact of tariffs coming through into prices
Speaker 2: over time for a number of different reasons. So what
Speaker 2: I'm hearing from firms around my district, which is most
Speaker 2: of New England, and what we're seeing in the data
Speaker 2: as we do that analysis at the Boston FED are
Speaker 2: pretty much telling a similar story.
Speaker 1: From that context, I was looking at where inflation was
Speaker 1: the last time that we were here and heard at
Speaker 1: Jackson Hole speech versus now, and it's crept higher. It's
Speaker 1: gone on in the wrong direction. When you look at CPI,
Speaker 1: it's basically ground around the same place in core PCEE.
Speaker 1: Why did there seem to be confidence before that inflation
Speaker 1: was on a sustainable pack down to two percent?
Speaker 2: Why is it no longer well that underlying inflation. I
Speaker 2: was quite confident a year ago that that trajectory was
Speaker 2: back down to restoring price stability. And in terms of
Speaker 2: what I hear around the district, high price level and
Speaker 2: concern about inflation is one of the number one things
Speaker 2: that I hear about, which is one of the reasons
Speaker 2: I'm so focused on the importance of that side of
Speaker 2: the mandate as well as maximum employment. But you know,
Speaker 2: the tariff impacts are significant, and we have done analysis
Speaker 2: in the Boston FED understanding that it's not just direct imports,
Speaker 2: but the range of goods and services that rely on
Speaker 2: imported intermediate goods as well, a much broader range. It
Speaker 2: would surprise many people how many kinds of services actually
Speaker 2: use imported intermediate It's as part of what's happening there,
Speaker 2: and so we are anticipating that over the next couple
Speaker 2: of quarters. So the rest of this year into early
Speaker 2: next year, inflation is going to remain elevated, and then
Speaker 2: my baseline would be it would start to come back down,
Speaker 2: but I don't rule out a larger and more persistent impact.
Speaker 1: To Myke's earlier point, what is the harm in cutting
Speaker 1: by twenty five basis points or even fifty basis points,
Speaker 1: because with that really cause runaway inflation at a time
Speaker 1: when I know that the Chair has talked about policy
Speaker 1: being relatively restrictive.
Speaker 2: Well, it's about the balance, right, I mean inflation side,
Speaker 2: And again that is what I hear about in every
Speaker 2: conversation I have across the first district, which is most
Speaker 2: of New England, and so it's about balancing that commitment
Speaker 2: to restoring price stability with an understanding that preserving healthy
Speaker 2: labor markets also really matters for the public. And so
Speaker 2: doing that balance, I would say it's not a done
Speaker 2: deal in terms of what we do at the next meeting,
Speaker 2: but a range of possibilities is on the table, and
Speaker 2: we're going to get more data between now and then.
Speaker 3: Definitely, and everybody out there listening, that's good advice. Wait,
Speaker 3: don't bet yet. Is it more likely that we see
Speaker 3: a rapid rise in unemployment because that tends to be
Speaker 3: what happens when it starts to go up, or a
Speaker 3: more long term but steady rise in inflation that would
Speaker 3: lead to inflation expectations becoming unnerved.
Speaker 2: Well, so from my perspective, the risks on the two
Speaker 2: sides have come into rough balance, and so that's a
Speaker 2: really complex context for monetary policy when you could see
Speaker 2: the unemployment rate rising and you could see higher inflation.
Speaker 2: You know, my baseline is not one that is as
Speaker 2: concerned about inflation expectations rising at the moment. Earlier in
Speaker 2: the year, I had more concerns about that. I would
Speaker 2: say that at the moment monetary policy is kind of
Speaker 2: modestly restricted. That's actually appropriate for a period when inflation
Speaker 2: is elevated. We haven't brought back price stability, at which
Speaker 2: I am more than I'm totally committed to. But at
Speaker 2: the same time, there are those risks with the slower
Speaker 2: employment growth that could lead unemployment rates to rise, and
Speaker 2: balancing those risks. So I think at the moment where
Speaker 2: we are is appropriate. But if we start to see
Speaker 2: worsening labor market risks relative to inflation and starting to
Speaker 2: dial back the restrictedness would become appropriate.
Speaker 4: Doctor Collins, I was going to ask you a bow
Speaker 4: tie question about the privilege of taking your PhD under
Speaker 4: Rudy Darnbush and what it means for the future of
Speaker 4: the dollar in that Unfortunately the economist Donald Trump is watching.
Speaker 4: Thank you President Trump for watching this morning. May I
Speaker 4: quote the United States is the quote hottest unquote country
Speaker 4: anywhere in the world. There is no other country that
Speaker 4: is even close. And just think one year ago we
Speaker 4: were a quote all caps dead country with no hope
Speaker 4: of ever seeing all caps greatness again. But that all
Speaker 4: changed on election day November fifth, twenty twenty four. Many,
Speaker 4: including Ken Rogoff of your Harvard line up and say
Speaker 4: markets all time high, economy okay, inflation edging up, bond
Speaker 4: market speaking. Is the Fed to ex post right now?
Speaker 4: Does the Fed just have to wait because so many
Speaker 4: things are firing on all cylinders? Is a president just noted?
Speaker 2: Well? You know, I am laser focused on the day
Speaker 2: data and the range of data from what's happening in
Speaker 2: the relative short term to what the indicators is just
Speaker 2: testing in terms of longer term trajectories. I think, as
Speaker 2: I said earlier, those underlying fundamentals are still.
Speaker 4: Quite how broken the disinflation vector. Here do we sit
Speaker 4: at this Jackson hole where we got a service vector
Speaker 4: in a goods vector nudging upwards.
Speaker 2: I think my baseline is again it's going to remain
Speaker 2: elevated for some time related to those tariffs which are
Speaker 2: still unfolding. It's a lot of uncertainty with that, but
Speaker 2: it's possible that we'll see more persistence. There are a
Speaker 2: lot of unusual dimensions of behavior right now, which means
Speaker 2: that some of the history doesn't give us as much
Speaker 2: of an indicator of how things are going to unfold.
Speaker 2: We got to realize that. But again, we can't wait
Speaker 2: until all of that uncertainty's result before we make our decisions.
Speaker 2: Those fundamentals are still healthy, and keeping that balance in
Speaker 2: mind of the mandate that Congress gave us for price
Speaker 2: stability and maximum employment is where I will keep my focus.
Speaker 1: We just have about thirty seconds. What's fed Chirp Howell
Speaker 1: going to say, no, one's listening.
Speaker 2: Well, I don't want to get a head out of
Speaker 2: the chair. He's going to talk about Obviously, the framework.
Speaker 2: We have had a robust process there which I'm you know,
Speaker 2: feel really good about and about what he's seeing in
Speaker 2: conditions and the outlook that was really good, really good massaging.
Speaker 1: Boston Fed President College, Thanks understanding