WEBVTT - Boston Fed President Susan Collins Talks September Rate Decision

0:00:02.520 --> 0:00:08.760
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news joining us now Boston

0:00:08.800 --> 0:00:12.280
<v Speaker 1>FRED President Susan Collins, who has been in this meeting

0:00:12.360 --> 0:00:16.160
<v Speaker 1>and coming here for what twenty years? Twenty some odd years. Absolutely,

0:00:16.280 --> 0:00:17.680
<v Speaker 1>this one feels different, doesn't it.

0:00:18.320 --> 0:00:21.040
<v Speaker 2>Well, there's a lot going on with this meeting, I

0:00:21.040 --> 0:00:24.400
<v Speaker 2>will say, and delighted to be here with you. The

0:00:24.440 --> 0:00:28.120
<v Speaker 2>framework review, which we will hear more about. Very complicated

0:00:28.160 --> 0:00:31.280
<v Speaker 2>context obviously, and I love to tell you a little

0:00:31.280 --> 0:00:33.960
<v Speaker 2>bit about how I'm seeing economic conditions in the outlook.

0:00:34.040 --> 0:00:36.159
<v Speaker 1>So let's get into that. There is this dual mandate

0:00:36.159 --> 0:00:40.240
<v Speaker 1>that's in question, the idea of inflation versus labor. Where

0:00:40.320 --> 0:00:42.080
<v Speaker 1>are you in the continuum of which you need to

0:00:42.080 --> 0:00:43.000
<v Speaker 1>be most worried about?

0:00:43.240 --> 0:00:44.000
<v Speaker 3>Well, you need to be.

0:00:44.120 --> 0:00:46.400
<v Speaker 2>This is a time when you need to be looking

0:00:46.479 --> 0:00:48.720
<v Speaker 2>at the balance. You need to be looking at all

0:00:48.760 --> 0:00:52.960
<v Speaker 2>of it. And growth has been slowing recently, but at

0:00:53.000 --> 0:00:57.000
<v Speaker 2>the same time, overall economic fundamentals are relatively solid, and

0:00:57.040 --> 0:00:59.800
<v Speaker 2>that's a context in which it's not surprising to see

0:00:59.840 --> 0:01:02.480
<v Speaker 2>the indicators being mixed. Some are stronger and some are

0:01:02.480 --> 0:01:03.960
<v Speaker 2>a bit weaker. You got to look at the whole

0:01:04.000 --> 0:01:07.480
<v Speaker 2>picture and not focus too much on any one or

0:01:07.480 --> 0:01:08.880
<v Speaker 2>two specific indicators.

0:01:09.319 --> 0:01:11.440
<v Speaker 3>There's a lot of people who are concerned that you

0:01:11.600 --> 0:01:15.000
<v Speaker 3>might be late getting to the economy if you wait

0:01:15.480 --> 0:01:19.080
<v Speaker 3>for unemployment to rise significantly. On the other hand, you

0:01:19.160 --> 0:01:22.959
<v Speaker 3>might see inflation rise fast. What about the compromise that's

0:01:23.000 --> 0:01:25.640
<v Speaker 3>been floated by some people that you cut rate once

0:01:25.880 --> 0:01:27.080
<v Speaker 3>and then you wait.

0:01:28.040 --> 0:01:30.360
<v Speaker 2>Well, so you do have to be thinking about all

0:01:30.400 --> 0:01:33.520
<v Speaker 2>of it. We cannot wait until all of the uncertainty

0:01:33.800 --> 0:01:36.920
<v Speaker 2>is behind us. You've got to make decisions in real time.

0:01:37.040 --> 0:01:39.319
<v Speaker 2>So I think that part is true. It is a

0:01:39.360 --> 0:01:43.680
<v Speaker 2>complex context for monetary policy because I see upside risks

0:01:43.760 --> 0:01:47.120
<v Speaker 2>to inflation related to tariffs already starting to see some

0:01:47.200 --> 0:01:50.440
<v Speaker 2>of that, and downside risks on the labor market side.

0:01:50.520 --> 0:01:55.200
<v Speaker 2>And so it's about balancing those features. And I don't

0:01:55.240 --> 0:01:57.080
<v Speaker 2>get ahead of a decision that we're going to make

0:01:57.680 --> 0:01:59.480
<v Speaker 2>four weeks from now. We're going to see data in

0:01:59.560 --> 0:02:02.440
<v Speaker 2>between and then, but it's going to be about balancing

0:02:02.640 --> 0:02:06.680
<v Speaker 2>those to really offset our risks and focus on both

0:02:06.720 --> 0:02:07.800
<v Speaker 2>sides of that mandate.

0:02:08.040 --> 0:02:11.320
<v Speaker 3>Well, I know data is important, but it's also backward looking.

0:02:11.840 --> 0:02:15.200
<v Speaker 3>So what are companies in your district telling you about

0:02:15.240 --> 0:02:18.079
<v Speaker 3>their plans for both employment and prices?

0:02:18.320 --> 0:02:22.160
<v Speaker 2>Yeah, absolutely, because I do think that complementing all of

0:02:22.160 --> 0:02:25.600
<v Speaker 2>the statistical analysis that we are always you know, I'm

0:02:25.639 --> 0:02:27.520
<v Speaker 2>a total dated geek, right, you got to be in

0:02:27.560 --> 0:02:31.280
<v Speaker 2>this role with what we're hearing is really important, and

0:02:31.440 --> 0:02:35.000
<v Speaker 2>what I'm hearing is pretty consistent with what I'm seeing

0:02:35.040 --> 0:02:39.240
<v Speaker 2>in the data actually, and so on the labor market side,

0:02:40.160 --> 0:02:44.480
<v Speaker 2>while the job growth has certainly slowed, it's somewhat more concentrated.

0:02:44.600 --> 0:02:47.120
<v Speaker 2>At the same time, a number of those indicators are

0:02:47.320 --> 0:02:51.679
<v Speaker 2>quite healthy, and so on that side of it, they're

0:02:52.440 --> 0:02:56.040
<v Speaker 2>you know, I think that their arguments for taking a

0:02:56.040 --> 0:02:59.560
<v Speaker 2>bit more time, but I'm very focused on how those

0:02:59.639 --> 0:03:02.880
<v Speaker 2>upside those downside risks are evolving. And then on the

0:03:02.880 --> 0:03:06.040
<v Speaker 2>inflation side, what I'm hearing is that early days in

0:03:06.120 --> 0:03:09.399
<v Speaker 2>terms of the impact of tariffs coming through into prices

0:03:09.440 --> 0:03:12.480
<v Speaker 2>over time for a number of different reasons. So what

0:03:12.560 --> 0:03:15.919
<v Speaker 2>I'm hearing from firms around my district, which is most

0:03:15.960 --> 0:03:18.640
<v Speaker 2>of New England, and what we're seeing in the data

0:03:18.720 --> 0:03:21.320
<v Speaker 2>as we do that analysis at the Boston FED are

0:03:21.320 --> 0:03:23.080
<v Speaker 2>pretty much telling a similar story.

0:03:23.080 --> 0:03:26.080
<v Speaker 1>From that context, I was looking at where inflation was

0:03:26.160 --> 0:03:27.920
<v Speaker 1>the last time that we were here and heard at

0:03:28.000 --> 0:03:31.320
<v Speaker 1>Jackson Hole speech versus now, and it's crept higher. It's

0:03:31.360 --> 0:03:33.160
<v Speaker 1>gone on in the wrong direction. When you look at CPI,

0:03:33.240 --> 0:03:35.920
<v Speaker 1>it's basically ground around the same place in core PCEE.

0:03:36.840 --> 0:03:40.600
<v Speaker 1>Why did there seem to be confidence before that inflation

0:03:40.800 --> 0:03:42.920
<v Speaker 1>was on a sustainable pack down to two percent?

0:03:43.000 --> 0:03:47.040
<v Speaker 2>Why is it no longer well that underlying inflation. I

0:03:47.240 --> 0:03:49.880
<v Speaker 2>was quite confident a year ago that that trajectory was

0:03:49.920 --> 0:03:52.400
<v Speaker 2>back down to restoring price stability. And in terms of

0:03:52.400 --> 0:03:55.160
<v Speaker 2>what I hear around the district, high price level and

0:03:55.200 --> 0:03:58.160
<v Speaker 2>concern about inflation is one of the number one things

0:03:58.160 --> 0:03:59.960
<v Speaker 2>that I hear about, which is one of the reasons

0:04:00.000 --> 0:04:02.520
<v Speaker 2>I'm so focused on the importance of that side of

0:04:02.520 --> 0:04:05.480
<v Speaker 2>the mandate as well as maximum employment. But you know,

0:04:05.520 --> 0:04:09.440
<v Speaker 2>the tariff impacts are significant, and we have done analysis

0:04:09.480 --> 0:04:13.560
<v Speaker 2>in the Boston FED understanding that it's not just direct imports,

0:04:13.600 --> 0:04:16.800
<v Speaker 2>but the range of goods and services that rely on

0:04:16.880 --> 0:04:21.160
<v Speaker 2>imported intermediate goods as well, a much broader range. It

0:04:21.160 --> 0:04:24.200
<v Speaker 2>would surprise many people how many kinds of services actually

0:04:24.279 --> 0:04:27.719
<v Speaker 2>use imported intermediate It's as part of what's happening there,

0:04:27.920 --> 0:04:31.839
<v Speaker 2>and so we are anticipating that over the next couple

0:04:31.839 --> 0:04:33.960
<v Speaker 2>of quarters. So the rest of this year into early

0:04:34.040 --> 0:04:37.520
<v Speaker 2>next year, inflation is going to remain elevated, and then

0:04:37.560 --> 0:04:40.000
<v Speaker 2>my baseline would be it would start to come back down,

0:04:40.600 --> 0:04:43.760
<v Speaker 2>but I don't rule out a larger and more persistent impact.

0:04:43.960 --> 0:04:46.760
<v Speaker 1>To Myke's earlier point, what is the harm in cutting

0:04:46.800 --> 0:04:49.279
<v Speaker 1>by twenty five basis points or even fifty basis points,

0:04:49.279 --> 0:04:52.520
<v Speaker 1>because with that really cause runaway inflation at a time

0:04:52.800 --> 0:04:55.960
<v Speaker 1>when I know that the Chair has talked about policy

0:04:56.000 --> 0:04:57.520
<v Speaker 1>being relatively restrictive.

0:04:57.800 --> 0:05:01.239
<v Speaker 2>Well, it's about the balance, right, I mean inflation side,

0:05:01.240 --> 0:05:04.640
<v Speaker 2>And again that is what I hear about in every

0:05:06.080 --> 0:05:10.000
<v Speaker 2>conversation I have across the first district, which is most

0:05:10.040 --> 0:05:14.640
<v Speaker 2>of New England, and so it's about balancing that commitment

0:05:14.720 --> 0:05:18.080
<v Speaker 2>to restoring price stability with an understanding that preserving healthy

0:05:18.120 --> 0:05:21.200
<v Speaker 2>labor markets also really matters for the public. And so

0:05:21.600 --> 0:05:23.800
<v Speaker 2>doing that balance, I would say it's not a done

0:05:23.880 --> 0:05:26.920
<v Speaker 2>deal in terms of what we do at the next meeting,

0:05:27.880 --> 0:05:30.800
<v Speaker 2>but a range of possibilities is on the table, and

0:05:30.839 --> 0:05:32.560
<v Speaker 2>we're going to get more data between now and then.

0:05:33.080 --> 0:05:37.280
<v Speaker 3>Definitely, and everybody out there listening, that's good advice. Wait,

0:05:37.800 --> 0:05:41.960
<v Speaker 3>don't bet yet. Is it more likely that we see

0:05:42.080 --> 0:05:44.880
<v Speaker 3>a rapid rise in unemployment because that tends to be

0:05:45.160 --> 0:05:48.240
<v Speaker 3>what happens when it starts to go up, or a

0:05:48.279 --> 0:05:53.320
<v Speaker 3>more long term but steady rise in inflation that would

0:05:53.600 --> 0:05:56.400
<v Speaker 3>lead to inflation expectations becoming unnerved.

0:05:57.200 --> 0:06:00.479
<v Speaker 2>Well, so from my perspective, the risks on the two

0:06:00.520 --> 0:06:03.960
<v Speaker 2>sides have come into rough balance, and so that's a

0:06:04.120 --> 0:06:08.080
<v Speaker 2>really complex context for monetary policy when you could see

0:06:08.120 --> 0:06:11.600
<v Speaker 2>the unemployment rate rising and you could see higher inflation.

0:06:12.960 --> 0:06:16.200
<v Speaker 2>You know, my baseline is not one that is as

0:06:16.279 --> 0:06:19.680
<v Speaker 2>concerned about inflation expectations rising at the moment. Earlier in

0:06:19.720 --> 0:06:22.480
<v Speaker 2>the year, I had more concerns about that. I would

0:06:22.560 --> 0:06:24.960
<v Speaker 2>say that at the moment monetary policy is kind of

0:06:25.000 --> 0:06:29.200
<v Speaker 2>modestly restricted. That's actually appropriate for a period when inflation

0:06:29.360 --> 0:06:33.640
<v Speaker 2>is elevated. We haven't brought back price stability, at which

0:06:33.680 --> 0:06:36.560
<v Speaker 2>I am more than I'm totally committed to. But at

0:06:36.560 --> 0:06:39.520
<v Speaker 2>the same time, there are those risks with the slower

0:06:39.560 --> 0:06:43.880
<v Speaker 2>employment growth that could lead unemployment rates to rise, and

0:06:44.360 --> 0:06:46.839
<v Speaker 2>balancing those risks. So I think at the moment where

0:06:46.839 --> 0:06:50.239
<v Speaker 2>we are is appropriate. But if we start to see

0:06:50.560 --> 0:06:54.680
<v Speaker 2>worsening labor market risks relative to inflation and starting to

0:06:54.839 --> 0:06:57.680
<v Speaker 2>dial back the restrictedness would become appropriate.

0:06:57.440 --> 0:06:58.880
<v Speaker 4>Doctor Collins, I was going to ask you a bow

0:06:58.960 --> 0:07:02.040
<v Speaker 4>tie question about the privilege of taking your PhD under

0:07:02.120 --> 0:07:04.240
<v Speaker 4>Rudy Darnbush and what it means for the future of

0:07:04.279 --> 0:07:08.280
<v Speaker 4>the dollar in that Unfortunately the economist Donald Trump is watching.

0:07:08.360 --> 0:07:11.360
<v Speaker 4>Thank you President Trump for watching this morning. May I

0:07:11.480 --> 0:07:15.240
<v Speaker 4>quote the United States is the quote hottest unquote country

0:07:15.280 --> 0:07:17.760
<v Speaker 4>anywhere in the world. There is no other country that

0:07:17.880 --> 0:07:20.840
<v Speaker 4>is even close. And just think one year ago we

0:07:20.960 --> 0:07:24.800
<v Speaker 4>were a quote all caps dead country with no hope

0:07:24.800 --> 0:07:28.480
<v Speaker 4>of ever seeing all caps greatness again. But that all

0:07:28.560 --> 0:07:33.280
<v Speaker 4>changed on election day November fifth, twenty twenty four. Many,

0:07:33.440 --> 0:07:37.040
<v Speaker 4>including Ken Rogoff of your Harvard line up and say

0:07:37.840 --> 0:07:44.880
<v Speaker 4>markets all time high, economy okay, inflation edging up, bond

0:07:44.920 --> 0:07:49.480
<v Speaker 4>market speaking. Is the Fed to ex post right now?

0:07:49.760 --> 0:07:53.520
<v Speaker 4>Does the Fed just have to wait because so many

0:07:53.560 --> 0:07:57.160
<v Speaker 4>things are firing on all cylinders? Is a president just noted?

0:07:57.720 --> 0:07:59.960
<v Speaker 2>Well? You know, I am laser focused on the day

0:08:00.040 --> 0:08:03.440
<v Speaker 2>data and the range of data from what's happening in

0:08:03.480 --> 0:08:06.360
<v Speaker 2>the relative short term to what the indicators is just

0:08:06.480 --> 0:08:09.320
<v Speaker 2>testing in terms of longer term trajectories. I think, as

0:08:09.320 --> 0:08:12.320
<v Speaker 2>I said earlier, those underlying fundamentals are still.

0:08:12.200 --> 0:08:15.320
<v Speaker 4>Quite how broken the disinflation vector. Here do we sit

0:08:15.360 --> 0:08:17.920
<v Speaker 4>at this Jackson hole where we got a service vector

0:08:18.240 --> 0:08:20.320
<v Speaker 4>in a goods vector nudging upwards.

0:08:21.480 --> 0:08:24.239
<v Speaker 2>I think my baseline is again it's going to remain

0:08:24.280 --> 0:08:26.960
<v Speaker 2>elevated for some time related to those tariffs which are

0:08:26.960 --> 0:08:29.600
<v Speaker 2>still unfolding. It's a lot of uncertainty with that, but

0:08:30.120 --> 0:08:32.520
<v Speaker 2>it's possible that we'll see more persistence. There are a

0:08:32.520 --> 0:08:35.760
<v Speaker 2>lot of unusual dimensions of behavior right now, which means

0:08:35.760 --> 0:08:38.520
<v Speaker 2>that some of the history doesn't give us as much

0:08:38.559 --> 0:08:40.920
<v Speaker 2>of an indicator of how things are going to unfold.

0:08:41.120 --> 0:08:44.120
<v Speaker 2>We got to realize that. But again, we can't wait

0:08:44.200 --> 0:08:47.360
<v Speaker 2>until all of that uncertainty's result before we make our decisions.

0:08:47.679 --> 0:08:51.560
<v Speaker 2>Those fundamentals are still healthy, and keeping that balance in

0:08:51.679 --> 0:08:54.640
<v Speaker 2>mind of the mandate that Congress gave us for price

0:08:54.679 --> 0:08:59.000
<v Speaker 2>stability and maximum employment is where I will keep my focus.

0:08:59.040 --> 0:09:01.520
<v Speaker 1>We just have about thirty seconds. What's fed Chirp Howell

0:09:01.520 --> 0:09:02.560
<v Speaker 1>going to say, no, one's listening.

0:09:04.880 --> 0:09:06.080
<v Speaker 2>Well, I don't want to get a head out of

0:09:06.160 --> 0:09:08.800
<v Speaker 2>the chair. He's going to talk about Obviously, the framework.

0:09:08.840 --> 0:09:11.680
<v Speaker 2>We have had a robust process there which I'm you know,

0:09:11.760 --> 0:09:15.000
<v Speaker 2>feel really good about and about what he's seeing in

0:09:15.880 --> 0:09:18.640
<v Speaker 2>conditions and the outlook that was really good, really good massaging.

0:09:18.679 --> 0:09:21.880
<v Speaker 1>Boston Fed President College, Thanks understanding