Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The former Fed governor Bessie two writes in the following,
Speaker 2: it would take something extraordinary to derail a twenty five
Speaker 2: basis point cut in September, the question, we've all got
Speaker 2: what it would take to make if fifty Bessie joined us.
Speaker 2: Now for more, Betsy, wonderful to see you once again.
Speaker 2: Let's start with Friday and that speech on Friday, Lisa,
Speaker 2: and I've got a similar question, and I think he
Speaker 2: might have the answer. Was the chairman speaking for the
Speaker 2: committee on Friday or speaking for himself?
Speaker 3: So for the entire speech, he was speaking for the
Speaker 3: committee except for the one line when he said, my
Speaker 3: confidence has grown that inflation is on a sustainable path.
Speaker 3: And there he said my and that's very unusual for
Speaker 3: this chairman. And I think what he was doing there
Speaker 3: was he was expressing his own opinion, but giving the
Speaker 3: committee room, not frontrunning the committee, but giving the committee
Speaker 3: room in September through the sep to all put out
Speaker 3: their own estimates of both where the various indicators are
Speaker 3: going to be and their confidence in their forecasts.
Speaker 2: Bessie, how big do you think the range will be?
Speaker 2: In the summary of economic projections come September eighteenth. How
Speaker 2: wide is that range going to be?
Speaker 3: The range of the projections themselves are the confidence. So
Speaker 3: the projections themselves I don't think are going to be
Speaker 3: a terribly wide range, or not more than usual wide range.
Speaker 3: But what I'm really watching for is the confidence, and
Speaker 3: particularly the confidence in the inflation forecast. So in the
Speaker 3: June projections there were just one or two participants who
Speaker 3: had more than actually normal confidence in their projections. All
Speaker 3: the rest of them said more uncertainty than usual. So
Speaker 3: that's the confidence piece that I'll be looking for.
Speaker 1: Betsy, do you think that it's appropriate for this federal
Speaker 1: reserve to be so disproportionately weighted to cutting rates at
Speaker 1: a time or we're not seeing true weakness in a
Speaker 1: labor market?
Speaker 3: Well, cutting rates is right now only reducing the amount
Speaker 3: of tightness. It's not in any way becoming stimulative, and
Speaker 3: so I think it is appropriate to begin that, But
Speaker 3: I think they'll go fairly slowly and feel their way along.
Speaker 3: The one piece that I don't think there's consensus on
Speaker 3: is what is the level of neutral What is the
Speaker 3: neutral level of interest rates? Those that are neither stimulative
Speaker 3: nor restrictive, and I think they'd be feeling that went
Speaker 3: along to that point.
Speaker 1: They also didn't really resolve the other issue, which was
Speaker 1: the theme of the whole conference, which was how much
Speaker 1: was monetary policy responsible for bringing down inflation and how
Speaker 1: much could it be responsible for preventing some sort of
Speaker 1: downside to the labor market in general. I mean, did
Speaker 1: we get any answers to some of the bigger questions
Speaker 1: other than simply a FED show came out and said, yes,
Speaker 1: we're going to cut rates, We're going to start the process,
Speaker 1: and we could potentially cut a lot.
Speaker 3: So actually, I think he did address that question. The
Speaker 3: piece that he talked about is the importance of inflation expectations,
Speaker 3: and what I heard him say was, yes, you know,
Speaker 3: we were wrong on transitory. Once we realized we were wrong,
Speaker 3: we acted. And so what I heard from that is
Speaker 3: so the FED might get the individual settings wrong from
Speaker 3: time to time, but its commitment to its mandate and
Speaker 3: willingness to act in furtherance of that mandate is most
Speaker 3: important for the confidence and anchoring inflation expectations, And that
Speaker 3: piece I think he declared victory on not necessarily inflation,
Speaker 3: but inflation expectations. Remaining anchored through this cycle of inflation.
Speaker 2: Can we deal with inflation that contribution to actually bringing
Speaker 2: inflation down from eight down towards three. Let's see what's
Speaker 2: your impression of things, because in that speech on Friday,
Speaker 2: I think we certainly walked away with this idea that
Speaker 2: the Federal Reserve chair was acknowledging that a lot of
Speaker 2: the work came from elsewhere.
Speaker 3: Well, the problem this was a supply side driven inflation anyway,
Speaker 3: So a lot all of the work was on the
Speaker 3: supply side, which effect can't really effect. All the VET
Speaker 3: could do was whole demand in check as best it
Speaker 3: could while supply caught up. And that's true for the
Speaker 3: labor market as well as the goods market. And I
Speaker 3: think they did that. But I heard in this speech
Speaker 3: he recognized that the reduction inflation has come entirely from supply,
Speaker 3: including on the labor side. So when you look at labor,
Speaker 3: I don't think we have a weak labor market. It's
Speaker 3: coming into balance, but it's coming into balance because of
Speaker 3: improvements and participation and increases in immigration, both of which
Speaker 3: have a limit to how much they can continue to contribute.
Speaker 2: Bessie Joke, appreciate it. Thank you. Former Fed governor Bessie
Speaker 2: Joke found the latest