WEBVTT - Former Kansas City Fed President Talks US Election Impact on Fed Policy

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<v Speaker 1>The former Kansas City FED president as the George Ester.

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<v Speaker 1>Welcome to the programmer, So wonderful to hear from you

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<v Speaker 1>once again. How difficult is life about to get at

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<v Speaker 1>the Federal Reserve.

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<v Speaker 2>Well, it's never an easy path when you get to

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<v Speaker 2>a time like this. But remember, Jonathan, this institution was

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<v Speaker 2>by design anticipating that there would be political influences on it,

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<v Speaker 2>and so a lot of safeguards will put around it

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<v Speaker 2>to allow the individuals that sit around that table to

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<v Speaker 2>really maintain their focus on the American public and the

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<v Speaker 2>mandate that was given to it by Congress.

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<v Speaker 3>There is a confusion though as to giving effect. Is

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<v Speaker 3>that a lot of the potential proposals would have a

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<v Speaker 3>fundamental effect on the trajectory of the economy, and that's

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<v Speaker 3>certainly what the market seemed to be responding to. Do

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<v Speaker 3>you think if you were on the Fed you'd be

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<v Speaker 3>rethinking just how much further the Fed can cut?

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<v Speaker 2>Well, there's no question, Lisa, that you have to take

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<v Speaker 2>into aunt fiscal policies and the impact they can have

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<v Speaker 2>on the economy.

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<v Speaker 4>And of course, when you're making a forecast.

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<v Speaker 2>You have to be thinking about what are the risks

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<v Speaker 2>around that forecast? Whatever baseline you set, you have to

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<v Speaker 2>be thinking about what lies ahead in terms of setting

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<v Speaker 2>a path, and I thought yesterday the Chairman was pretty

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<v Speaker 2>clear that he wasn't going to offer any forward guidance

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<v Speaker 2>about what comes next, and I think that's really.

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<v Speaker 5>The right way to handle it at this stage.

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<v Speaker 3>At this stage, December isn't going to be so easy

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<v Speaker 3>because they do have to release a new statement of

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<v Speaker 3>economic projections. I'm sure that you are very glad that

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<v Speaker 3>you don't have to offer up yours. How do they

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<v Speaker 3>signal a potential scenario analysis around something that the market

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<v Speaker 3>is actively considering and responding to.

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<v Speaker 4>So I think where we will see that.

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<v Speaker 2>Certainly you could see it play out in the median

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<v Speaker 2>assessment of those nineteen forecasts, but you'll also see it

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<v Speaker 2>in the state where this committee will talk about the

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<v Speaker 2>balance of risk and they will talk about their own

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<v Speaker 2>assessment of what the path ahead might look like. Today,

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<v Speaker 2>they're relying on what they know, which is we have

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<v Speaker 2>the economy that's handed to us. We are saying risk

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<v Speaker 2>are roughly in balance. You heard the Chairman say several

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<v Speaker 2>times what the trade offs are between going too fast

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<v Speaker 2>versus too slow, And so it will be a while

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<v Speaker 2>before they get any clarity on what steps will be

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<v Speaker 2>taken in Congress in the administration that will begin to

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<v Speaker 2>bend the curve of those forecasts.

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<v Speaker 1>As they can. We rewind and play the tape back,

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<v Speaker 1>because you've lift this, you lift the tax cuts in seventeen,

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<v Speaker 1>and you lift the trade war in eighteen. And we're

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<v Speaker 1>asking the same questions of people now that we were

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<v Speaker 1>asking in the back end of sixteen when President Trump

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<v Speaker 1>was elected to his first term. Could you share with

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<v Speaker 1>our audience your experience and at that time time how

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<v Speaker 1>long things took to really start to consider what was

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<v Speaker 1>happening on the other side of Washington.

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<v Speaker 2>So there's the real challenge for the committee when you

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<v Speaker 2>were watching.

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<v Speaker 4>How fiscal policy might play out.

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<v Speaker 2>So you can see today, for example, if you're thinking

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<v Speaker 2>about tax cuts, as we were back in twenty seventeen,

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<v Speaker 2>at what point do those feed through the economy? When

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<v Speaker 2>do you feel their full impact? And importantly, what else

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<v Speaker 2>is going on that is going to counter whatever you.

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<v Speaker 5>Might estimate those effects to be. So it is really.

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<v Speaker 2>A process as it was when I was at the

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<v Speaker 2>table of saying what are the various scenarios where might

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<v Speaker 2>we see more immediate impact, and then what tends to

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<v Speaker 2>play out over a longer timeframe, also taking into account

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<v Speaker 2>other things going on in this very large and complex.

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<v Speaker 5>Economy that we're trying to make an assessment of.

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<v Speaker 1>So that final point, I think is the more important one.

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<v Speaker 1>The terriss back in eighteen didn't turn out to be

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<v Speaker 1>as inflationary as some people warned. Is there reason to

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<v Speaker 1>believe that, given the backdrop now, given the current context

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<v Speaker 1>for things, that it could be more inflationary this time around?

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<v Speaker 2>Well, I think, by the Fed's own admission, there are

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<v Speaker 2>upside risks to inflation right now. Inflation has not returned

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<v Speaker 2>to target even as it has come down. We are

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<v Speaker 2>looking at a fiscal situation that is likely to bring

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<v Speaker 2>upside risk.

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<v Speaker 4>Here.

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<v Speaker 2>We're looking at really global trade and changes and shifts. There,

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<v Speaker 2>so many aspects of what we see playing out today,

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<v Speaker 2>I think give good reason to be cautious to think

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<v Speaker 2>about those upside risks even as you watch any given

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<v Speaker 2>action taken that could be pro inflationary.

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<v Speaker 1>As the George, thank you for sharing your experience with

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<v Speaker 1>us this morning. We appreciate it. As always, the former

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<v Speaker 1>Kansas City FED president there as the George