Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 1: Tracy, how about that? How about that Jolts report?
Speaker 2: How about them Jolts?
Speaker 1: About them jolts?
Speaker 3: Uh?
Speaker 2: Yeah, a lot stronger than expected, But I think there's
Speaker 2: there's a lot of uncertainty around jolts from what I remember.
Speaker 1: Yeah, well, it's like a I mean, we're recording this
Speaker 1: October third. These are August Jolts, so you know already.
Speaker 1: I guess that's like two months ago. I'm always sort
Speaker 1: of skeptical about job openings data, like what is it
Speaker 1: really measuring? But nonetheless, this is a measure the number
Speaker 1: of job openings that there are that people have been
Speaker 1: paying attention to. It had been coming down, it's jumped
Speaker 1: back up, and then it just does raise this whole
Speaker 1: question of like is the economy really sort of the
Speaker 1: celery into a nice smooth, soft landing or are we
Speaker 1: still really hot?
Speaker 4: Well?
Speaker 2: I know you were looking at jolts, but I've been
Speaker 2: watching the bond market, yes today, because the other big
Speaker 2: story in markets is, of course the big bond sell off. Yes,
Speaker 2: the thirty year treasury yield now at the highest since
Speaker 2: two thousand and seven, I think something like four point
Speaker 2: eight percent. Yeah, that's pretty crazy. And there's a lot
Speaker 2: of discussion right now over what is driving that long
Speaker 2: end sell off. Is it the higher for a longer
Speaker 2: stance that we saw from the Federal Reserve a couple
Speaker 2: of weeks ago, is it worries over supply, could be anything, really, right.
Speaker 1: We don't really know. And again, the moves that we're
Speaker 1: seeing in rates really like across the curve, but yet
Speaker 1: really at the long end, like they do not scream
Speaker 1: to me like we're in for a soft landing, right,
Speaker 1: They do not scream to me inflation is about to
Speaker 1: come down back to target. The Fed is going to
Speaker 1: be is going to cut sometime soon, and we're going
Speaker 1: to be, you know, back in like twenty eighteen, twenty
Speaker 1: nineteen Goldilock's territory. Like, we may get that, but it
Speaker 1: does not look like what the bond market.
Speaker 3: Is saying right now.
Speaker 2: It screams uncertainty to me. Like if you look at
Speaker 2: the bond sell off and you look at what's going
Speaker 2: on with jolts, it just seems like we are still
Speaker 2: in this period where even three years after the absolute
Speaker 2: depths of the pandemic. It feels like we're not quite
Speaker 2: sure how the economy is actually operating, what the impact
Speaker 2: of interest rates are, what's going on with inflation. It's
Speaker 2: come down, but we're not really sure if we can
Speaker 2: attribute that to the rate hikes or something else.
Speaker 1: You mentioned, by the way, the thirty year, but you know,
Speaker 1: mortgage thirty or mortgages they're coming on eight percent, so
Speaker 1: regardless or whatever I mean, like talk about a real
Speaker 1: effect on rates and their effect on rates to the
Speaker 1: broader economy may be kind of ambiguous, but no, no, no certain.
Speaker 2: This is why I mentioned the thirty year yield because
Speaker 2: this is the thing that mortgages are priced off of
Speaker 2: commercial paper, corporate debt. It is like a big benchmark
Speaker 2: for the wider economy.
Speaker 1: So I guess there's questions like what's going on and
Speaker 1: can we achieve that soft landing are still like huge
Speaker 1: questions that are.
Speaker 3: On everyone's mind.
Speaker 2: Absolutely.
Speaker 1: You know what I think is a better term than
Speaker 1: soft landing, by the way, uh.
Speaker 2: No, Golden path, Golden path.
Speaker 1: The golden path, I think you know soft landing and knights,
Speaker 1: but the golden path towards that sort of you know,
Speaker 1: low unemployment, low inflation, and our guest today recently gave
Speaker 1: a speech on the prospects of can we achieve that
Speaker 1: golden path? Can we walk this golden path into the
Speaker 1: sort of economic nirvana that we all want to see?
Speaker 2: I know you brought up the golden path just than
Speaker 2: your new term, but I kind of read it as
Speaker 2: this time is different speech, and it takes like it's
Speaker 2: pretty brave to make a this time is different speech.
Speaker 2: But on the other hand, if any time is going
Speaker 2: to be different, it might actually be the period after
Speaker 2: the worst pandemic that we've seen in over one hundred.
Speaker 1: Years, right exactly. Well, rather than us speculating about whether
Speaker 1: we can achieve the soft landing, or whether this time
Speaker 1: will be different, or whether we can walk down this
Speaker 1: golden path, let's bring onto the podcast. I'm very excited
Speaker 1: it's his first time on the show. But someone we've
Speaker 1: on to talk to forever Austin Goldsby, who is the
Speaker 1: relatively new president of the Chicago Fed. Austin thrilled to
Speaker 1: have you on the show. I love that term golden path.
Speaker 1: Can we continue to walk down it? Can we continue
Speaker 1: to see disinflation with unemployment as low as it is.
Speaker 4: Ray see Joe, longtime listener, first time caller. Thank you
Speaker 4: for having me on.
Speaker 2: Thanks.
Speaker 4: I've been saying this golden path, I kind of few
Speaker 4: it as that that would be the mother of all
Speaker 4: soft landings. Yeah, it's just the to get inflation down
Speaker 4: as much as we need to get inflation down, and
Speaker 4: we're part of the way through without having a big recession.
Speaker 4: As you know, there are a lot of economists who
Speaker 4: said that is not poss I don't know that it's
Speaker 4: still probable, but I have been highlighting it is possible
Speaker 4: now for a variety of reasons that we might be
Speaker 4: able to do it. And my recent speech was less
Speaker 4: whether the golden path is possible and more like Tracy said,
Speaker 4: it wasn't really why this time is different. But I
Speaker 4: know that's a loaded term. Argument, that's a loaded term.
Speaker 4: I was just making the argument why the intuition that
Speaker 4: going back and looking what things were like the last time,
Speaker 4: the unemployment way was three point seven percent. That's not
Speaker 4: a great that's not that accurate of a measure at
Speaker 4: times when there are supply shocks bumping around, at times
Speaker 4: when expectations are not unhinged like they were the last
Speaker 4: time inflation got out of control in the nineteen seventies,
Speaker 4: and because of those differences, just be cautious about using
Speaker 4: lessons from past periods to be analyzing what's happening right now.
Speaker 4: And you see it every month when the data come out.
Speaker 4: You'll see analysts look and say, ooh, the jolts ticked up.
Speaker 4: That must mean we're overheating. And implicit in that is
Speaker 4: a logic that the last time the unemployment rate was
Speaker 4: low and inflation was high, it meant we were overheating.
Speaker 4: So I just want to be careful of using historical
Speaker 4: analogies that might not be totally appropriate.
Speaker 2: I think that's totally fair and something that we've been
Speaker 2: discussing on this podcast, the idea that everyone tends to
Speaker 2: reach for the vulgar period of high inflation as their
Speaker 2: preferred historical analogy, but of course there are others out there,
Speaker 2: like what happened in the aftermath of the Spanish Flu.
Speaker 2: We've spoken about that before. But Austin, maybe before we
Speaker 2: move on, can you just give us give us a
Speaker 2: little snapshot of the speech that you gave, because you
Speaker 2: had this great series of charts in there which kind
Speaker 2: of pointed out I know this time is different is
Speaker 2: not a preferred term, but you kind of pointed out that, well,
Speaker 2: things have already been different compared to what traditional economic
Speaker 2: theory would have suggested.
Speaker 4: Yeah, look tremendously different. So the starting point, as I've
Speaker 4: started with this anecdote about my grandfather, who was a
Speaker 4: wise old guy, and he lived on a ranch in Abilene, Texas,
Speaker 4: and normally he was a great giver of life advice.
Speaker 4: But when I took my first job, he wanted to
Speaker 4: call and tell me never buy stocks. And I, as
Speaker 4: I said in this speech, I didn't know those my
Speaker 4: grandpa jack efficient markets guy. I said, you don't buy
Speaker 4: individual stocks. No, he said, don't buy any stocks. Your
Speaker 4: grandmother and I knew people that bought stocks. They lost
Speaker 4: everything when the market crashed. And that idea that one
Speaker 4: historical episode could live with you for sixty seventy years
Speaker 4: and influence your behavior, even when it's not necessarily the
Speaker 4: perfect lesson. There's a little element of that looking back
Speaker 4: to the Vocar episode or to past history and assuming
Speaker 4: that there's a let's call it a stable Phillips curve
Speaker 4: or something like that. So point one is when you
Speaker 4: have supply shocks going on negative or positive the normal
Speaker 4: relationship between the contemporaneous economic conditions and the future inflation,
Speaker 4: those relationships break down or they bend a lot. And
Speaker 4: if you take kind of a traditional va are in
Speaker 4: the academic language set up in which you just look
Speaker 4: at the historical patterns of when they have monetary policy
Speaker 4: changes and then just look over the average what happens
Speaker 4: in the quarters and the years that follow. I put
Speaker 4: that up on a chart and it showed that you
Speaker 4: usually have long legs to monetary policy. When they take
Speaker 4: the monetary actions, it's really two years plus before you
Speaker 4: get the full impact on the economy, and it leads
Speaker 4: to big drops in GDP. And when inflation starts to drop,
Speaker 4: it drops a lot, and it only starts dropping after
Speaker 4: the recession has begun. That's the normal historical pattern. And
Speaker 4: if you look now, the same logic that says the
Speaker 4: FED will not be able to pull off the golden
Speaker 4: path because past history shows that if you want to
Speaker 4: get inflation down a lot, you must have a serious
Speaker 4: trade off with economic performance. The last six months are impossible. Okay,
Speaker 4: inflation has come down a lot, Employment really went up,
Speaker 4: didn't go down, and we haven't had any recession. So
Speaker 4: if you looked at that graph, it's kind of the
Speaker 4: predicted from nine months ago from what the FED has
Speaker 4: done over the last year or year and a half.
Speaker 4: What we've experienced looks nothing like the historical record. So, Teresa,
Speaker 4: you can hear me resisting a little bit using the
Speaker 4: phrase this time. I get it. It's just when supply
Speaker 4: shocks are going on, there's no reason to think that
Speaker 4: the historical relationship would be holding, and you would run
Speaker 4: a danger of overshooting if you pay too close attention
Speaker 4: to those kind of metrics. If you're looking at metrics
Speaker 4: that say we must get the unemployment rate back to
Speaker 4: four and a half percent, you're going to overshoot if
Speaker 4: there are positive supply shocks or if the supply chain
Speaker 4: is healing. And I do think that's extremely relevant on
Speaker 4: any month of data separate from just individual months are noisy.
Speaker 4: I think this broader philosophical almost issue that the past
Speaker 4: is not that great of a guide when you got
Speaker 4: weird things happening, and the COVID business cycle was maybe
Speaker 4: the weirdest of all. We just need to keep that
Speaker 4: in mind as we're deliberating and thinking this through.
Speaker 1: Yeah, the way I like to think about this or
Speaker 1: framness in my head is that the last six nine months,
Speaker 1: maybe a year, it shows that the golden path soft
Speaker 1: landing is possible in practice, but there still seems to
Speaker 1: be a considerable, considerable debate about whether it's possible in theory.
Speaker 1: And that's sort of within determine whether exactly whether we
Speaker 1: get to target there is I mean, inflation is coming down.
Speaker 1: The last core PCE print that we got I think
Speaker 1: it was just this past Friday benign, but you know,
Speaker 1: most measure is still some heat. The story is, and
Speaker 1: I think most economists have come around to it, most
Speaker 1: of the improvement that we've seen in realized disinflation is
Speaker 1: due to supply side healing. Is there more supply side healing?
Speaker 3: Is?
Speaker 1: Do you see that channel as having Are we are
Speaker 1: we healed? Or do we need to see something on
Speaker 1: the demand mitigation side? Like sort of the difference between
Speaker 1: where we are right now on inflation and where like
Speaker 1: the FED is like, Okay, we are comfortable, We've done that,
Speaker 1: Like can that still be achieved through normalization? Whatever that means?
Speaker 4: Well, I want to make two points here. One, let's
Speaker 4: think about the supply side, but let's loop back and
Speaker 4: think about the role of expectations in bringing inflation down,
Speaker 4: because it's critically important and it's it's one of the
Speaker 4: other things that make our experience of twenty one, twenty
Speaker 4: two to twenty three very different looking in the fundamentals
Speaker 4: than the nineteen seventies and make our job different perhaps
Speaker 4: than than the what the Volker moment was. On the
Speaker 4: supply side, I talked to a lot of business contacts
Speaker 4: in the seventh District, you know, which is part of
Speaker 4: the Midwest. It definitely has been substantial improvement on a
Speaker 4: lot of supply chain. I think most measures of supply
Speaker 4: chain say there's still some to come, and it's important
Speaker 4: and remember when the supply chain fixes, it still works
Speaker 4: its way through the economy. It's still going to take
Speaker 4: some time to work its way through the inflation rate.
Speaker 4: It's not going to be an instant adjustment of inflation
Speaker 4: when the supply shocks. When the supply socks hit, So
Speaker 4: I do think there's still some to come. And if
Speaker 4: you go down in the weeds, if you take like
Speaker 4: the New York Fed's Supply Chain Index, the New York
Speaker 4: Fed uses historical data to make a prediction of what
Speaker 4: are going to be the impacts on inflation, and their
Speaker 4: index shows that we've mostly returned to where we were
Speaker 4: before COVID, but that there's still some material amount of
Speaker 4: dropping inflation that will still come through that channel. So
Speaker 4: I think both the anecdotes and the data tell you
Speaker 4: that that's been improving. Now I feel okay because I
Speaker 4: ident what I'm about to say. I've been saying for
Speaker 4: a long time that I put on the board here's
Speaker 4: what we're going to need to see to believe that
Speaker 4: we are still on the golden path. So I'm not
Speaker 4: after the fact looking back and saying, oh, it was
Speaker 4: a B and C. I said before the first thing
Speaker 4: that has to happen loosely, before COVID, we had two
Speaker 4: percent inflation or even less on a stable basis, and
Speaker 4: that was coming. It wasn't that all inflation was at
Speaker 4: a two percent level. It's that goods were minus one
Speaker 4: percent a year on average, housing was growing about three
Speaker 4: or even three and a half percent per year on average,
Speaker 4: and services not counting housing were two and a half
Speaker 4: to three. And that combination is how we were getting
Speaker 4: to one point eight. So we even have a little
Speaker 4: bit of wiggle room. Any one component could be a
Speaker 4: little higher than it was before and we could still
Speaker 4: get to two percent. Definitely. What needed to happen first
Speaker 4: was goods prices needed to come down. That's the thing
Speaker 4: that went completely bonkers during the COVID times because it
Speaker 4: was the first downturn ever where demand for durable goods
Speaker 4: went up and demand for going to the dentist went down,
Speaker 4: and that kind of tells you everything you need to
Speaker 4: know about why this cycle is extremely unusual. Goods prices
Speaker 4: have largely returned to where they were pre COVID. Then
Speaker 4: the second thing that has to happen is housing inflation
Speaker 4: needs to come down, and we believe that it would
Speaker 4: because of this mechanical part that as market rents change,
Speaker 4: that's going to slowly filter through the CPI type measures
Speaker 4: of housing, and you have seen that begin and that
Speaker 4: needs to continue. The issue of non housing services, we've
Speaker 4: always known that's the most persistent part of inflation. It
Speaker 4: doesn't need to get down to two percent for us
Speaker 4: to hit the target. It wasn't at two percent before COVID,
Speaker 4: and so in the short to medium run, the critical
Speaker 4: component to whether we can stay on the golden path
Speaker 4: is actually about housing because that's the thing that's supposed
Speaker 4: to come down and needs to keep coming down. There
Speaker 4: are I do have. Are they concerns? They're probably concerns.
Speaker 4: They're not yet elevated to the level of fears that
Speaker 4: the normal dynamics on residential house prices have had some
Speaker 4: bumps with this aspect that there are a bunch of
Speaker 4: people locked in because rates were so low for a
Speaker 4: long time. There are a bunch of people with three
Speaker 4: percent mortgages who are resisting putting their house on the market.
Speaker 4: So the supply of existing homes is not what you
Speaker 4: might normally think, and that's pushed prices the other way,
Speaker 4: and eventually that could slow the decline of inflation on
Speaker 4: the CPI style measures of residential inflation. This is the
Speaker 4: long wind up to say I think the supply chain
Speaker 4: mostly goes through goods and goods inflation. We've seen the
Speaker 4: progress that we wanted, So the danger on the goods side,
Speaker 4: of course, is now with oil prices going up. We
Speaker 4: know what happens when you get negative supply shocks. We
Speaker 4: just live through that. So that's an area of concern.
Speaker 4: And then the second is about labor supply. So there
Speaker 4: was a big negative shock to the supply of labor.
Speaker 4: I think that explains part of the persistence and the
Speaker 4: rise of inflation in other components. But that is also easy.
Speaker 4: If you look at the job market or if you
Speaker 4: talk to businesses, it's not fully back to where it
Speaker 4: was before, but there's been dramatic improvement in the ability
Speaker 4: to hire and retain new workers. You've seen labor supply,
Speaker 4: labor force participation of women hitting record levels, labor supply
Speaker 4: of people of workers with disabilities hitting record levels, both
Speaker 4: suggesting maybe some of the increased flexibility in the workplace
Speaker 4: is going to operate a bit like a positive supply shock,
Speaker 4: so that's kind of promising, and immigration levels returning to
Speaker 4: something like what the were before also a positive impact
Speaker 4: on labor supply. So on the real side, I still
Speaker 4: feel like nothing has happened so far that is convincing
Speaker 4: evidence that we're off the golden path. And a lot
Speaker 4: of the markers that we've been hitting are the things
Speaker 4: that months ago I was saying we would have to
Speaker 4: hit these markers to believe that this thing is still possible,
Speaker 4: and so far we've been hitting those.
Speaker 2: Markers soft landing, golden path, whatever you want to call it.
Speaker 2: It's very clear why that is a desirable target for
Speaker 2: the FED to be aiming at. But I guess one
Speaker 2: of the questions I would have is if we say
Speaker 2: that a lot of the inflation that we have experienced
Speaker 2: is driven by supply shocks, is it reason for the
Speaker 2: FED to take credit for a soft landing in that context?
Speaker 2: Or like, what would the central bank think it has done?
Speaker 2: Or what has the impact of higher interest rates actually
Speaker 2: been in this scenario.
Speaker 4: Yeah, it's it's important that we think about that in
Speaker 4: a different way. What matters is the is the actual pudding?
Speaker 4: You know what I mean, what does it taste like?
Speaker 4: It's not fighting over the who deserves the credit? Is
Speaker 4: only informative if it's telling you about the effectiveness of policy.
Speaker 4: In a way, I think the FED has played an
Speaker 4: important role in preventing inflation from spiraling upward, and it
Speaker 4: kind of brings us into the area of inflation expectations.
Speaker 2: Yeah, sorry, can I ask one really technical question before
Speaker 2: before we do that, But when you talk about inflation
Speaker 2: expectations as you did in your recent speech, are you
Speaker 2: looking at market based measures or surveys or what is
Speaker 2: your benchmark? Exactly?
Speaker 4: In that speech, I identified both. There's, as you know, there's
Speaker 4: a lot of argument by analysts and by economists about
Speaker 4: exactly that question. And my point was, take any measure
Speaker 4: you want, take them all. I put up graphs of
Speaker 4: market based measures, which personally I do like the market
Speaker 4: based measures and survey measures and estimates from the FED
Speaker 4: of what those what the market expectations were back in
Speaker 4: the nineteen seventies. And the crucial thing to see that
Speaker 4: really came out of a lot of the academic literature
Speaker 4: on inflation, is that if expectations remain anchored at say
Speaker 4: two percent, you outline an inflation target of two percent.
Speaker 4: If it is credible and people believe that the FED
Speaker 4: will do whatever it takes to get to the target,
Speaker 4: that is a powerful draw bringing actual inflation down if
Speaker 4: it's above two percent. So when they're having negotiations or
Speaker 4: thinking about price increases, what the private market participants believe
Speaker 4: is going to happen overall will heavily influence wage and
Speaker 4: price determinations right now. And if you look at expectations
Speaker 4: in the nineteen seventies, they clearly became massively unhinged. They
Speaker 4: would ratchet up with each experience of rising inflation. The
Speaker 4: measures of expectations would rise and not come back down.
Speaker 4: So you know, if inflation was at two and jumps
Speaker 4: to six, the expectations, long term inflation expectations would rise,
Speaker 4: let's say, to three and a half. And then when
Speaker 4: inflation comes down, it doesn't go back to two, it
Speaker 4: goes back to three and a half. And then when
Speaker 4: you get your next bout of inflation, the long run
Speaker 4: expectations jump up to five and a half. And so
Speaker 4: you get this ratchet effect. And I showed the graph.
Speaker 4: It became totally unhinged in the seventies and the experience
Speaker 4: of the seventies with expectations are what made the Voker
Speaker 4: experience so difficult and so painful. Now you probably know
Speaker 4: Paul Voker was a great mentor of mine. I worked
Speaker 4: with him through the financial crisis, and he's personal hero.
Speaker 4: And I would ask him all the time about the
Speaker 4: Voker experience and what was it like in the seventies,
Speaker 4: and was it hard to convince the FOMC to go along?
Speaker 4: And you know, what did you think when and interest
Speaker 4: rates we're twenty percent and things like that, and that experience,
Speaker 4: the scarring experience of trying to fight inflation when expectations
Speaker 4: are unhinged, that should be on everyone's mind. And that
Speaker 4: looks nothing like what happened in twenty one and twenty two.
Speaker 4: If you plot market based measures of expectations or survey
Speaker 4: based measures, they go up modestly and they return and
Speaker 4: they are now they remain very well anchored at something
Speaker 4: close to the target rate. And that is a sign
Speaker 4: of FED credibility, and that is crucial. It's absolutely crucial
Speaker 4: that the FED maintain that credibility because if they don't
Speaker 4: and the thing becomes unanchored, it becomes dramatically harder to
Speaker 4: achieve a Golden Path like outcome. If you just go look,
Speaker 4: and partly I went through some of the theory, We've
Speaker 4: got two economists at the Chicago FED who kind of
Speaker 4: redid the traditional model but incorporated market based expectations of
Speaker 4: several of the variables. In the normal analysis, there is
Speaker 4: no role for future expectations of the unemployment rate, of
Speaker 4: the inflation rate, at GDP growth. There is only the
Speaker 4: backward looking monetary policy happened, how long does it take
Speaker 4: to have an impact? So what they did is go
Speaker 4: take some of these expectations measures and put them in
Speaker 4: a normal analysis, and what they find is that these
Speaker 4: measures of future expectations do matter. And if you do
Speaker 4: a model like that, it says that the impact of
Speaker 4: monetary policy occurs much more quickly then in the historical
Speaker 4: In a way, it's saying something like, the market expected
Speaker 4: conditions financial conditions to tighten well before the FED actually
Speaker 4: started raising rates, and so the clock kind of begins
Speaker 4: when the market believes it, not when they actually do it.
Speaker 4: If you think that, then in a way, just go
Speaker 4: look at the market expectations. Now, the market expects that
Speaker 4: the FED is only going to raise rates a little
Speaker 4: bit more, that it's going to keep them a little
Speaker 4: bit higher for some time, but that that's going to
Speaker 4: work the market expectations of inflation, or that it's going
Speaker 4: to in relatively in the relatively near future get back
Speaker 4: to target and do so without a recession. And it's
Speaker 4: that that it's in the data is the thing that's
Speaker 4: driving this, this model and every other model. So we
Speaker 4: can argue about the details of anyone model, but the
Speaker 4: fundamental fact that the market expectations are that we're going
Speaker 4: to pull it off makes it easier to pull it off.
Speaker 4: Because of that expectations, channel got it.
Speaker 1: So you talked about, you know, the golden path, you
Speaker 1: talked about some of you know, how you would decompose
Speaker 1: getting back to a stable low inflation, a sort of
Speaker 1: maintain modest goods inflation, maybe a little heat on the
Speaker 1: shelter side, modest services inflation. Maybe some wiggle room within
Speaker 1: those three categories, immigrations, picking up supply chain's healing. Maybe
Speaker 1: we can get there. The one thing that seems unambiguously
Speaker 1: different between right now and twenty nineteen is rates, And
Speaker 1: so I guess I'll start with a sort of first question.
Speaker 1: When you look at the yield curve right now and
Speaker 1: you see rates shooting up higher and higher, I guess
Speaker 1: we're still in inversion, but flat all that coming out
Speaker 1: of inversion. Can you square that story with a golden
Speaker 1: path story? Is that a market that is consistent with
Speaker 1: a golden path? Or do you see tension between what
Speaker 1: a golden path looks like to you and what market
Speaker 1: participants are pricing it in terms of the trajectory of
Speaker 1: rates going out.
Speaker 4: I kind of think two things. One, I'm struck by
Speaker 4: your comparison. People are comparing the labor market and the
Speaker 4: ratio of unemployment of vacancies and things like that to
Speaker 4: pre COVID, and we're comparing inflation levels to pre COVID.
Speaker 4: It's an interesting racle Joe to say, but the rates
Speaker 4: were a lot lower than if anything, I would have
Speaker 4: thought that would make you more optimistic that inflation would
Speaker 4: come down, because on top of if we could get
Speaker 4: some of the conditions to look like what they were before,
Speaker 4: that those higher rates, higher real rates, would would exert
Speaker 4: a little restraint on things. I guess one answer to
Speaker 4: the question would be me personally, what do I think?
Speaker 4: And one answer the question is what does the market think?
Speaker 4: And I guess the answer to both of those is
Speaker 4: both the market and I think that it's still possible.
Speaker 4: So the market has decided that the SEP higher for
Speaker 4: longer is accurate. And it's yet another in the series
Speaker 4: of the market realizing the FED is serious and there
Speaker 4: we're not bs ing, you know when we when we
Speaker 4: say what we're going to do, but that that hasn't
Speaker 4: led them to predict a recession. The you know, the
Speaker 4: forecast of GDP are for not a recession. So I
Speaker 4: still feel like this is our goal and it's still possible.
Speaker 4: My concerns are less that we're misinterpreting the whether the
Speaker 4: economy is overheating or undershooting, overcooling, whatever's the opposite of overheating.
Speaker 4: My concerns are more past soft landings that were easier
Speaker 4: than the Golden Path version have been derailed, like nineteen
Speaker 4: ninety two thousand and one. They were derailed by external shocks,
Speaker 4: and we got a lot of external shocks that we're
Speaker 4: going to have to monitor. We got the price of
Speaker 4: fuel rising pretty significantly. You've got potential slow down in
Speaker 4: China that could do damage to the rest of the
Speaker 4: world's growth rate. We didn't have a government shutdown, we
Speaker 4: got auto strikes, we got the prospects of government shutdown
Speaker 4: maybe in November, and things like that. If you look
Speaker 4: at past history, they have had negative impacts if they
Speaker 4: last long enough. So that's kind of where my head
Speaker 4: is about whether we could pull it off or not.
Speaker 1: Just maybe if I can reframe the question, what is
Speaker 1: it that's changed in this environment pre pandemic versus now
Speaker 1: such that this sort of benign environment is such higher
Speaker 1: rates are necessary. I mean, again, you know we did
Speaker 1: not need higher rates. We did not need rates at all.
Speaker 1: We basically observe prior to COVID. We certainly did not
Speaker 1: need eight percent mortgage rates to have this sort of,
Speaker 1: you know, a cool inflationary environment. What's changed in your
Speaker 1: view in that time.
Speaker 4: Let's say two. It all depends compared to what and
Speaker 4: so we'll answer the question compared to six months ago
Speaker 4: as we think about the why are the long rates
Speaker 4: going up? But then you're saying, well, let's compare to
Speaker 4: five years ago. The thing is, when we're at the
Speaker 4: zero lower bound, that's not normal. That's you don't the
Speaker 4: central Bank doesn't want to be sitting there bumping around
Speaker 4: at zero interest rates because it restricts the flexibility of
Speaker 4: the central bank, and it restricts the central bank's ability
Speaker 4: to respond to external shocks. Of course, so if you
Speaker 4: take a step back in history, the thing that's oddest
Speaker 4: is why were we at zero for so long? It's
Speaker 4: not why do we have positive interest rates now? If
Speaker 4: you compare to six months ago. Six months ago we
Speaker 4: were trying to figure out is the collapse of Silicon
Speaker 4: Valley Bank, First Republic? Are these indicators that we're about
Speaker 4: to have a financial crisis or some kind of a
Speaker 4: credit crunch a la the savings and loan crisis or
Speaker 4: those kind of things, and there was a much more
Speaker 4: pessimistic view about whether we're going to have a recession
Speaker 4: and is there going to be a significant slowdown. I
Speaker 4: do think compared to that, if you think there's less
Speaker 4: chance of recession and a deep recession would be a
Speaker 4: low rate environment. We've seen that over and over. So
Speaker 4: if you take away the prospects of a financial collapse
Speaker 4: and a back to zero for a long time kind
Speaker 4: of environment, the long rates are going to go up.
Speaker 4: So in that sense, that part is not a puzzle.
Speaker 4: I think the puzzle that people are trying to put
Speaker 4: together is, well, why did it happen in the last
Speaker 4: three weeks and what was it that got announced? Like
Speaker 4: the SEP came out and it was a little different
Speaker 4: than the market expectation, It was a little different than
Speaker 4: the previous SEP. But was it so different that it
Speaker 4: would lead to a material change in a three week period.
Speaker 4: That part's still a puzzle. But if you take a
Speaker 4: six month perspective, in a way, I don't think it's
Speaker 4: that much of a puzzle. It's clear that the long
Speaker 4: rates coming up is what you'd expect, and getting back
Speaker 4: to what I consider a more normal environment where we're
Speaker 4: not hitting the zero lower bound, we don't have seriously
Speaker 4: negative real interest rates for an extended period of time.
Speaker 4: We can argue about what that level is, but it's
Speaker 4: not a surprise that we would be going back to
Speaker 4: something like that.
Speaker 2: Well, just on this note, I take the point that
Speaker 2: the bond market could be reacting to the idea that
Speaker 2: a recession or at least rate cuts are off the table.
Speaker 2: The bond market could also just be wrong, of course,
Speaker 2: But let me ask this question is in a slightly
Speaker 2: different way, which is is there a point at which
Speaker 2: you start to worry about the run up in real
Speaker 2: rates or the sell off in the long end of
Speaker 2: the curve? And you mentioned SVB just then. I mean,
Speaker 2: we know that banks are sitting on huge amounts of
Speaker 2: duration at the moment. It does feel like the sort
Speaker 2: of financial markets channel is a potential path where we
Speaker 2: could maybe get a little bit of trouble. Maybe the
Speaker 2: bond market sell off causes financial conditions to tighten too much.
Speaker 2: Is that something that you're worried about and around you
Speaker 2: know what level would that be a concern for you.
Speaker 4: My only hesitation is on the word worry. That's not
Speaker 4: the right. We absolutely monitor that and are thinking about that,
Speaker 4: and that could be a blow to the to the
Speaker 4: either the financial or the real economy that various manifestations
Speaker 4: of that. That would be the credit crunch hypothesis that
Speaker 4: we were quite nervous about, especially in the wake of
Speaker 4: the of the bank collapses, because in past bank collapses
Speaker 4: you've seen that spiral into credit crunch. But as I
Speaker 4: always say, the you know, it's a very Midwestern thing
Speaker 4: that we're gonna deal with the problems. It doesn't matter
Speaker 4: what the conditions are, you go get the job done.
Speaker 4: You know, out in Chicago there is no bad weather.
Speaker 4: There is only bad clothing. And we're gonna put on
Speaker 4: a parka if we need to put on a parka.
Speaker 4: So if there is a credit crunch, if those things
Speaker 4: materially deteriorate in a way that we haven't seen but
Speaker 4: feared seeing over the last six months, we will adjust.
Speaker 4: And we've got to think about it. We by law,
Speaker 4: we have a dual mandate. As you know, we're gonna
Speaker 4: stabilize prices and maximize employment, and all eyes are on
Speaker 4: getting inflation down. We must get inflation down. That's the
Speaker 4: part of our mandate that we have not been hitting.
Speaker 4: We've been making quite substantial progress on getting the inflation
Speaker 4: rate back down to where we want it. And for
Speaker 4: all of the for all of the attention and heat
Speaker 4: about whether inflation would stall out at three and a half,
Speaker 4: at three, I would just point out, if you take
Speaker 4: the three months performance of inflation, we already blew through
Speaker 4: three percent. We're already getting it down more. And if
Speaker 4: we start to see weakness on the other side of
Speaker 4: the mandate coming from financial conditions getting tighter and that
Speaker 4: leading to more traditional business cycle dynamics where the interest
Speaker 4: rates sensitive sectors like durable goods and autos and stuff
Speaker 4: like that slows, we will adjust to it. You know.
Speaker 4: That's the that's the why the so far chat GPT
Speaker 4: is not going to replace the FOMC. The FOMC is
Speaker 4: a collection of a lot of different people, have a
Speaker 4: lot of different views on the economy, and that's the
Speaker 4: best thing we got going.
Speaker 2: Can you adjust even if inflation is still above target?
Speaker 2: I mean, again, I take the point that it has
Speaker 2: been coming down, But the concern, the major concern is
Speaker 2: that if we start to see it go up again,
Speaker 2: for instance, because of gas prices, which you've already mentioned,
Speaker 2: then maybe it becomes trickier for the Fed to navigate
Speaker 2: some sort of financial markets crisis while maintaining that momentum
Speaker 2: on the price side.
Speaker 4: Tricky is a perfectly accurate word. That's why the FMC exists.
Speaker 4: Is to try to think through the waggles. The worst
Speaker 4: thing you could do is pre announced. Hey, my policy
Speaker 4: is just take whatever last month's inflation rate was and
Speaker 4: whatever last month's unemployment rate was, and just react this
Speaker 4: month at the FOMC table based on one month's data.
Speaker 4: That's the wrong way to do it. I outlined Traditionally,
Speaker 4: the impact of monetary policy has a substantial lag, and
Speaker 4: inflation comes down after a big increases in rates, but
Speaker 4: the inflation comes down only after the recession begins. So
Speaker 4: what we have already experienced over the last six months
Speaker 4: is extremely unusual by historical standards, because the inflation came
Speaker 4: down before or slash without slow down. On the economic side,
Speaker 4: any central banks got to think through are these supply
Speaker 4: shocks or demand shocks? They've got to think through the dynamics,
Speaker 4: by which I mean, what have we already done and
Speaker 4: how much is of that is still to come? How
Speaker 4: much of that impact is is still to come, and
Speaker 4: we don't want to overshoot, and that's a balancing act,
Speaker 4: and we got to strike that balancing act. And that's
Speaker 4: kind of the root of the discussion. But I definitely
Speaker 4: don't want to tie my hands or anybody's hands on
Speaker 4: the FOMC about hypotheticals of like, well, would you vote
Speaker 4: for twenty five basis points up or down or this
Speaker 4: if the inflation rate came in at exactly this and
Speaker 4: it was matched to the unemployment rate? Of why, Because
Speaker 4: there's a lot of art as well as a lot
Speaker 4: of science to monetary policy, and you just got to
Speaker 4: monitor the conditions. That's why I always say I'm in
Speaker 4: the coalition of the data dogs. You know, our thing
Speaker 4: is go sniff, and if you don't know what's happening,
Speaker 4: go sniff some more. That's the that's the root of
Speaker 4: the school of thought where I come from.
Speaker 1: Well, I get your reluctance for patheticals and obviously not
Speaker 1: wanting to tie your hand. Well, it's just sort of
Speaker 1: like a vague hypothetical because you know, let's call.
Speaker 2: It scenario planning.
Speaker 4: Yeah, scenario planning.
Speaker 1: Yeah, Tracy nails it. Scenario planning. But it's basically, you know,
Speaker 1: right now the job is to get inflation down. As
Speaker 1: you said, the actual last few months, you're blowing through
Speaker 1: some of the expectations on the downside.
Speaker 4: Good.
Speaker 1: You know, obviously you have a dual mandate, and one
Speaker 1: side of the mandate is labor, which has been very
Speaker 1: strong by most metrics, including today's jobs report, including on
Speaker 1: employment rate below four percent. But talk to us just
Speaker 1: generally about where the shift would come from. What would
Speaker 1: you need to see such shift of what thinking about cuts? Yeah,
Speaker 1: whether it's on the employment side or just on the
Speaker 1: inflation side, what would be the type of thing to
Speaker 1: sort of get the other side of the mandate, the
Speaker 1: maintaining low employment via cutting. What would you need to
Speaker 1: see to get into that frame?
Speaker 4: Look, the I'm already not don't want to get into
Speaker 4: hypothetical discussions, much less phil hypothetical discussions about philosophy in
Speaker 4: the future. So I kind of can't. I don't have us, okay,
Speaker 4: definitive answer to what would the conditions look like? We
Speaker 4: would not just be past the raising period and past
Speaker 4: the to be fair period, to.
Speaker 1: Be fair to my question, to be fair to my question,
Speaker 1: I get cut well, to be fair to my question
Speaker 1: is why it's not completely out there. I mean, up
Speaker 1: until very recently, the market was pricing in cuts. Actually
Speaker 1: in twenty twenty three, I think those are gone. So
Speaker 1: it was like the market was trying to figure out
Speaker 1: when's the Fed gonna cut? When's the Fed gonna cut?
Speaker 1: You know, it's the down showed Maybe we're not going
Speaker 1: to get any cuts anytime soon. But this is like
Speaker 1: a sort of central question the market trying to figure
Speaker 1: out would it take a recession to get rate coaches
Speaker 1: or could we just.
Speaker 4: Get philosophical basis, the Fed is trying to maximize employment
Speaker 4: and stabilize prices. If we're stabilized prices in a way
Speaker 4: that we felt like we're on the target, then the
Speaker 4: Fed doesn't need to be tightening. And it's it's worth
Speaker 4: remembering holding rates at a level while the inflation rate
Speaker 4: comes down is a form of tightening. The real rate
Speaker 4: is getting tighter as that happens, and the if your
Speaker 4: target is something about real rates and a level of
Speaker 4: restrictiveness that matches your your mandate, The abstract answer to
Speaker 4: your question of when is it time to cut rates
Speaker 4: is when the dual mandate conditions suggest that cutting rates
Speaker 4: is necessary to maintain your to maintain your mandate. So
Speaker 4: if you observe big increases in unemployment, big drops in GDP,
Speaker 4: what looks like a recession in past business cycles, those
Speaker 4: can come on quite suddenly. You know, they can come
Speaker 4: on rapidly, they say of the unemployment rate. Usually it
Speaker 4: rises like a rocket, it goes down like a feather.
Speaker 4: So if you start to see rocketing higher unemployment rates
Speaker 4: while the inflation target remains tame, then that's a sign
Speaker 4: that the dual mandate, the other part of the dual
Speaker 4: mandate you got to think about.
Speaker 2: So we've been talking a lot about soft landing, golden path,
Speaker 2: and again, as you pointed out in your speech, that
Speaker 2: is a tantalizing prospect.
Speaker 4: I like how you keep I don't know if it's
Speaker 4: a if it's a gift to me or to Joe,
Speaker 4: But you want to say soft landing, but then you
Speaker 4: add slash golden paths. I'm just going to difference the
Speaker 4: path and the soft landing is that the golden path
Speaker 4: is the biggest of all the soft landings. That's when
Speaker 4: the softest of the soft land.
Speaker 1: That's when they chisel all of your all the faces
Speaker 1: on Mount rush. That's right, when you hit the golden path.
Speaker 4: That's right, the golden path. I get that.
Speaker 2: It's a great thing to aim for and a tantalizing
Speaker 2: prospect for policymakers. Do you worry at all about the
Speaker 2: no landing scenario anymore?
Speaker 4: Like?
Speaker 2: Is that still a tail risk? The idea that well,
Speaker 2: maybe landing meaning inflation, inflation stays above target, but unemployment
Speaker 2: is still relatively low, rates remain pretty high.
Speaker 4: I would tell you that, I mean, maybe this is
Speaker 4: too blunt. I don't worry about the no landing scenario
Speaker 4: because the FED will never allow it. The prospect that
Speaker 4: will just surrender and give up without getting inflation down
Speaker 4: to the target, that will not happen. The I can't.
Speaker 4: I'm not allowed to speak for anybody else on the FMC,
Speaker 4: but for me, I will, over my dead body, will
Speaker 4: that happened. And I feel like my mentor Paul Volger
Speaker 4: is whispering. My ghost will come back to haunt you
Speaker 4: forever if you don't. If you do not get us
Speaker 4: back to inflation, we will get inflation back to the target.
Speaker 4: So I don't view the no landing scenario as that
Speaker 4: that's not a foremost risk in my mind.
Speaker 2: All right, you're serious about it.
Speaker 1: I got it. You look, you're congressionally healthy.
Speaker 4: No, all I would tell people is this upset of
Speaker 4: folks who want to constantly express doubt. Ah, the FED
Speaker 4: will never do it. The FED won't achieve that FED
Speaker 4: doesn't have the guts to kids raise the raids. They
Speaker 4: don't have the guts to keep the raids there. Remember
Speaker 4: the lesson of Silicon Valley Bank, which I couldn't for
Speaker 4: the life of me understand. The Silicon Valley Bank knew
Speaker 4: they don't have a traditional deposit franchise, and they knew
Speaker 4: they hold a bunch of bonds and that the rates
Speaker 4: are going up. So I could not, for the life
Speaker 4: of me understand why did they just hedge? Why if
Speaker 4: you know you have these vulnerabilities, just hedge it? And
Speaker 4: the answer if you go through the bar report, they
Speaker 4: did hedge. But then they thought that the FED wouldn't
Speaker 4: stick it out, and that they would make more money
Speaker 4: if they got rid of the hedges, and so they
Speaker 4: got rid of them. And that's yet another in the
Speaker 4: long line of lessons. Don't bet against the FED. That's
Speaker 4: not a good night.
Speaker 1: So basically they made the ultimate price of fighting the FED,
Speaker 1: and no.
Speaker 4: No, they made a bet. They took a bet against
Speaker 4: the FED being being committed to its target or doing
Speaker 4: what it was said it was going to do. And
Speaker 4: that was not a good that was not smart. So
Speaker 4: I feel that way here too. The FED is not
Speaker 4: going to give up all the inflation rates three and
Speaker 4: a half percent. It's too hard to get it down anymore.
Speaker 4: That's totally wrong. That is not the FED is not
Speaker 4: going to do that.
Speaker 2: I'm kind of getting whatever it takes, vibes, whatever it takes. Y.
Speaker 4: Yes, well, we've said I don't know what you're getting
Speaker 4: that vibe. I don't know how to say it anymore.
Speaker 4: That we will do whatever it takes to get the
Speaker 4: band aid down. That's the law. The law tells us
Speaker 4: we have to do that. You know.
Speaker 1: One of the maxims in markets is that narrative follows price.
Speaker 1: And one of the things that is coming on big
Speaker 1: time with this rise.
Speaker 4: Is that a maxim narrative follows price. I like that.
Speaker 1: Yeah, you know, something happens and then people tell a
Speaker 1: story about whye. But with the rising rates, there has
Speaker 1: been a crescendo of a weirdess, a big pic about
Speaker 1: the deficit and expansionary fiscal policy and how the deficit
Speaker 1: is a percentage of GDP or however you want to
Speaker 1: measure it is much higher than it normally is with
Speaker 1: unemployment below four percent and structurally high deficits for a
Speaker 1: long time to come. And I know you don't you know,
Speaker 1: I understand the whole not commenting on fiscal policy in
Speaker 1: terms of giving just about to say that, I know,
Speaker 1: I know, we all know that. We all know that part.
Speaker 1: But from a sort from a FED standpoint, it is
Speaker 1: your job to you know, as you say, do the
Speaker 1: Congress gives you that job? Does it make it harder?
Speaker 1: And on a sustained basis?
Speaker 3: Is it?
Speaker 1: I is it a force for keeping rates as high
Speaker 1: as they are From the Fed's perspective, that fiscal policy
Speaker 1: appears to be so loose without any change to that insight.
Speaker 4: Is starting from your observation. I'm a FED man, now,
Speaker 4: I don't. My job is not to go argue about
Speaker 4: what the fiscal polity he should be or is. Like
Speaker 4: I said before, FED mandate is you take the conditions,
Speaker 4: whatever the conditions are, and figure out how to maximize
Speaker 4: employment and stabilize prices. And that's what we're gonna do.
Speaker 4: I mean that there's a whole argument among the fiscal
Speaker 4: policy minded economists about things like measurement and is what's
Speaker 4: the proper measure of debt and what's the proper measure
Speaker 4: of fiscal policy? And from a GDP kind of impulse perspective,
Speaker 4: isn't it all about delta from last year? So if
Speaker 4: the deficit is big, but it's smaller than it was
Speaker 4: last year, is that does that mean the fiscal impulse
Speaker 4: is going down? I don't, I studiously don't have an
Speaker 4: opinion about fiscal policy. I just tell you we're going
Speaker 4: to watch the conditions and on the ground. If whatever external, internal,
Speaker 4: or other shocks lead inflation to go up or unemployment
Speaker 4: to go up, then that's the kind of stuff that
Speaker 4: we're going to be factoring into our decisions for sure.
Speaker 1: Austin Golesby, such a thrill to finally have you on
Speaker 1: the show. Really appreciate you coming on on lots.
Speaker 4: Absolutely my pleasure. Keep up the good work.
Speaker 2: Thanks so much, Austin. I have that I have the
Speaker 2: clip of what is it Tim Allen from Galaxy Quest
Speaker 2: going never give up, never surrender in my head.
Speaker 4: That's right.
Speaker 1: Thank you for indulging about credibility, all of our hypotheticals,
Speaker 1: our philosophical hypotheticals, our attempts to get you to, you know,
Speaker 1: comment on physical policy. Appreciate you playing along.
Speaker 4: You guys do great work. Thank you, it's really my pleasure,
Speaker 4: and thank you for for inviting. Thanks.
Speaker 2: We're going to send that clip to our bosses.
Speaker 1: Take care, Austin.
Speaker 3: Yeah, thank you, Tracy.
Speaker 1: I really like the way he sort of frame this
Speaker 1: sort of golden path question, which is that theft the
Speaker 1: soft landing question, which is, you know, there's a few
Speaker 1: things we would want to see to know that we're
Speaker 1: getting back to something to the fence goals, and at
Speaker 1: least so far as he sees it, and I think
Speaker 1: it makes a good case. There hasn't been anything to
Speaker 1: disprove it. It doesn't mean it's guaranteed to happen, but
Speaker 1: we have yet to have something that says, oh no, no,
Speaker 1: we're off the path.
Speaker 4: Well.
Speaker 2: Also, his point about keeping interest rates high as inflation
Speaker 2: falls being a de facto tightening that makes a lot
Speaker 2: of sense to me, and I think that kind of
Speaker 2: plays into the long and variable lags idea that we're
Speaker 2: still seeing the effects of a lot of higher interest
Speaker 2: rates kind of filter through. That said, I wonder if
Speaker 2: there's sort of a tension between forward guidance and crushing,
Speaker 2: crushing inflation expectations while maintaining the flexibility that the Fed
Speaker 2: is clearly trying to hold on too, right, because Austin
Speaker 2: was very adamant about well, you know, we don't want
Speaker 2: to bind ourselves to any one particular path, which all
Speaker 2: makes sense from their perspective, But if the big wild
Speaker 2: card is inflation expectations, then I don't know, it feels
Speaker 2: like there's a tension there.
Speaker 1: I still feel some level of unsatisfaction. It's not like
Speaker 1: Austin or anything we're saying, but this question of like, okay,
Speaker 1: if inflation is coming down, right, it is, it's come
Speaker 1: down a lot, and as he said, the last actually
Speaker 1: last few months, like they're really like, you know, it's
Speaker 1: it's been really cool. Maybe it'll pick back up a
Speaker 1: little bit. Why do we just see the sustained day
Speaker 1: after day pressure And you could tell a story kind
Speaker 1: of like Austin has, which is that, well, that's the
Speaker 1: the market saying the Fed is going to do its
Speaker 1: job right. So that's I guess there's a positive spin
Speaker 1: but why does the Fed need to keep rates? Why
Speaker 1: is the market anticipating that the Fed will need to
Speaker 1: keep rates as high as they are just to get
Speaker 1: back to macro conditions? Like Lisa a few years ago,
Speaker 1: I sort of feel like the answer must on some
Speaker 1: level have to do with the big a shift in
Speaker 1: fiscal policy. But I'm not really sure. But like, you know,
Speaker 1: it's great that, it's great that on low employment, it's
Speaker 1: great if inflation gets back to two percent, But I
Speaker 1: don't want to pay eight percent for a mortgage, you know, Like,
Speaker 1: why do I didn't need to pay eight percent for
Speaker 1: mortgage in twenty nineteen for these conditions.
Speaker 2: No, it's a good point. It's also I mean, just
Speaker 2: to put it more simplistically, it feels like inflation is
Speaker 2: coming down, but we're still not entirely sure why or
Speaker 2: if interest rate hikes actually had much to do with it,
Speaker 2: because again, as Austin pointed out, things like the most
Speaker 2: interest rate sensitive portions of the economy like housing, have
Speaker 2: kind of surprised to the upside, at least for now.
Speaker 4: Yeah.
Speaker 1: No, it really does seem like on some level a
Speaker 1: big chunk of the inflation and it, you know, I
Speaker 1: not to go back to the old persistent versus transitory debates.
Speaker 1: But at least on some level, a big chunk of
Speaker 1: the rise in inflation in the fall seems to have
Speaker 1: to be seems to do with sort of economic dislocation,
Speaker 1: is related to COVID whatever they are. And then the
Speaker 1: question is is it all of it? Is it eighty
Speaker 1: percent of it? Is it fifty percent of it? And
Speaker 1: what is it actually going to take to get to,
Speaker 1: you know, the end of the golden path.
Speaker 2: Yeah? Absolutely, all right, Well for now, shall we leave
Speaker 2: it there?
Speaker 1: Let's leave it there.
Speaker 2: Okay, this has been another episode of the Odd Thoughts podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1: I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 1: Follow our guest Austin Goolesby. He's at Austin Underscore Goulesby.
Speaker 1: Follow our producers Carmen Rodriguez at Carmen Arman, dash O
Speaker 1: Bennett at dashbod and a big thanks to Moses Onam.
Speaker 1: Follow all of the Bloomberg podcasts under the handle at podcasts,
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