WEBVTT - Booth's Kroszner Says Hike Likely Before End of Year (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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<v Speaker 1>I'm Charlie Pelletta. Down day for Wall Street stock slipping

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<v Speaker 1>in a volatile session as remarks from Federal Reserve officials

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<v Speaker 1>lifted optimism on the economy while also bolstering speculation interest

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<v Speaker 1>rates could rise as soon as next month. The SMP

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<v Speaker 1>five hundred index fell three points to end the week

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<v Speaker 1>at twenty one sixty nine, a drop of two tenths

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<v Speaker 1>of one percent. For the week, the index was down

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<v Speaker 1>seven tenths of one percent. NASDAK had it up day

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<v Speaker 1>up six points to eighteen, a gain of one tenth

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<v Speaker 1>of one percent. Down Industrials down fifty three, a drop

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<v Speaker 1>there of three tenths of one percent. The tenure down

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<v Speaker 1>thirteen thirty seconds, the old one point six two percent,

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<v Speaker 1>Gold Laurel little change down twenty cents, thirteen twenty one

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<v Speaker 1>the ounce. I'm Charlie Pallett, and that's a Bloomberg Business flash.

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<v Speaker 1>You're listening to Taking a stock with Kathleen pim Fox

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<v Speaker 1>line from the Jackson Hole Economic symposium. Von Bloomberg Radio

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<v Speaker 1>channel is the FED chair and as she as a

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<v Speaker 1>FED chirt, traditionally does here at the Kansas City Federal

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<v Speaker 1>Reserve Banks Annual Symposium. She opened the symposium to Dave

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<v Speaker 1>remarks about the economy, in particular how it's continuing to improve.

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<v Speaker 1>She's a little bit concerned about some factors, likely productivity,

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<v Speaker 1>but in the end she seemed to echo others saying, yes,

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<v Speaker 1>the conditions are ripening for an interest rate move this year,

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<v Speaker 1>much much more. This is the context of a very

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<v Speaker 1>deep and broad discussion of how to most effectively operate

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<v Speaker 1>monetary policy in a world of zero interest rates or

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<v Speaker 1>even lower. Randy Krasner joins this now. He is a

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<v Speaker 1>perennial attendee here. In fact, he's going to be a

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<v Speaker 1>discussing and moderator one of the panels as the supposium

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<v Speaker 1>continues on Saturday. Former Federal Reserve Governor, professor of economics

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<v Speaker 1>with a Cargo Booth School. Randy, welcome, great to be

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<v Speaker 1>with you. Jenny Allen stan Fisher, what what's the message? Well,

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<v Speaker 1>I think they've been saying a fairly consistent message that

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<v Speaker 1>they have been seeing the conditions getting more and more

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<v Speaker 1>likely for the next hike. They they waited over the

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<v Speaker 1>summer because they're concerned about what might happen if Brexit occurred.

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<v Speaker 1>And then Brexit occurred, and so they wanted to see

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<v Speaker 1>what the consequences were. The consequences seemed to have been

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<v Speaker 1>quite small for the international markets, and so I think

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<v Speaker 1>another rate rise sometime before the end of the year

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<v Speaker 1>is is quite likely. Mr Krosner. If it's taking this

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<v Speaker 1>long to raise interest rates basis points and this much

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<v Speaker 1>discussion and hand ringing, what does that tell you about

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<v Speaker 1>the actual process of crafting monetary policy. I think they're

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<v Speaker 1>people have very different views sitting around that table, and

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<v Speaker 1>I think given that we're in somewhat uncharted territory, reason

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<v Speaker 1>why people can can disagree and uh and obviously there

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<v Speaker 1>have been a lot of disagreements. Some people wanted to

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<v Speaker 1>move much more rapidly than than others. And I think UM,

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<v Speaker 1>as Yellen has said many times, their movements are going

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<v Speaker 1>to be gradual, gentle. They're not going to move very

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<v Speaker 1>rapidly up to UM let's say roughly three percent or so.

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<v Speaker 1>That's going to take a long long time. Sure is

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<v Speaker 1>because you know it dawned on me finally, Randy, that

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<v Speaker 1>talk about gradual. The Fed raised the key rate last December.

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<v Speaker 1>If it raises it this December, one basis point increase

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<v Speaker 1>a year way at that rate to get to three percent,

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<v Speaker 1>it's going to be a while. It certainly would be

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<v Speaker 1>a while. I don't think it will necessarily be that slow.

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<v Speaker 1>If the economy really does start to to come back,

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<v Speaker 1>if we start to see some inflation pressures, uh, they'll

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<v Speaker 1>they'll move a little bit more rapidly, but we still

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<v Speaker 1>haven't seen those. The discussion here last year was exactly

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<v Speaker 1>on this sort of inflation dynamic. As the labor market recovers,

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<v Speaker 1>we have always seen a lot of wage pressure. We're

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<v Speaker 1>discussions last year. Are we in a different regime? We've

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<v Speaker 1>now been at roughly five percent unemployment rate for the

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<v Speaker 1>last year, and we seem very little wage pressure. So

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<v Speaker 1>a lot of controversy about whether the traditional dynamics will

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<v Speaker 1>eventually kick in or we're in a new regime. Do

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<v Speaker 1>you believe that they've cried wolf? What do you mean

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<v Speaker 1>by that? Well, I mean that they've been talking about

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<v Speaker 1>this for so long. It can be the kind of

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<v Speaker 1>situation where they invite everybody to a party, nobody shows up,

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<v Speaker 1>or you know, you try wolf after a while, no

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<v Speaker 1>one starts listening to you, and you actually discount what

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<v Speaker 1>the what the people in charge of saying. So certainly

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<v Speaker 1>I think that they have focused on the data and

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<v Speaker 1>they have said they've given sort of a broad outline

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<v Speaker 1>of where they think they would be going, but they

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<v Speaker 1>have certainly never given a concrete timetable when events like Brexit,

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<v Speaker 1>war or other changes in data came in. But James

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<v Speaker 1>just at breaking in, but I mean James Bullard today

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<v Speaker 1>at the St. Louis FED he basically dismissed issues like Brexit,

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<v Speaker 1>saying that's not necessarily going to be relevant for policy

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<v Speaker 1>and the US economy. Well, and of course uh uh

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<v Speaker 1>Jim Bullard um. And I'm glad he picked up on

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<v Speaker 1>that pan because I think he is a voice that

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<v Speaker 1>I don't hear, you don't see her here is often

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<v Speaker 1>on the Federal Open Market Committee that things like Brexit, China,

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<v Speaker 1>those concerns are going to be a factor that would

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<v Speaker 1>influence the FEDS policy making decision. H Randy. When you

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<v Speaker 1>look at what is top of the list for the

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<v Speaker 1>FED right now, what would you say, is there there

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<v Speaker 1>more They're they're talking a lot about global concerns, but

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<v Speaker 1>is that really such a big deal or what is

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<v Speaker 1>What is the number one? So I think god number

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<v Speaker 1>one is certainly the potential for inflation UM and UH

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<v Speaker 1>and the wage pressures that may be coming with with

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<v Speaker 1>the tight tight labor markets. Certainly, if they're looking at

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<v Speaker 1>at risks, they'll be looking at global risks. UM doesn't

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<v Speaker 1>seem like the risks in Europe are as high as

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<v Speaker 1>they had been, but they still concerned about some of

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<v Speaker 1>the issues in banking there. Obviously there are risks associated

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<v Speaker 1>with China that those seem to be much less than

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<v Speaker 1>they were than they were last year at this time

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<v Speaker 1>where there was an incredible volatively in the in the markets.

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<v Speaker 1>And so with most of these global risks, UM washing

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<v Speaker 1>out a bit. With UM continuing strength and the labor market,

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<v Speaker 1>I think they feel that the time for the next

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<v Speaker 1>next rise is coming soon, but they're not going to

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<v Speaker 1>give a definitive timetable because they want to see how

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<v Speaker 1>the data are evolving. Alright, Randy Krosner, thank you so

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<v Speaker 1>very much, so great to have you once again joining

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<v Speaker 1>us on Boomberg Radio here in Jackson Hall, Cancity. Fancy Poseum.

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<v Speaker 1>Great to be with your of course, former feder Preserve

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<v Speaker 1>a governor professor of economics to the Chicago Booth School. Well,

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<v Speaker 1>as we wrap things up, I first of all, Pim,

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<v Speaker 1>before we see anything else, I want to thank our

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<v Speaker 1>field producer Charlie Vollmark. He is a stalwart for us

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<v Speaker 1>on how we would get done in the field without him.

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<v Speaker 1>Back in Bloomberg World headquarters, Reggie Basil, our technical director

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<v Speaker 1>of course Sam land I can put it all together

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<v Speaker 1>on the show for us every single day, So we

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<v Speaker 1>will look forward to seeing you on Monday. We'll be

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<v Speaker 1>watching to see what the market ramifications are of FED

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<v Speaker 1>comments coming out of Jackson Hall. I'm Kathleen Hayes along

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<v Speaker 1>with Pam Fox. This is Bloomberg. Coming up, Bloomberg Law

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<v Speaker 1>will explore whether Puerto Rico's alternative minimum tax is unconstitutional.

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<v Speaker 1>That's next on Bloomberg